SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

                                 FORM 10-Q

                                 (Mark One)

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
     Exchange Act of 1934

               For the quarterly period ended December 31, 2002
                                              -----------------

                                     OR

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities and
     Exchange Act of 1934

     For the transition period from              to
                                    -------------   --------------

                          Commission file number 0-27062

                             Horizon Financial Corp.
                             -----------------------
             (Exact name of registrant as specified in its charter)

                      Chartered by the State of Washington
                      ------------------------------------
        (State or other jurisdiction of incorporation or organization)

                                 91-1695422
                                 ----------
                     (IRS Employer Identification No.)

                            1500 Cornwall Avenue
                           Bellingham, Washington
                           ----------------------
                  (Address of principal executive offices)

                                    98225
                                    -----
                                  (Zip Code)

Registrant's telephone number including area code:         (360) 733-3050
                                                           --------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                YES   X   NO
                                    -----    -----

As of  December 31, 2002, 10,652,691 common shares, $1.00 par value, were
outstanding.

<PAGE>



                           HORIZON FINANCIAL CORP.

INDEX                                                                 PAGE
-----                                                                 ----

PART 1      FINANCIAL INFORMATION

Item  1     Financial Statements

            Consolidated Statements of Financial Position               3

            Consolidated Statements of Income                          4-5

            Consolidated Statements of Stockholders' Equity             6

            Consolidated Statements of Cash Flows                       7

            Notes to Consolidated Financial Statements                  8

Item  2     Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                   9-15

Item  3     Quantitative and Qualitative Disclosures About
                 Mark Risk                                              15

Item  4     Controls and Procedures                                     15

PART II     OTHER INFORMATION

Item  1     Legal Proceedings                                           16

Item  2     Changes in Securities and Use of Proceeds                   16

Item  3     Defaults Upon Senior Securities                             16

Item  4     Submission of Matters to a Vote of  Security Holders        16

Item  5     Other Information                                           16

Item  6     Exhibits and Reports on Form 8-K                            16


               SIGNATURES                                               17

               CERTIFICATIONS                                         18-19

2

<PAGE>



PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements (unaudited)

                            HORIZON FINANCIAL CORP.
                 Consolidated Statements of Financial Position

                                   ASSETS
                                                 December 31,      March 31,
                                                     2002            2002
                                                -------------   -------------
                                                 (unaudited)

Cash and cash equivalents                       $  16,876,806   $  14,187,040
Interest-bearing deposits                          54,976,455      69,775,000
Investment securities
  Available-for-sale                               76,811,420      46,373,554
  Held-to-maturity                                 369,254            369,140
Mortgage-backed securities
  Available-for-sale                               34,855,341      29,987,703
  Held-to-maturity                                  3,114,461       4,410,204
Federal Home Loan Bank Stock                        6,527,500       6,243,300
Loans receivable, net of allowance of loan
 losses of $7,481,630 at December 31 and
 $5,887,482 at March 31                           574,567,776     568,303,481
Loans held for sale, at fair value                  7,296,199       3,295,900
Accrued interest and dividends receivable           4,486,330       4,495,360
Bank premises and equipment, net                   15,438,558      15,195,049
Federal income tax receivable                          40,291               -
Real estate owned                                     946,260         289,429
Other assets                                       14,914,689       9,137,746
                                                -------------   -------------
TOTAL ASSETS                                    $ 811,221,340   $ 772,062,906
                                                =============   =============

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                        $ 644,295,514   $ 628,782,470
Accounts payable and other liabilities             11,639,238       7,955,100
Other borrowed funds                               43,765,515      29,120,729
Advances by borrowers for taxes and insurance         369,116       1,439,124
Income tax currently payable                                -         513,509
Net deferred income tax liabilities                 3,146,726       2,071,613
Deferred compensation                               1,648,270       1,580,770
                                                -------------   -------------
     Total liabilities                            704,864,379     671,463,315
                                                -------------   -------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

  Serial preferred stock, $1 par value,
   10,000,000 shares authorized; none issued
   or outstanding                                           -               -
  Common stock, $1 par value, 30,000,000 shares
   authorized; 10,652,691 and 8,607,117 issued
   and outstanding, respectively                   10,652,691       8,607,117
  Additional paid-in capital                       57,794,423      60,428,238
  Retained earnings                                31,959,565      27,700,939
  Unearned ESOP shares                               (288,413)       (288,413)
  Accumulated other comprehensive income, net
   of tax                                           6,238,695       4,151,710
                                                -------------   -------------
     Total stockholders' equity                   106,356,961     100,599,591
                                                -------------   -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $ 811,221,340   $ 772,062,906
                                                =============   =============

                (See Notes to Consolidated Financial Statements)

3

<PAGE>



                            HORIZON FINANCIAL CORP.
                 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

                                                    Three  months ended
                                                        December 31,
                                                      2002          2001
                                                 ------------   ------------

INTEREST INCOME
  Interest on loans                              $ 11,215,221   $ 11,660,737
  Interest on investment and mortgage-backed
   securities                                       1,572,205      1,272,463
                                                 ------------   ------------
     Total interest income                         12,787,426     12,933,200
                                                 ------------   ------------

INTEREST EXPENSE
  Interest on deposits                              4,289,760      5,669,748
  Interest on other borrowings                        483,188        352,085
                                                 ------------   ------------
     Total interest expense                         4,772,948      6,021,833
                                                 ------------   ------------
     Net interest income                            8,014,478      6,911,367

PROVISION FOR LOAN LOSSES                           1,050,000        459,642
                                                 ------------   ------------
     Net interest income after provision for
      loan losses                                   6,964,478      6,451,725
                                                 ------------   ------------

NONINTEREST INCOME
  Service fees                                        784,204        662,477
  Other                                               548,862        125,421
  Net gain (loss) on sales of loans - servicing
   released                                           913,997        623,243
  Net gain (loss) on sales of loans - servicing
   retained                                             4,470              -
                                                 ------------   ------------
     Total noninterest income                       2,251,533      1,411,141
                                                 ------------   ------------

NONINTEREST EXPENSE
  Compensation and employee benefits                2,306,854      1,892,475
  Building occupancy                                  580,736        566,143
  Other expenses                                      959,895        883,938
  Data processing                                     250,764        248,042
  Advertising                                         183,740        215,600
                                                 ------------   ------------
     Total noninterest expense                      4,281,989      3,806,198
                                                 ------------   ------------

NET INCOME BEFORE PROVISION FOR INCOME TAX          4,934,022      4,056,668

PROVISION FOR INCOME TAX                            1,624,108      1,371,204
                                                 ------------   ------------

NET INCOME                                       $  3,309,914   $  2,685,464
                                                 ============   ============

BASIC EARNINGS PER SHARE                            $   .31        $   .25*
                                                    =======        =======

DILUTED EARNINGS PER SHARE                          $   .31        $   .24*
                                                    =======        =======

*Restated for 25% stock split paid July 23, 2002.

