CITY HOLDING CO, S-4, 1995-04-14

CITY HOLDING CO
S-4, 1995-04-14
STATE COMMERCIAL BANKS

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<PAGE>

As filed with the Securities and Exchange Commission on April 14, 1995

REGISTRATION NO. 33-________

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________
CITY HOLDING COMPANY
(Exact name of registrant as specified in its charter)
________________________

<TABLE>
<S> <C> <C>
WEST VIRGINIA 6711 55-0619957
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

3601 MACCORKLE AVENUE, S.E.
CHARLESTON, WEST VIRGINIA 25304
(304) 925-6611
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
________________________
STEVEN J. DAY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CITY HOLDING COMPANY
3601 MACCORKLE AVENUE, S.E.
CHARLESTON, WEST VIRGINIA 25304
(304) 925-6611
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
________________________
Copy to:
LATHAN M. EWERS, JR. DEBORAH A. SINK
HUNTON & WILLIAMS BOWLES, RICE, MCDAVID, GRAFF & LOVE
951 EAST BYRD STREET 16TH FLOOR COMMERCE SQUARE
RICHMOND, VIRGINIA 23219-4074
P.O. BOX 1386
CHARLESTON, WEST VIRGINIA 25325-1386
________________________

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box.[ ]
_________________________
CALCULATION OF REGISTRATION FEE

<TABLE>
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities Maximum Amount Offering Price Aggregate Registration
To Be Registered To Be Registered Per Unit Offering Price Fee
<S> <C> <C> <C> <C>
Common Stock 950,000 shares(1) $ 17.33(2) $16,463,500(2) $5,678
($2.50 par value)

Rights to Purchase Junior 950,000 rights N/A N/A N/A
Participating Cumulative
Preferred Stock, Series A
($25.00 Par Value)(3)
</TABLE>

(1) This Registration Statement covers the maximum number of shares of
common stock of the Registrant which is expected to be issued
in connection with the transactions described herein.
(2) Estimated in accordance with Rule 457(f)(2) solely for the
purpose of calculating the registration fee, using the per share
book value of First Merchants Bancorp, Inc. common stock at
March 31, 1995, and assuming no cash will be paid by City
Holding Company in the exchange.
(3) The Rights will be attached to and trade with the Common Stock.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

<PAGE>
CITY HOLDING COMPANY

CROSS-REFERENCE SHEET

Caption(s) or Location in Joint Proxy
Item of Form S-4 Statement/Prospectus
1. Forepart of Registration Facing Page; Cross Reference
Statement and Outside Front Sheet; Outside Front Cover
Cover Page of Joint Proxy Page
Statement/Prospectus

2. Inside Front and Outside Inside Front Cover Page; Table
Back Cover Pages of Joint of Contents; Available
Proxy Statement/Prospectus Information; Incorporation of
Certain Information by
Reference

3. Risk Factors, Ratio of Summary; Selected Financial
Earnings to Fixed Charges Data
and Other Information

4. Terms of the Transaction Summary; The Merger; City
Holding Capital Stock;
Comparative Rights of
Shareholders; Incorporation of
Certain Information by
Reference; Annex I; Annex II

5. Pro Forma Financial Pro Forma Condensed
Information Consolidated Financial
Statements (Unaudited)

6. Material Contacts with the Not Applicable
Company Being Acquired

7. Additional Information Not Applicable
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters

8. Interests of Named Experts The Merger; Legal Opinions
and Counsel

9. Disclosure of Commission Not Applicable
Position on Indemnification
for Securities Act
Liabilities

10. Information with Respect Not Applicable
to S-3 Registrants

11. Incorporation of Certain Not Applicable
Information by Reference

12. Information with Respect Business of City Holding;
to S-2 or S-3 Supervision and Regulation;
Registrants Selected Financial Data; City
Holding Capital Stock; City
Holding Management's
Discussion and Analysis of
Financial Condition and
Results of Operation; City
Holding Market Price and
Dividend Information; City
Holding Audited Consolidated
Financial Statements

13. Incorporation of Certain Incorporation of Certain
Information by Reference Information by Reference

14. Information with Respect Not Applicable
to Registrants Other
than S-3 or S-2
Registrants

15. Information with Respect Not Applicable
to S-3 Companies

16. Information with Respect Not Applicable
to S-2 or S-3 Companies

Caption(s) or Location in Joint Proxy
Item of Form S-4 Statement/Prospectus
17. Information with Respect Business of FMB; Properties of
to Companies other than FMB; FMB Management's
S-2 or S-3 Companies Discussion and Analysis of
Financial Condition and
Results of Operation; FMB
Audited Financial Statements;
Legal Proceedings Concerning
FMB; Market for FMB Common
Stock and Related Stockholder
Matters

18. Information if Proxies, Summary; The Shareholder
Consents or Meetings; Dissenters' Rights;
Authorizations are to be Annex IV; The Merger; City
Solicited Holding Ownership of Equity
Securities; FMB Ownership of
Equity Securities; Election of
City Holding Directors;
Executive Officers of City
Holding; City Holding
Executive Compensation; City
Holding Performance Graph;
City Holding Employment
Agreements; City Holding
Certain Relationships and
Related Transactions; FMB
Certain Relationships and
Related Transactions

19. Information if Proxies, Not Applicable
Consents or
Authorizations are not
to be Solicited, or in
an Exchange Offer

<PAGE>

[FIRST MERCHANTS BANCORP, INC. LETTERHEAD]
Fourth Avenue and Washington Street
Montgomery, West Virginia 25136

June 1, 1995

Dear Shareholders:

We cordially invite you to attend a special meeting of
shareholders of First Merchants Bancorp, Inc. ("FMB") to be held at FMB's
corporate headquarters at Fourth Avenue and Washington Street, Montgomery,
West Virginia, on June 29, 1995, at 4:30 p.m. for the purpose of
considering the proposal by which FMB will merge with and into City Holding
Company, a bank holding company headquartered in Charleston, West Virginia
("City Holding"), and the shareholders of FMB will become shareholders of
City Holding.

Upon consummation of the proposed merger, each FMB shareholder
will be entitled to receive for each share of FMB Common Stock, 1.60 shares
of City Holding Common Stock. The terms of the proposed merger are
explained in detail in the accompanying Joint Proxy Statement/Prospectus
that we urge you to read carefully.

Regardless of the number of shares you own and whether or not you
plan to attend, it is important that your shares be represented and voted
at the meeting. Accordingly, you are requested to sign, date and mail the
enclosed proxy at your earliest convenience. In the event you execute a
proxy and subsequently find you can attend the meeting, you may revoke your
proxy and vote at the meeting if you wish. Only shareholders of record as
of May 15, 1995, are entitled to notice of and to vote on matters to be
transacted at the annual meeting.

Your Board of Directors is unanimously of the opinion that City
Holding Common Stock, which will be more widely traded than FMB Common
Stock following the proposed merger, is a desirable security for our
shareholders. Further, we believe that the depth of services and support
that the combination of FMB and City Holding can bring to our market area
exceed those which FMB alone can offer to its customers. CONSEQUENTLY, THE
BOARD URGES YOU TO VOTE FOR THE MERGER DESCRIBED IN THE ACCOMPANYING JOINT
PROXY STATEMENT/PROSPECTUS.

Sincerely,

George F. Davis
Chief Executive Officer
First Merchants Bancorp, Inc.

<PAGE>
FIRST MERCHANTS BANCORP, INC.
Fourth Avenue and Washington Street
Montgomery, West Virginia 25136

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held June 29, 1995

TO THE SHAREHOLDERS OF FIRST MERCHANTS BANCORP, INC.:

Notice is hereby given that, pursuant to call of its Board of
Directors, a special meeting of shareholders of First Merchants Bancorp,
Inc. ("FMB") will be held at FMB's corporate headquarters at Fourth Avenue
and Washington Street on June 29, 1995, at 4:30 p.m. for the following
purposes:

1. Proposed Merger. To consider and vote upon the Agreement and
Plan of Reorganization, dated as of March 14, 1995, and the Plan of Merger
attached thereto (the "Agreement") providing for the merger of FMB with
City Holding Company, a West Virginia corporation. The Agreement is
attached to the accompanying Joint Proxy Statement/Prospectus as Annex I.

2. Other Business. To consider and vote upon such other matters
as may properly come before the meeting.

Only those FMB shareholders of record at the close of business on
May 15, 1995, shall be entitled to notice of and to vote at the meeting or
any adjournments or postponements thereof.

THE BOARD OF DIRECTORS OF FMB UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF FMB COMMON STOCK VOTE TO APPROVE THE ABOVE PROPOSAL.

By Order of the Board of
Directors,

_______________________
Secretary
June 1, 1995
Montgomery, West Virginia

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-
PAID ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED. SHAREHOLDERS
ATTENDING THE MEETING MAY PERSONALLY VOTE ON ALL MATTERS WHICH ARE
CONSIDERED, IN WHICH EVENT THE SIGNED PROXIES ARE REVOKED.

<PAGE>

[CITY HOLDING COMPANY LETTERHEAD]
3601 MacCorkle Avenue, S.E.
Charleston, West Virginia 25304

June 1, 1995

Dear Shareholders:

We cordially invite you to attend the annual meeting of
shareholders of City Holding Company ("City Holding") to be held at City
Holding's corporate headquarters located at 3601 MacCorkle Avenue, S.E.,
Charleston, West Virginia 25304, on June 29, 1995, at 4:00 p.m. for the
purpose of considering the approval of an Agreement and Plan of
Reorganization that provides for the merger of First Merchants Bancorp,
Inc., a West Virginia corporation headquartered in Montgomery, West
Virginia, into City Holding, thereby allowing City Holding to acquire FMB's
subsidiary, Merchants National Bank, a national banking association. The
approximately 950,000 additional shares to be issued in the merger
represent approximately 24% of the City Holding Common Stock outstanding on
December 31, 1994, and shareholder approval of the merger is a condition to
consummation of the acquisition.

Shareholders also will be asked to elect four Class III Directors
to the Board of Directors to serve three year terms, to ratify the Board of
Directors' appointment of Ernst & Young LLP as auditors for City Holding
for 1995, and to transact such other business as may properly come before
the meeting or any adjournment thereof.

If you cannot attend the meeting in person, please complete the
enclosed proxy and return it in the accompanying postage-paid envelope so
that your shares will be represented at the meeting. Only holders of City
Holding Common Stock of record at the close of business on May 15, 1995 are
entitled to notice of and to vote on matters to be transacted at the Annual
Meeting.

Your Board of Directors is unanimously of the opinion that the
proposed transaction with FMB would be beneficial to City Holding's
shareholders. CONSEQUENTLY, THE BOARD URGES YOU TO VOTE FOR THE MERGER
DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.

Sincerely,

Steven J. Day
President and Chief Executive Officer,
City Holding Company

<PAGE>

CITY HOLDING COMPANY
3601 MacCorkle Avenue, S.E.
Charleston, West Virginia 25304

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 29, 1995

TO THE SHAREHOLDERS OF CITY HOLDING COMPANY:

Notice is hereby given that, pursuant to call of its Board of
Directors, the annual meeting of shareholders of City Holding Company
("City Holding") will be held at City Holding's corporate headquarters
located at 3601 MacCorkle Avenue, S.E., Charleston, West Virginia 25304, on
June 29, 1995, at 4:00 p.m. for the following purposes:

1. Proposed Merger. To consider and vote upon the Agreement
and Plan of Reorganization, dated as of March 14, 1995, and the Plan of
Merger attached thereto (the "Agreement") providing for the merger of First
Merchants Bancorp, Inc. into City Holding. The Agreement is attached to
the accompanying Joint Proxy Statement/Prospectus as Annex I.

2. Election of Directors. To elect four Class III Directors to
the Board of Directors to serve three-year terms.

3. Ratification of Auditors. To ratify the Board of Directors'
appointment of Ernst & Young LLP as auditors for City Holding for 1995; and

4. Other Business. To consider and vote upon such other
matters as may properly come before the meeting.

Only holders of City Holding Common Stock of record at the close
of business on May 15, 1995 are entitled to notice of and to vote on
matters to be transacted at the Annual Meeting of any postponement or
adjournment thereof. All properly executed proxies delivered pursuant to
this solicitation will be voted at the Annual Meeting in accordance with
instructions, if any. In the absence of instructions, the proxies will be
voted FOR Items One through Three as described in the accompanying Joint
Proxy Statement/Prospectus.

By Order of the Board of
Directors,

Otis L. O'Connor
Secretary
June 1, 1995
Charleston, West Virginia

JOINT PROXY STATEMENT

CITY HOLDING COMPANY FIRST MERCHANTS BANCORP, INC.
ANNUAL MEETING SPECIAL MEETING
TO BE HELD ON TO BE HELD ON
JUNE 29, 1995 JUNE 29, 1995
______________________

PROSPECTUS
OF
CITY HOLDING COMPANY

COMMON STOCK
_____________________

This Joint Proxy Statement/Prospectus is being furnished to the
holders of common stock, $2.00 par value (the "FMB Common Stock"), of First
Merchants Bancorp, Inc. a West Virginia corporation ("FMB"), in connection
with the solicitation of proxies by the Board of Directors of FMB for use
at a special meeting of FMB shareholders to be held at 4:30 p.m., on June
29, 1995, at FMB's corporate headquarters at Fourth Avenue and Washington
Street, Montgomery, West Virginia (the "FMB Special Meeting").

This Joint Proxy Statement/Prospectus is also being furnished to
holders of common stock, par value $2.50 per share (the "City Holding
Common Stock"), of City Holding Company, a West Virginia corporation ("City
Holding"), in connection with the solicitation of proxies by the Board of
Directors of City Holding for use at the annual meeting of City Holding's
shareholders to be held at City Holding's corporate headquarters located at
3601 MacCorkle Avenue, S.E., Charleston, West Virginia 25304 on June 29,
1995, at 4:00 p.m. (the "City Holding Annual Meeting" and, together with
the FMB Special Meeting, the "Shareholder Meetings").

At the Shareholder Meetings, the shareholders of record of City
Holding Common Stock as of the close of business on May 15, 1995, and the
shareholders of record of FMB Common Stock as of the close of business on
May 15, 1995, will consider and vote upon, among other things, a proposal
to approve the Agreement and Plan of Reorganization (the "Agreement") dated
as of March 14, 1995, by and among City Holding, FMB and Merchants National
Bank ("Merchants"), a national banking association wholly-owned by FMB
pursuant to which FMB will merge into City Holding and the holders of
shares of FMB Common Stock will receive City Holding Common Stock in
exchange therefor. Upon consummation of the Merger, which is expected to
occur on June 30, 1995, each outstanding share of FMB Common Stock (other
than shares held by City Holding or in FMB's treasury and other than shares
as to which dissenters' rights have been asserted and duly perfected in
accordance with West Virginia law ("Dissenting Shares")) shall be converted
into 1.60 shares of City Holding Common Stock. For a description of the
Agreement, which is included herein in its entirety as Annex I to this
Joint Proxy Statement/Prospectus, see "THE MERGER."

-i-

This Joint Proxy Statement/Prospectus also constitutes a prospectus of
City Holding with respect to the shares of City Holding Common Stock to be
issued to shareholders of FMB in connection with the Merger. The
outstanding shares of City Holding Common Stock are, and the shares offered
hereby will be, traded on The Nasdaq National Market.

All information contained in this Joint Proxy Statement/Prospectus
relating to City Holding and its subsidiaries has been supplied by City
Holding, and all information relating to FMB and Merchants has been
supplied by FMB and Merchants. This Joint Proxy Statement/Prospectus and
the accompanying proxy appointment cards are first being mailed to
shareholders of City Holding and FMB on or about June 1, 1995.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

THE SHARES OF CITY HOLDING COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.

The date of this Joint Proxy Statement/Prospectus is __________, 1995.

-ii-

No person has been authorized to give any information or to make any
representation other than as contained herein in connection with the offer
contained in this Prospectus, and if given or made, such information or
representation must not be relied upon. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any
securities other than the securities to which it relates, nor does it
constitute an offer to or solicitation of any person in any jurisdiction to
whom it would be unlawful to make such an offer or solicitation. The
delivery of this Prospectus at any time does not imply that the information
herein is correct as of any time subsequent to the date hereof.

TABLE OF CONTENTS

AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 1

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . . . . 1

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . 11

THE SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . 14
FMB Special Meeting . . . . . . . . . . . . . . . . . . . . . . . 14
City Holding Annual Meeting . . . . . . . . . . . . . . . . . . . 15
Votes Required . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . 17

THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Background and Reasons for the Merger . . . . . . . . . . . . . . 19
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . 20
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Exchange Ratio and Conversion of Shares . . . . . . . . . . . . . 23
Business of FMB and Merchants Pending the Merger . . . . . . . . . 24
Conditions to Consummation of the Merger . . . . . . . . . . . . . 25
Stock Option Agreements . . . . . . . . . . . . . . . . . . . . . 27
Waiver and Amendment; Termination . . . . . . . . . . . . . . . . 28
Management and Operations after the Merger . . . . . . . . . . . . 29
Interests of Certain Persons in the Merger . . . . . . . . . . . . 29
Certain Federal Income Tax Consequences . . . . . . . . . . . . . 30

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) . . . 31

DISSENTERS' RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 36

CITY HOLDING CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . 38
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . 39
Preferred Stock Purchase Rights Plan; Change of Control . . . . . 39
Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . 40
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 40
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . 40
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Directors and Classes of Directors . . . . . . . . . . . . . . . . 41
Anti-Takeover Provisions . . . . . . . . . . . . . . . . . . . . . 41
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . 42
Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Conversion; Redemption; Sinking Fund . . . . . . . . . . . . . . . 42
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . 42
Dividends and Other Distributions . . . . . . . . . . . . . . . . 43
Shareholder Meetings . . . . . . . . . . . . . . . . . . . . . . . 43
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 43
Director Exculpation . . . . . . . . . . . . . . . . . . . . . . . 44

SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . 44
Limits on Dividends and Other Payments . . . . . . . . . . . . . . 45
Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . 46
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
FDICIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Bank Holding Companies . . . . . . . . . . . . . . . . . . . . . . 48
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
FDIC Insurance Assessments . . . . . . . . . . . . . . . . . . . . 49
Governmental Policies . . . . . . . . . . . . . . . . . . . . . . 49

BUSINESS OF CITY HOLDING . . . . . . . . . . . . . . . . . . . . . . . 50

CITY HOLDING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION . . . . . . . . . . . . . . . . 53
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Interest-Earning Assets and Interest-Bearing Liabilities . . . . . 54
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . 55
Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Loan Loss Analysis . . . . . . . . . . . . . . . . . . . . . . . . 59
Liquidity and Interest Rate Sensitivity . . . . . . . . . . . . . 61
Other Income and Expenses . . . . . . . . . . . . . . . . . . . . 64
Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . 65
Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

CITY HOLDING MARKET PRICE AND DIVIDEND INFORMATION . . . . . . . . . . 67

CITY HOLDING OWNERSHIP OF EQUITY SECURITIES . . . . . . . . . . . . . . 69

BUSINESS OF FMB . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

PROPERTIES OF FMB . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

FMB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION . . . . . . . . . . . . . . . . . . . . . . . 71
Summary of Changes in Financial Position . . . . . . . . . . . . . 71
Summary of Results of Operations . . . . . . . . . . . . . . . . . 72
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . 72
Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . 74
Noninterest Income and Expenses . . . . . . . . . . . . . . . . . 74
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . 76
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

LEGAL PROCEEDINGS CONCERNING FMB . . . . . . . . . . . . . . . . . . . 76

MARKET FOR FMB COMMON STOCK AND RELATED STOCKHOLDER MATTERS . . . . . . 77

DIRECTORS AND EXECUTIVE OFFICERS OF FMB . . . . . . . . . . . . . . . . 78

FMB EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . 81

FMB CHANGE OF CONTROL AGREEMENTS . . . . . . . . . . . . . . . . . . . 81

OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FMB . . . . . 82

FMB CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . 84

RESALE OF CITY HOLDING COMMON STOCK . . . . . . . . . . . . . . . . . . 84

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

ELECTION OF CITY HOLDING DIRECTORS . . . . . . . . . . . . . . . . . . 85
Committees of the Board of Directors . . . . . . . . . . . . . . . 88
Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Compensation of Directors . . . . . . . . . . . . . . . . . . . . 88

EXECUTIVE OFFICERS OF CITY HOLDING . . . . . . . . . . . . . . . . . . 89

CITY HOLDING EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . 89
City Holding Compensation Committee Report on Executive
Compensation . . . . . . . . . . . . . . . . . . . . . . . . 90
City Holding Company Stock Incentive Plan . . . . . . . . . . . . 91
City Holding Company Profit Sharing and 401(k) Plan . . . . . . . 92

CITY HOLDING PERFORMANCE GRAPH . . . . . . . . . . . . . . . . . . . . 94

CITY HOLDING EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . . . . . 95

CITY HOLDING CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . 95

CITY HOLDING COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT . . . . 95

RATIFICATION OF APPOINTMENT OF CITY HOLDING'S AUDITORS . . . . . . . . 96

CITY HOLDING SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . 96

CITY HOLDING AUDITED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . F-1

FMB AUDITED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . F-21

AGREEMENT AND PLAN OF REORGANIZATION. . . . . . . . . . . . . . . . Annex I

FMB STOCK OPTION AGREEMENT. . . . . . . . . . . . . . . . . . . . Annex II

FMB DIRECTORS' STOCK OPTION AGREEMENT . . . . . . . . . . . . . . Annex III

SECTIONS 31-1-122 AND 31-1-123 OF THE WEST VIRGINIA
CORPORATION ACT RELATING TO DISSENTERS' RIGHTS . . . . . . . Annex IV

FAIRNESS OPINION OF BAXTER FENTRISS AND COMPANY. . . . . . . . . . Annex V

-vi-

AVAILABLE INFORMATION

CITY HOLDING. City Holding is subject to the reporting and
informational requirements of the Securities Exchange Act of 1934 (the
"Exchange Act") and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information filed
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C., 20549, and at the Regional Offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and Seven World Trade Center (13th Floor), New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. As permitted by the Rules and Regulations
of the Commission, this Joint Proxy Statement/Prospectus does not contain
all the information set forth in the Registration Statement on Form S-4 and
the exhibits thereto (together with the amendments thereto, the
"Registration Statement"), which has been filed by City Holding with the
Commission under the Securities Act of 1933 (the "1933 Act") with respect
to the City Holding Common Stock and to which reference is hereby made for
further information.

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE
CERTAIN DOCUMENTS RELATING TO CITY HOLDING THAT ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. SUCH DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST FROM ROBERT A. HENSON, CHIEF FINANCIAL OFFICER, CITY HOLDING
COMPANY, 3601 MACCORKLE AVENUE, S.E., CHARLESTON, WEST VIRGINIA 25304. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE
MADE BY _________ __, 1995.

FMB. FMB is subject to the reporting and informational requirements
of the Exchange Act and in accordance therewith files reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information filed with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C., 20549, and at the
Regional Offices located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and Seven World Trade
Center (13th Floor), New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

Incorporated by reference herein are (i) City Holding's Annual Report
on Form 10-K, for the year ended December 31, 1994, as filed with the
Commission, (ii) all other documents filed by City Holding pursuant to
Sections 13(a) and 15(d) of the Exchange Act since December 31, 1994, (iii)
FMB's Annual Report on Form 10-K for the year ended December 31, 1994, as
filed with the Commission, and (iv) all other documentation filed by FMB
pursuant to Sections 13(a) and 15(d) of the Exchange Act since December 31,
1994.

<PAGE>

SUMMARY

The following summary is qualified in its entirety by the more
detailed information and consolidated financial statements (including the
notes thereto) appearing elsewhere or incorporated by reference in this
Joint Proxy Statement/Prospectus.

PARTIES TO THE MERGER

FMB. FMB is a one bank holding company which was incorporated in the
State of West Virginia on June 26, 1986. FMB commenced operations on March
5, 1987, acquiring Merchants in Montgomery, West Virginia and The Gauley
National Bank ("Gauley") in Gauley Bridge, West Virginia. FMB operated as
a multi-bank holding company from March 5, 1987 to March 1, 1990, at which
time it merged Gauley into Merchants. FMB expanded into Charleston, West
Virginia on September 17, 1993 when Merchants successfully bid for certain
assets and assumed the insured deposits and certain other liabilities of
Evergreen Federal Savings and Loan Association ("Evergreen"), a failed
thrift institution. Merchants' primary regulator is the Office of the
Comptroller of the Currency (the "OCC"); however, Merchants is also
regulated by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and the Federal Deposit Insurance Corporation (the
"FDIC"). FMB is regulated by the Federal Reserve Board and the West
Virginia Board of Banking and Financial Institutions (the "West Virginia
Board"). At December 31, 1994, FMB had total assets of $115.3 million,
total deposits of $95.5 million and total shareholders' equity of $9.5
million. See "BUSINESS OF FMB."

The principal executive office of FMB is located at Fourth Avenue and
Washington Street, Montgomery, West Virginia 25136 and its phone number is
(304) 442-2475.

CITY HOLDING. City Holding is a multi-bank holding company with its
principal office in Charleston, West Virginia. City Holding's eight
affiliate banks (the "Banking Subsidiaries"), The City National Bank of
Charleston, The Peoples Bank of Point Pleasant, First State Bank & Trust,
Bank of Ripley, The Home National Bank of Sutton, Blue Ridge Bank, Peoples
State Bank and the First National Bank of Hinton, operate 29 banking
offices in West Virginia, including six in the Charleston and Kanawha
County area, the state's capital and economic and financial center. City
National, which was formed in 1957, is City Holding's principal subsidiary
bank. City Holding acquired Point Pleasant in 1987, First State Bank &
Trust and Bank of Ripley in 1988, Home National and Peoples's State in 1992
and First National Bank of Hinton in 1994. In 1992, City Holding opened
Blue Ridge Bank, a new bank in Martinsburg, West Virginia. In early 1995,
City Holding renamed Buffalo Bank of Eleanor to Peoples State Bank in
anticipation of moving its headquarters to Clarksburg, West Virginia and
the transfer of its Putnam County operations to City National Bank. City
Holding's Banking Subsidiaries operate as separately-incorporated banks
with their own historical names and boards of directors. City Holding
operates three non-banking subsidiaries, City Mortgage Corporation, a
mortgage company with one office in Carnegie, Pennsylvania, City Financial

-2-

Corporation, a broker-dealer located in Charleston, West Virginia and
Hinton Financial Corporation, a bank holding company headquartered in
Hinton, West Virginia that owns all of the outstanding capital stock of the
First National Bank of Hinton. At December 31, 1994, City Holding had
total assets of $781 million, total deposits of $651 million and total
shareholders' equity of $57 million. City Holding is regulated by the
Federal Reserve Board and the West Virginia Board. See "BUSINESS OF CITY
HOLDING."

The principal executive office of City Holding is located at 3601
MacCorkle Avenue, S.E., Charleston, West Virginia 25304, and its phone
number is (304) 925-6611.

SHAREHOLDER MEETINGS

FMB. The FMB Special Meeting will be held on June 29, 1995, at 4:30
p.m., at FMB's corporate headquarters located at Fourth and Washington
Streets, Montgomery, West Virginia 25136. The purpose of the FMB Special
Meeting is to consider and vote upon a proposal to approve the Agreement.

CITY HOLDING. The City Holding Annual Meeting will be held on June
29, 1995, at 4:00 p.m., at City Holding's corporate headquarters located at
3601 MacCorkle Avenue, S.E., Charleston, West Virginia 25304. The purpose
of the City Holding Annual Meeting is (i) to consider and vote upon a
proposal to approve the Agreement, (ii) to elect four Class III directors
and (iii) to ratify the Board of Directors' appointment of Ernst & Young
LLP as auditors for City Holding for 1995.

See "THE SHAREHOLDER MEETINGS."

VOTES REQUIRED; RECORD DATES

FMB. Only FMB shareholders of record at the close of business on May
15, 1995 (the "FMB Record Date"), will be entitled to vote at the FMB
Special Meeting. The affirmative vote of the holders of a majority of the
shares of FMB Common Stock outstanding on such date is required to approve
the Agreement. See "THE SHAREHOLDER MEETINGS Votes Required FMB".

As of the FMB Record Date, there were 576,000 shares of FMB Common
Stock entitled to be voted. Consequently, 288,001 shares of FMB Common
Stock must vote for the approval of the Agreement for it to be adopted.
The directors and executive officers of FMB and their affiliates owned, as
of the FMB Record Date, 124,302 shares or approximately 21.58% of the
outstanding shares of FMB Common Stock. City Holding and the directors and
executive officers of City Holding and their affiliates beneficially owned,
as of the FMB Record Date, 2,000 of the outstanding shares of FMB Common
Stock. Directors of FMB have either agreed to vote in favor of the
Agreement or have given City Holding an option to purchase 87,438 shares or
approximately 15.2% of the outstanding shares of FMB Common Stock. See
"THE MERGER Stock Option Agreements".

-3-

<PAGE>
CITY HOLDING. Only City Holding shareholders of record at the close
of business on May 15, 1995 (the "City Holding Record Date") will be
entitled to vote at the City Holding Annual Meeting. The affirmative vote
of the holders of a majority of the shares voting is required to approve
the Agreement, and the affirmative vote of a majority of the shares
represented and entitled to vote at the meeting is required to ratify the
Board of Directors' appointment of auditors. Directors are elected by a
plurality of votes cast. Shareholders may cumulate their votes in the
election of directors. See "THE SHAREHOLDER MEETINGS -- Votes Required --
City Holding."

As of the City Holding Record Date, there were 3,777,933 shares of
City Holding Common Stock entitled to be voted. The directors and
executive officers of City Holding and their affiliates owned, as of the
City Holding Record Date, 355,770 shares or approximately 9.42% of the
outstanding shares of City Holding Common Stock. FMB and the directors and
executive officers of FMB and their affiliates beneficially owned, as of
the City Holding Record Date, none of the outstanding shares of City
Holding Common Stock.

See "THE SHAREHOLDER MEETINGS."

THE MERGER

Pursuant to the Agreement, FMB will merge with and into City Holding,
with City Holding as the surviving corporation. As a result of the Merger,
Merchants will be wholly-owned by City Holding. Upon consummation of the
Merger, each outstanding share of FMB Common Stock will be exchangeable for
1.60 shares of City Holding Common Stock (the "Exchange Ratio"). Up to
918,400 shares of City Holding Common Stock will be issued in the Merger,
which will constitute approximately 19.6% of the outstanding City Holding
Common Stock following the Merger, based upon shares outstanding on March
31, 1995.

In arm's length negotiations, FMB and City Holding valued FMB Common
Stock for purposes of exchange for City Holding Common Stock at $45.60 per
share. This value was determined based upon an evaluation of FMB's
historical deposit, assets and earnings growth and potential growth as well
as the book value and current sales prices for FMB Common Stock. The
$45.60 per share valuation represents a multiple of 2.78 times the book
value of the FMB Common Stock on December 31, 1994. To obtain the ratio at
which FMB Common Stock would be exchanged for City Holding Common Stock,
such value was divided by a valuation of City Holding Common Stock at
$28.50 per share, which was the average of the bid and asking prices of
City Holding Common Stock at the close of business on March 2, 1995, as
reported in The Nasdaq National Market.

THE EXCHANGE RATIO

City Holding and FMB have agreed to a fixed exchange ratio of 1.60-to-
one, which means that if the value of City Holding Common Stock or FMB
Common Stock should change prior to the Effective Date, FMB shareholders

-4-

could receive City Holding Common Stock worth more or less than $45.60 per
share of FMB Common Stock. For example, if the value of City Holding
Common Stock should be less than $25.00 per share on the date the Merger is
consummated, the value of shares of City Holding Common Stock received by
FMB shareholders in the Merger will be less than $40.00. The Agreement may
be terminated (i) by FMB if the average of the closing sales price of City
Holding Common Stock as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") for the 20 trading days
following the later of (a) the receipt of the Federal Reserve Board
approval of the Merger and (b) the date on which the shareholders of FMB
approve the Merger, is less than $22.80 per share and (ii) by City Holding
if the average of the closing sales price of City Holding Common Stock as
reported by NASDAQ for the 20 trading days following the later of (a) the
receipt of Federal Reserve Board approval of the Merger and (b) the date on
which the shareholders of FMB approve the Merger, is greater than $34.20
per share, provided, however, that a further condition to either parties'
termination of the Agreement for such changes in the price of City Holding
Common Stock is that City Holding and FMB must be unable to agree on an
amendment to the Exchange Ratio. On April 12, 1995, the last reported sale
price of City Holding Common Stock was $27.25. Based on this price and the
Exchange Ratio, FMB shareholders would receive City Holding Common Stock
worth $43.60 for each share of FMB Common Stock. See "THE MERGER --
Exchange Ratio and Conversion of Shares, -- Waiver and Amendment;
Termination."

EFFECTIVE DATE

Assuming satisfaction of all conditions to consummation of the Merger,
the Merger is expected to become effective on June 30, 1995. FMB and City
Holding each has the right, acting unilaterally, to terminate the Agreement
should the Merger not be consummated by December 31, 1995. See "THE MERGER --
Conditions to Consummation of the Merger, -- Waiver and Amendment;
Termination."

DISSENTERS' RIGHTS

Pursuant to the West Virginia Corporation Act, as amended (the "West
Virginia Act"), City Holding and FMB shareholders will have dissenters'
rights if the Merger is consummated. If any holder of City Holding or FMB
Common Stock does not fully and precisely satisfy the statutory
requirements for dissenting shareholders, such holder's right to have the
fair value of such holder's shares judicially determined and paid in cash
will be lost. See "THE SHAREHOLDER MEETINGS," "DISSENTERS' RIGHTS" and
Annex IV.

OPINION OF FINANCIAL ADVISOR

FMB. FMB has received the opinion of Baxter Fentriss and Company
("Baxter Fentriss"), dated March 14, 1995, that the Exchange Ratio results
in consideration that is fair, from a financial point of view, to the
holders of FMB Common Stock. The full text of Baxter Fentriss' opinion,
which describes the procedures followed, assumptions made, limitations on

-5-

the review taken, and other matters in connection with rendering such
opinion, is set forth in Annex V to this Joint Proxy Statement/Prospectus
and should be read in its entirety by FMB shareholders. For additional
information regarding the opinion of Baxter Fentriss and a discussion of
the qualifications of Baxter Fentriss, the method of their selection and
certain relationships between Baxter Fentriss and FMB, see "THE MERGER --
Opinion of Financial Advisor."

Baxter Fentriss, as part of its investment banking business, regularly
is engaged in the valuation of financial institutions and their securities
in connection with mergers and acquisitions and valuations for estate,
corporate and other purposes. Baxter Fentriss is an advisor to firms in
the financial services industry on mergers and acquisitions.

CONDUCT OF BUSINESS PENDING THE MERGER

FMB has agreed in the Agreement to operate its business in the
ordinary course and to refrain from taking certain actions relating to the
operation of its business pending consummation of the Merger without the
prior approval of City Holding, except as otherwise permitted by the
Agreement. See "THE MERGER -- Business of FMB and Merchants Pending the
Merger."

CONDITIONS TO CONSUMMATION; TERMINATION

Consummation of the Merger is contingent on, among other things, the
receipt of approvals from the Federal Reserve Board, and the West Virginia
Board. All applications required for approval of the Federal Reserve
Board, and the West Virginia Board have been made and such approvals are
expected to be received.

The Agreement may be terminated prior to the Effective Date, either
before or after approval by FMB and City Holding shareholders, under the
circumstances specified therein, including (i) by mutual consent of City
Holding and FMB, as expressed by their respective boards of directors;
(ii) by either City Holding or FMB, as expressed by their respective
boards of directors, after December 31, 1995; (iii) by City Holding in
writing authorized by its Board of Directors if FMB or Merchants has, or
by FMB in writing authorized by its Board of Directors if City Holding
has, in any material respect, breached (A) any covenant or agreement
contained in the Agreement, or (B) any representation or warranty
contained herein, in any case if such breach has not been cured by the
earlier of 30 days after the date on which written notice of such breach
is given to the party committing such breach or the Closing Date;
provided that it is understood and agreed that either party may
terminate the Agreement on the basis of any such material breach of any
representation or warranty contained in the Agreement notwithstanding
any qualification therein relating to the knowledge of the other party;
(iv) either City Holding or FMB, as expressed by their respective boards
of directors, in the event that any of the conditions precedent to the
obligations of such party to consummate the Merger have not been
satisfied or fulfilled or waived by the party entitled to so waive on or
before the Closing Date, provided that neither party

-6-

shall be entitled to terminate the Agreement pursuant to this subparagraph
(iv) if the condition precedent or conditions precedent which provide the
basis for termination can reasonably be and are satisfied within a
reasonable period of time, in which case, the Closing Date shall be
appropriately postponed; (v) City Holding or FMB, if the Board of Directors
of either corporation shall have determined in their sole discretion,
exercised in good faith, that the Merger has become inadvisable or
impracticable by reason of the threat or the institution of any litigation,
proceeding or investigation to restrain or prohibit the consummation of the
transactions contemplated by the Agreement or to obtain other relief in
connection with the Agreement; (vi) City Holding or FMB, if any of the
Federal Reserve Board or the West Virginia Board deny approval of the
Merger and the time period for all appeals or requests for reconsideration
has run; (vii) City Holding, if holders of more than 10% of the outstanding
shares of FMB Common Stock exercise their rights to an appraisal of their
shares pursuant to Sections 31-1-122 and 31-1-123 of the West Virginia Act
in connection with the Merger; (viii) FMB, if (A) the average closing sales
price of City Holding Common Stock as reported by NASDAQ for the 20 trading
days following the later of (1) the receipt of Federal Reserve Board
approval of the Merger and (2) the date on which the shareholders of FMB
approve the Merger, is less than $22.80 per share, and (B) City Holding and
FMB cannot agree on an amendment to the Exchange Ratio; and (ix) City
Holding, if (A) the average closing sales price of City Holding Common
Stock as reported by NASDAQ for the 20 trading days following the later of
(1) the receipt of Federal Reserve Board approval of the Merger and (2) the
date on which the shareholders of FMB approve the Merger, is greater than
$34.20 per share, and (B) City Holding and FMB cannot agree on an amendment
to the Exchange Ratio. See "THE MERGER -- Conditions to Consummation of the
Merger, -- Waiver and Amendment; Termination."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Certain members of FMB's management and Board of Directors have
interests in the Merger in addition to their interests as shareholders of
FMB generally. These include, among other things, provisions in the
Agreement relating to eligibility for certain employee benefits and
provisions in other agreements between FMB and certain of FMB's directors,
officers or employees relating to employment terms and change-in-control
payments. See "THE MERGER -- Interests Of Certain Persons In The Merger."

FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The Merger is intended to qualify as a tax-free reorganization as
defined in Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), so FMB shareholders will not recognize gain or loss on the
exchange of FMB Common Stock for City Holding Common Stock, except with
respect to the receipt of cash in lieu of fractional shares. A condition
to consummation of the Merger is the receipt of an opinion of Hunton &
Williams, counsel to City Holding, as to the qualification of the Merger as
a tax-free reorganization and certain other federal income tax consequences
of the Merger. See "THE MERGER -- Conditions to Consummation of the Merger,
- -- Certain Federal Income Tax Consequences."

-7-

STOCK OPTION AGREEMENTS

Pursuant to a Stock Option Agreement, dated as of March 14, 1995 (the
"FMB Stock Option Agreement"), FMB has granted City Holding an option to
purchase up to 114,600 shares of FMB Common Stock at $45.60 per share
exercisable upon the occurrence of a Purchase Event (as hereinafter
defined). The FMB Stock Option Agreement terminates in accordance with its
terms on the date on which occurs the earliest of: (i) the Effective Date;
(ii) a termination of the Agreement in accordance with its terms (other
than by City Holding under certain circumstances) prior to the occurrence
of a Purchase Event or a Preliminary FMB Purchase Event (as hereinafter
defined); (iii) 12 months following a termination of the Agreement by City
Holding under certain circumstances; (iv) 12 months after the termination
of the Agreement in accordance with its terms following the occurrence of a
Purchase Event or a Preliminary Purchase Event; (v) receipt of any order or
notice of the Federal Reserve Board, or the West Virginia Board denying
approval of the Merger; or (vi) June 30, 1996. The Stock Option Agreement
is attached hereto as Annex II. See also "THE MERGER -- Stock Option
Agreements."

City Holding has also entered into Stock Option Agreements, dated as
of March 14, 1995 (the "FMB Director Stock Option Agreements") with three
directors of FMB pursuant to which such directors have granted City Holding
options to purchase, in the aggregate, up to 65,437 shares of FMB stock on
or before the earlier of (i) the date City Holding receives the approval of
the Merger from the Federal Reserve Board and the West Virginia Board,
(ii) December 31, 1995, if only if, FMB receives an acquisition offer
from a third party and its board of directors determines in good faith
that such offer is materially better than that of City Holding. The FMB
Director Stock Option Agreement terminates in accordance with its terms
upon the Effective Date or the termination of the Agreement. A form of
FMB Directors Stock Option Agreement is attached hereto as Annex III.
See also "THE MERGER -- Stock Option Agreements."

MARKET PRICES PRIOR TO ANNOUNCEMENT OF THE MERGER

The following is certain information regarding the price per share of
City Holding Common Stock and FMB Common Stock based on the last reported
sale price per share of City Holding Common Stock on the Nasdaq National
Market and the last price per share of FMB Common Stock known to FMB on
March 10, 1995, the last business day prior to public announcement of the
Merger.

CITY HOLDING FMB FMB
HISTORICAL HISTORICAL EQUIVALENT
PRICE (A) PRICE (B) PRICE (C)
Common Stock . . . . . $28.50 $27.25 $45.60
_____________
(a) City Holding Common Stock is included in The Nasdaq National Market
under the symbol "CHCO."

(b) The last sale of FMB Common Stock known to FMB occurring prior to
March 14, 1995 was on March 10, 1995.

-8-

(c) The equivalent price for FMB Common Stock is the product of
multiplying the Exchange Ratio of 1.60 by $28.50 per share.

COMPARATIVE PER SHARE DATA

The following table presents historical per share data for City
Holding and FMB, pro forma combined per share data, and equivalent per
share data showing the value of one share of FMB Common Stock in the
combined corporation. Such data is based on historical financial
statements for City Holding and FMB, and pro forma combined amounts giving
effect to the exchange of 1.60 shares of City Holding Common Stock for each
share of FMB Common Stock. The per share data included in the following
table should be read in conjunction with the City Holding Audited
Consolidated Financial Statements included herein, the FMB Audited
Financial Statements included herein, the Pro Forma Condensed Consolidated
Financial Statements (unaudited) included herein and the notes
accompanying all such financial statements. The data presented below
(i) is not necessarily indicative of the results of operations which
would have been obtained if the Merger had been consummated in the past
or which may be obtainable in the future and (ii) does not include the
additional shares of City Holding Common Stock to be issued in exchange
for the outstanding options of FMB.

Years Ended December 31,
1994 1993 1992
Income Before Cumulative Effect
of Accounting Change Per Share
City Holding - Historical $ 1.85 $1.71 $ 1.56
FMB - Historical 2.05 2.31 1.85
City Holding and FMB Pro Forma
combined based on 1.60-for-1
Exchange Ratio 1.73 1.66 1.48
Cash Dividends Declared Per Share (1)
City Holding - Historical .59 .56 .49
FMB - Historical .69 .65 .46
City Holding and FMB Pro Forma
combined based on 1.60-for-1
Exchange Ratio (2) .59 .56 .49
Book Value Per Share at Period End
City Holding - Historical 15.05 14.80 13.88
FMB - Historical 16.43 16.96 14.83
City Holding and FMB Pro
Forma combined based on
1.60-for-1 Exchange Ratio 14.12 13.99 12.98
Equivalent Per Share Data (3)
Based on 1.60-for-1 Exchange Ratio
Income Before Cumulative Effect
of Accounting Change 2.77 2.66 2.37
Cash Dividends Declared per Share .94 .90 .78
Book Value per Share at period
end 22.59 22.38 20.77
__________

(1) Cash dividends declared per share represent amounts declared by City
Holding and FMB, exclusive of cash dividends of acquired subsidiaries prior
to the dates of consummation.

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(2) Pro forma combined cash dividends declared per share represent
historical dividends declared by City Holding.
(3) The equivalent per share data allows comparison of historical
information about one share of FMB Common Stock to the corresponding data
about what one share of FMB Common Stock will equate to in the combined
corporation after giving effect to the exchange of 1.60 shares of City
Holding Common Stock for each share of FMB Common Stock. The amounts are
computed by multiplying pro forma net income per share, the historical cash
dividends declared per share by City Holding, and pro forma book value per
share by the number of shares of City Holding Common Stock to be exchanged
for one share of FMB Common Stock.

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<PAGE>

SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data
and unaudited pro forma combined financial data for City Holding and FMB
for each of the five years in the period ended December 31, 1994, giving
effect to the proposed transaction under the pooling-of-interests method of
accounting as if it had been effected at the beginning of the earliest
period presented, assuming that all the outstanding shares of FMB Common
Stock are converted into shares of City Holding Common Stock. The pro
forma financial data may not be indicative of the results that actually
would have occurred if the combination had been in effect on the dates
indicated or that may be obtained in the future. This information should
be read in conjunction with the City Holding Audited Consolidated Financial
Statements and FMB Audited Financial Statements, including the respective
notes thereto, and the Pro Forma Condensed Consolidated Financial
Statements (unaudited) included elsewhere herein.

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<PAGE>
<TABLE>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
(Dollars in thousands, except per share
data)
SUMMARY OF OPERATIONS
Total interest income
City Holding . . . . . . . . . . . $55,148 $48,216 $43,527 $42,870 $41,110
FMB . . . . . . . . . . . . . . . 7,614 7,086 7,353 8,103 8,470
City Holding and FMB pro forma . . $62,762 $55,302 $50,880 $50,973 $49,580
Total interest expense
City Holding . . . . . . . . . . . $22,242 $19,547 $18,878 $21,927 $23,682
FMB . . . . . . . . . . . . . . . 2,926 2,878 3,306 4,495 5,235
City Holding and FMB pro forma . . $25,168 $22,425 $22,184 $26,422 $28,917
Net interest income
City Holding . . . . . . . . . . . $32,906 $28,669 $24,649 $20,943 $17,428
FMB . . . . . . . . . . . . . . . 4,688 4,208 4,047 3,608 3,235
City Holding and FMB pro forma . . $37,594 $32,877 $28,696 $24,551 $20,663
Provision for loan losses
City Holding . . . . . . . . . . . $953 $1,341 $2,222 $1,272 $898
FMB . . . . . . . . . . . . . . . 87 93 103 73 135
City Holding and FMB pro forma . . $1,040 $1,434 $2,325 $1,345 $1,033
Total other income
City Holding . . . . . . . . . . . $4,647 $3,004 $1,897 $1,797 $1,789
FMB . . . . . . . . . . . . . . . 602 858 431 497 458
City Holding and FMB pro forma . . $5,249 $3,862 $2,328 $2,294 $2,247
Total other expenses
City Holding . . . . . . . . . . . $26,448 $20,951 $15,909 $14,957 $12,477
FMB . . . . . . . . . . . . . . . 3,668 3,225 2,980 2,897 2,727
City Holding and FMB pro forma . . $30,116 $24,176 $18,889 $17,854 $15,204
Income before income taxes and
cumulative effect adjustment
City Holding . . . . . . . . . . . $10,152 $9,381 $8,415 $6,511 $5,842
FMB . . . . . . . . . . . . . . . 1,535 1,748 1,395 1,135 831
City Holding and FMB pro forma . . $11,687 $11,129 $9,810 $7,646 $6,673
Net Income
City Holding . . . . . . . . . . . $6,959 $6,432 $5,904 $4,373 $4,173
FMB . . . . . . . . . . . . . . . 1,183 1,213 1,068 830 615
City Holding and FMB pro forma . . $8,142 $7,645 $6,972 $5,203 $4,788
PER SHARE DATA(1)
Cash dividends declared
City Holding . . . . . . . . . . . $.59 $.56 $.49 $.42 $.35
FMB . . . . . . . . . . . . . . . .69 .65 .46 .40 .38
City Holding and FMB pro forma(4) $.59 $.56 $.49 $.42 $.35
Net Income
City Holding . . . . . . . . . . . $1.85 $1.71 $1.56 $1.16 $1.11
FMB . . . . . . . . . . . . . . . 2.05 2.11 1.85 1.44 1.07
City Holding and FMB pro forma . . $1.74 $1.63 $1.48 $1.11 $1.02
AVERAGE BALANCE SHEET SUMMARY
Total loans
City Holding . . . . . . . . . . . $448,924 $362,313 $274,455 $239,305 $206,552
FMB . . . . . . . . . . . . . . . 55,871 51,332 48,009 46,338 46,412
City Holding and FMB pro forma . . $504,795 $413,645 $322,464 $285,643 $252,964
Securities
City Holding . . . . . . . . . . . $222,466 $221,463 $193,626 $181,415 $186,488
FMB . . . . . . . . . . . . . . . 42,510 41,279 39,304 38,149 37,150
City Holding and FMB pro forma . . $264,976 $262,742 $232,930 $219,564 $223,638
Deposits
City Holding . . . . . . . . . . . $640,900 $554,035 $446,429 $406,055 $377,012
FMB . . . . . . . . . . . . . . . 95,215 85,445 77,059 73,929 72,407
City Holding and FMB pro forma . . $736,115 $639,480 $523,488 $479,984 $449,419
Long-term debt
City Holding . . . . . . . . . . . $6,252 $4,387 $508 $373 $1,817
FMB . . . . . . . . . . . . . . . 0 0 0 0 278
City Holding and FMB pro forma . . $6,252 $4,387 $508 $373 $2,095
Stockholders' equity
City Holding . . . . . . . . . . . $57,925 $54,459 $50,458 $46,771 $43,669
FMB . . . . . . . . . . . . . . . 9,727 9,052 8,148 7,280 6,757
City Holding and FMB pro forma . . $67,652 $63,511 $58,606 $54,051 $50,426
Total assets
City Holding . . . . . . . . . . . $754,409 $636,842 $514,206 $467,242 $444,735
FMB . . . . . . . . . . . . . . . 110,281 102,962 96,501 94,099 93,475
City Holding and FMB pro forma . . $864,690 $739,804 $610,707 $561,341 $538,210
</TABLE>

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<PAGE>
<TABLE>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
(Dollars in thousands, except per share data)
AT YEAR END
Net loans
City Holding . . . . . . . . . . . $489,395 $407,990 $324,078 $252,072 $223,277
FMB . . . . . . . . . . . . . . . 58,414 54,434 52,128 46,306 47,858
City Holding and FMB pro forma . . $547,809 $462,424 $376,206 $298,378 $271,135
Securities
City Holding . . . . . . . . . . . $196,377 $241,637 $208,075 $189,508 $184,137
FMB . . . . . . . . . . . . . . . 43,537 42,196 40,665 39,193 36,790
City Holding and FMB pro forma . . $239,914 $283,833 $248,740 $228,701 $220,927
Deposits
City Holding . . . . . . . . . . . $651,264 $617,333 $526,315 $418,888 $395,340
FMB . . . . . . . . . . . . . . . 95,541 92,625 79,083 75,049 72,677
City Holding and FMB pro forma . . $746,805 $709,958 $605,398 $493,937 $468,017
Long-term debt
City Holding . . . . . . . . . . . $6,875 $5,875 $4,000 $0 $1,725
FMB . . . . . . . . . . . . . . . 0 0 0 0 0
City Holding and FMB pro forma . . $6,875 $5,875 $4,000 $0 $1,725
Stockholders' equity
City Holding . . . . . . . . . . . $56,869 $55,834 $52,317 $48,200 $45,185
FMB . . . . . . . . . . . . . . . 9,462 9,771 8,541 7,560 6,861
City Holding and FMB pro forma . . $66,331 $65,605 $60,858 $55,760 $52,046
Total assets
City Holding . . . . . . . . . . . $780,526 $707,078 $597,370 $480,921 $462,613
FMB . . . . . . . . . . . . . . . 115,291 109,147 104,492 94,638 93,792
City Holding and FMB pro forma . . $895,817 $816,225 $701,862 $575,559 $556,405
Book value per share
City Holding . . . . . . . . . . . $15.05 $14.80 $13.88 $12.82 $11.98
FMB . . . . . . . . . . . . . . . 16.43 16.96 14.83 13.13 11.91
City Holding and FMB pro forma . . $14.12 $13.99 12.98 11.92 11.10
SELECTED RATIOS
Return on average assets(3)
City Holding . . . . . . . . . . . .92% 1.01% 1.15% .94% .94%
FMB . . . . . . . . . . . . . . . 1.07% 1.29% 1.11% .88% .66%
City Holding and FMB pro forma . . .94% 1.05% 1.14% .93% .89%
Return on average equity(3)
City Holding . . . . . . . . . . . 12.01% 11.81% 11.70% 9.35% 9.56%
FMB . . . . . . . . . . . . . . . 12.16% 14.69% 13.11% 11.40% 9.10%
City Holding and FMB pro forma . . 12.04% 12.22% 11.90% 9.63% 9.50%
Average equity to average assets
City Holding . . . . . . . . . . . 7.68% 8.55% 9.81% 10.01% 9.82%
FMB . . . . . . . . . . . . . . . 8.82% 8.79% 8.44% 7.74% 7.23%
City Holding and FMB pro forma . . 7.82% 8.58% 9.60% 9.63% 9.37%
Dividend payout ratio(3)
City Holding . . . . . . . . . . . 27.06% 33.33% 31.97% 33.37% 30.15%
FMB . . . . . . . . . . . . . . . 33.66% 28.14% 24.86% 27.78% 35.51%
City Holding and FMB pro forma(5) 27.06% 33.33% 31.97% 33.37% 30.15%
___________

(1) All per share data for City Holding have been restated to reflect a
10% stock dividend effective January, 1995 and August, 1992.

(2) Cash dividends and the related pay out ratio are based on historical
results of City Holding and do not include cash dividends of
acquired subsidiaries prior to the dates of consummation.

(3) Determined using income before cumulative effect adjustment.

(4) Cash dividends declared per share represent amounts declared by City
Holding.

(5) Pro forma dividend payout ratio represents City Holding's historical
dividend payout ratio.

City Holding acquired 100% of the common stock of The Buffalo Bank of
Eleanor (Buffalo) in December 1992 for cash. In 1993, certain other
purchase acquisitions were consummated by City Holding. As more fully
discussed in Note 3 of the City Holding Audited Consolidated Financial
Statements, these acquisitions were accounted for using the purchase method
of accounting. Accordingly, the results of operations of the purchased
subsidiaries are included in the information presented above from the date
of acquisition forward, and prior year balance sheets have not been
restated for such transactions.

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<PAGE>
THE SHAREHOLDER MEETINGS

FMB SPECIAL MEETING

Each copy of this Joint Proxy Statement/Prospectus mailed to
holders of FMB Common Stock is accompanied by a proxy appointment card
furnished in connection with the solicitation of proxies by the Board of
Directors of FMB for use at the FMB Special Meeting. The FMB Special
Meeting is scheduled to be held on June 29, 1995, at 4:30 p.m., at FMB's
corporate headquarters at Fourth Avenue and Washington Street, Montgomery,
West Virginia. Only holders of record of FMB Common Stock at the close of
business on May 15, 1995 (the "FMB Record Date"), are entitled to receive
notice of and to vote at the FMB Special Meeting. At the FMB Special
Meeting, shareholders will consider and vote upon a proposal to approve the
Agreement, and such other matters as may properly be brought before the FMB
Special Meeting. See "THE MERGER."

HOLDERS OF FMB COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY APPOINTMENT CARD AND RETURN IT PROMPTLY TO FMB
IN THE ENCLOSED, POSTAGE-PAID ENVELOPE. FAILURE TO RETURN YOUR PROPERLY
EXECUTED PROXY APPOINTMENT CARD OR TO VOTE AT THE MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE AGREEMENT.

Any holder of FMB Common Stock who has delivered a proxy
appointment may revoke it at any time before it is voted by attending and
voting in person at the FMB Special Meeting or by giving notice of
revocation in writing or submitting a signed proxy appointment bearing a
later date to First Merchants Bancorp, Inc., Fourth Avenue and Washington
Street, Montgomery, West Virginia 25136, Attention: Corporate Secretary,
provided such notice or proxy appointment is actually received by FMB
before the vote of shareholders. A proxy appointment will not be revoked
by death or supervening incapacity of the shareholder executing the proxy
appointment unless, before the shares are voted, notice of such death or
incapacity is filed with the Corporate Secretary or other person
responsible for tabulating votes on behalf of FMB. The shares of FMB
Common Stock represented by properly executed proxy appointments received
at or prior to the FMB Special Meeting and not subsequently revoked will be
voted as directed by the shareholders submitting such appointments. IF
INSTRUCTIONS ARE NOT GIVEN, PROXY APPOINTMENTS RECEIVED WILL BE VOTED FOR
APPROVAL OF THE AGREEMENT. IF ANY OTHER MATTERS ARE PROPERLY PRESENTED FOR
CONSIDERATION AT THE FMB SPECIAL MEETING OR ANY ADJOURNMENT, THE PERSONS
NAMED IN THE FMB PROXY APPOINTMENT CARD ENCLOSED HEREWITH WILL HAVE
DISCRETIONARY AUTHORITY TO VOTE ON SUCH MATTERS IN ACCORDANCE WITH THEIR
BEST JUDGMENT. If necessary, and unless the shares represented by the
proxy were voted against the applicable proposal therein, the proxy holder
may also vote in favor of a proposal to adjourn the FMB Special Meeting to
permit further solicitation of proxies in order to obtain sufficient votes
to approve any of the matters being considered at the FMB Special Meeting.
FMB is unaware of any matter to be presented at the FMB Special Meeting
other than those indicated above.

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The cost of soliciting proxies from holders of FMB Common Stock
will be borne by FMB. Such solicitation will be made by mail but also may
be made by telephone or in person by the directors, officers and employees
of FMB (who will receive no additional compensation for doing so).

FMB SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH
THEIR PROXY APPOINTMENT CARDS.

