Valley Bank of Des Moines to buy Horizons Financial

Northwestern Financial Review, Dec 15-Dec 31, 2007 by Sandin, Erik

Valley Bank of Des Moines, Iowa, agreed to buy the assets of the financially ailing thrift Horizon Financial Services Corp. for $2.9 million plus payments for a portion of recoveries that may occur with soured loans, Horizon officials said on Nov. 6.

Valley Bank, a subsidiary of River Valley Bancorp Inc. with offices in Des Moines and Davenport, will acquire Horizon Bank offices in Oskaloosa, Knoxville and Pleasant Hill, Iowa, in a deal the companies finalized in October.

The sale comes after the Office of Thrift Supervision issued a May 18 cease-and-desist order against Horizon, charging that the Oskaloosa-based thrift violated 14 separate banking regulations.

The OTS said Horizon had failed to properly administer loans, failed to follow requirements for loans to insiders, inadequately documented loans and had not used proper appraisal practices for loans, among other violations.

The OTS also barred Horizon from making any commercial loans without first getting approval from the OTS regional director in Texas.

The OTS then ordered Horizon Bank to find a merger partner or inject $1 million cash into the operation.

The sale announcement came on the same day that Horizon reported a $4.5 million net loss for its fiscal year that ended June 30, about 10 times the amount the bank lost in 2006. According to the Horizon's Nov. 6 financial statement, the bank received River Valley Bancorp's binding letter of intent to merge on Oct. 1, but was ordered on Oct. 2 by OTS to raise $1 million through a capital infusion from Horizon Financial.

"The bank complied with the directive, the effect of which, in management's opinion, was to affect in a materially adverse manner the company's liquidity position,'' Horizon said in its statement.

Denny Hanson, president of Valley Bank's western division, said Horizon Bank was an attractive acquisition for Valley Bank.

The eastern half of the Des Moines metro, and the surrounding communities that Horizon is a part of, are poised for growth and opportunity over the next several years," Hanson said. "Valley wants to be a part of that and looks forward to introducing our products and services to the Horizon clients."

Jim Hicks, chairman of Horizon Financial, said the deal was "in the best interest of our shareholders, our depositors and our local community."

"The last fiscal year has been quite a struggle for our company and our bank, as we have been adversely affected by large loss provisions," he said. "However, we are delighted that Valley Bank, a very strong bank with a great reputation for serving its communities, will be entering our market and serving our local customers."

Horizon has $131 million in assets and employs 37 people.

The deal is expected to be completed in the first quarter of 2008, pending approval by regulators and Horizon Financial shareholders.

By Erik Sandin