Executive Summary

GAAP loss as planned: Q3 2025 net loss of $222.0M (diluted EPS $(4.69)) driven by balance sheet repositioning (securities sale loss ~$299.1M, indirect auto sale loss ~$7.7M, and $12.7M FHLB prepayment penalty) despite strong core fundamentals .
Core trends improved: Net interest income rose to $58.4M and net FTE margin expanded to 3.52% (8th straight quarter); September exit margin exceeded 4% per management, with Q4 margin guided to 4.15%–4.25% and year-end ~4.2%–4.3% .
Franchise momentum: Commercial loans grew $57.9M (7% annualized) while total loans fell on auto runoff/sale; deposit mix improved with ~$275M high‑cost transactional runoff; credit quality remained strong (annualized NCOs 0.07%; NPAs/Assets 0.53%) .
Outlook catalysts: Q4 non‑FTE NII expected up high single digits sequentially, expenses ~ $40M, tax rate 18–20%; initial 2026 guide aligns with ~$2 EPS and NIM 4.2–4.3%, with de‑risked balance sheet and capital generation as potential stock drivers .
Estimate framing: S&P Global “Primary EPS” framework shows a positive “actual” vs consensus in Q3 due to exclusion of unusual items; GAAP EPS was negative—investors should distinguish GAAP vs normalized when benchmarking beats/misses (see Estimates Context) . Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well
- Net interest margin expanded to 3.52% (from 3.23% in Q2 and 2.66% in Q3’24) on core remix and partial quarter impact from balance sheet actions; September exit run‑rate was above 4% per management .
- Funding mix improved with ~$275M planned runoff of high‑cost transactional deposits, non‑interest bearing balances stable, and FHLB advances repaid; interest‑bearing liability cost fell 2 bps q/q .
- Credit quality held up: annualized NCOs 0.07%, ACL/Loans 1.04%, NPAs/Assets 0.53%; exit of higher‑risk indirect auto (2/3 of charge‑offs historically) enhances forward credit profile .
What Went Wrong
- GAAP earnings were severely impacted by one‑time repositioning losses: ~$299.1M loss on securities sales and ~$7.7M loss on the auto portfolio drove total non‑interest loss of $(295.3)M .
- Non‑interest expense inflated by a $12.7M FHLB prepayment penalty and ~$0.9M of other balance sheet activity costs (not expected to recur), lifting reported expenses to $53.0M .
- Non‑accrual commercial loans rose (two credits migrated to non‑accrual; one expected to be brought current and one largely SBA‑guaranteed), lifting total NPAs to $35.7M (0.53% of assets), though levels remain manageable .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Net Interest Income ($M)	$46.9	$52.3	$55.4	$58.4
Non‑Interest Income ($M)	$11.5	$16.5	$10.9	$(295.3)
Total Revenue ($M) (NII + Non‑interest)	$58.4 (46.9+11.5)	$68.8 (52.3+16.5)	$66.3 (55.4+10.9)	$(236.9) (58.4−295.3)
Provision for Credit (Benefit) ($M)	$1.0	$1.4	$2.5	$(3.6)
Non‑Interest Expense ($M)	$39.3	$39.3	$39.4	$53.0
Net Income (Loss) ($M)	$18.2	$23.9	$20.6	$(222.0)
Diluted EPS ($)	$0.41	$0.54	$0.47	$(4.69)
Net FTE Interest Margin (%)	2.66%	3.04%	3.23%	3.52%

Segment/Loan Mix (End of Period, $M)

Category	Q3 2024	Q2 2025	Q3 2025
Commercial Real Estate	$2,105.5	$2,322.0	$2,367.0
Commercial & Industrial	$808.6	$976.7	$989.6
Total Commercial	$2,914.1	$3,298.7	$3,356.6
Residential Real Estate	$801.4	$786.0	$783.9
Consumer	$1,008.1	$900.9	$683.3
Total Loans HFI	$4,804.0	$4,985.6	$4,823.7

