UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



SCHEDULE 14A

(RULE 14a-101)



INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION



PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934



Filed by the Registrant [X]

Filed by a Party other than the Registrant [  ]



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[  ] Preliminary Proxy Statement

[  ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[  ] Definitive Additional Materials

[  ] Soliciting Material Pursuant to Section 240.14a-12



Central Federal Corporation

(Name of Registrant as Specified In Its Charter)



(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)



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[  ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11



(1)  Title of each class of securities to which transaction applies:

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(2)  Aggregate number of securities to which transaction applies:

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(3)  Per unit price or other underlying value of transaction computed

pursuant to Exchange Act Rule 0-11 (set forth the amount on which the

filing fee is calculated and state how it was determined):

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(4)  Proposed maximum aggregate value of transaction:

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[  ] Check box if any part of the fee is offset as provided by Exchange Act rule

0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.

Identify the previous filing by registration statement number, or the Form or

Schedule and the date of its filing.



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(4)  Date Filed:

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7000 N. High StreetWorthington, Ohio 43085









April 26,  2019  







Fellow Stockholders:



You are cordially invited to attend the Annual Meeting of Stockholders (the “Meeting”) of Central Federal Corporation (the “Company”) which will be held at the New Albany County Club, located at 1 Club Lane, New Albany, Ohio 43054, on Wednesday, May 29, 2019, at 10:00 a.m., local time.



The attached Notice of Annual Meeting and Proxy Statement describe the formal business to be transacted at the Meeting.  Directors and officers of the Company, as well as one or more representatives of the Company’s independent registered public accounting firm, will be present at the Meeting to respond to any questions stockholders may have regarding the business to be transacted.  In addition, the Meeting will include management’s report on the Company’s financial performance for 2018. Attendance at the Meeting is limited to stockholders of record as of the close of business on April 12, 2019, their duly appointed proxies and guests of the Board of Directors and management.



Your vote is very important.  Whether or not you expect to attend the Meeting, please read the enclosed Proxy Statement and then complete, sign and return the enclosed proxy card promptly in the postage-paid envelope provided, or follow the procedures on the proxy card to vote your shares electronically, so that your shares will be represented.  If you attend the Meeting and are a stockholder of record, or hold a legal proxy from your bank or broker, you may vote in person even if you have previously submitted a proxy.



On behalf of the Board of Directors, management and all of the employees of Central Federal Corporation, thank you for your continued interest and support.



Sincerely yours,

Timothy T. O’Dell

President and Chief Executive Officer











 

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CENTRAL FEDERAL CORPORATION

7000 N. High Street

Worthington, Ohio 43085





NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be held on May 29, 2019





NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Meeting”) of Central Federal Corporation (the “Company”) will be held at the New Albany County Club, 1 Club Lane, New Albany, Ohio 43054, on Wednesday, May 29, 2019, at 10:00 a.m., local time, for the following purposes:





Record holders of the common stock of the Company at the close of business on April 12, 2019 are entitled to receive notice of and to vote at the Meeting and any adjournment(s) of the Meeting.  A list of stockholders entitled to vote will be available for examination by any stockholder at the Meeting and for the ten days preceding the Meeting during ordinary business hours at Central Federal Corporation, 7000 N. High Street, Worthington, Ohio 43085.



Included with this Notice are the Company’s Proxy Statement for the Meeting, a form of proxy card and the Company’s 2018 Annual Report to Stockholders.



Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on May 29, 2019:  The Company’s Proxy Statement for the Meeting, the form of proxy card and the Company’s 2018 Annual Report to Stockholders are available at http://CFBankonline.com.



BY ORDER OF THE BOARD OF DIRECTORS



Timothy T. O’Dell

President and Chief Executive Officer

Worthington, Ohio

April 26,  2019





IMPORTANT:  THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM.  PLEASE READ THE ENCLOSED PROXY MATERIALS AND FOLLOW THE PROCEDURES ON THE PROXY CARD TO VOTE YOUR SHARES ELECTRONICALLY, OR SIGN AND RETURN THE PROXY CARD IN THE SELF-ADDRESSED ENVELOPE ENCLOSED FOR YOUR CONVENIENCE.  NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.



 

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CENTRAL FEDERAL CORPORATION

7000 N. High Street

Worthington, Ohio 43085

(614) 334-7979

cfbankonline.com







PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 29, 2019





INFORMATION CONCERNING SOLICITATION AND VOTING

This Proxy Statement is being furnished in connection with the solicitation by the Board of Directors (the “Board of Directors” or the “Board”) of Central Federal Corporation (the “Company”) of proxies to be voted at the Annual Meeting of Stockholders of the Company (the “Meeting”) to be held at the New Albany County Club, 1 Club Lane, New Albany, Ohio 43054, at 10:00 a.m., local time, on May 29, 2019, and at any adjournment(s) thereof.  Your vote is very important.  This Proxy Statement, the accompanying proxy card and the Company’s 2018 Annual Report to Stockholders are being first sent or given on or about April 26,  2019 to stockholders of record of the Company as of the close of business on April 12, 2019.  The Board of Directors encourages you to read this Proxy Statement thoroughly and to take this opportunity to vote on the matters to be decided at the Meeting. 



This Proxy Statement, the form of proxy card and the Company’s 2018 Annual Report to Stockholders are also available at http://CFBankonline.com.   





ATTENDING THE MEETING AND VOTING PROCEDURES 





WHO MAY ATTEND THE MEETING?

If you are a stockholder of record as of the close of business on April 12, 2019 (the “Record Date”), you are entitled to attend the Meeting.  Please note, however, that if you hold your shares in street name (i.e., you are a beneficial owner of shares of Company common stock that are held by a broker, bank or other nominee), you will need proof of ownership to be admitted to the Meeting.  See “HOW DO I VOTE” and “Must I VOTE BY proxy or may I vote in person at the annual meeting?” for additional information.



To obtain directions to attend the Meeting and vote in person, please call Barb Pyke at (614) 318-4669. 



WHO IS ENTITLED TO VOTE?

You are entitled to vote your shares of common stock if the Company’s records show that you held your shares as of the close of business on the Record Date.  As of the close of business on the Record Date, a total of 4,392,296 shares of common stock of the Company were outstanding and entitled to vote.  Each share of common stock entitles the holder thereof to one vote on each matter presented at the Meeting, except as described below.



As provided in the Company’s Certificate of Incorporation, as amended (“Certificate of Incorporation”), a person (either a natural person or an entity) who, as of the close of business on the Record Date, beneficially owned, either directly or indirectly, a total number of shares of the Company’s common stock in excess of 10% of the total outstanding shares of the Company’s common stock (the “10% limit”) is not entitled to vote any of such person’s shares in excess of the 10% limit, and those shares in excess of the 10% limit are not treated as outstanding for voting purposes.  For purposes of calculating the 10% limit, a person is deemed to beneficially own shares owned by an affiliate of, as well as by persons acting in concert with, such person.  The Certificate of Incorporation authorizes the Board of Directors to (i) make all determinations necessary to implement and apply the 10% limit, including determining whether persons are acting in concert, and (ii) demand that any

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person who is reasonably believed to beneficially own stock in excess of the 10% limit supply information to the Company to enable the Board of Directors to implement and apply the 10% limit.  As of the Record Date, the Company was not aware of any person who beneficially owned more than 10% of the Company’s outstanding common stock. 



HOW DO I VOTE?

If you are a stockholder of record, you may vote in person by attending the Meeting or you may vote by completing the enclosed proxy card and returning it signed and dated in the enclosed postage-paid envelope, or by following the procedures on the proxy card to vote your shares electronically.  If you hold your shares through a broker, bank or other nominee, you are considered to hold your shares in “street name,” and you will receive separate instructions from your bank, broker or other nominee describing how to vote your shares.  Please note that if you hold your shares in street name and wish to vote those shares in person at the Meeting, you will need to obtain a “legal proxy” from the broker, bank or other nominee that holds those shares for you.



Must I VOTE BY proxy or may I vote in person at the annual meeting? 

If you are a stockholder of record, you may attend and vote in person at the Meeting.  To be admitted at the Meeting, you may need to present personal photo identification.  If your shares are held in street name (i.e., the shares are not registered in your name), you must present personal photo identification and proof of stock ownership to be admitted to the Meeting.  A copy of your account statement or a letter from your broker, bank or other institution reflecting the number of shares of common stock you owned as of the Record Date (April 12, 2019) will constitute adequate proof of stock ownership for admission to the Meeting.  In order to vote your shares held in street name at the Meeting, you also will need to obtain and bring with you to the Meeting a legal proxy from your broker, bank or other institution in whose name your shares are held. 



HOW WILL MY SHARES BE VOTED?

Shares of the Company’s common stock which are represented by properly executed proxy cards that are received prior to the Meeting, and not subsequently revoked, will be voted by your proxies in accordance with your instructions.  If you submit a valid proxy card prior to the Meeting but do not provide voting instructions, your proxies will vote your shares as recommended by the Board of Directors, except in the case of broker non-votes where applicable, as follows:

If any other matters are properly presented for voting at the Meeting, the persons appointed as proxies will vote on those matters, to the extent permitted by applicable law, in accordance with their best judgment.  No appraisal or dissenters’ rights exist for any action proposed to be taken at the Meeting.  



If a beneficial owner does not provide appropriate voting instructions to any broker or other nominee holding the common shares of such beneficial owner in street name, the stock exchange rules and regulations applicable to brokers and other nominees allow them to vote such common shares on “routine” matters without instructions from the beneficial owner.  If a proposal is considered a “non-routine” matter, the broker or other nominee may vote the common shares held in street name on the proposal only if the beneficial owner of such common shares has provided voting instructions.  A broker non-vote occurs when the broker or other nominee is unable to vote on a proposal because the proposal is considered a “non-routine” matter and the beneficial owner does not provide appropriate voting instructions.



Of the proposals to be presented at the Meeting, the ratification of the appointment of the Company’s independent registered public accounting firm (Proposal 4)  qualifies as a “routine” matter.  Each of the other proposals (Proposals 1, 2, 3 and 5) is considered a “non-routine” matter and, therefore, your broker may vote on these matters only if you provide voting instructions.  Accordingly, it is important that you provide instructions to your broker.

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CAN I REVOKE OR CHANGE MY VOTE AFTER I SUBMIT MY PROXY?

You may revoke your proxy at any time before the vote is taken at the Meeting.  To revoke your proxy, you must take one of the following actions: (i) advise the Corporate Secretary of the Company in writing of the revocation of your proxy before your shares have been voted at the Meeting; (ii) deliver to the Company another proxy that bears a later date;  or (iii) attend the Meeting and vote your shares in person.  Attendance at the Meeting will not, by itself, revoke your proxy.  The last-dated proxy you submit (by any means) will supersede any previously submitted proxy. If you have instructed your broker, bank or nominee to vote your shares, you must follow the directions received from your broker, bank or nominee to revoke a previously delivered proxy.

WHAT CONSTITUTES A QUORUM FOR THE MEETING?

A quorum exists if a majority of the outstanding shares of common stock entitled to vote at the Meeting (after subtracting any shares in excess of the 10% limit) is present in person or represented by proxy at the Meeting. The Meeting will be held if a quorum exists at the Meeting.  If you return valid proxy instructions or attend the Meeting in person, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting.  Broker non-votes also will be counted for purposes of determining a quorum.  If there are not sufficient shares present or represented by proxy at the Meeting to constitute a quorum or to approve or ratify any proposal at the time of the Meeting, the Meeting may be adjourned in order to permit the further solicitation of proxies.

WHAT VOTE IS REQUIRED FOR EACH PROPOSAL?

