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<SEC-DOCUMENT>0000950152-05-002729.txt : 20050330
<SEC-HEADER>0000950152-05-002729.hdr.sgml : 20050330
<ACCEPTANCE-DATETIME>20050330133713
ACCESSION NUMBER:		0000950152-05-002729
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		14
CONFORMED PERIOD OF REPORT:	20041231
FILED AS OF DATE:		20050330
DATE AS OF CHANGE:		20050330

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CENTRAL FEDERAL CORP
		CENTRAL INDEX KEY:			0001070680
		STANDARD INDUSTRIAL CLASSIFICATION:	SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035]
		IRS NUMBER:				341877137
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-25045
		FILM NUMBER:		05713034

	BUSINESS ADDRESS:	
		STREET 1:		C/O CENTRAL FEDERAL BANK
		STREET 2:		601 MAIN ST
		CITY:			WELLSVILLE
		STATE:			OH
		ZIP:			43968
		BUSINESS PHONE:		3305321517

	MAIL ADDRESS:	
		STREET 1:		C/O CENTRAL FEDERAL BANK
		STREET 2:		601 MAIN ST
		CITY:			WELLSVILLE
		STATE:			OH
		ZIP:			43968

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GRAND CENTRAL FINANCIAL CORP
		DATE OF NAME CHANGE:	19980918
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>l12592ae10ksb.txt
<DESCRIPTION>CENTRAL FEDERAL CORPORATION / FORM 10KSB
<TEXT>
<PAGE>

                                     FEDERAL
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934

      For the Fiscal Year Ended December 31, 2004

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

      For the transition period from __________ to __________

                         Commission File Number: 0-25045

                          CENTRAL FEDERAL CORPORATION.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

           Delaware                                      34-1877137
State or Other Jurisdiction of              (I.R.S. Employer Identification No.)
Incorporation or Organization)

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

                                 (330) 666-7979
                (Issuer's Telephone Number, Including Area Code)

       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share
                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer's revenues for the fiscal year ended December 31, 2004 were $6.7
million.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates as of March 15, 2005 was $20,953,000.

As of March 15, 2005, there were 2,225,987 shares of the Registrant's Common
Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Rule 14a-3(b) Annual Report to Shareholders for
2004 and its Proxy Statement for the 2005 Annual Meeting of Stockholders to be
held on May 19, 2005, which was filed with the Securities and Exchange
Commission (the "Commission") on March 30, 2005, are incorporated herein by
reference into Parts II and III, respectively, of this Form 10-KSB.

Transitional Small Business Disclosure Format (Check One): YES [ ] NO [X]

<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                      PAGE
                                                                                                      ----
<S>                                                                                                   <C>
PART I

      Item 1.    Description of Business..........................................................     3

      Item 2.    Description of Property..........................................................     28

      Item 3.    Legal Proceedings................................................................     28

      Item 4.    Submission of Matters to a Vote of Security Holders..............................     28

PART II

      Item 5.    Market for Common Equity, Related Stockholder Matters and Small Business
                 Issuer Purchases of Equity Securities ...........................................     29

      Item 6.    Management's Discussion and Analysis or Plan of Operation........................     30

      Item 7.    Financial Statements.............................................................     30

      Item 8.    Changes In and Disagreements With Accountants on Accounting and Financial
                 Disclosure.......................................................................     30

      Item 8A.   Controls and Procedures..........................................................     30

      Item 8B.   Other Information................................................................     30

PART III

      Item 9.    Directors and Executive Officer of the Registrant................................     31

      Item 10.   Executive Compensation...........................................................     33

      Item 11.   Security Ownership of Certain Beneficial Owners and Management
                 and Related Stockholder Matters..................................................     33

      Item 12.   Certain Relationships and Related Transactions...................................     33

      Item 13.   Exhibits.........................................................................     33

      Item 14.   Principal Accountant Fees and Services...........................................     33

SIGNATURES

EXHIBIT INDEX
</TABLE>

                                       2

<PAGE>

FORWARD-LOOKING STATEMENTS

When used in this Form 10-KSB, or in future filings with the Commission, in
press releases or other public or shareholder communications, or in oral
statements made with the approval of an authorized executive officer, the words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors, which may
cause the Company's actual results to be materially different from those
indicated. Such statements are subject to certain risks and uncertainties
including changes in economic conditions in the market areas where the Company
conducts business, which could materially impact credit quality trends, changes
in policies by regulatory agencies, fluctuations in interest rates, demand for
loans in the market areas where the Company conducts business, and competition
that could cause actual results to differ materially from historical earnings
and those presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. The Company undertakes no obligation to
publicly release the result of any revisions that may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

                                     PART I

ITEM 1 DESCRIPTION OF BUSINESS

GENERAL

Central Federal Corporation (the "Company"), formerly known as Grand Central
Financial Corp., was organized as a Delaware corporation in September 1998 as
the holding company for CFBank (the "Bank"), a community-oriented savings
institution which was originally organized in 1892 formerly known as Central
Federal Savings and Loan Association of Wellsville and, more recently as Central
Federal Bank, in connection with the Bank's conversion from a mutual to stock
form of organization. As a savings and loan holding company, the Company is
subject to regulation by the Office of Thrift Supervision (the "OTS"). Reserve
Mortgage Services, Inc. ("Reserve"), a wholly owned subsidiary of the Bank, was
acquired in October 2004 to expand the Company's mortgage services business.
Central Federal Capital Trust I (the "Trust"), a wholly owned subsidiary of the
Company, was formed in 2003 as to raise additional funding for the Company.
Under new accounting guidance, FASB Interpretation No. 46, as revised in
December 2003, the Trust is not consolidated with the Company. Accordingly, the
Company does not report the securities issued by the Trust as liabilities, and
instead reports as liabilities the subordinated debentures issued by the Company
and held by the Trust. Currently, the Company does not transact any material
business other than through the Bank and its subsidiary mortgage services
company and the Trust. At December 31, 2004, the Company had total assets of
$171.0 million and stockholders' equity of $19.5 million.

The Company's principal business consists of attracting deposits from the
general public primarily in its principal market area and investing those
deposits and other funds, generated from operations and from borrowings,
primarily to originate commercial and commercial real estate loans, single- and
multi-family residential mortgage loans, home equity lines of credit and
short-term consumer loans. To a lesser extent, the Company invests in closed-end
home equity, construction and land loans. In 2003, the Company began originating
more commercial, commercial real estate and multi-family mortgage loans than it
had in the past as management positioned the Company for expansion into business
financial services. The Company also invests in securities, primarily those
guaranteed or insured by government agencies, and other investment-grade
securities. Revenues are derived principally from the generation of interest and

                                       3

<PAGE>

fees on loans originated and, to a lesser extent, interest and dividends on
securities. The Company's primary sources of funds are retail savings deposits
and, to a lesser extent, brokered certificates of deposit, principal and
interest payments on loans and securities, FHLB advances and other borrowings
and proceeds from the sale of loans. The Company operates through its executive
offices in Fairlawn, Ohio, an office in Columbiana County, Ohio, an office in
Jefferson County, Ohio, an office in Columbus, Ohio and a mortgage services
location in Akron, Ohio.

MARKET AREA AND COMPETITION

The Company's primary market area is a competitive market for financial services
and it faces competition both in making loans and in attracting deposits. Direct
competition comes from a number of financial institutions operating in its
market area, many with a state-wide or regional presence, and in some cases, a
national presence. Many of these financial institutions are significantly larger
and have greater financial resources than the Company. Competition for loans and
deposits comes from savings institutions, mortgage banking companies, commercial
banks and credit unions brokerage firms and insurance companies.

LENDING ACTIVITIES

LOAN PORTFOLIO COMPOSITION. The loan portfolio consists primarily of mortgage
loans secured by single-family and multi-family residences and commercial real
estate loans. At December 31, 2004, gross loans receivable totaled $109.3
million. Commercial, commercial real estate and multi-family mortgage loans
totaled $52.7 million and represented 48.3% of the gross loan portfolio at
December 31, 2004, compared to 17.8% at December 31, 2003. The increase in the
percentage of commercial, commercial real estate and multi-family mortgage loans
in the portfolio was a result of the growth strategy implemented in 2003 to
expand into business financial services. Single-family residential mortgage
loans totaled $41.4 million and represented 37.9% of total gross loan at
year-end 2004. The remainder of the portfolio consisted of the following at
December 31, 2004: consumer loans totaled $14.0 million, or 12.8% of gross loans
receivable and construction loans totaled $1.1 million, or 1.0% of gross loans
receivable. At year-end 2004, 32.8% of the loan portfolio had fixed rates,
compared to 55.7% at year-end 2003. The decline in the percentage of fixed rate
loans in the portfolio was a result of growth in commercial, commercial real
estate and multi-family mortgage loans during 2004, which are predominantly
adjustable rate loans.

The types of loans originated are subject to federal and state law and
regulations. Interest rates charged on loans are affected by the demand for such
loans and the supply of money available for lending purposes and the rates
offered by competitors. In turn, these factors are affected by, among other
things, economic conditions, fiscal policies of the federal government, the
monetary policies of the Federal Reserve Board and legislative tax policies.

                                       4

<PAGE>

The following table sets forth the composition of the loan portfolio in dollar
amounts and as a percentage of the portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                        AT DECEMBER 31,
                                         ------------------------------------------------------------------------------
                                                  2004                         2003                        2002
                                         ----------------------       ---------------------       ---------------------
                                                        PERCENT                     PERCENT                     PERCENT
                                          AMOUNT        OF TOTAL       AMOUNT       OF TOTAL       AMOUNT       OF TOTAL
                                         --------       --------      --------      --------      --------      --------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                      <C>            <C>           <C>           <C>           <C>           <C>
Real estate mortgage loans:
  Single-family                          $ 41,450         37.94%      $ 34,810        59.58%      $ 47,108        74.84%
  Multi-family                             25,602         23.43%         1,250         2.14%         1,536         2.44%
  Construction                              1,127          1.03%           610         1.04%           134         0.22%
  Commercial real estate                   20,105         18.40%         5,040         8.63%             -         0.00%
                                         --------        ------       --------       ------       --------       ------
     Total real estate mortgage loans      88,284         80.80%        41,710        71.39%        48,778        77.50%

Consumer loans:
  Home equity loans                           663          0.61%         1,003         1.72%         1,378         2.19%
  Home equity lines of credit               5,928          5.43%         1,640         2.81%         1,109         1.76%
  Automobile                                6,735          6.16%         9,292        15.90%        10,540        16.75%
  Other                                       626          0.57%           663         1.13%           877         1.39%
                                         --------        ------       --------       ------       --------       ------
     Total consumer loans                  13,952         12.77%        12,598        21.56%        13,904        22.09%

Commercial loans                            7,030          6.43%         4,116         7.05%           261         0.41%
                                         --------        ------       --------       ------       --------       ------
Total loans receivable                    109,266        100.00%        58,424       100.00%        62,943       100.00%
                                         ========        ======       ========       ======       ========       ======

Less:
  Net deferred loan fees                     (139)                          15                         (17)
  Allowance for loan losses                  (978)                        (415)                       (361)
                                         --------                     --------                    --------
Loans receivable, net                    $108,149                     $ 58,024                    $ 62,565
                                         ========                     ========                    ========
</TABLE>

LOAN MATURITY. The following table shows the remaining contractual maturity of
the loan portfolio at December 31, 2004. Demand loans and other loans having no
stated schedule of repayments or no stated maturity are reported as due within
one year. The table does not include potential prepayments or scheduled
principal amortization.

<TABLE>
<CAPTION>
                                                                           AT DECEMBER 31, 2004
                                                    -----------------------------------------------------------------
                                                    REAL ESTATE                                           TOTAL LOANS
                                                     MORTGAGE           CONSUMER          COMMERCIAL      RECEIVABLE
                                                     --------           --------          ----------      ----------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                                 <C>                 <C>               <C>             <C>
Amounts due:
  Within one year                                    $   1,027          $    625          $    6,264      $    7,916
                                                     ---------          --------          ----------      ----------
  After one year:
     More than one year to three years                   2,483             2,549               2,874           7,906
     More than three years to five years                 1,257             4,359               3,219           8,835
     More than five years to 10 years                   24,197             1,801               3,995          29,993
     More than 10 years to 15 years                     13,074                 -               7,831          20,905
     More than 15 years                                 26,141             4,618               2,952          33,711
                                                     ---------          --------          ----------      ----------
        Total due after 2005                            67,152            13,327              20,871         101,350
                                                     ---------          --------          ----------      ----------
  Total amount due                                   $  68,179          $ 13,952          $   27,135      $  109,266
                                                     =========          ========          ==========      ==========
</TABLE>

                                       5

<PAGE>

The following table sets forth at December 31, 2004, the dollar amount of total
loans receivable contractually due after December 31, 2005, and whether such
loans have fixed interest rates or adjustable interest rates.

<TABLE>
<CAPTION>
                                           DUE AFTER DECEMBER 31, 2005
                                    ------------------------------------------
                                     FIXED          ADJUSTABLE          TOTAL
                                    -------         ----------        --------
                                               (DOLLARS IN THOUSANDS)
<S>                                 <C>             <C>               <C>
Real estate mortgage loans          $21,131          $46,021          $ 67,152
Consumer loans                        7,407            5,920            13,327
Commercial loans                      5,386           15,485            20,871
                                    -------          -------          --------
     Total loans                    $33,924          $67,426          $101,350
                                    =======          =======          ========
</TABLE>

ORIGINATION OF LOANS. Lending activities are conducted through the Company's
offices. In 2003, the Company began originating commercial, commercial real
estate and multi-family mortgage loans as it started the process of utilizing
its strong capital position to take advantage of opportunities for expansion
into business financial services and growth in the Fairlawn and Columbus, Ohio
markets. These loans are predominantly adjustable rate loans. A majority of the
Company's single-family mortgage loan originations are fixed-rate loans.
Beginning in 2002 and more pronouncedly in 2003 and 2004, current originations
of long-term fixed-rate single-family mortgages were sold rather than retained
in portfolio. Although the decision to sell current single-family mortgage
originations rather than retain the loans in portfolio may result in declining
single-family loan portfolio balances and lower earnings from that portfolio in
the near term, it protects future profitability as management believes it is not
prudent to retain these long-term, fixed-rate loans and subject the Company to
the interest rate risk and reduced future earnings associated with a rise in
interest rates. The Company allowed single-family mortgage loan portfolio
balances to decline as interest rates fell to 40-year lows and home owners
continued to refinance during 2003. The refinancing activity slowed as market
mortgage interest rates increased in 2004. The growth in single-family mortgage
loans in 2004 was predominantly adjustable rate loans. The acquisition of
Reserve is expected to significantly expand the Company's mortgage services and
increase the Company's mortgage loan production. Although the Company currently
expects that most of the long-term fixed-rate mortgage loan originations will be
sold on a servicing-released basis, a portion of the loans may be retained for
portfolio within the Company's interest rate risk and profitability guidelines.
The Company also emphasizes the origination of home equity lines of credit.

SINGLE-FAMILY MORTGAGE LENDING. A significant lending activity of the Company
has been the origination of permanent conventional mortgage loans secured by
single-family residences located in the Company's primary market area. The
Company currently sells substantially all of the fixed-rate single-family
mortgage loans that it originates on a servicing released basis. Prior to 2004,
servicing rights were generally retained on loans sold. The Company retains
adjustable rate mortgage ("ARM") single-family mortgage loans for its portfolio.
Most single-family mortgage loans are underwritten according to Freddie Mac
guidelines. Loan originations are obtained from the Company's mortgage services
subsidiary, loan officers and their contacts with the local real estate
industry, existing or past customers, and members of the local communities. At
December 31, 2004, single-family mortgage loans totaled $41.4 million, or 37.9%
of total loans, of which $19.5 million, or 47.2% were fixed-rate loans.

The Company's policy is to originate single-family residential mortgage loans in
amounts up to 80% of the appraised value of the property securing the loan and
up to 95% of the appraised value if private mortgage insurance is obtained.
Mortgage loans generally include due-on-sale clauses which provide the

                                       6
<PAGE>

Company with the contractual right to deem the loan immediately due and payable
in the event the borrower transfers ownership of the property without the
Company's consent. Due-on-sale clauses are an important means of adjusting the
rates on the fixed-rate mortgage loan portfolio, and the Company exercises its
rights under these clauses. The single-family mortgage loan originations are
generally for terms to maturity of up to 30 years.

The Company offers several adjustable-rate loan programs with terms of up to 30
years and interest rates that adjust with a maximum adjustment limitation of
2.0% per year and a 6% lifetime cap. The interest rate adjustments on ARM loans
currently offered are indexed to a variety of established indices. ARM loans
offered by the Company do not provide for initial deep discount interest rates
or for negative amortization.

The volume and types of ARM loans originated have been affected by such market
factors as the level of interest rates, consumer preferences, competition and
the availability of funds. In recent years, demand for ARM loans in the
Company's primary market area has been weak due to the low interest rate
environment and consumer preference for fixed-rate loans. Consequently, in
recent years the Company has not originated a significant amount of ARM loans as
compared to its originations of fixed-rate loans. However, as a result of
management's strategy to sell current long-term fixed rate loan production, ARM
loans represent a larger percentage of the portfolio. At December 31, 2004,
$21.9 million, or 52.8% of the single-family mortgage loan portfolio had
adjustable rates, compared to $15.1 million, or 43.4% at December 31, 2003 and
$6.5 million, or 11% at December 31, 2002.

COMMERCIAL AND MULTI-FAMILY REAL ESTATE LENDING. In 2003, the Company expanded
into business financial services and positioned itself for growth in the
Fairlawn and Columbus, Ohio markets and, as a result, originations of commercial
real estate and multi-family residential mortgage loans increased significantly.
Commercial real estate and multi-family residential mortgage loans totaled $45.7
million at December 31, 2004 or 41.8% of gross loans, an increase of $39.4
million compared to $6.3 million or 10.8% of gross loans receivable at December
31, 2003. The Company anticipates that commercial real estate and multi-family
residential mortgage lending activities will continue to grow in the future.

The Company originates commercial real estate loans that are secured by
properties used for business purposes, such as manufacturing facilities, office
buildings or retail facilities. Commercial real estate and multi-family
residential mortgage loans are secured by properties generally located in its
primary market area. The Company's underwriting policies provide that commercial
real estate and multi-family residential mortgage loans may be made in amounts
up to 85% of the appraised value of the property. In underwriting commercial
real estate and multi-family residential mortgage loans, the Company considers
the appraisal value and net operating income of the property, the debt service
ratio and the property owner's financial strength, expertise and credit history.

Commercial real estate and multi-family residential mortgage loans are generally
considered to involve a greater degree of risk than single-family residential
mortgage loans. Because payments on loans secured by commercial real estate and
multi-family properties are dependent on successful operation or management of
the properties, repayment of such loans may be subject to a greater extent to
adverse conditions in the real estate market or the economy. The Company seeks
to minimize these risks through its underwriting policies, which require such
loans to be qualified at origination on the basis of the property's income and
debt coverage ratio and the financial strength of the owners.

COMMERCIAL LENDING. In 2003, the Company expanded into business financial
services and positioned itself for growth in the Fairlawn and Columbus, Ohio
markets and, as a result, originations of commercial loans increased. Commercial
loans totaled $7.0 million, or 6.4% of gross loans at December 31, 2004, an
increase of $2.9 million compared to $4.1 million, or 7.1% of gross loans at
December 31, 2003 and $261,000 or .4% of gross loans at December 31, 2002. The
Company anticipates that commercial lending activities will continue to grow in
the future.

                                       7
<PAGE>

The Company makes commercial business loans primarily to small business and
generally secured by business equipment, inventory, accounts receivable and
other business assets. In underwriting commercial loans, the Company considers
the net operating income of the company, the debt service ratio and the
financial strength, expertise and credit history of the owners.

Commercial loans are generally considered to involve a greater degree of risk
than loans secured by real estate. Because payments on commercial loans are
dependent on successful operation of the business enterprise, repayment of such
loans may be subject to a greater extent to adverse conditions in the economy.
The Company seeks to minimize these risks through its underwriting policies,
which require such loans to be qualified at origination on the basis of the
enterprise's income and debt coverage ratio and the financial strength of the
owners.

CONSTRUCTION AND LAND LENDING. The Company generally originates construction and
land development loans to contractors and individuals in its primary market
areas. Construction loans are made to finance the construction of owner-occupied
single-family residential properties and, to a substantially lesser extent,
individual properties built by developers for future sale. Construction loans to
individuals are fixed or adjustable-rate loans which may convert to permanent
loans with maturities of up to 30 years. The Company's policies provide that
construction loans may be made in amounts up to 80% of the appraised value of
the property for construction of single-family residences. The Company requires
an independent appraisal of the property. Loan proceeds are disbursed in
increments as construction progresses and as inspections warrant. The Company
requires regular inspections to monitor the progress of construction. Land loans
are determined on an individual basis, but generally they do not exceed 75% of
the actual cost or current appraised value of the property, whichever is less.

Construction and land financing is considered to involve a higher degree of
credit risk than long-term financing on improved, owner-occupied real estate.
Risk of loss on a construction loan is dependent largely upon the accuracy of
the initial estimate of the property's value at completion of construction or
development compared to the estimated cost (including interest) of construction.
If the estimate of value proves to be inaccurate, the Company may be confronted
with a project, when completed, having a value which is insufficient to assure
full repayment.

CONSUMER AND OTHER LENDING. The consumer loan portfolio generally consists of
home equity lines of credit, automobile loans, home equity and home improvement
loans and loans secured by deposits. Home equity lines of credit are generally
ARM loans with rates adjusting monthly at up to 2% above the prime rate of
interest as disclosed in The Wall Street Journal. At December 31, 2004, the
consumer loan portfolio totaled $14.0 million, or 12.8% of gross loans
receivable.

Loans secured by rapidly depreciable assets such as automobiles entail greater
risks than single-family residential mortgage loans. In such cases, repossessed
collateral for a defaulted loan may not provide an adequate source of repayment
of the outstanding loan balance, since there is a greater likelihood of damage,
loss or depreciation of the underlying collateral. Further, consumer loan
collections on these loans depend on the borrower's continuing financial
stability and, therefore, are more likely to be adversely affected by job loss,
divorce, illness or personal bankruptcy. Finally, the application of various
federal and state laws, including federal and state bankruptcy and insolvency
laws, may limit the amount which can be recovered on such loans in the event of
a default. A significant portion of the Company's automobile loans were
originated on the Company's behalf by automobile dealers at the time of sale.
This indirect lending requires the maintenance of relationships with such
dealers. Such loans do not have the benefit of direct interaction between the
borrowers and the Company's lending officers during the underwriting process,
which is heavily reliant on information contained in the borrowers' credit
reports.

DELINQUENCIES AND CLASSIFIED ASSETS. The Board of Directors monitors the status
of all delinquent mortgage and commercial loans thirty days or more past due
monthly. Additionally, the Board of

                                       8
<PAGE>

Directors review past due statistics and trends for all consumer and installment
loans. The procedures taken by the Company with respect to resolving
delinquencies vary depending on the nature and type of the loan and period of
delinquency. In general, the Company makes every effort, consistent with safety
and soundness principles, to work with the borrower to have the loan brought
current. If the loan is still not brought current it then becomes necessary for
the Company to repossess collateral and/or take legal action.

Federal regulations and the Company's Classification of Assets Policy require
use of an internal asset classification system as a means of reporting and
monitoring assets. The Company has incorporated the OTS internal asset
classifications as a part of its credit monitoring system. In accordance with
regulations, problem assets are classified as "substandard," "doubtful" or
"loss", and the classifications are subject to review by the OTS. An asset is
considered "substandard" under the regulations if it is inadequately protected
by the current net worth and paying capacity of the obligor or of the collateral
pledged, if any. An asset considered "doubtful" under the regulations has all of
the weaknesses inherent in those classified "substandard" with the added
characteristic that the weaknesses make "collection or liquidation in full," on
the basis of currently existing facts, conditions, and values, "highly
questionable and improbable." Assets considered "loss" under the regulations are
those considered "uncollectible" and having so little value that their
continuance as assets without the establishment of a specific loss allowance is
not warranted. Assets are required to be designated "special mention" when they
posses weaknesses but do not currently expose the insured institution to
sufficient risk to warrant classification in one of these categories. In order
to more closely monitor credit risk as the Company employs its growth strategy
in business financial services, the Company has developed internal loan review
procedures and a credit grading system for commercial, commercial real estate
and multi-family mortgage loans, and also utilizes an external firm for loan
review.

At December 31, 2004, no assets were designated as special mention; $419,000 in
assets were classified as substandard, 97.4% of which are single-family mortgage
loans and real estate owned, $1,000 in assets were classified as doubtful and no
assets were classified as loss.

                                       9
<PAGE>

The following table sets forth information concerning delinquent loans in dollar
amounts and as a percentage of the total loan portfolio. The amounts presented
represent the total remaining principal balances of the loans rather than the
actual payment amounts which are overdue.

<TABLE>
<CAPTION>
                                                DECEMBER 31, 2004                             DECEMBER 31, 2003
                                   ------------------------------------------   -------------------------------------------
                                        60-89 DAYS         90 DAYS OR MORE           60-89 DAYS          90 DAYS OR MORE
                                   -------------------   --------------------   -------------------   ---------------------
                                   NUMBER    PRINCIPAL              PRINCIPAL   NUMBER    PRINCIPAL               PRINCIPAL
                                     OF       BALANCE     NUMBER     BALANCE     OF        BALANCE     NUMBER      BALANCE
                                   LOANS      OF LOANS   OF LOANS    OF LOANS   LOANS      OF LOANS   OF LOANS    OF LOANS
                                   ------    ---------   --------    --------   ------    ---------   --------    --------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                <C>       <C>         <C>        <C>         <C>       <C>         <C>         <C>
Real estate loans:
  Single-family                         2    $     149          8   $     276        3    $      97          9    $    714
  Multi-family                          -            -          -           -        -            -          -           -
  Construction                          -            -          -           -        -            -          -           -
  Commercial                            -            -          -           -        -            -          -           -
Consumer loans:
  Home equity loans and lines of
  credit                                1            7          -           -        3           37          -           -
  Automobile                            5           43          2           9        2           13          2           6
  Unsecured lines of credit             -            -          -           -        -            -          1           1
  Other                                 -            -          1           1        -            -          4          20
Commercial loans                        -            -          -           -        1           25          -           -
                                   ------    ---------   --------   ---------   ------    ---------   --------    --------
     Total delinquent loans             8    $     199         11   $     286        9    $     172         16    $    741
                                   ======    =========   ========   =========   ======    =========   ========    ========
Delinquent loans as a percent of
total loans                                        .18%                   .26%                  .30%                  1.28%

<CAPTION>
                                                 DECEMBER 31, 2002
                                   ----------------------------------------------
                                         60-89 DAYS             90 DAYS OR MORE
                                   --------------------      --------------------
                                              PRINCIPAL      NUMBER     PRINCIPAL
                                    NUMBER     BALANCE         OF        BALANCE
                                   OF LOANS    OF LOANS      LOANS       OF LOANS
                                   --------   ---------      ------     ---------
                                              (DOLLARS IN THOUSANDS)
<S>                                <C>        <C>            <C>        <C>
Real estate loans:
  Single-family                          10   $     559          10     $     761
  Multi-family                            -           -           -             -
  Construction                            -           -           -             -
  Commercial                              -           -           -             -
Consumer loans:
  Home equity loans and lines of
  credit                                  -           -           -             -
  Automobile                              1           5           3            19
  Unsecured lines of credit               -           -           1             1
  Other                                   2           6           -             -
Commercial loans                          -           -           -             -
                                   --------   ---------      ------     ---------
     Total delinquent loans              13   $     570          14     $     781
                                   ========   =========      ======     =========
Delinquent loans as a percent of
total loans                                         .91%                     1.25%
</TABLE>

- ----------
The table does not include delinquent loans less than 60 days past due. At
December 31, 2004, 2003 and 2002, loans past due 30 to 59 days totaled $
549,000, $481,000, and $517,000, respectively.

                                       10
<PAGE>

NONPERFORMING ASSETS. The following table contains information regarding
nonperforming loans, real estate owned ("REO") and other repossessed assets. At
December 31, 2004, nonperforming loans totaled $286,000. It is the Company's
policy to stop accruing interest on loans 90 days or more past due and set up
reserves for all previously accrued interest. At December 31, 2004, the amount
of additional interest income that would have been recognized on nonaccrual
loans if such loans had continued to perform in accordance with their
contractual terms was approximately $12,000. At December 31, 2004, 2003 and
2002, there were no impaired loans or troubled debt restructurings.

<TABLE>
<CAPTION>
                                              AT DECEMBER 31,
                                          ------------------------
                                          2004      2003      2002
                                          ----      ----      ----
                                           (DOLLARS IN THOUSANDS)
<S>                                       <C>       <C>       <C>
Nonaccrual loans:

   Single-family real estate              $276      $ 714     $ 761

   Consumer                                 10         27        20
                                          ----      -----     -----
        Total(1)                           286        741       781

Real estate owned (REO)                    132        184         -

Other repossessed assets                     -          9         2
                                          ----      -----     -----
        Total nonperforming assets(2)     $418      $ 934     $ 783
                                          ====      =====     =====

Nonperforming loans to total loans         .26%      1.28%     1.25%
Nonperforming assets to total assets       .24%       .87%      .71%
</TABLE>

- ----------
(1)   Total nonaccrual loans equal total nonperforming loans.

(2)   Nonperforming assets consist of nonperforming loans, other repossessed
      assets and REO.

ALLOWANCE FOR LOAN LOSSES. Management analyzes the adequacy of the allowance for
loan losses regularly through reviews of the performance of the loan portfolio
considering economic conditions, changes in interest rates and the effect of
such changes on real estate values and changes in the composition of the loan
portfolio. Management estimates the allowance balance required using past loan
loss experience, the nature and volume of the portfolio, information about
specific borrower situations and estimated collateral values, economic
conditions, and other factors. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
in its loan portfolio. Various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses. Such agencies may require additional provisions for loan losses based
upon information available at the time of the review. As of December 31, 2004,
the allowance for loan losses totaled .90% of total loans as compared to .71% as
of December 31, 2003.

The OTS, in conjunction with the other federal banking agencies, has adopted an
interagency policy statement on the allowance for loan and lease losses. The
policy statement provides guidance for financial institutions on both the
responsibilities of management for the assessment and establishment of adequate
allowances in accordance with generally accepted accounting principles and
guidance for banking agency examiners to use in evaluating the allowances. The
policy statement requires that institutions have effective systems and controls
to identify, monitor and address asset quality problems; that management has
analyzed all significant factors that affect the collectibility of the portfolio
in a reasonable manner; and that management has established acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
The Company adopted an Allowance for Loan Losses Policy designed to provide a
thorough, disciplined and consistently applied process that

                                       11
<PAGE>

incorporates management's current judgments about the credit quality of the loan
portfolio into determination of the allowance for loan and lease losses in
accordance with generally accepted accounting principles and supervisory
guidance. Management believes that an adequate allowance for loan losses has
been established. However, actual losses are dependent upon future events and,
as such, further additions to the level of allowances for estimated loan losses
may become necessary.

The following table sets forth activity in the allowance for loan losses for the
periods indicated.

<TABLE>
<CAPTION>
                                                    AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                    -------------------------------------
                                                       2004         2003      2002
                                                      ------       ------    ------
                                                           (DOLLARS IN THOUSANDS)
<S>                                                 <C>            <C>       <C>
Allowance for loan losses, beginning of period        $     415    $  361    $  373
Charge-offs:
   Consumer                                                 117        50        35
                                                      ---------    ------    ------
        Total charge-offs                                   117        50        35
Recoveries on loans previously charged off:
   Consumer                                                  34         2         4
                                                      ---------    ------    ------
        Total recoveries                                     34         2         4
Net charge-offs                                              83        48        31
Provision for loan losses                                   646       102        19
                                                      ---------    ------    ------
Allowance for loan losses, end of period              $     978    $  415    $  361
                                                      =========    ======    ======

Allowance for loan losses to total loans                    .90%      .71%      .57%
Allowance for loan losses to nonperforming loans         341.96%    56.01%    46.22%
Net charge-offs to the allowance for losses                8.49%    11.57%     8.59%
Net charge-offs to average loans                            .10%      .08%      .05%
</TABLE>

The Company's strategy to expand into business financial services and the
significant growth in commercial, commercial real estate and multi-family
mortgage loans that resulted from that strategy in 2004 required an increase in
the provision and allowance for loan losses related to these loan types. The
provision for loan losses totaled $646,000 in 2004, compared to $102,000 in 2003
and $19,000 in 2002 (which was prior to implementation of the growth strategy in
2003). At December 31, 2004, the allowance for commercial, commercial real
estate and multi-family mortgage loans totaled $862,000, an increase of $762,000
from $100,000 at December 31, 2003 as these loan types grew from 17.8% of the
total loan portfolio at year-end 2003 to 48.3% at year-end 2004. 88.4% of the
allowance was allocated to these loan types at December 31, 2004, as they tend
to be larger balance, higher risk loans than single-family residential
mortgages, where the Company has experienced low historical loss rates.

                                       12
<PAGE>

The following table sets forth the allowance for loan losses in each of the
categories listed at the dates indicated and the percentage of such amounts to
the total allowance and loans in each category as a percent of total loans.
Although the allowance may be allocated to specific loans or loan types, the
entire allowance is available for any loan that, in Management's judgment,
should be charged-off.

<TABLE>
<CAPTION>
                                                                                   AT DECEMBER 31,
                                                  -------------------------------------------------------------------------------
                                                                  2004                                        2003
                                                  -----------------------------------          ----------------------------------
                                                                  % OF        PERCENT                         % OF        PERCENT
                                                                ALLOWANCE     OF LOANS                      ALLOWANCE     OF LOANS
                                                                 IN EACH      IN EACH                        IN EACH      IN EACH
                                                                CATEGORY      CATEGORY                      CATEGORY      CATEGORY
                                                                TO TOTAL      TO TOTAL                      TO TOTAL      TO TOTAL
                                                  AMOUNT        ALLOWANCE       LOANS          AMOUNT       ALLOWANCE       LOANS
                                                  ------        ---------     --------         ------       ---------     --------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                               <C>           <C>           <C>              <C>          <C>           <C>
Single-family mortgage and construction loans     $    4            .41%        38.97%         $  213         51.33%        60.62%

Consumer loans                                       112          11.45%        12.77%            102         24.58%        21.56%
Commercial, commercial real estate and
multi-family mortgage loans                          862          88.14%        48.26%            100         24.09%        17.82%
                                                  ------         ------        ------          ------        ------        ------
   Total allowance for loan losses                $  978         100.00%       100.00%         $  415        100.00%       100.00%
                                                  ======         ======        ======          ======        ======        ======

<CAPTION>
                                                                    AT DECEMBER 31,
                                                          ------------------------------------
                                                                        2002
                                                          ------------------------------------
                                                                         % OF         PERCENT
                                                                       ALLOWANCE      OF LOANS
                                                                       IN EACH        IN EACH
                                                                       CATEGORY       CATEGORY
                                                                       TO TOTAL       TO TOTAL
                                                          AMOUNT       ALLOWANCE        LOANS
                                                          ------       ---------      --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                       <C>          <C>            <C>
Single-family mortgage and construction loans             $  296         82.00%        75.06%

Consumer loans                                                64         17.73%        22.09%
Commercial, commercial real estate and
multi-family mortgage loans                                    1           .27%         2.85%
                                                          ------        ------        ------
   Total allowance for loan losses                        $  361        100.00%       100.00%
                                                          ======        ======        ======
</TABLE>

                                       13
<PAGE>

REAL ESTATE OWNED

At December 31, 2004, real estate owned totaled $132,000 and consisted of 2
single-family residential properties. Assets acquired through or instead of loan
foreclosure are initially recorded at fair value when acquired, establishing a
new cost basis. If fair value declines subsequent to foreclosure, a valuation
allowance is recorded through expense. Costs after acquisition are expensed.

