The Company. Horizon Financial Services Corporation, a Delaware corporation, was formed in March 1994 to act as the holding company for Horizon Federal Savings Bank upon the Bank's conversion from the mutual to the stock form (the "Conversion"), which occurred on June 28, 1994. All references to the Company, unless otherwise indicated, at or before June 28, 1994 are to the Bank and its subsidiary on a consolidated basis. The Company's common stock trades over-the-counter on the Nasdaq Bulletin Board under the Symbol "HZFS".

At June 30, 2003, the Company had $91.3 million of assets and stockholders' equity of $10.4 million (or 11.4% of total assets).

Horizon Federal. Horizon Federal, a wholly owned subsidiary of the Company, is a federally chartered stock savings bank headquartered in Oskaloosa, Iowa. Its deposits are insured up to applicable limits, by the Federal Deposit Insurance Corporation (the "FDIC"), which is backed by the full faith and credit of the United States. Horizon Federal's primary market area covers Mahaska County, that portion of Marion County in and around Knoxville, Iowa and to a lesser extent, Wapello County, Iowa. The Bank services its market area through its three full service offices, two of which are located in Oskaloosa, Iowa and one which is located in Knoxville, Iowa.