10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For The Quarterly Period Ended September 30, 2012

OR

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

For The Transition Period From ____________To_____________.

Commission File number 0-11733

CITY HOLDING COMPANY

(Exact name of registrant as specified in its charter)

West Virginia	55-0619957
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
25 Gatewater Road
Charleston, West Virginia	25313
(Address of principal executive offices)	(Zip Code)

(304) 769-1100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [   ]	Accelerated filer [X]
Non-accelerated filer [   ]	Smaller reporting company [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common stock, $2.50 Par Value – 14,833,283 shares as of November 5, 2012.

1

FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including statements in Management’s Discussion and Analysis of Financial Condition and Result of Operations are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such information involves risks and uncertainties that could result in the Company’s actual results differing from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to:  (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3)  the Company could have adverse legal actions of a material nature; (4) the Company may face competitive loss of customers; (5) the Company may be unable to manage its expense levels; (6) the Company may have difficulty retaining key employees; (7) changes in the interest rate environment may have results on the Company’s operations materially different from those anticipated by the Company’s market risk management functions; (8) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (9) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company’s operating results; (10) the Company may experience difficulties growing loan and deposit balances; (11) the current economic environment poses significant challenges for us and could adversely affect our  financial condition and results of operations; (12) continued deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments; (13) the effects of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) recently adopted by the United States Congress; and (14) the merger with Community Financial Corporation will not be consummated unless certain conditions are met. Forward-looking statements made herein reflect management’s expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.

2

City Holding Company and Subsidiaries

PART I	Financial Information	Pages
Item 1.	Financial Statements (Unaudited).	4-33
	Consolidated Balance Sheets – September 30, 2012 and December 31, 2011.
	Consolidated Statements of Comprehensive Income – Three and Nine months ended September 30, 2012 and 2011.
	Consolidated Statements of Changes in Shareholders’ Equity – Nine months ended September 30, 2012 and 2011.
	Consolidated Statements of Cash Flows – Nine months ended September 30, 2012 and 2011.
	Notes to Consolidated Financial Statements – September 30, 2012.
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	34-49
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	50
Item 4.	Controls and Procedures.	50
PART II	Other Information
Item 1.	Legal Proceedings.	51
Item 1A.	Risk Factors.	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	51
Item 3.	Defaults Upon Senior Securities.	51
Item 4.	Mine Safety Disclosures.	51
Item 5.	Other Information.	51
Item 6.	Exhibits.	52
Signatures		53

3

PART I, ITEM 1 – FINANCIAL STATEMENTS

Consolidated Balance Sheets

City Holding Company and Subsidiaries

(in thousands)

	September 30, 2012			December 31, 2011
	(Unaudited)
Assets
Cash and due from banks	$	72,309		$	140,873
Interest-bearing deposits in depository institutions		5,563			5,526
Federal funds sold		35,000			-
Cash and Cash Equivalents		112,872			146,399
Investment securities available for sale, at fair value		389,686			360,783
Investment securities held-to-maturity, at amortized cost (approximate fair value at September 30, 2012 and December 31, 2011 - $13,658 and $23,423, respectively)		13,444			23,458
Other securities		11,459			11,934
Total Investment Securities		414,589			396,175
Gross loans		2,085,232			1,973,103
Allowance for loan losses		(18,986	)		(19,409	)
Net Loans		2,066,246			1,953,694
Bank owned life insurance		81,146			78,961
Premises and equipment, net		72,360			64,612
Accrued interest receivable		7,681			7,093
Net deferred tax asset		32,407			32,219
Goodwill and other intangible assets		65,103			56,164
Other assets		46,793			41,792
Total Assets	$	2,899,197		$	2,777,109
Liabilities
Deposits:
Noninterest-bearing	$	407,634		$	369,025
Interest-bearing:
Demand deposits		549,752			526,824
Savings deposits		495,068			439,823
Time deposits		929,042			885,596
Total Deposits		2,381,496			2,221,268
Short-term borrowings:
Federal funds purchased		-			75,000
Customer repurchase agreements		131,947			114,050
Long-term debt		16,495			16,495
Other liabilities		40,844			39,162
Total Liabilities		2,570,782			2,465,975
Shareholders’ Equity
Preferred stock, par value $25 per share: 500,000 shares authorized; none issued		-			-
Common stock, par value $2.50 per share: 50,000,000 shares authorized; 18,499,282 shares issued at September 30, 2012 and December 31, 2011, less 3,665,999 and 3,717,993 shares in treasury, respectively		46,249			46,249
Capital surplus		103,311			103,335
Retained earnings		303,567			291,050
Cost of common stock in treasury		(124,347	)		(125,593	)
Accumulated other comprehensive income (loss):
Unrealized gain on securities available-for-sale		4,367			825
Underfunded pension liability		(4,732	)		(4,732	)
Total Accumulated Other Comprehensive Loss		(365	)		(3,907	)
Total Shareholders’ Equity		328,415			311,134
Total Liabilities and Shareholders’ Equity	$	2,899,197		$	2,777,109

See notes to consolidated financial statements.

4

Consolidated Statements of Comprehensive Income (Unaudited)

City Holding Company and Subsidiaries

(in thousands, except earnings per share data)

	Three months Ended September 30						Nine months Ended September 30
	2012			2011			2012			2011
Interest Income
Interest and fees on loans	$	24,633		$	23,326		$	70,843		$	70,416
Interest on investment securities:
Taxable		3,438			4,639			11,345			13,694
Tax-exempt		346			392			1,101			1,299
Interest on federal funds sold		15			13			38			39
Total Interest Income		28,432			28,370			83,327			85,448
Interest Expense
Interest on deposits		3,312			4,550			10,363			15,829
Interest on short-term borrowings		79			90			229			239
Interest on long-term debt		166			159			499			474
Total Interest Expense		3,557			4,799			11,091			16,542
Net Interest Income		24,875			23,571			72,236			68,906
Provision for loan losses		975			-			4,600			2,372
Net Interest Income After Provision for Loan Losses		23,900			23,571			67,636			66,534
Non-interest Income
Total investment securities impairment losses		(272	)		(1,849	)		(878	)		(1,849	)
Noncredit impairment losses recognized in other comprehensive income		-			1,494			302			1,494
Net investment securities impairment losses		(272	)		(355	)		(576	)		(355	)
Gains on sale of investment securities		730			627			1,530			3,756
Net investment securities gains		458			272			954			3,401
Service charges		9,861			9,840			28,601			28,749
Insurance commissions		1,439			1,388			4,782			4,513
Trust and investment management fee income		912			699			2,662			2,181
Bank owned  life insurance		738			952			2,228			2,455
Other income		671			380			1,762			1,434
Total Non-interest Income		14,079			13,531			40,989			42,733
Non-interest Expense
Salaries and employee benefits		11,295			10,302			32,207			30,397
Occupancy and equipment		2,126			2,057			6,038			6,084
Depreciation		1,175			1,131			3,371			3,408
FDIC insurance expense		405			392			1,184			2,276
Advertising		674			546			1,993			1,854
Bankcard expenses		720			559			2,035			1,693
Postage, delivery, and statement mailings		529			551			1,565			1,615
Office supplies		407			492			1,258			1,483
Legal and professional fees		611			567			1,349			4,547
Telecommunications		433			371			1,209			1,217
Repossessed asset losses, net of expenses		429			109			1,200			300
Merger related costs		157			-			4,335			-
Other expenses		2,885			2,611			8,382			7,585
Total Non-interest Expense		21,846			19,688			66,126			62,459
Income Before Income Taxes		16,133			17,414			42,499			46,808
Income tax expense		5,526			5,837			14,450			15,784
Net Income Available to Common Shareholders	$	10,607		$	11,577		$	28,049		$	31,024
Total comprehensive income	$	12,719		$	10,714		$	31,591		$	30,820
Average common shares outstanding		14,751			15,003			14,700			15,165
Effect of dilutive securities:
Employee stock options		83			68			83			77
Shares for diluted earnings per share		14,834			15,071			14,783			15,242
Basic earnings per common share	$	0.71		$	0.77		$	1.89		$	2.03
Diluted earnings per common share	$	0.71		$	0.76		$	1.88		$	2.02
Dividends declared per common share	$	0.35		$	0.34		$	1.05		$	1.02

See notes to consolidated financial statements.

5

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

City Holding Company and Subsidiaries

Nine Months Ended September 30, 2012 and 2011

(in thousands)

	Common Stock		Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balances at December 31, 2010	$	46,249	$	103,057		$	270,905		$	(102,853	)		(2,497	)	$	314,861
Net income							31,024									31,024
Other comprehensive income													(204	)		(204	)
Cash dividends declared ($1.02 per share)							(15,394	)								(15,394	)
Stock-based compensation expense, net				83						784						867
Exercise of 6,576 stock options				(20	)					188						168
Purchase of 675,501 treasury shares										(21,430	)					(21,430	)
Balances at September 30, 2011	$	46,249	$	103,120		$	286,535		$	(123,311	)	$	(2,701	)	$	309,892

	Common Stock		Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balances at December 31, 2011	$	46,249	$	103,335		$	291,050		$	(125,593	)	$	(3,907	)	$	311,134
Net income							28,049									28,049
Other comprehensive income													3,542			3,542
Acquisition of Virginia Savings Bancorp				276						7,447						7,723
Cash dividends declared ($1.05 per share)							(15,532	)								(15,532	)
Stock-based compensation expense, net				(179	)					1,049						870
Exercise of 18,899 stock options				(121	)					665						544
Purchase of 237,535 treasury shares										(7,915	)					(7,915	)
Balances at September 30, 2012	$	46,249	$	103,311		$	303,567		$	(124,347	)	$	(365	)	$	328,415

See notes to consolidated financial statements.

6

Consolidated Statements of Cash Flows (Unaudited)

City Holding Company and Subsidiaries

(in thousands)

	Nine months Ended September 30
	2012			2011
Net income	$	28,049		$	31,024
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion		1,356			1,296
Provision for loan losses		4,600			2,372
Depreciation of premises and equipment		3,371			3,408
Deferred income tax expense (benefit)		342			(1,802	)
Accretion of gain from sale of interest rate floors		-			(295	)
Net periodic employee benefit cost		391			288
Realized investment securities gains		(1,530	)		(3,756	)
Net investment securities impairment losses		576			355
Stock-compensation expense		870			867
Increase in value of bank-owned life insurance		(2,164	)		(2,455	)
Proceeds from bank-owned life insurance		-			492
Change in accrued interest receivable		(137	)		464
Change in other assets		(735	)		(4,694	)
Change in other liabilities		2,092			14,711
Net Cash Provided by Operating Activities		37,081			42,275
Proceeds from sale of money market and mutual fund securities available-for-sale		-			617,230
Purchases of money market and mutual fund securities available-for-sale		-			(617,337	)
Proceeds from sales of securities available-for-sale		27,773			56,371
Proceeds from maturities and calls of securities available-for-sale		113,760			88,807
Proceeds from maturities and calls of securities held-to-maturity		10,046			1,338
Purchases of securities available-for-sale		(150,497	)		(107,050	)
Net (increase) in loans		(43,656	)		(61,800	)
Purchases of premises and equipment		(5,910	)		(3,691	)
Acquisition of Virginia Savings Bancorp, net of cash acquired of $24,947		20,275			-
Net Cash Used in Investing Activities		(28,209	)		(26,132	)
Net increase in noninterest-bearing deposits		26,777			25,577
Net increase (decrease) in interest-bearing deposits		10,815			(2,631	)
Net (decrease) increase in short-term borrowings		(57,103	)		15,171
Purchases of treasury stock		(7,915	)		(21,429	)
Proceeds from exercise of stock options		544			168
Dividends paid		(15,517	)		(15,591	)
Net Cash (Used in) Provided by Financing Activities		(42,399	)		1,265
(Decrease) increase in Cash and Cash Equivalents		(33,527	)		17,408
Cash and cash equivalents at beginning of period		146,399			66,379
Cash and Cash Equivalents at End of Period	$	112,872		$	83,787

See notes to consolidated financial statements.

7

Notes to Consolidated Financial Statements (Unaudited)

September 30, 2012

Note A – Basis of Presentation

The accompanying consolidated financial statements, which are unaudited, include all of the accounts of City Holding Company (“the Parent Company”) and its wholly-owned subsidiaries (collectively, “the Company”). All material intercompany transactions have been eliminated. The consolidated financial statements include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations and financial condition for each of the periods presented. Such adjustments are of a normal recurring nature. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results of operations that can be expected for the year ending December 31, 2012. The Company’s accounting and reporting policies conform with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Such policies require management to make estimates and develop assumptions that affect the amounts reported in the consolidated financial statements and related footnotes. Actual results could differ from management’s estimates.

The consolidated balance sheet as of December 31, 2011 has been derived from audited financial statements included in the Company’s 2011 Annual Report to Shareholders.  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the 2011 Annual Report of the Company.

Certain amounts in the financial statements have been reclassified.  Such reclassifications had no impact on shareholders’ equity or net income for any period.

Note B – Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.”  This ASU amends Topic 820, “Fair Value Measurements and Disclosures,” to converge the fair value measurement guidance contained in U.S. generally accepted accounting principles and International Financial Reporting Standards (“IFRS”).  The provisions of ASU No. 2011-04 clarify existing fair value measurements, amend certain principles set forth in Topic 820 and requires additional fair value disclosures.  ASU No. 2011-04 became effective for the Company’s reporting period that began on January 1, 2012.  The adoption of ASU No. 2011-04 did not have a material impact on the Company’s financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) – Presentation of Comprehensive Income.”  ASU 2011-05 amends Topic 220, “Comprehensive Income,” to require that all non-owner changes in shareholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate, but consecutive statements, thus eliminating the option to present components of comprehensive income within the statement of changes in shareholders’ equity.  ASU No. 2011-05 is effective for the Company’s reporting period that began on January 1, 2012; however, certain provisions related to the presentation of reclassification adjustments have been deferred by ASU 2011-12, “Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassification Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” as further discussed below.  The adoption of ASU No. 2011-05 did not have a material impact on the Company’s financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment.”  Under this ASU, an entity has the option to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.  If an entity determines, as a result of this qualitative assessment, that it is not more than likely that the fair value of the reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.  ASU No. 2011-08 is effective for the Company’s reporting period that began on January 1, 2012.  The adoption of ASU No. 2011-08 did not have a material impact on the Company’s financial statements.

8

In December 2011, the FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.”  This ASU defers the changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments.  ASU No. 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to ASU No. 2011-05.  All other requirements in ASU No. 2011-05 are not affected.  ASU No. 2011-12 is effective for the Company’s reporting period that began on January 1, 2012.  The adoption of ASU No. 2011-12 did not have a material impact on the Company’s financial statements.

Note C – Acquisitions

On May 31, 2012, the Company acquired 100% of the outstanding common and preferred stock of Virginia Savings Bancorp, Inc. and its wholly owned subsidiary, Virginia Savings Bank (collectively, “VSB”).  As a result of this acquisition, the Company acquired five branches which expanded its footprint into Virginia.  At the time of closing, VSB had total assets of $132 million, loans of $82 million, deposits of $120 million and shareholders’ equity of $11 million.

The total transaction was valued at $12.4 million, consisting of cash of $4.7 million and approximately 240,000 shares of common stock valued at $7.7 million.  The common stock was valued based on the closing price of $32.18 for the Company’s common shares on May 31, 2012.  The preliminary purchase price has been allocated as follows:

	May 31, 2012
Consideration:
Cash	$	4,672
Common stock		7,723
	$	12,395
Identifiable assets:
Cash and cash equivalents	$	24,947
Investment securities		14,082
Loans		73,448
Premises and equipment		5,158
Other assets		8,931
Total identifiable assets		126,566
Identifiable liabilities:
Deposits		122,755
Other liabilities		698
Total identifiable liabilities		123,453
Net identifiable assets		3,113
Goodwill		8,009
Core deposit intangible		1,273
	$	12,395

In determining the estimated fair value of the acquired loans, management considered several factors, such as estimated future credit losses, estimated prepayments, remaining lives of the acquired loans, estimated value of the underlying collateral and the net present value of the cash flows expected to be received.  For smaller loans not specifically reviewed, management grouped the loans into their respective homogeneous loan pool and applied a loss estimate accordingly.

Acquired loans are accounted for using one of the two following accounting standards:

9

(1)   ASC Topic 310-20 is used to value loans that do not have evidence of credit quality deterioration.  For these loans, the difference between the fair value of the loan and the amortized cost of the loan would be amortized or accreted into income using the interest method.

(2)   ASC Topic 310-30 is used to value loans that have evidence of credit quality deterioration.  For these loans, the expected cash flows that exceed the fair value of the loan represent the accretable yield, which is recognized as interest income on a level-yield basis over the expected cash flow periods of the loans.  The non-accretable difference represents the difference between the contractually required principal and interest payments and the cash flows expected to be collected based upon management’s estimation.  Subsequent decreases in the expected cash flows will require the Company to evaluate the need for additions to the Company’s allowance for loan losses.  Subsequent increases in the expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges with a corresponding adjustment to the accretable yield, which will result in the recognition of additional interest income over the remaining lives of the loans.  The accretable difference represents the difference between the expected cash flows and the net present value of expected cash flows.  This difference is accreted into earnings using the level-yield method over the expected cash flow periods of the loans.  In determining the net present value of expected cash flows, management used various discount rates based upon the risk characteristics for each loan type.

The following table presents the loans acquired in conjunction with the VSB acquisition:

	May 31, 2012
Contractually required principal and interest	$	11,567
Contractual cash flows not expected to be collected (non-accretable difference)		(3,973	)
Expected cash flows		7,594
Interest component of expected cash flows (accretable difference)		(954	)
Estimated fair value of purchased credit impaired loans acquired	$	6,640
Estimated fair value of performing loans acquired		66,808
Estimated fair value of loans acquired	$	73,448

  The fair values of non-time deposits approximated their carrying value at the acquisition date.  For time deposits, the fair values were estimated based on discounted cash flows, using interest rates that are currently being offered compared to the contractual interest rates.   Based on this analysis, management recorded a premium on time deposits acquired of $2.3 million, which is being amortized over five years.

The Company believes that the customer relationships with the deposits acquired have an intangible value.  In connection with the acquisition, the Company recorded a core deposit intangible asset of $1.3 million, which represents the value of the relationship that VSB had with their deposit customers.  The fair value was estimated based on a discounted cash flow methodology that considered type of deposit, deposit retention and the cost of the deposit base.   The core deposit intangible is being amortized over ten years, with an annual charge of less than $0.2 million per year.  The following table presents a rollforward of the Company’s intangible assets from the beginning of the year:

	Intangible Assets
Balance, January 1, 2012	$	1,274
Core deposit intangible acquired in conjunction with the acquisition of VSB		1,273
Amortization expense		(343	)
Balance, September 30, 2012	$	2,204

Under GAAP, management has up to twelve months following the date of the acquisition to finalize the fair values of acquired assets and liabilities.  The measurement period ends as soon as the Company receives information it was seeking about facts and circumstances that existed as of the acquisition date or learns more information is not obtainable.  Any subsequent adjustments to the fair value of the acquired assets and liabilities, intangible assets or other purchase accounting adjustments will result in adjustments to the goodwill recorded.  The measurement period is limited to one year from the acquisition date.  The goodwill recorded in conjunction with the VSB acquisition is not expected to be deductible for tax purposes.  The following table presents a rollforward of goodwill from the beginning of the year:

10

	Goodwill
Balance, January 1, 2012		$	54,890
Goodwill acquired in conjunction with the acquisition of VSB			8,009
Balance, September 30, 2012		$	62,899

On August 2, 2012, the Company entered into a definitive agreement to acquire Community Financial Corporation and its wholly owned subsidiary Community Bank (“Community”).  Community is a $500 million bank and operates eight branches along the I-81 corridor in western Virginia and two branches in Virginia Beach, Virginia.  The Company anticipates the transaction will be completed in the first quarter of 2013, pending regulatory approvals, the approval of Community’s shareholders and the completion of other customary closing conditions.  The total transaction value is expected to be approximately $26.6 million.

Note D –Investments

The aggregate carrying and approximate market values of securities follow.  Fair values are based on quoted market prices, where available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable financial instruments.

	September 30, 2012								December 31, 2011
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. Treasuries and U.S.
government agencies	$	4,310	$	105	$	-	$	4,415	$	5,868	$	173	$	-	$	6,041
Obligations of states and
political subdivisions		48,334		1,814		15		50,133		55,262		1,561		21		56,802
Mortgage-backed securities:
U.S. government agencies		285,678		8,695		45		294,328		220,815		6,966		168		227,613
Private label		3,583		43		-		3,626		5,117		45		6		5,156
Trust preferred
securities		18,405		201		3,098		15,508		48,951		941		4,735		45,157
Corporate securities		16,178		251		466		15,963		16,226		160		1,988		14,398
Total Debt Securities		376,488		11,109		3,624		383,973		352,239		9,846		6,918		355,167
Marketable equity  securities		3,381		551		11		3,921		4,318		-		465		3,853
Investment funds		1,724		68		-		1,792		1,724		39		-		1,763
Total Securities
Available-for-Sale	$	381,593	$	11,728	$	3,635	$	389,686	$	358,281	$	9,885	$	7,383	$	360,783

	September 30, 2012								December 31, 2011
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities held-to-maturity
Trust preferred securities	$	13,444	$	283	$	69	$	13,658	$	23,458	$	675	$	710	$	23,423
Total Securities
Held-to-Maturity	$	13,444	$	283	$	69	$	13,658	$	23,458	$	675	$	710	$	23,423
Other investment securities:
Non-marketable equity securities	$	11,459	$	-	$	-	$	11,459	$	11,934	$	-	$	-	$	11,934
Total Other Investment
Securities	$	11,459	$	-	$	-	$	11,459	$	11,934	$	-	$	-	$	11,934

Securities with limited marketability, such as stock in the Federal Reserve Bank or the Federal Home Loan Bank, are carried at cost and are reported as non-marketable equity securities in the table above.

11

Certain investment securities owned by the Company were in an unrealized loss position (i.e., amortized cost basis exceeded the estimated fair value of the securities) as of September 30, 2012 and December 31, 2011.  The following table shows the gross unrealized losses and fair value of the Company’s investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2012 and December 31, 2011.

	September 30, 2012
	Less Than Twelve Months				Twelve Months or Greater				Total
(In thousands)	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	1,482	$	15	$	-	$	-	$	1,482	$	15
Mortgage-backed securities:
U.S. Government agencies		16,440		35		2,830		10		19,270		45
Trust preferred securities		-		-		5,497		3,098		5,497		3,098
Corporate securities		4,070		258		2,165		208		6,235		466
Marketable equity securities		127		11		-		-		127		11
Total	$	22,119	$	319	$	10,492	$	3,316	$	32,611	$	3,635
Securities held-to-maturity:
Trust preferred securities	$	-	$	-	$	3,372	$	69	$	3,372	$	69

	December 31, 2011
	Less Than Twelve Months				Twelve Months or Greater				Total
(In thousands)	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	992	$	11	$	394	$	10	$	1,386	$	21
Mortgage-backed securities:
U.S. Government agencies		-		-		4,333		168		4,333		168
Private label		3,236		6		-		-		3,236		6
Trust preferred securities		6,724		520		5,402		4,215		12,126		4,735
Corporate securities		1,791		241		4,941		1,747		6,732		1,988
Marketable equity securities		3,810		465		-		-		3,810		465
Total	$	16,553	$	1,243	$	15,070	$	6,140	$	31,623	$	7,383
Securities held-to-maturity:
Trust preferred securities	$	4,823	$	212	$	8,219	$	498	$	13,042	$	710

Marketable equity securities consist of investments made by the Company in equity positions of various community banks.  Included within this portfolio are meaningful (2-5%) ownership positions in the following community bank holding companies: First National Corporation and First United Corporation.

During the first nine months of 2012, the Company recorded $0.6 million in credit-related net investment impairment losses.  The charges deemed to be other-than-temporary were related to pooled bank trust preferred securities with a remaining book value of $5.6 million at September 30, 2012.  The credit-related net impairment charges related to the pooled bank trust preferred securities were based on the Company’s quarterly reviews of its investment securities for indications of losses considered to be other than temporary.  Based on management’s assessment of the securities the Company owns, the seniority positions of the securities within the pools, the level of defaults and deferred payments within the pools, management concluded that credit-related impairment charges of $0.6 million on the pooled bank trust preferred securities were appropriate for the nine months ended September 30, 2012.  During 2011, the Company recorded $1.3 million in credit-related net investment impairment losses.  The charges deemed to be other-than-temporary were related to pooled bank trust preferred securities ($0.4 million credit-related net impairment losses for the full year) with a remaining book value of $6.3 million at December 31, 2011, and community bank and bank holding company equity positions ($0.9 million credit-related net impairment losses for the full year) with a remaining book value of $3.9 million at December 31, 2011.  The credit-related net impairment charges related to the pooled bank trust preferred securities were based on the Company’s quarterly reviews of its investment securities for indications of losses considered to be other than temporary.  Based on management’s assessment of the securities the Company owns, the seniority position of the securities within the pools, the level of defaults and deferred payments within the pools, management concluded that credit-related impairment charges of $0.4 million on the pooled bank trust preferred securities were appropriate for the year ending December 31, 2011.  During the year ended December 31, 2011, the Company recognized $0.9 million of credit-related net impairment charges on the Company’s equity positions due to the length of time and extent to which the market value of these securities have been below the Company’s cost basis.  As a result of these factors, the Company does not expect the market value of these securities to recover in the near future.

12

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary would be reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition, capital strength, and near-term (12 months) prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; (iii) the historical volatility in the market value of the investment and/or the liquidity or illiquidity of the investment; (iv) adverse conditions specifically related to the security, an industry, or a geographic area; or (v) the intent to sell the investment security and if it’s more likely than not that the Company will not have to sell the security before recovery of its cost basis.  In addition, management also employs a continuous monitoring process in regards to its marketable equity securities, specifically its portfolio of regional community bank holdings.  Although the regional community bank stocks that are owned by the Company are publicly traded, the trading activity for these stocks is minimal, with trading volumes of less than 0.1% of each respective company being traded on a daily basis.  Another factor influencing the market value of these equity securities is a depressed stock market, particularly in the smaller community bank financial sector.  As part of management’s review process for these securities, management reviews the financial condition of each respective regional community bank for any indications of financial weakness.

Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company will receive full value for the securities.  Furthermore, as of September 30, 2012, management does not intend to sell an impaired security and it is not more than likely that it will be required to sell the security before the recovery of its amortized cost basis.  The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread widening on agency-issued mortgage related securities, general financial market uncertainty and unprecedented market volatility.  These conditions will not prohibit the Company from receiving its contractual principal and interest payments on its debt securities.  The fair value is expected to recover as the securities approach their maturity date or repricing date.   As of September 30, 2012, management believes the unrealized losses detailed in the table above are temporary and no impairment loss has been recognized in the Company’s consolidated income statement.  Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period of the other-than-temporary impairment is identified, while any noncredit loss will be recognized in other comprehensive income.

At September 30, 2012, the book value of the Company’s five pooled trust preferred securities totaled $5.6 million with an estimated fair value of $3.7 million.  All of these securities are mezzanine tranches.  Pooled trust preferred securities represent beneficial interests in securitized financial assets that the Company analyzes within the scope of ASC 320, “Investments-Debt and Equity Securities” and are evaluated quarterly for other-than-temporary-impairment (“OTTI”).  Management performs an analysis of OTTI utilizing its internal methodology as described below to estimate expected cash flows to be received in the future.  The Company reviews each of its pooled trust preferred securities to determine if an OTTI charge would be recognized in current earnings in accordance with ASC 320, “Investments-Debt and Equity Securities”.  There is a risk that continued collateral deterioration could cause the Company to recognize additional OTTI charges in earnings in the future.

13

When evaluating pooled trust preferred securities for OTTI, the Company determines a credit related portion and a noncredit related portion.  The credit related portion is recognized in earnings and represents the difference between the present value of expected future cash flows and the amortized cost basis of the security.  The noncredit related portion is recognized in other comprehensive income, and represents the difference between the book value and the fair value of the security less the amount of the credit related impairment.  The determination of whether it is probable that an adverse change in estimated cash flows has occurred is evaluated by comparing estimated cash flows to those previously projected as further described below.  The Company considers this process to be its primary evidence when determining whether credit related OTTI exists.  The results of these analyses are significantly affected by other variables such as the estimate of future cash flows, credit worthiness of the underlying issuers and determination of the likelihood of defaults of the underlying collateral.

The Company utilizes a third party model to compute the present value of expected cash flows which considers the structure and term of each of the five respective pooled trust preferred securities and the financial condition of the underlying issuers.  Specifically, the third party model details interest rates, principal balances of note classes and underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of the payments to the note classes. The current estimate of expected cash flows is based on the most recent trustee reports and any other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities. For issuing banks that have defaulted, management generally assumes no recovery. For issuing banks that have deferred its interest payments, management excludes the collateral balance associated with these banks and assumes no recoveries of such collateral balance in the future. The exclusion of such issuing banks in a current deferral position is based on such bank experiencing a certain level of financial difficulty that raises doubt about its ability to satisfy its contractual debt obligation, and accordingly, the Company excludes the associated collateral balance from its estimate of expected cash flows. Other assumptions used in the estimate of expected cash flows include expected future default rates and prepayments. Specifically, the model assumes annual prepayments of 1.0% with 100% at maturity and assumes 150 basis points of additional annual defaults from banks that are currently not in default or deferral.  In addition, the model assumes no recoveries except for one trust preferred security which assumes that one of the banks currently deferring or in default will cure such positions by June 2013.  Management compares the present value of expected cash flows to those previously projected to determine if an adverse change in cash flows has occurred. If an adverse change in cash flows has occurred, management determines the credit loss to be recognized in the current period and the portion related to noncredit factors to be recognized in other comprehensive income.

The following table presents a progression of the credit loss component of OTTI on debt and equity securities recognized in earnings during the nine months ended September 30, 2012 and for the year ended December 31, 2011.  The credit loss component represents the difference between the present value of expected future cash flows and the amortized cost basis of the security.  The credit component of OTTI recognized in earnings during a period is presented in two parts based upon whether the credit impairment in the current period is the first time the security was credit impaired (initial credit impairment) or if there is additional credit impairment on a security that was credit impaired in previous periods.

(In thousands)	Debt Securities			Equity Securities			Total
Balance at January 1, 2011	$	20,893		$	5,130		$	26,023
Additions:
Initial credit impairment		-			-			-
Additional credit impairment		355			918			1,273
Deductions:
Called		(638	)		-			(638	)
Balance December 31, 2011		20,610			6,048			26,658
Additions:
Initial credit impairment		-			-			-
Additional credit impairment		576			-			576
Deductions:
Sold		-			(1,235	)		(1,235	)
Balance September 30, 2012	$	21,186		$	4,813		$	25,999

14

The following table presents additional information about the Company’s trust preferred securities with a credit rating of below investment grade as of September 30, 2012:

(Dollars in thousands)

Deal Name			Type	Class	Original Cost		Amortized Cost		Fair Value		Difference (1)			Lowest Credit Rating	# of issuers currently performing		Actual deferrals/defaults (as a % of original dollar)			Expected deferrals/defaults (as a % of remaining of performing collateral)				Excess Subordination as a Percentage of Current Performing Collateral (4)
			Pooled trust preferred securities:
			Other-than-temporarily impaired
			Available for Sale:
	P1		Pooled	Mezz	$	1,115	$	451	$	175		(276	)	Ca		12		22.8	%		17.1	%	(2)		33.3	%
	P2		Pooled	Mezz		3,944		1,197		892		(305	)	Ca		12		25.9	%		15.8	%	(2)		8.3	%
	P3	(5)	Pooled	Mezz		2,962		1,419		350		(1,069	)	Caa3		24		24.5	%		21.5	%	(2)		0.2	%
	P4	(6)	Pooled	Mezz		4,060		400		400		-		Ca		10		19.2	%		23.0	%	(3)		0.0	%
	P5		Pooled	Mezz		5,872		826		366		(460	)	Ca		14		26.0	%		22.0	%	(2)		20.8	%
			Held to Maturity:
	P6		Pooled	Mezz		2,158		246		349		103		Ca		12		22.8	%		17.1	%	(2)		33.3	%
	P7		Pooled	Mezz		5,237		1,068		1,189		121		Ca		12		25.9	%		15.8	%	(2)		8.3	%
			Single issuer trust preferred securities
			Available for sale:
	S1		Single			261		235		163		(72	)	NR		1		-			-
	S2		Single			1,000		1,000		1,036		36		B2		1		-			-
			Held to Maturity:
	S3		Single			4,000		4,000		4,000		-		NR		1		-			-
	S4		Single			3,360		3,098		3,075		(23	)	NR		1		-			-
	S5		Single			3,564		3,532		3,533		1		NR		1		-			-

(1)	The differences noted consist of unrealized losses recorded at September 30, 2012 and noncredit other-than-temporary impairment losses recorded subsequent to April 1, 2009 that have not been reclassified as credit losses.
(2)	Performing collateral is defined as total collateral minus all collateral that has been called, is currently deferring, or currently in default. This model for this security assumes that all collateral that is currently deferring will default with a zero recovery rate. The underlying issuers can cure, thus this bond could recover at a higher percentage upon default than zero.
(3)	Performing collateral is defined as total collateral minus all collateral that has been called, is currently deferring, or currently in default.  The model for this security assumes that one of the banks that are currently deferring will cure by June 2013.  If additional underlying issuers cure, this bond could recover at a higher percentage.
(4)	Excess subordination is defined as the additional defaults/deferrals necessary in the next reporting period to deplete the entire credit enhancement (excess interest and over-collateralization) beneath our tranche within each pool to the point that would cause a "break in yield." This amount assumes that all currently performing collateral continues to perform. A break in yield means that our security would not be expected to receive all the contractual cash flows (principal and interest) by maturity. The "percent of current performing collateral" is the ratio of the "excess subordination amount" to current performing collateral—a higher percent means there is more excess subordination to absorb additional defaults/deferrals, and the better our security is protected from loss.
(5)	Other-than-temporary impairment losses of $11,000 were recognized during the nine months ended September 30, 2012.  Other-than-temporary impairment losses of $115,000 were recognized during the year ended December 31, 2011.
(6)	Other-than-temporary impairment losses of $565,000 were recognized during the nine months ended September 30, 2012.  Other-than-temporary impairment losses of $240,000 were recognized during the year ended December 31, 2011.