The following describes the required vote on each proposal so long as a quorum is present at the Meeting.



•     Proposal 1 – Election of Directors 



Under Delaware law and the Company’s Bylaws, Directors are elected by a plurality of the votes cast.  This means that the three (3) nominees receiving the greatest number of votes “FOR” election will be elected Directors.  Shares as to which the authority to vote is withheld and broker non-votes will not affect whether a nominee has received sufficient votes to be elected.  



•     Proposal 2 – Non-Binding Advisory Resolution to Approve the Compensation of the Company’s Named Executive Officers



Under the Company’s Bylaws, the affirmative vote of a majority of the votes cast is required to approve the non-binding advisory resolution to approve the compensation paid to the Company’s named executive officers as disclosed in this Proxy Statement.  Abstentions and broker non-votes will not be counted as votes “FOR” or “AGAINST” this proposal and will have no effect on the outcome of this proposal.



•   Proposal 3 – Non-Binding Advisory Vote on the Frequency of Future Stockholder Advisory Votes on Compensation of the Company’s Named Executive Officers



Under the Company’s Bylaws, the affirmative vote of a majority of the votes cast is required to approve, on a non-binding advisory basis, one of the selections as to the frequency of future stockholder advisory votes on the compensation of the Company’s named executive officers.  Abstentions and broker non-votes will not be counted as votes cast with respect to any of the selections and will have no effect on the outcome of this proposal.



•    Proposal 4 – Ratification of the Appointment of the Company’s Independent Registered Public Accounting firm



Under the Company’s Bylaws, the affirmative vote of a majority of the votes cast is required to ratify the appointment of BKD LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2019.  Abstentions will not be counted as votes “FOR” or “AGAINST” this proposal and will have no effect on the outcome of this proposal.

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•    Proposal 5 – Approval of the Central Federal Corporation 2019 Equity Incentive Plan



The affirmative vote of a majority of the votes cast is required to approve the Central Federal Corporation 2019 Equity Incentive Plan.  Abstentions and broker non-votes will not be counted as votes “FOR” or “AGAINST” this proposal and will have no effect on the outcome of this proposal.



WHO WILL COUNT THE VOTE?

Broadridge, a servicing company for the financial industry, will tally the votes at the Meeting, which will be certified by an Inspector of Election.  The Board of Directors has designated John W. Helmsdoerfer, Executive Vice President and Chief Financial Officer of the Company, to act as the Inspector of Election for the meeting.  Mr. Helmsdoerfer is an officer of the Company and an officer and employee of the Company’s wholly-owned operating subsidiary, CFBank, National Association (“CFBank”). 



IS THE BOARD OF DIRECTORS AWARE OF ANY OTHER MATTERS THAT WILL BE PRESENTED AT THE ANNUAL MEETING?

The Company’s Board of Directors is not aware of any other matters to be presented at the Meeting.  If any matters not described in this Proxy Statement are properly presented at the Meeting, the persons named in the proxy card will use his or her best judgment to determine how to vote your shares. 



WHO PAYS THE COST OF PROXY SOLICITATION?

The Company will pay the costs of preparing, printing and mailing/delivering this proxy statement, the accompanying proxy card, the Company’s 2018 Annual Report to Stockholders and other related materials and all other costs incurred in connection with the solicitation of proxies on behalf of the Company’s Board of Directors, other than the Internet access charges incurred by a stockholder when voting electronically.  Although we are soliciting proxies by mailing these proxy materials to our stockholders, the directors, officers and employees of the Company and of our subsidiary, CFBank, may also solicit proxies by further mailing, personal contact, telephone or electronic mail without receiving any additional compensation for such solicitations.  Arrangements will also be made with brokerage firms, financial institutions and other nominees that are record holders of shares of common stock of the Company for the forwarding of solicitation materials to the beneficial owners of such shares.  The Company will reimburse these brokers, financial institutions and other nominees for their reasonable out-of-pocket costs incurred in sending proxy materials to the beneficial owners of the Company’s common stock. 

WHO SHOULD I CALL IF I HAVE QUESTIONS?    



If you have questions concerning this proxy solicitation, or the proposals to be considered at the Meeting, please call Timothy T. O’Dell, President and Chief Executive Officer, at (614) 334-7979.





Important Notice Regarding the Availability of Proxy Materials

for the Stockholder Meeting to Be Held on May 29, 2019:



The Company’s Proxy Statement for the Annual Meeting, the form of proxy card and the Company’s 2018 Annual Report to Stockholders are available at http://CFBankonline.com.  







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CORPORATE GOVERNANCE







DIRECTOR INDEPENDENCE

The Board of Directors of the Company has determined that each of the following directors of the Company is “independent” as that term is defined by applicable listing standards of the NASDAQ Marketplace Rules and by applicable “SEC” rules:  Thomas P. Ash, Edward W. Cochran, James Frauenberg II, Robert E. Hoeweler, Robert H. Milbourne and David L. Royer.  Timothy O’Dell does not qualify as “independent” as a result of serving as the President and Chief Executive Officer of the Company and CFBank during 2018.  



The NASDAQ independence definition includes a series of tests, such as that the director is not an employee of the Company and has not engaged in various types of business dealings with the Company and its subsidiaries.  As required by the NASDAQ Marketplace Rules, the Board of Directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of the Board, would interfere with the exercise of his independent judgment in carrying out the responsibilities of a director.  In making these determinations, the Board of Directors reviewed and discussed information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to the Company and CFBank, including those described under the heading “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” on page 9 of this Proxy Statement.



BOARD LEADERSHIP STRUCTURE

The Company’s current Chairman, Robert E. Hoeweler, has served in this capacity since August 24, 2012.  Mr. Hoeweler has extensive experience in the banking industry and intimate familiarity with the operations of financial institutions. As a result, he is able to provide unique insights as Chairman that are valuable to the Board in determining and overseeing the strategic direction of the Company. 



Currently, the Board of Directors has placed the responsibilities of Chairman with an “independent” member of the Board, which we believe provides strong accountability between the Board and our management team.  Our Chairman is responsible for providing leadership to the Board of Directors and facilitating communication among the directors, setting the Board meeting agendas in consultation with the President and Chief Executive Officer, and presiding at Board meetings.  The Chairman also actively oversees the activities and controls of the Company and CFBank. This delineation of duties between the Chairman and the President and Chief Executive Officer allows the Company’s President and Chief Executive Officer to focus his attention on managing the day-to-day business of the Company and CFBank.  We believe this structure provides strong leadership for our Board while positioning our President and Chief Executive Officer as the leader of the Company in the eyes of our customers, employees, stockholders and other stakeholders.



The Board also believes that the Company and its stockholders are best served by a Board that has the flexibility to establish and change the Board’s leadership structure from time to time to fit the needs of the Company.  Pursuant to the Company’s Corporate Governance Guidelines, the Board of Directors has the power and authority to combine or separate the positions of Chairman and President/Chief Executive Officer.  Thus, from time to time, the Board may consider combining the roles of President/Chief Executive Officer and Chairman, and/or appointing a Lead Independent Director.  These decisions will be dependent upon the needs of the Company at that time, including the composition of the Board and the availability, willingness and qualifications of candidates to serve as Chairman and/or Lead Independent Director, as well as other factors.



BOARD ROLE IN RISK OVERSIGHT

The Board of Directors has overall responsibility for consideration and oversight of risks facing the Company and CFBank and is responsible for ensuring that material risks are identified and managed appropriately.  The Board delegates to its committees certain risk management oversight responsibilities related to their specific areas of responsibility.  The Audit Committee is responsible for overseeing financial risk exposure and the steps management is taking to monitor and control such exposure.  The Compensation and Management Development Committee oversees the management of risks arising from our compensation programs, policies and practices for our executives and employees that would be reasonably likely to have a material adverse effect on the Company.   The Corporate Governance and Nominating Committee oversees risks related to corporate governance, including those related to performance and composition of the Board and the independence

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of Board members.  Directors discuss risk and risk mitigation strategies with management within these committees.  All risk oversight discussions are included in committee and other reports to the full Board of Directors. 



BOARD MEETINGS AND COMMITTEES

The Board of Directors of the Company holds four (4) regular meetings annually and special meetings as called from time to time in accordance with the Bylaws of the Company.  During 2018, the Company’s Board of Directors held twelve (12) meetings. The Board of Directors of CFBank has the same composition as the Board of the Company and holds regular meetings monthly and special meetings as called from time to time in accordance with the Bylaws of CFBank.  During 2018, CFBank’s Board of Directors held twelve (12) meetings.  No director during the period he served in 2018 attended less than 75% of the Company’ Board meetings and any committees on which he served.



The Board’s principal standing committees during 2018 were the Audit Committee, the Executive Committee, the Compensation and Management Development Committee, and the Corporate Governance and Nominating Committee.  Information regarding the functions of the Board’s committees, their present membership and the number of meetings held by each committee during fiscal 2018 is set forth below.  All committees operate under formal written charters adopted by the Board of Directors.  The charters of the Audit Committee, the Compensation and Management Development Committee and the Corporate Governance and Nominating Committee are available in the Investor Relations section of our website at http://CFBankonline.com.



AUDIT COMMITTEE.  The Audit Committee provides assistance to the Board in fulfilling its oversight responsibility relating to the integrity of our consolidated financial statements and the financial reporting processes, the systems of internal accounting and financial controls, compliance with legal and regulatory requirements, the annual independent audit of our consolidated financial statements, the qualifications and independence of our independent registered public accounting firm, the performance of our internal audit function and of our independent registered public accounting firm, and any other areas of potential financial risk to the Company as specified by the Board.  The Audit Committee also is responsible for the appointment, retention and oversight of our independent registered public accounting firm, including pre-approval of all audit and non-audit services to be performed by the independent registered public accounting firm, and for the review and approval, on an ongoing basis, of all related-party transactions for potential conflict-of-interest situations.  The Audit Committee Report appears on page 32 of this Proxy Statement.



During 2018, the Audit Committee held eleven (11) meetings.  The following directors served as members of the Audit Committee during 2018:



Each director who currently serves on the Audit Committee qualifies, and each director who served as a member of the Audit Committee during 2018 qualified, as “independent” under the standards set forth in the NASDAQ Marketplace Rules and Rule 10A-3of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).  None of such members of the Audit Committee has participated in the preparation of the financial statements of the Company or any of its current subsidiaries at any time during the past three years, and all of such members are able to read and understand fundamental financial statements, including our balance sheet, income statement and cash flow statement. The Board has also determined that Thomas P. Ash, the Chair of the Audit Committee, qualifies as an “audit committee financial expert” under applicable SEC regulations.



EXECUTIVE COMMITTEE.  The Executive Committee is responsible for strategy formulation, the detailed development of the Company’s and CFBank’s Business and Capital Plan and for oversight of the detailed operations of the Company.   The Executive Committee is also the working committee of the Board responsible for various activities, including: identification, analysis, scenario development and action planning regarding issues and opportunities impacting CFBank’s current operations and future success. The Executive Committee also signs off on all information releases to outside parties.  The Executive Committee is comprised of the Board Chairman, the President and Chief Executive Officer and one additional non-employee director.  Meetings of the Executive Committee are also attended by the Company’s Chief Financial Officer. 

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Executive Committee meetings are generally held as matters arise requiring consideration by the Executive Committee, and its activities are discussed with the full Board at Board meetings.



COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE.  The Compensation and Management Development Committee (the “Compensation Committee”) has overall responsibility for reviewing, evaluating and approving the director, officer and employee compensation plans, policies and programs of the Company and CFBank.  The Compensation Committee is responsible for administering our equity compensation plans and for establishing, in consultation with executive management, the Company’s general compensation philosophy and overseeing the development and implementation of executive compensation programs.    



