sfgincentivecom.htm


    EXHIBIT
      10.2

    


    


    Summit
      Financial Group, Inc.

    Incentive
      Compensation Plan

    


    December
      14, 2007

    


    Introduction:

    In
      order
      to provide management with incentive to assure that the company operates to
      its
      fullest potential, the Board of Directors of Summit Financial Group,
      Inc.  (the “Company”) has implemented various incentive
      programs.  The Board of Directors of the Company established the
      Incentive Compensation Plan to reward those officers who oversee the various
      facets of the entire company.  The basic specific performance measure
      for the Incentive Compensation Plan is Return on Average Equity
      (ROAE).  This performance measure was chosen because it is widely
      recognized as being a core measure of the Company’s performance and uses our
      shareholder’s equity as a base for measurement.

    


    Incentive
      Compensation Plan Criteria and Method of Calculation:

    At
      the
      end of each year, the Compensation and Nominating Committee will review data
      and
      determine the ROAE level at which officers will become eligible for a
      bonus.  During this review, the Committee will consider, among other
      things, the Company’s peer group data.

    


    After
      determining these levels, the Compensation and Nominating Committee will
      determine the percentage of earnings to allocate to the bonus pool for each
      bonus level.

    


    The
      current ROAE levels at which bonuses will be paid and corresponding percentage
      allocation levels to the bonus pool are as follows:

     

     

    


      
        	
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    Should
      the Company achieve an ROAE of *% to *%, then the allocation to the bonus pool
      will be calculated at *% of net earnings.  An allocation of *% of
      earnings will be made for an ROAE of *% or greater.

    


    The
      Company’s ROAE will be calculated on a quarterly basis.  For bonus
      purposes, “other comprehensive income (loss)” will not be considered when
      calculating average equity.  The bonus pool will be established by
      applying the appropriate percentage to the current earnings on a quarterly
      basis.  The bonus pool will then be divided among plan participants
      using the percentages shown on “Exhibit A”*.

    


    Attached
      to this policy as “Exhibit A”* is the chart which represents sample calculations
      that would be applicable based on the above guidelines.  The sample
      calculation is shown on an annual basis for ease of
      illustration.  However, the Company’s Board of Directors has approved
      the payment of bonuses under the Incentive Compensation Plan on a quarterly
      basis.

    


    Payment:

    The
      Board
      of Directors or Compensation and Nominating Committee shall approve the payments
      under this plan on a quarterly basis.

    


     

    Any
      items
      that qualify as “Extraordinary” under Generally Accepted Accounting Principals
      (GAAP) shall not be considered when calculating bonuses, regardless of whether
      these items have a positive or negative affect.

    


    In
      addition to the bonus pool established based on the ROAE criteria discussed
      above, the Company has also established a discretionary bonus pool under the
      Incentive Compensation Plan.  Bonuses paid from the discretionary pool
      are paid at the sole discretion of the Chief Executive Officer and may be
      awarded to any employee other than the Chief Executive Officer or any other
      Executive Officer.

    


    Any
      conflicts, ambiguities or questions of interpretation will be resolved by the
      Company’s Board of Directors, in its sole discretion.

    


    *
      Confidential, Business Proprietary
      Information