Employee Benefit Plans

12 Months Ended

Dec. 31, 2011

Employee Benefit Plans [Abstract]

Employee Benefit Plans

NOTE 11: Employee Benefit Plans

The Bank maintains a Defined Contribution Profit-Sharing Plan (the Profit-Sharing Plan) sponsored by the Virginia Bankers Association (VBA). The Profit-Sharing Plan includes a 401(k) savings provision that authorizes a maximum voluntary salary deferral of up to 95% of compensation (with a partial company match), subject to statutory limitations. The Profit-Sharing Plan provides for an annual discretionary contribution to the account of each eligible employee based in part on the Bank's profitability for a given year and on each participant's yearly earnings. All salaried employees who have attained the age of eighteen and have at least three months of service are eligible to participate. Contributions and earnings may be invested in various investment vehicles offered through the VBA. All employee contributions are fully vested upon contribution. An employee is 20% vested in the Bank's contributions after two years of service, 40% after three years, 60% after four years, 80% after five years and fully vested after six years, or earlier in the event of retirement, death or attainment of age 65 while an employee. The amounts charged to expense under this plan were $405,000, $372,000 and $409,000 in 2011, 2010 and 2009, respectively.

C&F Mortgage maintains a Defined Contribution 401(k) Savings Plan that authorizes a voluntary salary deferral of from 1% to 100% of compensation (with a discretionary company match), subject to statutory limitations. Substantially all employees who have attained the age of eighteen are eligible to participate on the first day of the next month following employment date. The plan provides for an annual discretionary contribution to the account of each eligible employee based in part on C&F Mortgage's profitability for a given year, and on each participant's contributions to the plan. Contributions may be invested in various investment funds offered under the plan. All employee contributions are fully vested upon contribution. An employee is vested 25% in the employer's contributions after two years of service, 50% after three years, 75% after four years, and fully vested after five years.  The amounts charged to expense under this plan were $12,000, $0 and $18,000 in 2011, 2010 and 2009, respectively.

C&F Finance maintains a Defined Contribution Profit-Sharing Plan sponsored by the VBA with plan features similar to the Profit-Sharing Plan of the Bank. The amounts charged to expense under this plan were $139,000, $108,000 and $89,000 in 2011, 2010 and 2009, respectively.

Individual performance bonuses are awarded annually to certain members of management under a management incentive bonus plan. The Corporation's Compensation Committee recommends to the Corporation's Board of Directors the bonuses to be paid to the Chief Executive Officer and the Chief Financial Officer of the Corporation, and recommends to the Bank's Board of Directors bonuses to be paid to certain other senior Bank and C&F Finance officers. In addition, the Chief Executive Officer recommends bonuses to be paid to other officers of the Bank and C&F Finance. In determining the awards, performance, including the Corporation's growth rate, returns on average assets and equity, and absolute levels of income are considered. In addition, the Bank's Board of Directors considers the individual performance of the members of management who may receive awards. The expense for these bonus awards is accrued in the year of performance. Expenses under these plans were $844,000, $816,000 and $418,000 in 2011, 2010 and 2009, respectively. In accordance with employment agreements for certain senior officers of C&F Mortgage, performance bonuses of $657,000, $336,000 and $1.8 million were expensed in 2011, 2010 and 2009, respectively. Performance used in determining the awards is directly related to the profitability of C&F Mortgage.

The Bank has a non-contributory, defined benefit pension plan (Cash Balance Plan) for all full-time employees over 21 years of age. Under the Cash Balance Plan, the benefit account for each participant will grow each year with annual pay credits based on age and years of service and monthly interest credits based on the prior year's December average yield on 30-year Treasuries plus 150 basis points. The Bank funds pension costs in accordance with the funding provisions of the Employee Retirement Income Security Act.

The Corporation has a nonqualified defined contribution plan for certain executives. The plan allows for elective salary and bonus deferrals. The plan also allows for employer contributions to make up for limitations on covered compensation imposed by the Internal Revenue Code with respect to the Bank's Profit Sharing Plan and Cash Balance Plan and to enhance retirement benefits by providing supplemental contributions from time to time. Expenses under this plan were $153,000, $124,000 and $90,000 in 2011, 2010 and 2009, respectively. Investments for this plan are held in a Rabbi trust. These investments are included in other assets and the related liability is included in other liabilities.

The following table summarizes the projected benefit obligations, plan assets, funded status and rate assumptions associated with the Bank's Cash Balance Plan based upon actuarial valuations.