During 2018, the Compensation Committee held four (4) meetings.  All members of the Compensation Committee are “independent” as defined under the NASDAQ Marketplace Rules.  The following directors served as members of the Compensation Committee during 2018:





CORPORATE GOVERNANCE AND NOMINATING COMMITTEE.    The Corporate Governance and Nominating Committee is responsible for identifying qualified director candidates and recommending to the Board of Directors the director nominees for election or appointment to the Board.  The Corporate Governance and Nominating Committee considers nominees in the context of standards codified in its Charter and in the Board’s Corporate Governance Guidelines.  The Committee also provides oversight on matters involving the size, composition and operation of the Board, including in the areas of committee membership and committee chairpersons.  The Committee also leads the Board in its annual review of the Board’s performance.  The Corporate Governance and Nominating Committee is authorized to employ professional search firms to assist in identifying potential members of the Board of Directors with the desired skills and disciplines.  No such firms were engaged or otherwise utilized during 2018. Final approval of director nominees is determined by the full Board of Directors, based on the recommendation of the Corporate Governance and Nominating Committee. 



During 2018, the Corporate Governance and Nominating Committee held one (1) meeting.  The following directors served as members of the Corporate Governance and Nominating Committee during 2018:





All members of the Corporate Governance and Nominating Committee during 2018 qualified as “independent” under the NASDAQ Marketplace Rules. 



NOMINATING PROCEDURE

The Corporate Governance and Nominating Committee recommends candidates, including incumbents, for election and appointment to the Board of Directors, subject to the provisions set forth in the Company’s Certificate of Incorporation and Bylaws.  Nominations are based on the criteria the Committee deems appropriate and consistent with the standards set forth in the Board’s Corporate Governance Guidelines.  Criteria considered by the Board may include the following: business experience, education, integrity and reputation, independence, conflicts of interest, diversity, age, number of other directorships and commitments (including charitable obligations), tenure on the Board, attendance at Board and committee meetings, stock ownership, specialized knowledge (such as an understanding of banking, accounting, marketing, finance, regulation and public policy) and a commitment to the Company’s communities and shared values, as well as overall experience in the context of the needs of the Board as a whole.  Nominations received from stockholders are considered and evaluated using the same criteria as all other nominations.



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Nominations, other than those made by the Board of Directors after its review of the recommendations of the Corporate Governance and Nominating Committee, must be made by timely notice in writing to the Corporate Secretary as set forth in the Company’s Bylaws.  In general, to be timely, a stockholder’s notice must be received by the Company not less than ninety (90) days before the date of the scheduled annual meeting; however, if less than one hundred (100) days’ notice or prior disclosure of the date of the scheduled annual meeting is given by the Company, the stockholder has until the close of business on the tenth (10th) day following the day on which notice or prior disclosure of the date of the scheduled annual meeting was made.  The stockholder’s notice must include:











The description above is a summary of the Company’s nominating process.  Any stockholder wishing to propose a director nominee to the Company must comply in full with the applicable procedures and requirements set forth in the Company’s Bylaws, the SEC’s proxy rules and Delaware law. 



QUALIFICATIONS OF DIRECTORS

The Board of Directors has codified certain standards for directors in its Corporate Governance Guidelines.  These guidelines provide that the Board of Directors should encompass, among other things, a diverse range of viewpoints, backgrounds, experiences and demographics sufficient to build a Board that is effective, collegial and responsive to the Company’s operations and interests.  The Corporate Governance Guidelines also provide that Board membership should be based on judgment, character, expertise, skills and knowledge useful to the oversight of the Company’s business as well as on business or other relevant experience.  Further, at all times a majority of the Board must be “independent” as defined from time to time by the listing requirements of NASDAQ and any specific requirements established by the Board.  Each director also is expected to:





The Corporate Governance Guidelines are posted in the Investor Relations section of the Company’s website at http://CFBankonline.com.



CODE OF ETHICS AND BUSINESS CONDUCT    

The Board of Directors has adopted a Code of Ethics and Business Conduct, which applies to all of our directors, officers and employees, including directors, officers and employees of CFBank and other subsidiaries.  Our Code of Ethics and Business Conduct is posted in the Investor Relations section of our website at http://CFBankonline.com.



BOARD MEMBER ATTENDANCE AT ANNUAL STOCKHOLDER MEETINGS

Although the Company does not have a formal policy regarding director attendance at annual stockholder meetings, directors are expected to attend these meetings absent extenuating circumstances.  All of our directors,  as of May 30, 2018, attended last year’s annual meeting of stockholders.

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COMMUNICATIONS WITH DIRECTORS

The Board of Directors has adopted a process by which stockholders and other interested parties may communicate with the Board, any individual director or any committee chair by e-mail or regular mail.  Communications by e-mail should be sent to bobhoeweler@CFBankmail.com.  Communications by regular mail should be sent to the attention of the Board of Directors; any individual director by name; Chair, Audit Committee; Chair, Compensation and Management Development Committee; or Chair, Corporate Governance and Nominating Committee, c/o Corporate Secretary, Central Federal Corporation, 7000 N. High Street, Worthington, Ohio 43085.  Management will pass on all communications received to the appropriate director or directors without any screening.



CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The Audit Committee is responsible for reviewing and overseeing policies designed to identify transactions with “related persons,” including directors, executive officers and beneficial owners of more than 5% of the Company’s capital stock and the immediate family members of any of the foregoing, that are material to the Company’s consolidated financial statements or otherwise require disclosure under applicable rules adopted by the SEC, including those transactions required to be disclosed under Item 404 of SEC Regulation S-K, or the rules of any other appropriate regulatory agency or body.  All such transactions must be approved in advance by the Audit Committee. In addition, under the terms of the Company’s Code of Business Conduct and Ethics, the Audit Committee is responsible for reviewing and overseeing all actions and transactions which involve the personal interest of a director or executive officer of the Company and determining in advance whether any such action or transaction represents a potential conflict of interest.  Further, under the terms of CFBank’s Insider and Affiliate Credit and Regulation O Policy, all loans made to directors or executive officers of the Company or one of our subsidiaries must be reported to the Senior Credit Officer and the Compliance Officer. All such related party loans must conform to the Company’s credit policy. To the extent any transaction represents an ongoing business relationship with the Company or any of our subsidiaries, such transaction must be reviewed annually and be on terms no more favorable than those which would be usual and customary in similar transactions between unrelated persons dealing at arm’s length.



On an annual basis, each director and each executive officer of the Company must complete a Directors’ and Officers’ questionnaire which requires disclosure of any transaction, arrangement or relationship with the Company and/or any of our subsidiaries since the beginning of the last fiscal year in which the director or executive officer, or any member of his or her immediate family, has or had a direct or indirect interest. As a part of its review process, CFBank compares information to track originations of any new loans for a director or an executive officer, or any member of his or her immediate family, and reconciles all then-current account information to ensure the data has been gathered and recorded accurately.



CFBank policy and the laws and regulations governing insured financial institutions require that any and all loans or extensions of credit made by CFBank to executive officers, directors or their immediate family members, must (i) be made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to CFBank, (ii) not involve more than the normal risk of collectability and (iii) not present any other unfavorable features.  In addition, loans made to a director or executive officer may not exceed an amount which, when aggregated with the amount of all other loans to such person and his or her related interests, is equal to 15 percent of CFBank’s unimpaired capital and unimpaired surplus in the case of loans not fully secured, and an additional 10 percent of CFBank’s unimpaired capital and unimpaired surplus with respect to loans that are fully secured. All loans outstanding to such related persons totaled  $3,671,768 at December 31, 2018 and $5,469,506 at December 31, 2017,  and were performing in accordance with their terms at such dates.

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PROPOSAL 1 –

ELECTION OF DIRECTORS



In accordance with the Bylaws of the Company, the number of directors is currently fixed at seven (7).  There are currently seven (7) directors serving on the Board, with three (3) directors currently serving terms that will expire at the Meeting.  The independent members of the Board have nominated the three (3) directors named below for re-election as directors of the Company to serve three-year terms expiring at the annual meeting in 2022.

Each nominee has consented to serve as a director if elected.  Should a nominee decline or be unable to serve, or for good cause will not serve, the Board of Directors reserves the right in its discretion to substitute another person as a nominee or to reduce the number of nominees.  In this event, the proxy holders may vote your shares in their discretion for any substitute nominee proposed by the Board of Directors unless you have withheld authority. 

The following sets forth information regarding each of the nominees for election as director of the Company and each of the current directors whose term will continue following the meeting.  Unless otherwise indicated, each director or director nominee has held his principal occupation for more than five years.  There are no family relationships among any of the directors and executive officers of the Company.



NOMINEES



Thomas P. Ash has been Director of Governmental Relations at the Columbus, Ohio-based Buckeye Association of School Administrators since August 2005.  Prior to that time, Mr. Ash was Superintendent of Schools, Mid-Ohio Educational Service Center in Mansfield, Ohio from January 2000 through July 2005.   Mr. Ash was the Superintendent of Schools, East Liverpool City School District in East Liverpool, Ohio from August 1984 to December 1999.  As Superintendent at Mid-Ohio Educational Service Center and East Liverpool City School District, his experience included financial reporting and analysis, supervising and directing financial staff members, implementing and complying with U.S. generally accepted accounting principles (GAAP) reporting requirements, and developing internal controls.  Mr. Ash’s public-sector and advocacy experience, both on the local level in Columbiana County and on the state level, lends a perspective unique to the Board of Directors.  Age 69. Director since 1985.



James H. Frauenberg, II has been the principal owner of Addison Holdings, LLC since 2007, where he has been active in opening/owning new franchises for multiple retail chains including Five Guys Burgers and Fries and Flip Flop Shops.  He was the Senior Vice President with Checksmart Financial in Dublin, Ohio from 1995 to 2008.  Mr. Frauenberg’s strong financial and entrepreneurial skills bring a high level of insight and judgment to the Company and CFBank.  Age 43.  Director since August 23, 2012.



David L. Royer is the Executive Vice President of Development for Continental Real Estate Companies. He is responsible for project development and capital procurement of various asset classes including apartments, student housing, office, retail and medical office property types. Previously, he served as Vice President of Finance and Development for CREC across a diverse set commercial development projects.  Prior to Continental, David served as Vice President for Fifth Third Bank in their commercial real estate group.  He earned his finance degree from Miami University (1989) and an MBA from The Ohio State University (1993).  David currently serves as a board member for Scioto Country Club, First Community Village Foundation and NAIOP of Central Ohio (a national commercial real estate development association).  David is a Past President of The Athletic Club of Columbus (2010) and NAIOP of Central Ohio (2017).  Prior board experience includes Junior Achievement of Central Ohio as well as advisory board roles for Sky Bank Central Ohio and FC Bank.  David is a member and advisor for the Columbus real estate firm, Kohr Royer Griffith, Inc.  David is also a current member of the Columbus Board of Realtors and the National Association of Realtors.  David brings extensive business experience and relationships that are valuable to the Company and CFBank.  Age 51.    Director since July 1, 2018.

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CONTINUING DIRECTORS



Edward W. Cochran has been engaged in the practice of law for 44 years since graduating from Columbia University Law School in 1975.  He holds an undergraduate degree from Harvard University, where he was a Harvard National Scholar.  Mr. Cochran is admitted to practice before the United States Supreme Court, as well as the courts of Ohio, the U.S. District Court for the Northern District of Ohio, and the United States Circuit Courts of Appeal for the Second, Third, Sixth, Seventh and Ninth Circuits.  In addition, Mr. Cochran is involved in various business interests and is a successful investor.  Mr. Cochran has strong relationships in Cleveland and brings a valuable legal perspective and regulatory understanding to the Company and CFBank. Age 69.  Term expires in 2021. Director since December 19, 2012.