                   (See Notes to Consolidated Financial Statements)

4

<PAGE>



                            HORIZON FINANCIAL CORP.
                 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

                                                      Nine months ended
                                                         December 31,
                                                     2002           2001
                                                 ------------   ------------

INTEREST INCOME
  Interest on loans                              $ 33,268,747   $ 35,997,735
  Interest on investment and mortgage-backed
   securities                                       4,583,148      4,440,270
                                                 ------------   ------------
     Total interest income                         37,851,895     40,438,005
                                                 ------------   ------------

INTEREST EXPENSE
  Interest on deposits                             13,825,269     19,735,311
  Interest on other borrowings                      1,277,211      1,109,690
                                                 ------------   ------------
     Total interest expense                        15,102,480     20,845,001
                                                 ------------   ------------
     Net interest income                           22,749,415     19,593,004

PROVISION FOR LOAN LOSSES                           1,700,000        904,642
                                                 ------------   ------------
    Net interest income after provision for
     loan losses                                   21,049,415     18,688,362
                                                 ------------   ------------

NONINTEREST INCOME
  Service fees                                      1,931,075      1,901,722
  Other                                             1,348,018        408,411
  Net gain (loss) on sales of loans - servicing
   released                                         1,841,420      1,169,901
  Net gain (loss) on sales of loans - servicing
   retained                                            99,766       (252,984)
  Net gain on sale of investment securities            62,258        178,617
                                                 ------------   ------------
     Total noninterest income                       5,282,537      3,405,667
                                                 ------------   ------------

NONINTEREST EXPENSE
  Compensation and employee benefits                6,917,653      5,662,916
  Building occupancy                                1,766,199      1,702,812
  Other expenses                                    2,804,183      2,346,338
  Data processing                                     745,412        717,553
  Advertising                                         576,282        553,305
                                                 ------------   ------------
     Total noninterest expense                     12,809,729     10,982,924
                                                 ------------   ------------

NET INCOME BEFORE PROVISION FOR INCOME TAX         13,522,223     11,111,105

PROVISION FOR INCOME TAX                            4,446,200      3,756,113
                                                 ------------   ------------

NET INCOME                                       $  9,076,023   $  7,354,992
                                                 ============   ============

BASIC EARNINGS PER SHARE                            $   .85        $  .67*
                                                    =======        ======

DILUTED EARNINGS PER SHARE                          $   .84        $  .66*
                                                    =======        ======

*Restated for 25% stock split paid July 23,2002.

                  (See Notes to Consolidated Financial Statements)

5

<PAGE>


<PAGE>
<TABLE>

                                                HORIZON FINANCIAL CORP.
                                    Consolidated Statements of Stockholders Equity
                                     Six Months Ended December 31, 2002 and 2001
                                                     (unaudited)

                                 Common Stock
                           ------------------------    Additional                   Unearned       Other
                            Number of                    Paid-In       Retained       ESOP     Comprehensive
                             Shares        At Par        Capital       Earnings      Shares    Income (Loss)
                           ----------   -----------   ------------   ------------   ---------   -----------

                         <c>         <c>           <c>            <c>            <c>         <c>
BALANCE, March 31, 2001     8,861,238  $  8,861,238   $ 62,380,016   $ 23,046,017   $ (360,517) $ 3,982,603
Comprehensive income
  Net income                        -             -              -      7,354,992            -           -
  Other comprehensive income
   Change in unrealized
    gains on available-for-
    sale securities, net
    of taxes of $164,169            -             -              -              -            -      318,678
   Total other comprehensive
    income                          -             -              -              -            -            -
  Comprehensive income              -             -              -              -            -            -
Unearned ESOP shares                -             -              -              -            -            -
Cash dividends on common
 stock at $.36 per sh               -             -              -     (3,137,965)           -            -
15% stock dividend
 adjustment                       (88)          (88)          (882)           970            -            -
Stock options exercised        12,063        12,063         78,824              -            -            -
Dividend reinvestment plan      8,791         8,791         97,571              -            -            -
Treasury stock purchased            -             -              -              -            -            -
Retirement of treasury
 stock                       (259,042)     (259,042)    (1,920,019)      (934,603)           -            -
                           ----------   -----------   ------------   ------------   ----------  -----------
BALANCE, December 31, 2001  8,622,962   $ 8,622,962   $ 60,635,510   $ 26,329,411   $ (360,517) $ 4,301,281
                           ==========   ===========   ============   ============   ========== ============
BALANCE, March 31, 2002     8,607,117   $ 8,607,117   $ 60,428,238   $ 27,700,939   $ (288,413) $ 4,151,710

Comprehensive income
  Net income                        -             -              -      9,076,023            -            -
  Other comprehensive
    income
   Change in unrealized
    gains on available-
    for-sale securities,
    net of taxes of
    $1,075,113                      -             -              -              -            -    2,086,985
   Total other comprehen-
    sive income                     -             -              -              -            -            -