15

The amortized cost and estimated fair value of debt securities at September 30, 2012, by contractual maturity, are shown in the following table.  Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.  Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity.

(In thousands)	Cost		Estimated Fair Value
Securities Available-for-Sale
Due in one year or less		7,229		7,275
Due after one year through five years		33,449		33,844
Due after five years through ten years		46,821		48,827
Due after ten years		288,989		294,027
	$	376,488	$	383,973
Securities Held-to-Maturity
Due in one year or less		-		-
Due after one year through five years		-		-
Due after five years through ten years		-		-
Due after ten years		13,444		13,658
	$	13,444	$	13,658

The Company recognized $0.7 million and $1.5 million in gross gains from investment security transactions during the three and nine months ended September 30, 2012.  The Company recognized $0.6 million and $3.8 million in gross gains from investment security transactions during the three and nine months ended September 30, 2011.  The specific identification method is used to determine the cost basis of securities sold. The carrying value of securities pledged to secure public deposits and for other purposes as required or permitted by law approximated $218 million and $204 million at September 30, 2012 and December 31, 2011, respectively.

Note E –Loans

The following summarizes the Company’s major classifications for loans:

( In thousands)	September 30, 2012			December 31, 2011
Residential real estate	$	1,008,305		$	929,788
Home equity – junior liens		143,058			141,797
Commercial and industrial		105,027			130,899
Commercial real estate		787,887			732,146
Consumer		38,285			35,845
DDA overdrafts		2,670			2,628
Gross loans		2,085,232			1,973,103
Allowance for loan losses		(18,986	)		(19,409	)
Net loans	$	2,066,246		$	1,953,694

Construction loans of $12.8 million and $9.3 million are included within residential real estate loans at September 30, 2012 and December 31, 2011, respectively.  Construction loans of $17.1 million and $20.2 million are included within commercial real estate loans at September 30, 2012 and December 31, 2011, respectively.  The Company’s commercial and residential real estate construction loans are primarily secured by real estate within the Company’s principal markets.  These loans were originated under the Company’s loan policy, which is focused on the risk characteristics of the loan portfolio, including construction loans.  Adequate consideration has been given to these loans in establishing the Company’s allowance for loan losses.

16

The composition of loans acquired in the VSB acquisition outstanding at September 30, 2012 is as follows:

	September 30, 2012
Residential real estate	$	22,789
Home equity – junior liens		6,137
Commercial and industrial		2,810
Commercial real estate		34,435
Consumer		2,934
Gross loans	$	69,105

The outstanding loan balances acquired in the VSB acquisition in the above table include $6.5 million of credit-impaired loans, with a contractual principal balance of $10.8 million.

Activity for the accretable yield for the first nine months of 2012 is as follows:

Accretable yield at the beginning of the period	$	-
Additions		954
Accretion		(112	)
Net reclassifications to accretable from non-accretable		-
Maturities, foreclosures and charge-offs		-
Accretable yield at the end of period	$	842

Note F –Allowance For Loan Losses

Management systematically monitors the loan portfolio and the adequacy of the allowance for loan losses on a quarterly basis to provide for probable losses inherent in the portfolio.  Management assesses the risk in each loan type based on historical trends, the general economic environment of its local markets, individual loan performance and other relevant factors.

Individual credits are selected throughout the year for detailed loan reviews, which are utilized by management to assess the risk in the portfolio and the adequacy of the allowance.  Due to the nature of commercial lending, evaluation of the adequacy of the allowance as it relates to these types of loan types is often based more upon specific credit reviews, with consideration given to the potential impairment of certain credits and historical loss rates, adjusted for economic conditions and other inherent risk factors.

A loan acquired and accounted for under ASC Topic 310-30 is reported as an accruing loan and a performing asset.

The following summarizes the activity in the allowance for loan loss, by portfolio segment, for the nine months ended September 30, 2012 and 2011.  The following also presents the balance in the allowance for loan loss disaggregated on the basis of the Company’s impairment measurement method and the related recorded investment in loans, by portfolio segment, as of September 30, 2012 and December 31, 2011.

(In thousands)	Commercial and industrial			Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
Nine months ended
September 30, 2012:
Allowance for loan loss
Beginning balance	$	590		$	11,666	$	3,591	$	2,773	$	88	$	701	$	19,409
Charge-offs		126			2,860		746		989		148		1,128		5,997
Recoveries		12			100		15		12		90		745		974
Provision		45			1,684		955		1,250		75		591		4,600
Ending balance	$	521		$	10,590	$	3,815	$	3,046	$	105	$	909	$	18,986
Nine months ended
September 30, 2011:
Allowance for loan loss
Beginning balance	$	1,864		$	8,488	$	4,149	$	2,640	$	95	$	988	$	18,224
Charge-offs		275			341		1,191		614		133		1,318		3,872
Recoveries		8			1,982		19		6		107		1,002		3,124
Provision		(1,032	)		1,942		744		538		23		157		2,372
Ending balance	$	565		$	12,071	$	3,721	$	2,570	$	92	$	829	$	19,848
As of September 30, 2012:
Allowance for loan loss
Evaluated for impairment:
Individually	$	-		$	-	$	-	$	-	$	-	$	-	$	-
Collectively		521			10,590		3,815		3,046		105		909		18,986
Acquired with deteriorated
credit quality		-			-		-		-		-		-		-
Total	$	521		$	10,590	$	3,815	$	3,046	$	105	$	909	$	18,986
Loans
Evaluated for impairment:
Individually	$	-		$	10,002	$	471	$	297	$	-	$	-	$	10,770
Collectively		105,027			771,716		1,007,710		142,674		38,177		2,670		2,067,974
Acquired with deteriorated
credit quality		-			6,169		124		87		108		-		6,488
Total	$	105,027		$	787,887	$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
As of December 31, 2011:
Allowance for loan loss
Evaluated for impairment:
Individually	$	-		$	2,666	$	-	$	-	$	-	$	-	$	2,666
Collectively		590			9,000		3,591		2,773		88		701		16,743
Total	$	590		$	11,666	$	3,591	$	2,773	$	88	$	701	$	19,409
Loans
Evaluated for impairment:
Individually	$	81		$	15,311	$	476	$	298	$	-	$	-	$	16,166
Collectively		130,818			716,835		929,312		141,499		35,845		2,628		1,956,937
Total	$	130,899		$	732,146	$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

17

Credit Quality Indicators

All commercial loans within the portfolio are subject to internal risk grading.  All non-commercial loans are evaluated based on payment history.  The Company’s internal risk ratings for commercial loans are:  Exceptional, Good, Acceptable, Pass/Watch, Special Mention, Substandard and Doubtful.  Each internal risk rating is defined in the loan policy using the following criteria:  balance sheet yields, ratios and leverage, cash flow spread and coverage, prior history, capability of management, market position/industry, potential impact of changing economic, legal, regulatory or environmental conditions, purpose structure, collateral support, and guarantor support.  Risk grades are generally assigned by the primary lending officer and are periodically evaluated by the Company’s internal loan review process.  Based on an individual loan’s risk grade, estimated loss percentages are applied to the outstanding balance of the loan to determine the amount of probable loss.

The Company categorizes loans into risk categories based on relevant information regarding the customer’s debt service ability, capacity, overall collateral position along with other economic trends, and historical payment performance.  The risk grades for each credit are updated when the Company receives current financial information, the loan is reviewed by the Company’s internal loan review/credit administration departments, or the loan becomes delinquent or impaired.  The risk grades are updated a minimum of annually for loans rated exceptional, good, acceptable, or pass/watch.  Loans rated special mention, substandard or doubtful are reviewed at least quarterly.  The Company uses the following definitions for its risk ratings:

18

Risk Rating	Description
Exceptional	Loans classified as exceptional are secured with liquid collateral conforming to the internal loan policy.  Loans rated within this category pose minimal risk of loss to the bank and the risk grade within this pool of loans is generally updated on an annual basis.
Good	Loans classified as good have similar characteristics that include a strong balance sheet, satisfactory debt service coverage ratios, strong management and/or guarantors, and little exposure to economic cycles.  Loans within this category are generally reviewed on an annual basis.  Loans in this category generally have a low chance of loss to the bank.
Acceptable	Loans classified as acceptable have acceptable liquidity levels, adequate debt service coverage ratios, experienced management, and have average exposure to economic cycles.  Loans within this category generally have a low risk of loss to the bank.
Pass/watch	Loans classified as pass/watch have erratic levels of leverage and/or liquidity, cash flow is volatile and the borrower is subject to moderate economic risk.  A borrower in this category poses a low to moderate risk of loss to the bank.
Special mention	Loans classified as special mention have a potential weakness(es) that deserves management’s close attention.  The potential weakness could result in deterioration of the loan repayment or the bank’s credit position at some future date.  A loan rated in this category poses a moderate loss risk to the bank.
Substandard	Loans classified as substandard reflect a customer with a well defined weakness that jeopardizes the liquidation of the debt.  Loans in this category have the possibility that the bank will sustain some loss if the deficiencies are not corrected and the bank’s collateral value is weakened by the financial deterioration of the borrower.
Doubtful	Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristics that make collection of the full contract amount highly improbable.  Loans rated in this category are most likely to cause the bank to have a loss due to a collateral shortfall or a negative capital position.

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The following presents loans by the Company’s credit quality indicators, by class, as of September 30, 2012 and December 31, 2011:

(In thousands)	Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
Risk Grade
Exceptional	$	3,508	$	1,813		-		-		-		-	$	5,321
Good		6,466		98,231		-		-		-		-		104,697
Acceptable		68,504		456,116		-		-		-		-		524,620
Pass/watch		23,320		177,974		-		-		-		-		201,294
Special mention		1,066		15,831		-		-		-		-		16,897
Substandard		2,163		37,922		-		-		-		-		40,085
Doubtful		-		-		-		-		-		-		-
Total	$	105,027	$	787,887										892,914
Payment Activity
Performing						1,005,522		141,950		38,274		2,666	$	1,188,412
Non-performing						2,783		1,108		11		4		3,906
Total					$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
December 31, 2011:
Risk Grade
Exceptional	$	4,220	$	42		-		-		-		-	$	4,262
Good		6,728		107,718		-		-		-		-		114,446
Acceptable		93,077		411,721		-		-		-		-		504,798
Pass/watch		25,246		161,598		-		-		-		-		186,844
Special mention		470		16,802		-		-		-		-		17,272
Substandard		1,037		34,265		-		-		-		-		35,302
Doubtful		121		-		-		-		-		-		121
Total	$	130,899	$	732,146										863,045
Payment Activity
Performing					$	928,789	$	139,996	$	35,845	$	2,616	$	1,107,246
Non-performing						999		1,801		-		12		2,812
Total					$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

Aging Analysis of Accruing and Non-Accruing Loans

Interest income on loans is accrued and credited to operations based upon the principal amount outstanding, using methods that generally result in level rates of return.  Loan origination fees, and certain direct costs, are deferred and amortized as an adjustment to the yield over the term of the loan.  The accrual of interest generally is discontinued when a loan becomes 90 days past due as to principal or interest for all loan types.  However, any loan may be placed on non-accrual if the Company receives information that indicates a borrower is unable to meet the contractual terms of their respective loan agreement.  Other indicators considered for placing a loan on non-accrual status include the borrower’s involvement in bankruptcies, foreclosures, repossessions, litigation and any other situation resulting in doubt as to whether full collection of contractual principal and interest is attainable.  When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and interest accrued in prior years is charged to the allowance for loan losses.  Management may elect to continue the accrual of interest when the net realizable value of collateral exceeds the principal balance and related accrued interest, and the loan is in the process of collection.

20

Generally for all loan classes, interest income during the period the loan is non-performing is recorded on a cash basis after recovery of principal is reasonably assured.  Cash payments received on nonperforming loans are typically applied directly against the outstanding principal balance until the loan is fully repaid.  Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Generally, all loan types are considered past due when the contractual terms of a loan are not met and the borrower is 30 days or more past due on a payment.  Furthermore, residential and home equity loans are generally subject to charge-off when the loan becomes 120 days past due, depending on the estimated fair value of the collateral less cost to dispose, versus the outstanding loan balance.  Unsecured commercial loans are generally charged off when the loan becomes 120 days past due.  Secured commercial loans are generally charged off when the loan becomes 120 days past due and open-end consumer loans are generally charged off when the loan becomes 180 days past due.

The following presents an aging analysis of the Company’s accruing and non-accruing loans, by class, as of September 30, 2012 and December 31, 2011:

(In thousands)	Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
30 – 59 days past due	$	25	$	1,168	$	4,332	$	2,473	$	110	$	309	$	8,417
60 – 89 days past due		-		102		231		135		15		6		489
Over 90 days past due		-		1		346		35		11		4		397
Non-accrual		1,426		17,650		2,437		1,073		-		-		22,586
		1,451		18,921		7,346		3,716		136		319		31,889
Current		103,576		768,966		1,000,959		139,342		38,149		2,351		2,053,343
Total	$	105,027	$	787,887	$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
December 31, 2011:
30 – 59 days past due	$	1,243	$	576	$	4,912	$	1,906	$	133	$	883	$	9,653
60 – 89 days past due		-		2,839		408		228		5		14		3,494
Over 90 days past due		-		-		42		112		-		12		166
Non-accrual		375		18,930		957		1,689		-		-		21,951
		1,618		22,345		6,319		3,935		138		909		35,264
Current		129,281		709,801		923,469		137,862		35,707		1,719		1,937,839
Total	$	130,899	$	732,146	$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

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The following presents the Company’s impaired loans, by class, as of September 30, 2012 and December 31, 2011:

(In thousands)	Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
With no related allowance recorded
Recorded investment	$	1,113	$	11,843	$	219	$	29	$	-	$	-	$	13,204
Unpaid principal balance		1,369		17,594		219		29		-		-		19,211
With an allowance recorded
Recorded investment	$	313	$	5,808	$	2,564	$	1,079	$	11	$	4	$	9,779
Unpaid principal balance		313		5,808		2,564		1,079		11		4		9,779
Related allowance		41		758		314		86		1		4		1,204
December 31, 2011:
With no related allowance recorded
Recorded investment	$	78	$	2,840	$	-	$	-	$	-	$	-	$	2,918
Unpaid principal balance		78		6,036		-		-		-		-		6,114
With an allowance recorded
Recorded investment	$	297	$	16,090	$	1,000	$	1,801	$	-	$	12	$	19,200
Unpaid principal balance		297		16,090		1,000		1,801		-		12		19,200
Related allowance		53		3,044		139		240		-		12		3,488

The following table presents information related to the average recorded investment and interest income recognized on the Company’s impaired loans, by class, for the nine months ended September 30, 2012 and 2011:

(In thousands)	Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
With no related allowance recorded
Average recorded investment	$	81	$	7,472	$	-	$	-	$	-	$	-	$	7,553
Interest income recognized		4		232		-		-		-		-		236
With an allowance recorded
Average recorded investment	$	203	$	11,197	$	1,254	$	1,354	$	-	$	-	$	14,008
Interest income recognized		7		378		36		30		-		-		451
September 30, 2011:
With no related allowance recorded
Average recorded investment	$	-	$	12,350	$	320	$	698	$	-	$	-	$	13,368
Interest income recognized		-		206		15		5		-		-		226
With an allowance recorded
Average recorded investment	$	248	$	14,192	$	996	$	526	$	-	$	-	$	15,962
Interest income recognized		-		157		-		-		-		-		157

Approximately $0.7 million and $0.6 million of interest income would have been recognized during the nine months ended September 30, 2012 and 2011, if such loans had been current in accordance with their original terms.  There were no commitments to provide additional funds on non-accrual, impaired or other potential problem loans at September 30, 2012.

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Loan Modifications

The Company’s policy on loan modifications typically does not allow for modifications that would be considered a concession from the Company.  However, when there is a modification, the Company evaluates each modification to determine if the modification constitutes a troubled debt restructuring (“TDR”) in accordance with ASU 2011-02, whereby a modification of a loan would be considered a TDR when both of the following conditions are met: (1) a borrower is experiencing financial difficulty and (2) the modification constitutes a concession.  When determining whether the borrower is experiencing financial difficulties, the Company reviews whether the debtor is currently in payment default on any of its debt or whether it is probable that the debtor would be in payment default in the foreseeable future without the modification.  Other indicators of financial difficulty include whether the debtor has declared or is in the process of declaring bankruptcy, the debtor’s ability to continue as a going concern, or the debtor’s projected cash flow to service its debt (including principal and interest) in accordance with the contractual terms for the foreseeable future, without a modification.

As of September 30, 2012, the Company reclassified $21.1 million of loans as TDRs in accordance with recent regulatory guidance.  The regulatory guidance requires loans to be accounted for as collateral-dependent loans when borrowers have filed Chapter 7 bankruptcy, the debt has been discharged by the bankruptcy court and the borrower has not reaffirmed the debt.  The filing of bankruptcy is deemed to be evidence that the borrower is in financial difficulty and the discharge of the debt by the bankruptcy court is deemed to be a concession granted to the borrower.  As of September 30, 2012, less than 5% of these loans were non-accruing loans.  There was no material difference between the pre-modification and post-modification balances.  The impact on the allowance for loan losses of this reclassification was insignificant.

The following tables set forth the Company’s TDRs at September 30, 2012:

	September 30, 2012
(In thousands)	Accruing		Non-Accruing		Total
Commercial and industrial	$	-	$	-	$	-
Commercial real estate		227		-		227
Residential real estate		14,098		185		14,283
Home equity		6,400		422		6,822
Consumer		144		-		144
	$	20,869	$	607	$	21,476

During the three month and nine months ended September 30, 2012, no other loans were identified as TDRs.  There were no TDRs that defaulted during the three or nine months ended September 30, 2012.

Note G – Previously Securitized Loans

Between 1997 and 1999, the Company completed six securitization transactions involving approximately $760 million in 125% of fixed rate, junior-lien underlying mortgages.  The Company retained a financial interest in each of the securitizations until 2004.  Principal amounts owed to investors were evidenced by securities (“Notes”).  During 2003 and 2004, the Company exercised its early redemption options on each of those securitizations.  Once the Notes were redeemed, the Company became the beneficial owner of the mortgage loans and recorded the loans as assets of the Company within the loan portfolio.

As the Company redeemed the outstanding Notes, no gain or loss was recognized in the Company’s financial statements and the remaining mortgage loans were recorded in the Company’s loan portfolio as “previously securitized loans,” at the lower of carrying value or fair value.  Because the carrying value of the mortgage loans incorporated assumptions for expected prepayment and default rates, the carrying value of the loans was generally less than the actual outstanding contractual balance of the loans.  As of September 30, 2012, there is no carrying value remaining on these loans, while the actual contractual balances of these loans was $8.4 million.  During the three and nine months ended September 30, 2012 and 2011, the Company recognized $0.8 million and $2.4 million and $0.8 million and $2.5 million, respectively, of interest income from its previously securitized loans.

Note H – Long-Term Debt

The components of long-term debt are summarized below:

23

( In thousands)	September 30, 2012			December 31, 2011
Junior subordinated debentures owed to City Holding Capital Trust III, due 2038, interest at a rate of 3.89% and 3.85%, respectively		$	16,495		$	16,495

The Company formed a statutory business trust, City Holding Capital Trust III (“Capital Trust III”), under the laws of Delaware.  Capital Trust III was created for the exclusive purpose of (i) issuing trust-preferred capital securities (“Capital Securities”), which represent preferred undivided beneficial interests in the assets of the trust, (ii) using the proceeds from the sale of the Capital Securities to acquire junior subordinated debentures (“Debentures”) issued by the Company, and (iii) engaging in only those activities necessary or incidental thereto.  The trust is considered a variable interest entity for which the Company is not the primary beneficiary.  Accordingly, the accounts of the trusts are not included in the Company’s consolidated financial statements.

Distributions on the Debentures are cumulative and will be payable quarterly at an interest rate of 3.50% over the three month LIBOR rate, reset quarterly.  Interest payments are due in March, June, September and December.  The Debentures are redeemable prior to maturity at the option of the Company (i) in whole or at any time or in part from time-to-time, at declining redemption prices ranging from 103.525% to 100.000% on June 15, 2013, and thereafter, or (ii) in whole, but not in part, at any time within 90 days following the occurrence and during the continuation of certain pre-defined events.

Payments of distributions on the trust preferred securities and payments on redemption of the trust preferred securities are guaranteed by the Company.  The Company also entered into an agreement as to expenses and liabilities with the trust pursuant to which it agreed, on a subordinated basis, to pay any costs, expenses or liabilities of the trust other than those arising under the trust preferred securities.  The obligations of the Company under the junior subordinated debentures, the related indentures, the trust agreement establishing the trust, the guarantees and the agreements as to expenses and liabilities, in the aggregate, constitute a full and unconditional guarantee by the Company of the trust’s obligations under the trust preferred securities.  The Capital Securities issued by the statutory business trusts qualify as Tier 1 capital for the Company under current Federal Reserve Board guidelines.

Note I – Derivative Instruments

As of September 30, 2012 and December 31, 2011, the Company has derivative financial instruments not included in hedge relationships.  These derivatives consist of interest rate swaps used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies.

The following table summarizes the fair value of these derivative instruments at September 30, 2012 and December 31, 2011:

	September 30, 2012		December 31, 2011
Fair Value:
Other Assets	$	14,616	$	11,541
Other Liabilities		14,616		11,541

The following table summarizes the change in fair value of these derivative instruments for the three and nine months ended September 30, 2012 and 2011:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Change in Fair Value:
Other income - derivative asset	$	543		$	7,095		$	3,075		$	7,943
Other income - derivative liability		(543	)		(7,095	)		(3,075	)		(7,943	)

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Note J – Employee Benefit Plans

During 2003, shareholders approved the City Holding Company 2003 Incentive Plan (“the Plan”).  Employees, directors and individuals who provide service to the Company (collectively, “Plan Participants”) are eligible to participate in the Plan.  Pursuant to terms of the Plan, the Compensation Committee of the Board of Directors, or its delegate, may, from time-to-time, grant stock options, stock appreciation rights (“SARs”), or stock awards to Plan Participants.  A maximum of 1,000,000 shares of the Company’s common stock may be issued upon the exercise of stock options, SARs and stock awards, but no more than 350,000 shares of common stock may be issued as stock awards.  These limitations may be adjusted in the event of a change in the number of outstanding shares of common stock by reason of a stock dividend, stock split or other similar event.  Specific terms of options and SARs awarded, including vesting periods, exercise prices (stock price at date of grant) and expiration dates are determined at the date of grant and are evidenced by agreements between the Company and the awardee.  The exercise price of the option grants equals the market price of the Company’s stock on the date of grant.  All incentive stock options and SARs will be exercisable up to ten years from the date granted and all options and SARs are exercisable for the period specified in the individual agreement.

Each award from the Plan is evidenced by an award agreement that specifies the option price, the duration of the option, the number of shares to which the option pertains, and such other provisions as the Compensation Committee, or its delegate, determines.  The option price for each grant is equal to the fair market value of a share of the Company’s common stock on the date of the grant.  Options granted expire at such time as the Compensation Committee, or its delegate, determines at the date of the grant and in no event does the exercise period exceed a maximum of ten years.  Upon a change-in-control of the Company, as defined in the Plan, all outstanding options and awards shall immediately vest.

Stock Options

A summary of the Company’s stock option activity and related information is presented below for the nine months ended September 30, 2012 and 2011:

	2012					2011
	Options			Weighted-Average Exercise Price		Options			Weighted-Average Exercise Price
Outstanding at January 1		293,817		$	33.95		287,393		$	33.64
Granted		16,876			35.39		16,000			35.09
Exercised		(18,899	)		28.78		(6,576	)		25.54
Forfeited		(1,500	)		34.73		-			-
Outstanding at September 30		290,294		$	34.37		296,817		$	33.90

Additional information regarding stock options outstanding and exercisable at September 30, 2012, is provided inthe following table:

Ranges of Exercise Prices		No. of Options Outstanding		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Months)		Aggregate Intrinsic Value (in thousands)		No. of Options Currently Exercisable		Weighted-Average Exercise Price of Options Currently Exercisable		Weighted-Average Remaining Contractual Life (Months)		Aggregate Intrinsic Value of Options Currently Exercisable (in thousands)
$	26.62 - $33.90		165,918	$	31.87		43	$	659		114,584	$	32.65		26	$	366
$	35.09 - $40.88		124,376		37.70		65		20		69,000		38.11		46		-
			290,294					$	679		183,584					$	366

Proceeds from stock option exercises were $0.5 million and $0.3 million during the nine months ended September 30, 2012 and 2011, respectively. Shares issued in connection with stock option exercises are issued from available treasury shares. If no treasury shares are available, new shares are issued from available authorized shares. During the nine months ended September 30, 2012 and 2011 all shares issued in connection with stock option exercises and restricted stock awards were issued from available treasury stock.

25

The total intrinsic value of stock options exercised was $0.1 million and less than $0.1 million during the nine months ended September 30, 2012 and 2011, respectively.

Stock-based compensation expense was approximately $0.2 million for both the nine months ended September 30, 2012 and 2011.  Unrecognized stock-based compensation expense related to stock options approximated $0.5 million at September 30, 2012. At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 1.6 years.

The fair value of the options is estimated at the date of grant using a Black-Scholes option-pricing model.   The following weighted average assumptions were used to estimate the fair value of options granted during the nine months ended September 30, 2012 and 2011:

	2012			2011
Risk-free interest rate		2.51	%		3.07	%
Expected dividend yield		3.90	%		3.88	%
Volatility factor		48.40	%		41.12	%
Expected life of option	5.0 years			8.0 years

Restricted Shares

The Company records compensation expense with respect to restricted shares in an amount equal to the fair value of the common stock covered by each award on the date of grant. The restricted shares awarded become fully vested after various periods of continued employment from the respective dates of grant. The Company is entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted shares when the restrictions are released and the shares are issued. Compensation is being charged to expense over the respective vesting periods.

Restricted shares are forfeited if officers and employees terminate prior to the lapsing of restrictions. The Company records forfeitures of restricted stock as treasury share repurchases and any compensation cost previously recognized is reversed in the period of forfeiture.  Recipients of restricted shares do not pay any cash consideration to the Company for the shares, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested.  Stock-based compensation expense related to restricted shares was approximately $0.5 million and $0.4 million for the nine months ended September 30, 2012 and 2011, respectively.  Unrecognized stock-based compensation expense related to non-vested restricted shares was $2.4 million at September 30, 2012. At September 30, 2012, this unrecognized expense is expected to be recognized over 4.6 years based on the weighted average-life of the restricted shares.

A summary of the Company’s restricted shares activity and related information is presented below for the nine months ended September 30, 2012 and 2011:

	2012					2011
	Restricted Awards			Average Market Price at Grant		Restricted Awards			Average Market Price at Grant
Outstanding at January 1		108,209					96,060
Granted		23,336		$	34.94		14,050		$	35.07
Forfeited/Vested		(13,234	)				(1,651	)
Outstanding at September 30		118,311					108,459

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Benefit Plans

The Company provides retirement benefits to its employees through the City Holding Company 401(k) Plan and Trust (“the 401(k) Plan”), which is intended to be compliant with Employee Retirement Income Security Act (ERISA) section 404(c). The Company’s total expense associated with the retirement benefit plan approximated $0.5 million for both the nine months ended September 30, 2012 and 2011.

The Company also maintains a defined benefit pension plan (“the Defined Benefit Plan”). The Defined Benefit Plan was frozen in 1999 subsequent to the Company’s acquisition of the plan sponsor. The Defined Benefit Plan maintains a December 31 year-end for purposes of computing its benefit obligations. The Company made contributions of approximately $0.6 million and $0.3 million to the Defined Benefit Plan during the nine months ended September 30, 2012 and 2011, respectively.

The following table presents the components of the net periodic pension cost of the Defined Benefit Plan:

	Three months ended						Nine months ended
	September 30						September 30
(In thousands)	2012			2011			2012			2011
Components of net periodic cost:
Interest cost	$	158		$	162		$	476		$	487
Expected return on plan assets		(203	)		(203	)		(607	)		(609	)
Net amortization and deferral		174			137			522			410
Net Periodic Pension Cost	$	129		$	96		$	391		$	288

Note K – Commitments and Contingencies

The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  The Company has entered into agreements with its customers to extend credit or provide a conditional commitment to provide payment on drafts presented in accordance with the terms of the underlying credit documents. The Company also provides overdraft protection to certain demand deposit customers that represent an unfunded commitment.  Overdraft protection commitments, which are included with other commitments below, are uncollateralized and are paid at the Company’s discretion.  Conditional commitments generally include standby and commercial letters of credit. Standby letters of credit represent an obligation of the Company to a designated third party contingent upon the failure of a customer of the Company to perform under the terms of the underlying contract between the customer and the third party. Commercial letters of credit are issued specifically to facilitate trade or commerce. Under the terms of a commercial letter of credit, drafts will be drawn when the underlying transaction is consummated, as intended, between the customer and a third party. The funded portion of these financial instruments is reflected in the Company’s balance sheet, while the unfunded portion of these commitments is not reflected in the balance sheet.  The table below presents a summary of the contractual obligations of the Company resulting from significant commitments:

(In thousands)	September 30, 2012		December 31, 2011
Commitments to extend credit:
Home equity lines	$	154,874	$	143,856
Commercial real estate		38,060		29,995
Other commitments		176,732		185,602
Standby letters of credit		16,703		20,110
Commercial letters of credit		525		412

Loan commitments and standby and commercial letters of credit have credit risks essentially the same as that involved in extending loans to customers and are subject to the Company’s standard credit policies. Collateral is obtained based on management’s credit assessment of the customer. Management does not anticipate any material losses as a result of these commitments.

27

City National Bank is currently in a civil action pending in the Circuit Court of Kanawha County, West Virginia, in a case styled Thomas Casto v. City National Bank, N.A (“Casto”).  This putative class action asserts that the plaintiffs, and others similarly situated, were wrongfully assessed overdraft fees in connection with City National Bank accounts.  The plaintiffs alleged that City National Bank’s policy of posting debit and check transactions from high to low order was in violation of the West Virginia Consumer Credit and Protection Act, constituted a breach of the implied covenant of good faith and fair dealing and created an unjust enrichment to City National Bank. In February 2012, City National Bank and the plaintiffs’ attorneys in the Casto case submitted an Amended Preliminary Motion to Approve Settlement to the Kanawha County Circuit Court.  This motion asked the Court to approve a settlement in which City National Bank will pay the eligible members of the class a total of $3.616 million and will forgive and release $3.5 million in account balances of accounts of former customers who are no longer customers of the bank, but left overdrawn accounts.  The amounts were increased from the initial Preliminary Motion for Approval due to a systems error in harvesting information regarding City National Bank’s customers.  The Court has approved the settlement and the Company anticipates that the case will be closed by the end of 2012.  At December 31, 2011, the Company had accrued for this probable loss.  During the first quarter of 2012, the Company deposited the funds into a qualified settlement fund.

In addition, the Company is engaged in various legal actions that it deems to be in the ordinary course of business. As these legal actions are resolved, the Company could realize positive and/or negative impact to its financial performance in the period in which these legal actions are ultimately decided. There can be no assurance that current actions will have immaterial results, either positive or negative, or that no material actions may be presented in the future.

Note L – Total Comprehensive Income

The following table sets forth the computation of total comprehensive income:

	Three months ended September 30,						Nine months ended September 30,
(In thousands)	2012			2011			2012			2011
Net income	$	10,607		$	11,577		$	28,049		$	31,024
Other comprehensive income:
Unrealized security gains/(losses) arising during the period		3,847			(1,122	)		6,637			3,550
Reclassification adjustment for gains included in income		(458	)		(272	)		(954	)		(3,401	)
		3,389			(1,394	)		5,683			149
Unrealized loss on interest rate floors		-			-			-			(477	)
Other comprehensive income (loss) before income taxes		3,389			(1,394	)		5,683			(328	)
Tax effect		(1,277	)		531			(2,141	)		124
Other comprehensive income (loss)		2,112			(863	)		3,542			(204	)
Total comprehensive income	$	12,719		$	10,714		$	31,591		$	30,820

Note M – Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three months ended September 30,				Nine months ended September 30,
(In thousands, except per share data)	2012		2011		2012		2011
Distributed earnings allocated to  common stock	$	5,150	$	5,015	$	15,451	$	15,045
Undistributed earnings allocated to common stock		5,373		6,479		12,375		15,756
Net earnings allocated to common shareholders	$	10,523	$	11,494	$	27,826	$	30,801
Average shares outstanding		14,751		15,003		14,700		15,165
Effect of dilutive securities:
Employee stock options		83		68		83		77
Shares for diluted earnings per share		14,834		15,071		14,783		15,242
Basic earnings per share	$	0.71	$	0.77	$	1.89	$	2.03
Diluted earnings per share	$	0.71	$	0.76	$	1.88	$	2.02

28

Options to purchase approximately 124,000 and 255,000 shares of common stock at an exercise price between $35.09 and $40.88 and between $30.38 and $40.88 per share were outstanding during the third quarter of 2012 and the third quarter of 2011, respectively, but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares and therefore, the effect would have been anti-dilutive.  

Note N –Fair Value Measurements

Fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company bases fair value of assets and liabilities on quoted market prices, prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.  If such information is not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.  The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  While management believes the company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.  Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amount presented herein.  A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Financial Assets and Liabilities

The Company used the following methods and significant assumptions to estimate fair value for financial assets and liabilities measured on a recurring basis.

Securities Available for Sale.  Securities available for sale are reported at fair value utilizing Level 1, Level 2, and Level 3 inputs.  The fair value of securities available for sale is determined by utilizing a market approach by obtaining quoted prices on nationally recognized securities exchanges (other than forced or distressed transactions) that occur in sufficient volume or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.  If such measurements are unavailable, the security is classified as Level 3.  Significant judgment is required to make this determination.