INVESTMENT ACTIVITIES

Federally chartered savings institutions have the authority to invest in various
types of liquid assets, including United States Treasury obligations, securities
of various federal agencies, certificates of deposit of insured banks and
savings institutions, bankers' acceptances and federal funds. Subject to various
restrictions, federally chartered savings institutions may also invest their
assets in commercial paper, investment-grade corporate debt securities and
mutual funds whose assets conform to the investments that a federally chartered
savings institution is otherwise authorized to make directly. Additionally,
minimum levels of investments that qualify as liquid assets under OTS
regulations must be maintained. Historically, liquid assets above the minimum
OTS requirements have been maintained at a level considered to be more than
adequate to meet its normal daily activities.

The investment policy established by the Board of Directors is designed to
provide and maintain liquidity, generate a favorable return on investments
without incurring undue interest rate and credit risk, and complement lending
activities. The Company's policies provide the authority to invest in United
States Treasury and federal agency securities meeting the Company's guidelines
and in mortgage-backed securities guaranteed by the U.S. government and agencies
thereof, as well as municipal bonds. To improve liquidity, the Company
transferred all securities previously classified as "held to maturity" to
"available for sale" in 2003. At December 31, 2004, the securities portfolio
totaled $13.5 million.

At December 31, 2004, all mortgage-backed securities in the securities portfolio
were insured or guaranteed by Freddie Mac or Fannie Mae. There were no
collateralized mortgage obligations that failed stress testing at December 31,
2004. Management reports high risk mortgage derivatives testing results the
Board of Directors each month, at which time the Board may direct management to
divest of any such securities failing any portion of the testing, in accordance
with regulations.

                                       14
<PAGE>

The following table sets forth certain information regarding the amortized cost
and fair value of securities at the dates indicated.

<TABLE>
<CAPTION>
                                                                                     AT DECEMBER 31,
                                                         --------------------------------------------------------------------
                                                                  2004                    2003                    2002
                                                         --------------------    --------------------    --------------------
                                                         AMORTIZED     FAIR      AMORTIZED     FAIR      AMORTIZED     FAIR
                                                            COST       VALUE        COST       VALUE        COST       VALUE
                                                         ---------    -------    ---------    -------    ---------    -------
                                                                                    (DOLLARS IN THOUSANDS)
<S>                                                      <C>          <C>        <C>          <C>        <C>          <C>
Debt securities:
   Debt securities available for sale:
     Federal agency                                       $ 5,018     $ 4,983     $12,755     $12,759     $     -     $     -
     State and municipal                                        -           -       1,370       1,375           -           -
                                                          -------     -------     -------     -------     -------     -------
        Total debt securities available for sale            5,018       4,983      14,125      14,134           -           -
   Debt securities held to maturity:
     U.S. Government and federal agency                         -           -           -           -       2,527       2,557
     Corporate                                                  -           -           -           -       1,996       1,996
                                                          -------     -------     -------     -------     -------     -------
        Total debt securities held to maturity                  -           -           -           -       4,523       4,553
                                                          -------     -------     -------     -------     -------     -------
            Total debt securities                           5,018       4,983      14,125      14,134       4,523       4,553

Mortgage-backed securities:
   Available for sale                                       8,397       8,525      12,697      12,992       1,395       1,439
   Held to maturity                                             -           -           -           -      13,299      13,616
                                                          -------     -------     -------     -------     -------     -------
          Total mortgage-backed securities                  8,397       8,525      12,697      12,992      14,694      15,055

Net unrealized gains on securities available for sale          93           -         304           -          44           -
                                                          -------     -------     -------     -------     -------     -------
Total securities                                          $13,508     $13,508     $27,126     $27,126     $19,261     $19,608
                                                          =======     =======     =======     =======     =======     =======
</TABLE>

                                       15
<PAGE>

The table below sets forth certain information regarding the carrying value,
weighted average yields and contractual maturities of the debt securities
available for sale as of December 31, 2004. Yields are stated on a fully taxable
equivalent basis.

<TABLE>
<CAPTION>
                                                                    AT DECEMBER 31, 2004
                                        -------------------------------------------------------------------------
                                                             MORE THAN ONE YEAR TO       MORE THAN FIVE YEARS TO
                                         ONE YEAR OR LESS         FIVE YEARS                    TEN YEARS
                                        -------------------  ---------------------       ------------------------
                                                   WEIGHTED              WEIGHTED                        WEIGHTED
                                        CARRYING    AVERAGE   CARRYING    AVERAGE        CARRYING         AVERAGE
                                          VALUE      YIELD     VALUE       YIELD          VALUE           YIELD
                                        --------   --------   --------   --------        --------        --------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                     <C>        <C>       <C>         <C>             <C>             <C>
Federal agency                            $   -               $ 4,983      3.37%         $     -
Mortgage-backed                               -                   496      5.35%           3,197           4.55%
                                          -----               -------                    -------
  Total securities at fair value          $   -               $ 5,479      3.55%         $ 3,197           4.55%
                                          =====               =======                    =======

<CAPTION>
                                                                 AT DECEMBER 31, 2004
                                               --------------------------------------------------------

                                                 MORE THAN TEN YEARS                    TOTAL
                                               ----------------------          ------------------------
                                                               WEIGHTED                        WEIGHTED
                                               CARRYING         AVERAGE        CARRYING         AVERAGE
                                                 VALUE           YIELD           VALUE           YIELD
                                               --------        --------        --------        --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                            <C>             <C>             <C>             <C>
Federal agency                                 $      -                        $  4,983          3.37%
Mortgage-backed                                   4,832          4.95%            8,525          4.82%
                                               --------                        --------
  Total securities at fair value               $  4,832          4.95%         $ 13,508          4.28%
                                               ========                        ========
</TABLE>

                                       16
<PAGE>

SOURCES OF FUNDS

GENERAL. Deposits, loan repayments and prepayments, securities maturities and
prepayments, borrowings and cash flows generated from operations are the primary
sources of funds for use in lending, investing and for other general purposes.

DEPOSITS. The Company offers a variety of deposit accounts with a range of
interest rates and terms. The Company's deposits consist of passbook accounts,
savings and club accounts, interest-bearing checking accounts, money market
accounts and certificates of deposit. For the year ended December 31, 2004,
certificates of deposit constituted 46.8% of total average deposits. The term of
the certificates of deposit offered vary from seven days to five years and the
offering rates are established by the Company. Specific terms of an individual
account vary according to the type of account, the minimum balance required, the
time period funds must remain on deposit and the interest rate, among other
factors. The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and
competition. At December 31, 2004, the Company had $29.3 million of certificate
accounts maturing in less than one year. The Company expects that most of these
accounts will be reinvested and does not believe that there are any material
risks associated with the respective maturities of these certificates. Deposits
are obtained predominantly from the area in which its banking offices are
located. The Company does, however, accept brokered deposits. At December 31,
2004, brokered deposits totaled $6.1 million. The Company relies primarily on a
willingness to pay market-competitive interest rates to attract and retain these
deposits. Accordingly, rates offered by competing financial institutions affect
the Company's ability to attract and retain deposits.

At December 31, 2004, the Company had $11.3 million in certificate accounts in
amounts of $100,000 or more maturing as follows:

<TABLE>
<CAPTION>
                                           WEIGHTED
MATURITY PERIOD              AMOUNT      AVERAGE RATE
- ---------------              -------     ------------
                              (DOLLARS IN THOUSANDS)
<S>                          <C>         <C>
Three months or less         $ 3,704         2.47%
Over 3 through 6 months          226         1.82%
Over 6 through 12 months       2,834         2.80%
Over 12 months                 4,495         3.67%
                             -------
   Total                     $11,259
                             =======

</TABLE>

                                       17
<PAGE>

The following table sets forth the distribution of the Company's average deposit
accounts for the periods indicated and the weighted average interest rates on
each category of deposits presented. Averages for the periods presented are
based on month-end balances.

<TABLE>
<CAPTION>
                                                                  FOR THE YEAR ENDED DECEMBER 31,
                                 ------------------------------------------------------------------------------------------------

                                                 2004                            2003                             2002
                                 ---------------------------------  ------------------------------  -------------------------------
                                               PERCENT                          PERCENT                         PERCENT
                                               OF TOTAL    AVERAGE              OF TOTAL  AVERAGE               OF TOTAL    AVERAGE
                                  AVERAGE      AVERAGE      RATE     AVERAGE    AVERAGE    RATE      AVERAGE     AVERAGE      RATE
                                  BALANCE      DEPOSITS     PAID     BALANCE    DEPOSITS   PAID      BALANCE    DEPOSITS      PAID
                                  -------      --------    -------   -------    --------  -------    -------    --------    -------
                                                                         (DOLLARS IN THOUSANDS)
<S>                              <C>           <C>         <C>      <C>         <C>       <C>       <C>         <C>         <C>
Interest-bearing checking
  accounts                       $  11,602       13.82%      .58%   $  8,463      11.25%    .86%    $  8,748      11.47%      1.66%
Money market accounts               10,688       12.73%     2.34%      7,843      10.43%   1.40%       6,146       8.06%      1.49%
Savings accounts                    18,730       22.30%      .57%     18,373      24.43%    .82%      17,812      23.36%      1.69%
Certificates of deposit             39,285       46.78%     2.57%     38,761      51.52%   3.24%      42,792      56.12%      4.63%
Noninterest-bearing deposits:
   Demand deposits                   3,674        4.37%        -       1,781       2.37%      -          754       0.99%         -
                                 ---------      ------              --------     ------             --------     ------
      Total average deposits     $  83,979      100.00%     1.79%   $ 75,221     100.00%   2.14%    $ 76,252     100.00%      3.31%
                                 =========      ======              ========     ======             ========     ======
</TABLE>

The following table presents by various rate categories, the amount of
certificate accounts outstanding at the dates indicated and the periods to
maturity of the certificate accounts outstanding at December 31, 2004.

<TABLE>
<CAPTION>
                                        PERIOD TO MATURITY FROM DECEMBER 31, 2004                   AT DECEMBER 31,
                                   --------------------------------------------------  --------     ---------------     --------
                                   LESS THAN   ONE TO TWO  TWO TO THREE    OVER THREE
                                   ONE YEAR      YEARS         YEARS         YEARS       2004             2003            2002
                                   ---------   ----------  ------------    ----------  --------         --------        --------
                                                                     (DOLLARS IN THOUSANDS)

<S>                                <C>         <C>         <C>             <C>         <C>          <C>                 <C>
Certificate accounts:
0 to 3.99%                         $ 28,669     $ 6,449      $  2,686       $ 1,582    $ 39,386         $ 29,492        $ 23,359
4.00 to 4.99%                           448       2,930           303         2,592       6,273            6,152          12,167
5.00 to 5.99%                           212         443             -             -         655              977           3,421
6.00 to 6.99%                             -           -             -             -           -               61           1,547
7.00 to 7.99%                             -           -             -             -           -                -             160
8.00% and above                           -           -            10             -          10               11              67
                                   --------     -------      --------       -------    --------         --------        --------
   Total certificate accounts      $ 29,329     $ 9,822      $  2,999       $ 4,174    $ 46,324         $ 36,693        $ 40,721
                                   ========     =======      ========       =======    ========         ========        ========
</TABLE>

                                       18
<PAGE>

BORROWINGS. The Company utilizes FHLB advances as an alternative to retail
deposits to fund its operations as part of its operating strategy. These FHLB
advances are collateralized primarily by certain mortgage loans, home equity
lines of credit, commercial real estate loans and mortgage-backed securities and
secondarily by the Company's investment in capital stock of the FHLB. FHLB
advances are made pursuant to several credit programs, each of which has its own
interest rate and range of maturities. The maximum amount that the FHLB will
advance to member institutions fluctuates from time to time in accordance with
the policies of the FHLB.

The Company had a revolving line of credit with an unaffiliated bank, acquired
in the Reserve acquisition, which provides financing primarily for single-family
mortgage loan originations and is collateralized by loan sales proceeds
receivable.

A trust formed by the Company issued $5,000 of 3 month LIBOR plus 2.85% floating
rate trust preferred securities in 2003 as part of a pooled offering of such
securities. The Company issued subordinated debentures to the trust in exchange
for the proceeds of the offering, which debentures represent the sole asset of
the trust. The Company may redeem the subordinated debentures, in whole but not
in part, any time after five years at par. The subordinated debentures must be
redeemed no later than 2033.

Under accounting guidance, FASB Interpretation No. 46, as revised in December
2003, the trust is not consolidated with the Company. Accordingly, the Company
does not report the securities issued by the trust as liabilities, and instead
reports as liabilities the subordinated debentures issued by the Company and
held by the trust.

The following table sets forth certain information regarding borrowed funds at
or for the periods ended on the dates indicated:

<TABLE>
<CAPTION>
                                                                     AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                                     -------------------------------------
                                                                         2004        2003         2002
                                                                     ----------    --------     ----------
                                                                             (DOLLARS IN THOUSANDS)
<S>                                                                  <C>           <C>          <C>
FHLB advances and other borrowings:
   Average balance outstanding                                       $   31,265    $ 12,192     $   19,902
   Maximum amount outstanding at any month-end during the period         48,574      16,542         19,370
   Balance outstanding at end of period                                  48,574      12,655         16,330
   Weighted average interest rate during the period                        2.28%       5.59%          4.83%
   Weighted average interest rate at end of period                         2.76%       2.28%          5.53%
</TABLE>

SUBSIDIARY ACTIVITIES

As of December 31, 2004, the Company maintained the Bank and Trust as wholly
owned subsidiaries. Reserve Mortgage Services, Inc., a wholly owned subsidiary
of the Bank was acquired in October 2004.

PERSONNEL

As of December 31, 2004, the Company had 54 full-time and 2 part-time employees.

                                       19
<PAGE>

REGULATION AND SUPERVISION

GENERAL. As a savings and loan holding company, the Company is required by
federal law to report to, and otherwise comply with the rules and regulations
of, the Office of Thrift Supervision ("OTS"). The Bank is subject to extensive
regulation, examination and supervision by the OTS, as its primary federal
regulator, and the Federal Deposit Insurance Corporation ("FDIC"), as the
deposit insurer. The Bank is a member of the Federal Home Loan Bank System and,
with respect to deposit insurance, of the Savings Bank Insurance Fund ("SAIF")
managed by the FDIC. The Bank must file reports with the OTS and the FDIC
concerning its activities and financial condition in addition to obtaining
regulatory approvals prior to entering into certain transactions such as mergers
with, or acquisitions of, other savings institutions. The OTS and/or the FDIC
conduct periodic examinations to test the Bank's safety and soundness and
compliance with various regulatory requirements. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the insurance fund and
depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such regulatory requirements and
policies, whether by the OTS, the FDIC or Congress, could have a material
adverse impact on the Company and its operations. Certain regulatory
requirements applicable to the Company are referred to below or elsewhere
herein. The description of statutory provisions and regulations applicable to
savings institutions and their holding companies set forth in this Form 10-KSB
does not purport to be a complete description of such statutes and regulations
and their effects on the Bank and the Company.

SARBANES-OXLEY ACT OF 2002. The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act)
was enacted on July 30, 2002. The Sarbanes-Oxley Act represents a comprehensive
revision of laws affecting corporate governance and financial disclosure. The
Sarbanes-Oxley Act is applicable to all companies with equity securities
registered or that file reports under the Securities Exchange Act of 1934,
including the Company. The Sarbanes-Oxley Act establishes, among other things:
(i) new requirements for audit committees; (ii) additional responsibilities
regarding financial statements for the Chief Executive Officer and Chief
Financial Officer; (iii) new standards for auditors and regulations governing
audits; (iv) increased disclosure and reporting obligations for the reporting
company and its directors and executive officers: and (v) new and increased
civil and criminal penalties for violations of the securities laws.

HOLDING COMPANY REGULATION. The Company is a nondiversified unitary savings and
loan holding company within the meaning of federal law. Under prior law, a
unitary savings and loan holding company, such as the Company, was not generally
restricted as to the types of business activities in which it may engage,
provided that the Bank continued to be a qualified thrift lender. See "Federal
Savings Institution Regulation - QTL Test." The Gramm-Leach-Bliley Act of 1999
provides that no company may acquire control of a savings Bank after May 4, 1999
unless it engages only in the financial activities permitted for financial
holding companies under the law or for multiple savings and loan holding
companies as described below. Further, the Gramm-Leach-Bliley Act specifies that
existing savings and loan holding companies may only engage in such activities.
The Gramm-Leach-Bliley Act, however, grandfathered the unrestricted authority
for activities with respect to unitary savings and loan holding companies
existing prior to May 4, 1999, so long as the holding company's savings Bank
subsidiary continues to comply with the QTL Test. The Company does qualify for
the grandfathering. Upon any non-supervisory acquisition by the Company of
another savings institution or savings bank that meets the qualified thrift
lender test and is deemed to be a savings institution by the OTS, the Company
would become a multiple savings and loan holding company (if the acquired
institution is held as a separate subsidiary) and would generally be limited to
activities permissible for bank holding companies under Section 4(c)(8) of the
Bank Holding Company Act, subject to the prior approval of the OTS, and certain
activities authorized by OTS regulation. However, the OTS has issued an
interpretation concluding that

                                       20
<PAGE>

multiple savings and loan holding companies may also engage in activities
permitted for financial holding companies.

A savings and loan holding company is prohibited from, directly or indirectly,
acquiring more than 5% of the voting stock of another savings institution or
savings and loan holding company, without prior written approval of the OTS and
from acquiring or retaining control of a depository institution that is not
insured by the FDIC. In evaluating applications by holding companies to acquire
savings institutions, the OTS considers the financial and managerial resources
and future prospects of the company and institution involved, the effect of the
acquisition on the risk to the deposit insurance funds, the convenience and
needs of the community and competitive factors.

The OTS may not approve any acquisition that would result in a multiple savings
and loan holding company controlling savings institutions in more than one
state, subject to two exceptions: (i) the approval of interstate supervisory
acquisitions by savings and loan holding companies and (ii) the acquisition of a
savings institution in another state if the laws of the state of the target
savings institution specifically permit such acquisitions. The states vary in
the extent to which they permit interstate savings and loan holding company
acquisitions.

Although savings and loan holding companies are not currently subject to
specific capital requirements or specific restrictions on the payment of
dividends or other capital distributions, federal regulations do prescribe such
restrictions on subsidiary savings institutions as described below. The Bank
must notify the OTS 30 days before declaring any dividend to the Company. In
addition, the financial impact of a holding company on its subsidiary
institution is a matter that is evaluated by the OTS and the agency has
authority to order cessation of activities or divestiture of subsidiaries deemed
to pose a threat to the safety and soundness of the institution.

ACQUISITION OF THE HOLDING COMPANY. Under the Federal Change in Bank Control Act
("CIBCA"), a notice must be submitted to the OTS if any person (including a
company), or group acting in concert, seeks to acquire 10% or more of the
Company's outstanding voting stock, unless the OTS has found that the
acquisition will not result in a change of control of the Company. Under the
CIBCA, the OTS has 60 days from the filing of a complete notice to act, taking
into consideration certain factors, including the financial and managerial
resources of the acquirer and the anti-trust effects of the acquisition. Any
company that acquires control would then be subject to regulation as a savings
and loan holding company.

FEDERAL SAVINGS INSTITUTION REGULATION

Business Activities. The activities of federal savings banks are governed by
federal law and regulations. These laws and regulations delineate the nature and
extent of the activities in which federal banks may engage. In particular,
certain lending authority for federal banks, e.g., commercial, non-residential
real property loans and consumer loans, is limited to a specified percentage of
the institution's capital or assets.

Capital Requirements. The OTS capital regulations require savings institutions
to meet three minimum capital standards: a 1.5% tangible capital to total assets
ratio, a 4% leverage ratio (3% for institutions receiving the highest rating on
the CAMELS examination rating system) and an 8% risk-based capital ratio. In
addition, the prompt corrective action standards discussed below also establish,
in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for
institutions receiving the highest CAMELS rating), and, together with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The
OTS regulations also require that, in meeting the tangible, leverage and
risk-based capital standards, institutions must generally deduct investments in
and loans to subsidiaries engaged in activities as principal that are not
permissible for a national bank.

                                       21
<PAGE>

The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance-sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the OTS capital regulation based on the risks
believed inherent in the type of asset. Core (Tier 1) capital is defined as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus, and minority interests in equity
accounts of consolidated subsidiaries less intangibles other than certain
mortgage servicing rights and credit card relationships. The components of
supplementary capital currently include cumulative preferred stock, long-term
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock, the allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted assets and up to 45% of
unrealized gains on available-for-sale equity securities with readily
determinable fair market values. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.

The OTS also has authority to establish individual minimum capital requirements
in appropriate cases upon a determination that an institution's capital level is
or may become inadequate in light of the particular circumstances. At December
31, 2004, the Bank met each of its capital requirements.

The following table presents the Bank's capital position at December 31, 2004:

<TABLE>
<CAPTION>
                                             EXCESS            CAPITAL
                                          ------------   -------------------
                   ACTUAL     REQUIRED    (DEFICIENCY)    ACTUAL    REQUIRED
                  CAPITAL     CAPITAL       AMOUNT       PERCENT    PERCENT
                  --------    --------    ------------   -------    --------
                                    (DOLLARS IN THOUSANDS)
<S>               <C>         <C>         <C>            <C>        <C>
Tangible          $ 13,576    $  2,522    $    11,054       8.1%       1.5%

Core (Leverage)     13,576       6,726          6,850       8.1%       4.0%

Risk-based          14,555       9,580          4,975      12.2%       8.0%
</TABLE>

Prompt Corrective Regulatory Action. The OTS is required to take certain
supervisory actions against undercapitalized institutions, the severity of which
depends upon the institution's degree of undercapitalization. Generally, a
savings institution that has a ratio of total capital to risk weighted assets of
less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less
than 4% or a ratio of core capital to total assets of less than 4% (3% or less
for institutions with the highest examination rating) is considered to be
"undercapitalized." A savings institution that has a total risk-based capital
ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio
that is less than 3% is considered to be "significantly undercapitalized" and a
savings institution that has a tangible capital to assets ratio equal to or less
than 2% is deemed to be "critically undercapitalized." Subject to a narrow
exception, the OTS is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the OTS within 45 days of the
date a savings institution receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." Compliance
with the plan must be guaranteed by any parent holding company. In addition,
numerous mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion. The OTS could also take any one of a number of discretionary
supervisory actions, including the issuance of a capital directive and the
replacement of senior executive officers and directors.

                                       22

<PAGE>

Insurance of Deposit Accounts. The Bank is a member of the SAIF. The FDIC
maintains a risk-based assessment system by which institutions are assigned to
one of three categories based on their capitalization and one of three
subcategories based on examination ratings and other supervisory information. An
institution's assessment rate depends upon the categories to which it is
assigned. Assessment rates for SAIF member institutions are determined
semi-annually by the FDIC and currently range from zero basis points for the
healthiest institutions to 27 basis points of assessable deposits for the
riskiest.

In addition to the assessment for deposit insurance, institutions are required
to make payments on bonds issued in the late 1980s by the Financing Corporation
("FICO") to recapitalize the predecessor to the SAIF. During 2003, FICO payments
for SAIF members approximated 1.54 basis points of assessable deposits. The
Bank's total assessment paid for 2004 (including the FICO assessment) was
$12,167. The FDIC has authority to increase insurance assessments. A significant
increase in SAIF insurance premiums would likely have an adverse effect on the
operating expenses and results of operations of the Company. Management cannot
predict what insurance assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or the OTS. The
management of the Company does not know of any practice, condition or violation
that might lead to termination of deposit insurance.

Loans to One Borrower. Federal law provides that savings institutions are
generally subject to the limits on loans to one borrower applicable to national
banks. A savings institution may not make a loan or extend credit to a single or
related group of borrowers in excess of 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired capital
and surplus, if secured by specified readily-marketable collateral. At December
31, 2004, the Bank's 15% limit on loans to one borrower was $2.1 million. At
December 31, 2004, the Bank did not have a lending relationship in excess of
this limit.

QTL Test. The HOLA requires savings institutions to meet a qualified thrift
lender test. Under the test, a savings bank is required to either qualify as a
"domestic building and loan bank" under the Internal Revenue Code or maintain at
least 65% of its "portfolio assets" (total assets less: (i) specified liquid
assets up to 20% of total assets; (ii) intangibles, including goodwill; and
(iii) the value of property used to conduct business) in certain "qualified
thrift investments" (primarily residential mortgages and related investments,
including certain mortgage-backed securities) in at least 9 months out of each
12 month period.

A savings institution that fails the qualified thrift lender test is subject to
certain operating restrictions and may be required to convert to a bank charter.
As of December 31, 2004, the Bank maintained 95.06% of its portfolio assets in
qualified thrift investments and, therefore, met the qualified thrift lender
test. Recent legislation has expanded the extent to which education loans,
credit card loans and small business loans may be considered "qualified thrift
investments."

Limitation on Capital Distributions. OTS regulations impose limitations upon all
capital distributions by a savings institution, including cash dividends,
payments to repurchase its shares and payments to shareholders of another
institution in a cash-out merger. Under the regulation, an application to and
the prior approval of the OTS is required prior to any capital distribution if
the institution does not meet the criteria for "expedited treatment" of
applications under OTS regulations (i.e., generally, examination ratings in the
two top categories), the total capital distributions for the calendar year
exceed net income for that year plus the amount of retained net income for the
preceding two years, the institution would be undercapitalized following the
distribution or the distribution would otherwise be contrary to a statute,
regulation or agreement with the OTS. If an application is not required, the
institution must still provide

                                       23

<PAGE>

prior notice to the OTS of the capital distribution if, like the Bank, it is a
subsidiary of a holding company. In the event the Bank's capital fell below its
regulatory requirements or the OTS notified it that it was in need of increased
supervision, the Bank's ability to make capital distributions could be
restricted. In addition, the OTS could prohibit a proposed capital distribution
by any institution, which would otherwise be permitted by the regulation, if the
OTS determines that such distribution would constitute an unsafe or unsound
practice.

Assessments. Savings institutions are required to pay assessments to the OTS to
fund the agency's operations. The general assessments, paid on a semi-annual
basis, are computed upon the savings institution's total assets, including
consolidated subsidiaries, as reported in the Bank's latest quarterly thrift
financial report. The assessments paid by the Bank for 2004 totaled $36,113.

Transactions with Related Parties. The Bank's authority to engage in
transactions with "affiliates" (e.g., any company that controls or is under
common control with an institution, including the Company and its non-savings
institution subsidiaries) is limited by federal law. The aggregate amount of
covered transactions with any individual affiliate is limited to 10% of the
capital and surplus of the savings institution. The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus. Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in federal law. The
purchase of low quality assets from affiliates is generally prohibited. The
transactions with affiliates must be on terms and under circumstances, that are
at least as favorable to the institution as those prevailing at the time for
comparable transactions with non-affiliated companies. In addition, savings
institutions are prohibited from lending to any affiliate that is engaged in
activities that are not permissible for bank holding companies and no savings
institution may purchase the securities of any affiliate other than a
subsidiary.

The recently enacted Sarbanes Oxley Act generally prohibits loans by the Company
to its executive officers and directors. However, that act contains a specific
exception for loans by the Bank to its executive officer's and directors in
compliance with federal banking laws. Under such laws the Bank's authority to
extend credit to executive officers, directors and 10% shareholders
("insiders"), as well as entities such persons control, is limited. The law
limits both the individual and aggregate amount of loans the Bank may make to
insiders based, in part, on the Bank's capital position and requires certain
board approval procedures to be followed. Such loans are required to be made on
terms substantially the same as those offered to unaffiliated individuals and
not involve more than the normal risk of repayment. There is an exception for
loans made pursuant to a benefit or compensation program that is widely
available to all employees of the institution and does not give preference to
insiders over other employees.

Enforcement. The OTS has primary enforcement responsibility over savings
institutions and has the authority to bring actions against the institution and
all institution-affiliated parties, including stockholders, and any attorneys,
appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured institution. Formal
enforcement action may range from the issuance of a capital directive or cease
and desist order to removal of officers and/or directors to institution of
receivership, conservatorship or termination of deposit insurance. Civil
penalties cover a wide range of violations and can amount to $25,000 per day, or
even $1 million per day in especially egregious cases. The FDIC has the
authority to recommend to the Director of the OTS that enforcement action to be
taken with respect to a particular savings institution. If action is not taken
by the Director, the FDIC has authority to take such action under certain
circumstances. Federal law also establishes criminal penalties for certain
violations.

Standards for Safety and Soundness. The federal banking agencies have adopted
interagency guidelines prescribing standards for safety and soundness. The
guidelines set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. If the OTS determines that a savings
institution fails to

                                       24

<PAGE>

meet any standard prescribed by the guidelines, the OTS may require the
institution to submit an acceptable plan to achieve compliance with the
standard.

FEDERAL HOME LOAN BANK SYSTEM

The Bank is a member of the Federal Home Loan Bank System, which consists of 12
regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central
credit facility primarily for member institutions. The Bank, as a member of the
Federal Home Loan Bank, is required to acquire and hold shares of capital stock
in that Federal Home Loan Bank in an amount at least equal to 1.0% of the
aggregate principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances (borrowings)
from the Federal Home Loan Bank, whichever is greater. The Bank was in
compliance with this requirement with an investment in Federal Home Loan Bank
stock at December 31, 2004 of $3.8 million.

The Federal Home Loan Banks are required to provide funds for the resolution of
insolvent thrifts in the late 1980s and to contribute funds for affordable
housing programs. These requirements could reduce the amount of dividends that
the Federal Home Loan Banks pay to their members and could also result in the
Federal Home Loan Banks imposing a higher rate of interest on advances to their
members. If dividends were reduced, or interest on future Federal Home Loan Bank
advances increased, The Company's net interest income would likely also be
reduced. Recent legislation has changed the structure of the Federal Home Loan
Banks funding obligations for insolvent thrifts, revised the capital structure
of the Federal Home Loan Banks and implemented entirely voluntary membership for
Federal Home Loan Banks. Management cannot predict the effect that these changes
may have with respect to its Federal Home Loan Bank membership.

FEDERAL RESERVE SYSTEM

The Federal Reserve Board regulations require savings institutions to maintain
non-interest earning reserves against their transaction accounts (primarily
checking accounts). The regulations generally provide that reserves be
maintained against aggregate transaction accounts as follows: a 3% reserve ratio
is assessed on net transaction accounts up to and including $47.6 million; a 10%
reserve ratio is applied above $47.6. The first $7.0 million of otherwise
reservable balances (subject to adjustments by the Federal Reserve Board) are
exempted from the reserve requirements. These amounts are adjusted annually. The
Bank complies with the foregoing requirements.

FEDERAL AND STATE TAXATION

FEDERAL TAXATION

General. The Company reports income on a calendar year, consolidated basis using
the accrual method of accounting, and is subject to federal income taxation in
the same manner as other corporations, with some exceptions discussed below. The
following discussion of tax matters is intended only as a summary and does not
purport to be a comprehensive description of the tax rules applicable to the
Company. For its 2004 taxable year, the Company is subject to a maximum federal
income tax rate of 34%.

Distributions. Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Bank's unrecaptured tax bad debt reserves (including the
balance of its reserves as of December 31, 1987) to the extent thereof, and then
from the Bank's supplemental reserve for losses on loans, to the extent thereof,
and an amount based on the amount distributed (but not in excess of the amount
of such reserves) will be included in the Bank's taxable income. Non-dividend
distributions include distributions in excess of the Bank's current and

                                       25

<PAGE>

accumulated earnings and profits, as calculated for federal income tax purposes,
distributions in redemption of stock, and distributions in partial or complete
liquidation.

Dividends paid out of the Bank's current or accumulated earnings and profits
will not be so included in the Bank's taxable income. At year-end 2004, the
Bank had approximately $922,000 in accumulated earnings and profits.

The amount of additional taxable income triggered by a non-dividend is an amount
that, when reduced by the tax attributable to the income, is equal to the amount
of the distribution. Thus, if the Bank makes a non-dividend distribution to the
Company, approximately one and one-half times the amount of such distribution
(but not in excess of the amount of such reserves) would be includable in income
for federal income tax purposes, assuming a 34% federal corporate income tax
rate. The Bank does not intend to pay dividends that would result in a recapture
of any portion of its bad debt reserves.

OHIO TAXATION

The Company is subject to the Ohio corporation franchise tax, which, as applied
to the Company, is a tax measured by both net earnings and net worth. In
general, the tax liability is the greater of 5.1% on the first $50,000 of
computed Ohio taxable income and 8.5% of computed Ohio taxable income in excess
of $50,000 or 0.4% times of taxable net worth. Under these alternative measures
of computing tax liability, complex formulas determine the jurisdictions to
which total net income and total net worth are apportioned or allocated. The
minimum tax is $1,000 per year and maximum tax liability as measured by net
worth is limited to $150,000 per year.

A special litter tax also applies to all corporations, including the Company,
subject to the Ohio Corporation franchise tax. This litter tax does not apply to
"financial institutions." If the franchise tax is paid on the net income basis,
the litter tax is equal to 0.11% of the first $50,000 of computed Ohio taxable
income and 0.22% of computed Ohio taxable income in excess of $50,000. If the
franchise tax is paid on the net worth basis, the litter tax is equal to 0.014%
times taxable net worth.

Certain holding companies, such as the Company, will qualify for complete
exemption from the net worth tax if certain conditions are met. The Company will
most likely meet these conditions, and thus, calculate its Ohio franchise tax on
the net income basis.

The Bank is a "financial institution" for State of Ohio tax purposes. As such,
it is subject to the Ohio corporate franchise tax on "financial institutions,"
which is imposed annually at a rate of 1.3% of the Bank's apportioned book net
worth, determined in accordance with generally accepted accounting principles,
less any statutory deduction. As a "financial institution," the Bank is not
subject to any tax based upon net income or net profits imposed by the State of
Ohio.

DELAWARE TAXATION

As a Delaware holding company not earning income in Delaware, the Company is
exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual franchise tax to the State of Delaware.

AVAILABLE INFORMATION

The Company's website address is www.CFBankonline.com. The Company makes
available free of charge through its website its annual report on Form 10-KSB,
its quarterly reports on Form 10-QSB, its current reports on Form 8-K and any
amendments to these reports as soon as reasonably practicable after it
electronically files such reports with the Securities and Exchange Commission.
These reports can be found on the Company's website under the caption "CF News
and Links - Investor Relations - SEC

                                       26

<PAGE>

Filings." Investors also can obtain copies of the Company's filings from the
Securities and Exchange Commission's website at www.sec.gov.