Comprehensive income                -             -              -              -            -            -
Cash dividends on common
 stock at $.335/share               -             -              -     (3,575,669)           -            -
25% stock split             2,138,190     2,138,190     (2,138,190)             -            -            -
Cash paid in lieu of
 fractional shares                  -             -              -         (7,425)           -            -
Stock options exercised        92,995        92,995        583,512              -            -            -
Dividend reinvestment plan     31,889        31,889        365,808              -            -            -
Treasury stock purchased            -             -              -              -            -            -
Retirement of treasury
 stock                       (217,500)     (217,500)    (1,444,945)    (1,234,303)           -            -
                           ----------   -----------   ------------   ------------   ----------  -----------
BALANCE, December 31,
 2002                      10,652,691   $10,652,691   $ 57,794,423   $ 31,959,565   $ (288,413) $ 6,238,695
                           ==========   ===========   ============   ============   ==========  ===========

                                    (See Notes to Consolidated Financial Statements)
</TABLE>

<TABLE>
                                  Treasury                        Total
                                   Stock      Stockholders    Comprehensive
                                  at Cost         Equity          Income
                                -----------  -------------    ------------

                             <c>          <c>              <c>
BALANCE, March 31, 2001        $         -   $  97,909,357
Comprehensive income
  Net income                             -       7,354,992    $  7,354,992
  Other comprehensive income
   Change in unrealized
    gains on available-for-
    sale securities, net
    of taxes of $164,169                 -         318,678         318,678
                                                              ------------
   Total other comprehensive
    income                               -               -         318,678
                                                              ------------
  Comprehensive income                   -               -    $  7,673,670
                                                              ============
Unearned ESOP shares                     -               -
Cash dividends on common
 stock at $.36 per sh                    -      (3,137,965)
15% stock dividend
 adjustment                              -               -
Stock options exercised                  -          90,887
Dividend reinvestment plan               -         106,362
Treasury stock purchased        (3,113,664)     (3,113,664)
                               -----------   -------------
Retirement of treasury
 stock                           3,113,664               -
                               -----------    ------------
BALANCE, December 31, 2001     $         -    $ 99,528,647
                               ===========    ============
BALANCE, March 31, 2002        $         -   $ 100,599,591

Comprehensive income
  Net income                             -       9,076,023    $  9,076,023
  Other comprehensive
    income
   Change in unrealized
    gains on available-
    for-sale securities,
    net of taxes of
    $1,075,113                           -       2,086,985       2,086,985
                                                              ------------
   Total other comprehen-
    sive income                                          -       2,086,985
                                                              ------------
Comprehensive income                     -               -    $ 11,163,008
                                                              ============
Cash dividends on common
 stock at $.335/share                    -      (3,575,669)
25% stock split                          -               -
Cash paid in lieu of
 fractional shares                       -          (7,425)
Stock options exercised                  -         676,507
Dividend reinvestment plan               -         397,697
Treasury stock purchased        (2,896,748)     (2,896,748)
Retirement of treasury
 stock                           2,896,748               -
                               -----------    ------------
BALANCE, December 31,
 2002                          $         -    $106,356,961
                               ===========    ============

                                (See Notes to Consolidated Financial Statements)
</TABLE>

6

<PAGE>



                           HORIZON FINANCIAL CORP.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        Nine Months Ended
                                                          December 31,
                                                       2002          2001
                                                  ------------   ------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                      $  9,076,023   $  7,354,992
Adjustments to reconcile net income to net
 cash provided by operating activities
  Depreciation and amortization                      1,271,417      1,673,342
  Stock dividends - Federal Home Loan Bank stock      (284,200)      (303,100)
  Provision for loan losses                          1,700,000        904,642
Changes in assets and liabilities
  Accrued interest and dividends receivable              9,030        296,837
  Net change in loans held for sale                 (4,000,299)    (6,991,914)
  Federal income tax (receivable) payable             (553,800)         6,113
  Other assets                                      (5,805,646)      (128,769)
  Other liabilities                                  2,517,982        218,052
                                                  ------------   ------------
     Net cash flows from operating activities        3,930,507      3,030,195
                                                  ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Investment in interest-bearing deposits, net      14,798,545    (50,099,988)
  Purchases of investment securities -
   available-for-sale                              (30,941,880)   (10,685,000)
  Proceeds from sales and maturities of
   investment securities - available-for-sale        3,217,998      2,507,467
  Purchases of mortgage-backed securities -
   available-for-sale                              (12,511,034)    (4,812,336)
  Proceeds from maturities of mortgage-backed
   securities - available-for-sale                   8,091,895     22,475,855
  Proceeds from maturities of mortgage-backed
   securities - held-to-maturity                     1,295,243      1,651,781
  Net change in loans                               (8,470,817)    30,568,103
  Purchases of bank premises and equipment          (1,008,403)      (997,103)
  Net change in other real estate owned               (656,831)      (530,291)
                                                  ------------   ------------
     Net cash flows from investing activities      (26,185,284)    (9,921,512)
                                                  ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net change in deposits                            15,513,044      5,897,819
  Advances from other borrowed funds                14,644,786     17,748,172
  Repayments of other borrowed funds                         -    (10,000,000)
  Common stock issued, net                           1,074,204        197,249
  Cash dividends paid                               (3,390,743)    (3,027,861)
  Treasury stock purchased                          (2,896,748)    (3,113,664)
                                                  ------------   ------------
     Net cash flows from financing activities       24,944,543      7,701,715
                                                  ------------   ------------

NET CHANGE IN CASH AND CASH EQUIVALENTS              2,689,766        810,398

CASH AND CASH EQUIVALENTS, beginning of period      14,187,040     11,947,606
                                                  ------------   ------------

CASH AND CASH EQUIVALENTS, end of period          $ 16,876,806   $ 12,758,004
                                                  ============   ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for interest        $ 15,209,103   $ 20,915,649
                                                  ============   ============
  Cash paid during the period for income tax      $  5,100,000   $  3,750,000
                                                  ============   ============

              (See Notes to Consolidated Financial Statements)

7

<PAGE>



                           HORIZON FINANCIAL CORP.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 2002
                                (unaudited)


NOTE A - Basis of Presentation
------------------------------

     The consolidated financial statements for the three months and nine
months ended December 31, 2002, include the accounts of Horizon Financial
Corp. (the Corporation), Horizon Bank (the Bank), and other subsidiaries of
the Bank.  Significant intercompany balances and transactions have been
eliminated in consolidation. The Corporation has engaged in no significant
activity other than holding the stock of the Bank.