Key KPIs

KPI	Q3 2024	Q2 2025	Q3 2025
Return on Avg Assets (ROA)	0.92%	1.08%	(12.07)%
Net FTE NIM	2.66%	3.23%	3.52%
Efficiency Ratio	67.22%	59.48%	(22.35)% (distorted by losses)
NPAs / Assets	0.32%	0.36%	0.53%
NCOs (annualized, % of avg loans)	0.03%	0.02%	0.07%
ACL / Loans	1.10%	1.09%	1.04%
TCE / TA	7.58%	8.37%	7.60%
Tangible Book Value / Share	$13.46	$14.32	$9.76

Notes: Q3 2025 metrics are significantly affected by the one‑time repositioning transactions.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net FTE Interest Margin	Q4 2025	Ongoing expansion (no range)	4.15%–4.25%; exit 2025 ~4.2%–4.3%	New (range introduced)
Net FTE Interest Margin	2026	~4.2%–4.3% (implied prior)	4.2%–4.3% (in line with prior)	Maintained
Non‑FTE Net Interest Income	Q4 2025	n/a	High single‑digit growth vs reported Q3	New
Fees (Service/Interchange/Mortgage)	Q4 2025	n/a	Approx. $11M (seasonal headwinds)	New
Total Reported Expenses	Q4 2025	FY flat vs 2024	~$40M; includes ~$0.7M non‑recurring sub‑debt amortization write‑off	Updated
Effective Tax Rate	Q4 2025	Mid‑teens (FY)	18%–20%	Raised
Deposit Balances	Q4 2025	Low single‑digit FY growth	Decline from remaining ~$125M runoff of high‑cost non‑relationship balances	Updated
EPS (approx.)	FY 2026	n/a	~$2 per share (aligned with consensus)	New
Non‑FTE NII Growth	FY 2026	n/a	Low double‑digit growth	New
Effective Tax Rate	FY 2026	n/a	~18%–20%	New
Quarterly Dividend	Q4 2025	$0.16 in recent quarters	$0.16 (no change disclosed)	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Balance Sheet Repositioning	Planned deleveraging; securities cash flows to fund loans	Executed: ~$1.7B securities sold (loss ~$299.1M), $700M FHLB advances repaid, reinvest ~$580–600M; indirect auto sale/LOIs; equity $98.6M net, $100M sub‑debt (then redeemed $56.5M)	Completed/De‑risked
Net Interest Margin	3.04% (Q1), 3.23% (Q2; +7 bps recoveries) with continued expansion expected	3.52%; September >4%; Q4 4.15%–4.25%; 2026 4.2%–4.3%	Rising
Rate Sensitivity	“Not a major driver,” neutral stance	Modestly asset‑sensitive but effectively rate‑neutral given mix; ~25% floating loans	Neutral/Stable
Deposits & Funding Costs	Competitive CDs; cost management; slight cost uptick in Q1; Q2 interest‑bearing costs -2 bps	$275M high‑cost transactional runoff; non‑interest bearing stable; overall interest‑bearing liability cost -2 bps	Mix improving
Loan Growth	Mid‑single digit FY; strong commercial growth Q1/Q2	Commercial +$58M (7% annualized); total loans down on auto runoff/sale	Disciplined, C&I‑led
Credit Quality	Strong; low NCOs; stable NPAs	NPAs 0.53%; NCOs 0.07%; auto exit reduces risk; two new commercial non‑accruals manageable	Stable
Fees/Mortgage	Seasonal patterns; low single‑digit FY growth outlook (ex special items)	Q4 fees guided ~$11M (seasonal); equipment finance syndication starting to contribute	Steady
Capital & M&A	Optionality including buybacks; disciplined approach	Favor M&A optionality in IN/MI; typical target size $300M–several $B; buybacks not near‑term after raise	Dialogues increasing

Management Commentary

“Horizon’s third quarter results were highlighted by the successful execution of our…strategic balance sheet repositioning…on pace to achieve the top tier financial outcomes outlined in our plan…our net interest margin continues to expand…credit quality is excellent and expenses are well managed.” — CEO Thomas Prame .
“The margin continued to expand for the eighth consecutive quarter, with an exit run rate in September above 4%…we are expecting the margin to expand further in Q4 into the range of 4.15% to 4.25%…we should exit the year…4.2% to 4.3%, where it should generally remain through 2026.” — CFO John Stewart .
“We have completely changed the company’s risk profile, significantly curtailing both liquidity and interest rate risk through these actions…establishing a pro forma cash flow profile that should create durable returns.” — CFO John Stewart .
“As we move into 2026, we will be front‑footed…with optionality to create further shareholder value through disciplined operating model, profitable growth, and smart stewardship of the positive capital generation platform we have created.” — CEO Thomas Prame .