                                       27

<PAGE>

ITEM 2      DESCRIPTION OF PROPERTY

The Company conducts its business through five offices located in Summit,
Columbiana, Jefferson and Franklin Counties, Ohio.

<TABLE>
<CAPTION>
                                         ORIGINAL                   NET BOOK VALUE OF
                                           YEAR        DATE OF    PROPERTY OR LEASEHOLD
                             LEASED OR   LEASED OR      LEASE        IMPROVEMENTS AT
LOCATION                       OWNED     ACQUIRED    EXPIRATION     DECEMBER 31, 2004
- --------                     ---------   ---------   ----------   ----------------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                          <C>         <C>         <C>          <C>
OFFICES:
2923 Smith Rd                 Leased      2004          2014            $   259
Fairlawn, Ohio 44333

601 Main Street               Owned       1989           -                  751
Wellsville, Ohio 43968

49028 Foulks Drive            Owned       1979           -                  327
East Liverpool, Ohio 43920

4249 Easton Way, Suite 125    Leased      2003          2009                 15
Columbus, Ohio 43219

RESERVE MORTGAGE SERVICES
1730 Akron-Peninsula Rd       Leased      2004          2009                 44
Akron, Ohio 44313
</TABLE>

ITEM 3      LEGAL PROCEEDINGS

The Company may, from time to time, be involved in various legal proceedings in
the normal course of business. Periodically, there have been various claims and
lawsuits involving the Company, such as claims to enforce liens, condemnation
proceedings on properties in which the Company holds security interests, claims
involving the making and servicing of real property loans and other issues
incident to the Company's business. The Company is not a party to any pending
legal proceedings that the Company believes would have a material adverse effect
on its financial condition or operations, if decided adversely to the Company.

ITEM 4      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held a special meeting of stockholders on March 14, 2005 to approve
an amendment to the Company's Certificate of Incorporation to effect a
one-for-325 reverse stock split of the Company's common stock, thereby
permitting the Company to apply to the Securities and Exchange Commission to
terminate the registration of its common stock pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934. Results of shareholder voting were as
follows:

<TABLE>
<S>                   <C>
For:                  1,158,219
Against:                123,013
Abstain:                  2,550
</TABLE>

                                       28

<PAGE>

Although the measure was approved by stockholders, the Board of Directors
abandoned the transaction on March 17, 2004 in the interest of the Company and
its shareholders, as the capital cost of the transaction was in excess of the $2
million ceiling which the board had set as the cost for going private. A press
release announcing the abandonment of the transaction was issued on March 18,
2004, and the Company filed an amended Schedule 13E-3 with the Commission on
March 22, 2004 to report the abandonment.

                                     PART II

ITEM 5      MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
            BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

The market information required by Item 201(a), the stockholders information
required by Item 201(b) and the dividend information required by Item 201(c) of
Regulation S-B is incorporated by reference to the Company's 2004 Annual Report
to shareholders distributed to shareholders and furnished to the Commission
under Rule 14a-3(b) of the Exchange Act; the information appears under the
caption "Market Prices and Dividends Declared" on page 16 and in "Note 17 -
Capital Requirements and Restrictions on Retained Earnings" at page 37 therein,
respectively.

The equity compensation plan information required by Item 201(d) of Regulation
S-B is set forth herein under Part III, Item 11, Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 701 of Regulation S-B with respect to the
Company's sales of unregistered securities during fiscal 2004 has been reported
previously in filings made with the Commission. The information required by Item
703 of Regulation S-B is as follows:

                      ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
                                                                           Maximum
                                                                         Number (or
                                                         Total Number    Approximate
                                                          of Shares     Dollar Value)
                                                          (or Units)    of Shares (or
                                                         Purchased as    Units) that
                                                           Part of       May Yet Be
                                             Average       Publicly       Purchased
                         Total Number of    Price Paid     Announced      Under the
                        Shares (or Units)   per Share      Plans or       Plans or
Period                      Purchased       (or Unit)      Programs       Programs
- ------                  -----------------   ----------   ------------   -------------
<S>                     <C>                 <C>          <C>            <C>
October 1 - 31, 2004             -                 -              -              -
November 1 - 30, 2004            -                 -              -              -
December 1 - 31, 2004       15,000 (1)      $  12.57              -              -
</TABLE>

- ----------
(1) shares purchased in an open market transaction.

                                       29

<PAGE>

ITEM 6      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Information required by Item 303 of Regulation S-B is incorporated by reference
to the Company's 2004 Annual Report to shareholders distributed to shareholders
and furnished to the Commission under Rule 14a-3(b) of the Exchange Act; the
information appears under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" at page 4 therein.

ITEM 7      FINANCIAL STATEMENTS

The consolidated financial statements required by Item 310(a) of Regulation S-B
are incorporated by reference to the Company's 2004 Annual Report to
shareholders distributed to shareholders and furnished to the Commission under
Rules 14a-3(b) and (c) of the Exchange Act; the financial statements appear
under the caption "Financial Statements" at page 17 therein and include the
following:

       Report of Independent Registered Public Accounting Firm
       Consolidated Balance Sheets
       Consolidated Statements of Operations
       Consolidated Statements of Comprehensive Income (Loss)
       Consolidated Statements of Changes in Shareholders' Equity
       Consolidated Statements of Cash Flows
       Notes to Consolidated Financial Statements

ITEM 8      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

None.

ITEM 8A     CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. The Company maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Company's Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to the Company's management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure based closely on the definition of "disclosure controls and
procedures" in Rule 13a-14(c). The Company's management, with the participation
of the Company's Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of its disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (Exchange Act)) as of the end of the period covered by this report.
Based on such evaluation, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act.

Changes in internal controls. The Company made no significant changes in its
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the completion of the evaluation of those
controls by the Chief Executive Officer and Chief Financial Officer.

ITEM 8B     OTHER INFORMATION

None.

                                       30

<PAGE>

                                    PART III

ITEM 9      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors. Information required by Item 401 of Regulation S-B with respect to
the Company's directors and committees of the Board of Directors is incorporated
by reference to the Company's definitive Proxy Statement for its 2005 Annual
Meeting of Stockholders filed with the Commission on March 30, 2005, under the
caption "PROPOSAL 1. ELECTION OF DIRECTORS."

Executive Officers of the Registrant

<TABLE>
<CAPTION>
                            AGE AT
                         DECEMBER 31,
        NAME                 2004         POSITION HELD WITH THE COMPANY AND/OR SUBSIDIARIES
- --------------------     ------------     --------------------------------------------------
<S>                      <C>              <C>
David C. Vernon (1)           64          Chairman, President and Chief Executive Officer,
                                          Company; Chairman and Chief Executive Officer, Bank

Mark S. Allio (2)             50          Vice Chairman, President and Chief Executive
                                          Officer, Company; Vice Chairman and Chief
                                          Executive Officer, Bank

Raymond E. Heh                62          President and Chief Operating Officer, Bank

R. Parker MacDonell           50          Regional President - Columbus, Bank

Richard J. O'Donnell          55          President and Chief Executive Officer, Reserve
                                          Mortgage Services, Inc.

Eloise L. Mackus              54          Senior Vice President, General Counsel and
                                          Secretary, Company and Bank

Therese A. Liutkus            45          Treasurer and Chief Financial Officer, Company and
                                          Bank
</TABLE>

- ----------
(1) Mr. Vernon held these positions thru January 31, 2005, after which time he
    retained the title of Chairman of the Board of Directors.

(2) Mr. Allio was appointed to these positions effective February 1, 2005

David C. Vernon is Chairman of the Board of the Company and Bank. He served as
President and Chief Executive Officer of the Company and Chief Executive Officer
of the Bank until January 31, 2005. Prior to assuming those positions with the
Company and Bank in 2003, he was Chairman and CEO of Founders Capital
Corporation. Prior to forming Founders Capital Corporation, Mr. Vernon was
Chairman, President and CEO of Summit Bancorp and Summit Bank in Akron, Ohio.

Mark S. Allio was appointed Vice Chairman, President and Chief Executive Officer
of the Company and Vice Chairman and Chief Executive Officer of the Bank on
February 1, 2005. Mr. Allio was President and Chief Executive Officer of Rock
Bank (in formation) in Livonia, Michigan from April 2003 to December 2004,
President of Third Federal Savings, MHC in Cleveland, Ohio from January 2000 to

                                      31
<PAGE>

December 2002, Chief Financial Officer of Third Federal from 1988 through 1999,
and has worked in banking for more than 17 years.

Raymond E. Heh, President and Chief Operating Officer, joined the Bank in June
2003. Formerly, Mr. Heh held numerous positions at Bank One Akron NA including
Chairman, President and CEO. He was with Bank One Akron NA for 18 years and has
40 years of experience in the commercial banking industry. Mr. Heh is a graduate
of The Pennsylvania State University.

R. Parker MacDonell is Regional President - Columbus and joined the Bank in May
2003. Mr. MacDonell is a third generation Ohio banker with 18 years of
commercial banking experience. He is a former Senior Vice President of Bank One
Columbus NA, a position he held for three years during his 15 year tenure with
Bank One. He is a graduate of Dartmouth College and received his master's degree
from Yale University.

Richard J. O'Donnell has been President and Chief Executive Officer, Reserve
Mortgage Services, Inc. (formerly RJO Financial Services, Inc.), 1730
Akron-Peninsula Road, Akron, Ohio 44313, since 1995. Reserve Mortgage Services,
Inc. was acquired by the Company in October 2004.

Eloise L. Mackus is Senior Vice President, General Counsel and Secretary of the
Company and Bank. Prior to joining the Company and Bank in July 2003, Ms. Mackus
practiced in law firms in Connecticut and Ohio and was the Vice President and
General Manager of International Markets for The J. M. Smucker Company. Ms.
Mackus completed a BA at Calvin College and a JD at The University of Akron
School of Law.

Therese A. Liutkus joined the Company and Bank as Chief Financial Officer in
November 2003. Prior to that time, Ms. Liutkus was Chief Financial Officer of
First Place Financial Corp. and First Place Bank for five years and she has 18
years of banking experience. Ms. Liutkus is a certified public accountant and
has a Bachelor's degree in accounting from Cleveland State University.

Compliance with Section 16(a) of the Exchange Act. Information required by Item
405 of Regulation S-B is incorporated by reference to the Company's definitive
Proxy Statement for its 2005 Annual Meeting of Stockholders filed with the
Commission on March 30, 2005, under the caption "ADDITIONAL INFORMATION ABOUT
DIRECTORS AND EXECUTIVE OFFICERS - Compliance with Section 16(a) of the Exchange
Act." Copies of Section 16 reports, Forms 3, 4 and 5, are available on the
Company's website, www.CFBankonline.com under the caption "CF News and Links -
Investor Relations - Section 16 Filings."

Code of Ethics. The Company has adopted a code of ethics, its Financial Code of
Ethics, which meets the requirements of Item 406 of Regulation S-B and applies
to the Company's principal executive officer, principal financial officer and
principal accounting officer. Since the Company's inception in 1998, it has had
a Code of Business Conduct and Ethics (Code of Conduct). The Company requires
all directors, officers and other employees to adhere to the Code of Conduct in
addressing the legal and ethical issues encountered in conducting their work.
The Code of Conduct requires that the Company's employees avoid conflicts of
interest, comply with all laws and other legal requirements, conduct business in
an honest and ethical manner and otherwise act with integrity and in the
Company's best interest. The Company's Financial Code of Ethics and Code of
Conduct are available on the Company's website, www.CFBankonline.com under the
caption "CF News and Links - Investor Relations - Corporate Governance."

                                      32
<PAGE>

ITEM 10      EXECUTIVE COMPENSATION

Information required by Item 402 of Regulation S-B is incorporated by reference
to the Company's definitive Proxy Statement for its 2005 Annual Meeting of
Stockholders filed with the Commission on March 30, 2005, under the caption
"EXECUTIVE COMPENSATION."

ITEM 11     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
            RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners and Management. Information
required by Item 403 of Regulation S-B is incorporated by reference to the
Company's definitive Proxy Statement for its 2005 Annual Meeting of Stockholders
filed with the Commission on March 30, 2005, under the caption "STOCK
OWNERSHIP."

Related Stockholder Matters. Information required by Item 201(d) of Regulation
S-B is incorporated by reference to the Company's definitive Proxy Statement for
its 2005 Annual Meeting of Stockholders filed with the Commission on March 30,
2005, under the caption "PROPOSAL 2: SECOND AMENDED AND RESTATED CENTRAL FEDERAL
CORPORATION 2003 EQUITY COMPENSATION PLAN - EQUITY COMPENSATION PLAN
INFORMATION."

See Part II, Item 7, Financial Statements, Notes 12 and 16, for a description of
the principal provisions of the Company's equity compensation plans. The
information required by Item 7 is incorporated by reference to the Company's
2004 Annual Report to shareholders distributed to shareholders and furnished to
the Commission under Rules 14a-3(b) and (c) of the Exchange Act; the financial
statements appear under the caption "Financial Statements" at page 17 therein.

ITEM 12     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by Item 404 of Regulation S-B is incorporated by reference
to the Company's definitive Proxy Statement for its 2005 Annual Meeting of
Stockholders filed with the Commission on March 30, 2005, under the caption
"ADDITIONAL INFORMATION ABOUT DIRECTORS AND OFFICERS - Certain Relationships and
Related Transactions."

ITEM 13     EXHIBITS

See Exhibit Index at page 35 of this report on Form 10-KSB.

ITEM 14     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by Item 9(e) of Schedule 14A pursuant to this Item 14 is
incorporated by reference to the Company's definitive Proxy Statement for its
2005 Annual Meeting of Stockholders filed with the Commission on March 30, 2005,
under the caption "PROPOSAL 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT
ACCOUNTANTS."

                                       33
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                            CENTRAL FEDERAL CORPORATION

                            /s/ Mark S. Allio
                            ----------------------------------------------------
                            Mark S. Allio
                            Vice Chairman, President and Chief Executive Officer

                            Date: March 30, 2005

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
                 Name                                   Title                         Date
- ------------------------------------    -------------------------------------   ---------------
<S>                                     <C>                                     <C>
/s/ Mark S. Allio                       Vice Chairman of the Board, President    March 30, 2005
- ------------------------------------    and Chief Executive Officer
Mark S. Allio
(principal executive officer)

/s/ Therese Ann Liutkus                 Treasurer and Chief Financial Officer    March 30, 2005
- ------------------------------------
Therese Ann Liutkus, CPA
(principal accounting
and financial officer)

/s/ David C. Vernon                     Chairman of the Board                    March 30, 2005
- ------------------------------------
David C. Vernon

/s/ Jeffrey W. Aldrich                  Director                                 March 30, 2005
- ------------------------------------
Jeffrey W. Aldrich

/s/ Thomas P. Ash                       Director                                 March 30, 2005
- ------------------------------------
Thomas P. Ash

/s/ William R. Downing                  Director                                 March 30, 2005
- ------------------------------------
William R. Downing

/s/ Gerry W. Grace                      Director                                 March 30, 2005
- ------------------------------------
Gerry W. Grace

/s/ Jerry F. Whitmer                    Director                                 March 30, 2005
- ------------------------------------
Jerry F. Whitmer
</TABLE>

                                      34
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                             Description of Exhibit
- -----------  -------------------------------------------------------------------------
<S>          <C>
    3.1      Certificate of Incorporation of Central Federal Corporation (incorporated
             by reference to Exhibit 3.1 to the Company's Registration Statement on
             Form SB-2 No. 333-64089 filed with the Commission on September 23, 1998)

    3.2      Bylaws of Central Federal Corporation (incorporated by reference to
             Exhibit 3.2 to the Company's Registration Statement on Form SB-2 No.
             333-64089 filed with the Commission on September 23, 1998)

    4.1      Form of Stock Certificate of Central Federal Corporation (incorporated by
             reference to Exhibit 4.0 to the Company's Registration Statement on Form
             SB-2 No. 333-64089 filed with the Commission on September 23, 1998)

   10.1*     Salary Continuation Agreement between CFBank and David C. Vernon

   10.2*     Employment Agreement between CFBank and Richard J. O'Donnell

   10.3*     Amendment to Employment Agreement between Central Federal Corporation and
             David C. Vernon

   10.4*     Amendment to Employment Agreement between CFBank and David C. Vernon

   10.5*     Second Amendment to Employment Agreement between Central Federal
             Corporation and David C. Vernon

   10.6*     Second Amendment to Employment Agreement between CFBank and David C.
             Vernon

   11.1      Statement Re:  Computation of Per Share Earnings

   13.1      Annual Report to Security Holders for the Fiscal Year Ended December 31,
             2004

   21.1      Subsidiaries of the Registrant

   23.1      Consent of Independent Registered Public Accounting Firm

   31.1      Rule 13a-14(a) Certifications of the Chief Executive Officer

   31.2      Rule 13a-14(a) Certifications of the Chief Financial Officer

   32.1      Section 1350 Certifications of the Chief Executive Officer and Chief
             Financial Officer
</TABLE>

- -------------

*Management contract or compensation plan or arrangement identified pursuant to
Item 13(a) of Form 10-KSB

                                       35
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>l12592aexv10w1.txt
<DESCRIPTION>EX-10.1 SALARY CONTINUATION AGREEMENT
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.1

        SALARY CONTINUATION AGREEMENT BETWEEN CFBANK AND DAVID C. VERNON

                                     CFBANK
                          SALARY CONTINUATION AGREEMENT

      THIS SALARY CONTINUATION AGREEMENT (the "AGREEMENT") is adopted as of this
25th day of May, 2004, by and between CFBANK, a federally-chartered savings
association located in Fairlawn, Ohio (the "COMPANY"), and David C. Vernon (the
"EXECUTIVE").

      The purpose of this Agreement is to provide specified benefits to the
Executive, a member of a select group of management or highly compensated
employees who contribute materially to the continued growth, development and
future business success of the Company. This Agreement shall be unfunded for tax
purposes and for purposes of Title I of the Employee Retirement Income Security
Act of 1974 ("ERISA"), as amended from time to time. The Company will pay the
benefits from its general assets.

The Company and the Executive agree as provided in this Agreement.

                                    ARTICLE 1
                                   DEFINITIONS

Whenever used in this Agreement, the following words and phrases shall have the
meanings specified:

1.1   "ACCRUAL BALANCE" means the liability that should be accrued by the
      Company, under Generally Accepted Accounting Principles ("GAAP"), for the
      Company's obligation to the Executive under this Agreement, by applying
      Accounting Principles Board Opinion Number 12 ("APB 12") as amended by
      Statement of Financial Accounting Standards Number 106 ("FAS 106") and the
      Discount Rate. Any one of a variety of amortization methods may be used to
      determine the Accrual Balance, in the sole discretion of the Board of
      Directors of the Company. However, once chosen, the method must be
      consistently applied. The Accrual Balance shall be reported by the Company
      to the Executive on SCHEDULE A.

1.2   "BENEFICIARY" means each designated person, or the estate of the deceased
      Executive, entitled to benefits, if any, upon the death of the Executive,
      as determined under Article 4.

1.3      "BENEFICIARY DESIGNATION FORM" means the form established from time to
         time by the Plan Administrator that the Executive completes, signs and
         returns to the Plan Administrator to designate one or more
         Beneficiaries.

1.4   "CHANGE OF CONTROL" means:

      1.4.1 the transfer of shares of the Company's voting common stock such
            that one entity or one person acquires (or is deemed to acquire when
            applying Section 318 of the Code) more than 50% of the Company's
            outstanding voting common stock followed within 12 months by the
            Executive's Termination of Employment for reasons other than death,
            Disability or retirement; or

      1.4.2 such definition of Change of Control hereafter promulgated by the
            Secretary of the Treasury or other authorized regulatory body in
            which case such definition shall

                                       36
<PAGE>

            supersede any other definition of Change of Control in this
            Agreement and shall control the terms of this Agreement.

1.5   "CLAIMANT" means an Executive or Beneficiary who has not received benefits
      under the Agreement that he or she believes should be paid.

1.6   "CODE" means the Internal Revenue Code of 1986, as amended.

1.7   "COMPANY" means Central Federal Corporation, a Delaware corporation.

1.8   "DISABILITY" means:

      1.8.1 the Executive's suffering a sickness, accident or injury which has
            been determined by the carrier of any individual or group disability
            insurance policy covering the Executive, or by the Social Security
            Administration, to be a disability rendering the Executive totally
            and permanently disabled, and the Executive must submit proof to the
            Plan Administrator of the carrier's or Social Security
            Administration's determination upon the request of the Plan
            Administrator; or

      1.8.2 any definition of Disability published by the Secretary of the
            Treasury or any other authorized regulatory body, in which case such
            definition shall supersede any other definition of Disability in
            this Agreement and shall control the terms of this Agreement.

1.9   "DISCOUNT RATE" means the rate used by the Plan Administrator for
      determining the Accrual Balance. The initial Discount Rate is six percent
      (6%). However, the Plan Administrator, in its sole discretion, may adjust
      the Discount Rate to maintain the rate within reasonable standards
      according to GAAP.

1.10  "EARLY TERMINATION" means the Termination of Employment before Normal
      Retirement Age for reasons other than death, Disability, Termination for
      Cause or following a Change of Control. Further, the term "EARLY
      TERMINATION DATE" means the month, day and year in which such Early
      Termination occurs.

1.11  "EFFECTIVE DATE" means June 1, 2004.

1.12  "EXCESS PARACHUTE PAYMENT" has the meaning described in Section 280G of
      the Code, as amended from time to time.

1.13  "NORMAL RETIREMENT AGE" means the Executive's 66th birthday.

1.14  "NORMAL RETIREMENT DATE" means the later of the Executive reaching his
      Normal Retirement Age or the Termination of Employment of the Executive.

1.15  "PLAN ADMINISTRATOR" means the plan administrator described in Article 8.

1.16  "PLAN YEAR" means each 12-month period commencing on the Effective Date.

1.17  "SPECIFIED EMPLOYEE" is, for purposes of Section 2.2.3, a key employee (as
      defined in section 416(i) of the Code, as amended) of a corporation the
      stock in which is publicly traded on an established securities market or
      otherwise.

                                       37
<PAGE>

1.18  "TERMINATION FOR CAUSE" has that meaning set forth in Article 5.

1.19  "TERMINATION OF EMPLOYMENT" means that the Executive ceases to be employed
      by the Company for any reason, voluntary or involuntary, other than by
      reason of a leave of absence approved by the Company.

                                    ARTICLE 2
                            BENEFITS DURING LIFETIME

2.1   Normal Retirement Benefit. Upon Termination of Employment on or after the
      Normal Retirement Age for reasons other than death, the Company shall pay
      to the Executive the benefit described in this Section 2.1 in lieu of any
      other benefit under this Article.

      2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is
            $25,000.

      2.1.2 Payment of Benefit. The Company shall pay the annual benefit to the
            Executive in 12 equal monthly installments commencing on the first
            day of the month following the Executive's Normal Retirement Date
            and continuing on the first day of the month thereafter until paid
            in full. The annual benefit, as provided hereunder, shall be paid to
            the Executive for a period of twenty (20) years and shall be paid
            without interest.

2.2   Early Termination Benefit. Upon Early Termination, the Company shall pay
      to the Executive the benefit described in this Section 2.2 in lieu of any
      other benefit under this Article.

      2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the
            Early Termination Benefit set forth on Schedule A for the Plan Year
            during which the Early Termination Date occurs. This benefit, as
            provided in Schedule A, is determined by vesting the Executive in
            100% of the then existing Accrual Balance for the Plan Year during
            which the Early Termination Date occurs in accordance with Schedule
            A.

      2.2.2 Payment of Benefit. The Company shall pay the annual benefit to the
            Executive in 12 consecutive equal monthly installments commencing
            with the first day of the month following the Executive's Normal
            Retirement Age and continuing on the first day of the month
            thereafter until paid in full. The annual benefit, as provided
            hereunder, shall be paid to the Executive for a period of twenty
            (20) years and shall be paid without interest.

      2.2.3 Restriction on Timing of Payment. Notwithstanding any provision of
            this Agreement to the contrary, if the Executive is considered a
            Specified Employee, payment under this Section 2.2 may not be made
            earlier than six months after the date of the Early Termination.

2.3   Disability Benefit. Upon Termination of Employment due to Disability prior
      to Normal Retirement Age, the Company shall pay to the Executive the
      benefit described in this Section 2.3 in lieu of any other benefit under
      this Article.

      2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the
            Disability Benefit set forth on Schedule A for the Plan Year during
            which the Termination of Employment occurs. This benefit, as
            provided in Schedule A, is determined by vesting the Executive in
            100% of the then existing Accrual Balance for the Plan Year during
            which the Termination of Employment occurs in accordance with
            Schedule A.

                                       38
<PAGE>

      2.3.2 Payment of Benefit. The Company shall pay the annual benefit to the
            Executive in 12 consecutive equal monthly installments commencing
            with the first day of the month following the Executive's Normal
            Retirement Age and continuing on the first day of the month
            thereafter until paid in full. The annual benefit, as provided
            hereunder, shall be paid to the Executive for a period of twenty
            (20) years and shall be paid without interest.

2.4   Change of Control Benefit. Upon a Change of Control, the Company shall pay
      to the Executive the benefit described in this Section 2.4 in lieu of any
      other benefit under this Article.

      2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Change
            of Control Benefit set forth on Schedule A for the Plan Year during
            which Termination of Employment occurs. This benefit, as provided in
            Schedule A, is determined by vesting the Executive in 100% of the
            Normal Retirement Benefit amount described in Section 2.1.1.

      2.4.2 Payment of Benefit. The Company shall pay the annual benefit to the
            Executive in 12 equal monthly installments commencing with the first
            day of the month following the Executive's Normal Retirement Age and
            continuing on the first day of the month thereafter until paid in
            full. The annual benefit, as provided hereunder, shall be paid to
            the Executive for a period of twenty (20) years and shall be paid
            without interest.

      2.4.3 Parachute Payments. Notwithstanding any provision of this Agreement
            to the contrary, to the extent the amount or timing of any
            payment(s), if made, under this Section 2.4 would be treated as an
            Excess Parachute Payment, the Company shall either reduce or delay,
            in the sole discretion of the Board of Directors, the payment(s)
            under this Section 2.4 to the extent it would not be an Excess
            Parachute Payment.

                                    ARTICLE 3
                                 DEATH BENEFITS

3.1   Death During Active Service. If the Executive dies while in the active
      service of the Company, the Company shall pay to the Beneficiary(ies) the
      benefit described in this Section 3.1. This benefit shall be paid in lieu
      of the benefits under Article 2.

      3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal
            Retirement Benefit amount described in Section 2.1.1.

      3.1.2 Payment of Benefit. The Company shall pay the annual benefit to the
            Beneficiary(ies) in 12 equal monthly installments commencing on the
            first day of the month following the Executive's death and
            continuing on the first day of the month thereafter until paid in
            full. The annual benefit, as provided hereunder, shall be paid to
            the Executive for a period of twenty (20) years and shall be paid
            without interest.

3.2   Death During Payment of a Benefit. If the Executive dies after any benefit
      payments have commenced under Article 2 of this Agreement but before
      receiving all such payments, the Company shall pay the remaining benefits
      to the Beneficiary(ies) at the same time and in the same amounts they
      would have been paid to the Executive had the Executive survived.

   3.2   Death After Termination of Employment But Before Payment of a Benefit
         Commences. If the Executive is entitled to any benefit payments under
         Article 2 of this Agreement, but dies prior to the commencement of said
         benefit payments, the Company shall pay the same benefit payments to
         the Beneficiary(ies) that the Executive was entitled to prior to death
         except that the benefit

                                      39
<PAGE>

         payments shall commence on the first day of the month following the
         date of the Executive's death.

                                    ARTICLE 4
                                  BENEFICIARIES

4.1   Beneficiary Designation. The Executive shall have the right, at any time,
      to designate a Beneficiary(ies) to receive any benefits payable under this
      Agreement upon the death of the Executive. The Beneficiary(ies) designated
      under this Agreement may be the same as or different from the beneficiary
      designation under any other benefit plan of the Company in which the
      Executive participates.

4.2   Beneficiary Designation: Change. The Executive shall designate a
      Beneficiary by completing and signing the Beneficiary Designation Form,
      and delivering it to the Plan Administrator or its designated agent. The
      Executive's Beneficiary designation shall be deemed automatically revoked
      if the Beneficiary predeceases the Executive or if the Executive names a
      spouse as Beneficiary and the marriage is subsequently dissolved or
      otherwise terminated by court order. The Executive shall have the right to
      change a Beneficiary by completing, signing and otherwise complying with
      the terms of the Beneficiary Designation Form and the Plan Administrator's
      rules and procedures, as in effect from time to time. Upon the acceptance
      by the Plan Administrator of a new Beneficiary Designation Form, all
      Beneficiary designations previously filed shall be cancelled. The Plan
      Administrator shall be entitled to rely on the last Beneficiary
      Designation Form filed by the Executive and accepted by the Plan
      Administrator prior to the Executive's death.

4.3   Acknowledgment. No designation or change in designation of a Beneficiary
      shall be effective until received, accepted and acknowledged in writing by
      the Plan Administrator or its designated agent.

4.4   No Beneficiary Designation. If the Executive dies without a valid
      beneficiary designation, or if all designated Beneficiaries predecease the
      Executive, then the Executive's spouse shall be the designated
      Beneficiary. If the Executive has no surviving spouse, the benefits shall
      be made to the personal representative of the Executive's estate.

4.5   Facility of Payment. If the Plan Administrator determines in its
      discretion that a benefit is to be paid to a minor, to a person declared
      incompetent, or to a person incapable of handling the disposition of that
      person's property, as determined in the sole discretion of the Plan
      Administrator, the Plan Administrator may direct payment of such benefit
      to the guardian, legal representative or person having the care or custody
      of such minor, incompetent person or incapable person. The Plan
      Administrator may obtain or require proof of incompetence, minority or
      guardianship as it may deem appropriate prior to distribution of the
      benefit. Any payment of a benefit shall be a payment for the account of
      the Executive and the Executive's Beneficiary(ies), as the case may be,
      and shall be a complete discharge of any liability under the Agreement for
      such payment amount.

                                    ARTICLE 5
                               GENERAL LIMITATIONS

5.1   Termination for Cause. Notwithstanding any provision of this Agreement to
      the contrary, the Company shall not pay any benefit under this Agreement
      if the Company's Board of Directors terminates the Executive's employment
      for:

                                      40
<PAGE>

      (a)   Gross negligence or gross neglect of duties to the Company;

      (b)   Commission of a felony or of a gross misdemeanor involving moral
            turpitude;

      (c)   Fraud, disloyalty, dishonesty or Willful violation of any law or
            significant Company policy committed in connection with the
            significant Company policy committed in connection with the
            Executive's employment and resulting in a material adverse effect on
            the Company; or

      (d)   Issuance of an order for removal of the Executive by the Company's
            banking regulators.

5.2   Suicide or Misstatement. The Company shall not pay any benefit under this
      Agreement if the Executive commits suicide within two (2) years after the
      Effective Date. In addition, the Company shall not pay any benefit under
      this Agreement if the Executive has made any material misstatement of fact
      on any application for life insurance owned by the Company on the
      Executive's life or otherwise provides any information which invalidates
      any life insurance policy owned by the Company on the Executive's life.

                                    ARTICLE 6
                          CLAIMS AND REVIEW PROCEDURES

6.1   Claims Procedure. A Claimant shall make a claim as follows for benefits
      that he or she believes should have been paid:

      6.1.1 Initiation - Written Claim. The Claimant initiates a claim by
            submitting to the Plan Administrator a written claim for the
            benefits.

      6.1.2 Timing of Plan Administrator Response. The Plan Administrator shall
            respond to the Claimant within 90 days after receiving the claim. If
            the Plan Administrator determines that special circumstances require
            additional time for processing the claim, the Plan Administrator can
            extend the response period by an additional 90 days by notifying the
            claimant in writing, prior to the end of the initial 90-day period,
            that an additional period is required. The notice of extension must
            set forth the special circumstances and the date by which the Plan
            Administrator expects to render its decision.

      6.1.3 Notice of Decision. If the Plan Administrator denies part or all of
            the claim, the Plan Administrator shall notify the Claimant in
            writing of the denial. The Plan Administrator shall write the
            notification in a manner calculated to be understood by the
            Claimant. The notification shall set forth:

            (a)   The specific reasons for the denial;

            (b)   A reference to the specific provisions of the Agreement on
                  which the denial is based;

            (c)   A description of any additional information or material
                  necessary for the Claimant to perfect the claim and an
                  explanation of why it is needed;

            (d)   An explanation of the Agreement's review procedures and the
                  time limits applicable to such procedures; and

            (e)   A statement of the Claimant's right to bring a civil action
                  under ERISA Section 502(a) following an adverse benefit
                  determination on review.

                                      41
<PAGE>

6.2   Review Procedure. If the Plan Administrator denies part or all of the
      claim, the Claimant shall have the opportunity for a full and fair review
      by the Plan Administrator of the denial, as follows:

      6.2.1 Initiation - Written Request. To initiate the review, the Claimant,
            within 60 days after receiving the Plan Administrator's notice of
            denial, must file with the Plan Administrator a written request for
            review.

      6.2.2 Additional Submissions - Information Access. The Claimant shall then
            have the opportunity to submit written comments, documents, records
            and other information relating to the claim. The Plan Administrator
            shall also provide the Claimant, upon request and free of charge,
            reasonable access to, and copies of, all documents, records and
            other information relevant (as defined in applicable ERISA
            regulations) to the Claimant's claim for benefits.

      6.2.3 Considerations on Review. In considering the review, the Plan
            Administrator shall take into account all materials and information
            the Claimant submits relating to the claim, without regard to
            whether such information was submitted or considered in the initial
            benefit determination.

      6.2.4 Timing of Plan Administrator Response. The Plan Administrator shall
            respond in writing to the Claimant within 60 days after receiving
            the request for review. If the Plan Administrator determines that
            special circumstances require additional time for processing the
            claim, the Plan Administrator can extend the response period by an
            additional 60 days by notifying the Claimant in writing, prior to
            the end of the initial 60-day period, that an additional period is
            required. The notice of extension must set forth the special
            circumstances and the date by which the Plan Administrator expects
            to render its decision.

      6.2.5 Notice of Decision. The Plan Administrator shall notify the Claimant
            in writing of its decision on review. The Plan Administrator shall
            write the notification in a manner calculated to be understood by
            the Claimant. The notification shall set forth:

            (a)   The specific reasons for the denial;

            (b)   A reference to the specific provisions of the Agreement on
                  which the denial is based;

            (c)   A statement that the Claimant is entitled to receive, upon
                  request and free of charge, reasonable access to, and copies
                  of, all documents, records and other information relevant (as
                  defined in applicable ERISA regulations) to the Claimant's
                  claim for benefits; and

            (d)   A statement of the Claimant's right to bring a civil action
                  under ERISA Section 502(a).

                                    ARTICLE 7
                           AMENDMENTS AND TERMINATION

This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive; provided, however, that if the Company's Board
of Directors determines that the Executive is no longer a member of a select
group of management or highly compensated employees, as that phrase applies to
ERISA, for reasons other than death, Disability or retirement or determines this
Agreement must be amended to comply with any federal, state or local law or
regulation concerning the subject matter hereof, the Company may amend or
terminate this Agreement without the written agreement of the

                                      42
<PAGE>

Executive. Upon such amendment or termination, the Company shall pay benefits to
the Executive as if Early Termination occurred on the date of such amendment or
termination, regardless whether Early Termination actually occurs. Additionally,
the Company may amend this Agreement to conform with written directives to the
Company from its banking regulators.

