form8k.htm

NEWS RELEASE

For Immediate Release

October 27, 2008

For Further Information Contact:

Charles R. Hageboeck, Chief Executive Officer and President

(304) 769-1102

City Holding Company Announces Third Quarter Results

Charleston, West Virginia – City Holding Company, “the Company” (NASDAQ:CHCO), a $2.5 billion bank holding company headquartered in Charleston, today announced net income of $23.9 million, or diluted earnings per share of $1.47, year-to-date through September 30, 2008 compared to $38.3 million, or diluted earnings per share of $2.24 year-to-date through September 30, 2007. The Company reported a net loss of $2.6 million for the third quarter of 2008, primarily as a result of the federal government’s actions to place Freddie Mac and Fannie Mae into conservatorship in September 2008. As a result of this action, the Company recorded a $21.1 million ($12.7 million after tax or $0.78 per diluted share) impairment loss for the third quarter of 2008 on its investment of $22.7 million in Freddie Mac and Fannie Mae preferred stock.

Charles Hageboeck, Chief Executive Officer and President, stated, “During the third quarter of 2008, the U.S. financial service sector has experienced serious challenges as a result of continuing turmoil associated with overbuilding, foreclosures, and price deterioration in the residential construction industry. Following the acquisition of Bear Stearns by J.P. Morgan Chase in March 2008, every major investment bank in the U.S. has been impacted: Lehman Brothers failed, Merrill Lynch agreed to be acquired by Bank of America, and Goldman Sachs and Morgan Stanley accepted capital infusions from private investors and converted from ‘Investment Banks’ to ’Bank Holding Companies.’ In July, IndyMac was seized by federal bank regulators and became our nation’s 3rd largest bank failure ever. On September 25, 2008, Washington Mutual became our nation’s largest bank failure ever and its principal banking subsidiary was sold to JP Morgan Chase. Within days, another of our nation’s largest banks, Wachovia, was acquired by Wells Fargo. Against this back-drop, City National Bank (’City’) was not immune to the negative effects of the general deterioration of the United States economy, and the results on our Company are evident in our third quarter results.

“Nevertheless, City’s core businesses remain very strong. City is extremely well capitalized, with tangible capital of 9.4% and total risk-based capital of 14.1%. City’s balance sheet is liquid, with a loan to deposit ratio of 89.2%. City has experienced strong loan growth ($118 million in the last 12 months) of 7.1%. City has also experienced growth in average transaction deposits and savings deposits in the third quarter of 2008 as compared to the year-ago period. As a result of City’s balance sheet growth and because City was positioned to benefit from a declining interest rate environment, City’s net interest income increased $2.1 million, or 8.5%, in the third quarter of 2008 as compared to the third quarter of 2007. And, City’s net interest margin rose from 4.32% in the third quarter of 2007 to 4.78% in the third quarter of 2008. Service fees, our largest source of non-interest income, increased $0.8 million, or 7.2%, from the third quarter of 2007. Expenses remain controlled with an efficiency ratio of 46.5%. Non-performing assets declined to 1.00% of total loans and Other Real Estate Owned at September 30, 2008 as compared to 1.23% at September 30, 2007. Overall, I can say that I am pleased with the performance of our business during the third quarter of 2008 with one exception – our ownership of preferred stock in the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).

“According to the American Banker’s Association, approximately 27% of all community banks in the United States owned preferred stock in FNMA and FHLMC. FNMA and FHLMC were considered ’quasi-governmental agencies.’ The Federal Government was widely believed to be willing to ‘stand behind’ the debt or these two Congressionally chartered companies. They were regulated by the government through the Office of Federal Housing Enterprise Oversight created by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, and the United States Congress was actively involved in overseeing these institutions - encouraging them to increase and extend credit to homeowners to increase total home ownership in the United States. City’s primary regulator, the Office of the Comptroller of the Currency (the ‘OCC’) allowed national banks such as City to own only two preferred stocks – FNMA and FHLMC – ostensibly due to their ’special nature’ as quasi-governmental agencies. These preferred shares were rated by the rating agencies – Moody’s and S&P – as ‘investment grade’ at the time they were purchased and in fact right up until the federal government placed both institutions in a ‘Conservatorship’ on September 6, 2008. It now appears that FNMA and FHLMC were encouraged to take on too much risk in their mortgage lending, were inadequately regulated, received inadequate oversight from the Congress, and carried ratings from the rating agencies that did not represent their true financial position. The impact of the decision to place these institutions into a ‘Conservatorship’ had an extremely negative impact upon the value of City’s preferred shares in these two institutions. Due to the actions (and the inaction) by the federal government, City recorded an ‘Other Than Temporary Impairment’ charge of $21.1 million ($12.7 million after tax or $0.78 per diluted share) during the third quarter in regard to our investments in these preferred shares.

“Additionally, City took a charge of $5.4 million with respect to other investments in pooled trust preferred securities and recorded a provision for loan losses of $2.35 million reflecting several commercial loan customers whose credit worthiness has deteriorated in the third quarter of 2008.

“Although difficulties in the United States’ financial system have caused the Company to incur significant ‘Other Than Temporary Impairment’ charges and higher provision for loan losses for the third quarter, the Company remains very profitable with year-to-date return on assets ratio of 1.27%, and as previously described, our core business remains very strong. As a result, we will continue to focus on achieving reasonable growth given the markets in which we operate. For example, we were pleased to announce the opening of a new branch in Hurricane, West Virginia in September 2008. Although the financial services industry and the United States economy are experiencing severe stress and unprecedented challenges, we believe that we are uniquely positioned in a regional economy that remains strong, and look forward to continuing our solid performance for our shareholders in the fourth quarter of 2008.”

