Summit Financial 8-K Summit Financial Corporation Reports

EXHIBIT 99.1

NEWS RELEASE

DATE:   January 25, 2005

RELEASE DATE:  Immediate

SUMMIT FINANCIAL CORPORATION REPORTS

36% INCREASE IN FOURTH QUARTER EARNINGS

AND RECORD RESULTS FOR 2004

GREENVILLE, SC --Summit Financial Corporation (NASDAQ/Small Cap: SUMM) today announced a 36% increase in quarterly earnings to $1.2 million, or $0.24 per diluted share, for the fourth quarter of 2004. For the year ended December 31, 2004, record net income of $4.4 million, or $0.90 per diluted share, was reported. This marks the ninth consecutive year of record earnings for Summit. The 2004 results represent a 17% increase over net income of $3.8 million or $0.79 per diluted share for the year ended 2003. Profitability measures increased significantly during the year with return on assets and return on equity increasing from 1.18% and 12.46%, respectively for the year ended December 31, 2003 to 1.36% and 12.81%, respectively, for the y ear ended December 31, 2004.

The following were primary factors in the increased earnings for both the fourth quarter and the year ended December 31, 2004:

·   Higher net interest income related to the reduced cost of funds;

·   Lower provision for loan losses resulting from the overall improvement in credit quality of the loan portfolio and lower net loan growth in 2004 as compared to the prior year; and,

·   Lower overhead expenses related primarily to reductions in advertising and consultant expenses, and a FHLB prepayment penalty incurred in 2003.

These improvements are offset somewhat by the reduction in noninterest income resulting primarily from less mortgage loan referral fees as the refinancing boom has slowed, and lower gains on sales of securities for 2004 due to a smaller volume of transactions and changes in market interest rates.

At December 31, 2004, assets totaled $320.9 million, down 7% from $343.9 million at the prior year end. Gross loans increased 5% during the year to total $242.5 million at December 31, 2004, while investments, the second largest component of earning assets, decreased 34% from the prior year end to total $59.8 million. The realignment of the balance sheet, resulting in the reduction of investment securities and higher priced deposits and FHLB advances, has decreased the Company’s exposure to interest rate risk and contributed to the increase in net interest income for 2004.

 The Company has continued its diligent focus on maintaining a quality loan portfolio and improving the level of classified and nonperforming loans. Summit National Bank reported net recoveries of previously charged-off loans of ($87,000), while consolidated net charge-offs, which includes Freedom Finance, Inc., for the year were $224,000 or 0.10% of average loans. This is compared to consolidated net charge-offs of $718,000 or 0.32% of average loans for 2003. Included in nonperforming assets at December 31, 2004 are loans past due in excess of 90 days of $156,000, nonaccrual loans of $531,000, and other real estate owned of $217,000. The allowance for loan losses was 1.51% of gross loans at the 2004 year end, compared to 1.48% for the prior year e nd.

 Summit Financial Corporation stock ended the year at $21.35 per share which represents a 19% increase during 2004. The Company ended 2004 with total equity of $37.3 million, a 16% increase from the prior year end. This represents a total risk-based capital ratio of 15.3% at December 31, 2004. Book value per share was up 10% from December 31, 2003 to end the year at $8.25.

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SUMMIT FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
($ in thousands, except share data) (unaudited)
							% Change
		12/31/2004			12/31/2003			2004/2003
Balance Sheet (at period end)
Cash and due from banks	$	6,548		$	9,854			(34	%)
Interest-bearing bank balances		147			341			(57	%)
Federal funds sold		218			201			8	%
Investments available for sale		59,838			90,887			(34	%)
Loans, net of unearned income		242,460			231,802			5	%
Less: allowance for loan losses		(3,649	)		(3,437	)		6	%
Net loans		238,811			228,365			5	%
Premises and equipment, net		4,805			4,070			18	%
Other assets		10,571			10,203			4	%
	$	320,938		$	343,921			(7	%)
Noninterest-bearing deposits	$	36,897		$	37,037			-
Interest-bearing deposits		194,821			219,975			(11	%)
Total deposits		231,718			257,012			(10	%)
FHLB advances		50,134			52,317			(4	%)
Other liabilities		1,821			2,387			(24	%)
Total liabilities		283,673			311,716			(9	%)
Shareholders' equity		37,265			32,205			16	%
	$	320,938		$	343,921			(7	%)
Capital Ratios (at period end)
Total risk-based capital ratio		15.27	%		13.75	%		11	%
Tier 1 risk-based capital ratio		14.02	%		12.50	%		12	%
Leverage ratio		11.39	%		9.92	%		15	%
Selected Average Balances (year-to-date)
Total assets	$	326,519		$	322,766			1	%
Loans, net of unearned income		232,301			223,365			4	%
Investment securities		68,467			74,661			(8	%)
Total earning assets		310,053			307,234			1	%
Interest-bearing liabilities		253,762			257,733			(2	%)
Total deposits		238,848			244,180			(2	%)
Shareholders' equity		34,651			30,558			13	%
Share Data (at period end)
Book value per common share	$	8.25		$	7.47			10	%
Shares outstanding		4,515,553			4,312,925			5	%
Stock performance (at period end)
Closing market price	$	21.35		$	18.00			19	%
Shares traded - year to date		246,198			463,061			(47	%)
Price/book ratio		2.59			2.41			7	%
Price/earnings ratio (diluted earnings per share)		23.7			22.8			4	%
Market capitalization	$	96,407		$	77,633			24	%

