UNITED STATES
                        SECURITY AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

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

Commission File Number:   0-24036
                       ---------------------------------------------------------

   Horizon Financial Services Corporation
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

   Delaware
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)

   42-1419757
--------------------------------------------------------------------------------
(I.R.S. Employer Identification No.)

   301 First Avenue East, Oskaloosa, Iowa                                52577
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

   (641)673-8328
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
 last report)

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 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. [X] YES [ ] NO

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.

                Common Stock                                     754,902
--------------------------------------------------------------------------------
                   Class                                    Shares Outstanding
                                                         as of February 04, 2003

Transitional Small Business Disclosure Format (check one):
Yes: [_]  No: [X]

<PAGE>
<TABLE>
<CAPTION>



              HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARY

                                      INDEX


<S>       <C>                                                                   <C>
Part I.    Financial Information                                                Page
                                                                                ----
          Item 1.  Financial Statements (Unaudited)

          Consolidated Balance Sheets at December 3l, 2002 and June 30, 2002      1

          Consolidated Statements of Operations for the three months and          2
          six months ended December 31, 2002 and 2001

          Consolidated Statements of Comprehensive Income for the three months    3
          and six months ended December 31, 2002 and 2001

          Consolidated Statements of Cash Flows for the six months ended          4
          December 31, 2002 and 2001

          Notes to Consolidated Financial Statements                              5

          Item 2.  Management's Discussion and Analysis                           7

          Item 3.  Controls and Procedures                                       15

Part II.  Other Information                                                      16

          Signatures                                                             17

          Certifications                                                         18

          Index of Exhibits                                                      21
</TABLE>

<PAGE>



                                                      PART I

ITEM 1.  FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                               HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARY
                                            Consolidated Balance Sheets

                                                                 December 31,          June 30,
Assets                                                               2002                2002
------                                                               ----                ----
                                                                 (Unaudited)
<S>                                                              <C>                <C>
Cash and cash equivalents                                        $ 10,056,802       $   8,124,566
Securities available-for-sale                                      12,839,538          12,086,313
Loans receivable, net                                              65,952,442          65,098,795
Real estate                                                           307,043             417,137
Stock in Federal Home Loan Bank, at cost                              509,200             509,200
Office property and equipment, net                                  1,487,303           1,351,486
Accrued interest receivable                                           567,972             587,134
Deferred tax asset                                                    165,200             211,800
Prepaid expenses and other assets                                      55,171              51,576
                                                                 ------------        ------------

     Total assets                                                $ 91,940,671        $ 88,438,007
                                                                 ============        ============

Liabilities and Stockholders' Equity
------------------------------------

Deposits                                                         $ 75,703,272        $ 71,953,695
Advances from Federal Home Loan Bank                                5,557,486           5,571,497
Advance payments by borrowers for taxes and insurance                 139,802             373,147
Accrued income taxes                                                  129,585             490,522
Accrued expenses and other liabilities                                393,722             645,694
                                                                 ------------        ------------

     Total liabilities                                             81,923,867          79,034,555
                                                                 ------------        ------------

Stockholders' equity
--------------------
Preferred stock, $.01 par value, authorized 250,000
     shares, none issued                                                  ---                 ---
Common stock, $.01 par value, authorized 1,500,000
     shares, 1,046,198 issued                                          10,462              10,462
Additional paid-in capital                                          5,029,126           5,025,598
Retained earnings, substantially restricted                         6,961,786           6,515,330
Treasury stock, at cost, (291,296 and 293,016 shares
      at December 31, 2002 and June 30, 2002, respectively)        (2,109,044)         (2,119,466)
Accumulated other comprehensive income (loss)-net
      unrealized gain (loss) on securities available-for-sale         124,474             (28,472)
                                                                 ------------        ------------

     Total stockholders' equity                                    10,016,804           9,403,452

Total liabilities and stockholders' equity                       $ 91,940,671        $ 88,438,007
                                                                 ============        ============
</TABLE>

See Notes to Consolidated Financial Statements.




                                      -1-


<PAGE>

<TABLE>
<CAPTION>


                                                         HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARY
                                                                 Consolidated Statements of Operations

                                                            Three Months Ended                 Six Months Ended
                                                                December 31,                     December 31,
                                                             2002          2001              2002             2001
                                                             ----          ----              ----             ----
                                                                 (Unaudited)                       (Unaudited)
<S>                                                    <C>              <C>              <C>              <C>
Interest income:
Interest and fees on loans                             $1,293,927       $1,356,282       $2,619,033       $2,720,649
Interest on securities available-for-sale                 149,050          182,702          284,116          388,369
Other interest income                                      21,594           27,421           44,483           64,885
                                                       ----------       ----------       ----------       ----------

Total interest income                                   1,464,571        1,566,405        2,947,632        3,173,903
                                                       ----------       ----------       ----------       ----------

Interest expense:
Interest on deposits                                      458,527          609,771          937,306        1,372,164
Interest on FHLB advances                                  73,034          103,385          144,178          223,500
                                                       ----------       ----------       ----------       ----------

Total interest expense                                    531,561          713,156        1,081,484        1,595,664
                                                       ----------       ----------       ----------       ----------

Net interest income                                       933,010          853,249        1,866,148        1,578,239

Provision for losses on loans                              57,500           57,500          138,300           86,500
                                                       ----------       ----------       ----------       ----------

Net interest income after provision for
  losses on loans                                         875,510          795,749        1,727,848        1,491,739
                                                       ----------       ----------       ----------       ----------

Non-interest income:
Fees, commissions and service charges                     149,547          149,233          310,808          305,467
(Loss) gain on sale of securities, net                     (2,363)          38,331           12,621           67,965
Gain on sale of mortgage loans                             24,525           20,180           37,161           37,807
Impairment loss on equity securities                            0                0         (161,662)               0
Other                                                      18,972                0           18,972                0
                                                       ----------       ----------       ----------       ----------