Net Interest Income

The Company’s tax equivalent net interest income increased $2.0 million, or 8.3%, from $24.5 million during the third quarter of 2007 to $26.5 million during the third quarter of 2008. This increase is primarily attributable to interest expense on deposits and other interest bearing liabilities decreasing more quickly than interest income from loans and investments as a result of rate declines in the Federal Funds rate during 2008. As a result of the Company’s positioning of its balance sheet, interest sensitive liabilities have repriced to lower levels at a faster rate than interest sensitive assets. Additionally, the Company’s interest rate floors with a total notional value of $500 million during the quarter diminished the impact of falling rates on the Company’s interest income from variable rate loans. Partially offsetting these increases from falling market rates was a decrease of $0.6 million in interest income from Previously Securitized Loans from the third quarter of 2007, as the balances of these loans have decreased 48.2%. The decrease in average balances was partially mitigated by an increase in the yield on these loans to 110.3% for the third quarter of 2008 from 82.9% for the third quarter of 2007 and 69.1% for the year ended December 31, 2007. The yield on the previously securitized loans has increased due to improved cash flows, as net default rates have been less than previously estimated. The default rates have decreased as a result of the Company’s assumption of the servicing of all of the pool balances during the third quarter of 2005. Subsequent to our assumption of the servicing of these loans, the Company has averaged net recoveries, but does not believe that continued net recoveries can be sustained indefinitely. During the quarter, the Company sold an interest rate floor with a notional value of $100 million that matured in June 2011 in order to mitigate its risk associated with the counterparty of this interest rate floor. The gain from this sale will be recognized over the period of the interest rate floor’s original maturity.

The Company’s net interest margin was 4.78% in the third quarter of 2008 as compared to 4.32% in the third quarter of 2007.

Credit Quality

At September 30, 2008, the Allowance for Loan Losses (“ALLL”) was $18.9 million or 1.06% of total loans outstanding and 135% of non-performing loans, compared to $17.6 million or 1.00% of loans outstanding and 103% of non-performing loans at December 31, 2007, and $17.0 million or 0.99% of loans outstanding and 86% of non-performing loans at September 30, 2007.

As a result of the Company’s quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $2.35 million in the third quarter of 2008 compared to $1.2 million for the comparable period in 2007 and $0.85 million in the first quarter of 2008. The provision for loan losses recorded during the third quarter of 2008 reflects the difficulties of certain commercial borrowers of the Company during the quarter, the downgrade of their related credits, and management’s assessment of the impact of these difficulties on the ultimate collectability of the loans. Changes in the amount of the provision and related allowance are based on the Company’s detailed systematic methodology and are directionally consistent with growth and changes in the composition and quality of the Company’s loan portfolio. The Company believes its methodology for determining the adequacy of 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’s ratio of non-performing assets to total loans and other real estate owned improved from 1.20% at June 30, 2008 to 1.00% at September 30, 2008. This decrease was due to the sale of an upscale residence in Southern West Virginia during the quarter that had previously been reported as other real estate owned. Based on our analysis, the Company believes that the allowance allocated to the substandard and nonperforming loans, after considering the value of the collateral securing such loans, is adequate to cover losses that may result from these loans at September 30, 2008. The Company’s ratio of non-performing assets to total loans and other real estate owned is 91 basis points lower than that of our peer group (bank holding companies with total assets between $1 and $5 billion), which reported average non-performing assets as a percentage of loans and other real estate owned of 1.91% for the most recently reported quarter ended June 30, 2008.

The Company had net charge-offs of $1.4 million for the third quarter of 2008. Net charge-offs on commercial and residential loans were $0.6 and $0.5 million, respectively, while installment loans experienced no net charge-offs for the third quarter. Charge-offs for commercial and residential loans were primarily related to two specific credits that had been appropriately considered in establishing the allowance for loan losses in prior periods. In addition, net charge-offs for depository accounts were $0.4 million for the third quarter of 2008. While charge-offs on depository accounts are appropriately taken against the ALLL, the revenue associated with depository accounts is reflected in service charges.

Non-interest Income

Exclusive of investment losses, non-interest income increased $0.9 million, or 6.5%, to $14.7 million in the third quarter of 2008 as compared to $13.8 million in the third quarter of 2007. The largest source of non-interest income is service charges from depository accounts, which increased $0.8 million, or 7.2%, from $11.2 million during the third quarter of 2007 to $12.0 million during the third quarter of 2008. Bank owned life insurance revenues increased $0.2 million from the quarter ended September 30, 2007, as a result of the Company modifying this portfolio during 2008.

Non-interest Expenses

Non-interest expenses increased $1.2 million from $18.0 million in the third quarter of 2007 to $19.2 million in the third quarter of 2008. Repossessed asset losses increased $0.4 million from the third quarter of 2007 primarily as a result of the sale of an upper-scale residential property in Southern West Virginia. Salaries and employee benefits increased $0.2 million, or 2.5%, from the third quarter of 2007 due in part to additional staffing for new retail locations. In addition, other expenses increased $0.2 million from the third quarter of 2007 due to increased derivative amortization and check card expenses (higher volume) and occupancy equipment expenses increased $0.2 million due to higher maintenance costs associated with the Company’s new core system that is used to process and accumulate data for customers and financial reporting.

Balance Sheet Trends

As compared to December 31, 2007, loans have increased $10.7 million (0.6%) at September 30, 2008, due to increases in home equity loans of $36.1 million (10.6%), commercial loans of $21.6 million (3.1%), and residential real estate loans of $18.9 million (3.1%). These increases were partially offset by decreases in loans to depository institutions of $60.0 million (100.0%), installment loans of $3.5 million (7.3%), and previously securitized loans of $2.4 million (34.4%).

