Heartland Group Holdings Limited/Announcement

Heartland Group 2019 Interim Results

Half Year Results18 February 2019HGHFinancials

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1

NZX/ASX and Media Release

HEARTLAND POSTS HALF YEAR PROFIT OF $33.1 MILLION

19 February 2019
Heartland Group Holdings Limited (NZX/ASX:HGH) (Heartland Group) achieved a net profit after tax
(NPAT) of $33.1 million for the six months ended 31 December 2018, an increase of 6.5% from the six
months ended 31 December 2017 (previous corresponding reporting period).
1

Highlights for the six months ended 31 December 2018 include:
 Net profit after tax $33.1 million, up 6.5%
 Gross finance receivables $4.2 billion, up 11.9% (annualised growth excluding the impact of changes
in foreign currency exchange rates)
 Return on equity (ROE) 10.3%
 NIM 4.36%
 Cost to income ratio 42.5%, down from 42.9% in the previous corresponding reporting period
 2019 Interim Dividend 3.5cps
 Corporate restructure successfully completed – removing the funding constraints on growth in
Australia previously arising from Reserve Bank of New Zealand regulations, and providing greater
flexibility to take advantage of growth opportunities and capital raising options in New Zealand and
Australia
 ASX foreign exempt listing successfully completed

1
This announcement is based on the 31 December 2018 unaudited interim consolidated financial statements of
Heartland Group Holdings Limited (HGH). Following a corporate restructure on 31 October 2018, Heartland Bank
Limited (HBL) became a 100% controlled subsidiary of HGH and ownership of the Australian group of companies
(comprising Heartland Australia Holdings Pty Limited) transferred from HBL to HGH. The interim consolidated
financial statements of HGH comprise results for HBL up to 31 October 2018, and HGH from 1 November 2018 to 31
December 2018. As common control has remained the same both before and after the corporate restructure,
management believe that the operations of HGH from 1 November 2018 are directly comparable to those of HBL
prior to 1 November 2018. All comparative results are based on 31 December 2017 unaudited interim consolidated
financial statements of HBL.

2
FINANCIAL POSITION
Gross finance receivables increased by $240.7 million (11.9% annualised growth) in the six month
period, offset by adverse foreign exchange impact on Australian receivables of $32.0 million resulting in
reported 10.3% annualised growth to $4,226.2 million as at 31 December 2018.
 New Zealand Reverse Mortgages gross receivables increased $24.6 million (10.7% annualised
growth) to $481.5 million as at 31 December 2018.
 Motor gross receivables increased $79.0 million (16.3% annualised growth) to $1,039.9 million
as at 31 December 2018.
 Harmoney and other personal lending gross receivables increased $34.7 million (44.3%
annualised growth excluding the impact of changes in foreign currency exchange rates). New
Zealand Harmoney and other personal lending increased 37.7% (annualised growth) to $153.6
million while Australia Harmoney increased 77.0% (annualised growth excluding the impact of
changes in foreign currency exchange rates) to $35.0 million.
 Business gross receivables increased $32.4 million (6.1% annualised growth) to $1,093.8 million
as at 31 December 2018, with Business Intermediated lending up $72.3 million (44.3%
annualised growth) and Open for Business (O4B) lending up $25.5 million (56.2% annualised
growth) to $115.4 million as at 31 December 2018.
 Australian Reverse Mortgages gross receivables increased $85.1 million (24.9% annualised
growth excluding the impact of changes in foreign currency exchange rates) to $733.3 million in
the six months to 31 December 2018. This was offset by an adverse movement in foreign
currency translation of $29.8 million, resulting in reported growth of $55.3 million (16.2%
annualised growth) to $733.3 million as at 31 December 2018.
Net finance receivables increased by $214.3 million (10.7% annualised growth) offset by the impact of
changes in foreign currency exchange rates of $32.0 million resulting in reported 9.1% annualised
growth to $4,167.3 million as at 31 December 2018.
Total assets increased by $205.5 million from 30 June 2018 due to the increase in net finance
receivables and cash, cash equivalents and investments.
Borrowings increased by $231.7 million from 30 June 2018 (12.1% annualised growth), including an
increase in retail deposits of $106.6 million (7.3% annualised growth) funding the 9.0% annualised
growth in New Zealand gross finance receivables with additional funding through securitised
borrowings.
During the reporting period, Net Assets decreased by $10.0 million to $654.2 million as at 31 December
2018. Net Tangible Assets (NTA) decreased by $13.3 million to $571.1 million as at 31 December 2018.
NTA per share was $1.01 at 31 December 2018 compared to $1.04 at 30 June 2018. This reduction in
NTA per share is primarily due to opening retained earnings being restated by $18.2 million upon the
initial adoption of IFRS9, accounting for $0.03 NTA per share, with a corresponding increase in
provisions for impairments.

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FINANCIAL PERFORMANCE
Profitability
NPAT was $33.1 million for the six months ended 31 December 2018. This is an increase of $2.0 million
(6.5%) from the previous corresponding reporting period.
Return on Equity (ROE) for Heartland Group reduced from 10.8% (annualised) for the six months ended
31 December 2017 to 10.3% (annualised) for the six months ended 31 December 2018. The reduced ROE
is a result of higher average equity for the current period.
Earnings per share for Heartland Group for the six months ended 31 December 2018 was 5.9 cents per
share, compared to 6.0 cents per share for the six months ended 31 December 2017.
Net Operating Income
Net Operating Income (NOI) was $102.1 million, an increase of $8.2 million (8.7%) compared to the
previous corresponding reporting period.
Heartland Group’s Net Interest Margin (NIM) for the six months ended 31 December 2018 was 4.36%
compared to 4.44% for the six months ended 31 December 2017. NIM was impacted by $1.1m of break
costs incurred due to the early repayment of the Tier 2 Australian dollar subordinated bond, and was
4.41% excluding those break costs. The Tier 2 bond has been replaced by lower cost funding, which is
expected to result in lower interest expense in the second half of the financial year.
Costs
Operating costs were $43.4 million, an increase of $3.1 million (7.7%) compared to the previous
corresponding reporting period. Higher operating expenses are due to growth, one-off corporate
restructure and ASX listing costs of $0.9 million and one-off foreign currency costs of $1.2 million
incurred in relation to the corporate restructure.
2

The cost to income ratio improved to 42.5% compared to 42.9% in the previous corresponding reporting
period, although excluding one-off costs related to the corporate restructure, the cost to income ratio
improved further to 40.4%.
Impairments
The new accounting standard relating to impairments, IFRS9, came into effect on 1 July 2018. This new
standard requires impairments to be provided for on an expected loss basis at the date of loan
origination. For the period ending 31 December 2018, whilst receivables have performed largely in line
with expectations, there has been an increase in impairment expense due to how changes in product
mix and growth are provided for under new IFRS9 methodology.

2
These costs arise from adverse foreign currency movements due to a foreign exchange exposure at the time of
the corporate restructure. This exposure has subsequently been hedged, removing the potential for any further
negative impact.

4
Impaired asset expense increased $2.9 million (27.6%) to $13.3 million for the six months ended 31
December 2018. $2.2 million of that increase is a result of the new IFRS9 methodology, which is greater
than anticipated due to the timing and mix of our loan portfolio growth.
As a result, impaired asset expense as a percentage of average gross finance receivables increased from
0.58% as at 30 June 2018 to 0.64% as at 31 December 2018.
Despite the increase, underlying receivables performance is stable. Excluding the $2.2 million of
impairments due to the new IFRS9 methodology:
 impaired asset expense as a percentage of average gross finance receivables reduced to 0.53%;
 impairment expense in Motor was 0.84% compared to 0.95% in the previous corresponding
reporting period; and
 Business lending impairment expense was 0.63% compared to 0.55% in the previous
corresponding reporting period (largely due to the growth in O4B).
For Reverse Mortgages, which are valued using fair value methodology, the risk remained stable.
The initial adoption of IFRS9 also resulted in opening adjustments to provisions for impairments of $25.3
million and retained earnings of $18.2 million, after allowance for the deferred tax benefit.
Net impaired and past due loans over 90 days decreased by $2.0 million from 30 June 2018 to $71.8
million as at 31 December 2018, and as a percentage of gross receivables decreased from 1.84% as at 30
June 2018 to 1.70% as at 31 December 2018.

BUSINESS PERFORMANCE
New Zealand Reverse Mortgages
New Zealand Reverse Mortgages net operating income was $10.0 million, an increase of $1.2 million or
13.5% from the previous corresponding reporting period. New Zealand Reverse Mortgages gross
receivables increased $24.6 million (10.7% annualised growth) during the period to $481.5 million as at
31 December 2018.
Motor
Motor vehicle net operating income was $28.2 million, an increase of $2.3 million or 8.9% from the
previous corresponding reporting period. Motor vehicle gross receivables increased $79.0 million (16.3%
annualised growth) to $1,039.9 million as at 31 December 2018 through Motor Dealer lending (car
dealerships, brokers and partnerships such as Holden and Jaguar/Land Rover).
Harmoney and other personal lending
Harmoney and other personal lending net operating income was $9.5 million, an increase of $2.6 million
or 38.0% from the previous corresponding reporting period. Harmoney and other personal lending
achieved growth in gross receivables of $34.7 million (44.3% annualised growth), offset by a small

5
foreign currency movement of $1.3 million on Australia Harmoney receivables, to $188.6 million as at 31
December 2018.
Heartland has a 13.34% shareholding in Harmoney.
Business
Business lending net operating income was $27.6 million, an increase of $1.5 million or 5.7% from the
previous corresponding reporting period.
Business gross receivables increased by $32.4 million (6.1% annualised growth) to $1,093.8 million as at
31 December 2018. Heartland’s growth focus continues to be on Intermediated Business and lending
through our digital platform, Open for Business. These markets continue to deliver results with Business
Intermediated lending up $72.3 million (44.3% annualised growth) and Open for Business lending up
$25.5 million (56.2% annualised growth) to $115.4 million as at 31 December 2018. Business
Relationship lending continues to be managed down as part of our strategy to reduce concentration risk
resulting in Business Relationship gross receivables reducing by $65 million in the period.
Rural
Rural lending net operating income was $15.8 million, a decrease of $0.4 million or 2.7% from the
previous corresponding reporting period.
Rural gross receivables decreased in the period by $15.0 million (4.5% annualised decrease). Similarly to
Business Relationship lending, we continue to manage down large Rural Relationship lending to reduce
concentration risk in this area.
Australia
Net operating income from Australian operations (comprising Australian Reverse Mortgages and
business lending to Spotcap) was $11.8 million, an increase of $2.2 million or 23.3% from the previous
corresponding reporting period.
Australian Reverse Mortgages gross receivables grew by $85.1 million (24.9% annualised growth) in the
six months to 31 December 2018. This growth was offset by an adverse movement in foreign currency
translation of $29.8 million, resulting in a reported growth of $55.3 million (16.2% annualised growth) to
gross receivables of $733.3 million as at 31 December 2018. Australian business lending to Spotcap
increased $4.3 million (45.4% annualised growth), also offset by a small adverse movement in foreign
currency translation of $0.8 million to $22.2 million as at 31 December 2018.
Other
New Zealand residential mortgages decreased by $4.4 million to $21.3 million as at 31 December 2018
as Heartland continues to run-down this portfolio.

FUNDING AND LIQUIDITY

6
The corporate restructure was completed in October 2018 and provides the group greater flexibility for
capital and funding options going forward. The Tier 2 Notes (A$20 million) were repaid as part of this
corporate restructure.
Retail Deposits grew $106.6 million (7.3% annualised growth) to $3.0 billion as at 31 December 2018.
Heartland continues to be a strong market leader in term deposit and call account offerings, providing
customers with competitive interest rates and unlimited on call access to their money.

CORPORATE RESTRUCTURE AND ASX LISTING
Under the corporate restructure, all of the shares in Heartland Bank Limited (Heartland Bank) were
exchanged for shares in Heartland Group Holdings Limited (Heartland Group), and Heartland Bank
became a wholly owned subsidiary of Heartland Group. In addition, the Australian group of companies
were transferred from Heartland Bank to Heartland Group.
The corporate restructure provides Heartland greater flexibility to explore and take advantage of future
growth opportunities and funding options in New Zealand and Australia outside of the banking group.
This helps to enable Heartland to achieve the strategic priorities set out below.

REGULATORY UPDATE
There has been considerable recent scrutiny of the financial services sector, with the Financial Markets
Authority (FMA) and Reserve Bank of New Zealand (Reserve Bank) reporting on their findings following
a review of conduct and culture in New Zealand retail banks, the Australian Securities and Investments
Commission (ASIC) releasing a report following its review of reverse mortgages in Australia, and the
Australian Royal Commission publishing its final report on its findings on misconduct in the Australian
banking, superannuation and financial services industry.
The FMA and Reserve Bank report found no evidence of widespread conduct and culture issues;
however, the findings did reveal opportunities to strengthen the governance and management of
conduct risks industry-wide. Heartland is required to develop a plan to address the findings, to be
completed by end of March 2019, and will continue to focus on iterative improvement of conduct and
culture bank-wide.
ASIC’s review of reverse mortgage lending in Australia highlighted the increasing need for equity release
products and that “reverse mortgage products can help many Australians achieve a better quality of life
in retirement”.
3
The report also identified several areas for improvement from lenders, and Heartland
has already acted on these and is very much aligned with ASIC in being committed to ensuring
customers make informed decisions. Heartland is a member of a working group which was formed to
ensure that ASIC’s expectations for improved lending practices for reverse mortgages are satisfied.

3
ASIC Deputy Chair Peter Kell, ASIC Review of reverse mortgage lending in Australia (report 586)

7
The final Royal Commission report makes a number of recommendations, including changes in the way
that brokers are remunerated for introducing clients to financial service providers.
Heartland does not expect any of the reports, or any expected legislative response to any of them, to
have any material impact on Heartland’s business.
Finally, as noted in the capital requirements section below, the Reserve Bank also released a
consultation paper seeking public views on a proposal to increase the minimum level of regulatory
capital in the banking system. At this stage, there is some detail to be clarified and the Reserve Bank is
yet to make any final decisions.

STRATEGIC PRIORITIES
Following the corporate restructure, the Group’s activity comprises three areas of strategic focus:
Australia Reverse Mortgages, New Zealand Banking and Digital Platform Services.
Australia Reverse Mortgages
Australia Reverse Mortgages continues to experience strong growth in a market with compelling
fundamentals. Population demographics are accelerating favourably with the number of Australians
over 65 being projected to grow from 15% of the population in 2018 to 23% by 2050.
4

This provides Heartland with a unique opportunity as the primary originator of reverse mortgages in
Australia. Heartland plans to accelerate growth through raising product awareness under dedicated
marketing initiatives, including a television campaign (TVC), to reach the total estimated market of
approximately A$6billion
5
. Heartland intends to leverage off the key experiences and success achieved
in the New Zealand market.
The combination of favourable demographics, limited active originators and raising product awareness
through increased marketing activity presents the opportunity for significant growth and to cement
Heartland’s position as the market leader in reverse mortgage origination in Australia.
To support this growth opportunity, Heartland continues to diversify its sources of funding and to fund
growth with improved capital efficiency. Heartland Australia has established an A$ medium-term note
programme, has engaged with a number of Australian fixed income investors and is in the process of
launching an inaugural A$ bond offering. A number of other options are currently being explored,
including additional warehouse facilities and long-term funding sourced offshore.
Digital Platform Services
The Digital strategy aims to deliver three main benefits:
 simple and fast customer service

4
Australian Bureau of Statistics
5
Based on peak penetration from the Deloitte annual reverse mortgage report 2015, combined with current
Australian Bureau of Statistics population and housing statistics and APRA and HSF reverse mortgage data.

