U.S. SECURITIES AND EXCHANGE
                                   COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10 - Q

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2002

                                       or

     [ ] TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the transition period from ______  to ______.

                         Commission File Number 0-16587

                          Summit Financial Group, Inc.
             (Exact name of registrant as specified in its charter)

                   West Virginia                   55-0672148
           (State or other jurisdiction of        (IRS Employer
            incorporation or organization)        Identification No.)

                              223 North Main Street
                         Moorefield, West Virginia        26836
               (Address of principal executive offices) (Zip Code)

                                 (304) 538-7233
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the  Securities  and Exchange Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.            Yes |X| No |_|

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
Common Stock as of the latest practicable date.

                          Common Stock, $2.50 par value
               1,753,160 shares outstanding as of November 8, 2002

Summit Financial Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Table of Contents

                                                                            Page
PART  I. FINANCIAL INFORMATION

  Item 1.  Financial Statements

           Consolidated Balance Sheets
           September 30, 2002 (unaudited) and December 31, 2001................4

           Consolidated Statements of Income for
           the Three Months and Nine Months Ended
           September 30, 2002 and 2001 (unaudited).............................5

           Consolidated Statements of Shareholders' Equity
           for the Nine Months Ended
           September 30, 2002 and 2001 (unaudited).............................6

           Consolidated Statements of Cash Flows
           for the Nine months Ended
           September 30, 2002 and 2001 (unaudited)...........................7-8

           Notes to Consolidated Financial Statements (unaudited)...........9-20

  Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations.......................................21-26

  Item 3.  Quantitative and Qualitative Disclosures about Market Risk.........26

  Item 4.  Controls and Procedures............................................26

                                       2

                                                                            Page

PART  II. OTHER INFORMATION

  Item 1.  Legal Proceedings..................................................27

  Item 2.  Changes in Securities and Use of Proceeds........................None

  Item 3.  Defaults upon Senior Securities..................................None

  Item 4.  Submission of Matters to a Vote of Security Holders..............None

  Item 5.  Other Information................................................None

  Item 6.  Exhibits and Reports on Form 8-K

           Exhibits

             Exhibit 11.  Statement re: Computation of Earnings per
                          Share - Information contained in Note 3 to the
                          Consolidated Financial Statements on page 11 of
                          this Quarterly Report is incorporated herein by
                          reference.

             Exhibit 99.1 Chief Executive Officer's Certification
                          Pursuant to 18 U.S.C. Section 1350, as Adopted
                          Pursuant to Section 906 of the Sarbanes-Oxley
                          Act of 2002

             Exhibit 99.2 Chief Financial Officer's Certification
                          Pursuant to 18 U.S.C. Section 1350, as Adopted
                          Pursuant to Section 906 of the Sarbanes-Oxley
                          Act of 2002

           Reports on Form 8-K..............................................None

SIGNATURES....................................................................28

CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT 0F 2002.......29-30

                                       3

Summit Financial Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Balance Sheets

                                                       September 30,    December 31,    September 30,
                                                           2002             2001            2001
                                                        (unaudited)         (*)          (unaudited)
                                                      --------------   --------------   -------------
 ASSETS
                                                                               
Cash and due from banks                               $  11,967,810    $  11,776,231    $   8,384,827
Interest bearing deposits with other banks                2,315,399        2,261,826          116,122
Federal funds sold                                        1,384,928        1,848,129        8,382,000
Securities available for sale                           218,490,418      206,967,097      184,946,145
Securities held to maturity                                       -          150,280          150,425
Loans, net                                              408,186,019      344,415,429      320,713,286
Premises and equipment, net                              13,109,239       12,911,507       12,738,232
Accrued interest receivable                               4,210,043        3,874,002        3,972,518
Intangible assets                                         3,238,917        3,352,281        3,422,828
Other assets                                              6,479,094        4,199,975        4,054,683
                                                      -------------    -------------    -------------
                          Total assets                $ 669,381,867    $ 591,756,757    $ 546,881,066
                                                      =============    =============    =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
  Deposits
      Non interest bearing                            $  52,108,168    $  38,685,688    $  32,685,444
      Interest bearing                                  411,806,850      357,519,290      354,121,921
                                                      -------------    -------------    -------------
                       Total deposits                   463,915,018      396,204,978      386,807,365
                                                      -------------    -------------    -------------
  Short-term borrowings                                  12,165,301       24,032,790       12,988,575
  Long-term borrowings                                  137,596,604      123,444,531       98,304,452
  Other liabilities                                       4,326,049        3,787,111        4,031,276
                                                      -------------    -------------    -------------
                         Total liabilities              618,002,972      547,469,410      502,131,668
                                                      -------------    -------------    -------------

Commitments and Contingencies

Shareholders' Equity
  Common stock, $2.50 par value; authorized
      5,000,000 shares; issued 1,780,780                  4,451,950        4,451,950        4,451,950
  Capital surplus                                         8,256,901        8,256,901        8,256,901
  Retained earnings                                      35,348,274       30,803,543       29,797,041
  Less cost of shares acquired for the treasury
      2002 - 27,070 shares and 2001 - 26,470 shares        (554,403)        (532,479)        (532,479)
  Accumulated other comprehensive income                  3,876,173        1,307,432        2,775,985
                                                      -------------    -------------    -------------
                         Total shareholders' equity      51,378,895       44,287,347       44,749,398
                                                      -------------    -------------    -------------

         Total liabilities and shareholders' equity   $ 669,381,867    $ 591,756,757    $ 546,881,066
                                                      =============    =============    =============

(*) - December 31, 2001 financial  information  has been extracted from audited
      consolidated financial statements

See Notes to Consolidated Financial Statements

                                       4

Summit Financial Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Income (unaudited)

                                                                   Three Months Ended               Nine Months Ended
                                                              -----------------------------   -----------------------------
                                                              September 30,   September 30,   September 30,   September 30,
                                                                  2002            2001            2002            2001
                                                              -------------   -------------   -------------   -------------
                                                                                                  
 Interest income
     Interest and fees on loans
        Taxable                                               $ 7,323,374     $ 6,589,313     $21,075,193     $18,858,904
        Tax-exempt                                                 89,622          48,826         258,699         131,167
    Interest and dividends on securities
        Taxable                                                 2,406,690       2,675,642       7,506,835       8,251,351
        Tax-exempt                                                480,518         241,125       1,268,976         689,344
    Interest on interest bearing deposits with other banks         23,097           3,548          69,607          12,623
    Interest on Federal funds sold                                 22,156          77,415          43,832         199,296
                                                              -----------     -----------     -----------     -----------
                       Total interest income                   10,345,457       9,635,869      30,223,142      28,142,685
                                                              -----------     -----------     -----------     -----------
Interest expense
    Interest on deposits                                        2,998,480       3,698,379       8,709,988      11,512,517
    Interest on short-term borrowings                              64,782          90,627         246,042         370,910
    Interest on long-term borrowings                            1,739,512       1,326,016       5,191,621       3,735,205
                                                              -----------     -----------     -----------     -----------
                      Total interest expense                    4,802,774       5,115,022      14,147,651      15,618,632
                                                              -----------     -----------     -----------     -----------
                        Net interest income                     5,542,683       4,520,847      16,075,491      12,524,053
Provision for loan losses                                         307,500         227,500         907,500         552,500
                                                              -----------     -----------     -----------     -----------
        Net interest income after provision for loan losses     5,235,183       4,293,347      15,167,991      11,971,553
                                                              -----------     -----------     -----------     -----------
Other income
    Insurance commissions                                          61,771          26,322         136,921          67,632
    Service fees                                                  353,942         271,852         977,163         738,946
    Securities gains (losses)                                       8,651         204,405          73,728         381,672
    Other                                                         176,826          57,545         350,642         134,337
                                                              -----------     -----------     -----------     -----------
                        Total other income                        601,190         560,124       1,538,454       1,322,587
                                                              -----------     -----------     -----------     -----------
Other expense
    Salaries and employee benefits                              1,700,763       1,441,475       5,056,470       4,133,228
    Net occupancy expense                                         204,048         186,382         585,030         564,610
    Equipment expense                                             313,969         298,125         949,084         866,092
    Supplies                                                      121,040          74,534         359,475         209,748
    Amortization of intangibles                                    37,788          70,548         113,364         211,644
    Other                                                         737,099         671,148       2,316,466       2,042,531
                                                              -----------     -----------     -----------     -----------
                        Total other expense                     3,114,707       2,742,212       9,379,889       8,027,853
                                                              -----------     -----------     -----------     -----------
                    Income before income taxes                  2,721,666       2,111,259       7,326,556       5,266,287
Income tax expense                                                798,600         673,680       2,132,730       1,620,335
                            Net income                        $ 1,923,066     $ 1,437,579     $ 5,193,826     $ 3,645,952
                                                              ===========     ===========     ===========     ===========

