8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):January 26, 2006

Summit Financial Group, Inc.

(Exact name of registrant as specified in its charter)

West Virginia	0-16587	55-0672148
(State or Other Jurisdiction)	(Commission File Number)	(I.R.S. Employer Identification)

300 North Main Street

      Moorefield, WV 26836

(Address of principal executive offices) (Zip Code)

(304) 530-1000

Registrant's telephone number, including area code

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 - Financial Information

Item 2.02. Results of Operations and Financial Condition.

On January 26, 2006, Summit Financial Group, Inc. (“Summit”) issued a News Release announcing its earnings for the fourth quarter and for the year 2005. This News Release is furnished as Exhibit 99 and is incorporated herein by reference.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(c)   Exhibits

99News Release issued on January 26, 2006

SIGNATURE

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

                  SUMMIT FINANCIAL GROUP, INC.

Date: January 27, 2006	By: /s/ Julie R. Cook
	Julie R. Cook
	Vice President and
	Chief Accounting Officer

EX-99

Exhibit 99

  

FOR RELEASE 6:00 AM EST, THURSDAY, JANUARY 26, 2006

Contact:	Robert S. Tissue, Senior VP & CFO
Telephone:	(304) 530-0552
Email:	rtissue@SummitFGI.com

SUMMIT FINANCIAL GROUP REPORTS RECORD EARNINGS FOR 18^TH CONSECUTIVE YEAR

MOOREFIELD, WV -- January 26, 2006 -- Summit Financial Group, Inc. (NASDAQ: SMMF) today reported 2005 net income of $11.2 million, an increase of 6.0 percent from the $10.6 million reported for the prior year. Diluted earnings per share were $1.56 compared with $1.49 for 2004, an increase of 4.7 percent. As previously disclosed, included in earnings for the current period was a fourth quarter 2005 other-than-temporary non-cash impairment charge of $1.5 million pre-tax, equivalent to $940,000 after-tax, or $0.13 per diluted share. This impairment charge relates to $5.7 million of certain preferred stock issuances of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation which Summit continues to own, and was taken primarily due to difficulty in accurately projecting the future recovery period of these securities. Excluding this impairment charge, 2005 earnings were $12.2 million, up 14.8 percent, and $1.69 per share, up 13.4 percent, compared with the prior year. Results reflect strong revenue growth, both from community banking and mortgage banking activities, and controlled expense growth.

For 2005, the returns on average shareholders' equity and average assets were 15.87 percent and 1.16 percent, respectively, compared with 2004 ratios of 17.21 percent and 1.26 percent. Excluding the impairment charge, returns on average shareholders’ equity and average assets for 2005 were 17.20percent and 1.26percent, respectively.

For the fourth quarter of 2005, Summit reported net income of $2.44 million, an increase of 3.6 percent from the $2.36 million reported for the fourth quarter of 2004. Diluted earnings per share were $0.34 compared with $0.33 for the prior-year period, up 3.0 percent. Excluding the impairment charge, fourth quarter 2005 earnings were $3.4 million, up 43.5 percent over the 2004 period, and diluted earnings per share were $0.47, up 42.4 percent. Quarterly performance mirrors that of the entire year; revenue from community banking activities remains strong, as does mortgage banking, albeit on a seasonally-adjusted basis.

For the fourth quarter of 2005, the returns on average shareholders' equity and average assets were 13.15 percent and 0.92 percent, respectively, compared with prior-year period ratios of 14.33 percent and 1.07 percent. Returns on average shareholders’ equity and average assets for the fourth quarter of 2005 excluding the impairment charge were 18.21 percent and 1.27 percent, respectively.

H. Charles Maddy, III, President and Chief Executive Officer, commented, “We are very pleased to report our 18^th consecutive year of earnings growth. The trends we reported earlier in the year continued throughout 2005. Both segments produced strong revenue growth, supported by well-controlled expenses, and in the case of our community banking segment, continued excellent asset quality. Our recent investments in people and infrastructure were well-timed; as a result of having the right people in the right places, we experienced exceptional loan growth - 31.6 percent for the year, and in the second half of 2005, 40.4 percent annualized. We continue to see ample lending opportunities, particularly in northern Virginia, where the demographics are among the best in the country. I am pleased to report that Summit Financial and our subsidiary banks are winning more than their share of this growth.”