8
 greater customer reach
 low cost on-boarding and transaction processing
The three major areas of activity have been: Deposits, where 10 percent of deposit customers use the
Heartland mobile app (an increase of 20 percent over the past three months); Australian Reverse
Mortgages, where 30 percent of customers are direct, and 93 percent of those are generated online;
and O4B.
O4B targets Small to Medium Enterprises (SMEs) with loans of less than $250,000. Automated approvals
are possible within minutes for loans up to $75,000.
Since 2015 O4B has grown to $115.4 million (gross receivables), including an annualised growth of 56.2
percent in the six months to December 2018. During this period the offering has been continuously
improved to ensure a frictionless end to end process.
The platform has reached a stage where increased marketing is required to develop awareness and
extend reach into a target market estimated to be $5.6 billion.
6
Consideration is being given to
attracting external investment from specialist investors who can help Heartland to take O4B to the next
stage of growth. An update will be provided to the market in due course should any transaction
eventuate.
Heartland Bank Limited
Heartland Bank’s focus will remain on delivering best or only products to depositors and borrowers,
through continued growth in core lending activities:
 New Zealand Reverse Mortgages (gross receivables annualised growth of 10.7 percent),
 Business lending (gross receivables annualised growth of 6.1 percent),
 Motor Finance (gross finance receivables annualised growth of 16.3 percent), and
 Harmoney and other consumer lending (gross receivables annualised growth of 44.3 percent)
Like Australian Reverse Mortgages, there are significant growth opportunities for New Zealand Reverse
Mortgages, and Heartland intends to continue to leverage off its success achieved to date in the New
Zealand market.
Larger Business and Rural relationship lending is being managed down as part of our strategy to reduce
concentration risk in these areas. Options are also being considered with regard to the acceleration of
the run down which would free up capital to be dedicated to core lending activities.

6
Based on the number of SMEs in New Zealand (Ministry of Business, Innovation and Employment Small
Business Fact Sheet 2017) with a turnover, risk profile and needs consistent with O4B.

9
INTERIM DIVIDEND
Heartland is pleased to declare a 2019 interim dividend of 3.5 cents per share. The interim dividend will
be paid on Friday 29 March 2019 (Payment Date) to shareholders on the company’s register as at
5.00pm on Friday 15 March 2019 (Record Date) and will be fully imputed.
In December 2018, Heartland Group established a DRP, giving eligible shareholders opportunity to
reinvest some or all of their dividend payments into new ordinary shares. The DRP will apply to the
interim dividend with a 2.5 percent discount
7
. Shareholders are encouraged to participate in order to
support Heartland’s capital needs given its strong asset growth.
It is important to note that shareholders’ previous election under the Heartland Bank Limited DRP has
not automatically been carried across to the Heartland Group DRP. Shareholders who previously
participated in the Heartland Bank Limited DRP, and wish to continue to receive shares instead of
dividend payments, must make a new election to participate in the Heartland Group DRP in one of the
ways specified in the DRP offer document by 5.00pm on 18 March 2019 (being the first trading day after
the Record Date). The DRP offer document and participation form is available on our shareholder
website at: https://shareholders.heartland.co.nz/shareholder-resources/dividends.

OUTLOOK
Underlying balance sheet growth supports a result in line with the original forecast in the range of $75
million to $77 million. However, the one-off costs incurred in relation to the corporate restructure and
ASX listing, and the higher than anticipated impact of IFRS9 as a result of receivables growth, have
caused some pressure on earnings. Whilst Heartland considers that it could still achieve a result at the
bottom end of guidance, it would come at a cost to further investment in growth. Accordingly, an
updated guidance range of $73 million to $75 million is now considered prudent. The midpoint of that
range would see the delivery of approximately 10% NPAT growth for FY19 compared to FY18.

- Ends -
For further information, please contact:

Jeff Greenslade
Chief Executive Officer
MOB 021 563 5493
jeff.greenslade@heartland.co.nz
Julia Belk
Investor Relations Manager
DDI 09 926 3837
julia.belk@heartland.co.nz

7
That is, the strike price under the DRP will be 97.5 percent of the volume weighted average sale price of
Heartland shares over the five trading days following the Record Date. For the full details of the DRP and the Strike
Price calculation, refer to Heartland Group Holdings Limited DRP offer document dated 10 December 2018.

---

Re p or t 2 019
Interim
Six months to 31 December 2018

Contents
1 Introduction
2 Chair and CEO's Report
8 Profitability through receivables growth
9 Feature story – The next generation is coming through
10 Financial Commentary
12 Interim Financial Statement
42 Auditor's Report
45 Corporate Directory
Net profit after tax
$33.1 million, up 6.5%
Gross finance receivables
$4.2 billion, up 11.9%
1
Corporate
restructure and
ASX foreign
exempt listing
successfully
completed
1 Annualised growth excluding changes in foreign
currency exchange rates.
11.9
%
1
PROFITABILITY CONTINUES
TO INCREASE
6.5
%
STRONG GROWTH
ACROSS THE BUSINESS
BUSINESS RESTRUCTURE

Profitability once again
increased, driven by growth
in our core lending divisions
and digital channels.
With a strong strategic
focus for the future, we
expect Heartland to
continue to grow.
1
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

Chair and
CEO’s Report
New Zealand Banking is expected to continue to grow. Alongside this,
there are two areas with potential high growth opportunities –
Australia Reverse Mortgages and O4B.
More resources will be dedicated to these areas to unlock these
opportunities while maintaining a strong bank which continues to
grow and deliver valued customer services. Across the Group, the
common theme is to deliver simple, frictionless on-boarding and
processing solutions for the customer. Heartland also aims to grow
while utilising the flexibility of the new corporate structure to access
broader funding and capital sources.
Australia Reverse Mortgages
Australia Reverse Mortgages continues to experience strong growth
(gross receivables annualised growth of 24.9 percent excluding FX
in the six months ending 31 December 2018) in a market with
compelling fundamentals. Population demographics are accelerating
favourably with the number of Australians over 65 being projected to
grow from 15 percent of the population in 2018 to 23 percent
by 2050.
3
This provides Heartland with a unique opportunity as the primary
originator of reverse mortgages in Australia. Heartland plans to
accelerate growth through raising product awareness under dedicated
marketing initiatives, including a television campaign (TVC), to reach
the total estimated market of approximately A$6billion.
4
Heartland
intends to leverage off the experiences and success achieved in the
New Zealand market.
The combination of favourable demographics, limited active
originators and raising product awareness through increased
We are pleased to report Heartland’s result for the first six months
of the 2019 financial year. Profitability once again increased. This
was achieved during a period of restructure which has positioned
Heartland to grow and more efficiently access funding and capital.
Heartland Group Holdings Limited (Heartland Group) achieved a net
profit after tax of $33.1 million, an increase of 6.5 percent from the
previous corresponding reporting period.
Gross finance receivables grew $240.7 million in the six months to 31
December 2018, an annualised growth rate of 11.9 percent, excluding
the impact of changes in foreign currency exchange rates.
1
The key
drivers of this growth were our Australian Reverse Mortgages, Open
for Business (O4B), Business Intermediated, Harmoney and Motor
divisions.
Growth in profitability was achieved notwithstanding one-off
corporate restructure and ASX listing costs ($0.9 million) and one-off
foreign currency costs of $1.2 million incurred in relation to the
corporate restructure. Profitability was also impacted due to the
adoption of IFRS9 which requires providing for impairments on an
expected loss basis on the date of loan origination. Additional
impairment expense due to the new IFRS9 methodology was
$2.2 million in the six months ended 31 December 2018, which
is greater than anticipated due to the timing and mix of our
loan portfolio growth.
2
Growth strategy
Following the corporate restructure, Heartland Group’s activity
comprises three areas of strategic focus: Australia Reverse Mortgages,
New Zealand Banking and Digital Platform Services.

Australia Reverse Mortgages
Total estimated market of
approximately A$6bn
Long term funding
Increase use of marketing campaigns
including TVC

New Zealand Banking
Five core lending activities: Reverse
Mortgages, Motor, SME, Livestock,
Harmoney
Accessible deposits
Manage down large relationship legacy
Rural and Business loans

Digital Platform Services
Open for Business (04B)
Mobile app
New markets
Simple, frictionless on-boarding and processing
Capital efficiency
1 This was offset by an adverse foreign currency movement on Australian dollar denominated receivables of $32.0 million to $4,226.2 million (10.3 percent
annualised growth).
2 See impairments section in Financial Commentary.
3 Based on peak penetration from the Deloitte annual reverse mortgage report 2015, combined with current Australian Bureau of Statistics population and
housing statistics and APRA and HSF reverse mortgage data.
2
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

marketing activity, presents the opportunity for significant growth
and to cement Heartland’s position as the market leader in reverse
mortgage origination in Australia.
To support this growth opportunity, Heartland continues to diversify
its sources of funding and to fund growth with improved capital
efficiency. Heartland Australia has established an A$ medium-term
note programme, has engaged with a number of Australian fixed
income investors and is in the process of launching an inaugural A$
bond offering. A number of other options are currently being explored,
including additional warehouse facilities and long-term funding
sourced offshore.
Digital Platform Services
The Digital strategy aims to deliver three main benefits:
• simple and fast customer service
• greater customer reach
• low cost on-boarding and transaction processing
The three major areas of activity have been: Deposits, where
10 percent of deposit customers use the Heartland mobile app
(an increase of 20 percent over the past three months); Australia
Reverse Mortgages, where 30 percent of customers are direct and
93 percent of those are generated online; and O4B.
O4B targets Small to Medium Enterprises (SMEs) with loans of less
than $250,000. Automated approvals are possible within minutes for
loans up to $75,000.
Since 2015, O4B has grown to $115.4 million (gross receivables),
including an annualised growth of 56.2 percent in the six months
to December 2018. During this period the offering has been
continuously improved to ensure a frictionless end to end process.
The platform has reached a stage where increased marketing is
required to develop awareness and extend reach into a target market
estimated to be $5.6 billion.
5
Consideration is being given to attracting
external investment from specialist investors who can help Heartland
to take O4B to the next stage of growth. An update will be provided to
the market in due course should any transaction eventuate.
Heartland Bank Limited
Heartland Bank’s focus will remain on delivering best or only products
to depositors and borrowers, through continued growth in core
lending activities:
“The corporate
restructure provides
Heartland greater
flexibility to explore and
take advantage of future
growth opportunities
and funding options
in New Zealand and
Australia outside of the
banking group."
4 Per note 3 above.
5 Based on the number of SMEs in New Zealand (Ministry of Business, Innovation and Employment Small Business Fact Sheet 2017) with a turnover, risk profile
and needs consistent with O4B.
6 ASIC Deputy Chair Peter Kell, ASIC Review of reverse mortgage lending in Australia (report 586).
• New Zealand Reverse Mortgages (gross receivables annualised
growth of 10.7 percent),
• Business lending (gross receivables annualised growth of
6.1 percent),
• Motor Finance (gross finance receivables annualised growth of 16.3
percent), and
• Harmoney and other personal lending (gross receivables annualised
growth of 44.3 percent)
Like Australian Reverse Mortgages, there are significant growth
opportunities for New Zealand Reverse Mortgages, and Heartland
intends to continue to leverage off its success achieved to date in the
New Zealand market.
Larger Business and Rural Relationship lending is being managed
down as part of our strategy to reduce concentration risk in these
areas resulting in Business Relationship gross receivables reducing by
$65 million in the period. Options are also being considered with
regard to the acceleration of this run down which would free up
capital to be dedicated to core lending activities.
Regulatory Update
There has been considerable recent scrutiny of the financial services
sector, with the Financial Markets Authority (FMA) and Reserve Bank
of New Zealand (Reserve Bank) reporting on their findings following
a review of conduct and culture in New Zealand retail banks, the
Australian Securities and Investments Commission (ASIC) releasing
a report following its review of reverse mortgages in Australia and the
Australian Royal Commission publishing its final report on it findings
on misconduct in the Australian banking, superannuation and financial
services industry.
The FMA and Reserve Bank report found no evidence of widespread
conduct and culture issues; however, the findings did reveal
opportunities to strengthen the governance and management of
conduct risks industry-wide. Heartland is required to develop a plan
to address the findings, to be completed by end of March 2019, and
will continue to focus on iterative improvement of conduct and
culture bank-wide.
ASIC’s review of reverse mortgage lending in Australia highlighted the
increasing need for equity release products and that “reverse mortgage
products can help many Australians achieve a better quality of life in
retirement”.
6
The report also identified several areas for improvement
3
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