Basic earnings per common share                               $      1.10     $      0.82     $      2.96     $      2.08
                                                              ===========     ===========     ===========     ===========
Diluted earnings per common share                             $      1.09     $      0.82     $      2.94     $      2.08
                                                              ===========     ===========     ===========     ===========

Average common shares outstanding
    Basic                                                       1,754,283       1,761,595       1,754,301       1,754,495
                                                              ===========     ===========     ===========     ===========
    Diluted                                                     1,768,110       1,761,595       1,767,729       1,754,495
                                                              ===========     ===========     ===========     ===========

Dividends per common share                                            $ -             $ -     $      0.37     $      0.35
                                                              ===========     ===========     ===========     ===========

                                       5

Summit Financial Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Shareholders' Equity (unaudited)

                                                                                                  Accumulated
                                                                                                     Other             Total
                                                                                                    Compre-            Share-
                                          Common        Capital       Retained      Treasury        hensive           holders'
                                          Stock        Surplus        Earnings       Stock          Income            Equity
                                                                                                  
 Balance, December 31, 2001             $ 4,451,950    $ 8,256,901   $ 30,803,543   $ (532,479)      $ 1,307,432    $ 44,287,347
 Nine Months Ended September 30, 2002
  Comprehensive income:
   Net income                                     -              -      5,193,826            -                 -       5,193,826
   Other comprehensive income,
    net of deferred taxes
    of $1,574,390:
   Net unrealized gain on
    securities of $2,614,452, net
    of reclassification adjustment
    for gains included in net
    income of $45,711                             -              -              -            -         2,568,741       2,568,741
              -------                                                                                               ------------
  Total comprehensive income                      -              -              -            -                 -       7,762,567
                                                                                                                    ------------
  Cash dividends declared ($.37 per share)        -              -       (649,095)           -                 -        (649,095)
  Purchase of treasury shares                     -              -              -      (21,924)                -         (21,924)
                                        -----------    -----------   ------------   -----------     ------------    ------------

 Balance, September 30, 2002            $ 4,451,950    $ 8,256,901   $ 35,348,274   $ (554,403)      $ 3,876,173    $ 51,378,895
                                        ===========    ===========   ============   ==========       ===========    ============

 Balance, December 31, 2000             $ 4,451,950    $ 8,256,901   $ 26,765,097   $ (517,725)      $   816,978    $ 39,773,201
 Nine Months Ended September 30, 2001
  Comprehensive income:
   Net income                                     -              -      3,645,952            -                 -       3,645,952
   Other comprehensive income,
    net of deferred taxes
    of $1,200,682:
   Net unrealized gain on
    securities of $2,340,679, net
    of reclassification adjustment
    for gains included in net
    income of $381,672                            -              -              -            -         1,959,007       1,959,007
              --------                                                                                              ------------
  Total comprehensive income                      -              -              -            -                 -       5,604,959
                                                                                                                    ------------
  Cash dividends declared ($.35 per share)        -              -       (614,008)           -                 -        (614,008)
  Purchase of treasury shares                     -              -              -      (14,754)                -         (14,754)
                                        -----------    -----------   ------------   ----------       -----------    ------------

 Balance, September 30, 2001            $ 4,451,950    $ 8,256,901   $ 29,797,041   $ (532,479)      $ 2,775,985    $ 44,749,398
                                        ===========    ===========   ============   ==========       ===========    ============

 See Notes to Consolidated Financial Statements

                                       6

Summit Financial Group, Inc. and Subsidiaries
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Consolidated Statements of Cash Flows (unaudited)

                                                                                        Nine Months Ended
                                                                               ----------------------------------
                                                                               September 30,         September 30,
                                                                                   2002                  2001
                                                                               ------------          ------------
                                                                                               
 Cash Flows from Operating Activities
    Net income                                                                 $  5,193,826          $  3,645,952
    Adjustments to reconcile net earnings to net cash
        provided by operating activities:
        Depreciation                                                                763,796               682,527
        Provision for loan losses                                                   907,500               552,500
        Deferred income tax (benefit) expense                                      (400,470)             (137,340)
        Securities (gains) losses                                                   (73,728)             (381,670)
        (Gain) loss on disposal of bank premises, equipment and other assets          8,275               100,159
        Amortization of securities premiums (accretion of discounts), net           216,818              (293,616)
        Amortization of intangibles and purchase accounting adjustments, net        131,244               209,593
        (Increase) decrease in accrued interest receivable                         (336,041)             (211,817)
        (Increase) decrease in other assets                                        (260,541)             (174,691)
        Increase (decrease) in other liabilities                                   (294,561)              218,773
                                                                               ------------          ------------
               Net cash provided by operating activities                          5,856,118             4,210,370
                                                                               ------------          ------------
Cash Flows from Investing Activities
    Net (increase) decrease in interest bearing deposits with other banks           (53,573)              356,878
    Proceeds from maturities and calls of securities available for sale          10,711,500            43,959,529
    Proceeds from maturities and calls of securities held to maturity               150,000               250,000
    Proceeds from sales of securities available for sale                         18,983,528            24,150,733
    Principal payments received on securities available for sale                 30,597,959            19,168,665
    Purchases of securities available for sale                                  (67,869,813)          (94,070,010)
    Net (increase) decrease in Federal funds sold                                   463,201            (6,571,000)
    Net loans made to customers                                                 (64,742,923)          (49,800,232)
    Purchases of premises and equipment                                            (991,996)           (1,298,894)
    Proceeds from disposal of assets                                                 68,900                88,278
    Purchases of life insurance contracts                                        (2,250,000)              (74,200)
                                                                               ------------          ------------
          Net cash provided by (used in) investing activities                   (74,933,217)          (63,840,253)
                                                                               ------------          ------------
Cash Flows from Financing Activities
    Net increase (decrease) in demand deposit, NOW and
        savings accounts                                                         38,193,878            18,440,513
    Net increase (decrease) in time deposits                                     29,609,219            22,294,803
    Net increase (decrease) in short-term borrowings                            (11,867,488)            3,597,762
    Proceeds from long-term borrowings                                           14,590,000            17,500,000
    Repayment of long-term borrowings                                              (585,912)             (281,477)
    Dividends paid                                                                 (649,095)             (614,008)
    Purchase of treasury shares                                                     (21,924)              (14,754)
                                                                               ------------          ------------
               Net cash provided by financing activities                         69,268,678            60,922,839
                                                                               ------------          ------------
Increase (decrease) in cash and due from banks                                      191,579             1,292,956
Cash and due from banks:
        Beginning                                                                11,776,231             7,091,871
                                                                               ------------          ------------
        Ending                                                                 $ 11,967,810          $  8,384,827
                                                                               ============          ============