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SUMMIT FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
($ in thousands, except per share data) (unaudited)
	For the Three Months Ended						%
		12/31/2004			12/31/2003			Change
Income Statement
Interest income	$	4,619		$	4,412			5	%
Interest expense		1,173			1,218			(4	%)
Net interest income		3,446			3,194			8	%
Provision for loan losses		243			284			(14	%)
Net interest income after provision for loan losses		3,203			2,910			10	%
Noninterest income:
Service charges on deposit accounts		103			133			(23	%)
Insurance sales commissions		207			105			97	%
Gain on sale of securities		17			-			100	%
Other income		222			318			(30	%)
Total noninterest income		549			556			(1	%)
Noninterest expenses:
Salaries, wages and benefits		1,326			1,336			(1	%)
Occupancy		182			166			10	%
Furniture, fixtures and equipment		135			163			(17	%)
Other operating expenses		399			520			(23	%)
Total noninterest expenses		2,042			2,185			(7	%)
Income before income taxes		1,710			1,281			33	%
Income tax expense		526			412			28	%
Net income	$	1,184		$	869			36	%
Net income per common share:
Basic	$	0.26		$	0.20			30	%
Diluted		0.24			0.18			33	%
Average common shares outstanding:
Basic		4,476,000			4,296,000			4	%
Diluted		4,952,000			4,899,000			1	%
Performance ratios
Return on average assets		1.47	%		1.02	%		44	%
Return on average equity		12.76	%		10.94	%		17	%
Net interest margin		4.68	%		4.10	%		14	%
Net charge-offs to average loans		0.18	%		0.64	%		(72	%)

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SUMMIT FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
($ in thousands, except per share data) (unaudited)
	For the Years Ended						%
		12/31/2004			12/31/2003			Change
Income Statement
Interest income	$	17,542		$	17,445			1	%
Interest expense		4,590			5,156			(11	%)
Net interest income		12,952			12,289			5	%
Provision for loan losses		436			786			(45	%)
Net interest income after provision for loan losses		12,516			11,503			9	%
Noninterest income:
Service charges on deposit accounts		480			550			(13	%)
Insurance sales commissions		588			438			34	%
Gain on sale of securities		83			367			(77	%)
Other income		1,165			1,575			(26	%)
Total noninterest income		2,316			2,930			(21	%)
Noninterest expenses:
Salaries, wages and benefits		5,370			5,213			3	%
Occupancy		682			666			2	%
Furniture, fixtures and equipment		608			647			(6	%)
Other operating expenses		1,774			2,346			(24	%)
Total noninterest expenses		8,434			8,872			(5	%)
Income before income taxes		6,398			5,561			15	%
Income tax expense		1,959			1,754			12	%
Net income	$	4,439		$	3,807			17	%
Net income per common share:
Basic	$	1.00		$	0.89			12	%
Diluted		0.90			0.79			14	%
Cash dividends declared per common share		0.15			0.10			50	%
Average common shares outstanding:
Basic		4,419,000			4,256,000			4	%
Diluted		4,924,000			4,842,000			2	%
Performance ratios
Return on average assets		1.36	%		1.18	%		15	%
Return on average equity		12.81	%		12.46	%		3	%
Net interest margin		4.33	%		4.14	%		5	%
Net charge-offs to average loans		0.10	%		0.32	%		(69	%)
Nonperforming assets to loans plus OREO, at period end		0.37	%		0.38	%		(3	%)
Allowance for loan losses to gross loans, at period end		1.51	%		1.48	%		2	%

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Summit Financial Corporation,www.summit-bank.com, headquartered in Greenville, SC, is the parent holding company for Summit National Bank and Freedom Finance, Inc., a consumer finance company. Summit National Bank provides a full range of banking services designed to meet substantially all of the financial needs of its customers from its four full-service branches in the Upstate of South Carolina. Through its subsidiary, Summit Investment Services, Inc., Summit provides nondeposit investments and financial management services. Freedom Finance specializes in making small dollar installment loans to individuals from 11 branch locations throughout South Carolina.

Certain matters set forth in this news release may contain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. For discussion of certain factors that may cause such forward-looking statements to differ materially from the Company's actual results, see the Company's Annual Report on Form 10-K for the year ended December 31, 2003 and the Quarterly Report on Form 10-Q for the period ended September 30, 2004.

CONTACTS:

J. Randolph Potter, President & CEO, (864) 240-5886

Blaise B. Bettendorf, Chief Financial Officer, (864) 240-5890

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