• The Australian business is outside of the New Zealand banking
group and therefore not subject to Reserve Bank capital
requirements, reducing the impact of changes in those
requirements.
• The options being explored for long-term funding of Heartland
Australia and Heartland Group, if implemented, may potentially result
in the Heartland Group requiring less capital, or being able to
redeploy capital to Heartland Bank to satisfy Reserve Bank capital
requirements without necessarily raising more equity in the market.
Additionally, the run-down of Heartland Bank’s non-core Business and
Rural loans is expected to continue, reducing Heartland Bank’s capital
requirements.
All of the above taken into account, and in the absence of an
unanticipated increase in growth or an acquisition, the Group has no
current need to raise equity from shareholders other than thorough
the Dividend Reinvestment Plan. A combination of retained earnings
reinvested through the Dividend Reinvestment Plan and other sources
are sufficient for funding business as usual growth.
Interim dividend
Heartland is pleased to declare a 2019 interim dividend of 3.5 cents
per share. The interim dividend will be paid on Friday 29 March 2019
(Payment Date) to shareholders on the company’s register as at
5.00pm on Friday 15 March 2019 (Record Date) and will be fully
imputed.
In December 2018, Heartland Group established a DRP, giving eligible
shareholders opportunity to reinvest some or all of their dividend
payments into new ordinary shares. The DRP will apply to the interim
dividend with a 2.5 percent discount.
7
Shareholders are encouraged to
participate in order to support Heartland’s capital needs given its
strong asset growth.
It is important to note that shareholders’ previous election under the
Heartland Bank Limited DRP has not automatically been carried across
to the Heartland Group DRP. Shareholders who previously participated
in the Heartland Bank Limited DRP, and wish to continue to receive
shares instead of dividend payments, must make a new election to
participate in the Heartland Group DRP in one of the ways specified in
the DRP offer document by 5.00pm on 18 March 2019 (being the first
trading day after the Record Date).
Outlook
The underlying balance sheet growth supports a result in line with the
original forecast NPAT in the range of $75 million to $77 million.
However, the one-off costs incurred in relation to the corporate
restructure and ASX listing, and the higher than anticipated impact of
IFRS9 as a result of receivables growth, have caused some pressure on
earnings. Whilst Heartland considers that it could still achieve a result
at the bottom end of guidance, it would come at a cost to further
investment in growth. Accordingly, an updated guidance range of $73
million to $75 million is now considered prudent. The midpoint of that
range would see the delivery of approximately 10% NPAT growth for
FY19 compared to FY18.
We are committed to investing in growth, and are very excited about
the Group’s future growth opportunities – particularly those present in
Australia and O4B.
Finally, we would like to take this opportunity to thank Heartland’s staff
for their efforts and our shareholders for their continued support.
Geoffrey Ricketts Jeff Greenslade
Chair of the Board Chief Executive Officer
from lenders, and Heartland has already acted on these and is very much
aligned with ASIC in being committed to ensuring customers make
informed decisions. Heartland is a member of a working group which
was formed to ensure that ASIC’s expectations for improved lending
practices for reverse mortgages are satisfied.
The final Royal Commission report makes a number of
recommendations, including changes in the way that brokers are
remunerated for introducing clients to financial service providers.
Heartland does not expect any of the reports, or any expected
legislative response to any of them, to have any material impact on
Heartland’s business.
Finally, as noted in the capital requirements section below, the Reserve
Bank also released a consultation paper seeking public views on a
proposal to increase the minimum level of regulatory capital in the
banking system. At this stage, there is some detail to be clarified and
the Reserve Bank is yet to make any final decisions.
Operating efficiencies
A theme running across Heartland Group is the need to provide
simple, frictionless services to our customers. This is particularly
important with respect to on-boarding new customers. Investment is
being made in technologies including biometrics and robotics in order
to make our processes frictionless and scalable. Efficient, high quality
services are vital to facilitate growth.
Corporate restructure
Heartland completed a corporate restructure on 31 October 2018. All of
the shares in Heartland Bank were exchanged for shares in Heartland
Group, and Heartland Bank became a wholly owned subsidiary of
Heartland Group. In addition, the Australian group of companies were
transferred from Heartland Bank to Heartland Group.
Following the corporate restructure, Heartland Group now consists of
a parent company (Heartland Group Holdings Limited) which is listed
on both the NZX Main Board and as a Foreign Exempt Listing on the
ASX and owns a New Zealand registered bank (Heartland Bank
Limited) and the Australian Reverse Mortgages business (Heartland
Seniors Finance).
The corporate restructure provides Heartland greater flexibility to
explore and take advantage of future growth opportunities and
funding options in New Zealand and Australia outside of the banking
group. This helps to enable Heartland to achieve the strategic
objectives set out above.
Jeff Greenslade remains overall Group Chief Executive Officer (CEO).
The Group CEO will continue to provide oversight of all Heartland
Group activities, including banking, and will take direct responsibility
for Australia and Digital as well as managing the Group’s strategy,
capital and corporate finance. Chris Flood (previously Deputy CEO) has
been appointed as dedicated CEO for Heartland Bank Limited, subject
to Reserve Bank of New Zealand non-objection.
Capital requirements
In December 2018, the Reserve Bank released a consultation paper
seeking public views on a proposal to increase the minimum level of
regulatory capital in the banking system. At this stage, there is some
detail to be clarified and the Reserve Bank is yet to make any final
decisions. If the proposal was to be implemented in its current form,
Heartland would be required to lift its Tier 1 capital ratio to 15 percent
over a five year transitional period. This equates to an increase in Tier 1
capital of less than 0.4 percent (or approximately $15 million) per year,
based on Heartland’s current financial position.
The corporate restructure provides Heartland Group with the following
flexibility in relation to the Reserve Bank’s capital requirements.
7 That is, the strike price under the DRP will be 97.5 percent of the volume weighted average sale price of Heartland shares over the five trading days following
the Record Date. For the full details of the DRP and the Strike Price calculation, refer to Heartland Group Holdings Limited DRP offer document dated
10 December 2018.
Chair and CEO’s Report continued
4
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

“Nā ngā panonitanga
ā-kaporeihana nei, kua
māmā ake ināianei te
torotoro, te taunaha hoki
i ētahi āheinga mō āpōpō
e whanake ake ai, nui
ai hoki ngā kōwhiringa
pūtea i Aotearoa me
Ahitereiria, i waho atu i
ngā rōpū pēke pūtea."
E koa ana mātou ki te pūrongo i ēnei whakakitenga a Heartland mō
ngā marama e ono, tuatahi o te tau pūtea, 2019. I whanake anō ngā
pūtea. I tutuki tēnei i tētahi wā panoni heoi, mā tēnei kua
whakanoho a Heartland kia tipu, kia toro pai ake hoki ki ngā pūtea
tautoko me ngā uara.
I eke a Heartland Group Holdings Ltd ki te painga more i muri a te
take, ki $33.1 million, he pikinga tērā mā te 6.5 ōrau i ngā wā pūrongo
pūtea kua mahia i mua.
I tipu ngā ahumoni nama mai mā te $240.7 miriona, i ngā marama e
ono ki 31 Tīhema 2018, he tipunga ā-tau tērā o te 11.9 ōrau, i waho
atu i ngā whakaaweawe o ngā nekehanga i te pāpātanga uetanga tāra
nō tāwāhi.
1
Ko ngā kaikōkiri matua o tēnei whakawhanaketanga, i ahu
tonu mai i ērā o ngā Australian Reverse Mortgages, Open for Business
(O4B), Business Intermediated, Harmoney me ngā ratonga Motoka.
I eke tēnei whakawhanaketanga ā-pūtea ahakoa te utu kotahi e pā ana
ki te panoni rangatōpū me te urunga ki te rārangi ASX ($0.9 miriona)
me te utu kotahi e pā ana ki te uetanga tāra o te $1.2 miriona, ko te
panonitanga o te rangatōpū te take. I ākina hoki ngā whiwhinga
ā-pūtea e te whai wāhitanga mai a IFRS9, tērā me whakatohu te hauā i
te rā taketake o te pūtea taurewa. I pā mai tētahi utu whakahauā anō
nā te tukanga hou a IFRS9, arā, e $2.2 miriona i ngā marama e ono ki
te rā 31 o Tīhema 2018, he nui ake taua utu i tērā o te whakapae i te
mea he rerekē te whakawhenumitanga o tō mātou huinga haumitanga
i te whakapae i te rā 31 Tīhema 2018.
2

Rautaki Whakawhanake
I muri mai i ngā panonitanga ā-kaporeihana, e toru ngā wāhanga
rautaki i aro nuitia rā e Te Rōpū a Heartland:
E kawatautia ana ka whanake tonu te ao Pēke o Aotearoa. Āpiti atu ki
tērā, he pitomata tō ngā wāhi e rua hei tupu matomato: Australia
Reverse Mortgages Mōkete tauaro k I Ahitereiria me O4B.
Kia nui kē atu ngā rauemi kia whakamahia ki ēnei wāhi e puare mai ai
ētahi āheinga, otirā, e whanake haere tonu ana, e ngākau marae tonu
ana ki ana kiritaki puipuiaki. I waenga i te katoa o te rangatōpū, ko te
kaupapa matua kia whakatutuki i te whakaurunga māmā hoki, i ngā
ratonga hātepe anō hoki ki te kiritaki. E whai tipuranga ana hoki a
Heartland, otirā ka whakamahi hoki te āhua ngāwari o te
panonigtanga hou o te rangatōpū kia toro atu hoki ki ngā pūtea tautok
whānui ake me ngā mātāpuna uara.
Ngā Mōkete Tauaro ki Ahitereiria
E rangona ana e ngā Mōkete Tauaro o Ahitereiria ētahi
whakawhanaketanga hirahira (moni mai ā mua i te utu take,
whakawhanaketanga ā-tau o te 24.9 ōrau hāunga ngā FX i ngā
marama e ono atu ki te 31 o Hakihea, 2018) i roto i tētahi mākete he
nui ōna whakawanawana. E tipu pai ana te kāhui tāngata me te
matapae ka neke atu te kāhui o ngā tāngata e 65 ngā tau neke atu, mai
i te 15 ōrau o te tau 2018 ki te 23 ōrau hei te 2050.
3

Mā tēnei ka whai wāhi atu a Heartland ki ētahi āheinga motuhake, nā
te mea mā rātou, i te orokotīmatanga, ngā Mōkete Tauaro i Ahitereiria.

Mōkete Tauaro ki Ahitereiria
Te matapae o te katoa o te mākete e taea
ai, ko te A$6piriona
Tahua tautoko pae tawhiti
Kia piki ake ngā rautaki whakatairanga,
ko te TVC tētahi o ēnei

Ngā mahi pēke ki Aotearoa
E rima ngā mahi pūtea taurewa matua:
Mōkete Tauaro, Motoka, SME, Kararehe,
Harmoney
Tomonga ki ngā Moni Kuhu
Kia heke iho ngā hononga nui o mua mō
ngā pūtea taurewa Taiwhenua, Pakihi hoki

Ngā ratonga pae matihiko
Tūwhera ki te Pakihi
Pūmanawa Tautono
Mākete hou
Kia ngāwari, kia taero kore te kuhunga me ngā hātepe
Kia pakari anō te uara
1 I whakatauritea tēnei e tētahi nekehanga kino a te uetanga tāra o te tāra ki Ahitereiria e pā ana ki ngā moni mai i raro taua tāra, arā, $32.0 miriona ki te
$4,226.2 miriona (10.3 ōrau whakatipuranga ā-tau).
2 Tirohia te wāhanga hauā I te Financial Commentary.
3 E ai ki te tino ngoto i te pūrongo mōkete tauaro ā-tau 2015 a Deloitte, me ngā tauanga taupori, tauanga kāinga hoki a te Australian Bureau of Statistics, me te
raraunga a APRA me HSF e pā ana ki te mōkete tauaro.
Reta i te Heamana
& Pou Whakahaere
5
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

Reta i te Heamana & Pou Whakahaere
E tūmanako ana a Heartland ki te kimi angitutanga i roto i ngā pakihi
hou mā te whakatairanga i ngā tuaritanga ki tētahi kaupapa
whakatairanga whiwhita, arā, ko tētahi whakatairanga pouaka
whakaata (TVC) kia torotoro atu ki te mākete, tōna A$6 piriona te nui.
4

Te manako ka whai hua a Heartland i āna wheako, i āna angitutanga
hoki kua ea kē i te mākete ki Aotearoa.
Ko te hanumitanga o ētahi kāhui tāngata pai, ētahi limited active
originators, me te whakatairanga ake i te mōhiotia ō ētahi tuaritanga
mā roto mai i ētahi tūmahi whakatairanga ka kitea ētahi āheinga e tipu
ai, e toka ai hoki te tūranga o Heartland hei rangatira i roto i ngā
mōkete tauaro taketake i Ahitereiria.
E tautokona ai ēnei āheinga whakawhanake, ka kōkiri whakamua tonu
a Heartland ki te whakamatarau i ōna mātāpuna pūtea, me te tāpae
mataara hoki i ētahi pūtea ki tōna whakawhanaketanga. Kua
whakatūria a Heartland ki Ahitereiria i tētahi hotaka $A pae wawaenga
nōti, kua tūhono hoki ki ētahi whaipūtea ita kaihoko haumitanga, ā, hei
tuatahitanga kei te tata oti tētahi $A hokonga ā-tūtanga pakihi
tūmatawhāiti. Arā noa atu ngā huarahi e tūhuratia ana, arā, ko te
whare pūkainga taonga me ētahi mātāpuna pūtea pae tawhiti mai i
tāwhāhi.
Ngā Ratonga Pae Matihiko
E arotahi tonu ana te rautaki Mamati ki ētahi mea matua e toru:
• Kia māmā, kia tere hoki ngā mahinga tahitanga ki ngā kiritaki
• Kia whānui kē atu ngā torotoronga ki te kiritaki
• Kia iti iho hoki ngā utu hao tāngata, tukanga whakahaere pūtea hoki
He nui te whakamahi o ngā wāhanga e toru, arā: Moni kuhu, tērā 10
ōrau o ngā kiritaki kuhu moni e whakamahi nei i te pūmanawa tautono
(he pikinga mā te 20 ōrau i ngā marama e toru); Mōkete Tauaro ki
Ahitereiria, tērā he horipū te 30 ōrau o ngā kiritaki, ā, 93 ōrau o ēnei e
ara mai ana i te ipurangi, me O4B.
E aro atu ai a O4B ki ngā pakihi iti ki ngā pakihi waenga, me ngā pūtea
taurewa iti iho i te $250,000. Kei ngā mēneti noa iho te whakaaetanga
rorohikotanga o ētahi pūtea taurewa kei raro iho i te $75,000.
Mai i te tau 2015 kua tupu a O4B ki te $115.4 miriona (moni mai ā mua
i te utu tāke), me tētahi tupuranga ā-tau o te 56.2 ōrau i ngā marama e
ono, atu ki te Hakihea, 2018. I tēnei wā, kua auau te pai ake o ngā
hoatutanga kia taero-kore ngā tukanga, mai i te tīmatanga ki te
mutunga.
Kua tae te kaupapa ki tētahi taumata me nui kē atu whakatairangatia
ōna e mataara ake ai, e toro atu ai hoki ia ki tētahi mākete e kīia ana kei
te takiwā o te $5.6 piriona te uarā.
5
Kei te whakaarohia te
whakapoapoa mai a ngā mātanga kaiwhakarato moni o waho, kia
āwhina i a O4B kia eke ki taumata kē. Kia puta tētahi
whakamōhiotanga ki te mākete ā tōna wā ki te whakatutuki tētahi o
ēnei whakawhitinga.
Heartland Bank Tāpoi
Ka mau tonu i a Heartland Bank i tana kaupapa o te hoatu tonu i te
tino kounga, i āna ake rawa rānei ki ana Kaimonikuhu me ana
kaimonihoko mā te whakatipuranga tonutanga i ngā mahi pūtea
taurewa, arā:
• Ngā MōketeTauaro ki Aotearoa (he tipuranga 10.7 ōrau o te moni
mai ā mua i te tāke ia tau)
• Nama Atu ā-Pakihi (he tipuranga 6.1 ōrau o te moni mai ā mua i te
tāke ia tau)
• Ahumoni Motoka (he tipuranga 16.3 ōrau te ahumoni mai ā mua i te
take ia tau)
• Harmoney me ērā atu momo nama atu ā-kiritaki (he tipuranga 44.3
ōrau te nama mai ā mua i te take)
Pērā i te Mōkete Tauaro ki Ahitereiria, he nui ngā āheinga piki mā te
Mōkete Tauaro ki Aotearoa, ā, e whakaaro ana a Heartland kia whai
tonu i te wahanga taurewa o te angitu kua pahawa tae noa ki tēnei rā i
te mākete ki Aotearoa nei.
Kei te whāiti haere te whakahaerehia o ngā Hononga Pakihi nui,
hononga Taiwhenua hoki, kia hāngai ai ki tā mātou rautaki e iti haere ai
te warea ki aua kaupapa rā e whaihua ana, arā, i heke iho te nama utua
mai a mua i te tāke a ngā Hononga Pakihi mā te $65 miriona i taua wā.
Kei te wānangahia tonutia hoki ngā whakaaro kia whakaterehia te wā
whakawhaiti nei, tērā kia whakawātea ētahi pūtea me ētahi rauemi mō
ētahi mahi pūtea taurewa matua.
Ngā penapenatanga whakahaere
Ko tētahi kaupapa matua i waenganui i te Rōpū Heartland ko te hoatu
i ētahi āwhinatanga he māmā te uru ki a mātou kiritaki. He take matua
tēnei mō ngā rautaki hao tāngata e rēhita mai ai ētahi kiritaki hou. He
pūtea e hoatu atu nei mātou ki ngā momo hangarau pēnei i te tautohu
tangata matihiko me ngā mahi karetao ā-hangarau e māmā ake ai, e
taea ai hoki e mātou ētahi mahi te ine. He mahinga nui te kimi i ētahi
tukanga māmā, kounga anō hoki e pai ai ngā whakawhanaketanga.
Panonitanga a te Rangatōpū
I oti ngā mahi panoni ā-kaporeihana nei i te 31 o Whiringa-ā-nuku,
2018. Ko ngā tūtanga pakihi katoa i Heartland Bank i whakawhitihia
mō ngā tūtanga pakihi i Rōpū Heartland, ā, ka noho ko Heartland Bank
ki raro i te mana o Heartland Group. Me te aha, ko ngā rōpū pakihi o
Ahitereiria ka whakawhiti i Heartland Bank ki Heartland Group.
Whai muri mai i ngā panonitanga, ā-kaporeihana, ināianei ko te Rōpū
Heartland te kamupene matua (Heartland Group Holdings Limited) kei
te rārangi ingoa o NZX Main Board me ASX, i raro iho i tētahi Foreign
Exempt Listing e noho nei tētahi pēke rēhita nō Aotearoa (Heartland
Bank Limited) me te pakihi Mōkete Tauaro ki Ahitereiria (Heartland
Seniors Finance).
Nā ngā panonitanga ā-kaporeihana nei, kua māmā ake ināianei te
torotoro, te taunaha hoki i ētahi āheinga mō āpōpō e whanake ake ai,
nui ai hoki ngā kōwhiringa pūtea i Aotearoa me Ahitereiria, i waho atu i
ngā rōpū pēke pūtea. Mā tēnei e taea ai e Heartland ngā whāinga o te
rautaki, kua whakapuakina kētia, te whakatutuki.
4 Tirohia te tuhinga 3 o runga.
5 E ai ki te nama o pakihi iti ki pakihi waenga ki Aotearoa me he rerenga pūtea, taumata tūraru me ngā hiahia e hāngai pai ana ki ērā o O4B. (Whārangi Meka
Pakihi Iti 2017 Hīkina Whakatutuki)
6
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