                               (Continued)
 See Notes to Consolidated Financial Statements

                                       7

Summit Financial Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows - continued (unaudited)

                                                                                        Nine Months Ended
                                                                               ----------------------------------
                                                                               September 30,         September 30,
                                                                                   2002                  2001
                                                                               ------------          ------------
                                                                                               
 Supplemental Disclosures of Cash Flow Information
     Cash payments for:
         Interest                                                              $ 14,186,188          $ 15,846,167
                                                                               ============          ============
         Income taxes                                                          $  2,317,000          $  1,712,000
                                                                               ============          ============
 Supplemental Schedule of Noncash Investingand Financing Activities
     Other assets acquired in settlement of loans                              $     59,850          $    126,098
                                                                               ============          ============

 See Notes to Consolidated Financial Statements

                                       8

Summit Financial Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements (unaudited)

Note 1.  Basis of Presentation

These consolidated financial statements of Summit Financial Group, Inc. and
Subsidiaries ("Summit" or "Company") have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with instructions to Form 10-Q and Regulation
S-X. Accordingly, they do not include all the information and footnotes required
by accounting principles generally accepted in the United States of America for
annual year end financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
are of a normal recurring nature.

The presentation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that effect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ materially
from these estimates.

The results of operations for the nine months ended September 30, 2002 are not
necessarily indicative of the results to be expected for the full year. The
consolidated financial statements and notes included herein should be read in
conjunction with the Company's 2001 audited financial statements and Annual
Report on Form 10-K. Certain accounts in the consolidated financial statements
for December 31, 2001 and September 30, 2001, as previously presented, have been
reclassified to conform to current year classifications.

Note 2.  Accounting Change and New Accounting Pronouncement

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
("SFAS 142"), which addresses the accounting and reporting for acquired goodwill
and other intangible assets. Under the provisions of SFAS 142, goodwill and
certain other intangible assets with indefinite useful lives are no longer
amortized into net income over an estimated life, but rather are tested at least
annually for impairment based on specific guidance provided in the new standard.
However, SFAS 142 did not supercede Statement of Financial Accounting Standards
No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions
("SFAS 72"), and therefore, any goodwill accounted for in accordance with SFAS
72 will continue to be amortized until further guidance is issued from the FASB.
SFAS 142 also requires that intangible assets determined to have definite useful
lives be amortized over their estimated useful lives and also be subject to
impairment testing.

The provisions of SFAS 142 were adopted by Summit as required effective January
1, 2002. During the second quarter of 2002, the Company performed the required
transitional impairment test of goodwill as of January 1, 2002, and did not
record an impairment loss as a result of this test. Due to no longer having to
amortize goodwill against earnings, Summit's net income is expected to increase
by approximately $131,000, or $0.07 per diluted share in 2002.

The following presents the Company's consolidated results of operations adjusted
as though the adoption of SFAS 142 occurred as of January 1, 2001.

                                       9

                                       Three Months Ended September 30,  Nine Months Ended September 30,
                                       --------------------------------  -------------------------------
                                            2002             2001             2002            2001
                                       --------------   ---------------  --------------   --------------

Reported net income                     $   1,923,066   $   1,437,579     $   5,193,826   $   3,645,952
Add back:  goodwill amortization,
    net of applicable tax effect                    -          32,760                 -          98,280
                                        -------------   -------------     -------------   -------------
Adjusted net income                     $   1,923,066   $   1,470,339     $   5,193,826   $   3,744,232
                                        =============   =============     =============   =============

Basic earnings per share
    Reported net income                 $        1.10   $        0.82     $        2.96   $        2.08
    Add back:  goodwill amortization,
        net of applicable tax effect                -            0.02                 -            0.06
                                        -------------   -------------     -------------   -------------
    Adjusted net income                 $        1.10   $        0.84     $        2.96   $        2.14
                                        =============   =============     =============   =============

Diluted earnings per share
    Reported net income                 $        1.09   $        0.82     $        2.94   $        2.08
    Add back:  goodwill amortization,
        net of applicable tax effect                -            0.02                 -            0.06
                                        -------------   -------------     -------------   -------------
    Adjusted net income                 $        1.09   $        0.84     $        2.94   $        2.14
                                        =============   =============     =============   =============

The carrying amount of goodwill at September 30, 2002 and December 31, 2001 was
$1,488,030. Accordingly, no changes in goodwill were recorded during the nine
months ended September 30, 2002.

At September 30, 2002 and December 31, 2001, Summit had $1,750,887 and
$1,864,251, respectively, in unamortized acquired intangible assets consisting
entirely of goodwill recorded in accordance with SFAS 72. Amortization of
$113,364 was recorded for the nine months ended September 30, 2002 relative to
these intangible assets. Annual amortization is expected to be approximately
$151,000 for each of the years ending 2002 through 2006.

In October 2002, the FASB issued Statement of Financial Accounting Standards No.
147, Acquisitions of Certain Financial Institutions ("SFAS 147"). SFAS 147
removes acquisitions of financial institutions from the scope of SFAS 72 and
requires that these transactions be accounted for in accordance with FASB
Statement No. 141, Business Combinations, and SFAS 142. In addition, SFAS 147
clarifies that the acquisition of a less-than-whole financial institution (e.g.
a branch acquisition) that meets the definition of a business should be
accounted for as a business combination, otherwise the transaction should be
accounted for as an acquisition of net assets that does not result in the
recognition of goodwill. SFAS 147 also amends FASB Statement No. 144, Accounting
for Impairment or Disposal of Long-Lived Assets, to include in its scope
long-term customer-relationship intangible assets of financial institutions such
as depositor- and borrower- relationship intangible assets. SFAS 147 is
effective on and after October 1, 2002. The Company does not expect the adoption
of SFAS 147 will result in a material impact on its financial position or its
results of operations.

                                       10

Note 3.  Earnings per Share

The computations of basic and diluted earnings per share follow:

                                      Three Months Ended September 30,       Nine Months Ended September 30,
                                      -------------------------------       ------------------------------
                                         2002                2001               2002               2001
                                      ------------       ------------        ----------        ------------

Numerator:
  Net Income                          $  1,923,066       $  1,437,579        $  5,193,826      $  3,645,952
                                      ============       ============        ============      ============

Denominator:
  Denominator for basic earnings
      per share - weighted average
      common shares outstanding          1,754,283          1,761,595           1,754,301         1,754,495

  Effect of dilutive securities:
      Stock options                         13,827                  -              13,428                 -
                                      ------------       ------------        ------------      ------------

  Denominator for diluted earnings
      per share - weighted average
      common shares outstanding and
      assumed conversions                1,768,110          1,761,595           1,767,729         1,754,495
                                      ============       ============        ============      ============

Basic earnings per share              $       1.10       $       0.82        $       2.96        $     2.08
                                      ============       ============        ============      ============

Diluted earnings per share            $       1.09       $       0.82        $       2.94        $     2.08
                                      ============       ============        ============      ============

                                       11

Note 4.  Securities

The amortized cost, unrealized gains, unrealized losses and estimated fair
values of securities at September 30, 2002, December 31, 2001, and September 30,
2001 are summarized as follows:

                                                        September 30, 2002
                                     ---------------------------------------------------------
                                       Amortized            Unrealized              Estimated
                                                    ---------------------------
                                         Cost          Gains          Losses       Fair Value
                                     ------------   ------------   ------------   ------------
                                                                      
Available for Sale
  Taxable:
   U. S. Government agencies
    and corporations                 $ 36,728,531   $  1,187,948   $          -   $ 37,916,479
   Mortgage-backed securities          95,245,831      2,208,555        131,061     97,323,325
   State and political subdivisions     5,448,472        185,333              -      5,633,805
   Corporate debt securities           30,106,915      1,228,554         62,878     31,272,591
   Federal Reserve Bank stock             397,000              -              -        397,000
   Federal Home Loan Bank stock         7,368,800              -              -      7,368,800
   Other equity securities                  6,625              -              -          6,625
                                     ------------   ------------   ------------   ------------
          Total taxable               175,302,174      4,810,390        193,939    179,918,625
                                     ------------   ------------   ------------   ------------
  Tax-exempt:
   State and political subdivisions    31,977,763      1,515,256          4,678     33,488,341
   Federal Reserve Bank stock               8,400              -              -          8,400
   Other equity securities              5,066,498        152,325        143,771      5,075,052
                                     ------------   ------------   ------------   ------------
      Total tax-exempt                 37,052,661      1,667,581        148,449     38,571,793
                                     ------------   ------------   ------------   ------------
            Total                    $212,354,835   $  6,477,971   $    342,388   $218,490,418
                                     ============   ============   ============   ============

                                       12

                                                         December 31, 2001
                                      ---------------------------------------------------------
                                        Amortized            Unrealized              Estimated
                                                     ---------------------------
                                          Cost          Gains          Losses       Fair Value
                                      ------------   ------------   ------------   ------------
                                                                       
Available for Sale
 Taxable:
  U. S. Government agencies
   and corporations                   $ 36,987,640   $  1,133,062   $     37,477   $ 38,083,225
  Mortgage-backed securities           103,002,225        999,540        801,923    103,199,842
  State and political subdivisions       4,957,792         15,511         20,549      4,952,754
  Corporate debt securities             21,690,167      1,028,726         31,948     22,686,945
  Federal Reserve Bank stock               341,300              -              -        341,300
  Federal Home Loan Bank stock           6,946,800              -              -      6,946,800
  Other equity securities                  306,625              -         53,280        253,345
                                      ------------   ------------   ------------   ------------
         Total taxable                 174,232,549      3,176,839        945,177    176,464,211
                                      ------------   ------------   ------------   ------------
 Tax-exempt:
  State and political subdivisions      25,857,242        279,303        445,895     25,690,650
  Federal Reserve Bank stock                 4,100              -              -          4,100
  Other equity securities                4,823,109              -         14,973      4,808,136
                                      ------------   ------------   ------------   ------------
        Total tax-exempt                30,684,451        279,303        460,868     30,502,886
                                      ------------   ------------   ------------   ------------
              Total                   $204,917,000   $  3,456,142   $  1,406,045   $206,967,097
                                      ============   ============   ============   ============

                                                         December 31, 2001
                                      ---------------------------------------------------------
                                       Amortized             Unrealized             Estimated
                                                     ---------------------------
                                                                       
Held to Maturity                         Cost           Gains          Losses       Fair Value
 Tax-exempt:                          ------------   ------------   ------------   ------------
  State and political subdivisions    $    150,280   $      1,410   $        157   $    151,533
                                      ============   ============   ============   ============

                                       13

                                                       September 30, 2001
                                    ---------------------------------------------------------
                                      Amortized            Unrealized              Estimated
                                                   ---------------------------
                                        Cost          Gains          Losses       Fair Value
                                    ------------   ------------   ------------   ------------
                                                                     
Available for Sale
 Taxable:
  U. S. Government agencies
     and corporations               $ 46,347,609   $  1,575,298   $      5,106   $ 47,917,801
 Mortgage-backed securities           78,430,406      1,589,294         60,081     79,959,619
 State and political subdivisions      5,329,922         22,807          1,375      5,351,354
 Corporate debt securities            25,411,147      1,148,484         11,084     26,548,547
 Federal Reserve Bank stock              341,300              -              -        341,300
 Federal Home Loan Bank stock          5,377,900              -              -      5,377,900
 Other equity securities                 306,625              -         87,000        219,625
                                    ------------   ------------   ------------   ------------
       Total taxable                 161,544,909      4,335,883        164,646    165,716,146
                                    ------------   ------------   ------------   ------------
Tax-exempt:
 State and political subdivisions     14,094,706        421,195            292     14,515,609
 Federal Reserve Bank stock                4,100              -              -          4,100
 Other equity securities               4,825,068              -        114,778      4,710,290
                                    ------------   ------------   ------------   ------------
     Total tax-exempt                 18,923,874        421,195        115,070     19,229,999
                                    ------------   ------------   ------------   ------------
           Total                    $180,468,783   $  4,757,078   $    279,716   $184,946,145
                                    ============   ============   ============   ============

                                                       September 30, 2001
                                    ---------------------------------------------------------
                                      Amortized            Unrealized              Estimated
                                                   ---------------------------
                                        Cost          Gains          Losses       Fair Value
                                    ------------   ------------   ------------   ------------
                                                                     
Held to Maturity
 Tax-exempt:
  State and political subdivisions  $    150,425   $      2,350    $        157  $    152,618
                                    ============   ============    ============  ============

The maturities, amortized cost and estimated fair values of securities at
September 30, 2002, are summarized as follows:

                                                   Available for Sale
                                           ----------------------------------
                                             Amortized           Estimated
                                                Cost             Fair Value
                                           --------------      --------------

 Due in one year or less                   $   70,432,785      $   71,731,068
 Due from one to five years                    85,300,928          88,316,965
 Due from five to ten years                    15,703,193          16,490,657
 Due after ten years                           28,070,606          29,095,851
 Equity securities                             12,847,323          12,855,877
                                           --------------      --------------
                                           $  212,354,835      $  218,490,418
                                           ==============      ==============

                                       14

Note 5.  Loans

Loans are summarized as follows:
                                      September 30,  December 31,  September 30,
                                          2002           2001          2001
                                      ------------   ------------  ------------
Commerical                            $ 32,308,945   $ 26,464,421  $ 26,480,269
Commercial real estate                 165,271,845    121,576,437   106,837,585
Real estate - construction               3,885,468      2,393,754     2,700,827
Real estate - mortgage                 160,619,722    149,050,426   141,958,535
Consumer                                42,113,266     41,508,960    39,872,354
Other                                    8,715,381      7,263,448     6,415,024
                                      ------------   ------------  ------------
  Total loans                          412,914,627    348,257,446   324,264,594
Less unearned income                       809,726        731,769       697,094
                                      ------------   ------------  ------------
  Total loans net of unearned income   412,104,901    347,525,677   323,567,500
Less allowance for loan losses           3,918,882      3,110,248     2,854,214
                                      ------------   ------------  ------------
  Loans, net                          $408,186,019   $344,415,429  $320,713,286
                                      ============   ============  ============

Note 6.  Allowance for Loan Losses

An analysis of the allowance for loan losses for the nine month periods ended
September 30, 2002 and 2001, and for the year ended December 31, 2001 is as
follows:

                                       Nine Months Ended        Year Ended
                                         September 30,          December 31,
                                   -------------------------
                                      2002           2001           2001
                                   ----------     ----------     ----------