     The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect amounts reported in
the consolidated financial statements. Changes in these estimates and
assumptions are considered reasonably possible and may have a material impact
on the financial statements and thus actual results could differ from the
amounts reported and disclosed herein.

     The unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America for interim financial information and with the instructions to the
Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include
all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements.  In the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation are reflected in
the interim financial statements.  The results of operations for the periods
ended December 31, 2002 and 2001 are not necessarily indicative of the
operating results for the full year.  For further information, refer to the
consolidated financial statements and footnotes thereto in the Horizon
Financial Corp. annual report for the year ended March 31, 2002.

NOTE B - Reclassification
-------------------------

     Certain reclassifications have been made to prior financial statements to
conform with current presentation.  Such reclassifications have no effect on
net income.

NOTE C - Net Income Per Share
-----------------------------

     Basic earnings per share for the three months ended December 31, 2002 and
2001 are calculated on the basis of 10,663,367 and 10,819,490 weighted average
shares outstanding. Diluted earnings per share for the three months ended
December 31, 2002 and 2001 are calculated on the basis of 10,835,626 and
10,980,344 weighted average shares outstanding, respectively.  Basic earnings
per share for the nine months ended December 31, 2002 and 2001 are calculated
on the basis of 10,695,604 and 10,966,568 weighted average shares outstanding,
respectively.  Diluted earnings per share for the nine months ended December
31, 2002 and 2001 are calculated on the basis of 10,874,591 and 11,107,409
weighted average shares outstanding, respectively.  Diluted EPS figures are
computed by determining the number of additional shares that are deemed
outstanding due to stock options and warrants under the treasury stock method.
All numbers have been restated to reflect the 25% stock split paid July 23,
2002.

NOTE D -  New Accounting Pronouncements
---------------------------------------

     Statement of Financial Accounting Standard (SFAS) No. 148, Accounting for
Stock-Based Compensation   Transition and Disclosure   an amendment to FASB
Statements No. 123. This Statement provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results.  This statement is effective for fiscal years ending after
December 15, 2002.  The Corporation will continue to disclose in accordance
with APB 25 and as such will enhance the footnote disclosure as required under
this new standard effective March 31, 2003.  The Corporation does not expect
the Statement will result in a material impact on its financial position or
results of operations.

8

<PAGE>



Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS


     The following discussion is intended to assist in understanding the
financial condition and results of operations of the Corporation and its
subsidiary. The information contained in this section should be read in
conjunction with the Consolidated Financial Statements and the accompanying
Notes contained herein.

Forward Looking Statements
--------------------------

     Management's Discussion and Analysis and other portions of this report
contain certain "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.  This statement is for the express
purpose of availing Horizon Financial to the protections of such safe harbor
provisions of said Act with respect to all "forward looking statements."
Horizon Financial has used "forward looking statements" to describe future
plans and strategies, including expectations of Horizon Financial's potential
future financial results.  Management's ability to predict results or the
effect of future plans and strategies is inherently uncertain.  Factors that
could affect results include, but are not limited to: the future level of
interest rates, industry trends, general economic conditions, loan delinquency
rates, and changes in state and federal regulations.  These factors should be
considered when evaluating the "forward looking statements" and undue reliance
should not be placed on such statements.

General
-------

     Horizon Financial was formed under Washington law on May 22, 1995, and
became the holding company for Horizon Bank, effective October 13, 1995.
Effective June 19, 1999 the Corporation completed the acquisition of
Bellingham Bancorporation, whose wholly-owned subsidiary, Bank of Bellingham,
was merged with and into Horizon Bank.  At December 31, 2002, the Corporation
had total assets of $811.2 million, total deposits of $644.3 million and total
equity of $106.4 million.  The Corporation's business activities generally are
limited to passive investment activities and oversight of its investment in
the Bank.  Accordingly, the information set forth herein, including the
consolidated financial statements and related data, relates primarily to the
Bank and its subsidiary.

     The Bank was organized in 1922 as a Washington State chartered mutual
savings and loan association and converted to a federal mutual savings and
loan association in 1934.  In 1979, the Bank converted to a Washington State
chartered mutual savings bank, the deposits of which are insured by the
Federal Deposit Insurance Corporation ("FDIC").  On August 12, 1986, the Bank
converted to a state chartered stock savings bank under the name "Horizon
Bank, a savings bank".  The Bank became a member of the Federal Home Loan Bank
("FHLB") of Seattle in December 1998.  Effective March 1, 2000, the Bank
changed its name to its current title, "Horizon Bank".

     The Bank's operations are conducted through 15 full-service office
facilities, located in Whatcom, Skagit and Snohomish counties in Northwest
Washington.  The acquisition of Bellingham Bancorporation increased Horizon
Financial's and Horizon Bank's presence in Whatcom County.  During fiscal
2000, the Bank purchased a bank site in Marysville, which will provide
potential additional growth opportunities.  In Fiscal 2002, the Bank acquired
a bank site in Lynnwood, Washington.  The Bank is currently working on
remodeling and upgrading this building, and anticipates opening for business
in the first quarter of 2003.  Future plans for the Bank include the opening
of loan centers in Snohomish and Everett during the first quarter of 2003.

Operating Strategy
------------------

     The primary business of the Bank is to acquire funds in the form of
deposits and wholesale funds, and to use the funds to make consumer, real
estate and commercial loans in the Bank's primary market area.  In addition,
the Bank invests in a variety of investment grade securities including, but
not necessarily limited to U.S. Government and federal agency obligations,
mortgage-backed securities, corporate debt, equity securities, and municipal
securities.  The Bank intends to continue to fund its assets primarily with
retail deposits, although FHLB advances, and other wholesale borrowings, may
be used as a supplemental source of funds.

     The Bank's profitability depends primarily on its net interest income,
which is the difference between the income it receives on its loan and
investment portfolio and its cost of funds, which consists of interest paid on
deposits and borrowings.