Mr. Maddy continued, “Mortgage origination volumes for the fourth quarter of 2005 surpassed our expectations. The fourth and first quarters are typically slower for our mortgage banking business. However, we saw strong year over year fourth quarter growth as well as a 20.6 percent increase in mortgage volumes for the year. Volume gains more than offset a slightly less profitable mix, while expense growth was well-controlled.”

“To sum up our year, it was strong, with positive trends that appear to continue into 2006. We plan to take advantage of market opportunities,” Mr. Maddy concluded.

2005 CONSOLIDATED RESULTS

Total revenue for the year 2005, consisting of net interest income plus non-interest income, was $59.7 million, an increase of 8.5 percent over 2004; excluding the impairment charge, total revenue increased 11.2 percent to $61.1 million. Net interest income increased 10.9 percent above the prior year, to $30.8 million, reflecting 15.1 percent growth in average earning assets, partially offset by a 15 basis point decline in the net interest margin to 3.51 percent. Mr. Maddy noted that funding costs negatively impacted the net interest margin, as exceptionally strong loan growth surpassed growth in core deposits, requiring continued reliance on higher cost time and brokered deposits. Non-interest income, excluding the impairment charge, was $30.4 million, an increase of 11.5 percent over the prior year. Mortgage origination revenue from Summit Mortgage, the Company's mortgage banking unit, increased 9.5 percent in 2005, while bank service fees and other income grew 24.4 percent during the same period.

For the fourth quarter of 2005, revenue was $13.8 million compared with $13.7 million for the prior-year fourth quarter, an increase of 0.8 percent; excluding the impairment charge, fourth quarter 2005 revenue was $15.3 million, an increase of 11.8 percent. Net interest income increased 12.6 percent, reflecting 20.7 percent growth in average earning assets, partially offset by a 30 basis point decline in the net interest margin to 3.39 percent. Non-interest income for the fourth quarter of 2005, excluding the impairment charge, was $7.0 million compared with $6.3 million in the prior-year period, an increase of 10.9 percent.

Non-interest expense for the fiscal year 2005 was $42.2 million, an 8.9 percent increase over the $38.8 million reported for the prior year. Salaries and employee benefits represented the largest category of expense growth, accounting for approximately two-thirds of the $3.4 million increase; salaries grew $2.2 million, or 12.3 percent. The efficiency ratio improved to 66.93 percent for 2005, from 68.33 percent for the prior fiscal year.

For the fourth quarter of 2005, non-interest expense was $10.4 million compared with $10.0 million for the year-ago fourth quarter, a 4.2 percent increase. The efficiency ratio improved to 65.50 percent for the current quarter from 70.50 percent for the prior-year period.

Asset quality remains strong.  Net charge-offs were $401,000for 2005, equivalent to 0.06 percent of average loans. Nonperforming assets were $1.8 million, or 0.16 percent of assets at December 31, 2005, compared with $1.9 million or 0.18 percent of assets at September, 30, 2005, and $1.7 million, or 0.19 percent of assets, at December 31, 2004. At period-end, the allowance for losses was 0.75 percent of loans.

Assets at December 31, 2005 were $1.1 billion, an increase of 24.7 percent over the last twelve months. The increase was driven by portfolio loan growth of $192.1 million, up 31.6 percent, to $799.9 million. Commercial real estate loans, up $157.2 million or 56.2 percent, were the largest contributors to this growth, and now constitute 54.5 percent of the loan portfolio. Since June 30, 2005, loans increased $134.4 million or 20.2 percent (40.4 percent annualized). Mr. Maddy noted that loan growth for the second half of 2005 benefited from the three lenders hired over the past 18 months who had become more seasoned with the Company and its markets.

Deposits at December 31, 2005 were $673.9 million, an increase of $149.3 million, or 28.5 percent from twelve months ago. Since June 30, 2005, deposits increased $108.7 million, or 19.2 percent (38.5 percent annualized). More importantly, core deposits (checking and savings accounts) increased 35.0 percent year-over-year, and 20.2 percent since the June 30, 2005 (40.4 percent annualized). Mr. Maddy added, “Deposit gathering has become a “core” priority at our community banks. We have developed a competitive suite of products, and our retail bankers’ compensation will soon be more closely tied to established goals for core deposit growth.”