CITY HOLDING ANNUAL MEETING

Each copy of this Joint Proxy Statement/Prospectus mailed to
holders of City Holding Common Stock is accompanied by a proxy appointment
card furnished in connection with the solicitation of proxies by the Board
of Directors of City Holding for use at the City Holding Annual Meeting.
The City Holding Annual Meeting is scheduled to be held on June 29, 1995,
at 4:00 p.m., at City Holding's corporate headquarters located at 3601
MacCorkle Avenue, S.E., Charleston, West Virginia 25304. Only holders of
record of City Holding Common Stock at the close of business on May 15,
1995 (the "City Holding Record Date"), are entitled to receive notice of
and to vote at the City Holding Annual Meeting. At the City Holding Annual
Meeting, shareholders will consider and vote upon (i) a proposal to approve
the Agreement, (ii) election of four Class III directors, (iii)
ratification of the Board of Directors' appointment of Ernst & Young LLP as
auditors for City Holding for 1995 and (iv) such other matters as may
properly be brought before the City Holding Annual Meeting. See "THE
MERGER," "ELECTION OF CITY HOLDING DIRECTORS" and "RATIFICATION OF
APPOINTMENT OF CITY HOLDING'S AUDITORS."

HOLDERS OF CITY HOLDING COMMON STOCK ARE REQUESTED TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY APPOINTMENT CARD AND RETURN IT
PROMPTLY TO CITY HOLDING IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.

Any holder of City Holding Common Stock who has delivered a proxy
appointment may revoke it at any time before it is voted by attending and
voting in person at the City Holding Annual Meeting or by giving notice of
revocation in writing or submitting a signed proxy appointment bearing a
later date to City Holding Company, 3601 MacCorkle Avenue, S.E.,
Charleston, West Virginia 25304, Attention: Corporate Secretary, provided
such notice or proxy appointment is actually received by City Holding
before the vote of shareholders. A proxy appointment will not be revoked
by death or supervening incapacity of the shareholder executing the proxy
appointment unless, before the shares are voted, notice of such death or
incapacity is filed with the Corporate Secretary or other person
responsible for tabulating votes on behalf of City Holding. The shares of
City Holding Common Stock represented by properly executed proxy
appointments received at or prior to the City Holding Annual Meeting and
not subsequently revoked will be voted as directed by the shareholders
submitting such appointments. IF INSTRUCTIONS ARE NOT GIVEN, PROXY
APPOINTMENTS RECEIVED WILL BE VOTED FOR APPROVAL OF THE AGREEMENT, ELECTION
OF THE FOUR NOMINEES AS CLASS III DIRECTORS AND RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP. IF ANY OTHER MATTERS ARE PROPERLY
PRESENTED FOR CONSIDERATION AT THE CITY HOLDING ANNUAL MEETING OR ANY

-20-

ADJOURNMENT, THE PERSONS NAMED IN THE CITY HOLDING PROXY APPOINTMENT CARD
ENCLOSED HEREWITH WILL HAVE DISCRETIONARY AUTHORITY TO VOTE ON SUCH MATTERS
IN ACCORDANCE WITH THEIR BEST JUDGMENT. If necessary, and unless the
shares represented by the proxy were voted against the applicable proposal
therein, the proxy holder may also vote in favor of a proposal to adjourn
the City Holding Annual Meeting to permit further solicitation of proxies
in order to obtain sufficient votes to approve any of the matters being
considered at the City Holding Annual Meeting. City Holding is unaware of
any matter to be presented at the City Holding Annual Meeting other than
those indicated above.

The cost of soliciting proxies from holders of City Holding
Common Stock will be borne by City Holding. Such solicitation will be made
by mail but also may be made by telephone or in person by the directors,
officers and employees of City Holding (who will receive no additional
compensation for doing so). City Holding will make arrangements with
brokerage firms and other custodians, nominees and fiduciaries to send
proxy materials to their principals.

VOTES REQUIRED

FMB. The holders of each share of FMB Common Stock outstanding
will be entitled to one vote for each share held of record as of the FMB
Record Date upon each matter properly submitted at the FMB Special Meeting
and the affirmative vote of a majority of the votes entitled to be cast by
the holders of the FMB Common Stock is required to approve the Agreement.

The presence, in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of FMB Common Stock
entitled to vote at the FMB Special Meeting is necessary to constitute a
quorum at the FMB Special Meeting. Abstentions will be counted, but broker
non-votes will not be counted, as shares present for purposes of
determining the presence of a quorum. Neither abstentions nor broker non-
votes will be counted as votes cast for purposes of determining whether a
particular proposal has received sufficient votes for approval. A broker
non-vote will occur when a broker who holds shares in street name for a
customer does not have the authority to cast a vote on a particular matter
because its customer has not furnished voting instructions on the matter.

As of the FMB Record Date, there were 576,000 shares of FMB
Common Stock outstanding and entitled to vote at the FMB Special Meeting,
with each share being entitled to one vote. As of the FMB Record Date, the
directors and executive officers of FMB owned a total of 124,302 shares
(representing approximately 21.58% of the outstanding shares of FMB Common
Stock). Directors of FMB have either agreed to vote in favor of the
Agreement or have given City Holding an option to purchase 87,438 shares or
approximately 15.2% of the outstanding shares of FMB Common Stock. See
"THE MERGER -- Stock Option Agreements." City Holding and the directors and
executive officers of City Holding and their affiliates owned 2,000 of the
outstanding shares of FMB Common Stock.

-21-

CITY HOLDING. The affirmative vote of a majority of the shares
voting at the City Holding Annual Meeting is required to approve the
Agreement and the affirmative vote of a majority of shares represented and
entitled to vote at the meeting is required to ratify the appointment of
Ernst & Young LLP. Directors are elected by a plurality of the votes cast.
In all elections of directors, each shareholder shall have the right to
cast one vote for each share of stock owned by him for as many persons as
there are directors to be elected, or upon notice to City Holding, he may
cumulate such votes and give one candidate as many votes as the number of
directors to be elected multiplied by the number of his shares of stock or
he may distribute them on the same principle among as many candidates and
in such manner as he shall desire. If one shareholder has given notice
that he intends to cumulate votes, all shareholders may do so.

The presence, in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of City Holding Common
Stock entitled to vote at the City Holding Annual Meeting is necessary to
constitute a quorum at the City Holding Annual Meeting. Abstentions and
broker non-votes will be counted as shares present for purposes of
determining the presence of a quorum. Brokers cannot vote customer shares
without instruction on the proposed issuance of City Holding Common Stock
pursuant to the Agreement. Neither abstentions nor broker non-votes will
be counted as votes cast for purposes of determining whether the proposal
to approve the Agreement has received sufficient votes for approval.
Broker non-votes will not be counted as votes cast for purposes of
determining whether the proposals to ratify the appointment of Ernst &
Young LLP as auditors for City Holding for 1995 is approved. As a
consequence, broker non-votes and abstentions will be counted as votes
against the proposals. Because director nominees must receive a plurality
of the votes cast at the meeting, a vote withheld will not affect the
outcome of the election.

As of the City Holding Record Date, there were 3,777,933 shares
of City Holding Common Stock outstanding and entitled to vote at the City
Holding Annual Meeting, with each share being entitled to one vote, except
as described below. As of the City Holding Record Date, the directors and
executive officers of City Holding beneficially owned a total of 355,770
shares (representing approximately 9.42% of the outstanding shares of City
Holding Common Stock); FMB and the directors and officers of FMB and their
affiliates owned none of the outstanding shares of City Holding Common
Stock.

RECOMMENDATIONS

FMB. For the reasons described herein, the Board of Directors of
FMB has adopted the Agreement, believes the Merger is in the best interests
of FMB and its shareholders and unanimously recommends that shareholders of
FMB vote FOR approval of the Agreement. In making its recommendation, the
Board of Directors of FMB considered, among other things, the opinion of
Baxter Fentriss that the Exchange Ratio was and is fair to FMB shareholders
from a financial point of view.

-22-

CITY HOLDING. For the reasons described herein, the Board of
Directors of City Holding has adopted the Agreement, believes the Merger is
in the best interests of City Holding and its shareholders and unanimously
recommends that the shareholders of City Holding vote FOR approval of the
Agreement.

See "THE MERGER -- Background and Reasons For the Merger" and "--
Opinion of Financial Advisor."

-23-

<PAGE>
THE MERGER

The detailed terms of the Merger are contained in the Agreement
attached as Annex I to this Joint Proxy Statement/Prospectus. The
following discussion describes the more important aspects of the Merger and
the terms of the Agreement. This description is not complete and is
qualified in its entirety by reference to the Agreement which is
incorporated by reference herein and which FMB and City Holding
shareholders are urged to read carefully.

BACKGROUND AND REASONS FOR THE MERGER

FMB. The FMB Board of Directors approved the Agreement after due
deliberation of a variety of considerations. The Board of Directors
considered whether FMB's present position in its market would enable it to
continue to grow and enhance value for its shareholders. The Board of
Directors considered whether FMB would want to seek target acquisitions,
remain in its present position, or seek to be acquired. In considering
these options, the Board of Directors reviewed the means of enhancing
shareholder value given the company's market, size, and potential for
growth through market expansion or acquisition. Having analyzed the
geographic location of FMB, the available acquisition targets for FMB and
the likelihood of continuing to increase shareholder value through either
or both means, the FMB Board of Directors determined that the shareholders
would be better served by an opportunity to affiliate with the larger
organization and to obtain a more liquid and more widely held security.

Having determined that it would seek an affiliation partner, the
FMB Board of Directors retained Baxter Fentriss to assist in the
identification of an acquisition partner. Baxter Fentriss assembled
materials on FMB and approached numerous potential buyers. In doing so,
the FMB Board of Directors learned of several viable candidates with an
interest in inquiring FMB. This process enabled the FMB Board of
Directors, through Baxter Fentriss, to negotiate an attractive purchase
price with an attractive acquiror. The end results of this process was the
negotiated transaction with City Holding. The FMB Board of Directors
believes that the City Holding franchise offers FMB shareholders
significant value not only in terms of the negotiated Exchange Ratio but
also in terms of the geographic diversity of City Holding, the growth
potential of its markets, as well as a more widely held and more easily
tradeable security. City Holding also offered an opportunity for FMB to
continue to offer a community banking service to its customers with a
distinctive local flavor and the opportunity to continue to utilize the FMB
employees with established ties to this customer base. For these reasons,
the FMB Board of Directors unanimously approve and recommend to the FMB
shareholders the transactions contemplated in the Agreement.

CITY HOLDING. The City Holding Board of Directors has approved
the Agreement and determined that the Merger and issuance of City Holding
Common Stock pursuant thereto are in the best interests of City Holding and
its shareholders. In approving the Agreement, the City Holding Board of
Directors considered a number of factors including, but not limited to, the

-24-

following: (i) a review of the business, operations, earnings and
financial condition of FMB, (ii) the opportunity for City Holding to enter
an economically sound market with better growth prospects than its present
area of operations and (iii) the terms of the Agreement, including the
Exchange Ratio. The City Holding Board of Directors did not assign
specific or relative weights to the factors considered.

OPINION OF FINANCIAL ADVISOR

Baxter Fentriss has acted as financial advisor to FMB in
connection with the Merger. Baxter Fentriss previously assisted FMB in
identifying prospective acquirors. On March 14, 1995, Baxter Fentriss
delivered to FMB its opinion that as of such date, and on the basis of
matters referred to herein, the offer is fair, from a financial point of
view, to the holders of FMB Common Stock. In rendering its opinion, Baxter
Fentriss consulted with the management of FMB and City Holding, reviewed
the Agreement and certain publicly-available information on the parties,
and reviewed certain additional materials made available by the management
of the respective banks.

In addition, Baxter Fentriss discussed with the management of FMB
and City Holding their respective businesses and outlook. Baxter Fentriss
was involved in the negotiations with City Holding and initiated merger
discussions at the request of FMB. No limitations were imposed by the FMB
Board of Directors upon Baxter Fentriss with respect to the investigation
made or procedures followed by it in rendering its opinion. The full text
of Baxter Fentriss' written opinion is attached as Annex V to this Joint
Proxy Statement/Prospectus and should be read in its entirety with respect
to the procedures followed, assumptions made, matters considered, and
qualifications and limitations on the review undertaken by Baxter Fentriss
in connection therewith.

Baxter Fentriss' opinion is directed to the FMB Board of
Directors only, and is directed only to the fairness, from a financial
point of view, of the Exchange Ratio. It does not address FMB's underlying
business decision to effect the proposed Merger, nor does it constitute a
recommendation to any FMB shareholder as to how such shareholder should
vote with respect to the Merger at the FMB Special Meeting or as to any
other matter.

Baxter Fentriss' opinion was one of many factors taken into
consideration by the FMB Board of Directors in making its determination to
approve the Agreement, and the receipt of Baxter Fentriss' opinion is a
condition precedent to FMB consummating the Merger. The opinion of Baxter
Fentriss does not address the relative merits of the Merger as compared to
any alternative business strategies that might exist for FMB or the effect
of any other business combination in which FMB might engage.

Baxter Fentriss, as part of its investment banking business, is
continually engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions and valuations for
estate, corporate and other purposes. Baxter Fentriss is a nationally

-25-

ranked advisor to firms in the financial services industry on mergers and
acquisitions. FMB selected Baxter Fentriss as its financial advisor
because Baxter Fentriss is an investment banking firm focusing on banking
transactions, and because of the firm's extensive experience and expertise
in transactions similar to the Merger. Baxter Fentriss is not affiliated
with City Holding or FMB.

In connection with rendering its opinion to the FMB Board of
Directors, Baxter Fentriss performed a variety of financial analyses. In
conducting its analyses and arriving at its opinion as expressed herein,
Baxter Fentriss considered such financial and other factors as it deemed
appropriate under the circumstances including, among others, the following:
(i) the historical and current financial condition and results of
operations of City Holding and FMB including interest income, interest
expense, interest sensitivity, noninterest income, noninterest expense,
earnings, book value, returns on assets and equity, capitalization, the
amount and type of non-performing assets, the impact of holding certain
non-earning real estate assets, the reserve for loan losses and possible
tax consequences resulting from the Merger; (ii) the business prospects of
City Holding and FMB; (iii) the economies of City Holding's and FMB's
respective market areas; (iv) the historical and current market for FMB
Common Stock; and (v) the nature and terms of certain other merger
transactions that it believed to be relevant. Baxter Fentriss also
considered its assessment of general economic, market, financial and
regulatory conditions and trends, as well as its knowledge of the financial
institutions industry, its experience in connection with similar
transactions, its knowledge of securities valuation generally, and its
knowledge of merger transactions in West Virginia.

In connection with rendering its opinion, Baxter Fentriss
reviewed (i) the Agreement; (ii) drafts of this Joint Proxy
Statement/Prospectus; (iii) the Annual Reports to shareholders, including
the audited financial statements of FMB and City Holding, and the Annual
Reports of FMB and City Holding for the year ended December 31, 1994; (iv)
pro forma combined unaudited condensed balance sheets as of December 31,
1994; pro forma combined statements of income for the year ended December
31, 1994; (v) certain additional financial and operating information with
respect to the business, operations and prospects of City Holding and FMB
as it deemed appropriate. Baxter Fentriss also (a) held discussions with
members of the senior management of City Holding and FMB regarding the
historical and current business operations, financial condition and future
prospects of their respective companies; (b) reviewed the historical market
prices and trading activity for FMB and City Holding Common Stock; (c)
compared the results of operations of FMB with those of certain banking
companies that it deemed to be relevant; (d) analyzed the pro forma
financial impact of the Merger on City Holding; (e) analyzed the pro forma
financial impact of the Merger on FMB; and (f) conducted such other
studies, analyses, inquiries and examinations as Baxter Fentriss deemed
appropriate.

The following is a summary of selected analyses performed by
Baxter Fentriss in connection with its opinion.

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1. Stock Price History. Baxter Fentriss studied the history of
the trading prices and volume for FMB and City Holding Common Stock and
compared that to publicly traded banks in West Virginia and to the price
offered by City Holding. As of December 31, 1994, FMB fully diluted book
value was $16.43 per share.

2. Comparative Analysis. Baxter Fentriss compared the price to
earnings multiple, price to book multiple, and price to book multiple of
the City Holding offer with other comparable merger transactions in West
Virginia after considering FMB's non-performing assets and other variables.
The Comparative multiples included both bank and thrift sales during the
last three years.

3. Baxter Fentriss considered the pro forma impact of the
Merger and concluded that the Merger should have a positive long-term
impact on City Holding.

4. Baxter Fentriss performed a discounted cash flow analysis to
determine hypothetical present values for a share of FMB Common Stock as a
five and ten year investment. Under this analysis, Baxter Fentriss
considered various scenarios for the performance of FMB Common Stock using
(i) a range from 0% to 10% in the growth of FMB earnings and dividends and
(ii) a range from eight times to 16 times earnings as the terminal value
for FMB Common Stock. A range of discount rates from 11% to 15% were
applied to these alternative growth and terminal value scenarios. These
ranges of discount rates, growth alternatives, and terminal values were
chosen based upon what Baxter Fentriss, in its judgment, considered to be
appropriate taking into account, among other things, FMB's past and current
performance, the general level of inflation, rates of return for fixed
income and equity securities in the marketplace generally and for companies
with similar risk profiles. In all of the scenarios considered, the
present value of a share of FMB Common Stock was calculated at less than
that of the City Holding offer. Thus, Baxter Fentriss' discounted cash
flow analysis indicated that FMB shareholders would be in a better
financial position by receiving City Holding Common Stock offered in the
Merger rather than continuing to hold FMB Common Stock.

Using publicly available information on City Holding and applying
the capital guidelines of banking regulators, Baxter Fentriss' analysis
indicated that the Merger would not seriously dilute the capital and
earnings capacity of City Holding and would, therefore, likely not be
opposed by the banking regulatory agencies from a capital perspective.
Furthermore, Baxter Fentriss considered the likely market overlap and the
Federal Reserve Board guidelines with regard to market concentration and
did not believe there to be an issue with regard to possible antitrust
concerns.

Baxter Fentriss has relied, without any independent verification,
upon the accuracy and completeness of all financial and other information
reviewed. Baxter Fentriss has assumed that all estimates, including those
as to possible economies of scale, were reasonably prepared by management,
and reflect their best current judgments. Baxter Fentriss did not make an

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independent appraisal of the assets or liabilities of either FMB or City
Holding, and has not been furnished such an appraisal.

Baxter Fentriss was paid an amount equal to 1.5% of the Merger
consideration plus reasonable out-of-pocket expenses for its services. FMB
has agreed to indemnify Baxter Fentriss against certain liabilities,
including certain liabilities under federal securities laws.

THE FULL TEXT OF BAXTER FENTRISS' OPINION AS OF THE DATE HEREOF,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
OF THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX V TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE, AND SHOULD BE
READ IN ITS ENTIRETY IN CONNECTION WITH THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE SUMMARY OF THE OPINION OF BAXTER FENTRISS SET
FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.

Effective Date

The Merger shall become effective on the date of the filing of
the Articles of Merger with the West Virginia Secretary of State (the
"Effective Date"). Assuming satisfaction of all conditions to consummation
of Merger, the Merger is expected to become effective on June 30, 1995.
Either FMB or City Holding may terminate the Agreement if the Merger has
not been consummated by December 31, 1995. See "THE MERGER Conditions to
Consummation of the Merger, Waiver and Amendment; Termination."

Until the Effective Date occurs, FMB shareholders will generally
retain their rights as shareholders to receive dividends and to vote on
matters submitted to them by the FMB Board of Directors.

Exchange Ratio and Conversion of Shares

In arm's length negotiations, FMB and City Holding valued FMB
Common Stock for purposes of exchange for City Holding Common Stock at
$45.60 per share. This value was determined based upon an evaluation of
FMB's historical deposit, assets and earnings growth and potential growth
as well as the book value and recent sales prices for FMB Common Stock. In
view of the wide variety of factors considered, the parties did not find it
practicable to assign relative weights to each of these factors. The
$45.60 valuation represents a multiple of 2.78 times the book value of FMB
Common Stock at December 31, 1994. Each share of FMB Common Stock will be
exchanged for 1.60 shares of City Holding Common Stock. The Exchange Ratio
was determined by dividing $45.60 by a valuation of City Holding Common
Stock of $28.50, which was the average of the reported bid and asking
prices of the City Holding Common Stock at the close of business on March
2, 1995, as quoted on The Nasdaq National Market.

Notwithstanding any other provisions of the Agreement, each
holder of shares of FMB Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of City
Holding Common Stock (after taking into account all certificates delivered
by such holder ) shall receive, in lieu thereof, cash (without interest) in

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an amount equal to such fractional part of a share of City Holding Common
Stock multiplied by the market value of one share of City Holding Common
Stock at the Effective Date. The market value of one share of City Holding
Common Stock at the Effective Date shall be the average of the closing
sales price of such common stock on The Nasdaq National Market on the last
ten trading days immediately preceding the Effective Date.

City Holding and FMB have agreed to a fixed exchange ratio of
1.60-to-one, which means that if the value of City Holding or FMB Common
Stock should change prior to the Effective Date, FMB shareholders could
receive City Holding Common Stock worth more or less than $45.60 per share
of FMB Common Stock. For example, if the value of City Holding Common
Stock should fall below $25.00 per share, the value of such stock will be
less than $40 per share of FMB Common Stock. The Agreement may be
terminated by (i) FMB if the average closing sales price of City Holding
Common Stock as reported by NASDAQ for the 20 trading days following the
later of (a) the receipt of Federal Reserve Board approval of the Merger
and (b) the date on which the shareholders of FMB approve the Merger, is
less than $22.80 per share, (ii) by City Holding if the average closing
sales price of City Holding Common Stock as reported by NASDAQ for the 20
trading days following the later of (a) the receipt of Federal Reserve
Board approval of the Merger and (b) the date on which the shareholders of
FMB approve the Merger, is greater than $34.20 per share, provided,
however, that a further condition to either parties' termination of the
Agreement for such changes in the price of City Holding Common Stock is
that City Holding and FMB must be unable to agree on an amendment to the
Exchange Ratio.

The last reported sale price of City Holding Common Stock on The
Nasdaq National Market was $27.25 on April 12, 1995. The bid and asked
prices for City Holding Common Stock as reported on The Nasdaq National
Market were $26.00 and $28.50, respectively, on that date. Based on the
last sale price on April 12, 1995, and the 1.60-to-one exchange ratio, FMB
shareholders would receive City Holding Common Stock worth $43.60 for each
share of FMB Common Stock. The last reported sale price of FMB Common
Stock of which FMB has knowledge was $27.50 per share on February 23, 1995.
FMB Common Stock is not widely traded and the volume of trading is limited.
There is no established market for FMB Common Stock. Most transactions
occur in the local area and bid and ask prices are not available.

Following the Effective Date, former shareholders of FMB will be
mailed a Letter of Transmittal which will set forth the procedures that
should be followed for exchange of FMB Common Stock for City Holding Common
Stock.

FMB SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THE
ENCLOSED PROXY CARD.

Holders of FMB Common Stock, upon surrender of their certificates
for cancellation, will be entitled to receive certificates representing the
number of shares of City Holding Common Stock for which such shares have
been submitted for exchange.

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Business of FMB and Merchants Pending the Merger

FMB and Merchants agree that from the date hereof to the
Effective Date, they will operate their respective businesses substantially
as presently operated and only in the ordinary course, and, consistent with
such operation, they will use their best efforts to preserve intact its
present business organizations and relationships with persons having
business dealings with them. Without limiting the generality of the
foregoing, FMB and Merchants agree that they will not, without the prior
written consent of City Holding, unless consistent with past practices and
in the ordinary course of business (i) make any material change in the
compensation or title of any executive officer; (ii) make any material
change in the compensation or title of any other employee, other than those
permitted by current employment policies in the ordinary course of
business, any of which changes shall be promptly reported to City Holding;
(iii) enter into any new bonus, incentive compensation, deferred
compensation, profit sharing, thrift, retirement, pension, group insurance
or other benefit plan or (except as otherwise specifically contemplated in
the Agreement) any employment or consulting agreement or amend any such
plan or agreement to increase the benefits accruing or payable thereunder;
(iv) create or otherwise become liable with respect to any indebtedness for
money borrowed or purchase money indebtedness except in the ordinary course
of business; (v) amend FMB's Amended Articles of Incorporation, Merchants'
Articles of Association, or their Bylaws except as may be necessary to
consummate the Merger or give effect to the FMB Stock Option Agreement;
(vi) issue or contract to issue any shares of FMB capital stock or
securities exchangeable for or convertible into capital stock other than
pursuant to the FMB Stock Option Agreement; (vii) purchase any shares of
FMB capital stock; (viii) enter into or assume any material contract or
obligation, except in the ordinary course of business; (ix) waive any right
of substantial value; (x) propose or take any other action which would
make any representation or warranty in Section 3.1 of the Agreement untrue;
(xi) change securities portfolio policies; (xii) enter into any new
agreement, amendment or endorsement or make any changes relating to
insurance coverage, including coverage for its directors and officers,
which would result in an additional payment obligation of $200,000 or more;
or (xiii) propose or take any action with respect to the closing of any
branches. FMB and Merchants further agree that, between the date of the
Agreement and the Effective Date, they will consult and cooperate with City
Holding regarding (i) loan portfolio management, including management and
work-out of nonperforming assets, and credit review and approval
procedures, and (ii) securities portfolio and funds management, including
management of interest rate risk.

Conditions to Consummation of the Merger

Consummation of the Merger is conditioned upon the approval
thereof by (i) the holders of a majority of the outstanding FMB Common
Stock entitled to vote at the FMB Special Meeting and (ii) the holders of a
majority of the outstanding City Holding Common Stock voting at the City
Holding Annual Meeting. The Merger of FMB with and into City Holding must

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be approved by the West Virginia Board and by the Federal Reserve Board,
which approvals have been applied for and are expected to be received.

There can be no assurance that such regulatory approvals will be
obtained or as to the timing of any such approval. There can also be no
assurance that any such approvals will not contain a condition or
requirement which causes such approvals to fail to satisfy the conditions
set forth in the Agreement and described below.

City Holding and FMB are not aware of any material governmental
approvals or actions that are required for consummation of the Merger,
except as described above. Should any other approval or action be
required, it is presently contemplated that such approval or action would
be sought.

The obligations of City Holding and FMB to consummate the Merger
are further conditioned upon, among other things, (i) the accuracy of
certain representations contained in the Agreement, (ii) the performance of
all covenants and agreements contained in the Agreement, (iii) the receipt
of an opinion of Hunton & Williams, special counsel to City Holding, with
respect to certain of the tax consequences of the Merger described herein
under "THE MERGER -- Certain Federal Income Tax Consequences," (iv) the
receipt of opinions of counsel with respect to certain legal matters,
including the organization and good standing of City Holding and FMB, the
due authorization of the Agreement by City Holding and FMB and the validity
of the shares of City Holding Common Stock being issued to FMB
shareholders, and (v) the execution by affiliates of FMB of undertakings
not to dispose of the City Holding Common Stock received by them in the
Merger except under certain circumstances. The obligations of FMB and City
Holding to consummate the Merger are also conditioned upon the absence of
any material adverse change in the financial condition or the results of
operations of City Holding or FMB and qualification of the Merger for
pooling-of-interests accounting treatment.

The Merger is expected to be treated as a pooling-of-interests
for accounting purposes in accordance with generally accepted accounting
principles. Under the pooling-of-interests method of accounting, the
historical basis of the assets and liabilities of City Holding and FMB will
be combined and carried forward at their previously recorded amounts.
Revenue and expenses of City Holding and FMB will be retroactively combined
for the entire fiscal period in which the combination occurs and for all
periods prior to the combination at historically recorded amounts. In
order for the Merger to qualify for pooling-of-interests accounting
treatment, 90% or more of the outstanding FMB Common Stock must be
exchanged for City Holding Common Stock and other pooling-of-interests
requirements of generally accepted accounting principles and the Commission
must be met.

In addition, as described below under "Waiver and Amendment;
Termination," City Holding and FMB are not obligated to effect the Merger
under certain circumstances related to the market price of City Holding
Common Stock.

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It is anticipated that the foregoing conditions will be
satisfied, but FMB and City Holding may waive any condition to their
obligations to consummate the Merger except requisite approvals of FMB
shareholders and regulatory authorities. The Board of Directors of FMB
will not, however, waive any condition or agree to any amendment to the
Agreement which, in the opinion of the Board of Directors, will have any
material adverse effect on the shareholders of FMB.

Stock Option Agreements

City Holding and FMB entered into the FMB Stock Option Agreement,
dated as of March 14, 1995, pursuant to which FMB issued to City Holding an
option to purchase up to 114,600 shares of FMB Common Stock at a purchase
price of $45.60 per share (the "FMB Option").

The FMB Option is exercisable only upon the occurrence of a
Purchase Event (as defined below). A Purchase Event means any of the
following events: (i) without City Holding's prior written consent, FMB
shall have authorized, recommended, publicly proposed or publicly announced
an intention to authorize, recommend or propose, or entered into an
agreement with any person (other than City Holding or any subsidiary
thereof) (A) to effect a merger, consolidation or similar transaction
involving FMB or Merchants, (B) for the disposition, by sale, lease,
exchange or otherwise, of 15% or more of the consolidated assets of FMB and
its subsidiaries or (C) for the issuance, sale, exchange or other
disposition of securities representing 25% or more of the voting power of
FMB or any of its subsidiaries (collectively referred to as an "Acquisition
Transaction"); or (ii) any person (other than City Holding or any
subsidiary thereof) shall have acquired beneficial ownership of 25% or more
of FMB Common Stock.

The FMB Stock Option Agreement terminates on the date on which
occurs the earliest of: (i) the Effective Date; (ii) a termination of the
Agreement in accordance with its terms (other than by City Holding under
certain circumstances) prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event (as defined below); (iii) 12 months following a
termination of the Agreement by City Holding under certain circumstances;
(iv) 12 months after the termination of the Agreement in accordance with
its terms following the occurrence of a Purchase Event or a Preliminary
Purchase Event; (v) receipt of any order or notice of the Federal Reserve
Board or the West Virginia Board denying approval of the Merger; or
(vi) June 30, 1996.

An FMB Preliminary Purchase Event means any of the following
events: (i) any person (other than City Holding) shall have commenced a
tender offer or exchange offer to acquire 25% or more of FMB Common Stock
(a "Tender Offer"); or (ii) FMB's shareholders shall have failed to adopt
the Agreement at a meeting called for such purpose or such meeting shall
not have been held or shall have been canceled or the FMB Board shall have
withdrawn its recommendation to shareholders, in each case following the
public announcement of (A) a Tender Offer, (B) a proposal to engage in an

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Acquisition Transaction, or (C) the filing of an application or notice for
regulatory approval to engage in an Acquisition Transaction.

City Holding has also entered into Stock Option Agreements, dated
as of March 14, 1995 (the "FMB Director Stock Option Agreements") with
three directors of FMB pursuant to which such directors have granted City
Holding options to purchase, in the aggregate, up to 65,437 shares of FMB
stock on or before the earlier of (i) the date City Holding receives the
approval of the Merger from the Federal Reserve Board and the West Virginia
Board, (ii) December 31, 1995, if only if, FMB receives an acquisition
offer from a third party and its board of directors determines in good
faith that such offer is materially better than that of City Holding (such
conditions a "Directors Purchase Event"). The FMB Director Stock Option
Agreements terminate upon the Effective Date or the termination of the
Agreement. A form of FMB Directors Stock Option Agreement is attached
hereto as Annex III.

Waiver and Amendment; Termination

Waiver and Amendment. Prior to the Effective Date, and to the
extent permitted by law, any provision of the Agreement may be (i) waived
by any party benefitted by the provision or (ii) amended or modified by an
agreement in writing between City Holding and FMB.

The Agreement may be terminated prior to the Effective Date,
either before or after approval by FMB and City Holding shareholders, under
the circumstances specified therein, including (i) by mutual consent of
City Holding and FMB, as expressed by their respective boards of directors;
(ii) by either City Holding or FMB, as expressed by their respective boards
of directors, after December 31, 1995; (iii) by City Holding in writing
authorized by its Board of Directors if FMB or Merchants has, or by FMB in
writing authorized by its Board of Directors if City Holding has, in any
material respect, breached (A) any covenant or agreement contained in the
Agreement, or (B) any representation or warranty contained herein, in any
case if such breach has not been cured by the earlier of 30 days after the
date on which written notice of such breach is given to the party
committing such breach or the Closing Date; provided that it is understood
and agreed that either party may terminate the Agreement on the basis of
any such material breach of any representation or warranty contained in the
Agreement notwithstanding any qualification therein relating to the
knowledge of the other party; (iv) either City Holding or FMB, as expressed
by their respective boards of directors, in the event that any of the
conditions precedent to the obligations of such party to consummate the
Merger have not been satisfied or fulfilled or waived by the party entitled
to so waive on or before the Closing Date, provided that neither party
shall be entitled to terminate the Agreement pursuant to this subparagraph
(iv) if the condition precedent or conditions precedent which provide the
basis for termination can reasonably be and are satisfied within a
reasonable period of time, in which case, the Closing Date shall be
appropriately postponed; (v) City Holding or FMB, if the Board of Directors
of either corporation shall have determined in their sole discretion,
exercised in good faith, that the Merger has become inadvisable or

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impracticable by reason of the threat or the institution of any litigation,
proceeding or investigation to restrain or prohibit the consummation of the
transactions contemplated by the Agreement or to obtain other relief in
connection with the Agreement; (vi) City Holding or FMB, if any of the
Federal Reserve Board or the West Virginia Board deny approval of the
Merger and the time period for all appeals or requests for reconsideration
has run; (vii) City Holding, if holders of more than 10% of the outstanding
shares of FMB Common Stock exercise their rights to an appraisal of their
shares pursuant to Sections 31-1-122 and 31-1-123 of the West Virginia Act
in connection with the Merger; (viii) FMB, if (A) the average closing sales
price of City Holding Common Stock as reported by NASDAQ for the 20 trading
days following the later of (1) the receipt of Federal Reserve Board
approval of the Merger and (2) the date on which the shareholders of FMB
approve the Merger, is less than $22.80 per share, and (B) City Holding and
FMB cannot agree on an amendment to the Exchange Ratio; and (ix) City
Holding, if (A) the average closing sales price of City Holding Common
Stock as reported by NASDAQ for the 20 trading days following the later of
(1) the receipt of Federal Reserve Board approval of the Merger and (2) the
date on which the shareholders of FMB approve the Merger, is greater than
$34.20 per share, and (B) City Holding and FMB cannot agree on an amendment
to the Exchange Ratio.

Management and Operations after the Merger

After the consummation of the Merger, FMB will cease to exist and
Merchants will become a direct wholly-owned subsidiary of City Holding.
For at least five years after the Effective Date, unless otherwise approved
by a majority of continuing directors of Merchants, Merchants will remain a
separately-incorporated bank operated under the name "Merchants National
Bank". All branches of Merchants will remain branches of Merchants
following the Effective Date except the Kanawha City branch of Merchants
located at 4315 MacCorkle Avenue, S.E. in Charleston, West Virginia and the
Bradford Street branch of Merchants located at 200 Bradford Street in
Charleston, West Virginia, both of which shall be consolidated into The
City National Bank of Charleston at the Effective Date or as soon as
practicable thereafter. Following the Effective Date, the Directors of
City Holding shall continue as Directors of City Holding. City Holding has
agreed to increase the number of members of the City Holding Board of
Directors by two and to appoint two persons approved by the continuing
directors of Merchants to fill the resulting vacancies. Following the
Effective Date, the Directors of Merchants shall continue as Directors of
Merchants for at least five years following the Effective Date unless
removed for cause and shall continue to receive Board fees at least equal
to the Board fees such persons received prior to the Effective Date. In
addition, for at least five years following the Effective Date, except with
the approval of the continuing directors of Merchants, no employee of
Merchants as of the date of the Agreement may be terminated by City Holding
without cause and no change will be made in the compensation levels, fringe
benefits or similar arrangements of such employees. All employees of FMB
and Merchants immediately prior to the Effective Date who are employed by
FMB and Merchants following the Effective Date ("Transferred Employees")
will be covered by City Holding's employee benefit plans with eligibility

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based on their length of service, compensation, job classification, and
position with FMB and Merchants. City Holding's benefits plans will
recognize for purposes of eligibility to participate and for vesting, all
Transferred Employees' service with FMB and Merchants, subject to
applicable break in service rules. Eligible employees of FMB and Merchants
shall be permitted to contribute funds distributed on any termination of
FMB or Merchants benefit plans to similar City Holding benefit plans.

Interests of Certain Persons in the Merger

Certain members of FMB's management and the Board of Directors of
FMB have interests in the Merger in addition to their interests as
shareholders of FMB generally. The Agreement provides that all continuing
employees of FMB will be entitled to participate in City Holding's employee
benefit plans following the Merger and will receive credit under those
plans for past service with FMB. The Agreement also provides that George
F. Davis, President and Chief Executive Office of Merchants will serve as
Executive Vice President of City Holding at annual compensation and
benefits not less than his current compensation package with FMB and
Merchants and when he retires on his seventieth birthday, City Holding will
retain him in a consulting capacity for three years and shall pay him an
annual fee equal to fifty percent of his last annual salary as an officer
of Merchants.

Certain Federal Income Tax Consequences

City Holding and FMB have received an opinion of Hunton &
Williams, counsel to City Holding, to the effect that for federal income
tax purposes (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, (ii) neither City Holding nor FMB
will recognize any taxable gain or loss upon consummation of the Merger,
and (iii) the Merger will result in the tax consequences summarized below
for FMB shareholders who receive City Holding Common Stock in exchange for
FMB Common Stock pursuant to the Merger. Such opinion has been filed as an
exhibit to the Registration Statement. Receipt of substantially the same
opinion of Hunton & Williams as of the Effective Time of the Merger is a
condition to consummation of the Merger. The following summary does not
discuss all potentially relevant federal income tax matters or consequences
to any foreign or other shareholders subject to special tax treatment. In
addition, the opinion of Hunton & Williams is based on, and the opinion to
be given as of the Effective Time of the Merger will be based on, certain
customary assumptions and representations regarding, among other things,
the lack of previous dealings between FMB and City Holding, the existing
and future ownership of FMB and City Holding stock, and the future business
plans for City Holding.

A FMB shareholder who receives solely City Holding Common Stock
in exchange for his shares of FMB Common Stock will not recognize any gain
or loss on the exchange. If a shareholder receives City Holding Common
Stock and cash in lieu of a fractional share of FMB Common Stock, the
shareholder will recognize taxable gain or loss solely with respect to such
fractional share as if the fractional share had been received and then

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redeemed for cash. A shareholder will have an aggregate tax basis in
shares of City Holding Common Stock (including any fractional share
interest) received in the Merger equal to his tax basis in the shares of
FMB Common Stock exchanged therefor. A shareholder's holding period for
shares of City Holding Common Stock (including any fractional share
interest) received in the Merger will include his holding period for the
shares of FMB Common Stock exchanged therefor if they are held as a capital
asset at the Effective Date.

The receipt of cash for shares of FMB Common Stock or City
Holding Common Stock pursuant to the exercise of dissenters' rights will be
a taxable transaction. A shareholder who exercises dissenters' rights and
consequently receives cash for his shares will be treated as receiving the
cash in redemption of such shares. Such a dissenting shareholder
ordinarily will recognize gain or loss equal to the difference between the
amount of cash received and his tax basis in the redeemed shares, and such
gain or loss generally will be a capital gain or loss if the shares are
held as a capital asset. However, if a dissenting shareholder is treated
under Section 318 of the Code as constructively owning shares owned by one
or more other, non-dissenting shareholders, and if the redemption of shares
actually owned by the shareholder does not result (for purposes of Section
302 of the Code) in a meaningful reduction in the shareholder's total stock
interest represented by all shares actually or constructively owned by the
shareholder, the entire amount of the cash received could be taxed as a
dividend. Under Section 318(a) of the Code, a shareholder is treated as
owning stock that the shareholder has an option or other right to acquire,
stock owned by certain family members, stock owned by certain entities in
which the shareholder has an ownership interest, and if the shareholder is
an entity, stock owned by certain persons having an ownership interest in
the entity. Stock constructively owned by a person generally is treated as
being owned by that person for the purpose of attributing ownership to
another person. Any shareholder considering the exercise of dissenters'
rights should consult his tax advisor about the tax consequences of
receiving cash for his shares.

THE PRECEDING DISCUSSION SUMMARIZES FOR GENERAL INFORMATION THE
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. THE TAX
CONSEQUENCES TO ANY PARTICULAR SHAREHOLDER MAY DEPEND ON THE SHAREHOLDER'S
CIRCUMSTANCES. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO SPECIFIC FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE
MERGER TO SHAREHOLDERS.

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following pro forma condensed consolidated balance sheet as
of December 31, 1994, and the related pro forma condensed consolidated
statements of income for each of the three years in the period ended
December 31, 1994, give effect to the acquisition of 100% of the
outstanding shares of FMB by City Holding. The pro forma financial
statements are based on the historical financial statements of City Holding
and FMB, giving effect to the proposed transaction under the pooling-of-
interests method of accounting as if it had been effected at the beginning

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of the earliest period presented, assuming that all of the outstanding
shares of FMB Common Stock are converted into shares of City Holding Common
Stock. The pro forma financial statements may not be indicative of the
results that actually would have occurred if the combination had been in
effect on the dates indicated or that may be obtained in the future. The
pro forma financial statements should be read in conjunction with the City
Holding Audited Consolidated Financial Statements and FMB Audited Financial
Statements, including the respective notes thereto, included herein.

-37-
<PAGE>
CITY HOLDING COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(IN THOUSANDS)

</TABLE>
<TABLE>
CITY HOLDING
AND FMB
CITY HOLDING FMB PRO FORMA PRO FORMA
AS REPORTED AS REPORTED ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
ASSETS

Cash and due from banks $ 27,591 $ 5,212 $ 32,803
Interest bearing deposits with other banks 671 671
Securities available for sale 67,920 14,889 82,809
Investment securities 128,457 28,648 157,105
Federal funds sold 810 810
Total loans 495,412 58,874 554,286
Less allowance for possible
loan losses (6,017) (460) (6,477)

NET LOANS 489,395 58,414 547,809

Loans held for sale 30,227 30,227
Bank premises and equipment 17,678 3,452 21,130
Other assets 19,258 3,195 22,453

TOTAL ASSETS $780,526 $115,291 $895,817

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES

Deposits:
Noninterest bearing 80,694 13,674 94,368
Interest bearing 570,570 81,867 652,437

TOTAL DEPOSITS 651,264 95,541 746,805

Short-term borrowings 57,483 9,144 66,627
Long-term debt 6,875 6,875
Other liabilities 8,035 1,144 9,179

TOTAL LIABILITIES 723,657 105,829 829,486

SHAREHOLDERS' EQUITY

Common stock 9,451 1,152 1,144 11,747
Capital surplus 18,887 649 (1,144) 18,392
Unrealized loss on marketable
equity securities (2,074) (789) (2,863)
Retained earnings 30,605 8,450 39,055

TOTAL SHAREHOLDERS' EQUITY 56,869 9,462 0 66,331

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $780,526 $115,291 $895,817
</TABLE>

-40-

CITY HOLDING COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS EXCEPT PER SHARE)
<TABLE>
CITY HOLDING
AND FMB
CITY HOLDING FMB PRO FORMA
AS REPORTED AS REPORTED COMBINED
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 41,167 $ 4,900 $ 46,067
Interest on investment securities:
Taxable 12,071 1,826 13,897
Tax-exempt 1,716 761 2,477
Other interest income 194 127 321

TOTAL INTEREST INCOME 55,148 7,614 62,762

Interest expense:
Interest on deposits 20,110 2,768 22,878
Short-term borrowings 1,687 159 1,846
Long-term debt 445 445

TOTAL INTEREST EXPENSE 22,242 2,927 25,169

NET INTEREST INCOME 32,906 4,687 37,593

Provision for possible loan losses 953 87 1,040

NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 31,953 4,600 36,553

Other income 4,647 602 5,249

Other expense 26,448 3,667 30,115
INCOME BEFORE INCOME TAXES 10,152 1,535 11,687

Income taxes 3,193 353 3,546

NET INCOME $ 6,959 $ 1,182 $ 8,141

NET INCOME PER SHARE $ 1.85 $ 2.05 $ 1.73

AVERAGE SHARES OUTSTANDING 3,773 576 4,691
</TABLE>

-42-

CITY HOLDING COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS EXCEPT PER SHARE)
<TABLE> CITY HOLDING
AND FMB
CITY HOLDING FMB PRO FORMA
AS REPORTED AS REPORTED COMBINED
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 33,251 $ 4,349 $37,600
Interest on investment securities:
Taxable 12,650 1,843 14,493
Tax-exempt 1,839 807 2,646
Other interest income 476 86 562

TOTAL INTEREST INCOME 48,216 7,085 55,301

Interest expense:

Interest on deposits
Short-term borrowings
Long-term debt 274 274

TOTAL INTEREST EXPENSE 19,547 2,878 22,425

NET INTEREST INCOME 28,669 4,207 32,876

Provision for possible loan losses 1,341 93 1,434

NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 27,328 4,114 31,442

Other income 3,004 858 3,862

Other expense 20,951 3,224 24,175

INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 9,381 1,748 11,129

Income taxes 2,949 418 3,367

Income Before Cumulative Effect of
Change in Accounting Principle 6,432 1,330 7,762

Cumulative Effect of Change in Accounting
Principle for Postretirement Benefits, net of tax (117) (117)

NET INCOME $ 6,432 $ 1,213 $ 7,645

Earnings per Common Share:
Income before cumulative effect of
change in accounting principle 2.31 1.66
Cumulative effect of change in accounting principle (.20) (.03)

NET INCOME $ 1.71 $ 2.11 $ 1.63

AVERAGE COMMON SHARES OUTSTANDING 3,763 576 4,681
</TABLE>

-44-

<PAGE>
CITY HOLDING COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1992
(IN THOUSANDS EXCEPT PER SHARE)
<TABLE>
CITY HOLDING
AND FMB
CITY HOLDING FMB PRO FORMA
AS REPORTED AS REPORTED COMBINED
<S> <C> <C> <C>

Interest Income:
Interest and fees on loans $ 28,222 $ 4,272 $32,494
Interest on investment securities:
Taxable 12,895 2,246 15,141
Tax-exempt 1,880 750 2,630
Other interest income 530 85 615

TOTAL INTEREST INCOME 43,527 7,353 50,880

Interest expense:

Interest on deposits 18,514 2,964 21,478
Short-term borrowings 329 342 671
Long-term debt 35 35

TOTAL INTEREST EXPENSE 18,878 3,306 22,184

NET INTEREST INCOME 24,649 4,047 28,696

Provision for possible loan losses 2,222 103 2,325

NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 22,427 3,944 26,371

Other income 1,897 431 2,328

Other expense 15,909 2,980 18,889

INCOME BEFORE INCOME TAXES 8,415 1,395 9,810

Income taxes 2,511 327 2,838

NET INCOME $ 5,904 $ 1,068 $ 6,972

NET INCOME PER SHARE $ 1.56 $ 1.85 $ 1.48

AVERAGE COMMON SHARES OUTSTANDING 3,779 576 4,697
</TABLE>

-46-

DISSENTERS' RIGHTS

Sections 31-1-122 and 31-1-123 of the West Virginia Act give holders of
City Holding and FMB Common Stock dissenters' rights in the Merger. City Holding
and FMB shareholders who object to the Merger and who comply with the provisions
of (section) 31-1-123 of the West Virginia Act may demand the right to receive a
cash payment from City Holding and FMB, respectively, for the "fair value" of
their stock as determined as of the day prior to the date on which the Merger
was approved by the City Holding or FMB shareholders, as applicable. Under
(section) 31-1-123 of the West Virginia Act, such "fair value" of City Holding
or FMB Common Stock shall not include any appreciation or depreciation of the
price of shares of City Holding or FMB Common Stock resulting from anticipation
of the Merger. Consequently, the amount received by a dissenting FMB
shareholder may be higher or lower than the consideration he would have received
for such shares in the Merger. City Holding shareholders are not receiving any
consideration for their shares in the Merger.

To exercise their dissenters' rights, FMB shareholders electing to
dissent ("Dissenting FMB Shareholders") must file with FMB at Fourth Avenue
and Washington Street, Montgomery, West Virginia 25136, Attention:
Secretary, prior to or at the FMB Special Meeting, a written objection to
the proposed Merger. To exercise their dissenters' rights, City Holding
shareholders electing to dissent ("Dissenting City Holding Shareholders"
and collectively with Dissenting FMB Shareholders, "Dissenting
Shareholders") must file with City Holding at 3601 MacCorkle Avenue, S.E.,
Charleston, West Virginia, Attention: Robert A. Henson, Chief Financial
Officer, prior to or at the City Holding Annual Meeting, a written
objection to the proposed Merger. A Dissenting Shareholder may dissent as
to less than all of shares of FMB Common Stock or City Holding Common Stock
owned beneficially by him. If the Merger is approved by the City Holding
and FMB shareholders, and a Dissenting Shareholder did not vote the related
shares in favor of the Merger, he must then, within ten days after the date
on which the vote was taken, file with City Holding a written demand for
payment of the fair value of such shares.

Within 20 days after demanding payment for his shares, each Dissenting
Shareholder must submit the certificate or certificates representing his
shares to City Holding for notation thereon that such demand has been made.
His failure to do so shall, at the option of City Holding, terminate his
rights under Section 3-1-122 and 3-1-123 of the West Virginia Act unless a
court of general civil jurisdiction, for good and sufficient cause shown,
shall otherwise direct. If shares of City Holding or FMB Common Stock
represented by a certificate on which notation has been so made shall be
transferred, each new certificate issued therefor shall bear similar
notation, together with the name of the original dissenting holder of such
shares, and a transferee of such shares shall acquire by such transfer no
rights in City Holding or FMB, as applicable, other than those which the
original Dissenting Shareholder had after making demand for payment under
Section 31-1-123 of the West Virginia Act.

-48-

A demand filed by a Dissenting Shareholder may not be withdrawn unless
City Holding consents. Within ten days after the Effective Date of the
Merger, City Holding shall give written notice thereof to each Dissenting
Shareholder who has made a demand as required by the West Virginia Act, and
shall make a written offer to each such Dissenting Shareholder to pay for
his related shares at a specified price deemed by City Holding to be the
fair value thereof. Such notice and offer shall be accompanied by a
balance sheet of FMB or City Holding, as applicable, as of the latest
available date and not more than 12 months prior to the making of such
offer, and a profit and loss statement for the 12 months' period ended on
the date of such balance sheet. If within 30 days after the Effective
Date, the fair value of such shares is agreed upon between any Dissenting
Shareholder and City Holding, payment therefor shall be made within 90 days
after the Effective Date, upon surrender of the certificate(s) representing
such share(s). Upon payment of the agreed value a Dissenting Shareholder
shall cease to have any interest in such shares.

If within the 30-day period described above, a Dissenting Shareholder
and City Holding do not agree as to the fair value of the shares, City
Holding shall within 30 days after receipt of written demand from any
Dissenting Shareholder, which written demand must be given within 60 days
after the Effective Date, file a complaint in a court of general civil
jurisdiction in the county where City Holding's or FMB's, as applicable,
principal office was located requesting that the fair value of such shares
be determined, or City Holding may file such a complaint within such 60-day
period at its own election. If City Holding fails to bring such action
within the 60-day period, and at this time it cannot predict whether it
would file such a complaint, any Dissenting Shareholder may do so in the
name of City Holding. If no complaint is filed, Dissenting Shareholders
may be deemed to have waived their rights under the West Virginia Act. All
Dissenting Shareholders, except those who have agreed upon a price to be
paid for their shares by City Holding, may be made parties to the
proceeding and may receive a copy of the petition or summons. All
Dissenting Shareholders who are parties to the proceeding shall be entitled
to judgment against City Holding for the amount of the fair value of their
shares plus accrued interest except any Dissenting Shareholder whom the
court determines not to be entitled to receive payment for his shares. The
judgment shall be payable only upon and concurrently with the surrender to
City Holding of the certificate(s) representing such share(s).

Section 31-1-123(e) of the West Virginia Act provides that any costs
and expenses of any such proceeding shall be determined by the court and
assessed against City Holding, except that all or any part of such costs
and expenses may be assessed against all or some Dissenting Shareholders,
in amounts the court finds equitable, to the extent the court finds the
Dissenting Shareholders did not act in good faith in contesting City
Holding's offer. Such expenses shall not include experts' or attorneys'
expenses and fees unless the court, in its discretion, awards such fees and
expenses.

Reference is made to Annex IV attached hereto for the complete text of
the provisions of Sections 31-1-122 and 33-1-123 of the West Virginia Act

-49-

relating to the rights of dissenting shareholders. The statements made in
this summary of such provisions are qualified in their entirety by
reference to Annex IV. The provisions of Section 31-1-123 of the West
Virginia Act are technical and complex and it is suggested that any
shareholder who desires to exercise his right to dissent consult counsel,
because failure to comply strictly with such provisions may defeat his
dissenters' rights.

CITY HOLDING CAPITAL STOCK

City Holding's Articles of Incorporation, authorize 20,000,000 shares
of Common Stock, par value $2.50, and 500,000 shares of Preferred Stock,
par value $25, including a series of 100,000 shares of Junior Participating
Cumulative Preferred Stock, Series A. As of December 31, 1994, 3,777,933
shares of Common Stock and no shares of Preferred Stock were outstanding
and entitled to vote. At such date, City Holding had 1,771 shareholders of
record.

Authority is given in the Articles of Incorporation to the Board of
Directors to issue shares of City Holding's Common Stock and Preferred
Stock from time to time for such consideration as the Board may deem
advisable.

The characteristics of City Holding's capital stock are summarized
below.

Common Stock

Dividend Rights. Common shareholders are entitled to dividends to the
extent funds are legally available and the Board of Directors declares
payment. City Holding's ability to pay dividends is largely contingent
upon the abilities of its subsidiary banks to pay dividends, and is subject
to various statutory limits. See "SUPERVISION AND REGULATION Limits on
Dividends and Other Payments."

Voting Rights and Cumulative Voting. In all elections of directors,
each holder of City Holding Common Stock has the right to cast one vote for
each share of stock owned by him and entitled to vote for as many persons
as there are directors to be elected, or he may cumulate such votes and
give one candidate as many votes as the number of directors to be elected
multiplied by the number of his shares of stock shall equal; or he may
distribute such votes on the same principle among as many candidates and in
such manner as he desires. On any other question to be determined by a
vote of shares at any meeting of shareholders, each shareholder is entitled
to one vote for each share of stock owned by him and entitled to vote.

Liquidation Rights. Upon liquidation, after payment to all creditors
and holders of Preferred Stock, the remaining assets of City Holding would
be distributed to the holders of City Holding Common Stock pro rata.

Preemptive Rights. Holders of City Holding Common Stock have no
preemptive rights with respect to future issues of Common Stock.

-50-

Calls and Assessments. All City Holding Common Stock outstanding is
fully paid and nonassessable.

Preferred Stock

The Board of Directors has the authority, without any vote or action
by the shareholders, to issue Preferred Stock in one or more series and to
fix the designations, preferences, rights, qualifications, limitations and
restrictions thereof, including the voting rights, dividend rights,
dividend rate, conversion rights, terms of redemption (including sinking
fund provisions), redemption price or prices, liquidation preferences and
the number of shares constituting any series. Issuance of Preferred Stock
by the Board of Directors of City Holding could be utilized to render more
difficult, or discourage, an attempt to gain control of City Holding.
There are no shares of Preferred Stock outstanding, and there are no
agreements or understandings for the designation of any series of Preferred
Stock or the issuance of shares, except pursuant to the Preferred Stock
Purchase Rights Plan summarized below.

Preferred Stock Purchase Rights Plan; Change of Control

Pursuant to a Preferred Stock Purchase Rights Plan and a related
Amended and Restated Rights Agreement between City Holding and NationsBank,
N.A., as Rights Agent, each outstanding share of City Holding Common Stock
carries with it one Preferred Stock Purchase Right (a "Right"). In
general, the number of Rights outstanding will equal the number of shares
of City Holding Common Stock outstanding from time to time. The Rights
will expire on April 9, 2001, unless previously exercised or redeemed at
the option of the Board of Directors. Each share of City Holding Common
Stock offered hereby has one Right attached.

Generally, under the terms of the Rights Plan, the Rights will be
exercisable only if a person or group acquires 10% or more of City Holding
Common Stock or announces a tender offer, the consummation of which would
result in ownership by a person or group of 10% or more of City Holding
Common Stock. Each Right will entitle its holder to buy one one-thousandth
of a share of Junior Participating Cumulative Preferred Stock, Series A,
par value $25, at an exercise price of $53, subject to adjustment. If a
person or group acquires 20% or more of the outstanding City Holding Common
Stock, each Right will entitle its holder (other than such person or
members of such group) to purchase, at the then-current exercise price,
City Holding Common Stock having a market value equal to twice the exercise
price. If City Holding is acquired in a merger or other business
combination or if 50% or more of City Holding's assets or earning power is
sold or transferred, each Right will entitle its holder to purchase, at the
then-current exercise price, common stock of the acquiror having a value
equal to twice the exercise price.

City Holding's Articles of Incorporation provide that the Board of
Directors consist of three classes with staggered terms for directors.
City Holding has also adopted a by-law requiring advance notice from a
shareholder to nominate a director. The effect of these measures and the

-51-

Rights Plan could be to render more difficult or to discourage an attempt
to gain control of City Holding by means of a merger, tender offer, proxy
contest or otherwise, even if supported by holders of a majority of the
voting securities of City Holding, and thereby protect the current
management.

Reports to Shareholders

City Holding furnishes its shareholders with annual reports, including
audited financial statements, and with quarterly reports.

Transfer Agent

The transfer agent for City Holding Common Stock is City National Bank
of Charleston.

COMPARATIVE RIGHTS OF SHAREHOLDERS

At the Effective Date, FMB shareholders automatically will become
shareholders of City Holding, and their rights as shareholders will be
determined by City Holding's Articles of Incorporation and Bylaws. The
following is a summary of the material differences in the rights of
shareholders of City Holding and FMB.

Capitalization

City Holding. City Holding is authorized to issue 20,000,000 shares
of City Holding Common Stock, $2.50 par value, of which 3,779,818 shares,
including 1,885 treasury shares, were issued and outstanding as of the City
Holding Record Date. City Holding is also authorized to issue 500,000
shares of Preferred Stock, $25 par value, including a series of 100,000
shares of Junior Participating Cumulative Preferred Stock, Series A, of
which no shares were issued and outstanding as of the City Holding Record
Date.