Investment securities balances declined from $439.8 million at June 30, 2008 to $379.0 million at September 30, 2008. This decrease was primarily attributable to other than temporary impairment charges of $27.5 million and declines in the fair market value of available for sale securities deemed to be temporary of $22.8 million. The charges deemed to be other than temporary were related to agency preferreds ($21.1 million compared to a book value of $22.7 million), pooled bank trust preferreds ($4.3 million compared to a book value of $22.3 million), income notes ($1.1 million compared to a book value of $2.0 million), and corporate debt securities ($1.0 million compared to a book value of $24.6 million). The impairment charges for the agency preferred securities were due to the actions of the federal government to place Freddie Mac and Fannie Mae into conservatorship and the suspension of dividends on such preferred securities. The impairment charges related to the pooled bank trust preferred securities and income notes were based on the Company’s quarterly review 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, and a review of the financial strength of the banks within the respective pools, management concluded that an impairment charge of $4.3 million and $1.1 million on the pooled bank trust preferred securities and the income notes, respectively, was necessary at September 30, 2008. The $1.0 million impairment charge for corporate debt securities was due to Lehman Brothers Holdings bankruptcy filing. The Company had acquired this security as the result of an acquisition of a bank in 2005.

Total average depository balances increased $17.1 million, or 0.9%, from the quarter ended December 31, 2007 to the quarter ended September 30, 2008. This increase was primarily in non-interest bearing demand deposits, savings deposits, and interest bearing demand deposits, which have increased $25.8 million, $15.6 million, and $9.4 million, respectively. These increases have been partially offset by decreases in average balances of time deposits of $33.7 million.

Income Tax Expense

The effective rate is based upon the Company’s expected tax rate for the year ending December 31, 2008, excluding impairment losses and the realization of previously unrecognized tax positions. Excluding the impact of other than temporary impairment losses and the realization of previously unrecognized tax positions during the third quarter, the Company’s effective income tax rate for the third quarter of 2008 was 33.9% compared to 33.8% for the year ended December 31 2007, and 33.4% for the quarter ended September 30, 2007. During the quarter ended September 30, 2008, the Company realized $1.1 million of previously unrecognized tax positions compared to $0.2 million during the quarter ended September 30, 2007.

Previously Securitized Loans

At September 30, 2008, the Company reported “Previously Securitized Loans” of $4.5 million compared to $6.9 million at December 31, 2007 and $8.3 million at September 30, 2007, respectively, representing a decrease of 34.4% and 45.7%, respectively. The yield on the previously securitized loans was 110.2% for the quarter ended September 30, 2008, compared to 93.2% for the quarter ended December 31, 2007, and 82.9% for the quarter ended September 30, 2007. The yield on the previously securitized loans has increased due to improved cash flows as net default rates have been less than previously estimated. The default rates have decreased as a result of the Company’s assumption of the servicing of all of the pool balances during the second quarter of 2005. Subsequent to our assumption of the servicing of these loans, the Company has averaged net recoveries but does not believe that continued net recoveries can be sustained indefinitely.

Capitalization and Liquidity

One of the Company’s strengths is that it is highly profitable while maintaining strong liquidity and capital. With respect to liquidity, the Company’s loan to deposit ratio was 89.2% and the loan to asset ratio was 72.1% at September 30, 2008. The Company maintained investment securities totaling 15.4% of assets as of this date. Further, the Company’s deposit mix is weighted heavily toward checking and saving accounts that fund 43.8% of assets at September 30, 2008. Time deposits fund 37.0% of assets at September 30, 2008, but very few of these deposits are in accounts that have balances of more than $150,000, reflecting the core retail orientation of the Company.

The Company is also strongly capitalized. With respect to regulatory capital, at September 30, 2008, the Company’s Leverage Ratio is 9.97%, the Tier I Capital ratio is 13.11%, and the Total Risk-Based Capital ratio is 14.13%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation. The Company’s tangible equity ratio was 9.4% at September 30, 2008 compared with a tangible equity ratio of 9.7% at December 31, 2007.

City Holding Company is the parent company of City National Bank of West Virginia. City National operates 69 branches across West Virginia, Eastern Kentucky and Southern Ohio.

Forward-Looking Information

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 may experience increases in the default rates on previously securitized loans that would result in impairment losses or lower the yield on such loans; (4) the Company may not continue to benefit from strong recovery efforts on previously securitized loans resulting in improved yields on these assets; (5) the Company could have adverse legal actions of a material nature; (6) the Company may face competitive loss of customers; (7) the Company may be unable to manage its expense levels; (8) the Company may have difficulty retaining key employees; (9) 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; (10) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (11) 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; (12) the Company may experience difficulties growing loan and deposit balances; (13) the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations; and (14) the United States government’s plan to purchase large amounts of illiquid, mortgage-backed and other securities from financial institutions may not be effective and/or it may not be available to us. 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.