29

The Company utilizes a third party pricing service provider to value its Level 1 and Level 2 investment securities.  Annually, the Company obtains an independent auditor’s report from its third party pricing service provider regarding its controls over investment securities.  Although no control deficiencies were noted, the report did contain caveats and disclaimers regarding the pricing information, such as the Company should review fair values for reasonableness.  On a quarterly basis, the Company selects a sample of its debt securities and reprices those securities with a third party that is independent of the primary pricing service provider to verify the reasonableness of the fair values.

The Company has determined that its pooled trust preferred securities should be priced using Level 3 inputs in accordance with ASC Topic 820 and guidance issued by the SEC.  The Company has determined that there are few observable transactions and market quotations available for pooled trust preferred securities and they are not reliable for purposes of determining fair value at September 30, 2012.  Due to these circumstances, the Company has elected to utilize an income valuation approach produced by a third party pricing source.  This third party model utilizes deferral and default probabilities for the underlying issuers, estimated prepayment rates and assumes no future recoveries of any defaults or deferrals.  The Company then compares the values provided by the third party model with other external sources.  At such time as there are observable transactions or quoted prices that are associated with an orderly and active market for pooled trust preferred securities, the Company will incorporate such market values in its estimate of fair values for these securities.

Derivatives.Derivatives are reported at fair value utilizing Level 2 inputs.  The Company utilizes a market approach by obtaining dealer quotations to value its customer interest rate swaps.  The Company’s derivatives are included within its Other Assets and Other Liabilities in the accompanying consolidated balance sheets.

The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis.  Financial assets measured at fair value on a nonrecurring basis include impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.  Collateral values are estimated using Level 2 inputs based on observable market data for real estate collateral or Level 3 inputs for non-real estate collateral.  The following table presents assets and liabilities measured at fair value as of September 30, 2012 and December 31, 2011:

(in thousands)	Total		Level 1		Level 2		Level 3		Total Gains (Losses)
September 30, 2012
Recurring fair value measurements
Financial Assets
U.S. Government agencies	$	4,415	$	-	$	4,415	$	-
Obligations of states and political subdivisions		50,133		-		50,133		-
Mortgage-backed securities:
U.S. Government agencies		294,328		-		294,328		-
Private label		3,626		-		3,626		-
Trust preferred securities		15,508		-		13,162		2,346
Corporate securities		15,963		-		15,963		-
Marketable equity securities		3,921		3,921		-		-
Investment funds		1,792		1,792		-		-
Derivative assets		14,616		-		14,616		-
Financial Liabilities
Derivative liabilities		14,616		-		14,616		-
Nonrecurring fair value measurements
Financial Assets
Impaired loans	$	22,983	$	-	$	21,542	$	1,441	$	-
December 31, 2011
Recurring fair value measurements
Financial Assets
U.S. Government agencies	$	6,041	$	-	$	6,041	$	-
Obligations of states and political subdivisions		56,802		-		56,802		-
Mortgage-backed securities:
U.S. Government agencies		227,613		-		227,613		-
Private label		5,156		-		5,156		-
Trust preferred securities		45,157		-		43,175		1,982
Corporate securities		14,398		-		14,398		-
Marketable equity securities		3,853		3,853		-		-
Investment funds		1,763		1,763		-		-
Derivative assets		11,541		-		11,541		-
Financial Liabilities
Derivative liabilities		11,541		-		11,541		-
Nonrecurring fair value measurements
Financial Assets
Impaired loans	$	22,118	$	-	$	21,743	$	375	$	2,701

30

The table below presents a reconcilement of the Company’s financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2012 and 2011:

	Nine months Ended September 30,
(In thousands)	2012			2011
Beginning balance	$	1,982		$	2,504
Impairment losses on investment securities		(576	)		(355	)
Included in other comprehensive income		940			158
Dispositions		-			(375	)
Transfers into Level 3		-			-
Ending Balance	$	2,346		$	1,932

The Company utilizes a third party model to compute the present value of expected cash flows which considers the structure and term of each of the five respective pooled trust preferred securities and the financial condition of the underlying issuers.  Specifically, the third party model details interest rates, principal balances of note classes and underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of the payments to the note classes. The current estimate of expected cash flows is based on the most recent trustee reports and any other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities. For issuing banks that have defaulted, management generally assumes no recovery. For issuing banks that have deferred its interest payments, management excludes the collateral balance associated with these banks and assumes no recoveries of such collateral balance in the future. The exclusion of such issuing banks in a current deferral position is based on such bank experiencing a certain level of financial difficulty that raises doubt about its ability to satisfy its contractual debt obligation, and accordingly, the Company excludes the associated collateral balance from its estimate of expected cash flows. Other assumptions used in the estimate of expected cash flows include expected future default rates and prepayments. Specifically, the model assumes annual prepayments of 1.0% with 100% at maturity and assumes 150 basis points of additional annual defaults from banks that are currently not in default or deferral.  In addition, the model assumes no recoveries except for one trust preferred security which assumes that one of the banks currently deferring or in default will cure such positions by June 2013.

The table below presents the Company’s Level 2 financial assets and liabilities measured on a nonrecurring basis, which solely relates to impaired loans that were remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses based upon the fair value of the underlying collateral during the nine months ended September 30, 2012 and 2011.  During the nine months ended September 30, 2012 and 2011, the Company had no Level 3 financial assets and liabilities that were measured on a nonrecurring basis.

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	Nine months Ended September 30,
	2012			2011
(In thousands)	Level 2			Level 2
Carrying value of impaired loans before allocations	$	14,933		$	18,329
Specific valuation allowance allocations		(1,955	)		(4,532	)
Fair value	$	12,978		$	13,797

The fair value of impaired loans is estimated using one of several methods, including collateral value, liquidation value and discounted cash flows.  The significant unobservable inputs used in the fair value measurement of collateral for collateral-dependent impaired loans primarily relate to discounts applied to the customers’ reported amount of collateral.  The amount of collateral discount depends upon the marketability of the underlying collateral.  During the nine months ended September 30, 2012 and 2011, collateral discounts ranged from 20% to 30%.

Non-Financial Assets and Liabilities

The Company has no non-financial assets or liabilities measured at fair value on a recurring basis.  Certain non-financial assets measured at fair value on a non-recurring basis include other real estate owned (“OREO”), which is measured at the lower of cost or fair value, and goodwill and other intangible assets, which are measured at fair value for impairment assessments.

The table below presents OREO that was remeasured and reported at fair value during the nine months ended September 30, 2012 and 2011.

	Nine months Ended September 30,
(In thousands)	2012			2011
OREO remeasured at initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	3,088		$	4,411
Charge-offs recognized in the allowance for loan losses		(845	)		(790	)
Fair value	$	2,243		$	3,621
OREO remeasured subsequent to initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	2,804		$	944
Write-downs included in other non-interest expense		(877	)		(186	)
Fair value	$	1,927		$	758

ASC Topic 825“Financial Instruments” as amended, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including discount rate and estimate of future cash flows.  In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.  ASC Topic 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.  Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions were used in estimating fair value for financial instruments:

Securities Held to Maturity:  The fair value of securities held-to-maturity are generally based on quoted market prices or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Net loans:  The fair value of the loan portfolio is estimated by discounting the expected future cash flows using the current interest rates at which similar loans would be made to borrowers for the same remaining maturities. Loans were first segregated by type such as commercial, real estate and consumer, and were then further segmented into fixed, adjustable and variable rate categories. Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments.

32

Time deposits:  The fair values of time deposits were estimated using discounted cash flow analyses. The discount rates used were based on rates currently offered for deposits with similar remaining maturities. The fair values of the time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

Long-term debt: The fair value of long-term borrowings is estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements and market conditions of similar debt instruments.

Commitments and letters of credit: The fair values of commitments are estimated based on fees currently charged to enter into similar agreements, taking into consideration the remaining terms of the agreements and the counterparties’ credit standing.  The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.  The amounts of fees currently charged on commitments and letters of credit are deemed insignificant, and therefore, the estimated fair values and carrying values have not been reflected in the table below.

The following table represents the estimates of fair value of financial instruments as of September 30, 2012 and December 31, 2011. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as noninterest-bearing demand, interest-bearing demand and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

(In thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
September 30, 2012
Assets:
Securities held-to-maturity	$	13,444	$	13,658	$	-	$	13,658	$	-
Net loans		2,066,246		2,107,167		-		-		2,107,167
Liabilities:
Time deposits		929,042		943,262		-		943,262		-
Long-term debt		16,495		16,465		-		16,465		-
December 31, 2011
Assets:
Securities held-to-maturity	$	23,458	$	23,423	$	-	$	23,423	$	-
Net loans		1,953,694		1,991,335		-		-		1,991,335
Liabilities:
Time deposits		885,596		898,972		-		898,972		-
Long-term debt		16,495		16,456		-		16,456		-

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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

The accounting policies of the Company conform with U.S. generally accepted accounting principles and require management to make estimates and develop assumptions that affect the amounts reported in the financial statements and related footnotes. These estimates and assumptions are based on information available to management as of the date of the financial statements. Actual results could differ significantly from management’s estimates. As this information changes, management’s estimates and assumptions used to prepare the Company’s financial statements and related disclosures may also change. The most significant accounting policies followed by the Company are presented in Note One to the audited financial statements included in the Company’s 2011 Annual Report to Shareholders. The information included in this Quarterly Report on Form 10-Q, including the Consolidated Financial Statements, Notes to Consolidated Financial Statements, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, should be read in conjunction with the financial statements and notes thereto included in the 2011 Annual Report of the Company.  Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses, income taxes, and previously securitized loans to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new information becomes available.

Pages 41-45 of this Quarterly Report on Form 10-Q provide management’s analysis of the Company’s allowance for loan losses and related provision. The allowance for loan losses is maintained at a level that represents management’s best estimate of probable losses in the loan portfolio. Management’s determination of the adequacy of the allowance for loan losses is based upon an evaluation of individual credits in the loan portfolio, historical loan loss experience, current economic conditions, and other relevant factors. This determination is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. The allowance for loan losses related to loans considered to be impaired is generally evaluated based on the discounted cash flows using the impaired loan’s initial effective interest rate or the fair value of the collateral for certain collateral dependent loans.

The Company is subject to federal and state income taxes in the jurisdictions in which it conducts business.  In computing the provision for income taxes, management must make judgments regarding interpretation of laws in those jurisdictions.  Because the application of tax laws and regulations for many types of transactions is susceptible to varying interpretations, amounts reported in the financial statements could be changed at a later date upon final determinations by taxing authorities.  On a quarterly basis, the Company estimates its annual effective tax rate for the year and uses that rate to provide for income taxes on a year-to-date basis.  The amount of unrecognized tax benefits could change over the next twelve months as a result of various factors.  However, management cannot currently estimate the range of possible change.  The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2009 through 2011. The Company and its subsidiaries state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2008 through 2011.

34

On a quarterly basis, the Company performs a review of investment securities to determine if any unrealized losses are other-than-temporarily impaired.  Management considers the following, amongst other things, in its determination of the nature of the unrealized losses, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition, capital strength, and near-term (12 months) prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; (iii) the historical volatility in the market value of the investment and/or the liquidity or illiquidity of the investment; (iv) adverse conditions specifically related to the security, an industry, or a geographic area; or (v) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.  The Company continues to actively monitor the market value of these investments along with the financial strength of the issuers behind these securities, as well as its entire investment portfolio.  Based on the market information available, the Company believes that the recent declines in market value are temporary and that the Company does not have the intent to sell any of the securities classified as available for sale and believes it is more likely than not that the Company will not have to sell any such securities before recovery of costs.  The Company cannot guarantee that such securities will recover and if additional information becomes available in the future to suggest that the losses are other than temporary, the Company may need to record impairment charges in future periods.  As a result of this review, the Company recognized $0.3 million and $0.6 million of impairment charges during the three and nine months ended September 30, 2012.  The Company continues to actively monitor the market values of these investments along with the financial strength of the issuers behind these securities, as well as our entire investment portfolio.

Financial Summary

Nine months Ended September 30, 2012 vs. 2011

The Company reported consolidated net income of $28.0 million, or $1.88 per diluted common share, for the nine months ended September 30, 2012, compared to $31.0 million, or $2.02 per diluted common share, for the first nine months of 2011. Return on average assets (“ROA”) was 1.33% and return on average equity (“ROE”) was 11.6%  for the first nine months of 2012, compared to 1.53% and 13.1%, respectively, for the first nine months of 2011.  The results for the nine months ended September 30, 2012 include $4.3 million, or $0.19 diluted per share on an after tax basis, of acquisition and integration expenses related to the acquisition of Virginia Savings Bancorp, Inc.  Excluding these acquisition and integration expenses, the Company would have reported net income of $30.9 million, a return on assets of 1.47% and a return on average equity of 12.8%.

The Company’s net interest income for the first nine months of 2012 increased $3.3 million compared to the first nine months of 2011 (see Net Interest Income). The Company recorded a provision for loan losses of $4.6 million for the first nine months of 2012 compared to $2.4 million for the first nine months of 2011 (see Allowance and Provision for Loan Losses).  As further discussed under the caption Non-Interest Income and Expense, non-interest income decreased $1.7 million from the nine months ended September 30, 2011, to the nine months ended September 30, 2012.  Non-interest expenses for the nine months ended September 30, 2012 increased $3.7 million from the nine months ended September 30, 2011.

Three Months Ended September 30, 2012 vs. 2011

The Company reported consolidated net income of $10.6 million, or $0.71 per diluted common share, for the three months ended September 30, 2012, compared to $11.6 million, or $0.76 per diluted common share, for the three months ended September 30, 2011. Return on average assets (“ROA”) was 1.47% and return on average equity (“ROE”) was 13.0% for the three months ended September 30, 2012 compared to 1.71% and 14.6%, respectively, for the third quarter of 2011.

The Company’s net interest income for the third quarter of 2012 increased $1.3 million compared to the third quarter of 2011 (see Net Interest Income). The Company recorded a provision for loan losses of $1.0 million for the third quarter of 2012. There was no provision recorded in the third quarter of 2011 (see Allowance and Provision for Loan Losses).  As further discussed under the caption Non-Interest Income and Expense, non-interest income increased $0.5 million from the third quarter ended September 30, 2011, to the third quarter ended September 30, 2012.  Non-interest expenses for the third quarter ended September 30, 2012 increased $2.1 million from the third quarter ended September 30, 2011.

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Net Interest Income

Nine months Ended September 30, 2012 vs. 2011

The Company’s tax equivalent net interest income increased $3.2 million, or 4.6%, from $69.6 million during the first nine months of 2011 to $72.8 million during the first nine months of 2012.  This increase is due to the acquisition of Virginia Savings Bancorp, Inc., as well as to a decrease in interest expense that was primarily related to a decline in the average rate paid on interest bearing deposits which declined from 1.15% during the first nine months of 2011 to 0.72% during the first nine months of 2012.  This decline is primarily due to the average interest rate paid on time deposits decreasing 66 basis points to 1.37% for the nine months ended September 30, 2012.  Partially offsetting this increase was lower interest income due to approximately $38 million of higher yielding trust preferred securities being called during the third quarter of 2012. The Company’s reported net interest margin increased from 3.89% for the nine months ended September 30, 2011 to 3.95% for the nine months ended September 30, 2012.  Excluding the favorable impact of acquisition accounting fair value adjustments ($0.95 million), the net interest margin for the nine months ended September 30, 2012 would have been 3.90%.

Three Months Ended September 30, 2012 vs. 2011

The Company’s tax equivalent net interest income increased $1.3 million, or 5.4%, from $23.8 million for the third quarter of 2011 to $25.1 million for the third quarter of 2012.  This increase is primarily due to the acquisition of Virginia Savings Bancorp, Inc., and lower interest expense paid on time deposits, that were partially offset by lower interest income due to approximately $38 million of higher yielding trust preferred securities being called during the third quarter of 2012. The Company’s reported net interest margin increased from 3.93% for the quarter ended September 30, 2011 to 3.95% for the quarter ended September 30, 2012.  Excluding the favorable impact of acquisition accounting fair value adjustments ($0.95 million), the net interest margin for the three months ended September 30, 2012 would have been 3.80%.

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Table One

Average Balance Sheets and Net Interest Income

(In thousands)

	Nine months ended September 30,
	2012								2011
	Average					Yield/			Average					Yield/
	Balance			Interest		Rate			Balance			Interest		Rate
Assets
Loan portfolio(1):
Residential real estate(2)	$	1,101,805		$	36,731		4.45	%	$	1,033,830		$	36,905		4.77	%
Commercial, financial, and agriculture(3)		873,295			29,395		4.50			805,386			28,492		4.73
Installment loans to individuals(4)		45,756			2,303		6.72			45,713			2,570		7.52
Previously securitized loans(5)		-			2,414		-			452			2,449		724.40
Total loans		2,020,856			70,843		4.68			1,885,381			70,416		4.99
Securities:
Taxable		367,800			11,345		4.12			422,777			13,694		4.33
Tax-exempt(6)		39,176			1,694		5.78			47,077			1,999		5.68
Total securities		406,976			13,039		4.28			469,854			15,693		4.47
Deposits in depository institutions		7,200			-		-			7,815			-		-
Federal funds sold		29,712			38		0.17			31,348			39		0.17
Total interest-earning assets		2,464,744			83,920		4.55			2,394,398			86,148		4.81
Cash and due from banks		75,576								56,923
Bank premises and equipment		68,788								64,560
Other assets		221,661								204,909
Less: allowance for loan losses		(19,599	)							(19,290	)
Total assets	$	2,811,170				$			$	2,701,500				$
Liabilities
Interest-bearing demand deposits	$	532,231		$	531		0.13	%	$	490,691			711		0.19	%
Savings deposits		473,626			576		0.16			415,740			790		0.25
Time deposits		905,561			9,256		1.37			941,808			14,328		2.03
Short-term borrowings		119,454			229		0.26			121,350			239		0.26
Long-term debt		16,495			499		4.04			16,495			474		3.84
Total interest-bearing liabilities		2,047,367			11,091		0.72			1,986,084			16,542		1.11
Noninterest-bearing demand deposits		408,435								377,460
Other liabilities		33,612								21,368
Stockholders’ equity		321,756								316,588
Total liabilities and stockholders’ equity	$	2,811,170							$	2,701,500
Net interest income				$	72,829							$	69,606
Net yield on earning assets							3.95	%							3.89	%

(1)	For purposes of this table, non-accruing loans have been included in average balances and loan fees, which are immaterial, have been included in interest income.
(2)	Interest income includes $0 and $632 from interest rate floors for the nine months ended September 30, 2012 and September 30, 2011, respectively.
(3)	Includes the Company’s commercial and industrial and commercial real estate loan categories.  Interest income includes $0 and $488 from interest rate floors for the nine months ended September 30, 2012 and September 30, 2011, respectively.
(4)	Includes the Company’s consumer and DDA overdrafts loan categories.
(5)	Effective January 1, 2012, there is no carrying value of the Company’s previously securitized loans.
(6)	Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 35%.

37

Table Two

Rate/Volume Analysis of Changes in Interest Income and Interest Expense

(In thousands)

	Nine months ended September 30,
	2012 vs. 2011
	Increase (Decrease)
	Due to Change In:
	Volume			Rate			Net
Interest-earning assets:
Loan portfolio
Residential real estate	$	2,429		$	(2,603	)	$	(174	)
Commercial, financial, and agriculture		2,405			(1,502	)		903
Installment loans to individuals		2			(269	)		(267	)
Previously securitized loans		(2,451	)		2,416			(35	)
Total loans		2,385			(1,958	)		427
Securities:
Taxable		(1,782	)		(567	)		(2,349	)
Tax-exempt(1)		(336	)		31			(305	)
Total securities		(2,118	)		(536	)		(2,654	)
Federal funds sold		(2	)		1			(1	)
Total interest-earning assets	$	265		$	(2,493	)	$	(2,228	)
Interest-bearing liabilities:
Interest-bearing demand deposits	$	60		$	(240	)	$	(180	)
Savings deposits		110			(324	)		(214	)
Time deposits		(552	)		(4,520	)		(5,072	)
Short-term borrowings		(4	)		(6	)		(10	)
Long-term debt		-			25			25
Total interest-bearing liabilities	$	(386	)	$	(5,065	)	$	(5,451	)
Net Interest Income	$	651		$	2,572		$	3,223

(1) Fully federal taxable equivalent using a tax rate of approximately 35%.

38

Table Three

Average Balance Sheets and Net Interest Income

(In thousands)

	Three months ended September 30,
	2012								2011
	Average					Yield/			Average					Yield/
	Balance			Interest		Rate			Balance			Interest		Rate
Assets
Loan portfolio(1):
Residential real estate	$	1,140,910		$	13,000		4.53	%	$	1,046,155		$	12,054		4.57	%
Commercial, financial, and agriculture		880,243			10,069		4.55			825,353			9,575		4.60
Installment loans to individuals(2)		49,111			782		6.33			45,461			906		7.91
Previously securitized loans(3)		-			781		-			277			791		1132.93
Total loans		2,070,264			24,632		4.73			1,917,246			23,326		4.83
Securities:
Taxable		372,877			3,438		3.67			399,468			4,639		4.61
Tax-exempt(4)		36,761			532		5.76			42,249			604		5.67
Total securities		409,638			3,970		3.86			441,717			5,243		4.71
Deposits in depository institutions		7,063			-		-			7,497			-		-
Federal funds sold		35,487			15		0.17			32,204			13		0.16
Total interest-earning assets		2,522,452			28,617		4.51			2,398,664			28,582		4.73
Cash and due from banks		80,335								61,387
Bank premises and equipment		72,640								64,900
Other assets		232,793								206,943
Less: allowance for loan losses		(19,889	)							(20,496	)
Total assets	$	2,888,331				$			$	2,711,398				$
Liabilities
Interest-bearing demand deposits	$	539,189		$	180		0.13	%	$	496,866		$	224		0.18	%
Savings deposits		497,208			204		0.16			427,391			260		0.24
Time deposits		931,369			2,928		1.25			913,040			4,066		1.77
Short-term borrowings		122,955			79		0.26			132,487			90		0.27
Long-term debt		16,495			166		4.00			16,495			159		3.82
Total interest-bearing liabilities		2,107,216			3,557		0.67			1,986,279			4,799		0.96
Noninterest-bearing demand deposits		418,584								383,736
Other liabilities		35,461								25,054
Stockholders’ equity		327,070								316,329
Total liabilities and stockholders’ equity	$	2,888,331							$	2,711,398
Net interest income				$	25,060							$	23,783
Net yield on earning assets							3.95	%							3.93	%

(1)   For purposes of this table, non-accruing loans have been included in average balances and loan fees, which are immaterial, have been included in interest income.

(2)   Includes the Company’s consumer and DDA overdrafts loan categories.

(3)   Effective January 1, 2012, the carrying value of the Company’s previously securitized loans was reduced to $0.

(4)   Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 35%.

39

Table Four

Rate/Volume Analysis of Changes in Interest Income and Interest Expense

(In thousands)

	Three months ended September 30,
	2012 vs. 2011
	Increase (Decrease)
	Due to Change In:
	Volume			Rate			Net
Interest-earning assets:
Loan portfolio
Residential real estate	$	1,089		$	(143	)	$	946
Commercial, financial, and agriculture		635			(141	)		494
Installment loans to individual		73			(197	)		(124	)
Previously securitized loans		(789	)		779			(10	)
Total loans		1,008			298			1,306
Securities:
Taxable		(308	)		(893	)		(1,201	)
Tax-exempt(1)		(78	)		6			(72	)
Total securities		(386	)		(887	)		(1,273	)
Federal funds sold		1			1			2
Total interest-earning assets	$	623		$	(588	)	$	35
Interest-bearing liabilities:
Interest-bearing demand deposits	$	19		$	(63	)	$	(44	)
Savings deposits		42			(98	)		(56	)
Time deposits		81			(1,219	)		(1,138	)
Short-term borrowings		(6	)		(5	)		(11	)
Long-term debt		-			7			7
Total interest-bearing liabilities	$	136		$	(1,378	)	$	(1,242	)
Net Interest Income	$	487		$	790		$	1,277

(1)   Fully federal taxable equivalent using a tax rate of approximately 35%.

40

Loans

The composition of the Company’s loan portfolio as of the dates indicated follows:

Table Five

Loan Portfolio

(In thousands)

	September 30,		December 31,		September 30,
	2012		2011		2011
Residential real estate	$	1,008,305	$	929,788	$	916,122
Home equity – junior liens		143,058		141,797		142,028
Commercial and industrial		105,027		130,899		119,377
Commercial real estate		787,887		732,146		708,558
Consumer		38,285		35,845		36,575
DDA overdrafts		2,670		2,628		2,924
Previously securitized loans		-		-		214
Total loans	$	2,085,232	$	1,973,103	$	1,925,798

Loan balances increased $112.1 million from December 31, 2011 to September 30, 2012, with the acquisition of VSB contributing $71.9 million.  Residential real estate loans increased $78.5 million, or 8.4%, from $929.8 million at December 31, 2011 to $1,008.3 million at September 30, 2012, with the acquisition of VSB contributing $41.9 million.   Residential real estate loans primarily consist of: (i) single-family 1, 3, 5 and 10 year adjustable rate mortgages with terms that amortize the loans over periods from 15-30 years and (ii) home equity loans secured by first liens.  The Company’s mortgage products do not include sub-prime, interest only, or option adjustable rate mortgage products.  The Company’s home equity loans are underwritten differently than 1-4 family residential mortgages with typically less documentation but lower loan-to-value ratios.  Home equity loans consist of lines of credit, short-term fixed amortizing loans and non-purchase adjustable rate loans.  At September 30, 2012, $12.8 million of the residential real estate loans were for properties under construction.

Exclusive of the acquisition of VSB (which contributed $3.1 million), junior lien home equity loans decreased $1.8 million during the first nine months of 2012.  Junior lien home equity loans consist of lines of credit, short-term fixed amortizing loans, and non-purchase adjustable rate loans with second lien positions.

Commercial real estate loans increased $55.7 million, or 7.6%, from $732.1 million at December 31, 2011 to $787.9 million at September 30, 2012, with the acquisition of VSB contributing $21.2 million.  At September 30, 2012, $17.1 million of the commercial real estate loans were for commercial properties under construction.  Offsetting the increase in commercial real estate loans was a decrease in commercial and industrial loans (“C&I”) of $25.9 million, to $105.0 million at September 30, 2012.  This decrease was primarily due to: (i) the Company elected to exit from its participation in a C&I loan that, when originated, was a local company, but over time had become a “Shared National Credit” and would have yielded less than 1.50% going forward and (ii) a large C&I customer sold their business and paid off their outstanding loan balance of $9 million, offset slightly by $2.5 million in C&I loans acquired in the VSB acquisition.

Exclusive of the acquisition of VSB (which contributed $3.2 million), consumer loans decreased $0.7 million during the first nine months of 2012.  The consumer loan portfolio primarily consists of new and used automobile loans, personal loans secured by cash and cash equivalents, unsecured revolving credit products, and other similar types of credit facilities.

Allowance and Provision for Loan Losses

Management systematically monitors the loan portfolio and the adequacy of the allowance for loan losses (“ALLL”) on a quarterly basis to provide for probable losses inherent in the portfolio. Management assesses the risk in each loan type based on historical trends, the general economic environment of its local markets, individual loan performance, and other relevant factors. Individual credits are selected throughout the year for detailed loan reviews, which are utilized by management to assess the risk in the portfolio and the adequacy of the allowance. Due to the nature of commercial lending, evaluation of the adequacy of the allowance as it relates to these loan types is often based more upon specific credit review, with consideration given to the potential impairment of certain credits and historical loss rates, adjusted for general economic conditions and other inherent risk factors. Conversely, due to the homogeneous nature of the real estate and installment portfolios, the portions of the allowance allocated to those portfolios are primarily based on prior loss history of each portfolio, adjusted for general economic conditions and other inherent risk factors.

41

In evaluating the adequacy of the allowance for loan losses, management considers both quantitative and qualitative factors. Quantitative factors include actual repayment characteristics and loan performance, cash flow analyses, and estimated fair values of underlying collateral. Qualitative factors generally include overall trends within the portfolio, composition of the portfolio, changes in pricing or underwriting, seasoning of the portfolio, and general economic conditions.

The allowance not specifically allocated to individual credits is generally determined by analyzing potential exposure and other qualitative factors that could negatively impact the adequacy of the allowance.  Loans not individually evaluated for impairment are grouped by pools with similar risk characteristics and the related historical loss rates are adjusted to reflect current inherent risk factors, such as unemployment, overall economic conditions, concentrations of credit, loan growth, classified and impaired loan trends, staffing, adherence to lending policies, and loss trends.

Determination of the allowance for loan losses is subjective in nature and requires management to periodically reassess the validity of its assumptions. Differences between actual losses and estimated losses are assessed such that management can timely modify its evaluation model to ensure that adequate provision has been made for risk in the total loan portfolio.

As a result of the Company’s quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $4.6 million in the first nine months of 2012 and $2.4 million in the first nine months of 2011.  During the third quarter of 2011, the Company received life insurance proceeds from a policy carried by one of its commercial customers.  As a result, the Company recorded a recover of $1.9 million and no provision for loan losses was required for the quarter.  Changes in the amount of the provision and related allowance are based on the Company’s detailed systematic methodology and are directionally consistent with changes in the composition and quality of the Company’s loan portfolio.  The Company believes its methodology for determining its ALLL adequately provides for probable losses inherent in the loan portfolio and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience.

The Company had net charge-offs of $5.0 million and $0.7 million for the first nine months of 2012 and 2011, respectively.  Net charge-offs in the first nine months of 2012 consisted primarily of net charge-offs on commercial real estate loans of $2.8 million and home equity loans of $1.0 million.  Charge-offs for commercial real estate loans were primarily related to two specific borrowers and related impaired credits that had been appropriately considered in establishing the allowance for loan losses in the prior period.

The Company’s ratio of non-performing assets to total loans and other real estate owned increased slightly from 1.52% at December 31, 2011 to 1.53% at September 30, 2012.  The Company’s ratio of non-performing assets to total loans and other real estate owned is less than 30% of the 5.62% non-performing asset ratio reported by the Company’s peer group (bank holding companies with total assets between $1 and $5 billion), as of the most recently reported quarter ended June 30, 2012.

The ALLL at September 30, 2012 was $19.0 million compared to $19.4 million at December 31, 2011.  Below is a summary of the changes in the components of the ALLL from December 31, 2011 to September 30, 2012.

The allowance allocated to the commercial real estate loan portfolio (see Table Eight) decreased $1.1 million, or 9.2%, from $11.7 million at December 31, 2011 to $10.6 million at September 30, 2012.  This decrease was primarily due to charge-offs relating to two specific borrowers that had previously been considered in establishing the allowance.

42

The allowance related to the commercial and industrial loan portfolio decreased from $0.6 million at December 31, 2011 to $0.5 million at September 30, 2012 (see Table Eight).

The allowance allocated to the residential real estate portfolio (see Table Eight) increased $0.2 million from $3.6 million at December 31, 2011 to $3.8 million at September 30, 2012.

The allowance allocated to the home equity loan portfolio (see Table Eight) increased $0.2 million from $2.8 million at December 31, 2011 to $3.0 million at September 30, 2012.

The allowance allocated to the consumer loan portfolio (see Table Eight) remained flat at $0.1 million at September 30, 2012.

The allowance allocated to overdraft deposit accounts (see Table Eight) increased modestly from $0.7 million at December 31, 2011 to $0.9 million at September 30, 2012.

Based on the Company’s analysis of the adequacy of the allowance for loan losses and in consideration of the known factors utilized in computing the allowance, management believes that the allowance for loan losses as of September 30, 2012, is adequate to provide for probable losses inherent in the Company’s loan portfolio. Future provisions for loan losses will be dependent upon trends in loan balances including the composition of the loan portfolio, changes in loan quality and loss experience trends, and recoveries of previously charged-off loans, among other factors.

43

Table Six

Analysis of the Allowance for Loan Losses

(In thousands)

							Year ended
	Nine months ended September 30,						December 31,
	2012			2011			2011
Balance at beginning of period	$	19,409		$	18,224		$	18,224
Charge-offs:
Commercial and industrial		126			275			522
Commercial real estate		2,860			341			1,989
Residential real estate		746			1,191			1,367
Home equity		989			614			1,089
Consumer		148			133			164
DDA overdrafts		1,128			1,318			1,712
Total charge-offs		5,997			3,872			6,843
Recoveries:
Commercial and industrial		13			8			23
Commercial real estate		99			1,982			1,981
Residential real estate		15			19			29
Home equity		12			6			7
Consumer		90			107			136
DDA overdrafts		745			1,002			1,252
Total recoveries		974			3,124			3,428
Net charge-offs		5,023			748			3,415
Provision for loan losses		4,600			2,372			4,600
Balance at end of period	$	18,986		$	19,848		$	19,409
As a Percent of Average Total Loans:
Net charge-offs (annualized)		0.33	%		0.05	%		0.18	%
Provision for loan losses (annualized)		0.30	%		0.17	%		0.24	%
As a Percent of Non-Performing Loans:
Allowance for loan losses		82.61	%		87.27	%		87.76	%

Table Seven

Non-Accrual, Past-Due and Restructured Loans

(In thousands)

	As of September 30,				As of December 31,
	2012		2011		2011
Non-accrual loans	$	22,586	$	22,423	$	21,952
Accruing loans past due 90 days or more		397		320		166
Total non-performing loans		22,983		22,743		22,118
Total other real estate owned		9,017		8,273		7,948
Total non-performing assets	$	32,000	$	31,016	$	30,066

The average recorded investment in impaired loans during the nine months ended September 30, 2012 and 2011 was $21.6 million and $29.3 million, respectively.  The Company recognized approximately $0.7 million and $0.4 million of interest income received in cash on non-accrual and impaired loans for the nine month periods ended September 30, 2012 and September 30, 2011, respectively.  Approximately $0.7 million and $0.6 million of interest income would have been recognized during the nine month periods ended September 30, 2012 and September 30, 2011, respectively, if such loans had been current in accordance with their original terms.  There were no commitments to provide additional funds on non-accrual, impaired, or other potential problem loans at September 30, 2012 and December 31, 2011.  The Company recognized interest income of $0.7 million and $0.4 million using the accrual method of income recognition during the time period the loans were impaired for the nine month periods ended September 30, 2012 and September 30, 2011, respectively.