                                    ARTICLE 8
                           ADMINISTRATION OF AGREEMENT

8.1   Plan Administrator Duties. This Agreement shall be administered by a Plan
      Administrator which shall consist of the Board of Directors of the
      Company, at any time, or such committee or person(s) as the Board of
      Directors shall appoint. The Executive may not vote as a member of the
      Plan Administrator. The Plan Administrator shall also have the discretion
      and authority to:

      8.1.1 make, amend, interpret and enforce all appropriate rules and
            regulations for the administration of this Agreement; and

      8.1.2 decide or resolve any and all questions including interpretations of
            this Agreement, as may arise in connection with the Agreement.

8.2   Agents. In the administration of this Agreement, the Plan Administrator
      may employ agents and delegate to them such administrative duties as it
      sees fit, (including acting through a duly appointed representative), and
      may from time to time consult with counsel who may be counsel to the
      Company.

8.3   Binding Effect of Decisions. The decision or action of the Plan
      Administrator with respect to any question arising out of or in connection
      with the administration, interpretation and application of the Agreement
      and the rules and regulations promulgated hereunder shall be final and
      conclusive and binding upon all persons having any interest in the
      Agreement. No Executive or Beneficiary shall be deemed to have any right,
      vested or non-vested, regarding the continued use of any previously
      adopted assumptions, including but not limited to the Discount Rate.

8.4   Indemnity of Plan Administrator. The Company shall indemnify and hold
      harmless the members of the Plan Administrator against any and all claims,
      losses, damages, expenses or liabilities arising from any action or
      failure to act with respect to this Agreement, except in the case of
      willful misconduct by the Plan Administrator or any of its members.

8.5   Company Information. To enable the Plan Administrator to perform its
      functions, the Company shall supply, and the Executive hereby authorizes
      the release of, full and timely information to the Plan Administrator on
      all matters relating to the date and circumstances of the retirement,
      Disability, death, or Termination of Employment of the Executive and such
      other pertinent information as the Plan Administrator may reasonably
      require.

8.6   Annual Statement. The Plan Administrator shall provide to the Executive,
      within 120 days after the end of each Plan Year, a statement setting forth
      the benefits payable under this Agreement.

                                    ARTICLE 9
                                  MISCELLANEOUS

9.1   Binding Effect. This Agreement shall bind the Executive and the Company,
      and their beneficiaries, survivors, executors, successors, administrators
      and transferees.

9.2   No Guarantee of Employment. This Agreement is not an employment policy or
      contract. It does

                                      43
<PAGE>

      not give the Executive the right to remain an employee of the Company, nor
      does it interfere with the Company's right to discharge the Executive. It
      also does not require the Executive to remain an employee nor interfere
      with the Executive's right to terminate employment at any time.

9.3   Non-Transferability. Benefits under this Agreement cannot be sold,
      transferred, assigned, pledged, attached or encumbered in any manner,
      whether voluntarily or involuntarily.

9.4   Tax Withholding. The Company shall withhold any taxes that, in its
      reasonable judgment, are required to be withheld from the benefits
      provided under this Agreement. The Executive acknowledges that the
      Company's sole liability regarding taxes is to forward any amounts
      withheld to the appropriate taxing authority(ies).

9.5   Applicable Law. The Agreement and all rights hereunder shall be governed
      by the laws of the State of Ohio, except to the extent preempted by the
      laws of the United States of America.

9.6   Unfunded Arrangement. The Executive and Beneficiary(ies) are general
      unsecured creditors of the Company for the payment of benefits under this
      Agreement. The benefits represent the mere promise by the Company to pay
      such benefits. The rights to benefits are not subject in any manner to
      anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
      attachment, or garnishment by creditors, whether voluntary or involuntary.
      Any insurance on the Executive's life is a general asset of the Company to
      which the Executive and Beneficiary (ies) have no preferred or secured
      claim. The Company shall retain complete control of any amounts due and
      owing Executive hereunder and all funds, assets, accumulations and
      increments shall continue to be part of the general funds of the Company
      and subject to the general creditors of the Corporation. Executive shall
      rely solely and exclusively on the unsecured, unfunded promise and
      contractual obligation of the Company set forth herein.

9.7   Reorganization. The Company shall not merge or consolidate into or with
      another company, or reorganize, or sell substantially all of its assets to
      another company, firm, or person unless such succeeding or continuing
      company, firm, or person agrees to assume and discharge the obligations of
      the Company under this Agreement. Upon the occurrence of such event, the
      term "Company" as used in this Agreement shall be deemed to refer to the
      successor or survivor company.

9.8   Entire Agreement. This Agreement constitutes the entire agreement between
      the Company and the Executive as to the subject matter hereof. No rights
      are granted to the Executive by virtue of this Agreement other than those
      specifically set forth herein.

9.9   Interpretation. Wherever the fulfillment of the intent and purpose of this
      Agreement requires, and the context will permit, the use of the masculine
      gender includes the feminine and use of the singular includes the plural.

9.10  Alternative Action. In the event it shall become impossible for the
      Company or the Plan Administrator to perform any act required by this
      Agreement, the Company or Plan Administrator may in its discretion perform
      such alternative act as most nearly carries out the intent and purpose of
      this Agreement and is in the best interests of the Company.

9.11  Headings. Article and section headings are for convenient reference only
      and shall not control or affect the meaning or construction of any of its
      provisions.

9.12  Validity. In case any provision of this Agreement shall be illegal or
      invalid for any reason, said

                                      44
<PAGE>

      illegality or invalidity shall not affect the remaining parts hereof, but
      this Agreement shall be construed and enforced as if such illegal and
      invalid provision has never been inserted herein.

9.13  Notice.

      9.13.1 Any notice or filing required or permitted to be given to the
             Company or Plan Administrator under this Agreement shall be
             sufficient if in writing and hand-delivered, or sent by registered
             or certified mail, to the address below:

                                   SERP Plan Administrator
                                   Board of Directors
                                   CFBank
                                   2923 Smith Road
                                   Fairlawn, Ohio 44333

      9.13.2 Any notice or filing required or permitted to be given to the
             Executive under this Agreement shall be sufficient if in writing
             and hand-delivered, or sent by mail, to the last known address of
             the Executive.

      9.13.3 Such notice shall be deemed given as of the date of delivery or, if
             delivery is made by mail, as of the date shown on the postmark on
             the receipt for registration or certification.

      IN WITNESS WHEREOF, the Executive and a duly authorized representative of
the Company have signed this Agreement.

EXECUTIVE:                                    COMPANY:

                                              CFBANK

/s/ David C. Vernon                           By: /s/ Thomas P. Ash
- -------------------                               ---------------------------
David C. Vernon                               Name in Print: Thomas P. Ash
                                              For the Board of Directors

                                      45
<PAGE>

                                   SCHEDULE A

ACCRUAL BALANCE

<TABLE>
<CAPTION>
                 Accrual
Period Ending    Balance
- -------------   ---------
<S>             <C>

    May-05      $  65,306

    May-06        135,333

    May-07        210,423

    May-08        268,715

    May-09        262,172

    May-10        255,156

    May-11        247,633

    May-12        239,566

    May-13        230,916

    May-14        221,640

    May-15        211,694

    May-16        201,029

    May-17        189,593

    May-18        177,330

    May-19        164,181

    May-20        150,081

    May-21        134,962

    May-22        118,750

    May-23        101,366

    May-24         82,725

    May-25         62,737

    May-26         41,304

    May-27         18,321

    May-28              -
</TABLE>

                                      46
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>l12592aexv10w2.txt
<DESCRIPTION>EX-10.2 EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.2

          EMPLOYMENT AGREEMENT BETWEEN CFBANK AND RICHARD J. O'DONNELL

                              EMPLOYMENT AGREEMENT

      This AGREEMENT ("Agreement") is made effective as of October 22, 2004 by
and between RESERVE MORTGAGE SERVICES, INC. ("Reserve"), a wholly-owned
subsidiary of CFBank (the "Bank"), the Bank and RICHARD J. O'DONNELL (the
"Executive").

      WHEREAS, The Bank and Reserve wish to be assured of the services of the
Executive for the period provided in this Agreement following its acquisition by
the Bank, a wholly-owned subsidiary of Central Federal Corporation ("GCFC"); and

      WHEREAS, the Executive is willing to serve in the employ of Reserve for
said period; and

      WHEREAS, the Executive is willing to provide services to the Bank and
Reserve as provided herein.

      NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree, as follows:

1.    POSITION AND RESPONSIBILITIES.

      During the period of Executive's employment hereunder, the Executive
agrees to serve as President and Chief Executive Officer of Reserve. The
Executive shall render such administrative and management services to Reserve,
as are customarily performed by persons in a similar executive capacity for a
mortgage banking company, and to the Bank as may be assigned to him, from time
to time, by the Chairman of the Bank, to whom he shall report. The Executive
shall render such services at the current home office location of the Bank or
Reserve or such other location within thirty miles of either location unless the
Executive otherwise consents to a different location.

2.    TERM.

      (a)   The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the date first above written and shall continue
for a period of thirty-six (36) full calendar months thereafter (the "Term").
The Term may be extended at the discretion of Reserve upon a comprehensive
performance evaluation by Reserve's Board of Directors (the "Board") or a
committee thereof.

      (b)   During the period of Executive's employment hereunder, except for
periods of absence occasioned by illness, reasonable vacation periods provided
in accordance with policies of the Bank, and reasonable leaves of absence
provided in accordance with policies of the Bank, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including activities and services
related to the operation and management of the Bank and Reserve. The Executive
may serve, or continue to serve, on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which, in the
judgment of the Board, will not present any conflict of interest with GCFC or
its subsidiaries (the "Subsidiaries"), or materially affect the performance of
Executive's duties pursuant to this Agreement.

                                      47
<PAGE>

3.    COMPENSATION AND REIMBURSEMENT.

      (a)   The Executive shall be entitled to a salary from Reserve in the
amount of $100,000 per year ("Base Salary"). Base Salary shall include any
amounts of compensation deferred by Executive under any tax-qualified retirement
or welfare plan or any other deferred compensation plan maintained by GCFC and
its Subsidiaries. Such Base Salary shall be payable in accordance with the
normal payroll practices of the Bank. The Board may increase Executive's Base
Salary at anytime in its sole discretion, subject to an annual performance
review, but may not decrease the Base Salary unless it is part of a company wide
compensation adjustment applicable to all senior executives of the Bank in a
proportionate manner. Any increase in Base Salary shall become the "Base Salary"
for purposes of this Agreement.

      (b)   The Executive shall be entitled to participate in those benefit
plans, arrangements and perquisites available to all other senior executives of
the Bank, including any stock option plan of the Bank or GCFC, on the same terms
and conditions applicable to such executives. Without limiting the generality of
the foregoing provisions of this Subsection (b), Executive shall be entitled to
participate in or receive benefits under any employee benefit plains including,
but not limited to, retirement plans, pension plans, profit-sharing plans,
health-and-accident plans, medical coverage or any other employee benefit plan
or arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Nothing paid to the Executive under any such plan or arrangement will be deemed
to be in lieu of other compensation to which the Executive is entitled under
this Agreement.

      (c)   In addition to the Base Salary provided for by paragraph (a) of this
Section 3 and other compensation provided for by paragraph (b) of this Section
3, Reserve shall pay or reimburse Executive for all reasonable travel and other
reasonable expenses incurred in the performance of Executive's obligations under
this Agreement and may provide such additional compensation in such form and
such amounts as the Board may from time to time determine.

      (d)   Executive shall also receive incentive compensation equal to 50% of
pre-tax earnings, applied to Reserve as standalone corporation, in excess of
$300,000 per fiscal year, but in no event in excess of $400,000 per year
("Incentive Compensation"). The calculation of pre-tax earnings shall be made in
accordance with generally accepted accounting principles in the United States
("GAAP"), provided that the same shall be adjusted to eliminate all corporate
overhead and other expenses to Reserve by the Bank or GCFC. For purposes of
determining the pre-tax earnings of Reserve, there shall be included the revenue
that would have been recognized by Reserve (i) on loans originated by Reserve
and sold to the Bank rather than being sold to the customary purchasers of loans
originated by Reserve and (ii) on residential mortgage loans originated by the
Bank. The amount of such foregone revenue shall be determined in a manner
mutually agreed upon by Executive and the Chairman of the Bank. The calculation
shall be prorated for any partial year.

4.    PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION; TERMINATION UPON
      DISABILITY OR DEATH.

      (a)   Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean the termination by Reserve of Executive's full-time
employment hereunder for any reason, other than termination governed by Sections
4(c) or 5 hereof or for a Termination for Cause as defined in Section 7 hereof;

                                      48
<PAGE>

      (b)   Upon the occurrence of an Event of Termination on the Date of
Termination, as defined in Section 8(b), Reserve shall be obligated to pay
Executive, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, a sum equal to the sum of: (i)
$600,000; and (ii) all benefits, including health insurance in accordance with
Section 3(b) that would have been provided to Executive for the remaining Term
of this Agreement had an Event of Termination not occurred. Such benefits shall
be eliminated in the event the Executive obtains other employment following
termination of employment. In the event of the Executive's Termination for Cause
or his voluntary resignation, however, other than under Section 5(b)(ii) of this
Agreement, he shall be entitled to receive his Base Salary through the Date of
Termination as specified in the Notice of Termination under Section 8(a) and no
other benefits or payments under this Agreement.

      (c)   In the event Executive is unable to perform his duties under this
Agreement on a full-time basis for a period of six (6) consecutive months by
reason of illness or other physical or mental disability (as defined in the
Bank's human resources policy), Reserve may terminate this Agreement, provided
that Reserve shall continue to be obligated to pay the Executive his Base Salary
for one year after such termination, and provided further that any amounts
actually paid to Executive pursuant to any disability insurance or other similar
such program which the Reserve or the Bank has provided or may provide on behalf
of its employees or pursuant to any workman's or social security disability
program shall reduce the compensation to be paid to the Executive pursuant to
this paragraph.

      (d)   In the event of the Executive's voluntary termination, other than
under Section 5(b)(ii) of this Agreement, no payment of any type shall be made
to the Executive under this Agreement for the period through the Date of
Termination unless the Executive shall comply with his obligations under Section
2.03 of the Stock Purchase Agreement, dated June 10, 2004, by and among GCFC,
CFBank, RJO Financial Services, Inc., and the Executive.

5.    CHANGE IN CONTROL.

      (a)   For purposes of this Agreement, a "Change in Control" of GCFC or the
Bank shall mean an event of a nature that; (i) would be required to be reported
in response to Item 1(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"); or (ii) results in a change in control of GCFC or the
Bank within the meaning of the Home Owners' Loan Act, as amended, or the Rules
and Regulations promulgated by the Office of Thrift Supervision (or its
predecessor agency), as in effect on the date hereof (provided, that in applying
the definition of change in control as set forth under the rules and regulations
of the OTS, the Board shall substitute its judgment for that of the OTS).

      (b)   If a Change in Control of GCFC or the Bank has occurred pursuant to
Section 5(a) Executive shall be entitled to the benefits provided in paragraphs
(c) of this Section 5 only upon his subsequent termination of employment at any
time during the Term of this Agreement due to (i) Executive's dismissal, or (ii)
Executive's voluntary resignation following any demotion, loss of title, office
or significant authority or responsibility, reduction in the annual compensation
or material reduction in benefits or relocation of his principal place of
employment by more than 50 miles from its location immediately prior to the
Change in Control, unless such termination is because of his death or
Termination for Cause (as defined herein).

      (c)   Upon the Executive's entitlement to benefits pursuant to Section
5(b), Reserve shall pay Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay or liquidated damages, or both, a sum equal to the greater of (i) $600,000;
or (ii) an amount equal to the sum of (A) three (3) times the Executive's Base
Salary and (B) an amount equal to the Incentive Compensation paid or earned from
the date of this Agreement in accordance with

                                      49
<PAGE>

Section 3(d) hereof divided by the number of full months completed prior to the
occurrence of the event described in Section 5(b) and multiplied by thirty-six
(36). Payment to the Executive will be made on a monthly basis in approximately
equal installments during the remaining Term of the Agreement. Such payments
shall not be reduced in the event Executive obtains other employment following
termination of employment. In addition to the foregoing sum, the Executive shall
continue to receive for thirty-six (36) months, all benefits, including health
insurance in accordance with Section 3(b) that would have been provided to
Executive had the event described in Section (b) of this Section 5 not occurred.

6.    CHANGE OF CONTROL RELATED PROVISIONS.

      Notwithstanding the provisions of Section 5, in the event that

      (i)   the aggregate payments or benefits to be made or afforded to
            Executive, which are deemed to be parachute payments as defined in
            Section 280G of the Internal Revenue Code of 1936, as amended (the
            "Code") or any successor thereof, (the "Termination Benefits") would
            be deemed to include an "excess parachute payment" under Section
            280G of the Code; and

      (ii)  if such Termination Benefits were reduced to an amount (the
            "Non-Triggering Amount"), the value of which is one dollar ($1.00)
            less than an amount equal to three (3) times Executive's "base
            amount," as determined in accordance with said Section 280G and the
            Non-Triggering Amount less the product of the marginal rate of any
            applicable state and federal income tax and the Non Triggering
            Amount would be greater than the aggregate value of the Termination
            Benefits (without such reduction) minus (i) the amount of tax
            required to be paid by the Executive thereon by Section 4999 of the
            Code and further minus (ii) the product of the Termination Benefits
            and the marginal rate of any applicable state and federal income
            tax,

then the Termination Benefits shall be reduced to the Non-Triggering Amount. The
allocation of the reduction required thereby among the Termination Benefits
shall be determined by the Executive.

7.    TERMINATION FOR CAUSE.

      The term "Termination for Cause" or "Terminated for Cause" shall mean
termination because the Executive's failure to perform stated duties,
incompetence, willful misconduct, breach of fiduciary duty involving person
profit, personal dishonesty, willful violation of any law, rule, regulation
(other than traffic violations or similar offenses), final cease and desist
order or material breach of any provision of this Agreement. The Executive shall
not be deemed to have been Terminated for Cause unless and until there shall
have been delivered to him a Notice of Termination stating that the Executive
was guilty of conduct justifying Termination for Cause and specifying the
particulars thereof in detail. The Executive shall not have the right to receive
compensation or other benefits for any period after Termination for Cause.
During the period beginning on the date of the Notice of Termination for Cause
pursuant to Section 8 hereof through the Date of Termination, stock options and
related limited rights granted to Executive under any stock option plan shall
not be exercisable unless vested and any unvested awards granted to Executive
under any stock benefit plan of GCFC or its Subsidiaries shall not vest. At the
Date of Termination, such stock options and related limited rights and such
unvested awards shall become null and void and shall not be exercisable by or
delivered to Executive at any time subsequent to such Date of Termination for
Cause.

                                      50
<PAGE>

8.    NOTICE.

      (a)   Any purported termination by Reserve or the Bank or by Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes off this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.

      (b)   "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

9.    POST-TERMINATION OBLIGATIONS.

      All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 10 for twelve (12) full
calendar months after the earlier of the expiration of this Agreement or
termination of Executive's employment with Reserve. Executive shall, upon
reasonable notice, furnish such information and assistance to Reserve or its
successor as may reasonably be required by Reserve in connection with any
litigation in which it or any of its subsidiaries or affiliates or may become a
party.

10.   NON-COMPETITION AND NONDISCLOSURE.

      (a)   Upon the occurrence of a Termination for Cause (as defined in
Section 7 hereof) or the Executive's voluntary resignation (other than under
Section 5(b)(ii) hereof), Executive agrees not to compete with Reserve or its
Subsidiaries for a period of one (1) year following such Date of Termination in
any city, town or county in which Reserve or the Bank maintains an office or has
filed an application for regulatory approval to establish an office and any
county adjacent to such city, town or, county, determined as of the Date of
Termination, except as agreed to by GCFC. The Executive agrees that during such
period and within said cities, towns and counties, the Executive shall not work
for or advise, consult or otherwise serve with, directly or indirectly, any
entity whose business materially competes with the depository, lending or other
business activities of GCFC or its Subsidiaries. The parties hereto, recognizing
that irreparable injury will result to GCFC or its subsidiaries, its business
and property in the event of the Executive's breach of this Subsection 10(a),
agree that in the event of any such breach by the Executive, GCFC or its
subsidiaries will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Executive or his
partners, agents, servants, employees and all persons acting for or under the
direction of Executive. Executive represents and admits that in the event of the
termination of his employment pursuant to Section 7 hereof, Executive's
experience and capabilities are such that Executive can obtain employment in a
business engaged in other lines and/or of a different nature than GCFC or its
Subsidiaries, and that the enforcement of a remedy by way of injunction will not
prevent Executive from earning a livelihood. Nothing herein will be construed,
as prohibiting GCFC or its Subsidiaries from pursuing any other remedies
available to GCFC or its Subsidiaries for such breach or threatened breach,
including the recovery of damages from Executive.

      (b)   Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of GCFC and its
Subsidiaries, as it may exist from time to time, is a valuable, special and
unique asset of the business of GCFC and its Subsidiaries. Executive will not,
during or after the term of his employment, disclose any knowledge of the past,
present, planned or considered business activities of GCFC and its Subsidiaries
to any person, firm, corporation, or other entity for any reason or purpose
whatsoever unless expressly authorized by the Board or required by law.
Notwithstanding the

                                      51
<PAGE>

foregoing, Executive may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and exclusively
derived from the business plans and activities of GCFC or the Subsidiaries. In
the event of a breach or threatened breach by the Executive of the provisions of
this Section, Reserve will be entitled to an injunction restraining Executive
from disclosing, in whole or in part, the knowledge of the past, present,
planned or considered business activities of Reserve or the Subsidiaries or from
rendering any services to any person, firm, corporation, or other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting Reserve from pursuing
any other remedies available to Reserve for such breach or threatened breach,
including the recovery of damages from Executive.

11.   SOURCE OF PAYMENTS.

      (a)   All payments provided in this Agreement shall be timely paid in cash
or by check from the general funds of Reserve.

      (b)   In the event that Reserve is dissolved or liquidated, the Bank shall
assume the obligations of Reserve under this Agreement.

12.   EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

      This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the parties hereto
and supersedes any prior employment agreement between Reserve and Executive,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided.

13.   NO ATTACHMENT.

      (a)   Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

      (b)   This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Bank and Reserve and their respective successors, heirs and
assigns.

14.   MODIFICATION AND WAIVER.

      (a)   This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.

      (b)   No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

15.   SEVERABILITY.

      If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not

                                      52
<PAGE>

held so invalid, and each such other provision and part thereof shall to the
full extent consistent with law continue in full force and effect.

16.   HEADINGS FOR REFERENCE ONLY.

      The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

      Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply.

17.   GOVERNING LAW.

      This Agreement shall be governed by the laws of the State of Ohio and by
the laws of the United States to the extent controlling without regard to the
principles of conflicts of law of this state, unless otherwise specified herein.

18.   ARBITRATION.

      Notwithstanding any right to enforcement under Section 10(a), any dispute
or controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of three
arbitrators sitting in a location selected by the Executive within fifty (50)
miles from the location of Reserve's home office, in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that Executive shall be entitled to seek specific performance of his right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.

      In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.

19.   REQUIRED REGULATORY PROVISIONS

      (a)   Reserve may terminate the Executive's employment at any time subject
to his rights to receive payments under Section 4 hereof. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 7 hereinabove.

      (b)   If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Reserve's affairs by a
notice served under Section 8(e)(3) (12 USC Section 1818(e)(3)) or 8(g) (12 USC
Section 1818(g)) of the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, Reserve's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, Reserve may in its discretion (i) pay the Executive all or part of
the compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of the obligations which were suspended.

      (c)   If the Executive is removed and/or permanently prohibited from
participating in the conduct of Reserve's affairs by an order issued under
Section 8(e) (12 USC Section 1818(e)) or 8(g) (12 USC Section 1818(g)) of The
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,

                                      53
<PAGE>

Recovery and Enforcement Act of 1989, all obligations of Reserve under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

      (d)   If the Bank is in default as defined in Section 3(x) (12 USC Section
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Reserve under this Agreement shall terminate as of the date of default, but
this paragraph shall not affect any vested rights of the contracting parties.

      (e)   All obligations of Reserve under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of Reserve (i) by the Director of the Office of
Thrift Supervision or his or her designee (the "Director"), at the time the
Federal Deposit Insurance Corporation ("FDIC")enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) (12 USC Section 1823(c)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) by the Director at the time the Director approves a supervisory
merger to resolve problems related to the operation of the Bank or when the Bank
is determined by the Director to be in an unsafe or unsound condition. Any
rights of the parties that have already vested, however, shall not be affected
by such action.

      (f)   Notwithstanding anything herein contained to the contrary, any
payments to the Executive by Reserve, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with Section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the
regulations promulgated thereunder in 12 C.F.R. Part 359.

10.   SUCCESSOR TO RESERVE.

      Reserve and the Bank shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of Reserve or the Bank, expressly and
unconditionally to assume and agree to perform Reserve's obligations under this
Agreement, in the same manner and to the same extent that Reserve would be
required to perform if no such succession or assignment had taken place.

      IN WITNESS WHEREOF, Reserve and the Executive have executed Agreement on
date first above written

                                RESERVE MORTGAGE SERVICES, INC.

                                By: /s/ David C. Vernon
                                    -----------------------------------------
                                        David C. Vernon
                                        Chairman of the Board

                                CFBANK

                                By: /s/ David C. Vernon
                                    ----------------------------------------
                                        David C. Vernon
                                        Chairman and Chief Executive Officer

                                EXECUTIVE

                                         /s/ Richard J. O'Donnell
                                         ------------------------------------
                                             Richard J. O'Donnell

                                      54
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>l12592aexv10w3.txt
<DESCRIPTION>EX-10.3 AMENDMENT TO EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.3

AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN CENTRAL FEDERAL CORPORATION AND DAVID
                                   C. VERNON

                        AMENDMENT TO EMPLOYMENT AGREEMENT
                           CENTRAL FEDERAL CORPORATION

This AMENDMENT TO EMPLOYMENT AGREEMENT (this "AMENDMENT") is entered into and
made effective as of May 10, 2004 between Central Federal Corporation, a
Delaware corporation FKA Grand Central Financial Corp. ("GCFC"), and David C.
Vernon, an Ohio resident (the "EXECUTIVE").

A.    GCFC and the Executive entered into an Employment Agreement as of February
      28, 2003 (the "Agreement") for a term of 36 months.

B.    GCFC values the services and contributions that the Executive has made to
      it and seeks to extend the period of service under the Agreement by an
      additional 24 months.

C.    The Executive is willing to extend the period of his service to GCFC.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth
in this Amendment, GCFC and the Executive agree as follows:

1.    Section 2(a) is hereby amended by deleting "thirty six (36)" and
substituting "sixty (60)" therefore.

2.    Section 3(b) is hereby amended by adding ", whether or not made available
to any other senior executive or key management employee of GCFC" to the end of
the second sentence of the Subsection.

3.    All provisions of the Agreement, other than as modified in this Amendment,
are hereby ratified and shall remain in full force and effect.

IN WITNESS WHEREOF, GCFC and the Executive have executed this Amendment as of
the day and year first written above.

GCFC:                                                THE EXECUTIVE:

CENTRAL FEDERAL CORPORATION

                                                         /s/ David C. Vernon
                                                         ----------------------
By: /s/ Thomas P. Ash                                    David C. Vernon
    --------------------
Name in
Print: Thomas P. Ash
       For the Compensation and
       Management Development
       Committee of the Board of Directors

                                       55
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>l12592aexv10w4.txt
<DESCRIPTION>EX-10.4 AMENDMENT TO EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.4

      AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN CFBANK AND DAVID C. VERNON

                        AMENDMENT TO EMPLOYMENT AGREEMENT
                                     CF BANK

This AMENDMENT TO EMPLOYMENT AGREEMENT (this "AMENDMENT") is entered into and
made effective as of May 10, 2004 between CFBank, a federally chartered savings
association fka Central Federal Bank fka Central Federal Savings and Loan
Association of Wellsville (the "ASSOCIATION"), and David C. Vernon, an Ohio
resident (the "EXECUTIVE").

A.    The Association and the Executive entered into an Employment Agreement as
      of February 28, 2003 (the "Agreement") for a term of 36 months.

B.    The Association values the services and contributions that the Executive
      has made to it and seeks to extend the period of service under the
      Agreement by an additional 24 months.

C.    The Executive is willing to extend the period of his service to the
      Association.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth
in this Amendment, the Association and the Executive agree as follows:

1.    Section 2(a) is hereby amended by deleting "thirty six (36) and
      substituting "sixty (60)" therefore.

2.    Section 3(b) is hereby amended by adding ", whether or not made available
      to any other senior executive or key management employee of the
      Association" to the end of the second sentence of the Subsection.

3.    All provisions of the Agreement, other than as modified in this Amendment,
      are hereby ratified and shall remain in full force and effect.

IN WITNESS WHEREOF, the Association and the Executive have executed this
Amendment as of the day and year first written above.

THE ASSOCIATION:                            THE EXECUTIVE:

CENTRAL FEDERAL CORPORATION

                                                      /s/ David C. Vernon
                                                      ------------------------
By: /s/ Thomas P. Ash                                 David C. Vernon
    ------------------
Name in
Print: Thomas P. Ash
       For the Board of Directors

                                      56
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<FILENAME>l12592aexv10w5.txt
<DESCRIPTION>EX-10.5 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.5

 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN CENTRAL FEDERAL CORPORATION
                              AND DAVID C. VERNON

                    SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
                           CENTRAL FEDERAL CORPORATION

This SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (this "AMENDMENT") is entered into
and made effective as of December 16, 2004 between Central Federal Corporation,
a Delaware corporation fka Grand Central Financial Corp. (the "HOLDING
COMPANY"), and David C. Vernon, an Ohio resident (the "EXECUTIVE").

A.    The Holding Company and the Executive entered into an Employment Agreement
      as of February 28, 2003, which agreement was amended as of May 10, 2004
      (the Employment Agreement, as amended, the "Agreement").

B.    A cogent and realistic management succession plan is key to the continued
      stability and growth of the Holding Company.

C.    The Executive has participated in and has been integral to the ongoing
      plan for management succession of the Holding Company.

D.    The Corporate Governance and Nominating Committee of the Holding Company,
      the Compensation and Management Committee of the Holding Company, and the
      Executive recommended the finalization of a succession plan for executive
      management of the Holding Company.

E.    The recommended succession plan calls for an executive other than the
      Executive to be President and Chief Executive Officer of the Holding
      Company.

F.    Notwithstanding the recommended succession plan, the Board of Directors of
      the Holding Company values the services of the Executive and desires to
      have him continue to provide services to the Holding Company.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth
in this Amendment, the Holding Company and the Executive agree as follows:

1. Section 1 of the Agreement is hereby deleted and the following is substituted
therefore in its entirety:

            (a) Effective February 1, 2005, and so long as Executive continues
      to serve, if elected, as a director of the Holding Company, Executive
      agrees to serve as Chairman of the Board of Directors of the Holding
      Company through December 31, 2005 and thereafter as Vice Chairman of the
      Board of Directors until the scheduled expiration of Executive's
      employment under Section 2(a) of this Agreement. Executive shall render
      such administrative and management services to the Holding Company as are
      customarily performed by persons in a similar executive capacity. During
      such period, Executive also agrees to serve, if elected, as a director of
      any subsidiary of the Holding Company.

                                       57

<PAGE>

            (b) If during any period until April 17, 2014 Executive shall not be
      elected to continue to serve as a director of the Holding Company, then he
      agrees to provide, and the Holding Company agrees to retain, his in this
      Amendment, the Holding Company and

            (c) The Holding Company agrees that at the scheduled expiration of
      Executive's employment under Section 2(a) of this Agreement, and so long
      as he shall continue to be elected as a director of the Holding Company,
      he shall be elected to serve as Chairman Emeritus of the Board of
      Directors of the Holding Company.

2.    Section 2 of the Agreement is hereby amended by the insertion of the
      following new Subsection:

            (d) Subject to the provisions of Section 2(c) of this Agreement, and
      from and after the scheduled expiration of his employment under Section
      2(a) of this Agreement, Executive shall continue to serve as a consultant
      to or employee of the Holding Company. Executive shall be available to
      perform special project services for and on behalf of the Holding Company
      until April 17, 2014.

3.    Section 3 of the Agreement is hereby amended by the insertion of the
      following new Subsection:

            (f) In lieu of compensation under Subsections (a), (b), (d) and (e)
      of Section 3 of this Agreement, Executive shall receive reasonable
      compensation for his services during the period from and after the
      scheduled expiration of his employment under Section 2(a) of this
      Agreement until the expiration of his services to the Holding Company
      under Section 2(d) of this Agreement. Compensation to Executive shall be
      commensurate with his duties and responsibilities, but in any event not
      less than $100 per month. Executive shall continue to receive reasonable
      reimbursement under Section 3(c) of this Agreement.

4. The changes to Section 1 of the Agreement as set forth in Paragraph 1 of this
Amendment do not constitute an Event of Termination, as defined in Section 4 of
the Agreement.

5. The vesting schedule relating to any and all restricted stock and incentive
stock options awarded to the Executive during the course of the Agreement, as
amended by this Amendment, shall remain unaffected by this Amendment.

6. All provisions of the Agreement, other than as modified in this Amendment,
are hereby ratified and shall remain in full force and effect.

IN WITNESS WHEREOF, the Holding Company and the Executive have executed this
Amendment as of the day and year first written above.

THE HOLDING COMPANY:                        THE EXECUTIVE:

CENTRAL FEDERAL CORPORATION
                                                /s/ David C. Vernon
                                                -------------------------------
                                                David C. Vernon

By: /s/ Thomas P. Ash
    ---------------------------
Name in
Print: Thomas P. Ash

       For the Compensation and
       Management Development Committee
       of the Board of Directors

                                       58
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>7
<FILENAME>l12592aexv10w6.txt
<DESCRIPTION>EX-10.6 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.6

   SECOND AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN CFBANK AND DAVID C. VERNON

                    SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
                                     CFBANK

This SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (this "AMENDMENT") is entered into
and made effective as of December 16, 2004 between CFBank, a federally chartered
savings association fka Central Federal Bank fka Central Federal Savings and
Loan Association of Wellsville (the "ASSOCIATION"), and David C. Vernon, an Ohio
resident (the "EXECUTIVE").

A.    The Association and the Executive entered into an Employment Agreement as
      of February 28, 2003, which agreement was amended as of May 10, 2004 (the
      Employment Agreement, as amended, the "AGREEMENT").

B.    A cogent and realistic management succession plan is key to the continued
      stability and growth of the Association.

C.    The Executive has participated in and has been integral to the ongoing
      plan for management succession of the Association.

D.    The Corporate Governance and Nominating Committee of the Association's
      parent company, Central Federal Corporation, a Delaware corporation (the
      "HOLDING COMPANY"), the Compensation and Management Committee of the
      Holding Company, and the Executive recommended the finalization of a
      succession plan for executive management of the Association.