Shareholders' equity at period end was $73.8 million, an increase of 12.3 percent over the last twelve months. To support its continued balance sheet growth, Summit issued an additional $8.0 million in variable-rate trust preferred securities in December 2005. Common shares outstanding totaled 7,126,220 at December 31, 2005.

OPERATING SEGMENT RESULTS

Community Banking Financial Performance

Net income excluding the impairment charge increased 10.9 percent to $10.7 million. Total revenue excluding the impairment charge increased 12.9 percent to $34.4 million, while non-interest expense increased 13.7 percent to $17.6 million. The Community Banking segment's efficiency ratio was 52.85 percent for 2005 compared to 52.13 percent for the prior year.

Net income for the fourth quarter of 2005 excluding the impairment charge was $3.0 million compared with $2.5 million for the fourth quarter of 2004, an increase of 24.1 percent. Total revenue excluding the impairment charge totaled $9.1 million, an increase of 12.9 percent over the $8.1 million produced in the prior-year period. Non-interest expense increased 9.1 percent to $4.6 million. The Community Banking segment’s efficiency ratio for the fourth quarter of 2005 improved markedly to 50.73 percent from 52.70 percent in the fourth quarter of 2004.

Mortgage Banking Financial Performance

Net income for 2005 was $2.4 million, an increase of 32.4 percent over the prior fiscal year. Revenue generated from loan sales totaled $26.4 million, up 9.5 percent from $24.1 million in the prior year. Revenue growth reflects a larger volume of loan sales in 2005, up 23.0 percent from 2004 to $309.2 million, partially offset by a less profitable loan mix.

Non-interest expense was well-controlled for the year, up 5.3 percent, despite growth in loan originations of 20.6 percent to $314.7 million in 2005. This category represents expenses incurred primarily from salaries, bonuses and other activities associated with loan originations. Expenses incurred per loan originated declined 8.8 percent per loan for 2005 due to greater economies of scale resulting from higher origination volumes and improved operational efficiencies within the organization.

For the fourth quarter of 2005, net income was $490 thousand compared with $118 thousand for the fourth quarter of 2004, an increase of 315.3 percent. Revenue was $6.1 million, up 12.4 percent from the $5.4 million reported in the prior-year period, reflecting a 19.1 percent increase in loan sales to $73.9 million, partially offset by a less profitable mix.

Loan originations in the fourth quarter of 2005 were $78.3 million, a seasonal decline of 6.6 percent from the linked quarter but 18.7 percent ahead of the prior-year fourth quarter. Non-interest expense primarily associated with loan originations totaled $5.6 million, a 2.6 percent increase over the $5.4 million incurred in the prior-year period, however expenses per loan originated declined 16.0 percent in fourth quarter 2005 compared to fourth quarter 2004.

ABOUT THE COMPANY

Summit Financial Group, Inc., a financial holding company with total assets of $1.1 billion, operates fourteen banking locations through its two wholly-owned community banks: Summit Community Bank, headquartered in Moorefield, West Virginia; and Shenandoah Valley National Bank in Winchester, Virginia. Summit also operates Summit Mortgage, a residential mortgage loan originator in Chesapeake, Virginia and Summit Insurance Services, LLC in Moorefield, West Virginia.