Under City Holding's Articles of Incorporation, the Board of Directors
of City Holding has the power, without further action by City Holding's
shareholders, to provide for the issuance of City Holding Common Stock or
Preferred Stock from time to time for such consideration as the Board may
deem advisable.

FMB. FMB is authorized to issue 1,000,000 shares of FMB Common Stock,
$2.00 par value of which 576,000 shares were issued and outstanding as of
the FMB Record Date.

Merchants is authorized to issue 144,000 shares of Common Stock, $2.00
par value, all of which were issued and outstanding and owned by FMB as of
the FMB Record Date.

Voting Rights

-52-

City Holding. In all elections of directors, each holder of City
Holding Common Stock has the right to cast one vote for each share of stock
owned by him and is entitled to vote for as many persons as there are
directors to be elected, or he may cumulate such votes and give one
candidate as many votes as the number of directors to be elected multiplied
by the number of his shares of stock shall equal; or he may distribute
such votes on the same principle among as many candidates and in such
manner as he desires. On any other issue to be determined by a vote of
shares at any meeting of shareholders, each shareholder is entitled to one
vote for each share of stock owned by him and entitled to vote. The vote
of a majority of shares represented at a meeting and entitled to vote is
required to approve most actions requiring shareholder approval, except
that amendments to the Articles of Incorporation and certain fundamental
actions such as mergers, consolidations and sales of substantially all
assets outside the ordinary course of business must be approved by vote of
a majority of shares entitled to vote thereon.

FMB. In all elections of directors, each holder of FMB Common Stock
has the right to cast one vote for each share of stock owned by him and is
entitled to vote for as many persons as there are directors to be elected,
or he may cumulate such votes and give one candidate as many votes as the
number of directors to be elected multiplied by the number of his shares of
stock shall equal; or he may distribute such votes on the same principal
among as many candidates and in such manner as he desires. On any other
issue to be determined by a vote of shares at any meeting of shareholders,
each shareholder is entitled to one vote for each share of stock owned by
him and entitled to vote. The vote of the majority of shares represented
at a meeting and entitled to vote is required to approve most actions
requiring shareholder approval except that the West Virginia Act requires
that certain items, including amendments to the Articles of Incorporation,
must be approved by a vote of a majority of shares entitled to vote
thereon. Furthermore, the Articles of Incorporation of FMB and its Bylaws
requires the vote of the holders of at least two-thirds of the issued and
outstanding stock entitled to vote for certain "business combinations" as
defined in the Articles of Incorporation and Bylaws; provided, however,
that if 80% or greater of the directors of the corporation recommend the
"business combination" to the shareholders, only a simple majority vote of
the issued and outstanding stock entitled to vote thereon need be obtained
to approve the transaction. The Merger contemplated in the Agreement is a
"business combination" as defined in the Articles and Bylaws of FMB.
However, since the Agreement was unanimously approved by the FMB Board of
Directors, a simple majority of the shares entitled to vote thereon is the
vote requirement for the Merger presented to the shareholders in connection
with the Agreement.

Directors and Classes of Directors

City Holding. The City Holding Board of Directors presently comprises
14 members. The Board of Directors is classified into three classes, with
one class to be elected each year to a three-year term.

-53-

FMB. The FMB Board of Directors presently comprises 12 members. The
Board of Directors is classified into three classes, with one class to be
elected each year to a three-year term.

Anti-Takeover Provisions

City Holding. City Holding's Board of Directors has adopted a Rights
Plan and City Holding's Articles of Incorporation provide that the Board of
Directors consist of three classes with staggered terms for members of the
Board of Directors. City Holding has also adopted a by-law requiring
advance notice from a shareholder to nominate a director. See "CITY
HOLDING CAPITAL STOCK -- Preferred Stock Purchase Rights Plan; Change of
Control."

City Holding has not adopted other conventional anti-takeover
provisions such as, for example, a fair-price charter amendment, a super-
majority vote charter amendment, or an anti-greenmail charter amendment,
and has no current plans to submit further proposals with a possible "anti-
takeover" effect. In addition, the West Virginia Act does not contain any
provisions protecting a West Virginia corporation against hostile
takeovers, such as a fair price statute or a control share acquisition
statute.

FMB. FMB has adopted conventional anti-takeover provisions, including
certain super majority vote requirements for business combinations, a fair
price provision and an anti-green mail provision. Because of the unanimous
approval and recommendation by the FMB Board of Directors of the Merger,
these provisions are not applicable to the vote or procedures required in
connection with the Merger.

Preemptive Rights

Neither the shareholders of City Holding nor the shareholders of FMB
have preemptive rights. Thus, if additional shares of City Holding Common
Stock or FMB Common Stock were issued, holders of such stock, to the extent
that they did not participate in such additional issuance of shares, would
own proportionately smaller interests in a larger amount of outstanding
capital stock.

Assessment

City Holding. All outstanding shares of City Holding Common Stock
are, and those to be issued pursuant to the Agreement will be, fully paid
and nonassessable.

FMB. All outstanding shares of FMB Common Stock are fully paid and
nonassessable.

Conversion; Redemption; Sinking Fund

Neither City Holding Common Stock nor FMB Common Stock is convertible,
redeemable or entitled to any sinking fund.

-54-

Liquidation Rights

City Holding. Upon liquidation, after payment to all creditors and
holders of Preferred Stock, the remaining assets of City Holding would be
distributed to the holders of City Holding Common Stock pro rata.

FMB. Upon liquidation, after payment to all creditors, the remaining
assets of FMB would be distributed to the holders of FMB stock on a pro
rata basis.

Dividends and Other Distributions

City Holding. Holders of City Holding Common Stock are entitled to
dividends to the extent funds are legally available and the Board of
Directors declares payment. City Holding's ability to pay dividends is
largely contingent upon the abilities of its subsidiaries to pay dividends,
and is subject to various statutory limits. See "SUPERVISION AND
REGULATION -- Limits on Dividends and Other Payments."

FMB. Holders of FMB Common Stock are entitled to dividends to the
extent funds are legally available therefore and the FMB Board of Directors
declares payment. FMB's ability to pay dividends is contingent entirely
upon the ability of Merchants, its subsidiary bank, to pay dividends. The
ability of Merchants to pay dividends is subject to various regulatory and
statutory limits. See "SUPERVISION AND REGULATION -- Limits on Dividends
and Other Payments."

Shareholder Meetings

City Holding. City Holding's Bylaws provide that special meetings of
the shareholders may be called at any time by the Board of Directors or by
the President and Secretary, or by any three or more shareholders holding
together at least 10% of the capital stock of City Holding.

FMB. FMB's Bylaws provide that special meetings of the shareholders
may be called any time by the Board of Directors or by the President or
Secretary or by any number of shareholders holding together at least 10% of
the capital stock of FMB.

Indemnification

City Holding. Section 31-1-9 of the West Virginia Act provides in
part that each West Virginia corporation shall have power to indemnify any
director, officer, employee or agent or former director, officer, employee
or agent against expenses actually and reasonably incurred by him in
connection with the defense of any claim, action, suit or proceeding
against him by reason of being or having been such director, officer,
employee or agent other than an action by or in the right of the
corporation if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the corporation.
With respect to an action by or in the right of the corporation the
director, officer, employee or agent or former director, officer, employee

-55-

or agent may be indemnified if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, except in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding against him by reason of being
or having been such director, officer, employee or agent to be liable for
negligence or misconduct in the performance of duty; and to make any other
or further indemnity to any such persons that may be authorized by the
articles of incorporation or any by-law made by the shareholders or any
resolution adopted, before or after the event, by the shareholders. The
By-laws of City Holding contain provisions pursuant to the foregoing
section of the West Virginia Act indemnifying the directors, officers,
employees and agents of City Holding in certain cases against expenses and
liabilities under judgments and reimbursements of amounts paid in
settlement.

City Holding has purchased directors and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (i) the
directors and officers of City Holding against certain losses, to the
extent such losses are not indemnified by City Holding, and (ii) City
Holding, to the extent it indemnifies such directors and officers for
losses as permitted under the laws of West Virginia.

FMB. Section 31-1-9 of the West Virginia Act provides in part that
each West Virginia corporation shall have power to indemnify any director,
officer, employee or agent or former director, officer, employee or agent
against expenses actually and reasonably incurred by him in connection with
the defense of any claim, action, suit or proceeding against him by reason
of being or having been such director, officer, employee or agent other
than an action by or in the right of the corporation if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the corporation. With respect to an action by or in the
right of the corporation the director, officer, employee or agent or former
director, officer, employee or agent may be indemnified if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the corporation, except in relation to matters as to which
he shall be finally adjudged in such action, suit or proceeding against him
by reason of being or having been such director, officer, employee or agent
to be liable for negligence or misconduct in the performance of duty; and
to make any other or further indemnity to any such persons that may be
authorized by the articles of incorporation or any by-law made by the
shareholders or any resolution adopted, before or after the event, by the
shareholders.

Director Exculpation

City Holding. The West Virginia Act does not provide for limitation
of directors' monetary liability or director exculpation.

FMB. The West Virginia Act does not provide for limitation of
directors' monetary liability or director exculpation.

SUPERVISION AND REGULATION

-56-

The following generally describes the regulation to which City Holding
and its Banking Subsidiaries are subject. Bank holding companies and banks
are extensively regulated under both federal and state law. To the extent
that the following information describes statutory or regulatory
provisions, it is qualified in its entirety by reference to the particular
statutory provisions. Any change in applicable law or regulation may have
a material effect on the business and prospects of City Holding and the
Banking Subsidiaries.

Limits on Dividends and Other Payments

City Holding is a legal entity separate and distinct from its Banking
Subsidiaries. Most of City Holding's revenues result from dividends paid
to City Holding by the Banking Subsidiaries. The right of City Holding and
shareholders of City Holding, to participate in any distribution of the
assets or earnings of any Banking Subsidiary through the payment of such
dividends or otherwise is necessarily subject to the prior claims of
creditors of such Banking Subsidiary, except to the extent that claims of
City Holding in its capacity as a creditor may be recognized. Moreover,
there are various legal limitations applicable to the payment of dividends
to City Holding as well as the payment of dividends by City Holding to its
shareholders. Under federal law, the Banking Subsidiaries may not, subject
to certain limited exceptions, make loans or extensions of credit to, or
investments in the securities of, or take securities of City Holding as
collateral for loans to any borrower. The Banking Subsidiaries are also
subject to collateral security requirements for any loans or extensions of
credit permitted by such exceptions.

The Banking Subsidiaries are subject to various statutory restrictions
on their ability to pay dividends to City Holding. Under applicable
regulations, at December 31, 1994, the Banking Subsidiaries could have paid
aggregate dividends to City Holding of $6.2 million without obtaining prior
approval of their respective regulators. The payment of dividends by City
Holding and the Banking Subsidiaries may also be limited by other factors,
such as requirements to maintain adequate capital above regulatory
guidelines. The various regulators supervising the Banking Subsidiaries
have authority to prohibit any Banking Subsidiary under their jurisdiction
from engaging in an unsafe or unsound practice in conducting its business.
The payment of dividends, depending upon the financial condition of the
Banking Subsidiary in question, could be deemed to constitute such an
unsafe or unsound practice. The Federal Reserve Board and the OCC have
indicated their view that it generally would be an unsafe and unsound
practice to pay dividends except out of current operating earnings. The
Federal Reserve Board has stated that, as a matter of prudent banking, a
bank or bank holding company should not maintain its existing rate of cash
dividends on common stock unless (1) the organization's net income
available to common shareholders over the past year has been sufficient to
fund fully the dividends and (2) the prospective rate of earnings retention
appears consistent with the organization's capital needs, asset quality,
and overall financial condition. Moreover, the Federal Reserve Board has
indicated that bank holding companies should serve as a source of
managerial and financial strength to their subsidiary banks. Accordingly,

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the Federal Reserve Board has stated that a bank holding company should not
maintain a level of cash dividends to its shareholders that places undue
pressure on the capital of bank subsidiaries, or that can be funded only
through additional borrowings or other arrangements that may undermine the
bank holding company's ability to serve as a source of strength.

The ability of the Banking Subsidiaries to pay dividends in the future
is, and is expected to continue to be, influenced by regulatory policies
and by capital guidelines. The bank regulatory agencies have broad
discretion in developing and applying policies and guidelines, in
monitoring compliance with existing policies and guidelines, and in
determining whether to modify such policies and guidelines.

Capital Requirements

As a bank holding company, City Holding is subject to regulation by
the Federal Reserve Board under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). The Federal Reserve Board, the OCC and the FDIC have
issued substantially similar risk-based and leverage capital guidelines
applicable to United States banking organizations. In addition, those
regulatory agencies may from time to time require that a banking
organization maintain capital above the minimum levels whether because of
its financial condition or actual or anticipated growth. The Federal
Reserve Board guidelines define a two-tier capital framework. Tier 1
capital consists of common and qualifying preferred shareholders' equity,
less certain intangibles and other adjustments. Tier 2 capital consists of
subordinated and other qualifying debt, and the allowance for credit losses
of up to 1.25% of risk-weighted assets. The sum of Tier 1 and Tier 2
capital represents qualifying total capital, at least 50% of which must
consist of Tier 1 capital. Risk-based capital ratios are calculated by
dividing Tier 1 and total capital by risk-weighted assets. Risk-weighted
assets are determined by assigning assets and off-balance sheet exposures
to one of four categories of risk-weights, based primarily on relative
credit risk. The minimum Tier 1 capital ratio is 4% and the minimum total
capital ratio is 8%. City Holding's Tier 1 and total capital to risk-
weighted asset ratios as of December 31, 1994, were 10.65% and 11.88%,
respectively, exceeding the minimums required.

In addition, the Federal Reserve Board has established minimum
leverage ratio (Tier 1 capital to quarterly average tangible assets)
guidelines for bank holding companies. These guidelines provide for a
minimum ratio of 3 percent for bank holding companies that meet certain
specified criteria, including that they have the highest regulatory rating.
All other bank holding companies will be required to maintain a leverage
ratio of 3 percent plus an additional cushion of at least 100 to 200 basis
points. City Holding's leverage ratio as of December 31, 1994, was 6.65%.
The guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets.

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The following table presents capital ratios for City Holding and FMB
at December 31, 1994, and as adjusted to give effect to the Merger.

Historical
<TABLE>
Regulatory City Pro Forma
Minimum Holding FMB Combined
%/$ Millions %/$ Millions(1) %/$ Millions(2) %/$Millions(3)
<S> <C> <C> <C> <C>
Risk-based capital
Tier 1 4.00/19.7 10.65/52.4 13.43/9.1 10.97/61.0
Total 8.00/39.4 11.88/58.4 14.11/9.5 12.14/67.5
Leverage 3.00/23.6 6.65/52.4 8.10/9.1 6.79/61.0
Common shareholders'
equity to total assets -- 7.28/56.9 8.21/9.5 7.40/66.3
Total shareholders' equity
to total assets -- 7.28/56.9 8.21/9.5 7.40/66.3

</TABLE>

-60-
__________
(1) Calculated in accordance with the Federal Reserve Board's capital
rules.
(2) Calculated in accordance with the FDIC's capital rules.
(3) The pro forma risk-based capital ratios have been computed using pro
forma combined historical data for City Holding and FMB at December 31,
1994.

Bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond their current
levels. However, management is unable to predict whether higher capital
ratios would be imposed and, if so, at what levels and on what schedule.
Otherwise, management of City Holding is not aware of any known trends,
events or uncertainties that will have or that are reasonably likely to
have a material effect on the liquidity, capital resources or operations of
City Holding, nor is management aware of any current recommendations by the
regulatory authorities, which, if they were to be implemented, would have
such an effect.

FIRREA

Under the enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act ("FIRREA") a depository institution insured by the FDIC
can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC after August 9, 1989, in connection with (i) the
default of a commonly controlled FDIC-insured depository institution or
(ii) any assistance provided by the FDIC to a commonly controlled FDIC-
insured depository institution in danger of default. "Default" is defined
generally as the appointment of a conservator or receiver and "in danger of
default" is defined generally as the existence of certain conditions
indicating that a "default" is likely to occur in the absence of regulatory
assistance. Liability of any Bank Subsidiary under this "cross-guarantee
position could have a material adverse effect on the financial condition of
any other Bank Subsidiary and City Holding.

FDICIA

In December 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") became effective. FDICIA substantially
revised the depository institution regulatory and funding provisions of the
Federal Deposit Insurance Act and revised several other federal banking
statutes.

Bank Holding Companies

City Holding is registered as a "bank holding company" under the BHCA.
Bank holding companies are subject to regulation by the Federal Reserve
Board.

The BHCA requires the prior approval of the Federal Reserve Board in
any case where a bank holding company proposes to acquire direct or

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indirect ownership or control of more than 5% of the voting shares of any
bank that is not already majority owned by it or to merge or consolidate
with any other bank holding company. The BHCA prohibits the Federal
Reserve Board from approving an application from a bank holding company to
acquire shares of a bank located outside the state in which the operations
of the holding company's banking subsidiaries are principally conducted,
unless such an acquisition is specifically authorized by statute of the
state in which the bank whose shares are to be acquired is located. West
Virginia has adopted legislation permitting such acquisitions by bank
holding companies located in states that have reciprocal agreements with
West Virginia.

The BHCA also prohibits a bank holding company, with certain
exceptions, from acquiring more than 5% of the voting shares of any company
that is not a bank and from engaging in any business other than banking or
managing or controlling banks. Under the BHCA, the Federal Reserve Board
is authorized to approve the ownership of shares by a bank holding company
in any company the activities of which the Federal Reserve Board has
determined to be so closely related to banking or to managing or
controlling banks as to be a proper incident thereto. The Federal Reserve
Board has by regulation determined that certain activities are closely
related to banking within the meaning of the BHCA. These activities
include: operating a mortgage company, finance company, credit card
company or factoring company; performing certain data processing
operations; providing investment and financial advice; and acting as an
insurance agent for certain types of credit-related insurance.

Banks

City National Bank of Charleston, The Home National Bank of Sutton,
and the First National Bank of Hinton are national banking associations,
and are subject to supervision and regulation by the OCC, the Federal
Reserve Board and the FDIC. The Peoples Bank of Point Pleasant, First
State Bank & Trust, The Bank of Ripley, Peoples State and Blue Ridge Bank
are supervised and regulated by the West Virginia Board of Banking and
Financial Institutions, the FDIC and the Federal Reserve Board. The
various laws and regulations administered by the regulatory agencies affect
corporate practices, such as payment of dividends, incurring debt and
acquisition of financial institutions and other companies, and affect
business practices, such as payment of interest on deposits, the charging
of interest on loans, types of business conducted and location of offices.

FDIC Insurance Assessments

City Holding's Bank Subsidiaries are subject to FDIC deposit insurance
assessments. Effective in January 1993, deposit insurance premium rates
range from $.23 to $.31 per $100 of deposits and depend on both the
institution's capital adequacy and a supervisory judgment of overall risk
posed by the institution. Prior to January 1993, FDIC insurance premiums
were charged at a flat rate. Because of decreases in the reserves of the
Bank Insurance Fund due to the increased number of bank failures in recent
years, it is possible that insurance assessments will increase and that

-62-

there may be special additional assessments. Additional assessments could
have an adverse impact on City Holding's results of operations.

Governmental Policies

The operations of City Holding and its Banking Subsidiaries are
affected not only by general economic conditions, but also by the policies
of various regulatory authorities. In particular, the Federal Reserve
Board regulates money and credit and interest rates in order to influence
general economic conditions. These policies have a significant influence
on overall growth and distribution of bank loans, investments and deposits
and affect interest rates charged on loans or paid for time and savings
deposits. Federal Reserve monetary policies have had a significant effect
on the operating results of commercial banks in the past and are expected
to continue to do so in the future.

Among other things, FDICIA requires the federal banking regulators to
take prompt corrective action with respect to depository institutions that
do not meet minimum capital requirements. FDICIA establishes five capital
tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.

The Federal Reserve Board has adopted regulations establishing
relevant capital measures and relevant capital levels for banks. The
relevant capital measures are the total risk-adjusted capital ratio, Tier 1
risk-adjusted capital ratio and the leverage ratio. Under the regulations,
a bank is considered (i) well capitalized if it has a total capital ratio
of ten percent or greater, a Tier 1 capital ratio of six percent or greater
and a leverage ratio of five percent or greater and is not subject to any
order or written directive by such regulator to meet and maintain a
specific capital level for any capital measure, (ii) adequately capitalized
if it has a total capital ratio of eight percent or greater, a Tier 1
capital ratio of four percent or greater and a leverage ratio of four
percent or greater (three percent in certain circumstances) and is not well
capitalized, (iii) undercapitalized if it has a total capital ratio of less
than eight percent, a Tier 1 capital ratio of less than four percent or a
leverage ratio of less than four percent (three percent in certain
circumstances), (iv) significantly undercapitalized if it has a total
capital ratio of less than six percent, a Tier 1 capital ratio of less than
three percent or a leverage ratio of less than three percent, and (v)
critically undercapitalized if its tangible equity is equal to or less than
two percent of average quarterly tangible assets. As of December 31, 1994,
each of the Banking Subsidiaries had capital levels that qualify them as
being well capitalized under such regulations.

FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions
are subject to restrictions on borrowing from the Federal Reserve Board,
effective December 19, 1993. In addition, undercapitalized depository
institutions are subject to growth limitations and are required to submit

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capital restoration plans. In order to obtain acceptance of a capital
restoration plan, a depository institution's holding company must guarantee
the capital plan, up to an amount equal to the lesser of 5% of the
depository institution's assets at the time it becomes undercapitalized or
the amount of the capital deficiency when the institution fails to comply
with the plan. Furthermore, in the event of a bankruptcy of the parent
holding company, such guarantee would take priority over the parent's
general unsecured creditors. The federal banking agencies may not accept a
capital plan without determining, among other things, that the plan is
based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. If a depository institution fails to
submit an acceptable plan, it is treated as if it is significantly
undercapitalized.

Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, and cessation of receipt of deposits from
correspondent banks. Critically undercapitalized depository institutions
are subject to appointment of a receiver or conservator.

Under FDICIA, a depository institution that is not well capitalized is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. In
addition, pass through insurance coverage may not be available for certain
employee benefit accounts.

Various other legislation, including proposals to overhaul the banking
regulatory system and to limit the investments that a depository
institution may make with insured funds are from time to time introduced in
Congress. City Holding cannot determine the ultimate effect that FDICIA
and the implementing regulations to be adopted thereunder, or any other
potential legislation, if enacted, would have upon its financial condition
or operations.

BUSINESS OF CITY HOLDING

City Holding, a West Virginia corporation headquartered in Charleston,
commenced operations in November 1983. City Holding currently has eight
banking subsidiaries and three non-banking subsidiaries. All of the
subsidiaries are wholly-owned. In addition to City Holding's periodic
filings with the Commission, each of the Banking Subsidiaries is subject to
certain regulatory guidelines at the applicable federal and state level.
As such, the banks are routinely examined by these regulatory bodies and
certain information is required to be submitted to them each quarter. City
Holding operates retail and consumer-oriented community banks that
emphasize personal service. At December 31, 1994, City Holding had total
assets of $781 million, total deposits of $651 million and total
stockholders' equity of $57 million.

City Holding's principal subsidiary bank is The City National Bank of
Charleston ("City National"), which was organized in 1957 and had $272

-64-

million in total assets at December 31, 1994. Through its main office,
City National serves the Kanawha City section of Charleston and
municipalities and rural areas east of the city. City National operates
full service branch banks in downtown Charleston, western Charleston, the
South Hills district of Charleston, St. Albans and Cross Lanes.

The Charleston metropolitan area served by City National is the
largest in West Virginia, with a population of approximately 270,000. The
state's capital city, Charleston, is served by three interstate highways
and the area's economy is diverse and strong in relation to the economy of
the state as a whole. A service center, Charleston provides governmental,
medical, financial and other services for the entire state. Major chemical
companies and educational institutions also contribute to the local
economy.

City Holding completed its acquisition of The Peoples Bank of Point
Pleasant ("Point Pleasant") in June 1987. Point Pleasant, a
state-chartered bank organized in 1965, conducts a general banking business
through its main office and two branch offices located in Mason County,
West Virginia, which has a population of approximately 27,000. The Mason
County economy primarily consists of dairy and crop farming industries.
Point Pleasant had total assets of $103 million at December 31, 1994.

In September 1988, City Holding acquired First State Bank & Trust of
Rainelle, West Virginia ("Rainelle"). Rainelle, a state-chartered bank
incorporated in 1973, operates a full-service bank and two branch offices
in Greenbrier County, West Virginia. In 1994, City Holding acquired the
remaining 33% of First National Bank-Beckley which was subsequently merged
into Rainelle. The merger expanded Rainelle into Beckley (Raleigh County),
West Virginia by adding two additional branches. The Greenbrier County
economy is primarily supported by the mining, timber and farming industries
and Raleigh County is primarily supported by the mining, retail and
government industries. Rainelle had total assets of $74 million at
December 31, 1994.

In October 1988, City Holding acquired Bank of Ripley ("Ripley").
Ripley, a state-chartered institution organized in 1891, is located in
Jackson County, West Virginia. Ripley operates a full-service bank with an
emphasis on retail or consumer banking. The Jackson County economy is
primarily supported by the farming and timber industries. Ripley had $64
million in total assets at December 31, 1994.

City Holding acquired Home National Bank of Sutton, West Virginia
("Home National") in May 1992. Home National, organized in 1909, operates
a full service bank and one branch office in Braxton County, West Virginia.
The Braxton County economy is primarily supported by the mining, timber,
and farming industries. Home National had total assets of $63 million at
December 31, 1994.

In August 1992, City Holding began operations of Blue Ridge Bank
("Blue Ridge"), a de novo institution chartered as a state nonmember bank.
Blue Ridge, a full-service bank, is located in Martinsburg, West Virginia.

-65-

In October 1993, Blue Ridge assumed the insured deposits and purchased
certain facilities and an insignificant amount of performing loans of the
former Shenandoah Federal Savings Association in a cash transaction with
the Resolution Trust Corporation. This acquisition, which added
approximately $40 million in deposits, expanded Blue Ridge from two offices
to six, located in Berkeley, Jefferson, Morgan and Grant counties. The
economy of Martinsburg and surrounding communities is primarily supported
by the wholesale and retail trade, service, and government industries.
Blue Ridge had total assets of $100 million at December 31, 1994.

City Holding acquired The Buffalo Bank of Eleanor in December 1992 and
changed its name to Peoples State Bank ("Peoples") in early 1995. Peoples,
a state-chartered bank organized in 1919 (as "The Buffalo Bank of
Eleanor"), operates a full-service bank and a branch office in Putnam
County, West Virginia. The Putnam County economy consists of agriculture,
retail and governmental industries. People's had total assets of $59
million at December 31, 1994. City Holding anticipates that it will move
Peoples headquarters to Clarksburg, West Virginia and merge People's Putnam
County operations into City National sometime in the second quarter of
1995.

City Holding acquired Hinton Financial Corporation ("Hinton") and The
First National Bank of Hinton ("Hinton National") in December 1994. Hinton
owns all of the outstanding capital stock of Hinton National. Hinton
National, organized in 1974, operates a full service bank in Summers
County, West Virginia. Summers County is primarily supported by the
railroad and government industries. Hinton had total assets of $67 million
at December 31, 1994.

During 1993, City Holding formed two non-banking subsidiaries. City
Mortgage Corporation was approved by the Federal Reserve Bank of Richmond
to operate as a full service mortgage banking company in December 1993.
Headquartered in a suburb of Pittsburgh, Pennsylvania, this company
originates, services and sells long-term fixed-rate mortgage loans. City
Financial Corporation was approved by the Federal Reserve Bank of Richmond
in November 1993 and by the National Association of Securities Dealers in
February 1994, to serve as a full service securities brokerage and
investment advisory company. City Financial Corporation is headquartered
in Charleston, West Virginia with its primary office located in City
National's main location. Both of these companies were formed primarily to
generate fee income in order to lessen City Holding's reliance on net
interest margin and to enable City Holding to offer a full array of
financial services to its customers. Hinton, City Holding's third non-
banking subsidiary, owns all of the outstanding capital stock of Hinton
National and does not conduct any other business activities.

City Holding continually seeks strategic acquisition opportunities for
small to medium-sized banks, but currently is not a party to any agreement
or understanding regarding any such acquisition other than the Agreement.
City Holding's acquisition policy has permitted the Banking Subsidiaries to
operate as entities with their historical names and boards of directors.
City Holding believes that this policy maintains community loyalty to the

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Banking Subsidiaries and improves operating performance while providing the
services and efficiencies of a larger holding company.

CITY HOLDING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following discussion should be read in conjunction with the
Selected Financial Data for City Holding and City Holding Audited
Consolidated Financial Statements included elsewhere herein.

Overview

City Holding's return on average assets ("ROA"), a measure of the
effectiveness of asset utilization, was .92% in 1994. Return on average
equity ("ROE"), which measures the return on shareholders' investment, was
12.01% in 1994. City Holding's ROA and ROE were 1.01% and 11.81%,
respectively in 1993. Earnings per share for 1994 were $1.85, an increase
of approximately 8.2% from the $1.71 per share reported in 1993. The main
reason for the increase in earnings per share is increased net interest
income, which is principally the result of increased loan volume and
continued growth of City Holding.

City Holding reported total assets of $781 million at December 31,
1994, and achieved $7.0 million in net income for the year then ended.
Total assets increased 10.5% over the 1993 total of $707 million, roughly
half of which increase was the result of City Holding's loan growth, as
more fully discussed in "Interest-Earning Assets and Interest-Bearing
Liabilities." Net income was up significantly over the $6.4 million and
$5.9 million reported for 1993 and 1992, respectively.

City Holding's acquisition of Hinton was accounted for using the
pooling of interests method of accounting. Accordingly, City Holding's
consolidated financial statements and related Notes, as well as the
information presented herein, have been restated to include Hinton as
though it were acquired at the beginning of the earliest period presented.
For further information concerning the 1994 acquisition, see Note 3 of the
City Holding Audited Consolidated Financial Statements.

The following sections discuss in more detail information with respect
to City Holding as summarized in "SELECTED FINANCIAL DATA."

Interest-Earning Assets and Interest-Bearing Liabilities

Average interest-earning assets increased $108.6 million from 1993 to
1994 and $113.8 million from 1992 to 1993. These increases are
attributable to the loan volume generated by City Holding's subsidiary
banks, which was accompanied by a comparable increase in deposits and
short-term borrowings. A significant part of the increase in net earning
assets for 1994 is attributable to City Holding's participation in a short-
term, whole loan bulk purchasing program. Under the program, City Holding
purchases from a third party whole loans secured by residential mortgages
and insured by an Agency of the United States government. The loans
typically have balances of less than $25,000 and are not concentrated

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geographically. Additionally, the program permits City Holding to require
the seller to repurchase or replace certain non-performing loans. The
loans are generally repurchased from City Holding within 30 to 90 days.
Although the loans usually are located outside City Holding's primary
market areas, management believes that these loans pose no greater risk
than similar "in-market" loans because of City Holding's review of the
loans, the credit support associated with the loans, the short duration of
City Holding's investment and the other terms of the program. The loans
are serviced by third parties and City Holding earns a fixed rate of return
on the loans. City Holding earned approximately $1.9 million during 1994
on an average balance of approximately $21.2 million. These loans are
being funded through short-term borrowings which consist primarily of
securities sold under agreement to repurchase.

Average short-term borrowings increased $24.9 million from 1993 to
1994. The average rate paid by City Holding for short-term borrowings
increased 156 basis points in 1994 due to general increases in market
interest rates.

Most of the internal growth in deposits has been in response to City
Holding's service-oriented philosophy and its active involvement in the
local communities it serves. City Holding also continues to establish
additional commercial relationships, with an emphasis on "in-market"
lending to businesses owned and operated by established customers. City
Holding believes its decentralized management style appeals to retail
consumers and small businesses. These lending arrangements are in
furtherance of City Holding's mission of being a high quality service
provider retaining strong ties to the local communities in which its
subsidiary banks operate. While all subsidiaries have experienced loan
growth, Rainelle and Blue Ridge have generated the most loan volume in
1994, with increases of 43% and 198%, respectively.

In response to the significant growth in loans, average investment
securities had a slight increase of $1.0 million during 1994. The overall
yield on investments has decreased from 1993 as a result of a more liquid
portfolio and the reinvestment in 1994 of proceeds from matured or called
securities during a period of declining market interest rates.

Average investment securities increased $27.8 million during 1993
principally because of the increase in deposits and short-term borrowings
as well as a reduction in federal funds sold for the same period.

Long-term debt, representing obligations of the Parent Company,
consists of amounts borrowed to fund the purchase of Buffalo common stock
and the related recapitalization of Buffalo, and to provide Blue Ridge with
additional capital in connection with its 1993 acquisition of certain
assets and deposits of the former Shenandoah Federal Savings Association.
For further details with respect to long-term debt, see Note 8 of the City
Holding Audited Consolidated Financial Statements.

Net Interest Income

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Net interest income, on a fully federal tax-equivalent basis,
increased $4.2 million during 1994. The average yield on earning assets
decreased from 8.23% in 1993 to 7.94% in 1994, while the average cost of
interest-bearing liabilities decreased from 3.81% to 3.68% over this same
period. This had the effect of decreasing the net yield on earning assets
from 4.96% in 1993 to 4.79% in 1994.

The $2.1 million decrease in net interest income due to rate, as shown
in Table Three which follows, was coupled with a $6.3 million increase in
net interest income due to volume. The major components of this favorable
volume change were increased average loans and investment securities as
more fully discussed under "Interest-Earning Assets and Interest-Bearing
Liabilities."

Net interest income, on a fully federal tax-equivalent basis,
increased $4.0 million in 1993. The $5.8 million increase caused by
changes in volume was offset by a $1.8 million decrease in net interest
income due to rate.

The following tables summarize the average balances, interest earned
or paid and yield or rate for City Holding's earning assets and interest-
bearing liabilities for each of the three years ended December 31, 1994,
1993 and 1992 and changes in net interest income and expense due to changes
in volume and rate during the same periods.

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<PAGE> Table One
Earning Assets and Interest-Bearing Liabilities
(in thousands)
<TABLE>
1994 1993 1992
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans (1)
Commercial and industrial $ 128,777 $ 10,912 8.47% $ 101,187 $ 8,687 8.59% $ 66,703 $ 5,972 8.95%
Real estate 211,463 17,301 8.18 158,554 14,183 8.95 108,343 11,067 10.21
Consumer obligations 108,684 10,579 9.73 102,572 10,381 10.12 99,409 11,183 11.25

Total loans 448,924 38,792 8.64 362,313 33,251 9.18 274,455 28,222 10.28

Loans held for sale 27,655 2,375 8.59

Securities
Taxable 192,288 12,071 6.28 192,143 12,650 6.58 166,451 12,895 7.75
Tax-exempt (2) 30,178 2,600 8.62 29,320 2,786 9.50 27,175 2,848 10.48

Total securities 222,466 14,671 6.59 221,463 15,436 6.97 193,626 15,743 8.13

Federal funds sold 6,930 194 2.80 13,632 476 3.49 15,566 530 3.40

Total earning assets 705,975 56,032 7.94 597,408 49,163 8.23 483,647 44,495 9.20

Cash and due from banks 21,397 19,292 14,047
Bank premises and equipment 16,323 13,140 9,403
Other assets 16,630 12,366 10,089
Less allowance for possible
loan losses (5,916) (5,364) (2,980)

Total assets $ 754,409 $ 636,842 $ 514,206

INTEREST-BEARING LIABILITIES:
Demand deposits $ 83,587 $ 2,641 3.16% $ 73,965 $ 2,293 3.10% $ 65,136 $ 2,666 4.09%

Savings deposits 221,305 6,861 3.10 189,328 6,338 3.35 125,554 5,217 4.16
Time deposits 250,090 10,608 4.24 227,342 10,218 4.49 204,158 10,631 5.21
Short-term borrowings 42,559 1,687 3.96 17,641 424 2.40 10,605 329 3.10
Long-term debt 6,252 445 7.12 4,387 274 6.25 508 35 6.89

Total interest-bearing
liabilities 603,793 22,242 3.68 512,663 19,547 3.81 405,961 18,878 4.65
Demand deposits 85,918 63,400 51,581
Other liabilities 6,773 6,320 6,206
Shareholders' equity 57,925 54,459 50,458
Total liabilities and
shareholders' equity $ 754,409 $ 636,842 $ 514,206

Net interest income $ 33,790 $ 29,616 $ 25,617

Net yield on earning assets 4.79% 4.96% 5.30%

</TABLE>
______________
(1) For purposes of this table, nonaccruing loans have been included in average
balances and loan fees, which are immaterial, have been included in interest
income.

(2) Computed on a fully federal tax-equivalent basis assuming a tax rate of 34%
in all years.

-72-
<PAGE>

Table Two
Rate/Volume Anaysis
of Changes in Interest
Income and Expense
(in Thousands)

<TABLE>

1994 VS. 1993 1993 VS. 1992
Increase (Decrease) Increase (Decrease)
Due to Change In: Due to Change In:

Volume Rate Net Volume Rate Net
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME FROM:
Loans
Commercial and industrial $ 2,339 $ (114) $ 2,225 $ 2,970 $ (255) $ 2,715
Real estate 4,411 (1,293) 3,118 4,626 (1,510) 3,116
Consumer obligations 604 (406) 198 347 (1,149) (802)

Total 7,354 (1,813) 5,541 7,943 (2,914) 5,029

Loans held for sale 2,375 0 2,375 0 0 0
Investment securities
Taxable 10 (589) (579) 1,839 (2,084) (245)
Tax-exempt (1) 80 (266) (186) 215 (277) (62)

Total 90 (855) (765) 2,054 (2,361) (307)

Federal funds sold (201) (81) (282) (67) 13 (54)
Total interest-earning assets $ 9,618 $ (2,749) $ 6,869 $ 9,930 $ (5,262) $ 4,668

INTEREST EXPENSE ON:
Demand deposits $ 303 $ 45 $ 348 $ 330 $ (703) $ (373)
Savings deposits 1,015 (492) 523 2,277 (1,156) 1,121
Time deposits 986 (596) 390 1,132 (1,545) (413)
Short-term borrowings 865 398 1,263 182 (87) 95
Long-term debt 129 42 171 243 (4) 239
Total interest-bearing
liabilities $ 3,298 $ (603) $ 2,695 $ 4,164 $ (3,495) $ 669

NET INTEREST INCOME $ 6,320 $ (2,146) $ 4,174 $ 5,766 $ (1,767) $ 3,999
</TABLE>
______________
(1) Fully federal taxable equivalent using a tax rate of 34% in all years.

The change in interest due to both rate and volume has been allocated
to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.

-75-

Loan Portfolio

The following table summarizes the composition of City Holding's loan
portfolio.

Table Three
Loan Portfolio
(in Thousands)
<TABLE>
DECEMBER 31
1994 1993 1992 1991 1990
<S> <C> <C> <C>
Commercial, financial
and agricultural $ 137,425 $ 125,568 $ 80,806 $ 76,179 $ 58,180
Real estate-mortgage 238,231 184,602 141,079 92,539 85,241
Installment loans to
individuals 129,300 114,110 120,324 97,768 95,434

Total loans $ 504,956 $ 424,280 $ 342,209 $ 266,486 $ 238,855
</TABLE>

-77-

City Holding had $15.3 million and $15.1 million outstanding in real
estate construction loans at December 31, 1994 and 1993, respectively, the
majority of which related to one to four family residential properties.
Real estate construction loans were not material in all other periods
presented.

The following table shows the contractual maturity of loans
outstanding as of December 31, 1994.

MATURING

After One
Within But Within After
One Year Five Years Five Years Total
Commercial, financial &
agricultural $ 29,233 $ 59,614 $ 47,065 $ 135,912
Real estate-mortgage 41,122 60,060 141,535 242,717
Installment loans to
individuals 18,468 92,446 15,413 126,327

Total loans $ 88,823 $ 212,120 $ 204,013 $ 504,956

Loans maturing after one year with:

Fixed interest rates $ 273,961
Variable interest rates 142,172

Total $ 416,133

-78-

<PAGE>
Loan Loss Analysis

During 1994, City Holding charged-off $1,093,000 of loans that were
doubtful as to collection and had recoveries of $393,000. The resulting
net charge-offs of $700,000, decreased 34% from that reported in 1993. Net
charge-offs decreased approximately 15%, or $138,000 in 1993 versus 1992.
Approximately half of the 1993 net charge-offs was related to pre-
acquisition loans at Buffalo. Net charge-offs as a percent of average
total loans decreased 13 basis points when comparing 1994 to 1993. City
Holding's asset quality continues to compare favorably with that of peer
banks.

The provision for possible loan losses charged to operations each year
is dependent upon many factors, including loan growth, historical charge-
off experience, size and composition of the loan portfolio, delinquencies
and general economic trends. The provision of $953,000 in 1994 represents
.21% of average loans as compared to a $1,341,000 or .37% provision in
1993. The decreased provision for 1994 is primarily due to lower net
charge-offs as discussed above. Loan volume has continued to increase in
recent years as a result of City Holding's more active solicitation of
commercial loan business as well as general volume increases applicable to
the traditional borrowing segment from which City Holding has generated
loans in the past. City Holding has successfully attracted more commercial
customers, while continuing to obtain noncommercial, lower risk collateral
such as residential properties. City Holding's collateral position with
respect to real estate loans has typically been less volatile than its
peers, particularly banks located outside of its region where dramatic
escalations in real estate values took place in certain prior years. See
Note 5 to the City Holding Audited Consolidated Financial Statements for a
discussion of concentrations of credit risk.

The allowance for loan losses was $6,017,000, or 1.23% of net loans,
as of December 31, 1994, compared to $5,764,000 or 1.41% of net loans in
1993. In management's opinion, the consolidated allowance for loan losses
is adequate to provide for any potential losses on existing loans.

Nonperforming loans, consisting of nonaccrual, past due and
restructured credits, increased approximately $914,000 in 1994. While the
general economy remains soft in certain of the subsidiary banks' market
areas, management does not anticipate material loan losses since loan to
collateral ratios remain favorable. At December 31, 1994, loans
aggregating $529,000 are considered by management to represent possible
future credit problems. These loans are generally contractually current,
but information is available to management which indicates that serious
doubt may exist as to the ability of such borrowers to comply with the
present loan repayment terms. The ratio of the allowance for loan losses
to nonperforming loans, including potential problem loans, was 131% at
December 31, 1994, as compared to 125% and 102% at December 31, 1993 and
1992, respectively.

Tables Four, Five and Six detail loan performance and analyze the
allowance for loan losses.

-79-
<TABLE>

Table Four
Analsis of the Allowance for Loan Losses
(in thousands)

DECEMBER 31
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 5,764 $ 5,380 $ 2,401 $ 1,929 $ 1,721
Charge-offs:
Commercial, financial and agricultural (300) (684) (244) (302) (270)
Real estate-mortgage (151) (239) (292) (247) (186)
Installment loans to individuals (642) (614) (627) (452) (463)
Totals (1,093) (1,537) (1,163) (1,001) (919)

Recoveries:
Commercial, financial and agricultural 110 58 20 49 77
Real estate-mortgage 11 218 65 26 50
Installment loans to individuals 272 200 155 126 102
Totals 393 476 240 201 229

Net charge-offs (700) (1,061) (923) (800) (690)
Provision for possible loan losses 953 1,341 2,222 1,272 898
Balance of acquired subsidiary 104 1,680

Balance at end of period $ 6,017 $ 5,764 $ 5,380 $ 2,401 $ 1,929

AS A PERCENT OF AVERAGE TOTAL LOANS
Net charge-offs .16% .29% .34% .33% .33%
Provision for possible loan losses .21 .37 .81 .53 .43

AS A PERCENT OF NONPERFORMING
AND POTENTIAL PROBLEM LOANS
Allowance for loan losses 130.55% 125.06% 102.34% 65.37% 70.89%

</TABLE>
Table Five
Nonaccrual, Past Due and Restructured Loans
(in thousands)
<TABLE>

DECEMBER 31
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 2,600 $ 1,524 $ 1,473 $ 1,367 $ 874
Accruing loans past due 90 days or more 1,218 643 1,293 1,780 1,446
Restructured loans 262 999 1,475 526 401
$ 4,080 $ 3,166 $ 4,241 $ 3,673 $ 2,721
</TABLE>

-82-

During 1994, City Holding recognized approximately $119,000 of
interest income received in cash on nonaccrual and restructured loans.
Approximately $229,000 of interest income would have been recognized during
the year if such loans had been current in accordance with their original
terms. There were no commitments to provide additional funds on
nonaccrual, restructured, or other potential problem loans at December 31,
1994.

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.

Table Six
Allocation of the Allowance for Loan Losses
(in thousands)

<TABLE>
DECEMBER 31
1994 1993 1992 1991 1990
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in Each in Each in Each in Each in Each
Category Category Category Category Category
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 1,816 27% $ 1,943 30% $ 1,959 24% $ 1,020 28% $ 709 24%
Real estate-mortgage 2,600 47 2,131 43 1,745 41 494 35 457 36
Installment loans to
individuals 1,601 26 1,690 27 1,676 35 887 37 763 40
$ 6,017 100% $5,764 100% $ 5,380 100% $ 2,401 100% $ 1,929 100%
</TABLE>

-84-

The portion of the allowance for loan losses that is not specifically
allocated to individual credits has been apportioned among the separate
loan portfolios based on the relative risk of each portfolio.

Liquidity and Interest Rate Sensitivity

City Holding has a strong liquidity position and does not anticipate
any material adverse changes in 1995. There are no known trends, demands,
commitments or uncertainties that have resulted or are reasonably likely to
result in material changes in liquidity.

City Holding seeks to maintain a strong liquidity position to reduce
interest rate risk, which is the susceptibility of assets and liabilities
to declines in value as a result of changes in general market interest
rates. City Holding minimizes this risk through asset and liability
management, where the goal is to optimize earnings while managing interest
rate risk. City Holding measures this interest rate risk through interest
sensitivity gap analysis as illustrated in Table Seven. At December 31,
1994, the one year period shows a negative gap (liability sensitive) of
$328 million. This analysis is a "static gap" presentation and movements
in deposit rates offered by City Holding's subsidiary banks lag behind
movements in the prime rate. Such time lags affect the repricing frequency
of many items on City Holding's balance sheet. Accordingly, the
sensitivity of deposits to changes in market rates may differ significantly
from the related contractual terms. Table Seven is first presented without
adjustment for expected repricing behavior. Then, as presented in the
"management adjustment" line, these balances have been notionally
distributed over the first three periods to reflect those portions of such
accounts that are expected to reprice fully with market rates over the
respective periods. The distribution of the balances over the repricing
periods represents an aggregation of such allocations by each of the
affiliate banks, and is based upon historical experience with their
individual markets and customers. Management expects to continue the same
pricing methodology in response to the future market rate changes; however,
management adjustments may change as customer preferences, competitive
market conditions, liquidity, and loan growth change. Also presented in
the management adjustment line are loan prepayment assumptions which may
differ from the related contractual term of the loans. These balances have
been distributed over the four periods to reflect those loans that are
expected to be repaid in full prior to their maturity date over the
respected period. After management adjustments, Table Seven shows a
negative gap in the one year period of $137 million. A negative gap
position is advantageous when interest rates are falling because interest-
bearing liabilities are being repriced at lower rates and in greater
volume, which has a positive affect on net interest income. However, when
interest rates are rising, this position produces the converse effect.
Consequently, City Holding has experienced a decline in its net interest
margin during the past two years and is somewhat vulnerable to a rapid rise
in interest rates in 1995. These declines in the net interest margin did
not translate into declines in net interest income because of increases in
the volume of interest-earning assets. In any event, City Holding intends

-85-

to increase the repricing frequency of interest-earning assets,
particularly through variable-rate loan products, to achieve a less
volatile gap position.

Table Seven
Interest Rate Sensitivity Gaps
(in thousands)

<TABLE>
1 TO 3 3 TO 12 1 TO 5 OVER 5
MONTHS MONTHS YEARS YEARS TOTAL
<S> <C> <C> <C> <C> <C>
ASSETS
Gross loans $105,619 $ 59,186 $249,727 $ 87,824 $502,356
Loans held for sale 30,227 0 0 0 30,227
Securities 16,014 19,887 98,799 61,677 196,377
Total interest-earning
assets 151,860 79,073 348,526 149,501 728,960

LIABILITIES
Savings and NOW
accounts 308,100 0 0 0 308,100
All other interest-
bearing deposits 76,619 110,180 72,917 2,754 262,470
Short-term borrowings 57,483 0 0 0 57,483
Long-term borrowings 6,875 0 0 0 6,875

Total interest-
bearing liabilities 449,077 110,180 72,917 2,754 634,928
Interest sensitivity gap $ (297,217) $ (31,107) $ 275,609 $146,747 $ (94,032)
Cumulative sensitivity
gap $ (297,217) $(328,324) $ (52,715) $ 94,032
Management adjustments $ 262,434 $ (71,241) $(181,057) $(10,136)
Cumulative management
adjusted gap $ (34,783) $(137,131) $(42,579) $94,032

-87-
</TABLE>

The table above includes various assumptions and estimates by
management as to maturity and repricing patterns. Future interest margins
will be impacted by balances and rates which are subject to change
periodically throughout the year.

City Holding also seeks to maintain adequate liquidity in order to
generate sufficient cash flows to fund operations on a timely basis. City
Holding manages its liquidity position to provide for asset growth and to
ensure that the funding needs of depositors and borrowers can be met
promptly. City Holding does not have a high concentration of volatile
funds, and all such funds are invested in assets of comparable maturity to
mitigate liquidity concerns.

At December 31, 1994, the Parent Company had $6,875,000 in long-term
debt outstanding. These funds were used primarily to provide Blue Ridge
with additional capital in connection with its 1993 acquisition of certain
assets and deposits of the former Shenandoah Federal. Total debt service
for the Parent Company in 1995 will approximate $560,000 million at current
interest rates. Other than long-term debt, the cash needs of the Parent
Company consist of routine payroll and benefit expenses of the Parent
Company personnel, expenses for certain professional services, debt service
on affiliate advances and dividends to shareholders.

The Parent Company has approximately $6.2 million available for
transfer from its subsidiary banks as of January 1, 1995. Subsidiary bank
earnings in 1995 through the date of dividend declaration are also
available for transfer upstream. Such subsidiary bank dividends are the
Parent Company's primary source of cash. Management anticipates that the
cash flow requirements of the Parent Company will be adequately met in the
normal course of business. For more specific information regarding
restrictions on subsidiary dividends, see Note 9 to the City Holding
Audited Consolidated Financial Statements.

City Holding's cash and cash equivalents, represented by cash, due
from banks and federal funds sold, are a product of its operating,
investing and financing activities. These activities are set forth in City
Holding's Consolidated Statements of Cash Flows included elsewhere herein.
Cash was used in operating activities during 1994 due to the purchase of
loans held for sale and was generated from operating activities in 1993 and
1992. Net cash was used in investing activities for each year presented
which is indicative of City Holding's loan volume over this period and net
increases in the investment portfolio. The majority of this loan growth
and investment activity was funded by the net cash provided by financing
activities, principally in the form of increased interest-bearing deposits.

The following tables present information regarding City Holding's
investment portfolio.

-88-

Table Eight
Investment Portfolio
(in thousands)

<TABLE>
Held to Available Book Values as of December 31
Maturity For Sale
1994 1994 1993 1992
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. government
corporations and agencies $92,372 $56,751 $193,284 $168,821
States and political subdivisions 32,056 790 33,984 31,769
Other 3,669 10,379 14,353 7,467
Total $128,457 $67,920 $241,621 $208,057
</TABLE>

At December 31, 1994, there were no securities of any issuers whose
aggregate carrying or market value exceeded 10% of shareholders'
equity.

-89-
<TABLE>
MATURING
Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other
U.S. government
corporations and
agencies $ 24,744 6.83% $ 83,565 6.71% $ 39,119 6.47% $ 2,055 6.15%
State and political
subdivisions(1) 2,422 11.19 11,586 8.93 16,018 8.10 2,820 8.86
Other 8,735 6.11 3,648 7.46 1,665 7.70 0 0.00
Total $ 35,901 6.95% $ 98,799 6.98% $56,802 6.97% $ 4,875 7.72%
</TABLE>
____________

(1) Weighted average yields on tax-exempt obligations of states and political
subdivisions have been computed on a fully federal tax-equivalent basis using a
tax rate of 34%.

-90-

Other Income and Expenses

Other income continues to be an area of management emphasis.
Recognizing the importance of non-interest income to future operating
performance, City Holding is aggressively pursuing additional service
opportunities by offering a variety of services and products to its
customers which include trust, brokerage, mortgage banking and related
services.

The loan and deposit growth at City Holding's subsidiary banks, which
includes a greater mix of commercial relationships than certain prior
years, has positioned City Holding to increase other income in areas such
as service charges. Service charge income increased approximately $503,000
or 27% when comparing 1994 to 1993. Approximately half of this increase is
attributable to fees charged in the normal course of business on the
additional $40 million in deposits acquired by Blue Ridge from the former
Shenandoah Federal Savings Association in late 1993.

Other income increased $2.3 million during 1994. This increase was
related to an insurance recovery of $1.4 million at one of City Holding's
Subsidiary banks. An additional $280,000 in fees was generated from
services provided by City Financial and City Mortgage during their first
year of operations and approximately $360,000 in fees were generated from
overall loan growth during 1994.

During the fourth quarter of 1994, City Holding took the opportunity
to restructure its available-for-sale investment portfolio that resulted in
an $885,000 securities loss. Gains/losses from securities transactions
were not significant in 1993 or 1992. As more fully described in City
Holding's securities policy in Note 1 to the City Holding Audited
Consolidated Financial Statements, management determines the appropriate
classification of securities at the time of purchase. Historically, sales
of securities have been infrequent. See Note 4 to the City Holding Audited
Consolidated Financial Statements for a discussion of securities available-
for-sale.

Total other expenses increased $5.5 million, or 26.2%, during 1994 due
primarily to $1.1 million in expenses incurred by City Financial and City
Mortgage with no expenses for these new subsidiaries included in the 1993
results. In addition, Blue Ridge had an increase of approximately $1.9
million in non-interest expense associated with growth and the 1993
acquisition of Shenandoah Federal Savings Association. The additional
increase of $2.5 million is attributable to City Holding's overall growth
during 1994, which produced higher personnel costs throughout the
organization. Total other expenses increased $5.0 million or 31.7%, during
1993 due primarily to $1.9 million in expenses incurred by Buffalo and
Beckley with no expenses for these purchased Subsidiaries included in the
1992 results. In addition, Blue Ridge had $157,000 in other expenses in
1992 for the first four months of operation compared to $1.2 million in
1993 for a full year. The additional increase of $2.1 million in 1993 is
attributable to City Holding's overall growth during that year.

-91-

Capital Resources

As a bank holding company, City Holding is subject to regulation by
the Federal Reserve Board under the BHCA. At December 31, 1994, the
Federal Reserve Board's minimum ratio of qualified total capital to risk-
weighted assets is eight percent. At least half of the total capital is
required to be comprised of Tier 1 capital, or the equity of the holders of
City Holding Common Stock less intangibles. The remainder ("Tier 2
capital") may consist of certain other prescribed instruments and a limited
amount of loan loss reserves.

In addition, the Federal Reserve Board has established minimum
leverage ratio (Tier 1 capital to quarterly average tangible assets)
guidelines for bank holding companies. These guidelines provide for a
minimum ratio of three percent for bank holding companies that meet certain
specified criteria, including that they have the highest regulatory rating.
All other bank holding companies are required to maintain a leverage ratio
of three percent plus an additional cushion of at least 100 to 200 basis
points. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum
supervisory levels, without significant reliance on intangible assets.

The following table presents comparative capital ratios and related
dollar amounts of capital for City Holding:

<TABLE>

Table Nine
Regulatory Capital
(Dollars in Thousands)

1994 1993
<S> <C> <C>
CAPITAL COMPONENTS
Tier 1 risk-based capital $ 52,408 $ 50,821
Total risk-based capital 58,425 55,832
CAPITAL RATIOS
Tier 1 risk-based 10.65% 12.70%
Total risk-based 11.88 13.95
Leverage 6.65 7.31

REGULATORY MINIMUM
Tier 1 risk-based (dollar/ratio) $ 19,677/4.00% $ 16,036/4.00%
Total risk-based (dollar/ratio) 39,354/8.00 32,072/8.00
Leverage (dollar/ratio) 23,628/3.00 20,862/3.00

</TABLE>

The strong capital position of City Holding is indicative of
management's emphasis on asset quality and a history of retained net
income. The ratios enable City Holding to continually pursue acquisitions
and other growth opportunities. Improvements in operating results and a
consistent dividend program, coupled with an effective management of credit
risk, have been, and will be, the key elements in maintaining City
Holding's present capital position.

City Holding does not anticipate any material capital expenditures in
1995. Earnings from subsidiary bank operations are expected to remain
adequate to fund payment of shareholders' dividends and internal growth.
In management's opinion, subsidiary banks have the capability to upstream
sufficient dividends to meet the cash requirements of the Parent Company.
Maturities of time certificates of deposit of $100,000 or more outstanding
at December 31, 1994, are summarized as follows:

Table Ten
Maturity Distribution Of Certificates Of
Deposits In Amounts Of $100,000 Or More
(in thousands)

Amounts Percentage

Three months or less $ 11,195 32%
Over three months
through six months 5,727 16
Over six months through
twelve months 7,540 22
Over twelve months 10,585 30

Total $ 35,047 100%

Inflation

Since the assets and liabilities of the subsidiary banks are primarily
monetary in nature (payable in fixed, determinable amounts), the
performance of banks is affected more by changes in interest rates than by
inflation. Interest rates generally increase as the rate of inflation
increases, but the magnitude of the change in rates may not be the same.

While the effect of inflation on banks is normally not as significant
as its influence on those businesses which have large investments in plant
and inventories, it does have an effect. During periods of high inflation,
there are normally corresponding increases in the money supply, and banks
will normally experience above-average growth in assets, loans and
deposits. Also, general increases in the price of goods and services will
result in increased operating expenses.