E.    The recommended succession plan calls for an executive other than the
      Executive to be Chief Executive Officer of the Association.

F.    Notwithstanding the recommended succession plan, the Board of Directors of
      the Association values the services of the Executive and desires to have
      him continue to provide services to the Association.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth
in this Amendment, the Association and the Executive agree as follows:

1. Section 1 of the Agreement is hereby deleted and the following is substituted
therefore in its entirety:

            (a) Effective February 1, 2005, and so long as Executive continues
      to serve, if elected, as a director of the Association, Executive agrees
      to serve as Chairman of the Board of Directors of the Association through
      December 31, 2005 and thereafter as Vice Chairman of the Board of
      Directors until the scheduled expiration of Executive's employment under
      Section 2(a) of this Agreement. Executive shall render such administrative
      and management services to the Association as are customarily performed by
      persons in a similar executive capacity. During such period, Executive
      also agrees to serve, if elected, as a director of the Holding Company and
      any subsidiary of the Association.

                                       59
<PAGE>

            (b) If during any period until April 17, 2014 Executive shall not be
      elected to continue to serve as a director of the Association, then he
      agrees to provide, and the Association agrees to retain, his services as a
      consultant or employee.

            (c) The Association agrees that at the scheduled expiration of
      Executive's employment under Section 2(a) of this Agreement, and so long
      as he shall continue to be elected as a director of the Association, he
      shall be elected to serve as Chairman Emeritus of the Board of Directors
      of the Association.

2. Section 2 of the Agreement is hereby amended by the insertion of the
following new Subsection:

            (d) Subject to the provisions of Section 2(c) of this Agreement, and
      from and after the scheduled expiration of his employment under Section
      2(a) of this Agreement, Executive shall continue to serve as a consultant
      to or employee of the Association. Executive shall be available to perform
      special project services for and on behalf of the Association until April
      17, 2014.

3. Section 3 of the Agreement is hereby amended by the insertion of the
following new Subsection:

            (f) In lieu of compensation under Subsections (a), (b), (d) and (e)
      of Section 3 of this Agreement, Executive shall receive reasonable
      compensation for his services during the period from and after the
      scheduled expiration of his employment under Section 2(a) of this
      Agreement until the expiration of his services to the Association under
      Section 2(d) of this Agreement. Compensation to Executive shall be
      commensurate with his duties and responsibilities, but in any event not
      less than $100 per month. Executive shall continue to receive reasonable
      reimbursement under Section 3(c) of this Agreement.

4. The changes to Section 1 of the Agreement as set forth in Paragraph 1 of this
Amendment do not constitute an Event of Termination, as defined in Section 4 of
the Agreement.

5. The vesting schedule relating to any and all restricted stock and incentive
stock options awarded to the Executive during the course of the Agreement, as
amended by this Amendment, shall remain unaffected by this Amendment.

6. All provisions of the Agreement, other than as modified in this Amendment,
are hereby ratified and shall remain in full force and effect.

IN WITNESS WHEREOF, the Association and the Executive have executed this
Amendment as of the day and year first written above.

THE ASSOCIATION:                            THE EXECUTIVE:

CFBANK

                                                  /s/ David C. Vernon
                                                  -----------------------------
                                                  David C. Vernon

By: /s/ Thomas P. Ash
    ------------------------
Name in
Print: Thomas P. Ash
       For the Board of Directors

                                       60
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11.1
<SEQUENCE>8
<FILENAME>l12592aexv11w1.txt
<DESCRIPTION>EX-11.1 COMPUTATION OF PER SHARE EARNINGS
<TEXT>
<PAGE>

                                                                    EXHIBIT 11.1

                        COMPUTATION OF PER SHARE EARNINGS

The information regarding Computation of Per Share Earnings is incorporated by
reference to the Company's 2004 Annual Report to shareholders distributed to
shareholders and furnished to the Commission under Rules 14a-3(b) and (c) of the
Exchange Act; the computation appears under the caption "Note 21 - Earnings Per
Share" at page 41 therein.

                                      61
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>9
<FILENAME>l12592aexv13w1.txt
<DESCRIPTION>EX-13.1 ANNUAL REPORT
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                    EXHIBIT 13.1

  ANNUAL REPORT TO SECURITY HOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

Table of Contents

<TABLE>
<CAPTION>
                                                               Page
<S>                                                            <C>
Message to Shareholders                                          3

Management's Discussion and Analysis of
Financial Condition and Results of Operations
Selected Financial and Other Data                                4
General                                                          6
Forward-Looking Statements                                       6
Management Strategy                                              7
Financial Condition                                              8
Comparison of Results of Operations for 2004 and 2003            9
Comparison of Results of Operations for 2003 and 2002           11
Asset/Liability Management and Market Risk                      14
Liquidity and Capital Resources                                 15
Impact of Inflation                                             15
Critical Accounting Policies                                    16
Market Prices and Dividends Declared                            16

Financial Statements
Report of Independent Registered Public Accounting Firm         17
Consolidated Financial Statements                               18
Notes to Consolidated Financial Statements                      23

Board of Directors and Officers                                 42

CFBank and Reserve Mortgage Services, Inc. Office Locations     43

Corporate Data

Annual Report                                                   44
Annual Meeting                                                  44
Shareholder Services                                            44
</TABLE>

                                      62
<PAGE>

Message to Shareholders

Dear Shareholders,

For more than 112 years the officers and employees of our Company have served
the financial services needs of the communities of Wellsville and Calcutta, Ohio
with distinction, and in the past two years we began to serve the communities of
Summit and Franklin Counties. To position ourselves for this growth and future
profitability, we have invested in people, technology and products. More
importantly, we have developed a customer service approach and corporate values
that will serve our customers and our Company.

Our plan involved the execution of a number of action items, which have been
discussed in various press releases and regulatory filings throughout the year.
We urge you to review the Management Discussion and Analysis section of this
annual report for additional details about the actions we have taken to position
Central Federal Corporation for the future.

Specifically, we

      -     Relocated our Fairlawn office in April

      -     Acquired Reserve Mortgage Services in October

      -     Increased the commercial and multi-family loan portfolio by 407%

      -     Added online banking services

      -     Implemented a long-term succession plan

Each of these actions enhanced Central Federal Corporation.

We are now poised to deliver on the promise of creating value for our customers,
our community and our stockholders.

We look forward to the opportunity to build on the accomplishments of 2004,
which were made possible by the efforts of so many individuals. Thank you for
your support of Central Federal Corporation. We are continuing our efforts to
grow and become even stronger.

David C. Vernon
Chairman

Mark S. Allio
Vice Chairman, President and CEO

                                      63
<PAGE>

      Management's Discussion and Analysis of Financial Condition and Results of
Operations

The selected financial and other data of the Company set forth below is derived
in part from, and should be read in conjunction with the Financial Statements of
the Company and Notes thereto presented elsewhere in this report.

<TABLE>
<CAPTION>
                                                          AT DECEMBER 31,
                                     ---------------------------------------------------------
                                        2004        2003        2002        2001        2000
                                     ---------   ---------   ---------   ---------   ---------
                                                      (DOLLARS IN THOUSANDS)
<S>                                  <C>         <C>         <C>         <C>         <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets                         $ 171,005   $ 107,011   $ 110,551   $ 120,927   $ 140,933
Cash and cash equivalents               32,675       8,936      12,861       4,329       2,930
Securities available for sale           13,508      27,126       1,439       2,092       3,090
Securities held to maturity                  -           -      17,822      23,343      35,796
Loans, net(1)                          108,149      58,024      62,565      70,570      86,265
Allowance for loan losses                  978         415         361         373         354
Nonperforming assets                       418         934         783         985         489
Foreclosed assets                          132         193           2          98           -
Goodwill                                 1,749           -           -           -           -
Other intangible assets                    299           -           -           -           -
Deposits                               101,624      73,358      74,690      76,168      73,997
Federal Home Loan Bank advances         41,170       7,500      11,430      18,393      40,536
Other borrowings                         2,249           -       4,900       7,000       7,000
Subordinated debentures                  5,155       5,155           -           -           -
Total shareholders' equity              19,507      19,856      17,583      18,160      17,833
</TABLE>

<TABLE>
<CAPTION>
                                                                FOR THE YEAR ENDED DECEMBER 31,
                                                        ----------------------------------------------
                                                           2004      2003      2002     2001     2000
                                                        ---------  --------  -------  -------  -------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                     <C>        <C>       <C>      <C>      <C>
SUMMARY OF EARNINGS:
Total interest income                                   $   6,144  $  5,435  $ 7,067  $ 9,588  $ 9,834
Total interest expense                                      2,149     3,521    3,462    5,299    5,802
                                                        ---------  --------  -------  -------  -------
   Net interest income                                      3,995     1,914    3,605    4,289    4,032
Provision for loan losses                                     646       102       19       62        -
                                                        ---------  --------  -------  -------  -------
   Net interest income after provision for loan losses      3,349     1,812    3,586    4,227    4,032
Noninterest income
   Net gain (loss) on sale of securities                      (55)       42       16       15       10
   Other                                                      592       714      549      169      284
                                                        ---------  --------  -------  -------  -------
      Total noninterest income                                537       756      565      184      294
Noninterest expense                                         6,420     5,930    3,164    3,501    3,900
                                                        ---------  --------  -------  -------  -------
Income (loss) before income taxes                          (2,534)   (3,362)     987      910      426
Income tax expense (benefit)                                 (872)     (988)     313      312      150
                                                        ---------  --------  -------  -------  -------
      Net income (loss)                                 $  (1,662) $ (2,374) $   674  $   598  $   276
                                                        =========  ========  =======  =======  =======
</TABLE>

                                                    (See footnotes on next page)

                                      64
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

<TABLE>
<CAPTION>
                                                                  AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                           ---------------------------------------------------
                                                              2004      2003      2002       2001       2000
                                                           ---------  --------  --------   --------   --------
<S>                                                        <C>        <C>       <C>        <C>        <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:

PERFORMANCE RATIOS:(2)
Return on average assets                                      (1.23%)   (2.19%)    0.58%      0.45%      0.02%
Return on average equity                                      (8.60%)  (12.34%)    3.76%      3.32%      1.27%
Average yield on interest-earnings assets(3)                   5.03%     5.62%     6.98%      7.71%      7.42%
Average rate paid on interest-bearing liabilities              1.93%     2.63%     3.63%      4.65%      5.01%
Average interest rate spread(4)                                3.10%     2.99%     3.35%      3.06%      2.21%
Net interest margin, fully taxable equivalent(5) (11)          3.27%     3.28%     3.56%      3.45%      2.96%
Interest-earning assets to interest-bearing
liabilities                                                  109.82%   113.38%   106.09%    109.17%    120.16%
Efficiency ratio(6)                                          139.96%   225.65%    76.17%     78.53%     90.36%
Noninterest expense to average assets                          4.74%     5.47%     2.74%      2.63%      2.82%
Dividend payout ratio                                           n/m       n/m     83.72%     81.58%       n/m

CAPITAL RATIOS:(2)
Equity to total assets at end of period                       11.41%    18.56%    15.90%     15.02%     12.65%
Average equity to average assets                              14.26%    17.76%    15.54%     13.54%     15.68%
Tangible capital ratio (9)                                     8.10%    13.90%    18.90%     18.40%     15.60%
Core capital ratio (9)                                         8.10%    13.90%    18.90%     18.40%     15.60%
Risk-based capital ratio (9)                                  12.20%    21.60%    38.60%     35.70%     32.40%

ASSET QUALITY RATIOS:(2)
Nonperforming loans to total loans (7)                         0.26%     1.28%     1.25%      1.25%      0.56%
Nonperforming assets to total assets(8)                        0.24%     0.87%     0.71%      0.81%      0.35%
Allowance for loan losses to total loans                       0.90%     0.71%     0.57%      0.53%      0.41%
Allowance for loan losses to nonperforming loans (7)         341.99%    56.01%    46.22%     42.24%     72.39%
Net charge-offs to average loans                               0.10%     0.08%     0.05%      0.05%      0.02%

PER SHARE DATA:
Basic earnings (loss) per share                            ($  0.82)  $ (1.31)  $  0.44    $  0.38    $  0.17
Diluted earnings (loss) per share                             (0.82)    (1.31)     0.43       0.38       0.17
Dividends declared (10)                                        0.36      0.36      0.36       0.31       6.25
Tangible book value per share at year end                      7.99      9.81     10.68      10.42      10.19
</TABLE>

- -------------

(1)   Loans, net represents gross loans receivable net of the allowance for loan
      losses, loans in process and deferred loan origination fees.

(2)   Asset quality ratios and capital ratios are end-of-period ratios. All
      other ratios are based on average monthly balances during the indicated
      periods.

(3)   Calculations of yield are presented on a taxable equivalent basis using
      the federal income tax rate of 34%.

(4)   The average interest rate spread represents the difference between the
      weighted average yield on average interest-earning assets and the weighted
      average cost of average interest-bearing liabilities.

(5)   The net interest margin represents net interest income as a percent of
      average interest-earning assets.

(6)    The efficiency ratio equals noninterest expense divided by net interest
       income plus noninterest income (excluding gains or losses on securities
       transactions).

(7)   Nonperforming loans consist of nonaccrual loans and other loans 90 days or
      more past due.

(8)   Nonperforming assets consist of nonperforming loans, other repossessed
      assets and REO.

(9)   Regulatory capital ratios of CFBank.

(10)  The Company paid a return of capital dividend of $6.00 per share in 2000.

(11)  Calculated excluding the $1.3 million penalty on prepayment of Federal
      Home Loan Bank advances in 2003.

n/m - not meaningful

                                       65
<PAGE>

          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      GENERAL

      Central Federal Corporation (formerly known as Grand Central Financial
      Corp.) was formed as a thrift holding company as a result of the
      conversion of CFBank (formerly known as Central Federal Savings and Loan
      Association of Wellsville and, more recently as Central Federal Bank) from
      a federally chartered mutual savings and loan association to a federally
      chartered stock savings and loan association in December of 1998.

      Management's discussion and analysis represents a review of the Company's
      consolidated financial condition and results of operations. This review
      should be read in conjunction with the consolidated financial statements
      and footnotes.

      The Company's results of operations are dependent primarily on net
      interest income, which is the difference ("spread") between the interest
      income earned on its loans, securities and other interest-earning assets
      and its cost of funds, consisting of interest paid on its deposits and
      borrowed funds. The interest rate spread is affected by regulatory,
      economic and competitive factors that influence interest rates, loan
      demand and deposit flows. The Company's net income is also affected by,
      among other things, loan fee income, provisions for loan losses, loan
      sales, service charges, operating expenses and franchise and income taxes.
      The Company's revenues are derived primarily from interest on mortgage
      loans, consumer loans, commercial loans and securities, as well as income
      from service charges and loan sales. The Company's operating expenses
      principally consist of interest expense, employee compensation and
      benefits, occupancy and other general and administrative expenses. The
      Company's results of operations are significantly affected by general
      economic and competitive conditions, particularly changes in market
      interest rates, government policies and actions of regulatory authorities.
      Future changes in applicable laws, regulations or government policies may
      also materially impact the Company.

      FORWARD-LOOKING STATEMENTS

      When used in this Annual Report, or in future filings with the Securities
      and Exchange Commission, in press releases or other public or shareholder
      communications, or in oral statements made with the approval of an
      authorized executive officer, the words or phrases "will likely result",
      "are expected to", "will continue", "is anticipated", "estimate",
      "project" or similar expressions are intended to identify "forward-looking
      statements" within the meaning of the Private Securities Litigation Reform
      Act of 1995. Such forward-looking statements involve known and unknown
      risks, uncertainties and other factors, which may cause the Company's
      actual results to be materially different from those indicated. Such
      statements are subject to certain risks and uncertainties including
      changes in economic conditions in the market areas where the Company
      conducts business, which could materially impact credit quality trends,
      changes in policies by regulatory agencies, fluctuations in interest
      rates, demand for loans in the market areas where the Company conducts
      business, and competition that could cause actual results to differ
      materially from historical earnings and those presently anticipated or
      projected. The Company wishes to caution readers not to place undue
      reliance on any such forward-looking statements, which speak only as of
      the date made. The Company undertakes no obligation to publicly release
      the result of any revisions that may be made to any forward-looking
      statements to reflect events or circumstances after the date of such
      statements or to reflect the occurrence of anticipated or unanticipated
      events.

      MANAGEMENT STRATEGY

                                       66
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      The Company is a community-oriented financial institution offering a
      variety of financial services to meet the needs of the communities it
      serves. The Company attracts deposits from the general public and uses
      such deposits, together with borrowings and other funds, primarily to
      originate commercial and commercial real estate loans, single-family and
      multi-family residential mortgage loans, home equity lines of credit and
      short-term consumer loans.

      During 2004, the Company continued to execute the plan for growth, which
      started with significant changes in 2003 to utilize its strong capital
      position to take advantage of opportunities for expansion into business
      financial services and position itself for growth in the Fairlawn and
      Columbus, Ohio markets.

      Commercial, commercial real estate and multi-family mortgage loan balances
      increased $42.3 million, or 407% during 2004 and totaled $52.7 million at
      December 31, 2004, as the Company continued its focus on business
      financial lending. The Fairlawn office moved from its temporary location
      and opened for business in a newly constructed office building in April
      2004 and the Bank began using its new name, CFBank. On October 22, 2004,
      the Company completed its acquisition of Reserve Mortgage Services, Inc.
      (Reserve), which will enable the Company to significantly expand mortgage
      services.

      The Company continued to sell current originations of long-term fixed-rate
      mortgages during 2004, rather than subject the Company to the interest
      rate risk associated with rising interest rates when such loans are held
      in portfolio. The Company also borrowed $12.3 million from the Federal
      Home Loan Bank using fixed rate advances with maturities from March 2005
      through September 2008 in order to protect the Company from increased
      funding costs associated with rising interest rates.

      In December 2004, the Company announced the appointment of Mark S. Allio
      as Chief Executive Officer and President effective February 1, 2005. Mr.
      Allio brings over 15 years of banking experience to the management staff,
      particularly in the mortgage industry as he was President of Third Federal
      Savings, in Cleveland, Ohio and worked with a team to grow the business
      from $1.5 billion to $8.5 billion in assets between 1988 and 2002,
      becoming the largest federal mutual savings and loan in the country and
      the largest residential lender in Cuyahoga, Summit, Franklin and Hamilton
      Counties in Ohio.

      Profitability in 2004 was impacted by, and near-term profitability is
      expected to continue to be impacted by, the operating costs associated
      with offices in Fairlawn and Columbus, improvements in technology,
      staffing costs associated with the expansion and provision for loan losses
      resulting from increased commercial, commercial real estate and
      multi-family residential lending.

      The Company's profitability has also been negatively impacted by a rise in
      mortgage interest rates, which has caused consumer refinancing to slow,
      reducing the volume of loan originations, sales and resultant gains. The
      acquisition of Reserve is expected to significantly expand the Company's
      mortgage services and increase the Company's mortgage loan production.
      Although the Company currently expects that most of the

                                       67
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      long-term fixed-rate mortgage loan originations will be sold on a
      servicing-released basis, a portion of the loans may be retained for
      portfolio within the Company's interest rate risk and profitability
      guidelines.

      In an effort to ease the economic and management burden of complying with
      the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) and other federal
      securities laws, the Company announced in October 2004 that it would ask
      stockholders to approve a reverse stock split to reduce the number of the
      Company's stockholders to fewer than 300 and allow the Company to "go
      private." A private company does not have to implement many complex and
      costly requirements of Sarbanes-Oxley, file Exchange Act reports or comply
      with the corporate governance rules and onerous disclosure requirements of
      the SEC and Nasdaq(R). The Board of Directors subsequently established a
      reverse stock split ratio of 1-to-325 shares and set $14.50 per share as a
      fair price to compensate stockholders who hold fewer than 325 shares and
      who would no longer remain stockholders of the Company after the effective
      date of the split. Significant numbers of individuals purchased 324 or
      fewer shares during months between the announcement and the Special
      shareholders' meeting on March 14, 2005. The dramatic increase in shares
      held by stockholders who own fewer than 324 shares substantially increased
      the number of shares to be repurchased in the going private transaction
      and, despite stockholder approval, the Board of Directors abandoned the
      transaction in the interest of the Company and its shareholders, as the
      cost of share repurchases was in excess of the $2 million ceiling which
      the board had set as the cost for going private.

      As a result, the Company continues to be subject to compliance with
      federal securities laws, including Sarbanes-Oxley. In 2006, the Company
      will be subject to the internal control provisions of Section 404 of
      Sarbanes-Oxley. The Company currently estimates that the cost of
      compliance with the internal control provisions will increase expenses by
      approximately $340,000 over 2005 and 2006 as the company implements the
      provisions, and $140,000 in subsequent years.

      The Company is not aware of any market or institutional trends, other
      events or uncertainties that are expected to have a material effect on
      liquidity, capital resources or operations. The Company is not aware of
      any current recommendations by its regulators which would have a material
      effect if implemented.

      FINANCIAL CONDITION

      GENERAL. Total assets increased $64.0 million, or 59.8% during 2004 and
      totaled $171.0 million at December 31, 2004 compared to $107.0 million at
      December 31, 2003 primarily due to growth in the commercial and
      multi-family loan portfolios and short term cash balances.

      CASH AND CASH EQUIVALENTS. Cash and cash equivalents totaled $32.7 million
      at December 31, 2004, an increase of $23.8 million from $8.9 million at
      December 31, 2003. The increase was primarily funds from overnight
      borrowings, which were invested in short term cash investments available
      to fund loans.

      SECURITIES. Securities available for sale declined $13.6 million during
      the year and totaled $13.5 million at December 31, 2004 compared to $27.1
      million at December 31,

                                       68
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      2003. Cash flows from maturities and sales were generally invested in
      short term cash investments in anticipation of commercial loan growth.

      LOANS. Loans, net increased $50.1 million, or 86.4% during 2004 and
      totaled $108.1 million at December 31, 2004 compared to $58.0 million at
      December 31, 2003 primarily due to growth in commercial, commercial real
      estate and multi-family mortgage loans and, to a lesser extent, growth in
      single-family mortgage loan balances. Commercial, commercial real estate
      and multi-family mortgage loan balances increased $42.3 million and
      totaled $52.7 million at December 31, 2004 compared to $10.4 million at
      December 31, 2003 as the Company continued to focus on business financial
      lending. Single-family mortgage loan balances increased $6.6 million
      during the year and totaled $41.4 million at December 31, 2004 compared to
      $34.8 million at December 31, 2003.

      DEPOSITS. Deposits increased $28.2 million, or 38.4% during 2004 and
      totaled $101.6 million at December 31, 2004 compared to $73.4 million at
      December 31, 2003. The increase was due to growth of $14.6 million in
      money market accounts, $9.6 million in certificate of deposit accounts and
      $4.4 million in checking accounts, primarily commercial checking accounts
      offset by a $383,000 decline in savings accounts. The growth in deposits
      is primarily the result of the Company's focus on commercial customer
      relationships. The growth in certificate of deposit accounts included $6.1
      million in brokered deposits. The Company expects to continue to use
      brokered deposits as a source of funding depending on market conditions,
      pricing and funding needs.

      FEDERAL HOME LOAN BANK ADVANCES. Federal Home Loan Bank advances increased
      $33.7 million during 2004 and totaled $41.2 million at December 31, 2004
      compared to $7.5 million at December 31, 2003 as advances were used to
      fund loan growth and short term cash investments. Fixed rate advances for
      terms of 1 through 4.5 years totaling $12.3 million were drawn primarily
      during the first six months of 2004 to fund loans at low borrowing
      interest rates and protect the Company's interest rate risk position as
      market interest rates increased.

      OTHER BORROWINGS. Other borrowings totaled $2.2 million at December 31,
      2004 and represent the outstanding balance on a revolving line of credit
      with an unaffiliated bank, acquired in the Reserve acquisition. There were
      no other borrowings at December 31, 2003.

      SUBORDINATED DEBENTURES. Subordinated debentures totaled $5.2 million at
      year-end 2004 and 2003 and were issued by the Company in 2003 in exchange
      for the proceeds of a $5.0 million trust preferred securities offering
      issued by a trust formed by the Company. The proceeds of the offering are
      available to provide capital for CFBank to support growth.

      SHAREHOLDERS' EQUITY. Total shareholders' equity declined 1.8% during 2004
      and totaled $19.5 million at December 31, 2004 compared to $19.9 million
      at December 31, 2003 primarily due to the net loss and dividends during
      the year offset by the issuance of additional capital in the acquisition
      of Reserve in October 2004. Capital levels remained strong as the Company
      continued to leverage its capital through growth. The

                                       69
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      Company's capital ratio totaled 11.4% at December 31, 2004 compared to
      18.6% at December 31, 2003.

      Office of Thrift Supervision (OTS) regulations require savings
      institutions to maintain certain minimum levels of regulatory capital.
      Additionally, the regulations establish a framework for the classification
      of savings institutions into five categories: well-capitalized, adequately
      capitalized, undercapitalized, significantly undercapitalized and
      critically undercapitalized. Generally, an institution is considered
      well-capitalized if it has a core (Tier 1) capital ratio of at least 5.0%
      (based on adjusted total assets); a core (Tier 1) risk-based capital ratio
      of a least 6.0%; and a total risk-based capital ratio of at least 10.0%.
      The Bank had capital ratios above the well-capitalized levels at December
      31, 2004 and 2003.

      COMPARISON OF RESULTS OF OPERATIONS FOR 2004 AND 2003

      GENERAL. The Company incurred a net loss of $1.7 million or $.82 per
      diluted share in 2004, a 30.0% improvement from the net loss of $2.4
      million or $1.31 per diluted share in 2003 primarily due to higher net
      interest income offset by additional provision for loan losses, a decline
      in gains on loan sales and increased noninterest expense.

      NET INTEREST INCOME. Net interest income is a significant component of the
      Company's net income, and consists of the difference between interest
      income generated on interest-earning assets and interest expense incurred
      on interest-bearing liabilities. Net interest income is primarily affected
      by the volumes, interest rates and composition of interest-earning assets
      and interest-bearing liabilities. The following tables titled "Average
      Balances, Interest Rates and Yields" and "Rate/Volume Analysis of Net
      Interest Income" provide important information on factors impacting net
      interest income and should be read in conjunction with this discussion of
      net interest income.

      Net interest income totaled $4.0 million in 2004 compared to $1.9 million
      in 2003. Net interest income in 2003 included a $1.3 million pre-tax
      prepayment penalty incurred in the repayment of long-term, fixed-rate
      Federal Home Loan Bank advances, discussed below. Not including this prior
      year charge, net interest income increased 25.5% in 2004 compared to the
      2003. The improvement in net interest income was due to the growth in
      assets, primarily commercial, commercial real estate and multi-family
      mortgage loans in accordance with the Company's growth strategy and a
      reduction in the cost of borrowings in 2004 due to payoff of the Federal
      Home Loan Bank advances, noted above and lower market interest rates.

      Interest income increased $709,000 or 13.0% to $6.1 million in 2004,
      compared to $5.4 million in 2003, primarily due to increased income on
      loans and short term cash investments offset by a decline in income on
      securities. Interest income on loans increased $652,000, or 15.5% in 2004
      to $4.9 million, compared to $4.2 million in 2003, primarily due to growth
      in loan balances offset by lower yields on loans. Average loan balances
      increased $24.5 million and totaled $81.9 million in 2004 compared to
      $57.4 million in 2003 primarily due to loan growth pursuant to the
      Company's strategy to expand into business financial services in the
      Fairlawn and Columbus, Ohio markets. Average loan yields declined 139
      basis points (bp) to 5.93% in 2004 compared to 7.32% in

                                       70
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      2003 due to growth in commercial, commercial real estate and multi-family
      mortgage loans, which are primarily adjustable rate loans at lower rates
      than single-family mortgage loans, which comprised 59.6% of the loan
      portfolio in 2003 compared to 37.9% in 2004. Interest income on federal
      funds sold and other earning assets totaled $367,000 in 2004 and increased
      $215,000, or 141.4% from $152,000 in 2003 due to an increase in both the
      average balance and yield of other earning assets. The average balance of
      other earning assets increased $4.9 million and totaled $17.3 million in
      2004 compared to $12.4 million in 2003 as the Company maintained short
      term cash balances in anticipation of loan growth. The yield on other
      earning assets increased 90 bp to 2.12% in 2004 from 1.22% in 2003 as
      market interest rates increased during 2004. Interest income on securities
      declined $169,000 or 18.0% and totaled $770,000 in 2004 compared to
      $939,000 in 2003 primarily due to a decline in the average balance of
      securities. The average balance of securities declined $4.1 million and
      totaled $19.6 million in 2004 compared to $23.7 million in 2003 due to
      cash flows from maturities and sales of securities generally invested in
      short term cash investments in anticipation of loan growth. The yield on
      securities was 4.01% in 2004 compared to 4.02% in 2003. The average
      balance of interest-earning assets increased $25.4 million and the average
      yield of interest-earning assets declined 59 bp during 2004.

      Interest expense, not including the $1.3 million prepayment penalty,
      decreased $102,000 or 4.5% to $2.1 million in 2004 compared to $2.2
      million in 2003 due to a decline in interest expense on deposits offset by
      an increase in interest expense on borrowings. Interest expense on
      deposits decreased $134,000 or 8.5% to $1.4 million in 2004 from $1.6
      million in 2003 due to a decline in the cost of deposits offset by an
      increase in the deposit balances. The average cost of deposits declined 35
      bp to 1.79% in 2004 from 2.14% in 2003. Average deposit balances increased
      $6.9 million to $80.3 million in 2004 from $73.4 million in 2003 primarily
      due to the Company's success in building deposit relationships with
      business loan customers. Interest expense on FHLB advances and other
      borrowings, including subordinated debentures, increased $32,000 or 4.7%
      to $713,000 in 2004 from $681,000 in 2003, not including the $1.3 million
      prepayment penalty, due to increased borrowings offset by a decline in the
      average cost of borrowings. The average balance of FHLB advances and other
      borrowings increased $19.1 million to $31.3 million in 2004 from $12.2
      million in 2003 as borrowings were used to fund loan growth and short term
      cash investments. The average cost of FHLB advances and other borrowings
      decreased 331 bp to 2.28% in 2004 from 5.59% in 2003 primarily due to
      payoff of long- term, fixed-rate FHLB advances in 2003. The average
      balance of interest-bearing liabilities increased $25.9 million and the
      average cost of interest-bearing liabilities declined 70 bp in 2004.

      Net interest margin declined 1 bp from 3.28% in 2003 to 3.27% in 2004.

      PROVISION FOR LOAN LOSSES. Management analyzes the adequacy of the
      allowance for loan losses regularly through reviews of the performance of
      the loan portfolio considering economic conditions, changes in interest
      rates and the effect of such changes on real estate values and changes in
      the composition of the loan portfolio. The allowance for loan losses is
      established through a provision for loan losses based on Management's
      evaluation of the risk in its loan portfolio. Such evaluation, which
      includes a review of all loans for which full collectibility may not be
      reasonably assured, considers, among other matters, the estimated fair
      value of the underlying collateral, economic conditions, historical loan
      loss experience, changes in the size and growth of the loan portfolio and

                                       71
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      other factors that warrant recognition in providing for an adequate loan
      loss allowance. Future additions to the allowance for loan losses will be
      dependent on these factors.

      Based on Management's review, the provision for loan losses totaled
      $646,000 in 2004, an increase of $544,000 from $102,000 in 2003. The
      Company's strategy to expand into business financial services and the
      significant growth in commercial, commercial real estate and multi-family
      mortgage loans that resulted from that strategy in 2004 required an
      increase in the provision and allowance for loan losses related to these
      loan types. At December 31, 2004, the allowance for commercial, commercial
      real estate and multi-family mortgage loans totaled $862,000, an increase
      of $762,000 from $100,000 at December 31, 2003 as these loan types grew
      from 17.8% of the total loan portfolio at year-end 2003 to 48.3% at
      year-end 2004. 88.4% of the allowance was allocated to these loan types at
      December 31, 2004, as they tend to be larger balance, higher risk loans
      than single-family residential mortgages, where the Company has
      experienced low historical loss rates. At December 31, 2004, the allowance
      for loan losses represented .90% of total loans compared to .71% at
      December 31, 2003. Further, nonperforming loans, all of which are
      nonaccrual loans, were $286,000 at December 31, 2004 and $741,000 at
      December 31, 2003. At December 31, 2004, nonaccrual loans represented 0.3%
      of total loans, compared to 1.3% at December 31, 2003. The decline in
      nonaccrual loans was principally due to the Company's acquisition of
      properties through the foreclosure process. More than 96% of the
      nonaccrual loan balances are secured by single-family homes in the
      Company's primary market area. Management believes the allowance for loan
      losses is adequate to absorb probable incurred credit losses in the loan
      portfolio at December 31, 2004; however, future additions to the allowance
      may be necessary based on changes in economic conditions and the factors
      discussed in the previous paragraph.

      NONINTEREST INCOME. Noninterest income declined $219,000 or 29.0% to
      $537,000 in 2004, compared to $756,000 in 2003, primarily due to losses on
      security sales and decreased gains on sales of loans offset by increased
      loan servicing fees. Net losses on sales of securities, which totaled
      $55,000 in 2004 compared to gains of $42,000 in 2003, were primarily from
      sales of fixed-rate debt securities. Gains on sales of loans totaled
      $222,000 in 2004, a decline of $207,000 or 48.3% from $429,000 during 2003
      due to decreased mortgage originations and sales as market mortgage
      interest rates increased and customer refinancing slowed during the
      current year. Management anticipates that although current interest rate
      conditions may continue to reduce customer refinancing activity and the
      volume of loan originations in the market, the Company's mortgage loan
      origination and sales activity will increase as a result of the
      acquisition of Reserve. However, significant increases in market mortgage
      interest rates may reduce the volume of loan originations, sales and
      resultant gains. Net loan servicing fee income totaled $62,000 in 2004, an
      increase of $163,000 from a net loss of $101,000 in 2003, primarily a
      result of slower mortgage loan prepayments as market interest rates
      increased in 2004.

      NONINTEREST EXPENSE. Noninterest expense increased $490,000 or 8.3% and
      totaled $6.4 million in 2004 compared to $5.9 million in 2003 primarily
      due to a full year of operating costs related to staffing, improved
      technology and expansion to new locations in Fairlawn and Columbus,
      including data processing, occupancy, depreciation and other expenses.
      Noninterest expense in 2004 also included $106,500 in legal and
      professional fees related to the proposed reverse stock split and $412,000
      in expenses related to employee severance, post-retirement life insurance
      benefits associated with bank owned

                                       72
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      life insurance, one time charges recognized in connection with the
      servicing of loans and one time internal operating account write-offs.
      Expense for the year ended December 31, 2003 included $1.6 million in
      salaries and benefits expense related to restructuring of employee benefit
      plans and payments on agreements with former executives.

      INCOME TAXES. The income tax benefit associated with the lower net loss in
      2004 totaled $872,000 compared to $988,000 in 2003.