NON-GAAP FINANCIAL MEASURES

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Specifically, Summit adjusted several GAAP performance measures to exclude the effects of the non-cash, other-than-temporary impairment charge on securities it recorded in the 4^th quarter of 2005. Management deems this charge to be unusual in nature and believes presentations of financial measures excluding the impact of this item provide useful supplemental information that is important for a proper understanding of the operating results of Summit's core business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements as defined by federal securities laws. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results could differ materially from current projections. Please refer to Summit's filings with the Securities and Exchange Commission for a summary of important factors that could affect Summit's forward-looking statements. Summit undertakes no obligation to revise these statements following the date of this press release.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q4 2005 vs Q4 2004
	For the Quarter Ended						Percent
Dollars in thousands, except per share amounts	12/31/2005			12/31/2004			Change
Condensed Statements of Income
Interest income
Loans, including fees	$	14,260		$	9,814			45.3	%
Securities		2,368			2,294			3.2	%
Other		30			30			0.0	%
Total interest income		16,658			12,138			37.2	%
Interest expense
Deposits		4,450			2,456			81.2	%
Borrowings		3,971			2,366			67.8	%
Total interest expense		8,421			4,822			74.6	%
Net interest income		8,237			7,316			12.6	%
Provision for loan losses		300			292			2.7	%
Net interest income after provision
for loan losses		7,937			7,024			13.0	%
Noninterest income
Service fee income		680			592			14.9	%
Mortgage origination revenue		6,098			5,423			12.4	%
Securities gains (losses)		(1,434	)		32			n/m
Other income		182			287			-36.6	%
Total noninterest income		5,526			6,334			-12.8	%
Noninterest expense
Salaries and employee benefits		4,944			4,607			7.3	%
Net occupancy expense		510			404			26.2	%
Equipment expense		470			473			-0.6	%
Postage expense		1,387			1,361			1.9	%
Advertising		1,168			1,231			-5.1	%
Other expenses		1,960			1,939			1.1	%
Total noninterest expense		10,439			10,015			4.2	%
Income before income taxes		3,024			3,343			-9.5	%
Income taxes		582			986			-41.0	%
Net income	$	2,442		$	2,357			3.6	%
Per Share Data
Basic earnings	$	0.34		$	0.34			0.0	%
Diluted earnings	$	0.34		$	0.33			3.0	%
Average shares outstanding
Basic		7,125,994			7,032,512			1.3	%
Diluted		7,198,068			7,149,981			0.7	%
Performance Ratios
Return on average equity		13.15	%		14.33	%		-8.2	%
Return on average assets		0.92	%		1.07	%		-14.0	%
Net yield on earning assets - taxable equivalent		3.39	%		3.69	%		-8.1	%
Efficiency ratio consolidated(A)		65.50	%		70.50	%		-7.1	%
Efficiency ratio excluding mortgage banking (A)		50.73	%		52.70	%		-3.7	%

        NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary -- 2005 vs 2004
	For the Year Ended						Percent
Dollars in thousands, except per share amounts	12/31/2005			12/31/2004			Change
Condensed Statements of Income
Interest income
Loans, including fees	$	48,002		$	36,207			32.6	%
Securities		9,201			9,403			-2.1	%
Other		108			127			-15.0	%
Total interest income		57,311			45,737			25.3	%
Interest expense
Deposits		13,402			9,710			38.0	%
Borrowings		13,104			8,250			58.8	%
Total interest expense		26,506			17,960			47.6	%
Net interest income		30,805			27,777			10.9	%
Provision for loan losses		1,479			1,050			40.9	%
Net interest income after provision
for loan losses		29,326			26,727			9.7	%
Noninterest income
Service fee income		2,589			2,238			15.7	%
Mortgage origination revenue		26,371			24,089			9.5	%
Securities gains (losses)		(1,390	)		33			n/m
Other income		1,304			892			46.2	%
Total noninterest income		28,874			27,252			6.0	%
Noninterest expense
Salaries and employee benefits		20,315			18,087			12.3	%
Net occupancy expense		1,881			1,503			25.1	%
Equipment expense		1,911			1,776			7.6	%
Postage expense		5,863			5,851			0.2	%
Advertising		4,878			4,725			3.2	%
Other expenses		7,398			6,847			8.0	%
Total noninterest expense		42,246			38,789			8.9	%
Income before income taxes		15,954			15,190			5.0	%
Income taxes		4,712			4,582			2.8	%
Net income	$	11,242		$	10,608			6.0	%
Per Share Data
Basic earnings	$	1.58		$	1.51			4.6	%
Diluted earnings	$	1.56		$	1.49			4.7	%
Average shares outstanding
Basic		7,093,402			7,025,118			1.0	%
Diluted		7,206,838			7,121,761			1.2	%
Performance Ratios
Return on average equity		15.87	%		17.21	%		-7.8	%
Return on average assets		1.16	%		1.26	%		-7.9	%
Net yield on earning assets - taxable equivalent		3.51	%		3.66	%		-4.1	%
Efficiency ratio consolidated(A)		66.93	%		68.33	%		-2.0	%
Efficiency ratio excluding mortgage banking (A)		52.85	%		52.13	%		1.4	%

            NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
	For the Quarter Ended
Dollars in thousands, except per share amounts	12/31/2005			9/30/2005			6/30/2005			3/31/2005			12/31/2004
Condensed Statements of Income
Interest income
Loans, including fees	$	14,260		$	12,527		$	11,205		$	10,010		$	9,814
Securities		2,368			2,283			2,291			2,258			2,294
Other		30			27			28			25			30
Total interest income		16,658			14,837			13,524			12,293			12,138
Interest expense
Deposits		4,450			3,509			2,926			2,516			2,456
Borrowings		3,971			3,518			2,994			2,622			2,366
Total interest expense		8,421			7,027			5,920			5,138			4,822
Net interest income		8,237			7,810			7,604			7,155			7,316
Provision for loan losses		300			424			425			330			292
Net interest income after provision
for loan losses		7,937			7,386			7,179			6,825			7,024
Noninterest income
Service fee income		680			711			651			547			592
Mortgage origination revenue		6,098			7,304			7,113			5,856			5,423
Securities gains (losses)		(1,434	)		39			5			-			32
Other income		182			411			446			264			287
Total noninterest income		5,526			8,465			8,215			6,667			6,334
Noninterest expense
Salaries and employee benefits		4,944			5,435			5,394			4,542			4,607
Net occupancy expense		510			479			463			429			404
Equipment expense		470			465			483			493			473
Postage expense		1,387			1,451			1,458			1,567			1,361
Advertising		1,168			1,164			1,222			1,325			1,231
Other expenses		1,960			1,884			1,855			1,699			1,939
Total noninterest expense		10,439			10,878			10,875			10,055			10,015
Income before income taxes		3,024			4,973			4,519			3,437			3,343
Income taxes		582			1,700			1,403			1,026			986
Net income	$	2,442		$	3,273		$	3,116		$	2,411		$	2,357
Per Share Data
Basic earnings	$	0.34		$	0.46		$	0.44		$	0.34		$	0.34
Diluted earnings	$	0.34		$	0.45		$	0.43		$	0.34		$	0.33
Average shares outstanding
Basic		7,125,994			7,125,483			7,081,044			7,039,783			7,032,512
Diluted		7,198,068			7,211,331			7,205,377			7,171,099			7,149,981
Performance Ratios
Return on average equity		13.15	%		18.24	%		18.21	%		14.53	%		14.33	%
Return on average assets		0.92	%		1.33	%		1.34	%		1.08	%		1.07	%
Net yield on earning assets - taxable equivalent		3.39	%		3.47	%		3.61	%		3.59	%		3.69	%
Efficiency ratio consolidated (A)		65.50	%		65.40	%		66.98	%		70.26	%		70.50	%
Efficiency ratio excluding mortgage banking (A)		50.73	%		53.75	%		54.15	%		52.90	%		52.70	%

NOTE: (A) - Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles.

            SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF

Segment Information
For the Quarter Ended December 31, 2005
	Community			Mortgage			Parent
Dollars in thousands	Banking			Banking			and Other			Eliminations			Total
Condensed Statements of Income
Interest income	$	16,479		$	473		$	8		$	(302	)	$	16,658
Interest expense		8,130			301			292			(302	)		8,421
Net interest income		8,349			172			(284	)		-			8,237
Provision for loan losses		260			40			-			-			300
Net interest income after provision
for loan losses		8,089			132			(284	)		-			7,937
Noninterest income		(744	)		6,098			1,465			(1,293	)		5,526
Noninterest expense		4,637			5,586			1,509			(1,293	)		10,439
Income before income taxes		2,708			644			(328	)		-			3,024
Income taxes		605			154			(177	)		-			582
Net income	$	2,103		$	490		$	(151	)	$	-		$	2,442
Intersegment revenue (expense)	$	(923	)	$	(361	)	$	1,284		$	-		$	-
Average assets	$	1,050,961		$	23,028		$	91,169		$	(103,002	)	$	1,062,156

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Segment Information
For the Quarter Ended December 31, 2004
	Community			Mortgage			Parent
Dollars in thousands	Banking			Banking			and Other			Eliminations			Total
Condensed Statements of Income
Interest income	$	11,935		$	419		$	5		$	(221	)	$	12,138
Interest expense		4,670			220			153			(221	)		4,822
Net interest income		7,265			199			(148	)		-			7,316
Provision for loan losses		292			-			-			-			292
Net interest income after provision
for loan losses		6,973			199			(148	)		-			7,024
Noninterest income		798			5,423			1,183			(1,070	)		6,334
Noninterest expense		4,251			5,445			1,389			(1,070	)		10,015
Income before income taxes		3,520			177			(354	)		-			3,343
Income taxes		1,067			59			(140	)		-			986
Net income	$	2,453		$	118		$	(214	)	$	-		$	2,357
Intersegment revenue (expense)	$	(798	)	$	(265	)	$	1,063		$	-		$	-
Average assets	$	867,934		$	20,639		$	78,885		$	(88,743	)	$	878,715