Balance, beginning of period       $3,110,248     $2,570,776     $2,570,776
Losses:
    Commercial                         35,109         38,624         38,624
    Commercial - real estate                -         52,556         69,233
    Real estate - mortgage             18,618         46,976         46,977
    Consumer                           88,982        151,438        190,804
    Other                              48,153         60,773         75,643
                                   ----------     ----------     ----------
                  Total               190,862        350,367        421,281
                                   ----------     ----------     ----------
Recoveries:
    Commercial                          4,339          1,635          2,672
    Commercial - real estate                -              -          7,500
    Real estate - mortgage             15,289            728            728
    Consumer                           57,986         65,571         98,940
    Other                              14,382         13,371         20,913
                                   ----------     ----------     ----------
                  Total                91,996         81,305        130,753
                                   ----------     ----------     ----------
Net losses                             98,866        269,062        290,528
Provision for loan losses             907,500        552,500        830,000
                                   ----------     ----------     ----------
Balance, end of period             $3,918,882     $2,854,214     $3,110,248
                                   ==========     ==========     ==========

                                       15

Note 7.  Deposits

The following is a summary of interest bearing deposits by type as of September
30, 2002 and 2001, and December 31, 2001:

                                   September 30,  December 31,   September 30,
                                       2002           2001           2001
                                   ------------   ------------   ------------
Interest bearing demand deposits   $103,773,031   $ 81,509,961   $ 80,787,458
Savings deposits                     46,274,276     43,765,947     41,767,671
Certificates of deposit             237,939,820    211,116,608    210,666,505
Individual retirement accounts       23,819,723     21,126,774     20,900,287
                                   ------------   ------------   ------------
                      Total        $411,806,850   $357,519,290   $354,121,921
                                   ============   ============   ============

The following is a summary of the maturity distribution of certificates of
deposit and Individual Retirement Accounts in denominations of $100,000 or more
as of September 30, 2002:

                                           Amount         Percent
                                        -----------       -------
Three months or less                    $11,358,696         17.2%
Three through six months                 10,606,981         16.1%
Six through twelve months                16,393,716         24.8%
Over twelve months                       27,656,004         41.9%
                                        -----------        -----
                      Total             $66,015,397        100.0%
                                        ===========        =====

A summary of the scheduled maturities for all time deposits as of September 30,
2002 is as follows:

 Three Month Period Ending December 31, 2002             $  48,025,794
 Year Ending December 31, 2003                             108,490,609
 Year Ending December 31, 2004                              71,588,156
 Year Ending December 31, 2005                              18,212,937
 Year Ending December 31, 2006                               4,613,688
 Thereafter                                                 10,828,359
                                                         -------------
                                                         $ 261,759,543
                                                         =============

                                       16

Note 8.  Borrowed Funds

Short-term borrowings: A summary of short-term borrowings is presented below:

                                                 Nine Months Ended September 30, 2002
                                               -----------------------------------------
                                               Federal Funds                    Federal
                                                 Purchased                       Home
                                                 and Other                    Loan Bank
                                                Short-term     Repurchase     Short-term
                                                 Advances      Agreements      Advances
                                               -----------    -----------    -----------
                                                                    
Balance at September 30                        $   650,000    $ 8,515,301    $ 3,000,000
Average balance outstanding for the period       1,050,176      9,315,707      5,040,910
Maximum balance outstanding at
  any month end during period                    2,370,000     10,778,052      9,344,800
Weighted average interest rate for the period        4.20%          1.72%          2.45%
Weighted average interest rate for balances
  outstanding at September 30                        4.25%          1.86%          2.44%

                                                      Year Ended December 31, 2001
                                               -----------------------------------------
                                               Federal Funds                    Federal
                                                 Purchased                       Home
                                                 and Other                    Loan Bank
                                                Short-term     Repurchase     Short-term
                                                 Advances      Agreements      Advances
                                               -----------    -----------    ------------
                                                                 
Balance at December 31                         $ 1,041,000    $ 8,213,590    $ 14,778,200
Average balance outstanding for the year         1,458,355      7,351,836       3,069,203
Maximum balance outstanding at
  any month end                                  4,298,000      9,080,068      14,778,200
Weighted average interest rate for the year          5.10%          3.30%           4.42%
Weighted average interest rate for balances
  outstanding at December 31                         4.14%          1.83%           1.99%

                                       17

                                                    Nine Months Ended September 30, 2001
                                               ---------------------------------------------
                                               Federal Funds                      Federal
                                                 Purchased                         Home
                                                 and Other                       Loan Bank
                                                Short-term      Repurchase      Short-term
                                                 Advances       Agreements       Advances
                                               -----------      -----------     -----------
                                                                       
Balance at September 30                        $ 1,000,000      $ 8,158,575     $ 3,830,000
Average balance outstanding for the year         1,252,655        7,000,111       3,017,362
Maximum balance outstanding at
  any month end                                  4,298,000        8,158,575       7,467,100
Weighted average interest rate for the year          6.09%            3.76%           5.13%
Weighted average interest rate for balances
  outstanding at September 30                        5.50%            2.77%           3.55%

Long-term borrowings: The Company's long-term borrowings of $137,596,604,
$123,444,531 and $98,304,452 at September 30, 2002, December 31, 2001 and
September 30, 2001, respectively, consisted primarily of advances from the
Federal Home Loan Bank ("FHLB").

These borrowings bear both fixed and variable rates and mature in varying
amounts through the year 2016.

The average interest rate paid on long-term borrowings for the nine month period
ended September 30, 2002 was 5.19% compared to 5.64% for the first nine months
of 2001.

A summary of the maturities of all long-term borrowings for the next five years
and thereafter is as follows:

     Year Ending
     December 31,               Amount
     ------------           -------------
         2002               $     975,525
         2003                   4,935,414
         2004                  18,901,198
         2005                   7,889,448
         2006                   7,704,212
      Thereafter               97,190,807
                            -------------
                            $ 137,596,604
                            =============

Note 9.  Subsequent Events

On October 15, 2002, at a special meeting of Summit's shareholders, an amendment
to the Company's Articles of Incorporation was approved authorizing a class of
250,000 shares of $1.00 par value preferred stock. The amendment further
authorizes the Company's Board of Directors to issue the preferred stock, and to
fix the designation, preferences, rights, dividends, and all other attributes of
such preferred stock without any further vote or action by the shareholders.

On October 25, 2002. Summit's Board of Directors declared a $0.38 per share
dividend, payable on December 16, 2002 to shareholders of record as of December
2, 2002.

                                       18

On October 29, 2002, $3.5 million of Company-obligated mandatorily redeemable
capital securities ("Capital Securities") of a subsidiary trust holding solely
junior subordinated debt securities of the Company ("Debentures") were issued by
SFG Capital Trust I ("Trust"), a Delaware business trust, of which 100% of the
common equity is owned by Summit. The Trust was formed for the purpose of
issuing the Capital Securities and investing the proceeds from the sale of such
Capital Securities in the Debentures. The Debentures are the sole asset of the
Trust. Distributions on the Capital Securities issued by the Trust are payable
quarterly at a rate per annum equal to the interest rate being earned on the
Debentures held by the Trust and are recorded as interest expense by the
Company. The Capital Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Debentures. The Company has entered into an
agreement which fully and unconditionally guarantees the Capital Securities
subject to the terms of each of the guarantees. The Debentures held by the Trust
bear interest at a variable interest rate equal to LIBOR plus 345 basis points,
adjusted quarterly. The Debentures qualify as Tier 1 capital under Federal
Reserve Board guidelines. The Debentures are first redeemable, in whole or in
part, by the Company in 2007.