      COMPARISON OF RESULTS OF OPERATIONS FOR 2003 AND 2002

      GENERAL. The Company incurred a net loss in 2003 of $2.4 million or $1.31
      per diluted share, compared to net income of $674,000 or $.43 per diluted
      share in 2002. The loss was primarily due to increased noninterest expense
      associated with Management's strategy to expand into business financial
      services by opening offices in the Fairlawn and Columbus, Ohio markets,
      costs associated with additions to the management team and staff,
      restructuring of employee benefit plans and payments on agreements with
      former executives. Additionally, a $1.3 million pre-tax prepayment penalty
      was incurred in the repayment of long-term, fixed-rate Federal Home Loan
      Bank advances to eliminate an inappropriate and costly source of funding
      arranged in 1998 and 1999 to finance mortgage loans which had prepaid
      during the high refinancing activity in 2002 and 2003.

      NET INTEREST INCOME. Net interest income decreased $1.7 million in 2003 to
      $1.9 million, compared to $3.6 million in 2002 primarily due to the $1.3
      million prepayment penalty discussed above. Interest income decreased $1.7
      million or 23.1% to $5.4 million in 2003, compared to $7.1 million in
      2002. The decline was due to a decrease in mortgage loan portfolio
      balances and investment in securities with short-term maturities, and
      resultant lower yields, in order to reduce interest rate risk and provide
      liquidity for growth in commercial loans. Interest income on loans
      decreased $1.1 million, or 20.0% in 2003 to $4.2 million, compared to $5.3
      million in 2002, primarily due to continued high levels of mortgage
      refinancing and the sale of current fixed-rate loan production. Average
      loan balances decreased $9.4 million and average loan yields declined 54
      bp during 2003. Interest income from securities totaled $939,000 in 2003
      and declined $579,000, or 38.1% from $1.5 million in 2002. The decrease in
      income was primarily due to prepayments received on mortgage-backed
      securities and reinvestment of proceeds in securities with short-term
      maturities and lower current market rates. The average balance of
      securities decreased $177,000 and the average yield on the portfolio
      declined 234 bp during 2003. The decline in the yield of the portfolio was
      representative of Management's strategic decision to shorten the maturity
      of the securities portfolio.

      Interest expense, not including the $1.3 million prepayment penalty,
      decreased $1.2 million or 35.0% during 2003 to $2.3 million from $3.5
      million in 2002. The decline in interest expense resulted from a decrease
      in interest rates paid on deposits as market interest rates declined, and
      from reduced interest expense on borrowed funds, primarily as a result of
      the repayment of a $4.9 million borrowing. The average balance of
      interest-bearing liabilities decreased $9.8 million and the average cost
      of interest-bearing liabilities declined 100 bp in 2003.

      Net interest margin decreased 28 bp from 3.56% in 2002 to 3.28% in 2003.

                                       73
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

      The tables below titled "Average Balances, Interest Rates and Yields" and
      "Rate/ Volume Analysis of Net Interest Income" provide important
      information on factors impacting net interest income and should be read in
      conjunction with this discussion of net interest income.

      PROVISION FOR LOAN LOSSES. The provision for loan losses is based on
      Management's regular review of the loan portfolio as described in detail
      previously. Based on this review, the provision for loan losses totaled
      $102,000 in 2003, an increase of $83,000 from $19,000 in 2002. The
      increase primarily reflected the $8.9 million growth in commercial and
      commercial real estate loans during 2003. At December 31, 2003, the
      allowance for loan losses represented .71% of total loans compared to .57%
      at December 31, 2002. Further, nonperforming loans, all of which are
      nonaccrual loans, were $741,000 at December 31, 2003 and $781,000 at
      December 31, 2002. At both December 31, 2003 and December 31, 2002,
      nonaccrual loans represented 1.3% of the net loan balance. More than 96%
      of the nonaccrual loan balances are secured by single-family homes in the
      Company's primary market area.

      NONINTEREST INCOME. Noninterest income increased $191,000 to $756,000 in
      2003, compared to $565,000 in 2002, primarily due to increased gains on
      sales of loans, service charges and earnings on bank owned life insurance.
      Gains on sales of loans totaled $429,000 during 2003, an increase of
      $116,000 or 37.1% from $313,000 during 2002 due to increased originations
      experienced during the low market interest rate environment and
      Management's strategic decision to sell current production rather than
      retain the long-term, low fixed-rate loans in portfolio. Service charges
      totaled $165,000 in 2003, an increase of $35,000 or 26.9% from $130,000 in
      2002 primarily due to increased checking account fees. Earnings from bank
      owned life insurance increased $120,000 and totaled $188,000 in 2003,
      compared to $68,000 in 2002 primarily due to a full year of earnings in
      2003 versus a partial year in 2002 when the insurance was originally
      purchased.

      NONINTEREST EXPENSE. Noninterest expense increased $2.7 million or 87.4%
      and totaled $5.9 million in 2003, compared to $3.2 million in 2002. The
      increase in noninterest expense was primarily due to management, staff and
      benefits restructuring, expansion to new locations in the Fairlawn and
      Columbus markets and conversion of the data processing system in 2003.
      These expenses included higher salaries and employee benefits, higher
      occupancy expense, professional fees and data processing expenses.
      Salaries and employee benefits expense in 2003 included $638,000
      associated with termination of the Company's ESOP and $917,000 related to
      retirement and severance agreements with former executives.

      INCOME TAXES. The income tax benefit associated with the net loss in 2003
      totaled $988,000 compared to $313,000 income tax expense associated with
      net income in 2002.

                                       74
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

AVERAGE BALANCES, INTEREST RATES AND YIELDS. The following table presents for
the periods indicated the total dollar amount of fully taxable equivalent
interest income from average interest-earning assets and the resultant yields,
as well as the interest expense on average interest-bearing liabilities,
expressed in both dollars and rates.

<TABLE>
<CAPTION>
                                                                     For the Years Ended December 31,
                                                 ----------------------------------------------------------------
                                                                2004                            2003
                                                 ------------------------------   -------------------------------
                                                   Average    Interest  Average     Average     Interest  Average
                                                 Outstanding  Earned/    Yield/   Outstanding   Earned/   Yield/
                                                   Balance      Paid      Rate      Balance       Paid     Rate
                                                 -----------  --------  -------   -----------   --------  -------
                                                                      (Dollars in thousands)
<S>                                              <C>          <C>       <C>       <C>           <C>       <C>
Interest-earning assets:
 Securities (1) (2)                              $    19,605  $    780     4.01%  $    23,675   $    942     4.02%
 Loans (3)                                            81,900     4,855     5.93%       57,449      4,203     7.32%
 Other earning assets                                 17,329       367     2.12%       12,410        152     1.22%
 FHLB stock                                            3,694       152     4.11%        3,557        141     3.96%
                                                 -----------  --------            -----------   --------
     Total interest-earning assets                   122,528     6,154     5.03%       97,091      5,438     5.62%
 Noninterest-earning assets                           13,034                           11,268
                                                 -----------                      -----------
     Total assets                                $   135,562                      $   108,359
                                                 ===========                      ===========
Interest-bearing liabilities:
 Deposits                                        $    80,305     1,436     1.79%  $    73,440      1,570     2.14%
 FHLB advances and other borrowings (4)               31,265       713     2.28%       12,192        681     5.59%
                                                 -----------  --------            -----------   --------
     Total interest-bearing liabilities              111,570     2,149     1.93%       85,632      2,251     2.63%

 Noninterest-bearing liabilities                       4,658                            3,484
                                                 -----------                      -----------
     Total liabilities                               116,228                           89,116

 Equity                                               19,334                           19,243
                                                 -----------                      -----------
     Total liabilities and equity                $   135,562                      $   108,359
                                                 ===========                      ===========
 Net interest-earning assets                     $    10,958                      $    11,459
                                                 ===========                      ===========
 Net interest income/interest rate spread                     $  4,005     3.10%                $  3,187     2.99%
                                                              ========     ====                 ========     ====
 Net interest margin                                                       3.27%                             3.28%
                                                                           ====                              ====

 Average interest-earning assets
     to average interest-bearing liabilities          109.82%                          113.38%
                                                 ===========                      ===========

<CAPTION>
                                                  For the Years Ended December 31,
                                                  --------------------------------
                                                                2002
                                                  --------------------------------
                                                     Average     Interest  Average
                                                   Outstanding   Earned/   Yield/
                                                     Balance       Paid     Rate
                                                  ------------   --------  -------
                                                       (Dollars in thousands)
<S>                                               <C>            <C>       <C>

Interest-earning assets:
 Securities (1) (2)                                $    23,852     $1,518    6.36%
 Loans (3)                                              66,847      5,255    7.86%
 Other earning assets                                    7,105        137    1.93%
 FHLB stock                                              3,406        157    4.61%
                                                   -----------     ------
     Total interest-earning assets                     101,210      7,067    6.98%
 Noninterest-earning assets                             14,055
                                                   -----------
     Total assets                                  $   115,265
                                                   ===========
Interest-bearing liabilities:
 Deposits                                          $    75,498      2,501    3.31%
 FHLB advances and other borrowings (4)                 19,902        961    4.83%
                                                   -----------     ------
     Total interest-bearing liabilities                 95,400      3,462    3.63%

 Noninterest-bearing liabilities                         1,958
                                                   -----------
     Total liabilities                                  97,358

 Equity                                                 17,907
                                                   -----------
     Total liabilities and equity                  $   115,265
                                                   ===========
 Net interest-earning assets                       $     5,810
                                                   ===========
 Net interest income/interest rate spread                          $3,605    3.35%
                                                                   ======    ====
 Net interest margin                                                         3.56%
                                                                             ====
 Average interest-earning assets
     to average interest-bearing liabilities            106.09%
                                                   ===========
</TABLE>

- ------------------
(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 are stated on a fully taxable equivalent basis.

(3)   Balance is net of deferred loan origination fees, undisbursed proceeds of
      construction loans and includes nonperforming loans.

(4)   Interest paid does not include the $1.3 million penalty on prepayment of
      FHLB advances in 2003.

                                       75
<PAGE>
          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

RATE/VOLUME ANALYSIS OF NET INTEREST INCOME. The following table presents the
dollar amount of changes in interest income and interest expense for major
components of interest-earning assets and interest-bearing liabilities. It
distinguishes between the increase or decrease related to changes in balances
and/or changes in interest rates. For each category of interest-earning assets
and interest-bearing liabilities, information is provided on changes
attributable to (i) changes in volume (i.e., changes in volume multiplied by the
prior rate) and (ii) changes in rate (i.e., changes in rate multiplied by prior
volume). For purposes of this table, changes attributable to both rate and
volume which cannot be segregated have been allocated proportionately to the
change due to volume and the change due to rate.

<TABLE>
<CAPTION>
                                                               Year Ended                      Year Ended
                                                           December 31, 2004                December 31, 2003
                                                         Compared to Year Ended          Compared to Year Ended
                                                           December 31, 2003                December 31, 2002
                                                        --------------------------    -----------------------------
                                                        Increase (decrease)           Increase (decrease)
                                                              due to                        due to
                                                        -----------------             -----------------
                                                          Rate    Volume      Net        Rate    Volume       Net
                                                        -------   -------   ------    --------   ------     -------
<S>                                                     <C>       <C>       <C>       <C>        <C>        <C>
                                                                          (Dollars in thousands)
Interest-earning assets:
 Securities (1)                                          $   (2)  $ (160)   $ (162)    $  (565)  $  (11)    $  (576)
 Loans                                                     (904)   1,556       652        (345)    (707)     (1,052)
 Other earning assets                                       140       75       215         (62)      77          15
 FHLB stock                                                   6        5        11         (23)       7         (16)
                                                         ------   ------    ------     -------   ------     -------

     Total interest-earning assets                         (760)   1,476       716        (995)    (634)     (1,629)

Interest-bearing liabilities:

 Deposits                                                  (272)     138      (134)       (865)     (66)       (931)

 FHLB advances and other borrowings (2)                    (576)     608        32         134     (414)       (280)
                                                         ------   ------    ------     -------   ------     -------

     Total interest-bearing liabilities                    (848)     746      (102)       (731)    (480)     (1,211)
                                                         ------   ------    ------     -------   ------     -------
Net change in net interest income                        $   88   $  730    $  818     $  (264)  $ (154)    $  (418)
                                                         ======   ======    ======     =======   ======     =======
</TABLE>

(1)   Securities amounts are presented on a fully taxable equivalent basis.

(2)   Amounts do not include the $1.3 million penalty on prepayment of FHLB
      advances in 2003.

                                       76
<PAGE>

      ASSET/LIABILITY MANAGEMENT AND MARKET RISK

      GENERAL. The Company's most significant market risk, or risk of loss from
      adverse changes in market prices and rates, is interest rate risk.
      Asset/liability management is the measurement and analysis of the
      Company's exposure to changes in interest rates. Management actively
      monitors and manages its interest rate risk exposure. The objective of the
      Company's asset/liability management function is to maintain long-term
      profitability within the constraints of an optimum earning-asset mix,
      capital adequacy, liquidity and safety. The extent of the movement of
      interest rates is an uncertainty that could have a negative impact on
      earnings of the Company.

      QUALITATIVE ASPECTS OF MARKET RISK. The principal objective of the
      Company's interest rate risk management function is to evaluate interest
      rate risk, determine the level of risk appropriate to the Company's
      business strategy, operating environment, capital and liquidity
      requirements and performance objectives, and manage the risk consistent
      with Board of Directors' approved guidelines. Through such management, the
      Company seeks to reduce the vulnerability of its earnings to changes in
      interest rates. The Board of Directors has established an Asset/Liability
      Committee, responsible for reviewing its asset/liability policies and
      interest rate risk position, which meets on a monthly basis and reports
      trends and interest rate risk position to the Board. The Company manages
      interest rate risk on a continuing basis through the use of a number of
      strategies as an ongoing part of its business plan.

      QUANTITATIVE ASPECTS OF MARKET RISK. The Bank measures the effect of
      interest rate changes on its net portfolio value (NPV), which is the
      difference between the estimated market value of the Bank's assets and
      liabilities under different interest rate scenarios. Changes in NPV are
      measured using instantaneous changes in interest rates rather than linear
      changes in rates over a period of time. At December 31, 2004, the Bank's
      NPV ratios, using interest rate shocks ranging from a 300 bp rise in rates
      to a 100 bp decline in rates are shown in the following table. All values
      are within the acceptable range established by the Board of Directors.

<TABLE>
<CAPTION>
     Net Portfolio Value
         (Bank only)
- ------------------------------
Basis Point
 Change in
   Rates             NPV Ratio
- -----------          ---------
<S>                  <C>
    +300               11.33%
    +200               11.61%
    +100               11.75%
       0               11.69%
    -100               11.41%
</TABLE>

      In evaluating the Bank's exposure to interest rate risk, certain
      shortcomings inherent in the method of analysis presented in the foregoing
      table must be considered. For example, although certain assets and
      liabilities may have similar maturities or periods to which they reprice,
      they may react in different degrees to changes in market interest rates.
      In addition, the interest rates on certain types of assets and liabilities
      may fluctuate in advance of changes in market interest rates, while
      interest rates on other types may lag behind changes in market rates.
      Furthermore, in the event of a change in interest rates, prepayments and
      early withdrawal levels would likely deviate significantly from those
      assumed in calculating the table. Finally, the ability of many borrowers
      to service their debt may decrease when interest rates rise. Therefore,
      the actual effect of changing interest rates may differ materially from
      that presented in the foregoing table.

                                       77
<PAGE>

      The Company's interest rate risk position has improved as a result of
      Management's strategic decisions to sell fixed-rate mortgage loan
      originations rather than retain long-term, low fixed-rate loans in
      portfolio, increase short term cash investments, grow commercial loans,
      which tend to have shorter maturities than residential mortgage loans and,
      in many cases, adjustable interest rates, and extend the maturity dates of
      borrowings using longer-term, fixed-rate FHLB advances.

      LIQUIDITY AND CAPITAL RESOURCES

      In general terms, liquidity is a measurement of the Company's ability to
      meet its cash needs. The Company's objective in liquidity management is to
      maintain the ability to meet loan commitments, purchase securities or to
      repay deposits and other liabilities in accordance with their terms
      without an adverse impact on current or future earnings. The Company's
      principal sources of funds are deposits, amortization and prepayments of
      loans, maturities, sales and principal receipts of securities, borrowings
      and operations. While maturities and scheduled amortization of loans are
      predictable sources of funds, deposit flows and loan prepayments are
      greatly influenced by general interest rates, economic conditions and
      competition.

      The Bank is required by regulation to maintain sufficient liquidity to
      ensure its safe and sound operation. Thus, adequate liquidity may vary
      depending on the Bank's overall asset/liability structure, market
      conditions, the activities of competitors and the requirements of its own
      deposit and loan customers. Management believes that the Bank's liquidity
      is sufficient.

      Liquidity management is both a daily and long-term responsibility of
      Management. The Company adjusts its investments in liquid assets,
      primarily cash, short-term investments and other assets that are widely
      traded in the secondary market, based on Management's assessment of
      expected loan demand, expected deposit flows, yields available on
      interest-earning deposits and securities and the objective of its
      asset/liability management program. In addition to its liquid assets, the
      Company has other sources of liquidity available including, but not
      limited to access to advances from the Federal Home Loan Bank, use of
      brokered deposits and the ability to obtain deposits by offering
      above-market interest rates. The Bank relies primarily on competitive
      rates, customer service and relationships with customers to retain
      deposits. Based on the Bank's experience with deposit retention and
      current retention strategies, Management believes that, although it is not
      possible to predict future terms and conditions upon renewal, a
      significant portion of such deposits will remain with the Bank.

      At December 31, 2004, the Bank exceeded all of its regulatory capital
      requirements to be considered well-capitalized with a Tier 1 capital level
      of $13.6 million, or 8.1% of adjusted total assets, which exceeds the
      required level of $8.4 million, or 5.0%; Tier 1 risk-based capital level
      of $13.6 million, or 11.3% of risk-weighted assets, which exceeds the
      required level of $7.2 million, or 6.0%; and risk-based capital of $14.6
      million, or 12.2% of risk-weighted assets, which exceeds the required
      level of $12.0 million, or 10.0%.

      IMPACT OF INFLATION

                                       78
<PAGE>

      The financial statements and related data presented herein have been
      prepared in accordance with generally accepted accounting principles,
      which presently require the Company to measure financial position and
      results of operations primarily in terms of historical dollars. Changes in
      the relative value of money due to inflation are generally not considered.
      In Management's opinion, changes in interest rates affect the financial
      condition of the Company to a far greater degree than change in the
      inflation rate. While interest rates are generally influenced by changes
      in the inflation rate, they do not move concurrently. Rather, interest
      rate volatility is based on changes in the expected rate of inflation, as
      well as changes in monetary and fiscal policy. A financial institution's
      ability to be relatively unaffected by changes in interest rates is a good
      indicator of its ability to perform in a volatile economic environment. In
      an effort to protect itself from the effects of interest rate volatility,
      the Company reviews its interest rate risk position frequently, monitoring
      its exposure and taking necessary steps to minimize any detrimental
      effects on the Company's profitability.

      CRITICAL ACCOUNTING POLICIES

      The Company follows financial accounting and reporting policies that are
      in accordance with generally accepted accounting principles in the United
      States of America and conform to general practices within the banking
      industry. Some of these accounting policies are considered to be critical
      accounting policies. Critical accounting policies are those policies that
      require Management's most difficult, subjective or complex judgments,
      often as a result of the need to make estimates about the effect of
      matters that are inherently uncertain. Application of assumptions
      different than those used by Management could result in material changes
      in the Company's financial position or results of operations. Management
      believes that the judgments, estimates and assumptions used in the
      preparation of the consolidated financial statements are appropriate given
      the factual circumstances at the time.

      The Company has identified accounting polices that are critical accounting
      policies and an understanding of these policies is necessary to understand
      our financial statements. One critical accounting policy relates to
      determining the adequacy of the allowance for loan losses. The Company
      adopted an Allowance for Loan Losses Policy designed to provide a
      thorough, disciplined and consistently applied process that incorporates
      Management's current judgments about the credit quality of the loan
      portfolio into determination of the allowance for loan and lease losses in
      accordance with generally accepted accounting principles and supervisory
      guidance. Management estimates the allowance balance required using past
      loan loss experience, the nature and volume of the portfolio, information
      about specific borrower situations and estimated collateral values,
      economic conditions, and other factors. The Company's strategy to expand
      into business financial services and the significant growth in commercial,
      commercial real estate and multi-family mortgage loans that resulted from
      that strategy in 2004 required an increase in the provision and allowance
      for loan losses related to these loan types, which tend to be larger
      balance, higher risk loans than single-family residential mortgages, where
      the Company has experienced low historical loss rates. Management believes
      that an adequate allowance for loan losses has been established.
      Additional information regarding this policy is included in the notes to
      the consolidated financial statements, Note 1 (Summary of Significant
      Accounting Policies), Note 4 (Loans) and the sections above captioned
      "Provision for Loan Losses".

      Another critical accounting policy relates to the valuation of the
      deferred tax asset for net operating losses. Net operating losses totaling
      $2.8 million and $2.5 million expire in 2023 and 2024, respectively. No
      valuation allowance has been recorded against the deferred tax asset for

                                       79
<PAGE>

      net operating losses because the benefit is more likely than not to be
      realized. As the Company continues its strategy to expand into business
      financial services and focus on growth, the resultant increase in
      interest-earning assets is expected to increase profitability.
      Additionally, the acquisition of Reserve is expected to increase the
      Company's single-family mortgage loan volume and resultant gains on loan
      sales. Additional information is included in the notes to the consolidated
      financial statements, Note 14 (Income Taxes).

MARKET PRICES AND DIVIDENDS DECLARED

      The common stock of Central Federal Corporation trades on the Nasdaq
      SmallCap Market under the symbol "GCFC." As of December 31, 2004, there
      were 2,185,849 shares of common stock outstanding and 581 shareholders,
      excluding persons or entities holding stock in nominee or street name
      through various brokerage firms.

      The following table shows the quarterly reported high and low trade prices
      of the common stock and cash dividends per share declared during 2004 and
      2003.

<TABLE>
<CAPTION>
                      High      Low       Dividends
                     ------    ------     ---------
<S>                  <C>       <C>        <C>
2004
First quarter        $16.10    $12.00      $ 0.09
Second quarter        18.00     12.35        0.09
Third quarter         15.22     11.25        0.09
Fourth quarter        13.73     10.95        0.09

2003
First quarter        $11.03    $ 9.28      $ 0.09
Second quarter        13.13     10.49        0.09
Third quarter         14.00     10.70        0.09
Fourth quarter        16.18     13.60        0.09
</TABLE>

                                       80
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Central Federal Corporation
Fairlawn, Ohio

We have audited the accompanying consolidated balance sheets of Central Federal
Corporation as of December 31, 2004 and 2003 and the related consolidated
statements of operations, comprehensive income (loss), changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 2004. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Central Federal
Corporation as of December 31, 2004 and 2003 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2004, in conformity with U.S. generally accepted accounting principles.

                                                    Crowe Chizek and Company LLC
Cleveland, Ohio
February 10, 2005

                                       81
<PAGE>

                           CENTRAL FEDERAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2004 and 2003
                  (Dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                 2004             2003
                                                              ----------        ---------
<S>                                                           <C>               <C>
ASSETS
Cash and cash equivalents                                     $   32,675        $   8,936
Interest-bearing deposits in other financial institutions              -            1,587
Securities available for sale                                     13,508           27,126
Loans held for sale                                                    -              106
Loans, net of allowance of $978 and $415                         108,149           58,024
Federal Home Loan Bank stock                                       3,778            3,626
Loan servicing rights                                                208              221
Foreclosed assets, net                                               132              193
Premises and equipment, net                                        2,690            1,932
Goodwill                                                           1,749                -
Other intangible assets                                              299                -
Bank owned life insurance                                          3,401            3,256
Loan sales proceeds receivable                                     1,888                -
Deferred tax asset                                                 1,491              930
Accrued interest receivable and other assets                       1,037            1,074
                                                              ----------        ---------
                                                              $  171,005        $ 107,011
                                                              ==========        =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
     Non-interest bearing                                     $    5,505        $   2,457
     Interest bearing                                             96,119           70,901
                                                              ----------        ---------
          Total deposits                                         101,624           73,358
Federal Home Loan Bank advances                                   41,170            7,500
Other borrowings                                                   2,249                -
Advances by borrowers for taxes and insurance                        321              207
Accrued interest payable and other liabilities                       979              935
Subordinated debentures                                            5,155            5,155
                                                              ----------        ---------
          Total liabilities                                      151,498           87,155

Shareholders' equity
     Preferred stock, 1,000,000 shares authorized;
        none issued                                                    -                -
     Common stock, $.01 par value; 6,000,000 shares
        authorized; 2004 - 2,294,520 shares issued,
        2003 - 2,280,020 shares issued                                23               23
     Additional paid-in capital                                   12,519           11,845
     Retained earnings                                             8,497           10,997
     Accumulated other comprehensive income                           61              201
     Unearned stock based incentive plan shares                     (351)            (357)
     Treasury stock, at cost (2004 - 108,671 shares,
        2003 - 255,648 shares)                                    (1,242)          (2,853)
                                                              ----------        ---------
          Total shareholders' equity                              19,507           19,856
                                                              ----------        ---------
                                                              $  171,005        $ 107,011
                                                              ==========        =========
</TABLE>

                             See accompanying notes.

                                       82
<PAGE>

                           CENTRAL FEDERAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                              Years ended December
                             31, 2004, 2003 and 2002
                              (Dollars in thousands
                             except per share data)

<TABLE>
<CAPTION>
                                                                 2004         2003         2002
<S>                                                           <C>           <C>          <C>
Interest and dividend income
     Loans, including fees                                    $   4,855     $  4,203     $ 5,255
     Taxable securities                                             750          934       1,518
     Tax exempt securities                                           20            5           -
     Federal Home Loan Bank stock dividends                         152          141         157
     Federal funds sold and other                                   367          152         137
                                                              ---------     --------     -------
                                                                  6,144        5,435       7,067
Interest expense
     Deposits                                                     1,436        1,570       2,501
     Federal Home Loan Bank advances and other debt                 488        1,940         961
     Subordinated debentures                                        225           11           -
                                                              ---------     --------     -------
                                                                  2,149        3,521       3,462
                                                              ---------     --------     -------

Net interest income                                               3,995        1,914       3,605

Provision for loan losses                                           646          102          19
                                                              ---------     --------     -------

Net interest income after provision for loan losses               3,349        1,812       3,586

Noninterest income
     Service charges on deposit accounts                            141          165         130
     Net gains on sales of loans                                    222          429         313
     Loan servicing fees, net                                        62         (101)          8
     Net gains (losses) on sales of securities                     (55)           42          16
     Earnings on bank owned life insurance                          145          188          68
     Other                                                           22           33          30
                                                              ---------     --------     -------
                                                                    537          756         565

Noninterest expense
     Salaries and employee benefits                               3,454        3,549       1,713
     Occupancy and equipment                                        327          224          96
     Data processing                                                431          246         196
     Franchise taxes                                                196          301         287
     Professional fees                                              424          673         212
     Director fees                                                  169          119          84
     Postage, printing and supplies                                 167          198         133
     Advertising and promotion                                      171           27          20
     Telephone                                                       91           48          23
     Loan expenses                                                   48           91         143
     Foreclosed assets, net                                          57           14         (34)
     Depreciation                                                   355          176         144
     Amortization of intangibles                                     21            -           -
     Other                                                          509          264         147
                                                              ---------     --------     -------
                                                                  6,420        5,930       3,164
                                                              ---------     --------     -------

Income (loss) before income taxes                                (2,534)      (3,362)        987

Income tax expense (benefit)                                       (872)        (988)        313
                                                              ---------     --------     -------

Net income (loss)                                             $  (1,662)    $ (2,374)    $   674
                                                              =========     ========     =======

Earnings (loss) per share:
     Basic                                                       ($0.82)    $  (1.31)    $  0.44
     Diluted                                                     ($0.82)    $  (1.31)    $  0.43
</TABLE>

                             See accompanying notes.

                                       83
<PAGE>

                           CENTRAL FEDERAL CORPORATION
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                  Years ended December 31, 2004, 2003 and 2002
                  (Dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                        2004          2003         2002
                                                                      ---------     ---------     -------
<S>                                                                   <C>           <C>           <C>
Net income (loss)                                                     $  (1,662)    $  (2,374)    $   674

Unrealized holding gains (losses) on securities
          available for sale                                               (267)         (154)         34

Less:  Reclassification adjustment for
          gains and (losses) later recognized in net income                 (55)           42          16
                                                                      ---------     ---------     -------

Net unrealized gains and (losses)                                          (212)         (196)         18

Unrealized gain on securities transferred from held to maturity
to available for sale                                                         -           458           -

Tax effect                                                                   72          (89)          (6)
                                                                      ---------     ---------     -------

Other comprehensive income (loss)                                          (140)          173          12
                                                                      ---------     ---------     -------

Comprehensive income (loss)                                           $  (1,802)    $  (2,201)    $   686
                                                                      =========     =========     =======
</TABLE>

                             See accompanying notes.

                                       84
<PAGE>

                           CENTRAL FEDERAL CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  Years ended December 31, 2004, 2003 and 2002
                  (Dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                                                      Unearned
                                                                                                      Employee
                                                                                       Accumulated      Stock      Unearned
                                                             Additional                   Other       Ownership   Stock Based
                                                     Common  Paid-In      Retained    Comprehensive      Plan      Incentive
                                                      Stock   Capital      Earnings      Income         Shares    Plan Shares
                                                     ------  ----------   ---------   -------------   ---------   -----------
<S>                                                  <C>     <C>          <C>         <C>             <C>         <C>
Balance at January 1, 2002                           $   19  $    8,310   $  13,962   $          16   $  (1,651)  $      (270)

Comprehensive income:
Net income                                                                      674
Other comprehensive income                                                                       12

     Total comprehensive income

Commitment to release 21,588 employee stock
     ownership plan shares                                           (4)                                    226
Release of 15,516 stock based incentive plan shares                                                                       110
Purchase of 96,410 shares of treasury stock
Cash dividends declared ($.36 per share)                                       (551)
                                                     ------  ----------   ---------   -------------   ---------   -----------

Balance at December 31, 2002                             19       8,306      14,085              28      (1,425)         (160)

Comprehensive income:
Net loss                                                                     (2,374)
Other comprehensive income                                                                      173

     Total comprehensive loss

Issuance of common stock in private
     placement, net of offering costs of $64
     (312,649 shares)                                     3       3,116
Issuance of stock based incentive plan shares
     (28,500 shares)                                      1         337                                                  (338)
Sale of employee stock ownership plan shares
     at plan termination (81,000 shares)                            125                                     748
Final allocation of employee stock ownership plan
     shares at plan termination (41,882 shares)                     (39)                                    677
Release of 16,002 stock based incentive plan shares                                                                       141
Stock options exercised (37,302 shares)                                         (72)
Tax benefits from stock options exercised                                        47
Cash dividends declared ($.36 per share)                                       (689)
                                                     ------  ----------   ---------   -------------   ---------   -----------

Balance at December 31, 2003                             23      11,845      10,997             201           -          (357)
Comprehensive income:

<CAPTION>
                                                                 Total
                                                   Treasury   Shareholders'
                                                     Stock       Equity
                                                   --------   -------------
<S>                                                <C>        <C>
Balance at January 1, 2002                         $ (2,226)  $      18,160

Comprehensive income:
Net income                                                              674
Other comprehensive income                                               12
                                                              -------------
     Total comprehensive income                                         686

Commitment to release 21,588 employee stock
     ownership plan shares                                              222
Release of 15,516 stock based incentive plan shares                     110
Purchase of 96,410 shares of treasury stock          (1,044)         (1,044)
Cash dividends declared ($.36 per share)                               (551)
                                                   --------   -------------

Balance at December 31, 2002                         (3,270)         17,583

Comprehensive income:
Net loss                                                             (2,374)
Other comprehensive income                                              173
                                                              -------------
     Total comprehensive loss                                        (2,201)

Issuance of common stock in private
     placement, net of offering costs of $64
     (312,649 shares)                                                 3,119
Issuance of stock based incentive plan shares
     (28,500 shares)                                                      -
Sale of employee stock ownership plan shares
     at plan termination (81,000 shares)                                873
Final allocation of employee stock ownership plan
     shares at plan termination (41,882 shares)                         638
Release of 16,002 stock based incentive plan shares                     141
Stock options exercised (37,302 shares)                 417             345
Tax benefits from stock options exercised                                47
Cash dividends declared ($.36 per share)                               (689)
                                                   --------   -------------

Balance at December 31, 2003                         (2,853)         19,856
Comprehensive income:
</TABLE>

                            See accompanying notes.

                                     - 85 -
<PAGE>

<TABLE>
<S>                                 <C>       <C>            <C>           <C>               <C>           <C>
Net loss                                                        (1,662)
Other comprehensive loss                                                            (140)

   Total comprehensive loss

Issuance of stock based
incentive plan shares,
   net of forfeitures
   (20,703 shares)                                   237                                                          (237)
Release of 21,278 stock
based incentive plan shares                                                                                        243
Stock options exercised
(44,900 shares)                                                    (90)
Tax benefits from stock
 options exercised                                    48
Purchase of 25,000 shares
 of treasury stock
Issuance of 127,077 shares
of treasury stock in
acquisition                                          359
Other                                                 30
Cash dividends declared
($.36 per share)                                                  (748)
                                    ------    ----------     ---------     -------------     ---------     -----------
Balance at December 31, 2004        $   23    $   12,519     $   8,497     $          61     $       -     $      (351)
                                    ======    ==========     =========     =============     =========     ===========

<CAPTION>
<S>                                 <C>        <C>
Net loss                                              (1,662)
Other comprehensive loss                                (140)
                                               -------------
   Total comprehensive loss                           (1,802)

Issuance of stock based
incentive plan shares,
   net of forfeitures
   (20,703 shares)                                         -
Release of 21,278 stock
based incentive plan shares                              243
Stock options exercised
(44,900 shares)                          502             412
Tax benefits from stock
 options exercised                                        48
Purchase of 25,000 shares
 of treasury stock                      (319)           (319)
Issuance of 127,077 shares
of treasury stock in
acquisition                            1,428           1,787
Other                                                     30
Cash dividends declared
($.36 per share)                                        (748)
                                    --------   -------------
Balance at December 31, 2004        $ (1,242)  $      19,507
                                    ========   =============
</TABLE>

                            See accompanying notes.

                                     - 86 -
<PAGE>

                           CENTRAL FEDERAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 2004, 2003 and 2002
                  (Dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                      2004        2003        2002
                                                                    --------    --------    --------
<S>                                                                 <C>         <C>         <C>
Net income (loss)                                                   $ (1,662)   $ (2,374)   $    674
Adjustments to reconcile net income to net cash
     provided by operating activities:
         Provision for loan losses                                       646         102          19
         Valuation loss on mortgage servicing rights                     (36)         56           -
         Depreciation                                                    355         176         144
         Amortization, net                                               184          (5)        (77)
         Net realized (gain) loss on sales of securities                  55         (42)        (16)
         Loss (gain) on disposal of premises and equipment                (3)         50           -
         Gain on sale of foreclosed assets                                13           -           -
         FHLB stock dividend                                            (152)       (141)       (157)
         ESOP expense                                                      -         638         222
         SBIP expense                                                    243         141         110
         Net change in:
              Loans held for sale                                        106        (106)      8,221
              Bank owned life insurance                                 (145)       (188)        (68)
              Loan sales proceeds receivable                            (589)          -           -
              Deferred tax asset                                        (589)     (1,083)        138
              Accrued interest receivable and other assets                86         (22)       (206)
              Accrued interest payable and other liabilities             (42)       (600)        865
                                                                    --------    --------    --------
                    Net cash from operating activities                (1,530)     (3,398)      9,869

Cash flows from investing activities
    Net decrease in interest bearing deposits                          1,587       5,618        (199)

    Available-for-sale securities:
         Sales                                                        15,191       3,078         386
         Maturities, prepayments and calls                             5,114      28,968         594
         Purchases                                                    (7,081)    (46,914)       (290)
    Held-to-maturity securities:
         Maturities, prepayments and calls                                 -       7,201      27,056
         Purchases                                                         -           -     (21,508)
    Loan originations and payments, net                              (45,900)      4,434       8,010
    Loans purchased                                                   (5,574)          -           -
    Additions to premises and equipment                               (1,027)     (1,326)       (127)
    Proceeds from the sale of premises and equipment                       5           -           -
</TABLE>

                             See accompanying notes.