44

Interest on loans is accrued and credited to operations based upon the principal amount outstanding.  The accrual of interest income is generally discontinued when a loan becomes 90 days past due as to principal or interest unless the loan is well collateralized and in the process of collection.  When interest accruals are discontinued, interest credited to income in the current year that is unpaid and deemed uncollectible is charged to operations.  Prior-year interest accruals that are unpaid and deemed uncollectible are charged to the allowance for loan losses, provided that such amounts were specifically reserved.

Information pertaining to impaired loans is included in the following table:

	As of September 30,				As of December 31,
(In thousands)	2012		2011		2011
Impaired loans with a valuation allowance	$	9,779	$	20,378	$	19,200
Impaired loans with no valuation allowance		13,204		2,427		2,918
Total impaired loans	$	22,983	$	22,805	$	22,118
Allowance for loan losses allocated to impaired loans	$	1,204	$	4,836	$	3,488

Table Eight

Allocation of the Allowance for Loan Losses

(In thousands)

	As of September 30,				As of December 31,
	2012		2011		2011
Commercial and industrial	$	521	$	565	$	590
Commercial real estate		10,590		12,071		11,666
Residential real estate		3,815		3,721		3,591
Home equity		3,046		2,570		2,773
Consumer		105		92		88
DDA overdrafts		909		829		701
Allowance for Loan Losses	$	18,986	$	19,848	$	19,409

Previously Securitized Loans

As of September 30, 2012, the carrying value of the remaining previously securitized loans was zero, while the actual contractual balances of these loans were $8.4 million. The Company accounts for the difference between the carrying value and the total expected cash flows of previously securitized loans as an adjustment of the yield earned on these loans over their remaining lives. The discount was accreted to income over the period during which payments were probable of collection and were reasonably estimable. During the first nine months of 2012 and 2011, the Company recognized $2.4 million and $2.5 million, respectively, of interest income on its previously securitized loans.

Non-Interest Income and Non-Interest Expense

45

Nine months Ended September 30, 2012 vs. 2011

Non-Interest Income:During 2012, the Company sold certain equity positions related to community banks and bank holding companies and realized a $1.2 million gain.  The Company also recognized $0.3 million of gains associated with the calls of trust preferred securities during the year.  These gains were partially offset by $0.6 million of credit-related net investment impairment losses recorded by the Company.  These charges deemed to be other than temporary were related to pooled bank trust preferred securities with a remaining book value of $5.6 million at September 30, 2012.  The credit-related net impairment charges related to the pooled bank trust preferred securities were based on the Company’s quarterly reviews of its investment securities for indications of losses considered to be other than temporary.  Based on management’s assessment of the securities the Company owns, the seniority positions of the securities within the pools, the level of defaults and deferred payments within the pools, management concluded that credit-related impairment charges of $0.6 million on the pooled bank trust preferred securities were appropriate for the nine months ended September 30, 2012.  Exclusive of this net investment gain, non-interest income increased $0.7 million to $40.0 million in the first nine months of 2012 as compared to $39.3 million in the first nine months of 2011.  This increase was primarily the result of trust and investment management fee income increasing $0.5 million, or 22.1%, to $2.7 million, insurance commissions increasing $0.3 million, or 6.0%, to $4.8 million and other income increasing $0.3 million or 22.9% for the nine months ended September 30, 2012.  These increases were partially offset by a $0.2 million decrease in bank owned life insurance for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011.

Non-Interest Expense:During 2012, the Company completed its acquisition of Virginia Savings Bancorp, Inc. and recognized $4.3 million of acquisition and integration expenses.  In comparison, during 2011, the Company recorded a $3.0 million litigation reserve accrual.  Excluding these expenses, non-interest expenses increased $2.3 million from $59.5 million in the first nine months of 2011 to $61.8 million in the first nine months of 2012.  This increase was primarily related to increases in salaries and employee benefits of $1.8 million and repossessed asset losses of $0.9 million that were partially offset by lower FDIC insurance expense of $1.1 million due to a change in the assessment base methodology.

Income Tax Expense:The Company’s effective income tax rate for the nine months ended September 30, 2012 was 34.0% compared to 33.6% for the year ended December 31, 2011, and 33.7% for the nine months ended September 30, 2011.  The effective rate is based upon the Company’s expected tax rate for the year ending December 31, 2012.

Three Months Ended September 30, 2012 vs. 2011

Non-Interest Income:Exclusive of the net investment gain discussed above, non-interest income increased $0.3 million to $13.6 million in the third quarter of 2012 as compared to $13.3 million in the third quarter of 2011.  This increase was primarily the result of an increase in other income of $0.3 million or 76.6%, due to increased mortgage related income and a $0.2 million, or 30.5% trust and investment management fee income for the quarter ended September 30, 2012.  These increases were partially offset by a $0.2 million decrease in bank owned life insurance for the quarter ended September 30, 2012.

Non-Interest Expense:Non-interest expenses increased $2.1 million from $19.7 million in the third quarter of 2011 to $21.8 million in the third quarter of 2012.  Salaries and employee benefits increased $1.0 million primarily due to the acquisition of Virginia Savings Bancorp, Inc. ($0.4 million) and increased health insurance costs ($0.4 million).  Repossessed asset losses increased $0.3 million due to declines in estimated fair values of two foreclosed properties located at the Greenbrier Resort in West Virginia.  The Company continually reevaluates the estimated fair value of properties that it has repossessed by obtaining updated appraisals on at least an annual basis.  In addition, other expenses increased $0.3 million, bankcard expenses increased $0.2 million, and merger related expenses increased $0.2 million.

 Income Tax Expense:  The Company’s effective income tax rate for the third quarter of 2012 was 34.3% compared to 33.6% for the year ended December 31, 2011, and 33.5% for the third quarter of 2011.  The effective rate is based upon the Company’s expected tax rate for the year ending December 31, 2012.

Risk Management

Market risk is the risk of loss due to adverse changes in current and future cash flows, fair values, earnings or capital due to adverse movements in interest rates and other factors, including foreign exchange rates and commodity prices. Because the Company has no significant foreign exchange activities and holds no commodities, interest rate risk represents the primary risk factor affecting the Company’s balance sheet and net interest margin. Significant changes in interest rates by the Federal Reserve could result in similar changes in LIBOR interest rates, prime rates, and other benchmark interest rates that could affect the estimated fair value of the Company’s investment securities portfolio, interest paid on the Company’s short-term and long-term borrowings, interest earned on the Company’s loan portfolio and interest paid on its deposit accounts.

46

 The Company’s Asset and Liability Committee (“ALCO”) has been delegated the responsibility of managing the Company’s interest-sensitive balance sheet accounts to maximize earnings while managing interest rate risk. ALCO, comprised of various members of executive and senior management, is also responsible for establishing policies to monitor and limit the Company’s exposure to interest rate risk and to manage the Company’s liquidity position. ALCO satisfies its responsibilities through monthly meetings during which product pricing issues, liquidity measures, and interest sensitivity positions are monitored.

In order to measure and manage its interest rate risk, the Company uses an asset/liability management and simulation software model to periodically update the interest sensitivity position of the Company’s balance sheet. The model is also used to perform analyses that measure the impact on net interest income and capital as a result of various changes in the interest rate environment. Such analyses quantify the effects of various interest rate scenarios on projected net interest income.

The Company’s policy objective is to avoid negative fluctuations in net income or the economic value of equity of more than 15% within a 12-month period, assuming an immediate parallel increase or decrease of 400 basis points. The Company measures the long-term risk associated with sustained increases and decreases in rates through analysis of the impact to changes in rates on the economic value of equity.  Due to the current Federal Funds target rate of 25 basis points, the Company has chosen not to reflect a decrease of 25 basis points from current rates in its analysis.

The following table summarizes the sensitivity of the Company’s net income to various interest rate scenarios. The results of the sensitivity analyses presented below differ from the results used internally by ALCO in that, in the analyses below, interest rates are assumed to have an immediate and sustained parallel shock. The Company recognizes that rates are volatile, but rarely move with immediate and parallel effects. Internally, the Company considers a variety of interest rate scenarios that are deemed to be possible while considering the level of risk it is willing to assume in “worst-case” scenarios such as shown by the following:

Immediate Basis Point Change in Interest Rates		Implied Federal Funds Rate Associated with Change in Interest Rates			Estimated Increase (Decrease) in Net Income Over 12 Months			Estimated Increase (Decrease) in Economic Value of Equity
September 30, 2012:
	+400		4.25	%		+14.4	%		+13.7	%
	+300		3.25			+9.5			+10.9
	+200		2.25			+4.9			+6.7
	+100		1.25			+0.3			+2.2
December 31, 2011:
	+400		4.25	%		+16.0	%		+20.3	%
	+300		3.25			+10.4			+16.4
	+200		2.25			+5.6			+11.2
	+100		1.25			+0.8			+5.1

These estimates are highly dependent upon assumptions made by management, including, but not limited to, assumptions regarding the manner in which interest-bearing demand deposit and saving deposit accounts reprice in different interest rate scenarios, pricing behavior of competitors, prepayments of loans and deposits under alternative rate environments, and new business volumes and pricing. As a result, there can be no assurance that the estimates above will be achieved in the event that interest rates increase during 2012 and beyond.  The estimates above do not necessarily imply that the Company will experience increases in net income if market interest rates rise.  The table above indicates how the Company’s net income and the economic value of equity behave relative to an increase or decrease in rates compared to what would otherwise occur if rates remain stable.

Based upon the estimates above, the Company believes that its net income is positively correlated with increasing rates as compared to the level of net income the Company would expect if interest rates remain flat.

47

Liquidity

The Company evaluates the adequacy of liquidity at both the Parent Company level and at the banking subsidiary level. At the Parent Company level, the principal source of cash is dividends from its banking subsidiary, City National Bank. Dividends paid by City National Bank to the Parent Company are subject to certain legal and regulatory limitations. Generally, any dividends in amounts that exceed the earnings retained by City National Bank in the current year plus retained net profits for the preceding two years must be approved by regulatory authorities. At September 30, 2012, City National Bank could pay dividends up to $27.7 million plus net profits for the remainder of 2012, as defined by statute, up to the dividend declaration date without prior regulatory permission.

The Parent Company used cash obtained from the dividends received primarily to: (1) pay common dividends to shareholders, (2) remit interest payments on the Company’s junior subordinated debentures, and (3) fund repurchase of the Company’s common shares.

Over the next 12 months, the Parent Company has an obligation to remit interest payments approximating $0.7 million on the junior subordinated debentures held by City Holding Capital Trust III. Additionally, the Parent Company anticipates continuing the payment of dividends, which are expected to approximate $20.8 million on an annualized basis over the next 12 months based on common shareholders of record at September 30, 2012.  However, interest payments on the debentures can be deferred for up to five years under certain circumstances and dividends to shareholders can, if necessary, be suspended.  In addition to these anticipated cash needs, the Parent Company has operating expenses and other contractual obligations, which are estimated to require $0.5 million of additional cash over the next 12 months. As of September 30, 2012, the Parent Company reported a cash balance of $2.6 million and management believes that the Parent Company’s available cash balance, together with cash dividends from City National Bank will be adequate to satisfy its funding and cash needs over the next twelve months.

Excluding the interest and dividend payments discussed above, the Parent Company has no significant commitments or obligations in years after 2012 other than the repayment of its $16.5 million obligation under the debentures held by City Holding Capital Trust III. However, this obligation does not mature until June 2038, or earlier at the option of the Parent Company. It is expected that the Parent Company will be able to obtain the necessary cash, either through dividends obtained from City National Bank or the issuance of other debt, to fully repay the debentures at their maturity.

City National Bank manages its liquidity position in an effort to effectively and economically satisfy the funding needs of its customers and to accommodate the scheduled repayment of borrowings. Funds are available to City National Bank from a number of sources, including depository relationships, sales and maturities within the investment securities portfolio, and borrowings from the FHLB and other financial institutions. As of September 30, 2012, City National Bank’s assets are significantly funded by deposits and capital. Additionally, City National Bank maintains borrowing facilities with the FHLB and other financial institutions that are accessed as necessary to fund operations and to provide contingency funding mechanisms. As of September 30, 2012, City National Bank has the capacity to borrow an additional $1 billion from the FHLB and other financial institutions under existing borrowing facilities. City National Bank maintains a contingency funding plan, incorporating these borrowing facilities, to address liquidity needs in the event of an institution-specific or systemic financial industry crisis. Also, City National Bank maintains a significant percentage (94.0%, or $389.7 million at September 30, 2012) of its investment securities portfolio in the highly liquid available-for-sale classification. Although it has no current intention to do so, these securities could be liquidated, if necessary, to provide an additional funding source.  City National Bank also segregates certain mortgage loans, mortgage-backed securities, and other investment securities in a separate subsidiary so that it can separately monitor the asset quality of these primarily mortgage-related assets, which could be used to raise cash through securitization transactions or obtain additional equity or debt financing if necessary.

The Company manages its asset and liability mix to balance its desire to maximize net interest income against its desire to minimize risks associated with capitalization, interest rate volatility, and liquidity. With respect to liquidity, the Company has chosen a conservative posture and believes that its liquidity position is strong. The Company’s net loan to asset ratio is 71.3% as of September 30, 2012 and deposit balances fund 82.1% of total assets. The Company has obligations to extend credit, but these obligations are primarily associated with existing home equity loans that have predictable borrowing patterns across the portfolio. The Company has investment security balances with carrying values that totaled $414.6 million at September 30, 2012, and that greatly exceeded the Company’s non-deposit sources of borrowing which totaled $148.4 million.  Further, the Company’s deposit mix has a very high proportion of transaction and savings accounts that fund 50.1% of the Company’s total assets.

48

As illustrated in the Consolidated Statements of Cash Flows, the Company generated $37.1 million of cash from operating activities during the first nine months of 2012, primarily from interest income received on loans and investments, net of interest expense paid on deposits and borrowings.  The Company used $28.2 million of cash in investing activities during the first nine months of 2012 primarily for purchases of securities available-for-sale, net of proceeds from these securities and from maturities and calls of securities available-for-sale, partially offset by the acquisition of Virginia Savings Bancorp.  The Company used $42.4 million of cash in financing activities during the first nine months of 2012, principally as a result of decreasing its short-term borrowings by $57.1 million, cash dividends paid to the Company’s common stockholders of $15.5 million and the purchase of treasury stock of $7.9 million, partially offset by increasing its interest and noninterest bearing deposits by $37.6 million.

Capital Resources

During the first nine months of 2012, Shareholders’ Equity increased $17.3 million, or 5.6%, from $311.1 million at December 31, 2011 to $328.4 million at September 30, 2012.  This increase was primarily due to net income of $28.0 million, partially offset by dividends declared of $15.5 million and common stock purchases of $7.9 million.

During July 2011, the Board of Directors authorized the Company to buy back up to 1,000,000 shares of its common shares in open market transactions at prices that are accretive to the earnings per share of continuing shareholders.  No time limit was placed on the duration of the share repurchase program. Approximately 238,000 shares were repurchased during the first nine months of 2012 and there can be no assurance that the Company will continue to reacquire its common shares or to what extent the repurchase program will be successful.  As of September 30, 2012, the Company may repurchase an additional 454,000 shares from time to time depending on market conditions under the authorization.

Regulatory guidelines require the Company to maintain a minimum total capital to risk-adjusted assets ratio of 8.0%, with at least one-half of capital consisting of tangible common stockholders’ equity and a minimum Tier I leverage ratio of 4.0%. Similarly, City National Bank is also required to maintain minimum capital levels as set forth by various regulatory agencies. Under capital adequacy guidelines, City National Bank is required to maintain minimum total capital, Tier I capital, and leverage ratios of 8.0%, 4.0%, and 4.0%, respectively. To be classified as “well capitalized,” City National Bank must maintain total capital, Tier I capital, and leverage ratios of 10.0%, 6.0%, and 5.0%, respectively.

The Company’s regulatory capital ratios for both City Holding and City National Bank as illustrated in the following table:

							Actual
				Well-			September 30,			December 31,
	Minimum			Capitalized			2012			2011
City Holding:
Total		8.0	%		10.0	%		13.8	%		14.1	%
Tier I Risk-based		4.0			6.0			12.9			13.1
Tier I Leverage		4.0			5.0			9.7			10.2
City National Bank:
Total		8.0	%		10.0	%		12.9	%		13.0	%
Tier I Risk-based		4.0			6.0			12.0			12.0
Tier I Leverage		4.0			5.0			9.0			9.3

As of September 30, 2012, management believes that City Holding Company, and its banking subsidiary, City National Bank, were “well capitalized.”  City Holding is subject to regulatory capital requirements administered by the Federal Reserve, while City National Bank is subject to regulatory capital requirements administered by the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”).  Regulatory agencies can initiate certain mandatory actions if either City Holding or City National Bank fails to meet the minimum capital requirements, as shown above.  As of September 30, 2012, management believes that City Holding and City National Bank meet all capital adequacy requirements.

49

Item 3 – Quantitative and Qualitative Disclosure About Market Risk

The information called for by this item is provided under the caption “Risk Management” under Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4 – Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, the Company carried out an evaluation, with the participation of the Company’smanagement, including the Company’sChief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Company’sChief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’speriodic SEC filings.  There has been no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

50

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.
City National Bank is currently in a civil action pending in the Circuit Court of Kanawha County, West Virginia, in a case styled Thomas Casto v. City National Bank, N.A (“Casto”).  This putative class action asserts that the plaintiffs, and others similarly situated, were wrongfully assessed overdraft fees in connection with City National Bank accounts.  The plaintiffs alleged that City National Bank’s policy of posting debit and check transactions from high to low order was in violation of the West Virginia Consumer Credit and Protection Act, constituted a breach of the implied covenant of good faith and fair dealing and created an unjust enrichment to City National Bank.  In February 2012, City National Bank and the plaintiffs’ attorneys in the Casto case submitted an Amended Preliminary Motion to Approve Settlement to the Kanawha County Circuit Court.  This motion asked the Court to approve a settlement in which City National Bank will pay the eligible members of the class a total of $3.616 million and will forgive and release $3.5 million in account balances of accounts of former customers who are no longer customers of the bank, but left overdrawn accounts.  The amounts were increased from the initial Preliminary Motion for Approval due to a systems error in harvesting information regarding City National Bank’s customers.  The Court has approved the settlement and the Company anticipates that the case will be closed by the end of 2012.  At December 31, 2011, the Company had accrued for this probable loss.  During the first quarter of 2012, the Company deposited the funds into a qualified settlement fund. In addition, the Company is engaged in various legal actions that it deems to be in the ordinary course of business. As these legal actions are resolved, the Company could realize positive and/or negative impact to its financial performance in the period in which these legal actions are ultimately decided. There can be no assurance that current actions will have immaterial results, either positive or negative, or that no material actions may be presented in the future.
Item 1A.	Risk Factors.
There have been no material changes to the factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2011.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	None.
Item 3.	Defaults Upon Senior Securities.	None.
Item 4.	Mine Safety Disclosures.	None.
Item 5.	Other Information.	None.

51

Item 6.	Exhibits.
	(a) Exhibits
	31(a)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Charles R. Hageboeck
	31(b)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for David L. Bumgarner
	32(a)	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Charles R. Hageboeck
	32(b)	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for David L. Bumgarner
	101.INS	XBRL Instance Document*
	101.SCH	XBRL Taxonomy Extension Schema*
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase*
	101.DEF	XBRL Taxonomy Extension Definition Linkbase*
	101.LAB	XBRL Taxonomy Extension Label Linkbase*
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase*
· Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

52

SIGNATURES

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

City Holding Company

(Registrant)

/s/ Charles R. Hageboeck

Charles R. Hageboeck

President and Chief Executive Officer

(Principal Executive Officer)

/s/ David L. Bumgarner

David L. Bumgarner

Senior Vice President, Chief Financial Officer and Principal Accounting Officer

(Principal Financial Officer)

Date: November 9, 2012

53

EX-31.A

Exhibit 31(a)

CERTIFICATION

I, Charles R. Hageboeck, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 of City Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or such persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2012

/s/ Charles R. Hageboeck

Charles R. Hageboeck

President and Chief Executive Officer

EX-31.B

Exhibit 31(b)

CERTIFICATION

I, David L. Bumgarner, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 of City Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or such persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2012

/s/ David L. Bumgarner

David L. Bumgarner

Senior Vice President and Chief Financial Officer

EX-32.A

Exhibit 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of City Holding Company (the “Company”) for the period ending September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles R. Hageboeck, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)           the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles R. Hageboeck

Charles R. Hageboeck

President and Chief Executive Officer

Date: November 9, 2012

This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the“Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

EX-32.B

Exhibit 32(b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of City Holding Company (the “Company”) for the period ending September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David L. Bumgarner, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)           the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David L. Bumgarner

David L. Bumgarner

Senior Vice President and Chief Financial Officer

Date: November 9, 2012

This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

XML

Investments (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended		12 Months Ended			9 Months Ended	12 Months Ended
	Sep. 30, 2012 security	Sep. 30, 2011	Sep. 30, 2012 security	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 Minimum [Member]	Jun. 30, 2012 Maximum [Member]	Sep. 30, 2012 Pooled Bank Trust Preferred Securities [Member]	Dec. 31, 2011 Pooled Bank Trust Preferred Securities [Member]	Dec. 31, 2011 Community Bank And Bank Holding Equity [Member]
Schedule of Investments [Line Items]
Equity ownership positions in the community bank holding companies						2.00%	5.00%
Credit-related net investment impairment losses			$ 0.6		$ 1.3			$ 0.6	$ 0.4	$ 0.9
Pooled trust preferred securities, book value								5.6
Remaining book value									6.3	3.9
Pooled trust preferred securities, estimated fair value	3.7		3.7
Number of pooled trust preferred securities	5		5
Regional community bank stocks, percent of average trading volumes							0.10%
Annual prepayment rate			1.00%
Annual prepayments maturity	100.00%		100.00%
Additional basis points	150.00%		150.00%
Gross gains from investment security transactions	0.7	0.6	1.5	3.8
Carrying value of securities pledged	$ 218		$ 218		$ 204

XML

Allowance For Loan Losses (Schedule Of Impaired Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded investment	$ 13,204	$ 2,918
With no related allowance recorded, Unpaid principal balance	19,211	6,114
With an allowance recorded, Recorded investment	9,779	19,200
With an allowance recorded, Unpaid principal balance	9,779	19,200
With an allowance recorded, Related allowance	1,204	3,488
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded investment	1,113	78
With no related allowance recorded, Unpaid principal balance	1,369	78
With an allowance recorded, Recorded investment	313	297
With an allowance recorded, Unpaid principal balance	313	297
With an allowance recorded, Related allowance	41	53
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded investment	11,843	2,840
With no related allowance recorded, Unpaid principal balance	17,594	6,036
With an allowance recorded, Recorded investment	5,808	16,090
With an allowance recorded, Unpaid principal balance	5,808	16,090
With an allowance recorded, Related allowance	758	3,044
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded investment	219
With no related allowance recorded, Unpaid principal balance	219
With an allowance recorded, Recorded investment	2,564	1,000
With an allowance recorded, Unpaid principal balance	2,564	1,000
With an allowance recorded, Related allowance	314	139
Home equity - junior liens (including lines of credit) [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded investment	29
With no related allowance recorded, Unpaid principal balance	29
With an allowance recorded, Recorded investment	1,079	1,801
With an allowance recorded, Unpaid principal balance	1,079	1,801
With an allowance recorded, Related allowance	86	240
Consumer [Member]
Financing Receivable, Impaired [Line Items]
With an allowance recorded, Recorded investment	11
With an allowance recorded, Unpaid principal balance	11
With an allowance recorded, Related allowance	1
DDA Overdrafts [Member]
Financing Receivable, Impaired [Line Items]
With an allowance recorded, Recorded investment	4	12
With an allowance recorded, Unpaid principal balance	4	12
With an allowance recorded, Related allowance	$ 4	$ 12

XML

Loans (Composition Of Loans Acquired At Acquisition) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 2,085,232	$ 1,973,103
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	1,008,305	929,788
Home equity - junior liens (including lines of credit) [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	143,058	141,797
Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	105,027	130,899
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	787,887	732,146
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	38,285	35,845
Virginia Savings Bancorp, Inc. [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	69,105
Virginia Savings Bancorp, Inc. [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	22,789
Virginia Savings Bancorp, Inc. [Member] | Home equity - junior liens (including lines of credit) [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	6,137
Virginia Savings Bancorp, Inc. [Member] | Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	2,810
Virginia Savings Bancorp, Inc. [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	34,435
Virginia Savings Bancorp, Inc. [Member] | Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 2,934

XML

Fair Value Measurements (Narrative) (Details)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value Inputs, Prepayment Rate	1.00%
Annual prepayments maturity	100.00%
Additional basis points	150.00%
Maximum [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Collateral discount	30.00%	30.00%
Minimum [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Collateral discount	20.00%	20.00%

XML

Allowance For Loan Losses (Schedule Of Information Related To Average Recorded Investment And Interest Income Recognized On Impaired Loans) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Average recorded investment	$ 7,553	$ 13,368
With no related allowance recorded, Interest income recognized	236	226
With an allowance recorded, Average recorded investment	14,008	15,962
With an allowance recorded, Interest income recognized	451	157
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Average recorded investment	81
With no related allowance recorded, Interest income recognized	4
With an allowance recorded, Average recorded investment	203	248
With an allowance recorded, Interest income recognized	7
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Average recorded investment	7,472	12,350
With no related allowance recorded, Interest income recognized	232	206
With an allowance recorded, Average recorded investment	11,197	14,192
With an allowance recorded, Interest income recognized	378	157
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Average recorded investment		320
With no related allowance recorded, Interest income recognized		15
With an allowance recorded, Average recorded investment	1,254	996
With an allowance recorded, Interest income recognized	36
Home equity - junior liens (including lines of credit) [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Average recorded investment		698
With no related allowance recorded, Interest income recognized		5
With an allowance recorded, Average recorded investment	1,354	526
With an allowance recorded, Interest income recognized	$ 30

XML

Loans (Narrative) (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 2,085,232,000	$ 1,973,103,000
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Construction loans	12,800,000	9,300,000
Gross loans	1,008,305,000	929,788,000
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Construction loans	17,100,000	20,200,000
Gross loans	787,887,000	732,146,000
Virginia Savings Bank [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractual principal balance	10,800,000
Virginia Savings Bank [Member] | Credit Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 6,500,000

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Measurements [Abstract]

Schedule Of Assets And Liabilities Measured At Fair Value On A Recurring And Nonrecurring Basis

(in thousands)		Total		Level 1		Level 2		Level 3		Total Gains (Losses)
September 30, 2012
Recurring fair value measurements
Financial Assets
U.S. Government agencies	$	4,415	$	-	$	4,415	$	-
Obligations of states and political subdivisions		50,133		-		50,133		-
Mortgage-backed securities:
U.S. Government agencies		294,328		-		294,328		-
Private label		3,626		-		3,626		-
Trust preferred securities		15,508		-		13,162		2,346
Corporate securities		15,963		-		15,963		-
Marketable equity securities		3,921		3,921		-		-
Investment funds		1,792		1,792		-		-
Derivative assets		14,616		-		14,616		-
Financial Liabilities
Derivative liabilities		14,616		-		14,616		-
Nonrecurring fair value measurements
Financial Assets
Impaired loans	$	22,983	$	-	$	21,542	$	1,441	$	-
December 31, 2011
Recurring fair value measurements
Financial Assets
U.S. Government agencies	$	6,041	$	-	$	6,041	$	-
Obligations of states and political subdivisions		56,802		-		56,802		-
Mortgage-backed securities:
U.S. Government agencies		227,613		-		227,613		-
Private label		5,156		-		5,156		-
Trust preferred securities		45,157		-		43,175		1,982
Corporate securities		14,398		-		14,398		-
Marketable equity securities		3,853		3,853		-		-
Investment funds		1,763		1,763		-		-
Derivative assets		11,541		-		11,541		-
Financial Liabilities
Derivative liabilities		11,541		-		11,541		-
Nonrecurring fair value measurements
Financial Assets
Impaired loans	$	22,118	$	-	$	21,743	$	375	$	2,701

Schedule Of Reconciliation Of Investment Securities Available For Sale Measured At Fair Value On A Recurring Basis Level 3 Assets

		Nine months Ended September 30,
(In thousands)		2012		2011
Beginning balance	$	1,982	$	2,504
Impairment losses on investment securities		(576)		(355)
Included in other comprehensive income		940		158
Dispositions		-		(375)
Transfers into Level 3		-		-
Ending Balance	$	2,346	$	1,932

Schedule Of Level 2 Financial Assets And Liabilities Measured On A Recurring Basis

		Nine months Ended September 30,
		2012		2011
(In thousands)		Level 2		Level 2
Carrying value of impaired loans before allocations	$	14,933	$	18,329
Specific valuation allowance allocations		(1,955)		(4,532)
Fair value	$	12,978	$	13,797

Schedule Of OREO Measured And Reported At Fair Value

		Nine months Ended September 30,
(In thousands)		2012		2011
OREO remeasured at initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	3,088	$	4,411
Charge-offs recognized in the allowance for loan losses		(845)		(790)
Fair value	$	2,243	$	3,621
OREO remeasured subsequent to initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	2,804	$	944
Write-downs included in other non-interest expense		(877)		(186)
Fair value	$	1,927	$	758

Schedule Of Estimates Of Fair Value Of Financial Instruments

(In thousands)		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
September 30, 2012
Assets:
Securities held-to-maturity	$	13,444	$	13,658	$	-	$	13,658	$	-
Net loans		2,066,246		2,107,167		-		-		2,107,167
Liabilities:
Time deposits		929,042		943,262		-		943,262		-
Long-term debt		16,495		16,465		-		16,465		-
December 31, 2011
Assets:
Securities held-to-maturity	$	23,458	$	23,423	$	-	$	23,423	$	-
Net loans		1,953,694		1,991,335		-		-		1,991,335
Liabilities:
Time deposits		885,596		898,972		-		898,972		-
Long-term debt		16,495		16,456		-		16,456		-

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Fair Value Measurements (Schedule Of Level 2 Financial Assets And Liabilities Measured On A Recurring Basis) (Details) (Level 2 [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value of impaired loans before allocations	$ 14,933	$ 18,329
Specific valuation allowance allocations	(1,955)	(4,532)
Fair Value	$ 12,978	$ 13,797

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Previously Securitized Loans (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 item	Sep. 30, 2011
Previously Securitized Loans [Abstract]
Number of securitization transactions			6
Proceeds from securitization transactions			$ 760
Fixed rate of junior-lien underlying mortgages	125.00%		125.00%
Outstanding balance of securitized loans	8.4		8.4
Recognized interest income from previously securitized loans	$ 0.8	$ 0.8	$ 2.4	$ 2.5

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Fair Value Measurements (Schedule Of Assets And Liabilities Measured At Fair Value On A Recurring And Nonrecurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Obligations Of States And Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	$ 50,133	$ 56,802
Obligations Of States And Political Subdivisions [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	50,133	56,802
U.S Treasuries and U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	4,415	6,041
U.S Treasuries and U.S. Government Agencies [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	4,415	6,041
U.S. Government Agencies Mortgage-backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	294,328	227,613
U.S. Government Agencies Mortgage-backed Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	294,328	227,613
Private Label [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	3,626	5,156
Private Label [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	3,626	5,156
Trust Preferred Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	15,508	45,157
Trust Preferred Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	13,162	43,175
Trust Preferred Securities [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	2,346	1,982
Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	15,963	14,398
Corporate Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	15,963	14,398
Marketable Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	3,921	3,853
Marketable Equity Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	3,921	3,853
Investment Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	1,792	1,763
Investment Funds [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	1,792	1,763
Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	14,616	11,541
Derivative Assets [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Recurring	14,616	11,541
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Nonrecurring	22,983	22,118
Total Gains (Losses), Nonrecurring		2,701
Impaired Loans [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Nonrecurring	21,542	21,743
Impaired Loans [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets, Nonrecurring	1,441	375
Derivative Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Liabilities, Recurring	14,616	11,541
Derivative Liabilities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Liabilities, Recurring	$ 14,616	$ 11,541

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Loans (Tables)

9 Months Ended

Sep. 30, 2012

Loans [Abstract]

Summary Of Major Classifications For Loans

( In thousands)	September 30, 2012		December 31, 2011
Residential real estate	$	1,008,305	$	929,788
Home equity – junior liens		143,058		141,797
Commercial and industrial		105,027		130,899
Commercial real estate		787,887		732,146
Consumer		38,285		35,845
DDA overdrafts		2,670		2,628
Gross loans		2,085,232		1,973,103
Allowance for loan losses		(18,986)		(19,409)
Net loans	$	2,066,246	$	1,953,694

Composition Of Loans Acquired At Acquisition

	September 30, 2012
Residential real estate	$	22,789
Home equity – junior liens		6,137
Commercial and industrial		2,810
Commercial real estate		34,435
Consumer		2,934
Gross loans	$	69,105

Activity For The Accretable Yield

Accretable yield at the beginning of the period	$	-
Additions		954
Accretion		(112)
Net reclassifications to accretable from non-accretable		-
Maturities, foreclosures and charge-offs		-
Accretable yield at the end of period	$	842

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Allowance For Loan Losses (Narrative) (Details) (USD $)	9 Months Ended		21 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Maximum [Member]
Interest income recognized	$ 700,000	$ 600,000
Percent of loans were non-accuring			5.00%
TDRs total	$ 21,476,000