Robert E. Hoeweler has been the Chairman of the Board of the Company and CFBank since August 2012.  Since 1980 he has been the Chief Executive Officer of a diverse group of companies owned by the Hoeweler family, including manufacturing, communications, distribution, business services and venture capital entities.  He serves on the boards of a major waste management company and a large commercial bakery.  He previously has served as the Chairman of two family led businesses in financial services, a midsized community bank and a major payment processing service company.  He brings diverse business and banking skills and experience to the Company and CFBank.  Age 71.  Term expires in 2020.  Director since August 23, 2012.



Robert H. Milbourne is President of RHM Advisors, a business consulting firm specializing in financing, corporate development and business strategy for private sector and nonprofit organizations.  Mr. Milbourne was the founding President and CEO of the Columbus Partnership, a civic group of the leading CEOs working to improve the economic and cultural future of Central Ohio (from 2002 to 2008).  He came to Columbus after serving as President of a similar group in Milwaukee for 17 years.  From 1977 to 1985, he was Vice President and Economist for the Kohler Company responsible for strategic planning, real estate development and government affairs.  His career started in Wisconsin state government where he served as state budget director.  Mr. Milbourne has served on many corporate and nonprofit boards, including AirNet Systems (public company), Skybus Airlines, Care Network, PercuVision, Columbus Chamber, University of Wisconsin Athletic Board, Columbus School for Girls and CEOs for Cities (Chairman).  He brings extensive business and government experience and relationships that are valuable to the Company and CFBank.  Age 72.  Term expires in 2020.  Director since May 2013.



Timothy T. O’Dell has been the CEO and a Director of CFBank and the Company since August 2012 and has also served as the President of CFBank and the Company since October, 2015.  Prior to joining CFBank in 2012, Mr. O’Dell owned and operated a consulting company specializing in providing advisory services to a number of privately held enterprises in construction, health care, real estate and professional services.  Mr. O’Dell previously spent 22 years at Fifth Third Bank, and was a senior executive with Fifth Third’s Central Ohio affiliate for 12 of those years, concluding his tenure serving as President and Chief Executive Officer of the Central Ohio affiliate. At Fifth Third’s Central Ohio affiliate, Mr. O’Dell also served as Executive Vice President and senior lender and managed its commercial banking, residential, and commercial real estate divisions.  Prior to that he managed the Asset Based Lending Division for Fifth Third Bank engaged in financing growth companies and acquisition financing.  During his tenure, Fifth Third’s Central Ohio affiliate grew by $4 billion in deposits and $5 billion in loans from organic growth and through strategic acquisitions.  Mr. O’Dell has served on the board of the Columbus Chamber of Commerce and The Ohio State University Medical Center, and he was a founding investor in the Ohio TechAngel Venture Fund.  Mr. O'Dell holds a B.B.A. from Marshall University. Age 65.  Term expires in 2021.  Director since August 23, 2012.





Recommendation and Vote

Under Delaware law and the Company’s Bylaws, the three (3) nominees for election as directors of the Company who receive the greatest number of votes “FOR” election will be elected directors.  Shares represented by properly executed proxy cards that are received prior to the Meeting and not subsequently revoked will be voted “FOR” the election of the nominees listed above unless authority to vote for one or more nominees is withheld.  Stockholders may withhold authority to vote for the entire slate as nominated or may withhold the authority to vote for an individual nominee.  Shares as to which the authority to vote is withheld and broker non-votes will be counted for quorum purposes but will not be counted toward the election of directors or toward the election of the individual nominees specified on the proxy card.



The Board of Directors recommends that you vote “FOR” the re-election of each of the nominees listed above.

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2018 COMPENSATION OF DIRECTORS







Members of the Board of Directors who are not also officers or employees of the Company or CFBank (“non-employee directors”) receive certain fees for their service on the Boards of Directors of the Company and CFBank.  For 2018, each non-employee member of the Board of Directors received an annual retainer, payable quarterly, in the amount of $36,000, except that (i) the amount of the annual retainer payable to the Chairman of the Board of Directors was $52,000, and (ii) the amount of the annual retainer payable to the Chairs of the Compensation Committee and the Audit Committee was $44,000 and $42,000, respectively.  In addition, during 2018, (i) each non-employee director serving as a member of the Executive Committee of the Board of Directors also received an additional annual fee of $8,000, and (ii )each non-employee director serving as a member of the Loan Committee received an additional annual fee of $12,000. 



Members of the Board of Directors are also eligible to receive restricted stock, stock options and other equity awards under the Company’s equity compensation plans.  Effective as of December 19, 2018, each of the directors of the Company was granted 3,300 shares of restricted stock under the Company’s 2009 Equity Compensation Plan, except that (i) each of the Chairs of the Audit Committee and of the Compensation Committee was granted 3,800 and 4,150 shares of restricted stock, respectively, and (ii) Mr. Hoeweler was granted 4,900 shares of restricted stock as Chairman of the Board of Directors.  The shares of restricted stock will vest ratably over a three-year period beginning on December 19, 2019.



The following table summarizes the compensation paid to each non-employee director during the year-ended December 31, 2018.  















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EXECUTIVE OFFICERS





Provided below is information regarding each of the Company’s executive officers:    



Mr. Helmsdoerfer has been the CFO of the Company and CFBank since March 2013.  As a CPA with over 38 years of financial experience, which includes Big Four public accounting and 28 years as a CFO, he has a diverse finance and operations background in addition to his financial services background.  Prior to joining CFBank, Mr. Helmsdoerfer spent 18 years with Fifth Third Bank where he held positions as both a CFO and Regional CFO for the Central Ohio affiliate and region.  He also served as CFO for Nationwide Bank and Wilmington Savings Bank during his career.  Mr. Helmsdoerfer holds a B.S.B.A degree from Miami University where he graduated cum laude.   



The biography for Mr. O’Dell is included in the section entitled “PROPOSAL 1 – ELECTION OF DIRECTORS” above.







COMPENSATION OF EXECUTIVE OFFICERS





OVERVIEW OF COMPENSATION PROGRAMS



The Compensation Committee of the Board has overall responsibility for reviewing, evaluating and approving the director, officer and employee compensation plans, policies and programs of the Company and CFBank.  The Compensation Committee is responsible for administering our equity compensation plans and for establishing, in consultation with executive management, the Company’s general compensation philosophy and overseeing the development and implementation of executive compensation programs.  The responsibilities of the Compensation Committee include, but are not limited to: evaluation and approving goals and objectives relevant to compensation of the President and Chief Executive Officer and other executives; evaluating the performance of those executive officers in light of those goals and objectives; and recommending to the Board compensation policies for non-employee directors.



The Company’s compensation programs for executive officers include a base salary as the primary source of compensation. However, other forms of compensation are utilized including: bonus incentive; stock options; restricted stock; retirement plans; health and life insurance benefits; and other perquisites including car and mobile phone allowances.



The Compensation Committee regularly reviews the Company’s compensation programs to ensure that controls are in place to ensure that employees are not presented with the opportunity to take unnecessary or excessive risks that could threaten the value of the Company.   The Committee reviews and approves both the Company-wide and individual performance objectives that are used to determine how incentive payments are determined. The performance metrics are based on customary financial institution performance metrics as well as peer comparisons and trend analysis.



No compensation consultants were engaged by the Compensation Committee or the Board in 2018 or 2017.

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COMPENSATION PHILOSOPHY AND OBJECTIVES



The Company’s compensation programs are designed to provide market-relevant incentives and rewards to employees in positions of leadership who are largely responsible for the success and growth of the Company and CFBank, and to assist the Company and CFBank in attracting executives and other key employees with experience and ability.  Our compensation objectives begin with the premise that our success depends on the dedication and commitment of the employees in key management positions, and our compensation programs are intended to incentivize those employees to successfully implement our business strategy and corporate goals. We base our compensation practices on meeting the demands of the employment market, aligning the compensation of our employees with our stockholders’ interests, and driving superior performance.



Our compensation programs are designed to reward employees based upon their management responsibilities, performance levels, and their ability to create long-term value. Other considerations in the design of our compensation programs include: safe and sound operation of CFBank; management of business risk; experience levels to operate in a complex business environment; and the retention and development of incumbent executive management.  The Company’s compensation program includes an annual review and adjustment to base salary based on company-wide and individual performance objectives by which each employee’s contribution to the Company’s success is measured. 



The Company believes that its incentive compensation arrangements appropriately balance risk and financial results in a manner that does not expose the Company to imprudent risk-taking.  As such, the Company’s incentive compensation arrangements take into account the risks, as well as the financial benefits, from the employee’s activities and the impact of those activities on the Company’s safety and soundness.  In addition to the compensation programs being balanced in design, the implementation is such that the actual payouts of incentive compensation may vary based on risks or risk outcomes.  Appropriate personnel have input into the process to assess the effectiveness of these processes in discouraging imprudent risk-taking.  In addition, the Company monitors performance against key measurements and reserves the flexibility to revise the payout of incentive compensation as needed to reflect risks appropriately.



COMPONENTS OF COMPENSATION



Our executive compensation program is designed to be simple, competitive and link pay to performance.  For 2018, the compensation paid to our executive officers consisted of the following components:    





In August 2016, the Company adopted the Central Federal Corporation Incentive Compensation Plan (the “Incentive Compensation Plan”), pursuant to which the Compensation Committee is authorized to grant employees of the Company or CFBank the opportunity to earn awards of incentive compensation based on the achievement of performance objectives established by the Committee.  In connection with the Company’s performance in 2018, the Compensation Committee and the Board of Directors approved the grant of awards to Timothy O’Dell and John Helmsdoerfer under the Incentive Compensation Plan.  For additional information regarding the Incentive Compensation Plan and the awards granted thereunder, see “— Incentive Compensation Plan Information” below.



The Company and CFBank has entered into an employment agreement with each of Timothy T. O’Dell, President and Chief Executive Officer of CFBank, and John W. Helmsdoerfer, Executive Vice President and Chief Financial Officer of CFBank.    See “— Employment Agreements” below for additional information.       



2018 COMPENSATION



In accordance with the rules established by the SEC, the Company is required to provide certain data and information in regard to the compensation and benefits provided to the Company’s President and Chief Executive Officer and certain of its other most highly compensated executive officers of the Company for the years ended December 31, 2018 and 2017.    During the year ended December 31, 2018, the Company had two executive officers (the “named executive officers”) – Timothy T. O’Dell, President and Chief Executive Officer, and John W. Helmsdoerfer, Executive Vice President and Chief Financial Officer – who are included in the Summary Compensation Table below.

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EQUITY COMPENSATION PLAN INFORMATION



On May 21, 2009, the stockholders of the Company approved the Central Federal Corporation 2009 Equity Compensation Plan (the “2009 Plan”). The 2009 Plan was developed to provide incentives and rewards to those employees and directors who are largely responsible for the success and growth of the Company and its affiliates, and to assist the Company and CFBank in attracting and retaining directors, executive officers and other key employees with experience and ability.  The 2009 Plan provides for discretionary grants of stock options, stock appreciation rights and restricted stock.  The First Amendment to the 2009 Plan approved by stockholders at the May 13, 2013 annual meeting increased the number of shares of common stock reserved for awards thereunder to 1,500,000 (or 272,727 shares after the effect of 1-for-5.5 reverse stock split effected on August 20, 2018). Stock Options expire after ten years and vest over a three-year period; the exercise price of the options is set based upon the fair market value of our common stock at the date of the grant.  Shares of restricted stock vest over a three-year period.    The 2009 Plan terminated in accordance with its terms on March 19, 2019 and, as a result, no further awards may be granted under the 2009 Plan. 