                                      -87-

<PAGE>

<TABLE>
<S>                                                                 <C>         <C>         <C>
    Proceeds from the sale of foreclosed assets                          765           -           -
    Purchase of bank owned life insurance                                  -           -      (3,000)
    Net cash used in acquisition                                        (236)          -           -
    Cash received in repayment of ESOP loan                                -         853           -
                                                                    --------    --------    --------
         Net cash from investing activities                          (37,156)      1,912      10,922

Cash flows from financing activities
    Net change in deposits                                            28,266      (1,332)     (1,478)
    Net change in short-term borrowings from the
         Federal Home Loan Bank and other                             22,417       7,500           -
    Proceeds from Federal Home Loan Bank
         advances and other debt                                      12,270           -           -
    Repayments on Federal Home Loan Bank
         advances and other debt                                           -     (16,330)     (9,063)
    Net change in advances by borrowers for
         taxes and insurance                                             114        (241)       (123)
    Proceeds from subordinated debentures                                  -       5,155           -
    Cash dividends paid                                                 (735)       (655)       (551)
    Proceeds from private placement                                        -       3,119           -
    Proceeds from exercise of stock options                              412         345           -
    Repurchase of common stock                                          (319)          -      (1,044)
                                                                    --------    --------    --------
         Net cash from financing activities
                                                                      62,425      (2,439)    (12,259)

Net change in cash and cash equivalents                               23,739      (3,925)      8,532

Beginning cash and cash equivalents                                    8,936      12,861       4,329
                                                                    --------    --------    --------

Ending cash and cash equivalents                                    $ 32,675    $  8,936    $ 12,861
                                                                    ========    ========    ========

Supplemental cash flow information:
    Interest paid                                                   $  2,178    $  3,519    $  3,495
    Income taxes paid                                                      -         106         160

Supplemental noncash disclosures:
    Transfer of securities from held to maturity to available for
sale                                                                $      -    $ 10,533    $      -
    Transfers from loans to repossessed assets                           716         193           -
    Acquisition of Reserve Mortgage Services, Inc. through
       issuance of common stock                                        1,787           -           -
</TABLE>

                             See accompanying notes.

                                      -88-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated financial
statements include Central Federal Corporation, its wholly-owned subsidiary,
CFBank, and Reserve Mortgage Services, Inc., a wholly owned subsidiary of CFBank
since October 22, 2004, together referred to as "the Company". Intercompany
transactions and balances are eliminated in consolidation.

The Company provides financial services through its offices in Fairlawn,
Columbus, Wellsville and Calcutta, Ohio. Its primary deposit products are
checking, savings, and term certificate accounts, and its primary lending
products are residential mortgage, commercial, and installment loans.
Substantially all loans are secured by specific items of collateral including
business assets, consumer assets, and commercial and residential real estate.
Commercial loans are expected to be repaid from cash flow from operations of
businesses. There are no significant concentrations of loans to any one industry
or customer. However, the customers' ability to repay their loans is dependent
on the real estate and general economic conditions in the areas. Other financial
instruments, which potentially represent concentrations of credit risk, include
deposit accounts in other financial institutions.

Use of Estimates: To prepare financial statements in conformity with accounting
principles generally accepted in the United States of America, Management makes
estimates and assumptions based on available information. These estimates and
assumptions affect the amounts reported in the financial statements and the
disclosures provided, and actual results could differ. The allowance for loan
losses and fair values of financial instruments are particularly subject to
change.

Cash Flows: Cash and cash equivalents include cash and deposits with other
financial institutions under 90 days. Net cash flows are reported for customer
loan and deposit transactions, interest-bearing deposits in other financial
institutions and borrowings with original maturities under 90 days.

Interest-bearing Deposits in Other Financial Institutions: Interest-bearing
deposits in other financial institutions mature within one year and are carried
at cost.

Securities: Debt securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Debt securities are classified as available for sale when they
might be sold before maturity. Equity securities with readily determinable fair
values are classified as available for sale. Securities available for sale are
carried at fair value, with unrealized holding gains and losses reported in
other comprehensive income. Other securities such as Federal Home Loan Bank
stock are carried at cost.

Interest income includes amortization of purchase premium or discount. Premiums
and discounts on securities are amortized on the level-yield method without
anticipating prepayments. Gains and losses on sales are recorded on the trade
date and determined using the specific identification method.

                                       89
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Declines in the fair value of securities below their cost that are other than
temporary are reflected as realized losses. In estimating other-than-temporary
losses, management considers: (1) the length of time and extent that fair value
has been less than cost, (2) the financial condition and near term prospects of
the issuer, and (3) the Company's ability and intent to hold the security for a
period sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale: Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of aggregate cost or market, as
determined by outstanding commitments from investors. Net unrealized losses, if
any, are recorded as a valuation allowance and charged to earnings.

Mortgage loans held for sale after 2003 are generally sold with servicing rights
released. Mortgage loans held for sale prior to 2004 were generally sold with
servicing rights retained and the carrying value of mortgage loans sold was
reduced by the cost allocated to the servicing right. Gains and losses on sales
of mortgage loans are based on the difference between the selling price and the
carrying value of the related loan sold.

Loans: Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at the principal
balance outstanding, net of unearned interest, deferred loan fees and costs, and
an allowance for loan losses. Interest income is accrued on the unpaid principal
balance. Loan origination fees, net of certain direct origination costs, are
deferred and recognized in interest income using the level-yield method without
anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued at the time the
loan is 90 days delinquent unless the loan is well-secured and in process of
collection. Consumer and credit card loans are typically charged-off no later
than 90 days past due. Past due status is based on the contractual terms of the
loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier
date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on nonaccrual is reversed
against interest income. Interest received on such loans is accounted for on the
cash-basis or cost-recovery method, until qualifying for return to accrual.
Loans are returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably
assured.

Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance for probable incurred credit losses. Loan losses are charged against
the allowance when management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance.
Management estimates the allowance balance required using past loan loss
experience, the nature and volume of the portfolio, information about specific
borrower situations and estimated collateral values, economic conditions, and
other factors. Allocations of the allowance may be made for specific loans, but
the entire allowance is available for any loan that, in management's judgment,
should be charged-off.

                                       90
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The allowance consists of specific and general components. The specific
component relates to loans that are individually classified as impaired or loans
otherwise classified as substandard or doubtful. The general component covers
non-classified loans and is based on historical loss experience adjusted for
current factors.

A loan is impaired when full payment under the loan terms is not expected.
Commercial, multi-family residential and commercial real estate loans are
individually evaluated for impairment. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral. Large
groups of smaller balance homogeneous loans, such as consumer and single-family
residential real estate loans, are collectively evaluated for impairment, and
accordingly, they are not separately identified for impairment disclosures.

Servicing Rights: Servicing rights represent the allocated value of retained
servicing rights on loans sold. Servicing assets are expensed in proportion to,
and over the period of, estimated net servicing revenues. Impairment is
evaluated based on the fair value of the assets, using groupings of the
underlying loans as to interest rates and then, secondarily, as to loan type and
investor. Fair value is determined using prices for similar assets with similar
characteristics, when available, or based upon discounted cash flows using
market-based assumptions. Any impairment of a grouping is reported as a
valuation allowance, to the extent that fair value is less than the capitalized
amount for a grouping.

Foreclosed Assets: Assets acquired through or instead of loan foreclosure are
initially recorded at fair value when acquired, establishing a new cost basis.
If fair value declines subsequent to foreclosure, a valuation allowance is
recorded through expense. Costs after acquisition are expensed.

Premises and Equipment: Land is carried at cost. Premises and equipment are
stated at cost less accumulated depreciation. Buildings and related components
are depreciated using the straight-line method with useful lives ranging from 7
to 40 years. Furniture, fixtures and equipment are depreciated using the
straight-line method with useful lives ranging from 3 to 25 years. Leasehold
improvements are amortized over the lives of the respective leases.

Bank Owned Life Insurance: The Company has purchased life insurance policies on
certain key executives. Bank owned life insurance is recorded at its cash
surrender value, or the amount that can be realized.

Goodwill and Other Intangible Assets: Goodwill results from business
acquisitions and represents the excess of the purchase price over the fair value
of acquired tangible assets and liabilities and identifiable intangible assets.
Goodwill is assessed at least annually for impairment and any such impairment
will be recognized in the period identified.

Other intangible assets consist of a noncompete agreement and prior owner
intangible assets arising from the acquisition of Reserve Mortgage Services,
Inc. They are initially measured at fair value and then are amortized on the
straight-line method over their estimated useful lives.

                                       91
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Long-term Assets: Premises and equipment, other intangible assets, and other
long-term assets are reviewed for impairment when events indicate their carrying
amount may not be recoverable from future undiscounted cash flows. If impaired,
the assets are recorded at fair value.

Loan Commitments and Related Financial Instruments: Financial instruments
include off-balance-sheet credit instruments, such as commitments to make loans
and commercial letters of credit, issued to meet customer financing needs. The
face amount for these items represents the exposure to loss, before considering
customer collateral or ability to repay. Such financial instruments are recorded
when they are funded.

Stock Compensation: Employee compensation expense under stock options is
reported using the intrinsic value method. No stock-based compensation cost is
reflected in net income, as all options granted had an exercise price equal to
or greater than the market price of the underlying common stock at date of
grant. The following table illustrates the effect on net income and earnings per
share if expense was measured using the fair value recognition provisions of
FASB Statement No. 123, Accounting for Stock-Based Compensation.

<TABLE>
<CAPTION>
                                                           2004           2003         2002
                                                         --------       --------      -------
<S>                                                      <C>            <C>           <C>
Net income (loss) as reported                            $ (1,662)      $ (2,374)     $   674
Deduct:  Stock-based compensation expense
    determined under fair value based method                  183            175          121
                                                         --------       --------      -------
Pro forma net income (loss)                              $ (1,845)      $ (2,549)     $   553
                                                         ========       ========      =======

Basic earnings (loss) per share as reported              $  (0.82)      $  (1.31)     $  0.44
Pro forma basic earnings (loss) per share                   (0.91)         (1.40)        0.36

Diluted earnings (loss) per share as reported            $  (0.82)      $  (1.31)     $  0.43
Pro forma diluted earnings (loss) per share                 (0.91)         (1.40)        0.35
</TABLE>

The pro forma effects are computed using option pricing models, using the
following weighted- average assumptions as of grant date.

<TABLE>
<CAPTION>
                                                             2004           2003
                                                         -------------  --------------
<S>                                                      <C>            <C>
Risk-free interest rate                                    3.26%           2.96%
Expected option life (years)                                6.0 years       5.9 years
Expected stock price volatility                              24%             44%
Dividend yield                                             2.86%           3.13%

Weighted average fair value of options
granted during year                                      $ 2.53         $  3.96
</TABLE>

                                       92
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes: Income tax expense is the total of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences between carrying amounts and tax bases of assets and liabilities,
computed using enacted tax rates. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized. Deferred tax assets
are recognized for net operating losses that expire primarily in 2023 and 2024
because the benefit is more likely than not to be realized.

Employee Stock Ownership Plan: The cost of shares issued to the ESOP, but not
yet allocated to participants, is shown as a reduction of shareholders' equity.
Compensation expense is based on the market price of shares as they are
committed to be released to participant accounts. Dividends on allocated ESOP
shares reduce retained earnings; dividends on unearned ESOP shares reduce debt
and accrued interest. See Note 13 - ESOP Plan for information regarding
termination of this plan in 2003.

Earnings Per Common Share: Basic earnings per common share is net income divided
by the weighted average number of common shares outstanding during the period.
ESOP shares are considered outstanding for this calculation unless unearned.
Stock based incentive plan shares are considered outstanding as they are earned
over the vesting period. Diluted earnings per common share includes the dilutive
effect of stock based incentive plan shares and additional potential common
shares issuable under stock options.

Comprehensive Income: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale, which are also recognized as a separate
component of equity.

Effect of Newly Issued But Not Yet Effective Accounting Standards: In December
2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards 123R, Share-Based Payment, a revision of SFAS
123, Accounting for Stock-Based Compensation. The revised SFAS 123, Share-Based
Payment, requires measurement of the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value
of the award. The cost is to be recognized over the period during which an
employee is required to provide service in exchange for the award. The
provisions of this statement will become effective January 1, 2006 for all
equity awards granted after the effective date. The statement requires
compensation cost for the portion of awards for which the requisite service has
not been rendered that are outstanding as of the effective date be recognized as
the service is rendered on or after the effective date. The Company currently
reports employee compensation expense under stock options using the intrinsic
value method and no stock-based compensation cost is reflected in net income, as
all options were granted at an exercise price equal to or greater than the
market price of the underlying common stock at date of grant. The adoption of
this standard is expected to reduce net income by $115 in 2006 reflecting the
compensation cost relative to unvested options at January 1, 2006.

                                       93
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In March 2004, the Financial Accounting Standards Board (FASB) Emerging Issues
Task Force (EITF) released Issue 03-1, Meaning of Other Than Temporary
Impairment, which addressed other-than-temporary impairment for certain debt and
equity investments. The recognition and measurement requirements of Issue 03-1,
and other disclosure requirements not already implemented, were effective for
periods beginning after June 15, 2004. In September 2004, the FASB staff issued
FASB Staff Position (FSP) EITF 03-1-1, which delayed the effective date for
certain measurement and recognition guidance contained in Issue 03-1. The FSP
requires the application of pre-existing other-than-temporary guidance during
the period of delay until a final consensus is reached. Management does not
anticipate the issuance of the final consensus will have a material impact on
the Company's financial condition, results of operations or liquidity.

In December 2003, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt
Securities Acquired in a Transfer. SOP 03-3 requires acquired loans, including
debt securities, to be recorded at the amount of the purchaser's initial
investment and prohibits carrying over valuation allowances from the seller for
those individually-evaluated loans that have evidence of deterioration in credit
quality since origination, and it is probable all contractual cash flows on the
loan will be unable to be collected. SOP 03-3 also requires the excess of all
undiscounted cash flows expected to be collected at acquisition over the
purchaser's initial investment to be recognized as interest income on a
level-yield basis over the life of the loan. Subsequent increases in cash flows
expected to be collected are recognized prospectively through an adjustment of
the loan's yield over its remaining life, while subsequent decreases are
recognized as impairment. Loans carried at fair value, mortgage loans held for
sale, and loans to borrowers in good standing under revolving credit agreements
are excluded from the scope of SOP 03-3. The guidance is effective for loans
acquired in fiscal years beginning after December 15, 2004 and is not expected
to have a material impact on the Company's financial condition, results of
operations, or liquidity.

Loss Contingencies: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank
of $459 and $300 was required to meet regulatory reserve and clearing
requirements at year-end 2004 and 2003. These balances do not earn interest.

Dividend Restriction: Banking regulations require maintaining certain capital
levels and may limit the dividends paid by the bank to the holding company or by
the holding company to shareholders.

                                       94
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.

Operating Segments: While the chief decision-makers monitor the revenue streams
of the various products and services, the identifiable segments are not material
and operations are managed and financial performance is evaluated on a
Company-wide basis. Accordingly, all of the financial service operations are
considered by Management to be aggregated in one reportable operating segment.

Reclassifications: Some items in the prior year financial statements were
reclassified to conform to the current presentation.

                                       95
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 2 - BUSINESS COMBINATION

On October 22, 2004, the Company acquired 100% of the outstanding common stock
of RJO Financial Services, Inc., doing business as Reserve Mortgage Services
(Reserve), an Akron, Ohio based company licensed as a mortgage banker in Ohio,
Florida and Georgia. Reserve's name changed to Reserve Mortgage Services, Inc.
and it became an operating subsidiary of the Bank on the date of the
acquisition. Operating results of Reserve are included in the consolidated
financial statements since the date of the acquisition. As a result of this
acquisition, the Company expects to significantly expand mortgage services and
increase mortgage loan production. The Company expects to sell most of the
mortgage loan production on a servicing-released basis.

The aggregate purchase price was $2,206, including $419 in cash and $1,787 in
common stock. The value of the 127,077 common shares issued was determined based
on the average market price over the week before and after the terms of the
acquisition were agreed to and announced.

The purchase price resulted in goodwill of approximately $1,749, a noncompete
agreement of $25 and prior owner intangible of $295. The noncompete agreement
will be amortized over its one year term and the prior owner intangible will be
amortized over 3 years, using the straight-line method for book and tax
purposes. Goodwill will not be amortized but instead evaluated annually for
impairment. Goodwill is not deductible for tax purposes.

The following table summarizes the estimated fair value of assets acquired and
liabilities assumed at the date of acquisition.

<TABLE>
<CAPTION>
                                            At October 22, 2004
<S>                                         <C>
Cash                                           $       189
Loan sales proceeds receivable                       1,299
Loans receivable                                        54
Premises and equipment                                  83
Other assets                                             3
Intangible assets                                      320
Goodwill                                             1,749
                                               -----------
Total assets acquired                                3,697

Loans payable                                        1,232
Other liabilities                                      259
                                               -----------
 Total liabilities assumed                           1,491

 Net assets acquired                           $     2,206
                                               ===========
</TABLE>

                                       96
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 2 - BUSINESS COMBINATION (Continued)

The following table presents pro forma information as if the acquisition had
occurred at the beginning of the years indicated. The pro forma information
includes adjustments for interest income on net cash used in the acquisition,
amortization of intangibles arising from the transaction, depreciation expense
on property acquired, and the related income tax effects. These amounts include
Reserve's actual results in 2004 for the months prior to the acquisition on
October 22, 2004, and Reserve's actual results for 2003 and 2002. The pro forma
financial information is not necessarily indicative of the results of operations
as they would have been had the transactions been effected on the assumed dates.

<TABLE>
<CAPTION>
                                        2004            2003          2002
                                      ---------      ---------      ---------
<S>                                   <C>            <C>            <C>
Net interest income                   $   3,988      $   1,906      $   3,597

Net income (loss)                     $  (1,682)     $  (2,175)     $     711
                                      =========      =========      =========

Basic earnings (loss) per share       $   (0.79)     $   (1.12)     $    0.43
                                      =========      =========      =========
Diluted earnings (loss) per share     $   (0.79)     $   (1.12)     $    0.42
                                      =========      =========      =========
</TABLE>

                                       97
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 3 - SECURITIES

The fair value of available for sale securities and the related gross unrealized
gains and losses recognized in accumulated other comprehensive income (loss)
were as follows:

<TABLE>
<CAPTION>
                                                  Gross           Gross
                                      Fair      Unrealized      Unrealized
                                      Value       Gains           Losses
                                    ---------   ----------      ----------
<S>                                 <C>         <C>             <C>
2004
      Federal agency                $   4,983   $        2      $      (37)
      Mortgage-backed                   8,525          195             (68)
                                    ---------   ----------      ----------

        Total                       $  13,508   $      197      $     (105)
                                    =========   ==========      ==========

2003
      Federal agency                $  12,759   $        8      $       (4)
      State and municipal               1,375            5               -
      Mortgage-backed                  12,992          400            (105)
                                    ---------   ----------      ----------

        Total                       $  27,126   $      413      $     (109)
                                    =========   ==========      ==========
</TABLE>

Sales of available for sale securities were as follows:

<TABLE>
<CAPTION>
                                   2004         2003     2002
                                 --------     -------    -----
<S>                              <C>          <C>        <C>
Proceeds                         $ 15,191     $ 3,078    $ 386
Gross gains                            41          42       16
Gross losses                          (96)          -        -
</TABLE>

The tax (benefit) provision related to these net realized gains and losses was
($19), $14 and $5, respectively.

The fair value of debt securities at year-end 2004 by contractual maturity were
as follows. Securities not due at a single maturity date, primarily
mortgage-backed securities, are shown separately.

<TABLE>
<CAPTION>
                                                Available
                                                for Sale
                                                  Fair
                                                  Value
                                                ---------
<S>                                             <C>
Due from one to five years                      $   4,983
Mortgage-backed                                     8,525
                                                ---------

  Total                                         $  13,508
                                                =========
</TABLE>

                                       98
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share data)

NOTE 3 - SECURITIES (Continued)

Securities pledged at year-end 2004 and 2003 with a carrying amount of $770 and
$1,296 were pledged to secure Federal Home Loan Bank advances. At year-end 2004
and 2003, there were no holdings of securities of any one issuer, other than
federal agencies, in an amount greater than 10% of shareholders' equity.

Securities with unrealized losses at year-end 2004 and 2003, aggregated by
investment category and length of time that individual securities have been in a
continuous unrealized loss position, are as follows:

<TABLE>
<CAPTION>
        2004                         Less than 12 Months               12 Months or More                    Total
- --------------------------      ----------------------------    ------------------------------    ------------------------
                                                  Unrealized                        Unrealized                  Unrealized
Description of Securities       Fair Value           Loss       Fair Value             Loss       Fair Value       Loss
- --------------------------      ----------        ----------    ----------          ----------    -----------   ----------
<S>                             <C>               <C>           <C>                 <C>           <C>           <C>
Federal agency                  $    3,976        $      (37)   $        -          $        -    $     3,976   $      (37)

Mortgage-backed                        700                (1)        2,476                 (67)         3,176          (68)
                                ----------        ----------    ----------          ----------    -----------   ----------
Total temporarily impaired      $    4,676        $      (38)   $    2,476          $      (67)   $     7,152   $     (105)
                                ==========        ==========    ==========          ==========    ===========   ==========
</TABLE>

<TABLE>
<CAPTION>
        2003                         Less than 12 Months               12 Months or More                    Total
- --------------------------      ----------------------------    ------------------------------    ------------------------
                                                  Unrealized                        Unrealized                  Unrealized
Description of Securities       Fair Value           Loss       Fair Value             Loss       Fair Value       Loss
- --------------------------      ----------        ----------    ----------          ----------    -----------   ----------
<S>                             <C>               <C>           <C>                 <C>           <C>           <C>
Federal agency                  $    4,026        $       (4)   $        -          $        -    $     4,026   $       (4)
Mortgage-backed                      4,021              (105)            -                   -          4,021         (105)
                                ----------        ----------    ----------          ----------    -----------   ----------
Total temporarily impaired      $    8,047        $     (109)   $        -          $        -    $     8,047   $     (109)
                                ==========        ==========    ==========          ==========    ===========   ==========
</TABLE>

Unrealized losses on the above securities have not been recognized in income
because the issuers of the bonds are all federal agencies and the decline in
fair value is temporary and largely due to changes in market interest rates. The
fair value is expected to recover as the bonds approach their maturity date
and/or market rates decline.

To improve liquidity, in 2003 the Company transferred all securities previously
classified as "held to maturity," which had a carrying value of $10,533, to
"available for sale." The unrealized gain on the securities transferred totaled
$458 before tax. The Company's equity and accumulated other comprehensive income
increased $302 after tax as a result of the transfer.

                                       99
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 4 - LOANS

Loans at year-end were as follows:

<TABLE>
<CAPTION>
                                        2004       2003
                                      ---------   --------
<S>                                   <C>         <C>
Commercial                            $   7,030   $  4,116
Real estate:
    Single-family residential            41,450     34,810
    Multi-family residential             25,602      1,250
    Commercial                           20,105      5,040
    Construction                          1,127        610
Consumer                                 13,952     12,598
                                      ---------   --------
          Subtotal                      109,266     58,424
Less:  Net deferred loan fees              (139)        15
          Allowance for loan losses        (978)      (415)
                                      ---------   --------
Loans, net                            $ 108,149   $ 58,024
                                      =========   ========
</TABLE>

Activity in the allowance for loan losses was as follows.

<TABLE>
<CAPTION>
                                       2004    2003    2002
                                      -----   -----   -----
<S>                                   <C>     <C>     <C>
Beginning balance                     $ 415   $ 361   $ 373
Provision for loan losses               646     102      19
Loans charged-off                      (117)    (50)    (35)
Recoveries                               34       2       4
                                      -----   -----   ------

Ending balance                        $ 978   $ 415   $ 361
                                      =====   =====   =====
</TABLE>

Impaired loans are not material for any period presented.

Nonperforming loans were as follows:

<TABLE>
<CAPTION>
                                               2004      2003
                                               -----     -----
<S>                                            <C>       <C>
Loans past due over 90 days still on accrual   $   -     $   -
Nonaccrual loans                                 286       741
</TABLE>

Nonperforming loans include both smaller balance homogeneous loans that are
collectively evaluated for impairment and individually classified impaired
loans.

                                       100
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 5 - SECONDARY MORTGAGE MARKET ACTIVITIES

Mortgage loans serviced for others are not reported as assets. The principal
balances of these loans were $27,319 and $32,584 at year-end 2004 and 2003.

Custodial escrow balances maintained in connection with serviced loans were $282
and $100 at year-end 2004 and 2003.

Activity for capitalized mortgage servicing rights and the related valuation
allowance follows:

<TABLE>
<CAPTION>
                                    2004      2003     2002
                                   ------    ------    -----
<S>                                <C>       <C>       <C>
Servicing rights:
Beginning of year                  $  221    $  200    $  88
Additions                               3       195      162
Amortized to expense                  (52)     (118)     (50)
Provision for loss in fair value       36       (56)       -
                                   ------    ------    -----
End of year                        $  208    $  221    $ 200
                                   ======    ======    =====

Valuation allowance:
Beginning of year                  $   56    $    -    $   -
Additions expensed                      -        56        -
Reductions credited to expense        (36)        -        -
                                   ------    ------    -----
End of year                        $   20    $   56    $   -
                                   ======    ======    =====
</TABLE>

The fair value of capitalized mortgage servicing rights was $213 and $225 at
year-end 2004 and 2003. Fair value was determined using a 10% discount rate and
prepayment speeds ranging from 186% to 463%, depending on the stratification of
the specific right.

Estimated amortization expense for the next five years:

<TABLE>
<S>         <C>
2005        $     47
2006              47
2007              47
2008              47
2009              40
</TABLE>

                                      101
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 6 - PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:

<TABLE>
<CAPTION>
                                      2004       2003
                                    --------   ---------
<S>                                 <C>        <C>
Land and land improvements          $    127   $     117
Buildings                              1,880       1,713
Furniture, fixtures and equipment      2,020       1,416
Leasehold improvements                   325          10
                                    --------   ---------
                                       4,352       3,256
Less: accumulated depreciation        (1,662)     (1,324)
                                    --------   ---------
                                     $ 2,690   $   1,932
                                    ========   =========
</TABLE>

The Company leases certain office properties and autos. Rent expense was $209,
$14, and $0 for 2004, 2003 and 2002. Rent commitments under noncancelable
operating leases were as follows, before considering renewal options that
generally are present.

<TABLE>
<S>                 <C>
2005                $    287
2006                     287
2007                     265
2008                     251
2009                     208
Thereafter               662
                    --------
Total               $  1,960
                    ========
</TABLE>

The Company is a one-third owner of a limited liability company that owns and
manages the office building at 2923 Smith Road, Fairlawn, Ohio 44333 where the
Company's headquarters and CFBank's Fairlawn office are located. The Company
entered into a 10 year lease with the limited liability company in March 2004
that calls for monthly payments of $11, increasing 3% annually for the life of
the lease thru February 2014. Total rent expense under this operating lease was
$114 in 2004.

The President of Reserve Mortgage Services, Inc. is a 100% owner of a company
that owns and manages the office building at 1730 Akron-Peninsula Road, Akron,
Ohio 44313 where the Company's mortgage services office is located. Lease
agreements are for 5 year terms expiring at various times from May 2007 thru
December 2009, and call for monthly rental payments of $4 as of December 31,
2004, increasing to $7 at January 1, 2005. Total rent expense was $8 in 2004.

                                      102
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE  7 - GOODWILL AND INTANGIBLE ASSETS

GOODWILL

The change in balance for goodwill during the year is as follows:

<TABLE>
<CAPTION>
                            2004
<S>                       <C>
Beginning of year         $      -
Acquired goodwill            1,749
Impairment                       -
                          --------

End of year               $  1,749
                          ========
</TABLE>

ACQUIRED INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                        2004
                                        ----
                                 Gross
                                Carrying  Accumulated
                                 Amount   Amortization
                                --------  ------------
<S>                             <C>       <C>
Amortized intangible assets:
    Noncompete agreement        $     25    $      4
    Prior owner intangible           295          17
                                --------    --------

Total                           $    320    $     21
                                ========    ========
</TABLE>

Aggregate amortization expense was $21 for 2004.

Estimated amortization expense for each of the next three years:

<TABLE>
<CAPTION>
<S>                             <C>
   2005                         $    119
   2006                               98
   2007                               82
                                --------

Total                           $    299
                                ========
</TABLE>

                                      103
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 8 - DEPOSITS

Time deposits of $100 or more were $11,259 and $4,285 at year-end 2004 and 2003.

Scheduled maturities of time deposits for the next five years were as follows.

<TABLE>
<CAPTION>
<S>                  <C>
2005                 $   29,329
2006                      9,822
2007                      2,999
2008                      1,019
2009                      3,155
                     ----------

                     $   46,324
                     ==========
</TABLE>

NOTE 9 - FEDERAL HOME LOAN BANK ADVANCES

At year end, advances from the Federal Home Loan Bank were as follows.

<TABLE>
<CAPTION>
                                                         2004         2003
                                                      ----------    --------
<S>                                                   <C>           <C>
Maturity January 2005 at 2.20% floating rate          $   28,900    $      -
Maturity January 2004 at 1.09% floating rate                   -       7,500
Maturities March 2005 thru September 2008, fixed at
rates from 1.50% to 3.41%, averaging 2.70%                12,270           -
                                                      ----------    --------
Total                                                 $   41,170    $  7,500
                                                      ==========    ========
</TABLE>

In December 2003, the Company prepaid $11,195 in Federal Home Loan Bank
advances, with an average cost of 5.52% and an average remaining maturity of 4.5
years. These fixed-rate advances were originated primarily in 1998 and 1999 and
were used to finance mortgage loans which had prepaid. Accordingly, the loans
represented an inappropriate and costly source of funding which was not
necessary due to the liquidity position of the Company. The pre-tax prepayment
penalty associated with this transaction was $1,270 and is included in interest
expense on Federal Home Loan Bank advances and other debt in the 2003
Consolidated Statement of Operations.

The floating rate advances outstanding at year-end 2004 can be prepaid at any
time with no penalty. The advances were collateralized by $41,269 and $34,795 of
first mortgage loans under a blanket lien arrangement, $695 and $0 second
mortgage loans, $10,372 and $0 of multi-family mortgage loans, $3,236 and $0 of
home equity lines of credit, $14,964 and $0 of commercial real estate loans and
$770 and $1,296 of securities at year-end 2004 and 2003. Based on this
collateral and the Company's holdings of FHLB stock, the Company is eligible to
borrow up to $42,713 at year-end 2004.

                                      104
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 9 - FEDERAL HOME LOAN BANK ADVANCES (continued)

Payment information

Required payments over the next five years are:

<TABLE>
<S>           <C>
2005          $   30,900
2006               4,000
2007               4,270
2008               2,000
2009                   -
              ----------
Total         $   41,170
              ==========
</TABLE>

NOTE 10 - OTHER BORROWINGS

The Company had a revolving line of credit with an unaffiliated bank, acquired
in the Reserve acquisition, which provides financing up to $3,000 and matures
June 30, 2005. Interest on the outstanding balance is payable monthly at the
prime rate plus .25%. The line of credit is collateralized by loan sales
proceeds receivable. The outstanding balance was $2,238 and the interest rate
was 5.5% at year-end 2004.

The Company had a term note payable to an unaffiliated bank, acquired in the
Reserve acquisition, payable in monthly installments of principal and interest
of $1. Interest on the note is at the prime rate plus .50%. The note is
collateralized by equipment and accounts receivable of Reserve and matures in
August 2005. The outstanding balance was $11 and the interest rate was 5.75% at
year-end 2004.

NOTE 11 - SUBORDINATED DEBENTURES

A trust formed by the Company issued $5,000 of 3 month LIBOR plus 2.85% floating
rate trust preferred securities in 2003 as part of a pooled offering of such
securities. The Company issued subordinated debentures to the trust in exchange
for the proceeds of the offering, which debentures represent the sole asset of
the trust. The Company may redeem the subordinated debentures, in whole but not
in part, any time after five years at par. The subordinated debentures must be
redeemed no later than 2033.

Under FASB Interpretation No. 46, as revised in December 2003, the trust is not
consolidated with the Company. Accordingly, the Company does not report the
securities issued by the trust as liabilities, and instead reports as
liabilities the subordinated debentures issued by the Company and held by the
trust.

There are no required payments on the subordinated debentures over the next 5
years.

                                      105
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 12  - BENEFIT PLANS

Multi-employer pension plan: The Company participates in a multi-employer
contributory trusteed pension plan. The retirement benefits to be provided by
the plan were frozen as of June 30, 2003 and future employee participation in
the plan was stopped. The plan was maintained for all eligible employees and the
benefits were funded as accrued through the purchase of individual life
insurance policies. The cost of funding was charged directly to operations. The
unfunded liability at June 30, 2004 totaled $195. The Company's contribution in
2004, for the plan year ending June 30, 2005, and in 2003, for the plan year
ended June 30, 2004, totaled $66 and $34. The Company made no contribution for
2002.

401(k) Plan: In 2003, the Company instituted a 401(k) benefit plan. Employees 21
years of age and older are eligible to participate and are eligible for Company
matching contributions after one year of service. The plan allows employee
contributions up to 90% of their compensation, which may be matched by the
Company on a discretionary basis. There was no match in 2004 or 2003.

Stock Based Incentive Plans: Stock based incentive plans (SBIP) provide for
stock option grants and restricted stock awards to directors, officers and
employees. The 1999 Stock Based Incentive Plan was approved by shareholders on
July 13, 1999. The plan provided for 193,887 shares for stock option grants and
77,554 shares for restricted stock awards. The 2003 Equity Compensation Plan was
ratified by shareholders on April 23, 2003 and provided an aggregate of 100,000
shares for stock option grants and restricted stock awards, including up to a
maximum of 30,000 shares for restricted stock awards. An amendment and
restatement of the 2003 Equity Compensation Plan was approved by stockholders on
April 20, 2004 to provide an additional 100,000 shares of Company for stock
options grants and restricted stock awards, including up to a maximum of 30,000
shares for restricted stock awards. Both plans provide for options to be granted
for terms of up to, but not exceeding ten years from the date of grant and
cannot be granted at a price less than the fair market value of the common stock
on the date of grant. Shares related to forfeited stock options and restricted
stock awards become available for subsequent grant under the terms of the plans.
See Note 16 for discussion of stock options.