Q&A Highlights

Margin/Rate sensitivity: ~25% floating loans; deposit betas and callable CDs give flexibility; modest asset sensitivity but broadly neutral to parallel or non‑parallel shifts .
M&A stance: Actively evaluating IN/MI opportunities; preferred targets ~$300M to several $B; emphasis on accretive, franchise‑additive deals; buybacks remain an option but not near‑term after equity raise .
Credit: Slight uptick in NPAs due to two credits; one expected to be brought current; one SBA‑backed; exit from indirect auto reduces risk and charge‑off volatility .
Fee initiatives: Equipment finance syndication generated ~$0.3M gain on ~$10M in Q3; expected to build to $20–$30M volume in 2026 .
Q4 specifics: Non‑FTE NII up high single digits q/q; expenses ~ $40M including ~$0.7M non‑recurring; tax rate 18–20% .

Estimates Context

Measure	Q3 2025 Consensus	Q3 2025 Actual (S&P framework)	Surprise	Notes
Primary EPS (S&P)	$0.475*	$1.6305*	Beat*	S&P “Primary EPS” excludes unusual items; GAAP diluted EPS was $(4.69) .
Revenue ($)	$69.5M*	$(233.4)M*	Miss*	Negative “revenue” reflects net interest income less large non‑interest loss (securities/auto) .

Values retrieved from S&P Global.*
Management emphasized that Q3 included one‑time losses tied to the repositioning; investors should benchmark normalized earnings (S&P Primary EPS) against consensus while recognizing GAAP variance due to the $299.1M securities loss, $7.7M auto sale loss, and $12.7M prepayment penalty .

Key Takeaways for Investors

Core earnings power inflecting: 8th straight NIM expansion to 3.52% with September >4%; Q4 margin guided to 4.15%–4.25% and 2026 4.2%–4.3%, supporting high single‑digit sequential NII growth in Q4 .
One‑time pain largely behind: ~$299M securities loss, $7.7M auto sale loss, and $12.7M FHLB penalty depress GAAP Q3 but are non‑recurring; expense run‑rate normalizes to ~ $40M in Q4 .
Funding and risk profile improved: ~$275M high‑cost deposit runoff and repayment of $700M FHLB advances de‑levered and de‑risked the balance sheet; residual deposit runoff ~$125M expected in Q4 .
Credit resilient with risk reduction: NCOs 0.07%, NPAs 0.53%; exit of indirect auto (historically two‑thirds of charge‑offs) should dampen future loss rates .
2026 setup constructive: Early guide aligns with ~$2 EPS, low double‑digit NII growth, and 18–20% tax rate; fee growth steady with equipment finance syndication a nascent contributor .
M&A optionality rising: Improved capital generation and de‑risked profile position HBNC to be an acquirer in IN/MI; management prioritizes accretive, franchise‑enhancing deals .
Tactical lens: Near‑term stock drivers include confirmation of Q4 NIM/NII guide, clarity on normalized expense base, and demonstration of sustained credit stability post‑repositioning .

Appendix: Additional Relevant Q3 2025 Press Releases

Conference call announcement with logistics (Oct 1, 2025) .
Balance sheet repositioning progress with transaction specifics (Sept 15, 2025) .
Subordinated notes $100M placement completion (Aug 29, 2025) .
Common stock offering closing (7,138,050 shares; ~$103.5M gross) (Aug 22, 2025) .

HORIZON BANCORP INC /IN/ (HBNC)·Q3 2025 Earnings Summary