Income Taxes

-94-

Income tax expense was $3,193,000 in 1994, resulting in an effective
tax rate of 31.5% for the year. Such rates were 31.4% and 29.8% in 1993
and 1992, respectively. The effective tax rate from 1993 to 1994 remained
relatively unchanged. The increase effective tax rate from 1992 to 1993 is
principally the result of a decreased mix of tax-exempt income relative to
total earnings.

As more fully discussed in Note 10 to the City Holding Audited
Consolidated Financial Statements, City Holding prospectively adopted the
liability method of accounting for income taxes during 1992, without
material effect. At December 31, 1994, gross deferred tax assets total
approximately $5.0 million. Such assets are primarily attributable to the
allowance for loan losses ($2 million), acquired net operating loss ("NOL")
carryforwards ($777,000) certain nonqualified deferred compensation
arrangements sponsored by subsidiary banks ($436,000) and securities
available for sale ($1.4 million). Pursuant to management's evaluation for
the quarter ended December 31, 1994, no valuation allowance has been
allocated to the deferred tax assets. The quarterly evaluation process
employed by management is based upon the expected reversal period of the
assets, in consideration of taxes paid by City Holding in the carryback
years, expected reversals of existing taxable temporary differences, and
historical trends in taxable income.

Those assets for which realization is expected to be dependent on
future events are subjected to further evaluation. Management's analysis
has shown that realization of certain deferred tax assets, principally the
acquired NOL, will be dependent on future events. After considering such
factors as the magnitude of the asset relative to historical levels of
financial reporting income and taxable income, the period over which future
taxable income would have to be earned to realize the asset, and budgeted
future results of operations, management has concluded that it is more
likely than not that all other deferred tax assets existing at December 31,
1994, will be realized. At present, management does not expect that
implementation of tax planning strategies will be necessary to ensure
realization. The need for a valuation allowance will continue to be
addressed by management each quarter and any changes in the valuation
allowance will be reported contemporaneously therewith in City Holding's
quarterly results of operations.

<PAGE>
CITY HOLDING MARKET PRICE AND DIVIDEND INFORMATION

City Holding Common Stock is included on The Nasdaq National Market
under the symbol CHCO. The following table sets forth the cash dividends
paid per share and information regarding the market prices per share of
City Holding's Common Stock for the periods indicated. The price ranges
are based on transactions as reported on The Nasdaq National Market. At
December 31, 1994, there were 1,771 stockholders of record.

-95-

<TABLE>
Cash
Dividends Market Price Range
Per Share Low High
<S> <C> <C> <C>

1995
First Quarter $ .16 $26.75 $30.00

1994
Fourth Quarter $ .15 $27.00 $31.82
Third Quarter .15 28.18 31.82
Second Quarter .15 23.64 31.82
First Quarter .15 24.55 31.82

1993
Fourth Quarter $ .15 $25.91 $30.45
Third Quarter .15 23.18 30.45
Second Quarter .14 20.00 26.82
First Quarter .14 18.64 21.59

</TABLE>

-97-

See "SUPERVISION AND REGULATION" and Note 9 to the City Holding
Audited Consolidated Financial Statements for a discussion of restrictions
on subsidiary dividends. All per share data have been restated to reflect
a 10% stock dividend effective January 1995. Cash dividends represent
amounts declared by City Holding and do not include cash dividends of
acquired subsidiaries prior to the dates of acquisition.

CITY HOLDING OWNERSHIP OF EQUITY SECURITIES

The table below presents certain information as of March 24, 1995
regarding beneficial ownership of shares of City Holding Common Stock by
Directors, nominees for Director, all Directors and officers as a group and
each person known by City Holding to own more than five percent (5%) of the
outstanding City Holding Common Stock.

Sole Voting
and Aggregate
Investment Percentage
Name Power Other (1) Owned

Samuel M. Bowling 19,858 43,224 1.67
C. Scott Briers 5,422 2,057 .20

Dr. D. K. Cales 72,458 - 1.92
Steven J. Day 20,154 10,455 .81

Robert D. Fisher 4,128 - .11
Jack E. Fruth 28,076 391 .75

Jay Goldman 7,880 242 .21
Carlin K. Harmon 23,344 4,168 .73

C. Dallas Kayser 27,246 181 .73
Dale Nibert 35,365 - .94

Otis L. O'Connor 2,942 12 .08
Bob F. Richmond 8,415 - .22

Mark Schaul 23,958 1,270 .67
Van R. Thorn, II 1,452 1,125 .07

Directors and
Officers 286,732 69,038 9.42
As a group (17
persons)

-99-

______________
(1) Includes shares (a) owned by or with certain
relatives; (b) held in various fiduciary capacities; (c)
held by certain corporations; or (d) held in trust by City
Holding's 401(k) and Profit Sharing Plan.

BUSINESS OF FMB

FMB is a one bank holding company which was incorporated in the State
of West Virginia on June 26, 1986. FMB commenced operations on March 5,
1987, acquiring Merchants in Montgomery, West Virginia and Gauley in Gauley
Bridge, West Virginia. FMB operated as a multi-bank holding company from
March 5, 1987 to March 1, 1990, at which time it merged Gauley into
Merchants. FMB expanded into Charleston, West Virginia on September 17,
1993 when Merchants successfully bid for certain assets and assumed the
insured deposits and certain other liabilities of Evergreen, a failed
thrift institution. FMB is subject to the routine filing requirements of
the Commission and the subsidiary bank is subject to various regulatory
guidelines at the federal and state levels. Merchants' primary regulator
is the OCC; however, the bank is also regulated by the Federal Reserve
Board and the FDIC. FMB is regulated by the Federal Reserve Board and the
West Virginia Board.

As a bank holding company, FMB's operations consist of the operations
of its bank subsidiary. Merchants is a consumer-oriented community bank
which offers a full range of deposit and lending services to customers in
its primary market area. The markets in which it operates are determined
by the locations of its main facility and its branches. Merchants' main
facility is located in Montgomery, West Virginia; however, it also operates
branches in Cedar Grove/Glasgow, Gauley Bridge, and Charleston, West
Virginia.

As of December 31, 1994, FMB had a total of 78 employees, as compared
with a total of 78 and 64 employees at December 31, 1993 and 1992,
respectively. Management does not anticipate any material change in FMB's
workforce.

The principal executive office of FMB is located at Fourth Avenue and
Washington Street, Montgomery, West Virginia 25136 and its phone number is
(304) 442-2475.

PROPERTIES OF FMB

The principal offices of FMB are located at the same location as the
offices of Merchants, at Fourth Avenue and Washington Street, in
Montgomery, Fayette County, West Virginia. This facility consists of a
full-service banking lobby as well as office space for the various other
banking services offered by Merchants. In November, 1987, Merchants placed
in service a new facility which connects with the main structure via an
aerial walkway. This new facility features a full-service walkup lobby and
five drive through lanes at ground level and additional office space on the
second floor.

Merchants opened its first full-service branch in Glasgow, Kanawha
County, West Virginia on January 2, 1987. This facility offers a full-
service banking lobby as well as five drive through lanes. On March 1,
1990, FMB merged its two subsidiary banks, Merchants and Gauley. Gauley,
which is now a branch of Merchants, is located at One Main Street, Gauley

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Bridge, Fayette County, West Virginia. This facility consists of a full-
service banking lobby and three drive through lanes at ground level and
additional office space on the second floor.

On September 17, 1993, Merchants acquired two locations in Charleston,
West Virginia. These facilities, which formerly operated as the main
office and branch office of Evergreen, opened as branches of Merchants on
September 20, 1993. One office is located at 200 Bradford Street,
Charleston, Kanawha County, West Virginia. This facility consists of a
full-service banking lobby and two drive through lanes at ground level and
additional office space in the basement. The second facility is located at
4315 MacCorkle Avenue, SE, Charleston, Kanawha County, West Virginia. This
office consists of a full-service banking lobby and two drive through
lanes.

Merchants currently operates four automatic teller machines at the
following locations: (i) at the main banking facility, (ii) at the Glasgow,
West Virginia branch, (iii) at the Gauley Bridge, West Virginia branch, and
(iv) at the MacCorkle Avenue, Charleston, West Virginia branch.

FMB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

Summary of Changes in Financial Position

Total deposits as reflected in the consolidated Balance Sheets
increased approximately $2.9 million during 1994. This increase in FMB's
primary source of funds was complimented by an increase in the level of
securities sold under agreements to repurchase of approximately $3.7
million.

Net loans outstanding, exclusive of certain short-term instruments
classified as loans, increased approximately $2.8 million or 6.2% during
1994. This compares with the loan growth experienced in 1993 of $2.7
million or 7.22%, exclusive of the loans purchased from Evergreen. For
financial statement purposes, purchases of commercial loan participations
and commercial paper are classified as net loans outstanding. The
following table provides a comparative analysis of the loan portfolio
segregated by the typical loan products offered by Merchants to its
customers and short-term financial instruments classified as loans:

December 31,
1994 1993 1992
Loans, net of unearned income
and allowance for loan losses $47,913,738 $45,115,039 $36,957,493
Short-term financial instruments
classified as loans 10,500,455 9,318,614 15,170,749

Net loans outstanding $58,414,193 $54,433,653 $52,128,242

-102-

Historically, FMB has purchased the short-term financial instruments
classified as loans to match maturities of repurchase agreements and
volatile deposits. Management has elected to maintain a higher volume of
these instruments, relative to the volume of volatile funds, in an effort
to reduce FMB's liability sensitive financial position and corresponding
interest rate risk. Management has also directed its marketing efforts
towards generating additional loan demand through more competitive pricing
of its loan products in an effort to preserve its net yield on earning
assets.

Net unrealized (loss) gain, on securities available for sale declined
by approximately $1,095,000 (net of related taxes) during 1994. This
decline can be attributed to the rising interest rate environment in effect
throughout the year which has resulted in declining market values of
securities classified as available for sale.

As of December 31, 1994, management is not aware of any current
recommendations by regulatory authorities, which if implemented, would have
or are reasonably likely to have a material effect on FMB's liquidity,
capital resources or operations. There are also no known trends, demands,
commitments, or uncertainties that have had, or that are reasonably
expected to have, a material favorable or unfavorable impact on the
financial results of FMB.

Summary of Results of Operations

Net income for 1994 was $1,182,560, as compared to $1,212,677 and
$1,067,712 for 1993 and 1992, respectively.

Net Interest Income

FMB's net interest income increased approximately $480,000 during 1994
when compared with 1993 and approximately $160,000 during 1993 when
compared with 1992. FMB's net yield on earning assets increased to a level
of 5.09% in 1994 from 4.90% in 1993 after decreasing from a level of 4.98%
in 1992. The following table presents the weighted yield on earning
assets, weighted cost of funds and net yield on earning assets for each of
the periods presented:

1994 1993 1992

WEIGHTED YIELD ON EARNING ASSETS (1) 8.02% 7.93% 8.68%

WEIGHTED COST OF RATE SENSITIVE LIABILITIES 3.38 3.53 4.26

NET YIELD ON EARNING ASSETS 5.10 4.90 4.98

(1) Weighted average yields on assets exempt from federal income taxes
have been computed on a fully tax equivalent basis assuming a tax rate of
34 percent.

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The following tables present FMB's asset (liability) sensitivity
position:

<TABLE>
REPRICING FREQUENCY
at December 31, 1994
0-30 31-90 91-365 365+
DAYS DAYS DAYS DAYS TOTAL
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Interest bearing
deposits with other banks . . . . $ 29 $ 642 $ 671
Federal funds sold . . . . . . . . . 810 810
Securities available for sale . . . . 7,246 7,247 $ 396 14,889
Securities held to maturity . . . . . 750 $ 510 1,001 26,387 28,648
Loans . . . . . . . . . . . . . . . . 20,262 6,612 12,000 19,540 58,414

Total Earning Assets . . . . . . . . $29,097 $ 7,122 $20,890 $46,323 $103,432

Interest bearing demand deposits . . $13,942 $ 13,942
Savings deposits . . . . . . . . . . 3,225 $ 6,450 $22,686 32,361
Time deposits . . . . . . . . . . . . 4,457 5,525 13,803 $11,779 35,564
Short-term borrowings . . . . . . . . 5,952 3,192 9,144

Total Rate Sensitive Liabilities . . $27,576 $15,167 $36,489 $11,779 $ 91,011

Asset (Liability) Sensitivity . . . . 1,521 (8,045) (15,599) 34,544 12,421

Cumulative gap . . . . . . . . . . . 1,521 (6,524) (22,123) 12,421
</TABLE>
<TABLE>
REPRICING FREQUENCY
at December 31, 1993
0-30 31-90 91-365 365+
DAYS DAYS DAYS DAYS TOTAL
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Interest bearing
deposits with other banks . . . . . $ 1,215 $ 1,215
Federal funds sold . . . . . . . . . 710 710
Securities available for sale . . . . 21,056 21,056
Securities held to maturity . . . . . 564 $ 190 $ 2,227 $18,159 21,140
Loans . . . . . . . . . . . . . . . . 20,745 4,083 11,679 18,455 54,962

Total Earning Assets . . . . . . . . $44,290 $ 4,273 $13,906 $36,614 $99,083

Interest bearing demand deposits . . $13,176 $13,176
Savings deposits . . . . . . . . . . 34,209 34,209
Time deposits . . . . . . . . . . . . 4,280 $ 6,328 $13,573 $10,177 34,358
Short-term borrowings . . . . . . . . 3,893 1,650 5,543

Total Rate Sensitive Liabilities . . $55,558 $ 7,978 $13,573 $10,177 $87,286

Asset (Liability) Sensitivity . . . . (11,268) (3,705) 333 26,437 11,797

Cumulative gap . . . . . . . . . . . (11,268) (14,973) (14,640) 11,797
</TABLE>
-106-

The analysis above is a "static gap" presentation applicable at a
particular point in time. Various assumptions and estimates have been made
by management in determining maturity and repayment patterns for purposes
of these tables. One such assumption is that the entire portfolio of
securities available-for-sale is available for use in FMB's current
operations.

Provision for Loan Losses

The provision for loan losses is an estimate based upon management's
continuing assessment of the adequacy of the allowance for loan losses in
relation to anticipated losses. The provision for loan losses is
determined based on quarterly reviews of the adequacy of the allowance,
given current trends and existing economic conditions, along with estimates
of exposure to losses applicable to specific higher risk loans.

During 1994, loans totaling approximately $87,000 were charged-off and
recoveries of previously charged-off amounts totaled approximately $15,000.
The resulting net charge-offs of $72,000 are higher than net charge-offs
for 1993 of $59,000 and lower than 1992 net charge-offs of $113,000. The
provision charged to operations in 1994 was $86,699 as compared with
$93,193 and $103,155 in 1993 and 1992, respectively.

The allowance for loan losses represented 0.96%, .099%, and 0.94% of
outstanding loans at December 31, 1994, 1993, and 1992, respectively.
Management is not aware of any significant potential problem loans as of
December 31, 1994. For purposes of calculating the percentage of the
allowance for loan losses to outstanding loans, short-term financial
instruments classified as loans were excluded from total loans outstanding.
In management's opinion, these are extremely low risk instruments which do
not warrant an allocation in terms of the allowance for loan losses.

Nonperforming loans at December 31, 1994, approximated $216,000 as
compared with $179,000 and $322,000 at December 31, 1993 and 1992,
respectively. The ratio of the allowance for loan losses to nonperforming
loans was 213% at December 31, 1994, as compared to a coverage ratio of
229% at December 31, 1993. Management does not anticipate significant
ultimate losses on any of these nonperforming credits.

The average balance of nonaccrual loans was approximately $31,000 and
$33,000 for 1994 and 1993, respectively. Therefore, the interest earnings
foregone on these funds were immaterial, as was the income collected and
recorded in interest income on the cash basis.

Noninterest Income and Expenses

Total noninterest income decreased approximately $256,000 during 1994
when compared with 1993 as a result of a decline in securities gains of
approximately $278,000. The increase in total noninterest income from 1992
to 1993 also resulted primarily from securities gains and losses. The 1992

-107-

net gains are inclusive of a write-down (other than temporary loss) of
approximately $200,000 on certain equity securities.

Total noninterest expenses increased approximately $443,000 during
1994 when compared with 1993, and approximately $245,000 during 1993 when
compared with 1992. The increase in total noninterest expenses during 1994
is attributable to increases in salaries and employee benefits, occupancy
expense of premises, and other operating expenses. The primary reason for
these increases is that 1994 was the first full year of ownership and
operation of the two former Evergreen locations. The increase in total
noninterest expense during 1993 is primarily attributable to expenses
incurred in connection with the acquisition of Evergreen.

As more fully discussed in Note I to the audited consolidated
financial statements, FMB adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," effective January 1, 1993.
The adoption of the Statement decreased 1993 net income by approximately
$124,000 consisting of a one-time charge in the first quarter of
approximately $117,000 and additional expense during the year for the
excess of expense under SFAS no. 106 over amounts resulting from the cash
method of accounting previously employed. FMB's capital strength
influenced management's decision to recognize the SFAS No. 106 transition
Liability immediately, which will reduce reported benefit costs in future
periods.

Income Taxes

FMB's effective income tax rate for 1994 was 22.97% as compared with
23.91% and 23.47% for 1993 and 1992, respectively. The principal reason
for the difference between the effective and statutory tax rates during
each period was tax-exempt interest income.

As more fully discussed in Note J to the audited consolidated
financial statements, FMB prospectively adopted the liability method of
accounting for income taxes during 1993, without material effect. As of
December 31, 1994 gross deferred tax assets total approximately $840,000 as
compared to $342,000 as of December 31, 1993. The increase in these
assets, as well as their composition, is primarily unrealized losses on
securities available for sale. Pursuant to management's evaluation for the
quarter ended December 31, 1994, no valuation allowance has been allocated
to the deferred tax assets. The quarterly evaluation process employed by
management is based upon the expected reversal period of the assets, in
consideration of taxes paid by FMB in the carry back years and expected
reversals of existing taxable temporary differences.

Those assets for which realization is expected to be dependent on
future events are subjected to further evaluation. Management's analysis
has shown that realization of the deferred tax asset related to the OPEB
accrual will likely be dependent on future events. After considering such
factors as the magnitude of the asset relative to historical levels of
financial reporting income and taxable income, the period over which future
taxable income would have to be earned to realize the asset, and budgeted

-108-

future results of operations, management has concluded it is more likely
than not that the asset arising from the OPEB accrual and all other
deferred tax assets existing at December 31, 1994, will be realized. At
present, management does not expect implementation of tax planning
strategies will be necessary to ensure realization. The need for a
valuation allowance will continue to be addressed by management each
quarter and any changes in the valuation allowance will be reported
concurrently in FMB's quarterly results of operations.

Capital Resources

The ratio of average equity to average assets increased from 8.79% in
1993 to 8.82% in 1994. The increase, which is due to retained net profits,
was minimized by unrealized losses on securities available-for-sale. While
FMB is not subject to the risk-based capital regulations because its total
assets are presently less than $150 million, a similar exemption based upon
size is not available to the subsidiary bank. Accordingly, Merchants is
required to meet a minimum ratio for qualifying total capital to risk-
weighted total assets of 8% as of December 31, 1994. Furthermore, its Tier
One capital, or common stockholders' equity less goodwill, must equal at
least 4% of risk-weighted total assets at December 31, 1994.

At December 31, 1994, Merchants' risk-based capital ratios in both the
total qualifying capital and Tier One capital categories approximated
14.11% and 13.43%, respectively. This posture is indicative of
management's conservative lending and investment policies.

Liquidity

FMB currently has a strong liquidity position and material changes in
such position are not expected. In addition to assuring the availability
of adequate funds to meet its cash flow requirements, FMB's management
closely monitors its liquidity position in order to reduce exposure to
interest rate risk. This is accomplished largely by matching maturities of
assets and liabilities, particularly volatile funds such as securities sold
under agreements to repurchase and large denomination certificates of
deposit.

The major internal sources of liquidity are balances maintained by
Merchants with its correspondent banks as well as cash on hand. A
significant volume of securities available-for-sale and short-term
financial instruments classified as loans complement the balance of cash
and cash equivalents. FMB has also demonstrated the ability to obtain
external financing in the event such needs arise.

In management's opinion, the liquidity of FMB is adequate to
accommodate any anticipated cash requirements, and exposure to future
changes in market interest rates has been effectively minimized through its
asset/liability practices described above.

LEGAL PROCEEDINGS CONCERNING FMB

-109-

FMB is not a party to any legal proceedings. Merchants is presently a
party to certain legal proceedings arising from transactions occurring in
the normal course of business. In the opinion of Merchants' management,
based on the advice of legal counsel, the ultimate resolution of these
proceedings will not have a material effect on FMB's financial position.

MARKET FOR FMB COMMON STOCK AND RELATED STOCKHOLDER MATTERS

FMB is authorized to issue 1,000,000 shares of common stock with a par
value of $2 per share. As of December 31, 1994, there were 576,000 shares
issued and outstanding. FMB's stockholders are entitled to one vote for
each share of FMB Common Stock owned on all matters subject to a vote of
the stockholders. The unissued portion of FMB Common Stock is available
when and if the Board of Directors deems advisable. There are no present
plans to issue additional shares. FMB stockholders do not have preemptive
rights; therefore, shares of the authorized, but unissued stock of FMB may
be issued without first offering the shares to FMB's stockholders. FMB
Common Stock was held by approximately 223 stockholders of record as of
December 31, 1994.

FMB has only one class of stock, common stock, and all voting rights
are in the holders of that stock. FMB paid cash dividends on its common
stock as follows in 1994 and 1993:

1995:
Declared 03-21-95, paid 04-06-95 - $.13 per share

1994:

Declared 03-17-94, paid 04-05-94 - $.13 per share
Declared 06-21-94, paid 07-01-94 - $.13 per share
Declared 09-20-94, paid 10-04-94 - $.13 per share
Declared 12-20-94, paid 01-06-95 - $.30 per share

1993

Declared 03-23-93, paid 04-01-93 - $.13 per share
Declared 06-15-93, paid 10-01-93 - $.13 per share
Declared 09-21-93, paid 10-01-93 - $.13 per share
Declared 12-22-93, paid 01-03-94 - $.27 per share

Dividends paid by Merchants to FMB are the primary source of funds
available to FMB for the payment of dividends to its stockholders. There
are certain restrictions on the payment of dividends to FMB from Merchants
as described in "FMB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION" and Note H of Notes to Consolidated
Financial Statements.

FMB Common Stock is not widely traded and the volume of trading is
limited. There is no established market for FMB Common Stock. Most
transactions occur in the local area and bid and ask prices are not
available. The following table presents, on a historical basis, the high

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and low prices of FMB Common Stock, for the periods indicated, for the
transactions of which FMB has knowledge.

<TABLE>
Stock Prices Number of Shares
High Low Bought Sold*
<S> <C> <C> <C> <C>
1995 $27.50 27.50 1,858
First Quarter

1994
First Quarter $26 $21 4,828
Second Quarter 26 25 2,840
Third Quarter 26 25 80
Fourth Quarter 28 27 400
1993
First Quarter $ - $ - -
Second Quarter 16 15 3,120
Third Quarter 20 16 3,734
Fourth Quarter 21 20 1,670

</TABLE>
* The number of shares bought and sold indicated in this column does not
include shares transferred without monetary consideration, such as a
transfer by an estate to an heir.

All per share data have been restated to reflect a stock split
effected in the form of a 3 for 1 stock dividend which occurred in
1993.

DIRECTORS AND EXECUTIVE OFFICERS OF FMB

Directors

The following is a listing of the names and ages of the directors of
FMB and the year each individual began continuous service as a director of
FMB. Also shown are their principal occupations at present and during the
past five years, as well as any other directorships they may hold.

Linda G. Aguilar, age 47, has been a director of FMB since 1994. She
currently serves as Secretary of FMB and Vice President of Merchants
and has done so over the past five years.

Gordon Billheimer, age 70, has been a director of FMB since 1987. He
is currently in the practice of law in Montgomery, West Virginia, and
has served in that capacity during the past five years. Mr.
Billheimer serves as President of The Kanawha Water Company and also
as a director of Merchants.

Thomas L. Carson, age 67, has been a director of FMB since 1987. He
is a pharmacist and President of College Drug Store, Inc. in
Montgomery, West Virginia, and has served in that capacity during the
past five years. Mr. Carson also serves as a director of Merchants,
the Upper Kanawha Valley Chamber of Commerce, the Upper Kanawha Valley
Economic Development Corporation and the West Virginia Pharmacists
Association.

Hugh R. Clonch, age 55, has been a director of FMB since 1991. He is
President of Clonch Industries, Inc. in Dixie, West Virginia, and has
served in that capacity during the past five years. Mr. Clonch also
serves as a director of Merchants.

George F. Davis, age 67, has been a director of FMB since 1987. He is
currently President, Chief Executive Officer and Chairman of the Board
of FMB and Merchants, as well as Chief Financial Officer of FMB.
During the past five years, he has served as President and Chief
Executive Officer of Merchants. Mr. Davis also serves as a director
of Merchants, the Upper Kanawha Valley Economic Development
Corporation, the Upper Kanawha Valley Chamber of Commerce, the
Buckskin Council of the Boy Scouts of America and West Virginia Tech
Foundation, on which he also serves as President.

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Kenneth R. Fultz, age 59, has been a director of FMB since 1987. He
is currently President of Montgomery General Hospital in Montgomery,
West Virginia, and has served in that capacity during the past five
years. Mr. Fultz also serves as a director of Merchants, Montgomery
General Hospital, Montgomery General Elderly Care, Montgomery General
Health Care System, Laird Health Care Foundation, West Virginia
Hospital Service, Inc., Valley Emergency Medical Service and the West
Virginia Institute of Technology Advisory Board.

Robert C. Gillespie, age 52, has been a director of FMB since 1987.
During the past five years, Dr. Gillespie has served as President of
West Virginia Institute of Technology in Montgomery, West Virginia,
having resigned from his position in August, 1992. Dr. Gillespie is
currently serving West Virginia Institute of Technology as Regents
Professor, developing plans to meet the growing need for engineering
and technical education brought about by the rapid development of West
Virginia. In addition to his duties as a Regents Professor, Dr.
Gillespie consults in the areas of education, educational technology
and artificial intelligence. Dr. Gillespie also serves as a director
of Merchants, the Private Industry Council of West Virginia, the West
Virginia Experimental Program to Stimulate Competitive Research, the
State Council on Vocational Education, on which he also serves as Vice
Chair.

Robert L. Hardy, Sr., age 69, has been a director of FMB since 1987.
He is currently the owner of Hardy Realty in Smithers, West Virginia,
and has served in that capacity during the past five years. Mr. Hardy
also serves as a director of Merchants.

Thomas A. Jacobs, age 66, has been a director of FMB since 1987. He
is a Public Accountant and Tax Consultant. Prior to December, 1993,
Mr. Jacobs was a consultant to the accounting firm of Trainer, Wright
& Paterno in Charleston, West Virginia, and has served in that
capacity since 1987. He also serves as a director of Merchants.

Carl L. Kennedy, age 61, has been a director of FMB since 1987. He is
a dentist, doing business as Kennedy Dental Office, a partnership, in
Montgomery and Whitesville, West Virginia, and has served in that
capacity during the past five years. Dr. Kennedy also serves as a
director of Merchants.

Giles E. Musick, age 67, has been a director of First merchants since
1987. He is currently President of Brown Chevrolet, Oldsmobile,
Pontiac-Buick, Inc. in Montgomery, West Virginia, and has served in
that capacity during the past five years. Mr. Musick also serves as a
director of Merchants.

James F. Neil, age 56, has been a director of FMB since 1987. Mr.
Neil has served as a hydro licensing consultant for Elkem Metals Co.
in Alloy, West Virginia from 1989 to 1991. Mr. Neil also serves as a
director of Merchants, the Upper Kanawha Valley Economic Development
Corporation, Summersville Memorial Hospital, the Gauley River national

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Recreation Area Advisory Board and as Vice Chairman of the West
Virginia Institute of Technology Advisory Board.

Executive Officers

The following is a listing of the names and ages of the executive
officers of FMB and the year each individual began continuous service as an
executive officer of FMB. Also shown is their business experience during
the past five years.

George F. Davis, age 67, has been President, Chief Executive Officer
and Chief Financial Officer of FMB since 1987. During the past five
years, he has also served as President and Chief Executive Officer of
Merchants.

Robert P. McDowell, age 48, has been Vice President of FMB since 1987.
He has served as Vice President of Merchants since 1989 and was
President of Gauley from 1987 to 1989.

Robert L. Neal, age 38, has been Vice President of FMB since
September, 1988. During the past five years he has served as Vice
President of Merchants.

Linda G. Aguilar, age 47, has been Secretary of FMB since 1989. She
served as Secretary-Treasurer from 1987 to 1989. During the past five
years, she has also served as Vice President of Merchants.

Steven D. Nunley, age 36, has been Treasurer of FMB since 1989. He
has also served as Vice President and Cashier of Merchants since 1991,
Cashier of Gauley from 1988 to 1990 and Cashier of Merchants from 1987
to 1990.

FMB EXECUTIVE COMPENSATION

All forms of compensation paid to the officers and directors of FMB
are paid by the subsidiary bank. The individual officers do not receive
additional compensation for their services with FMB. The following
information is given with respect to the executive officers of FMB whose
direct aggregate case remuneration exceeded $100,000 in 1994.

Name of Individual Principal
and Number of Persons Capacities in Cash
in Group Which Served Compensation

George F. Davis President $140,000

Executive Officers as a Executive Officers $408,000
Group (5 persons in
group, including the
person listed above)

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There was no other compensation paid to Mr. Davis or the executive officers
as a group during 1994.

FMB CHANGE OF CONTROL AGREEMENTS

In view of the changing banking environment and the desire of FMB to
encourage its executive management to continue with FMB, the FMB Board of
Directors unanimously approved the entering into Change of Control
Agreements with the executive officers of FMB. Change of Control
Agreements were entered into as of March 1, 1995 between FMB and George F.
Davis, President, Chief Executive Officer and Chairman of FMB; Linda G.
Aguilar, Secretary of FMB; Robert P. McDowell, Vice President of FMB;
Robert L. Neal, Vice President of FMB and Steven D. Nunley, Treasurer of
FMB. The Change of Control Agreements for Ms. Aguilar and Messrs.
McDowell, Neal and Nunley, provide that in the event of a Change of
Control, as defined therein, the executive may thereafter only be
terminated for Good Cause, as defined therein, for the period of twenty-
four (24) months after the consummation of the Change of Control. A
termination for any other reason during the twenty-four (24) month period
would entitle the executive to compensation, based upon an average of W-2
earnings, for the period between the date of the termination and the date
that is twenty-four (24) months after the date of the consummation of the
Change of Control. The contracts permit an executive to resign for any
reason upon thirty (30) days prior written notice. The contracts also
provide for continuation of certain benefits during the twenty-four (24)
month period after the date of the consummation of the Change of Control.
In the event of a termination of the executive during the twenty-four (24)
month period, he or she may seek and obtain other employment without
reducing the amount of any payment made under the terms of the Change of
Control Agreement. Mr. Davis' contract is substantially the same as the
other executives, except that it is effective for a thirty-six (36) month
term following a Change of Control and also provides that Mr. Davis will
have the use of a car during that period. The Change of Control Agreements
are binding upon any successor in interest to FMB and will be binding upon
City Holding upon consummation of the transactions contemplated in the
Agreement, as recognized in the Agreement.

OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FMB

The following individuals are known to management to beneficially own
greater than five percent of the issued and outstanding shares of FMB
Common Stock.

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<TABLE>
Amount and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial Owner Ownerships (1) of Class
<S> <C> <C> <C>
Common Hugh R. Clonch 52,484 9.11%
Box 93
Belva, WV
Common Beatrice K. Kincaid 31,248 5.43%
Drawer 149
Charlton Heights, WV

Common Giles E. Musick 30,568 5.31%
503 Fourth Ave.
Montgomery, WV

-117-

In addition, two families own in excess of five percent of FMB Common
Stock, though no one member exercises voting and investment power over
greater than five percent. Three siblings and the widow of a fourth
sibling of the Morton family own common stock as follows: Sadie M.
Harlan - 6,432 shares; F. Hurxthal Morton, Jr. and Frances Garnett Morton -
5,600 shares; Paul Morton - 12,899 shares; and Lois W. Morton - 10,272
shares. Collectively, these individuals own 6.09% of FMB Common Stock.
Similarly, members of the Blackwell family own in excess of five percent of
FMB Common Stock as follows: Mary F. Blackwell - 12,000 shares; Lyle M.
Blackwell - 5,200 shares; Matthew F. Blackwell - 2,000 shares; Walter J.
Fitzgerald - 4,800 shares and Walter J. Fitzgerald and Margaret B.
Fitzgerald - 7,200 shares. Collectively, these individuals own 5.42% of
FMB Common Stock.

The following table presents the number of shares beneficially owned
by each director (excluding qualifying shares), and the number of shares
beneficially owned by each director and executive officer of FMB (excluding
qualifying shares) as a group.

-118-

</TABLE>
<TABLE>
Amount and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial Owner Ownerships (1) of Class
<S> <C> <C> <C>

Common Linda G. Aguilar 9,076 1.58%
P.O. Box 195
Ansted, WV

Common Gordon Billheimer 891 .15%
311 Washington St.
Montgomery, WV

Common Thomas L. Carson 5,924 1.08%
501 Monroe St.
Montgomery, WV

Common Hugh L. Clonch 52,396 9.10%
Box 93
Belva, WV

Common George F. Davis 3,987 .69%
Box 325
Charlton Heights, WV

Common Kenneth R. Fultz 1,907 .33%
307 E. Seventh St.
Belle, WV

Common Robert C. Gillespie 263 .05%
2050 Oak Ridge Drive
Charleston, WV

Common Robert L. Hardy, Sr. 1,907 .33%
Box 241
Smithers, WV

Common Thomas A. Jacobs 2,307 .40%
Box 219
Pratt, WV

Common Carl L. Kennedy 2,427 .42%
410 Fourth Ave.
Montgomery, WV

Common Giles E. Musick 30,475 5.29%
503 Fourth Ave.
Montgomery, WV

Common James F. Neil 2,307 .40%
626 Holley Dr.
Summersville, WV

Common Directors and executive officers 124,302 21.58%
as group (15 persons)
</TABLE>
-120-

(1) All of the shares reported are owned individually by each director and
executive officer unless otherwise indicated below:

(a) Thomas L. Carson - 4,404 shares are owned individually, 720
shares are owned by College Drug Store, Inc., of which he is
President, 480 shares are owned by his brother and 320
shares are owned jointly with his wife.

(b) Hugh R. Clonch - 5,756 shares are owned individually, 42,932
shares are owned by Clonch Industries, Inc., of which he is
President, 3,456 shares are owned jointly with his wife, 252
shares are owned by his children. In addition, 7,368 shares
are owned by his brother and his wife. Mr. Clonch exercises
no voting or investment power over the shares owned by his
brother and his wife.

(d) Robert C. Gillespie - 107 shares are owned individually and
156 shares are owned by his wife.

(e) Carl L. Kennedy - 2,307 shares are owned individually and
120 shares are owned by his wife.

(f) Giles E. Musick - 25,875 shares are owned individually,
3,600 shares are owned by his wife and 1,000 shares are
owned by his children.

FMB CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 1994, FMB and its subsidiaries had, and expect to have in the
future, banking transactions with officers and directors of FMB, their
immediate families and entities in which they are principal owners (more
than 10% interest). The transactions are in the ordinary course of
business and on substantially the same terms, including interest rates and
security, as those prevailing at the same time for comparable transactions
with others and do not involve more than the normal risk of collectability
or present other unfavorable factors.

RESALE OF CITY HOLDING COMMON STOCK

The shares of City Holding Common Stock offered hereby have been
registered under the 1933 Act, thereby allowing such shares to be traded
freely and without restriction by those holders of FMB Common Stock who
receive such shares following consummation of the Merger and who are not
deemed to be "affiliates" (as defined under the 1933 Act, but generally
including directors, certain executive officers and 10% or more
shareholders) of FMB or City Holding. The Agreement provides that each
holder of FMB Common Stock who is deemed by FMB to be an affiliate of it
will enter into an agreement with City Holding prior to the Effective Date

-121-

providing, among other things, that such affiliate will not transfer any
City Holding Common Stock received by such holder in the Merger except in
compliance with the 1933 Act. This Joint Proxy Statement/Prospectus does
not cover any resales of City Holding Common Stock received by affiliates
of FMB.

EXPERTS

The consolidated financial statements of FMB at December 31, 1994 and
1993, and for each of the three periods ended December 31, 1994,
incorporated by reference in this Joint Proxy Statement/Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon incorporated by reference
herein, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.

The consolidated financial statements of City Holding at December 31,
1994 and 1993, and for each of the three periods ended December 31, 1994,
incorporated by reference in this Joint Proxy Statement/Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon incorporated by reference
herein. As to the year ended December 31, 1994, Ernst & Young LLP's report
is based in part on the report of Persinger & Company LLC, independent
auditors. The financial statements referred to above are included in
reliance upon such reports given upon the authority of such firms as
experts in accounting and auditing.

LEGAL OPINIONS

The validity of City Holding Common Stock issued in the Merger will be
passed on for City Holding by Steptoe & Johnson, Charleston, West Virginia.
Otis L. O'Connor, a partner of Steptoe & Johnson, is a director of City
Holding.

ELECTION OF CITY HOLDING DIRECTORS

The Board of Directors of City Holding presently comprises fourteen
members. The Board of Directors is classified into three classes, with one
class to be elected each year to a three-year term.

Proxies will be voted for the election of the following nominees as
Class III directors to serve until the 1998 City Holding Annual Meeting.
Each nominee is currently a director of City Holding. The Board of
Directors has no reason to believe that any of the nominees will be
unavailable to serve if elected, but in such event, proxies will be voted
for such substitutes as the Board may designate. The Proxies may cumulate
votes at their discretion.

-122-

<TABLE>
Principal Occupation Director
Name (Age) and Business Experience Since
<S> <C> <C>

Class III (to serve until the
1998 Annual Meeting)
Dr. D. K. Cales (65) Dentist, Rainelle, WV. 7/90

Jay Goldman (51) President, Goldman Associates (real estate), 8/88
Charleston, WV.

C. Dallas Kayser (43) C. Dallas Kayser, L.C. (attorney), Point 1/95
Pleasant, WV.
Robert D. Fisher (42) Partner, Adams Fisher & Evans (attorney), 8/94
Ripley, WV.
</TABLE>

-123-

The terms of the following Class I and Class II Directors do
not expire at the 1995 Annual Meeting.

<TABLE>
Principal Occupation Director
Name (Age) and Business Experience Since
<S> <C> <C>
Class I (to serve until the
1996 Annual Meeting)

Samuel M. Bowling (57) President, Dougherty Company, Inc. (mechanical
contractor) since 1977; Chairman of City Holding
since 1990. 3/83

Steven J. Day (41) President and Chief Executive Officer of City
Holding since 1990; Treasurer and Chief
Financial Officer of City Holding from 1983 to
1990. 11/88

Jack E. Fruth (66) Principal Owner, Fruth Pharmacies
Point Pleasant, WV. 4/87
Otis L. O'Connor (59) Partner, Steptoe & Johnson (attorneys)
Charleston, WV. 1/76

Bob F. Richmond (54) Chief Executive Officer, First National Bank of
Hinton since 1981; Vice President of First
National Bank of Hinton since 1972.
1/95
Principal Occupation
and Business Experience Director
Name (Age) Since
Class II (to serve until the
1997 Annual Meeting)

C. Scott Briers (59) President of the Board, First National Bank of
Hinton since 1994; Owner, Briers Furniture since
1977. 1/95

Carlin K. Harmon (58) President & Chief Executive Officer, First State
Bank & Trust, Rainelle, WV, since 1972;
Executive Vice President of City Holding since
1990. 9/88

Dale Nibert (67) Dairy Farmer,
Point Pleasant, WV. 4/88

Mark Schaul (64) President, Charmar Realty Company, Charleston,
WV. 3/76

Van R. Thorn, II (46) Chief Executive Officer, The Home National Bank 5/92
of Sutton, Sutton, WV, since 1992; Cashier of
Home National Bank from 1979 to 1992.
</TABLE>
-125-

Committees of the Board of Directors

The entire Board of Directors functions as a nominating committee by
considering nominees for election as Directors of City Holding. The Board
will consider nominees recommended by shareholders if such recommendations
are submitted in writing and delivered or sent by first class registered or
certified mail to the President of City Holding not later than November 15,
1995, for consideration at the 1996 Annual Meeting. Such recommendations
should include information to enable City Holding's Board to evaluate the
proposed nominee's qualifications, including the name, address, occupation
and City Holding share ownership of the nominee, and the name, address and
City Holding share ownership of the nominating shareholder.

City Holding has a standing Audit Committee consisting of three
members, Dr. D. K. Cales, Jack E. Fruth and Mark Schaul. The Audit
Committee has the responsibility of meeting with and reviewing the scope of
work performed by internal and external auditors. Significant matters are
discussed with the full Board of Directors. This committee meets on a
quarterly basis as needed and met four times during 1994.

City Holding has a Compensation Committee consisting of Dr. D. K.
Cales, Jack E. Fruth and Jay Goldman, none of whom is an employee of City
Holding. The Compensation Committee makes recommendations to the Board
with respect to the compensation of executive officers and certain junior
officers who participate in the City Holding Company Stock Incentive Plan.
This committee meets once a year.

Attendance

City Holding's Board of Directors held 12 meetings during the fiscal
year ended December 31, 1994. No director attended fewer than 75% of the
meetings of City Holding's Board, all members of the Audit Committee
attended all of the Audit Committee meetings, and all members of the
Compensation Committee attended its meeting.

Compensation of Directors

Directors of City Holding are paid a fee of $500 for each meeting of
the full board, regardless of attendance. Directors who are also officers
of City Holding and its subsidiaries receive no fee.

EXECUTIVE OFFICERS OF CITY HOLDING
The executive officers of City Holding are as follows:

Matthew B. Call, 37, has been Senior Vice President of City Holding
Company since August 1994. Prior to joining City Holding, he was Senior
Vice President and Cashier for Bank One, West Virginia.

Steven J. Day, President and Chief Executive Officer.

Carlin K. Harmon, Executive Vice President.

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Robert A. Henson, CPA, 33, has been Chief Financial Officer of City
Holding since May 1990. He was Chief Accounting Officer from 1988 to 1990
and has been employed by City Holding since 1987. Prior to joining City
Holding, he was an Audit Manager with Ernst & Young LLP in Charleston, West
Virginia.

F. Eric Nelson, Jr., 34, has been Treasurer and Investment Portfolio
Manager of City Holding Company since October 1994. He was Chief
Operations Officer and Investment Portfolio Manager of City Holding Company
from 1992 to 1994 and Vice President and Investment Portfolio Manager from
1990 to 1992. Prior to joining City Holding, he was a Director with the
Corporate Finance Department of Crestar Bank in Richmond, Virginia.

CITY HOLDING EXECUTIVE COMPENSATION

The following table presents information relating to compensation of
executive officers of City Holding whose compensation exceeded $100,000
during the fiscal year ended December 31, 1994.

-127-
<TABLE>
Summary Compensation Table
Annual Compensation

Name and All Other
Principal Position Year Salary ($) Bonus ($) (1) Compensation (3)
<S> <C> <C> <C> <C>

Steven J. Day
President and Chief
Executive Officer 1994 $179,763 $72,952 $22,045
1993 167,803 58,070(2) 22,988
1992 156,606 40,000(2) 15,400

Carlin K. Harmon
Executive Vice President 1994 143,328 40,132 21,410
1993 132,709 5,597 16,080
1992 120,108 4,816 11,800

Robert A. Henson
Chief Financial Officer 1994 90,300 35,080 18,259
1993 70,300 25,995 10,339
1992 67,000 18,860 7,291

F. Eric Nelson, Jr.
Treasurer and
Investment Portfolio
Manager 1994 83,347 32,570 16,963
1993 68,222 25,511 10,135
1992 65,000 18,410 7,112

</TABLE>

___________
(1) Includes bonus awards under City Holding's Incentive Plan.
(2) Includes a bonus award under the Incentive Plan of 975 shares and
1,162 shares of Common Stock having a fair market value at the time of
grant of $20.68 per share and $25.23 per share for 1992 and 1993,
respectively.
(3) Includes Company matching and profit-sharing contributions under City
Holding's Profit-Sharing and 401(k) Plan, which was implemented January 1,
1991.

City Holding Compensation Committee Report on Executive Compensation

The Compensation Committee of the Board of Directors of City Holding
(the "Committee") is comprised of three outside directors, none of whom
serves on the board of any other Committee member's company or
organization. The Committee has access to both outside legal counsel and
consultants.

To the Board of Directors of City Holding Company:

The Compensation Committee of the Board of Directors of City Holding
submits the following report of its deliberations with respect to
compensation of City Holding executives for 1994:

City Holding executives are compensated under the City Holding Company
Incentive Plan (the "Incentive Plan") adopted in 1992. The Incentive Plan
is designed to link executive compensation to the performance of City
Holding and to provide levels of compensation adequate to attract and to
retain quality management. In 1994, four members of Executive management
of City Holding, including Mr. Day, participated in the Incentive Plan.

Compensation under the Incentive Plan includes base salaries with
provisions for annual increases and bonuses based on individual and
corporate performance. Bonuses are paid one-half in cash and one-half in
City Holding Common Stock. Maximum salary increases (as a percentage of
the percentage increase in the Consumer Price Index) and bonuses (as a
percentage of salary) are calculated under the Incentive Plan based on City
Holding's performance as measured by annual return on average assets and
return on average equity. The Committee believes these ratios best measure
performance that is likely to translate into increased shareholder value.
Participants automatically are awarded 40% of their maximum base salary
increase and bonus, if any. The remaining 60% of the maximum base salary
increase and bonus is awarded based on individual performance during the
prior year. The Incentive Plan may be amended or rescinded at any time.

Base Salaries. Base salaries for 1994 were determined primarily in
accordance with the formula that was adopted as part of the Incentive Plan.
The average increase in base pay for 1994 was approximately 13%. Mr. Day's
increase in base compensation was determined in accordance with the

-129-

Incentive Plan formula. Mr. Henson's and Mr. Nelson's increase in base
compensation exceeded that of the Incentive Plan formula as a result of
their increased responsibilities coincidental to the growth in asset size
and market capitalization of City Holding. Mr. Harmon's compensation
increase for 1994 was calculated under an agreement as described below
under "City Holding Employment Agreements." As of February 1995, Mr.
Harmon is compensated under the City Holding Incentive Plan.

Annual Bonuses. For performance in 1994, the four members of
management eligible to participate, including Mr. Day, were awarded
approximately $181,000 in annual bonuses under the Incentive Plan. Based
on the high level of individual performance during the year as reflected in
City Holding's return on average assets and return on average equity, this
amount included awards of 100% of the maximum bonuses payable under the
Incentive Plan, including an award of $72,952 to Mr. Day.
Respectfully submitted,

Dr. D.K. Cales
Jack E. Fruth
Jay Goldman

City Holding Company Stock Incentive Plan

The Committee administers City Holding's 1993 Stock Incentive Plan
(the "Stock Incentive Plan"). The Committee may delegate its authority to
administer the Stock Incentive Plan to an officer of City Holding.

Key employees of City Holding and its related entities and individuals
who provide services to City Holding and its related entities are eligible
to participate in the Stock Incentive Plan. The class of eligible
personnel is selected by the Committee and includes approximately 20
people, including Messrs. Day, Harmon, Henson and Nelson. The Committee
may, from time to time, grant stock options, stock appreciation rights
("SARs"), or stock awards to Stock Incentive Plan Participants.

Options granted under the Stock Incentive Plan may be incentive stock
options ("ISOs") or nonqualified stock options. The option price will be
fixed by the Committee at the time the option is granted, but in the case
of an ISO, the price cannot be less than the shares' fair market value on
the date of grant. The option price may be paid in cash, or, with the
Committee's consent, with shares of City Holding Common Stock, a
combination of cash and Common Stock or in installments.

SARs entitle the participant to receive the excess of the fair market
value of a share of City Holding Common Stock on the date of exercise over
the initial value of the SAR. The initial value of the SAR is the fair
market value of a share of City Holding Common Stock on the date of grant.

SARs may be granted in relation to option grants ("Corresponding
SARs") or independently of option grants. The difference between these two
types of SARs is that to exercise a Corresponding SAR, the participant must

-130-

surrender unexercised that portion of the stock option to which the
Corresponding SAR relates.

Participants may also be awarded shares of City Holding Common Stock
pursuant to a stock award. The Committee may prescribe that a
participant's right in a stock award shall be nontransferable or
forfeitable or both unless certain conditions are satisfied. These
conditions may include, for example, a requirement that the participant
continue employment with City Holding for a specified period or that City
Holding or the participant achieve stated objectives.

The Stock Incentive Plan provides that outstanding options and SARs
will become exercisable and outstanding stock awards will be earned in full
and nonforfeitable upon a change in control.

A maximum of 300,000 shares of City Holding Common Stock may be issued
upon the exercise of options and SARs and stock awards. This limitation
will be adjusted, as the Committee determines is appropriate, in the event
of a change in the number of outstanding shares of City Holding Common
Stock by reason of a stock dividend, stock split, combination,
reclassification, recapitalization or other similar events. The terms of
outstanding awards also may be adjusted by the Committee to reflect such
changes.

No option, SAR or stock award may be granted under the Stock Incentive
Plan after March 8, 2003. City Holding's Board of Directors may, without
further action by shareholders, terminate or suspend the Stock Incentive
Plan in whole or in part. The Board of Directors may also amend the Stock
Incentive Plan except that no amendment that increases the number of shares
of City Holding Common Stock that may be issued under the Stock Incentive
Plan or changes the class of individuals who may be selected to participate
in the Plan will become effective until it is approved by shareholders.
During 1994, no awards were made under the Stock Incentive Plan.

City Holding Company Profit Sharing and 401(k) Plan

Under City Holding's Profit Sharing and 401(k) Plan (the "Plan"), a
deferred compensation plan under the Internal Revenue Code, eligible
participants, including Messrs. Day Harmon, Henson and Nelson may
contribute from 1% to 15% of pre-tax earnings to their Plan accounts.
Contributions may be invested in any of four options selected by the
participant, including City Holding Common Stock. City Holding matches, in
City Holding Common Stock, 50% of the first 6% of earnings contributed by
each participant. Profit-sharing contributions are discretionary as
determined annually by the Board of Directors and vest 20% for each year of
service after the first year. Based on corporate performance in 1994,
profit-sharing contributions equalled 12% of participant's gross salary in
1994. Contributions to all executive officers of City Holding aggregated
$81,000, including contributions of $22,000 to Mr. Day, $21,000 to Mr.
Harmon, $18,000 to Mr. Henson and $17,000 to Mr. Nelson.

-131-

CITY HOLDING PERFORMANCE GRAPH

The following graph portrays a comparison of the yearly percentage
change in City Holding's cumulative total shareholder return on City
Holding Common Stock (as measured by dividing (i) the sum of (A) the
cumulative amount of dividends, assuming dividend reinvestment during the
periods presented and, (B) the difference between the City Holding Common
Stock share price at the end and the beginning of the periods presented; by
(ii) the share price at the beginning of the periods presented) with The
Nasdaq Stock Market Index and a Peer Group Index. The Peer Group consists
of publicly-traded financial institutions under $1 billion in assets
headquartered in Florida, Georgia, North Carolina, Ohio, Pennsylvania,
South Carolina, Virginia, Washington, D.C. and West Virginia.

-132-

Graph showing the following data points:

City Holding $100 $99.57 $115.46 $169.33 $272.05 $268.83
Peer Group Index $100 $77.61 $ 92.26 $138.60 $182.09 $177.76

The Nasdaq Stock
Market Index $100 $84.92 $136.28 $158.58 $180.93 $176.92
</TABLE>
-135-

CITY HOLDING EMPLOYMENT AGREEMENTS

City Holding has an executive severance agreement with Mr. Day
providing that if his employment is terminated (either voluntarily or
involuntarily other than as a normal consequence of death, disability or
retirement at a normal retirement age) at any time within a period of two
years from a change in control of City Holding, he will receive as
compensation for services a lump sum payment (subject to any applicable
payroll and other taxes) generally equal to 2.99 times his annual
compensation. A "change of control" shall be deemed to have taken place if
(i) a third person acquires shares of City Holding Common Stock that,
aggregated with shares of City Holding Common Stock previously held by such
person, have 30% or more of the total number of votes that may be cast for
the election of directors of City Holding; or (ii) as the result of any
cash tender or exchange offer, merger or other business combination or sale
of assets, shares of City Holding Common Stock are converted into cash or
securities of another corporation.

Under an agreement with City Holding, Mr. Harmon's base salary
increases annually pursuant to a formula based on the net income of First
State Bank & Trust, the wholly-owned subsidiary of City Holding of which
Mr. Harmon is the President and Chief Executive Officer. As of February
1995, Mr. Harmon is compensated under the City Holding Incentive Plan.

CITY HOLDING CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 1994, City Holding and its subsidiaries had, and expect to have
in the future, banking transactions with officers and directors of City
Holding, their immediate families and entities in which they are principal
owners (more than 10% interest). The transactions are in the ordinary
course of business and on substantially the same terms, including interest
rates and security, as those prevailing at the same time for comparable
transactions with others and do not involve more than the normal risk of
collectability or present other unfavorable factors.

Otis L. O'Connor, Secretary and Director of City Holding, is a partner
in Steptoe & Johnson, Charleston, West Virginia, which performed legal
services for City Holding in 1994 and is expected to continue to perform
similar services in the future.

CITY HOLDING COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

City Holding's executive officers, directors and 10% shareholders are
required under the Exchange Act to file reports of ownership and changes in
ownership with the Commission. Copies of these reports must also be
furnished to City Holding. Based solely on review of the copies of such
reports furnished to City Holding through the date hereof, or written
representations that no reports were required, City Holding believes that
during 1994, all filing requirements applicable to its officers, directors
and 10% shareholders were met except that Dr. Cales, a director of City
Holding, was late in filing one report on Form 4 with the Commission.

-136-

RATIFICATION OF APPOINTMENT OF CITY HOLDING'S AUDITORS

The City Holding Board of Directors has appointed Ernst & Young LLP to
audit the consolidated financial statements of City Holding for the year
ending December 31, 1995. The holders of City Holding Common Stock are
being asked to ratify this appointment at the City Holding Annual Meeting.
Ernst & Young LLP has been City Holding's independent auditor since 1982.
The Board of Directors unanimously recommends that shareholders vote FOR
such ratification.

Representatives of Ernst & Young LLP are expected to be present at the
City Holding Annual Meeting and will be given an opportunity to make a
statement if they desire to do so. They are expected to be available to
respond to appropriate questions.

CITY HOLDING SHAREHOLDER PROPOSALS

Holders of City Holding Common Stock having proposals which they
desire to present at next year's Annual Meeting should, if they desire that
such proposals be included in City Holding's proxy and proxy statement
relating to such meeting, submit such proposals in time to be received by
City Holding at its principal executive offices in Charleston, West
Virginia, no later than November 15, 1995. To be so included, all such
submissions must comply with the requirements of Rule 14a-8 of the
Commission under the Exchange Act and the Board of Directors directs the
close attention of interested shareholders to that Rule.
-137-

REPORT OF INDEPENDENT AUDITORS

BOARD OF DIRECTORS AND STOCKHOLDERS
CITY HOLDING COMPANY

We have audited the accompanying consolidated balance sheets of City
Holding Company and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits. We did not audit the
1994, 1993 or 1992 consolidated financial statements of Hinton Financial
Corporation and subsidiary which statements reflect total revenues
constituting 8%, 10% and 12% of the 1994, 1993 and 1992 consolidated
totals, respectively. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it
relates to data included for Hinton Financial Corporation and
subsidiary, is based solely on the report of the other auditors.

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

In our opinion, based on our audits and the report of other auditors,
the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of City Holding
Company and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.

As discussed in NOTE FOUR to the consolidated financial statements,
City Holding Company changed its method of accounting for certain debt
and equity securities as of January 1, 1994.

/s/ Ernst & Young LLP

Charleston, West Virginia
January 20, 1995
<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Hinton Financial Corporation
Hinton, West Virginia

We have audited the accompanying consolidated balance sheets of Hinton
Financial Corporation and Subsidiary as of December 31, 1994, and 1993, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1994, (not
presented separately, herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hinton
Financial Corporation and Subsidiary as of December 31, 1994, and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally accepted
accounting principles.

/S/ PERSINGER & COMPANY, L.L.C.