CITY HOLDING COMPANY AND SUBSIDIARIES

Financial Highlights

(Unaudited)

	Three Months Ended September 30,						Percent
	2008			2007			Change

Earnings ($000s, except per share data):
Net Interest Income (FTE)	$	26,484		$	24,448			8.33	%
Net (Loss) Income		(2,557	)		12,714			(120.11	)%
(Loss) Earnings per Basic Share		(0.16	)		0.76			(121.05	)%
(Loss) Earnings per Diluted Share		(0.16	)		0.76			(121.05	)%


Key Ratios (percent):
Return on Average Assets		(0.41	)%		2.03	%		(120.18	)%
Return on Average Tangible Equity		(4.04	)%		21.42	%		(118.87	)%
Net Interest Margin		4.78	%		4.32	%		10.66	%
Efficiency Ratio		46.53	%		46.94	%		(0.86	)%
Average Shareholders' Equity to Average Assets		12.45	%		11.82	%		5.36	%

Consolidated Risk Based Capital Ratios (a):
Tier I		13.11	%		14.84	%		(11.66	)%
Total		14.13	%		15.83	%		(10.74	)%

Tangible Equity to Tangible Assets		9.44	%		9.59	%		(1.57	)%


Common Stock Data:
Cash Dividends Declared per Share	$	0.34		$	0.31			9.68	%
Book Value per Share		17.61			17.68			(0.40	)%
Tangible Book Value per Share		14.05			14.14			(0.67	)%
Market Value per Share:
High		47.28			39.59			19.42	%
Low		35.74			31.16			14.70	%
End of Period		42.25			36.41			16.04	%

	Nine Months Ended September 30						Percent
	2008			2007			Change

Earnings ($000s, except per share data):
Net Interest Income (FTE)	$	76,295		$	73,683			3.54	%
Net Income		23,860			38,267			(37.65	)%
Earnings per Basic Share		1.48			2.24			(33.93	)%
Earnings per Diluted Share		1.47			2.24			(34.38	)%


Key Ratios (percent):
Return on Average Assets		1.27	%		2.03	%		(37.15	)%
Return on Average Tangible Equity		12.73	%		20.80	%		(38.81	)%
Net Interest Margin		4.61	%		4.35	%		6.06	%
Efficiency Ratio		47.08	%		45.83	%		2.72	%
Average Shareholders' Equity to Average Assets		12.31	%		12.06	%		2.07	%


Common Stock Data:
Cash Dividends Declared per Share	$	1.02		$	0.93			9.68	%
Market Value per Share:
High		47.28			41.54			13.82	%
Low		32.51			31.16			4.33	%

Price/Earnings Ratio (b)		21.41			12.19			75.63	%

(a) September 30, 2008 risk-based capital ratios are estimated

(b) September 30, 2008 price/earnings ratio computed based on annualized year to date 2008 earnings

CITY HOLDING COMPANY AND SUBSIDIARIES

Financial Highlights

(Unaudited)

Book Value and Market Price Range per Share

	Book Value per Share								Market Price Range per Share
	March 31		June 30		September 30		December 31		Low		High

2004	$	12.09	$	11.89	$	12.70	$	13.03	$	27.30	$	37.58
2005		13.20		15.56		15.99		16.14		27.57		39.21
2006		16.17		16.17		16.99		17.46		34.53		41.87
2007		17.62		17.40		17.68		18.14		31.16		41.54
2008		18.92		18.72		17.61				35.74		47.28

Earnings per Basic Share

	Quarter Ended
	March 31		June 30		September 30			December 31		Year-to-Date

2004	$	0.66	$	0.80	$	0.66		$	0.67	$	2.79
2005		0.70		0.72		0.73			0.72		2.87
2006		0.71		0.78		0.78			0.74		3.00
2007		0.76		0.72		0.76			0.78		3.02
2008		0.81		0.83		(0.16	)				1.48

Earnings per Diluted Share

	Quarter Ended
	March 31		June 30		September 30			December 31		Year-to-Date

2004	$	0.65	$	0.79	$	0.65		$	0.66	$	2.75
2005		0.69		0.71		0.72			0.72		2.84
2006		0.71		0.77		0.77			0.74		2.99
2007		0.76		0.72		0.76			0.78		3.01
2008		0.80		0.83		(0.16	)				1.47

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited) ($ in 000s, except per share data)

	Three Months Ended September 30,
	2008			2007

Interest Income
Interest and fees on loans	$	30,254		$	32,721
Interest on investment securities:
Taxable		5,850			6,024
Tax-exempt		371			415
Interest on deposits in depository institutions		47			171
Interest on federal funds sold		-			266
Total Interest Income		36,522			39,597

Interest Expense
Interest on deposits		9,446			13,190
Interest on short-term borrowings		478			1,758
Interest on long-term debt		317			426
Total Interest Expense		10,241			15,374
Net Interest Income		26,281			24,223
Provision for loan losses		2,350			1,200
Net Interest Income After Provision for Loan Losses		23,931			23,023

Non-Interest Income
Investment securities (losses)		(27,467	)		(1	)
Service charges		11,993			11,192
Insurance commissions		1,025			1,127
Trust and investment management fee income		640			523
Bank owned life insurance		767			596
Other income		284			377
Total Non-Interest Income		(12,758	)		13,814

Non-Interest Expense
Salaries and employee benefits		9,538			9,307
Occupancy and equipment		1,800			1,600
Depreciation		1,110			1,160
Professional fees		435			416
Postage, delivery, and statement mailings		636			641
Advertising		821			801
Telecommunications		496			438
Bankcard expenses		717			623
Insurance and regulatory		354			364
Office supplies		527			472
Repossessed asset losses (gains), net of expenses		314			(47	)
Other expenses		2,498			2,256
Total Non-Interest Expense		19,246			18,031
(Loss) Income Before Income Taxes		(8,073	)		18,806
Income tax (benefit) expense		(5,516	)		6,092
Net (Loss) Income	$	(2,557	)	$	12,714

Basic (loss) earnings per share	$	(0.16	)	$	0.76
Diluted (loss) earnings per share	$	(0.16	)	$	0.76
Average Common Shares Outstanding:
Basic		16,142			16,714
Diluted		16,195			16,767