Ko Jeff Greenslade tonu te Toihau (CEO). Ka rite tonu te
whakamāramatia o ngā kōiriiri me ngā kōnekeneke o te pēke e te
Toihau, nōna e noho Toihau ana mō Heartland Group Holdings, ā, ka
noho māna ngā kawenga mō Ahitereiria me ngā mahi mamati, me ngā
mahi whakahaere hoki i te rautaki ā-rōpū, pūtea, me ngā
whakahaerenga pūtea kaporeihana. Kua whakamanahia a Chris Flood
(Toihau Tuarua o mua) hei Toihau whakawhirinaki mō Heartland Bank
Limited, kei te āhua o te whakaaetanga nā Te Pūtea Matua o Aotearoa.
Ture Uara
Nō Tīhema 2018, nā te Pūtea Matua tētahi pepa kōrero hei whai i ngā
whakaaro o te hunga tūmatanui e pā ana ki te whakapakaringia ngā
ture taumata paeraro o te uara i te pūnaha pēke. I tēnei wā tonu, kei te
whakaarohia tonutia ētahi kōiriiri, ā, kāore anō a RBNZ kia ū ki tētahi
whakatau. Ki te whakatinanahia te tono i tōna hanga o naianei, kia
tonoa a Heartland kia hikitia tōna ōwehenga utu paetahi ki 15 ōrau i
ngā tau e rima. He pikitanga tēnei o te utu paetahi heke iho i te 0.4
ōrau (tōna $15 miriona rānei) ia tau, e ai ki tō Heartland tūranga
ahumoni o naianei.
Ko te panonitanga o te rangatōpū o te Rōpū Heartland he āheinga kia
ngāwari te mahi e pā ana ki ngā ture uara a Te Pūtea Matua.
• Kei te noho te pakihi a Ahitereiria i waho i ngā here o Aotearoa, nā
reira kāore ōna here ki ēnei ture uara a Te Pūtea Matua, he māmā
noa te whakaaweawe o ērā momo panonitanga.
• Ko ngā kōwhiringa e whāia ai hei pūtea tautoko paetawhiti ki
Heartland Ahitereiria me te Rōpū Heartland, tērā pea kia heke iho te
uara paearu ki te Rōpū Heartland, ki te whakawhiti rānei i ētahi uara
i wāhi kē kia whakaea ērā o ngā paearu uara a Te Pūtea Matua, kāore
pea he take ki te kohi uara anō i te mākete.
Āpiti atu ki tērā, ko te whakaaro ka heke iho tonu ngā mahi hauarea a
Heartland Bank me ngā pūtea taurewa ahuwhenua, kia whakaiti ai ngā
paearu uara.
Nā runga i te katoa o ngā mea o runga, me te korenga o tētahi
whakatipuranga nui me ētahi hokonga kāore i matakite, kāore he take
tō te rōpū kia whiwhi pūtea i ngā kaiwhaipānga atu i te mahere
haumitanga tukurua. I te whakawhenumitanga o ngā moni whiwhi e
puritia tonutia ana kia tukuruatia anō ki te mahere whiwhi moni, me
ētahi atu mātāpuna, he pai noa ēnei kia tautoko i ngā whakatipuranga
māori.
Moni Whiwhi Haurua Tuatahi
E harikoa ana a Hearland kia whākina atu he 3.5 heneti mō ia wehenga
te moni whiwhi i tēnei haurua o te tau. Ka utua te moni whiwhi ā te
Paraire 29 o Maihe 2019 (Rā Utu) ki ngā kaiwhaipānga I te rēhita o te
kamupene ā te 5.00 karaka i te ahiahi pō, Paraire 15 Maihe 2019 (Rā
Hopunga) ā, ka whakamāramahia katoatia.
Nō Tīhema 2018, nā Te Rōpū Heartland tētahi DRP i whakarewa, kia
taea ai ngā kaiwhaipānga tika te tuku anō i ā rātou moni whiwhi ki te
hoko anō i ētahi tūtanga pakihi māori hou. Ka whai wāhi te DRP ki te
moni whiwhi haurua tuatahi me te whakhekenga utu o 2.5 ōrau.
6

E akiakina ngā kaiwhaipānga kia whai wāhi i te kaupapa nei kia taunaki
ai ngā matea uara a Heartland nā te whaktipuranga pai o ngā rawa.
Me aro ka tika, kāore te kōwhiringa poti ō mua a ngā kaiwhaipānga kia
whakwhiti ki te Heartland Group Holdings Limited DRP i te Heartland
Bank Limited DRP. Ko ērā o ngā kaiwhaipānga i whai wāhi kē i te
Heartland Bank Limited DRP, ā, e hiahia ana ki te whiwhi tonu i ngā
tūtanga pakihi, kāore i ngā moni whiwhi, me tuku poti hou kia whai
wāhi i te Heartland Group DRP mā ngā tukanga e kitea ai i te tuhinga
DRP i mua i te 5 karaka i te ahiahipō, 18 Māihe 2019 (koinā tē rā hoko
tuatahi whai muri tonu mai i te Rā Hopu).
Anganga
Ka tautoko te tupu huna a te tuhinga toenga i ētahi hua e hāngai ana
ki te oroko matapae NPAT i te takiwā o te $75 miriona ki te $77
miriona. Heoi anō, ko te utu huatahi mō te panonitanga ā-kaporeihana
me te utu mō te ASX whakarārangi, me te whakaaweawe nui ake i te
whakapae e pā ana ki a IFRS i hua mai ai i te tupu a ngā nama utua
mai, kua pēhi atu ki te pūtea mai. Otira e whakapono ana tonu a
Heartland ka taea te moni hua te whakatutuki i te taha raro o te
matapae, heoi ko te utu, te hekenga o te haumitanga ki tōna
whakatipuranga. Nā reira, kua whakahoungia te matapae tūturu hei
arahi, ā, ko $73 miriona ki te $75 miriona te matapae hou, ā, e ngākau
titikaha ana a Heartland ka whakatutukia te NPAT tupu I te takiwā o te
10 ōrau hei te tau FY19.E ū ana ō mātou whakaaro ki ngā kaupapa
whakawhanake, ā, e hīkaka nui ana ki te kite i ngā momo
whakawhanaketanga mō raurangi - pēnei tonu i ērā e toitū kē ana i
Ahitereiria, me O4B.
Aua atu, kia whai wāhi atu mātou ki te mihi ki ngā kai mahi o Heartland
mō ngā hekenga werawera, me ā mātou kaiwhaipānga mō te auau o te
tautoko.
Geoffrey Ricketts Jeff Greenslade
Heamana o te Poari Toihau
6 Tērā, ko te utu tūturu i raro i te DRP kia 97.5 ōrau o te rahi o te utu toharite o ngā tūtanga pakihi i ngā rā e rima whai muri i te Rā Hopu. Mō ngā kōiriiri katoa o te
DRP me ngā tatauranga o te Utu Tūturu, tirohia te Heartland Group Holdings Limited DRP tuhinga, 10 Tīhema 2018.
7
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

Profitability through
receivables growth

Business Finance
Gross finance receivables $1,094
million, up $32 million
(6.1% annualised growth)
Working capital and plant and
equipment finance distributed
through Heartland’s relationship
managers, partners and
intermediaries.
Exceptional strong growth
through Business Intermediated
(44.3% annualised growth) and
Open for Business (56.2%
annualised growth).
Total Gross Finance
Receivables
$
4.2bn
1
$
1,094M
$
481M
$
756M
$
189M
$
1,040M
$
646M

Motor Vehicle Finance
Gross finance receivables $1,040 million, up
$79 million (16.3% annualised growth)
Lending through our motor vehicle dealer
network continues to grow strongly –
enabling customers to access finance at
point of sale.

Rural Finance
Gross finance receivables $646
million, down $15 million (4.5%
annualised decrease)
Rural loans and livestock finance
distributed through Heartland’s
relationship managers, alliance
partners and online through our
digital platform, Open for Livestock.
Gross Receivables($m)
Dec-18Jun-18Jun-17Jun-16Jun-15
11.9%
annualised
growth
(exc. FX)
2,877
3,125
3,576
4,017
4,226

New Zealand Reverse
Mortgages
Gross finance receivables $481 million, up
$25 million (10.7% annualised growth)
Primarily distributed through our
Heartland Seniors Finance sales team in
New Zealand.

Australia
Australia Reverse Mortgages
Gross finance receivables $733
million, up $85 million (24.9%
annualised growth excluding FX
2
)
Distributed through brokers and
our Heartland Seniors Finance sales
team in Australia.
Including impact of foreign currency
translation, reported annualised
growth of $55 million (16.2%)
Australian Spotcap
business lending
Gross finance receivables $22 million,
up $4 million (45.4% annualised
growth excluding FX
2
)
Including impact of foreign currency
translation, reported annualised
growth 36.5%

Harmoney and other
personal lending
Gross finance receivables $189
million, up $35 million (44.3%
annualised growth excluding FX)
Our partnership with Harmoney
enables Heartland to lend through
Harmoney’s online platform for
personal loans.
New Zealand Harmoney and
personal lending grew 37.7%
(annualised growth)
Australian Harmoney and personal
lending grew 77.0% (annualised
growth excluding FX
2
)
Our Business
1 Excluding residential mortgage lending of $21 million as at 31 December 2018.
2 Excludes impact of changes in foreign currency exchange rates.
11.9 %
annualised growth
(exc FX)
8
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

We all have a role to play in supporting the development of our
rangatahi as they prepare to begin their studies or enter ‘the world of
work’. Over the last two years, Heartland Bank has provided internship
opportunities for Māori students to test the waters of working life,
before they enter the workforce.
Heartland’s six week paid internship programme is based on the Māori
concept of ‘ako’, which means to learn and teach. The internship
provides students with work experience over their summer holiday,
and allows us to learn from them too – particularly in relation to how
we can make Heartland more welcoming and inclusive to Māori
people.
Following a successful programme in 2017, this year we opened our
doors to 20 students from three Auckland schools.
The internship was offered to students from the InZone Education
Foundation (an organisation which aims to enhance the educational
outcomes of Māori youth by providing opportunities to attend
Auckland Grammar and Epsom Girls Grammar schools), King’s College
and Ngā Puna O Waiōrea (a Māori immersion unit within Western
Springs College).
Through the programme, we aim to encourage students to return to
Heartland or consider a career in the banking or finance industry.
Overwhelmingly, feedback from our interns has been positive. Since
the programme began in 2017, four interns have had further
employment with Heartland Bank and another two have returned for
holiday work. One of those past interns is communications student
Payton Taplin who is currently employed in Heartland’s
communications and marketing team.
“The internship was such a great opportunity to see how our studies
can be applied in a corporate environment,” said Payton. “Since joining
the Heartland team on a more permanent basis, I’ve been learning
heaps – and now I’m confident that my decision to study
communications is a good one.”
Heartland is dedicated to promoting a diverse workplace where all
people feel accepted for who they are – including our future Māori
workforce. Overtime, we hope to become the employer of choice for
emerging Māori talent. Our internship programme is just one of the
ways we intend to achieve this.
According to Statistics New Zealand, by
2038, approximately 30% of the population
– and therefore our future workforce – will
be Māori.
Ka pū te ruha, ka
hao te rangatahi
FEATURE STORY
The next generation is
coming through

“The internship was such
a great opportunity to
see how our studies can
be applied in a corporate
environment.”
Payton Taplin,
communications student.
9
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