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Investments (Gross Unrealized Losses And Fair Value Of Investments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of Investments [Line Items]
Securities available-for-sale, Less Than Twelve Months, Estimated Fair Value	$ 22,119	$ 16,553
Securities available-for-sale, Less Than Twelve Months, Unrealized Loss	319	1,243
Securities available-for-sale, Twelve Months or Greater, Estimated Fair Value	10,492	15,070
Securities available-for-sale, Twelve Months or Greater, Unrealized Loss	3,316	6,140
Securities available-for-sale, Total, Estimated Fair Value	32,611	31,623
Securities available-for-sale, Total, Unrealized Loss	3,635	7,383
Obligations Of States And Political Subdivisions [Member]
Schedule of Investments [Line Items]
Securities available-for-sale, Less Than Twelve Months, Estimated Fair Value	1,482	992
Securities available-for-sale, Less Than Twelve Months, Unrealized Loss	15	11
Securities available-for-sale, Twelve Months or Greater, Estimated Fair Value		394
Securities available-for-sale, Twelve Months or Greater, Unrealized Loss		10
Securities available-for-sale, Total, Estimated Fair Value	1,482	1,386
Securities available-for-sale, Total, Unrealized Loss	15	21
U.S. Government Agencies Mortgage-backed Securities [Member]
Schedule of Investments [Line Items]
Securities available-for-sale, Less Than Twelve Months, Estimated Fair Value	16,440
Securities available-for-sale, Less Than Twelve Months, Unrealized Loss	35
Securities available-for-sale, Twelve Months or Greater, Estimated Fair Value	2,830	4,333
Securities available-for-sale, Twelve Months or Greater, Unrealized Loss	10	168
Securities available-for-sale, Total, Estimated Fair Value	19,270	4,333
Securities available-for-sale, Total, Unrealized Loss	45	168
Private Label [Member]
Schedule of Investments [Line Items]
Securities available-for-sale, Less Than Twelve Months, Estimated Fair Value		3,236
Securities available-for-sale, Less Than Twelve Months, Unrealized Loss		6
Securities available-for-sale, Total, Estimated Fair Value		3,236
Securities available-for-sale, Total, Unrealized Loss		6
Corporate Securities [Member]
Schedule of Investments [Line Items]
Securities available-for-sale, Less Than Twelve Months, Estimated Fair Value	4,070	1,791
Securities available-for-sale, Less Than Twelve Months, Unrealized Loss	258	241
Securities available-for-sale, Twelve Months or Greater, Estimated Fair Value	2,165	4,941
Securities available-for-sale, Twelve Months or Greater, Unrealized Loss	208	1,747
Securities available-for-sale, Total, Estimated Fair Value	6,235	6,732
Securities available-for-sale, Total, Unrealized Loss	466	1,988
Trust Preferred Securities [Member]
Schedule of Investments [Line Items]
Securities available-for-sale, Less Than Twelve Months, Estimated Fair Value		6,724
Securities available-for-sale, Less Than Twelve Months, Unrealized Loss		520
Securities held-to-maturity, Less Than Twelve Months, Estimated Fair Value		4,823
Securities held-to-maturity, Less Than Twelve Months, Unrealized Loss		212
Securities available-for-sale, Twelve Months or Greater, Estimated Fair Value	5,497	5,402
Securities available-for-sale, Twelve Months or Greater, Unrealized Loss	3,098	4,215
Securities held-to-maturity, Twelve Months or Greater, Estimated Fair Value	3,372	8,219
Securities held-to-maturity, Twelve Months or Greater, Unrealized Loss	69	498
Securities available-for-sale, Total, Estimated Fair Value	5,497	12,126
Securities available-for-sale, Total, Unrealized Loss	3,098	4,735
Securities held-to-maturity, Total Estimated Fair Value	3,372	13,042
Securities held-to-maturity, Total Unrealized Loss	69	710
Marketable Equity Securities [Member]
Schedule of Investments [Line Items]
Securities available-for-sale, Less Than Twelve Months, Estimated Fair Value	127	3,810
Securities available-for-sale, Less Than Twelve Months, Unrealized Loss	11	465
Securities available-for-sale, Total, Estimated Fair Value	127	3,810
Securities available-for-sale, Total, Unrealized Loss	$ 11	$ 465

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Fair Value Measurements (Schedule Of Estimates Of Fair Value Of Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities held-to-maturity	$ 13,444	$ 23,458
Time deposits	929,042	885,596
Long-term debt	16,495	16,495
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities held-to-maturity	13,444	23,458
Net loans	2,066,246	1,953,694
Time deposits	929,042	885,596
Long-term debt	16,495	16,495
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities held-to-maturity	13,658	23,423
Net loans	2,107,167	1,991,335
Time deposits	943,262	898,972
Long-term debt	16,465	16,456
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities held-to-maturity	13,658	23,423
Time deposits	943,262	898,972
Long-term debt	16,465	16,456
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Net loans	$ 2,107,167	$ 1,991,335

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Acquisitions (Schedule Of Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	May 31, 2012 Virginia Savings Bank [Member]
Intangible Assets, Beginning Balance	$ 1,274
Core deposit intangible acquired in conjunction with the acquisition of VSB		1,273
Amortization of Intangible Assets	(343)
Intangible Assets, Ending Balance	$ 2,204

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Allowance For Loan Losses (Schedule Of Credit Quality Indicators) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Total	$ 2,085,232	$ 1,973,103
Commercial, Industrial, And Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	892,914	863,045
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	105,027	130,899
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	787,887	732,146
Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,008,305	929,788
Home equity - junior liens (including lines of credit) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	143,058	141,797
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	38,285	35,845
DDA Overdrafts [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	2,670	2,628
Exceptional [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	5,321	4,262
Exceptional [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	3,508	4,220
Exceptional [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,813	42
Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	104,697	114,446
Good [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	6,466	6,728
Good [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	98,231	107,718
Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	524,620	504,798
Acceptable [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	68,504	93,077
Acceptable [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	456,116	411,721
Pass/Watch [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	201,294	186,844
Pass/Watch [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	23,320	25,246
Pass/Watch [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	177,974	161,598
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	16,897	17,272
Special Mention [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,066	470
Special Mention [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	15,831	16,802
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	40,085	35,302
Substandard [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	2,163	1,037
Substandard [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	37,922	34,265
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total		121
Doubtful [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total		121
Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,188,412	1,107,246
Performing [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,005,522	928,789
Performing [Member] | Home equity - junior liens (including lines of credit) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	141,950	139,996
Performing [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	38,274	35,845
Performing [Member] | DDA Overdrafts [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	2,666	2,616
Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	3,906	2,812
Non-Performing [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	2,783	999
Non-Performing [Member] | Home equity - junior liens (including lines of credit) [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,108	1,801
Non-Performing [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	11
Non-Performing [Member] | DDA Overdrafts [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	$ 4	$ 12

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Commitments And Contingencies (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012 Standby Letters Of Credit [Member]	Dec. 31, 2011 Standby Letters Of Credit [Member]	Sep. 30, 2012 Commercial Letters Of Credit [Member]	Dec. 31, 2011 Commercial Letters Of Credit [Member]	Sep. 30, 2012 Home equity - junior liens (including lines of credit) [Member] Commitments To Extend Credit [Member]	Dec. 31, 2011 Home equity - junior liens (including lines of credit) [Member] Commitments To Extend Credit [Member]	Sep. 30, 2012 Commercial Real Estate [Member] Commitments To Extend Credit [Member]	Dec. 31, 2011 Commercial Real Estate [Member] Commitments To Extend Credit [Member]	Sep. 30, 2012 Other Commitments [Member] Commitments To Extend Credit [Member]	Dec. 31, 2011 Other Commitments [Member] Commitments To Extend Credit [Member]
Commitments And Contingencies [Line Items]
Contractual obligations		$ 16,703,000	$ 20,110,000	$ 525,000	$ 412,000	$ 154,874,000	$ 143,856,000	$ 38,060,000	$ 29,995,000	$ 176,732,000	$ 185,602,000
Settlement	3,616,000
Litigation forgive and release amount	$ 3,500,000

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Employee Benefit Plans (Narrative) (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Common stock issued as stock awards	16,876	16,000
Incentive stock options and SARs exercisable period	10 years
Proceeds from exercise of stock options	$ 544,000	$ 168,000
Total intrinsic value of stock options exercised	100,000	100,000
Unrecognized stock-based compensation expense	500,000
Weighted-average period, unrecognized expense expected to be recognized	1 year 7 months 6 days
Stock-based compensation expense related to restricted shares	500,000	400,000
Non-Vested Restricted Shares [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Unrecognized stock-based compensation expense	2,400,000
Weighted-average period, unrecognized expense expected to be recognized	4 years 7 months 6 days
Maximum [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Common stock issued upon the exercise of stock options, SARs and stock awards	1,000,000
Common stock issued as stock awards	350,000
Stock-based compensation expense	$ 200,000	$ 200,000

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Loans (Summary Of Major Classifications For Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 2,085,232	$ 1,973,103
Allowance for loan losses	(18,986)	(19,409)
Net Loans	2,066,246	1,953,694
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	1,008,305	929,788
Home equity - junior liens (including lines of credit) [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	143,058	141,797
Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	105,027	130,899
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	787,887	732,146
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	38,285	35,845
DDA Overdrafts [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 2,670	$ 2,628

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Basis Of Presentation

9 Months Ended

Sep. 30, 2012

Basis Of Presentation [Abstract]

Basis Of Presentation

Note A – Basis of Presentation

The accompanying consolidated financial statements, which are unaudited, include all of the accounts of City Holding Company (“the Parent Company”) and its wholly-owned subsidiaries (collectively, “the Company”). All material intercompany transactions have been eliminated. The consolidated financial statements include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations and financial condition for each of the periods presented. Such adjustments are of a normal recurring nature. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results of operations that can be expected for the year ending December 31, 2012. The Company’s accounting and reporting policies conform with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Such policies require management to make estimates and develop assumptions that affect the amounts reported in the consolidated financial statements and related footnotes. Actual results could differ from management’s estimates.

The consolidated balance sheet as of December 31, 2011 has been derived from audited financial statements included in the Company’s 2011 Annual Report to Shareholders.  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the 2011 Annual Report of the Company.

Certain amounts in the financial statements have been reclassified.  Such reclassifications had no impact on shareholders’ equity or net income for any period.

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Employee Benefit Plans (Summary Of Stock Option Activity) (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Employee Benefit Plans [Abstract]
Options Outstanding, beginning balance	293,817	287,393
Options, Granted	16,876	16,000
Options, Exercised	(18,899)	(6,576)
Options, Forfeited	(1,500)
Options Outstanding, ending balance	290,294	296,817
Weighted-Average Exercise Price, Outstanding, beginning balance	$ 33.95	$ 33.64
Weighted-Average Exercise Price, Granted	$ 35.39	$ 35.09
Weighted-Average Exercise Price, Exercised	$ 28.78	$ 25.54
Weighted-Average Exercise Price, Forfeited	$ 34.73
Weighted-Average Exercise Price, Outstanding, ending balance	$ 34.37	$ 33.90

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Investments (Credit Loss Component Of OTTI On Debt Securities Recognized In Earnings) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Beginning Balance	$ 26,658	$ 26,023
Additional credit impairment	576	1,273
Called		(638)
Sold	(1,235)
Ending Balance	25,999	26,658
Debt Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Beginning Balance	20,610	20,893
Additional credit impairment	576	355
Called		(638)
Ending Balance	21,186	20,610
Equity Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Beginning Balance	6,048	5,130
Additional credit impairment		918
Sold	(1,235)
Ending Balance	$ 4,813	$ 6,048

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Employee Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2012

Employee Benefit Plans [Abstract]

Summary Of Stock Option Activity

	2012			2011
	Options		Weighted-Average Exercise Price	Options		Weighted-Average Exercise Price
Outstanding at January 1	293,817	$	33.95	287,393	$	33.64
Granted	16,876		35.39	16,000		35.09
Exercised	(18,899)		28.78	(6,576)		25.54
Forfeited	(1,500)		34.73	-		-
Outstanding at September 30	290,294	$	34.37	296,817	$	33.90

Stock Options Outstanding And Exercisable

Ranges of Exercise Prices	No. of Options Outstanding		Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Life (Months)		Aggregate Intrinsic Value (in thousands)	No. of Options Currently Exercisable		Weighted-Average Exercise Price of Options Currently Exercisable	Weighted-Average Remaining Contractual Life (Months)		Aggregate Intrinsic Value of Options Currently Exercisable       (in thousands)
$26.62 - $33.90	165,918	$	31.87	43	$	659	114,584	$	32.65	26	$	366
$35.09 - $40.88	124,376		37.70	65		20	69,000		38.11	46		-
	290,294				$	679	183,584				$	366

Weighted Average Assumptions Estimate The Fair Value Of Options Granted

	2012	2011
Risk-free interest rate	2.51%	3.07%
Expected dividend yield	3.90%	3.88%
Volatility factor	48.40%	41.12%
Expected life of option	5.0 years	8.0 years

Restricted Shares Activity And Related Information

	2012			2011
	Restricted Awards		Average Market Price at Grant	Restricted Awards		Average Market Price at Grant
Outstanding at January 1	108,209			96,060
Granted	23,336	$	34.94	14,050	$	35.07
Forfeited/Vested	(13,234)			(1,651)
Outstanding at September 30	118,311			108,459

Net Periodic Pension Cost Of The Defined Benefit Plan

		Three months ended				Nine months ended
		September 30				September 30
(In thousands)		2012		2011		2012		2011
Components of net periodic cost:
Interest cost	$	158	$	162	$	476	$	487
Expected return on plan assets		(203)		(203)		(607)		(609)
Net amortization and deferral		174		137		522		410
Net Periodic Pension Cost	$	129	$	96	$	391	$	288

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Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Derivative Instruments [Abstract]

Fair Value Of Derivative Instruments

		September 30, 2012		December 31, 2011
Fair Value:
Other Assets	$	14,616	$	11,541
Other Liabilities		14,616		11,541

Change In Fair Value Of Derivative Instruments

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2012		2011		2012		2011
Change in Fair Value:
Other income - derivative asset	$	543	$	7,095	$	3,075	$	7,943
Other income - derivative liability		(543)		(7,095)		(3,075)		(7,943)

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Allowance For Loan Losses (Schedule Of Troubled Debt Restructurings) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Financing Receivable, Modifications [Line Items]
Accruing	$ 20,869
Non-Accruing	607
Total	21,476
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Accruing	227
Total	227
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Accruing	14,098
Non-Accruing	185
Total	14,283
Home equity - junior liens (including lines of credit) [Member]
Financing Receivable, Modifications [Line Items]
Accruing	6,400
Non-Accruing	422
Total	6,822
Consumer [Member]
Financing Receivable, Modifications [Line Items]
Accruing	144
Total	$ 144

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Investments (Additional Information Of Trust Preferred Securities With Credit Rating Below Investment Grade) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2012		Dec. 31, 2011
Schedule of Investments [Line Items]
Available-for-sale Securities, Amortized Cost	$ 381,593		$ 358,281
Securities available-for-sale, Estimated Fair Value	389,686		360,783
Held-to-maturity, Amortized Cost	13,444		23,458
Held-to-maturity Securities, Fair Value	13,658		23,423
P3 [Member]
Schedule of Investments [Line Items]
Other-than-temporary impairment losses	11,000		115,000
P4 [Member]
Schedule of Investments [Line Items]
Other-than-temporary impairment losses	565,000		240,000
Available-for-sale Securities [Member] | P1 [Member]
Schedule of Investments [Line Items]
Type	Pooled
Class	Mezz
Original Cost	1,115
Available-for-sale Securities, Amortized Cost	451
Securities available-for-sale, Estimated Fair Value	175
Difference	(276)	[1]
Lowest Credit Rating	Ca
# of issuers currently performing	12
Actual deferrals/defaults (as a % of original dollar)	22.80%
Expected deferrals/defaults (as a % of remaining of performing collateral)	17.10%	[2]
Excess Subordination as a Percentage of Current Performing Collateral	33.30%	[3]
Available-for-sale Securities [Member] | P2 [Member]
Schedule of Investments [Line Items]
Type	Pooled
Class	Mezz
Original Cost	3,944
Available-for-sale Securities, Amortized Cost	1,197
Securities available-for-sale, Estimated Fair Value	892
Difference	(305)	[1]
Lowest Credit Rating	Ca
# of issuers currently performing	12
Actual deferrals/defaults (as a % of original dollar)	25.90%
Expected deferrals/defaults (as a % of remaining of performing collateral)	15.80%	[2]
Excess Subordination as a Percentage of Current Performing Collateral	8.30%	[3]
Available-for-sale Securities [Member] | P3 [Member]
Schedule of Investments [Line Items]
Type	Pooled	[4]
Class	Mezz	[4]
Original Cost	2,962	[4]
Available-for-sale Securities, Amortized Cost	1,419	[4]
Securities available-for-sale, Estimated Fair Value	350	[4]
Difference	(1,069)	[1],[4]
Lowest Credit Rating	Caa3	[4]
# of issuers currently performing	24	[4]
Actual deferrals/defaults (as a % of original dollar)	24.50%	[4]
Expected deferrals/defaults (as a % of remaining of performing collateral)	21.50%	[2],[4]
Excess Subordination as a Percentage of Current Performing Collateral	0.20%	[3],[4]
Available-for-sale Securities [Member] | P4 [Member]
Schedule of Investments [Line Items]
Type	Pooled	[5]
Class	Mezz	[5]
Original Cost	4,060	[5]
Available-for-sale Securities, Amortized Cost	400	[5]
Securities available-for-sale, Estimated Fair Value	400	[5]
Lowest Credit Rating	Ca	[5]
# of issuers currently performing	10	[5]
Actual deferrals/defaults (as a % of original dollar)	19.20%	[5]
Expected deferrals/defaults (as a % of remaining of performing collateral)	23.00%	[5],[6]
Excess Subordination as a Percentage of Current Performing Collateral	0.00%	[3],[5]
Available-for-sale Securities [Member] | P5 [Member]
Schedule of Investments [Line Items]
Type	Pooled
Class	Mezz
Original Cost	5,872
Available-for-sale Securities, Amortized Cost	826
Securities available-for-sale, Estimated Fair Value	366
Difference	(460)	[1]
Lowest Credit Rating	Ca
# of issuers currently performing	14
Actual deferrals/defaults (as a % of original dollar)	26.00%
Expected deferrals/defaults (as a % of remaining of performing collateral)	22.00%	[2]
Excess Subordination as a Percentage of Current Performing Collateral	20.80%	[3]
Available-for-sale Securities [Member] | S1 [Member]
Schedule of Investments [Line Items]
Type	Single
Original Cost	261
Available-for-sale Securities, Amortized Cost	235
Securities available-for-sale, Estimated Fair Value	163
Difference	(72)	[1]
Lowest Credit Rating	NR
# of issuers currently performing	1
Available-for-sale Securities [Member] | S2 [Member]
Schedule of Investments [Line Items]
Type	Single
Original Cost	1,000
Available-for-sale Securities, Amortized Cost	1,000
Securities available-for-sale, Estimated Fair Value	1,036
Difference	36	[1]
Lowest Credit Rating	B2
# of issuers currently performing	1
Held-to-maturity Securities [Member] | P6 [Member]
Schedule of Investments [Line Items]
Type	Pooled
Class	Mezz
Original Cost	2,158
Held-to-maturity, Amortized Cost	246
Held-to-maturity Securities, Fair Value	349
Difference	103	[1]
Lowest Credit Rating	Ca
# of issuers currently performing	12
Actual deferrals/defaults (as a % of original dollar)	22.80%
Expected deferrals/defaults (as a % of remaining of performing collateral)	17.10%	[2]
Excess Subordination as a Percentage of Current Performing Collateral	33.30%	[3]
Held-to-maturity Securities [Member] | P7 [Member]
Schedule of Investments [Line Items]
Type	Pooled
Class	Mezz
Original Cost	5,237
Held-to-maturity, Amortized Cost	1,068
Held-to-maturity Securities, Fair Value	1,189
Difference	121	[1]
Lowest Credit Rating	Ca
# of issuers currently performing	12
Actual deferrals/defaults (as a % of original dollar)	25.90%
Expected deferrals/defaults (as a % of remaining of performing collateral)	15.80%	[2]
Excess Subordination as a Percentage of Current Performing Collateral	8.30%	[3]
Held-to-maturity Securities [Member] | S3 [Member]
Schedule of Investments [Line Items]
Type	Single
Original Cost	4,000
Held-to-maturity, Amortized Cost	4,000
Held-to-maturity Securities, Fair Value	4,000
Lowest Credit Rating	NR
# of issuers currently performing	1
Held-to-maturity Securities [Member] | S4 [Member]
Schedule of Investments [Line Items]
Type	Single
Original Cost	3,360
Held-to-maturity, Amortized Cost	3,098
Held-to-maturity Securities, Fair Value	3,075
Difference	(23)	[1]
Lowest Credit Rating	NR
# of issuers currently performing	1
Held-to-maturity Securities [Member] | S5 [Member]
Schedule of Investments [Line Items]
Type	Single
Original Cost	3,564
Held-to-maturity, Amortized Cost	3,532
Held-to-maturity Securities, Fair Value	3,533
Difference	$ 1	[1]
Lowest Credit Rating	NR
# of issuers currently performing	1

[1] The differences noted consist of unrealized losses recorded at September 30, 2012 and noncredit other-than-temporary impairment losses recorded subsequent to April 1, 2009 that have not been reclassified as credit losses.

[2] Performing collateral is defined as total collateral minus all collateral that has been called, is currently deferring, or currently in default. This model for this security assumes that all collateral that is currently deferring will default with a zero recovery rate. The underlying issuers can cure, thus this bond could recover at a higher percentage upon default than zero.

[3] Excess subordination is defined as the additional defaults/deferrals necessary in the next reporting period to deplete the entire credit enhancement (excess interest and over-collateralization) beneath our tranche within each pool to the point that would cause a "break in yield." This amount assumes that all currently performing collateral continues to perform. A break in yield means that our security would not be expected to receive all the contractual cash flows (principal and interest) by maturity. The "percent of current performing collateral" is the ratio of the "excess subordination amount" to current performing collateral—a higher percent means there is more excess subordination to absorb additional defaults/deferrals, and the better our security is protected from loss.

[4] Other-than-temporary impairment losses of $11,000 were recognized during the nine months ended September 30, 2012. Other-than-temporary impairment losses of $115,000 were recognized during the year ended December 31, 2011.

[5] Other-than-temporary impairment losses of $565,000 were recognized during the nine months ended September 30, 2012. Other-than-temporary impairment losses of $240,000 were recognized during the year ended December 31, 2011.

[6] Performing collateral is defined as total collateral minus all collateral that has been called, is currently deferring, or currently in default. The model for this security assumes that one of the banks that are currently deferring will cure by June 2013. If additional underlying issuers cure, this bond could recover at a higher percentage.

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Commitments And Contingencies (Tables)

9 Months Ended

Sep. 30, 2012

Commitments And Contingencies [Abstract]

Schedule Of Contractual Obligations From Significant Commitments

(In thousands)		September 30, 2012		December 31, 2011
Commitments to extend credit:
Home equity lines	$	154,874	$	143,856
Commercial real estate		38,060		29,995
Other commitments		176,732		185,602
Standby letters of credit		16,703		20,110
Commercial letters of credit		525		412

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Total Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2012

Total Comprehensive Income [Abstract]

Schedule Of Total Comprehensive Income

		Three months ended September 30,				Nine months ended September 30,
(In thousands)		2012		2011		2012		2011
Net income	$	10,607	$	11,577	$	28,049	$	31,024
Other comprehensive income:
Unrealized security gains/(losses) arising during the period		3,847		(1,122)		6,637		3,550
Reclassification adjustment for gains included in income		(458)		(272)		(954)		(3,401)
		3,389		(1,394)		5,683		149
Unrealized loss on interest rate floors		-		-		-		(477)
Other comprehensive income (loss) before income taxes		3,389		(1,394)		5,683		(328)
Tax effect		(1,277)		531		(2,141)		124
Other comprehensive income (loss)		2,112		(863)		3,542		(204)
Total comprehensive income	$	12,719	$	10,714	$	31,591	$	30,820

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Consolidated Statements Of Cash Flows (Parenthetical) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Consolidated Statements Of Cash Flows [Abstract]
Cash acquired from acquisition	$ 24,947

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Schedule Of Computation Of Basic And Diluted Earnings Per Share

		Three months ended September 30,				Nine months ended September 30,
(In thousands, except per share data)		2012		2011		2012		2011
Distributed earnings allocated to  common stock	$	5,150	$	5,015	$	15,451	$	15,045
Undistributed earnings allocated to common stock		5,373		6,479		12,375		15,756
Net earnings allocated to common shareholders	$	10,523	$	11,494	$	27,826	$	30,801
Average shares outstanding		14,751		15,003		14,700		15,165
Effect of dilutive securities:
Employee stock options		83		68		83		77
Shares for diluted earnings per share		14,834		15,071		14,783		15,242
Basic earnings per share	$	0.71	$	0.77	$	1.89	$	2.03
Diluted earnings per share	$	0.71	$	0.76	$	1.88	$	2.02

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Investments (Aggregate Carrying And Approximate Market Values Of Available-For-Sale Securities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	$ 381,593	$ 358,281
Securities available-for-sale, Gross Unrealized Gains	11,728	9,885
Securities available-for-sale, Gross Unrealized Losses	3,635	7,383
Securities available-for-sale, Estimated Fair Value	389,686	360,783
U.S Treasuries and U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	4,310	5,868
Securities available-for-sale, Gross Unrealized Gains	105	173
Securities available-for-sale, Estimated Fair Value	4,415	6,041
Obligations Of States And Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	48,334	55,262
Securities available-for-sale, Gross Unrealized Gains	1,814	1,561
Securities available-for-sale, Gross Unrealized Losses	15	21
Securities available-for-sale, Estimated Fair Value	50,133	56,802
U.S. Government Agencies Mortgage-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	285,678	220,815
Securities available-for-sale, Gross Unrealized Gains	8,695	6,966
Securities available-for-sale, Gross Unrealized Losses	45	168
Securities available-for-sale, Estimated Fair Value	294,328	227,613
Private Label [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	3,583	5,117
Securities available-for-sale, Gross Unrealized Gains	43	45
Securities available-for-sale, Gross Unrealized Losses		6
Securities available-for-sale, Estimated Fair Value	3,626	5,156
Trust Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	18,405	48,951
Securities available-for-sale, Gross Unrealized Gains	201	941
Securities available-for-sale, Gross Unrealized Losses	3,098	4,735
Securities available-for-sale, Estimated Fair Value	15,508	45,157
Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	16,178	16,226
Securities available-for-sale, Gross Unrealized Gains	251	160
Securities available-for-sale, Gross Unrealized Losses	466	1,988
Securities available-for-sale, Estimated Fair Value	15,963	14,398
Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	376,488	352,239
Securities available-for-sale, Gross Unrealized Gains	11,109	9,846
Securities available-for-sale, Gross Unrealized Losses	3,624	6,918
Securities available-for-sale, Estimated Fair Value	383,973	355,167
Marketable Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	3,381	4,318
Securities available-for-sale, Gross Unrealized Gains	551
Securities available-for-sale, Gross Unrealized Losses	11	465
Securities available-for-sale, Estimated Fair Value	3,921	3,853
Investment Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Securities available-for-sale, Amortized Cost	1,724	1,724
Securities available-for-sale, Gross Unrealized Gains	68	39
Securities available-for-sale, Estimated Fair Value	$ 1,792	$ 1,763

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Allowance For Loan Losses (Schedule Of Aging Analysis Of Accruing And Non-Accruing Loans) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	$ 8,417	$ 9,653
60 - 89 days past due	489	3,494
Over 90 days past due	397	166
Non-accrual	22,586	21,951
Financing receivable recorded investment past due total	31,889	35,264
Current	2,053,343	1,937,839
Total	2,085,232	1,973,103
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	25	1,243
Non-accrual	1,426	375
Financing receivable recorded investment past due total	1,451	1,618
Current	103,576	129,281
Total	105,027	130,899
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	1,168	576
60 - 89 days past due	102	2,839
Over 90 days past due	1
Non-accrual	17,650	18,930
Financing receivable recorded investment past due total	18,921	22,345
Current	768,966	709,801
Total	787,887	732,146
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	4,332	4,912
60 - 89 days past due	231	408
Over 90 days past due	346	42
Non-accrual	2,437	957
Financing receivable recorded investment past due total	7,346	6,319
Current	1,000,959	923,469
Total	1,008,305	929,788
Home equity - junior liens (including lines of credit) [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	2,473	1,906
60 - 89 days past due	135	228
Over 90 days past due	35	112
Non-accrual	1,073	1,689
Financing receivable recorded investment past due total	3,716	3,935
Current	139,342	137,862
Total	143,058	141,797
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	110	133
60 - 89 days past due	15	5
Over 90 days past due	11
Financing receivable recorded investment past due total	136	138
Current	38,149	35,707
Total	38,285	35,845
DDA Overdrafts [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 days past due	309	883
60 - 89 days past due	6	14
Over 90 days past due	4	12
Financing receivable recorded investment past due total	319	909
Current	2,351	1,719
Total	$ 2,670	$ 2,628

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Fair Value Measurements (Schedule Of Reconciliation Of Investment Securities Available For Sale Measured At Fair Value On A Recurring Basis Level 3 Assets) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Fair Value Measurements [Abstract]
Beginning balance	$ 1,982	$ 2,504
Impairment losses on investment securities	(576)	(355)
Included in other comprehensive income	940	158
Dispositions		(375)
Transfers into Level 3
Ending Balance	$ 2,346	$ 1,932

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets
Cash and due from banks	$ 72,309	$ 140,873
Interest-bearing deposits in depository institutions	5,563	5,526
Federal funds sold	35,000
Cash and Cash Equivalents	112,872	146,399
Investment securities available for sale, at fair value	389,686	360,783
Investment securities held-to-maturity, at amortized cost (approximate fair value at September 30, 2012 and December 31, 2011 - $13,658 and $23,423, respectively)	13,444	23,458
Other securities	11,459	11,934
Total Investment Securities	414,589	396,175
Gross loans	2,085,232	1,973,103
Allowance for loan losses	(18,986)	(19,409)
Net Loans	2,066,246	1,953,694
Bank owned life insurance	81,146	78,961
Premises and equipment, net	72,360	64,612
Accrued interest receivable	7,681	7,093
Net deferred tax asset	32,407	32,219
Goodwill and other intangible assets	65,103	56,164
Other assets	46,793	41,792
Total Assets	2,899,197	2,777,109
Liabilities
Noninterest-bearing	407,634	369,025
Interest-bearing:
Demand deposits	549,752	526,824
Savings deposits	495,068	439,823
Time deposits	929,042	885,596
Total Deposits	2,381,496	2,221,268
Short-term borrowings:
Federal fund purchased		75,000
Customer repurchase agreements	131,947	114,050
Long-term debt	16,495	16,495
Other liabilities	40,844	39,162
Total Liabilities	2,570,782	2,465,975
Shareholders' Equity
Preferred stock, par value $25 per share: 500,000 shares authorized; none issued
Common stock, par value $2.50 per share: 50,000,000 shares authorized; 18,499,282 shares issued at September 30, 2012 and December 31, 2011, less 3,665,999 and 3,717,993 shares in treasury, respectively	46,249	46,249
Capital surplus	103,311	103,335
Retained earnings	303,567	291,050
Cost of common stock in treasury	(124,347)	(125,593)
Accumulated other comprehensive income (loss):
Unrealized gain on securities available-for-sale	4,367	825
Underfunded pension liability	(4,732)	(4,732)
Total Accumulated Other Comprehensive Loss	(365)	(3,907)
Total Shareholders' Equity	328,415	311,134
Total Liabilities and Shareholders' Equity	$ 2,899,197	$ 2,777,109

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Investments (Amortized Cost And Estimated Fair Value Of Debt Securities By Contractual Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Investments [Abstract]
Securities Available-for-Sale, Due in one year or less, Cost	$ 7,229
Securities Available-for-Sale, Due after one year through five years, Cost	33,449
Securities Available-for-Sale, Due after five years through ten years, Cost	46,821
Securities Available-for-Sale, Due after ten years, Cost	288,989
Securities Available-for-Sale, Cost, Total	376,488
Securities Available-for-Sale, Due in one year or less, Estimated Fair Value	7,275
Securities Available-for-Sale, Due after one year through five years, Estimated Fair Value	33,844
Securities Available-for-Sale, Due after five years through ten years, Estimated Fair Value	48,827
Securities Available-for-Sale, Due after ten years, Estimated Fair Value	294,027
Securities Available-for-Sale, Estimated Fair Value, Total	383,973
Securities Held-to-Maturity, Due after ten years, Cost	13,444
Securities Held-to-Maturity, Cost, Total	13,444
Securities Held-to-Maturity, Due after ten years, Estimated Fair Value	13,658
Securities Held-to-Maturity, Estimated Fair Value, Total	$ 13,658

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Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements Of Changes In Shareholders' Equity [Abstract]
Cash dividends declared	$ 1.05	$ 1.02
Exercise of stock options	18,899	6,576
Purchase of treasury shares	237,535	675,501

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Derivative Instruments (Fair Value Of Derivative Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Other Assets [Member]
Derivatives, Fair Value [Line Items]
Fair Value	$ 14,616	$ 11,541
Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Fair Value	$ 14,616	$ 11,541

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Acquisitions (Schedule Of Business Acquisition) (Details) (USD $) In Thousands, unless otherwise specified	May 31, 2012
Business Acquisition [Line Items]
Loans	$ 73,448
Virginia Savings Bank [Member]
Business Acquisition [Line Items]
Cash	4,672
Common stock	7,723
Purchase price	12,395
Cash and cash equivalents	24,947
Investments	14,082
Loans	73,448
Premises and equipment	5,158
Other assets	8,931
Total identifiable assets	126,566
Deposits	122,755
Other liabilities	698
Total identifiable liabilities	123,453
Net identifiable assets	3,113
Goodwill	8,009
Core deposit intangible	$ 1,273

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Employee Benefit Plans (Restricted Shares Activity And Related Information) (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Employee Benefit Plans [Abstract]
Restricted Awards, beginning balance	108,209	96,060
Restricted Awards, Granted	23,336	14,050
Restricted Awards, Forfeited/Vested	(13,234)	(1,651)
Restricted Awards, ending balance	118,311	108,459
Average Market Price at Grant, Granted	$ 34.94	$ 35.07

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Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note N –Fair Value Measurements

Fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company bases fair value of assets and liabilities on quoted market prices, prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.  If such information is not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.  The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  While management believes the company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.  Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amount presented herein.  A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Financial Assets and Liabilities

The Company used the following methods and significant assumptions to estimate fair value for financial assets and liabilities measured on a recurring basis.