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited) ($ in 000s, except per share data)

	Nine months ended September 30
	2008			2007

Interest Income
Interest and fees on loans	$	91,662		$	96,131
Interest on investment securities:
Taxable		18,034			19,709
Tax-exempt		1,151			1,270
Interest on deposits in depository institutions		163			401
Interest on federal funds sold		-			815
Total Interest Income		111,010			118,326

Interest Expense
Interest on deposits		31,980			38,978
Interest on short-term borrowings		2,286			4,965
Interest on long-term debt		1,070			1,383
Total Interest Expense		35,336			45,326
Net Interest Income		75,674			73,000
Provision for loan losses		5,083			3,700
Net Interest Income After Provision for Loan Losses		70,591			69,300

Non-Interest Income
Investment securities (losses) gains		(27,465	)		45
Service charges		34,536			32,681
Insurance commissions		3,231			2,971
Trust and investment management fee income		1,721			1,529
Bank owned life insurance		2,193			1,877
Gain on sale of credit card merchant agreements		-			1,500
VISA IPO Gain		3,289			-
Other income		1,250			1,252
Total Non-Interest Income		18,755			41,855

Non-Interest Expense
Salaries and employee benefits		28,418			27,275
Occupancy and equipment		5,098			4,762
Depreciation		3,330			3,339
Professional fees		1,229			1,204
Postage, delivery, and statement mailings		1,908			1,988
Advertising		2,081			2,533
Telecommunications		1,354			1,352
Bankcard expenses		1,978			1,737
Insurance and regulatory		1,025			1,132
Office supplies		1,488			1,369
Repossessed asset losses (gains), net of expenses		437			(52	)
Loss on early extinguishment of debt		1,208			-
Other expenses		8,352			6,514
Total Non-Interest Expense		57,906			53,153
Income Before Income Taxes		31,440			58,002
Income tax expense		7,580			19,735
Net Income	$	23,860		$	38,267

Basic earnings per share	$	1.48		$	2.24
Diluted earnings per share	$	1.47		$	2.24
Average Common Shares Outstanding:
Basic		16,130			17,057
Diluted		16,189			17,116

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited) ($ in 000s)

	Three Months Ended
	September 30, 2008			September 30, 2007

Balance at July 1	$	302,056		$	294,783

Net (loss) income		(2,557	)		12,714
Other comprehensive income:
Change in unrealized (loss) gain on securities available-for-sale		(13,682	)		2,201
Change in unrealized gain on interest rate floors		2,923			2,050
Cash dividends declared ($0.34/share)		(5,492	)		-
Cash dividends declared ($0.31/share)		-			(5,105	)
Issuance of stock award shares, net		70			54
Exercise of 48,179 stock options		1,351			-
Excess tax benefits on stock compensation		243			-
Purchase of 436,800 common shares of treasury		-			(14,977	)
Balance at September 30	$	284,912		$	291,720

	Nine Months Ended
	September 30, 2008			September 30, 2007

Balance at January 1	$	293,994		$	305,307

Cumulative effect of adopting FIN 48		-			(125	)
Net income		23,860			38,267
Other comprehensive income:
Change in unrealized (loss) gain on securities available-for-sale		(18,848	)		83
Change in unrealized gain on interest rate floors		3,738			1,050
Cash dividends declared ($1.02/share)		(16,457	)		-
Cash dividends declared ($0.93/share)		-			(15,703	)
Issuance of stock award shares, net		410			372
Exercise of 66,254 stock options		1,666			-
Exercise of 7,300 stock options		-			154
Excess tax benefits on stock compensation		266			3
Purchase of 104,960 common shares of treasury		(3,717	)		-
Purchase of 1,017,000 common shares of treasury		-			(37,688	)
Balance at September 30	$	284,912		$	291,720

CITY HOLDING COMPANY AND SUBSIDIARIES

Condensed Consolidated Quarterly Statements of Income

(Unaudited) ($ in 000s, except per share data)

	Quarter Ended
	September 30 2008			June 30 2008			March 31 2008			Dec. 31 2007			Sept. 30 2007

Interest income	$	36,522		$	36,968		$	37,520		$	38,989		$	39,597
Taxable equivalent adjustment		200			204			214			226			224
Interest income (FTE)		36,722			37,172			37,734			39,215			39,821
Interest expense		10,241			11,494			13,601			14,950			15,374
Net interest income		26,481			25,678			24,133			24,265			24,447
Provision for loan losses		2,350			850			1,883			1,650			1,200
Net interest income after provision for loan losses		24,131			24,828			22,250			22,615			23,247

Noninterest income		(12,758	)		14,195			17,318			14,281			13,814
Noninterest expense		19,246			18,761			19,899			17,861			18,031
(Loss) Income before income taxes		(7,873	)		20,262			19,669			19,035			19,030
Income tax (benefit) expense		(5,516	)		6,679			6,417			6,051			6,092
Taxable equivalent adjustment		200			204			214			226			224
Net (loss) income	$	(2,557	)	$	13,379		$	13,038		$	12,758		$	12,714



Basic (loss) earnings per share	$	(0.16	)	$	0.83		$	0.81		$	0.78		$	0.76
Diluted (loss) earnings per share		(0.16	)		0.83			0.80			0.78			0.76
Cash dividends declared per share		0.34			0.34			0.34			0.31			0.31


Average Common Share (000s):
Outstanding		16,142			16,103			16,147			16,359			16,714
Diluted		16,195			16,167			16,205			16,414			16,767

Net Interest Margin		4.78	%		4.65	%		4.40	%		4.32	%		4.32	%

CITY HOLDING COMPANY AND SUBSIDIARIES

Non-Interest Income and Non-Interest Expense

(Unaudited) ($ in 000s)