Total non-interest income                                 190,681          207,744          217,900          411,239
                                                       ----------       ----------       ----------       ----------

Non-interest expense:
Compensation, payroll taxes and employee benefits         323,022          309,999          657,122          606,244
Advertising                                                19,523           16,576           35,083           31,299
Office property and equipment                              92,526           64,150          175,148          129,567
Federal deposit insurance premiums                          3,067            8,590            6,193           17,323
Data processing services                                   50,294           46,319          105,787           90,511
Other real estate                                          (2,841)             359            9,582            7,440
Other                                                      90,757          106,568          174,697          208,632
                                                       ----------       ----------       ----------       ----------

Total non-interest expense                                576,348          552,561        1,163,612        1,091,016
                                                       ----------       ----------       ----------       ----------

Earnings before taxes on income                           489,843          450,932          782,136          811,962

Taxes on income                                           166,400          152,400          259,400          271,600
                                                       ----------       ----------       ----------       ----------

Net earnings                                           $  323,443       $  298,532       $  522,736       $  540,362
                                                       ==========       ==========       ==========       ==========

     Earnings per common share -
       Basic                                                $0.43            $0.40            $0.69            $0.72
       Diluted                                              $0.42            $0.39            $0.68            $0.71
</TABLE>

See Notes to Consolidated Financial Statements.

                                                                -2-


<PAGE>
<TABLE>
<CAPTION>

                                       HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARY
                                          Consolidated Statements of Comprehensive Income

                                                                       Three Months Ended              Six Months Ended
                                                                          December 31,                   December 31,
                                                                        2002          2001             2002          2001
                                                                        ----          ----             ----          ----
                                                                           (Unaudited)                    (Unaudited)

<S>                                                                <C>           <C>              <C>             <C>
Net income                                                         $ 323,443     $   298,532      $ 522,736       $ 540,362

Other Comprehensive Income:
   Unrealized gains (losses) on securities available-for-sale:
      Unrealized holding gains (losses) arising
         during the period, net of tax                                54,395         (45,806)        59,497          12,818
   Reclassification adjustment for net losses (gains)
         included in net income, net of tax                            1,482         (24,034)        93,449         (42,614)
                                                                   ---------       ---------      ---------       ---------

Other comprehensive income (loss), net of tax                         55,877         (69,840)       152,946         (29,796)
                                                                   ---------       ---------      ---------       ---------


Comprehensive income                                               $ 379,320       $ 228,692      $ 675,682       $ 510,566
                                                                   =========       =========      =========       =========

</TABLE>

See Notes to Consolidated Financial Statements.

                                                               -3-
<TABLE>
<CAPTION>



                                       HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARY
                                               Consolidated Statements of Cash Flows
                                                                                        Six Months Ended
                                                                                           December 31,
                                                                                       2002               2001
                                                                                       ----               ----
                                                                                              (Unaudited)
<S>                                                                             <C>               <C>
Cash flows from operating activities:
Net earnings                                                                    $     522,736     $     540,362
Adjustments to reconcile net earnings to net cash provided
by operating activities:
   Depreciation                                                                        71,524            47,951
   Amortization of fees, premiums and accretion of discounts, net                      39,786            34,853
   Provision for losses on loans                                                      138,300            86,500
   Loans originated for sale                                                       (5,644,011)       (6,998,315)
   Proceeds on sales of loans                                                       5,084,336         6,586,415
   Gain on sale of securities                                                         (12,621)          (67,965)
   Impairment loss on securities                                                      161,662             - - -
   Reinvested dividends                                                                 - - -            (2,489)
   Gain (loss) on sale of fixed assets                                                     35              (535)
   Decrease in accrued interest receivable                                             19,162            59,625
   (Decrease) increase in accrued income taxes                                       (405,237)           54,386
   Other, net                                                                        (236,074)         (474,414)
                                                                                -------------     -------------

Net cash used in operating activities                                                (260,402)         (133,626)
                                                                                -------------     -------------

Cash flows from investing activities:
   Securities available-for-sale:
     Purchases                                                                     (4,064,406)       (4,646,205)
     Proceeds from sale                                                             1,054,223         6,162,260
     Proceeds from maturity and principal collected                                 2,311,977         1,906,193
   Loans to customers, net                                                           (528,528)         (732,080)
   Proceeds from sale of real estate                                                  190,386            75,000
   Purchase of office property and equipment, net                                    (207,376)         (100,941)
                                                                                -------------     -------------

Net cash (used in) provided by investing activities                                (1,248,503)        2,664,227
                                                                                -------------     -------------

Cash flows from financing activities:
   Increase in deposits                                                             3,749,577         3,951,520
   Decrease in advance payments by borrowers for taxes and insurance                 (233,345)         (243,335)
   Principal payments on advances from Federal Home Loan Bank                         (14,011)       (3,011,394)
   Net proceeds from options exercised                                                  9,459             - - -
   Payment of dividends                                                               (75,318)          (67,631)
                                                                                -------------     -------------

Net cash provided by financing activities                                           3,436,362           629,160
                                                                                -------------     -------------

Net increase in cash and cash equivalents                                           1,932,236         3,159,761

Cash and cash equivalents at beginning of period                                    8,124,566         5,591,526
                                                                                -------------     -------------
Cash and cash equivalents at end of period                                      $  10,056,802     $   8,751,287
                                                                                =============     =============

Supplemental disclosures of cash flow information:
   Cash paid during the period for:
     Interest                                                                   $   1,318,340     $   2,086,483
     Taxes                                                                            661,108           217,214
   Noncash investing and financing activities:
     Transfers from loans to other real estate                                  $      96,256     $      71,467
                                                                                =============     =============

</TABLE>

   See Notes to Consolidated Financial Statements.