Beckley, West Virginia
January 6, 1995

<TABLE>

CONSOLIDATED BALANCE SHEETS
CITY HOLDING COMPANY AND SUBSIDIARIES

DECEMBER 31
1994 1993
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $ 27,591,000 $ 23,966,000
FEDERAL FUNDS SOLD 3,470,000
SECURITIES AVAILABLE FOR SALE, AT FAIR VALUE 67,920,000
SECURITIES AVAILABLE FOR SALE (APPROXIMATE MARKET
VALUES AT DECEMBER 31, 1993, $77,286,000) 75,527,000
INVESTMENT SECURITIES (APPROXIMATE MARKET VALUES:
1994-$123,995,000; 1993-$170,745,000) 128,457,000 166,110,000
LOANS:
GROSS LOANS 504,956,000 424,280,000
UNEARNED INCOME (9,544,000) (10,526,000)
ALLOWANCE FOR POSSIBLE LOAN LOSSES (6,017,000) (5,764,000)
NET LOANS 489,395,000 407,990,000
LOANS HELD FOR SALE 30,227,000
BANK PREMISES AND EQUIPMENT 17,678,000 15,426,000
ACCRUED INTEREST RECEIVABLE 5,922,000 5,292,000
OTHER ASSETS 13,336,000 9,297,000
TOTAL ASSETS $ 780,526,000 $ 707,078,000

LIABILITIES
DEPOSITS:
NONINTEREST-BEARING $ 80,694,000 $ 67,633,000
INTEREST-BEARING 570,570,000 549,700,000
TOTAL DEPOSITS 651,264,000 617,333,000
SHORT-TERM BORROWINGS 57,483,000 21,669,000
LONG-TERM DEBT 6,875,000 5,875,000
OTHER LIABILITIES 8,035,000 5,863,000
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 504,000
TOTAL LIABILITIES 723,657,000 651,244,000

STOCKHOLDERS' EQUITY
PREFERRED STOCK, PAR VALUE $25 A SHARE: AUTHORIZED -
500,000 SHARES; NONE ISSUED
COMMON STOCK, PAR VALUE $2.50 A SHARE: AUTHORIZED -
20,000,000 SHARES; ISSUED AND OUTSTANDING: 1994 -
3,780,477 SHARES; 1993 - 3,538,671 SHARES
INCLUDING
109,761 SHARES IN TREASURY AT DECEMBER 31, 1993 9,451,000 8,846,000
CAPITAL SURPLUS 18,887,000 13,999,000
RETAINED EARNINGS 30,605,000 35,222,000
NET UNREALIZED LOSS ON SECURITIES AVAILABLE FOR SALE,
NET OF DEFERRED INCOME TAXES (2,074,000) (23,000)
56,869,000 58,044,000
COST OF COMMON STOCK IN TREASURY (2,210,000)
TOTAL STOCKHOLDERS' EQUITY 56,869,000 55,834,000
COMMITMENTS AND CONTINGENT LIABILITIES
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 780,526,000 $ 707,078,000

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

</TABLE>

<TABLE>

CONSOLIDATED STATEMENTS OF INCOME
CITY HOLDING COMPANY AND SUBSIDIARIES

YEAR ENDED DECEMBER 31

1994 1993 1992
<S> <C> <C> <C>
INTEREST INCOME
INTEREST AND FEES ON LOANS $ 41,167,000 $ 33,251,000 $ 28,222,000
INTEREST ON INVESTMENT SECURITIES:
TAXABLE 12,071,000 12,650,000 12,895,000
TAX-EXEMPT 1,716,000 1,839,000 1,880,000
OTHER INTEREST INCOME 194,000 476,000 530,000
TOTAL INTEREST INCOME 55,148,000 48,216,000 43,527,000

INTEREST EXPENSE
INTEREST ON DEPOSITS 20,110,000 18,849,000 18,514,000
INTEREST ON SHORT-TERM BORROWINGS 1,687,000 424,000 329,000
INTEREST ON LONG-TERM DEBT 445,000 274,000 35,000
TOTAL INTEREST EXPENSE 22,242,000 19,547,000 18,878,000
NET INTEREST INCOME 32,906,000 28,669,000 24,649,000
PROVISION FOR POSSIBLE LOAN LOSSES 953,000 1,341,000 2,222,000
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN
LOSSES 31,953,000 27,328,000 22,427,000
OTHER INCOME
INVESTMENT SECURITIES (LOSSES) GAINS (803,000) 322,000 9,000
SERVICE CHARGES 2,396,000 1,893,000 1,362,000
OTHER INCOME 3,054,000 789,000 526,000
TOTAL OTHER INCOME 4,647,000 3,004,000 1,897,000

OTHER EXPENSES
SALARIES AND EMPLOYEE BENEFITS 13,122,000 10,172,000 7,695,000
OCCUPANCY, EXCLUDING DEPRECIATION 2,452,000 1,486,000 1,360,000
DEPRECIATION 1,829,000 1,386,000 988,000
OTHER EXPENSES 9,045,000 7,907,000 5,866,000
TOTAL OTHER EXPENSES 26,448,000 20,951,000 15,909,000
INCOME BEFORE INCOME TAXES 10,152,000 9,381,000 8,415,000
INCOME TAXES 3,193,000 2,949,000 2,511,000
NET INCOME $ 6,959,000 $ 6,432,000 $ 5,904,000
NET INCOME PER COMMON SHARE $ 1.85 $ 1.71 $ 1.56
A VERA G E COMMON SHARES OUTSTANDING 3,772,638 3,762,783 3,779,502

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
CITY HOLDING COMPANY AND SUBSIDIARIES
<TABLE>
UNREALIZED LOSS
COMMON ON SECURITIES TOTAL
STOCK CAPITAL RETAINED AVAILABLE TREASURY STOCKHOLDERS'
(PAR VALUE) SURPLUS EARNINGS FOR SALE STOCK EQUITY
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1992 $ 7,978,000 $ 8,913,000 $ 31,649,000 $ (25,000) $ (330,000) $ 48,185,000
NET INCOME 5,904,000 5,904,000
COST OF 31,422 SHARES OF
COMMON STOCK
ACQUIRED FOR TREASURY (548,000) (548,000)
SALE OF 38,107 SHARES
OF TREASURY STOCK 287,000 378,000 665,000
CHANGE IN NET UNREALIZED LOSS
ON MARKETABLE EQUITY
SECURITIES (70,000) (70,000)
ISSUANCE OF 10% STOCK DIVIDEND 681,000 4,098,000 (4,779,000)
CASH DIVIDENDS--$.49 A SHARE (1,522,000) (1,522,000)
CASH DIVIDENDS OF ACQUIRED
SUBSIDIARIES (299,000) (299,000)

BALANCES AT DECEMBER 31, 1992 8,659,000 13,298,000 30,953,000 (95,000) (500,000) 52,315,000
NET INCOME 6,432,000 6,432,000
CASH DIVIDENDS--$.56 A SHARE (1,833,000) (1,833,000)
CASH DIVIDENDS OF ACQUIRED
SUBSIDIARY (330,000) (330,000)
COMMON STOCK ISSUED IN
ACQUISITION 187,000 644,000 831,000
CHANGE IN NET UNREALIZED LOSS
ON MARKETABLE EQUITY SECURITIES 72,000 72,000
COST OF 96,072 SHARES OF
COMMON STOCK ACQUIRED FOR
TREASURY (2,218,000) (2,218,000)
SALE OF 22,801 SHARES OF
TREASURY STOCK 57,000 508,000 565,000
BALANCES AT DECEMBER 31, 1993 8,846,000 13,999,000 35,222,000 (23,000) (2,210,000) 55,834,000

NET INCOME 6,959,000 6,959,000
CASH DIVIDENDS
DECLARED-- $.59 A SHARE (1,930,000) (1,930,000)
CASH DIVIDENDS OF
ACQUIRED SUBSIDIARY (366,000) (366,000)
ADJUSTMENT TO BEGINNING BALANCE
FOR CHANGE IN ACCOUNTING
METHOD, NET OF INCOME
TAXES OF $704,000 1,055,000 1,055,000
CHANGE IN UNREALIZED GAIN/(LOSS)
NET OF INCOME TAXES OF $1,761,000 (3,106,000) (3,106,000)
REDEMPTION OF FRACTIONAL AND
DISSENTER SHARES (1,843,000) (1,843,000)
COST OF 7,002 SHARES OF
COMMON STOCK ACQUIRED FOR TREASURY (193,000) (193,000)
SALE OF 14,898 SHARES OF
TREASURY STOCK 131,000 328,000 459,000
RETIREMENT OF 101,865 SHARES
OF COMMON STOCK HELD IN TREASURY (255,000) (1,820,000) 2,075,000
ISSUANCE OF 10% STOCK DIVIDEND 860,000 8,420,000 (9,280,000)
BALANCES AT DECEMBER 31, 1994 $ 9,451,000 $ 18,887,000 $ 30,605,000 $ (2,074,000) $ 0 $ 56,869,000

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
CITY HOLDING COMPANY AND SUBSIDIARIES

<TABLE> YEAR ENDED DECEMBER 31
1994 1993 1992

<S> <C> <C> <C>
OPERATING ACTIVITIES
NET INCOME $ 6,959,000 $ 6,432,000 $ 5,904,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET AMORTIZATION 960,000 725,000 306,000
PROVISION FOR DEPRECIATION 1,829,000 1,386,000 988,000
PROVISION FOR POSSIBLE LOAN LOSSES 953,000 1,341,000 2,222,000
DEFERRED INCOME TAX BENEFIT (303,000) (153,000) (402,000)
MINORITY INTEREST IN INCOME OF SUBSIDIARY 10,000
LOANS ORIGINATED FOR SALE (24,729,000)
PURCHASES OF LOANS HELD FOR SALE (189,719,000)
PROCEEDS FROM LOANS SOLD 184,221,000
REALIZED INVESTMENT SECURITIES LOSSES (GAINS) 803,000 (322,000) (9,000)
LOSS ON SALE OF FORECLOSED PROPERTIES 22,000
(INCREASE) DECREASE IN ACCRUED INTEREST
RECEIVABLE (630,000) (132,000) 165,000
(INCREASE) DECREASE IN OTHER ASSETS (2,961,000) 721,000 (212,000)
INCREASE (DECREASE) IN OTHER LIABILITIES 2,172,000 157,000 (651,000)
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (20,445,000) 10,165,000 8,333,000

INVESTING ACTIVITIES
PROCEEDS FROM SALES OF INVESTMENT SECURITIES 9,218,000 5,304,000
PROCEEDS FROM MATURITIES AND CALLS OF INVESTMENT
SECURITIES 75,181,000 142,801,000 119,936,000
PURCHASES OF INVESTMENT SECURITIES (52,758,000) (184,643,000) (131,466,000)
PROCEEDS FROM SALES OF SECURITIES AVAILABLE FOR SALE 33,946,000
PROCEEDS FROM MATURITIES AND CALLS OF SECURITIES
AVAILABLE FOR SALE 13,093,000 5,539,000
PURCHASES OF SECURITIES AVAILABLE FOR SALE (28,791,000)
NET INCREASE IN LOANS (82,358,000) (77,007,000) (43,989,000)
NET CASH (PAID) ACQUIRED IN ACQUISITIONS (504,000) 41,454,000 2,564,000
SALE OF FORECLOSED PROPERTIES 10,000 125,000
PURCHASES OF PREMISES AND EQUIPMENT (4,081,000) (5,166,000) (2,299,000)
NET CASH USED IN INVESTING ACTIVITIES (46,272,000) (67,794,000) (49,825,000)

FINANCING ACTIVITIES
NET INCREASE IN NONINTEREST-BEARING DEPOSITS 13,061,000 2,456,000 18,509,000
NET INCREASE IN INTEREST-BEARING DEPOSITS 20,870,000 30,091,000 40,607,000
NET INCREASE IN SHORT-TERM BORROWINGS 35,814,000 12,175,000 1,110,000
PROCEEDS FROM LONG-TERM DEBT 6,875,000 5,225,000 4,000,000
REPAYMENT OF LONG-TERM DEBT (5,875,000) (3,350,000)
PURCHASES OF TREASURY STOCK (193,000) (2,218,000) (548,000)
PROCEEDS FROM SALES OF TREASURY STOCK 459,000 565,000 665,000
REDEMPTION OF DISSENTER AND FRACTIONAL SHARES (1,843,000)
CASH DIVIDENDS PAID (2,296,000) (2,163,000) (1,821,000)
NET CASH PROVIDED BY FINANCING ACTIVITIES 66,872,000 42,781,000 62,522,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 155,000 (14,848,000) 21,030,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 27,436,000 42,284,000 21,254,000
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 27,591,000 $ 27,436,000 $ 42,284,000

</TABLE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

DECEMBER 31, 1994

NOTE ONE
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES: The
accounting and reporting policies of City Holding Company and its
subsidiaries (the Company) conform with generally accepted accounting
principles. The following is a summary of the more significant
policies.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of City Holding Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS: The Company considers cash and due from
banks and federal funds sold as cash and cash equivalents. The carrying
amounts reported in the December 31, 1994 and 1993, consolidated balance
sheets for cash and cash equivalents approximate those assets' fair
values.

SECURITIES: Management determines the appropriate classification of
securities at the time of purchases. If management has the intent and
the Company has the ability at the time of purchase to hold debt
securities to maturity, they are classified as investments and are
stated at cost, adjusted for amortization of premiums and accretion of
discounts. At December 31, 1994, debt securities for which the Company
does not have the intent or ability to hold to maturity are classified
as available for sale along with the Company's investment in equity
securities. Securities available for sale are carried at fair value,
with the unrealized gains and losses, net of tax, reported in a separate
component of stockholders' equity. Securities classified as available
for sale include securities that management intends to use as part of
its asset/liability management strategy and that may be sold in response
to changes in interest rates, resultant prepayment risk, and other
factors.

At December 31, 1993, equity securities were stated at the lower of
cost or market value, while debt securities were carried at amortized
cost. Gains and losses on the sale of securities are computed by the
specific identification method and are reported separately in the
consolidated statements of income.

LOANS: Interest income on loans is accrued and credited to operations
based upon the principal amount outstanding, using methods which
generally result in level rates of return. The accrual of interest
income generally is discontinued when a loan becomes 90 days past due as
to principal or interest. 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 estimated net realizable value of collateral exceeds the principal
balance and related accrued interest, and the loan is in process of
collection.

LOANS HELD FOR SALE: Loans held for sale represent mortgage loans the
Company has either purchased or originated with the intent to sell on
the secondary market and are carried at the lower of cost or estimated
fair value.

ALLOWANCE FOR LOAN LOSSES: The provision for possible loan losses
included in the consolidated statements of income is based upon
management's evaluation of individual credits in the loan portfolio,
historical loan loss experience, current and expected future economic
conditions, and other relevant factors. These provisions, less net
charge-offs, comprise the allowance for loan losses. In management's
judgment, the allowance for loan losses is maintained at a level
adequate to provide for probable losses on existing loans.

BANK PREMISES AND EQUIPMENT: Bank premises and equipment are stated
at cost less accumulated depreciation. Depreciation is computed
primarily by the straight-line method over the estimated useful lives of
the assets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE ONE
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)

INTANGIBLES: Intangible assets, which are included in other assets in
the consolidated balance sheets, are comprised of goodwill and core
deposits which are amortized using straight-line (15 year life) and
accelerated methods (10 year life), respectively, over their estimated
useful lives.

During 1994, the Company purchased mortgage loan servicing rights
totaling $1,200,000 which are also included in other assets in the
consolidated balance sheets. The servicing rights are being amortized
using an accelerated method over the period of estimated net servicing
income.

INCOME TAXES: The consolidated provision for income taxes is based
upon reported income and expense. Deferred income taxes (included in
other assets) are provided for temporary differences between financial
reporting and tax bases of assets and liabilities. The Company files a
consolidated income tax return. The respective subsidiaries generally
provide for income taxes on a separate return basis and remit amounts
determined to be currently payable to the Parent Company.

NET INCOME PER COMMON SHARE: Net income per common share is based on
the weighted average common shares outstanding during each year. On
December 12, 1994, a 10% stock dividend was declared by the Board of
Directors for shareholders of record on January 2, 1995. The stock
dividend was paid on January 15, 1995, and all stock related data in the
consolidated financial statements reflects the stock dividend.A 10%
stock dividend was also declared in 1992. For each declaration an
amount equal to the fair value of the additional shares issued was
transferred from retained earnings to the common stock and capital
surplus accounts.

LOAN FEES AND COST: Loan origination and commitment fees and direct
loan origination costs are principally being recognized as collected and
incurred. The use of this method of recognition does not produce
results that are materially different from results which would have been
produced if such costs and fees were deferred and amortized as an
adjustment of loan yield over the life of the related loan.

STATEMENTS OF CASH FLOWS: Cash paid for interest, including long-term
debt, was $21,998,000, $19,693,000 and $19,996,000 in 1994, 1993, and
1992, respectively. Cash paid for income taxes was $3,219,000,
$2,877,000, and $2,957,000 in 1994, 1993, and 1992, respectively. NOTE
TWO RESTRICTIONS ON CASH AND DUE FROM BANKS

Certain of the subsidiary banks are required to maintain average
reserve balances with the Federal Reserve Bank. The average amount of
those balances for the year ended December 31, 1994, was approximately
$4,366,000.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE THREE
ACQUISITIONS

On December 5, 1994, the Company acquired 100% of the common stock of
Hinton Financial Corporation and subsidiary (Hinton) in exchange for
460,047 shares of the Company's common stock. The transaction has been
accounted for as a pooling of interests and, accordingly, the
consolidated financial statements for all periods presented have been
restated to include the accounts of Hinton. Previously reported results
of the Company have been restated as follows:

<TABLE>

NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992

<S> <C> <C> <C>
NET INTEREST INCOME AS PREVIOUSLY
REPORTED BY THE COMPANY $ 22,235,000 $ 25,813,000 $ 21,761,000
HINTON'S PREVIOUSLY REPORTED RESULTS 2,048,000 2,856,000 2,888,000
RESTATED NET INTEREST INCOME $ 24,283,000 $ 28,669,000 $ 24,649,000

NET INCOME AS PREVIOUSLY REPORTED
BY THE COMPANY $ 4,431,000 $ 5,503,000 $ 5,039,000
HINTON'S PREVIOUSLY REPORTED RESULTS 596,000 929,000 865,000
RESTATED NET INCOME $ 5,027,000 $ 6,432,000 $ 5,904,000

NET INCOME PER COMMON SHARE AS
PREVIOUSLY REPORTED BY THE COMPANY
AS ADJUSTED FOR THE 10% STOCK
DIVIDEND IN 1995 $ 1.34 $ 1.69 $ 1.53
EFFECT OF HINTON RESTATEMENT (.01) .02 .03
RESTATED NET INCOME PER COMMON SHARE $ 1.33 $ 1.71 $ 1.56

</TABLE>

In June 1994, the Company acquired the remaining 33% interest in the
common stock of First National Bank-Beckley, West Virginia (FNB) for
which consideration included $530,000. As a result, FNB became a
wholly-owned subsidiary of the Company. Minority interest, representing
the equity interest in FNB owned by stockholders other than the Company,
appears in the 1993 balance sheet as a liability.

On October 15, 1993, Blue Ridge Bank, a wholly-owned subsidiary of the
Company, was declared the successful bidder for the purchase of certain
assets and the assumption of the insured deposits and certain other
liabilities of a failed thrift which had been in conservatorship with
the Resolution Trust Corporation (RTC). Blue Ridge Bank assumed insured
deposits of approximately $43 million in exchange for assets
(principally cash and cash equivalents) of approximately $40 million
from the RTC.

The FNB and RTC transactions were accounted for under the purchase
method of accounting. Accordingly, the results of operations
attributable to such acquisitions have been included in the consolidated
totals from the respective dates of acquisition. Due to the
immateriality of the transactions and the significant assets retained by
the RTC with respect to the failed thrift, proforma financial
information has not been presented herein.

Intangible assets arising from prior year purchase business
combinations consist of core deposits and goodwill which have an
aggregate unamortized balance at December 31, 1994 and 1993, of
$4,978,000 and $5,538,000, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES
NOTE FOUR
INVESTMENTS

The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," effective January 1, 1994. In accordance with SFAS No.
115, prior years' financial statements have not been restated to reflect
the change in accounting method and there was no cumulative effect of
adopting the Statement. Under SFAS No. 115, investment securities are
carried at amortized cost and securities available for sale are carried
at fair value with the after-tax net unrealized gain or loss recorded in
stockholders' equity. The adoption of SFAS No. 115 resulted in an
increase in stockholders' equity of $1,055,000.

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 instruments.

<TABLE>
AVAILABLE-FOR-SALE SECURITIES
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U.S. TREASURY SECURITIES AND OBLIGATIONS
OF U.S. GOVERNMENT CORPORATIONS AND AGENCIES $ 47,900,000 $ 9,000 $ 2,735,000 $ 45,174,000
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS 790,000 1,000 1,000 790,000
MORTGAGE-BACKED SECURITIES 11,835,000 101,000 359,000 11,577,000
OTHER DEBT SECURITIES 1,003,000 39,000 964,000

TOTAL DEBT SECURITIES 61,528,000 111,000 3,134,000 58,505,000
EQUITY SECURITIES 9,828,000 18,000 431,000 9,415,000
$ 71,356,000 $ 129,000 $ 3,565,000 $ 67,920,000

HELD-TO-MATURITY SECURITIES
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U.S. TREASURY SECURITIES AND OBLIGATIONS
OF U.S. GOVERNMENT CORPORATIONS AND AGENCIES $ 87,836,000 $ 13,000 $ 3,461,000 $ 84,388,000
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS 32,056,000 355,000 883,000 31,528,000
MORTGAGE-BACKED SECURITIES 4,896,000 414,000 4,482,000
OTHER DEBT SECURITIES 3,669,000 23,000 95,000 3,597,000
$ 128,457,000 $ 391,000 $ 4,853,000 $ 123,995,000

</TABLE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES
NOTE FOUR
INVESTMENTS (CONTINUED)
<TABLE>

AVAILABLE-FOR-SALE SECURITIES
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
DECEMBER 31, 1993
U .S. TREASURY SECURITIES AND OBLIGATIONS
OF U.S. GOVERNMENT CORPORATIONS AND AGENCIES $ 45,280,000 $ 859,000 $ 58,000 $ 46,081,000
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS 95,000 1,000 94,000
MORTGAGE-BACKED SECURITIES 20,492,000 981,000 101,000 21,372,000
OTHER DEBT SECURITIES 1,809,000 50,000 1,859,000

TOTAL DEBT SECURITIES 67,676,000 1,890,000 160,000 69,406,000
EQUITY SECURITIES 7,851,000 29,000 0 7,880,000
$ 75,527,000 $ 1,919,000 $ 160,000 $ 77,286,000
</TABLE>
<TABLE>

HELD-TO-MATURITY SECURITIES
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
DECEMBER 31, 1993
U.S. TREASURY SECURITIES AND OBLIGATIONS OF U.S.
GOVERNMENT CORPORATIONS AND AGENCIES $ 127,512,000 $ 2,588,000 $ 158,000 $ 129,942,000
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS 33,889,000 1,969,000 26,000 35,832,000
OTHER DEBT SECURITIES 4,709,000 262,000 4,971,000
$ 166,110,000 $ 4,819,000 $ 184,000 $ 170,745,000
</TABLE>

The amortized cost and estimated fair value of debt securities at
December 31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations without
prepayment penalties.
<TABLE>

ESTIMATED
COST FAIR VALUE
<S> <C> <C>
AVAILABLE-FOR-SALE
DUE IN ONE YEAR OR LESS $ 6,047,000 $ 5,851,000
DUE AFTER ONE YEAR THROUGH FIVE YEARS 22,093,000 21,056,000
DUE AFTER FIVE YEARS THROUGH TEN YEARS 20,848,000 19,404,000
DUE AFTER TEN YEARS 705,000 617,000
49,693,000 46,928,000
MORTGAGE-BACKED SECURITIES 11,835,000 11,577,000
$ 61,528,000 $ 58,505,000
HELD-TO-MATURITY
DUE IN ONE YEAR OR LESS $ 18,010,000 $ 17,813,000
DUE AFTER ONE YEAR THROUGH FIVE YEARS 69,920,000 67,668,000
DUE AFTER FIVE YEARS THROUGH TEN YEARS 32,993,000 31,521,000
DUE AFTER TEN YEARS 2,638,000 2,511,000
123,561,000 119,513,000
MORTGAGE-BACKED SECURITIES 4,896,000 4,482,000
$ 128,457,000 $ 123,995,000
</TABLE>
Gross gains of $100,000 and gross losses of $903,000 were realized on
sales and calls of securities during 1994. During 1993 and 1992,
respectively, gross gains of $390,000 and $72,000 and gross losses of
$68,000 and $63,000 were realized on sales of securities. The book value
of securities pledged to secure public deposits and for other purposes
as required or permitted by law approximated $70,318,000 and $51,146,000
at December 31, 1994 and 1993, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE FIVE
LOANS

DECEMBER 31
1994 1993
COMMERCIAL, FINANCIAL AND AGRICULTURAL $ 137,425,000 $ 125,568,000
RESIDENTIAL REAL ESTATE 238,231,000 184,602,000
INSTALLMENT LOANS TO INDIVIDUALS 129,300,000 114,110,000
$ 504,956,000 $ 424,280,000

The Company grants loans to customers generally within the market
areas of its subsidiary banks. There is no significant concentration of
credit risk by industry or by related borrowers. There are no foreign
loans outstanding and highly leveraged loan transactions are
insignificant. The effects on income of nonaccrual loans, as well as
their outstanding balances, were not material.

During 1994, the Company began participation in a short-term,
whole-loan bulk purchasing program whereby the Company purchases from a
third party whole loans secured by residential mortgages. The loans,
generally, are repurchased from the Company within 90 days.
Additionally, the Company began originating residential mortgage loans
to be sold on the secondary market. Due to the short-term nature of
these loans, the recorded value approximates fair value. At December
31, 1994, the Company's investment in loans held for sale approximated
$30,227,000. A summary of changes in the allowance for possible loan
losses follows:

<TABLE>

1994 1993 1992
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $ 5,764,000 $ 5,380,000 $ 2,401,000
PROVISION FOR POSSIBLE LOAN LOSSES 953,000 1,341,000 2,222,000
CHARGE-OFFS (1,093,000) (1,537,000) (1,163,000)
RECOVERIES 393,000 476,000 240,000
ALLOWANCE OF PURCHASED SUBSIDIARY 0 104,000 1,680,000
BALANCE AT END OF YEAR $ 6,017,000 $ 5,764,000 $ 5,380,000

</TABLE>
The Financial Accounting Standards Board (FASB) has issued SFAS No.
114, "Accounting By Creditors for Impairment of a Loan," which was
amended by SFAS No. 118. The provisions of SFAS No. 114 and SFAS No. 118
are effective for fiscal years beginning after December 15, 1994. SFAS
No. 114 requires that impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable
market price or fair value of the collateral if the loan is collateral
dependent. The Company will adopt this Statement on January 1, 1995 and
it will not have a material effect on the Company's financial
statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE SIX
BANK PREMISES AND EQUIPMENT

A summary of bank premises and equipment follows:

DECEMBER 31
1994 1993
BANK PREMISES $ 17,865,000 $ 14,325,000
FURNITURE, FIXTURES, AND EQUIPMENT 11,009,000 9,806,000
28,874,000 24,131,000
LESS ALLOWANCE FOR DEPRECIATION 11,196,000 8,705,000
$ 17,678,000 $ 15,426,000
NOTE SEVEN
SHORT-TERM BORROWINGS

Short-term borrowings consist primarily of advances from the Federal
Home Loan Bank of Pittsburgh (the FHLB) and securities sold under
agreement to repurchase. A summary of the Company's short-term
borrowings is set forth below:
<TABLE>
<S> <C> <C>
1994:
AVERAGE AMOUNT OUTSTANDING DURING THE YEAR $ 42,559,000
MAXIMUM AMOUNT OUTSTANDING AT ANY MONTH END 78,263,000
WEIGHTED AVERAGE INTEREST RATE:
DURING THE YEAR 3.96%
END OF THE YEAR 5.50%
1993:
A VERA G E AMOUNT OUTSTANDING DURING THE Y EAR $ 17,641,000
MAXIMUM AMOUNT OUTSTANDING AT ANY MONTH END 24,539,000
WEIGHTED A VERA G E INTEREST RATE:
DURING THE YEAR 2.40%
END OF THE YEAR 2.65%
1992:
A VERA G E AMOUNT OUTSTANDING DURING THE Y EAR $ 10,605,000
MAXIMUM AMOUNT OUTSTANDING AT ANY MONTH END 16,272,000
WEIGHTED A VERA G E INTEREST RATE:
DURING THE YEAR 3.10%
END OF THE YEAR 2.18%
</TABLE>
NOTE EIGHT
LONG-TERM DEBT AND UNUSED LINES OF CREDIT

Long-term debt, which represents an obligation of the Parent Company,
consists of a $10,000,000 revolving credit loan with an unrelated party.
The loan has a variable rate (7.9375% at December 31, 1994) with
interest payments due quarterly and principal due at maturity in June
1995. Management intends to refinance the loan according to provisions
provided in the agreement.

The loan agreement contains certain restrictive provisions applicable
to the Parent Company including limitations on additional long-term
debt. The parent company has pledged the common stock of its
wholly-owned subsidiaries, The City National Bank (City National) and
The Peoples Bank of Point Pleasant, as collateral for the revolving
credit loan.

During 1994, five of the Company's subsidiaries were approved for
membership, joining City National who was approved in 1993, in the FHLB.
On a consolidated basis, the Company has purchased 44,000 shares of the
FHLB stock at par value. Such purchases entitle the Company to
dividends declared by the FHLB and provide an additional source of
short-term and long-term funding, in the form of collateralized
advances. At December 31, 1994, the subsidiaries have been issued one
year flexline commitments of $61,725,000, at prevailing interest rates,
from the FHLB with maturities ranging from June to December 1995. Such
commitments are subject to satisfying the Capital Stock Requirement
provisions, as defined, in the agreement with the FHLB. As of December
31, 1994, amounts outstanding pursuant to the agreements totaled
$12,707,000.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE NINE
RESTRICTIONS ON SUBSIDIARY DIVIDENDS

Certain restrictions exist regarding the ability of the subsidiary
banks to transfer funds to the Parent Company in the form of cash
dividends. The approval of the bank's applicable primary regulator is
required prior to the payment of dividends by a subsidiary bank in
excess of its earnings retained in the current year plus retained net
profits for the preceding two years. During 1995, the subsidiary banks
can, without prior regulatory approval, declare dividends of
approximately $6,214,000 to the Parent Company, plus retained net
profits for the interim period through the date of such dividend
declaration.

NOTE TEN
INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
and liabilities are as follows:

DECEMBER 31
1994 1993
DEFERRED TAX ASSETS:
ALLOWANCE FOR LOAN LOSSES $ 2,208,000 $ 2,168,000
ACQUIRED NET OPERATING LOSS CARRY FORWARD 777,000 885,000
DEFERRED COMPENSATION PAYABLE 436,000 435,000
SECURITIES AVAILABLE FOR SALE 1,356,000 0
OTHER 200,000 155,000
TOTAL DEFERRED TAX ASSETS 4,977,000 3,643,000
DEFERRED TAX LIABILITIES:
FEDERAL INCOME TAX ALLOWANCE FOR LOAN LOSSES 630,000 861,000
PREMISES AND EQUIPMENT 746,000 734,000
CORE DEPOSIT INTANGIBLE 482,000 544,000
INVESTMENTS 139,000 172,000
LOANS 272,000 278,000
PREPAIDS 111,000 111,000
OTHER 8,000 13,000
TOTAL DEFERRED TAX LIABILITIES 2,388,000 2,713,000

NET DEFERRED TAX ASSETS $ 2,589,000 $ 930,000

SIGNIFICANT COMPONENTS OF THE PROVISION FOR INCOME TAXES ARE AS FOLLOWS:

LIABILITY METHOD
1994 1993 1992
FEDERAL:
CURRENT $ 2,876,000 $ 2,667,000 $ 2,469,000
DEFERRED (303,000) (153,000) (402,000)

2,573,000 2,514,000 2,067,000
STATE 620,000 435,000 444,000

TOTAL $ 3,193,000 $ 2,949,000 $ 2,511,000

Current income tax expense (benefit) attributable to investment
securities transactions approximated $(321,000), $129,000, and $4,000 in
1994, 1993, and 1992, respectively. As of December 31, 1994, the Company
has approximately $ 1.7 million and $2.3 million, respectively, of
federal and state income tax credit carryforwards which expire in 2006.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE TEN
INCOME TAXES (CONTINUED)

A reconciliation between income taxes as reported and the amount
computed by applying the statutory federal income tax rate to income
before income taxes follows:

<TABLE>

LIABILITY METHOD
1994 1993 1992
<S> <C> <C> <C>
COMPUTED FEDERAL TAXES AND STATUTORY RATE $ 3,997,000 $ 2,764,000 $ 2,861,000
STATE INCOME TAXES, NET OF FEDERAL TAX BENEFIT 340,000 314,000 320,000
TAX EFFECTS OF:
NONTAXABLE INTEREST INCOME (611,000) (593,000) (606,000)
OTHER ITEMS, NET (33,000) 39,000 (64,000)
$ 3,193,000 $ 2,949,000 $ 2,511,000
</TABLE>

NOTE ELEVEN
RETIREMENT PLAN

The City Holding Company Profit Sharing and 401(k) Plan (the Plan) is
a deferred compensation plan under section 401(k) of the Internal
Revenue Code. All employees who complete one year of service are
eligible to participate in the Plan. Participants may contribute from
1% to 15% of pre-tax earnings to their respective accounts. These
contributions may be invested in any of four investment options selected
by the employee, one of which is City Holding Company common stock. The
Company matches 50% of the first 6% of compensation deferred by the
participant with City Holding Company common stock. Profit sharing
contributions are discretionary, as determined annually by the Company's
Board of Directors. The Company's total expense associated with the
Plan approximated $881,000, $562,000, and $403,000 in 1994, 1993, and
1992, respectively. The total number of shares of the Company's common
stock held by the Plan is 120,492. Other than the Plan, the Company
offers no postretirement benefits.

In May 1993, the Company formed the 1993 Stock Incentive Plan
(Incentive Plan) applicable to key employees. Under the Incentive Plan,
stock options are granted at an amount no less than the fair value of
the Company's common stock on the date of the grant. Participants in
the Incentive Plan may also be granted stock appreciation rights and
stock awards, at the discretion of the Company's Compensation Committee
of the Board of Directors. A maximum of 300,000 shares of the Company's
common stock may be issued pursuant to the provisions of the Incentive
Plan. Since its inception, no awards have been made under the Incentive
Plan.

NOTE TWELVE
TRANSACTIONS WITH DIRECTORS AND OFFICERS

Subsidiaries of the Company have granted loans to the officers and
directors of the Company and its subsidiaries, and to their associates.
The loans were made in the ordinary course of business and on
substantially the same terms, including interest rates and collateral,
as those prevailing at the same time for comparable transactions with
unrelated persons and did not involve more than normal risk of
collectibility. The aggregate amount of loans outstanding as of
December 31, 1994 and 1993, attributable directly and indirectly to
these parties, was approximately $20,089,000 and $18,898,000,
respectively. During 1994, $6,693,000 of new loans were made and
repayments totaled $5,502,000.

A director of one of the Company's subsidiaries is the President of a
non-affiliated financial institution that participates in the whole-loan
bulk purchasing program (See NOTE FIVE).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES
NOTE THIRTEEN
INCOME

Included in other income in 1994 is $1,400,000 related to an insurance
recovery at one of the Company's subsidiary banks. Additionally, in
1994 the Company became involved in the secondary market for mortgage
loans which generated fee income of $317,000.

NOTE FOURTEEN
EXPENSES

The following items of other expenses exceeded one percent of total
revenue for the respective years:

1994 1993 1992

INSURANCE, INCLUDING FDIC PREMIUMS $ 1,545,000 $ 1,324,000 $ 1,068,000
ADVERTISING 868,000 606,000 419,000
BANK SUPPLIES 887,000 783,000 573,000
LEGAL AND ACCOUNTING FEES 952,000 475,000 335,000
NOTE FIFTEEN
COMMITMENTS AND CONTINGENT LIABILITIES

In the normal course of business, certain financial products are
offered by the Company to accommodate the financial needs of its
customers. Loan commitments (lines of credit) represent the principal
off-balance-sheet financial product offered by the Company. At December
31, 1994 and 1993, commitments outstanding to extend credit totaled
approximately $45,776,000 and $25,252,000, respectively. To a much
lesser extent, the Company offers standby letters of credit which
require payments to be made on behalf of customers when certain
specified future events occur. Amounts outstanding pursuant to such
standby letters of credit were $3,161,000 and $780,000 as of December
31, 1994 and 1993, respectively. Historically, substantially all
standby letters of credit have expired unfunded.

Both of the above arrangements 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.

NOTE SIXTEEN
PREFERRED STOCK AND SHAREHOLDER RIGHTS PLAN

The Company's Board of Directors has the authority to issue
preferred stock, and to fix the designation, preferences, rights,
dividends and all other attributes of such preferred stock, without any
vote or action by the shareholders. As of December 31, 1994, there are
no such shares outstanding, nor are any expected to be issued, except as
might occur pursuant to the Stock Rights Plan discussed below.

The Company's Stock Rights Plan provides that each share of common
stock carries with it one right. The rights would be exercisable only
if a person or group, as defined, acquired 10% or more of the Company's
common stock, or announces a tender offer for such stock. Under
conditions described in the Stock Rights Plan, holders of rights could
acquire shares of preferred stock or additional shares of the Company's
common stock, or in the event of a 50% or more change-in-control, shares
of common stock of the acquiror. The value of shares acquired under the
plan would equal twice the exercise price.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES
NOTE SEVENTEEN
FAIR VALUES OF FINANCIAL INSTRUMENTS

FASB Statement No. 107, "Disclosures about Fair Value of Financial
Instruments," 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
the discount rate and estimates 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. SFAS No. 107 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 table represents the estimates of fair value of financial
instruments:
<TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
1994 1993
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE

<S> <C> <C> <C> <C>
ASSETS
CASH AND SHORT-TERM INVESTMENTS $ 27,591,000 $ 27,591,000 $ 27,436,000 $ 27,436,000
LOANS HELD FOR SALE 30,227,000 30,227,000
SECURITIES 199,813,000 191,915,000 241,637,000 248,031,000
NET LOANS 489,395,000 478,324,000 407,990,000 412,587,000
LIABILITIES
DEMAND DEPOSITS 388,794,000 388,794,000 400,099,000 400,099,000
TIME DEPOSITS 262,470,000 255,190,000 217,234,000 249,526,000
SHORT-TERM BORROWINGS 57,483,000 57,483,000 21,669,000 21,669,000
LONG-TERM DEBT 6,875,000 6,875,000 5,875,000 5,875,000
OFF-BALANCE SHEET
COMMITMENTS TO EXTEND CREDIT 45,776,000 45,776,000 25,252,000 25,252,000
LETTERS OF CREDIT 3,161,000 3,161,000 780,000 780,000

</TABLE>

The following methods and assumptions were used in estimating fair
value amounts for financial instruments:

The fair values for the loan portfolio are estimated using discounted
cash flow analyses at interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. The carrying
values of accrued interest approximate fair value.

The fair values of demand deposits (i.e interest and
noninterest-bearing checking, regular savings, and other types of money
market demand accounts) are, by definition, equal to their carrying
amounts. Fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregate expected
monthly maturities of time deposits.

Securities sold under agreements to repurchase represent borrowings
with original maturities of less than 90 days. The carrying amounts of
short-term borrowings approximate their fair values.

The fair values of long-term borrowings are estimated using
discounted cash flow analyses based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE EIGHTEEN
CITY HOLDING COMPANY (PARENT COMPANY ONLY)FINANCIAL INFORMATION

CONDENSED BALANCE SHEETS

DECEMBER 31
1994 1993
ASSETS
CASH $ 77,000 $ 188,000
SECURITIES AVAILABLE-FOR-SALE 1,726,000 1,603,000
INVESTMENT IN SUBSIDIARIES 67,009,000 60,630,000
FIXED ASSETS 1,745,000 1,768,000
OTHER ASSETS 1,262,000 490,000
TOTAL ASSETS $ 71,819,000 $ 64,679,000

LIABILITIES
LONG-TERM DEBT $ 6,875,000 $ 5,875,000
ADVANCES FROM AFFILIATES 5,807,000 2,234,000
OTHER LIABILITIES 2,268,000 736,000
TOTAL LIABILITIES 14,950,000 8,845,000

STOCKHOLDERS' EQUITY 56,869,000 55,834,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 71,819,000 $ 64,679,000

Advances from affiliates, which eliminate for purposes of the
Company's consolidated financial statements, represent amounts borrowed
from banking subsidiaries to fund the purchase of certain bank premises
and to meet other cash needs of the parent. Such debt is collateralized
by the securities and fixed assets of the Parent Company. Interest is
due quarterly at prime with principal due at maturity in 1997. The
maximum available credit under the advance is subject to the
subsidiaries' legal lending limit which approximated $6,356,000 at year
end.

CONDENSED STATEMENTS OF INCOME

<TABLE>
YEAR ENDED DECEMBER 31
1994 1993 1992

<S> <C> <C> <C>
INCOME
DIVIDENDS FROM BANK SUBSIDIARIES $ 5,231,000 $ 10,906,000 $ 4,476,000
INTEREST AND DIVIDENDS ON SECURITIES 111,000 117,000 12,000
OTHER INCOME 1,604,000 146,000 -
6,946,000 11,169,000 4,488,000
EXPENSES
INTEREST EXPENSE 735,000 349,000 5,000
OTHER EXPENSES 3,159,000 2,505,000 1,508,000
3,894,000 2,854,000 1,513,000
INCOME BEFORE INCOME TAX
BENEFIT AND EQUITY IN UNDISTRIBUTED NET INCOME
(EXCESS DIVIDENDS) OF SUBSIDIARIES 3,052,000 8,315,000 2,975,000
INCOME TAX BENEFIT (1,344,000) (991,000) (605,000)
INCOME BEFORE EQUITY
IN UNDISTRIBUTED NET INCOME (EXCESS DIVIDENDS)
OF SUBSIDIARIES 4,396,000 9,306,000 3,580,000
EQUITY IN UNDISTRIBUTED NET INCOME
(EXCESS DIVIDENDS) OF SUBSIDIARIES 2,563,000 (2,874,000) 2,324,000
NET INCOME $ 6,959,000 $ 6,432,000 $ 5,904,000

</TABLE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE EIGHTEEN

CITY HOLDING COMPANY (PARENT COMPANY ONLY)
FINANCIAL INFORMATION (CONTINUED)

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE> YEAR ENDED DECEMBER 31
1994 1993 1992
<S> <C> <C> <C>
OPERATING ACTIVITIES
NET INCOME $ 6,959,000 $ 6,432,000 $ 5,904,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR DEPRECIATION 149,000
DECREASE (INCREASE) IN OTHER ASSETS 44,000 (128,000) 190,000
INCREASE (DECREASE) IN OTHER LIABILITIES 1,532,000 430,000 (98,000)
(EQUITY IN UNDISTRIBUTED NET INCOME) EXCESS DIVIDENDS
OF SUBSIDIARIES (2,563,000) 2,874,000 (2,324,000)
OTHER 99,000 32,000
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,121,000 9,707,000 3,704,000

INVESTING ACTIVITIES
PROCEEDS FROM MATURITIES OF INVESTMENT SECURITIES 6,551,000 250,000
PROCEEDS FROM SALES OF SECURITIES 250,000
PURCHASES OF INVESTMENT SECURITIES (148,000) (6,407,000) (2,246,000)
PURCHASES OF MORTGAGE LOANS (808,000)
CASH PAID FOR ACQUIRED SUBSIDIARY (532,000) (193,000) (2,250,000)
CASH INVESTED IN SUBSIDIARIES (5,318,000) (8,767,000) (2,000,000)
PURCHASES OF PREMISES AND EQUIPMENT (126,000) (1,706,000)
NET CASH USED IN INVESTING ACTIVITIES (6,932,000) (10,272,000) (6,246,000)

FINANCING ACTIVITIES
PROCEEDS FROM LONG-TERM DEBT 6,875,000 5,225,000 4,000,000
PRINCIPAL REPAYMENTS ON LONG-TERM DEBT (5,875,000) (3,350,000)
ADVANCES FROM BANK SUBSIDIARIES, NET 3,573,000 2,234,000
CASH DIVIDENDS PAID (2,298,000) (1,833,000) (1,611,000)
PURCHASES OF TREASURY STOCK (193,000) (2,218,000) (548,000)
PROCEEDS FROM SALES OF TREASURY STOCK 461,000 565,000 665,000
REDEMPTION OF DISSENTER AND FRACTIONAL SHARES (1,843,000)
NET CASH PROVIDED BY FINANCING ACTIVITIES 700,000 623,000 2,506,000
(DECREASE) INCREASE IN CASH (111,000) 58,000 (36,000)
CASH AT BEGINNING OF YEAR 188,000 130,000 166,000
CASH AT END OF YEAR $ 77,000 $ 188,000 $ 130,000

</TABLE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CITY HOLDING COMPANY AND SUBSIDIARIES

NOTE NINETEEN

SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

A summary of selected quarterly financial information for 1994 and
1993 follows:

<TABLE>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER

<S> <C> <C> <C> <C>
1994
INTEREST INCOME $ 12,665,000 $ 13,359,000 $ 14,295,000 $ 14,829,000
INTEREST EXPENSE 5,095,000 5,259,000 5,682,000 6,206,000
NET INTEREST INCOME 7,570,000 8,100,000 8,613,000 8,623,000
PROVISION FOR POSSIBLE LOAN LOSSES 201,000 215,000 215,000 322,000
INVESTMENT SECURITIES GAINS (LOSSES) 69,000 3,000 (20,000) (855,000)
NET INCOME 1,658,000 1,644,000 1,725,000 1,932,000
NET INCOME PER COMMON SHARE 0.44 0.44 0.45 0.52

1993
INTEREST INCOME $ 11,760,000 $ 11,877,000 $ 11,891,000 $ 12,688,000
INTEREST EXPENSE 4,774,000 4,781,000 4,761,000 5,231,000
NET INTEREST INCOME 6,986,000 7,096,000 7,130,000 7,457,000
PROVISION FOR POSSIBLE LOAN LOSSES 343,000 320,000 295,000 383,000
INVESTMENT SECURITIES GAINS 87,000 99,000 84,000 52,000
NET INCOME 1,661,000 1,646,000 1,678,000 1,447,000
NET INCOME PER COMMON SHARE 0.44 0.44 0.45 0.38

</TABLE>

NOTE TWENTY
PENDING MERGER

In March 1995, the Company signed a definitive agreement to acquire
First Merchants Bancorp in Montgomery, West Virginia (Merchants). At
December 31, 1994, Merchants reported total assets of approximately $115
million. The merger, which is expected to be consummated in the third
quarter of 1995, involves the exchange of approximately 920,000 shares
of Company common stock for all of Merchants' outstanding shares. It is
anticipated that the transaction will be accounted for under the pooling
of interests method of accounting. The following condensed unaudited
proforma financial information presents selected balance sheet amounts
and operating results of the Company and Merchants as though they had
been combined during all periods indicated below.

<TABLE>

(IN THOUSANDS, EXCEPT PER SHARE DATA)
1994 1993 1992
<S> <C> <C> <C>
AT YEAR END
NET LOANS $ 547,809 $ 462,424 $ 376,206
TOTAL DEPOSITS 746,805 709,958 605,398
TOTAL ASSETS 895,817 816,225 701,862

SUMMARY OF OPERATIONS
NET INTEREST INCOME $ 37,594 $ 32,876 $ 28,696
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 8,142 7,762 6,972
NET INCOME 8,142 7,645 6,972
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE PER SHARE 1.73 1.63 1.48
NET INCOME PER COMMON SHARE 1.73 1.63 1.48

</TABLE>

<PAGE>

Report of Ernst & Young LLP
Independent Auditors

Board of Directors and Stockholders
First Merchants Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of
First Merchants Bancorp, Inc. and subsidiary as of December 31, 1994 and
1993, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
First Merchants Bancorp, Inc. and subsidiary at December 31, 1994 and
1993, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994,
in conformity with generally accepted accounting principles.

As discussed in the footnotes to the consolidated financial
statements, in 1993 First Merchants Bancorp, Inc. changed its method of
accounting for securities (Note D), postretirement benefits other than
pensions (Note I), and income taxes (Note J).

Ernst & Young LLP

Charleston, West Virginia

January 27, 1995, except as to
Note O, the date of which is March 14, 1995

<PAGE>

<TABLE>

CONSOLIDATED BALANCE SHEETS
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
DECEMBER 31
1994 1993
ASSETS ------------ ------------
<S> <C> <C>
Cash and due from banks $5,211,650 $4,436,864
Federal funds sold 810,000 710,000
------------ ------------
CASH AND CASH EQUIVALENTS 6,021,650 5,146,864

Interest-bearing deposits in other banks 670,734 1,215,307
Securities available for sale (cost: 12-31-94 -
$16,204,906: 12-31-93 - $20,547,829) 14,888,731 21,056,123
Securities held to maturity (approximate market
value: 12-31-94 - $28,304,476;
12-31-93 - $22,312,255) 28,648,209 21,139,938

Loans - gross 59,015,396 55,067,019
Less: Unearned income (141,203) (188,366)
Allowance for loan losses (460,000) (445,000)
------------ ------------
LOANS - NET 58,414,193 54,433,653

Premises and equipment 3,452,390 3,551,457
Other assets 3,195,202 2,603,663
------------ ------------
TOTAL ASSETS $115,291,109 $109,147,005
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $13,674,107 $10,882,479
Interest bearing 81,867,045 81,742,940
------------ ------------
TOTAL DEPOSITS 95,541,152 92,625,419
Short-term borrowings:
Securities sold under agreements
to repurchase 8,634,139 4,947,012
Other short-term borrowings 509,881 595,807
------------ ------------
TOTAL SHORT-TERM BORROWINGS 9,144,020 5,542,819
Other liabilities 1,144,151 1,207,401

------------ ------------
TOTAL LIABILITIES 105,829,323 99,375,639
Stockholders' equity:
Common stock, $2 par value, 1,000,000 shares
authorized, 576,000 shares issued and
outstanding 1,152,000 1,152,000
Surplus 649,343 649,343
Retained earnings 8,450,153 7,665,033
Net unrealized (loss) gain on Securities
available for sale, net of related tax effect:
1994 $(526,465); and 1993 $203,304 (789,710) 304,990
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 9,461,786 9,771,366
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $115,291,109 $109,147,005
============ ============
See notes to consolidated financial statements.
</TABLE>

CONSOLIDATED STATEMENTS OF INCOME
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
YEAR ENDED DECEMBER 31
1994 1993 1992
INTEREST INCOME ---------- ---------- ----------
Interest and fees on loans $4,899,930 4,349,508 4,272,442
Interest and dividends on securities:
Taxable 1,825,918 1,842,861 2,245,531
Nontaxable 761,162 806,764 750,040
Interest on federal funds sold 47,284 48,616 61,228
Interest on deposits with other banks 79,781 38,050 23,604
---------- ---------- ----------
TOTAL INTEREST INCOME 7,614,075 7,085,799 7,352,845
INTEREST EXPENSE
Interest on deposits 2,767,583 2,664,333 2,964,063
Interest on short-term borrowings 158,949 213,973 341,558
---------- ---------- ----------
TOTAL INTEREST EXPENSE 2,926,532 2,878,306 3,305,621
---------- ---------- ----------
NET INTEREST INCOME 4,687,543 4,207,493 4,047,224
PROVISION FOR LOAN LOSSES 86,699 93,193 103,155
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,600,844 4,114,300 3,944,069
OTHER INCOME
Service charges on deposit accounts 326,698 306,879 272,619
Other service charges and fees 50,509 48,746 41,210
Securities gains, net 73,829 351,522 6,122
Other 151,024 151,001 111,205
---------- ---------- ----------
TOTAL OTHER INCOME 602,060 858,148 431,156
OTHER EXPENSE
Salaries and employee benefits 1,752,089 1,573,371 1,444,818
Occupancy expense of premises 298,126 237,402 204,785
Furniture and equipment expense 291,738 283,545 303,201
Other operating expenses 1,325,789 1,130,605 1,027,317
---------- ---------- ----------
TOTAL OTHER EXPENSE 3,667,742 3,224,923 2,980,121
---------- ---------- ----------
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
CHANGE IN METHOD OF ACCOUNTING 1,535,162 1,747,525 1,395,104
INCOME TAXES 352,602 417,918 327,392
---------- ---------- ----------
Income Before Cumulative Effect
of Change in Method of Accounting $1,182,560 $1,329,607 1,067,712

Cumulative Effect as of January 1,
1993 of change in Method of
Accounting for Other Postretirement
Benefits, Net of income tax benefit
of $77,953 (116,930)
---------- ---------- ----------
NET INCOME $1,182,560 $1,212,677 1,067,712
EARNINGS PER COMMON SHARE : ========== ========== ==========
Income before cumulative
effect of change in method of
accounting $2.05 $2.31 $1.85

Cumulative effect of change
in method of accounting (.20)
-------- -------- --------

Net income $2.05 $2.11 $1.85
======== ======== ========

AVERAGE SHARES OUTSTANDING 576,000 576,000 576,000
======== ======== ========

See notes to consolidated financial statements.

<TABLE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY

Net
Unrealized Total
Gain
Common Retained (Loss) on Stockholders'
Stock Surplus Earnings Securities Equity
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $288,000 $649,343 $6,889,444 ($266,818) $7,559,969

Net income 1,067,712 1,067,712

Cash dividends declared
($0.46 per share) (266,400) (266,400)

Change in net unrealized
loss on marketable equity
securities 179,721 179,721
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1992 $288,000 $649,343 $7,690,756 $(87,097) $8,541,002

Net income 1,212,677 1,212,677

Cash dividends declared
($ .65 per share) (374,400) (374,400)

Change in net unrealized
loss on marketable equity
securities (9,880) (9,880)

Stock split effected in
the form of a 3 for 1
stock dividend 864,000 (864,000)

Change in accounting method
for securities, net of taxes
of $203,304 401,967 401,967
---------- ---------- ---------- ---------- ----------
Balance at Dec. 31, 1993 $1,152,000 $649,343 $7,665,033 $304,990 $9,771,366

Net income 1,182,560 1,182,560

Change in net unrealized loss
on securities (1,094,700) (1,094,700)

Cash dividends
($.69 per share) (397,440) (397,440)
---------- ---------- ---------- ---------- ----------

Balance at December 31, 1994 $1,152,000 $649,343 $8,450,153 $(789,710) $9,461,786
========== ========== ========== ========== ==========

See notes to consolidated financial statements.
</TABLE>

<TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
THE YEAR ENDED DECEMBER 31
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $1,182,560 $1,212,677 $1,067,712
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Cumulative effect of change in
accounting principle 116,930
Net amortization (8,846) (2,589) 41,013
Provision for loan losses 86,699 93,193 103,155
Depreciation 204,392 220,057 222,056
Deferred income tax expense (benefit) (5,547) 13,257 (124,951)
Securities, gain net 73,829 (351,522) (6,122)
Purchases of trading securities 0 (2,880,211) (5,177,674)
Proceeds from sales of trading
securities 0 2,880,211 5,177,674
Increase in other assets 160,973 2,158 63,613
Decrease in other liabilities (63,250) (212,551) (129,869)
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,483,152 1,091,610 1,236,607

INVESTING ACTIVITIES
Purchases of investment securities (11,588,316) (14,976,841) (17,392,904)
Purchases of securities AFS (1,955,534)
Proceeds from sales of securities AFS 6,361,604 6,303,206
Proceeds from maturities of sec. AFS 1,591,843
Proceeds from maturities of invest. sec. 3,610,085 2,763,236 6,760,446
Proceeds from calls of invest. sec. 1,034,050 3,736,543 8,945,230
Net decrease in short-term investments 1,295,068
Net (increase) decrease in loans (4,141,203) 3,478,477 (5,960,120)
Net cash received in acquisition 5,843,968
Purchases of premises and equipment (105,325) (209,854) (200,848)
Proceeds from sale of OREO 56,779 40,919 9,500
---------- ---------- ----------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (6,727,860) 9,866,565 (7,838,696)

FINANCING ACTIVITIES
Net inc. in noninterest-bearing deposits 2,791,628 655,298 1,332,764
Net inc. (dec.)in interest-bearing dep. 124,105 (1,879,103) 2,701,535
Net inc. (dec.) in repurchase agreements 3,687,128 (10,248,121) 4,738,724
Net increase (decrease) in other

short-term borrowings (85,927) 12,111 198,045
Cash dividends paid (397,440) (420,479) (234,720)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 6,119,494 (11,880,294) 8,736,348
---------- ---------- ----------
NET (DEC.) INC. IN CASH AND CASH EQUIV. 874,786 (922,119) 2,134,259

Cash and cash equiv. at start of period 5,146,864 6,068,983 3,934,724
---------- ---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $6,021,650 $5,146,864 $6,068,983
========== ========== ==========

See notes to consolidated financial statements.
</TABLE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
DECEMBER 31, 1994

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

The accounting and reporting policies of First Merchants Bancorp, Inc. and
subsidiary (First Merchants) conform with generally accepted accounting
principles. The following is a summary of the more significant policies:

PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of First Merchants Bancorp, Inc. and its wholly-owned
subsidiary, the Merchants National Bank(Merchants National). All significant
intercompany balances and transactions have been eliminated.

STATEMENT OF CASH FLOWS: For purposes of the statement of cash flows, First
Merchants considers cash and due from banks and federal funds sold as cash and
cash equivalents. Income taxes paid approximated $348,000 in 1994, $529,000 in
1993, and $453,000 in 1992. Interest paid on deposits and short-term borrowings
approximated $2,888,000 in 1994, $2,886,000 in 1993, and $3,461,000 in 1992.

SECURITIES: Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Debt securities are classified as held-to-maturity when
First Merchants has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost. Trading
account securities are held for resale in anticipation of short-term market
movements and are stated at fair value. Gains and losses on trading securities,
both realized and unrealized, are included in other income. No securities were
held in the trading account at December 31, 1994 or 1993. Debt securities not
classified as held-to-maturity or trading and marketable equity securities not
classified as trading are classified as available-for-sale. Available-for-sale
securities are stated at fair value with the unrealized gains and losses, net of
tax, reported in a separate component of stockholders' equity. The amortized
cost of debt securities classified as held-to-maturity or available-for-sale is
adjusted for amortization of premiums and accretion of discounts to maturity, or
in the case of mortgage-backed securities, over the estimated life of the
security. Realized gains and losses, and declines in value estimated to be
other-than-temporary, are included in net securities gains (losses). The cost
of securities sold is based on the specific identification method.

REVENUE RECOGNITION: Interest on loans is accrued and credited to operations
based upon the principal amount outstanding. The accrual of interest generally
is discontinued when a loan becomes 90 days past due as to principal or
interest. 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 estimated net realizable value of collateral is
sufficient to cover principal and accrued interest, and the loan is in the
process of collection.

ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is established through
a provision charged to operations. The allowance for loan losses is established
through a provision charged to operations. The allowance represents an amount
which, in management's judgement, will be adequate to absorb potential losses on
existing loans which may become uncollectible. Management's judgement in
determining the adequacy of the allowance is based on quarterly evaluations
which take into consideration such factors as changes in the nature and volume
of the loan portfolio, current economic conditions which may affect the
borrower's ability to pay, overall portfolio quality, and review of specific
problem loans. Loans deemed to be uncollectible are charged against the
allowance for loan losses.

PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. The provision for depreciation is computed
principally by the straight-line method over the estimated useful lives of the
assets.

INCOME TAXES: The consolidated provision for income taxes is based upon
reported income and expense. Deferred income taxes (included in other assets or
other liabilities, as applicable) are provided for temporary differences between
the financial reporting and tax basis of assets and liabilities.