Note 10.  Restrictions on Capital

Summit and its subsidiaries are subject to various regulatory capital
requirements administered by the banking regulatory agencies. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
Summit and each of its subsidiaries must meet specific capital guidelines that
involve quantitative measures of Summit's and its subsidiaries' assets,
liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. Summit and each of its subsidiaries' capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require Summit and each of its subsidiaries to maintain minimum amounts and
ratios of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of September 30, 2002, that Summit
and each of its subsidiaries met all capital adequacy requirements to which they
were subject.

The most recent notifications from the banking regulatory agencies categorized
Summit and each of its subsidiaries as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
Summit and each of its subsidiaries must maintain minimum total risk-based, Tier
I risk-based, and Tier I leverage ratios as set forth in the table below.

Summit's and its subsidiaries', Summit Community Bank's ("Summit Community", the
entity resulting from the merger of two former Summit bank subsidiaries, South
Branch Valley National Bank and Potomac Valley Bank on January 18, 2002),
Capital State Bank, Inc.'s ("Capital State") and Shenandoah Valley National
Bank's ("Shenandoah") actual capital amounts and ratios are presented in the
following table.

                                       19

 (Dollars in thousands)

                                                                                             To be Well Capitalized
                                                                      Minimum Required       under Prompt Corrective
                                                 Actual              Regulatory Capital         Action Provisions
                                          --------------------       -------------------       -------------------
                                           Amount        Ratio        Amount       Ratio        Amount       Ratio
                                          --------       -----       --------      -----       --------      -----
                                                                                            
 As of September 30, 2002
 Total Capital (to risk weighted assets)
     Summit                               $ 48,165       10.6%       $ 36,226        8.0%      $ 45,283       10.0%
     Summit Community*                      25,933       11.1%         18,727        8.0%        23,409       10.0%
     Capital State                          10,757       10.3%          8,368        8.0%        10,459       10.0%
     Shenandoah                             12,262       10.7%          9,137        8.0%        11,421       10.0%
 Tier I Capital (to risk weighted assets)
     Summit                                 44,221        9.8%         18,113        4.0%        27,170        6.0%
     Summit Community*                      23,680       10.1%          9,364        4.0%        14,045        6.0%
     Capital State                           9,887        9.5%          4,184        4.0%         6,276        6.0%
     Shenandoah                             11,441       10.0%          4,568        4.0%         6,853        6.0%
 Tier I Capital (to average assets)
     Summit                                 44,221        6.9%         19,204        3.0%        32,007        5.0%
     Summit Community*                      23,680        7.1%          9,979        3.0%        16,632        5.0%
     Capital State                           9,887        6.7%          4,418        3.0%         7,363        5.0%
     Shenandoah                             11,441        7.3%          4,683        3.0%         7,804        5.0%

 As of December 31, 2001
 Total Capital (to risk weighted assets)
     Summit                               $ 42,695       11.3%       $ 30,173        8.0%      $ 37,716       10.0%
     South Branch*                          14,014       10.4%         10,811        8.0%        13,514       10.0%
     Capital State                           9,407       10.4%          7,208        8.0%         9,011       10.0%
     Shenandoah                             10,386       13.7%          6,065        8.0%         7,581       10.0%
     Potomac*                                9,273       12.1%          6,121        8.0%         7,651       10.0%
 Tier I Capital (to risk weighted assets)
     Summit                                 39,585       10.5%         15,080        4.0%        22,620        6.0%
     South Branch*                          12,564        9.3%          5,404        4.0%         8,106        6.0%
     Capital State                           8,754        9.7%          3,602        4.0%         5,404        6.0%
     Shenandoah                              9,978       13.2%          3,033        4.0%         4,549        6.0%
     Potomac*                                8,674       11.3%          3,062        4.0%         4,593        6.0%
 Tier I Capital (to average assets)
     Summit                                 39,585        7.1%         16,797        3.0%        27,995        5.0%
     South Branch*                          12,564        7.0%          5,369        3.0%         8,949        5.0%
     Capital State                           8,754        6.7%          3,902        3.0%         6,504        5.0%
     Shenandoah                              9,978        8.1%          3,709        3.0%         6,182        5.0%
     Potomac*                                8,674        7.0%          3,739        3.0%         6,231        5.0%

*South Branch and Potomac merged to form Summit Community Bank effective January
 18, 2002.

                                       20

Summit Financial Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition
and Results of Operations

INTRODUCTION

The following discussion and analysis focuses on significant changes in the
financial condition and results of operations of Summit Financial Group, Inc.
("Company" or "Summit") and its wholly owned subsidiaries, Summit Community Bank
("Summit Community"), Capital State Bank, Inc. ("Capital State"), and Shenandoah
Valley National Bank ("Shenandoah") for the periods indicated. This discussion
and analysis should be read in conjunction with the Company's 2001 audited
financial statements and Annual Report on Form 10-K.

The Private Securities Litigation Act of 1995 indicates that the disclosure of
forward-looking information is desirable for investors and encourages such
disclosure by providing a safe harbor for forward-looking statements by
management. The following management's discussion and analysis of financial
condition and results of operations contains certain forward-looking statements
that involve risk and uncertainty. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause Summit's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in those forward-looking statements.

RESULTS OF OPERATIONS

Earnings Summary

Summit reported net income of $1,923,000, or $1.09 per diluted share for the
third quarter of 2002, as compared to $1,438,000, or $.82 per diluted share for
the third quarter of 2001. Net income for the nine months ended September 30,
2002 grew 42.5% to $5,194,000, or $2.94 per diluted share as compared to
$3,646,000, or $2.08 per diluted share for the nine months ended September 30,
2001. Returns on average equity and assets for the first nine months of 2002
were 14.94% and 1.13%, respectively, compared with 11.65% and 0.95% for the same
period of 2001. Improved financial performance for the first nine months of 2002
resulted primarily from growth in net interest income.

Net Interest Income

The Company's net interest income on a fully tax-equivalent basis totaled
$16,831,000 for the nine month period ended September 30, 2002 compared to
$12,905,000 for the same period of 2001, representing an increase of $3,926,000
or 30.42%. This increase resulted from growth in interest earning assets.
Average interest earning assets grew 21.3% from $478,856,000 during the first
nine months of 2001 to $581,042,000 for the first nine months of 2002.

Summit's net yield on interest earning assets increased to 3.9%, for the nine
month period ended September 30, 2002 compared to 3.6% for the same period of
2001. Consistent with industry trends, the Company's net interest margin has
been narrowing as competition from nontraditional financial service providers
and shifting customer preferences have made it difficult to attract core
deposits, the most significant and lowest cost funding source of commercial
banks.

Growth in the Company's net interest income is expected to continue due to
anticipated growth in volumes of interest earning assets, principally loans,
over the near term. However, if market interest rates were to rise significantly
over the next 12 months, the spread between interest earning assets and interest
bearing liabilities could begin to narrow due to Summit's current liability
sensitive position, thus negatively impacting net interest income. Management
continually monitors the net interest margin through net interest income
simulation to minimize the potential for any significant negative impact. See
the "Market Risk Management" section for further discussion of the impact
changes in market interest rates could have on Summit. Further analysis of the
Company's yields on interest earning assets and interest bearing liabilities are
presented in Tables I and II below.

