For immediate release

The Federal Reserve Board today announced its approval of the application by City Holding Company, Charleston, West Virginia, to acquire Horizon Bancorp, Inc., Beckley, West Virginia, and its wholly owned subsidiary banks. Attached is the Board's Order relating to this action.

City Holding Company Charleston, West Virginia Order Approving the Acquisition of a Bank Holding Company

City Holding Company ("Applicant"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire Horizon Bancorp, Inc., Beckley, West Virginia ("Horizon Bancorp"), and its wholly owned subsidiary banks, Bank of Raleigh, Beckley; First National Bank in Marlinton, Marlinton; Greenbrier Valley National Bank, Lewisburg; National Bank of Summers, Hinton; and The Twentieth Street Bank, Huntington, all in West Virginia. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 54,712 (1998)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 3 of the BHC Act. Applicant is the sixth largest depository institution in West Virginia, controlling approximately $916.9 million in deposits, representing approximately 4.8 percent of total deposits in depository institutions in the state ("state deposits").1 Horizon Bancorp is the seventh largest depository institution in West Virginia, controlling approximately $831.8 million in deposits, representing 4.4 percent of state deposits. On consummation of the proposal, and accounting for the proposed divestitures, Applicant would be the fourth largest depository institution in West Virginia, controlling approximately $1.65 billion in deposits in the state, representing approximately 8.7 percent of state deposits. Competitive Considerations The BHC Act prohibits the Board from approving an application under section 3 of the BHC Act if the proposal would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposed combination that would substantially lessen competition or tend to create a monopoly in any relevant banking market, unless the Board finds that the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.2 Applicant and Horizon Bancorp compete directly in four banking markets in West Virginia: Beckley, Charleston, Greenbrier and Huntington.3 The Board has carefully reviewed the competitive effects of the proposal in these banking markets in light of all the facts of record, including the number of competitors that would remain in the markets, the characteristics of the markets, and the projected increase in the concentration of total deposits in depository institutions in the markets ("market deposits")4 as measured by the Herfindahl-Hirshman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines").5 Consummation of the proposal without divestitures would be consistent with the DOJ Guidelines and prior Board decisions in the Huntington and Charleston, banking markets.6 To mitigate the potential anticompetitive effects of the proposal in the Greenbrier banking market, Applicant has committed to divest one branch that controls approximately $37.8 million in deposits in the market.7 With the proposed divestitures, the concentration levels in the Greenbrier banking market as measured by the HHI would be consistent with the DOJ Guidelines after consummation of the proposal. The HHI would increase by approximately 88 points to not more than 2529, and five competitors would remain in the Greenbrier banking market. Applicant is the fifth largest commercial banking organization in the Beckley banking market, controlling deposits of $109.8 million, representing 8.8 percent of market deposits. Horizon Bancorp is the largest in the market, controlling $361.1 million of deposits, representing 29 percent of total market deposits. Applicant has committed to divest one branch that controls approximately $57 million in deposits and that represents approximately 4.6 percent of the market deposits. On consummation of the proposal and divestiture, Applicant would be the largest depository institution in the market, controlling $413.9 million in deposits, representing approximately 33.3 percent of market deposits. The post-merger HHI would increase by not more than 208 points to not more than 2132. Consummation of the transaction with the proposed divestiture would exceed the DOJ Guidelines, in the Beckley banking market. As the Board has indicated in previous cases, in a market in which the competitive effects of a proposal exceed the DOJ Guidelines, the Board will consider whether other factors tend to mitigate the competitive effects of the proposal. The number and strength of factors necessary to mitigate competitive effects depend on the level of market concentration and size of the increase in market concentration.8 The Beckley banking market has characteristics that make it attractive for entry when compared to similar counties in West Virginia.9 For example, from 1994 to 1997, the increase in population in the Beckley banking market was three times larger than the increase in population in comparable counties. In addition, the average number of residents per branch and amount of deposits per branch in the banking market exceeded those statistics for comparable counties in West Virginia. The entry of a commercial bank de novo in 1995 also appears to confirm the attractiveness of the Beckley banking market. The proposed divestiture of approximately 4.6 percent of market deposits to an out-of-market commercial banking organization would create another market entrant, and the number of depository institutions competing in the market would remain unchanged at nine competitors. These competitors include three large national and regional banking organizations that each have significant market shares. The Department of Justice has conducted a detailed review of the proposal and has advised the Board that, in light of the proposed divestitures, consummation of the proposal would not likely have a significantly adverse effect on competition in any relevant banking market. The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the West Virginia Commissioner of Banking also have been afforded an opportunity to comment and have not objected to consummation of the proposal. After carefully reviewing all the facts of record and for the reasons discussed in this order and appendices, the Board concludes that consummation of the proposal would not likely result in any significantly adverse effects on competition or on the concentration of banking markets in the Beckley, Charleston, Greenbrier and Huntington banking markets where Applicant and Horizon Bancorp compete or in any other relevant banking market. Accordingly, based on all of the facts of record and subject to completion of the proposed divestitures, the Board has determined that the competitive factor is consistent with approval of the proposal. Other Factors Under the BHC Act The BHC Act also requires the Board, in acting on an application, to consider the financial and managerial resources and future prospects of the companies and banks involved in a proposal, the convenience and needs of the community to be served, and certain other supervisory factors.10 The Board has carefully considered the financial and managerial resources and future prospects of Applicant and Horizon Bancorp, and their respective subsidiary banks, and other supervisory factors in light of all the facts of record. As part of this consideration, the Board has reviewed relevant reports of examination and other supervisory information prepared by the Reserve Banks and other federal agencies. The Board notes that the bank holding companies and their subsidiary banks currently are well capitalized and are expected to remain so after consummation of the proposal. The Board also has considered other aspects of the financial condition and resources of the two organizations, the structure of the proposed transaction, and the managerial resources of each of the entities and the combined organization. Based on these and other facts of record, the Board concludes that considerations relating to the financial and managerial resources and future prospects of Applicant, Horizon Bancorp, and their respective subsidiaries are consistent with approval of the proposal, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act. The Board has carefully considered the effect of the proposed acquisition on the convenience and needs of the community to be served in light of all the facts of record. All of Applicant's and Horizon's subsidiary banks have received "outstanding" or "satisfactory" ratings from their appropriate federal supervisors at the most recent examinations of their performance under the Community Reinvestment Act ("CRA") (12 U.S.C. § 2901 et seq.). Based on all the facts of record, including the CRA performance records of the subsidiary banks of Applicant and Horizon Bancorp, the Board concludes that convenience and needs considerations are consistent with approval of the proposal. Conclusion Based on the foregoing, and in light of all the facts of record, the Board has determined that the application should be, and hereby is, approved. Approval of the application is specifically conditioned on compliance by Applicant with all the commitments made in connection with the proposal and with the conditions stated or referred to in this order, including Applicant's divestiture commitments. For purposes of this transaction, the commitments and conditions referred to in this order shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law. The acquisition shall not be consummated before the fifteenth calendar day after the effective date of this order, and the proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Richmond, acting pursuant to delegated authority.