	Quarter Ended
	September 30 2008			June 30 2008		March 31 2008		Dec. 31 2007			Sept. 30 2007

Non-Interest Income:
Service charges	$	11,993		$	11,269	$	11,274	$	11,735		$	11,192
Insurance commissions		1,025			1,168		1,038		1,119			1,127
Trust and investment management fee income		640			449		632		514			523
Bank owned life insurance		767			750		676		600			596
Other income		284			559		407		312			377
Subtotal		14,709			14,195		14,027		14,280			13,815
Investment securities (losses) gains		(27,467	)		-		2		1			(1	)
VISA IPO Gain		-			-		3,289		-			-
Total Non-Interest Income	$	(12,758	)	$	14,195	$	17,318	$	14,281		$	13,814

Non-Interest Expense:
Salaries and employee benefits	$	9,538		$	9,517	$	9,363	$	8,759		$	9,307
Occupancy and equipment		1,800			1,701		1,597		1,604			1,600
Depreciation		1,110			1,087		1,133		1,133			1,160
Professional fees		435			427		367		424			416
Postage, delivery, and statement mailings		636			618		654		601			641
Advertising		821			643		617		590			801
Telecommunications		496			440		418		456			438
Bankcard expenses		717			640		621		617			623
Insurance and regulatory		354			333		338		422			364
Office supplies		527			504		457		469			472
Repossessed asset losses (gains), net of expenses		314			91		32		(105	)		(47	)
Loss on early extinguishment of debt		-			-		1,208		-			-
Other expenses		2,498			2,760		3,094		2,891			2,256
Total Non-Interest Expense	$	19,246		$	18,761	$	19,899	$	17,861		$	18,031




Employees (Full Time Equivalent)		812			817		821		811			808
Branch Locations		69			68		69		69			68

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

($ in 000s)

	September 30 2008			December 31 2007
	(Unaudited)
Assets
Cash and due from banks	$	52,206		$	64,726
Interest-bearing deposits in depository institutions		4,045			9,792
Cash and cash equivalents		56,251			74,518

Investment securities available-for-sale, at fair value		345,982			382,098
Investment securities held-to-maturity, at amortized cost		33,033			34,918
Total investment securities		379,015			417,016

Gross loans		1,777,731			1,767,021
Allowance for loan losses		(18,879	)		(17,581	)
Net loans		1,758,852			1,749,440

Bank owned life insurance		69,660			64,467
Premises and equipment		59,574			54,635
Accrued interest receivable		9,733			11,254
Net deferred tax assets		41,173			20,633
Intangible assets		57,600			58,238
Other assets		33,707			32,566
Total Assets	$	2,465,565		$	2,482,767

Liabilities
Deposits:
Noninterest-bearing	$	316,205		$	314,231
Interest-bearing:
Demand deposits		404,593			397,510
Savings deposits		359,644			350,607
Time deposits		912,184			927,733
Total deposits		1,992,626			1,990,081
Short-term borrowings		140,726			161,916
Long-term debt		21,075			4,973
Other liabilities		26,226			31,803
Total Liabilities		2,180,653			2,188,773

Stockholders' 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, 2008 and December 31, 2007 less 2,316,638 and 2,292,357 shares in treasury, respectively		46,249			46,249
Capital surplus		102,831			103,390
Retained earnings		231,789			224,386
Cost of common stock in treasury		(81,480	)		(80,664	)
Accumulated other comprehensive (loss) income:
Unrealized loss on securities available-for-sale		(20,631	)		(1,783	)
Unrealized gain on derivative instruments		8,128			4,390
Underfunded pension liability		(1,974	)		(1,974	)
Total Accumulated Other Comprehensive (Loss) Income		(14,477	)		633
Total Stockholders' Equity		284,912			293,994
Total Liabilities and Stockholders' Equity	$	2,465,565		$	2,482,767

CITY HOLDING COMPANY AND SUBSIDIARIES

Loan Portfolio

(Unaudited) ($ in 000s)

	September 30 2008		June 30 2008		March 31 2008		Dec 31 2007		Sept 30 2007

Residential real estate	$	620,951	$	612,676	$	605,579	$	602,057	$	600,094
Home equity		377,919		371,537		347,986		341,818		338,161
Commercial, financial, and agriculture		729,613		715,196		699,653		707,987		666,960
Loans to depository institutions		-		-		-		60,000		60,000
Installment loans to individuals		44,728		45,385		45,557		48,267		46,244
Previously securitized loans		4,520		5,253		6,025		6,892		8,317
Gross Loans	$	1,777,731	$	1,750,047	$	1,704,800	$	1,767,021	$	1,719,776

CITY HOLDING COMPANY AND SUBSIDIARIES

Previously Securitized Loans

(Unaudited) ($ in millions)

Year Ended:	December 31 Balance (a)		Annualized Interest Income (a)		Effective Annualized Yield (a)

2007	$	6.9	$	7.3		69	%
2008		4.7		5.6		102	%
2009		3.5		4.1		102	%
2010		2.9		3.2		102	%
2011		2.4		2.6		102	%

a - 2007 amounts are based on actual results. 2008 amounts are based on actual results through September 30, 2008 and estimated amounts for the remainder of the year. 2009, 2010, and 2011 amounts are based on estimated amounts.

Note:

The amounts reflected in the table above require management to make significant assumptions based on estimated future default, prepayment, and discount rates. Actual performance could be significantly different from that assumed, which could result in the actual results being materially different from the amounts estimated above.