                                                                -4-

<PAGE>


              HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARY
                   Notes to Consolidated Financial Statements

1.  BASIS OF PRESENTATION

The  consolidated  financial  statements  for the  three  and six  months  ended
December  31,  2002 are  unaudited.  In the  opinion  of  management  of Horizon
Financial Services Corporation (the "Registrant" or "Company"),  these financial
statements  reflect  all  adjustments,   consisting  only  of  normal  occurring
accruals, necessary to present fairly the consolidated financial position of the
Company at December  31, 2002 and its results of  operations  and cash flows for
the periods presented. These consolidated financial statements do not purport to
contain  all  the  necessary   disclosures  required  by  accounting  principles
generally  accepted  in the United  States of America  that might  otherwise  be
necessary  in the  circumstances  and  should  be read in  conjunction  with the
consolidated  financial  statements  and notes  therein  included  in the annual
report of Horizon  Financial  Services  Corporation  for the year ended June 30,
2002. The results of the periods presented are not necessarily representative of
the results of  operations  and cash flows which may be expected  for the entire
year.


2.  PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements  include the accounts of the Company and
its wholly owned  subsidiary,  Horizon Federal Savings Bank (the "Bank") and the
Bank's wholly owned subsidiary,  Horizon Investment Services, Inc. The principal
business activity of Horizon  Investment  Services,  Inc. is to sell credit life
insurance  to  customers of the Bank.  All  material  intercompany  accounts and
transactions have been eliminated.


                                       -5-


<PAGE>

3.  EARNINGS PER SHARE

The following provides a reconciliation of the amounts used in the determination
of basic and  diluted  earnings  per  share for the three and six month  periods
ended December 31, 2002 and 2001:

<TABLE>
<CAPTION>

                                                                    Three Months Ended         Six Months Ended
                                                                       December 31,               December 31,
                                                                      2002       2001          2002         2001
                                                                      ----       ----          ----         ----
<S>                                                               <C>         <C>           <C>           <C>
Net Earnings                                                      $ 323,443   $ 298,532     $ 522,736     $ 540,362
                                                                  =========   =========     =========     =========


Basic earnings per share:

Weighted average number of common shares outstanding                753,332     751,462       753,257       751,462
                                                                  ---------   ---------     ---------     ---------

Earnings per common share - basic                                 $    0.43   $    0.40     $    0.69     $    0.72
                                                                  =========   =========     =========     =========


Diluted earnings per share:

Weighted average number of common shares outstanding                753,332     751,462       753,257       751,462

Assumed incremental option shares
     using the treasury stock method                                 17,469      10,349        17,702        11,015
                                                                  ---------   ---------     ---------     ---------

Common and common equivalent shares outstanding                     770,801     761,811       770,959       762,477
                                                                  =========   =========     =========     =========

Earnings per common share - diluted                               $    0.42   $    0.39     $    0.68     $    0.71
                                                                  =========   =========     =========     =========
</TABLE>



                                                          -6-


<PAGE>



ITEM 2.             MANAGEMENT'S DISCUSSION AND ANALYSIS
                    ------------------------------------


GENERAL
-------

Horizon Financial Services Corporation ("the Company") is a savings bank holding
company,  the  primary  asset of which is  Horizon  Federal  Savings  Bank ("the
Bank").  The  Company was  incorporated  in March 1994 and sold shares of common
stock on June 28, 1994 for the purpose of acquiring  all of the capital stock of
the Bank in connection  with the Bank's  conversion from mutual to stock form of
ownership (the "Conversion").

The principal  business of the Company  (through its operating  subsidiary,  the
Bank), has historically consisted of attracting deposits from the general public
and  making  loans  secured  by  residential  and,  to a  lesser  extent,  other
properties.  The Company's results of operations are primarily  dependent on the
difference  or spread  ("interest  rate  spread")  between the average  yield on
loans,  mortgage-backed  and related  securities and investments and the average
rate paid on deposits and other  borrowings  as well as the relative  amounts of
such assets and liabilities. The interest rate spread is affected by regulatory,
economic and competitive  factors that influence interest rates, loan demand and
deposit  flows.  The Company,  like other  non-diversified  savings  institution
holding  companies,  is subject  to  interest  rate risk to the degree  that its
interest-earning  assets mature or reprice at different times, or on a different
basis, than its interest-bearing liabilities.

The Company's  results of  operations  are also affected by, among other things,
fee income received,  loss or gain on securities available for sale and mortgage
loans, the establishment of provisions for probable loan losses,  income derived
from subsidiary  activities,  the level of operating  expenses and income taxes.
The Company's operating expenses  principally  consist of employee  compensation
and benefits,  occupancy  expenses,  federal deposit  insurance  premiums,  data
processing expenses and other general and administrative expenses.

The  Company  is  significantly   affected  by  prevailing  economic  conditions
including  federal  monetary  and fiscal  policies  and  federal  regulation  of
financial  institutions.  Deposit balances are influenced by a number of factors
including interest rates paid on competing personal investments and the level of
personal  income and  savings  within the  institution's  market  area.  Lending
activities are influenced by the demand for housing as well as competition  from
other lending institutions.  The primary sources of funds for lending activities
include deposits, loan payments, borrowings and funds provided from operations.

Local  economic  conditions  in the  Bank's  market are  mixed.  Some  retailing
concerns are  reporting  improving  sales and others are not.  Housing sales are
slowing,  and prices for both grain and  livestock  are  volatile  and  somewhat
undependable.  We are currently experiencing factory layoffs and some decline in
retail business.  In the event current economic and market conditions persist or
worsen,  loan demand and existing loans may be affected,  which could  adversely
affect the financial  condition and results of operations of the Company and the
Bank.


DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
-----------------------------------------------

The  Company,  and its  subsidiaries  may from time to time make written or oral
"forward-looking  statements",  including  statements contained in the Company's
filings with the Securities and Exchange  Commission  (including  this Quarterly
Report on Form 10-QSB and the exhibits  hereto and  thereto),  in its reports to
stockholders and in other communications by the Company,  which are made in good
faith by the Company and the Bank  pursuant to the "safe  harbor"  provisions of
the Private Securities

                                       -7-

<PAGE>

Litigation Reform Act of 1995.