Financial
Commentary
Profitability once again increased with Heartland achieving a net
profit after tax of $33.1 million for the six months to 31 December
2018, an increase of 6.5% from the previous corresponding
reporting period.
1
Heartland Group Holdings Limited (Heartland) achieved strong
growth in finance receivables in the current period, particularly in
Australian Reverse Mortgages, Open for Business and Intermediated
Business lending, Harmoney and other personal lending, and Motor
finance. Overall, Gross Finance Receivables increased $240.7 million
(11.9% annualised growth), excluding the impact of changes in
foreign currency exchange rates.
Net operating income
Net Operating Income (NOI) was $102.1 million, up $8.2 million
(8.7%) compared to the previous corresponding reporting period.
Heartland’s Net Interest Margin (NIM) for the six months ended
31 December 2018 was 4.36% compared to 4.44% for the six
months ended 31 December 2017. NIM was impacted by $1.1m
of break costs incurred due to the early repayment of the Tier 2
Australian dollar subordinated bond. The Tier 2 bond was repaid
using lower cost funding, which is expected to result in lower
interest expense in the second half of the financial year.
Costs
Operating costs were $43.4 million, an increase of $3.1 million (7.7%)
compared to the previous corresponding reporting period. Higher
operating expenses are due to growth, one-off corporate restructure
and ASX listing costs of $0.9 million and an adverse impact of foreign
currency movements of $1.2 million due to a temporary foreign
exchange exposure at the time of the corporate restructure. This
exposure has subsequently been hedged, removing the potential for
any further negative impact.
The cost to income ratio improved to 42.5% compared to 42.9% in
the previous corresponding reporting period, although excluding
one-off corporate restructure and ASX listing costs and the adverse
impact of foreign currency movements, the cost to income ratio
improved further to 40.4%.
Impairments
The new accounting standard relating to impairments, IFRS9, came
into effect on 1 July 2018. This new standard requires impairments
to be provided for on an expected loss basis at the date of loan
origination. For the period ending 31 December 2018, whilst
receivables have performed largely in line with expectations, there
has been an increase in impairment expense due to how changes
in product mix and growth are provided for under new IFRS9
methodology.
Impaired asset expense increased $2.9 million (27.6%) to $13.3
million for the six months ended 31 December 2018, but $2.2 million
of that increase is a result of the new IFRS9 methodology, which
is greater than anticipated due to the mix of our loan portfolio at
31 December 2018 differing from initial projections.
The impairment expense ratio increased from 0.58% to 0.64% for
the six months ended 31 December 2018. Despite the increase,
underlying receivables performance is stable. Excluding the $2.2
million of impairments due to the new IFRS9 methodology:
• impaired asset expense as a percentage of average gross finance
receivables reduced to 0.53%;
• impairment expense in Motor was 0.84% compared to 0.95% in the
previous corresponding reporting period; and
• Business lending impairment expense was 0.63% compared to
0.55% in the previous corresponding reporting period (largely due
to the growth in O4B).
For Reverse Mortgages, which are valued using fair value
methodology, the risk remained stable.
The initial adoption of IFRS9 also resulted in opening adjustments to
provisions for impairments of $25.3 million and retained earnings of
$18.2 million, after allowance for the deferred tax benefit.
Net impaired and past due loans over 90 days decreased by $2.0
million from 30 June 2018 to $71.8 million as at 31 December 2018,
and as a percentage of gross receivables decreased from 1.84% as at
30 June 2018 to 1.70% as at 31 December 2018.
Business performance
New Zealand Reverse Mortgages
New Zealand Reverse Mortgages net operating income was $10.0
million, an increase of $1.2 million or 13.5% from the previous
corresponding reporting period.
Motor
Motor vehicle net operating income was $28.2 million, an increase
of $2.3 million or 8.9% from the previous corresponding reporting
period. Motor vehicle gross receivables increased $79.0 million
(16.3% annualised growth) to $1,039.9 million as at 31 December
2018 through Motor Dealer lending (car dealerships, brokers and
partnerships such as Holden and Jaguar/Land Rover).
Harmoney and other personal lending
Harmoney and other personal lending net operating income was
$9.5 million, an increase of $2.6 million or 38.0% from the previous
corresponding reporting period. Harmoney and other personal
lending achieved growth in gross receivables of $34.7 million (44.3%
annualised growth), offset by small foreign currency movement of
$1.3 million on Australia Harmoney receivables, to $188.6 million as
at 31 December 2018.
Heartland has a 13.34% shareholding in Harmoney.
Business
Business lending net operating income was $27.6 million, an increase
of $1.5 million or 5.7% from the previous corresponding reporting
period.
Business gross receivables increased by $32.4 million (6.1%
annualised growth) to $1,093.8 million as at 31 December 2018.
1 This announcement is based on the 31 December 2018 unaudited interim consolidated financial statements of Heartland Group Holdings Limited (HGH).
Following a corporate restructure on 31 October 2018, Heartland Bank Limited (HBL) became a 100% controlled subsidiary of HGH and ownership of the
Australian group of companies (comprising Heartland Australia Holdings Pty Limited) transferred from HBL to HGH. The interim consolidated financial
statements of HGH comprise of results for HBL up to 31 October 2018, and HGH from 1 November 2018 to 31 December 2018. As common control has
remained the same both before and after the corporate restructure, management believe that the operations of HGH from 1 November 2018 are directly
comparable to those of HBL prior to 1 November 2018. All comparative results are based on 31 December 2017 unaudited interim consolidated financial
statements of HBL.
10
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

Heartland’s growth focus continues to be on Intermediated Business
and lending through our digital platform, Open for Business. These
markets continue to deliver results with Business Intermediated
lending up $72.3 million (44.3% annualised growth) and Open
for Business lending up $25.5 million (56.2% annualised growth)
to $115.4 million as at 31 December 2018. Business Relationship
lending continues to be managed down as part of our strategy to
reduce concentration risk resulting in Business Relationship gross
receivables reducing by $65 million in the period.
Rural
Rural lending net operating income was $15.8 million, a decrease of
$0.4 million or 2.7% from the previous corresponding reporting period.
Rural gross receivables decreased in the period by $15.0 million
(4.5% annualised decrease). Similarly to Business Relationship
lending, we continue to manage down large Rural Relationship
lending to reduce concentration risk in this area.
Australia
Net operating income from Australian operations (comprising
Australian Reverse Mortgages and business lending to Spotcap) was
$11.8 million, an increase of $2.2 million or 23.3% from the previous
corresponding reporting period.
Australian Reverse Mortgages gross receivables grew by $85.1
million (24.9% annualised growth) in the six months to 31 December
2018. This growth was offset by an adverse movement in foreign
currency translation of $29.8 million, resulting in a reported growth
of $55.3 million (16.2% annualised growth) to gross receivables of
$733.3 million as at 31 December 2018. Australian business lending
to Spotcap increased $4.3 million (45.4% annualised growth), also
offset by a small adverse movement in foreign currency translation
of $0.8 million to $22.2 million as at 31 December 2018.
Other
New Zealand residential mortgages decreased by $4.4 million to
$21.3 million as at 31 December 2018 as Heartland continues to
run-down this portfolio.
Net assets
During the reporting period, Net Assets decreased by $10.0
million to $654.2 million as at 31 December 2018. Net Tangible
Assets (NTA) decreased by $13.3 million to $571.1 million as at
31 December 2018. NTA per share was $1.01 at 31 December 2018
compared to $1.04 at 30 June 2018.
This reduction in NTA per share is primarily due to opening retained
earnings being restated by $18.2 million upon the initial adoption
of IFRS9, accounting for $0.03 NTA per share, with a corresponding
increase in provisions for impairments.
Funding and liquidity
The corporate restructure was completed in October 2018 and
provides Heartland with greater flexibility for capital and funding
options going forward. The Tier 2 Notes (A$20 million) were repaid
as part of this corporate restructure.
Retail Deposits grew $106.6 million (7.3% annualised growth) to
$3.0 billion as at 31 December 2018. Heartland continues to be a
strong market leader in term deposit and call account offerings,
providing customers with competitive interest rates and unlimited
on call access to their money.
Capital management
The regulatory capital ratio (Total Capital expressed as a
percentage of total risk weighted exposures) for Heartland Bank
Limited was 13.25% as at 31 December 2018, compared to 14.12%
as at 30 June 2018.
Return on Equity (ROE) for Heartland Group reduced from 10.8%
(annualised) for the six months ended 31 December 2017 to 10.3%
(annualised) for the six months ended 31 December 2018. The
reduced ROE is a result of higher average equity for the current period.
Earnings per share for Heartland Group Holdings Limited for the six
months ended 31 December 2018 was 5.9 cents per share, compared
to 6.0 cents per share for the six months ended 31 December 2017.
Interim dividend
An interim dividend of 3.5 cents per share was declared with the
release of the 2019 interim results. The interim dividend will be paid
on Friday 29 March 2019 (Payment Date) to shareholders on the
company’s register as at 5.00pm on Friday 15 March 2019 (Record
Date) and will be fully imputed. The Dividend Reinvestment Plan
(DRP) will apply to the interim dividend with a 2.5% discount.
2

Shareholders are strongly encouraged to participate in the DRP.
It is important to note that shareholders’ previous election under
the Heartland Bank Limited DRP has not automatically been carried
across to the Heartland Group Holdings Limited DRP following
the corporate restructure on 31 October 2018. Shareholders who
previously participated in the Heartland Bank Limited DRP, and
wish to continue to receive shares instead of dividend payments,
must make a new election to participate in the Heartland Group
Holdings Limited DRP in one of the ways specified in the DRP offer
document by 5.00pm on 18 March 2019 (being the first trading day
after the Record Date). The DRP offer document and participation
form is available on our shareholder website at: https://shareholders.
heartland.co.nz/shareholder-resources/dividends.
2 That is, the strike price under the DRP will be 97.5% of the volume weighted average sale price of Heartland shares over the five trading days following
the Record Date. For the full details of the DRP and the Strike Price calculation, refer to Heartland Group Holdings Limited DRP offer document dated
10 December 2018.
Change in profitability
Six months ended 31 December 2017
Net profit after tax
31.1
Increased net interest income7.9Increase in net interest income of 8.8%, in line with gross finance receivables annualised
growth of 10.3% offset by Tier 2 bond break costs and slightly lower net interest margin
Increased other net income0.3
Increased operating costs(3.1)Increased operating costs due to the increase in receivables combined with one-off corporate
restructure and ASX listing costs and adverse impact of foreign currency movements incurred
in the period
Increased impairment expense(2.9)Increased impairment expense due to growth in receivables and additional impairments
provided for on the date of loan origination under IFRS9 of $2.2 million
Increased income tax expense(0.2)Increase tax expense due to improved profitability
Six months ended 31 December 2018
Net profit after tax
33.1
11
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

12
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Financial
Statements
Interim
Consolidated

13
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Interim Consolidated
For the six months ended 31 December 2018
GENERAL INFORMATION
This Disclosure Statement has been issued by Heartland Bank Limited (the Bank) and its subsidiaries (the Banking Group) for the year ended
30 June 2018 in accordance with the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 (as amended)
(the Order). The financial statements of the Bank for the year ended 30 June 2018 form part of, and should be read in conjunction with, this Disclosure
Statement.
Words and phrases defined by the Order have the same meanings when used in this Disclosure Statement.
Name and address for service
The name of the Registered Bank is Heartland Bank Limited.
The Bank’s address for service is Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland.
Details of incorporation
The Bank was incorporated under the Companies Act 1993 on 30 September 2010.
Interests in 5% or more of voting securities of the Bank
Name Percentage held
Harrogate Trustee Limited9.63%
No person has the ability to directly or indirectly appoint 25% or more of the board of directors (the Board) (or other persons exercising powers of
management) of the Bank.
PRIORITY OF CREDITORS’ CLAIMS
In the event of the Bank becoming insolvent or ceasing business, certain claims set out in legislation are paid in priority to others. These claims include
secured creditors, taxes, certain payments to employees and any liquidator’s costs. After payment of those creditors, the claims of all other creditors are
unsecured and would rank equally, with the exception of holders of subordinated bonds and notes which rank below all other claims.
The loans sold to Heartland ABCP Trust 1 (ABCP Trust) are set aside for the benefit of investors in ABCP Trust. Loans held as receivables within Seniors
Warehouse Trust (SW Trust) and ASF Settlement Trust (ASF Trust) are also set aside for the benefit of funders in these Trusts. See Note 25 - Structured
entities for further details.
GUARANTEE ARRANGEMENTS
As at the date this Disclosure Statement was signed, no material obligations of the Bank were guaranteed.
Contents
General Information .............................................................................................. 13
Directors..................................................................................................................14
Auditor .................................................................................................................... 14
Consolidated Interim Statement of Comprehensive Income ........................... 15
Consolidated Interim Statement of Changes in Equity ..................................... 16
Consolidated Interim Statement of Financial Position...................................... 18
Consolidated Interim Statement of Cash Flows................................................. 19
Basis of Reporting .................................................................................................. 21
Performance
1 Segmental analysis ....................................................................................... 24
2 Net interest income 26
3 Operating expenses 26
4 Impaired asset expense 27
5 Earnings per share 27
Financial Position
6 Finance receivables ....................................................................................... 28
7 Borrowings ..................................................................................................... 31
8 Share capital and dividends ......................................................................... 32
9 Related party transactions and balances ................................................... 32
10 Fair value ........................................................................................................ 33
Risk Management
11 Risk management policies............................................................................ 36
12 Credit risk exposure ...................................................................................... 36
13 Liquidity risk ................................................................................................... 38
14 Interest rate risk ............................................................................................ 39
Other Disclosures
15 Structured entities........................................................................................ 40
16 Insurance business, securitisation, funds management and other
fiduciary activities .........................................................................................
41
17 Contingent liabilities and commitments .................................................... 41
18 Events after reporting date ......................................................................... 41
Independent Auditor’s Review ............................................................................. 42

14
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
GENERAL INFORMATION
Heartland Group Holdings Limited (HGH) is incorporated in New Zealand and registered under the Companies Act 1993. The shares in HGH are listed
on the NZX Main Board and the Australian Securities Exchange under a Foreign Exempt Listing.
On 31 October 2018 HGH acquired Heartland Bank Limited (HBL) pursuant to a corporate restructure approved by the shareholders of HBL. Under
this restructure all the shares of HBL were exchanged for shares in HGH. At the same time, the Australian group of companies owned by HBL were
transferred to HGH. HGH was incorporated solely for the purpose of undertaking this transaction.
As common control remained after the restructure, the interim financial statements presented for the six months ended 31 December 2018 are for
HGH and its subsidiaries (the Group) as if it had operated for the entire period. Comparative figures shown are for the consolidated HBL group.
The Group’s address for service is Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland.
DIRECTORS
As at the date this Interim Financial Statements was signed, the Directors of the Group are:
Geoffrey T Ricketts (Chair) – Independent Non-Executive Director
Jeffrey K Greenslade – Executive Director and Group Chief Executive Officer
Sir Christopher R Mace – Independent Non-Executive Director
Ellen F Comerford – Independent Non-Executive Director
Gregory R Tomlinson – Non-Executive Director
AUDITOR
KPMG
KPMG Centre
18 Viaduct Harbour Avenue
Auckland
OTHER MATERIAL MATTERS
There are no material matters relating to the business or affairs of the Group that are not contained elsewhere in this Consolidated Interim Financial
Report which would, if disclosed in this Consolidated Interim Financial Report, materially affect the decision of a person to subscribe for debt securities
of which the Group is the issuer.
DIRECTORS’ STATEMENT
This Consolidated Interim Financial Report is dated 19 February 2019 and has been signed by all the Directors.
G. T. Ricketts (Chair – Board of Directors) E. F. Comerford
J. K. Greenslade Sir C. R. Mace
G. R. Tomlinson

15
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Consolidated Interim Statement
of Comprehensive Income
For the six months ended 31 December 2018
$000NOTE
Unaudited
6 mths to
Dec 2018
Unaudited
6 mths to
Dec 2017
Audited
12 mths to
Jun 2018
Interest income2 166,260 152,471 309,284
Interest expense2 68,238 62,377 125,483
Net interest income98,022 90,094 183,801
Operating lease income2,871 3,082 5,675
Operating lease expenses1,801 2,132 4,005
Net operating lease income1,070 950 1,670
Lending and credit fee income1,444 1,202 2,351
Other income1,575 1,663 8,972
Net operating income102,111 93,909 196,794
Operating expenses3 43,356 40,248 80,433
Profit before impaired asset expense and income tax58,755 53,661 116,361
Impaired asset expense4 13,286 10,416 22,067
Profit before income tax45,469 43,245 94,294
Income tax expense12,355 12,159 26,781
Profit for the period33,114 31,086 67,513
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges, net of income tax781 (492)72
Movement in debt instrument fair value reserve, net of income tax170 1,034 981
Movement in foreign currency translation reserve, net of income tax(4,003)2,510 2,315
Items that will not be reclassified to profit or loss:
Movement in defined benefit reserve, net of income tax- 231 340
Other comprehensive (loss) / income for the period, net of income tax(3,052)3,283 3,708
Total comprehensive income for the period30,062 34,369 71,221
Earnings per share from continuing operations
Basic earnings per share5 6c6c13c
Diluted earnings per share5 6c6c13c
Total comprehensive income for the period is attributable to owners of the Group.
The notes on pages 21 to 41 are an integral part of these consolidated interim financial statements.