Securities Available for Sale.  Securities available for sale are reported at fair value utilizing Level 1, Level 2, and Level 3 inputs.  The fair value of securities available for sale is determined by utilizing a market approach by obtaining quoted prices on nationally recognized securities exchanges (other than forced or distressed transactions) that occur in sufficient volume or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.  If such measurements are unavailable, the security is classified as Level 3.  Significant judgment is required to make this determination.

The Company utilizes a third party pricing service provider to value its Level 1 and Level 2 investment securities.  Annually, the Company obtains an independent auditor’s report from its third party pricing service provider regarding its controls over investment securities.  Although no control deficiencies were noted, the report did contain caveats and disclaimers regarding the pricing information, such as the Company should review fair values for reasonableness.  On a quarterly basis, the Company selects a sample of its debt securities and reprices those securities with a third party that is independent of the primary pricing service provider to verify the reasonableness of the fair values.

The Company has determined that its pooled trust preferred securities should be priced using Level 3 inputs in accordance with ASC Topic 820 and guidance issued by the SEC.  The Company has determined that there are few observable transactions and market quotations available for pooled trust preferred securities and they are not reliable for purposes of determining fair value at September 30, 2012.  Due to these circumstances, the Company has elected to utilize an income valuation approach produced by a third party pricing source.  This third party model utilizes deferral and default probabilities for the underlying issuers, estimated prepayment rates and assumes no future recoveries of any defaults or deferrals.  The Company then compares the values provided by the third party model with other external sources.  At such time as there are observable transactions or quoted prices that are associated with an orderly and active market for pooled trust preferred securities, the Company will incorporate such market values in its estimate of fair values for these securities.

Derivatives.Derivatives are reported at fair value utilizing Level 2 inputs.  The Company utilizes a market approach by obtaining dealer quotations to value its customer interest rate swaps.  The Company’s derivatives are included within its Other Assets and Other Liabilities in the accompanying consolidated balance sheets.

The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis.  Financial assets measured at fair value on a nonrecurring basis include impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.  Collateral values are estimated using Level 2 inputs based on observable market data for real estate collateral or Level 3 inputs for non-real estate collateral.  The following table presents assets and liabilities measured at fair value as of September 30, 2012 and December 31, 2011:

(in thousands)		Total		Level 1		Level 2		Level 3		Total Gains (Losses)
September 30, 2012
Recurring fair value measurements
Financial Assets
U.S. Government agencies	$	4,415	$	-	$	4,415	$	-
Obligations of states and political subdivisions		50,133		-		50,133		-
Mortgage-backed securities:
U.S. Government agencies		294,328		-		294,328		-
Private label		3,626		-		3,626		-
Trust preferred securities		15,508		-		13,162		2,346
Corporate securities		15,963		-		15,963		-
Marketable equity securities		3,921		3,921		-		-
Investment funds		1,792		1,792		-		-
Derivative assets		14,616		-		14,616		-
Financial Liabilities
Derivative liabilities		14,616		-		14,616		-
Nonrecurring fair value measurements
Financial Assets
Impaired loans	$	22,983	$	-	$	21,542	$	1,441	$	-
December 31, 2011
Recurring fair value measurements
Financial Assets
U.S. Government agencies	$	6,041	$	-	$	6,041	$	-
Obligations of states and political subdivisions		56,802		-		56,802		-
Mortgage-backed securities:
U.S. Government agencies		227,613		-		227,613		-
Private label		5,156		-		5,156		-
Trust preferred securities		45,157		-		43,175		1,982
Corporate securities		14,398		-		14,398		-
Marketable equity securities		3,853		3,853		-		-
Investment funds		1,763		1,763		-		-
Derivative assets		11,541		-		11,541		-
Financial Liabilities
Derivative liabilities		11,541		-		11,541		-
Nonrecurring fair value measurements
Financial Assets
Impaired loans	$	22,118	$	-	$	21,743	$	375	$	2,701

The table below presents a reconcilement of the Company’s financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2012 and 2011:

		Nine months Ended September 30,
(In thousands)		2012		2011
Beginning balance	$	1,982	$	2,504
Impairment losses on investment securities		(576)		(355)
Included in other comprehensive income		940		158
Dispositions		-		(375)
Transfers into Level 3		-		-
Ending Balance	$	2,346	$	1,932

The Company utilizes a third party model to compute the present value of expected cash flows which considers the structure and term of each of the five respective pooled trust preferred securities and the financial condition of the underlying issuers.  Specifically, the third party model details interest rates, principal balances of note classes and underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of the payments to the note classes. The current estimate of expected cash flows is based on the most recent trustee reports and any other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities. For issuing banks that have defaulted, management generally assumes no recovery. For issuing banks that have deferred its interest payments, management excludes the collateral balance associated with these banks and assumes no recoveries of such collateral balance in the future. The exclusion of such issuing banks in a current deferral position is based on such bank experiencing a certain level of financial difficulty that raises doubt about its ability to satisfy its contractual debt obligation, and accordingly, the Company excludes the associated collateral balance from its estimate of expected cash flows. Other assumptions used in the estimate of expected cash flows include expected future default rates and prepayments. Specifically, the model assumes annual prepayments of 1.0% with 100% at maturity and assumes 150 basis points of additional annual defaults from banks that are currently not in default or deferral.  In addition, the model assumes no recoveries except for one trust preferred security which assumes that one of the banks currently deferring or in default will cure such positions by June 2013. 

The table below presents the Company’s Level 2 financial assets and liabilities measured on a nonrecurring basis, which solely relates to impaired loans that were remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses based upon the fair value of the underlying collateral during the nine months ended September 30, 2012 and 2011.  During thenine months ended September 30, 2012 and 2011, the Company had no Level 3 financial assets and liabilities that were measured on a nonrecurring basis.

		Nine months Ended September 30,
		2012		2011
(In thousands)		Level 2		Level 2
Carrying value of impaired loans before allocations	$	14,933	$	18,329
Specific valuation allowance allocations		(1,955)		(4,532)
Fair value	$	12,978	$	13,797

The fair value of impaired loans is estimated using one of several methods, including collateral value, liquidation value and discounted cash flows.  The significant unobservable inputs used in the fair value measurement of collateral for collateral-dependent impaired loans primarily relate to discounts applied to the customers’ reported amount of collateral.  The amount of collateral discount depends upon the marketability of the underlying collateral.  During the nine months ended September 30, 2012 and 2011, collateral discounts ranged from 20% to 30%.

Non-Financial Assets and Liabilities

The Company has no non-financial assets or liabilities measured at fair value on a recurring basis.  Certain non-financial assets measured at fair value on a non-recurring basis include other real estate owned (“OREO”), which is measured at the lower of cost or fair value, and goodwill and other intangible assets, which are measured at fair value for impairment assessments.

The table below presents OREO that was remeasured and reported at fair value during the nine months ended September 30, 2012 and 2011.

		Nine months Ended September 30,
(In thousands)		2012		2011
OREO remeasured at initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	3,088	$	4,411
Charge-offs recognized in the allowance for loan losses		(845)		(790)
Fair value	$	2,243	$	3,621
OREO remeasured subsequent to initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	2,804	$	944
Write-downs included in other non-interest expense		(877)		(186)
Fair value	$	1,927	$	758

ASC Topic 825“Financial Instruments” as amended, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including discount rate and estimate of future cash flows.  In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.  ASC Topic 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.  Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions were used in estimating fair value for financial instruments:

Securities Held to Maturity:  The fair value of securities held-to-maturity are generally based on quoted market prices or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Net loans:  The fair value of the loan portfolio is estimated by discounting the expected future cash flows using the current interest rates at which similar loans would be made to borrowers for the same remaining maturities. Loans were first segregated by type such as commercial, real estate and consumer, and were then further segmented into fixed, adjustable and variable rate categories. Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments. 

Time deposits:  The fair values of time deposits were estimated using discounted cash flow analyses. The discount rates used were based on rates currently offered for deposits with similar remaining maturities. The fair values of the time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

Long-term debt: The fair value of long-term borrowings is estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements and market conditions of similar debt instruments.

Commitments and letters of credit: The fair values of commitments are estimated based on fees currently charged to enter into similar agreements, taking into consideration the remaining terms of the agreements and the counterparties’ credit standing.  The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.  The amounts of fees currently charged on commitments and letters of credit are deemed insignificant, and therefore, the estimated fair values and carrying values have not been reflected in the table below.

The following table represents the estimates of fair value of financial instruments as of September 30, 2012 and December 31, 2011. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as noninterest-bearing demand, interest-bearing demand and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

(In thousands)		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
September 30, 2012
Assets:
Securities held-to-maturity	$	13,444	$	13,658	$	-	$	13,658	$	-
Net loans		2,066,246		2,107,167		-		-		2,107,167
Liabilities:
Time deposits		929,042		943,262		-		943,262		-
Long-term debt		16,495		16,465		-		16,465		-
December 31, 2011
Assets:
Securities held-to-maturity	$	23,458	$	23,423	$	-	$	23,423	$	-
Net loans		1,953,694		1,991,335		-		-		1,991,335
Liabilities:
Time deposits		885,596		898,972		-		898,972		-
Long-term debt		16,495		16,456		-		16,456		-

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Acquisitions (Acquired Loans At Acquisition) (Details) (USD $) In Thousands, unless otherwise specified	May 31, 2012
Acquisitions [Abstract]
Contractually required principal and interest	$ 11,567
Contractual cash flows not expected to be collected (non-accretable difference)	(3,973)
Expected cash flows	7,594
Interest component of expected cash flows (accretable difference)	(954)
Estimated fair value of purchased credit impaired loans acquired	6,640
Estimated fair value of performing loans acquired	66,808
Estimated fair value of loans acquired	$ 73,448

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Investments (Tables)

9 Months Ended

Sep. 30, 2012

Investments [Abstract]

Aggregate Carrying And Approximate Market Values Of Available-For-Sale Securities

		September 30, 2012								December 31, 2011
(In thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. Treasuries and U.S.
government agencies	$	4,310	$	105	$	-	$	4,415	$	5,868	$	173	$	-	$	6,041
Obligations of states and
political subdivisions		48,334		1,814		15		50,133		55,262		1,561		21		56,802
Mortgage-backed securities:
U.S. government agencies		285,678		8,695		45		294,328		220,815		6,966		168		227,613
Private label		3,583		43		-		3,626		5,117		45		6		5,156
Trust preferred
securities		18,405		201		3,098		15,508		48,951		941		4,735		45,157
Corporate securities		16,178		251		466		15,963		16,226		160		1,988		14,398
Total Debt Securities		376,488		11,109		3,624		383,973		352,239		9,846		6,918		355,167
Marketable equity  securities		3,381		551		11		3,921		4,318		-		465		3,853
Investment funds		1,724		68		-		1,792		1,724		39		-		1,763
Total Securities
Available-for-Sale	$	381,593	$	11,728	$	3,635	$	389,686	$	358,281	$	9,885	$	7,383	$	360,783

Aggregate Carrying And Approximate Market Values Of Held-To-Maturity Securities

		September 30, 2012								December 31, 2011
(In thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities held-to-maturity
Trust preferred securities	$	13,444	$	283	$	69	$	13,658	$	23,458	$	675	$	710	$	23,423
Total Securities
Held-to-Maturity	$	13,444	$	283	$	69	$	13,658	$	23,458	$	675	$	710	$	23,423
Other investment securities:
Non-marketable equity securities	$	11,459	$	-	$	-	$	11,459	$	11,934	$	-	$	-	$	11,934
Total Other Investment
Securities	$	11,459	$	-	$	-	$	11,459	$	11,934	$	-	$	-	$	11,934

Gross Unrealized Losses And Fair Value Of Investments

		September 30, 2012
		Less Than Twelve Months				Twelve Months or Greater				Total
(In thousands)		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	1,482	$	15	$	-	$	-	$	1,482	$	15
Mortgage-backed securities:
U.S. Government agencies		16,440		35		2,830		10		19,270		45
Trust preferred securities		-		-		5,497		3,098		5,497		3,098
Corporate securities		4,070		258		2,165		208		6,235		466
Marketable equity securities		127		11		-		-		127		11
Total	$	22,119	$	319	$	10,492	$	3,316	$	32,611	$	3,635
Securities held-to-maturity:
Trust preferred securities	$	-	$	-	$	3,372	$	69	$	3,372	$	69

		December 31, 2011
		Less Than Twelve Months				Twelve Months or Greater				Total
(In thousands)		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	992	$	11	$	394	$	10	$	1,386	$	21
Mortgage-backed securities:
U.S. Government agencies		-		-		4,333		168		4,333		168
Private label		3,236		6		-		-		3,236		6
Trust preferred securities		6,724		520		5,402		4,215		12,126		4,735
Corporate securities		1,791		241		4,941		1,747		6,732		1,988
Marketable equity securities		3,810		465		-		-		3,810		465
Total	$	16,553	$	1,243	$	15,070	$	6,140	$	31,623	$	7,383
Securities held-to-maturity:
Trust preferred securities	$	4,823	$	212	$	8,219	$	498	$	13,042	$	710

Credit Loss Component Of OTTI On Debt Securities Recognized In Earnings

(In thousands)		Debt Securities		Equity Securities		Total
Balance at January 1, 2011	$	20,893	$	5,130	$	26,023
Additions:						-
Initial credit impairment		-		-		-
Additional credit impairment		355		918		1,273
Deductions:						-
Called		(638)		-		(638)
Balance December 31, 2011		20,610		6,048		26,658
Additions:
Initial credit impairment		-		-		-
Additional credit impairment		576		-		576
Deductions:
Sold		-		(1,235)		(1,235)
Balance September 30, 2012	$	21,186	$	4,813	$	25,999

Additional Information Of Trust Preferred Securities With Credit Rating Below Investment Grade

(Dollars in thousands)

Deal Name	Type	Class	Original Cost	Amortized Cost	Fair Value	Difference (1)	Lowest Credit Rating	# of issuers currently performing	Actual deferrals/defaults (as a % of original dollar)	Expected deferrals/defaults (as a % of remaining of performing collateral)		Excess Subordination as a Percentage of Current Performing Collateral (4)
	Pooled trust preferred securities:
	Other-than-temporarily impaired
	Available for Sale:
P1	Pooled	Mezz	$             1,115	$                 451	$                175	(276)	Ca	12	22.8%	17.1%	(2)	33.3%
P2	Pooled	Mezz	3,944	1,197	892	(305)	Ca	12	25.9%	15.8%	(2)	8.3%
P3(5)	Pooled	Mezz	2,962	1,419	350	(1,069)	Caa3	24	24.5%	21.5%	(2)	0.2%
P4(6)	Pooled	Mezz	4,060	400	400	-	Ca	10	19.2%	23.0%	(3)	0.0%
P5	Pooled	Mezz	5,872	826	366	(460)	Ca	14	26.0%	22.0%	(2)	20.8%
	Held to Maturity:
P6	Pooled	Mezz	2,158	246	349	103	Ca	12	22.8%	17.1%	(2)	33.3%
P7	Pooled	Mezz	5,237	1,068	1,189	121	Ca	12	25.9%	15.8%	(2)	8.3%
	Single issuer trust preferred  securities
	Available for sale:
S1	Single		261	235	163	(72)	NR	1	-	-
S2	Single		1,000	1,000	1,036	36	B2	1	-	-
	Held to Maturity:
S3	Single		4,000	4,000	4,000	-	NR	1	-	-
S4	Single		3,360	3,098	3,075	(23)	NR	1	-	-
S5	Single		3,564	3,532	3,533	1	NR	1	-	-

(1)	The differences noted consist of unrealized losses recorded at September 30, 2012 and noncredit other-than-temporary impairment losses recorded subsequent to April 1, 2009 that have not been reclassified as credit losses.
(2)	Performing collateral is defined as total collateral minus all collateral that has been called, is currently deferring, or currently in default. This model for this security assumes that all collateral that is currently deferring will default with a zero recovery rate. The underlying issuers can cure, thus this bond could recover at a higher percentage upon default than zero.
(3)	Performing collateral is defined as total collateral minus all collateral that has been called, is currently deferring, or currently in default.  The model for this security assumes that one of the banks that are currently deferring will cure by June 2013.  If additional underlying issuers cure, this bond could recover at a higher percentage.
(4)	Excess subordination is defined as the additional defaults/deferrals necessary in the next reporting period to deplete the entire credit enhancement (excess interest and over-collateralization) beneath our tranche within each pool to the point that would cause a "break in yield." This amount assumes that all currently performing collateral continues to perform. A break in yield means that our security would not be expected to receive all the contractual cash flows (principal and interest) by maturity. The "percent of current performing collateral" is the ratio of the "excess subordination amount" to current performing collateral—a higher percent means there is more excess subordination to absorb additional defaults/deferrals, and the better our security is protected from loss.
(5)	Other-than-temporary impairment lossesof $11,000 were recognized during the nine months ended September 30, 2012.  Other-than-temporary impairment losses of $115,000 were recognized during the year ended December 31, 2011.
(6)	Other-than-temporary impairment lossesof $565,000 were recognized during the nine months ended September 30, 2012.  Other-than-temporary impairment losses of $240,000 were recognized during the year ended December 31, 2011.

Amortized Cost And Estimated Fair Value Of Debt Securities By Contractual Maturity

(In thousands)		Cost		Estimated Fair Value
Securities Available-for-Sale
Due in one year or less		7,229		7,275
Due after one year through five years		33,449		33,844
Due after five years through ten years		46,821		48,827
Due after ten years		288,989		294,027
	$	376,488	$	383,973
Securities Held-to-Maturity
Due in one year or less		-		-
Due after one year through five years		-		-
Due after five years through ten years		-		-
Due after ten years		13,444		13,658
	$	13,444	$	13,658

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Total Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Total Comprehensive Income [Abstract]
Net income	$ 10,607	$ 11,577	$ 28,049	$ 31,024
Unrealized security gains arising during the period	3,847	(1,122)	6,637	3,550
Reclassification adjustment for gains included in income	(458)	(272)	(954)	(3,401)
Net unrealized gains on securities	3,389	(1,394)	5,683	149
Unrealized loss on interest rate floors				(477)
Other comprehensive income (loss) before income taxes	3,389	(1,394)	5,683	(328)
Tax effect	(1,277)	531	(2,141)	124
Other comprehensive income (loss)	2,112	(863)	3,542	(204)
Total comprehensive income	$ 12,719	$ 10,714	$ 31,591	$ 30,820

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating Activities
Net income	$ 28,049	$ 31,024
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion	1,356	1,296
Provision for loan losses	4,600	2,372
Depreciation of premises and equipment	3,371	3,408
Deferred income tax expense (benefit)	342	(1,802)
Accretion of gain from sale of interest rate floors		(295)
Net periodic employee benefit cost	391	288
Realized investment securities gains	(1,530)	(3,756)
Net investment securities impairment losses	576	355
Stock-compensation expense	870	867
Increase in value of bank-owned life insurance	(2,164)	(2,455)
Proceeds from bank-owned life insurance		492
Change in accrued interest receivable	(137)	464
Change in other assets	(735)	(4,694)
Change in other liabilities	2,092	14,711
Net Cash Provided by Operating Activities	37,081	42,275
Investing Activities
Proceeds from sale of money market and mutual fund securities available-for-sale		617,230
Purchases of money market and mutual fund securities available-for-sale		(617,337)
Proceeds from sales of securities available-for-sale	27,773	56,371
Proceeds from maturities and calls of securities available-for-sale	113,760	88,807
Proceeds from maturities and calls of securities held-to-maturity	10,046	1,338
Purchases of securities available-for-sale	(150,497)	(107,050)
Net (increase) in loans	(43,656)	(61,800)
Purchases of premises and equipment	(5,910)	(3,691)
Acquisition of Virginia Savings Bancorp, net of cash acquired of $24,947	20,275
Net Cash Used in Investing Activities	(28,209)	(26,132)
Financing Activities
Net increase in noninterest-bearing deposits	26,777	25,577
Net increase (decrease) in interest-bearing deposits	10,815	(2,631)
Net (decrease) increase in short-term borrowings	(57,103)	15,171
Purchases of treasury stock	(7,915)	(21,429)
Proceeds from exercise of stock options	544	168
Dividends paid	(15,517)	(15,591)
Net Cash (Used in) Provided by Financing Activities	(42,399)	1,265
(Decrease) increase in Cash and Cash Equivalents	(33,527)	17,408
Cash and cash equivalents at beginning of period	146,399	66,379
Cash and Cash Equivalents at End of Period	$ 112,872	$ 83,787

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Investment securities held-to-maturity, fair value	$ 13,658	$ 23,423
Preferred stock, par value	$ 25	$ 25
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 2.50	$ 2.50
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	18,499,282	18,499,282
Common stock, treasury shares	3,665,999	3,717,993

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Derivative Instruments

9 Months Ended

Sep. 30, 2012

Derivative Instruments [Abstract]

Derivative Instruments

Note I – Derivative Instruments

As of September 30, 2012 and December 31, 2011, the Company has derivative financial instruments not included in hedge relationships.  These derivatives consist of interest rate swaps used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies.

The following table summarizes the fair value of these derivative instruments at September 30, 2012 and December 31, 2011:

		September 30, 2012		December 31, 2011
Fair Value:
Other Assets	$	14,616	$	11,541
Other Liabilities		14,616		11,541

The following table summarizes the change in fair value of these derivative instruments for the three and nine months ended September 30, 2012 and 2011:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2012		2011		2012		2011
Change in Fair Value:
Other income - derivative asset	$	543	$	7,095	$	3,075	$	7,943
Other income - derivative liability		(543)		(7,095)		(3,075)		(7,943)

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Document And Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 05, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2012
Entity Registrant Name	CITY HOLDING CO
Entity Central Index Key	0000726854
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		14,833,283
Trading Symbol	chco

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Employee Benefit Plans

9 Months Ended

Sep. 30, 2012

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note J – Employee Benefit Plans

During 2003, shareholders approved the City Holding Company 2003 Incentive Plan (“the Plan”).  Employees, directors and individuals who provide service to the Company (collectively, “Plan Participants”) are eligible to participate in the Plan.  Pursuant to terms of the Plan, the Compensation Committee of the Board of Directors, or its delegate, may, from time-to-time, grant stock options, stock appreciation rights (“SARs”), or stock awards to Plan Participants.  A maximum of 1,000,000shares of the Company’s common stock may be issued upon the exercise of stock options, SARs and stock awards, but no more than 350,000 shares of common stock may be issued as stock awards.  These limitations may be adjusted in the event of a change in the number of outstanding shares of common stock by reason of a stock dividend, stock split or other similar event.  Specific terms of options and SARs awarded, including vesting periods, exercise prices (stock price at date of grant) and expiration dates are determined at the date of grant and are evidenced by agreements between the Company and the awardee.  The exercise price of the option grants equals the market price of the Company’s stock on the date of grant.  All incentive stock options and SARs will be exercisable up to ten years from the date granted and all options and SARs are exercisable for the period specified in the individual agreement.

Each award from the Plan is evidenced by an award agreement that specifies the option price, the duration of the option, the number of shares to which the option pertains, and such other provisions as the Compensation Committee, or its delegate, determines.  The option price for each grant is equal to the fair market value of a share of the Company’s common stock on the date of the grant.  Options granted expire at such time as the Compensation Committee, or its delegate, determines at the date of the grant and in no event does the exercise period exceed a maximum of ten years.  Upon a change-in-control of the Company, as defined in the Plan, all outstanding options and awards shall immediately vest.

Stock Options

A summary of the Company’s stock option activity and related information is presented below for the nine months ended September 30, 2012 and 2011:

	2012			2011
	Options		Weighted-Average Exercise Price	Options		Weighted-Average Exercise Price
Outstanding at January 1	293,817	$	33.95	287,393	$	33.64
Granted	16,876		35.39	16,000		35.09
Exercised	(18,899)		28.78	(6,576)		25.54
Forfeited	(1,500)		34.73	-		-
Outstanding at September 30	290,294	$	34.37	296,817	$	33.90

Additional information regarding stock options outstanding and exercisable at September 30, 2012, is provided in the following table:

Ranges of Exercise Prices	No. of Options Outstanding		Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Life (Months)		Aggregate Intrinsic Value (in thousands)	No. of Options Currently Exercisable		Weighted-Average Exercise Price of Options Currently Exercisable	Weighted-Average Remaining Contractual Life (Months)		Aggregate Intrinsic Value of Options Currently Exercisable       (in thousands)
$26.62 - $33.90	165,918	$	31.87	43	$	659	114,584	$	32.65	26	$	366
$35.09 - $40.88	124,376		37.70	65		20	69,000		38.11	46		-
	290,294				$	679	183,584				$	366

Proceeds from stock option exercises were $0.5 million and $0.3 million during the nine months ended September 30, 2012 and 2011, respectively. Shares issued in connection with stock option exercises are issued from available treasury shares. If no treasury shares are available, new shares are issued from available authorized shares. During the nine months ended September 30, 2012 and 2011 all shares issued in connection with stock option exercises and restricted stock awards were issued from available treasury stock.

The total intrinsic value of stock options exercised was $0.1 millionand less than $0.1 million during the nine months ended September 30, 2012 and 2011, respectively.

Stock-based compensation expense was approximately  $0.2 million for both the nine months ended September 30, 2012and 2011.Unrecognized stock-based compensation expense related to stock options approximated$0.5 million at September 30, 2012. At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 1.6 years.

The fair value of the options is estimated at the date of grant using a Black-Scholes option-pricing model.   The following weighted average assumptions were used to estimate the fair value of options granted during the nine months ended September 30, 2012 and 2011:

	2012	2011
Risk-free interest rate	2.51%	3.07%
Expected dividend yield	3.90%	3.88%
Volatility factor	48.40%	41.12%
Expected life of option	5.0 years	8.0 years

Restricted Shares

The Company records compensation expense with respect to restricted shares in an amount equal to the fair value of the common stock covered by each award on the date of grant. The restricted shares awarded become fully vested after various periods of continued employment from the respective dates of grant. The Company is entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted shares when the restrictions are released and the shares are issued. Compensation is being charged to expense over the respective vesting periods.

Restricted shares are forfeited if officers and employees terminate prior to the lapsing of restrictions. The Company records forfeitures of restricted stock as treasury share repurchases and any compensation cost previously recognized is reversed in the period of forfeiture.  Recipients of restricted shares do not pay any cash consideration to the Company for the shares, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested.  Stock-based compensation expense related to restricted shares was approximately $0.5 million and  $0.4 million for the nine months ended September 30, 2012 and 2011, respectively.  Unrecognized stock-based compensation expense related to non-vested restricted shares was $2.4 million at September 30, 2012. At September 30, 2012, this unrecognized expense is expected to be recognized over 4.6years based on the weighted average-life of the restricted shares.

A summary of the Company’s restricted shares activity and related information is presented below for the nine months ended September 30, 2012 and 2011:

	2012			2011
	Restricted Awards		Average Market Price at Grant	Restricted Awards		Average Market Price at Grant
Outstanding at January 1	108,209			96,060
Granted	23,336	$	34.94	14,050	$	35.07
Forfeited/Vested	(13,234)			(1,651)
Outstanding at September 30	118,311			108,459

Benefit Plans

The Company provides retirement benefits to its employees through the City Holding Company 401(k) Plan and Trust (“the 401(k) Plan”), which is intended to be compliant with Employee Retirement Income Security Act (ERISA) section 404(c). The Company’s total expense associated with the retirement benefit plan approximated $0.5 million for both the nine months ended September 30, 2012 and 2011.

The Company also maintains a defined benefit pension plan (“the Defined Benefit Plan”). The Defined Benefit Plan was frozen in 1999 subsequent to the Company’s acquisition of the plan sponsor. The Defined Benefit Plan maintains a December 31 year-end for purposes of computing its benefit obligations. The Company made contributions of approximately $0.6 million and $0.3 million to the Defined Benefit Plan during the nine months ended September 30, 2012 and 2011, respectively.

The following table presents the components of the net periodic pension cost of the Defined Benefit Plan:

		Three months ended				Nine months ended
		September 30				September 30
(In thousands)		2012		2011		2012		2011
Components of net periodic cost:
Interest cost	$	158	$	162	$	476	$	487
Expected return on plan assets		(203)		(203)		(607)		(609)
Net amortization and deferral		174		137		522		410
Net Periodic Pension Cost	$	129	$	96	$	391	$	288

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Consolidated Statements Of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest Income
Interest and fees on loans	$ 24,633	$ 23,326	$ 70,843	$ 70,416
Interest on investment securities:
Taxable	3,438	4,639	11,345	13,694
Tax-exempt	346	392	1,101	1,299
Interest on federal funds sold	15	13	38	39
Total Interest Income	28,432	28,370	83,327	85,448
Interest Expense
Interest on deposits	3,312	4,550	10,363	15,829
Interest on short-term borrowings	79	90	229	239
Interest on long-term debt	166	159	499	474
Total Interest Expense	3,557	4,799	11,091	16,542
Net Interest Income	24,875	23,571	72,236	68,906
Provision for loan losses	975		4,600	2,372
Net Interest Income After Provision for Loan Losses	23,900	23,571	67,636	66,534
Non-interest Income
Total investment securities impairment losses	(272)	(1,849)	(878)	(1,849)
Noncredit impairment losses recognized in other comprehensive income		1,494	302	1,494
Net investment securities impairment losses	(272)	(355)	(576)	(355)
Gains on sale of investment securities	730	627	1,530	3,756
Net investment securities gains	458	272	954	3,401
Service charges	9,861	9,840	28,601	28,749
Insurance commissions	1,439	1,388	4,782	4,513
Trust and investment management fee income	912	699	2,662	2,181
Bank owned life insurance	738	952	2,228	2,455
Other income	671	380	1,762	1,434
Total Non-interest Income	14,079	13,531	40,989	42,733
Non-interest Expense
Salaries and employee benefits	11,295	10,302	32,207	30,397
Occupancy and equipment	2,126	2,057	6,038	6,084
Depreciation	1,175	1,131	3,371	3,408
FDIC insurance expense	405	392	1,184	2,276
Advertising	674	546	1,993	1,854
Bankcard expenses	720	559	2,035	1,693
Postage, delivery, and statement mailings	529	551	1,565	1,615
Office supplies	407	492	1,258	1,483
Legal and professional fees	611	567	1,349	4,547
Telecommunications	433	371	1,209	1,217
Repossessed asset losses, net of expenses	429	109	1,200	300
Merger related costs	157		4,335
Other expenses	2,885	2,611	8,382	7,585
Total Non-interest Expense	21,846	19,688	66,126	62,459
Income Before Income Taxes	16,133	17,414	42,499	46,808
Income tax expense	5,526	5,837	14,450	15,784
Net Income Available to Common Shareholders	10,607	11,577	28,049	31,024
Total comprehensive income	$ 12,719	$ 10,714	$ 31,591	$ 30,820
Average common shares outstanding	14,751	15,003	14,700	15,165
Effect of dilutive securities:
Employee stock options	83	68	83	77
Shares for diluted earnings per share	14,834	15,071	14,783	15,242
Basic earnings per common share	$ 0.71	$ 0.77	$ 1.89	$ 2.03
Diluted earnings per common share	$ 0.71	$ 0.76	$ 1.88	$ 2.02
Dividends declared per common share	$ 0.35	$ 0.34	$ 1.05	$ 1.02

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Investments

9 Months Ended

Sep. 30, 2012

Investments [Abstract]

Investments

Note D –Investments

The aggregate carrying and approximate market values of securities follow.  Fair values are based on quoted market prices, where available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable financial instruments.

		September 30, 2012								December 31, 2011
(In thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. Treasuries and U.S.
government agencies	$	4,310	$	105	$	-	$	4,415	$	5,868	$	173	$	-	$	6,041
Obligations of states and
political subdivisions		48,334		1,814		15		50,133		55,262		1,561		21		56,802
Mortgage-backed securities:
U.S. government agencies		285,678		8,695		45		294,328		220,815		6,966		168		227,613
Private label		3,583		43		-		3,626		5,117		45		6		5,156
Trust preferred
securities		18,405		201		3,098		15,508		48,951		941		4,735		45,157
Corporate securities		16,178		251		466		15,963		16,226		160		1,988		14,398
Total Debt Securities		376,488		11,109		3,624		383,973		352,239		9,846		6,918		355,167
Marketable equity  securities		3,381		551		11		3,921		4,318		-		465		3,853
Investment funds		1,724		68		-		1,792		1,724		39		-		1,763
Total Securities
Available-for-Sale	$	381,593	$	11,728	$	3,635	$	389,686	$	358,281	$	9,885	$	7,383	$	360,783

		September 30, 2012								December 31, 2011
(In thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities held-to-maturity
Trust preferred securities	$	13,444	$	283	$	69	$	13,658	$	23,458	$	675	$	710	$	23,423
Total Securities
Held-to-Maturity	$	13,444	$	283	$	69	$	13,658	$	23,458	$	675	$	710	$	23,423
Other investment securities:
Non-marketable equity securities	$	11,459	$	-	$	-	$	11,459	$	11,934	$	-	$	-	$	11,934
Total Other Investment
Securities	$	11,459	$	-	$	-	$	11,459	$	11,934	$	-	$	-	$	11,934

Securities with limited marketability, such as stock in the Federal Reserve Bank or the Federal Home Loan Bank, are carried at cost and are reported as non-marketable equity securities in the table above.