These  forward-looking   statements  include  statements  with  respect  to  the
Company's  and the  Bank's  beliefs,  plans,  objectives,  goals,  expectations,
anticipations,  estimates and intentions,  that are subject to significant risks
and  uncertainties,  and are subject to change based on various factors (some of
which are  beyond  the  Company's  and the  Bank's  control).  The words  "may",
"could",  "should",  "would",  "believe",  "anticipate",  "estimate",  "expect",
"intend",   "plan"  and   similar   expressions   are   intended   to   identify
forward-looking statements. The following factors, among others, could cause the
Company's and the Bank's  financial  performance to differ  materially  from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements:

o    the  strength of the United  States  economy in general and the strength of
     the  local  economies  in which  the  Company  and the Bank  conduct  their
     operations;
o    the effects of, and changes in,  trade,  monetary  and fiscal  policies and
     laws,  including  interest  rate  policies  of the Federal  Reserve  Board,
     inflation, interest rate, market and monetary fluctuations;
o    the timely  development  of and  acceptance of new products and services of
     the Bank and the perceived  overall value of these products and services by
     users, including the features, pricing and quality compared to competitors'
     products and services;
o    the willingness of users to substitute  competitors'  products and services
     for the Bank's products and services;
o    the success of the Bank in gaining regulatory  approval of its products and
     services, when required;
o    the  impact  of  changes  in  financial   services'  laws  and  regulations
     (including laws concerning taxes, banking, securities and insurance);
o    technological changes;
o    acquisitions;
o    changes in consumer spending and saving habits; and
o    the success of the Company and the Bank at managing  the risks  involved in
     the foregoing.

The foregoing list of important factors is not exclusive.  Additional discussion
of factors  affecting  the  Company's  business is  contained  in the  Company's
periodic filings with the Securities and Exchange  Commission.  The Company does
not undertake and expressly  disclaims any intent or  obligation,  to update any
forward-looking statements,  whether written or oral, that may be made from time
to time by or on behalf of the Company or the Bank.


FINANCIAL CONDITION
-------------------

The Company's total assets at December 31, 2002 of $91.9 million  increased $3.5
million, or 4.0%, from $88.4 million at June 30, 2002. Cash and cash equivalents
increased  $1.9 million,  or 23.8%,  from $8.1 million at June 30, 2002 to $10.1
million at December 31, 2002.  Accompanying  this  increase,  was an increase in
securities available-for-sale of $753,000 from $12.1 million at June 30, 2002 to
$12.8 million at December 31, 2002.  Loans  receivable,  net increased  $854,000
from $65.1 million at June 30, 2002 to $66.0 million at December 31, 2002.

Total liabilities  increased $2.9 million, or 3.7%, to $81.9 million at December
31, 2002 from $79.0  million at June 30,  2002.  Deposits  continued to increase
from $72.0  million at June 30, 2002 to $75.7  million at December  31,  2002, a
5.2% increase,  or $3.75 million.  Partially offsetting the increase in deposits
were decreases in advance payments by borrowers for taxes and insurance, accrued
income taxes, and accrued expenses and other  liabilities.  Total  stockholders'
equity increased  $613,000,  from $9.4 million at June 30, 2002 to $10.0 million
at December 31, 2002, the result of an increase of

                                       -8-

<PAGE>

$446,500 in retained earnings and an increase in accumulated other comprehensive
income  on  securities  available-for-sale  of  $153,000.  There  were no  other
significant changes in the components of the Company's balance sheet.


RESULTS OF OPERATIONS
---------------------

The  Company's  results of operations  depend  primarily on the level of its net
interest  income and non-interest  income and the level of operating  expenses.
Net  interest  income  depends  upon the volume of  interest-earning  assets and
interest-bearing liabilities and interest rates earned or paid on such assets or
liabilities.  The  Company's  non-interest  income  consists  primarily  of fees
charged on transaction  accounts which help to offset the costs  associated with
establishing and maintaining  these accounts,  and to a lesser extent,  gains or
losses on sale of securities.


Comparison  of three month and six month  periods  ended  December  31, 2002 and
December 31, 2001.


GENERAL
-------

Net earnings for the three months ended December 31, 2002  increased  $25,000 to
$323,400 from $298,500 for the three month period ended  December 31, 2001.  The
increase in net earnings for the quarter was primarily attributable to increased
net interest  income,  both before and after  provisions for losses on loans, as
interest on deposits and FHLB of Des Moines ("FHLB") advances declined offset in
part by decreased interest income. Non-interest income decreased slightly during
the three month period ended December 31, 2002 compared to the same period ended
2001  primarily  due to decreased  gain on sale of  securities.  Taxes on income
increased  slightly,  the result of higher  earnings  during  this  three  month
period.  Net earnings for the six month period ended December 31, 2002 decreased
$17,600 to $522,700 for the period ended  December 31, 2002 compared to $540,400
for the six month period ended  December 31, 2001.  Decreases  for the six month
period were generally attributable to the recognition of the $161,660 write down
of an equity security  resulting from a decline in fair value that was judged to
be other than  temporary.  As with the results for the three month  period,  net
interest income, both before and after provisions for losses on loans increased,
but was offset in part by increased non-interest expense as compared to the same
period in fiscal 2001.


