THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Horizon Financial Corp. (HRZB)

6/20/2006 Proxy Information

Federal regulations require that all loans or extensions of credit to executive officers and directors of insured financial institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, except for loans made pursuant to programs generally available to all employees, and must not involve more than the normal risk of repayment or present other unfavorable features. The Bank is therefore prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public, except for loans made pursuant to programs generally available to all employees, and has adopted a policy to this effect.

Director Richard R. Haggen is an owner and co-chairman of the Board of Directors of Haggen, Inc., an affiliate of the Haggen/Talbot Company LTD P/S, from which the Corporation leases space for its Whatcom Commercial Center. The Corporation paid lease expenses of $177,000 to the Haggen/Talbot Company LTD P/S during the fiscal year ended March 31, 2006.