     Net interest income is also affected by the relative amounts of
interest-earning assets and interest-bearing liabilities.  When
interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. The Bank's
profitability is also affected by the level of other income and expenses.
Other

9

<PAGE>



income includes income associated with the origination and sale of mortgage
loans, loan servicing fees and net gains and losses on sales of
interest-earning assets.  Other expenses include compensation and benefits,
occupancy and equipment expenses, deposit insurance premiums, data servicing
expenses and other operating costs.  The Bank's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government legislation and
regulation and monetary and fiscal policies.

     The Bank's business strategy is to operate as a well-capitalized,
profitable and independent community bank, dedicated to commercial lending,
home mortgage lending, consumer lending, small business lending and providing
quality financial services to local personal and business customers.  The Bank
has sought to implement this strategy by: (i) focusing on commercial banking
opportunities;  (ii) continued efforts towards the origination of residential
mortgage loans, including one- to- four family residential construction loans;
(iii) providing high quality, personalized financial services to individuals
and business customers and communities served by its branch network; (iv)
selling many of its fixed rate mortgages to the secondary market; (v) focusing
on asset quality; (vi) containing operating expenses; and (vii) maintaining
capital in excess of regulatory requirements combined with prudent growth.

Financial Condition
-------------------

     Total consolidated assets for the Corporation as of December 31, 2002,
were $811,221,340, a 5.07% increase from the March 31, 2002, level of
$772,062,906.  This increase in assets was due primarily to the growth in
available for sale investment securities, which increased 65.64% to
$76,811,420 from $46,373,554 at March 31, 2002.  The tables below display the
characteristics of the AFS and HTM portfolios as of December 31, 2002:

                                           As of December 31, 2002
                                    -----------------------------------------
                                                                 Estimated
                                      Amortized        Net         Fair
                                        Costs      Gain/(Loss)     Value
                                    -------------  -----------  -------------
Available-For-Sale Securities
  State and political subdivisions
   and U.S. government agency
   securities                       $  40,920,015  $ 1,906,218  $  42,826,233
  Marketable equity securities          3,805,723    5,599,881      9,405,604
  Mutual funds                          5,000,000       15,106      5,015,106
  Corporate debt securities            18,615,593      948,884     19,564,477
  Mortage-backed securities and
   CMO's                               33,872,861      982,480     34,855,341
                                    -------------  -----------  -------------
     Total available-for-sale
      securities                      102,214,192    9,452,569    111,666,761
                                    -------------  -----------  -------------

Held-To-Maturity Securities
  State and political subdivisions
   and U.S. government agency
   securities                             369,254       30,124        399,378
  Mortgage-backed securities and
   CMO's                                3,114,461      228,760      3,343,221
                                    -------------  -----------  -------------
     Total held-to-maturity
      securities                        3,483,715      258,884      3,742,599
                                    -------------  -----------  -------------
     Total securities               $ 105,697,907  $ 9,711,453  $ 115,409,360
                                    =============  ===========  =============

                                     Maturity Schedule of Securities
                           --------------------------------------------------
                              Available-For-Sale          Held-To-Maturity
                           -------------------------- -----------------------
                            Amortized     Estimated   Amortized    Estimated
                               Cost       Fair Value     Cost      Fair Value
                           ------------  ------------ ----------- -----------
Maturities:
  One year                 $  7,617,490  $  7,675,632 $     3,505 $     3,721
  Two to five years          70,377,722    73,275,284     563,445     605,018
  Five to ten years             525,391       538,880   2,582,053   2,754,787
  Over ten years             14,887,866    15,756,255     334,712     379,073
                           ------------  ------------ ----------- -----------
                             93,408,469    97,246,051   3,483,715   3,742,599
                           ------------  ------------ ----------- -----------
Mutual funds and
 Marketable equity
 securities (liquid)          8,805,723    14,420,710           -           -
                           ------------  ------------ ----------- -----------
Total investment
 securities                $102,214,192  $111,666,761 $ 3,483,715 $ 3,742,599
                           ============  ============ =========== ===========

10

<PAGE>



     Total liabilities also increased slightly to $704,864,379 at December 31,
2002, from $671,463,315 at March 31, 2002.  This increase in liabilities was
due in large part to the growth in deposits, which increased 2.47% to
$644,295,514 from $628,782,470 at March 31, 2002.  The following is an
analysis of the deposit portfolio by major type of deposit:

A comparative summary of deposits at December 31, 2002 and March 31, 2002
follows:

                                        December 31         March 31
                                      -------------     --------------

Demand deposits
  Savings                             $  36,574,413      $  35,262,865
  Checking                               59,201,731         52,336,378
  Checking (noninterest-bearing)         29,500,027         22,915,124
  Money Market                          124,549,869        121,666,173
                                      -------------     --------------
                                        249,826,040        232,180,540
                                      -------------     --------------

Time certificates of deposit
  Less than $100,000                    265,502,339        272,739,558
  Greater than or equal to $100,000     128,967,135        123,862,372
                                      -------------     --------------
                                        394,469,474        396,601,930
                                      -------------     --------------
Total deposits                        $ 644,295,514     $  628,782,470
                                      =============     ==============

     Also contributing to the growth was an increase in other borrowed funds
to $43,765,515 at December 31, 2002, from $29,120,729 at March 31, 2002.
During the quarter, the Bank took out an additional $4,000,000 in borrowings
from the Federal Home Loan Bank to help control interest rate risk and support
the growth in assets.

     Shareholder equity at December 31, 2002 increased 5.72% to $106,356,961
from $100,599,591 at March 31, 2002.  This increase was due primarily to the
increase in net income of $9,076,023 less dividends paid and shares
repurchased.  Also contributing to this increase was the change accumulated
other comprehensive income to $6,238,695 at December 31, 2002 from $4,151,710
at March 31, 2002.  The declining interest rates throughout the year resulted
in an increased value of the Bank's AFS security portfolio as shown in the
table above.  The Corporation remains strong in terms of its capital position,
with a shareholder equity-to-assets ratio of 13.11% at December 31, 2002,
compared to 13.03% at March 31, 2002.

Liquidity and Capital Resources
-------------------------------

     The Bank maintains liquid assets in the form of cash and short-term
investments to provide a source to fund loans, savings withdrawals, and other
short-term cash requirements.  At December 31, 2002, the Bank had liquid
assets (cash and marketable securities with maturities of one year or less)
with a book value of $85,958,864.