INTEREST INCOME
---------------

Interest  income  decreased  $101,800 to  $1,465,000  for the three month period
ended  December 31, 2002 compared to $1,566,000 for the three month period ended
December 31, 2001 and $226,300 to $2,948,000, a 7.1% decrease, for the six month
period  ended  December  31, 2002  compared to  $3,174,000  for the period ended
December 31, 2001.  The  decrease for the three month period was  primarily  the
result of a 53 basis point  decrease in the  weighted  average  yield on average
interest-earning  assets to 6.66% for the three month period ended  December 31,
2002 as  compared  to 7.19%  for the same  period  in 2001.  Average  net  loans
receivable  decreased  slightly by $186,300,  and the weighted  average yield on
loans  decreased  35 basis  points  to 7.84% for the three  month  period  ended
December  31, 2002 from 8.19% for the same period  ended 2001,  resulting  in an
overall  decrease  in  interest  and  fees on  loans  of  $62,400.  Interest  on
securities  available-for-sale  also  impacted  interest  income as both average
balance and weighted  average yield  decreased.  Average  balance for securities
available-for-sale  decreased $561,000 for the three month period ended December
31,  2002 to $12.9  million  from  $13.4  million  for the same  period in 2001.
Weighted average yield for the December 31, 2002 period

                                       -9-

<PAGE>

decreased 81 basis points to 4.63% from 5.44% for the comparable  period in 2001
as a result of sale and purchase activities in the available-for-sale  portfolio
and reduced  rates on  investments  due to market  conditions.  The  decrease in
interest  on  securities  available-for-sale  for the three month  period  ended
December 31, 2002 compared to the same period in 2001 was $33,700, or 18.4%. For
the three month period other interest income  decreased  $5,800,  or 21.3%,  The
average  outstanding  balance of other  interest-earning  assets  increased $1.6
million,  but the average yield on other  interest-earning  assets for the three
month period decreased 47 basis points to .83% for the period ended December 31,
2002 from 1.30% for the three month period ended December 31, 2001.

For the six month  period  results  were  similar  with an overall  decrease  in
interest  income of $226,300 to $2.9 million for the period  ended  December 31,
2002  compared to $3.2 million for the period  ended 2001.  Interest and fees on
loans decreased  $101,600 to $2.6 million for the period ended December 31, 2002
from $2.7 million for the six month  period  ended  December 31, 2001 as average
loans for the period  decreased  $101,600 and average yield on loans  receivable
decreased 30 basis  points to 7.95% for the period ended 2002  compared to 8.25%
for the six month  period  ended  December  31,  2001.  Interest  on  securities
available-for-sale  also  decreased for the six month period ended  December 31,
2002 as compared to 2001.  Interest on securities  available-for-sale  decreased
$104,300 to $284,100 for the six month  period  ended 2002  compared to $388,400
for the period  ended  20001,  a 26.8%  decrease.  Average  yield on  securities
available-for-sale  for the six month period decreased 100 basis points to 4.53%
for the period ended December 31, 2002 from 5.53% for the six month period ended
December 31, 2001.  Average yield on other  interest-earning  assets for the six
month  period  decreased  81 basis points to .92% for the six month period ended
December 31, 2002 from 1.73% for the period ended December 31, 2001.


INTEREST EXPENSE
----------------

Interest expense decreased $181,600 to $531,600 from $713,200, a 25.5% decrease,
for the three month period, and $514,200 to $1,081,500 from $1,595,700,  a 32.2%
decrease,  for the six month period  ended  December 31, 2002 as compared to the
same periods ended 2001. The decrease in interest  expense was ultimately due to
the weighted  average rate on deposits  decrease of 89 basis points to 2.45% for
the three month  period ended  December  31, 2002 from 3.34% for the  comparable
period ended  December 31, 2001.  Weighted  average rate on deposits for the six
month period  comparison  decreased  127 basis points to 2.54% for the six month
period  ended  December  31, 2002 as compared to 3.81% for the same period ended
2001.  Average  outstanding  balance of deposits increased $1.9 million to $74.9
million for the three month  period ended  December 31, 2002 from $73.0  million
for the three month period ended  December 31, 2001,  and increased $1.7 million
to $73.8  million  from  $72.1  million  for the  comparable  six month  period.
Contributing  to the decrease in interest  expense was a decrease in interest on
FHLB  advances for the three and six month  periods  ended  December 31, 2002 as
compared to the same  periods  ended  December  31,  2001.  Interest on advances
decreased  $30,400 to  $73,000  from  $103,400  for the three  month  period and
$79,300 to $144,200  from  $223,500 for the six month  period.  This decrease is
attributable to reduced average FHLB advances of $2.0 million,  to $5.56 million
for the three month period ended  December 31, 2001, at a weighted  average rate
of 5.25%,  from $7.58  million  for the same period  ended  2001,  at a weighted
average rate of 5.45%.  The decrease in average FHLB advances for the comparable
six month period was $2.6 million to $5.56 million, with a weighted average rate
of 5.18%,  for the period  ended  December  31, 2002 from $8.2  million,  with a
weighted average rate of 5.48%, for same period ended 2001.


NET INTEREST INCOME
-------------------

Net interest  income was $933,000 and $1.87  million for the three month and six
month periods ended

                                      -10-

<PAGE>


December 31, 2002,  compared to $853,200  and $1.58  million for the  comparable
periods in 2001,  increases of 9.3% and 15.8%,  respectively.  The Company's net
interest  margin  increased  32 basis points to 4.24% for the three month period
ended  December 31, 2002 as compared to 3.92% for the same period ended December
31, 2001 and  increased  67 basis points to 4.30% for the six month period ended
December 31, 2002 as compared to 3.63% for the six month  period ended  December
31, 2001.



PROVISION FOR LOSSES ON LOANS
-----------------------------

The provision for losses on loans is a result of management's  periodic analysis
of the adequacy of the Company's  allowance  for losses on loans.  The Company's
provision  for  losses on loans was  $138,300  for the six  month  period  ended
December  31, 2002 as compared  to $86,500  for the same  period  ended 2001,  a
$51,800 increase,  as the Company continues to increase its allowance for losses
on loans to a greater  percentage of its overall loans receivable in response to
its assessment of local and national economic conditions and their affect on the
Company and its customers. As of December 31, 2002, the Company's non-performing
assets,  consisting  of  nonaccrual  loans,  accruing  loans  90  days  or  more
delinquent,  real  estate  owned  and  repossessed  consumer  property,  totaled
$2,335,000  or 2.54% of total  assets,  compared to $1,917,000 or 2.41% of total
assets as of June 30, 2002. As of December 31, 2002, the Company's allowance for
losses on loans was $637,000,  representing  27.3% of non-performing  assets and
..97% of net loans receivable,  compared to allowance for losses on loans at June
30, 2002 of $537,000,  representing  25.3% of non-performing  assets and .83% of
net loans receivable.

