CONTACTS:Rich Jacobson, CEO
                Greg Spear, CFO
Horizon Financial Reports Fiscal 2009 Results

BELLINGHAM, WA April 30, 2009 – Horizon Financial Corp. (NASDAQ GS:HRZB) the bank holding company for Horizon Bank (“Bank”), today reported that a $40.0 million provision for loan losses contributed to a net loss of $25.7 million, or $2.15 per share, for the fiscal fourth quarter ended March 31, 2009.  The net loss totaled $33.4 million, or $2.79 per share, including a $65.0 million loan loss provision for the year ended March 31, 2009.
“Fiscal 2009 was one of the most challenging years on record, and the regional and national recession is likely to continue to present challenges to our asset quality.  We continue to make significant progress in de-leveraging our balance sheet, diversifying our loan portfolio and maintaining strong liquidity,” said Rich Jacobson, Chief Executive Officer. “Despite the difficult environment, we generated net revenues (net-interest income plus non-interest income) in excess of non-interest expenses, resulting in pre-tax, pre-provision income of $11.1 million for the fiscal year ended March 31, 2009.
“The recent increase in home sales in most of our markets during the quarter ended March 31, 2009, was a positive sign.  We believe residential real estate values, however, will likely test the market as the excess inventory of newly built homes, including those owned by other regional banks, come onto the market in the coming months,” said  Jacobson.  “As a result of our impairment analysis of our loan portfolio and measurement of the accounting estimate for probable losses, we charged off $26.3 million in loans during the fourth quarter and recorded a $40.0 million provision for loan losses.  We continue to work diligently with our borrowers to complete those projects in process and we do not expect to fund new construction or development projects until region-wide housing inventories decline.  Net commercial real estate loans in our portfolio have declined more than $100.0 million in the past year, with construction and land development loans balances down $77.7 million.”
Net loans receivable declined $63.5 million during the fourth quarter of fiscal 2009, following a $52.5 million decrease in net loans receivable in the immediate prior quarter.  “The decline in loan totals was a direct result of our efforts to de-leverage our balance sheet by aggressively selling loans and charging off the appropriate amount of each loan that we do not expect to recover,” Jacobson noted.
Capital Ratios, Liquidity and Credit Quality
Horizon Bank was adequately capitalized by regulatory standards as of March 31, 2009, with both its tangible common equity to assets and leverage ratios at 6.34%.  Tier 1 capital to risk adjusted assets was 7.29% and the total risk-based capital ratio was 8.58% at March 31, 2009.  “We intend to improve our capital levels to comply with our recent agreement with our regulators by continuing to de-leverage our balance sheet.  In addition, we anticipate returning to the equity markets for additional capital when market conditions improve,” said Jacobson.
“We continue to maintain strong liquidity with a sound mix of funding sources, including growth in core deposits, potential sale of investments and loans, and our lines of credit with the Federal Home Loan Bank and Federal Reserve Bank,” Jacobson noted.  “The extension of FDIC insurance to all non-interest bearing deposits and the increased limit to $250,000 from $100,000 per account has brought insurance coverage to the vast majority of our deposits.”
Total non-performing assets were $104.7 million, or 7.13% of total assets at March 31, 2009, up from $83.7 million, or 5.69% of total assets at December 31, 2008, and $12.3 million, or 0.88% of total assets at March 31, 2008. Non-performing loans increased to $85.4 million, or 7.35% of gross loans at March 31, 2009, from $66.9 million, or 5.52% of gross loans at December 31, 2008, and $11.6 million, or 0.97% of gross loans at March 31, 2008.
“The increase in non-performing assets was primarily related to commercial land development loans in Snohomish and Pierce Counties,” said Greg Spear, Chief Financial Officer.  “While we believe the majority of our builders have sound financial foundations and are committing additional resources to their development projects, the downturn in the housing market has significantly affected our customers. We are working with these customers to reduce housing inventories, using a variety of options, including short sales.  Together with our capital position and the increased allowance for loan losses, we believe we have the flexibility to aggressively address our non-performing assets.”

The following information was filed by Horizon Financial Corp on Thursday, April 30, 2009 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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