     As of December 31, 2002, the total book value of investments and
mortgage-backed securities was $105,697,907 compared to a market value of
$115,409,360 with an unrealized gain of $9,711,453.  As of March 31, 2002 the
total book value of investments and mortgage-backed securities was
$74,850,129, compared to a market value of $81,336,830 with an unrealized gain
of $6,486,701.   The Bank foresees no factors that would impair its ability to
hold debt securities to maturity.

     As indicated on the Corporation's Consolidated Statement of Cash Flows,
the Bank's primary sources of funds are cash flow from operations, which
consist primarily of mortgage loan repayments, deposit increases, loan sales,
borrowings, and cash received from the maturity or sale of investment
securities.  The Bank's liquidity fluctuates with the supply of funds and
management believes that the current level of liquidity is adequate at this
time.  If additional liquidity is needed, the Bank's options include, but are
not necessarily limited to: 1) Selling additional loans in the secondary
market; 2) Entering into reverse repurchase agreements; 3) Borrowing from the
FHLB of Seattle; 4) Accepting additional jumbo and/or public funds deposits;
or 5) Accessing the discount window of the Federal Reserve Bank of San
Francisco.

     Shareholder's equity as of December 31, 2002 was $106,356,961, or 13.11%
of assets, compared to $100,599,591, or 13.03% of assets at March 31, 2002.
The Bank continues to exceed the 5.0% minimum tier one capital required by the
FDIC in order to be considered well capitalized.  The Bank's total
risk-adjusted capital ratio as of December 31, 2002 was 19.38%, compared to
20.26% as of March 31, 2002.  These figures are well above the
well-capitalized minimum of 10% set by the FDIC.

11

<PAGE>



     The Corporation has been in various buy-back programs since August 1996.
At its October 24, 2000 meeting, the Board of Directors authorized the
repurchase of up to 10% (approximately 1,121,250 shares, as restated) of the
Corporation's outstanding Common Stock over a 24 month period. In total, the
Corporation repurchased 769,059 shares under this plan at an average price of
$9.88.

     At its October 22, 2002 meeting, the Board of Directors authorized it's
fourth repurchase plan, allowing the repurchase of up to 10% (approximately
1,065,000 shares) of the Corporation's outstanding Common Stock over a 12
month period.  During the quarter ended December 31, 2002, the Corporation
repurchased 32,800 shares at an average price of $12.15.

     Management intends to continue its stock buy-back programs from time to
time as long as repurchasing the stock is perceived to contribute to the
overall growth of shareholder value.   The number of shares of stock that will
be repurchased and the price that will be paid is the result of many factors,
several of which are outside of the control of the Corporation. The primary
factors, however, are market and economic factors such as the price at which
the stock is trading in the market, the number of shares available in the
market; the attractiveness of other investment alternatives in terms of the
rate of return and risk involved in the investment;  the ability to increase
the book value and/or earnings per share of the remaining outstanding shares,
and the Bank's and the Corporation's liquidity and capital needs and
regulatory requirements.  Presently, it is management's belief that purchases
made under the current Board approved plan will not materially affect the
Bank's capital or liquidity position.

12

<PAGE>



                         Comparative Results of Operations
                    For the Three Months and Nine Months Ended
                            December 31, 2002 and 2001


Net Interest Income
-------------------

     Net interest income for the three months ended December 31, 2002,
increased 15.96% to $8,014,478 from $6,911,367 in the same time period of the
previous year.  Interest on loans for the quarter ended December 31, 2002,
decreased 3.82% to $11,215,221, from $11,660,737.  Included in these numbers
are $638,998 and $428,401, respectively of deferred fee income as a result of
loan paydowns, payoffs, and loans sold from the portfolio.  The decrease in
total interest on loans was due primarily to the overall decline in interest
rates.  Interest and dividends on investments and mortgage-backed securities
increased 23.56% to $1,572,205, from $1,272,463 for the comparable quarter a
year ago.  This increase is due to the overall growth in the investment
portfolio compared to the prior period.  Total interest income decreased 1.13%
to $12,787,426 from $12,933,200 due to the overall decline in interest rates.

     Total interest paid on deposits decreased 24.34% to $4,289,760 from
$5,669,748.  This decrease in interest expense is due to an overall decline in
interest rates.  Interest on borrowings increased to $483,188 during the
quarter, compared to $352,085 for the comparable period one year ago.  The
increased expense in the current year was due to a higher level of borrowings
outstanding.  The Bank continues to carry wholesale borrowings in order to
further leverage its balance sheet and better manage its interest rate risk
profile.

     Net interest income for the nine-month period ended December 31, 2002
increased 16.11% to $22,749,415 from $19,593,004 for the comparable period one
year ago.  Included in these numbers are $1,357,764 and $1,650,550,
respectively of deferred fee income as a result of loan paydowns, payoffs, and
loans sold from the portfolio.  Total interest income decreased 6.40% to
$37,851,895 from $40,438,005.  Total interest expense for the nine-month
period decreased 27.55% to $15,102,480 from $20,845,001 due to reasons stated
above.

Provision for losses on loans
-----------------------------

     Provisions for loan losses are charges to earnings to bring the total
allowance for loan losses to a level considered by management as adequate to
provide for known and inherent risks in the loan portfolio, based on
management's continuing analysis of factors underlying the quality of the loan
portfolio.  These factors include changes in portfolio size and composition,
actual loss experience, current economic conditions, detailed analysis of
individual loans for which full collectibility may not be assured, and
determination of the existence and realizable value of the collateral and
guarantees securing the loans.