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Segment Information
For the Year Ended December 31, 2005
	Community			Mortgage			Parent
Dollars in thousands	Banking			Banking			and Other			Eliminations			Total
Condensed Statements of Income
Interest income	$	56,630		$	1,776		$	27		$	(1,122	)	$	57,311
Interest expense		25,630			1,118			880			(1,122	)		26,506
Net interest income		31,000			658			(853	)		-			30,805
Provision for loan losses		1,295			184			-			-			1,479
Net interest income after provision
for loan losses		29,705			474			(853	)		-			29,326
Noninterest income		1,861			26,371			5,507			(4,865	)		28,874
Noninterest expense		17,643			23,208			6,260			(4,865	)		42,246
Income before income taxes		13,923			3,637			(1,606	)		-			15,954
Income taxes		4,133			1,262			(683	)		-			4,712
Net income	$	9,790		$	2,375		$	(923	)	$	-		$	11,242
Intersegment revenue (expense)	$	(3,491	)	$	(1,342	)	$	4,833		$	-		$	-
Average assets	$	958,210		$	22,613		$	84,433		$	(96,288	)	$	968,968

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Segment Information
For the Year Ended December 31, 2004
	Community			Mortgage			Parent
Dollars in thousands	Banking			Banking			and Other			Eliminations			Total
Condensed Statements of Income
Interest income	$	45,031		$	1,348		$	16		$	(658	)	$	45,737
Interest expense		17,460			652			506			(658	)		17,960
Net interest income		27,571			696			(490	)		-			27,777
Provision for loan losses		1,050			-			-			-			1,050
Net interest income after provision
for loan losses		26,521			696			(490	)		-			26,727
Noninterest income		2,863			24,087			4,215			(3,913	)		27,252
Noninterest expense		15,523			22,045			5,134			(3,913	)		38,789
Income before income taxes		13,861			2,738			(1,409	)		-			15,190
Income taxes		4,189			944			(551	)		-			4,582
Net income	$	9,672		$	1,794		$	(858	)	$	-		$	10,608
Intersegment revenue (expense)	$	(3,063	)	$	(827	)	$	3,890		$	-		$	-
Average assets	$	817,414		$	16,701		$	74,101		$	(67,333	)	$	840,883

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data
Dollars in thousands, except per share amounts	12/31/2005		9/30/2005		6/30/2005		3/31/2005		12/31/2004
Assets	$	1,109,532	$	1,029,103	$	946,487	$	907,264	$	889,489
Securities		223,772		215,757		209,561		209,223		211,362
Loans held for sale		16,585		12,695		16,994		15,766		14,274
Loans, net		793,767		729,431		659,792		623,863		602,728
Intangible assets		3,348		3,385		3,423		3,461		3,499
Deposits		673,901		628,919		565,167		537,412		524,614
Short-term borrowings		182,028		139,681		127,974		129,697		120,629
Long-term borrowings and
subordinated debentures		170,501		179,383		176,796		165,384		172,201
Shareholders' equity		73,803		72,429		69,838		66,400		65,708
Book value per share	$	10.36	$	10.16	$	9.80	$	9.43	$	9.33

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Portfolio Loan Composition
Dollars in thousands	12/31/2005		9/30/2005		6/30/2005		3/31/2005		12/31/2004
Commercial	$	63,206	$	60,723	$	59,067	$	56,394	$	53,226
Commercial real estate		436,803		376,506		328,071		296,911		279,631
Residential construction		4,343		4,125		3,815		3,806		3,916
Residential mortgage		251,886		249,383		229,769		226,866		223,689
Consumer		36,863		37,431		36,993		37,066		38,948
Other		8,598		8,824		9,233		9,458		9,605
Total loans		801,699		736,992		666,948		630,501		609,015
Less unearned fees and interest		1,780		1,640		1,459		1,322		1,214
Total loans net of unearned fees and interest		799,919		735,352		665,489		629,179		607,801
Less allowance for loan losses		6,152		5,921		5,697		5,316		5,073
Loans, net	$	793,767	$	729,431	$	659,792	$	623,863	$	602,728