Certain investment securities owned by the Company were in an unrealized loss position (i.e., amortized cost basis exceeded the estimated fair value of the securities) as of September 30, 2012 and December 31, 2011.  The following table shows the gross unrealized losses and fair value of the Company’s investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2012 and December 31, 2011.

		September 30, 2012
		Less Than Twelve Months				Twelve Months or Greater				Total
(In thousands)		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	1,482	$	15	$	-	$	-	$	1,482	$	15
Mortgage-backed securities:
U.S. Government agencies		16,440		35		2,830		10		19,270		45
Trust preferred securities		-		-		5,497		3,098		5,497		3,098
Corporate securities		4,070		258		2,165		208		6,235		466
Marketable equity securities		127		11		-		-		127		11
Total	$	22,119	$	319	$	10,492	$	3,316	$	32,611	$	3,635
Securities held-to-maturity:
Trust preferred securities	$	-	$	-	$	3,372	$	69	$	3,372	$	69

		December 31, 2011
		Less Than Twelve Months				Twelve Months or Greater				Total
(In thousands)		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	992	$	11	$	394	$	10	$	1,386	$	21
Mortgage-backed securities:
U.S. Government agencies		-		-		4,333		168		4,333		168
Private label		3,236		6		-		-		3,236		6
Trust preferred securities		6,724		520		5,402		4,215		12,126		4,735
Corporate securities		1,791		241		4,941		1,747		6,732		1,988
Marketable equity securities		3,810		465		-		-		3,810		465
Total	$	16,553	$	1,243	$	15,070	$	6,140	$	31,623	$	7,383
Securities held-to-maturity:
Trust preferred securities	$	4,823	$	212	$	8,219	$	498	$	13,042	$	710

Marketable equity securities consist of investments made by the Company in equity positions of various community banks.  Included within this portfolio are meaningful (2-5%) ownership positions in the following community bank holding companies: First National Corporation and First United Corporation.

During the first nine months of 2012, the Company recorded $0.6 million in credit-related net investment impairment losses.  The charges deemed to be other-than-temporary were related to pooled bank trust preferred securities with a remaining book value of $5.6 million at September 30, 2012.  The credit-related net impairment charges related to the pooled bank trust preferred securities were based on the Company’s quarterly reviews of its investment securities for indications of losses considered to be other than temporary.  Based on management’s assessment of the securities the Company owns, the seniority positions of the securities within the pools, the level of defaults and deferred payments within the pools, management concluded that credit-related impairment charges of $0.6 million on the pooled bank trust preferred securities were appropriate for the nine months ended September 30, 2012.  During 2011, the Company recorded $1.3 million in credit-related net investment impairment losses.  The charges deemed to be other-than-temporary were related to pooled bank trust preferred securities ($0.4 million credit-related net impairment losses for the full year) with a remaining book value of $6.3 million at December 31, 2011, and community bank and bank holding company equity positions ($0.9 million credit-related net impairment losses for the full year) with a remaining book value of $3.9 million at December 31, 2011.  The credit-related net impairment charges related to the pooled bank trust preferred securities were based on the Company’s quarterly reviews of its investment securities for indications of losses considered to be other than temporary.  Based on management’s assessment of the securities the Company owns, the seniority position of the securities within the pools, the level of defaults and deferred payments within the pools, management concluded that credit-related impairment charges of $0.4 million on the pooled bank trust preferred securities were appropriate for the year ending December 31, 2011.  During the year ended December 31, 2011, the Company recognized $0.9 million of credit-related net impairment charges on the Company’s equity positions due to the length of time and extent to which the market value of these securities have been below the Company’s cost basis.  As a result of these factors, the Company does not expect the market value of these securities to recover in the near future.

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary would be reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition, capital strength, and near-term (12 months) prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; (iii) the historical volatility in the market value of the investment and/or the liquidity or illiquidity of the investment; (iv) adverse conditions specifically related to the security, an industry, or a geographic area; or (v) the intent to sell the investment security and if it’s more likely than not that the Company will not have to sell the security before recovery of its cost basis.  In addition, management also employs a continuous monitoring process in regards to its marketable equity securities, specifically its portfolio of regional community bank holdings.  Although the regional community bank stocks that are owned by the Company are publicly traded, the trading activity for these stocks is minimal, with trading volumes of less than 0.1% of each respective company being traded on a daily basis.  Another factor influencing the market value of these equity securities is a depressed stock market, particularly in the smaller community bank financial sector.  As part of management’s review process for these securities, management reviews the financial condition of each respective regional community bank for any indications of financial weakness.

Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company will receive full value for the securities.  Furthermore, as of September 30, 2012, management does not intend to sell an impaired security and it is not more than likely that it will be required to sell the security before the recovery of its amortized cost basis.  The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread widening on agency-issued mortgage related securities, general financial market uncertainty and unprecedented market volatility.  These conditions will not prohibit the Company from receiving its contractual principal and interest payments on its debt securities.  The fair value is expected to recover as the securities approach their maturity date or repricing date.   As of September 30, 2012, management believes the unrealized losses detailed in the table above are temporary and no impairment loss has been recognized in the Company’s consolidated income statement.  Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period of the other-than-temporary impairment is identified, while any noncredit loss will be recognized in other comprehensive income.

At September 30, 2012, the book value of the Company’s five pooled trust preferred securities totaled $5.6 million with an estimated fair value of $3.7 million.  All of these securities are mezzanine tranches.  Pooled trust preferred securities represent beneficial interests in securitized financial assets that the Company analyzes within the scope of ASC 320, “Investments-Debt and Equity Securities” and are evaluated quarterly for other-than-temporary-impairment (“OTTI”).  Management performs an analysis of OTTI utilizing its internal methodology as described below to estimate expected cash flows to be received in the future.  The Company reviews each of its pooled trust preferred securities to determine if an OTTI charge would be recognized in current earnings in accordance with ASC 320, “Investments-Debt and Equity Securities”.  There is a risk that continued collateral deterioration could cause the Company to recognize additional OTTI charges in earnings in the future.

When evaluating pooled trust preferred securities for OTTI, the Company determines a credit related portion and a noncredit related portion.  The credit related portion is recognized in earnings and represents the difference between the present value of expected future cash flows and the amortized cost basis of the security.  The noncredit related portion is recognized in other comprehensive income, and represents the difference between the book value and the fair value of the security less the amount of the credit related impairment.  The determination of whether it is probable that an adverse change in estimated cash flows has occurred is evaluated by comparing estimated cash flows to those previously projected as further described below.  The Company considers this process to be its primary evidence when determining whether credit related OTTI exists.  The results of these analyses are significantly affected by other variables such as the estimate of future cash flows, credit worthiness of the underlying issuers and determination of the likelihood of defaults of the underlying collateral.

The Company utilizes a third party model to compute the present value of expected cash flows which considers the structure and term of each of the five respective pooled trust preferred securities and the financial condition of the underlying issuers.  Specifically, the third party model details interest rates, principal balances of note classes andunderlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of thepayments to the note classes. The current estimate of expected cash flows is based on the most recent trustee reports and anyother relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferredsecurities. For issuing banks that have defaulted, management generally assumes no recovery. For issuing banks that have deferred its interest payments, management excludes the collateral balance associated with these banks and assumes no recoveries of such collateral balance in the future. The exclusion of such issuing banks in a current deferral position is based on such bank experiencing a certain level of financial difficulty that raises doubt about its ability to satisfy its contractual debt obligation, and accordingly, the Company excludes the associated collateral balance from its estimate of expected cash flows. Other assumptions used in the estimate of expected cash flows include expected future default rates and prepayments. Specifically, the model assumesannual prepayments of 1.0% with 100% at maturity and assumes 150 basis points of additional annual defaults from banks that are currently not in default or deferral.  In addition, the model assumes no recoveries except for one trust preferred security which assumes that one of the banks currently deferring or in default will cure such positions by June 2013.  Management compares the present value of expected cash flows to those previously projected to determine if an adverse change in cash flows has occurred. If an adverse change in cash flows has occurred, management determines the credit loss to be recognized in the current period and the portion related to noncredit factors to be recognized in other comprehensive income.

The following table presents a progression of the credit loss component of OTTI on debt and equity securities recognized in earnings during the nine months ended September 30, 2012 and for the year ended December 31, 2011.  The credit loss component represents the difference between the present value of expected future cash flows and the amortized cost basis of the security.  The credit component of OTTI recognized in earnings during a period is presented in two parts based upon whether the credit impairment in the current period is the first time the security was credit impaired (initial credit impairment) or if there is additional credit impairment on a security that was credit impaired in previous periods. 

(In thousands)		Debt Securities		Equity Securities		Total
Balance at January 1, 2011	$	20,893	$	5,130	$	26,023
Additions:						-
Initial credit impairment		-		-		-
Additional credit impairment		355		918		1,273
Deductions:						-
Called		(638)		-		(638)
Balance December 31, 2011		20,610		6,048		26,658
Additions:
Initial credit impairment		-		-		-
Additional credit impairment		576		-		576
Deductions:
Sold		-		(1,235)		(1,235)
Balance September 30, 2012	$	21,186	$	4,813	$	25,999

The following table presents additional information about the Company’s trust preferred securities with a credit rating of below investment grade as of September 30, 2012:

(Dollars in thousands)

Deal Name	Type	Class	Original Cost	Amortized Cost	Fair Value	Difference (1)	Lowest Credit Rating	# of issuers currently performing	Actual deferrals/defaults (as a % of original dollar)	Expected deferrals/defaults (as a % of remaining of performing collateral)		Excess Subordination as a Percentage of Current Performing Collateral (4)
	Pooled trust preferred securities:
	Other-than-temporarily impaired
	Available for Sale:
P1	Pooled	Mezz	$             1,115	$                 451	$                175	(276)	Ca	12	22.8%	17.1%	(2)	33.3%
P2	Pooled	Mezz	3,944	1,197	892	(305)	Ca	12	25.9%	15.8%	(2)	8.3%
P3(5)	Pooled	Mezz	2,962	1,419	350	(1,069)	Caa3	24	24.5%	21.5%	(2)	0.2%
P4(6)	Pooled	Mezz	4,060	400	400	-	Ca	10	19.2%	23.0%	(3)	0.0%
P5	Pooled	Mezz	5,872	826	366	(460)	Ca	14	26.0%	22.0%	(2)	20.8%
	Held to Maturity:
P6	Pooled	Mezz	2,158	246	349	103	Ca	12	22.8%	17.1%	(2)	33.3%
P7	Pooled	Mezz	5,237	1,068	1,189	121	Ca	12	25.9%	15.8%	(2)	8.3%
	Single issuer trust preferred  securities
	Available for sale:
S1	Single		261	235	163	(72)	NR	1	-	-
S2	Single		1,000	1,000	1,036	36	B2	1	-	-
	Held to Maturity:
S3	Single		4,000	4,000	4,000	-	NR	1	-	-
S4	Single		3,360	3,098	3,075	(23)	NR	1	-	-
S5	Single		3,564	3,532	3,533	1	NR	1	-	-

(1)	The differences noted consist of unrealized losses recorded at September 30, 2012 and noncredit other-than-temporary impairment losses recorded subsequent to April 1, 2009 that have not been reclassified as credit losses.
(2)	Performing collateral is defined as total collateral minus all collateral that has been called, is currently deferring, or currently in default. This model for this security assumes that all collateral that is currently deferring will default with a zero recovery rate. The underlying issuers can cure, thus this bond could recover at a higher percentage upon default than zero.
(3)	Performing collateral is defined as total collateral minus all collateral that has been called, is currently deferring, or currently in default.  The model for this security assumes that one of the banks that are currently deferring will cure by June 2013.  If additional underlying issuers cure, this bond could recover at a higher percentage.
(4)	Excess subordination is defined as the additional defaults/deferrals necessary in the next reporting period to deplete the entire credit enhancement (excess interest and over-collateralization) beneath our tranche within each pool to the point that would cause a "break in yield." This amount assumes that all currently performing collateral continues to perform. A break in yield means that our security would not be expected to receive all the contractual cash flows (principal and interest) by maturity. The "percent of current performing collateral" is the ratio of the "excess subordination amount" to current performing collateral—a higher percent means there is more excess subordination to absorb additional defaults/deferrals, and the better our security is protected from loss.
(5)	Other-than-temporary impairment lossesof $11,000 were recognized during the nine months ended September 30, 2012.  Other-than-temporary impairment losses of $115,000 were recognized during the year ended December 31, 2011.
(6)	Other-than-temporary impairment lossesof $565,000 were recognized during the nine months ended September 30, 2012.  Other-than-temporary impairment losses of $240,000 were recognized during the year ended December 31, 2011.

The amortized cost and estimated fair value of debt securities at September 30, 2012, by contractual maturity, are shown in the following table.  Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.  Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity.

(In thousands)		Cost		Estimated Fair Value
Securities Available-for-Sale
Due in one year or less		7,229		7,275
Due after one year through five years		33,449		33,844
Due after five years through ten years		46,821		48,827
Due after ten years		288,989		294,027
	$	376,488	$	383,973
Securities Held-to-Maturity
Due in one year or less		-		-
Due after one year through five years		-		-
Due after five years through ten years		-		-
Due after ten years		13,444		13,658
	$	13,444	$	13,658

The Company recognized $0.7 million and $1.5 million in gross gains from investment security transactions during the three and nine months ended September 30, 2012.  The Company recognized $0.6 million and $3.8 million in gross gains from investment security transactions during the three and nine months ended September 30, 2011.  The specific identification method is used to determine the cost basis of securities sold. The carrying value of securities pledged to secure public deposits and for other purposes as required or permitted by law approximated $218 million and $204 million at September 30, 2012 and December 31, 2011, respectively.

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Acquisitions

9 Months Ended

Sep. 30, 2012

Acquisitions [Abstract]

Acquisitions

Note C – Acquisitions

On May 31, 2012, the Company acquired 100% of the outstanding common and preferred stock of Virginia Savings Bancorp, Inc. and its wholly owned subsidiary, Virginia Savings Bank (collectively, “VSB”).  As a result of this acquisition, the Company acquired five branches which expanded its footprint into Virginia.  At the time of closing, VSB had total assets of $132 million, loans of $82 million, deposits of $120 million and shareholders’ equity of $11 million.

The total transaction was valued at $12.4 million, consisting of cash of $4.7 million and approximately 240,000 shares of common stock valued at $7.7 million.  The common stock was valued based on the closing price of $32.18 for the Company’s common shares on May 31, 2012.  The preliminary purchase price has been allocated as follows:

	May 31, 2012
Consideration:
Cash	$	4,672
Common stock		7,723
	$	12,395
Identifiable assets:
Cash and cash equivalents	$	24,947
Investment securities		14,082
Loans		73,448
Premises and equipment		5,158
Other assets		8,931
Total identifiable assets		126,566
Identifiable liabilities:
Deposits		122,755
Other liabilities		698
Total identifiable liabilities		123,453
Net identifiable assets		3,113
Goodwill		8,009
Core deposit intangible		1,273
	$	12,395

In determining the estimated fair value of the acquired loans, management considered several factors, such as estimated future credit losses, estimated prepayments, remaining lives of the acquired loans, estimated value of the underlying collateral and the net present value of the cash flows expected to be received.  For smaller loans not specifically reviewed, management grouped the loans into their respective homogeneous loan pool and applied a loss estimate accordingly.  

Acquired loans are accounted for using one of the two following accounting standards:

(1) ASC Topic 310-20 is used to value loans that do not have evidence of credit quality deterioration.  For these loans, the difference between the fair value of the loan and the amortized cost of the loan would be amortized or accreted into income using the interest method.

(2) ASC Topic 310-30 is used to value loans that have evidence of credit quality deterioration.  For these loans, the expected cash flows that exceed the fair value of the loan represent the accretable yield, which is recognized as interest income on a level-yield basis over the expected cash flow periods of the loans.  The non-accretable difference represents the difference between the contractually required principal and interest payments and the cash flows expected to be collected based upon management’s estimation.  Subsequent decreases in the expected cash flows will require the Company to evaluate the need for additions to the Company’s allowance for loan losses.  Subsequent increases in the expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges with a corresponding adjustment to the accretable yield, which will result in the recognition of additional interest income over the remaining lives of the loans.  The accretable difference represents the difference between the expected cash flows and the net present value of expected cash flows.  This difference is accreted into earnings using the level-yield method over the expected cash flow periods of the loans.  In determining the net present value of expected cash flows, management used various discount rates based upon the risk characteristics for each loan type.

The following table presents the loans acquired in conjunction with the VSB acquisition:

	May 31, 2012
Contractually required principal and interest	$	11,567
Contractual cash flows not expected to be collected (non-accretable difference)		(3,973)
Expected cash flows		7,594
Interest component of expected cash flows (accretable difference)		(954)
Estimated fair value of purchased credit impaired loans acquired	$	6,640
Estimated fair value of performing loans acquired		66,808
Estimated fair value of loans acquired	$	73,448

 The fair values of non-time deposits approximated their carrying value at the acquisition date.  For time deposits, the fair values were estimated based on discounted cash flows, using interest rates that are currently being offered compared to the contractual interest rates.   Based on this analysis, management recorded a premium on time deposits acquired of $2.3 million, which is being amortized over five years. 

The Company believes that the customer relationships with the deposits acquired have an intangible value.  In connection with the acquisition, the Company recorded a core deposit intangible asset of $1.3 million, which represents the value of the relationship that VSB had with their deposit customers.  The fair value was estimated based on a discounted cash flow methodology that considered type of deposit, deposit retention and the cost of the deposit base.   The core deposit intangible is being amortized over ten years, with an annual charge of less than $0.2 million per year.  The following table presents a rollforward of the Company’s intangible assets from the beginning of the year:

	Intangible Assets
Balance, January 1, 2012	$	1,274
Core deposit intangible acquired in conjunction with the acquisition of VSB		1,273
Amortization expense		(343)
Balance, September 30, 2012	$	2,204

Under GAAP, management has up to twelve months following the date of the acquisition to finalize the fair values of acquired assets and liabilities.  The measurement period ends as soon as the Company receives information it was seeking about facts and circumstances that existed as of the acquisition date or learns more information is not obtainable.  Any subsequent adjustments to the fair value of the acquired assets and liabilities, intangible assets or other purchase accounting adjustments will result in adjustments to the goodwill recorded.  The measurement period is limited to one year from the acquisition date.  The goodwill recorded in conjunction with the VSB acquisition is not expected to be deductible for tax purposes.  The following table presents a rollforward of goodwill from the beginning of the year:

	Goodwill
Balance, January 1, 2012	$	54,890
Goodwill acquired in conjunction with the acquisition of VSB		8,009
Balance, September 30, 2012	$	62,899

On August 2, 2012, the Company entered into a definitive agreement to acquire Community Financial Corporation and its wholly owned subsidiary Community Bank (“Community”).  Community is a $500 million bank and operates eight branches along the I-81 corridor in western Virginia and two branches in Virginia Beach, Virginia.  The Company anticipates the transaction will be completed in the first quarter of 2013, pending regulatory approvals, the approval of Community’s shareholders and the completion of other customary closing conditions.  The total transaction value is expected to be approximately $26.6 million.

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2012

Acquisitions [Abstract]

Schedule of Business Acquisition

	May 31, 2012
Consideration:
Cash	$	4,672
Common stock		7,723
	$	12,395
Identifiable assets:
Cash and cash equivalents	$	24,947
Investment securities		14,082
Loans		73,448
Premises and equipment		5,158
Other assets		8,931
Total identifiable assets		126,566
Identifiable liabilities:
Deposits		122,755
Other liabilities		698
Total identifiable liabilities		123,453
Net identifiable assets		3,113
Goodwill		8,009
Core deposit intangible		1,273
	$	12,395

Acquired Loans At Acquisition

	May 31, 2012
Contractually required principal and interest	$	11,567
Contractual cash flows not expected to be collected (non-accretable difference)		(3,973)
Expected cash flows		7,594
Interest component of expected cash flows (accretable difference)		(954)
Estimated fair value of purchased credit impaired loans acquired	$	6,640
Estimated fair value of performing loans acquired		66,808
Estimated fair value of loans acquired	$	73,448

Schedule Of Intangible Assets

	Intangible Assets
Balance, January 1, 2012	$	1,274
Core deposit intangible acquired in conjunction with the acquisition of VSB		1,273
Amortization expense		(343)
Balance, September 30, 2012	$	2,204

Schedule Of Goodwill

	Goodwill
Balance, January 1, 2012	$	54,890
Goodwill acquired in conjunction with the acquisition of VSB		8,009
Balance, September 30, 2012	$	62,899

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Commitments And Contingencies

9 Months Ended

Sep. 30, 2012

Commitments And Contingencies [Abstract]

Commitments And Contingencies

Note K – Commitments and Contingencies

The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  The Company has entered into agreements with its customers to extend credit or provide a conditional commitment to provide payment on drafts presented in accordance with the terms of the underlying credit documents. The Company also provides overdraft protection to certain demand deposit customers that represent an unfunded commitment.  Overdraft protection commitments, which are included with other commitments below, are uncollateralized and are paid at the Company’s discretion.  Conditional commitments generally include standby and commercial letters of credit. Standby letters of credit represent an obligation of the Company to a designated third party contingent upon the failure of a customer of the Company to perform under the terms of the underlying contract between the customer and the third party. Commercial letters of credit are issued specifically to facilitate trade or commerce. Under the terms of a commercial letter of credit, drafts will be drawn when the underlying transaction is consummated, as intended, between the customer and a third party. The funded portion of these financial instruments is reflected in the Company’s balance sheet, while the unfunded portion of these commitments is not reflected in the balance sheet.  The table below presents a summary of the contractual obligations of the Company resulting from significant commitments:

(In thousands)		September 30, 2012		December 31, 2011
Commitments to extend credit:
Home equity lines	$	154,874	$	143,856
Commercial real estate		38,060		29,995
Other commitments		176,732		185,602
Standby letters of credit		16,703		20,110
Commercial letters of credit		525		412

Loan commitments and standby and commercial letters of credit have credit risks essentially the same as that involved in extending loans to customers and are subject to the Company’s standard credit policies. Collateral is obtained based on management’s credit assessment of the customer. Management does not anticipate any material losses as a result of these commitments.

City National Bank is currently in a civil action pending in the Circuit Court of Kanawha County, West Virginia, in a case styled Thomas Casto v. City National Bank, N.A (“Casto”).  This putative class action asserts that the plaintiffs, and others similarly situated, were wrongfully assessed overdraft fees in connection with City National Bank accounts.  The plaintiffs alleged that City National Bank’s policy of posting debit and check transactions from high to low order was in violation of the West Virginia Consumer Credit and Protection Act, constituted a breach of the implied covenant of good faith and fair dealing and created an unjust enrichment to City National Bank. In February 2012, City National Bank and the plaintiffs’ attorneys in the Casto case submitted an Amended Preliminary Motion to Approve Settlement to the Kanawha County Circuit Court.  This motion asked the Court to approve a settlement in which City National Bank will pay the eligible members of the class a total of $3.616 million and will forgive and release $3.5 million in account balances of accounts of former customers who are no longer customers of the bank, but left overdrawn accounts.  The amounts were increased from the initial Preliminary Motion for Approval due to a systems error in harvesting information regarding City National Bank’s customers.  The Court has approved the settlement and the Company anticipates that the case will be closed by the end of 2012.  At December 31, 2011, the Company had accrued for this probable loss.  During the first quarter of 2012, the Company deposited the funds into a qualified settlement fund.

In addition, the Company is engaged in various legal actions that it deems to be in the ordinary course of business. As these legal actions are resolved, the Company could realize positive and/or negative impact to its financial performance in the period in which these legal actions are ultimately decided. There can be no assurance that current actions will have immaterial results, either positive or negative, or that no material actions may be presented in the future.

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Previously Securitized Loans

9 Months Ended

Sep. 30, 2012

Previously Securitized Loans [Abstract]

Previously Securitized Loans

Note G – Previously Securitized Loans

Between 1997 and 1999, the Company completed six securitization transactions involving approximately $760 million in 125% of fixed rate, junior-lien underlying mortgages.  The Company retained a financial interest in each of the securitizations until 2004.  Principal amounts owed to investors were evidenced by securities (“Notes”).  During 2003 and 2004, the Company exercised its early redemption options on each of those securitizations.  Once the Notes were redeemed, the Company became the beneficial owner of the mortgage loans and recorded the loans as assets of the Company within the loan portfolio. 

As the Company redeemed the outstanding Notes, no gain or loss was recognized in the Company’s financial statements and the remaining mortgage loans were recorded in the Company’s loan portfolio as “previously securitized loans,” at the lower of carrying value or fair value.  Because the carrying value of the mortgage loans incorporated assumptions for expected prepayment and default rates, the carrying value of the loans was generally less than the actual outstanding contractual balance of the loans.  As of September 30, 2012, there is no carrying value remaining on these loans, while the actual contractual balances of these loans was $8.4 million.  During the three and nine months ended September 30, 2012 and 2011, the Company recognized $0.8 million and $2.4 million and $0.8 million and $2.5 million, respectively, of interest income from its previously securitized loans.

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Derivative Instruments (Change In Fair Value Of Derivative Instruments) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Other Income Derivative Asset [Member]
Derivatives, Fair Value [Line Items]
Change in Fair Value	$ 543	$ 7,095	$ 3,075	$ 7,943
Other Income Derivative Liability [Member]
Derivatives, Fair Value [Line Items]
Change in Fair Value	$ (543)	$ (7,095)	$ (3,075)	$ (7,943)

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Loans

9 Months Ended

Sep. 30, 2012

Loans [Abstract]

Loans

Note E –Loans

The following summarizes the Company’s major classifications for loans:

( In thousands)	September 30, 2012		December 31, 2011
Residential real estate	$	1,008,305	$	929,788
Home equity – junior liens		143,058		141,797
Commercial and industrial		105,027		130,899
Commercial real estate		787,887		732,146
Consumer		38,285		35,845
DDA overdrafts		2,670		2,628
Gross loans		2,085,232		1,973,103
Allowance for loan losses		(18,986)		(19,409)
Net loans	$	2,066,246	$	1,953,694

Construction loans of $12.8 million and $9.3 million are included within residential real estate loans at September 30, 2012 and December 31, 2011, respectively.  Construction loans of $17.1 million and $20.2 million are included within commercial real estate loans at September 30, 2012 and December 31, 2011, respectively.  The Company’s commercial and residential real estate construction loans are primarily secured by real estate within the Company’s principal markets.  These loans were originated under the Company’s loan policy, which is focused on the risk characteristics of the loan portfolio, including construction loans.  Adequate consideration has been given to these loans in establishing the Company’s allowance for loan losses.

The composition of loans acquired in the VSB acquisition outstanding at September 30, 2012 is as follows:

	September 30, 2012
Residential real estate	$	22,789
Home equity – junior liens		6,137
Commercial and industrial		2,810
Commercial real estate		34,435
Consumer		2,934
Gross loans	$	69,105

The outstanding loan balances acquired in the VSB acquisition in the above table include $6.5 million of credit-impaired loans, with a contractual principal balance of $10.8 million.

Activity for the accretable yield for the first nine months of 2012 is as follows:

Accretable yield at the beginning of the period	$	-
Additions		954
Accretion		(112)
Net reclassifications to accretable from non-accretable		-
Maturities, foreclosures and charge-offs		-
Accretable yield at the end of period	$	842

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Allowance For Loan Losses

9 Months Ended

Sep. 30, 2012

Allowance For Loan Losses [Abstract]

Allowance For Loan Losses

Note F  –Allowance For Loan Losses

Management systematically monitors the loan portfolio and the adequacy of the allowance for loan losses on a quarterly basis to provide for probable losses inherent in the portfolio.  Management assesses the risk in each loan type based on historical trends, the general economic environment of its local markets, individual loan performance and other relevant factors.

Individual credits are selected throughout the year for detailed loan reviews, which are utilized by management to assess the risk in the portfolio and the adequacy of the allowance.  Due to the nature of commercial lending, evaluation of the adequacy of the allowance as it relates to these types of loan types is often based more upon specific credit reviews, with consideration given to the potential impairment of certain credits and historical loss rates, adjusted for economic conditions and other inherent risk factors.

A loan acquired and accounted for under ASC Topic 310-30 is reported as an accruing loan and a performing asset.

The following summarizes the activity in the allowance for loan loss, by portfolio segment, for the nine months ended September 30, 2012 and 2011.  The following also presents the balance in the allowance for loan loss disaggregated on the basis of the Company’s impairment measurement method and the related recorded investment in loans, by portfolio segment, as of September 30, 2012 and December 31, 2011.

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
Nine months ended
September 30, 2012:
Allowance for loan loss
Beginning balance	$	590	$	11,666	$	3,591	$	2,773	$	88	$	701	$	19,409
Charge-offs		126		2,860		746		989		148		1,128		5,997
Recoveries		12		100		15		12		90		745		974
Provision		45		1,684		955		1,250		75		591		4,600
Ending balance	$	521	$	10,590	$	3,815	$	3,046	$	105	$	909	$	18,986
Nine months ended
September 30, 2011:
Allowance for loan loss
Beginning balance	$	1,864	$	8,488	$	4,149	$	2,640	$	95	$	988	$	18,224
Charge-offs		275		341		1,191		614		133		1,318		3,872
Recoveries		8		1,982		19		6		107		1,002		3,124
Provision		(1,032)		1,942		744		538		23		157		2,372
Ending balance	$	565	$	12,071	$	3,721	$	2,570	$	92	$	829	$	19,848
As of September 30, 2012:
Allowance for loan loss
Evaluated for impairment:
Individually	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Collectively		521		10,590		3,815		3,046		105		909		18,986
Acquired with deteriorated
credit quality		-		-		-		-		-		-		-
Total	$	521	$	10,590	$	3,815	$	3,046	$	105	$	909	$	18,986
Loans
Evaluated for impairment:
Individually	$	-	$	10,002	$	471	$	297	$	-	$	-	$	10,770
Collectively		105,027		771,716		1,007,710		142,674		38,177		2,670		2,067,974
Acquired with deteriorated
credit quality		-		6,169		124		87		108		-		6,488
Total	$	105,027	$	787,887	$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
As of December 31, 2011:
Allowance for loan loss
Evaluated for impairment:
Individually	$	-	$	2,666	$	-	$	-	$	-	$	-	$	2,666
Collectively		590		9,000		3,591		2,773		88		701		16,743
Total	$	590	$	11,666	$	3,591	$	2,773	$	88	$	701	$	19,409
Loans
Evaluated for impairment:
Individually	$	81	$	15,311	$	476	$	298	$	-	$	-	$	16,166
Collectively		130,818		716,835		929,312		141,499		35,845		2,628		1,956,937
Total	$	130,899	$	732,146	$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

Credit Quality Indicators

All commercial loans within the portfolio are subject to internal risk grading.  All non-commercial loans are evaluated based on payment history.  The Company’s internal risk ratings for commercial loans are:  Exceptional, Good, Acceptable, Pass/Watch, Special Mention, Substandard and Doubtful.  Each internal risk rating is defined in the loan policy using the following criteria:  balance sheet yields, ratios and leverage, cash flow spread and coverage, prior history, capability of management, market position/industry, potential impact of changing economic, legal, regulatory or environmental conditions, purpose structure, collateral support, and guarantor support.  Risk grades are generally assigned by the primary lending officer and are periodically evaluated by the Company’s internal loan review process.  Based on an individual loan’s risk grade, estimated loss percentages are applied to the outstanding balance of the loan to determine the amount of probable loss.

The Company categorizes loans into risk categories based on relevant information regarding the customer’s debt service ability, capacity, overall collateral position along with other economic trends, and historical payment performance.  The risk grades for each credit are updated when the Company receives current financial information, the loan is reviewed by the Company’s internal loan review/credit administration departments, or the loan becomes delinquent or impaired.  The risk grades are updated a minimum of annually for loans rated exceptional, good, acceptable, or pass/watch.  Loans rated special mention, substandard or doubtful are reviewed at least quarterly.  The Company uses the following definitions for its risk ratings:

Risk Rating	Description
Exceptional	Loans classified as exceptional are secured with liquid collateral conforming to the internal loan policy.  Loans rated within this category pose minimal risk of loss to the bank and the risk grade within this pool of loans is generally updated on an annual basis.
Good	Loans classified as good have similar characteristics that include a strong balance sheet, satisfactory debt service coverage ratios, strong management and/or guarantors, and little exposure to economic cycles.  Loans within this category are generally reviewed on an annual basis.  Loans in this category generally have a low chance of loss to the bank.
Acceptable	Loans classified as acceptable have acceptable liquidity levels, adequate debt service coverage ratios, experienced management, and have average exposure to economic cycles.  Loans within this category generally have a low risk of loss to the bank.
Pass/watch	Loans classified as pass/watch have erratic levels of leverage and/or liquidity, cash flow is volatile and the borrower is subject to moderate economic risk.  A borrower in this category poses a low to moderate risk of loss to the bank.
Special mention	Loans classified as special mention have a potential weakness(es) that deserves management’s close attention.  The potential weakness could result in deterioration of the loan repayment or the bank’s credit position at some future date.  A loan rated in this category poses a moderate loss risk to the bank.
Substandard	Loans classified as substandard reflect a customer with a well defined weakness that jeopardizes the liquidation of the debt.  Loans in this category have the possibility that the bank will sustain some loss if the deficiencies are not corrected and the bank’s collateral value is weakened by the financial deterioration of the borrower.
Doubtful	Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristics that make collection of the full contract amount highly improbable.  Loans rated in this category are most likely to cause the bank to have a loss due to a collateral shortfall or a negative capital position.