Awards for 2018 Fiscal Year



Effective as of December 19, 2018, Mr. O’Dell was granted 10,000 shares of restricted stock. The shares of restricted stock will vest ratably over a three-year period beginning on December 19, 2019.



Effective as of February 27, 2019, Mr. Helmsdoerfer was granted 5,000 shares of restricted stock.  The shares of restricted stock will vest ratably over a three-year period beginning on February 27, 2020.

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Outstanding Equity Awards at Fiscal Year End



The following table shows information regarding equity awards outstanding to our named executive officers as of December 31, 2018.  All outstanding equity awards were granted under the 2009 Plan.









Additional information regarding the number of shares of Company common stock that may be issued upon exercise of options, warrants and rights under the Company’s equity compensation plans as of December 31, 2018, is contained under the heading “PROPOSAL 5—APPROVAL OF THE CENTRAL FEDERAL CORPORATION 2019 EQUITY INCENTIVE PLAN—Summary of the Plan, As Proposed—New Plan Benefits” beginning on page 22 of this Proxy Statement.





Incentive Compensation Plan INFORMATION

 

On August 11, 2016, the Company adopted the Incentive Compensation Plan to enable it to attract and retain skilled employees, increase organizational and employee performance, promote employee retention, and allow personnel costs to vary along with revenues, all while appropriately balancing risk and financial rewards.



Under the Incentive Compensation Plan, the Compensation Committee is authorized to select the employees of the Company or any of its wholly-owned subsidiaries who are eligible to participate.  Under the Incentive Compensation Plan, designated employees are given the opportunity to earn awards of incentive compensation if the Company or CFBank achieves various performance objectives established by the Compensation Committee.



Pursuant to the Incentive Compensation Plan, designated employee participants may earn incentive compensation based on the satisfaction of corporate and/or strategic performance objectives over a prescribed performance period.  For each performance period, the Committee shall establish: (a) performance objectives used to determine the amount payable to each participant; (b) the requisite level of achievement of the performance objectives (which may include threshold, target and maximum levels); (c) the method for determining the amount payable based on the achievement of the performance objectives; and (d) any other terms and conditions.



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The performance criteria that the Committee may use to establish awards under the Incentive Compensation Plan include earnings or earnings per share (whether on a pre-tax, after-tax, operational or other basis); return on equity; return on assets; revenues; expenses or expense levels; one or more capital or operating ratios; stock price; stockholder return; market share; cash flow; capital expenditures; net borrowing, debt, leverage levels or debt ratings; strategic objectives (including, mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions); net asset value per share; growth in deposits or assets; asset or credit quality; economic value added; regulatory compliance; or such other measures as the Board may select from time to time.



In order to receive a payment of incentive compensation under the Incentive Compensation Plan, a participant must remain employed on the payment date.  However, if a participant’s employment is terminated prior to the payment date due to death, disability or retirement (as defined in the Incentive Compensation Plan), the participant may receive a prorated payment.



2018 Incentive Compensation Plan Awards



On January 24, 2018, the Compensation Committee and the Board of Directors approved the establishment of 2018 awards (the “2018 incentive awards”) to Timothy O’Dell  and John Helmsdoerfer under the Incentive Compensation Plan.  The 2018 incentive awards permitted the employees selected as participants to earn a specified “target” percentage of the incentive pool based upon the satisfaction of certain performance objectives over a one-year performance period ending on December 31, 2018.   The maximum incentive award that could be earned by each participant was an amount equal to 100% of such participant’s base compensation.  The amount of the incentive that could be earned by each participant under the 2018 incentive awards was based on the level of achievement of the following performance objectives over a performance period of one year beginning on January 1, 2018:  





The 2018 incentive awards could be earned at different levels, depending on the level of attainment of the performance objectives.  The Compensation Committee established both “threshold” and “maximum” targets with respect to performance objectives and weighted percentages to be earned based upon these targets.  The potential payouts for the incentive awards ranged from 0% if certain “threshold” targets were not achieved, to 90% if the “maximum” targets were achieved with respect to all performance objectives.  The Board also had discretion to grant participants a supplementary discretionary bonus not to exceed 10% of the participant’s share of the incentive pool as determined by the Board in its sole discretion.



Based on the Company’s performance in 2018, the target objectives were achieved at various levels under the 2018 incentive awards for each of Messrs. O’Dell and Helmsdoerfer.  As a result, Messrs. O’Dell and Helmsdoerfer earned incentive bonuses in the amount of $300,000 and $160,000, respectively, for 2018.  The amount paid to each named executive officer with respect to the 2018 incentive awards is included under the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table under the heading “2018 COMPENSATION” above.

  

EMPLOYMENT AGREEMENTS



Effective as of August 15, 2016, the Company and CFBank entered into employment agreements with each of Timothy T. O’Dell, President and Chief Executive Officer of CFBank, and John W. Helmsdoerfer, Executive Vice President and Chief Financial Officer of CFBank.  The employment agreements with Mesrsrs. O’Dell and Helmsdoerfer were subsequently amended and restated effective as of April 22,  2019.  As amended, each employment agreement has a current term ending on December 31, 2021.  Annually, the Boards of Directors of CFBank and the Company review each employment agreement to determine whether extension of the employment agreement for an additional 12 months is appropriate.  Pursuant to each named executive officer’s employment agreement, Mr. O’Dell is entitled to receive a base annual salary of not less than $315,000 and Mr. Helmsdoerfer is entitled to receive a base annual salary of not less than $249,375.  In addition to the base annual salary, the employment agreements provide for, among other things, participation in incentive programs and other employee benefit plans and other fringe benefits applicable to executive employees.

 

The employment agreements provide for certain payments if the named executive officer executes a release of claims against CFBank and the Company and either: (i) has an involuntary termination without “cause” not in connection with a “change of

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control”, (ii) voluntarily terminates with “good reason” not in connection with a “change in control,” (iii) has an involuntary termination without “cause” during the first 24 months after a “change of control”, (iv) voluntarily terminates with “good reason” during the first 24 months after a “change in control,”(v) dies, or (vi) becomes disabled.  



In the event of involuntary termination without “cause” or voluntary termination with “good reason,” the named executive officer would be entitled to receive a severance benefit equal to:











Upon the termination of the named executive officer without cause or the voluntary termination by the named executive officer with good reason within 24 months after a “change of control,” the named executive officer will receive a lump sum payment equal to a multiple (2 for Mr. O’Dell and 1.5 for Mr. Helmsdoerfer) of the sum of such terminated executive’s base salary on the date of termination and the average bonus paid to such terminated executive over the 24 month period preceding such termination.  The lump sum shall be paid within sixty days following the named executive officer’s termination date.  Upon the occurrence of such termination events, the named executive officer is also entitled to full vesting of all outstanding equity awards and stock options, which shall remain exercisable for the full option exercise period that would have applied had such terminated executive remained employed.  This change of control benefit shall be subject to reduction if necessary to comply with regulatory limitations on golden parachute payments or to avoid excise taxes under Internal Revenue Code Section 4999.



If during the term a named executive officer terminates employment due to his death or disability, as defined under the employment agreement, the executive is entitled to receive an amount equal to 1 year of his base salary, payable in 12 equal monthly installments commencing on the first business day of the second month beginning after his date of termination.  Any death/disability benefit provided under the employment agreement will be offset by any death or disability benefit or payment provided by or on behalf of CFBank or Company, whether insured or self-insured.  All outstanding stock options shall become vested as of the date of termination due to his death or disability, and shall remain exercisable in accordance with the terms of each applicable option award agreement.



The employment agreements also require each of the named executive officers to comply with a non-solicitation covenant during his employment with CFBank and Company during the term of the employment agreements and for a period of one year thereafter (or, if longer, the number of months of severance payments under the employment agreement).

 

The employment agreements also provide for a clawback of any incentive paid to, credited to an account on behalf or, or vested in the named executive officer within the prior twenty-four (24) months under certain circumstances if it is later determined that the incentive is directly attributable to materially misleading financial statements.  If applicable law or exchange listing regulation would require a more extensive clawback of any incentive, the employment agreements will be deemed to require the minimum clawback necessary to comply with such law or regulation.





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PROPOSAL 2 –

NON-BINDING ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION





The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and corresponding SEC rules enable the Company’s stockholders to vote to approve, on an advisory and non-binding basis, the compensation of the Company’s named executive officers as disclosed in this Proxy Statement in accordance with SEC rules.  As a result, the Board of Directors is submitting the following resolution for stockholder approval at the Meeting:



“RESOLVED, that the stockholders of Central Federal Corporation (the “Company”) hereby approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Company’s Proxy Statement for its 2019 Annual Meeting of Stockholders pursuant to Item 402 of SEC Regulation S-K, including the compensation tables, notes and narrative disclosures contained under the heading “COMPENSATION OF EXECUTIVE OFFICERS” in the Company’s Proxy Statement.



The Board of Directors believes that the Company’s compensation policies and procedures, which are reviewed and approved by the Compensation Committee, are effective in aligning the compensation of the Company’s named executive officers with the Company’s short-term goals and long-term success and that such compensation and incentives are designed to attract, retain and motivate the Company’s key executives who are directly responsible for the Company’s continued success.  The Board of Directors believes that the Company’s compensation policies and practices do not threaten the value of the Company or the investments of the Company’s stockholders or create incentives to engage in behaviors or business activities that are reasonably likely to have a material adverse impact on the Company.  The Board of Directors further believes that the Company’s compensation policies and procedures are reasonable in comparison both to the Company’s peer bank holding companies and to the Company’s performance during the past year.



Stockholders are encouraged to carefully review the information provided in this Proxy Statement regarding the compensation of the Company’s named executive officers in the section captioned “COMPENSATION OF EXECUTIVE OFFICERS” beginning on page 13 of this Proxy Statement.    



Similar “Say on Pay” proposals were approved by a majority of the votes cast at each of the Company’s last six annual meetings of stockholders.



Because your vote is advisory, the outcome of the vote will not: (i) be binding upon the Company’s Board of Directors or the Compensation Committee with respect to future executive compensation decisions, including those relating to the Company’s named executive officers, or otherwise; (ii) overrule any decision made by the Company’s Board of Directors or the Compensation Committee; or (iii) create or imply any additional fiduciary duty by the Company’s Board of Directors or the Compensation Committee.  However, the Compensation Committee expects to take into account the outcome of the advisory vote when considering future executive compensation arrangements.



Recommendation and Vote

Under the Company’s Bylaws, the affirmative vote of a majority of the votes cast is required to approve Proposal 2.  Abstentions and broker non-votes will not be counted as votes “FOR” or “AGAINST” this proposal and will have no effect on the outcome of this proposal. 



The Board of Directors recommends that you vote “FOR” Proposal 2.

   

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PROPOSAL 3 –

NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF FUTURE STOCKHOLDER ADVISORY VOTES ON EXECUTIVE COMPENSATION





In Proposal 2 above, stockholders are being asked to vote on an advisory resolution on the approval of the compensation of the Company’s named executive officers.  The Company’s stockholders have previously voted on this type of advisory resolution every year since 2013.  Under the Dodd-Frank Act and corresponding SEC rules, the Company is required to include a separate resolution subject to a separate stockholder advisory vote at least once every six years with respect to the frequency of the future advisory votes on the compensation of the Company’s named executive officers.  The last such advisory vote occurred at the Company’s 2013 annual meeting of stockholders.  As a result, the Company is now asking stockholders to vote, on an advisory and non-binding basis, on how frequently they would like to cast an advisory vote on the compensation of the Company’s named executive officers.  By voting on this proposal, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation every one year, every two years or every three years.  Accordingly, the following resolution is submitted for an advisory stockholder vote at the Annual Meeting:



“RESOLVED, that the stockholders of Central Federal Corporation (the “Company”) advise that an advisory resolution with respect to executive compensation should be presented to the Company’s stockholders every 1 year,  every 2 years, or every 3 years, as reflected by the stockholders’ votes for each of these alternatives in connection with this resolution.”