The Company continues to monitor and adjust its allowance for losses on loans as
management's analysis of its loan portfolio and economic conditions dictate. The
Company believes it has taken an appropriate  approach to maintain the allowance
for loan losses at a level  consistent  with the Company's loss  experiences and
considering,  among  other  factors,  the  composition  of  the  Company's  loan
portfolio,  the level of the Company's classified and non-performing  assets and
their estimated value. Future additions to the Company's allowance for losses on
loans and any change in the related  ratio of the  allowance for losses on loans
to non-performing  loans are dependent upon the economy,  changes in real estate
values  and  interest  rates.  In  addition,   federal  regulators  may  require
additional  reserves  as a  result  of their  examination  of the  Company.  The
allowance for losses on loans reflects what the Company currently believes is an
adequate  level of  reserves,  although  there can be no  assurance  that future
losses will not exceed the estimated amounts, thereby adversely affecting future
results of operations.


NON-INTEREST INCOME
-------------------

Non-interest  income  decreased  to $190,700  and $217,900 for the three and six
month periods ended  December 31, 2002,  respectively,  compared to $207,700 and
$411,200 for the periods  ended  December  31, 2001.  The decrease for the three
month period ended  December 31, 2002 was  primarily  attributable  to a $40,700
decrease in gain on sale of securities  which was partially  offset by increases
in other  non-interest  income  of  $19,000  and  increased  profit on sale of
mortgage loans of $4,300. Fees,  commissions,  and service charges collected for
the three month  periods being  compared were similar.  For the six month period
the $193,300 decrease was attributable to the recorded $161,660  impairment loss
on equity securities and a $55,300 decrease in gain on sale of securities,  net.
Fees,  commissions,  and service charges collected  increased slightly by $5,300
for the six month periods being compared and other non- interest income increase
$19,000.


NON-INTEREST EXPENSE
--------------------

Total non-interest  expense was $576,300 and $1.16 million for the three and six
month periods ended

                                      -11-

<PAGE>


December 31, 2002,  respectively,  compared to $552,600 and $1.1 million for the
same periods in 2001.  Compensation and employee benefits expenses,  the largest
component of non-interest  expense,  increased $13,000 and $50,900 for the three
and six month  periods  ended  December  31, 2002 as compared to the same period
ended December 31, 2001.  Office  property and equipment  increased for both the
three month and six month periods  ended  December 31, 2002 compared to the same
periods in 2001 by $28,400 and $45,600, respectively. Offsetting these increases
were decreases in federal deposit insurance premiums and other operating expense
for both periods being compared.


TAXES ON INCOME
---------------

Income taxes  increased  $25,000 for the three month  period ended  December 31,
2002 as compared to the same period  ended  December  31,  2001,  but  decreased
$17,600 for the comparable  six month  periods.  The income tax increase for the
three month period is the result of increased  earnings  before taxes on income,
while  the  decrease  for the six  month  period  ended  2002 is the  result  of
decreased six month earnings  primarily  attributable  to the impairment loss on
equity  securities.  The  effective  tax rate for the three month  period  ended
December  31, 2002 was 34.0%  compared to 33.8% for the same period  ended 2001.
For the six month period ended  December 31, 2002,  the  effective  tax rate was
33.2% compared to 33.4% for the same period in fiscal 2001.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company's principal sources of funds are deposits and principal and interest
payments collected on mortgage loans, investments and related securities.  While
scheduled loan repayments and maturing  investments are relatively  predictable,
deposit flows and early loan  prepayments are more influenced by interest rates,
general  economic  conditions  and  competition.  Additionally,  the Company may
borrow funds from the FHLB or utilize  other  borrowings of funds based on need,
comparative costs and availability at the time.

The Bank has historically maintained its liquidity ratio at, or above, the level
needed to meet its operational  needs.  The Bank's liquidity ratio was 14.61% on
December 31, 2002 and 12.16% on June 30, 2002.

At December 31, 2002, the Company had advances of $5.6 million  outstanding from
the FHLB. The Company uses its liquidity  resources  principally to meet ongoing
commitments,  to fund maturing  certificates of deposit and deposit withdrawals,
and  to  meet  operating  expenses.  At  December  31,  2002,  the  Company  had
outstanding commitments to extend credit which amounted to $2,582,000 (including
$613,000 in available  revolving  commercial  lines of credit).  At December 31,
2002,  certificates  of deposit  scheduled to mature in one year or less totaled
$20.5  million.  Management  believes that loan  repayments and other sources of
funds will be adequate to meet the Company's foreseeable liquidity needs.

Liquidity management is both a daily and long-term responsibility of management.
The Bank  adjusts  its  investments  in liquid  assets  based upon  management's
assessment  of (i) expected  loan demand,  (ii) expected  deposit  flows,  (iii)
yields available on interest-bearing  investments and (iv) the objectives of its
asset/liability  management  program.  Excess liquidity generally is invested in
interest-earning  overnight deposits and other short-term  government and agency
obligations.

At December 31, 2002, the Bank had tangible and core capital of $7.9 million, or
8.7% of adjusted  total assets,  which was  approximately  $6.5 million and $4.3
million above the minimum  requirements of 1.5% and 4.0%,  respectively,  of the
adjusted total assets in effect on that date. At December 31, 2002,

                                      -12-


<PAGE>

the Bank had risk-based  capital of $8.4 million (including $7.9 million in core
capital),  or 13.8% of risk- weighted  assets of $60.7 million.  This amount was
$3.5  million  above the 8.0%  requirement  in effect on that date.  The Bank is
considered to be "well-capitalized" under Federal regulatory guidelines.