First Merchants and its subsidiary file a consolidated income tax return. The
subsidiary provides for income taxes on a separate return basis and remits
amounts determined to be currently payable to First Merchants.

Loan Fees and Costs: Loan origination fees and direct loan origination costs
are being recognized as collected and incurred. The use of this method of
recognition does not produce results that are materially different from results
which would have been produced if such costs and fees were deferred and
amortized as an adjustment of loan yield over the life of the related loan.

NET INCOME PER COMMON SHARE: Net income per common share is based on the
weighted average common shares outstanding during each year. Net income per
share has been restated for all periods presented prior to 1993 to reflect a
stock split, effected in the form of a 3 for 1 stock dividend, which occurred in
1993.

NOTE B - ACQUISITION

In March, 1987, First merchants acquired Gauley National Bank (Gauley
National), which has subsequently been merged with and into Merchants National.
The acquisition was accounted for under the purchase method of accounting.
Accordingly, the identifiable tangible and intangible assets and liabilities of
Gauley National were adjusted to their estimated fair market values at the date
the transaction was consummated.

In September, 1993, Merchants National, was declared the successful
bidder for the purchase of certain assets and the assumption of the
insured deposits and certain other liabilities of Evergreen Federal
Savings and Loan Association (Evergreen) following its closure by the
Office of Thrift Supervision. Merchants National assumed deposits and
other liabilities of approximately $15 million in exchange for net loans
of $6 million, and cash and cash equivalents (net of premium paid by
Merchants National of approximately $900,000) of approximately $6
million and certain other assets. This acquisition was accounted for
under the purchase method of accounting. Accordingly, the results of
operations of Evergreen have been included in the consolidated totals
from the date of acquisition.

Intangible assets representing the present value of future net income to be
earned from the acquired deposits of Gauley National and Evergreen ($459,000)
are being amortized on an accelerated basis over ten and seven years,
respectively. Accumulated amortization approximated $221,000 and $149,000 at
December 31, 1994 and 1993, respectively. The excess of purchase price over the
fair market value of the net assets acquired in the Gauley National and
Evergreen transactions ($1,008,000) is being amortized on a straight-line basis
over 15 years. Accumulated amortization approximated $259,000 and $193,000 at
December 31, 1994 and 1993, respectively.

NOTE C - RESTRICTIONS ON CASH AND DUE FROM BANKS

Merchants National is required to maintain balances in cash on hand or on
deposit with the Federal Reserve Bank. The average amount of required reserve
balances was approximately $737,000 for the year ended December 31, 1994.

NOTE D - SECURITIES

In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 115, "Accounting For Certain Investments in
Debt and Equity Securities." First Merchants elected to adopt the provisions of
the new standard at the end of 1993. The cumulative effect as of December 31,
1993 of adopting Statement 115 had no effect on the results of operation. The
ending balance of stockholder' equity was decreased as of December 31, 1994 by
$789,710 (net of $526,465 in deferred income taxes) to reflect the net
unrealized holding loss and increased as of December 31, 1993 by $401,967 (net
of $203,304 in deferred income taxes) to reflect the net unrealized holding gain
on securities classified as available-for-sale.

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 instruments.

December 31, 1994
----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------------------------------------------
HELD-TO-MATURITY
U.S. Treasury sec. and
oblig. of U.S. Govern't
Corp's and agencies $15,059,378 $ 8,812 $(332,508) $14,735,682
Oblig. of states and
political subdivisions 10,928,045 262,041 (160,170) 11,029,916
Mortgage-backed securities 2,400,786 (112,788) 2,287,998
Other debt securities 260,000 (9,120) 250,880
-----------------------------------------------------
Totals $28,648,209 $270,853 $(614,586) $28,304,476
=====================================================
AVAILABLE-FOR-SALE
U.S. Treasury sec. and
oblig. of U.S. Govern't
corp's and agencies $13,152,520 $ 7,278 $(1,042,429) $12,117,369
Obligations of state and
political subdivisions 1,308,011 5,478 (45,579) 1,267,910
-----------------------------------------------------
Total debt securities 14,460,531 12,756 (1,088,008) 13,385,279
Equity securities 1,744,375 (240,923) 1,503,452
-----------------------------------------------------
Totals $16,204,906 $ 12,756 $(1,328,931) $14,888,731
=====================================================

December 31, 1993
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-----------------------------------------------------
HELD-TO-MATURITY
U.S. Treasury sec. and
oblig. of U.S. Govern't
corp's and agencies $ 6,497,581 $ 127,669 $ (20,207) $ 6,605,043
Obligations of state and
political subdivisions 11,904,049 985,913 (3,401) 12,886,561
Mortgage-backed securities 2,168,308 81,193 2,249,501
Other debt securities 570,000 3,550 (2,400) 571,150
-----------------------------------------------------

Totals $21,139,938 $1,198,325 $ (26,008) $22,312,255
=====================================================
AVAILABLE-FOR-SALE
U.S. Treasury sec. and
oblig. of U.S. Govern't
corp's and agencies $ 15,216,839 $419,682 $ (67,594) $15,568,927
Obligations of states and
political subdivisions 2,395,685 219,433 2,615,118
-----------------------------------------------------
Total debt securities 17,612,524 639,115 (67,594) 18,184,045
Equity securities 2,935,305 33,750 (96,977) 2,872,078
-----------------------------------------------------
Totals $ 20,547,829 $672,865 $(164,571) 21,056,123
=====================================================

The amortized cost and estimated market value of debt securities at December 31,
1994, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because the issuers of the securities may have the
right to call or prepay obligations with or without call or prepayment
penalties.

ESTIMATED
AMORTIZED MARKET
COST VALUE
HELD-TO-MATURITY -----------------------------
Due in one year or less $ 2,510,693 $ 2,503,105
Due after one year through five years 14,381,652 13,992,987
Due after five years through ten years 10,248,204 10,369,524
Due after ten years 1,507,660 1,438,860
-----------------------------
$28,648,209 $28,304,476
=============================
AVAILABLE-FOR-SALE
Due in one year or less $ - $ -
Due after one year through five years 10,403,167 9,611,325
Due after five years through ten years 2,249,353 2,043,444
Due after ten years 1,808,011 1,730,510
-----------------------------
$14,460,531 $13,385,279
=============================

During 1994, gross gains of approximately $134,000 and gross losses of
approximately $96,000 were realized on securities sales. During 1993 and 1992
respectively, gross gains of approximately $353,000 and $209,000, and gross
losses of $1,000 and $2,000 were realized on securities sales.

Securities with a carrying value of approximately $11,086,030 and $8,089,179,
respectively, have been pledged to secure public deposits and for other purposes
as required or permitted by law as of December 31, 1994 and 1993, respectively.

NOTE E - LOANS

Major classifications of loans as of December 31, are summarized as follows:
1994 1993
Commercial loans: ---------------------------------
Commercial paper and loan participations $10,500,455 $ 9,318,614
Other commercial and industrial 16,440,210 14,225,357
---------------------------------
26,940,665 23,543,971
Consumer loans:
Installment loans 10,615,351 9,851,982
Revolving credit 780,551 528,513
---------------------------------
11,395,902 10,380,495
Residential real estate loans 20,678,829 21,142,553
---------------------------------
Total Loans 59,015,396 55,067,019
Less unearned income on loans 141,203 188,366
---------------------------------

58,874,193 54,878,653
Less allowance for loan losses 460,000 445,000
---------------------------------
Net loans $58,414,193 $54,443,653
=================================

Changes in the allowance for loan losses for each of the three years ended
December 31 were as follows:
1994 1993 1992

----------------------------------
Balance, January 1 $445,000 $350,000 $360,000
Allowance on acquired loans 61,000
Provision for loan losses 86,699 93,193 103,155
Charge-offs (87,182) (77,852) (128,201)
Recoveries 15,483 18,659 15,046
----------------------------------
Balance, December 31 $460,000 $445,000 $350,000
==================================

Certain directors and executive officers of First Merchants, including their
immediate families and companies in which they are principal owners, are loan
customers of Merchants National. Such loans were made in the ordinary course of
business on the Bank's normal credit terms including interest rate and
collateralization and did not represent more than a normal risk of collection.
The aggregate amount of loans outstanding at December 31, 1994 and 1993,
attributable directly and indirectly to these parties was approximately
$3,150,000 and $3,090,000, respectively. During 1994, $733,000 of new loans
were made and repayments totaled $673,000.

The FASB has issued SFAS No. 114, "Accounting By Creditors for Impairment of a
Loan". The provisions of SFAS No.114 are effective for fiscal years beginning
after December 15, 1994. SFAS No. 114 requires that impaired loans be measured
based on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or fair value of the collateral in the loan is
collateral dependent. First merchants has not yet completed the complex
analysis required to estimate the impact of these new rules and does not expect
it implement SFAS No. 114 prior to its first quarter 1995 effective date.

NOTE F - PREMISES AND EQUIPMENT

The major categories of premises and equipment are summarized as follows:

December 31
1994 1993
---------------------------
Land $ 913,561 $ 913,561
Buildings 3,171,351 3,126,560
Furniture and equipment 2,144,560 2,084,026
---------------------------
6,229,472 6,124,147
Less accumulated depreciation 2,777,082 2,572,690
---------------------------
Premises and Equipment - Net $3,452,390 3,551,457
===========================

NOTE G - DEPOSITS

The major categories of deposits are summarized as follows:

December 31
1994 1993
---------------------------
Demand deposits
Non-interest-bearing $13,674,107 $10,882,479
Interest-bearing 13,942,620 13,176,640
Savings deposits 32,360,660 34,209,274
Certificates of deposits < $100,000 31,869,979 30,835,601
Certificates of deposits > $100,000 3,693,786 3,521,425
---------------------------

Total Deposits $95,541,152 $92,625,419
===========================

NOTE H - RESTRICTIONS ON SUBSIDIARY DIVIDENDS

First Merchant's primary source of funds for payment of dividends to
stockholders is dividends received from Merchants National. Certain restrictions
exist regarding the ability of Merchants National to transfer funds to First
Merchants in the form of cash dividends. Federal banking regulations require
regulatory approval prior to declaring dividends in excess of the current year's
net income, combined with retained net income for the two preceding years.
During 1995, Merchants National can, without prior regulatory approval, declare
dividends of approximately $1,610,000 to First Merchants, plus retained net
profits for the interim period through the date of such dividend declaration.

NOTE I - EMPLOYEE BENEFITS

Merchants National participates in a noncontributory defined benefit retirement
plan which covers all full-time employees with one year of service who have
attained the age of 21. Employee benefits are based on years of service and
employee compensation earned during employment. The Bank's funding policy is to
contribute annually the maximum amount that can be deducted for federal income
tax purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future.

The following table sets forth the plans funded status and the amounts
recognized in First Merchant's balance sheets at December 31, based on
actuarial valuations performed as of November 1:

1994 1993
----------------------
Actuarial present value of accumulated benefit
obligations - (substantially vested in full) $1,143,000 $1,191,000
======================

Proj. benefit oblig. for service rendered to date $1,341,000 $1,402,000
Plan assets at fair value, primarily listed
common stocks and investments is various
mutual bond and stock funds 1,702,000 1,777,000
----------------------
Funded status - Plan Assets in Excess of
Projected Benefit Obligation 361,000 375,000
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions (239,000) (263,000)
Unrecognized prior service cost (23,000) (25,000)
Unrecognized net asset (overfunding) at date of
adoption of FASB No. 87 (145,000) (95,000)
----------------------
Net Accrued pension Cost Included
in Other Liabilities $ (46,000) $ (8,000)
======================

Net periodic pension cost for each of the three years ended December 31 included
the following components:

1994 1993 1992
------------------------------
Service cost-benefits earned during the period $ 42,000 $ 65,000 $ 76,000
Interest cost on projected benefit obligation 102,000 97,000 90,000
Actual return on plan assets 34,000 (207,000) (157,000)
Deferred gains (181,000) 68,000 20,000
Amortization of unrecognized net gains (6,000) (14,000) (14,000)
Amortization of unrecognized prior service
cost (2,000) (2,000) (2,000)
Amortization of plan overfunding at date of
adoption (16,000) (10,000) (10,000)
------------------------------
Net Periodic Pension (Benefit) Expense $(27,000) $ (3,000) $ 3,000
==============================

The weighted-average discount rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation were 8.5% and 6%, respectively, at November 1, 1994 and 1993. The
expected long-term rate of return on plan assets was 8.5% in 1994, 1993, and
1992. The overfunding as of the date of adoption of FASB No. 87, the net
deferred gain from past experience different from that assumed, and the effects
of changes in assumptions are being amortized as a net credit against pension
cost over the average future working lifetime of the participants expected to
receive benefits under the plan which approximates 17 years.

In addition to the defined benefit pension plan, Merchants National sponsors
contributory defined benefit health care and life insurance plans that provide
postretirement medical and life insurance benefits to qualifying retirees.
Full-time employees who retire on or after age 62 with 15 years of service, or
after age 65 with 10 years of service are eligible for medical benefits. The
postretirement medical plan covers a stated percentage of eligible expenses,
reduced by deductibles and other coverage, as applicable. The cost-sharing
provisions of the medical plan require covered retirees to fund 50% of the total
cost of employee coverage and 100% of any dependent coverage. Life insurance
coverage is available only to employees who retired prior to January 1, 1993 and
otherwise met the service requirements indicated above for medical benefits.
The cost-sharing provisions of the postretirement life insurance plan require
covered retirees to fund 50% of the total cost. Effective January 1, 1993,
First Merchants adopted FASB Statement No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions". The cumulative effect as of
January 1, 1993 of adopting Statement 106 decreased net income by $116,930 (net
of $77,953 in deferred income tax benefit), or $.20 per share. Adoption of the
Statement also increased 1993 net periodic postretirement benefit cost by
approximately $11,000. Postretirement benefit costs for 1992, Which was
recorded on a cash basis, has not been restated.

The following table presents combined details of the amounts recognized in First
Merchant's statement of financial position relative to the respective unfunded
postretirement benefit plans:

DECEMBER 31
1994 1993
-------------------------
Accumulated postretirement benefit obligation:
Retirees $136,441 $128,789
Fully eligible active plan participants 17,657 16,665
Other active plan participants 63,894 60,321
-------------------------
Accrued Postretirement Benefit Cost $217,992 $205,775
=========================

Net periodic postretirement benefit cost for the years ended December 31,
included the following components:

1994 1993
--------------------------
Service cost 6,777 6,477
Interest cost 15,291 14,616
--------------------------
Net Periodic Postretirement Benefit Cost 22,068 21,093
==========================

The weighted-average annual assumed rates of increase in the per capita cost of
covered benefits are 11% (pre-age 65 benefits) and 9% (post-age 65 benefits) for
1994 (the rates previously assumed for 1993 were 11.5% and 9,5%, respectively)
and are assumed to decrease .5% annually to an ultimate level of 5%. The annual
assumed rate of increase in per capita cost of life insurance benefits (i.e.
salary increases) is %5. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the assumed
health care cost trend rates by one percentage point in each year would increase
the accumulated postretirement benefit obligation as of December 31, 1994 by
approximately $30,000, and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1994 by approximately
$5,000. The weighed- average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at December 31, 1994 and 1993.

NOTE J - INCOME TAXES

Effective January 1, 1993, First Merchants changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes". The cumulative effect of
adopting Statement 109 as of January 1, 1993, was not material to First
Merchant's consolidated financial statements.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of asset and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of First Merchant's deferred tax liabilities and assets as of December 31 are as
follows:

Deferred tax liabilities 1994 1993
-----------------------
Unrealized gains on securities
available for sale $ - $(203,000)
Premises and equipment (179,000) (185,000)
Federal income tax allowance for loan losses (166,000) (167,000)
Other (42,000) (34,000)
-----------------------
Total Deferred Liabilities (387,000) (589,000)

Deferred tax assets:
Unrealized losses on sec. available-for-sale 526,000 -
Allowance for loan losses 180,000 176,000
OPEB liability 86,000 81,000
Accrued liabilities 10,000 31,000
Other 38,000 54,000
-----------------------
Total Deferred Tax Assets 840,000 342,000
-----------------------
Net Deferred Tax Assets (Liabilities) $ 483,000 $(247,000)
=======================

Income taxes included in earnings for each of the three years ended December 31
are composed of:
<TABLE>
Deferred
Liability Method Method
1994 1993 1992
<S> <C> <C> <C>
------------------------------
Federal:
Current $275,564 $306,289 $340,343
Deferred (benefit) expense (5,547) 13,257 (124,951)
------------------------------
270,017 319,546 215,392
State 82,585 98,372 112,000
------------------------------
Total $352,602 $417,918 $327,392
==============================
</TABLE>
Current income tax expense attributable to securities transactions approximated
$29,000, $141,000, and $2,000 in 1994, 1993, and 1992, respectively.

The provision for income taxes differs from the federal statutory rate for the
following reasons:
<TABLE>

LIABILITY METHOD DEFERRED METHOD
-------------------------------------------------
1994 % 1993 % 1992 %
-------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Comp. tax at stat. fed. rate $521,955 34.00 $594,159 34.00 $474,335 34.00
Add state income taxes net
of federal tax benefit 53,478 3.48 63,789 3.65 59,469 4.26
Increase (decrease) in taxes
resulting from:
Tax-exempt interest (239,141) (15.58) (252,876)(14.47) (231,801)(16.62)
Amortization of purchase
accounting adjustments - - - - 20,003 1.43
Other 16,310 1.06 12,846 .73 5,386 .40
-------------------------------------------------
$352,602 22.96 $417,918 23.91 $327,392 23.47
=================================================
</TABLE>

NOTE K - COMMITMENTS AND CONTINGENT LIABILITIES

In the normal course of business, Merchants National offers a variety of
financial products to customers to aid them in meeting their requirements for
liquidity and credit enhancement. Generally accepted accounting principles
recognize these transactions as contingent liabilities and, accordingly, they
are not reflected in the accompanying financial statements. Following is a
discussion of the transactions.

Standby letters of credit: These transactions are used by the Bank's
customers as a means of improving their credit standing in their dealings
with others. Under these agreements, the Bank agrees, in exchange for a
fee, to honor certain financial commitments in the event that its customers
are unable to do so. Amounts outstanding pursuant to such standby letters
of credit as of December 31, 1994 and 1993 were $388,000 and $213,000,
respectively. Management conducts regular reviews of these instruments on
an individual customer basis, and the results are considered in assessing
the adequacy of the allowance for loan losses.

Loan Commitments: As of December 31, 1994 and 1993, Merchants National had
commitments outstanding to extend credit totaling approximately $2,633,000
and $682,000, respectively. These commitments (lines of Credit) generally
require the customers to maintain certain credit standards.

Both of the above arrangements have credit risk 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.

The following items of other income and expense exceeded one percent of total
revenue for the periods indicated:

1994 1993 1992
----------------------------
Other Expense:
FDIC assessment $213,000 $179,000 $170,000
Marketing 96,000 87,000 65,000
Directors and committee fees 94,000 88,000 63,000
Printing stationery and supplies 102,000 93,000 75,000

Other income:
Credit life insurance premiums 97,000 94,000 88,000

NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS

In December 1991, the FASB issued Statement No. 107, Disclosures about Fair
Values of Financial Instruments". This statement requires the disclosure of the
fair value of substantially all financial instruments, whether recognized or not
recognized in the balance sheet. The statement does not change any of the
present requirements for recognition, measurement, or classification of
financial instruments in the financial statements. Statement 107 is effective
for financial statements issued for fiscal years ending after December 15, 1995,
for entities with less than $150 million in total assets.

NOTE N - FIRST MERCHANTS BANCORP, INC (PARENT ONLY) FINANCIAL INFORMATION

CONDENSED BALANCE SHEETS

December 31
1994 1993
-------------------------
ASSETS
Cash $ 56,137 $ 51,297
Investment in bank subsidiary 9,518,838 9,830,978
Other assets 175,000 160,000
-------------------------
Total Assets $9,749,975 $10,042,275
=========================

LIABILITIES
Other liabilities $ 288,189 $ 270,909
-------------------------
Total Liabilities $ 288,189 $ 270,909
=========================

STOCKHOLDERS' EQUITY 9,461,786 9,771,366
-------------------------
Total Liabilities and Stockholders' Equity $9,749,975 $10,042,275
=========================

CONDENSED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31
1994 1993 1992
----------------------------------
INCOME
Dividends from bank subsidiary $ 400,000 $ 385,000 $ 275,000

Equity in undistributed earnings of sub 782,560 827,677 792,712
----------------------------------
Net Income $1,182,560 $1,212,677 $1,067,712
==================================

CONDENSED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31
1994 1993 1992
----------------------------------
OPERATING ACTIVITIES
Net income $1,182,560 $1,212,677 $1,067,712
Adjustments to reconcile net income to
cash provided by operating activities:
Equity in undistributed
earnings of subsidiary (782,560) (827,677) (792,713)
(Increase) Decrease in other assets (15,000) 45,000 (205,000)
----------------------------------
Cash Provided by Operating Activities 385,000 430,000 69,999

FINANCING ACTIVITIES
Cash dividends paid (380,160) (420,479) (234,720)
----------------------------------
Cash Used in Financing Activities (380,160) (420,479) (234,720)
==================================

Increase (Decrease) in Cash 4,840 9,521 (164,721)

Cash at beginning of year 51,297 41,776 206,497
----------------------------------
Cash at End of Year $ 56,137 $ 51,297 $ 41,776
==================================

NOTE O - PENDING MERGER

On March 14, 1995, the Company's board of directors approved a plan of merger
whereunder the Company will be acquired by City Holding Company. The merger is
subject to approvals of shareholders and regulators, and is expected to be
consummated in the summer of 1995.

ANNEX I

AGREEMENT AND PLAN OF REORGANIZATION

among

CITY HOLDING COMPANY,

FIRST MERCHANTS BANCORP, INC.

and

MERCHANTS NATIONAL BANK

March 14, 1995
<PAGE>

ARTICLE I

General

1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Issuance of City Holding Common Stock . . . . . . . . . . . 3
1.3 Taking of Necessary Action . . . . . . . . . . . . . . . . 3
1.4 Directors and Officers . . . . . . . . . . . . . . . . . . 3
1.5 Employee Benefits . . . . . . . . . . . . . . . . . . . . . 3

ARTICLE II

Effect of Merger on Common Stock of FMB

2.1 Conversion of Stock . . . . . . . . . . . . . . . . . . . . 4
2.2 Manner of Exchange . . . . . . . . . . . . . . . . . . . . 4
2.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . 6
2.4 No Fractional Shares . . . . . . . . . . . . . . . . . . . 6

ARTICLE III

Representations and Warranties

3.1 Representations and Warranties of FMB and Merchants . . . . . 7
(a) Organization, Standing and Power . . . . . . . . . . . . 7
(b) Capital Structure . . . . . . . . . . . . . . . . . . . 8
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Investments . . . . . . . . . . . . . . . . . . . . . . 9
(e) Financial Statements . . . . . . . . . . . . . . . . . . 10
(f) Absence of Undisclosed Liabilities . . . . . . . . . . . 11
(g) Tax Matters . . . . . . . . . . . . . . . . . . . . . . 11
(h) Options, Warrants and Related Matters . . . . . . . . . 13
(i) Property; Leases . . . . . . . . . . . . . . . . . . . . 13
(j) Additional Schedules Furnished to City Holding. . . . . 14
(k) Agreements in Force and Effect . . . . . . . . . . . . . 15
(l) Legal Proceedings; Compliance with Laws . . . . . . . . 15
(m) Employee Benefit Plans . . . . . . . . . . . . . . . . . 17
(n) Insurance . . . . . . . . . . . . . . . . . . . . . . . 20
(o) Loan Portfolio . . . . . . . . . . . . . . . . . . . . . 21
(p) Absence of Changes . . . . . . . . . . . . . . . . . . . 22
(q) Brokers and Finders . . . . . . . . . . . . . . . . . . 22
(r) Reports . . . . . . . . . . . . . . . . . . . . . . . . 22
(s) Environmental Matters . . . . . . . . . . . . . . . . . 22
(t) Community Reinvestment Act . . . . . . . . . . . . . . . 24
(u) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 Representations and Warranties of City Holding . . . . . . . 25
(a) Organization, Standing and Power . . . . . . . . . . . . 25
(b) Capital Structure . . . . . . . . . . . . . . . . . . . 25
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Financial Statements . . . . . . . . . . . . . . . . . . 26
(e) Absence of Undisclosed Liabilities . . . . . . . . . . . 27
(f) Absence of Changes . . . . . . . . . . . . . . . . . . . 27
(g) Brokers and Finders . . . . . . . . . . . . . . . . . . 28
(h) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 28
(i) Reports . . . . . . . . . . . . . . . . . . . . . . . . 28
(j) Tax Matters . . . . . . . . . . . . . . . . . . . . . . 29
(k) Options, Warrants and Related Matters . . . . . . . . . 29
(l) Property; Leases . . . . . . . . . . . . . . . . . . . . 29
(m) Legal Proceedings; Compliance with Laws . . . . . . . . 30
(n) Employee Benefit Plans . . . . . . . . . . . . . . . . . 31
(o) Loan Portfolio . . . . . . . . . . . . . . . . . . . . . 31
(p) Environmental Matters . . . . . . . . . . . . . . . . . 32
(q) Community Reinvestment Act . . . . . . . . . . . . . . . 32
(r) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE IV

Conduct Prior to
Effective Time of the Merger

4.1 Access to Records and Properties of City Holding, FMB and
Merchants . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 Registration Statement; Proxy Statement; Shareholder
Approval . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.3 Operation of the Business of FMB and Merchants . . . . . . 35
4.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . 36
4.5 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . 37
4.6 Regulatory Filings . . . . . . . . . . . . . . . . . . . . 37
4.7 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . 38
4.8 Public Announcements . . . . . . . . . . . . . . . . . . . 38
4.9 Transactions in City Holding Common Stock . . . . . . . . . 38
4.10 City Holding Rights Agreement . . . . . . . . . . . . . . . 38
4.11 Accounting Treatment. . . . . . . . . . . . . . . . . . . . 38
4.12 Agreement as to Efforts to Consummate. . . . . . . . . . . 38
4.13 Adverse Changes in Condition. . . . . . . . . . . . . . . . 39
4.14 Updating of Schedules. . . . . . . . . . . . . . . . . . . 39

ARTICLE V

Conditions of Merger

5.1 Conditions of Obligations of City Holding . . . . . . . . . 40
(a) Representations and Warranties; Performance of
Obligations; No Adverse Change . . . . . . . . . . . . 40
(b) Authorization of Merger . . . . . . . . . . . . . . . . 40
(c) Opinion of Counsel . . . . . . . . . . . . . . . . . . . 40
(d) Registration Statement . . . . . . . . . . . . . . . . . 44
(e) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . 44
(f) Regulatory Approvals . . . . . . . . . . . . . . . . . . 44
(g) Affiliate Letters . . . . . . . . . . . . . . . . . . . 45
(h) Accounting Treatment . . . . . . . . . . . . . . . . . . 45
(i) Acceptance by City Holding Counsel . . . . . . . . . . . 45
5.2 Conditions of Obligations of FMB and Merchants . . . . 45
(a) Representations and Warranties; Performance of
Obligations; No Adverse Change . . . . . . . . . . . . 45
(b) Authorization of Merger . . . . . . . . . . . . . . . . 46
(c) Opinion of Counsel . . . . . . . . . . . . . . . . . . . 46
(d) Registration Statement . . . . . . . . . . . . . . . . . 49
(e) Regulatory Approvals . . . . . . . . . . . . . . . . . . 50
(f) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . 50
(g) Fairness Opinion . . . . . . . . . . . . . . . . . . . . 51
(h) Acceptance by FMB's and Merchants's Counsel. . . . . . . 51

ARTICLE VI

Closing Date; Effective Time of the
Merger

6.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . 51
6.2 Filings at Closing . . . . . . . . . . . . . . . . . . . . 51
6.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . 51

ARTICLE VII

Termination; Survival of Representations
Warranties and Covenants; Waiver and Amendment

7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 54
7.3 Survival of Representations, Warranties and Covenants . . . 54
7.4 Waiver and Amendment . . . . . . . . . . . . . . . . . . . 54

ARTICLE VIII

Additional Covenants

8.1 Registration Statement . . . . . . . . . . . . . . . . . . 55
8.2 Employee Benefits . . . . . . . . . . . . . . . . . . . . . 55
8.3 Operations after Closing . . . . . . . . . . . . . . . . . 56
8.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . 56
8.5 City Holding Agreement with George Davis. . . . . . . . . . 57

ARTICLE IX

Miscellaneous

9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 58
9.3 Descriptive Headings . . . . . . . . . . . . . . . . . . . 58
9.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 59
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 59

Exhibit A - Plan of Merger

<PAGE>

SCHEDULE DESCRIPTION SECTION IN AGREEMENT

A FMB Restated 3.1(a)(i)
Certificate of
Incorporation

B FMB Bylaws 3.1(a)(i)

C Merchants Articles of 3.1(a)(ii)
Association

D Merchants Bylaws 3.1(a)(ii)

E Securities Owned by 3.1(b), 3.1(d)
FMB and Merchants

F FMB/Merchants 3.1(c)
Conflicts, Breaches
or Defaults

G FMB Financial 3.1(e)
Statements

H FMB and Merchants Tax 3.1(g)
Matters

I Salary Rates and FMB 3.1(j)(i)
Common Stock Owned by
Employees and
Directors of Bank;
Owners of 5% of FMB
Common Stock;
Outstanding
Unexercised Options,
Warrants, Calls,
Commitments or
Agreements

J Notes, Bonds, 3.1(j)(ii), 5.1(c)(vi), 5.1(c)(viii)
Mortgages, Indentures,
Licenses, Lease
Agreements and Other
Contracts of FMB

K Employment Contracts 3.1(j)(iii),
and Related Matters of 3.1(m)(i)
FMB and Merchants 3.1(m)(vii),
3.1(m)(viii)

L Real Estate Owned or 3.1(j)(iv)
Leased by FMB and
Merchants

M FMB and Merchants 3.1(l)
Legal Proceedings

N FMB and Merchants 3.1(n)
Insurance
O Merchants Loans 3.1(o)

P Merchants Material 3.1(p)
Adverse Changes
Q Merchants 3.1(s)
Environmental Matters

R City Holding Tax ?
Matters

S City Holding 3.2(m)
Regulation Matters

<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION

This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made and entered into as of the 14th day of March, 1995, by and among City
Holding Company, a West Virginia corporation ("City Holding"), First
Merchants Bancorp, Inc., a West Virginia corporation ("FMB") and Merchants
National Bank, a national banking association wholly-owned by FMB
("Merchants"), recites and provides:

A. City Holding and FMB and City Holding and certain directors
of FMB have entered into Stock Option Agreements (the "Option Agreements"),
dated March 14, 1995, pursuant to which FMB and such directors have each
granted an option to City Holding to purchase a specified number of their
respective shares of FMB Common Stock in certain events. The Option
Agreements shall survive the execution of this Agreement for the term
provided in each Option Agreement.

B. The boards of directors of City Holding and FMB deem it
advisable to merge FMB into City Holding (the "Merger") pursuant to this
Agreement and the Plan of Merger attached as Exhibit A (the "Plan of
Merger") whereby the holders of shares of common stock of FMB ("FMB Common
Stock") will receive common stock of City Holding ("City Holding Common
Stock") in exchange therefor. It is the desire of both parties that,
following the Merger, Merchants will remain a separately incorporated bank
which would be a subsidiary of City Holding and operated under the name
"Merchants National Bank," and there will be no change in the Board of
Directors, officers, employees, compensation levels, fringe benefits or
similar arrangements in effect at Merchants immediately prior to the
Effective Time of the Merger, unless required by federal income tax laws or
otherwise provided herein.

C. To effectuate the foregoing, the parties desire to adopt a
plan of reorganization in accordance with the provisions of Section 368(a)
of the United States Internal Revenue Code, as amended (the "Code").

NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement, and of the representations, warranties,
conditions and promises herein contained, City Holding, FMB and Merchants
adopt this Agreement whereby at the "Effective Time of the Merger" (as
defined in Article VI hereof) FMB shall be merged into City Holding in
accordance with the Plan of Merger. The outstanding shares of FMB Common
Stock shall be converted into shares of City Holding Common Stock on the
basis, terms and conditions contained herein and in the Plan of Merger. In
connection therewith, the parties hereto agree as follows:

ARTICLE I

General

1.1 Merger. Subject to the provisions of this Agreement, at the
Effective Time of the Merger, FMB shall be merged with and into City
Holding and the separate existence of FMB shall cease. For at least five
years after the Effective Time of the Merger, unless otherwise approved by
a majority of continuing directors of Merchants, Merchants will remain a
separately incorporated bank operated under the name "Merchants National
Bank". "Continuing directors of Merchants" shall mean the directors of
Merchants as of the Effective Time of the Merger and any successors to such
directors approved by a majority of the continuing directors of Merchants.

1.2 Issuance of City Holding Common Stock. City Holding agrees
that at the Effective Time of the Merger it will issue City Holding Common
Stock to the extent set forth in, and in accordance with, the terms of this
Agreement and the Plan of Merger.

1.3 Taking of Necessary Action. Prior to and after the
Effective Time of the Merger (as defined in Article VI hereof), subject to
the provisions of this Agreement, City Holding, FMB and Merchants,
respectively, each shall take all such action as may be necessary or
appropriate to effect the Merger.

1.4 Directors and Officers. Following the Effective Time of the
Merger, the Directors of City Holding shall continue as Directors and City
Holding agrees to increase the number of members of City Holding's Board of
Directors by two and to appoint two persons approved by the continuing
directors of Merchants to fill the resulting vacancies. Following the
Effective Time of the Merger, the Directors of Merchants shall continue as
Directors of Merchants for at least five years following the Effective Time
of the Merger unless removed for cause or in accordance with Merchants'
Bylaws and shall continue to receive Board fees at least equal to the Board
fees such persons received immediately prior to the Effective Time of the
Merger. As used in this Section, "cause" shall mean dishonesty, fraud or
gross abuse of authority in the performance of duty or breach of fiduciary
duty.

1.5 Employee Benefits. For at least five years following the
Effective Time of the Merger, except with the approval of the continuing
directors of Merchants, no employee of Merchants as of the date of this
Agreement may be terminated without cause and no change may be made in the
compensation levels, fringe benefits or similar arrangements of such
employees. No provision of this Agreement shall be deemed to limit the
right of City Holding to require the termination of any employee of
Merchants for cause. Following the Effective Time of the Merger, City
Holding agrees to honor all the terms and conditions of the change in
control agreements of George F. Davis, Robert P. McDowell, Linda G.
Aguilar, Robert L. Neal and Steven D. Nunley copies of which are attached
hereto as Schedule K.

ARTICLE II

Effect of Merger on Common Stock of FMB

2.1 Conversion of Stock. At the Effective Time of the Merger:

(a) Each share of FMB Common Stock which is issued and
outstanding at the Effective Time of the Merger (other than shares held by
City Holding or in FMB's treasury and other than Dissenting Shares as
defined in Section 2.3) shall, and without any action by the holder
thereof, be converted into 1.60 shares of City Holding Common Stock (the
"Exchange Ratio") which shall be validly issued, fully paid and
nonassessable.

(b) The Exchange Ratio at the Effective Time of the Merger
shall be adjusted to reflect any consolidation, split-up, other
subdivisions or combinations of City Holding Common Stock, any dividend
payable in City Holding Common Stock, or any capital reorganization
involving the reclassification of City Holding Common Stock subsequent to
the date of this Agreement.

2.2 Manner of Exchange. (a) After the Effective Time of the
Merger, each holder of a certificate theretofore evidencing outstanding
shares of FMB Common Stock (other than shares held by City Holding and
other than Dissenting Shares), upon surrender of such certificate to City
National Bank of Charleston, which shall act as exchange agent, accompanied
by a Letter of Transmittal, shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full
shares of City Holding Common Stock for which shares of FMB Common Stock
theretofore represented by the certificate or certificates so surrendered
shall have been exchanged as provided in this Article II. Until so
surrendered, each outstanding FMB certificate which, prior to the Effective
Time of the Merger, represented FMB Common Stock will be deemed to evidence
the right to receive the number of shares of City Holding Common Stock into
which the shares of FMB Common Stock represented thereby have been
converted.

(b) Until such outstanding certificates formerly
representing FMB Common Stock are surrendered, no dividend payable to
holders of record of City Holding Common Stock for any period as of any
date subsequent to the Effective Time of the Merger shall be paid to the
holder of such outstanding certificates in respect thereof. After the
Effective Time of the Merger, there shall be no further registry of
transfers on the records of FMB of shares of FMB Common Stock. Upon
surrender of certificates of FMB Common Stock in exchange for City Holding
Common Stock, there shall be paid to the record holder of the certificates
of City Holding Common Stock issued in exchange therefor (i) the amount of
dividends theretofore paid with respect to such full shares of City Holding
Common Stock as of any date subsequent to the Effective Time of the Merger
which have not yet been paid to a public official pursuant to abandoned
property laws; and (ii) at the appropriate payment date the amount of
dividends with a record date after the Effective Time of the Merger but
prior to surrender and a payment date subsequent to surrender. No interest
shall be payable with respect to such dividends upon surrender of
outstanding certificates.

2.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of FMB Common Stock which are issued and
outstanding immediately prior to the Effective Time of the Merger and which
are held by a shareholder who has the right (to the extent such right is
available by law) to demand and receive payment of the fair value of his
shares of FMB Common Stock (the "Dissenting Shares") pursuant to Sections
31-1-122 and 31-1-123 of the West Virginia Corporation Act, shall not be
converted into or be exchangeable for the right to receive the
consideration provided in Section 2.1 unless and until such holder shall
fail to perfect his or her right to dissent or shall have effectively
withdrawn or lost such right under the West Virginia Corporation Act, as
the case may be. If such holder shall have so failed to perfect his right
to dissent or shall have effectively withdrawn or lost such right, each of
his shares of FMB Common Stock shall thereupon be deemed to have been
converted into, at the Effective Time of the Merger, the right to receive
shares of City Holding Common Stock at the Exchange Ratio.

2.4 No Fractional Shares. No certificates or scrip for
fractional shares of City Holding Common Stock will be issued. In lieu
thereof, City Holding will pay the value of such fractional shares in cash
in an amount equal to such fraction of a share multiplied by the City
Holding Stock Price.

ARTICLE III

Representations and Warranties

3.1 Representations and Warranties of FMB and Merchants. FMB
and Merchants represent and warrant to City Holding as follows:

(a) Organization, Standing and Power. (i) FMB is a
corporation duly organized, validly existing and in good standing under the
laws of West Virginia and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and, subject to the approval of the Plan of Merger by the
shareholders of FMB as contemplated by Section 4.2, to perform this
Agreement to effect the transactions contemplated hereby. FMB has
delivered to City Holding complete and correct copies of (A) the Amended
Articles of Incorporation of FMB and all amendments thereto to the date
hereof; and (B) the Bylaws of FMB as amended to the date hereof, which are
attached hereto as Schedule A and Schedule B, respectively.

(ii) Merchants is a national banking association
duly organized, validly existing and in good standing under the laws of the
United States and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted
and to perform this Agreement to effect the transactions contemplated
hereby. FMB has delivered to City Holding complete and correct copies of
(A) the Articles of Association of Merchants and all amendments thereto to
the date hereof; and (B) the Bylaws of Merchants as amended to the date
hereof, which are attached hereto as Schedule C and Schedule D,
respectively. Merchants's deposits are insured by the Bank Insurance Fund
of the Federal Deposit Insurance Corporation to the maximum extent
permitted by law.

(b) Capital Structure. The authorized capital stock of FMB
consists of 1,000,000 shares of common stock, par value $2.00 per share of
which 576,000 shares are issued and outstanding. As of the Effective Time
of the Merger, the issued and outstanding shares of FMB Common Stock will
be validly issued, fully paid and nonassessable.

The authorized capital stock of Merchants consists of 144,000
shares of common stock, par value $2.00 per share. FMB owns all of the
issued and outstanding common stock of Merchants free and clear of any
liens, claims, encumbrances, charges or rights of third parties of any kind
whatsoever and all of such shares are validly issued, fully paid and
nonassessable. Merchants is the sole subsidiary of FMB and Merchants has
no subsidiaries.

All outstanding shares of FMB Common Stock have been issued in
all material respects in compliance with the applicable requirements of the
Securities Act of 1933 (the "1933 Act"). Except as disclosed on Schedule
I, FMB knows of no person who beneficially owns 5% or more of the
outstanding FMB Common Stock.

(c) Authority. Subject to the approval of the Plan of
Merger by the shareholders of FMB as contemplated by Section 4.2 hereof,
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and by the Plan of Merger have been duly
and validly authorized by all necessary action on the part of FMB and
Merchants, and this Agreement is a valid and binding obligation of FMB and
Merchants, enforceable in accordance with its terms. The execution and
delivery of this Agreement, the consummation of the transactions
contemplated hereby and by the Plan of Merger and compliance by FMB and
Merchants with any of the provisions hereof will not, except as noted on
Schedule F, (i) conflict with or result in a breach of any provision of
their respective Amended Articles of Incorporation, Articles of Association
or Bylaws or a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, debenture, mortgage, indenture, license,
material agreement or other material instrument or obligation to which FMB
or Merchants is a party, by which either of them or any of their properties
or assets may be bound (except for such conflict, breach or default, as to
which requisite waivers or consents shall have been obtained by FMB or
Merchants prior to the Effective Time of the Merger or the obtaining of
which shall have been waived by City Holding); or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to FMB or
Merchants or any of their properties or assets. No consent or approval by
any governmental authority, other than compliance with applicable federal
and state corporate, securities and banking laws, and regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), and the West Virginia Board of Banking and Financial Institutions
(the "West Virginia Board") is required to be obtained by FMB or Merchants
in connection with the execution and delivery by FMB and Merchants of this
Agreement or the consummation by FMB and Merchants of the transactions
contemplated hereby or by the Plan of Merger.

(d) Investments. All securities owned by FMB and Merchants
of record and beneficially are free and clear of all mortgages, liens,
pledges, encumbrances or any other restriction, whether contractual or
statutory, which would materially impair the ability of FMB or Merchants
freely to dispose of any such security at any time, except as noted on
Schedule E. Any securities owned of record by FMB or Merchants in an
amount equal to 5% or more of the issued and outstanding voting securities
of the issuer thereof have been noted on Schedule E. To the knowledge of
FMB and Merchants, there are no voting trusts or other agreements or
undertakings with respect to the voting of such securities. With respect
to all repurchase agreements to which FMB or Merchants is a party, FMB or
Merchants has a valid, perfected first lien or security interest in the
government securities or other collateral securing the repurchase
agreement, and the value of the collateral securing each such repurchase
agreement equaled or exceeded the amount of the debt secured by such
collateral under such agreement as of the date of this Agreement, except as
noted on Schedule E.

(e) Financial Statements. Schedule G contains copies of
the following consolidated financial statements of FMB and Merchants (the
"FMB Financial Statements"):

(i) Consolidated Balance Sheets as of
December 31, 1994, 1993 and 1992;

(ii) Consolidated Statements of Income for each of
the three years ended December 31, 1994, 1993 and 1992;

(iii) Consolidated Statements of Changes in
Stockholders' Equity for each of the three years ended December 31, 1994,
1993 and 1992; and

(iv) Consolidated Statements of Cash Flows for
each of the three years ended December 31, 1994, 1993 and 1992.

Such financial statements and the notes thereto have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. Each of
such statements of financial condition, together with the notes thereto,
presents fairly as of its date the financial condition and assets and
liabilities of FMB or Merchants. Such statements of operations, statements
of stockholders' equity and statements of cash flows, together with the
notes thereto, present fairly the results of operations of Merchants for
the periods indicated.

Subject to the limitations imposed by federal and state laws, and
except as disclosed in the FMB Financial Statements, there are no
restrictions precluding FMB or Merchants from paying dividends when, as,
and if declared by their respective boards of directors.

(f) Absence of Undisclosed Liabilities. At December 31,
1994, Merchants and FMB had no obligations or liabilities (contingent or
otherwise) of any nature which were not reflected in the FMB Financial
Statements as of such date, or disclosed in the notes thereto, except for
those which in the aggregate are immaterial or disclosed in Schedules
specifically referred to herein.

(g) Tax Matters. Merchants and FMB are members of the same
"affiliated group," as defined in Section 1504(a)(1) of the Code
(collectively, the "FMB Group"). Each member of the FMB Group has filed or
caused to be filed or (in the case of returns or reports not yet due) will
file all tax returns and reports required to have been filed by or for it
before the Effective Time of the Merger, and all information set forth in
such returns or reports is or (in the case of such returns or reports not
yet due) will be accurate and complete in all material respects. Each
member of the FMB Group has paid or made adequate provision in all material
respects for or (with respect to returns or reports not yet filed) before
the Effective Time of the Merger will pay or make adequate provision for
all taxes, additions to tax, penalties, and interest for all periods
covered by those returns or reports. Except as disclosed on Schedule H,
there are, and at the Effective Time of the Merger will be, no unpaid
taxes, additions to tax, penalties, or interest due and payable by any
member of the FMB Group or by any other person that are or could become a
lien on any asset or otherwise materially adversely affect the business,
property or financial condition of any member of the FMB Group. Each
member of the FMB Group has collected or withheld, or will collect or
withhold before the Effective Time of the Merger, all amounts required to
be collected or withheld by it for any taxes, and all such amounts have
been, or before the Effective Time of the Merger will have been, paid to
the appropriate governmental agencies or set aside in appropriate accounts
for future payment when due. Each member of the FMB Group is in material
compliance with, and its records contain all applicable information and
documents (including, without limitation, properly completed IRS Forms W-9)
necessary to comply in all material respects with, all information
reporting and tax withholding requirements under federal, state, and local
laws, rules, and regulations, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Code.
The consolidated balance sheets contained in the FMB Financial Statements
fully and properly reflect, as of the dates thereof, the aggregate
liabilities of the members of the FMB Group for all accrued taxes,
additions to tax, penalties and interest in all material respects. For
periods ending after December 31, 1994, the books and records of each
member of the FMB Group fully and properly reflect its liability for all
accrued taxes, additions to tax, penalties and interest. Except as
disclosed in Schedule H, no member of the FMB Group has granted (nor is it
subject to) any waiver of the period of limitations for the assessment of
tax for any currently open taxable period, no tax return or report of any
member of the FMB Group is under examination by any taxing authority or the
subject of any administrative or judicial proceeding, and no unpaid tax
deficiency has been asserted against or with respect to any member of the
FMB Group by any taxing authority. No member of the FMB Group has made or
entered into, or holds any asset subject to, a consent filed pursuant to
Section 341(f) of the Code and the regulations thereunder or a "safe harbor
lease" subject to former Section 168(f)(8) of the Code and the regulations
thereunder. Schedule H describes all tax elections, consents and
agreements affecting any member of the FMB Group. To the knowledge of FMB,
no FMB shareholder is a "foreign person" for purposes of Section 1445 of
the Code.

(h) Options, Warrants and Related Matters. There are no
outstanding unexercised options, warrants, calls, commitments or agreements
of any character to which FMB or Merchants is a party or by which either of
them is bound, calling for the issuance of securities of FMB or Merchants
or any security representing the right to purchase or otherwise receive any
such security other than the Option Agreements.

(i) Property; Leases. FMB and Merchants own (or enjoy use
of under capital leases) all property reflected on the FMB Financial
Statements as of December 31, 1994 (except personal property sold or
otherwise disposed of in the ordinary course of business). All property
shown as being owned is owned free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever, except those
referred to in the notes to the FMB Financial Statements, liens for current
taxes not yet due and payable, any unfiled mechanics' liens and such
encumbrances and imperfections of title, if any, as are not substantial in
character or amount or otherwise materially impair business operations.

The leases relating to leased property are valid and subsisting
and there does not exist with respect to FMB's or Merchants's obligations
thereunder any material default or event or condition which, after notice
or lapse of time or both, would constitute a material default thereunder.
There is no condemnation proceeding pending or, to the knowledge of FMB or
Merchants, threatened which would preclude or impair the use of any
property as presently being used in the conduct of the business of FMB or
Merchants. The leases are reflected in the FMB Financial Statements.

All property and assets material to the business or operations of
FMB and Merchants are in an operating condition and state of repair that is
fit for their current intended purpose and such property and assets are
adequate for the business and operations of FMB and Merchants as currently
conducted.

No notice of violation of zoning laws, building or fire codes or
other statutes, ordinances or regulations relating to the operations of FMB
or Merchants has been received by FMB or Merchants.

(j) Additional Schedules Furnished to City Holding. In
addition to any Schedules furnished to City Holding pursuant to other
provisions of this Agreement, FMB and Merchants have previously furnished
to City Holding the following Schedules which are correct and complete as
of the date hereof:

(i) Employees and Affiliates. Schedule I lists
(A) name of, current annual salary rates for, and the number of shares of
FMB Common Stock owned beneficially by, all present employees of FMB and
Merchants who each are presently scheduled to receive a salary in excess of
$60,000 during the year ending December 31, 1995; (B) the number of shares
of FMB Common Stock owned beneficially by each director of FMB and
Merchants; and (C) the names of and the number of shares of FMB Common
Stock owned by each person who beneficially owns 5% or more of the
outstanding FMB Common Stock.

(ii) Certain Contracts. Schedule J lists all
notes, bonds, mortgages, indentures, licenses, lease agreements and other
contracts and obligations to which FMB or Merchants is a party, except for
those entered into by FMB and Merchants in the ordinary course of their
respective businesses consistent with their prior practices and that do not
involve an amount greater than $100,000.

(iii) Employment Contracts and Related
Matters. Except in all cases as set forth on Schedule K, neither FMB nor
Merchants is a party to (A) any employment contract not terminable at the
option of FMB or Merchants without liability; (B) any retirement, stock
option, profit sharing or pension plan or thrift plan or agreement or
employee benefit plan (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974); (C) any management or consulting agreement
not terminable at the option of FMB or Merchants without liability; or (D)
any union or labor agreement.

(iv) Real Estate. Schedule L describes all
interests in real property owned, leased or otherwise claimed by FMB or
Merchants, including "other real estate owned."

(k) Agreements in Force and Effect. All material
contracts, agreements, plans, leases, policies and licenses referred to in
any Schedule of FMB or Merchants referred to herein are valid and in full
force and effect, and neither FMB nor Merchants have breached any material
provision of, nor are in default in any material respect under the terms
of, any such contract, agreement, lease, policy or license.

(l) Legal Proceedings; Compliance with Laws. Except as set
forth in Schedule M, there is no legal, administrative, arbitration or
other proceeding or governmental investigation pending (including any
legal, administrative, arbitration or other proceeding or governmental
investigation pending involving a violation of the federal antitrust laws),
or, to the knowledge of FMB's or Merchants's management, threatened or
probable of assertion, which might result in money damages payable by FMB
or Merchants in excess of insurance coverage, which might result in a
permanent injunction against FMB or Merchants, which might result in a
change in the zoning or building ordinances materially affecting the
property or leasehold interests of FMB or Merchants, or which otherwise,
either individually or in the aggregate, is likely to have a material
adverse affect on the financial condition of FMB or Merchants. Except as
set forth in Schedule M, FMB and Merchants have complied in all material
respects with any laws, ordinances, requirements, regulations or orders
applicable to their respective businesses (including environmental laws,
ordinances, requirements, regulations or orders). FMB and Merchants have
all licenses, permits, orders or approvals of any federal, state, local or
foreign governmental or regulatory body (collectively, "Permits") that are
material to or necessary for the conduct of the respective businesses of
FMB or Merchants; the Permits are in full force and effect; no violations
are or have been recorded in respect of any Permits, nor has either FMB or
Merchants received notice of any such violation; and no proceeding is
pending or, to the knowledge of FMB or Merchants, threatened or probable of
assertion to revise, revoke or limit any Permit. Except as set forth in
Schedule M, neither FMB nor Merchants is party to any currently effective
agreements or written understandings with the Federal Reserve Board, the
West Virginia Board or any other regulatory authority. Neither FMB nor
Merchants are subject to any judgment, order, writ, injunction or decree
which materially adversely affects, or might reasonably be expected to
materially adversely affect, the condition (financial or otherwise) or
business of FMB or Merchants or their ability to fulfill their respective
obligations pursuant to this Agreement.

(m) Employee Benefit Plans.

(i) Schedule K includes a correct and complete
list of, and City Holding has been furnished a true and correct copy of,
(A) all qualified pension and profit-sharing plans, all deferred
compensation, consultant, severance, thrift, option, bonus and group
insurance contracts and all other incentive, welfare and employee benefit
plans, trust, annuity or other funding agreements, and all other agreements
that are presently in effect, or have been approved prior to the date
hereof, for the benefit of employees or former employees of FMB, Merchants
or the dependents or beneficiaries of any employee or former employee of
FMB or Merchants, whether or not subject to ERISA (the "Employee Plans");
(B) the most recent actuarial and financial reports prepared or required to
be prepared with respect to any Employee Plan; and (C) the most recent
annual reports filed with any governmental agency, the most recent
favorable determination letter issued by the Internal Revenue Service, and
any open requests for rulings or determination letters, that pertain to any
such qualified Employee Plan. Schedule K identifies each Employee Plan
that is intended to be qualified under Section 401(a) of the Code. With
respect to each Employee Plan so identified and except as set forth on
Schedule K, the IRS has issued favorable determination letters to such
plans to the effect that the forms of such plans (or predecessor plans)
satisfy the requirements of Code Section 401(a) and for all years
subsequent to the establishment of the plans and up to the Effective Time
of the Merger, and with respect to which the FMB's and Merchants's tax
returns and the plans' returns on Form 5500 are open to audit, to FMB's and
Merchants's knowledge the plans have satisfied, in form and operation, the
qualification requirements of Section 401(a) of the Code, and no action
that has been taken or not taken with respect to the plans subsequent to
such date has had or is reasonably expected to have any adverse impact on
the continued qualification of the plans through the Effective Time of the
Merger. The IRS has not revoked any letter of determination or opinion
letter to which reference is made above, nor has the IRS threatened any
such revocation.

(ii) Neither FMB, Merchants nor any employee
pension benefit plan (as defined in Section 3(2) of ERISA (a "Pension
Plan")) maintained or previously maintained by it, has incurred any
material liability to the Pension Benefit Guaranty Corporation ("PBGC") or
to the Internal Revenue Service with respect to any Pension Plan. There is
not currently pending with the PBGC any filing with respect to any
reportable event under Section 4043 of ERISA nor has any reportable event
occurred as to which a filing is required and has not been made.

(iii) Full payment has been made (or proper
accruals have been established) of all contributions which are required for
periods prior to the Closing Date under the terms of each Employee Plan,
ERISA, or a collective bargaining agreement. No accumulated funding
deficiency (as defined in Section 302 of ERISA or Section 412 of the Code)
whether or not waived, exists with respect to any Pension Plan (including
any Pension Plan previously maintained by FMB or Merchants). There is no
"unfunded current liability" (as defined in Section 412 of the Code) with
respect to any Pension Plan.

(iv) No Employee Plan is a "multiemployer plan"
(as defined in Section 3(37) of ERISA). Neither FMB nor Merchants has
incurred any liability under Section 4201 of ERISA for a complete or
partial withdrawal from a multiemployer plan (as defined in Section 3(37)
of ERISA). Neither FMB nor Merchants has participated in or agreed to
participate in, a multiemployer plan (as defined in Section 3(37) of
ERISA).

(v) All Employee Plans that are "employee benefit
plans", as defined in Section 3(3) of ERISA, that are maintained by or were
previously maintained by FMB or Merchants comply and have been administered
in compliance in all material respects with ERISA and all other legal
requirements, including the terms of such plans, collective bargaining
agreements and securities laws. Neither FMB nor Merchants have any
material liability under any such plan that is not reflected in the FMB
Financial Statements.

(vi) No prohibited transaction has occurred with
respect to any Employee Plan that is an "employee benefit plan" (as defined
in Section 3(3) of ERISA) maintained by FMB or Merchants or any "employee
benefit plan" previously maintained by FMB or Merchants that would result,
directly or indirectly, in material liability under ERISA or in the
imposition of a material excise tax under Section 4975 of the Code.

(vii) Schedule K identifies each Employee Plan
that is an "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA) and which is funded. The funding under each such plan does not
exceed the limitations under Section 419A(b) or 419A(c) of the Code.
Neither FMB nor Merchants are subject to taxation on the income of any such
plan or any such plan previously maintained by FMB or Merchants.

(viii) Schedule K identifies the method of
funding (including any individual accounting) for all post-retirement
medical or life insurance benefits for the employees of FMB and Merchants.
Schedule K also discloses the funded status of these Employee Plans.

(ix) FMB and Merchants are the only trades or businesses which
are, or have ever been, treated as a single employer for employee benefit
purposes under ERISA and the Code.

(n) Insurance. All policies or binders of fire, liability,
product liability, workmen's compensation, vehicular and other insurance
held by or on behalf of FMB or Merchants are described on Schedule N and
are valid and enforceable in accordance with their terms, are in full force
and effect, and insure against risks and liabilities to the extent and in
the manner customary for the industry and are deemed appropriate and
sufficient by FMB and Merchants. Neither FMB nor Merchants is in default
with respect to any provision contained in any such policy or binder and
has not failed to give any notice or present any claim under any such
policy or binder in due and timely fashion. Neither FMB nor Merchants has
received notice of cancellation or non-renewal of any such policy or
binder. Neither FMB nor Merchants has knowledge of any inaccuracy in any
application for such policies or binders, any failure to pay premiums when
due or any similar state of facts that might form the basis for termination
of any such insurance. Neither FMB nor Merchants has knowledge of any
state of facts or of the occurrence of any event that is reasonably likely
to form the basis for any material claim against it not fully covered
(except to the extent of any applicable deductible) by the policies or
binders referred to above. Neither FMB nor Merchants has received notice
from any of their respective insurance carriers that any insurance premiums
will be materially increased in the future or that any such insurance
coverage will not be available in the future on substantially the same
terms as now in effect.