16
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
$000NOTE
Share
Capital
Treasury
Shares
Reserve
Employee
Benefits
Reserve
Foreign
Currency
Translation
Reserve
Debt
Instrument
Fair Value
Reserve
Defined
Benefit
Reserve
Hedging
Reserve
Retained
Earnings
(restated)
Total
Equity
(restated)
Unaudited – Dec 2018
Balance at 1 July 2018544,927 (2,612)2,558 1,260 1,590 257 (1,080)117,260 664,160
Impact of NZ IFRS 9 (net of tax) – – – – – – – (18,231)(18,231)
Balance at 1 July 2018- Restated544,927 (2,612)2,558 1,260 1,590 257 (1,080)99,029 645,929
Total comprehensive income for the period
Profit for the period– – – – – – – 33,114 33,114
Other comprehensive (loss) / income, net of
income tax– – – (4,003)170 – 781 – (3,052)
Total comprehensive income for the period– – – (4,003)170 – 781 33,114 30,062
Contributions by and distributions to owners
Dividends paid8– – – – – – – (30,808)(30,808)
Dividend reinvestment plan88,585 – – – – – – – 8,585
Transfer of treasury shares(2,340)2,340 – – – – – – –
Shares cancelled(272)272 – – – – – – –
Share based payments– – 382 – – – – – 382
Total transactions with owners5,973 2,612 382 – – – – (30,808)(21,841)
Balance at 31 December 2018550,900 – 2,940 (2,743)1,760 257 (299)101,335 654,150
Unaudited – Dec 2017
Balance at 1 July 2017473,128 (2,612)3,118 (1,055)609 (83)(1,152)97,642 569,595
Total comprehensive income for the period
Profit for the period– – – – – – – 31,086 31,086
Other comprehensive income / (loss), net of
income tax– – – 2,510 1,034 231 (492)– 3,283
Total comprehensive income for the period– – – 2,510 1,034 231 (492)31,086 34,369
Contributions by and distributions to owners
Dividends paid8– – – – – – – (28,393)(28,393)
Dividend reinvestment plan87,495 – – – – – – – 7,495
Issue of share capital859,225 – – – – – – – 59,225
Transaction costs associated with
capital raising(681)– – – – – – – (681)
Share based payments– – 216 – – – – – 216
Shares vested709 – (1,196)– – – – – (487)
Total transactions with owners66,748 – (980)– – – – (28,393)37,375
Balance at 31 December 2017539,876 (2,612)2,138 1,455 1,643 148 (1,644)100,335 641,339
The notes on pages 21 to 41 are an integral part of these consolidated interim financial statements.
Consolidated Interim
Statement of Changes in Equity
For the six months ended 31 December 2018

17
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Consolidated Interim
Statement of Changes in Equity (Continued)
For the six months ended 31 December 2018
$000NOTE
Share
Capital
Treasury
Shares
Reserve
Employee
Benefits
Reserve
Foreign
Currency
Translation
Reserve
Debt
Instrument
Fair Value
Reserve
Defined
Benefit
Reserve
Hedging
Reserve
Retained
Earnings
(restated)
Total
Equity
(restated)
Audited – Jun 2018
Balance at 1 July 2017473,128 (2,612)3,118 (1,055)609 (83)(1,152)97,642 569,595
Total comprehensive income for the year
Profit for the year– – – – – – – 67,513 67,513
Other comprehensive income, net of
income tax– – – 2,315 981 340 72 – 3,708
Total comprehensive income for the year– – – 2,315 981 340 72 67,513 71,221
Contributions by and distributions to owners
Dividends paid8– – – – – – – (47,895)(47,895)
Dividend reinvestment plan812,745 – – – – – – – 12,745
Issue of share capital859,225 – – – – – – – 59,225
Transaction costs associated with
capital raising(910)– – – – – – – (910)
Share based payments– – 666 – – – – – 666
Shares vested739 – (1,226)– – – – – (487)
Total transactions with owners71,799 – (560)– – – – (47,895)23,344
Balance at 30 June 2018544,927 (2,612)2,558 1,260 1,590 257 (1,080)117,260 664,160
The notes on pages 21 to 41 are an integral part of these consolidated interim financial statements.

18
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Consolidated Interim
Statement of Financial Position
As at 31 December 2018
$000NOTE
Unaudited
Dec 2018
Unaudited
Dec 2017
Audited
Jun 2018
Assets
Cash and cash equivalents89,161 117,316 49,588
Investments318,961 294,197 340,546
Investment properties9,196 1,724 9,196
Finance receivables6 4,167,276 3,783,091 3,984,941
Operating lease vehicles16,430 17,551 17,524
Other assets17,366 15,522 14,411
Intangible assets73,085 71,365 74,401
Deferred tax asset9,949 6,718 5,319
Total assets4,701,424 4,307,484 4,495,926
Liabilities
Borrowings7 4,027,785 3,633,423 3,796,058
Current tax liabilities1,835 6,722 11,459
Trade and other payables17,654 26,000 24,249
Total liabilities4,047,274 3,666,145 3,831,766
Equity
Share capital550,900 539,876 544,927
Treasury shares- (2,612)(2,612)
Retained earnings and reserves103,250 104,075 121,845
Total equity654,150 641,339 664,160
Total equity and liabilities4,701,424 4,307,484 4,495,926
Total interest earning and discount bearing assets4,557,144 4,179,777 4,361,014
Total interest and discount bearing liabilities4,011,329 3,626,752 3,789,144
The notes on pages 21 to 41 are an integral part of these consolidated interim financial statements.

19
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Consolidated Interim
Statement of Cash Flows
For the six months ended 31 December 2018
$000NOTE
Unaudited
6 mths to
Dec 2018
Unaudited
6 mths to
Dec 2017
Audited
12 mths to
Jun 2018
Cash flows from operating activities
Interest received149,255 139,100 280,471
Operating lease income received2,961 2,618 4,941
Lending, credit fees and other income received3,363 3,335 10,398
Operating inflows155,579 145,053 295,810
Payments to suppliers and employees50,799 33,543 73,672
Interest paid71,393 63,266 123,783
Taxation paid19,730 14,559 23,818
Operating outflows141,922 111,368 221,273
Net cash flows from operating activities before changes in operating assets
and liabilities13,657 33,685 74,537
Proceeds from sale of operating lease vehicles2,414 2,804 5,577
Purchase of operating lease vehicles(2,996)(2,887)(7,163)
Net movement in finance receivables(196,828)(237,056)(431,863)
Net movement in deposits105,388 131,864 307,733
Net cash flows applied to operating activities(78,365)(71,590)(51,179)
Cash flows from investing activities
Net proceeds from sale of investment properties– 3,185 3,185
Proceeds from sale of office fit-out, equipment and intangible assets– 16 –
Sale of equity investment– – 300
Net decrease in investments21,928 23,159 –
Total cash provided from investing activities21,928 26,360 3,485
Purchase of office fit-out, equipment and intangible assets2,379 2,437 8,837
Net increase in investments– – 23,107
Purchase of investment property– – 7,472
Total cash applied to investing activities2,379 2,437 39,416
Net cash flows from / (applied to) investing activities19,549 23,923 (35,931)
Cash flows from financing activities
Net increase/(decrease) in wholesale funding143,459 (79,703)(93,507)
Proceeds from issue of Unsubordinated Notes– 150,000 150,000
Increase in share capital8 – 59,225 58,315
Total cash provided from financing activities143,459129,522 114,808
Dividends paid8 22,22420,898 35,150
Repayment of subordinated notes7 22,846
Transaction costs associated with capital raising– 681 –
Total cash applied to financing activities45,07021,579 35,150
Net cash flows from financing activities98,389107,943 79,658
Net increase / (decrease) in cash held39,573 60,276 (7,452)
Opening cash and cash equivalents49,588 57,040 57,040
Closing cash and cash equivalents89,161 117,316 49,588
The notes on pages 21 to 41 are an integral part of these consolidated interim financial statements.

20
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Consolidated Interim
Statement of Cash Flows (Continued)
For the six months ended 31 December 2018
Reconciliation of profit after tax to net cash flows from operating activities
$000NOTE
Unaudited
6 mths to
Dec 2018
Unaudited
6 mths to
Dec 2017
Audited
12 mths to
Jun 2018
Profit for the period33,114 31,086 67,513
Add / (less) non-cash items
Depreciation and amortisation expense2,701 2,311 4,638
Depreciation on lease vehicles1,676 1,975 3,771
Capitalised net interest income(12,040)(10,884)(26,373)
Impaired asset expense413,286 10,416 22,067
Total non-cash items 5,623 3,818 4,103
Add / (less) movements in operating assets and liabilities:
Finance receivables(196,828)(237,056)(431,863)
Operating lease vehicles(582)(488)(2,257)
Other assets(5,377)1,814 (635)
Current tax (9,624)(3,134)1,603
Derivative financial instruments revaluation(1,948)(1,273)(1,638)
Deferred tax(4,630)1,134 2,533
Deposits105,388 131,864 307,733
Other liabilities(3,501)645 1,729
Total movements in operating assets and liabilities(117,102)(106,494)(122,795)
Net cash flow applied to operating activities(78,365)(71,590)(51,179)
The notes on pages 21 to 41 are an integral part of these consolidated interim financial statements.

21
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
BASIS OF REPORTING
Reporting entity
The interim financial statements presented are the consolidated financial statements comprising Heartland Group Holdings Limited and its subsidiaries
(the Group).
On 31 October 2018 HGH acquired Heartland Bank Limited (HBL) pursuant to a corporate restructure approved by the shareholders of HBL. Under
this restructure all the shares of HBL were exchanged for shares in HGH. At the same time, the Australian group of companies owned by HBL were
transferred to HGH. HGH was incorporated solely for the purpose of undertaking this transaction. HGH is a FMC reporting entity for the purposes of
the Financial Markets Conduct Act 2013
As common control remained after the restructure, the interim financial statements presented for the six months ended 31 December 2018 are for
HGH and its subsidiaries (the Group) as if it had operated for the entire period. Comparative figures shown are for the consolidated HBL Group.
Basis of preparation
The interim financial statements presented here are for the following periods:
• 6 month period ended 31 December 2018 – Unaudited
• 6 month period ended 31 December 2017 – Unaudited
• 12 month period ended 30 June 2018 – Audited
The interim financial statements of the Group have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ
GAAP), NZ IAS 34 Interim Financial Reporting, IAS 34 Interim Financial Reporting and the NZX Main Board Listing Rules and ASX Listing Rules. They do
not include all of the information required for full annual financial statements and should be read in conjunction with Heartland Bank Limited’s Annual
Report for the year ended 30 June 2018.
The interim financial statements have been prepared on a going concern basis in accordance with historical cost, unless stated otherwise. The
accounting policies applied by the Group in these consolidated interim financial statements are the same as those applied by Heartland Bank Limited in
its consolidated financial statements as at and for the year ended 30 June 2018, except for those listed below.
Certain comparative information has been restated to comply with the current period presentation.
Change in accounting policy
The Group adopted NZ IFRS 9 Financial Instruments and NZ IFRS 15 Revenue from Contracts with Customers from 1 July 2018. There have been no
changes in previously reported financials.
NZ IFRS 9 Financial Instruments
In accordance with the transition provisions of NZ IFRS 9 the classification and measurement requirements of this standard have been applied
retrospectively by adjusting affected opening balances at the date of initial application with no restatement of comparative periods.
The following changes to accounting policy due to the application of NZ IFRS 9 have been made.
Impairment of finance receivables
At each reporting date, the Group assess whether there has been a significant increase in credit risk since initial recognition based on the “expected
credit loss” (ECL) model.
The ECL model is a forward looking model where impairment allowances are recognised before losses are actually incurred. On initial recognition, an
impairment allowance is required, based on events that are possible in the next 12 months.
After initial recognition, the Group applies a 3 stage test to measure ECL’s. Assets may migrate through the following stages based on their change in
credit risk since initial recognition.
Stage 1 – 12 months ECL
No evidence of impairment (past due 30 days or less)
Stage 2 – Lifetime ECL not credit impaired
Significant increase in credit risk (greater than 30 but less than 90 days past due)
Stage 3 – Lifetime ECL credit impaired
Objective evidence of impairment, so are considered to be in default or otherwise credit impaired (past due 90 days or more)
In determining whether credit risk has increased, all available information relevant to the assessment including information about past events, current
conditions and reasonable and supportable forecasts of economic conditions at the reporting date are taken into consideration.
The calculation of expected credit loss is modelled for portfolios of like assets. For portfolios which are either new or to small to model, judgement is
used to determine impairment provisions.
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018