In voting on this resolution, you should mark your proxy card or submit your voting instructions for every “1  YEAR”, every “2  YEARS” or every “3  YEARS” based on your preference as to the frequency with which an advisory vote on executive compensation should be held.  If you have no preference, you may “ABSTAIN”.



After careful consideration, the Board of Directors has determined that holding an advisory vote on the compensation of the Company’s named executive officers every one year continues to be the most appropriate for the Company, and unanimously recommends that you vote for a frequency of every one year for future advisory votes on the compensation of the Company’s named executive officers.  While the Company’s executive compensation programs are designed to promote both short-term and long-term alignment between pay and performance, the Company’s Board of Directors recognizes that executive compensation disclosures are made annually.  Holding an annual advisory vote on the compensation of the Company’s named executive officers provides the Company with more direct and immediate feedback on the Company’s compensation disclosures.  However, stockholders should note that because the advisory vote on the compensation of the Company’s named executive officers occurs well after the beginning of the compensation year, and because the different elements of the Company’s executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases, it may not be feasible or appropriate to change the Company’s executive compensation programs in consideration of any one year’s advisory vote on the compensation of the Company’s executive compensation program by the time of the following year’s annual meeting of stockholders. 



The Board of Directors understands that the Company’s stockholders may have different views as to what is appropriate frequency for advisory votes on the compensation of the Company’s named executive officers, and the Board of Directors and Compensation Committee will carefully review the voting result on this Proposal 3.  However, because your vote is advisory, it will not: (i) be binding upon the Company’s Board of Directors or the Compensation Committee with respect to the frequency of future advisory votes on the compensation of the Company’s named executive officers; (ii) overrule any decision made by the Company’s Board of Directors of the Compensation Committee; or (iii) create or imply any additional fiduciary duty by the Company’s Board of Directors or the Compensation Committee.  Notwithstanding the outcome of the stockholder advisory vote, the Company’s Board of Directors may in the future decide to conduct advisory votes on a more or less frequent bases and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to compensation programs.

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Recommendation and Vote

Under the Company’s Bylaws, the affirmative vote of a majority of the votes cast is required to approve, on a non-binding advisory basis, one of the selections as to the frequency of future stockholder advisory votes on the compensation of the Company’s named executive officers.  Abstentions and broker non-votes will not be counted as votes cast with respect to any of the selections and will have no effect on the outcome of this proposal. 



The Board of Directors recommends holding an advisory vote for the approval of the compensation of the Company’s named executive officers every “1  YEAR.”





PROPOSAL 4  –

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The appointment of the Company’s independent registered public accounting firm is made annually by the Audit Committee.  The Audit Committee, with the approval of the Board of Directors, has appointed BKD, LLP to serve as the Company’s independent registered public accounting firm for 2019, subject to ratification by stockholders. BKD, LLP audited the Company’s consolidated financial statements for the fiscal year ended December 31, 2018.  



One or more representatives of BKD, LLP is expected to be present at the Meeting to respond to appropriate questions from stockholders and will have the opportunity to make a statement should he, she or they desire to do so.



Recommendation and Vote

Under the Company’s Bylaws, the affirmative vote of a majority of the votes cast is required to ratify the appointment of BKD, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.  Abstentions will not be counted as votes “FOR” or “AGAINST” this proposal and will have no effect on the outcome of this proposal.  Even if the appointment of BKD, LLP is ratified by the stockholders, the Audit Committee, in its discretion, could decide to engage another firm if the Audit Committee determines such action is necessary or desirable.  If the appointment of BKD, LLP is not ratified, the Audit Committee will reconsider the appointment (but may decide to maintain the appointment).





The Board of Directors recommends that you vote “FOR” Proposal 4.



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PROPOSAL 5  –

APPROVAL OF THE CENTRAL FEDERAL CORPORATION 2019 EQUITY INCENTIVE PLAN





On March 27, 2019, the Board unanimously adopted, subject to approval by the Company’s stockholders, the Central Federal Corporation 2019 Equity Incentive Plan, a general description of which is set forth below and a copy of which is attached hereto as Annex A (the “Plan”).  At the Meeting, the stockholders will be asked to approve the Plan.  The stockholders of the Company are urged to review the Plan carefully. If you have any questions concerning the Plan that you wish to discuss prior to the Meeting, please contact Ivory Brown at (614) 334-7979. 



PURPOSE



The purpose of the Plan is to advance the interests of the Company and its stockholders by affording to directors and employees an opportunity to acquire or increase their proprietary interest in the Company by the grant to such persons of equity-based awards pursuant to the terms set forth under the Plan.  By encouraging such persons to become owners of the Company, the Company seeks to attract, motivate, reward and retain those highly competent individuals whose judgment, initiative, leadership and efforts are key to the success of the Company.  The Plan serves these purposes by making equity-based awards available for grant to eligible participants in the form of nonqualified stock options (“NQSOs”), incentive stock options (“ISOs” and together with NQSOs, “Options”), Stock Appreciation Rights (“SARs”), Restricted Stock, and Restricted Stock Units (“RSUs”).



Summary of the Plan, as Proposed



The material features of the Plan, as it is proposed, are summarized below. This summary is qualified in its entirety by reference to the complete text of the proposed Plan, which is attached to this Proxy Statement as Annex A.

 

Available Shares of Common stock



Subject to the adjustments discussed below, the aggregate number of shares of common stock of the Company available for the grant of awards under the Plan will be 300,000, plus any shares that are subject to grants under the Central Federal Corporation 2009 Equity Compensation Plan and that are later forfeited or expire.  Common stock issued under the Plan may consist of: (a) treasury shares; (b) authorized but unissued shares of common stock not reserved for any other purpose; or (c) shares of common stock purchased by the Company in the open market for such purpose.



If awards granted under the Plan expire, are terminated, or are canceled for any reason without being fully exercised or settled as applicable, new awards may be granted under the Plan covering the number of shares of common stock subject to such expired, terminated, or canceled awards. Shares of common stock that are withheld from or that are tendered by a director or an employee (either by delivery or attestation) in payment of an exercise price or to cover withholding tax obligations will not be available for future grants under the Plan. 



In the event of any common stock dividend, common stock split, recapitalization (including payment of an extraordinary dividend), merger, consolidation, combination, spin-off, distribution of assets to stockholders, exchange of shares or similar corporate change affecting the common stock of the Company, the Compensation Committee will appropriately adjust: (a) the number of shares of common stock that may be issued under the Plan; (b) the aggregate number of shares of common stock available for awards or subject to outstanding awards; (c) the respective exercise price, number of shares of common stock and other limitations applicable to outstanding awards; and (d) other factors, limits, or terms affecting any outstanding awards granted under the Plan.



Subject to the anti-dilution adjustment provisions described above, during any fiscal year of the Company in which the Plan is in effect, the Compensation Committee may not grant any participant one or more awards covering more than 75,000 shares of common stock.  Further, the aggregate fair market value of such shares of common stock (under all plans of the Company and all of its affiliates), with respect to which ISOs are exercisable for the first time by a person during any calendar year may not exceed $100,000.  Any options that exceed $100,000 will be treated as NQSOs. 





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Administration



The Compensation Committee will administer the Plan.



In its capacity as plan administrator, the Compensation Committee will determine which participants will be granted awards, the number of shares of common stock subject to each award and the terms and conditions of each award.   The Compensation Committee will also have full power and authority to: (a) establish, amend, and rescind rules and regulations relating to the Plan; (b) interpret and administer the Plan and all related award agreements; and (c) make any other determinations and take any other action that the Compensation Committee deems necessary or desirable for the administration of the Plan.  Any action taken by the Compensation Committee will be final, binding, and conclusive on all persons interested in the Plan.



The effective date of the Plan is March 27, 2019,  which is the date the Plan was approved by the Board, subject to stockholder approval.  The Plan will terminate upon the earliest of: (a) the tenth anniversary of the effective date of the Plan; (b) the date on which all shares of common stock available for issuance under the Plan have been issued pursuant to the exercise or settlement of awards granted under the Plan or with respect to which payments have been made upon the exercise of SARs or other rights; or (c) the determination of the Board to terminate the Plan.  No awards may be granted under the Plan after such termination date, provided that the awards granted and outstanding on such date will continue in full force and effect in accordance with the relevant award agreement.



Types of Awards



Options



The Compensation Committee may grant Options at any time during the term of the Plan in such number, and upon such terms and conditions, as the Compensation Committee determines.  The exercise price of any Option must be at least equal to the fair market value of a share of common stock on the date the Option is granted, and may be paid: (a) in cash; (b) by tendering previously-acquired shares of common stock; (c) by a cashless exercise (including by withholding shares of common stock deliverable upon exercise and through a broker-assisted arrangement to the extent permitted by applicable law); or (d) by any combination of the payment methods set forth in the foregoing points (b) and (c).  The Compensation Committee will also determine the term of the Option (which may not exceed a period of ten years from the grant date), the vesting terms and conditions (subject to a minimum vesting period of three years for time-based vesting awards), and any other terms and conditions of the Option, all of which will be reflected in the related award agreement.  If any participant desires to dispose of shares of common stock delivered pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Internal Revenue Code, such participant must notify the Company of such disposition within ten days thereof.



Stock Appreciation Rights



The Compensation Committee may grant SARs at any time during the term of the Plan in such number, and upon such terms and conditions, as the Compensation Committee determines.  The exercise price of a SAR granted under the Plan must be at least equal to the fair market value of a share of common stock on the date the SAR is granted. A participant may exercise a SAR by giving written notice of exercise on a form acceptable to the Compensation Committee specifying the portion of the SAR to be exercised.  The Compensation Committee will also determine the term of the SAR (which may not exceed a period of ten years from the grant date), the vesting terms and conditions (subject to a minimum vesting period of three years for time-based vesting awards), and any other terms and conditions of the SAR, all of which will be reflected in the related award agreement.  The total appreciation available to a participant from an exercise of a SAR will be paid in a single lump sum payment in either cash or shares of common stock, as determined by the Compensation Committee.



Restricted Stock



The Compensation Committee may grant shares of Restricted Stock at any time during the term of the Plan in such number, and upon such terms and conditions, as the Compensation Committee determines. Restricted Stock consists of common stock issued to a participant subject to forfeiture based upon satisfaction of certain terms, conditions and restrictions which may include, without limitation: (a) a requirement that the participant pay a purchase price for each share of Restricted Stock; (b) restrictions based on the achievement of specific performance goals; (c) time-based restrictions; or (d) holding requirements or sale restrictions upon vesting and settlement.  The Compensation Committee will determine the terms, conditions, and restrictions applicable to each Restricted Stock award, all of which will be reflected in the related award

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agreement.  In the Compensation Committee’s sole discretion, all shares of Restricted Stock will be held by the Company as escrow agent or issued to the participant in the form of certificates bearing a legend describing the restrictions imposed on the shares of common stock.