(o) Loan Portfolio. FMB has no loans outstanding. Each
loan outstanding on the books of Merchants is reflected correctly in all
material respects by the loan documentation, was made in the ordinary
course of business, was not known to be uncollectible at the time it was
made, and was made in accordance with Merchants's standard loan policies in
effect at the time the loans were made. The records of Merchants regarding
all loans outstanding on its books are accurate in all material respects.
The reserves for possible loan losses on the outstanding loans of Merchants
and the reserves for other real estate owned by Merchants as reflected in
the FMB Financial Statements, have been established in accordance with
generally accepted accounting principles and with the requirements of the
Office of the Comptroller of the Currency, and in the best judgment of the
management of Merchants, are adequate to absorb all material known and
anticipated loan losses in the loan portfolio of Merchants, and any losses
associated with other real estate owned or held by Merchants. Except as
identified on Schedule O, no loan in excess of $200,000 has been classified
as of the date hereof by Merchants or regulatory examiners as "Other Loans
Specifically Mentioned", "Substandard", "Doubtful" or "Loss". Except as
identified on Schedule O, each loan reflected as an asset on the FMB
balance sheets is, to the knowledge of FMB and Merchants, the legal, valid
and binding obligation of the obligor and any guarantor, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditor's rights and to general
equity principles, and no defense, offset or counterclaim has been asserted
with respect to any such loan which if successful would have a material
adverse effect on the financial condition, results of operations or
business of FMB or Merchants.

(p) Absence of Changes. Except as set forth in Schedule P,
since December 31, 1994, there has not been any material adverse change in
the condition (financial or otherwise), aggregate assets or liabilities,
earnings or business of FMB or Merchants. Since such date the business of
FMB and Merchants has been conducted only in the ordinary course.

(q) Brokers and Finders. Except for Merchants's engagement
of Baxter Fentriss and Company, neither FMB nor Merchants, nor any of their
respective officers, directors or employees have employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transaction contemplated herein.

(r) Reports. For the past five years, FMB and Merchants
have filed all reports and statements, together with any amendments
required to be made with respect thereto, that were required to be filed
with (i) the Securities and Exchange Commission (the "SEC"); (ii) the
Federal Reserve Board; (iii) the West Virginia Board; and (iv) any other
governmental or regulatory authority or agency having jurisdiction over
their operations. Each of such reports and documents, including the
financial statements, exhibits and schedules thereto, which was filed with
the SEC was in form and substance in compliance with the 1933 Act or the
Securities Exchange Act of 1934 (the "1934 Act"), as the case may be. None
of such reports or statements, or any amendments thereto, contains any
statement which, at the time and in the light of the circumstances under
which it was made, was false or misleading with respect to any material
fact necessary in order to make the statements contained therein not false
or misleading.

(s) Environmental Matters. For purposes of this
subsection, the following terms shall have the indicated meaning:

"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any governmental entity relating to (i) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource),
and/or (ii) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of Hazardous Substances. The term "Environmental Law" includes
without limitation (i) the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. (section mark) 9601, et
seq; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. (section
mark) 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. (section mark)
7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
(section mark) 1251, et seq; the Toxic Substances Control Act, as amended, 15
U.S.C. (section mark) 9601, et seq; the Emergency Planning and Community Right
to Know Act, 42 U.S.C. (section mark) 11001, et seq; the Safe Drinking Water
Act, 42 U.S.C. (section mark) 300f, et seq; and all comparable state and local
laws, and (ii) any common law (including without limitation common law that may
impose strict liability) that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Substance.

"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether by
type or by quantity, including any material containing any such substance
as a component. Hazardous Substances include without limitation petroleum
or any derivative or by-product thereof, asbestos, radioactive material,
and polychlorinated biphenyls.

"Loan Portfolio Properties and Other Properties Owned" means
those properties owned or operated by FMB or Merchants or any of their
subsidiaries, including those properties serving as collateral for any
loans made by FMB or Merchants.

To the knowledge of FMB and Merchants, except as set forth in
Schedule Q,

(i) neither FMB nor Merchants has been or is in
violation of or liable in any material respect under any Environmental Law;

(ii) none of the Loan Portfolio Properties and Other
Properties Owned has been or is in violation of or liable in any material
respect under any Environmental Law; and

(iii) there are no actions, suits, demands, notices,
claims, investigations or proceedings pending or threatened relating to the
liability of the Loan Portfolio Properties and Other Properties Owned under
any Environmental Law, including without limitation any notices, demand
letters or requests for information from any federal or state environmental
agency relating to any such liabilities under or violations of
Environmental Law, except for such violations and liabilities, and actions,
suits, demands, notices, claims, investigations or proceedings, which would
not individually or in the aggregate have a material adverse effect on the
financial condition, results of operations or business of FMB or Merchants.

(t) Community Reinvestment Act. FMB and Merchants have no
reason to believe that the transactions contemplated by this Agreement will
not be approved by all required regulatory authorities for reasons related
to compliance by FMB or Merchants with the Community Reinvestment Act of
1977 (12 U.S.C. 2901 et. seq.) ("CRA"). Merchants received at least a
"satisfactory" CRA rating as of its last CRA examination and has no reason
to believe that its CRA rating will be downgraded on or before the Closing
Date.

(u) Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished prior to the date
hereof, all written statements, certificates, schedules, lists and other
written information furnished by or on behalf of FMB or Merchants at any
time to City Holding in connection with this Agreement are true and correct
in all material respects. Each document delivered or to be delivered by
FMB or Merchants to City Holding is or will be a true and complete copy of
such document, unmodified except by another document delivered by FMB or
Merchants.

3.2 Representations and Warranties of City Holding. City
Holding, to the extent applicable, represent and warrant to FMB and
Merchants as follows:

(a) Organization, Standing and Power. City Holding is a
corporation duly organized, validly existing and in good standing under the
laws of West Virginia and has all requisite corporate power and authority
to own, lease and operate its properties, to effect the Merger and to carry
on its business as now being conducted. City Holding has delivered to FMB
complete and correct copies of (i) the Articles of Incorporation of City
Holding and all amendments thereto to the date hereof, and (ii) the Bylaws
of City Holding as amended to the date hereof.

(b) Capital Structure. As of December 31, 1994, the
authorized capital stock of City Holding consisted of 500,000 shares of
preferred stock, par value $25.00 per share none of which were issued and
outstanding, and 10,000,000 shares of common stock, par value $2.50 per
share, of which 3,780,477 shares of common stock were issued and
outstanding. All of such issued and outstanding shares of common stock
were validly issued, fully paid and nonassessable at such date and all of
such shares issued since December 31, 1991, were issued in all material
respects in compliance with the Securities Act of 1933, as amended.

(c) Authority. Subject to the approval of the Plan of
Merger by the shareholders of City Holding, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary action on the part
of City Holding, and this Agreement is a valid and binding obligation of
City Holding, enforceable in accordance with its terms. The execution and
delivery of this Agreement, the consummation of the transactions
contemplated hereby and compliance by City Holding with any of the
provisions hereof will not (i) conflict with or result in a breach of any
provision of City Holding's Articles of Incorporation or Bylaws or a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or to
which City Holding is a party, or by which either of them or any of their
properties or assets may be bound; or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to City Holding
or any of their properties or assets. No consent or approval by any
government authority, other than compliance with applicable federal and
state corporate, securities and banking laws, and regulations of the
Federal Reserve Board and the West Virginia Board is required in connection
with the execution and delivery by City Holding of this Agreement or the
consummation by City Holding of the Merger, or by the Plan of Merger.

(d) Financial Statements. City Holding has delivered to
FMB copies of the following financial statements of City Holding (the "City
Holding Financial Statements"):

(i) Consolidated Balance Sheets as of
December 31, 1994, 1993 and 1992;

(ii) Consolidated Statements of Income for each of
the three years ended December 31, 1994, 1993 and 1992;

(iii) Consolidated Statements of Changes in
Stockholders' Equity for each of the three years ended December 31, 1994,
1993 and 1992; and

(iv) Consolidated Statements of Cash Flows for
each of the three years ended December 31, 1994, 1993 and 1992.

Such consolidated financial statements and the notes thereto
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated.
Each of such consolidated balance sheets, together with the notes thereto,
presents fairly as of its date the financial condition and assets and
liabilities of City Holding. The consolidated statements of income,
statements of changes in shareholders' equity and statements of cash flows,
together with the notes thereto, present fairly the consolidated results of
operations of City Holding and its consolidated subsidiaries for the
periods indicated.

(e) Absence of Undisclosed Liabilities. At December 31,
1994, City Holding and its consolidated subsidiaries had no material
liabilities of any nature which were not reflected on the City Holding
Financial Statements or disclosed in the notes thereto at such date except
for those which individually or in the aggregate are immaterial.

(f) Absence of Changes. Since December 31, 1994, there has
not been any material adverse change in the condition (financial or
otherwise), aggregate assets or liabilities, earnings or business of City
Holding as reflected on its consolidated financial statements as of such
date and for the year then ended.

(g) Brokers and Finders. Neither City Holding nor any of
its officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the Merger.

(h) Subsidiaries; Ownership of FMB Common Stock. City
Holding's subsidiaries are The City National Bank of Charleston, First
State Bank & Trust, Bank of Ripley, Peoples Bank of Point Pleasant, Home
National Bank of Sutton, Blue Ridge Bank, Peoples State Bank, City
Financial Corporation, City Mortgage Corporation, Hinton Financial
Corporation and the First Nation Bank of Hinton. Such corporations are
duly organized, validly existing and in good standing under the laws of
their jurisdiction of incorporation and have all requisite corporate power
and authority to own, lease and operate their properties and to carry on
their business as now being conducted. City Holding currently owns 2,000
shares of FMB Common Stock.

(i) Reports. Since its date of organization, City Holding
has filed all reports and statements, together with any amendments required
to be made with respect thereto, that were required to be filed with
(i) the SEC; (ii) the Federal Reserve Board; (iii) the West Virginia Board;
and (iv) any other governmental or regulatory authority or agency having
jurisdiction over their operations. Each of such reports and documents,
including the financial statements, exhibits and schedules thereto, which
was filed with the SEC was in form and substance in compliance with the
1933 Act or the 1934 Act, as the case may be. No such report or statement,
or any amendments thereto, contains any statement which, at the time and in
the light of the circumstances under which it was made, was false or
misleading with respect to any material fact necessary in order to make the
statements contained therein not false or misleading.

(j) Tax Matters. City Holding has filed or caused to be
filed or (in the case of returns or reports not yet due) will file all tax
returns and reports required to have been filed by or for it before the
Effective Time of the Merger, and all information set forth in such returns
or reports is or (in the case of such returns or reports not yet due) will
be accurate and complete in all material respects. City Holding has paid
or made adequate provision in all material respects for or (with respect to
returns or reports not yet filed) before the Effective Time of the Merger
will pay or make adequate provision for all taxes, additions to tax,
penalties, and interest for all periods covered by those returns or
reports. The consolidated balance sheets of City Holding fully and
properly reflect, as of the dates thereof, all liabilities aggregate
liabilities for accrued taxes, additions to tax, penalties and interest in
all material respects. Except as disclosed in Schedule R, no tax return or
report of City Holding is under examination by any taxing authority or
subject of any administrative or judicial proceeding, and no unpaid tax
deficiency has been asserted against City Holding by any taxing authority.

(k) Options, Warrants and Related Matters. As of the date
of this Agreement, there are no outstanding unexercised options, warrants,
calls, commitments or agreements of any character to which City Holding is
a party or by which it is bound, calling for the issuance of securities of
City Holding or any security representing the right to purchase or
otherwise receive such security, except for any rights pursuant to City
Holding's shareholder rights plan.

(l) Property; Leases. City Holding owns (or enjoys use of
under capital leases) all property reflected on its financial statements as
of December 31, 1994 (except property sold or otherwise disposed of in the
ordinary course of business). All property shown as being owned is owned
free and clear of all mortgages, liens, pledges, charges or encumbrances of
any nature whatsoever, except those referred to in the notes to the
financial statements, liens for current taxes not yet due and payable, any
unfiled mechanics' liens and such encumbrances and imperfections of title,
if any, as are not substantial in character or amount or otherwise
materially impair business operations.

(m) Legal Proceedings; Compliance with Laws. There is no
legal, administrative, arbitration or other proceeding or governmental
investigation pending (including any legal, administrative, arbitration or
other proceeding or governmental investigation pending involving a
violation of the federal antitrust laws), or, to the knowledge of City
Holding, threatened or probably of assertion, which might result in money
damages payable by City Holding in excess of insurance coverage, which
might result in a permanent injunction against City Holding, which might
result in a change in the zoning or building ordinances materially
affecting the property or leasehold interests of City Holding or which
otherwise, either individually or in the aggregate, is likely to have a
material adverse affect on the financial condition of City Holding. City
Holding has complied in all material respects with any laws, ordinances,
requirements, regulations or orders applicable to their respective
businesses (including environmental laws, ordinances, requirements,
regulations or orders). Except as set forth in Schedule S, City Holding
has all licenses, permits, orders or approvals of any federal, state, local
or foreign governmental or regulatory body that are material to or
necessary for the conduct of its business. All of such permits are in full
force and effect; no violations are or have been recorded in respect of any
permits. City Holding has not entered into any agreements or written
understandings with the Federal Reserve Board, the West Virginia Board or
any other regulatory authority. City Holding is not subject to any
judgment, order, writ, injunction or decree which materially adversely
affects, or might reasonably be expected to materially adversely affect,
the condition (financial or otherwise) or business of City Holding or its
ability to fulfill its obligations pursuant to this Agreement.

(n) Employee Benefit Plans. Neither City Holding nor any
employee pension benefit plan (as defined in Section 3(2) of ERISA)
maintained or previously maintained by it, has incurred any material
liability to the PBGC or to the Internal Revenue Service. There is not
currently pending with the PBGC any filing with respect to any reportable
event under Section 4043 of ERISA nor has any reportable event occurred as
to which a filing is required and has not been made. Full payment has been
made (or proper accruals have been established) of all contributions which
are required for periods prior to the Closing Date under the terms of each
employee plan, ERISA, or a collective bargaining agreement of City Holding.
No accumulated funding deficiency (as defined in Section 302 of ERISA or
Section 412 of the Code) whether or not waived, exists with respect to any
pension plan of City Holding. There is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any pension plan of
City Holding.

(o) Loan Portfolio. Each loan outstanding on the books of
City Holding or any City Holding subsidiary is reflected correctly in all
material respects by the loan documentation, was made in the ordinary
course of business, was not known to be uncollectible at the time it was
made, and was made in accordance with standard loan policies in effect at
the time the loans were made. The reserves for possible loan losses on
such loans and the reserves for other real estate owned by City Holding or
any City Holding subsidiary have been established in accordance with
generally accepted accounting principles and with the requirements of the
West Virginia Board or any other regulatory authority and, in the best
judgment of management of City Holding, are adequate to absorb all material
known and anticipated loan losses in the loan portfolios of City Holding
and its subsidiaries, and any losses associated with other real estate
owned or held by City Holding and its subsidiaries.

(p) Environmental Matters. There are no actions, suits,
demands, notices, claims, investigations or proceedings pending or
threatened relating to the liability under any Environmental Law (as
defined in Section (t) of Article III) including, without limitation, any
notices, demand letters or requests for information from any federal or
state environmental agency relating to any such liabilities under or
violations of Environmental Law, except for such violations and
liabilities, and actions, suits, demands, notices, claims, investigations
or proceedings, which would not individually or in the aggregate have a
material adverse effect on the financial condition, results of operations
or business of City Holding.

(q) Community Reinvestment Act. City Holding has no reason
to believe that the transactions contemplated by this Agreement will not be
approved by all required regulatory authorities for reasons related to
compliance with the CRA. Each subsidiary of City Holding to which the CRA
applies received at least a "satisfactory" CRA rating as of its last CRA
examination and City Holding has no reason to believe that any such CRA
ratings will be downgraded on or before the Closing Date.

(r) Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished prior to the date
hereof, all written statements, certificates, schedules, lists and other
written information furnished by or on behalf of City Holding at any time
to FMB or Merchants in connection with this Agreement are true and correct
in all material respects. Each document delivered or to be delivered by
City Holding to FMB or Merchants is or will be a true and complete copy of
such document, unmodified except by another document delivered by City
Holding.

ARTICLE IV

Conduct Prior to
Effective Time of the Merger

4.1 Access to Records and Properties of City Holding, FMB and
Merchants. Between the date of this Agreement and the Effective Time of
the Merger, each of City Holding, on the one hand, and FMB and Merchants,
on the other, agree to give to the other reasonable access to all its
premises and books and records and to cause its officers to furnish the
other with such financial and operating data and other information with
respect to the business and properties as the other shall from time to time
request for the purposes of verifying the warranties and representations
set forth herein, preparing the Registration Statement (as defined in
Section 4.2) and applicable regulatory filings and preparing consolidated
financial statements of FMB as of a date prior to the Effective Time of the
Merger in order to facilitate City Holding in performance of its post-
Closing Date financial reporting requirements; provided, that any such
investigation shall be conducted in such manner as not to interfere
unreasonably with the operation of the respective business of the other.
City Holding, FMB and Merchants shall each maintain the confidentiality of
all confidential information furnished to them by the other parties hereto
concerning the business, operations, and financial condition of the party
furnishing such information, and shall not use any such information except
in furtherance of the Merger. If this Agreement is terminated, each party
hereto shall promptly return all documents and copies of, and all
workpapers containing, confidential information received from the other
party hereto. The obligations of confidentiality under this Section 4.1
shall survive any such termination of this Agreement and shall remain in
effect, except to the extent that (a) one party shall have directly or
indirectly acquired the assets and business of the other party; (b) as to
any particular confidential information with respect to one party, such
information (i) shall become generally available to the public other than
as a result of an unauthorized disclosure by the other party or (ii) was
available to the other party on a nonconfidential basis prior to its
disclosure by the first party; or (c) disclosure by any party is required
by subpoena or order of a court of competent jurisdiction or by order of a
regulatory authority of competent jurisdiction.

4.2 Registration Statement; Proxy Statement; Shareholder
Approval. Each of City Holding and FMB will duly call and will hold a
meeting of shareholders as soon as practicable for the purpose of approving
the Merger, and in connection therewith will recommend to and actively
encourage shareholders that they vote in favor of the Merger and will
comply fully with the provisions of the West Virginia Corporation Act, the
1933 Act and the 1934 Act and the rules and regulations of the SEC under
such acts, and their respective articles of incorporation and bylaws
relating to the call and holding of a meeting of shareholders for such
purpose. City Holding and FMB will jointly prepare the proxy statement-
prospectus to be used in connection with such meeting (the "Proxy
Statement-Prospectus") and City Holding will prepare and file with the SEC
a Registration Statement on Form S-4 (the "Registration Statement"), of
which such Proxy Statement-Prospectus shall be a part, and use its best
efforts promptly to have the Registration Statement declared effective. In
connection with the foregoing, City Holding will comply with the
requirements of the 1933 Act and the 1934 Act and the rules and regulations
of the SEC under such Acts with respect to the offering and sale of City
Holding Common Stock in connection with the Merger and with all applicable
state Blue Sky and securities laws. The notices of such meetings and the
Proxy Statement-Prospectus shall not be mailed to FMB or City Holding
shareholders until the Registration Statement shall have become effective
under the 1933 Act. FMB covenants that none of the information supplied by
FMB, and City Holding covenants that none of the information supplied by
City Holding, for inclusion in the Proxy Statement-Prospectus will, at the
time of the mailing of the Proxy Statement-Prospectus to FMB and City
Holding shareholders, contain any untrue statement of a material fact nor
will any such information omit any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading; and at all times
subsequent to the time of the mailing of the Proxy Statement-Prospectus,
including the date of the meetings of FMB and City Holding shareholders to
which the statement relates and the Effective Time of the Merger, none of
such information in the Proxy Statement-Prospectus, as amended or
supplemented, will contain an untrue statement of a material fact or omit
any material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made,
not misleading.

4.3 Operation of the Business of FMB and Merchants. FMB and
Merchants agree that from the date hereof to the Effective Time of the
Merger, they will operate their respective businesses substantially as
presently operated and only in the ordinary course, and, consistent with
such operation, they will use their best efforts to preserve intact its
present business organizations and relationships with persons having
business dealings with them. Without limiting the generality of the
foregoing, FMB and Merchants agree that they will not, without the prior
written consent of City Holding, unless consistent with past practices and
in the ordinary course of business (i) make any material change in the
compensation or title of any executive officer; (ii) make any material
change in the compensation or title of any other employee, other than those
permitted by current employment policies in the ordinary course of
business, any of which changes shall be promptly reported to City Holding;
(iii) enter into any new bonus, incentive compensation, deferred
compensation, profit sharing, thrift, retirement, pension, group insurance
or other benefit plan or (except as otherwise specifically contemplated in
this Agreement) any employment or consulting agreement or amend any such
plan or agreement to increase the benefits accruing or payable thereunder;
(iv) create or otherwise become liable with respect to any indebtedness for
money borrowed or purchase money indebtedness except in the ordinary course
of business; (v) amend FMB's Amended Articles of Incorporation, Merchants's
Articles of Association, or their Bylaws except as may be necessary to
consummate the Merger or give effect to the Option Agreement; (vi) issue or
contract to issue any shares of FMB capital stock or securities
exchangeable for or convertible into capital stock other than pursuant to
the Option Agreement; (vii) purchase any shares of FMB capital stock;
(viii) enter into or assume any material contract or obligation, except in
the ordinary course of business; (ix) waive any right of substantial value;
(x) propose or take any other action which would make any representation or
warranty in Section 3.1 hereof untrue; (xi) change securities portfolio
policies; (xii) enter into any new agreement, amendment or endorsement or
make any changes relating to insurance coverage, including coverage for its
directors and officers, which would result in an additional payment
obligation of $200,000 or more; or (xiii) propose or take any action with
respect to the closing of any branches. FMB and Merchants further agree
that, between the date of this Agreement and the Effective Time of the
Merger, they will consult and cooperate with City Holding regarding
(i) loan portfolio management, including management and work-out of
nonperforming assets, and credit review and approval procedures, and
(ii) securities portfolio and funds management, including management of
interest rate risk.

4.4 No Solicitation. Unless and until this Agreement shall have
been terminated pursuant to its terms, neither FMB, Merchants nor any of
their respective officers, directors, representatives, agents or affiliates
shall, directly or indirectly, encourage, solicit or initiate discussions
or negotiations (with any person other than City Holding) concerning any
merger, sale of substantial assets, tender offer, sale of shares of stock
or similar transaction involving FMB or Merchants or disclose, directly or
indirectly, any information not customarily disclosed to the public
concerning FMB or Merchants, afford to any other person access to the
properties, books or records of FMB or Merchants or otherwise assist any
person preparing to make or who has made such an offer, or enter into any
agreement with any third party providing for a business combination
transaction, equity investment or sale of significant amount of assets.
The foregoing shall not prevent FMB from considering competing offers if,
in the opinion of counsel to FMB, the fiduciary duty FMB's directors owe to
its shareholders requires them to do so. FMB or Merchants will promptly
communicate to City Holding the terms of any proposal which either of them
may receive in respect to any of the foregoing transactions.

4.5 Dividends. FMB agrees that in 1995 it will declare and pay
only regular quarterly cash dividends at a rate no greater than the rate
declared and paid with respect to the corresponding quarter of 1994 and at
the same time dividends were declared and paid in 1994, provided that the
quarter in which the Merger is effective, shareholders of FMB will be paid
either the FMB or City Holding dividend.

4.6 Regulatory Filings. City Holding and FMB shall jointly
prepare all regulatory filings required to consummate the transactions
contemplated by the Agreement, and the Plan of Merger and submit the
filings for approval with the Federal Reserve Board and the West Virginia
Board as soon as practicable after the date hereof. City Holding and FMB
shall use their best efforts to obtain approvals of such filings.

4.7 Tax Opinion. City Holding and FMB shall each use their best
efforts to obtain the tax opinion referred to in paragraph (e) of Section
5.1 and paragraph (f) of Section 5.2 hereof.

4.8 Public Announcements. Each party will consult with the
other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any press release
or make any such public statement prior to such consultations except as may
be required by law.

4.9 Transactions in City Holding Common Stock. Other than the
issuance of City Holding Common Stock upon the exercise of stock options
granted pursuant to employee benefit plans of City Holding or in connection
with the operation in the ordinary course of City Holding's dividend
reinvestment plan and 401(k) and Profit Sharing Plan, none of City Holding,
FMB, Merchants or the directors and executive officers of any of them will
purchase, sell or otherwise acquire or dispose of any shares of City
Holding Common Stock during the period of calculation of the City Holding
Stock Price.

4.10 City Holding Rights Agreement. City Holding agrees that any
rights issued pursuant to the Rights Agreement adopted by it in 1991 shall
be issued with respect to each share of City Holding Common Stock issued
pursuant to the terms hereof and the Plan of Merger, regardless whether
there has occurred a Distribution Date under the terms of such Rights
Agreement prior to the occurrence of the Effective Time of the Merger.

4.11 Accounting Treatment. City Holding and FMB shall use their
best efforts to cause the Merger to be accounted for as a "pooling of
interests."

4.12 Agreement as to Efforts to Consummate. Subject to the terms
and conditions of this Agreement, each of City Holding and FMB agrees to
use all reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, as soon
as practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including, without limitation, using
reasonable effort to lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate
the transactions contemplated herein. Each of City Holding and FMB shall
use its best efforts to obtain consents of all third parties and
governmental bodies necessary or desirable for the consummation of the
transactions contemplated by this Agreement.

4.13 Adverse Changes in Condition. City Holding and FMB each
agrees to give written notice promptly to the other concerning any material
adverse change in its condition from the date of this Agreement until the
Effective Time that might adversely affect the consummation of the
transactions contemplated hereby or upon becoming aware of the occurrence
or impending occurrence of any event or circumstance which would cause or
constitute a material breach of any of the representations, warranties or
covenants of such party contained herein. Each of City Holding and FMB
shall use its best efforts to prevent or promptly to remedy the same.

4.14 Updating of Schedules. From the date of execution of this
Agreement until the consummation of the Merger, FMB agrees to keep up to
date all of the Schedules hereto and to provide notification to the other
of any changes or additions or events which have caused, or after the lapse
of time may cause, any such change or addition in any of the Schedules
hereto.

ARTICLE V

Conditions of Merger

5.1 Conditions of Obligations of City Holding. The obligations
of City Holding to perform this Agreement are subject to the satisfaction
of the following conditions unless waived by City Holding.

(a) Representations and Warranties; Performance of
Obligations; No Adverse Change. The representations and warranties of FMB
and Merchants set forth in Section 3.1 hereof shall be true and correct in
all material respects as of the date of this Agreement and as of the
Effective Time of the Merger as though made on and as of the Effective Time
of the Merger; FMB and Merchants shall have performed in all material
respects all obligations required to be performed by them under this
Agreement prior to the Effective Time of the Merger; there shall have
occurred no material adverse change in the condition (financial or
otherwise), assets, liabilities, properties or business of FMB or Merchants
from December 31, 1994 to the Effective Time of the Merger; and City
Holding shall have received a certificate of authorized officers of FMB to
such effects.

(b) Authorization of Merger. All action necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein (including the
shareholder action referred to in Section 4.2) shall have been duly and
validly taken by the boards of directors of FMB and Merchants, and by the
shareholders of FMB and City Holding and FMB shall have full power and
right to merge on the terms provided herein.

(c) Opinion of Counsel. City Holding shall have received
an opinion or opinions of Bowles, Rice, McDavid, Graff and Love, special
counsel to FMB and Merchants, or other counsel reasonably satisfactory to
City Holding, dated the Closing Date and reasonably satisfactory to counsel
to City Holding to the effect that:

(i) FMB is a corporation organized and in good
standing under the laws of West Virginia and has all requisite corporate
power to own, lease and operate its properties and to carry on its business
as now being conducted as described in the Registration Statement and Proxy
Statement-Prospectus;

(ii) Merchants is a national banking association
organized and in good standing under the laws of the United States and has
all requisite corporate power to own, lease and operate its properties and
to carry on its business as now being conducted as described in the
Registration Statement and Proxy Statement Prospectus;

(iii) FMB and Merchants have full power to
carry out the transactions provided for in the Agreement; all corporate and
other proceedings required to be taken by or on the part of FMB and
Merchants to authorize them to execute and deliver the Agreement and to
consummate the transactions contemplated thereby and by the Plan of Merger
have been duly and validly taken; the Agreement has been duly and validly
authorized, executed and delivered by FMB and Merchants and constitutes a
valid and binding obligation of FMB and Merchants enforceable in accordance
with its terms except as same (A) may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to the rights of creditors,
and (B) is subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or law); and
the Plan of Merger has been approved by the Board of Directors and the
shareholders of FMB;

(iv) All outstanding shares of FMB Common Stock to
be exchanged for shares of City Holding Common Stock at the Effective Time
of the Merger have been duly authorized and are validly issued, fully paid
and nonassessable;

(v) To the knowledge of such counsel, except as
disclosed in Section 3.1(h) of the Agreement, FMB is not a party to or
bound by any outstanding option or agreement to sell, issue, buy or
otherwise dispose of or acquire any shares of FMB Common Stock or other
security of FMB or any shares of Merchants common stock or other security
of Merchants other than pursuant to the Option Agreement;

(vi) Execution and delivery by FMB and Merchants
of the Agreement, consummation by FMB and Merchants of the transactions
contemplated hereby, and compliance by FMB and Merchants with the
provisions hereof will not conflict with or result in a breach of any
provision of the Amended Articles of Incorporation, Articles of
Association, or Bylaws of FMB or Merchants, as applicable, or, a default
(or give rise to rights of termination, cancellation or acceleration) under
the terms, conditions, or provisions of any note, bond, mortgage,
indenture, license, agreement or any other instrument or listed in Schedule
J (such counsel having no knowledge of any item called for by such schedule
which is not disclosed therein), or violate any court order, writ,
injunction or decree applicable to FMB or Merchants or any of their
properties or assets, of which such counsel has knowledge after making
inquiry with respect thereto;

(vii) Such counsel does not know of any
litigation that is pending or threatened which might result in money
damages payable by FMB or Merchants in excess of insurance coverage, which
might result in a permanent injunction against FMB or Merchants or which,
individually or in the aggregate, otherwise might have a material adverse
effect on FMB or Merchants or the transactions contemplated by this
Agreement;

(viii) Such counsel does not know of any
default under, or the occurrence of any event which with the lapse of time,
action or inaction by a third party would result in a default under any
outstanding indenture, contract or agreement listed in Schedule J to the
Agreement (such counsel having no knowledge of any item called for by such
Schedule which is not disclosed therein) or under any governmental license
or permit or a breach of any provision of the Amended Articles of
Incorporation, Articles of Association, or Bylaws of FMB or Merchants, as
applicable;

(ix) All legal obligations of FMB or Merchants
pertaining to consummation of the Merger under the laws of West Virginia
and the United States, including receipt of all regulatory approvals
required to be obtained by FMB or Merchants, other than the filing of the
Articles of Merger relating to the Merger with the Secretary of State of
West Virginia and the completion of all legal obligations not the
responsibility of FMB or Merchants pursuant to this Agreement, have been
completed to the satisfaction of such counsel in all material respects;

(x) On the basis of facts within their knowledge,
such counsel have no reason to believe that (except as to financial
statements and other financial data, or as to material relating to, and
supplied by, City Holding for inclusion in the Proxy Statement-Prospectus
as to which no belief need be expressed) the Proxy Statement-Prospectus (as
amended or supplemented, if so amended or supplemented) contained any
untrue statement of a material fact or omitted any material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading
as of (A) the time the Registration Statement became effective, (B) the
time of the meeting of FMB shareholders referred to in Section 4.2 of the
Agreement, (C) the time of the meeting of City Holding Shareholders
referred to in Section 4.2 of the Agreement, or (D) at the Closing Date
(the matters set forth in this subsection (xi) may be addressed in a
separate letter of such counsel addressed to City Holding).

(d) Registration Statement. The Registration Statement
shall be effective under the 1933 Act and City Holding shall have received
all state securities laws or "blue sky" permits and other authorizations or
there shall be exemptions from registration requirements necessary to offer
and issue the City Holding Common Stock in connection with the Merger, and
neither the Registration Statement nor any such permit, authorization or
exemption shall be subject to a stop order or threatened stop order by the
SEC or any state securities authority.

(e) Tax Opinion. City Holding shall have received, in form
and substance reasonably satisfactory to it, an opinion of Hunton &
Williams, dated as of the Closing Date, to the effect that, for federal
income tax purposes, consummation of the Merger will constitute a
"reorganization" as defined in Section 368(a) of the Code and no taxable
gain will be recognized by City Holding or FMB upon consummation of the
Merger.

(f) Regulatory Approvals. All required approvals from
federal and state regulatory authorities having jurisdiction to permit City
Holding to consummate the Merger and to issue City Holding Common Stock to
FMB shareholders shall have been received and all related waiting periods
shall have expired, all applicable federal and state laws governing the
Merger shall have been complied with and there shall not be in any order or
decree of any regulatory authority any condition or requirement reasonably
deemed objectionable to City Holding.

(g) Affiliate Letters. Each person listed on Schedule M
shall have executed and delivered a commitment and undertaking to the
effect that such shareholder will dispose of the shares of City Holding
Common Stock received by him in connection with the Merger only in
accordance with the provisions of paragraph (d) of Rule 145; (ii) such
shareholder will not dispose of any of such shares until City Holding has
received an opinion of counsel acceptable to it that such proposed
disposition will not violate the provisions of any applicable securities
laws; (iii) that they will not sell or reduce their risk with respect to
the City Holding shares acquired in the Merger until after the publication
of combined financial results covering 30 days of combined operations; and
(iv) the certificates representing said shares may bear a legend referring
to the foregoing restrictions.

(h) Accounting Treatment. City Holding shall have
received, in form and substance satisfactory to it, a letter dated the
Effective Date of the Merger from Ernst & Young to the effect that the
Merger will qualify for pooling-of-interests accounting treatment.

(i) Acceptance by City Holding Counsel. The form and
substance of all legal matters contemplated hereby and of all papers
delivered hereunder shall be reasonably acceptable to counsel for City
Holding.

5.2 Conditions of Obligations of FMB and Merchants. The
obligations of FMB and Merchants to perform this Agreement are subject to
the satisfaction of the following conditions unless waived by FMB and
Merchants:

(a) Representations and Warranties; Performance of
Obligations; No Adverse Change. The representations and warranties of City
Holding set forth in Section 3.2 hereof shall be true and correct in all
material respects as of the date of this Agreement and as of the Effective
Time of the Merger as though made on and as of the Effective Time of the
Merger; City Holding shall have performed all obligations required to be
performed by them under this Agreement prior to the Effective Time of the
Merger; there shall have occurred no material adverse change in the
condition (financial or otherwise), assets, liabilities, properties or
business of City Holding from December 31, 1994 to the Effective Time of
the Merger; and FMB shall have received a certificate of authorized
officers of City Holding to such effects.

(b) Authorization of Merger. All action necessary to
authorize the execution, delivery and performance of this Agreement by City
Holding and the consummation of the transactions contemplated herein
(including the shareholder action referred to in Section 4.2) shall have
been duly and validly taken by the boards of directors of City Holding and
the shareholders of City Holding and FMB, and City Holding shall have full
power and right to merge and to acquire and assume on the terms provided herein.

(c) Opinion of Counsel. (1) FMB and Merchants shall have
received an opinion of Hunton & Williams, special counsel to City Holding
dated the Closing Date and reasonably satisfactory to counsel to FMB and
Merchants, to the effect that:

(i) The shares of City Holding Common Stock to be
issued pursuant to the Agreement have been duly registered under the 1933
Act;

(ii) All legal obligations of City Holding
pertaining to consummation of the Merger under the laws of West Virginia
and the United States, including the receipt of all regulatory approvals
required to be obtained by City Holding, other than the filing of the
Articles of Merger relating to the Merger with the West Virginia Secretary
of State and the completion of other legal obligations that are the
responsibility of City Holding pursuant to this Agreement, have been
completed to the satisfaction of such counsel in all material respects; and

(iii) On the basis of facts within their
knowledge, such counsel have no reason to believe that (except as to
financial statements and other financial data, or as to material relating
to, and supplied by, FMB or Merchants for inclusion in the Proxy Statement-
Prospectus, as to which no belief need be expressed) the Proxy Statement-
Prospectus (as amended or supplemented, if so amended or supplemented)
contained any untrue statement of a material fact or omitted any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading (A) as of the time the Registration Statement became
effective; (B) as of the time of the special meeting of shareholders of FMB
mentioned in Section 4.2 of the Agreement; (C) as of the time of the
special meeting of shareholders of City Holding mentioned in Section 4.2 of
the Agreement; or (D) as of the Closing Date.

(2) FMB and Merchants shall have received an opinion of
Steptoe & Johnson, general counsel to City Holding, dated the Closing Date
and satisfactory in form and substance to counsel to FMB and Merchants to
the effect that:

(i) City Holding is a corporation organized and
in good standing under the laws of West Virginia and have all requisite
corporate power to own, lease and operate their respective properties and
to carry on their respective business as now being conducted as described
in the Registration Statement and Proxy Statement-Prospectus;

(ii) City Holding has full power to carry out the
transactions provided for in the Agreement; all corporate and other
proceedings required to be taken by or on the part of City Holding to
authorize them to execute and deliver the Agreement and to consummate the
transactions contemplated thereby and by the Plan of Merger have been duly
and validly taken; the Agreement has been duly and validly authorized,
executed and delivered by City Holding and constitutes a valid and binding
obligation of City Holding enforceable in accordance with its terms except
as same (A) may be limited by bankruptcy, insolvency, reorganization or
other similar laws relating to the rights of creditors; and (B) is subject
to general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or law); the Plan of Merger has
been approved by the Board of Directors and shareholders of City Holding,
respectively; and the shares of City Holding Common Stock to be issued in
the Merger in exchange for shares of FMB Common Stock have been duly
authorized and when so issued will be validly issued, fully paid and
nonassessable.

(iii) All outstanding shares of City Holding
Common Stock have been duly authorized and are validly issued, fully paid
and nonassessable; and

(iv) Execution and delivery by City Holding of the
Agreement, consummation by City Holding of the transactions contemplated
thereby, and compliance by City Holding with the provisions thereof will
not conflict with or result in a breach of any provisions of either City
Holding's Articles of Incorporation, or either of their Bylaws or a default
(or give rise to rights or termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or any other instrument or of City Holding or
Acquisition known to such counsel, or violate any court order, writ,
injunction or decree applicable to City Holding or any of their properties
or assets, of which such counsel has knowledge after making inquiry with
respect thereto.

(v) Such counsel does not know of any litigation that
is pending or threatened which might result in money damages payable by
City Holding in excess of insurance coverage, which might result in a
permanent injunction against City Holding or which, individually or in the
aggregate, otherwise might have a material adverse effect on City Holding
or the transactions contemplated by this Agreement;

(vi) Such counsel does not know of any default under,
or the occurrence of any event which with the lapse of time, action or
inaction by a third party would result in a default under any material
outstanding indenture, contract or agreement or under any governmental
license or permit or a material breach of any provision of the Articles of
Incorporation, or Bylaws of City Holding;

(vii) On the basis of facts within their knowledge,
such counsel has no reason to believe that (except as to financial
statements and other financial data, or as to material relating to and
supplied by, FMB or Merchants for inclusion in the Proxy Statement-
Prospectus as to which no belief need be expressed) the Proxy Statement-
Prospectus (as amended or supplemented, if so amended or supplemented)
contained any untrue statement of a material fact or omitted any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading as of (A) the time the Registration Statement became
effective, (B) the time of the meeting of FMB shareholders referred to in
Section 4.2 of the Agreement, (C) the time of the meeting of City Holding
shareholders referred to in Section 4.2 of the Agreement, or (D) at the
Closing Date.

(e) Regulatory Approvals. All required approvals from
federal and state regulatory authorities having jurisdiction to permit City
Holding to consummate the Merger and to permit City Holding to issue City
Holding Common Stock to FMB shareholders shall have been received and all
related waiting periods shall have expired.

(f) Tax Opinion. FMB shall have received, in form and
substance reasonably satisfactory to it, an opinion of Hunton & Williams to
the effect, for federal income tax purposes, that consummation of the
Merger will constitute a "reorganization" as defined in Section 368(a) of
the Code; that no taxable gain will be recognized by City Holding or FMB
upon consummation of the Merger; that no taxable gain will be recognized by
a FMB shareholder on the exchange by such shareholder of shares of FMB
Common Stock solely for shares of City Holding Common Stock (including any
fractional share interest); that the basis of City Holding Common Stock
(including any fractional share interest) received in the Merger will be
the same as the basis of the FMB Common Stock surrendered in exchange
therefor; that the holding period of such City Holding Common Stock
(including any fractional share interest) will include the holding period
of the FMB Common Stock surrendered in exchange therefor, if such FMB
Common Stock is held as a capital asset at the Effective Time of the
Merger; and if the Exchange Ratio results in the issuance of a fractional
share interest, that a FMB shareholder who receives cash in lieu of a
fractional share of City Holding Common Stock will recognize gain or loss
equal to any difference between the amount of cash received and the
shareholder's basis in the fractional share interest.

(g) Fairness Opinion. FMB shall have received the opinion
of Baxter Fentriss and Company that the consideration to be received
pursuant to the Agreement is fair from a financial point of view to the
shareholders of FMB.

(h) Acceptance by FMB's and Merchants's Counsel. The form
and substance of all legal matters contemplated hereby and of all papers
delivered hereunder shall be reasonably acceptable to counsel for FMB and
Merchants.

ARTICLE VI

Closing Date; Effective Time of the
Merger

6.1 Closing Date. Unless another date or place is agreed to in
writing by the parties, the closing of the transactions contemplated in
this Agreement shall take place at the offices of City Holding at 3601
MacCorkle Avenue, S.E., Charleston, West Virginia, at 10:00 A.M., local
time, on such date as City Holding shall designate to FMB and is reasonably
acceptable to FMB; provided, that the date so designated shall not be
earlier than 30 days or later than 120 days following the date of the
decision of the Federal Reserve Board, whichever decision occurs later,
approving the Merger (the "Closing Date").

6.2 Filings at Closing. Subject to the provisions of Article V,
at the Closing Date, City Holding shall cause the Articles of Merger
relating to the Merger to be filed in accordance with the West Virginia
Business Corporation Act, and each of City Holding and FMB shall take any
and all lawful actions to cause the Merger to become effective.

6.3 Effective Time. Subject to the terms and conditions set
forth herein, including receipt of all required regulatory approvals, the
Merger shall become effective at the later of the time the Articles of
Merger relating to the Merger filed are made effective by the West
Virginia Secretary of State (the "Effective Time of the Merger").

ARTICLE VII

Termination; Survival of Representations
Warranties and Covenants; Waiver and Amendment

7.1 Termination. This Agreement shall be terminated, and the
Merger abandoned, if (i) the shareholders of FMB shall not have given the
approval required by Section 5.1(b) or (ii) the shareholders of City
Holding shall not have given the approval required by Section 5.2(b).

Notwithstanding such approval by such shareholders, this Agreement may be
terminated in writing at any time prior to the Effective Time of the Merger
by:

(a) The mutual consent of City Holding and FMB, as
expressed by their respective boards of directors;

(b) Either City Holding or FMB, as expressed by their
respective boards of directors, after December 31, 1995;

(c) By City Holding in writing authorized by its Board of
Directors if FMB or Merchants has, or by FMB in writing authorized by its
Board of Directors if City Holding has, in any material respect, breached
(i) any covenant or agreement contained herein, or (ii) any representation
or warranty contained herein, in any case if such breach has not been cured
by the earlier of 30 days after the date on which written notice of such
breach is given to the party committing such breach or the Closing Date;
provided that it is understood and agreed that either party may terminate
this Agreement on the basis of any such material breach of any
representation or warranty contained herein notwithstanding any
qualification therein relating to the knowledge of the other party;

(d) Either City Holding or FMB, as expressed by their
respective boards of directors, in the event that any of the conditions
precedent to the obligations of such party to consummate the Merger have
not been satisfied or fulfilled or waived by the party entitled to so waive
on or before the Closing Date, provided that neither party shall be
entitled to terminate this Agreement pursuant to this subparagraph (d) if
the condition precedent or conditions precedent which provide the basis for
termination can reasonably be and are satisfied within a reasonable period
of time, in which case, the Closing Date shall be appropriately postponed;

(e) City Holding or FMB, if the Board of Directors of
either Corporation shall have determined in their sole discretion,
exercised in good faith, that the Merger has become inadvisable or
impracticable by reason of the threat or the institution of any litigation,
proceeding or investigation to restrain or prohibit the consummation of the
transactions contemplated by this Agreement or to obtain other relief in
connection with this Agreement;

(f) City Holding or FMB, if any of the Federal Reserve
Board or the West Virginia Board deny approval of the Merger and the time
period for all appeals or requests for reconsideration has run;

(g) City Holding, if holders of more than 10% of the
outstanding shares of FMB Common Stock exercise their rights to an
appraisal of their shares pursuant to Sections 31-1-122 and 31-1-123 of the
West Virginia Corporation Act in connection with the Merger;

(h) FMB, if (i) the average closing sales price of City
Holding Common Stock as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") for the 20 trading days
following the later of (a) the receipt of Federal Reserve Board approval of
the Merger and (b) the date on which the shareholders of FMB approve the
merger, is less than $22.80 per share, and (ii) City Holding and FMB cannot
agree on an amendment to the Exchange Ratio;

(i) City Holding, if (i) the average closing sales price of
City Holding Common Stock as reported by NASDAQ for the 20 trading days
following the later of (a) the receipt of Federal Reserve Board approval of
the Merger and (b) the date on which the shareholders of FMB approve the
merger, is greater than $34.20 per share, and (ii) City Holding and FMB
cannot agree on an amendment to the Exchange Ratio; and

7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement and the Merger pursuant to Section 7.1, this
Agreement, other than the provisions of Sections 4.1 (last sentence) and
8.3, 9.1, shall become void and have no effect, without any liability on
the part of any party or its directors, officers or shareholders.

7.3 Survival of Representations, Warranties and Covenants. The
respective representations and warranties, covenants and agreements (except
for those contained in Sections 1.1, 1.2, 1.3, 1.4, 1.5, 2.1, 2.2, 2.3,
2.4, 4.1 (last sentence), 7.3, 8.2, 8.3, 8.4, 9.1, 9.2, 9.3, 9.4, 9.5 and
9.6, which shall survive the effectiveness of the Merger) of City Holding,
Merchants and FMB contained herein shall expire with, and be terminated and
extinguished by, the effectiveness of the Merger and shall not survive the
Effective Time of the Merger.

7.4 Waiver and Amendment. Any term or provision of this
Agreement may be waived in writing at any time by the party which is, or
whose shareholders are, entitled to the benefits thereof and this Agreement
may be amended or supplemented by written instructions duly executed by all
parties hereto at any time, whether before or after the meeting of FMB and
City Holding shareholders referred to in Section 4.2 hereof, except
statutory requirements and requisite approvals of shareholders and
regulatory authorities.

ARTICLE VIII

Additional Covenants

8.1 Registration Statement. City Holding, FMB and Merchants
acknowledge and agree that the Merger is a transaction to which the 1933
Act is applicable. Each of the parties agrees to comply with the
provisions of the 1933 Act and all rules and regulations of the SEC
promulgated pursuant to the 1933 Act and cooperate in connection with the
preparation and filing by City Holding of a Registration Statement under
the 1933 Act relating to the Merger. City Holding, FMB and Merchants agree
(a) to give their respective authorized representatives complete access to
the books, records and files of the other party at any reasonable time for
the purpose of preparing such Registration Statement and Proxy Statement;
(b) to provide the other party upon request such information relating to
their businesses and financial condition, as shall be appropriate in
connection with the preparation of said Registration Statement and Proxy
Statement; and (c) to submit to the other party for its prior approval all
press releases or other oral or written statements made or issued which
relate to the Merger in any manner.

8.2 Employee Benefits. All employees of FMB and Merchants
immediately prior to the Effective Time of the Merger who are employed by
FMB and Merchants following the Effective Time of the Merger ("Transferred
Employees") will be covered by City Holding's employee benefit plans with
eligibility based on their length of service, compensation, job
classification, and position with FMB and Merchants. City Holding's
benefits plans will recognize for purposes of eligibility to participate
and for vesting, all Transferred Employees' service with FMB and Merchants,
subject to applicable break in service rules. Eligible employees of FMB
and Merchants shall be permitted to contribute funds distributed on any
termination of FMB or Merchants benefit plans to similar City Holding
benefit plans.

8.3 Operations after Closing. For at least five years after the
Effective Time of the Merger, unless otherwise approved by a majority of
continuing directors of Merchants, Merchants will remain a separately
incorporated bank operated under the name "Merchants National Bank". All
branches of Merchants will remain in operation following the Effective Time
of the Merger except the Kanawha City branch of Merchants located at 4315
MacCorkle Avenue, S.E. in Charleston, West Virginia and the Bradford Street
branch of Merchants located at 200 Bradford Street in Charleston, West
Virginia both of which shall be consolidated into City National Bank at the
Effective Time or as soon as practicable thereafter. Following the
Effective Time of the Merger, the Directors of Merchants shall continue as
Directors and Merchants for at least five years following the Effective
Time of the Merger unless removed for cause and shall continue to receive
Board fees at least equal to the Board fees such persons received
immediately prior to the Effective Time of the Merger. In addition, for at
least five years following the Effective Time of the Merger, except with
the approval of the continuing directors of Merchants, no employee of
Merchants as of the date of this Agreement may be terminated without cause
and no change will be made in the compensation levels, fringe benefits or
similar arrangements of such employees. As used in this Section, "cause"
shall mean dishonesty, fraud or gross abuse of authority in the performance
of duty or breach of fiduciary duty.

8.4 Indemnification. City Holding shall indemnify, and advance
expenses (including legal fees and expenses) in matters that may be subject
to indemnification to, persons who served as directors and officers of FMB
and Merchants on or before the Effective Time of the Merger with respect to
liabilities and claims (and related expenses) made against them resulting
from their service as such prior to the Effective Time of the Merger in
accordance with and subject to the requirements and other provisions of
City Holdings' Articles of Incorporation and Bylaws in effect on the date
of this Agreement and applicable provisions of law to the same extent as
City Holding is obliged thereunder to indemnify and advance expenses to its
own directors and officers with respect to liabilities and claims made
against them resulting from their service as such to City Holding.

8.5 City Holding Agreement with George Davis. From the
Effective Date of the Merger until his retirement, George F. Davis will
serve as Executive Vice President of City Holding at annual compensation
and benefits not less than his current compensation package with FMB and
Merchants. City Holding agrees that when Mr. Davis retires on his
seventieth birthday, City Holding will retain him in a consulting capacity
for three years and will pay him an annual consulting fee equal to 50% of
his annual salary in effect at the time of his retirement.

ARTICLE IX

Miscellaneous

9.1 Expenses. Each party hereto shall bear and pay the costs
and expenses incurred by it relating to the transactions contemplated
hereby, provided, however, that if either party hereto terminates this
Agreement pursuant to Sections 7.1(c) or 7.1(d) without the consent of the
other party hereto, such terminating party shall pay to the other party
$50,000 cash within 10 business days of such other party's receipt of the
terminating party's written notice of termination.

9.2 Entire Agreement. This Agreement contains the entire
agreement among City Holding, FMB and Merchants with respect to the Merger
and the related transactions and supersedes all prior arrangements or
understandings with respect thereto.

9.3 Descriptive Headings; Recitals. The descriptive headings
and recitals contained in this Agreement are for convenience only and shall
not control or affect the meaning or construction of any provisions of this
Agreement.

9.4 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if
delivered personally or sent by registered or certified mail, postage
prepaid, addressed as follows:

If to City Holding:

City Holding Company
3601 MacCorkle Avenue, S.E.
Charleston, West Virginia 25304
Attention: Mr. Steven J. Day

Copy to:

Lathan M. Ewers, Jr.
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219

If to FMB or Merchants:

First Merchants Bancorp, Inc.
Fourth Avenue and Washington Street
Montgomery, West Virginia 25136
Attention: George F. Davis, Chief Executive Officer

Copy to:

Deborah A. Sink
Bowles, Rice, McDavid, Graff & Love
16th Floor Commerce Square
P.O. Box 1386
Charleston, West Virginia 25325-1386

9.5 Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
one agreement.

9.6 Governing Law. Except as may otherwise be required by the
laws of the United States, this Agreement shall be governed by and
construed in accordance with the laws of West Virginia.

IN WITNESS WHEREOF, each of the parties hereto have caused
this Agreement to be executed on their behalf and their corporate seals
affixed and attested by their officers thereunto duly authorized, all as of
the day and year first above written.

CITY HOLDING COMPANY

By /s/ Steven J. Day

Its President and Chief Executive Officer

FIRST MERCHANTS BANCORP, INC.

By /s/ George F. Davis

Its Chairman of Board and CEO

MERCHANTS NATIONAL BANK

By /s/ George F. Davis

Its Chairman of Board and CEO

<PAGE>

Exhibit A

PLAN OF MERGER
OF
FIRST MERCHANTS BANCORP, INC.
INTO
CITY HOLDING COMPANY

Section 1. First Merchants Bancorp, Inc., a West Virginia
corporation ("FMB"), upon the time that the Articles of Merger are made
effective by the Secretary of State of West Virginia (the "Effective Time
of the Merger"), be merged (the "Merger") into City Holding Company, a West
Virginia corporation ("City Holding"), with the result that City Holding
shall be the surviving corporation (the "Surviving Corporation").

Section 2. Conversion of Stock. At the Effective Time of the
Merger:

(i) Each share of FMB Common Stock ("FMB Common
Stock") issued and outstanding immediately prior to the
Effective Time of the Merger, other than shares held by City
Holding or in the treasury of FMB and other than Dissenting
Shares (as hereinafter defined), and which, under the terms of
Section 3 of this Plan of Merger, is to be converted into and
exchangeable for Common Stock of City Holding ("City Holding
Common Stock") shall be converted into 1.60 shares of City
Holding Common Stock.

(ii)Each share of FMB Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger and held
by City Holding or in the treasury of FMB shall be canceled.

Section 3. Manner of Conversion of FMB Common Stock. The
manner in which outstanding shares of FMB Common Stock shall be
converted into City Holding Common Stock, as specified in Section 2
hereof, after the Effective Time of the Merger, shall be as follows:

(i) Each share of FMB Common Stock, other than
shares held by City Holding or in the treasury of FMB and
other than Dissenting Shares, shall be converted into 1.60
shares of City Holding Common Stock.

(ii) No fractional shares of City Holding Common
Stock shall be issued, but instead the value of fractional
shares shall be paid in cash (less all applicable withholding
taxes), as determined in accordance with Section 2.4 of the
Agreement (defined below).

(iii)Certificates for shares of FMB Common Stock
shall be submitted for exchange for City Holding Common Stock
accompanied by a Letter of Transmittal to be furnished within
five business days after the Effective Time of the Merger to
FMB's shareholders of record as of the Effective Time of the
Merger. Until so surrendered, each outstanding certificate which,
prior to the Effective Time of the Merger, represented FMB Common
Stock, shall be deemed to evidence only the right to receive 1.60
shares of City Holding Common Stock. Until such outstanding shares
formerly representing FMB Common Stock are so surrendered, no dividend
payable to holders of record of City Holding Common Stock as of any
date subsequent to the Effective Time of the Merger shall be paid to
the holder of such outstanding certificates in respect thereof. Upon
such surrender, dividends accrued or declared on City Holding Common
Stock shall be paid in accordance with Section 2.2 of the Agreement
and Plan of Reorganization dated as of March 14, 1995, among City
Holding, FMB and Merchants National Bank (the "Agreement").

Section 4. Dissenting Shares. Notwithstanding anything in
this Plan of Merger to the contrary, shares of FMB Common Stock which
are issued and outstanding immediately prior to the Effective Time of
the Merger and which are held by a shareholder who has the right (to the
extent such right is available by law) to demand and receive payment of
the fair value of his shares of FMB Common Stock pursuant to Sections
13-1-122 and 13-1-123 of the West Virginia Corporation Act (the
"Dissenting Shares") shall be canceled and shall not be converted into
or by exchangeable for the right to receive the consideration provided
in Section 2 of this Plan of Merger, unless and until such holder shall
fail to perfect his right to dissent or shall have effectively withdrawn
or lost such right under the West Virginia Corporation Act, as the case
may be. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, his shares of FMB Common Stock
shall thereupon be deemed to have been converted into, at the Effective
Time of the Merger, the right to receive 1.60 shares of City Holding
Common Stock.

Section 5. Articles of Incorporation, Bylaws and Directors of
the Surviving Company. At and following the Effective Time of the
Merger, there shall be no change caused by the Merger in the Articles of
Incorporation (except any change caused by the filing of Articles of
Merger relating to the Merger), By-laws, or Board of Directors of the
Surviving Company.

Section 6. Effect of the Merger. The Merger, upon the
Effective Time of the Merger, shall have the effect provided by Section
31-1-37 of the West Virginia Corporation Act.

<PAGE>

ANNEX II

STOCK OPTION AGREEMENT

STOCK OPTION AGREEMENT, dated as of March 14, 1995 (the
"Agreement"), by and between First Merchants Bancorp, Inc., a West
Virginia corporation ("Issuer"), and City Holding Company, a West
Virginia corporation ("Grantee").

WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Reorganization dated as of the date hereof (the "Acquisition
Agreement"), providing for, among other things, the acquisition of
Issuer by Grantee (the "Transaction"); and

WHEREAS, as a condition and inducement to Grantee's execution
of the Acquisition Agreement, Grantee has required that Issuer agree,
and Issuer has agreed, to grant Grantee the Option (as defined below);

NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set
forth herein and in the Acquisition Agreement and intending to be
legally bound hereby, Issuer and Grantee agree as follows:

1. Defined Terms. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in the
Acquisition Agreement.

2. Grant of Option. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 114,600 shares (as adjusted as set forth
herein) (the "Option Shares", which shall include the Option Shares
before and after any transfer of such Option Shares) of Common Stock
("Issuer Common Stock"), of Issuer at a purchase price per Option Share
(the "Purchase Price") of $45.60.