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition
Dollars in thousands	12/31/2005		9/30/2005		6/30/2005		3/31/2005		12/31/2004
Non interest bearing checking	$	62,631	$	69,346	$	63,207	$	57,008	$	55,402
Interest bearing checking		200,638		169,893		145,626		134,500		122,355
Savings		44,681		45,868		47,407		50,647		50,428
Retail time deposits		237,154		236,396		231,645		240,541		243,161
Brokered time deposits		128,797		107,416		77,282		54,716		53,268
Total deposits	$	673,901	$	628,919	$	565,167	$	537,412	$	524,614

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Mortgage Banking Segment Loan Activity
	For the Quarter Ended
Dollars in thousands	12/31/2005		9/30/2005		6/30/2005		3/31/2005		12/31/2004
Loans originated
Amount	$	78,297	$	83,860	$	83,616	$	68,929	$	65,983
Number		1,443		1,567		1,578		1,308		1,182
Loans sold
Amount	$	73,903	$	87,071	$	81,422	$	66,761	$	62,043
Number		1,376		1,566		1,549		1,295		1,148

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information
	For the Quarter Ended
Dollars in thousands	12/31/2005			9/30/2005			6/30/2005			3/31/2005			12/31/2004
Net loan charge-off's	$	70		$	200		$	44		$	87		$	357
Net loan charge-off's to average loans (annualized)		0.04	%		0.11	%		0.03	%		0.05	%		0.25	%
Allowance for loan losses	$	6,152		$	5,921		$	5,697		$	5,316		$	5,073
Allowance for loan losses as a percentage
of period end loans		0.75	%		0.79	%		0.83	%		0.82	%		0.82	%
Nonperforming assets:
Nonperforming loans	$	1,382		$	1,017		$	911		$	836		$	672
Foreclosed properties and
repossessed assets		395			862			949			608			646
Nonaccrual securities		-			-			326			334			349
Total	$	1,777		$	1,879		$	2,186		$	1,778		$	1,667
Nonperforming loans to period end loans		0.17	%		0.14	%		0.13	%		0.13	%		0.11	%
Nonperforming assets to period end assets		0.16	%		0.18	%		0.23	%		0.20	%		0.19	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q4 2005 vs Q4 2004
	Q4 2005								Q4 2004
	Average			Earnings /		Yield /			Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate			Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest
Taxable	$	773,394		$	14,160		7.26	%	$	605,020		$	9,701		6.41	%
Tax-exempt		8,106			150		7.34	%		9,381			173		7.38	%
Securities
Taxable		169,871			1,847		4.31	%		162,810			1,734		4.26	%
Tax-exempt		46,315			778		6.66	%		48,387			835		6.90	%
Interest bearing deposits other banks
and Federal funds sold		2,899			32		4.38	%		3,249			31		3.82	%
Total interest earning assets		1,000,585			16,967		6.73	%		828,847			12,474		6.02	%
Noninterest earning assets
Cash & due from banks		20,525								17,698
Premises & equipment		22,732								20,573
Other assets		24,389								16,806
Allowance for loan losses		(6,075	)							(5,209	)
Total assets	$	1,062,156							$	878,715
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	181,251		$	1,252		2.74	%	$	122,038		$	343		1.12	%
Savings deposits		44,917			77		0.68	%		51,508			68		0.53	%
Time deposits		352,146			3,122		3.52	%		305,411			2,045		2.68	%
Short-term borrowings		160,159			1,700		4.21	%		91,763			512		2.23	%
Long-term borrowings and
subordinated debentures		175,116			2,270		5.14	%		177,709			1,854		4.17	%
		913,589			8,421		3.66	%		748,429			4,822		2.58	%
Noninterest bearing liabilities
Demand deposits		65,378								58,921
Other liabilities		8,882								5,557
Total liabilities		987,849								812,907
Shareholders' equity		74,307								65,808
Total liabilities and
shareholders' equity	$	1,062,156							$	878,715
NET INTEREST EARNINGS				$	8,546							$	7,652
NET INTEREST YIELD ON EARNING ASSETS							3.39	%							3.69	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2005 vs YTD 2004
	For the Year Ended December 30,
	2005								2004