	December 31,
(Dollars in thousands)	2011			2010			2009
Change in benefit obligation
Projected benefit obligation, beginning	$	7,915		$	6,816		$	6,400
Service cost		611			531			504
Interest cost		438			397			373
Actuarial loss (gain)		154			523			(13	)
Benefits paid		(350	)		(352	)		(448	)
Projected benefit obligation, ending	$	8,768		$	7,915		$	6,816
Change in plan assets
Fair value of plan assets, beginning	$	7,261		$	6,385		$	4,346
Actual return on plan assets		(116	)		828			1,487
Employer contributions		1,500			400			1,000
Benefits paid		(350	)		(352	)		(448	)
Fair value of plan assets, ending	$	8,295		$	7,261		$	6,385
Funded status	$	(473	)	$	(654	)	$	(431	)
Amounts recognized as an other liability	$	(473	)	$	(654	)	$	(431	)
Amounts recognized in accumulated other comprehensive income
Net loss	$	2,525		$	1,738		$	1,595
Net obligation at transition		--			(4	)		(9	)
Prior service cost		(1,144	)		(1,212	)		(1,279	)
Deferred taxes		(483	)		(183	)		(107	)
Total recognized in accumulated other comprehensive income	$	898		$	339		$	200
Weighted-average assumptions for benefit obligation at valuation date
Discount rate		4.5	%		5.5	%		6.0	%
Expected return on plan assets		8.0			8.0			8.0
Rate of compensation increase		4.0			4.0			4.0

The accumulated benefit obligation was $8.77 million and $7.91 million as of the actuarial valuation dates in 2011 and 2010, respectively.

	Year Ended December 31,
(Dollars in thousands)	2011			2010			2009
Components of net periodic benefit cost
Service cost	$	611		$	531		$	504
Interest cost		438			397			373
Expected return on plan assets		(581	)		(495	)		(413	)
Amortization of prior service cost		(68	)		(68	)		(68	)
Amortization of net obligation at transition		(4	)		(5	)		(5	)
Recognized net actuarial loss		63			48			115
Net periodic benefit cost		459			408			506
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net loss (gain)		788			142			(1,203	)
Amortization of net obligation at transition		4			5			5
Amortization of prior service costs		68			68			68
Deferred taxes		(301	)		(76	)		396
Total recognized in accumulated other comprehensive income		559			139			(734	)
Total recognized in net periodic benefit cost and other comprehensive income	$	1,018		$	547		$	(228	)

The estimated net loss, obligation at transition and prior service cost that will be (accreted to) amortized from accumulated other comprehensive income into net periodic benefit cost over the next year are $106,000, zero and $(68,000), respectively.

	January 1,
	2011			2010			2009
Weighted-average assumptions for net periodic benefit cost as of
Discount rate		5.5	%		6.0	%		6.0	%
Expected return on plan assets		8.0			8.0			8.0
Rate of compensation increase		4.0			4.0			4.0

The benefits expected to be paid by the plan in the next ten years are as follows:

(Dollars in thousands)
2012	$	552
2013		119
2014		657
2015		181
2016		642
2017 – 2021		3,095
	$	5,246

The Bank selects the expected long-term rate of return on assets in consultation with its investment advisors and actuary, and with concurrence from their auditors. This rate is intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for the major asset classes held or anticipated to be held by the trust and for the trust itself. Undue weight is not given to recent experience, which may not continue over the measurement period. Higher significance is placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, solely for this purpose, the plan is assumed to continue in force and not terminate during the period during which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are not explicitly within periodic costs).

The Bank's defined benefit pension plan's weighted average asset allocations by asset category are as follows:

	December 31,
	2011			2010
Mutual funds-fixed income		40	%		37	%
Mutual funds-equity		60			63
Cash and equivalents		*			*
		100	%		100	%

* Less than one percent.

As of December 31, 2011 and 2010, the fair value of plan assets is as follows:

	December 31, 2011
	Fair Value Measurements Using						Assets at Fair Value
(Dollars in thousands)	Level 1		Level 2		Level 3
Mutual funds-fixed income (1)	$	3,306		-		-	$	3,306
Mutual funds-equity (2)		4,983		-		-		4,982
Cash and equivalents (3)		6		-		-		6
Total pension assets	$	8,295		-		-	$	8,294

	December 31, 2010
	Fair Value Measurements Using						Assets at Fair Value
(Dollars in thousands)	Level 1		Level 2		Level 3
Mutual funds-fixed income (1)	$	2,665		-		-	$	2,665
Mutual funds-equity (2)		4,591		-		-		4,591
Cash and equivalents (3)		5		-		-		5
Total pension assets	$	7,261		-		-	$	7,261

_________

(1) This category includes investments in mutual funds focused on fixed income securities with both short-term and long-term investments. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the funds.

(2) This category includes investments in mutual funds focused on equity securities with a diversified portfolio and includes investments in large cap and small cap funds, growth funds, international focused funds and value funds. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the funds.

(3) This category comprises cash and short-term cash equivalent funds. The funds are valued at cost which approximates fair value.

The trust fund is sufficiently diversified to maintain a reasonable level of risk without imprudently sacrificing return, with a targeted asset allocation of 40% fixed income and 60% equities. The investment advisor selects investment fund managers with demonstrated experience and expertise, and funds with demonstrated historical performance, for the implementation of the plan's investment strategy. The investment manager will consider both actively and passively managed investment strategies and will allocate funds across the asset classes to develop an efficient investment structure.

It is the responsibility of the trustee to administer the investments of the trust within reasonable costs, being careful to avoid sacrificing quality. These costs include, but are not limited to, management and custodial fees, consulting fees, transaction costs and other administrative costs chargeable to the trust.