                                       21

Table I - Average Balance Sheet and Net Interest Income Analysis
(Dollars in thousands)

                                                              For the Nine Months Ended September 30,
                                          ---------------------------------------------------------------------------
                                                         2002                                   2001
                                          ----------------------------------     ------------------------------------
                                           Average      Earnings/     Yield/      Average      Earnings/       Yield/
                                           Balance       Expense       Rate       Balance       Expense         Rate
                                          ---------      --------      -----     ---------      --------        -----
                                                                                               
Interest earning assets
    Loans, net of unearned income
        Taxable                           $ 366,361     $  21,075      7.7%      $ 292,311     $  18,859         8.6%
        Tax-exempt (1)                        6,166           392      8.5%          2,440           198        10.8%
    Securities
        Taxable                             168,983         7,507      5.9%        159,681         8,251         6.9%
        Tax-exempt (1)                       33,846         1,892      7.5%         17,559         1,004         7.6%
    Federal funds sold and interest
        bearing deposits with other banks     5,686           113      2.6%          6,865           212         4.1%
                                          ---------     ---------      ---       ---------     ---------         ---
  Total interest earning assets             581,042        30,979      7.1%        478,856        28,524         7.9%
                                                        ---------      ---                     ---------         ---
Noninterest earning assets
    Cash & due from banks                     8,518                                  8,562
    Premises and equipment                   13,090                                 12,442
    Other assets                             15,836                                 14,066
    Allowance for loan losses                (3,520)                                (2,714)
                                          ---------                              ---------
           Total assets                   $ 614,966                              $ 511,212
                                          =========                              =========

Interest bearing liabilities
    Interest bearing demand deposits       $ 89,861     $   1,007      1.5%      $  71,912     $   1,529         2.8%
    Savings deposits                         45,899           447      1.3%         39,411           736         2.5%
    Time deposits                           241,536         7,256      4.0%        221,315         9,248         5.6%
    Short-term borrowings                    15,428           246      2.1%         11,270           371         4.4%
    Long-term borrowings                    133,316         5,192      5.2%         88,322         3,735         5.6%
                                          ---------     ---------      ---       ---------     ---------         ---
Total interest bearing liabilities          526,040        14,148      3.6%        432,230        15,619         4.8%
                                                        ---------      ---                     ---------         ---

Noninterest bearing liabilities
    and shareholders' equity
    Demand deposits                          38,193                                 33,040
    Other liabilities                         4,373                                  4,197
    Shareholders' equity                     46,360                                 41,745
                                          ---------                              ---------
      Total liabilities and
        shareholders' equity              $ 614,966                              $ 511,212
                                          =========                              =========
Net interest earnings                                   $  16,831                              $  12,905
                                                        =========                              =========
Net yield on interest earning assets                                   3.9%                                      3.6%
                                                                       ===                                       ===

(1)  - Interest  income on  tax-exempt  securities  and loans has been  adjusted
     assuming an effective tax rate of 34% for both periods  presented.  The tax
     equivalent  adjustment  resulted  in an  increase  in  interest  income  of
     $756,000 and $381,000 for the periods  ended  September  30, 2002 and 2001,
     respectively.

                                       22

Table II - Changes in Interest Margin Attributable to Rate and Volume
(Dollars in thousands)
                                           For the Nine Months Ended
                                   September 30, 2002 versus September 30, 2001
                                      -------------------------------------
                                              Increase (Decrease)
                                               Due to Change in:
                                      -------------------------------------
                                      Volume           Rate            Net
                                      -------        --------         -----
Interest earned on:
Loans
  Taxable                             $ 4,414        $(2,198)         2,216
  Tax-exempt                              245            (51)           194
Securities
  Taxable                                 461         (1,205)          (744)
  Tax-exempt                              911            (23)           888
Federal funds sold and interest
  bearing deposits with other banks       (32)           (67)           (99)
                                      -------        -------        -------
Total interest earned on
  interest earning assets               5,999         (3,544)         2,455
                                      -------        -------        -------

Interest paid on:
Interest bearing demand
  deposits                                320           (842)          (522)
Savings deposits                          106           (395)          (289)
Time deposits                             787         (2,779)        (1,992)
Short-term borrowings                     108           (233)          (125)
Long-term borrowings                    1,773           (316)         1,457
                                      -------        -------        -------
  Total interest paid on
    interest bearing liabilities        3,094         (4,565)        (1,471)
                                      -------        -------        -------

          Net interest income         $ 2,905        $ 1,021        $ 3,926
                                      =======        =======        =======

Credit Experience

The provision for loan losses represents charges to earnings necessary to
maintain an adequate allowance for potential future loan losses. Management's
determination of the appropriate level of the allowance is based on an ongoing
analysis of credit quality and loss potential in the loan portfolio, change in
the composition and risk characteristics of the loan portfolio, and the
anticipated influence of national and local economic conditions. The adequacy of
the allowance for loan losses is reviewed quarterly and adjustments are made as
considered necessary.

The Company recorded a $908,000 provision for loan losses for the first nine
months of 2002, compared to $553,000 for the same period in 2001, an increase of
$355,000 or 64.2%. This increase represents continued growth of the loan
portfolio. Net loan charge offs for the first nine months of 2002 were $99,000,
as compared to $269,000 over the same period of 2001. At September 30, 2002, the
allowance for loan losses totaled $3,919,000 or 0.95% of loans, net of unearned
income, compared to $3,110,000 or 0.89% of loans, net of unearned income at
December 31, 2001.

                                       23

Summit's asset quality remains sound. As illustrated in Table III below, the
Company's non-performing assets and loans past due 90 days or more and still
accruing interest have decreased during the past 12 months, remaining at a
historically moderate level.

Table III - Summary of Past Due Loans and Non-Performing Assets
 (Dollars in thousands)

                                             September 30,        December 31,
                                          -------------------
                                           2002         2001         2001
                                          ------       ------       ------
Accruing loans past due 90 days or more   $  241       $  104       $  328
Nonperforming assets:
    Nonaccrual loans                         734          933          788
    Foreclosed properties                     81           81           81
    Repossessed assets                         4           14            -
                                          ------       ------       ------
                 Total                    $1,060       $1,132       $1,197
                                          ======       ======       ======

Percentage of total loans                    0.3%         0.3%         0.3%
                                             ===          ===          ===

Noninterest Expense

Total noninterest expense increased approximately $1,352,000, or 16.8% to
$9,380,000 during the first nine months of 2002 as compared to the same period
in 2001. Substantially all of this increase resulted primarily from an increase
in salaries and employee benefits expense as a result of the company awarding
general merit raises and the addition of new staff positions required as a
result of Summit's growth.

FINANCIAL CONDITION

Total assets of the Company were $669,382,000 at September 30, 2002, compared to
$591,757,000 at December 31, 2001, representing a 13.1% increase. Table IV below
serves to illustrate significant changes in the Company's financial position
between December 31, 2001 and September 30, 2002.

                                       24

 Table IV - Summary of Significant Changes in Financial Position
 (Dollars in thousands)

                                  Balance                            Balance
                                December 31,  Increase (Decrease)  September 30,
                                             ---------------------
                                   2001      Amount     Percentage     2002
                                 --------    --------     ------      --------
 Assets
  Federal funds sold             $  1,848   $   (463)     -25.1%     $  1,385
  Securities available for sale   206,967     11,523        5.6%      218,490
  Loans, net of unearned income   344,415     63,771       18.5%      408,186

Liabilities
  Interest bearing deposits      $357,519   $ 54,288       15.2%     $411,807
  Short-term borrowings            24,033    (11,868)     -49.4%       12,165
  Long-term borrowings            123,445     14,152       11.5%      137,597

Loan growth during the first nine months of 2002, occurring principally in the
commercial real estate and real estate - mortgage portfolios, was funded
primarily by long-term borrowings from the FHLB.