CANCELLATION OF SUPERVISORY AGREEMENT
-------------------------------------

On August 27,  1999,  the Bank  entered into a  supervisory  agreement  with the
Office of Thrift Supervision, ("OTS"). Based on results of the Bank's recent OTS
safety and  soundness  examination,  on November  14, 2002 OTS released the Bank
from the Supervisory Agreement.

EFFECT OF NEW ACCOUNTING STANDARDS
----------------------------------

In July 2001, the Federal Accounting  Standards Board (FASB) issued Statement of
Financial  Accounting  Standard  (SFAS)  No.  141,  Business  Combinations,  and
Statement No. 142, Goodwill and Other Intangible  Assets.  SFAS No. 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated  after  July  30,  2001  as  well  as  all  purchase  method  business
combinations completed after June 30, 2001. SFAS No. 141 also specifies criteria
intangible  assets acquired in a purchase method business  combination must meet
to be  recognized  and reported  apart from  goodwill,  noting that any purchase
price  allocable to an assembled  workforce may not be accounted for separately.
SFAS No. 142 requires that goodwill and intangible assets with indefinite useful
lives no longer  be  amortized,  but  instead  tested  for  impairment  at least
annually in  accordance  with the  provisions of SFAS No. 142. SFAS No. 142 also
requires that  intangible  assets with definite  useful lives be amortized  over
their respective  estimated useful lives to their estimated residual values, and
reviewed for  impairment in accordance  with  Statement of Financial  Accounting
Standards (SFAS) No. 121, Accounting for Impairment of Long-Lived Assets and for
Long-Lived  Assets to Be  Disposed  Of. This  statement  did not have a material
effect on its consolidated financial statements.


In June 2001,  the FASB  issued SFAS No. 143,  Accounting  for Asset  Retirement
Obligations.  SFAS No. 143  requires  the Company to record the fair value of an
asset  retirement  obligation  as a liability in the period in which it incurs a
legal obligation  associated with the retirement of tangible  long-lived  assets
that result from the acquisition, construction, development and/or normal use of
assets. The Company also records a corresponding asset which is depreciated over
the life of the asset. The Company was required to adopt SFAS No. 143 for fiscal
years  beginning  after June 15, 2002.  This  statement  did not have a material
effect on its consolidated financial statements.

In August 2001,  the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long- Lived  Assets.  SFAS No. 144  supersedes  SFAS No. 121 and the
accounting  and reporting  provision of APB Opinion No. 30 for the disposal of a
segment of a business. SFAS No. 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets and requires that long-lived
assets be reviewed for impairment  whenever  events or changes in  circumstances
indicate  that  the  carrying  amount  of  an  asset  may  not  be  recoverable.
Recoverability  of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated  future cash
flows,  an  impairment  charge is recognized by the amount by which the carrying
amount of the asset  exceeds the fair value of the asset.  SFAS No. 144 requires
companies  to  separately  report  discontinued   operations  and  extends  that
reporting to a component of an entity that either has been disposed of (by sale,
abandonment,  or in a distribution to owners) or is classified as held for sale.
Assets to be disposed of are  reported  at the lower of the  carrying  amount or
fair value less costs to sell.  The Company  was  required to adopt SFAS No. 144
for fiscal  years  beginning  after  December  15,  2001.  The  adoption of this
statement  did  not  have  a  material  effect  on  the  consolidated  financial
statements.

                                      -13-

<PAGE>

SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement  No.  13,  and  Technical  Corrections  was issued  April  2002.  This
Statement  rescinds  FASB  Statement  No. 4,  Reporting  Gains and  Losses  from
Extinguishment  of Debt, and an amendment of that Statement,  FASB Statement No.
64,  Extinguishments  of Debt Made to Satisfy  Sinking-Fund  Requirements.  This
Statement also rescinds FASB Statement No. 44,  Accounting for Intangible Assets
of Motor Carriers.  This Statement amends FASB Statement No. 13,  Accounting for
Leases,  to  eliminate an  inconsistency  between the  required  accounting  for
sale-leaseback  transactions  and the  required  accounting  for  certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions.   This  Statement   also  amends  other   existing   authoritative
pronouncements  to make various  technical  corrections,  clarify  meanings,  or
describe their applicability  under changed  conditions.  The provisions of this
Statement  related to the  rescission  of Statement 4 shall be applied in fiscal
years  beginning  after May 15, 2002.  The provisions in paragraph 8 and 9(c) of
this  Statement  related to  Statement 13 shall be  effective  for  transactions
occurring  after May 15, 2002. All other  provisions of this Statement  shall be
effective for financial  statements issued on or after May 15, 2002. The effects
of implementation are not material.

SFAS No. 146 Accounting for Costs  Associated  with Exit or Disposal  Activities
was  issued  June  2002.  This  Statement  addresses  financial  accounting  and
reporting for costs  associated  with exit or disposal  activities and nullifies
Emerging  Issues Task Force  (EITF) Issue No. 94-3,  Liability  Recognition  for
Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an  Activity
(including  Certain Costs Incurred in a  Restructuring).  The provisions of this
Statement  are  effective  for exit and disposal  activities  that are initiated
after December 31, 2002.

In  September  2002,  the FASB  issued  SFAS No.  147,  Acquisition  of  Certain
Financial  Institutions.  SFAS  No.  147  changed  the  special  accounting  for
unidentifiable  intangible  assets  recognized  under  SFAS No.  72.  Transition
provisions  for  previously  recognized  unidentifiable  intangible  assets were
effective on October 1, 2002. The effects of implementation had no impact on the
Company's consolidated financial statements.




                                      -14-

<PAGE>

ITEM 3. CONTROLS AND PROCEDURES
        -----------------------


With the  participation  and under the supervision of the Company's  management,
including the Company's Chief Executive Officer and Chief Financial Officer, and
within 90 days of the filing date of the quarterly  report,  the Company's Chief
Executive  Officer and Chief Financial  Officer have evaluated the effectiveness
of the design and operation of the Company's  disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14(c) and 15(d)- 14(c) and, based on their
evaluation,  have  concluded  that the  disclosure  controls and  procedures are
effective.  There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their  evaluation,  including any  corrective  action with regard to
significant deficiencies and material weaknesses.