22
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
Changes to classification and measurement under NZ IFRS 9
The table below details the changes to classification and measurement of the Group’s financial assets due to the adoption of NZ IFRS 9. There are no
changes in the classification or measurement category of the Group’s financial liabilities.
Financial instrumentsNZ IAS 39 Measurement categoryNZ IFRS 9 Measurement category
NZ IAS 39 carrying
value June 18
NZ IFRS 9 carrying
value 1 July 18
Financial assets
Bank bonds and floating rate notesAvailable for sale (AFS)Fair Value through other
comprehensive income (FVOCI)230,754230,754
Public sector securities & Corporate bondsAFSFVOCI57,81857,818
Local authority stockAFSFVOCI42,28042,280
Equity investmentsFair value through profit or loss
(FVTPL)
FVOCI – for equity
9,6949,694
Finance receivables – Reverse MortgagesAmortised costFVOCI 1,129,956 1,132,620
Finance receivables – OtherAmortised costAmortised cost2,854,9852,826,974
Trade receivablesAmortised costAmortised cost1,6131,613
Financial Liabilities
BorrowingsAmortised costAmortised cost3,796,0583,796,058
Derivative financial liabilitiesAmortised costAmortised cost1,6391,639
Trade payablesAmortised costAmortised cost10,40610,406
The table below is a reconciliation of the balance sheet detailing the changes from NZ IAS 39 to NZ IFRS 9.
$000
Audited
12 mths to
Jun 2018
Impact of
NZ IFRS 9
Restatement
Restated
1 July 2018
Assets
Cash and cash equivalents49,588 – 49,588
Investments340,546 – 340,546
Investment properties9,196 – 9,196
Finance receivables3,984,941 (25,347)3,959,594
Operating lease vehicles17,524 – 17,524
Other assets14,411 – 14,411
Intangible assets74,401 – 74,401
Deferred tax asset5,319 7,116 12,435
Total assets4,495,926 (18,231)4,477,695
Liabilities
Borrowings3,796,058 – 3,796,058
Current tax liabilities11,459 – 11,459
Trade and other payables24,249 – 24,249
Total liabilities3,831,766 – 3,831,766
Equity
Share capital542,315 – 542,315
Retained earnings and reserves121,845 (18,231)103,614
Total equity664,160 (18,231)645,929
Total equity and liabilities4,495,926 (18,231)4,477,695
Impact of new impairment model
Additional provision for impairment recognised at 1 July 2018 on:
– Finance Receivables – Other 25,929
– Finance Receivables – Reverse Mortgages (582)
Provision for Impairment at 1 July 2018 25,347
Less tax impact (7,116)
Net impact on retained earnings 18,231

23
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
NZ IFRS 15 Revenue from Contracts with Customers
The Group adopted NZ IFRS 15 on 1 July 2018. This standard provides a principles based approach for revenue recognition and introduces the concept
of recognising revenue for performance obligations as they are satisfied.
The Group has adopted this standard retrospectively with the cumulative effect of initial application recognised as an adjustment to opening balances
and has applied all practical expedients applicable. There have been no changes to previously reported financials.
Accounting standards issued not yet effective
Standard and description
Effective for
annual years
beginning
on or after:
Expected to be
initially applied in
year ending:
NZ IFRS 16 Leases, contains guidance on identification, recognition, measurement, presentation,
and disclosure of leases by lessees and lessors.
1 Jan 201930 Jun 2020
NZ IFRS 17 Insurance contracts, establishes principles for the recognition, measurement, presentation and
disclosure of insurance contracts.
1 Jan 202130 Jun 2022
NZ IFRS 9 Financial Instruments, contains relaxed requirements for hedged effectiveness, and expanded
disclosures.
1 Jan 201930 Jun 2020
The Group is currently assessing the impact of NZ IFRS 16 and NZ IFRS 17, and it is not practicable to quantify the effect at the date of the publication
of these financial statements.

24
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
PERFORMANCE
1 Segmental analysis
Segment information is presented in respect of the Group’s operating segments which are those used for the Group’s management and internal
reporting structure.
All income received is from external sources, except those transactions with related parties. Certain operating expenses, such as premises, IT and
support centre costs are not allocated to operating segments and are included in Other.
Internal structures have changed during the current year. Previously reported Household segment has been disaggregated to show Motor, Reverse
Mortgages, Other Personal and Australia. Prior years have been restated accordingly.
Operating segments
The Group operates predominantly within New Zealand and Australia and comprises the following main operating segments:
MotorProviding motor vehicle finance
Reverse MortgagesProviding reverse mortgage lending within New Zealand
Other PersonalProviding both a comprehensive range of financial services – including term, transactional and savings based deposit accounts
and personal loans
BusinessProviding term debt, plant and equipment finance, commercial mortgage lending and working capital solutions for small-to-
medium sized businesses.
RuralProviding specialist financial services to the farming sector primarily offering livestock finance, rural mortgage lending, seasonal
and working capital financing, as well as leasing solutions to farmers.
AustraliaProviding reverse mortgage lending and other financial services within Australia

25
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
1 Segmental analysis (continued)
$000Motor
Reverse
Mortgages
Other
PersonalBusinessRuralAustraliaOtherTotal
Unaudited – 6 months ended 31 December 2018
Net interest income27,716 9,937 8,304 26,904 15,426 11,555 (1,820)98,022
Net other income467 112 1,195 723 404 196 992 4,089
Net operating income28,183 10,049 9,499 27,627 15,830 11,751 (828)102,111
Operating expenses1,203 1,261 2,974 4,539 1,899 2,633 28,847 43,356
Profit / (loss) before impaired asset expense
and income tax26,980 8,788 6,525 23,088 13,931 9,118 (29,675)58,755
Impaired asset expense4,654 –5,036 3,812 (135)(322) 24113,286
Profit / (loss) before income tax22,326 8,788 1,489 19,276 14,066 9,440 (29,916)45,469
Income tax expense– – – – – – 12,355 12,355
Profit / (loss) for the period22,326 8,788 1,489 19,276 14,066 9,440 (42,271)33,114
Total assets1,021,673 479,855 200,823 1,083,029 634,486 754,933 526,625 4,701,424
Total liabilities– – – – – – 4,047,274 4,047,274
$000Motor
Reverse
Mortgages
Other
PersonalBusinessRuralAustraliaOtherTotal
Restated and unaudited - 6 months ended 31 December 2017
Net interest income24,397 8,739 5,740 25,734 16,245 9,287 (48)90,094
Net other income1,472 116 1,142 402 25 240 418 3,815
Net operating income25,869 8,855 6,882 26,136 16,270 9,527 370 93,909
Operating expenses1,551 913 3,383 4,011 2,146 2,009 26,235 40,248
Profit / (loss) before impaired asset expense
and income tax24,318 7,942 3,499 22,125 14,124 7,518 (25,865)53,661
Impaired asset expense4,139 70 2,302 2,259 1,362 283 1 10,416
Profit / (loss) before income tax20,179 7,872 1,197 19,866 12,762 7,235 (25,866)43,245
Income tax expense– – – – – – 12,159 12,159
Profit / (loss) for the period20,179 7,872 1,197 19,866 12,762 7,235 (38,025)31,086
Total assets886,301 427,892 151,588 1,031,647 676,630 609,033 524,393 4,307,484
Total liabilities– – – – – – 3,666,145 3,666,145
$000Motor
Reverse
Mortgages
Other
PersonalBusinessRuralAustraliaOtherTotal
Restated – 12 months ended 30 June 2018
Net interest income50,328 19,086 12,421 51,189 32,122 20,011 (1,356)183,801
Net other income2,515 262 2,392 1,124 163 514 6,023 12,993
Net operating income52,843 19,348 14,813 52,313 32,285 20,525 4,667 196,794
Operating expenses2,914 1,670 6,552 8,130 4,351 4,142 52,67480,433
Profit / (loss) before impaired asset expense
and income tax49,929 17,678 8,261 44,183 27,934 16,383 (48,007)116,361
Impaired asset expense7,778 (18)5,741 6,275 2,400 234 (343)22,067
Profit / (loss) before income tax42,151 17,696 2,520 37,908 25,534 16,149 (47,664)94,294
Income tax expense– – – – – – 26,781 26,781
Profit / (loss) for the period42,151 17,696 2,520 37,908 25,534 16,149 (74,445)67,513
Total assets (restated)955,088 454,016 178,309 1,048,239 654,935 695,251 510,0884,495,926
Total liabilities (restated)– – – – – – 3,831,766 3,831,766

26
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
2 Net interest income
Interest income and expense is recognised in profit or loss using the effective interest method. The effective interest rate is established on initial
recognition of the financial assets and liabilities and is not revised subsequently. The calculation of the effective interest rate includes all yield related
fees and commissions paid or received that are an integral part of the effective interest rate.
Interest on the effective portion of a derivative designated as a cash flow hedge is initially recognised in the hedging reserve. It is released to profit or
loss at the same time as the hedged item or when the hedge relationship is subsequently deemed to be ineffective, should this occur.
$000NOTE
Unaudited
6 mths to
Dec 2018
Unaudited
6 mths to
Dec 2017
Audited
12 mths to
Jun 2018
Interest income
Cash and cash equivalents312 435 842
Investments4,906 4,766 9,515
Finance receivables161,042 147,270 298,927
Total interest income166,260 152,471 309,284
Interest expense
Retail deposits48,595 44,904 90,880
Bank and securitised borrowings13,194 13,518 25,380
Subordinated and Unsubordinated Notes7 5,039 2,568 6,596
Net interest expense on derivative financial instruments1,410 1,387 2,627
Total interest expense68,238 62,377 125,483

Net interest income98,022 90,094 183,801
3 Operating expenses
$000
Unaudited
6 mths to
Dec 2018
Unaudited
6 mths to
Dec 2017
Audited
12 mths to
Jun 2018
Personnel expenses22,776 22,528 45,539
Directors’ fees612 514 972
Superannuation509 466 921
Audit and review of financial statements
1
338 223 433
Other assurance services paid to auditor
2
15 26 36
Other fees paid to auditor
3
– 121 171
Depreciation - property, plant and equipment898 701 1,386
Amortisation - intangible assets1,803 1,610 3,252
Operating lease expense as a lessee912 1,039 2,033
Legal and professional fees1,843 999 2,267
Other operating expenses13,650 12,021 23,423
Total operating expenses43,356 40,248 80,433
1 Audit and review of financial statements includes fees paid for both the audit of annual financial statements and the review of interim financial statements.
2 Other assurance services paid to the auditor comprise review of regulatory returns, trust deed reporting, registry audits and other agreed upon procedure engagements.
3 Other fees paid to the auditor include professional fees in connection with regulatory advisory services and a Health and Safety framework review.

27
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
4 Impaired asset expense
The Group adopted NZ IFRS 9 which sets out new requirements for impairment of financial assets using the ECL approach. (Refer note 1)
$000
Unaudited
6 mths to
Dec 2018
Unaudited
6 mths to
Dec 2017
Unaudited
12 mths to
Jun 2018
Non-securitised
Individually impaired expense(425)1,876 5,190
Collectively impaired expense13,740 8,383 16,889
Total non-securitised impaired asset expense13,315 10,259 22,079
Securitised
Collectively impaired expense(29)157 (12)
Total securitised impaired asset expense(29)157 (12)
Total
Individually impaired expense(425)1,876 5,190
Collectively impaired expense13,711 8,540 16,877
Total impaired asset expense13,286 10,416 22,067
5 Earnings per share
Dec 2018Dec 2017Jun 2018
Earnings
per share
Net profit
after tax
Weighted
average no.
of shares
Earnings
per share
Net profit
after tax
Weighted
average no.
of shares
Earnings
per share
Net profit
after tax
Weighted
average no.
of shares
cents$000000cents$000000cents$000000
Basic earnings 6 33,114 561,188 6 31,086 520,741 13 67,513 538,594
Diluted earnings 6 33,114 561,188 6 31,086 520,795 13 67,513 538,594
Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of fully paid shares less
treasury shares.

28
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
FINANCIAL POSITION
6 Finance receivables
$000NOTE
Unaudited
Dec 2018
Unaudited
Dec 2017
Audited
Jun 2018
Non-securitised
Neither at least 90 days past due nor impaired3,999,686 3,617,858 3,863,764
At least 90 days past due34,854 36,634 27,893
Individually impaired36,773 35,944 45,186
Gross finance receivables4,071,313 3,690,436 3,936,843
Less provision for impairment(55,412)(28,256)(29,367)
Less fair value adjustment for present value of future losses over expected life(2,216)(3,325)(2,824)
Total non-securitised finance receivables4,013,685 3,658,855 3,904,652
Securitised
Neither at least 90 days past due nor impaired154,642 124,103 79,809
At least 90 days past due197 440 784
Individually impaired– – –
Gross finance receivables154,839 124,543 80,593
Less provision for impairment(1,248)(307)(304)
Total securitised finance receivables153,591 124,236 80,289
Total
Neither at least 90 days past due nor impaired4,154,328 3,741,961 3,943,573
At least 90 days past due35,05137,074 28,677
Individually impaired 36,77335,944 45,186
Gross finance receivables4,226,152 3,814,979 4,017,436
Less provision for impairment(56,660)(28,563)(29,671)
Less fair value adjustment for present value of future losses over expected life(2,216)(3,325)(2,824)
Total finance receivables4,167,276 3,783,091 3,984,941

29
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
6 Finance receivables (continued)
(a) Movement in Provision
The following table details the movement from the opening balance to the closing balance of provision for impairment by class
12 month
ECL
Lifetime
ECL Not
credit
impaired
Lifetime
ECL Credit
impaired
Collective
provision
Jun 18
Specific
provisionTotal
Non-securitised
Impairment allowance as at 30 June 2018 – – – 20,301 9,066 29,367
Restated for adoption of NZ IFRS 929,356 1,438 14,909 (20,301)(169)25,233
Restated Impairment allowance as at 1 July 201829,356 1,438 14,909 – 8,897 54,600
Changes in loss allowance
Transfer to 12 month588 (560) (28) – – –
Transfer to lifetime not credit impaired (1,127) 1,189 (62) – – –
Transfer to lifetime credit impaired (1) (731) 732 – – –
Transfer to specific provision (1,443) (9) (751) – 2,203 –
Effect of changes in foreign exchange rate (67) (6) (3) – – (76)
Impaired asset expense 2,325 348 11,067 – (425) 13,315
Write offs – – (7,953) – (4,503) (12,456)
Transfer to/from securitised (776) 15 484 – – (277)
Recovery of amounts written off – – 293 – 13 306
Impairment allowance as at 31 December 2018 28,855 1,684 18,688 – 6,185 55,412
Securitised
Impairment allowance as at 30 June 2018 – – – 304 – 304
Restated for adoption of NZ IFRS 9 546 20 434 (304) – 696
Restated Impairment allowance as at 1 July 2018 546 20 434 – – 1,000
Changes in loss allowance
Transfer to 12 month 12 (11) (1) – – –
Transfer to lifetime not credit impaired (17) 19 (2) – – –
Transfer to lifetime credit impaired – (5) 5 – – –
Transfer to specific provision – – – – – –
Effect of changes in foreign exchange rate – – – – – –
Impaired asset expense (155) 13 113 – – (29)
Write offs – – – – – –
Transfer to/from non-securitised 776 (15) (484) – – 277
Recovery of amounts written off – – – – – –
Impairment allowance as at 31 December 2018 1,162 21 65 – – 1,248
Total
Impairment allowance as at 30 June 2018– – – 20,605 9,066 29,671
Restated for adoption of NZ IFRS 929,902 1,458 15,343 (20,605)(169)25,929
Restated Impairment allowance as at 1 July 201829,902 1,458 15,343 – 8,897 55,600
Changes in loss allowance
Transfer to 12 month600 (571)(29)– – –
Transfer to lifetime not credit impaired(1,144)1,208(64)– – –
Transfer to lifetime credit impaired(1)(736)737 – – –
Transfer to specific provision(1,443)(9)(751)– 2,203 –
Effect of changes in foreign exchange rate(67)(6)(3)– – (76)
Impaired asset expense 2,170 36111,180– (425)13,286
Write offs– – (7,953)– (4,503)(12,456)
Recovery of amounts written off– – 293 – 13 306
Impairment allowance as at 31 December 2018 30,017 1,705 18,753 – 6,185 56,660