     The provision for loan losses was $1,050,000 for the quarter ended
December 31, 2002 compared to $459,642 for the quarter ended December 31,
2001.  This increase resulted from management's ongoing analysis of changes in
loan portfolio composition by collateral categories, overall credit quality of
the portfolio, peer group analysis, and current economic conditions.  The
reserve for loan losses was $7,481,630, or 1.30% of loans receivable at
December 31, 2002, compared to $5,759,596, or 1.02% of loans receivable at
December 31, 2001.  The increased allowance level resulted from continued loan
portfolio growth in the higher-risk lending categories of commercial and
multi-family construction/permanent loans and business loans during the
period, which comprised $346.4 million, or 60.3% of the portfolio at December
31, 2002, versus $263.9 million, or 46.7% at December 31, 2001.  The following
is an analysis of the loan portfolio by major type of loans:

                                            December 31,       March 31,
                                               2002              2002
                                           -------------     -------------
First mortgage loans
  1-4 Family                               $ 390,276,950     $ 493,097,739
  1-4 Family construction                     28,792,747        29,958,286
  Less participations                       (169,111,932)     (228,874,332)
                                           -------------     -------------
      Net first mortgage loans               249,957,765       294,181,693
  Construction and land development           82,020,140        55,746,760
  Residential commercial real estate          51,433,297        28,603,971
  Non-residential commercial real estate     156,554,949       169,696,803
  Commercial loans                            54,092,049        37,844,119
  Home equity secured                         24,003,706        18,873,309
  Other consumer loans                         6,375,301         5,263,284
                                           -------------     -------------
      Subtotal                               374,479,442       316,028,246
                                           -------------     -------------
      Subtotal                               624,437,207       610,209,939
                                           -------------     -------------

Less:
  Undisbursed loan proceeds                  (37,277,495)      (30,406,272)
  Deferred loan fees                          (5,110,306)       (5,612,704)
  Allowance for loan losses                   (7,481,630)       (5,887,482)
                                           -------------     -------------
                                           $ 574,567,776     $ 568,303,481
                                           =============     =============


13

<PAGE>



     In addition, commercial and multi-family loans have larger individual
loan amounts, which have a greater single impact on the total portfolio
quality in the event of delinquency or default.  The Bank considers these
increased provisions to be appropriate, due to the uncertain regional economic
environment.  Northwest Washington's economy has been adversely affected by a
number of factors, including but not limited to slowdowns in the aerospace,
technology, and telecommunications industries.

     As of December 31, 2002, there were 8 loans in the Bank's portfolio over
90 days delinquent and two loans on non accrual status.  At December 31, 2002
total non-performing loans were $1,171,722.  Real estate owned at December 31,
2002 totaled $946,260.  Total non-performing assets represented .26% of total
assets at December 31, 2002 compared to $1,033,548 or .14% of total assets at
December 31, 2001.

                                             As of December 31,
Non-Performing Assets                         2002         2001
                                          -----------   -----------

Accruing loans - 90 days past due         $   929,085   $   418,257
Non-accrual loans                             242,637             -
                                          -----------   -----------
Total non-performing loans                  1,171,722       418,257
Total non-performing loans/gross loans           0.20%         0.07%
Real estate owned                             946,260       615,291
                                          -----------   -----------
Total non-performing assets                 2,117,982     1,033,548
                                          -----------   -----------
Total non-performing assets/total assets         0.26%         0.14%


Non Interest Income
-------------------

     Non interest income for the three months ended December 31, 2002,
increased 59.55% to $2,251,533 from $1,411,141 for the same time period a year
ago.  Service fee income increased 18.37% to $784,204 from $662,477. The net
gain/loss on the sale of loans servicing released increased to $913,997 from
$623,243 in the comparable period one year ago. The recent low mortgage rate
environment was the primary reason for this increase over the prior year.  In
February of 2001, the Bank began selling many of its new long-term fixed rate
mortgages into the secondary market on a servicing released basis.
Separately, the net gain/loss on the sale of loans on a servicing retained
basis (loans sold from the Bank's portfolio) showed a slight gain of $4,470
during the quarter, compared to a gain of $-0- in the comparable period one
year ago. When the Bank sells loans, the gains or losses related to the loan
balances and the prices received in the secondary market are reflected as
non-interest income.  Other non-interest income for the quarter increased
337.62% to $548,862 from $125,421.  The primary reason for the increase in
fiscal 2003 is the recognition of income related to approximately $10.0
million in bank-owned life insurance which was acquired in late March and
early April 2002.  Also contributing to the increase in fiscal 2003 was the
recognition of approximately $145,000 in commercial loan origination fees.

     Non interest income for the nine months ended December 31, 2002 increased
55.11% to $5,282,537 from $3,405,667.  The net gain/loss on the sale of loans
servicing released increased to $1,841,420 from $1,169,901 in the comparable
period one year ago.  The net gain/loss on the sale of loans on a servicing
retained basis (loans sold from the Bank's portfolio) showed a gain of $99,766
during the nine-months ended December 31, 2002, compared to a loss of $252,984
in the prior period.  The primary reasons for these differences year over year
are discussed above in the discussion of the quarterly results.  The net
gain/loss on sales of investment securities decreased 65.14% to $62,258 from
$178,617 for the comparable period one year ago. The gains in these periods
were due primarily to the sale of selected common stocks and mortgage backed
securities from the Bank's available for sale investment portfolio.  Other non
interest income for the nine-month period increased 230.06% to $1,348,018 from
$408,411, due primarily to the reasons stated in the quarterly discussion
above regarding the bank-owned life insurance, commercial loan origination
fees, and the recognition of approximately $40,000 gain on the sale of real
estate owned in April 2002.

14

<PAGE>



Non Interest Expense
--------------------

     Non interest expense for the three months ended December 31, 2002,
increased 12.50% to $4,281,989 from $3,806,198.  Compensation and employee
benefits increased 21.90% for the quarter ended December 31, 2002, to
$2,306,854 from $1,892,475.  The increase in compensation and employee
benefits during the quarter ended December 31, 2002 was primarily due to the
overall growth in employment at the Bank, including key additions to staff as
the Bank continues its efforts to enhance its commercial banking expertise,
along with additional staff for the Lynnwood office.  Building occupancy for
the quarter ended December 31, 2002 increased slightly to $580,736 from
$566,143.  Data processing expenses increased 1.10% to $250,764 from $248,042.
Advertising and marketing expenses for the quarter ended December 31, 2002
decreased 14.78% to $183,740 from $215,600.  Other non-interest expense
increased 8.59% to $959,895 from $883,938 due to the overall growth of the
Bank, and various expenses related to the creation and implementation of the
Horizon Bank brand.