                                      -15-


<PAGE>

                                     PART II
                                OTHER INFORMATION

ITEM 1.        Legal Proceedings
               -----------------

               None, other than debt collection in the ordinary course of
               business.

ITEM 2.        Changes in Securities
               ---------------------

               None

ITEM 3.        Defaults Upon Senior Securities
               -------------------------------

               None

ITEM 4.        Submission of Matters to a Vote of Security Holders
               ---------------------------------------------------

                    (a)  Annual meeting date: October 24, 2002

                    (b)  Not required

                    (c)  The matters approved by stockholders at the Meeting and
                         number of votes cast for,  against or withheld (as well
                         as the number of abstentions and broker  non-votes,  if
                         any) as to each matter are set forth below:
<TABLE>
<CAPTION>

                         Proposal                                  Number of Votes
                         --------                                  ---------------
                                                              For                  Withheld
                                                              ---                  --------
<S>                                                         <C>                          <C>
Election of the following director for a three year term:

               Robert W. DeCook                             672,035                      8,200


                                                              For      Against     Abstain
                                                              ---      -------     -------
Ratification of the appointment of KPMG LLP
as the Company's auditors for the                           679,000           0         1,235
fiscal year ending June 30, 2003
</TABLE>


ITEM 5.        Other Information
               -----------------

               None

ITEM 6.        Exhibits and Reports on Form 8-K.
               ---------------------------------

               (a)   Exhibits:
                     See Index to Exhibits

               (b)  The following is a description  of the Form 8-K filed during
                    the three months ended December 31, 2002:

                    On October 25, 2002, current report on Form 8-K was filed to
                    announce  the  Company's  earnings  for  the  quarter  ended
                    September 30, 2002.


                                                           -16-



                                                        SIGNATURES


Pursuant  to the  requirement  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 SERVICES CORPORATION
                                          Registrant


Date: February 04, 2003                    /s/ Robert W. DeCook
-----------------------                   --------------------------------------
                                          Robert W. DeCook
                                          President and Chief Executive Officer




Date: February 04, 2003                    /s/ Vicki Hladik
-----------------------                   --------------------------------------
                                          Vicki Hladik
                                          Chief Financial Officer



                                      -17-

<PAGE>

                                  Certification
  (Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended)

I, Robert W. DeCook, certify that:

1. I have reviewed  this  quarterly  report on Form 10-QSB of Horizon  Financial
Services Corporation (the "registrant");

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  officer  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 officer 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  officer  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 04, 2003
                                                          /s/   Robert W. DeCook
                                                         -----------------------
                                                                Robert W. DeCook
                                                         Chief Executive Officer




                                      -18-

<PAGE>

                                  Certification
  (Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended)

I, Vicki Hladik, certify that:

1. I have reviewed  this  quarterly  report on Form 10-QSB of Horizon  Financial
Services Corporation (the "registrant");

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  officer  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 officer 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  officer  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 04, 2003
                                                               /s/  Vicki Hladik
                                                         -----------------------
                                                                    Vicki Hladik
                                                         Chief Financial Officer

                                      -19-

<PAGE>

                                  Certification
           (Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)


I, Robert W. DeCook, certify that:

1.  This  quarterly  report  on  Form  10-QSB  of  Horizon  Financial   Services
Corporation  fully  complies  with  the  requirements  of  section  13(a) of the
Securities Exchange Act of 1934; and

2. The information  contained in this quarterly report fairly  presents,  in all
material respects,  the financial condition and results of operations of Horizon
Financial Services Corporation.

Date: February 04, 2003



                                                          /s/   Robert W. DeCook
                                                          ----------------------
                                                                Robert W. DeCook
                                                         Chief Executive Officer

I, Vicki Hladik, certify that:

1.  This  quarterly  report  on  Form  10-QSB  of  Horizon  Financial   Services
Corporation  fully  complies  with  the  requirements  of  section  13(a) of the
Securities Exchange Act of 1934; and

2. The information  contained in this quarterly report fairly  presents,  in all
material respects,  the financial condition and results of operations of Horizon
Financial Services Corporation.

Date: February 04, 2003



                                                               /s/  Vicki Hladik
                                                         -----------------------
                                                                    Vicki Hladik
                                                         Chief Financial Officer




                                      -20-



                                INDEX TO EXHIBITS


Exhibit
Number                              Document
-------   ----------------------------------------------------------------------


  3       The Articles of Incorporation  and Bylaws,  filed on March 18, 1994 as
          exhibits  3.1  and  3.2,  respectively,  to  Registrants  Registration
          Statement on Form S-1 (File No. 33-76674),  are incorporated herein by
          reference.

  4       Registrant's  Specimen Stock  Certificate,  filed on March 18, 1994 as
          Exhibit to Registrant's  Registration  Statement on Form S-1 (File No.
          33-76674), is incorporated herein by reference.

 10.1     Employment   Agreements  between  the  Bank  and  Messrs.  DeCook  and
          Gillespie,   filed  as  Exhibits  10.1  and  10.2,  respectively,   to
          Registrant's  Report on Form 10-KSB for the fiscal year ended June 30,
          1994 (File No. 0-24036), are incorporated herein by reference.

 10.2     1994  Stock  Option  and  Incentive  Plan,  filed as  Exhibit  10.3 in
          Registrant's  Report on Form 10-KSB for the fiscal year ended June 30,
          1994 (File No. 0- 24036), is incorporated herein by reference.

 10.3     Recognition and Retention Plan,  filed as Exhibit 10.4 to Registrant's
          Report on Form  10-KSB for the fiscal  year ended June 30,  1994 (File
          No. 0-24036), is incorporated herein by reference.

 11       Statement re  computation of earnings per share (See Footnote 4 of the
          Registrant's  Notes to  Consolidated  Financial  Statements  contained
          herein)























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