3. Exercise of Option.

(a) Provided that (i) Grantee shall not be in material
breach of the agreements or covenants contained in this Agreement or in
the Acquisition Agreement and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the
Option issued by any court of competent jurisdiction in the United
States shall be in effect, Grantee may exercise the Option, in whole or
in not more than two parts, at any time and from time to time following
the occurrence of a Purchase Event; provided, that the Option shall
terminate and be of no further force and effect upon the earliest to
occur of (A) the Effective Time of the Acquisition, (B) termination of
the Acquisition Agreement in accordance with the terms thereof prior to
the occurrence of a Purchase Event or a Preliminary Purchase Event
(other than a termination of the Acquisition Agreement by Grantee
because of Issuer's breach of a representation or warranty contained
therein (a "Default Termination")), (C) 12 months after termination of
the Acquisition Agreement by Grantee pursuant to a Default Termination,
(D) 12 months after termination of Acquisition Agreement (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event, (E) upon receipt of any order or notice of the
Board of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the Currency, the West Virginia
Department of Banking denying approval of the Transaction, or (F) June 30, 1996
and provided, further, that any purchase of shares upon exercise of the Option
shall be subject to compliance with applicable law, including the Bank Holding
Company Act of 1956 (the "BHC Act"). The rights set forth in Section 8 shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth above.

(b) As used herein, a "Purchase Event" means any of the
following events:

(i) Without Grantee's prior written consent, Issuer
shall have authorized, recommended or publicly-proposed, or
publicly announced an intention to authorize, recommend or
propose, or entered into an agreement with any person (other
than Grantee or any subsidiary of Grantee) to effect an
Acquisition Transaction (as defined below). As used herein,
the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any
of its subsidiaries (other than transactions solely between
Issuer's subsidiaries), (B) the disposition, by sale, lease,
exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar
transaction) securities representing 25% or more of the voting
power of Issuer or any of its subsidiaries (any of the
foregoing an "Acquisition Transaction"); or

(ii) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the
"1934 Act") of or the right to acquire beneficial ownership
of, or any "group" (as such term is defined under the 1934
Act) shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 25% or more of the
then outstanding shares of Issuer Common Stock.

(i) any person (other than Grantee or any
subsidiary of Grantee) shall have commenced (as such term is
defined in Rule 14d-2 under the 1934 Act) or shall have filed
a registration statement under the Securities Act of 1933, as
amended (the "1933 Act"), with respect to, a tender offer or
exchange offer to purchase any shares of Issuer Common Stock
such that, upon consummation of such offer, such person would
own or control 25% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender
Offer" or an "Exchange Offer", respectively); or

(ii) the holders of Issuer Common Stock shall not
have approved the Transaction at the meeting of such
stockholders held for the purpose of voting on the
Transaction, such meeting shall not have been held or shall
have been canceled prior to termination of the Acquisition
Agreement or Issuer's Board of Directors shall have withdrawn
or modified in a manner adverse to Grantee the recommendation
of Issuer's Board of Directors with respect to the Acquisition
Agreement, in each case after it shall have been publicly
announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (A) made, or disclosed an
intention to make, a proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a
registration statement under the 1933 Act with respect to an
Exchange Offer, or (C) filed an application (or given a
notice), whether in draft or final form, under the BHC Act,
the Bank Merger Act or the Change in Bank Control Act of 1978,
for approval to engage in an Acquisition Transaction.

As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the 1934 Act.

(d) In the event Grantee wishes to exercise the Option,
it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of
Option Shares it intends to purchase pursuant to such exercise, and (ii)
a place and date not earlier than three business days nor later than 15
business days from the Notice Date for the closing (the "Closing") of
such purchase (the "Closing Date"). If prior notification to or
approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") or any other regulatory authority is required
in connection with such purchase, Issuer shall cooperate with Grantee in
the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately
following such regulatory approvals (and any mandatory waiting periods).

4. Payment and Delivery of Certificates.

(a) On each Closing Date, Grantee shall (i) pay to
Issuer, in immediately available funds by wire transfer to a bank
account designated by Issuer, an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased on such
Closing Date, and (ii) present and surrender this Agreement to Issuer at
the address of Issuer specified in Section 12(f) hereof.

(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Grantee (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre- emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Grantee shall
deliver to Issuer a letter agreeing that Grantee shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.

(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend which shall read
substantially as follows:

THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MARCH __,
1995. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.

It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such legend if
Grantee shall have delivered to Issuer a copy of a letter from the staff
of the Securities and Exchange Commission (the "SEC"), or an opinion of
counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of
the 1933 Act.

5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:

(a) Due Authorization. Issuer has all requisite
corporate power and authority to enter into this Agreement and, subject
to any approvals referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Issuer.
This Agreement has been duly executed and delivered by Issuer. The
execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and compliance by Issuer with any of
the provisions hereof will not (i) conflict with or result in a breach
of any provision of its Articles of Incorporation or By-laws or a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any
note, bond, debenture, mortgage, indenture, license, material agreement
or other material instrument or obligation to which Issuer is a party,
by which it or any of its properties or assets may be bound, or (ii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Issuer or any of its properties or assets. No consent or
approval by any governmental authority, other than compliance with
applicable federal and state securities and banking laws, is required of
Issuer in connection with the execution and delivery by Issuer of this
Agreement or the consummation by Issuer of the transactions contemplated
hereby.

(b) Authorized Stock. Issuer has taken all necessary
corporate and other action to authorize and reserve and to permit it to
issue, and, at all times from the date hereof until the obligation to
deliver Issuer Common Stock upon the exercise of the Option terminates,
will have reserved for issuance, upon exercise of the Option, the number
of shares of Issuer Common Stock necessary for Grantee to exercise the
Option, and Issuer will take all necessary corporate action to authorize
and reserve for issuance all additional shares of Issuer Common Stock or
other securities which may be issued pursuant to Section 7 upon exercise
of the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer Common
Stock or other securities which may be issuable pursuant to Section 7,
upon issuance pursuant hereto, shall be duly and validly issued, fully
paid and nonassessable, and shall be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any stockholder of
Issuer.

6. Representations and Warrants of Grantee. Grantee hereby
represents and warrants to Issuer that:

(a) Due Authorization. Grantee has all requisite
corporate power and authority to enter into this Agreement and, subject
to any approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by
Grantee.

(b) Purchase Not for Distribution. This Option is not
being, and any Option Shares or other securities acquired by Grantee
upon exercise of the Option will not be, acquired with a view to the
public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from
registration under the 1933 Act.

7. Adjustment upon Changes in Capitalization, etc.

(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and
number of shares or securities subject to the Option, and the Purchase
Price therefor, shall be adjusted appropriately, and proper provision
shall be made in the agreements governing such transaction so that
Grantee shall receive, upon exercise of the Option, the number and class
of shares or other securities or property that Grantee would have
received in respect of Issuer Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor,
as applicable. If any additional shares of Issuer Common Stock are
issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a)), the number of
shares of Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, it, together with any shares of Issuer Common
Stock previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option.

(b) In the event that Issuer shall enter in an
agreement: (i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit
any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but,
in connection with such merger, the then outstanding shares of Issuer
Common Stock shall be changed into or exchanged for stock or other
securities of Issuer or any other person or cash or any other property
or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii)
to sell or otherwise transfer all or substantially all of its assets to
any person, other than Grantee or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction shall make
proper provisions so that upon the consummation of any such transaction
and upon the terms and conditions set forth herein, Grantee shall
receive for each Option Share with respect to which the Option has not
been exercised an amount of consideration in the form of and equal to
the per share amount of consideration that would be received by the
holder of one share of Issuer Common Stock less the Purchase Price (and,
in the event of an election or similar arrangement with respect to the
type of consideration to be received by the holders of Issuer Common
Stock, subject to the foregoing, proper provision shall be made so that
the holder of the Option would have the same election or similar rights
as would the holder of the number of shares of Issuer Common Stock for
which the Option is then exercisable).

(c) Issuer shall not enter into any agreement of the
type described in Section 7(b) unless the other party thereto commits to
provide the funding required for Issuer to pay the Section 8 Repurchase
Consideration to the extent required by Section 8 hereof.

8. Repurchase at the Option of Grantee.

(a) Subject to the last sentence of Section 3(a), at the
request of Grantee at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending 12 months
immediately thereafter, Issuer shall repurchase from Grantee (i) the
Option and (ii) all shares of Issuer Common Stock purchased by Grantee
pursuant hereto with respect to which Grantee then has beneficial
ownership. The date on which Grantee exercises its rights under this
Section 8 is referred to as the "Request Date". Such repurchase shall
be at an aggregate price (the "Section 8 Repurchase Consideration")
equal to the sum of:

(i) the aggregate Purchase Price paid by Grantee
for any shares of Issuer Common Stock acquired pursuant to the
Option with respect to which Grantee then has beneficial
ownership;

(ii) the excess, if any, of (x) the Applicable Price
(as defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with respect
to which the Option has not been exercised; and

(iii) the excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to
Section 7) paid (or, in the case of Option Shares with respect
to which the Option has been exercised but the Closing Date
has not occurred, payable) by Grantee for each share of Issuer
Common Stock with respect to which the Option has been
exercised and with respect to which Grantee then has
beneficial ownership, multiplied by the number of such shares.

(b) If Grantee exercises its rights under this Section
8, Issuer shall, within 10 business days after the Request Date, pay the
Section 8 Repurchase Consideration to Grantee in immediately available
funds, and contemporaneously with such payment Grantee shall surrender
to Issuer the Option and the certificates evidencing the shares of
Issuer Common Stock purchased thereunder with respect to which Grantee
then has beneficial ownership, and Grantee shall warrant that it has
sole record and beneficial ownership of such shares and that the same
are then free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever. Notwithstanding the foregoing, to the extent
that prior notification to or approval of the Federal Reserve Board or
other regulatory authority or any lender of Issuer is required in
connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Grantee shall have the ongoing option to
revoke its request for repurchase pursuant to Section 8, in whole or in
part, or to require that Issuer deliver from time to time that portion
of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and each
party shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If the Federal
Reserve Board or any other regulatory authority disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Grantee. If the Federal Reserve
Board or other agency or any such lender prohibits the repurchase in
part but not in whole, then Grantee shall have the right (i) to revoke
the repurchase request, or (ii) to the extent permitted by the Federal
Reserve Board or other agency, determine whether the repurchase should
apply to the Option and or Option Shares and to what extent to each, and
Grantee shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the
Request Date less the sum of the number of shares covered by the Option
in respect of which payment has been made pursuant to Section 8(a)(ii)
and the number of shares covered by the portion of the Option (if any)
that has been repurchased. Grantee shall notify Issuer of its
determination under the preceding sentence within five (5) business days
of receipt of notice of disapproval of the repurchase.

Notwithstanding anything herein to the contrary, all of
Grantee's rights under this Section 8 shall terminate on the date of
termination of this Option pursuant to Section 3(a).

(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of Issuer
Common Stock paid for any such share by the person or groups described
in Section 8(d)(i), (ii) the price per share of Issuer Common Stock
received by holders of Issuer Common Stock in connection with any merger
or other business combination transaction described in Section 7(b)(i),
7(b)(ii) or 7(b)(iii), or (iii) the highest bid price per share as
quoted on the principal trading market or securities exchange on which
such shares are traded as reported by a recognized source chosen by
Grantee during the 60 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid
in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee, divided by the number of
shares of Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of
the foregoing clauses (i) or (ii) shall be other than in cash, the value
of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by
Grantee and reasonable acceptable to Issuer, which determination shall
be conclusive for all purposes of this Agreement.

(d) As used herein, "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have acquired actual ownership or control, or any "group" (as such term
is defined under the 1934 Act) shall have been formed which shall have
acquired actual ownership or control, of 50% or more of the then
outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall
be consummated.

9. Registration Rights.

(a) Demand Registration Rights. Issuer shall, subject
to the conditions of subparagraph (c) below, if requested by Grantee (or
if applicable, a Grantee Majority), as expeditiously as possible prepare
and file a registration statement under the 1933 Act if such
registration is necessary in order to permit the sale or other
disposition of any or all shares of Issuer Common Stock or other
securities that have been acquired by or are issuable to Grantee upon
exercise of the Option in accordance with the intended method of sale or
other disposition stated by Grantee in such request, including without
limitation a "shelf" registration statement under Rule 415 under the
1933 Act or any successor provision, and Issuer shall use its best
efforts to qualify such shares or other securities for sale under any
applicable state securities laws.

(b) Additional Registration Rights. If Issuer at any
time after the exercise of the Option proposes to register any shares of
Issuer Common Stock under the 1933 Act in connection with an
underwritten public offering of such Issuer Common Stock, Issuer will
promptly give written notice to Grantee (and any permitted transferee)
of its intention to do so and, upon the written request of Grantee (or
any such permitted transferee of Grantee) given within 30 days after
receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Grantee (or such permitted transferee)), Issuer will cause
all such shares, the holders of which shall have requested participation in such
registration, to be so registered and included in such underwritten public
offering; provided, however, that Issuer may elect to not cause any such shares
to be so registered (i) if the underwriters in good faith object for valid
business reasons, or (ii) in the case of a registration solely to implement an
employee benefit plan or a registration filed on Form S-4; provided, further,
however, that such election pursuant to (i) may only be made one time. If some
but not all the shares of Issuer Common Stock, with respect to which Issuer
shall have received requests for registration pursuant to this subparagraph (b),
shall be excluded from such registration, Issuer shall make appropriate
allocation of shares to be registered among Grantee and any other person (other
than the Issuer) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each such holder bears
to the total number of shares requested to be registered by all such holders
then desiring to have Issuer Common Stock registered for sale.

(c) Conditions to Required Registration. Issuer shall
use all reasonable efforts to cause each registration statement referred
to in subparagraph (a) above to become effective and to obtain all
consents or waivers of other parties which are required therefor and to
keep such registration statement effective; provided, however, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided
Issuer shall in good faith determine that any such registration would
adversely affect an offering or contemplated offering of other
securities by Issuer, and Issuer shall not be required to register
Option Shares under the 1933 Act pursuant to subparagraph (a) above:

(i) prior to the earliest of (A) termination of the
Acquisition Agreement pursuant to the terms thereof, and (B) a
Purchase Event or a Preliminary Purchase Event;

(ii) on more than two occasions;

(iii) more than once during any calendar year;

(iv) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to
which the holder or holders of the Option Shares concerned
were afforded the opportunity to register such shares under
the 1933 Act and such shares were registered as requested; and

(v) unless a request therefor is made to Issuer by the
holder or holders of at least 25% or more of the aggregate
number of Option Shares then outstanding.

In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the
expiration of 120 days from the effective date of such registration
statement. Issuer shall use all reasonable efforts to make any filings,
and take all steps, under all applicable state securities laws to the
extent necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of
distribution for such shares, provided, however, that Issuer shall not
be required to consent to general jurisdiction or qualify to do business
in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.

(d) Expenses. Except where applicable state law
prohibits such payments, Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and
expenses, accounting expenses and printing expenses incurred by it) in
connection with each registration pursuant to subparagraph (a) or (b)
above and all other qualifications, notifications or exemptions pursuant
to subparagraph (a) or (b) above. Underwriting discounts and
commissions relating to Option Shares, fees and disbursements of counsel
to the holders of Option Shares being registered and any other expenses
incurred by such holders in connection with any such registration shall
be borne by such holders.

(e) Indemnification. In connection with any
registration under subparagraph (a) or (b) above, Issuer hereby
indemnifies the holder of the Option Shares, and each underwriter
thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the 1933 Act, against
all expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement of a material fact contained in any
registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission, or alleged omission,
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar
as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue
statement that was included by Issuer in any such registration statement
or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon and in conformity
with, information furnished in writing to Issuer by such indemnified
party expressly for use therein, and Issuer and each officer, director
and controlling person of Issuer shall be indemnified by such holder of
the Option Shares, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement that was included by Issuer in any
such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance
upon, and in conformity with, information furnished in writing to Issuer
by such holder or such underwriter, as the case may be, expressly for
such use.

Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against
such indemnified party in respect of which indemnity or reimbursement
may be sought against any indemnifying party under this subparagraph
(e), such indemnified party shall notify the indemnifying party in
writing of the commencement of such action, but, except to the extent of
any actual prejudice to the indemnifying party, the failure so to notify the
indemnifying party shall not relieve it of any liability which it may otherwise
have to any indemnified party under this subparagraph (e). In case notice of
commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in and,
to the extent it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such indemnified party. The
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the indemnifying party agrees to pay the same, (ii)
the indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the indemnified party
has been advised by counsel that one or more legal defenses may be available to
the indemnifying party that may be contrary to the interest of the indemnified
party, in which case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligation to bear fees and expenses
of such counsel. No indemnifying party shall be liable for any settlement
entered into without its consent, which consent may not be unreasonably
withheld.

If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in
respect of any expenses, losses, claims, damages or liabilities referred
to herein, then the indemnifying party, in lieu of indemnifying such
party otherwise entitled to be indemnified, shall contribute to the
amount paid or payable by such party to be indemnified as a result of
such expenses, losses, claims, damages or liabilities in such proportion
as is appropriate to reflect the relative benefits received by Issuer,
the selling shareholders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling
shareholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
The amount paid or payable by a party as a result of the expenses,
losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim; provided however, that in no case shall the holders of
the Option Shares be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.

In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each holder of any Option Shares (other
than Grantee) shall enter into an agreement containing the
indemnification provisions of this subparagraph (e).

(f) Miscellaneous Reporting. Issuer shall comply with
all reporting requirements and will do all such other things as may be
necessary to permit the expeditious sale at any time of any Option
Shares by the holder thereof in accordance with and to the extent
permitted by any rule or regulation permitting non-registered sales of
securities promulgated by the SEC from time to time, including, without
limitation, Rule 144A. Issuer shall at its expense provide the holder
of any Option Shares with any information necessary in connection with
the completion and filing of any reports or forms required to be filed
by them under the 1933 Act or the 1934 Act, or required pursuant to any
state securities laws or the rules of any stock exchange.

(g) Issue Taxes. Issuer will pay all stamp taxes in
connection with the issuance and the sale of the Option Shares and in
connection with the exercise of the Option, and will save Grantee
harmless, without limitation as to time, against any and all
liabilities, with respect to all such taxes.

10. Quotation; Listing. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then
authorized for quotation or trading or listing on the NASDAQ/NMS or any
securities exchange, Issuer, upon the request of Grantee, will promptly
file an application, if required, to authorize for quotation or trading
or listing the shares of Issuer Common Stock or other securities to be
acquired upon exercise of the Option on the NASDAQ/NMS or such other
securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.

11. Division of Option. Upon the occurrence of a Purchase
Event or a Preliminary Purchase Event, this Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of
Grantee, upon presentation and surrender of this Agreement at the
principal office of Issuer for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include
any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such
new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.

12. Miscellaneous.

(a) Expenses. Except as otherwise provided in Section
9, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.

(b) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery
of a written agreement executed by the parties hereto.

(c) Entire Agreement: No Third-Party Beneficiary;
Severability. This Agreement, together with the Acquisition Agreement
and, when executed, the other documents and instruments referred to
herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject
matter hereof, and (ii) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares
or any permitted transferee of this Agreement pursuant to Section 12(h))
any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state regulatory agency to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated. If for any reason
such court or regulatory agency determines that the Option does not
permit Grantee to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common Stock as provided in Sections 3
and 8 (as adjusted pursuant to Section 7), it is the express intention
of Issuer to allow Grantee to acquire or to require Issuer to repurchase
such lesser number of shares as may be permissible without any amendment
or modification hereof.

(d) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of West Virginia
without regard to any applicable conflicts of law rules.

(e) Descriptive Heading. The descriptive headings
contained herein are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.

(f) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation) or mailed by registered or
certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):

If to Issuer to: First Merchants Bancorp, Inc.
Fourth Avenue and Washington Street
Montgomery, West Virginia 25136
Attention: George F. Davis, Chairman
of the Board and President

with a copy to: Deborah A. Sink
Bowles, Rue, McDavid, Graff and Love
16th Floor, Commerce Square
P. O. Box 1386
Charleston, West Virginia 25325-1386

If to Grantee to: City Holding Company
3601 MacCorkle Avenue, SE
Charleston, West Virginia 25304
Attention: Steven J. Day
President

with a copy to: Lathan M. Ewers, Jr.
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219

(g) Counterparts. This Agreement and any amendments hereto
may be executed in two counterparts, each of which shall be considered one
and the same agreement and shall become effective when both counterparts
have been signed, it being understood that both parties need not sign the
same counterpart.

(h) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except
that Grantee may assign this Agreement to a wholly owned subsidiary of
Grantee and Grantee may assign its rights hereunder in whole or in part
after the occurrence of a Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit and be
enforceable by the parties and their respective successors and assigns.

(i) Further Assurances. In the event of any exercise of
the Option by Grantee, Issuer and Grantee shall execute and deliver all
other documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided for
by such exercise.

(j) Specific Performance. The parties hereto agree that
this Agreement may be enforced by either party through specific
performance, injunctive relief and other equitable relief. Both parties
further agree to waive any requirement for the securing or posting of any
bond in connection with the obtaining of any such equitable relief and that
this provision is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.

IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.

FIRST MERCHANTS BANCORP, INC.

By: /s/ George F. Davis
Name: George F. Davis
Title: Chairman of Board and
CEO

CITY HOLDING COMPANY

By:/s/ Steven J. Day
Name: Steven J. Day
Title: President

<PAGE>

ANNEX III

OPTION AGREEMENT

This OPTION AGREEMENT, by and between City Holding Company,
a West Virginia corporation ("Purchaser"), and the undersigned ("Seller"),
recites and provides:

A. Seller is the owner of the number of shares (the
"Shares") of Common Stock of First Merchants Bancorp, Inc. ("FMB") set
forth on the signature page.

B. FMB owns all of the outstanding common stock of
Merchants National Bank ("Merchants").

C. Purchaser, FMB and Merchants are entering into an
Agreement and Plan of Reorganization (the "Agreement") providing for the
merger (the "Merger") of FMB into Purchaser.

D. In connection with the Merger, Purchaser will undergo
considerable expense in pursuing regulatory approvals and taking other
necessary actions. Purchaser is unwilling to proceed unless it is assured
it can purchase shares of FMB common stock owned by directors of FMB.

E. Seller, a director of FMB, desires to facilitate
Purchaser's acquisition of FMB and in connection therewith is willing to
grant an option to Purchaser to acquire the Shares.

NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, receipt whereof is hereby acknowledged,
Purchaser and Seller agree as follows:

1. Grant of Option to Purchase. Seller hereby grants to
Purchaser an irrevocable option (the "Option") to purchase the Shares at an
exercise price of $45.60 cash per Share. Purchaser, at its election, may
deliver shares of Purchaser's Common Stock in payment of the exercise
price, or Seller may elect to receive the exercise price in the form of
Purchaser's Common Stock. For purposes of determining the number of shares
of Purchaser's Common Stock to be delivered in exchange for each share of
FMB's Common Stock, the value of Purchaser's Common Stock shall be the
average of the closing bid price for Purchaser's Common Stock as reported
on NASDAQ or the 10 trading days prior to the day on which the Option is
exercised.

2. Exercise of Option. The Option may be exercised by
Purchaser on or before such date which is the earlier of (y) the date on
which Purchaser has received all regulatory approvals that are prerequisite
to consummation of the Merger and all applicable waiting periods have
expired, or (z) December 31, 1995 (the applicable period being hereinafter
called the "Option Period"), but in neither case (y) or (z) unless an offer
to acquire FMB has been received from a person other than Purchaser and
FMB's directors in good faith determine such offer is materially better
than Purchaser's offer from a financial point of view. On a date specified
by Purchaser within 10 days following exercise of the option, Seller will
deliver to Purchaser certificates representing the Shares against payment
of the exercise price.

3. Consideration for Grant of Option. In consideration of
Seller's grant of the Option, Purchaser is entering into an Agreement and
Plan of Reorganization and proceeding with the other actions necessary to
consummate the Merger.

4. Seller's Representations. Seller is the sole owner of
and has the right to sell the Shares, and has full power to transfer the
Shares, not subject to any restriction. The Shares are now and at all
times during the Option Period will be free of all encumbrances and will
not be disposed of except pursuant to the terms of this Option Agreement.
Purchaser will receive good and marketable title to the Shares when
delivered under this Agreement.

5. Benefit. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective legal
representatives and assigns. Seller agrees that Purchaser may not assign
the Option without the prior consent of the Seller.

6. Endorsement of Certificates. Upon execution of this
Agreement, Seller shall place on the certificate or certificates for the
Shares an endorsement that such certificates are subject to the terms of
this Option Agreement.

7. Exercise of Dissenting Shareholder's Rights; Voting of
Shares. Seller warrants that it has not exercised any dissenting
shareholder's rights with respect to the Shares. Seller shall refrain from
exercising any dissenting shareholder's rights with respect to the Shares
without the prior written consent of Purchaser. Seller agrees that if the
Merger is submitted to the shareholders of FMB during the Option Period and
prior to Purchaser's exercise of the Option, Seller will vote the Shares
for the Merger. Seller further agrees that if any business combination
other than the Merger is submitted to the shareholders of FMB during the
Option Period and prior to exercise of the Option, Seller will vote the
Shares against such business combination. During the Option Period, Seller
is entitled to all voting rights as respects the Shares except as limited
by this Section 7.

8. Dividends, Distributions and Exchanges. Until exercise
of the Option, Seller shall be entitled to any cash dividends declared on
the Shares. In the event any stock dividend (or other non-cash
distribution equivalent to a stock dividend) is declared and paid on the
Shares during the Option Period, such stock dividend or distribution shall
be subject to the terms and conditions of this Option Agreement and shall
be delivered by Seller to Purchaser upon exercise of the Option for no
additional consideration. If the Shares are exchanged for or converted
into any other securities during the Option Period, such securities shall
be subject to the terms and conditions of the Option Agreement and shall be
delivered by Seller to Purchaser upon exercise of the Option for no
additional consideration.

9. Termination. This Option shall terminate upon the
effectiveness of the Merger or termination of the Agreement prior to the
occurrence of an event entitling Purchaser to exercise the Option pursuant
to Section 2 hereof.

WITNESS the following signatures as of the 14th day of
March, 1995.

CITY HOLDING COMPANY

/s/ Steven J. Day

Name: Steven J. Day
Title: President and Chief
Executive Officer

SELLER

___________________________________

Print Name:________________________

Number of Shares:__________________

<PAGE>

ANNEX IV

(SECTION MARK) 31-1-122. RIGHT OF SHAREHOLDERS TO DISSENT.

Any shareholder of a corporation shall have the right to
dissent from any of the following corporate actions:

(a) Any plan of merger or consolidation to which the
corporation is a party; or

(b) Any sale or exchange of all or substantially all of the
property and assets of the corporation not made in the usual and regular
course of its business, including a sale in dissolution, but not including
a sale pursuant to an order of a court having jurisdiction in the premises
or a sale for cash on terms requiring that all or substantially all of the
net proceeds of sale be distributed to the shareholders in accordance with
their respective interests within one year after the date of sale.

A shareholder may dissent as to less than all of the shares
registered in his name. In that event, his rights shall be determined as
if the shares as to which he has dissented and his other shares were
registered in the names of different shareholders. (1974, c. 13.)

(SECTION MARK) 31-1-123. RIGHTS OF DISSENTING SHAREHOLDERS; PROCEDURE
FOR PURCHASING OF DISSENTING SHAREHOLDERS'
SHARES; CIVIL ACTION FOR DETERMINING VALUE OF
SHARES; PROCEDURES FOR TRANSFERRING OF SUCH
SHARES TO CORPORATION AND PAYMENT THEREFOR.

(a) Any shareholder electing to exercise his right to dissent,
pursuant to section one hundred twenty-two [(section mark) 31-1-122] of this
article, shall file with the corporation, prior to or at the meeting of
shareholders at which such proposed corporate action is submitted to a vote, a
written objection to such proposed corporate action. If such proposed corporate
action be approved by the required vote and such shareholder shall not have
voted in favor thereof, such shareholder may, within ten days after the date on
which the vote was taken or if a corporation is to be merged without a vote of
its shareholders into another corporation, any of its shareholders may, within
fifteen days after the plan of such merger shall have been mailed to such
shareholders, make written demand on the corporation, or, in the case of a
merger or consolidation, on the surviving or new corporation, domestic or
foreign, for payment of the fair value of such shareholder's shares, and, if
such proposed corporate action is effected, such corporation shall pay to such
shareholder, upon surrender of the certificate or certificates representing such
shares, the fair value thereof as of the day prior to the date on which the vote
was taken approving the proposed corporate action, excluding any appreciation or
depreciation in anticipation of such corporate action. Any shareholder failing
to make demand within the ten-day period shall be bound by the terms of the
proposed corporate action. Any shareholder making such demand shall thereafter
be entitled only to payment as in this section provided and shall not be
entitled to vote or to exercise any other rights of a shareholder.

(b) No such demand may be withdrawn unless the corporation
shall consent thereto. If, however, such demand shall be withdrawn upon
consent, or if the proposed corporate action shall be abandoned or
rescinded or the shareholders shall revoke the authority to effect such
action, or if, in the case of a merger, on the date of the filing of the
articles of merger the surviving corporation, is the owner of all the
outstanding shares of the other corporations, domestic and foreign, that
are parties to the merger, or if no demand or petition for the
determination of fair value by a court of general civil jurisdiction have
been made or filed within the time provided in subsection (e) of this
section, or if a court of general civil jurisdiction shall determine that
such shareholder is not entitled to the relief provided by this section,
then the right of such shareholder to be paid the fair value of his shares
shall cease and his status as a shareholder shall be restored, without
prejudice to any corporate proceedings which may have been taken during the
interim.

(c) Within ten days after such corporate action is
effected, the corporation, or, in the case of a merger or consolidation,
the surviving or new corporation, domestic or foreign, shall give written
notice thereof to each dissenting shareholder who has made demand as herein
provided, and shall make a written offer to each shareholder to pay for
such shares at a specified price deemed by such corporation to be fair
value thereof. Such notice and offer shall be accompanied by a balance
sheet of the corporation the shares of which the dissenting shareholder
holds, as of the latest available date and not more than twelve months
prior to the making of such offer, and a profit and loss statement of such
corporation for the twelve months' period ended on the date of such balance
sheet.

(d) If within thirty days after the date on which such
corporate action is effected the fair value of such shares is agreed upon
between any such dissenting shareholder and the corporation, payment
therefor shall be made within ninety days after the date on which such
corporate action was effected, upon surrender of the certificate or
certificates representing such shares. Upon payment of the agreed value
the dissenting shareholder shall cease to have any interest in such shares.

(e) If within such period of thirty days, a dissenting
shareholder and the corporation do not so agree, then the corporation shall
within thirty days after receipt of written demand from any dissenting
shareholder, which written demand must be given within sixty days after the
date on which such corporate action was effected, file a complaint in a
court of general civil jurisdiction requesting that the fair value of such
shares be found and determined, or the corporation may file such complaint
at any time within such sixty-day period at its own election. Such
complaint shall be filed in any court of general civil jurisdiction in the
county in which the principal office of the corporation is situated, or, if
there be no such office in this State, in the county in which any
dissenting shareholder resides or is found or in which the property of such
corporation, or any part of it, may be. If the corporation shall fail to
institute such proceedings, any dissenting shareholder may do so in the
name of the corporation. All dissenting shareholders wherever residing,
may be made parties to the proceedings as an action against their shares
quasi in rem. A copy of the complaint shall be served on each dissenting
shareholder who is a resident of this State in the same manner as in other
civil actions. Dissenting shareholders who are nonresidents of this State
shall be served a copy of the complaint by registered or certified mail,
return receipt requested. In addition, service upon such nonresident
shareholders shall be made by publication, as provided in Rule 4(e)(2) of
the West Virginia Rules of Civil Procedure. All shareholders who are
parties to the proceeding shall be entitled to judgment against the
corporation for the amount of the fair value of their shares. The court
may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The
appraiser shall have such power and authority as shall be specified in the
order of their appointment or any subsequent appointment. The judgment
shall be payable only upon and concurrently with the surrender to the
corporation of the certificate or certificates representing such shares.
Upon payment of the judgment, the dissenting shareholder shall cease to
have any interest in such shares.

The judgment shall include an allowance for interest at such
rate as the court may find to be fair and equitable in all the
circumstances, from the date on which the vote was taken on the proposed
corporate action to the date of payment.

The costs and expenses of any such proceeding shall be
determined by the court and shall be assessed against the corporation, but
all or any part of such costs and expenses may be apportioned and assessed
as the court may deem equitable against any or all of the dissenting
shareholders who are parties to the proceeding to whom the corporation
shall have made an offer to pay for the shares if the court shall find that
the action of such shareholders in failing to accept such offer was
arbitrary or vexatious or not in good faith. Such expenses shall include
reasonable compensation for and reasonable expenses of the appraisers, but
shall exclude the fees and expenses of counsel for and experts employed by
any party; but if the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay therefor, or if no
offer was made, the court in its discretion may award to any shareholder
who is a party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or experts employed by the
shareholder in the proceeding. Any party to the proceeding may appeal any
judgment or ruling of the court as in other civil cases.

(f) Within twenty days after demanding payment for his
shares, each shareholder demanding payment shall submit the certificate or
certificates representing his shares to the corporation for notation
thereon that such demand has been made. His failure to do so shall, at the
option of the corporation, terminate his rights under this section unless a
court of general civil jurisdiction, for good and sufficient cause shown,
shall otherwise direct. If shares represented by a certificate on which
notation has been so made shall be transferred, each new certificate issued
therefor shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares
shall acquire by such transfer no rights in the corporation other than
those which the original dissenting shareholder had after making demand for
payment of the fair value thereof.

(g) Shares acquired by a corporation pursuant to payment of
the agreed value therefor or to payment of the judgment entered therefor,
as in this section provided, may be held and disposed of by such
corporation as in the case of other treasury shares, except that, in the
case of a merger or consolidation, they may be held and disposed of as the
plan of merger or consolidation may otherwise provide. (1974, c. 13.)

<PAGE>

ANNEX V

BAXTER FENTRISS AND COMPANY (LOGO)
9100 ARBORETUM PARKWAY
SUITE 280
RICHMOND, VIRGINIA 23236
(804) 323-7540 FAX (804) 323-7457
March 14, 1995

The Board of Directors
First Merchants Bancorp, Inc.
P.O. Box 1109
Montgomery, West Virginia 25136

Dear Members of the Board:

First Merchants Bancorp, Montgomery, West Virginia ("FMB") and the City
Holding Company, Charleston ("City") have entered into an Agreement
providing for the acquisition of FMB by City ("Acquisition"). The terms
of the Acquisition are set forth in the Agreement and Plan of
Reorganization and Merger dated March 14, 1995.

The terms of the Acquisition provide that, with the possible exception
of those shares as to which dissenter's rights may be perfected, each
common share of FMB will be converted into stock of City.

You have asked our opinion as to whether the proposed transaction
pursuant to the terms of the Acquisition are fair to the respective
shareholders of FMB from a financial point of view.

In rendering our opinion, we have evaluated the consolidated financial
statements of FMB available to us from published sources. In addition,
we have, among other things: (a) to the extent deemed relevant, analyzed
selected public information of certain other financial institutions and
compared FMB and City from a financial point of view to the other
financial institutions; (b) considered the historical market price of
the common stock of FMB and City; (c) compared the terms of the
Acquisition with the terms of certain other comparable transactions to
the extent information concerning such acquisitions was publicly
available; (d) reviewed the Agreement and Plan of Reorganization and
related documents; and (e) made such other analyses and examinations as
we deemed necessary. We have met with various senior officers of FMB and
City to discuss the foregoing as well as other matters that may be
relevant.

We have not conducted a due diligence review of City nor have we
reviewed registration statements, proxy materials, regulatory
applications or other documents which must be prepared prior to
completion of any transaction.

We have not independently verified the financial and other information
concerning FMB, or City or other data which we have considered in our
review. We have assumed the accuracy and completeness of all such
information; however, we have no reason to believe that such information
is not accurate and complete. Our conclusion is rendered on the basis of
securities market conditions prevailing as of the date hereof and on the
conditions and prospects, financial and otherwise, of FMB and City as
they exist and are known to us as of December 31, 1994.

It is understood that this opinion may be included in its entirety in
any communication by FMB or the Board of Directors to the stockholders
of FMB. The opinion may not, however, be summarized, excerpted from or
otherwise publicly referred to without our prior written consent.

Based on the foregoing, and subject to the limitations described above,
we are of the opinion that the terms of the Acquisition are fair to the
shareholders of FMB from a financial point of view.

Very truly yours,

/s/ Baxter Fentriss and Company

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Officers and Directors

Section 31-1-9 of the West Virginia Corporation Act provides in part
that each West Virginia corporation shall have the power to indemnify any
director, officer, employee or agent or former director, officer, employee
or agent against expenses actually and reasonably incurred by him in
connection with the defense of any claim, action, suit or proceeding
against him by reason of being or having been such director, officer,
employee or agent other than an action by or in the right of the
corporation if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the corporation.
With respect to an action by or in the right of the corporation the
director, officer, employee or agent or former director, officer, employee
or agent may be indemnified if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, except in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding against him by reason of being
or having been such director, officer, employee or agent to be liable for
negligence or misconduct in the performance of duty; and to make any other
or further indemnity to any such persons that may be authorized by the
articles of incorporation or any by-law made by the shareholders or any
resolution adopted, before or after the event, by the shareholders. The
By-laws of City Holding contain provisions pursuant to the foregoing
section of the West Virginia Corporation Act indemnifying the directors,
officers, employees and agents of City Holding in certain cases against
expenses and liabilities under judgments and reimbursements of amounts paid
in settlement.

City Holding has purchased directors and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (l) the
directors and officers of City Holding against certain losses, to the
extent such losses are not indemnified by City Holding, and (2) City
Holding, to the extent it indemnifies such directors and officers for
losses as permitted under the laws of West Virginia.

Item 21. Exhibits and Financial Statement Schedules

(a) Exhibits

2 Agreement and Plan of Reorganization dated March 14,
1995, among City Holding, Merchants, and FMB (attached to
the Joint Proxy Statement/Prospectus as Annex I)

5 Opinion of Steptoe & Johnson

8 Opinion of Hunton & Williams with respect to tax
consequences of the Merger

II-1

23(a) Consent of Ernst & Young LLP

23(b) Consent of Ernst & Young LLP

23(c) Consent of Steptoe & Johnson (included in Exhibit 5)

23(d) Consent of Hunton & Williams (included in Exhibit 8)

23(e) Consent of Persinger & Company, L.L.C.

23(f) Consent of Baxter Fentriss and Company

24 Power of Attorney (included on page II-5)

99(a) Form of FMB Proxy

99(b) Form of City Holding Proxy

(b) Financial Statement Schedules -- None

Item 22. Undertakings

(a) The undersigned Registrant hereby undertakes as follows:

1. To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration;

(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration statement.

2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities

II-2

at that time shall be deemed to be the initial bona
fide offering thereof.

3. To remove from registration by means of a post-
effective amendment any of the securities being
registered in which remain unsold at the termination
of the offering.

4. That prior to any public reoffering of the securities
registered hereunder through the use of a prospectus
which is a part of this registration statement, by
any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the
Registrant undertakes that such reoffering prospectus
will contain, or will be amended to contain, the
information called for by the applicable registration
form with respect to reoffering by persons who may be
deemed underwriters, in addition to the information
called for by the other items of the applicable form;

5. That every prospectus (i) that is filed pursuant to
the paragraph immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3)
of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as
part of an amendment to the registration statement
and will not be used until such amendment is
effective, and that for the purposes of determining
any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a
new registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof;

6. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of
the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant

II-3

will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question
whether such indemnification by it is against public
policy as expressed in the Act and will be governed
by the final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes to respond
to requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first-class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.

(c) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was not
the subject of and included in the registration statement when it became
effective.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Charleston, State of West
Virginia, on April 14, 1995.

CITY HOLDING COMPANY

By /s/ Steven J. Day

Steven J. Day, President
and Chief Executive Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities indicated on April 14, 1995. Each of the directors and/or
officers of City Holding Company whose signature appears below hereby
appoints Steven J. Day, Robert A. Henson and Lathan M. Ewers, Jr., and each
of them generally, as his attorney-in-fact to sign in his name and behalf,
in any and all capacities stated below and to file with the Commission, any
and all amendments, including post-effective amendments to this
registration statement, making such changes in the registration statement
as appropriate, and generally to do all such things in their behalf in
their capacities as officers and directors to enable City Holding Company
to comply with the provisions of the Securities Act of 1933, and all
requirements of the Securities and Exchange Commission.

Signature Title and Capacity

/s/ Steven J. Day President and Chief
Steven J. Day Executive Officer; Director
(Principal Executive Officer)

/s/ Robert A. Henson Chief Financial Officer (Principal
Robert A. Henson Financial Officer and
Principal Accounting Officer)

II-5

/s/ Otis L. O'Connor Secretary; Director
Otis L. O'Connor

/s/ Darrell K. Cales Director
Darrell K. Cales

/s/ Robert D. Fisher Director
Robert D. Fisher

/s/ Jack E. Fruth Director
Jack E. Fruth

/s/ Jay Goldman Director
Jay Goldman

/s/ Carlin K. Harmon Director
Carlin K. Harmon

/s/ C. Dallas Kayser Director
C. Dallas Kayser

/s/ Dale Nibert Director
Dale Nibert

/s/ Mark Schaul Director
Mark Schaul

/s/ Van R. Thorn Director
Van R. Thorn

II-6

Exhibit Index

Exhibit

2 Agreement and Plan of Reorganization dated
March 14, 1995, among City Holding, Merchants,
and FMB (attached to the Joint Proxy Statement/
Prospectus as Annex I)

5 Opinion of Steptoe & Johnson

8 Opinion of Hunton & Williams with respect to tax
consequences of the Merger

23(a) Consent of Ernst & Young LLP

23(b) Consent of Ernst & Young LLP

23(c) Consent of Steptoe & Johnson (included in Exhibit 5)

23(d) Consent of Hunton & Williams (included in Exhibit 8)

23(e) Consent of Persinger & Company, L.L.C.

23(f) Consent of Baxter Fentriss and Company

24 Power of Attorney (included on page II-5)

99(a) Form of FMB Proxy

99(b) Form of City Holding Proxy

Exhibit 5

[Steptoe & Johnson Letterhead]

April 14, 1995

Board of Directors
City Holding Company
3601 MacCorkle Ave., S.E.
Charleston, WV 25304

REGISTRATION STATEMENT ON FORM S-4

Ladies and Gentlemen:

We are acting as counsel for City Holding Company (the "Company") in
connection with the registration under the Securities Act of 1933 of
950,000 shares of its Common Stock (the "Common Stock"). The transaction
in which the Common Stock will be issued is described in the Company's
Registration Statement on Form S-4 (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission"). In
connection with the filing of the Registration Statement, you have
requested our opinion concerning certain corporate matters.

We are of the opinion that:

1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of West Virginia.

2. The Common Stock has been duly authorized and, when the shares
have been issued as described in the Registration Statement, will be
legally issued, fully paid and nonassessable.

We consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the references to us in the
Proxy Statement/Prospectus included therein. In giving this consent, we do
not admit that we are within the category of persons whose consent is
required by Section 7 of the Securities Act of 1933 or the rules and
regulations promulgated thereunder by the Securities and Exchange
Commission.

Very truly yours,

Exhibit 8

Opinion of Hunton & Williams
with respect to tax consequences of the Merger

HUNTON & WILLIAMS
951 East Byrd Street
Richmond, Virginia 23219-4074

April 14, 1995

City Holding Company
3601 MacCorkle Avenue, S.E.
Charleston, West Virginia 25304

First Merchants Bancorp, Inc.
Fourth Avenue and Washington Street
Montgomery, West Virginia 25136

Merger of First Merchants Bancorp, Inc.
Into City Holding Company
Certain Federal Income Tax Matters

Gentlemen:

We have acted as counsel to City Holding Company, a West Virginia
corporation and bank holding company ("City Holding"), in connection with
the proposed merger (the "Merger") of First Merchants Bancorp, Inc., a West
Virginia corporation and bank holding company ("FMB"), into City Holding
pursuant to West Virginia law. In the Merger, each outstanding share of
FMB common stock (except treasury shares and any shares with respect to
which dissenter's rights are exercised) is to be converted into 1.60 shares
of City Holding common stock. Any FMB shareholder who becomes entitled to
a fractional share of City Holding common stock as a result of the Merger,
after aggregating all the shareholder's shares of FMB common stock, will
receive cash from City Holding in lieu of the fractional share. Any FMB
shareholder who exercises and perfects dissenter's rights will be entitled
to receive cash for the fair value of the shareholder's shares of FMB
common stock; a condition to consummation of the Merger is that dissenter's
rights not be exercised for more than ten percent of the outstanding shares
of FMB common stock. FMB common stock is the only class of FMB stock
outstanding.

Pursuant to a Stock Option Agreement dated March 14, 1995, FMB
has granted City Holding an option to purchase up to 114,600 shares of FMB
common stock upon the occurrence of certain

City Holding Company
First Merchants Bancorp, Inc.
April 14, 1995
Page 2

triggering events involving a competing offer to acquire FMB. That option
will terminate upon consummation of the Merger. City Holding also has
acquired options to purchase up to 65,437 shares of FMB common stock from
three shareholders who are directors of FMB. City Holding paid no cash or
other property for those options, and they will terminate upon consummation
of the Merger.
You have requested our opinion concerning certain federal income
tax consequences of the Merger. In giving this opinion, we have reviewed
the Agreement and Plan of Reorganization (including the Plan of Merger)
dated as of March 14, 1995, among City Holding, FMB, and Merchants National
Bank, a national banking association wholly-owned by FMB; the Form S-4
Registration Statement under the Securities Act of 1933 relating to the
Merger (the "S-4"); and such other documents as we have considered neces-
sary. In addition, we have assumed the following:

1. The fair market value of the City Holding common stock
(including any fractional share interest) received by an FMB shareholder in
exchange for FMB common stock will be approximately equal to the fair
market value of the FMB common stock surrendered in the exchange.

2. None of the compensation received by any shareholder-
employee of FMB will be separate consideration for, or allocable to, any
shares of FMB common stock; none of the shares of City Holding common stock
received by any shareholder-employee in the Merger will be separate consid-
eration for, or allocable to, any employment agreement; and the compensa-
tion paid to any shareholder-employee will be for services actually ren-
dered and will be commensurate with amounts paid to third parties bargain-
ing at arm's length for similar services.

3. The payment of cash in lieu of fractional shares of City
Holding common stock is solely for the purpose of avoiding the expense and
inconvenience to City Holding of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash consider-
ation that will be paid in the Merger to FMB shareholders in lieu of
fractional shares of City Holding common stock will not exceed one percent
of the total consideration that will be issued in the Merger to the FMB
shareholders in exchange for their FMB common stock.

4. No share of FMB common stock has been or will be redeemed in
anticipation of the Merger, and FMB has not made and will not make any
extraordinary distribution with respect to its stock in anticipation of the
Merger.

5. City Holding has no plan or intention to reacquire any of
its stock issued in the Merger or to make any extraordinary distribution
with respect to such stock.

City Holding Company
First Merchants Bancorp, Inc.
April 14, 1995
Page 3

6. There is no plan or intention by FMB shareholders to sell,
exchange, or otherwise dispose of a number of shares of City Holding common
stock received in the Merger that would reduce the FMB shareholders'
ownership of City Holding common stock to a number of shares having a fair
market value, as of the effective date of the Merger, of less than 50
percent of the fair market value of all the formerly outstanding FMB common
stock as of the same date. For this purpose, shares of FMB common stock
exchanged for cash in lieu of fractional shares of City Holding common
stock and any shares for which dissenter's rights are exercised are treated
as outstanding FMB common stock on the effective date of the Merger.
Moreover, shares of FMB common stock and shares of City Holding common
stock held by FMB shareholders and otherwise sold, redeemed, or disposed of
before or after the Merger are considered in making the above determina-
tion.

7. Following the Merger, City Holding will continue the
historic business of FMB or use a significant portion of FMB's historic
business assets in a business.

8. On the effective date of the Merger, the fair market value
of the assets of FMB transferred to City Holding will exceed the sum of
FMB's liabilities assumed by City Holding plus the amount of liabilities,
if any, to which the transferred assets are subject.

9. The liabilities of FMB that will be assumed by City Holding
and the liabilities, if any, to which the transferred assets are subject
were incurred by FMB in the ordinary course of business.

10. There is no intercorporate indebtedness existing between FMB
and City Holding or any subsidiary of City Holding that was issued or
acquired or will be settled at a discount.

11. Neither City Holding nor any subsidiary of City Holding (a)
has transferred or will transfer cash or other property to FMB or any
subsidiary of FMB for less than fair market value consideration in antici-
pation of the Merger or (b) has made or will make any loan to FMB or any
subsidiary of FMB in anticipation of the Merger.

12. City Holding has no plan or intention to sell or otherwise
dispose of any of the assets of FMB acquired in the Merger, except for
dispositions made in the ordinary course of business.

13. City Holding, FMB, and the shareholders of FMB will pay
their respective expenses, if any, incurred in connection with the Merger.

14. For each of City Holding and FMB, not more than 25 percent
of the fair market value of its adjusted total assets consists of stock and
securities of any one issuer, and not more than 50 percent of the fair

City Holding Company
First Merchants Bancorp, Inc.
April 14, 1995
Page 4

market value of its adjusted total assets consists of stock and securities
of five or fewer issuers. For purposes of the preceding sentence, (a) a
corporation's adjusted total assets exclude cash, cash items (including
accounts receivable and cash equivalents), and United States government
securities, (b) a corporation's adjusted total assets exclude stock and
securities issued by any subsidiary at least 50 percent of the voting power
or 50 percent of the total fair market value of the stock of which is owned
by the corporation, but the corporation is treated as owning directly a
ratable share (based on the percentage of the fair market value of the
subsidiary's stock owned by the corporation) of the assets owned by any
such subsidiary, and (c) all corporations that are members of the same
"controlled group" within the meaning of section 1563(a) of the Internal
Revenue Code (the "Code") are treated as a single issuer.

15. At all times during the five-year period ending on the
effective date of the Merger, the fair market value of all of FMB's United
States real property interests was and will have been less than 50 percent
of the total fair market value of
(a) its United States real property interests, (b) its interests in real
property located outside the United States, and (c) its other assets used
or held for use in a trade or business. For purposes of the preceding sen-
tence, (x) United States real property interests include all interests
(other than an interest solely as a creditor) in real property and associ-
ated personal property (such as movable walls and furnishings) located in
the United States or the Virgin Islands and interests in any corporation
(other than a controlled corporation) owning any United States real
property interest, (y) FMB is treated as owning its proportionate share
(based on the relative fair market value of its ownership interest to all
ownership interests) of the assets owned by any controlled corporation or
any partnership, trust, or estate in which it is a partner or beneficiary,
and (z) any such entity in turn is treated as owning its proportionate
share of the assets owned by any controlled corporation or any partnership,
trust, or estate in which the entity is a partner or beneficiary. As used
in this paragraph, "controlled corporation" means any corporation at least
50 percent of the fair market value of the stock of which is owned by FMB,
in the case of a first-tier subsidiary of FMB, or by a controlled corpora-
tion, in the case of a lower-tier subsidiary.

16. FMB has not filed, and holds no asset subject to, a consent
pursuant to section 341(f) of the Code and regulations thereunder.

17. FMB is not a party to, and holds no asset subject to, a
"safe harbor lease" under former section 168(f)(8) of the Code and regula-
tions thereunder.

18. Any shares of City Holding common stock received in exchange
for shares of FMB common stock that (a) were acquired in connection with
the performance of services, including stock acquired through the exercise

City Holding Company
First Merchants Bancorp, Inc.
April 14, 1995
Page 5

of an option or warrant acquired in connection with the performance of ser-
vices, and (b) are subject to a substantial risk of forfeiture within the
meaning of section 83(c) of the Code will be subject to substantially the
same risk of forfeiture.

19. No outstanding FMB common stock acquired in con-nection with
the performance of services was or will have been acquired within six
months before the effective date of the Merger by any person subject to
section 16(b) of the Securities Exchange Act of 1934 other than pursuant to
an option granted more than six months before the effective date of the
Merger.

On the basis of the foregoing, and assuming that (a) with respect
to shareholders that are nonresident aliens or foreign entities, FMB will
comply with all applicable statement and notification requirements of
Treasury Regulation (section) 1.897-2(g) & (h), and (b) the Merger will be
consummated in accordance with the Plan of Merger, we are of the
opinion that (under existing law) for federal income tax purposes:

1. The Merger will be a "reorganization" within the meaning of
section 368(a)(1)(A) of the Code.

2. City Holding will not recognize gain or loss on the acquisi-
tion of FMB's assets in exchange for City Holding common stock and the
assumption of FMB's liabilities.

3. FMB will not recognize gain or loss (a) on the transfer of
its assets to City Holding in exchange for City Holding common stock and
the assumption of FMB's liabilities or (b) on the constructive distribution
of City Holding common stock to FMB shareholders.

4. An FMB shareholder will not recognize gain or loss on the
exchange of shares of FMB common stock for shares of City Holding common
stock (including any fractional share interest) in the Merger.

5. The basis of shares of City Holding common stock (including
any fractional share interest) received by an FMB shareholder in the Merger
will be the same as the basis of the shares of FMB common stock exchanged
therefor.

6. The holding period for the shares of City Holding common
stock (including any fractional share interest) received by an FMB share-
holder in the Merger will include the holding period for the shares of FMB
common stock exchanged therefor, if such shares of FMB common stock are
held as a capital asset on the effective date of the Merger.

7. Cash received by an FMB shareholder in lieu of a fractional
share of City Holding common stock will be treated as having been received

City Holding Company
First Merchants Bancorp, Inc.
April 14, 1995
Page 6

as full payment in exchange for such fractional share pursuant to section
302(a) of the Code.

We are also of the opinion that the federal income tax conse-
quences of the Merger are fairly summarized in the S-4 under the headings
"Summary -- Federal Income Tax Consequences of the Merger" and "The
Merger -- Certain Federal Income Tax Consequences." We consent to the use
of this opinion as an exhibit to the S-4 and to the reference to this firm
under such headings. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by section 7 of
the Securities Act of 1933 or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.

Very truly yours,

Exhibit 23(a)

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-4) and related Prospectus of City
Holding Company for the registration of up to 918,400 shares of its
common stock and to the use of our report dated January 20, 1995,
included herein, with respect to the Consolidated Financial Statements
of City Holding Company.

/s/ Ernst & Young LLP

Charleston, West Virginia
April 14, 1995

Exhibit 23(b)

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-4) and related Prospectus of City
Holding Company for the registration of up to 918,400 shares of its
common stock and to the use of our report
dated January 27, 1995, except as to Note O, the date of which is March
14, 1995, included herein, with respect to the Consolidated Financial Statements
of First Merchants Bancorp.

/s/ Ernst & Young LLP

Charleston, West Virginia
April 14, 1995

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated January 6, 1995, with respect to the
consolidated financial statements of Hinton Financial Corporation,
including in this Registration Statement (Form S-4) and related
prospectus of City Holding Company for the registration of up to 918,400
shares of its common stock.

/s/ Persinger & Company, L.L.C.

Beckley, West Virginia
April 14, 1995

Exhibit 23(f)

CONSENT OF FINANCIAL ADVISORS

We consent to the inclusion of our Fairness Opinion issued to FMB State
Bank in this registration statement on Form S-4. We also consent to the
reference to our firm under the caption "Experts".

/s/ BAXTER FENTRISS AND COMPANY

Richmond, Virginia
March 14, 1995

Exhibit 99(a)

FIRST MERCHANTS BANCORP, INC.

PROXY SOLICITED BY BOARD OF DIRECTORS

The undersigned hereby appoint(s) the Board of Directors of First
Merchants Bancorp, Inc. as proxy to vote all common stock of the
undersigned at the Special Meeting of Shareholders of First Merchants
Bancorp, Inc. to be held at its main office at Fourth Avenue and Montgomery
Street, Montgomery, West Virginia on June 29 1995, at 4:30 p.m., and at any
adjournment thereof as follows:

(1) To vote FOR ( ), AGAINST ( ), or ABSTAIN FROM VOTING ON
( ) the Agreement and Plan of Reorganization, dated as of March 14,
1995 (the "Agreement"), and a related Plan of Merger providing
for the merger of First Merchants Bancorp, Inc. into City Holding
Company as more fully set forth in the accompanying Proxy
Statement/Prospectus dated , 1995.

(2) To vote upon such other business as may properly come before this
meeting.

THE STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR (1), ABOVE.

___________________________ ______________________________
Date Signed Shareholder

PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY.

Exhibit 99(b)

PROXY

CITY HOLDING COMPANY

3601 Maccorkle Avenue, S. E.
Charleston, West Virginia 24304

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints _________________ and _______________ as
Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of City Holding Company held of record by the
undersigned on May 15, 1995 at the 1995 Annual Meeting of Shareholders to
be held on June 29, 1995, or any adjournment thereof.

The Board of Directors recommends a vote for Proposals 1 through 3.

1. PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION, DATED AS
OF MARCH 14, 1995, AND A RELATED PLAN OF MERGER PROVIDING FOR THE
MERGER OF FIRST MERCHANTS BANCORP, INC. INTO CITY HOLDING COMPANY AS
MORE FULLY SET FORTH IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS DATED , 1995

( ) FOR ( ) AGAINST ( ) ABSTAIN

2. PROPOSAL TO ELECT FOUR CLASS III DIRECTORS TO THE BOARD OF DIRECTORS
TO SERVE THREE-YEAR TERMS

( ) FOR (except ( ) WITHHOLD
as marked to AUTHORITY
the contrary
below)

Dr. D. K. Cales Jay Goldman
Robert D. Fisher C. Dallas Kayser

TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME ABOVE.

3. PROPOSAL TO RATIFY THE BOARD OF DIRECTORS' APPOINTMENT OF ERNST &
YOUNG, LLP AS AUDITORS FOR THE COMPANY FOR 1995

( ) FOR ( ) AGAINST ( ) ABSTAIN

4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 THROUGH 3. YOU MAY REVOKE THIS PROXY AT ANY
TIME PRIOR TO THE TIME IT IS VOTED AT THE ANNUAL MEETING.

Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.

DATED: __________________________, 1994

________________________________________
Signature

________________________________________
Signature if held jointly

Please mark, sign, date and return the
proxy promptly using the enclosed
envelope.