During the period that shares of Restricted Stock remain subject to forfeiture: (a) a participant may not sell or otherwise transfer such shares; and (b) unless otherwise provided in the related award agreement, a participant will generally be entitled to exercise full voting rights and receive all dividends paid with respect to such shares (except that receipt of any such dividends will be subject to the same terms, conditions, and restrictions that apply to such shares).  At the end of the restriction period: (a) the participant will forfeit the shares of Restricted Stock if all terms, conditions and restrictions specified in the related award agreement have not been met; or (b) the Company will distribute the shares of Restricted Stock to the participant if all terms, conditions and restrictions specified in the related award agreement have been met.



In the event a participant wishes to elect under Section 83(b) of the Internal Revenue Code to include in gross income in the year of grant the amounts specified in such Section, the participant must notify the Company within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing or notification required pursuant to regulations issued under the Internal Revenue Code.



Restricted Stock Units



The Compensation Committee may grant RSUs at any time during the term of the Plan in such number, and upon such terms and conditions, as the Compensation Committee determines.  An RSU consists of a right to receive a specified number of shares of common stock or a cash payment equal to the fair market value of a specified number of shares of common stock, the settlement of which is subject to specified restrictions on vesting and transferability which may include, without limitation: (a) restrictions based on the achievement of specified performance goals; (b) time-based restrictions; (c) holding requirements or sale restrictions; or (d) sale restrictions placed on the underlying shares of common stock by the Company upon vesting.  The Compensation Committee will determine the terms, conditions, and restrictions applicable to each RSU award, all of which will be reflected in the related award agreement.  An award of RSUs may be settled in full shares of common stock, in cash, or in a combination thereof, as set forth in the relevant award agreement.  Awards of RSUs may provide the participant with dividend equivalents, provided that such dividend equivalents must be subject to the same terms and conditions, including the applicable forfeiture conditions, as the RSUs.  A participant will not have voting rights with respect to shares of common stock underlying RSUs.



Transferability



Except as otherwise provided in an award agreement: (a) a participant may not sell, assign, alienate, pledge, attach, sell or otherwise transfer or encumber any award granted under the Plan, except by will or the laws of descent and distribution; and (b) during a participant’s lifetime, only the participant or his or her guardian or legal representative may exercise an award.



Effect of Termination, Disability, or Death



Termination



If a director or employee is terminated for any reason, other than retirement, disability, death, or termination for cause, before the date of expiration of the awards held by such participant: (a) any Options and SARs that are not exercisable, and any unvested Restricted Stock and RSUs, will become null and void on the date of such termination; and (b) all exercisable Options and SARs will terminate on the earlier of (i) the date of expiration of the Options and/or SARs or (ii) three months following the date of termination.



Retirement



If a participant retires before the date of expiration of the awards held by such participant: (a) any Options and SARs that are not exercisable, and any unvested Restricted Stock and RSUs, will become null and void on the date of such retirement; (b) all exercisable Options and SARs will terminate on the earlier of the date of expiration of the Options and/or SARs or one year following the date of retirement; and (c) to the extent provided in the award agreement, any unvested RSUs will become fully vested.



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Disability or Death



If a participant’s service as a director or an employee terminates due to death or disability prior to the expiration of the awards held by such participant: (a) any Options and SARs that are not exercisable will become exercisable and all Options and SARs will terminate upon the earlier of (i) the date of expiration of the Options and/or SARs, as applicable, or (ii) one year following the date of the participant’s death or disability; and (b) any unvested Restricted Stock and RSUs will become fully vested.



Termination for Cause



If a participant’s service as a director or an employee is terminated for Cause, as defined under the Plan, any outstanding award will become null and void on the date of termination.



EFFECT OF A CHANGE IN CONTROL



Upon a Change in Control, as defined under the Plan, (a) all Options and SARs will immediately become exercisable and will remain as such through the term of such Option or SAR, and (b) any unvested Restricted Stock and RSUs will become fully vested.



In the event of a Change in Control, each outstanding Option or SAR may be assumed or an equivalent option or right will be substituted by the successor corporation or a parent or subsidiary of such successor corporation.  If such successor corporation does not agree to assume the outstanding options or to substitute equivalent options or rights, each Option, at the direction of the Compensation Committee: (a) may be canceled by the Company in exchange for (i) a transfer to the participant of the number of whole shares of common stock, if any, equal to the fair market value of the then-difference between the exercise price of the Option or SAR and the fair market value of the common stock issuable upon the Option’s or SAR’s exercise, or (ii) a cash payment equal to the then-difference between the exercise price of the Option or SAR and the fair market value of the stock issuable upon the Option’s or SAR’s exercise; or (b) may be canceled by the Company if the exercise price equals or exceeds the fair market value of a share of common stock on a date set by the Board.



Tax Withholding



The Company will withhold from amounts distributed under the Plan or require the relevant participant to remit to the Company an amount sufficient to satisfy all federal, state, and local income and employment tax withholding requirements with respect to any amounts paid pursuant to the Plan.  At the discretion of the Compensation Committee, a participant may be permitted to pay to the Company the withholding amount in the form of cash, shares of common stock owned by the participant for at least the previous six months, or by having the Company withhold shares of common stock from the settlement of the award. 



No Repricing



Except in connection with a corporate transaction involving the Company, the terms of outstanding awards may not be amended without stockholder approval to reduce the exercise price of outstanding Options or SARs or to cancel outstanding Options or SARs in exchange for cash, Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs, or other awards or property.



Amendment or Termination



The Compensation Committee may terminate, modify, or amend the Plan at any time.  No such action to amend the Plan may reduce the then-existing number of awards granted to any participant or adversely change the terms and conditions thereof without such participant’s consent.



The Board may not amend the Plan, and the Compensation Committee may not amend an award agreement, in any manner that effectively: (a) allows any Option to be granted to an exercise price below the fair market value of the common stock on the date of the grant; (b) allows the exercise price of any Option previously granted to be reduced after the date of the grant; or (c) extends the Option term, unless and until the Compensation Committee determines that such extension does not cause the Option to cease to be exempt from Section 409A of the Internal Revenue Code.



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In addition, no amendment of the Plan shall become effective without the approval of a majority of the stockholders: (a) if such amendment increases the maximum number of shares subject to the Plan (except as it relates to the anti-dilution provisions set forth above) or changes the designation or class of persons eligible to receive awards under the Plan; (b) to make any grants of awards after any change in the granting corporation (for example, by assumption of the Plan by another corporation) or in the definition of stock under the Plan; or (c) if counsel for the Company determines that such approval is otherwise required by or necessary to comply with applicable law.



NEW PLAN BENEFITS



All awards granted under the Plan will be at the discretion of the Compensation Committee and, in the case of performance-based awards, dependent upon the Company’s future performance. As a result, the specific number and terms of awards that (a) will be granted to participants or (b) would have been granted to participants during the 2018 fiscal year had the Plan been in place, are not determinable.



The following table provides information as of December 31, 2018, with respect to the shares of common stock of the Company that may be issued under the Company’s existing equity compensation plans.  Although awards outstanding under the Central Federal Corporation 2009 Equity Incentive Plan will remain in effect in accordance with their respective terms, the 2009 Plan terminated in accordance with its terms on March 19, 2019 and, as a result, no further awards may be granted under the 2009 Plan.



Equity Compensation Plan Information

(as of December 31, 2018)







U.S. Federal Income Tax Consequences



The following is a brief summary of the general U.S. federal income tax consequences relating to participation in the Plan. This summary is based on U.S. federal tax laws and Treasury Regulations in effect on the date of this Proxy Statement and does not purport to be a complete description of the U.S. federal income tax laws.  In addition, this summary does not constitute tax advice or describe federal employment, state, local or foreign tax consequences.  Each participant is advised to consult with his or her tax advisor concerning the U.S. federal income tax and other tax consequences of participating in the Plan.



Incentive Stock Options



The Company intends for ISOs to qualify for special treatment available under Section 422 of the Internal Revenue Code.  A participant will not recognize taxable income when an ISO is granted, and we will not receive a deduction at that time.  A participant will not recognize ordinary income upon the exercise of an ISO, provided that the participant was, without a break in service, an employee of the Company or a subsidiary during the period beginning on the grant date of the ISO and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant’s employment is terminated due to disability).



If the participant does not sell or otherwise dispose of the shares of common stock acquired upon the exercise of an ISO within two years from the grant date of the ISO or within one year after the participant receives the shares, then, upon

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disposition of such shares of common stock, any amount realized in excess of the exercise price will be taxed to the participant as a capital gain, and we will not be entitled to a corresponding deduction.  The participant generally will recognize a capital loss to the extent that the amount realized is less than the exercise price.



If the foregoing holding period requirements are not met, the participant generally will recognize ordinary income at the time of the disposition of the shares of common stock in an amount equal to the lesser of: (a) the excess of the fair market value of the shares on the date of exercise over the exercise price; or (b) the excess, if any, of the amount realized upon disposition of the shares over the exercise price, and the Company will be entitled to a corresponding deduction.  Any amount realized in excess of the value of the shares of common stock on the date of exercise will be capital gain.  If the amount realized is less than the exercise price, the participant generally will recognize a capital loss equal to the excess of the exercise price over the amount realized upon the disposition of the shares.



The rules that generally apply to ISOs do not apply when calculating any alternative minimum tax liability.  The rules affecting the application of the alternative minimum tax are complex, and their effect depends on individual circumstances, including whether a participant has items of adjustment other than those derived from ISOs.



Nonqualified Stock Options



A participant will not recognize any income when a NQSO is granted, and we will not receive a deduction at that time.  However, when a NQSO is exercised, a participant will recognize ordinary income equal to the excess, if any, of the fair market value of the shares of common stock that the participant purchased on the date of exercise over the exercise price.  If a participant uses shares of common stock or a combination of shares and cash to pay the exercise price of a NQSO, the participant will recognize ordinary income equal to the value of the excess of the number of shares that the participant purchases over the number of shares that the participant surrenders, less any cash the participant uses to pay the exercise price.  When a NQSO is exercised, we will be entitled to a deduction equal to the ordinary income that the participant recognizes.



If the amount a participant receives upon disposition of the shares of common stock that the participant acquired by exercising a NQSO is greater than the sum of the aggregate exercise price that the participant paid plus the amount of ordinary income recognized by the participant upon exercise, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the shares for more than one year after the participant acquired them by exercising the NQSO.  Conversely, if the amount a participant receives upon disposition of the shares of common stock that the participant acquired by exercising a NQSO is less than the sum of the aggregate exercise price the participant paid plus the amount of ordinary income recognized by the participant upon exercise, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the shares for more than one year after the participant acquired them by exercising the NQSO.



Stock Appreciation Rights



A participant will not recognize taxable income when a SAR is granted, and we will not receive a deduction at that time.  When an SAR is exercised, a participant will recognize ordinary income equal to the excess of the cash and/or the fair market value of the shares of common stock the participant receives over the aggregate exercise price of the SAR, if any, and we will be entitled to a corresponding deduction.  If the amount a participant receives upon disposition of the shares of common stock that the participant acquired by exercising a SAR is greater than the sum of the aggregate exercise price that the participant paid plus the amount of ordinary income recognized by the participant upon exercise, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the shares for more than one year after the participant acquired them by exercising the SAR.  Conversely, if the amount a participant receives upon disposition of the shares of common stock that the participant acquired by exercising a SAR is less than the sum of the aggregate exercise price that the participant paid plus the amount of ordinary income recognized by the participant upon exercise, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the shares for more than one year after the participant acquired them by exercising the SAR.



Restricted Stock



Unless a participant makes a Section 83(b) Election, the participant generally will not recognize taxable income when Restricted Stock is granted, and we will not receive a deduction at that time. Instead, a participant will recognize ordinary income when the Restricted Stock vests (i.e., when the underlying shares of common stock are freely transferable or not subject to a substantial risk of forfeiture) equal to the fair market value of the shares of common stock that the participant

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receives when the terms, conditions and restrictions have been met, less any consideration paid for the Restricted Stock, and we generally will be entitled to a deduction equal to the income that the participant recognizes.