     Non interest expense for the nine months ended December 31, 2002
increased 16.63% to $12,809,729 from $10,982,924.  Compensation and employee
benefits increased 22.16% to $6,917,653 from  $5,662,916.  Building occupancy
expenses for the nine months increased slightly to $1,766,199 from $1,702,812.
Other expenses increased 19.51% to $2,804,183 at December 31, 2002 compared to
$2,346,338 for the prior period due primarily to the reasons stated in the
discussion above regarding the quarterly results.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

     The Corporation continues to be exposed to interest rate risk.
Currently, the Corporation's assets and liabilities are not materially exposed
to foreign currency or commodity price risk.  At December 31, 2002, the
Corporation had no off-balance sheet derivative financial instruments, nor did
it have a trading portfolio of investments.  At December 31, 2002, there were
no material changes in the Corporation's market risk from the information
provided in the Form 10-K for the fiscal year ended March 31, 2002.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures
------------------------------------------------

     An evaluation of the Corporation's disclosure controls and procedures (as
defined in Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the
"Act")) was carried out under the supervision and with the participation of
the Corporation's Chief Executive Officer, Chief Financial Officer, and
several other members of the Corporation's senior management within the 90-day
period preceding the filing date of this quarterly report.  The Corporation's
Chief Executive Officer and Chief Financial Officer concluded that the
Corporation's disclosure controls and procedures as currently in effect are
effective in ensuring that the information required to be disclosed by the
Corporation in the reports it files or submits under the Act is (i)
accumulated and communicated to the Corporation's management (including the
Chief Executive Officer and Chief Financial Officer) in a timely manner, and
(ii) recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms.

Changes in Internal Controls
----------------------------

     In the quarter ended December 31, 2002, the Corporation did not make any
significant changes in, nor take any corrective actions regarding, its
internal controls or other factors that could significantly affect these
controls.

15

<PAGE>

PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings
              Horizon Financial Corporation has certain litigation and/or
              negotiations in progress resulting from activities arising from
              normal operations.  In the opinion of management, none of these
              matters is likely to have a materially adverse effect on the
              Corporation's financial position or results of operation.

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

(a)         Exhibits
            --------
            (3.1)   Articles of Incorporation of Horizon Financial, Corp.
                    (incorporated by reference to Exhibit 3.1 to the
                    Registrant's Current Report on Form 8-K dated October 13,
                    1995)
            (3.2)   Bylaws of Horizon Financial Corp. (incorporated by
                    reference to Exhibit 3.2 to the Registrant's Current
                    Report on Form 8-K dated October 13, 1995)
            (10.1)  Amended and Restated Employment Agreement with V. Lawrence
                    Evans (incorporated by reference to the Registrant's
                    Annual Report on Form 10-K for the year ended March 31,
                    1996)
            (10.2)  Deferred Compensation Plan (incorporated by reference to
                    the Registrant's Annual Report on Form 10-K for the year
                    ended March 31, 1996)
            (10.3)  1986 Stock Option and Incentive Plan (incorporated by
                    reference to Exhibit 99.1 to the Registrant's Registration
                    Statement on Form S-8 (File No. 33-99780))
            (10.4)  1995 Stock Option Plan (incorporated by reference to
                    Exhibit 99.2 to the Registrant's Registration Statement on
                    Form S-8 (File No. 33-99780))
            (10.5)  Bank of Bellingham 1993 Employee Stock Option Plan
                    (incorporated by reference to Exhibit 99 to the
                    Registrant's Registration Statement on Form S-8 (File No.
                    33-88571))
            (10.6)  Severance Agreement with Dennis C. Joines (incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    for the year ended March 31, 2002)
            (10.7)  Severance Agreement with Richard P. Jacobson (incorporated
                    by reference to the Registrant's Quarterly Report on Form
                    10-Q for the quarter ended June 30, 2002)
            (10.8)  Severance Agreement with Steven L. Hoekstra (incorporated
                    by reference to the Registrant's Quarterly Report on Form
                    10-Q for the quarter ended June 30, 2002)
            (99.1)  Certification Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002

(b)         Reports on Form 8-K:
            -------------------

              None

16

<PAGE>



                                   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.


                              HORIZON FINANCIAL CORP.



                              By:  V. Lawrence Evans
                                 -----------------------------
                                 V. Lawrence Evans
                                 Chairman, President, and
                                 Chief Executive Officer


                              By:  Richard P. Jacobson
                                 -----------------------------
                                 Richard P. Jacobson
                                 Chief Financial Officer


                              Dated:   February 13, 2003
                                    ---------------------

17

<PAGE>



                               CERTIFICATIONS


                            Certification Required
    by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934

I, V. Lawrence Evans, certify that:

1.   have reviewed this quarterly report on Form 10-Q of Horizon Financial
     Corp;

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 the 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: February 13, 2003


                             By:  /s/V. Lawrence Evans
                                  ----------------------------------------
                                  V. Lawrence Evans
                                  Chairman, President, and Chief Executive
                                  Officer

18

<PAGE>



                        Certification Required
    by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934

I, Richard P. Jacobson, certify that:

1.   have reviewed this quarterly report on Form 10-Q of Horizon Financial
     Corp;

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 the 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: February 13, 2003


                             By:  /s/Richard P. Jacobson
                                  ----------------------------------------
                                  Richard P. Jacobson
                                  Chief Financial Officer, EVP

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                              Exhibit 99.1

  CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF
                    HORIZON FINANCIAL CORP.
         PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     The undersigned hereby certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report of
Form 10-Q, that:

      1.   the report fully complies with the requirements of Sections 13(a)
           and 15(d) of the Securities Exchange Act of 1934, as amended, and

      2.   the information contained in the report fairly presents, in all
           material respects, the company's financial condition and results of
           operations.

/s/ V. Lawrence Evans                         /s/ Richard P. Jacobson
---------------------------                   -----------------------------
V. Lawrence Evans                             Richard P. Jacobson
Chairman, President, and                      Chief Financial Officer
Chief Executive Officer

Dated:  February 13, 2003

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