Short-term borrowings decreased during the first nine months of 2002 as the
Company borrowed long-term with the FHLB and paid down the short-term
borrowings.

Refer to Notes 4, 5, 6, 7 and 8 of the notes to the accompanying consolidated
financial statements for additional information with regard to changes in the
composition of the Summit's securities, loans, deposits and borrowing activity
between September 30, 2002 and December 31, 2001.

LIQUIDITY

Liquidity reflects the Company's ability to ensure the availability of adequate
funds to meet loan commitments and deposit withdrawals, as well as provide for
other transactional requirements. Liquidity is provided primarily by funds
invested in cash and due from banks, Federal funds sold, non-pledged securities,
and available lines of credit with the FHLB, the total of which approximated
$122 million or 18% of total assets at September 30, 2002 versus $126 million,
or 21% of total assets at December 31, 2001.

The Company's liquidity position is monitored continuously to ensure that
day-to-day as well as anticipated funding needs are met. Management is not aware
of any trends, commitments, events or uncertainties that have resulted in or are
reasonably likely to result in a material change to the Summit's liquidity.

CAPITAL RESOURCES

Maintenance of a strong capital position is a continuing goal of Company
management. Through management of its capital resources, the Company seeks to
provide an attractive financial return to its shareholders while retaining
sufficient capital to support future growth. Shareholders' equity at September
30, 2002 totaled $51,379,000 compared to $44,287,000 at December 31, 2001,
representing an increase of 16.0% which resulted primarily from net retained
earnings of the Company during the first nine months of 2002 and the
appreciation in fair value of the Company's available for sale securities
portfolio.

                                       25

Refer to Note 10 of the notes to the accompanying consolidated financial
statements for information regarding regulatory restrictions on the Company's
and its subsidiaries' capital.

MARKET RISK MANAGEMENT

Market risk is the risk of loss arising from adverse changes in the fair value
of financial instruments due to changes in interest rates, exchange rates and
equity prices. Interest rate risk is Summit's primary market risk and results
from timing differences in the repricing of assets, liabilities and off-balance
sheet instruments, changes in relationships between rate indices and the
potential exercise of imbedded options. The principal objective of
asset/liability management is to minimize interest rate risk and the Company's
actions in this regard are taken under the guidance of its Asset/Liability
Management Committee ("ALCO"), which is comprised of members of senior
management and members of the Board of Directors. The ALCO actively formulates
the economic assumptions that the Company uses in its financial planning and
budgeting process and establishes policies which control and monitor the
Company's sources, uses and prices of funds.

Some amount of interest rate risk is inherent and appropriate to the banking
business. Summit's net income is affected by changes in the absolute level of
interest rates. The Company's interest rate risk position is liability
sensitive; that is, liabilities are likely to reprice faster than assets,
resulting in a decrease in net income in a rising rate environment. Conversely,
net income should increase in a falling interest rate environment. Net income is
also subject to changes in the shape of the yield curve. In general, a
flattening yield curve would result in a decline in Company earnings due to the
compression of earning asset yields and funding rates, while a steepening would
result in increased earnings as margins widen.

Several techniques are available to monitor and control the level of interest
rate risk. Summit primarily uses earnings simulations modeling to monitor
interest rate risk. The earnings simulation model forecasts the effects on net
interest income under a variety of interest rate scenarios that incorporate
changes in the absolute level of interest rates and changes in the shape of the
yield curve. Assumptions used to project yields and rates for new loans and
deposits are derived from historical analysis. Securities portfolio maturities
and prepayments are reinvested in like instruments. Mortgage loan prepayment
assumptions are developed from industry estimates of prepayment speeds.
Noncontractual deposit repricings are modeled on historical patterns.

As of September 30, 2002, Summit's earnings simulation model projects net
interest income would decrease by approximately 0.9% if rates rise evenly by 200
basis points over the next 12 month period, as compared to a projected stable
rate net interest income. Further, the model projects that if rates fall evenly
by 200 basis points over the next year, Company net interest income would
decrease by approximately 0.5%, as compared to a projected stable rate net
interest income. These projected changes are well within Summit's ALCO policy
limit of +/- 10%.

CONTROLS AND PROCEDURES

Summit management, including the Chief Executive Officer and Chief Financial
Officer, have conducted within 90 days of the filing of this Form 10-Q an
evaluation of the effectiveness of disclosure controls and procedures pursuant
to Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the disclosure controls and
procedures are effective in ensuring that all material information required to
be filed in this quarterly report has been made known to them in a timely
fashion. There have been no significant changes in internal controls, or in
factors that could significantly affect internal controls, subsequent to the
date the Chief Executive Officer and Chief Financial Officer completed their
evaluation.

                                       26

Summit Financial Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Part II.  Other Information

Item 1.  Legal Proceedings

Summit is involved in various pending legal actions, all of which are regarded
by management as litigation arising in the ordinary course of business and are
not expected to have a materially adverse effect on the business or financial
condition of the Company.

                                       27

                                   SIGNATURES

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

                                 SUMMIT FINANCIAL GROUP, INC.
                                 (registrant)

                                 By:  /s/ H. Charles Maddy, III
                                 -------------------------------------
                                 H. Charles Maddy, III,
                                 President and Chief Executive Officer

                                 By:  /s/ Robert S. Tissue
                                 ------------------------------------
                                 Robert S. Tissue,
                                 Sr. Vice President and Chief Financial Officer

Date:  November 13, 2002
       -----------------

                                       28

                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, H. Charles Maddy, III, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Summit Financial
     Group, Inc.;

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

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

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;
     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and
     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and
     b)   any fraud, whether or not material,  that involves management or other
          employees  who  have  a  significant  role  in  registrant's  internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  November 13, 2002
       -----------------
                                        /s/ H. Charles Maddy, III
                                        -------------------------------------
                                        H. Charles Maddy, III
                                        President and Chief Executive Officer

                                       29

CERTIFICATION

I, Robert S. Tissue, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Summit Financial
     Group, Inc.;

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

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

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;
     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and
     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and
     b)   any fraud, whether or not material,  that involves management or other
          employees  who  have  a  significant  role  in  registrant's  internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  November 13, 2002
       -----------------

                                 /s/ Robert S. Tissue
                                 ------------------------------------
                                 Robert S. Tissue
                                 Sr. Vice President and Chief Financial Officer

                                       30

                                                                   Exhibit 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Summit Financial Group, Inc.
("Summit") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I, H.
Charles Maddy, III, President and Chief Executive Officer of Summit, certify
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:

     (1)  The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

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

                                       /s/ H. Charles Maddy, III
                                       -------------------------------------
                                       H. Charles Maddy, III,
                                       President and Chief Executive Officer

Date:  November 13, 2002
       -----------------

The foregoing certification is being furnished solely pursuant to 18 U.S.C. ss.
1350 and is not being filed as part of the Report or as a separate disclosure
document.

                                                                 Exhibit 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Summit Financial Group, Inc.
("Summit") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Robert S. Tissue, Senior Vice President and Chief Financial Officer of Summit,
certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:

     (1)  The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

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

                               /s/ Robert S. Tissue
                               -----------------------------
                               Robert S. Tissue,
                               Sr. Vice President and Chief Financial Officer

Date:  November 13, 2002
       -----------------

The foregoing certification is being furnished solely pursuant to 18 U.S.C. ss.
1350 and is not being filed as part of the Report or as a separate disclosure
document.