If the amount a participant receives upon disposition of these shares of common stock is greater than the fair market value of the shares when the Restricted Stock vested, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the shares for more than one year after the Restricted Stock vested.  Conversely, if the amount the participant receives upon disposition of these shares of common stock is less than the fair market value of the shares when the Restricted Stock vested, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the shares for more than one year after the Restricted Stock vested.



If a participant makes a Section 83(b) Election, the participant will recognize ordinary income on the grant date equal to the fair market value of the shares of common stock subject to the Restricted Stock award on the grant date, and we will be entitled to a deduction equal to the income that the participant recognizes at that time.  However, the participant will not recognize income when (and if) the Restricted Stock vests.  If a participant who has made a Section 83(b) Election earns the shares of common stock subject to a Restricted Stock award, any appreciation between the grant date and the date the participant disposes of the shares will be treated as a long-term or short-term capital gain, depending on whether the participant held the shares for more than one year after the grant date.  Conversely, if the amount the participant receives upon disposition of these shares of common stock is less than the fair market value of the shares on the grant date, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the shares for more than one year after the grant date.  Also, if a participant forfeits his or her Restricted Stock, the participant cannot take a tax deduction in connection with the forfeiture of the Restricted Stock subject to a Section 83(b) Election.



Restricted Stock Units



A participant will not recognize taxable income when a RSU is granted, and we will not receive a deduction at that time.  When a RSU vests and is settled, the participant will recognize ordinary income equal to the cash and/or the fair market value of the shares of common stock the participant receives at the time of settlement, and the Company will be entitled to a corresponding deduction.



If the amount a participant receives upon disposition of the shares of common stock received upon settlement of the RSU is greater than the fair market value of the shares when the RSU vested, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the shares for more than one year after the RSU vested.  Conversely, if the amount the participant receives upon disposition of these shares of common stock is less than the fair market value of the shares when the RSU vested, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the shares for more than one year after the RSU vested.



Section 409A



Section 409A of the Internal Revenue Code imposes certain restrictions on amounts deferred under non-qualified deferred compensation plans and a 20% additional tax on amounts that are subject to, but do not comply with, Section 409A.  Section 409A includes a broad definition of non-qualified deferred compensation plans, which includes certain types of equity incentive compensation.  The Company intends for the awards granted under the Plan to comply with or be exempt from the requirements of Section 409A and the Treasury Regulations promulgated thereunder.



Section 162(m)



Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to publicly held companies (such as the Company) for compensation paid in excess of $1,000,000 per “covered employee” in any year.  While the Company expects that all awards under the Plan will be tax deductible, it is possible for awards to be granted under the Plan that would not be fully tax deductible under Section 162(m).  

 

Recommendation and Vote



The affirmative vote of a majority of the votes cast is required to approve the Central Federal Corporation 2019 Equity Incentive Plan.  Abstentions and broker non-votes will not be counted as votes “FOR” or “AGAINST” this proposal and will have no effect on the outcome of this proposal.



The Board of Directors recommends that you vote “FOR” Proposal 5.

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BENEFICIAL OWNERSHIP OF

COMPANY COMMON STOCK





The following table provides information as of April 12, 2019 about the persons known by the Company to be beneficial owners of more than 5% of the Company’s outstanding common stock.  A person may be considered to beneficially own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting or investment power. 













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The following table sets forth information as of April 12, 2019 with respect to the number of shares of the Company's common stock considered to be beneficially owned by each director or nominee for director of the Company, by each executive officer named in the Summary Compensation Table, and by all directors and executive officers of the Company as a group.  A person may be considered to beneficially own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting or investment power.







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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.  Section 16(a) of the Exchange Act requires the Company’s executive officers and directors and persons who own more than 10% of any registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission.  Executive officers, directors and beneficial owners of more than 10% of the outstanding common stock of the Company are required by regulations of the SEC to furnish the Company with copies of all Section 16(a) reports they file. To the Company’s knowledge, based solely on a review of the Section 16(a) reports filed on behalf of these persons and written representations that no other Section 16(a) reports were required to be filed for transactions during 2018, all filing requirements applicable to executive officers, directors and beneficial owners of more than 10% of the outstanding common stock of the Company under Section 16(a) of the Exchange Act were complied with, except that Timothy T. O’Dell had one late Form 4 filing in 2018 reporting a total of one transaction.







AUDIT COMMITTEE MATTERS





INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

BKD has served as the Company’s independent registered public accounting firm since 2014.  The Board of Directors of the Company, upon the recommendation of the Audit Committee, approved the engagement of BKD to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2018.  The engagement of BKD as the Company’s independent registered public accounting firm for 2018 was also ratified by the Company’s stockholders at the 2018 annual meeting of stockholders.    





PRE-APPROVAL OF SERVICES



The Company’s Audit Committee must pre-approve all engagements of the independent registered public accounting firm by the Company and its subsidiaries, including CFBank, as required by the Audit Committee’s charter and the rules of the Securities and Exchange Commission.  Prior to the beginning of each fiscal year, the Audit Committee approves an annual estimate of fees for engagements, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent registered public accounting firm’s independence from management.  In addition, the Audit Committee evaluates any potential engagements of the independent registered public accounting firm, including the scope of the proposed work to be performed and the proposed fees, and approves or rejects each service.  Management may present additional services for approval at subsequent Committee meetings during the fiscal year.  The Audit Committee has delegated to the Audit Committee Chairman the authority to evaluate and approve engagements on behalf of the Audit Committee in the event a need arises for pre-approval between Committee meetings and in the event the engagement for services was within the annual estimate but not specifically approved.  If the Chairman so approves any such engagements, he reports that approval to the full Committee at the next Committee meeting.



For the 2017 and 2018 fiscal years, all services provided by BKD were pre-approved by the Audit Committee in accordance with this policy.

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FEES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



BKD served as the Company’s independent registered public accounting firm for the 2018 and 2017 fiscal years.  The Audit Committee pre-approved all services rendered by BKD for 2018 and 2017.  The Company was billed the aggregate fees shown below for audit services, audit related services, tax services and other services rendered to the Company and its subsidiaries for the 2018 and 2017 fiscal years. 











AUDIT COMMITTEE REPORT



The Company’s Audit Committee has reviewed and discussed with management and with BKD, the Company’s independent registered public accounting firm for 2018, the audited financial statements of the Company for the year ended December 31, 2018.  In addition, the Audit Committee has discussed with BKD the matters required to be discussed under Public Company Accounting Oversight Board (the “PCAOB”) Auditing Standards No. 1301,  Communications with Audit Committees.



The Audit Committee also has received the written disclosures and the letter from BKD required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with BKD its independence from the Company.



Based on the foregoing review and discussions, the Audit Committee has recommended to the Company’s Board of Directors that the audited financial statements for the year ended December 31, 2018, be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the SEC.



AUDIT COMMITTEE

Thomas P. Ash, Chairman

Edward W. Cochran

James Frauenberg II

Robert Hoeweler

Robert Milbourne





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STOCKHOLDER PROPOSALS FOR 2020 ANNUAL MEETING





If a stockholder desires to have a proposal included in the Company’s proxy statement and form of proxy for the 2020 annual meeting of stockholders, the proposal must conform to the requirements of Rule 14a-8 promulgated under the Exchange Act and other applicable proxy rules and interpretations of the SEC concerning the submission and content of proposals.  Proposals for the 2020 annual meeting of stockholders must be received by the Company, at 7000 N. High Street, Worthington, Ohio 43085, prior to the close of business on  December 26,  2018 in order to be eligible for inclusion in the Company’s proxy, notice of meeting and proxy statement relating to the 2020 annual meeting.

The Company’s Bylaws provide an advance notice procedure for a stockholder to properly bring business before an annual meeting of stockholders.  For business to be properly brought before an annual meeting by a stockholder, the business must relate to a proper subject matter for stockholder action and the stockholder must have given timely notice thereof in writing to the Corporate Secretary of the Company.  To be timely, a stockholder’s notice must be delivered or mailed to and received at the principal executive offices of the Company not less than 90 days prior to the date of the annual meeting; provided, however, that in the event that less than 100 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made.  A stockholder’s notice to the Corporate Secretary shall set forth as to each matter such stockholder proposes to bring before the annual meeting:  (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on the Company’s books, of the stockholder proposing such business; (iii) the class and number of shares of the Company’s capital stock that are beneficially owned by such stockholder; and (iv) any material interest of such stockholder in such business. 



Assuming that the 2020 annual meeting of stockholders is held on the fourth Wednesday of May, 2020 and that such date is announced at least 100 days in advance, a stockholder’s proposal for that meeting must be received by the Company at 7000 N. High Street, Worthington, Ohio 43085, not later than the close of business on  February 27, 2020, in order to be considered timely.  If any such proposal is received after such date, it will be considered untimely, and the persons named in the proxies solicited by the Board of Directors of the Company may exercise discretionary voting power with respect to that proposal





ANNUAL REPORT ON FORM 10-K



A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2018, AS FILED WITH THE SEC, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS OF RECORD UPON WRITTEN REQUEST TO THE CORPORATE SECRETARY, CENTRAL FEDERAL CORPORATION, 7000 N. HIGH STREET, WORTHINGTON, OHIO 43085.





BY ORDER OF THE BOARD OF DIRECTORS

Timothy T. O’Dell

President and Chief Executive Officer



Worthington, Ohio





YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.  WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.    



 

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Annex A





CENTRAL FEDERAL CORPORATION

2019 EQUITY INCENTIVE PLAN



Section 1.  Purpose.  The purpose of the Plan is to advance the interests of the Holding Company and its shareholders by affording to Outside Directors and Employees an opportunity to acquire or increase their proprietary interest in the Holding Company by the grant to such persons of Awards under the terms set forth herein. By encouraging such persons to become owners of the Holding Company, the Holding Company seeks to attract, motivate, reward and retain those highly competent individuals upon whose judgment, initiative, leadership and efforts are key to the success of the Holding Company. 



Section 2.  Definitions.  Whenever used in this Plan, the following words, terms and phrases have the meanings given to them in this Section 2, unless another meaning is expressly provided elsewhere in this Plan or clearly required by the context.  When applying these definitions and any other word, term or phrase used in this Plan, the form of any word, term or phrase will include any and all of its other forms.



With regard to any Award that is subject to Code Section 409A, the definition of Change in Control contained in this Section 2(f) shall be interpreted in a manner that is consistent with the definition of “change in control event” under Code Section 409A.

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The Committee’s determination of Fair Market Value shall be conclusive and binding on all persons.

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Section 3.  Administration of the Plan. 



Section 4.  Shares of Stock Subject to Plan.



Section 5.  Options



Section 6.  Stock Appreciation Rights

Section 7.  Restricted Stock

Section 8.  Restricted Stock Units

Section 9.  General Provisions.



An Employee who also serves as a director of the Holding Company or an Affiliate, who terminates employment with the Holding Company and all Affiliates, but who retains his status as a director, is not considered terminated with respect to any outstanding Award until the date the Participant ceases to be both an Outside Director and an Employee.

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This Plan is adopted by the Board on the 27th day of March, 2019.



IN WITNESS WHEREOF, the Holding Company has caused the Plan to be executed this 27th day of March, 2019.

CENTRAL FEDERAL CORPORATION





By:     /s/ Timothy T. O’Dell

Name:     Timothy T. O’Dell

Title:       President and Chief Executive Officer