The following presents loans by the Company’s credit quality indicators, by class, as of September 30, 2012 and December 31, 2011:

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
Risk Grade
Exceptional	$	3,508	$	1,813		-		-		-		-	$	5,321
Good		6,466		98,231		-		-		-		-		104,697
Acceptable		68,504		456,116		-		-		-		-		524,620
Pass/watch		23,320		177,974		-		-		-		-		201,294
Special mention		1,066		15,831		-		-		-		-		16,897
Substandard		2,163		37,922		-		-		-		-		40,085
Doubtful		-		-		-		-		-		-		-
Total	$	105,027	$	787,887										892,914
Payment Activity
Performing						1,005,522		141,950		38,274		2,666	$	1,188,412
Non-performing						2,783		1,108		11		4		3,906
Total					$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
December 31, 2011:
Risk Grade
Exceptional	$	4,220	$	42		-		-		-		-	$	4,262
Good		6,728		107,718		-		-		-		-		114,446
Acceptable		93,077		411,721		-		-		-		-		504,798
Pass/watch		25,246		161,598		-		-		-		-		186,844
Special mention		470		16,802		-		-		-		-		17,272
Substandard		1,037		34,265		-		-		-		-		35,302
Doubtful		121		-		-		-		-		-		121
Total	$	130,899	$	732,146										863,045
Payment Activity
Performing					$	928,789	$	139,996	$	35,845	$	2,616	$	1,107,246
Non-performing						999		1,801		-		12		2,812
Total					$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

Aging Analysis of Accruing and Non-Accruing Loans

Interest income on loans is accrued and credited to operations based upon the principal amount outstanding, using methods that generally result in level rates of return.  Loan origination fees, and certain direct costs, are deferred and amortized as an adjustment to the yield over the term of the loan.  The accrual of interest generally is discontinued when a loan becomes 90 days past due as to principal or interest for all loan types.  However, any loan may be placed on non-accrual if the Company receives information that indicates a borrower is unable to meet the contractual terms of their respective loan agreement.  Other indicators considered for placing a loan on non-accrual status include the borrower’s involvement in bankruptcies, foreclosures, repossessions, litigation and any other situation resulting in doubt as to whether full collection of contractual principal and interest is attainable.  When interest accruals are discontinued, unpaid interest recognized in income in the current year is reversed, and interest accrued in prior years is charged to the allowance for loan losses.  Management may elect to continue the accrual of interest when the net realizable value of collateral exceeds the principal balance and related accrued interest, and the loan is in the process of collection.

Generally for all loan classes, interest income during the period the loan is non-performing is recorded on a cash basis after recovery of principal is reasonably assured.  Cash payments received on nonperforming loans are typically applied directly against the outstanding principal balance until the loan is fully repaid.  Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Generally, all loan types are considered past due when the contractual terms of a loan are not met and the borrower is 30 days or more past due on a payment.  Furthermore, residential and home equity loans are generally subject to charge-off when the loan becomes 120 days past due, depending on the estimated fair value of the collateral less cost to dispose, versus the outstanding loan balance.  Unsecured commercial loans are generally charged off when the loan becomes 120 days past due.  Secured commercial loans are generally charged off when the loan becomes 120 days past due and open-end consumer loans are generally charged off when the loan becomes 180 days past due.

The following presents an aging analysis of the Company’s accruing and non-accruing loans, by class, as of September 30, 2012 and December 31, 2011:

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
30 – 59 days past due	$	25	$	1,168	$	4,332	$	2,473	$	110	$	309	$	8,417
60 – 89 days past due		-		102		231		135		15		6		489
Over 90 days past due		-		1		346		35		11		4		397
Non-accrual		1,426		17,650		2,437		1,073		-		-		22,586
		1,451		18,921		7,346		3,716		136		319		31,889
Current		103,576		768,966		1,000,959		139,342		38,149		2,351		2,053,343
Total	$	105,027	$	787,887	$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
December 31, 2011:
30 – 59 days past due	$	1,243	$	576	$	4,912	$	1,906	$	133	$	883	$	9,653
60 – 89 days past due		-		2,839		408		228		5		14		3,494
Over 90 days past due		-		-		42		112		-		12		166
Non-accrual		375		18,930		957		1,689		-		-		21,951
		1,618		22,345		6,319		3,935		138		909		35,264
Current		129,281		709,801		923,469		137,862		35,707		1,719		1,937,839
Total	$	130,899	$	732,146	$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

Impaired Loans

The following presents the Company’s impaired loans, by class, as of September 30, 2012 and December 31, 2011:

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
With no related allowance recorded
Recorded investment	$	1,113	$	11,843	$	219	$	29	$	-	$	-	$	13,204
Unpaid principal balance		1,369		17,594		219		29		-		-		19,211
With an allowance recorded
Recorded investment	$	313	$	5,808	$	2,564	$	1,079	$	11	$	4	$	9,779
Unpaid principal balance		313		5,808		2,564		1,079		11		4		9,779
Related allowance		41		758		314		86		1		4		1,204
December 31, 2011:
With no related allowance recorded
Recorded investment	$	78	$	2,840	$	-	$	-	$	-	$	-	$	2,918
Unpaid principal balance		78		6,036		-		-		-		-		6,114
With an allowance recorded
Recorded investment	$	297	$	16,090	$	1,000	$	1,801	$	-	$	12	$	19,200
Unpaid principal balance		297		16,090		1,000		1,801		-		12		19,200
Related allowance		53		3,044		139		240		-		12		3,488

The following table presents information related to the average recorded investment and interest income recognized on the Company’s impaired loans, by class, for the nine months ended September 30, 2012 and 2011:

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
With no related allowance recorded
Average recorded investment	$	81	$	7,472	$	-	$	-	$	-	$	-	$	7,553
Interest income recognized		4		232		-		-		-		-		236
With an allowance recorded
Average recorded investment	$	203	$	11,197	$	1,254	$	1,354	$	-	$	-	$	14,008
Interest income recognized		7		378		36		30		-		-		451
September 30, 2011:
With no related allowance recorded
Average recorded investment	$	-	$	12,350	$	320	$	698	$	-	$	-	$	13,368
Interest income recognized		-		206		15		5		-		-		226
With an allowance recorded
Average recorded investment	$	248	$	14,192	$	996	$	526	$	-	$	-	$	15,962
Interest income recognized		-		157		-		-		-		-		157

Approximately $0.7 million and $0.6 million of interest income would have been recognized during the nine months ended September 30, 2012 and 2011, if such loans had been current in accordance with their original terms.  There were no commitments to provide additional funds on non-accrual, impaired or other potential problem loans at September 30, 2012.

Loan Modifications

The Company’s policy on loan modifications typically does not allow for modifications that would be considered a concession from the Company.  However, when there is a modification, the Company evaluates each modification to determine if the modification constitutes a troubled debt restructuring (“TDR”) in accordance with ASU 2011-02, whereby a modification of a loan would be considered a TDR when both of the following conditions are met: (1) a borrower is experiencing financial difficulty and (2) the modification constitutes a concession.  When determining whether the borrower is experiencing financial difficulties, the Company reviews whether the debtor is currently in payment default on any of its debt or whether it is probable that the debtor would be in payment default in the foreseeable future without the modification.  Other indicators of financial difficulty include whether the debtor has declared or is in the process of declaring bankruptcy, the debtor’s ability to continue as a going concern, or the debtor’s projected cash flow to service its debt (including principal and interest) in accordance with the contractual terms for the foreseeable future, without a modification. 

As of September 30, 2012, the Company reclassified $21.1 million of loans as TDRs in accordance with recent regulatory guidance.  The regulatory guidance requires loans to be accounted for as collateral-dependent loans when borrowers have filed Chapter 7 bankruptcy, the debt has been discharged by the bankruptcy court and the borrower has not reaffirmed the debt.  The filing of bankruptcy is deemed to be evidence that the borrower is in financial difficulty and the discharge of the debt by the bankruptcy court is deemed to be a concession granted to the borrower.  As of September 30, 2012, less than 5% of these loans were non-accruing loans.  There was no material difference between the pre-modification and post-modification balances.  The impact on the allowance for loan losses of this reclassification was insignificant.

The following tables set forth the Company’s TDRs at September 30, 2012: 

		September 30, 2012
(In thousands)		Accruing		Non-Accruing		Total
Commercial and industrial	$	-	$	-	$	-
Commercial real estate		227		-		227
Residential real estate		14,098		185		14,283
Home equity		6,400		422		6,822
Consumer		144		-		144
	$	20,869	$	607	$	21,476

During the three month and nine months ended September 30, 2012, no other loans were identified as TDRs.  There were no TDRs that defaulted during the three or nine months ended September 30, 2012.

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Long-Term Debt

9 Months Ended

Sep. 30, 2012

Long-Term Debt [Abstract]

Long-Term Debt

Note H – Long-Term Debt

The components of long-term debt are summarized below:

( In thousands)	September 30, 2012		December 31, 2011
Junior subordinated debentures owed to City Holding Capital Trust III, due 2038, interest at a rate of 3.89% and 3.85%, respectively	$	16,495	$	16,495

The Company formed a statutory business trust, City Holding Capital Trust III (“Capital Trust III”), under the laws of Delaware.  Capital Trust III was created for the exclusive purpose of (i) issuing trust-preferred capital securities (“Capital Securities”), which represent preferred undivided beneficial interests in the assets of the trust, (ii) using the proceeds from the sale of the Capital Securities to acquire junior subordinated debentures (“Debentures”) issued by the Company, and (iii) engaging in only those activities necessary or incidental thereto.  The trust is considered a variable interest entity for which the Company is not the primary beneficiary.  Accordingly, the accounts of the trusts are not included in the Company’s consolidated financial statements.

Distributions on the Debentures are cumulative and will be payable quarterly at an interest rate of 3.50% over the three month LIBOR rate, reset quarterly.  Interest payments are due in March, June, September and December.  The Debentures are redeemable prior to maturity at the option of the Company (i) in whole or at any time or in part from time-to-time, at declining redemption prices ranging from 103.525% to 100.000% on June 15, 2013, and thereafter, or (ii) in whole, but not in part, at any time within 90 days following the occurrence and during the continuation of certain pre-defined events.

Payments of distributions on the trust preferred securities and payments on redemption of the trust preferred securities are guaranteed by the Company.  The Company also entered into an agreement as to expenses and liabilities with the trust pursuant to which it agreed, on a subordinated basis, to pay any costs, expenses or liabilities of the trust other than those arising under the trust preferred securities.  The obligations of the Company under the junior subordinated debentures, the related indentures, the trust agreement establishing the trust, the guarantees and the agreements as to expenses and liabilities, in the aggregate, constitute a full and unconditional guarantee by the Company of the trust’s obligations under the trust preferred securities.  The Capital Securities issued by the statutory business trusts qualify as Tier 1 capital for the Company under current Federal Reserve Board guidelines.

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Employee Benefit Plans (Weighted Average Assumptions Estimate The Fair Value Of Options Granted) (Details)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Employee Benefit Plans [Abstract]
Risk-free interest rate	2.51%	3.07%
Expected dividend yield	3.90%	3.88%
Volatility factor	48.40%	41.12%
Expected life of option	5 years	8 years

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Employee Benefit Plans (Net Periodic Pension Cost Of The Defined Benefit Plan) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Employee Benefit Plans [Abstract]
Interest cost	$ 158	$ 162	$ 476	$ 487
Expected return on plan assets	(203)	(203)	(607)	(609)
Net amortization and deferral	174	137	522	410
Net Periodic Pension Cost	$ 129	$ 96	$ 391	$ 288

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Employee Benefit Plans (Stock Options Outstanding And Exercisable) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
No. of Options Outstanding	290,294
Aggregate Intrinsic Value	$ 679
No. of Options Currently Exercisable	183,584
Aggregate Intrinsic Value of Options Currently Exercisable	366
Ranges Of Exercise Prices 26.62 - 33.90 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
No. of Options Outstanding	165,918
Weighted-Average Exercise Price	$ 31.87
Weighted Average Remaining Contractual Life, Outstanding	43 months
Aggregate Intrinsic Value	659
No. of Options Currently Exercisable	114,584
Weighted-Average Exercise Price of Options Currently Exercisable	$ 32.65
Weighted Average Remaining Contractual Life, Exercisable	26 months
Aggregate Intrinsic Value of Options Currently Exercisable	366
Ranges Of Exercise Prices 26.62 - 33.90 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ranges Of Exercise Prices	$ 26.62
Ranges Of Exercise Prices 26.62 - 33.90 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ranges Of Exercise Prices	$ 33.90
Ranges Of Exercise Prices 35.09 - 40.88 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
No. of Options Outstanding	124,376
Weighted-Average Exercise Price	$ 37.70
Weighted Average Remaining Contractual Life, Outstanding	65 months
Aggregate Intrinsic Value	$ 20
No. of Options Currently Exercisable	69,000
Weighted-Average Exercise Price of Options Currently Exercisable	$ 38.11
Weighted Average Remaining Contractual Life, Exercisable	46 months
Ranges Of Exercise Prices 35.09 - 40.88 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ranges Of Exercise Prices	$ 35.09
Ranges Of Exercise Prices 35.09 - 40.88 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ranges Of Exercise Prices	$ 40.88

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Acquisitions (Narrative) (Details) (USD $)	9 Months Ended					9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010	Sep. 30, 2012 Community Bank [Member]	Sep. 30, 2012 Virginia Savings Bank [Member]	May 31, 2012 Virginia Savings Bank [Member] item	Sep. 30, 2012 Virginia Beach, Virginia [Member] Community Bank [Member]	Sep. 30, 2012 Western Virginia [Member] Community Bank [Member]
Business Acquisition [Line Items]
Percent of outstanding common and preferred stock							100.00%
Number of branches acquired							5
Assets	$ 2,899,197,000	$ 2,777,109,000			$ 500,000,000		$ 132,000,000
Loans							82,000,000
Deposits	2,381,496,000	2,221,268,000					120,000,000
Shareholders equity	328,415,000	311,134,000	309,892,000	314,861,000			11,000,000
Transaction purchase price							12,395,000
Cash							4,672,000
Common stock value							7,723,000
Number of common stock shares acquired							240,000
Closing price of common stock at acquisition							$ 32.18
Amortization time period for core deposit intangible assets	10 years
Core deposit annual charge, Maximum						200,000
Premium on time deposits						2,300,000
Premium on time deposits amortization period						5 years
Core deposit intangible							1,273,000
Number of branches								2	8
Transaction value					$ 26,600,000

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Allowance For Loan Losses (Schedule Of Allowance For Loan Loss By Portfolio Segment) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan loss, Beginning balance	$ 19,409	$ 18,224
Allowance for loan loss, Charge-offs	5,997	3,872
Allowance for loan loss, Recoveries	974	3,124
Allowance for loan loss, Provision	4,600	2,372
Allowance for loan loss, Ending balance	18,986	19,848
Allowance for loan loss, Evaluated for impairment, Individually			2,666
Allowance for loan loss, Evaluated for impairment, Collectively	18,986		16,743
Allowance for loan loss, Total	18,986		19,409
Loans, Evaluated for impairment, Individually	10,770		16,166
Loans, Evaluated for impairment, Collectively	2,067,974		1,956,937
Loans, Acquired with deteriorated credit quality	6,488
Loans, Total	2,085,232		1,973,103
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan loss, Beginning balance	590	1,864
Allowance for loan loss, Charge-offs	126	275
Allowance for loan loss, Recoveries	12	8
Allowance for loan loss, Provision	45	(1,032)
Allowance for loan loss, Ending balance	521	565
Allowance for loan loss, Evaluated for impairment, Collectively	521		590
Allowance for loan loss, Total	521		590
Loans, Evaluated for impairment, Individually			81
Loans, Evaluated for impairment, Collectively	105,027		130,818
Loans, Total	105,027		130,899
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan loss, Beginning balance	11,666	8,488
Allowance for loan loss, Charge-offs	2,860	341
Allowance for loan loss, Recoveries	100	1,982
Allowance for loan loss, Provision	1,684	1,942
Allowance for loan loss, Ending balance	10,590	12,071
Allowance for loan loss, Evaluated for impairment, Individually			2,666
Allowance for loan loss, Evaluated for impairment, Collectively	10,590		9,000
Allowance for loan loss, Total	10,590		11,666
Loans, Evaluated for impairment, Individually	10,002		15,311
Loans, Evaluated for impairment, Collectively	771,716		716,835
Loans, Acquired with deteriorated credit quality	6,169
Loans, Total	787,887		732,146
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan loss, Beginning balance	3,591	4,149
Allowance for loan loss, Charge-offs	746	1,191
Allowance for loan loss, Recoveries	15	19
Allowance for loan loss, Provision	955	744
Allowance for loan loss, Ending balance	3,815	3,721
Allowance for loan loss, Evaluated for impairment, Collectively	3,815		3,591
Allowance for loan loss, Total	3,815		3,591
Loans, Evaluated for impairment, Individually	471		476
Loans, Evaluated for impairment, Collectively	1,007,710		929,312
Loans, Acquired with deteriorated credit quality	124
Loans, Total	1,008,305		929,788
Home equity - junior liens (including lines of credit) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan loss, Beginning balance	2,773	2,640
Allowance for loan loss, Charge-offs	989	614
Allowance for loan loss, Recoveries	12	6
Allowance for loan loss, Provision	1,250	538
Allowance for loan loss, Ending balance	3,046	2,570
Allowance for loan loss, Evaluated for impairment, Collectively	3,046		2,773
Allowance for loan loss, Total	3,046		2,773
Loans, Evaluated for impairment, Individually	297		298
Loans, Evaluated for impairment, Collectively	142,674		141,499
Loans, Acquired with deteriorated credit quality	87
Loans, Total	143,058		141,797
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan loss, Beginning balance	88	95
Allowance for loan loss, Charge-offs	148	133
Allowance for loan loss, Recoveries	90	107
Allowance for loan loss, Provision	75	23
Allowance for loan loss, Ending balance	105	92
Allowance for loan loss, Evaluated for impairment, Collectively	105		88
Allowance for loan loss, Total	105		88
Loans, Evaluated for impairment, Collectively	38,177		35,845
Loans, Acquired with deteriorated credit quality	108
Loans, Total	38,285		35,845
DDA Overdrafts [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan loss, Beginning balance	701	988
Allowance for loan loss, Charge-offs	1,128	1,318
Allowance for loan loss, Recoveries	745	1,002
Allowance for loan loss, Provision	591	157
Allowance for loan loss, Ending balance	909	829
Allowance for loan loss, Evaluated for impairment, Collectively	909		701
Allowance for loan loss, Total	909		701
Loans, Evaluated for impairment, Collectively	2,670		2,628
Loans, Total	$ 2,670		$ 2,628

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Earnings Per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Note M – Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share:

		Three months ended September 30,				Nine months ended September 30,
(In thousands, except per share data)		2012		2011		2012		2011
Distributed earnings allocated to  common stock	$	5,150	$	5,015	$	15,451	$	15,045
Undistributed earnings allocated to common stock		5,373		6,479		12,375		15,756
Net earnings allocated to common shareholders	$	10,523	$	11,494	$	27,826	$	30,801
Average shares outstanding		14,751		15,003		14,700		15,165
Effect of dilutive securities:
Employee stock options		83		68		83		77
Shares for diluted earnings per share		14,834		15,071		14,783		15,242
Basic earnings per share	$	0.71	$	0.77	$	1.89	$	2.03
Diluted earnings per share	$	0.71	$	0.76	$	1.88	$	2.02

Options to purchase approximately 124,000 and 255,000 shares of common stock at an exercise price between $35.09 and $40.88 and between $30.38 and $40.88 per share were outstanding during the third quarter of 2012 and the third quarter of 2011, respectively, but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares and therefore, the effect would have been anti-dilutive.

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Allowance For Loan Losses (Tables)

9 Months Ended

Sep. 30, 2012

Allowance For Loan Losses [Abstract]

Schedule Of Allowance For Loan Loss By Portfolio Segment

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
Nine months ended
September 30, 2012:
Allowance for loan loss
Beginning balance	$	590	$	11,666	$	3,591	$	2,773	$	88	$	701	$	19,409
Charge-offs		126		2,860		746		989		148		1,128		5,997
Recoveries		12		100		15		12		90		745		974
Provision		45		1,684		955		1,250		75		591		4,600
Ending balance	$	521	$	10,590	$	3,815	$	3,046	$	105	$	909	$	18,986
Nine months ended
September 30, 2011:
Allowance for loan loss
Beginning balance	$	1,864	$	8,488	$	4,149	$	2,640	$	95	$	988	$	18,224
Charge-offs		275		341		1,191		614		133		1,318		3,872
Recoveries		8		1,982		19		6		107		1,002		3,124
Provision		(1,032)		1,942		744		538		23		157		2,372
Ending balance	$	565	$	12,071	$	3,721	$	2,570	$	92	$	829	$	19,848
As of September 30, 2012:
Allowance for loan loss
Evaluated for impairment:
Individually	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Collectively		521		10,590		3,815		3,046		105		909		18,986
Acquired with deteriorated
credit quality		-		-		-		-		-		-		-
Total	$	521	$	10,590	$	3,815	$	3,046	$	105	$	909	$	18,986
Loans
Evaluated for impairment:
Individually	$	-	$	10,002	$	471	$	297	$	-	$	-	$	10,770
Collectively		105,027		771,716		1,007,710		142,674		38,177		2,670		2,067,974
Acquired with deteriorated
credit quality		-		6,169		124		87		108		-		6,488
Total	$	105,027	$	787,887	$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
As of December 31, 2011:
Allowance for loan loss
Evaluated for impairment:
Individually	$	-	$	2,666	$	-	$	-	$	-	$	-	$	2,666
Collectively		590		9,000		3,591		2,773		88		701		16,743
Total	$	590	$	11,666	$	3,591	$	2,773	$	88	$	701	$	19,409
Loans
Evaluated for impairment:
Individually	$	81	$	15,311	$	476	$	298	$	-	$	-	$	16,166
Collectively		130,818		716,835		929,312		141,499		35,845		2,628		1,956,937
Total	$	130,899	$	732,146	$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

Schedule Of Credit Quality Indicators

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
Risk Grade
Exceptional	$	3,508	$	1,813		-		-		-		-	$	5,321
Good		6,466		98,231		-		-		-		-		104,697
Acceptable		68,504		456,116		-		-		-		-		524,620
Pass/watch		23,320		177,974		-		-		-		-		201,294
Special mention		1,066		15,831		-		-		-		-		16,897
Substandard		2,163		37,922		-		-		-		-		40,085
Doubtful		-		-		-		-		-		-		-
Total	$	105,027	$	787,887										892,914
Payment Activity
Performing						1,005,522		141,950		38,274		2,666	$	1,188,412
Non-performing						2,783		1,108		11		4		3,906
Total					$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
December 31, 2011:
Risk Grade
Exceptional	$	4,220	$	42		-		-		-		-	$	4,262
Good		6,728		107,718		-		-		-		-		114,446
Acceptable		93,077		411,721		-		-		-		-		504,798
Pass/watch		25,246		161,598		-		-		-		-		186,844
Special mention		470		16,802		-		-		-		-		17,272
Substandard		1,037		34,265		-		-		-		-		35,302
Doubtful		121		-		-		-		-		-		121
Total	$	130,899	$	732,146										863,045
Payment Activity
Performing					$	928,789	$	139,996	$	35,845	$	2,616	$	1,107,246
Non-performing						999		1,801		-		12		2,812
Total					$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

Schedule Of Aging Analysis Of Accruing And Non-Accruing Loans

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
30 – 59 days past due	$	25	$	1,168	$	4,332	$	2,473	$	110	$	309	$	8,417
60 – 89 days past due		-		102		231		135		15		6		489
Over 90 days past due		-		1		346		35		11		4		397
Non-accrual		1,426		17,650		2,437		1,073		-		-		22,586
		1,451		18,921		7,346		3,716		136		319		31,889
Current		103,576		768,966		1,000,959		139,342		38,149		2,351		2,053,343
Total	$	105,027	$	787,887	$	1,008,305	$	143,058	$	38,285	$	2,670	$	2,085,232
December 31, 2011:
30 – 59 days past due	$	1,243	$	576	$	4,912	$	1,906	$	133	$	883	$	9,653
60 – 89 days past due		-		2,839		408		228		5		14		3,494
Over 90 days past due		-		-		42		112		-		12		166
Non-accrual		375		18,930		957		1,689		-		-		21,951
		1,618		22,345		6,319		3,935		138		909		35,264
Current		129,281		709,801		923,469		137,862		35,707		1,719		1,937,839
Total	$	130,899	$	732,146	$	929,788	$	141,797	$	35,845	$	2,628	$	1,973,103

Schedule Of Impaired Loans

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
With no related allowance recorded
Recorded investment	$	1,113	$	11,843	$	219	$	29	$	-	$	-	$	13,204
Unpaid principal balance		1,369		17,594		219		29		-		-		19,211
With an allowance recorded
Recorded investment	$	313	$	5,808	$	2,564	$	1,079	$	11	$	4	$	9,779
Unpaid principal balance		313		5,808		2,564		1,079		11		4		9,779
Related allowance		41		758		314		86		1		4		1,204
December 31, 2011:
With no related allowance recorded
Recorded investment	$	78	$	2,840	$	-	$	-	$	-	$	-	$	2,918
Unpaid principal balance		78		6,036		-		-		-		-		6,114
With an allowance recorded
Recorded investment	$	297	$	16,090	$	1,000	$	1,801	$	-	$	12	$	19,200
Unpaid principal balance		297		16,090		1,000		1,801		-		12		19,200
Related allowance		53		3,044		139		240		-		12		3,488

Schedule Of Information Related To Average Recorded Investment And Interest Income Recognized On Impaired Loans

(In thousands)		Commercial and industrial		Commercial real estate		Residential real estate		Home equity		Consumer		DDA overdrafts		Total
September 30, 2012:
With no related allowance recorded
Average recorded investment	$	81	$	7,472	$	-	$	-	$	-	$	-	$	7,553
Interest income recognized		4		232		-		-		-		-		236
With an allowance recorded
Average recorded investment	$	203	$	11,197	$	1,254	$	1,354	$	-	$	-	$	14,008
Interest income recognized		7		378		36		30		-		-		451
September 30, 2011:
With no related allowance recorded
Average recorded investment	$	-	$	12,350	$	320	$	698	$	-	$	-	$	13,368
Interest income recognized		-		206		15		5		-		-		226
With an allowance recorded
Average recorded investment	$	248	$	14,192	$	996	$	526	$	-	$	-	$	15,962
Interest income recognized		-		157		-		-		-		-		157

Schedule Of Troubled Debt Restructurings

		September 30, 2012
(In thousands)		Accruing		Non-Accruing		Total
Commercial and industrial	$	-	$	-	$	-
Commercial real estate		227		-		227
Residential real estate		14,098		185		14,283
Home equity		6,400		422		6,822
Consumer		144		-		144
	$	20,869	$	607	$	21,476

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Loans (Activity For The Accretable Yield) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Loans [Abstract]
Additions	$ 954
Accretion	(112)
Accretable yield at the end of the period	$ 842

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Investments (Aggregate Carrying And Approximate Market Values Of Held-To-Maturity Securities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	$ 13,444	$ 23,458
Securities held-to-maturity, Gross Unrealized Gains	283	675
Securities held-to-maturity, Gross Unrealized Losses	69	710
Securities held-to-maturity, Estimated Fair Value	13,658	23,423
Trust Preferred Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	13,444	23,458
Securities held-to-maturity, Gross Unrealized Gains	283	675
Securities held-to-maturity, Gross Unrealized Losses	69	710
Securities held-to-maturity, Estimated Fair Value	13,658	23,423
Other Investment Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	11,459	11,934
Securities held-to-maturity, Estimated Fair Value	11,459	11,934
Non-Marketable Equity Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	11,459	11,934
Securities held-to-maturity, Estimated Fair Value	$ 11,459	$ 11,934

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Consolidated Statements Of Changes In Shareholders' Equity (USD $) In Thousands	Common Stock [Member]	Capital Surplus[Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Beginning balance at Dec. 31, 2010	$ 46,249	$ 103,057	$ 270,905	$ (102,853)	$ (2,497)	$ 314,861
Net income			31,024			31,024
Other comprehensive income					(204)	(204)
Cash dividends declared			(15,394)			(15,394)
Stock-based compensation expense, net		83		784		867
Exercise of stock options		(20)		188		168
Purchase of treasury shares				(21,430)		(21,430)
Ending balance at Sep. 30, 2011	46,249	103,120	286,535	(123,311)	(2,701)	309,892
Beginning balance at Dec. 31, 2011	46,249	103,335	291,050	(125,593)	(3,907)	311,134
Net income			28,049			28,049
Other comprehensive income					3,542	3,542
Acquisition of Virginia Savings Bancorp		276		7,447		7,723
Cash dividends declared			(15,532)			(15,532)
Stock-based compensation expense, net		(179)		1,049		870
Exercise of stock options		(121)		665		544
Purchase of treasury shares				(7,915)		(7,915)
Ending balance at Sep. 30, 2012	$ 46,249	$ 103,311	$ 303,567	$ (124,347)	$ (365)	$ 328,415

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note B  – Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.”  This ASU amends Topic 820, “Fair Value Measurements and Disclosures,” to converge the fair value measurement guidance contained in U.S. generally accepted accounting principles and International Financial Reporting Standards (“IFRS”).  The provisions of ASU No. 2011-04 clarify existing fair value measurements, amend certain principles set forth in Topic 820 and requires additional fair value disclosures.  ASU No. 2011-04 became effective for the Company’s reporting period that began on January 1, 2012.  The adoption of ASU No. 2011-04 did not have a material impact on the Company’s financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) – Presentation of Comprehensive Income.”  ASU 2011-05 amends Topic 220, “Comprehensive Income,” to require that all non-owner changes in shareholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate, but consecutive statements, thus eliminating the option to present components of comprehensive income within the statement of changes in shareholders’ equity.  ASU No. 2011-05 is effective for the Company’s reporting period that began on January 1, 2012; however, certain provisions related to the presentation of reclassification adjustments have been deferred by ASU 2011-12, “Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassification Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” as further discussed below.  The adoption of ASU No. 2011-05 did not have a material impact on the Company’s financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment.”  Under this ASU, an entity has the option to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.  If an entity determines, as a result of this qualitative assessment, that it is not more than likely that the fair value of the reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.  ASU No. 2011-08 is effective for the Company’s reporting period that began on January 1, 2012.  The adoption of ASU No. 2011-08 did not have a material impact on the Company’s financial statements.

In December 2011, the FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.”  This ASU defers the changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments.  ASU No. 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to ASU No. 2011-05.  All other requirements in ASU No. 2011-05 are not affected.  ASU No. 2011-12 is effective for the Company’s reporting period that began on January 1, 2012.  The adoption of ASU No. 2011-12 did not have a material impact on the Company’s financial statements.

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Long-Term Debt (Components Of Long-Term Debt) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Long-Term Debt [Abstract]
Junior subordinated debentures owed to City Holding Capital Trust III, due 2038, interest at a rate of 3.89% and 3.85%, respectively	$ 16,495	$ 16,495
Junior subordinated debentures, interest rate	3.89%	3.85%
Junior subordinated debentures, due date	Dec. 31, 2038
Percent over three month LIBOR Rate	3.50%
Junior subordinated debenture redemption price range rate, Upper limit	103.525%
Junior subordinated debenture redemption price range rate, Lower limit	100.00%
Junior subordinated debenture, Redemption date	Jun. 15, 2013
Junior subordinated debenture, Threshold in days	90 days

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Earnings Per Share [Abstract]
Distributed earnings allocated to common stock	$ 5,150	$ 5,015	$ 15,451	$ 15,045
Undistributed earnings allocated to common stock	5,373	6,479	12,375	15,756
Net earnings allocated to common shareholders	$ 10,523	$ 11,494	$ 27,826	$ 30,801
Average common shares outstanding	14,751	15,003	14,700	15,165
Effect of dilutive securities, Employee stock options	83	68	83	77
Shares for diluted earnings per share	14,834	15,071	14,783	15,242
Basic earnings per share	$ 0.71	$ 0.77	$ 1.89	$ 2.03
Diluted earnings per share	$ 0.71	$ 0.76	$ 1.88	$ 2.02
Options to purchase shares of common stock, anti-dilutive	124,000	255,000
Common stock exercise price, lower limit	$ 35.09	$ 30.38
Common stock exercise price, upper limit	$ 40.88	$ 40.88

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2012

Long-Term Debt [Abstract]

Long-Term Debt

( In thousands)	September 30, 2012		December 31, 2011
Junior subordinated debentures owed to City Holding Capital Trust III, due 2038, interest at a rate of 3.89% and 3.85%, respectively	$	16,495	$	16,495

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Fair Value Measurements (Schedule Of OREO Measured And Reported At Fair Value) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
OREO Remeasured At Initial Recognition [Member]
Other Real Estate Owned Reported At Fair Value [Line Items]
Carrying value of foreclosed assets prior to remeasurement	$ 3,088	$ 4,411
Charge-offs recognized in the allowance for loan losses	(845)	(790)
Fair value	2,243	3,621
OREO Remeasured Subsequent To Initial Recognition [Member]
Other Real Estate Owned Reported At Fair Value [Line Items]
Carrying value of foreclosed assets prior to remeasurement	2,804	944
Write-downs included in other non-interest expense	(877)	(186)
Fair value	$ 1,927	$ 758

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Acquisitions (Schedule Of Goodwill) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Acquisitions [Abstract]
Goodwill, Beginning Balance	$ 54,890
Goodwill acquired in conjunction with the acquisition of VSB	8,009
Goodwill, Ending Balance	$ 62,899

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Total Comprehensive Income

9 Months Ended

Sep. 30, 2012

Total Comprehensive Income [Abstract]

Total Comprehensive Income

Note L – Total Comprehensive Income

The following table sets forth the computation of total comprehensive income:

		Three months ended September 30,				Nine months ended September 30,
(In thousands)		2012		2011		2012		2011
Net income	$	10,607	$	11,577	$	28,049	$	31,024
Other comprehensive income:
Unrealized security gains/(losses) arising during the period		3,847		(1,122)		6,637		3,550
Reclassification adjustment for gains included in income		(458)		(272)		(954)		(3,401)
		3,389		(1,394)		5,683		149
Unrealized loss on interest rate floors		-		-		-		(477)
Other comprehensive income (loss) before income taxes		3,389		(1,394)		5,683		(328)
Tax effect		(1,277)		531		(2,141)		124
Other comprehensive income (loss)		2,112		(863)		3,542		(204)
Total comprehensive income	$	12,719	$	10,714	$	31,591	$	30,820