                                      106
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 12  - BENEFIT PLANS (Continued)

Compensation expense for restricted stock awards is recognized over the vesting
period of the shares based on the fair value of the shares on the date of grant.
Unearned compensation is reported as a reduction of shareholders' equity until
earned. Compensation expense was $243, $141 and $110 for 2004, 2003 and 2002.

A summary of the activity in the plan is as follows:

<TABLE>
<CAPTION>
                                               2004      2003     2002
                                              -------   ------   -------
<S>                                           <C>       <C>      <C>
Unvested shares outstanding at
beginning of year                              40,518   28,695    43,043
Granted                                        26,028   28,500         -
Vested                                        (19,968) (12,024)  (14,348)
Forfeited                                      (5,325)  (4,653)        -
                                              -------   ------   -------

Unvested shares outstanding at end of year     41,253   40,518    28,695
                                              =======   ======   =======

Shares available for grant                      8,659   10,028     3,875
                                              =======   ======   =======
</TABLE>

Salary Continuation Agreement: In 2004, the Company initiated a nonqualified
salary continuation agreement for the Chairman of the Board of Directors.
Benefits provided under the plan are unfunded, and payments to the Chairman will
be made the by Company. Under the plan, the Company pays him, or his
beneficiary, a benefit of $25,000 annually for 20 years, beginning the earlier
of March 2008 or termination of his employment. The expense related to this plan
totaled $38 in 2004. The accrual is included in accrued interest payable and
other liabilities in the consolidated balance sheets and totaled $38 at year-end
2004.

Life Insurance Benefits: The Company entered into agreements with certain
employees, former employees and directors to provide life insurance benefits
which are funded through life insurance policies purchased and owned by the
Company. The expense related to these benefits totaled $101 in 2004. The accrual
is included in accrued interest payable and other liabilities in the
consolidated balance sheets and totaled $101 at year-end 2004.

                                      107
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 13 - ESOP PLAN

Until the plan was terminated in 2003, employees participated in an Employee
Stock Ownership Plan (ESOP). The ESOP borrowed from the Company to purchase
155,111 shares of stock at $10 per share. The Company made discretionary
contributions to the ESOP, and paid dividends on unallocated shares to the ESOP,
and the ESOP used funds it received to repay the loan. When loan payments were
made, ESOP shares were allocated to participants based on relative compensation
and expense was recorded. Dividends on allocated shares increased participant
accounts.

The ESOP received $738 from a return of capital distribution paid by the Company
in 2000 and purchased an additional 83,353 shares with the proceeds.

At the time of termination, there were 122,882 unearned ESOP shares of which
81,000 shares were sold and the proceeds were used to repay the outstanding
balance of the loan incurred to fund the ESOP plan at inception. The remaining
41,882 shares were allocated to participants on a fully vested basis. The cost
associated with terminating the ESOP totaled $638 and is included in salaries
and employee benefits expense in the 2003 Consolidated Statement of Operations.

Contributions to the ESOP during 2003 and 2002 were $0 and $159. Expense for
2003 and 2002 was $638 and $222.

                                       108
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 14 - INCOME TAXES

Income tax expense (benefit) was as follows.

<TABLE>
<CAPTION>
                      2004        2003      2002
                    ---------   --------   -------
<S>                 <C>         <C>        <C>
Current federal     $    (283)  $     95   $   175
Deferred federal         (589)    (1,083)      138
                    ---------   --------   -------

Total               $    (872)  $   (988)  $   313
                    =========   ========   =======
</TABLE>

Effective tax rates differ from federal statutory rate of 34% applied to income
(loss) before income taxes due to the following.

<TABLE>
<CAPTION>
                                                             2004          2003       2002
                                                           ----------    --------    -------
<S>                                                        <C>           <C>         <C>
Federal statutory rate times financial statement income
(loss)                                                     $     (861)   $ (1,143)   $   336
Effect of:
Bank owned life insurance income                                  (49)        (64)       (23)
ESOP shares released at fair market value                           -         207          1
Other                                                              38          12         (1)
                                                           ----------    --------    -------
                                                           $     (872)   $   (988)   $   313
                                                           ==========    ========    =======
Effective tax rate                                              (34.4)%     (29.4)%     31.7%
</TABLE>

                                      109
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 14 - INCOME TAXES (Continued)

Year-end deferred tax assets and liabilities were due to the following.

<TABLE>
<CAPTION>
                                                          2004       2003
                                                        --------    ------
<S>                                                     <C>         <C>
Deferred tax assets:
    Allowance for loan losses                           $    333    $  141
    Deferred loan fees                                       159       160
    Post-retirement death benefits                            34         -
    Deferred compensation                                     13         -
    Nonaccrual interest                                        5        36
    Accrued stock awards                                      58        39
    Net operating loss                                     1,810     1,325
    Deferred tax credits                                      17         -
    Other                                                      6        14
                                                        --------    ------
                                                           2,435     1,715
Deferred tax liabilities:
    Depreciation                                             284       229
    FHLB stock dividend                                      430       378
    Intangible assets                                         95         -
    Mortgage servicing rights                                 71        75
    Prepaid expenses                                          33         -
    Unrealized gain on securities available for sale          31       103
                                                        --------    ------
                                                             944       785
                                                        --------    ------

Net deferred tax asset (liability)                      $  1,491    $  930
                                                        ========    ======
</TABLE>

Federal income tax laws provided additional bad debt deductions through 1987,
totaling $2,250. Accounting standards do not require a deferred tax liability to
be recorded on this amount, which otherwise would total $765 at year-end 2004.
If the Bank were liquidated or otherwise ceases to be a bank or if tax laws were
to change, this amount would be expensed.

No valuation allowance has been recorded against the deferred tax asset for net
operating losses because the benefit is more likely than not to be realized. Net
operating losses totaling $2,839 and $2,485 expire in 2023 and 2024,
respectively.

NOTE 15 - RELATED PARTY TRANSACTIONS

There were no loans to principal officers, directors, and their affiliates in
2004 or 2003. Deposits from principal officers, directors, and their affiliates
at year-end 2004 and 2003 were $1,282 and $384.

                                      110
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 16 - STOCK OPTIONS

Options to buy stock are granted to directors, officers and employees under the
1999 Stock Based Incentive Plan and 2003 Equity Compensation Plan, which provide
for issue of up to 393,887 options. Exercise price is the market price at date
of grant, so there is no compensation expense recognized in the income
statement. The maximum option term is ten years, and options vest over three to
five years.

A summary of the activity in the plan is as follows.

<TABLE>
<CAPTION>
                                    2004                 2003                  2002
                              ------------------   ------------------   -------------------
                                        Weighted             Weighted              Weighted
                                        Average              Average               Average
                                        Exercise             Exercise              Exercise
                              Shares     Price     Shares     Price      Shares     Price
                              -------   --------   -------   --------    -------   --------
<S>                           <C>       <C>        <C>       <C>        <C>        <C>
Outstanding at beginning of
year                          209,721   $  10.17   182,497   $   9.23    182,497   $  9.23
Granted                       110,864      12.63    77,758      11.79          -
Exercised                     (44,900)      9.19   (37,302)      9.23          -
Forfeited                     (19,149)     11.16   (13,232)      9.26          -
                              -------   --------   -------   --------    -------   -------

Outstanding at end of year    256,536   $  11.32   209,721   $  10.17    182,497   $  9.23
                              =======   ========   =======   ========    =======   =======

Options exercisable at
year-end                      106,386   $   9.86   101,285   $   9.20    107,903   $  9.22
                              =======   ========   =======   ========    =======   =======

Options available for grant    12,149               18,364                11,390
</TABLE>

Options outstanding at year-end 2004 were as follows.

<TABLE>
<CAPTION>
                                    Outstanding                 Exercisable
                           -------------------------------  ------------------
                                      Weighted
                                      Average    Weighted             Weighted
                                     Remaining    Average             Average
                                    Contractual   Exercise            Exercise
Range of Exercise Prices   Number       Life       Price     Number    Price
- ------------------------   -------  -----------  ---------   ------   --------
<S>                        <C>      <C>          <C>        <C>       <C>
$  9.19 - $10.05            92,638   5.0 years   $    9.32   82,726   $   9.24
$ 11.50 - $12.70           146,666   8.9 years   $   12.30   21,994   $  11.91
$  13.76- $13.94            17,232   9.1 years   $   13.81    1,666   $  13.94
</TABLE>

                                      111
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 17 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

The Bank is subject to regulatory capital requirements administered by federal
banking agencies. Capital adequacy guidelines and, additionally for banks,
prompt corrective action regulations involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators. Failure to meet capital requirements can
initiate regulatory action.

Prompt corrective action regulations provide five classifications: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and capital restoration plans are required. At year-end 2004 and
2003, the most recent regulatory notifications categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. There
are no conditions or events since that notification that management believes
have changed the institution's category.

Actual and required capital amounts and ratios are presented below at year-end.

<TABLE>
<CAPTION>
                                                                        To Be Well
                                                                      Capitalized Under
                                                      For Capital     Prompt Corrective
                                      Actual       Adequacy Purposes  Action Provisions
                                ----------------   -----------------  -----------------
                                 Amount    Ratio    Amount    Ratio    Amount     Ratio
                                --------   -----   --------   -----   --------    -----
<S>                             <C>        <C>     <C>        <C>     <C>         <C>
2004
Total Capital to risk
 weighted assets                $ 14,555    12.2%  $  9,580     8.0%  $ 11,975    10.0%

Tier 1 (Core) Capital to risk
 weighted assets                  13,576    11.3      4,790     4.0      7,185     6.0

Tier 1 (Core) Capital to
 adjusted assets                  13,576     8.1      6,726     4.0      8,408     5.0

Tangible Capital (to
 adjusted total assets)           13,576     8.1      2,522     1.5        N/A
</TABLE>

                                      112
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 17 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS (Continued)

<TABLE>
<CAPTION>
                                                                         To Be Well
                                                                      Capitalized Under
                                                     For Capital      Prompt Corrective
                                      Actual       Adequacy Purposes  Action Provisions
                                -----------------  -----------------  -----------------
                                 Amount     Ratio  Amount      Ratio  Amount     Ratio
                                --------    -----  ------      -----  -------    -----
<S>                             <C>         <C>    <C>        <C>     <C>        <C>
2003
Total Capital to risk
 weighted assets                $ 15,093    21.6%  $ 5,597      8.0%  $ 6,997     10.0%

Tier 1 (Core) Capital to risk
 weighted assets                  14,678    21.0     2,799      4.0     4,198      6.0

Tier 1 (Core) Capital to
 adjusted assets                  14,678    13.9     4,217      4.0     5,272      5.0

Tangible Capital (to
 adjusted total assets)           14,678    13.9     1,584      1.5           N/A
</TABLE>

The Qualified Thrift Lender test requires at least 65% of assets be maintained
in housing-related finance and other specified areas. If this test is not met,
limits are placed on growth, branching, new investments, FHLB advances and
dividends, or the Bank must convert to a commercial bank charter. Management
believes that this test is met.

The Bank converted from a mutual to a stock institution, and a "liquidation
account" was established at $14,300, which was net worth reported in the
conversion prospectus. Eligible depositors who have maintained their accounts,
less annual reductions to the extent they have reduced their deposits, would
receive a distribution from this account if the Bank liquidated. Dividends may
not reduce shareholders' equity below the required liquidation account balance.

Office of Thrift Supervision (OTS) regulations limit capital distributions by
savings associations. Generally, capital distributions are limited to
undistributed net income for the current and prior two years. At year-end 2004,
no amount is available to pay dividends to the Company without prior approval
from the OTS. The Company's ability to pay dividends is dependent on the Bank,
which is restricted by regulations. These regulations may limit the Company's
ability to pay dividends at historical levels.

                                      113
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 18 - LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of
credit, and overdraft protection, are issued to meet customer financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates. Commitments may expire without being used. Off-balance-sheet
risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make
such commitments as are used for loans, including obtaining collateral at
exercise of the commitment.

The contractual amount of financial instruments with off-balance-sheet risk was
as follows at year-end.

<TABLE>
<CAPTION>
                                2004               2003
                                ----               ----
                            Fixed   Variable   Fixed   Variable
                            Rate       Rate    Rate      Rate
                            -----   --------   -----   --------
<S>                         <C>     <C>        <C>     <C>
Commitments to make loans   $ 882   $    917   $ 486   $    520
Unused lines of credit        543      8,406       -      4,257
</TABLE>

Commitments to make loans are generally made for periods of 60 days or less. The
fixed rate loan commitments have interest rates ranging from 5.75% to 9.63% at
December 31, 2004 and 5.25% to 7.00% at December 31, 2003 with maturities
ranging from 15 years to 30 years.

NOTE 19 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amounts and estimated fair values of financial instruments were as
follows at year-end.

<TABLE>
<CAPTION>
                                                            2004                 2003
                                                            ----                 ----
                                                    Carrying     Fair     Carrying    Fair
                                                     Amount      Value     Amount     Value
                                                    --------   --------   --------   --------
<S>                                                 <C>        <C>        <C>        <C>
Financial assets
     Cash and cash equivalents                      $ 32,675   $ 32,675   $  8,936   $  8,936
     Interest-bearing deposits in other financial
     institutions                                          -          -      1,587      1,587
     Securities available for sale                    13,508     13,508     27,126     27,126
     Loans held for sale                                   -          -        106        107
     Loans, net                                      108,149    108,712     58,024     59,341
     Federal Home Loan Bank stock                      3,778      3,778      3,626      3,626
     Loan sales proceeds receivable                    1,888      1,888          -          -
     Accrued interest receivable                         501        501        487        487

Financial liabilities
     Deposits                                       (101,624)  (102,030)   (73,358)   (73,927)
     Federal Home Loan Bank advances                 (41,170)   (41,017)    (7,500)    (7,500)
     Other borrowings                                 (2,249)    (2,249)         -          -
     Subordinated debentures                          (5,155)    (5,155)    (5,155)    (5,155)
     Accrued interest payable                            (36)       (36)       (65)       (65)
</TABLE>

                                      114
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 19 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

The methods and assumptions used to estimate fair value are described as
follows.

Carrying amount is the estimated fair value for cash and cash equivalents,
short-term borrowings, Federal Home Loan Bank stock, loan sales proceeds
receivable, accrued interest receivable and payable, demand deposits, short-term
debt, and variable rate loans or deposits that reprice frequently and fully.
Security fair values are based on market prices or dealer quotes, and if no such
information is available, on the rate and term of the security and information
about the issuer. For fixed rate loans or deposits and for variable rate loans
or deposits with infrequent repricing or repricing limits, fair value is based
on discounted cash flows using current market rates applied to the estimated
life and credit risk. Fair values for impaired loans are estimated using
discounted cash flow analysis or underlying collateral values. Fair value of
loans held for sale is based on market quotes. Fair value of debt is based on
current rates for similar financing. The fair value of off-balance-sheet items
is based on the current fees or cost that would be charged to enter into or
terminate such arrangements.

                                      115
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 20 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of Central Federal Corporation follows.

CONDENSED BALANCE SHEETS
December 31

<TABLE>
<CAPTION>
                                                      2004          2003
                                                   ----------    ----------
<S>                                                <C>           <C>
ASSETS
Cash and cash equivalents                          $    8,504    $    9,238
Investment in banking subsidiary                       15,708        15,099
Investment in and advances to other subsidiaries          296           289
Other assets                                              399           621
                                                   ----------    ----------
Total assets                                       $   24,907    $   25,247
                                                   ==========    ==========

LIABILITIES AND EQUITY
Debt                                               $    5,155    $    5,155
Accrued expenses and other liabilities                    245           236
Shareholders' equity                                   19,507        19,856
                                                   ----------    ----------
Total liabilities and shareholders' equity         $   24,907    $   25,247
                                                   ==========    ==========
</TABLE>

CONDENSED STATEMENTS OF OPERATIONS
Years ended December 31

<TABLE>
<CAPTION>
                                                      2004          2003         2002
                                                   ----------    ----------     --------
<S>                                                <C>           <C>            <C>
Interest income                                    $        -    $       20     $     77
Dividends from subsidiaries                                 -         5,437        2,800
Other income                                                -            11            -
Interest expense                                          225            59          297
Other expense                                             306           338          173
                                                   ----------    ----------     --------

Income (loss) before income tax and
    undistributed subsidiaries operations                (531)        5,071        2,407
Income tax benefit                                        143           125          137
Effect of subsidiaries' operations                     (1,274)       (7,570)      (1,870)
                                                   ----------    ----------     --------

Net income (loss)                                  $   (1,662)   $   (2,374)    $    674
                                                   ==========    ==========     ========
</TABLE>

                                      116
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 20 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
(Continued)

CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31

<TABLE>
<CAPTION>
                                                      2004          2003           2002
                                                   ----------    ----------     --------
<S>                                                <C>           <C>            <C>
Cash flows from operating activities
  Net income (loss)                                $   (1,662)   $   (2,374)    $    674
  Adjustments:
    Effect of subsidiaries' operations                  1,274         7,570        1,870
    Change in other assets and other liabilities          296          (102)        (230)
                                                   ----------    ----------     --------
         Net cash from operating activities               (92)        5,094        2,314

Cash flows from investing activities
  Cash received in repayment of ESOP loan                   -           853          212
  Investments in subsidiaries                               -          (289)           -
                                                   ----------    ----------     --------
         Net cash from investing activities                 -           564          212

Cash flows from financing activities
  Proceeds of borrowings                                    -         5,155            -
  Repayments of borrowings                                  -        (4,900)      (2,100)
  Proceeds from stock issue                                 -         3,119            -
  Proceeds from exercise of stock options                 412           345            -
  Purchase of treasury stock                             (319)            -       (1,044)
  Dividends paid                                         (735)         (655)        (551)
  Dividends on unallocated ESOP shares                      -             -          (53)
                                                   ----------    ----------     --------
         Net cash from financing activities              (642)        3,064       (3,748)
                                                   ----------    ----------     --------

Net change in cash and cash equivalents                  (734)        8,722       (1,222)

Beginning cash and cash equivalents                     9,238           516        1,738
                                                   ----------    ----------     --------

Ending cash and cash equivalents                   $    8,504    $    9,238     $    516
                                                   ==========    ==========     ========
</TABLE>

                                      117
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (Dollars in thousands except per share date)

NOTE 21 - EARNINGS PER SHARE

The factors used in the earnings per share computation follow.

<TABLE>
<CAPTION>
                                                                        2004          2003          2002
                                                                     -----------   -----------   -----------
<S>                                                                  <C>           <C>           <C>
Basic
     Net income (loss)                                               $    (1,662)  $    (2,374)  $       674
                                                                     ===========   ===========   ===========

     Weighted average common shares outstanding                        2,033,376     1,815,210     1,530,429
                                                                     ===========   ===========   ===========

     Basic earnings (loss) per common share                          $     (0.82)  $     (1.31)  $      0.44
                                                                     ===========   ===========   ===========

Diluted
     Net income (loss)                                               $    (1,662)  $    (2,374)  $       674
                                                                     ===========   ===========   ===========

     Weighted average common shares outstanding for basic earnings
     (loss) per share                                                  2,033,376     1,815,210     1,530,429

     Add:  Dilutive effects of assumed exercises of stock options
     and stock based incentive plan shares                                     -             -        31,570
                                                                     -----------   -----------   -----------

     Average shares and dilutive potential common shares               2,033,376     1,815,210     1,561,999
                                                                     ===========   ===========   ===========

     Diluted earnings (loss) per common share                        $     (0.82)  $     (1.31)  $      0.43
                                                                     ===========   ===========   ===========
</TABLE>

The following potential average common shares were anti-dilutive and not
considered in computing diluted earnings (loss) per share because the Company
had a loss from continuing operations, the exercise price of the options was
greater than the average stock price for the periods or the fair value of the
stock based incentive plan shares at the date of grant was greater than the
average stock price for the periods.

<TABLE>
<CAPTION>
                                                                       2004         2003         2002
                                                                     -------       -------       -----
<S>                                                                  <C>           <C>           <C>
Stock options                                                        263,400       225,285       8,000

Stock based incentive plan shares                                     33,313        28,927           -
</TABLE>

In 2003, the Company had included stock options and stock based incentive plan
shares that increased the number of outstanding shares in computing diluted loss
per share. However, because the Company had a loss from continuing operations,
these potential common shares were anti-dilutive and should not have been
considered for the computation. As a result, the Company revised 2003 diluted
loss per share amounts. The impact of this change was not material to the
diluted loss per share amounts disclosed.

                                      118
<PAGE>

CENTRAL FEDERAL CORPORATION
AND CFBANK
BOARD OF DIRECTORS

David C. Vernon
Chairman of the Board

Mark S. Allio
Vice-Chairman, President &
Chief Executive Officer
Central Federal Corporation
Vice-Chairman &
Chief Executive Officer
CFBank

Jeffrey W. Aldrich
President
Sterling China Co.

Thomas P. Ash
Superintendent
Mid-Ohio Educational Service
Center

William R. Downing
President
R.H. Downing, Inc.

Gerry W. Grace
President
Grace Services, Inc.

Jerry F. Whitmer, Esq.
Partner
Brouse McDowell

RESERVE MORTGAGE SERVICES,
INC.
BOARD OF DIRECTORS

David C. Vernon
Chairman of the Board

Richard J. O'Donnell
President & Chief Executive Officer
Reserve Mortgage Services, Inc.

Mark S. Allio
Vice-Chairman, President &
Chief Executive Officer
Central Federal Corporation
Vice-Chairman & Chief Executive Officer
CFBank

CFBANK
COLUMBUS DEVELOPMENT
BOARD

Daniel P. Finkelman
Executive Vice President
Alliance Data Systems Corporation

Julia F. Johnson
Managing Member
Johnson Manufacturing and
Farming LLC

R. Parker MacDonell
President - Columbus Region
CFBank

John L. Mead
Owner
Little Turtle Golf Course

Louis A. Nobile, Jr.
Former President
Bank One Lima

Robert F. Parsons
Director of Development & Marketing
Communities in Schools, Columbus Inc.

Kim Rice Wilson
President
Six String Concerts

                                      119
<PAGE>

CENTRAL FEDERAL CORPORATION
OFFICERS

David C. Vernon
Chairman of the Board

Mark S. Allio
Vice-Chairman, President &
Chief Executive Officer

Eloise L. Mackus, Esq.
Senior Vice President,
General Counsel & Secretary

Therese A. Liutkus, CPA
Treasurer & Chief Financial
Officer

LAURA L. MARTIN
ASSISTANT SECRETARY

CFBANK
OFFICERS

David C. Vernon
Chairman of the Board

Mark S. Allio
Vice-Chairman & Chief
Executive Officer

Raymond E. Heh
President & Chief Operating
Officer

R. Parker MacDonell
President - Columbus Region

Eloise L. Mackus, Esq.
Senior Vice President, General
Counsel & Secretary

Therese A. Liutkus, CPA
Treasurer & Chief Financial
Officer

William R. Reed
Senior Credit Officer

J. Brent Thomas
Vice President

Nancianne Dodgson
Assistant Vice President

Deborah L. Jacob
Assistant Vice President

John S. Lawell
Assistant Vice President

Daphne U. Moehring
Assistant Vice President

Diana M. Spencer
Assistant Vice President

Stephen C. Burt
Commercial Banking Officer

Scott T. Read
Commercial Banking Officer

Amy L. Tenney
Controller

MARY D. WILLIAMS
BANK SECRECY ACT OFFICER

Laura L. Martin
Assistant Secretary

RESERVE MORTGAGE SERVICES,
INC.
OFFICERS

David C. Vernon
Chairman of the Board

Richard J. O'Donnell
President & Chief Executive
Officer

Kathy K. Vidakovics
Vice President & Chief Operating
Officer

Eloise L. Mackus, Esq.
Secretary

Therese A. Liutkus, CPA
Treasurer

                                      120
<PAGE>

CFBANK
OFFICE LOCATIONS
FAIRLAWN, OHIO
2923 Smith Road
Akron, Ohio  44333
330-666-7979

David C. Vernon
Chairman of the Board

Mark S. Allio
Vice-Chairman &
Chief Executive Officer

Raymond E. Heh
President &
Chief Operating Officer

Eloise L. Mackus, Esq.
Senior Vice President,
General Counsel & Secretary

Therese A. Liutkus, CPA
Treasurer &
Chief Financial Officer

William R. Reed
Senior Credit Officer

Nancianne Dodgson
Assistant Vice President &
Office Manager

Stephen C. Burt
Commercial Banking Officer

Katie M. Costigan
Client Service Representative

Krista J. Dobronos
Commercial Banking Officer

Kenneth V. Hastings
Client Service Manager

Deborah L. Jacob
Assistant Vice President,
Compliance & Audit &
Bank Security Officer

Nicholas D. Kostoff
Consumer Loan Operations Manager

John S. Lawell
Assistant Vice President,
Operations

Laura L. Martin
Assistant Secretary &
Executive Assistant

Richard J. Miller
Accounting Manager

Shelley A. Morrow
Commercial Loan
Operations Manager

Scott T. Read
Commercial Banking Officer

Brenda L. Russell
Staff Accountant

Amy L. Tenney
Controller

Matthew J. Welsh
Financial Analyst

Mary D. Williams
Bank Secrecy Act Officer

WELLSVILLE, OHIO
601 Main Street
Wellsville, Ohio  43968
330-532-1517

Diana M. Spencer
Assistant Vice President,
Columbiana County
Regional Manager

Joan L. Boley
Mortgage Loan Servicing

Lisa A. Conkle
Mortgage Loan Servicing

Amy Dalrymple
Client Service Representative

Sheryl A. Gibson
Client Service Supervisor

Michele R. Guildoo
Human Resources Coordinator

Carolyn J. LaScola
Client Service Representative

Marjorie K. Minor
Reserve Mortgage Services, Inc.
Mortgage Loan Officer
Susan D. Pickens
Client Service Representative

Michelle Smith
Client Service Representative

Teresa L. Wilson
Client Service Representative

CALCUTTA, OHIO
49028 Foulks Drive
Calcutta, Ohio  43920
330-385-4323

Marian C. Ferlaino
Office Manager

Janice L. Boso
Client Service Representative

Janna L. Cable
Reserve Mortgage Services, Inc.
Mortgage Loan Officer

Kimberlee K. Little
Client Service Representative

Rhonda R. McDole
Client Service Representative

M. Renee Perorazio
Client Service Representative

Nancy Tice
Client Service Representative

COLUMBUS, OHIO
4249 Easton Way
Suite 125
Columbus, Ohio  43219
614-334-7979

R. Parker MacDonell
President - Columbus Region

Daphne U. Moehring
Assistant Vice President,
Office Manager & Commercial Banker

Matthew Allyn
Reserve Mortgage Services, Inc.
Mortgage Loan Officer
Kelley E. Joseph
Client Service Manager

Mary C. Linscott
Reserve Mortgage Services, Inc.
Mortgage Loan Officer

Arline R. Moore
Client Service Representative &
Administrative Assistant

J. Brent Thomas
Vice President,
Commercial Banker

RESERVE MORTGAGE SERVICES, INC.
OFFICE LOCATIONS
AKRON, OHIO
1730 Akron-Peninsula Rd.
Akron, Ohio  44313
330-945-7000

Richard J. O'Donnell
President & Chief Executive Officer

Kathy K. Vidakovics
Vice President & Chief Operating Officer

Kelly N. Bates
Office Manager

Holly Bingman
Mortgage Loan Processor

Gina D'Andrea
Mortgage Loan Officer

Jennifer Eagle
Senior Mortgage Loan Processor

Jamie L. Jones
Mortgage Loan Processor

Shelley A. McAfee
Mortgage Loan Processor

Christine Tomic
Receptionist & Junior Mortgage
Loan Processor

Larry Zarrilli
Mortgage Loan Officer

MARIETTA, GEORGIA
1025 Denmeade Walk
Marietta, Georgia  30064
678-797-9600

Don Dugan
Mortgage Loan Officer

                                      121
<PAGE>

Corporate Data

Annual Report

A copy of the Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission will be available March 30, 2005 without charge upon written
request to:

Therese A. Liutkus, CPA
Treasurer and Chief Financial Officer
Central Federal Corporation
2923 Smith Road
Fairlawn, Ohio  44333
Phone: 330-666-7979 ext. 1012
Fax: 330-666-7959
Email:  TerriLiutkus@cfbankmail.com

Annual Meeting

The Annual Meeting of Shareholders of Central Federal Corporation will be held
at 10 a.m. on Thursday, May 19, 2005 at the CFBank Fairlawn Office, 2923 Smith
Road, Fairlawn, Ohio 44333.

Shareholder Services

The Registrar and Transfer Company serves as transfer agent for Central Federal
Corporation shares. Communications regarding change of address, transfer of
shares or lost certificates should be sent to:

The Registrar & Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Phone: 800-368-5948

                                      122
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>10
<FILENAME>l12592aexv21w1.txt
<DESCRIPTION>EX-21.1 SUBSIDIARIES
<TEXT>
<PAGE>

                                                                    EXHIBIT 21.1

                         SUBSIDIARIES OF THE REGISTRANT

CFBank and its wholly owned subsidiary, Reserve Mortgage Services, Inc. Central
Federal Capital Trust I

                                      123
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>11
<FILENAME>l12592aexv23w1.txt
<DESCRIPTION>EX-23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
<TEXT>
<PAGE>

                                                                    EXHIBIT 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (333-84817, 333-105515, 333-114025, and 333-115943) and
Form S-3 (333-110218) of Central Federal Corporation (formerly Grand Central
Financial Corp.) of our report dated February 10, 2005, related to the
consolidated financial statements of Central Federal Corporation included in
this annual report on Form 10-KSB for the year ended December 31, 2004.

                                                    Crowe Chizek and Company LLC

Cleveland, Ohio
March 30, 2005

                                      124
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>12
<FILENAME>l12592aexv31w1.txt
<DESCRIPTION>EX-31.1 CERTIFICATION
<TEXT>
<PAGE>

                                                                    EXHIBIT 31.1

                          Rule 13A-14(a) Certifications

I, Mark S. Allio, certify, that:

      1.    I have reviewed this report on Form 10-KSB of Central Federal
            Corporation;

      2.    Based on my knowledge, this report does not contain any untrue
            statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this report;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations and cash
            flows of the small business issuer as of, and for, the periods
            presented in this report;

      4.    The small business issuer's other certifying officers and I are
            responsible for establishing and maintaining disclosure controls and
            procedures (as defined in Exchange Act Rules 13a-15(e) and
            15d-15(e)) for the small business issuer and have:

            a)    designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the small business issuer, including its consolidated
                  subsidiaries, is made known to us by others within those
                  entities, particularly during the period in which this report
                  is being prepared;

            b)    evaluated the effectiveness of the small business issuer's
                  disclosure controls and procedures and presented in this
                  report our conclusions about the effectiveness of the
                  disclosure controls and procedures, as of the end of the
                  period covered by this report based on such evaluation; and

            c)    disclosed in this report any change in the small business
                  issuer's internal control over financial reporting that
                  occurred during the small business issuer's fourth fiscal
                  quarter that has materially affected, or is reasonably likely
                  to materially affect, the small business issuer's internal
                  control over financial reporting; and

      5.    The small business issuer's other certifying officers and I have
            disclosed, based on our most recent evaluation of internal control
            over financial reporting, to the small business issuer's auditors
            and the audit committee of small business issuer's board of
            directors (or persons performing the equivalent functions):

            a)    all significant deficiencies in the design or operation of
                  internal control over financial reporting which are reasonably
                  likely to adversely affect the small business issuer's ability
                  to record, process, summarize and report financial
                  information; and

            b)    any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the small
                  business issuer's internal control over financial reporting.

Date: March 30, 2005                     /s/ Mark S. Allio
                                         --------------------------------------
                                         Mark S. Allio
                                         Vice Chairman of the Board, President
                                         and Chief Executive Officer

                                      125
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>13
<FILENAME>l12592aexv31w2.txt
<DESCRIPTION>EX-31.2 CERTIFICATION
<TEXT>
<PAGE>

                                                                    EXHIBIT 31.2

                          Rule 13a-14(a) Certifications

I, Therese Ann Liutkus, certify, that:

      1.    I have reviewed this report on Form 10-KSB of Central Federal
            Corporation;

      2.    Based on my knowledge, this report does not contain any untrue
            statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this report;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations and cash
            flows of the small business issuer as of, and for, the periods
            presented in this report;

      4.    The small business issuer's other certifying officers and I are
            responsible for establishing and maintaining disclosure controls and
            procedures (as defined in Exchange Act Rules 13a-15(e) and
            15d-15(e)) for the small business issuer and have:

            a)    designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the small business issuer, including its consolidated
                  subsidiaries, is made known to us by others within those
                  entities, particularly during the period in which this report
                  is being prepared;

            b)    evaluated the effectiveness of the small business issuer's
                  disclosure controls and procedures and presented in this
                  report our conclusions about the effectiveness of the
                  disclosure controls and procedures, as of the end of the
                  period covered by this report based on such evaluation; and

            c)    disclosed in this report any change in the small business
                  issuer's internal control over financial reporting that
                  occurred during the small business issuer's fourth fiscal
                  quarter that has materially affected, or is reasonably likely
                  to materially affect, the small business issuer's internal
                  control over financial reporting; and

      5.    The small business issuer's other certifying officers and I have
            disclosed, based on our most recent evaluation of internal control
            over financial reporting, to the small business issuer's auditors
            and the audit committee of small business issuer's board of
            directors (or persons performing the equivalent functions):

            a)    all significant deficiencies in the design or operation of
                  internal control over financial reporting which are reasonably
                  likely to adversely affect the small business issuer's ability
                  to record, process, summarize and report financial
                  information; and

            b)    any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the small
                  business issuer's internal control over financial reporting.

Date: March 30, 2005                     /s/ Therese Ann Liutkus
                                         --------------------------------------
                                         Therese Ann Liutkus, CPA
                                         Treasurer and Chief Financial Officer

                                      126
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>14
<FILENAME>l12592aexv32w1.txt
<DESCRIPTION>EX-32.1 CERTIFICATION
<TEXT>
<PAGE>

                                                                    EXHIBIT 32.1

                           Section 1350 Certifications

In connection with the Annual Report of Central Federal Corporation (the
"Company") on Form 10-KSB for the fiscal year ended December 31, 2004 as filed
with the Securities and Exchange Commission (the "Report"), the undersigned,
Mark S. Allio, Vice Chairman of the Board, President and Chief Executive Officer
of the Company and Therese Ann Liutkus, Treasurer and Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as added by Section
906 of the Sarbanes-Oxley Act of 2002, that:

      (1)   The Report fully complies with the requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The information contained in the Report fairly presents, in all
            material respects, the financial condition and results of operations
            of the Company as of and for the period covered by the Report.

                                       /s/ Mark S. Allio
                                       ----------------------------------------
                                       Mark S. Allio
                                       Vice Chairman of the Board, President
                                       and Chief Executive Officer

                                       /s/ Therese Ann Liutkus
                                       ----------------------------------------
                                       Therese Ann Liutkus, CPA
                                       Treasurer and Chief Financial Officer

Date: March 30, 2005

                                      127
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