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Average Balance Sheets, Yields, and Rates

(Unaudited) ($ in 000s)

	Three Months Ended September 30,
	2008								2007
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate

Assets:
Loan portfolio:
Residential real estate	$	613,771		$	9,393		6.09	%	$	598,954		$	9,272		6.14	%
Home equity		373,445			6,644		7.08	%		334,363			6,547		7.77	%
Commercial, financial, and agriculture		708,665			11,622		6.52	%		679,104			12,776		7.46	%
Loans to depository institutions		-			-		-			60,000			820		5.42	%
Installment loans to individuals		53,521			1,270		9.44	%		47,626			1,379		11.49	%
Previously securitized loans		4,781			1,325		110.25	%		9,220			1,927		82.92	%
Total loans		1,754,183			30,254		6.86	%		1,729,267			32,721		7.51	%
Securities:
Taxable		407,754			5,850		5.71	%		442,696			6,024		5.40	%
Tax-exempt		34,653			571		6.56	%		38,810			639		6.53	%
Total securities		442,407			6,421		5.77	%		481,506			6,663		5.49	%
Deposits in depository institutions		8,981			47		2.08	%		15,184			171		4.47	%
Federal funds sold		-			-		-			20,870			266		5.06	%
Total interest-earning assets		2,205,571			36,722		6.62	%		2,246,827			39,821		7.03	%
Cash and due from banks		54,572								51,149
Bank premises and equipment		57,923								50,333
Other assets		195,217								171,478
Less: Allowance for loan losses		(18,158	)							(16,563	)
Total assets	$	2,495,125							$	2,503,224

Liabilities:
Interest-bearing demand deposits		414,022			654		0.63	%		410,907			1,136		1.10	%
Savings deposits		362,550			862		0.95	%		347,055			1,523		1.74	%
Time deposits		887,884			7,929		3.55	%		923,937			10,530		4.52	%
Short-term borrowings		142,290			477		1.33	%		165,965			1,758		4.20	%
Long-term debt		21,089			316		5.96	%		21,871			426		7.73	%
Total interest-bearing liabilities		1,827,835			10,238		2.23	%		1,869,735			15,373		3.26	%
Noninterest-bearing demand deposits		331,919								309,553
Other liabilities		24,677								28,092
Stockholders' equity		310,694								295,844

Total liabilities and stockholders' equity	$	2,495,125							$	2,503,224
Net interest income				$	26,484							$	24,448
Net yield on earning assets							4.78	%							4.32	%

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Average Balance Sheets, Yields, and Rates

(Unaudited) ($ in 000s)

	Nine Months Ended September 30,
	2008								2007
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate

Assets:
Loan portfolio:
Residential real estate	$	604,798		$	28,187		6.23	%	$	596,585		$	27,144		6.08	%
Home equity		359,101			19,520		7.26	%		328,036			19,091		7.78	%
Commercial, financial, and agriculture		705,819			35,563		6.73	%		672,331			38,119		7.58	%
Loans to depository institutions		1,551			35		3.01	%		56,410			2,271		5.38	%
Installment loans to individuals		52,277			4,014		10.26	%		45,596			3,967		11.63	%
Previously securitized loans		5,521			4,343		105.08	%		11,583			5,539		63.94	%
Total loans		1,729,067			91,662		7.08	%		1,710,541			96,131		7.51	%
Securities:
Taxable		436,440			18,034		5.52	%		482,484			19,709		5.46	%
Tax-exempt		36,253			1,771		6.53	%		39,789			1,954		6.57	%
Total securities		472,693			19,805		5.60	%		522,273			21,663		5.55	%
Deposits in depository institutions		8,981			163		2.42	%		12,823			401		4.18	%
Federal funds sold		-			-		-			20,832			814		5.22	%
Total interest-earning assets		2,210,741			111,630		6.74	%		2,266,469			119,009		7.02	%
Cash and due from banks		58,293								50,668
Bank premises and equipment		56,217								47,555
Other assets		191,625								170,137
Less: Allowance for loan losses		(18,240	)							(16,114	)
Total assets	$	2,498,636							$	2,518,715

Liabilities:
Interest-bearing demand deposits		412,417			1,979		0.64	%		423,222			3,777		1.19	%
Savings deposits		361,465			2,796		1.03	%		340,490			4,259		1.67	%
Time deposits		910,187			27,204		3.99	%		922,958			30,942		4.48	%
Short-term borrowings		136,644			2,286		2.23	%		158,250			4,965		4.19	%
Long-term debt		21,663			1,070		6.60	%		25,368			1,383		7.29	%
Total interest-bearing liabilities		1,842,376			35,335		2.56	%		1,870,288			45,326		3.24	%
Noninterest-bearing demand deposits		322,344								314,744
Other liabilities		26,213								29,803
Stockholders' equity		307,703								303,880
Total liabilities and stockholders' equity	$	2,498,636							$	2,518,715
Net interest income				$	76,295							$	73,683
Net yield on earning assets							4.61	%							4.35	%

CITY HOLDING COMPANY AND SUBSIDIARIES

Analysis of Risk-Based Capital

(Unaudited) ($ in 000s)

	September 30 2008 (a)			June 30 2008			March 31 2008			Dec 31 2007			Sept 30 2007

Tier I Capital:
Stockholders' equity	$	284,912		$	302,056		$	304,841		$	293,994		$	291,720
Goodwill and other intangibles		(57,600	)		(57,893	)		(58,065	)		(58,238	)		(58,328	)
Accumulated other comprehensive loss (income)		14,477			3,718			(7,280	)		(633	)		4,396
Qualifying trust preferred stock		16,000			16,000			16,000			16,000			16,000
Unrealized Loss on AFS securities		(761	)		(712	)		(275	)		(247	)		(94	)
Excess deferred tax assets		(15,470	)		-			-			-			-
Total tier I capital	$	241,558		$	263,169		$	255,221		$	250,876		$	253,694