	Average			Earnings /		Yield /			Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate			Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest
Taxable	$	691,041		$	47,582		6.89	%	$	567,066		$	35,770		6.31	%
Tax-exempt		8,688			635		7.31	%		8,818			662		7.51	%
Securities
Taxable		164,611			7,076		4.30	%		166,882			7,193		4.31	%
Tax-exempt		47,563			3,180		6.69	%		48,356			3,303		6.83	%
Interest bearing deposits other banks
and Federal funds sold		2,779			109		3.92	%		3,489			127		3.64	%
Total interest earning assets		914,682			58,582		6.40	%		794,611			47,055		5.92	%
Noninterest earning assets
Cash & due from banks		17,583								14,367
Premises & equipment		21,234								19,998
Other assets		21,121								16,879
Allowance for loan losses		(5,652	)							(4,972	)
Total assets	$	968,968							$	840,883
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	151,271		$	3,120		2.06	%	$	120,066		$	1,183		0.99	%
Savings deposits		47,745			312		0.65	%		49,806			242		0.49	%
Time deposits		319,377			9,970		3.12	%		306,850			8,285		2.70	%
Short-term borrowings		138,694			4,824		3.48	%		70,318			1,204		1.71	%
Long-term borrowings and
subordinated debentures		172,260			8,280		4.81	%		172,580			7,046		4.08	%
		829,347			26,506		3.20	%		719,620			17,960		2.50	%
Noninterest bearing liabilities
Demand deposits		61,543								54,212
Other liabilities		7,258								5,416
Total liabilities		898,148								779,248
Shareholders' equity		70,820								61,635
Total liabilities and
shareholders' equity	$	968,968							$	840,883
NET INTEREST EARNINGS				$	32,076							$	29,095
NET INTEREST YIELD ON EARNING ASSETS							3.51	%							3.66	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
	For the Quarter Ended					For the Year Ended
Dollars in thousands	12/31/2005			12/31/2004		12/31/2005			12/31/2004
Net income - excluding other-than-
temporary impairment charge on
securities	$	3,382		$	2,357	$	12,182		$	10,608
Other-than-temporary impairment
charge on securities		(1,500	)		-		(1,500	)		-
Applicable income tax effect		560			-		560			-
		(940	)		-		(940	)		-
GAAP net income	$	2,442		$	2,357	$	11,242		$	10,608
Diluted earnings per share - excluding
other-than-temporary impairment
charge on securities	$	0.47		$	0.33	$	1.69		$	1.49
Other-than-temporary impairment
charge on securities		(0.21	)		-		(0.21	)		-
Applicable income tax effect		0.08			-		0.08			-
		(0.13	)		-		(0.13	)		-
GAAP diluted earnings per share	$	0.34		$	0.33	$	1.56		$	1.49
Total revenue - excluding other-than-
temporary impairment charge on
securities	$	15,263		$	13,650	$	61,179		$	55,029
Other-than-temporary impairment
charge on securities		(1,500	)		-		(1,500	)		-
GAAP total revenue	$	13,763		$	13,650	$	59,679		$	55,029
Non-interest income - excluding
other-than-temporary impairment
charge on securities	$	7,026		$	6,334	$	30,374		$	27,252
Other-than-temporary impairment
charge on securities		(1,500	)		-		(1,500	)		-
GAAP non-interest income	$	5,526		$	6,334	$	28,874		$	27,252

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
(continued)
	For the Quarter Ended						For the Year Ended
	12/31/2005			12/31/2004			12/31/2005			12/31/2004
Return on average equity (ROE) - excluding
other-than-temporary impairment
charge on securities		18.21	%		14.33	%		17.20	%		17.21	%
Other-than-temporary impairment
charge on securities, net		-5.06	%		0.00	%		-1.33	%		0.00	%
GAAP ROE		13.15	%		14.33	%		15.87	%		17.21	%
Return on average assets (ROA) - excluding
other-than-temporary impairment
charge on securities		1.27	%		1.07	%		1.26	%		1.26	%
Other-than-temporary impairment
charge on securities, net		-0.35	%		0.00	%		-0.10	%		0.00	%
GAAP ROA		0.92	%		1.07	%		1.16	%		1.26	%