By order of the Board of Governors,11 effective November 30, 1998. (signed) Robert deV. Frierson Robert deV. Frierson Associate Secretary of the Board

Appendix A The Beckley, West Virginia, banking market is defined as the Beckley Ranally Metro Area ("RMA") and includes the town of Whitesville in Boone County, the remainder of Raleigh County, Summers County, and the portion of Fayette County that excludes the towns of Montgomery and Smithers. The Charleston, West Virginia, banking market is defined as the Charleston, West Virginia, RMA and includes the remainders of Kanawha and Putman Counties, and the towns of Montgomery and Smithers in Fayette County. The Greenbrier, West Virginia, banking market is defined as Greenbrier County, West Virginia. The Huntington banking market is defined as Huntington, West Virginia-Kentucky-Ohio RMA and the remainder of Boyd County, Kentucky; Lawrence County, Ohio; and Cabell and Wayne Counties, West Virginia. Appendix B In the Charleston, West Virginia, banking market applicant would control 13.8 percent of market deposits and would remain the second largest depository institution in the market after consummation of the proposal. The HHI would increase by 34 points to 1841. In the Huntington, West Virginia, banking market applicant would control 9.3 percent of the market deposits and would become the second largest depository institution in the market after consummation of the proposal. The HHI would increase by 25 points to 636.

Footnotes 1 State and market data are as of June 30, 1997, and are updated for merger activity as of October 23, 1998. 2 12 U.S.C. § 1842(c). 3 The banking markets are described in Appendix A. 4 Market share data are based on calculations that include the deposits of thrift institutions at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See, e.g., Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian Inc., 77 Federal Reserve Bulletin 52 (1991). 5 Under DOJ Guidelines, 49 Federal Register 26,823 (1984), a market in which the post-merger HHI is more than 1800 is considered highly concentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Justice Department has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other nondepository financial institutions. 6 Market data for these banking markets after consummation of the proposal are described in Appendix B. 7 With respect to each divestiture, Applicant has committed to execute a sales agreement for the proposed divestiture with a new market entrant prior to consummation of the proposal, and to complete the divestiture within 180 days of consummation. Applicant also has committed that, in the event it is unsuccessful in completing the divestiture within 180 days of consummation, it will transfer the unsold branch to an independent trustee that is acceptable to the Board and will instruct the trustee to sell the branch promptly to one or more alternative purchasers acceptable to the Board. See BankAmerica Corporation, 78 Federal Reserve Bulletin 338 (1992); United New Mexico Financial Corporation, 77 Federal Reserve Bulletin 484 (1991). In the Beckley banking market, Applicant has committed that the purchaser of the divested branch of a one-branch bank would be given the option of retaining the name of that bank. 8 See, e.g., First Union Corporation, 84 Federal Reserve Bulletin 489 (1998); NationsBank Corporation, 84 Federal Reserve Bulletin 129 (1998). 9 Beckley is not a Metropolitan Statistical Area ("MSA"). Accordingly, the market characteristics of the Beckley banking market were compared with other non-MSA counties in West Virginia. 10 A commenter has asserted that First National Bank in Marlinton ("Bank") is the subject of several lawsuits as a result of its business relationships with local public agencies. There have been no adjudications of wrongdoing by Bank in these proceedings, and each matter is before a forum that can provide adequate remedies if the allegations of wrongdoing can be sustained. Commenter also alleges, without providing any supporting information, that Bank is under investigation for the misuse of federal and state grants. In reviewing this case, the Board has contacted and considered the views of federal banking agencies and the Department of Justice. 11 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Meyer, Ferguson and Gramlich.

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1998 Orders on banking applications