Total Risk-Based Capital:
Tier I capital	$	241,558		$	263,169		$	255,221		$	250,876		$	253,694
Qualifying allowance for loan losses		18,879			17,959			18,567			17,581			16,980
Total risk-based capital	$	260,437		$	281,128		$	273,788		$	268,457		$	270,674

Net risk-weighted assets	$	1,842,684		$	1,855,401		$	1,828,559		$	1,776,158		$	1,709,486


Ratios:
Average stockholders' equity to average assets		12.45	%		12.46	%		12.03	%		11.84	%		11.82	%
Tangible capital ratio		9.44	%		10.02	%		10.00	%		9.72	%		9.59	%
Risk-based capital ratios:
Tier I capital		13.11	%		14.18	%		13.96	%		14.12	%		14.84	%
Total risk-based capital		14.13	%		15.15	%		14.97	%		15.11	%		15.83	%
Leverage capital		9.97	%		10.75	%		10.47	%		10.31	%		10.38	%

(a) September 30, 2008 risk-based capital ratios are estimated

CITY HOLDING COMPANY AND SUBSIDIARIES

Intangibles

(Unaudited) ($ in 000s)

	As of and for the Quarter Ended
	September 30 2008		June 30 2008		March 31 2008		Dec 31 2007		Sept 30 2007

Intangibles, net	$	57,600	$	57,893	$	58,065	$	58,238	$	58,328
Intangibles amortization expense		173		172		173		177		176

CITY HOLDING COMPANY AND SUBSIDIARIES

Summary of Loan Loss Experience

(Unaudited) ($ in 000s)

	Quarter Ended
	September 30 2008			June 30 2008			March 31 2008			Dec 31 2007			Sept 30 2007

Balance at beginning of period	$	17,959		$	18,567		$	17,581		$	16,980		$	16,616

Charge-offs:
Commercial, financial, and agricultural		563			1,022			406			359			-
Real estate-mortgage		523			190			274			203			240
Installment loans to individuals		62			77			75			108			91
Overdraft deposit accounts		783			604			985			938			1,035
Total charge-offs		1,931			1,893			1,740			1,608			1,366

Recoveries:
Commercial, financial, and agricultural		(30	)		41			13			23			19
Real estate-mortgage		69			48			27			35			22
Installment loans to individuals		71			72			108			97			89
Overdraft deposit accounts		391			274			695			404			400
Total recoveries		501			435			843			559			530

Net charge-offs		1,430			1,458			897			1,049			836
Provision for loan losses		2,350			850			1,883			1,650			1,200
Balance at end of period	$	18,879		$	17,959		$	18,567		$	17,581		$	16,980

Loans outstanding	$	1,777,731		$	1,750,047		$	1,704,800		$	1,767,021		$	1,719,776
Average loans outstanding		1,754,183			1,728,609			1,704,133			1,739,166			1,729,267
Allowance as a percent of loans outstanding		1.06	%		1.03	%		1.09	%		1.00	%		0.99	%
Allowance as a percent of non-performing loans		134.95	%		122.89	%		113.55	%		103.28	%		86.47	%
Net charge-offs (annualized) as a percent of average loans outstanding		0.33	%		0.34	%		0.21	%		0.24	%		0.19	%
Net charge-offs, excluding overdraft deposit accounts, (annualized) as a percent of average loans outstanding		0.24	%		0.26	%		0.14	%		0.12	%		0.05	%

CITY HOLDING COMPANY AND SUBSIDIARIES

Summary of Non-Performing Assets

(Unaudited) ($ in 000s)

	September 30 2008			June 30 2008			March 31 2008			Dec 31 2007			Sept 30 2007

Nonaccrual loans	$	13,709		$	14,018		$	15,840		$	16,437		$	18,896
Accruing loans past due 90 days or more		181			431			257			314			566
Previously securitized loans past due 90 days or more		100			165			255			76			176
Total non-performing loans		13,990			14,614			16,352			16,827			19,638
Other real estate owned, excluding property associated with previously securitized loans		3,332			6,164			4,192			4,163			1,091
Other real estate owned associated with previously securitized loans		417			321			148			-			405
Other real estate owned		3,749			6,485			4,340			4,163			1,496
Total non-performing assets	$	17,739		$	21,099		$	20,692		$	20,990		$	21,134

Non-performing assets as a percent of loans and other real estate owned		1.00	%		1.20	%		1.21	%		1.20	%		1.23	%

CITY HOLDING COMPANY AND SUBSIDIARIES

Summary of Total Past Due Loans

(Unaudited) ($ in 000s)

	September 30 2008		June 30 2008		March 31 2008		Dec 31 2007		Sept 30 2007

Residential real estate	$	3,636	$	5,487	$	3,763	$	5,480	$	4,500
Home equity		1,400		1,316		1,344		2,141		1,075
Commercial, financial, and agriculture		1,741		1,166		806		1,506		311
Loans to depository institutions		-		-		-		-		-
Installment loans to individuals		216		290		360		385		279
Previously securitized loans		598		632		897		1,099		948
Overdraft deposit accounts		491		485		568		612		575
Total past due loans	$	8,082	$	9,376	$	7,738	$	11,223	$	7,688

West Virginia	55-0619957
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Dated: October 30, 2008	City Holding Company


By:	/s/ David L. Bumgarner
	David L. Bumgarner
	Chief Financial Officer