30
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
6 Finance receivables (continued)
(b) Summary of Provision
$000SecuritisedNon SecuritisedTotal
Unaudited – 6 months ended 31 December 2018
Specific provision– 6,185 6,185
Collective provision measured on a 12 month ECL1,162 28,855 30,017
Collective provision for assets not credit impaired21 1,684 1,705
Collective provision for assets credit impaired65 18,688 18,753
Total provision for impairment 1,248 55,412 56,660
Total
Dec 2017
Total
Jun 2018
Specific provision for impaired assets 8,743 9,066
Collective provision for impaired assets 19,820 20,605
Total provision for impairment 28,563 29,671
(c) Impact of changes in gross carrying amount of ECL
The following provides an explanation of how significant change in the gross carrying value of the Finance receivables have contributed to the changes
in the provision for impairment. The provision for impairment reflects ECL measured using the 3 stage approach under NZ IFRS 9 (refer to Basis of
reporting).
Overall the net increase in the total provision for impairment was $1.1 million which was primarily driven by an increase in stage 3 collective provisions
offset by a reduction in specific provisions.
Collective 12 months ECL provisions (stage 1) increased $0.1m. Growth in receivables of $104 million, primarily consumer lending with higher
average ECL rates, added $2.2m to stage 1 provisions however this was offset by reductions in provisions on loans moving to stage 2 and 3 or
specifically provided.
Collective lifetime not credit impaired provisions (stage 2) increased $0.2m. $45 million of receivables transferred to stage 2 due to deterioration in
credit quality which was offset by a similar amount which was repaid or transferred to stage 1 or 3.
Collective lifetime credit impaired provisions (stage 3) increased $3.4m driven by an increase a net increase in receivables of $12 million most of
which were loans with higher ECL rates.
The reduction in specific provisions of $2.7 million is primarily the result of the write off of previously provided loans.
(d) Credit risk adjustment on financial assets designated at fair value through profit and loss
There were no credit risk adjustments in individual financial assets.
Credit risk adjustments on financial assets designated at fair value through profit and loss are presented in the following table.
Securitised
Dec 2018
Non Securitised
Dec 2018
Total
Dec 2018
Credit risk adjustments on collective groups of financial assets
Opening balance as at 30 June 2018– 2,824 2,824
Effect of changes in foreign exchange rate(26) (26)
Restated for adoption of NZ IFRS 9– (582) (582)
Closing balance as at 31 December 2018 – 2,216 2,216

31
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
7 Borrowings
$000NOTE
Unaudited
6 mths to
Dec 2018
Unaudited
6 mths to
Dec 2017
Audited
12 mths to
Jun 2018
Deposits2,988,365 2,703,234 2,881,805
Subordinated Bonds– 3,379 3,378
Subordinated Notes – 22,277 22,172
Unsubordinated Notes151,902 151,902 151,853
Bank borrowings759,574 637,572 689,346
Borrowings – securitised15(d)127,944 115,059 47,504
Total borrowings4,027,785 3,633,423 3,796,058
Deposits and Unsubordinated notes rank equally and are unsecured. The Subordinated bonds and Subordinated Notes (settled early on 31 October
2018) ranked below all other general liabilities of the banking group.
Securitised borrowings as at 31 December 2018 are held by investors in the Heartland Auto Receivables Warehouse Trust (Auto Warehouse).
Securitised borrowings at previous period end dates were held by investors in the Heartland ABCP Trust 1 (ABCP Trust). Both Trusts were established to
acquire motor vehicle loans as part of a securitisation facility. Securitised borrowings held by investors in Auto Warehouse rank equally with each other
and are secured over the assets of the trust.
On 29 August 2018 the assets of ABCP were acquired by Heartland Bank Limited. On the same day Heartland Bank sold the acquired assets to Auto
Warehouse. Refer Note 15.
Auto Warehouse has bank facilities of $250 million at 31 December 2018, with $128 million drawn. Bank facilities held by ABCP at 31 December 2017
were $175 million and 30 June 2018 $100 million.
The Group has an Australian bank facility provided by Commonwealth Bank of Australia (CBA bank facility) totalling AUD $650 million, with AUD $586
million drawn (December 2017: AUD $495 million; June 2018: AUD $562 million). The CBA bank facility is secured over the shares in Australian Seniors
Finance Pty Limited (ASF) and the assets of the ASF Group (comprising ASF, the ASF Settlement Trust and the Seniors Warehouse Trust). The CBA bank
facility has a maturity date of 30 September 2022.
The banking agreements include covenants for the provision of information, attainment of minimum financial ratios and equity, compliance with
specified procedures and certification of due performance by ASF Group.

32
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
8 Share capital and dividends
000s
Unaudited
Dec 2018
Number of shares
Unaudited
Dec 2017
Number of shares
Audited
Jun 2018
Number of shares
Issued shares
Opening balance560,588 516,236 516,236
Cancelled shares(441)– –
Shares issued during the period– 37,16137,224
Dividend reinvestment plan5,283 4,163 7,128
Closing balance Heartland Group Limited565,430 557,560 560,588
Less treasury shares– (2,299)(2,299)
Net closing balance565,430 555,261 558,289
The table above shows shares in HBL up until 31 October 2018 when HGH acquired HBL, and shares in HGH from that date. At 31 October 2018 HBL
had issued 565,430 shares, all of which were exchanged for shares in HGH on a one for one basis.
Under dividend reinvestment plans, the Group issued 5,282,619 new shares at $1.6250 per share on 21 September 2018 (December 2017: 4,163,008
new shares at $1.8004 per share on 21 September 2017; June 2018: 4,163,008 new shares at $1.8004 per share on 21 September 2017 and 2,965,048
new shares at $1.7707 per share on 3 April 2018).
The shares have equal voting rights, rights to dividends and distributions and do not have a par value.
(a) Dividends paid by Heartland Bank Limited
Dec 2018Dec 2017Jun 2018
Date
declared
Cents per
share$000
Date
declared
Cents per
share$000
Date
declared
Cents per
share$000
Final dividend15 Aug 185.5 30,808 14 Aug 175.5 28,393 14 Aug 175.5 28,393
Interim dividend– – – – 20 Feb 183.5 19,502
Total dividends paid5.5 30,808 5.5 28,393 9.0 47,895
9 Related party transactions and balances
Transactions with key personnel
Key personnel, being directors of the Group, the Chief Executive Officer (CEO) and those executive staff reporting directly to the CEO and their
immediate relatives have transacted with the Group during the period as follows:
$000
Unaudited
Dec 2018
Unaudited
Dec 2017
Audited
Jun 2018
Transactions with key personnel
Interest income– 3 5
Interest expense(31)(69)(128)
Total transactions with key personnel(31)(66)(123)
Due from / (to) key personnel
Finance receivables– 63 –
Borrowings – deposits(2,960)(8,464)(2,412)
Total due (to) key personnel(2,960)(8,401)(2,412)

33
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
10 Fair value
The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations.
For all other financial instruments, the Group determines fair value using valuation techniques.
The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.
– Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or
indirectly (derived from prices).
– Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.
(a) Financial instruments measured at fair value
The following methods and assumptions were used to estimate the fair value of each class of financial asset and liability measured at fair value on a
recurring basis in the Consolidated Interim Statement of Financial Position.
Investments
Investments in public sector securities and corporate bonds are classified as being Fair value through Other Comprehensive Income, with the fair value
being based on quoted market prices (Level 1 under the fair value hierarchy) or modelled using observable market inputs (Level 2 under the fair value
hierarchy).
Investments valued under Level 2 of the fair value hierarchy are valued either based on quoted market prices or dealer quotes for similar instruments, or
discounted cash flows analysis.
Investments in unlisted equity securities are classified as being fair valued through profit or loss and are valued under Level 3 of the fair value hierarchy,
with the fair value being based on unobservable inputs.

34
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
10 Fair value (continued)
Finance receivables
Reverse mortgage loans classified as finance receivables are stated at fair value with the fair value being based on present value of future cash flows
discounted using observable market interest rates including an assessment of the no negative equity guarantee (Level 3 under the fair value hierarchy).
Derivative items
Interest rate swaps are classified as held for trading and are recognised in the Consolidated Interim Financial Statements at fair value. Derivatives are
initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. Fair
values are determined on the basis of discounted cash flow analysis using observable market prices and adjustments for counterparty credit spreads
(Level 2 under the fair value hierarchy).
The following table analyses financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy into which each
fair value measurement is categorised. The amounts are based on the values recognised in the Interim Statement of Financial Position.
$000 Level 1Level 2Level 3Total
Unaudited – Dec 2018
Assets
Investments209,048 100,219 9,694 318,961
Finance receivables– – 1,234,788 1,234,788
Derivative assets held for risk management– 1,238 – 1,238
Total assets measured at fair value209,048 101,457 1,244,482 1,554,987
Liabilities
Derivative liabilities held for risk management– 148 – 148
Total liabilities measured at fair value– 148 – 148
Unaudited – Dec 2017
Assets
Investments284,856 – 9,341 294,197
Finance receivables– 3,717 – 3,717
Total assets measured at fair value284,856 3,717 9,341 297,914
Liabilities
Derivative liabilities held for risk management– 2,568 – 2,568
Total liabilities measured at fair value– 2,568 – 2,568
Audited – Jun 2018
Assets
Investments140,282 190,570 9,694 340,546
Finance receivables– 454 – 454
Total assets measured at fair value140,282 191,024 9,694 341,000
Liabilities
Derivative liabilities held for risk management– 1,639 – 1,639
Total liabilities measured at fair value– 1,639 – 1,639

35
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
10 Fair value (continued)
(b) Financial instruments not measured at fair value
The following table sets out the fair values of financial instruments not measured at fair value and analyses these by the level in the fair value hierarchy
into which each fair value measurement is categorised.
$000
Unaudited
Total Fair Value
Dec 2018
Unaudited
Total Carrying
Value
Dec 2018
Unaudited
Total Fair Value
Dec 2017
Unaudited
Total Carrying
Value
Dec 2017
Audited
Total Fair Value
Jun 2018
Audited
Total Carrying
Value
Jun 2018
Assets
Cash and cash equivalentsLevel 189,161 89,161 117,316 117,316 49,588 49,588
Finance receivablesLevel 32,765,569 2,778,8973,645,531 3,655,138 3,891,458 3,904,198
Finance receivables –
securitisedLevel 3154,152153,591124,344 124,236 80,614 80,289
Other financial assetsLevel 31,383 1,383 5,189 5,189 1,613 1,613
Total financial assets3,010,2653,023,032 3,892,380 3,901,879 4,023,273 4,035,688
Liabilities
BorrowingsLevel 23,904,6843,899,841 3,521,873 3,518,364 3,744,634 3,748,554
Borrowings – securitisedLevel 2127,944 127,944 115,059 115,059 47,504 47,504
Other financial liabilitiesLevel 3– – 23,352 23,352 22,610 22,610
Total financial liabilities4,032,6284,027,785 3,660,284 3,656,775 3,814,748 3,818,668
Further information on valuation techniques and assumptions used for determining fair value is included in Note 17 of the Heartland Bank Limited
Annual Report for the year ended 30 June 2018.

36
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
RISK MANAGEMENT
11 Risk management policies
There have been no material changes in the Group’s policies for managing risk, or material exposures to any new types of risk since the reporting date,
refer to the Heartland Bank Limited Annual Report for the year ended 30 June 2018.
12 Credit risk exposure
Credit risk is the risk that a borrower will default on any type of debt by failing to make payments when it is obligated to do so. The risk is primarily that
of the lender and includes loss of principal and interest, disruption to cash flows and increased collection costs.
Credit risk is managed to achieve sustainable and superior risk-reward performance whilst maintaining exposures within acceptable risk “appetite”
parameters. This is achieved through the combination of governance, policies, systems and controls, underpinned by sound commercial judgement as
described below.
To manage this risk the Board Risk Committee (BRC) has been delegated the task of overseeing a formal credit risk management strategy. The BRC
reviews the Group’s credit risk exposures to ensure consistency with the Group’s credit policies to manage all aspects of credit risk.
The credit risk management strategies ensure that:
• Credit origination meets agreed levels of credit quality at point of approval.
• Sector and geographical risks are actively managed.
• Industry concentrations are actively monitored.
• Maximum total exposure to any one debtor is actively managed.
• Changes to credit risk are actively monitored with regular credit reviews.
(a) Maximum exposure to credit risk
The following table represents the maximum credit risk exposure, without taking account of any collateral held. The exposures set out below are based
on net carrying amounts as reported in the Consolidated Interim Statement of Financial Position.
$000
Unaudited
Dec 2018
Cash and cash equivalents89,161
Investments309,267
Finance receivables4,167,276
Derivative financial assets1,238
Other financial assets1,383
Total on balance sheet credit exposures4,568,325

37
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
12 Credit risk exposure (continued)
(b) Concentration of credit risk by geographic region
$000
Unaudited
Dec 2018
New Zealand:
Auckland1,134,679
Wellington248,521
Rest of North Island1,153,907
Canterbury483,667
Rest of South Island598,100
Australia:
Queensland162,858
New South Wales359,905
Victoria182,695
Western Australia41,370
South Australia26,926
Rest of Australia16,913
Rest of the world
1
211,475
Collective provision(50,475)
Less acquisition fair value adjustment for present value of future losses(2,216)
Total on balance sheet credit exposures4,568,325
1 These overseas assets are primarily NZD-denominated investments in AA+ and higher rated securities issued by offshore supranational agencies (“Kauri Bonds”).
(c) Concentration of credit risk by industry sector
Agriculture728,992
Forestry and Fishing84,874
Mining16,542
Manufacturing68,034
Finance & Insurance408,971
Wholesale Trade38,531
Retail Trade221,515
Households2,274,781
Property and Business Services418,792
Transport and Storage222,026
Other137,958
4,621,016
Collective provision(50,475)
Less acquisition fair value adjustment for present value of future losses(2,216)
Total on balance sheet credit exposures4,568,325
(d) Credit exposure to individual counterparties
At 31 December 2018 the Group did not have any period end or peak end-of-day credit exposures over 10% of equity to individual counterparties (not
being members of groups of closely related counterparties) or groups of closely related counterparties (excluding central government of any country
with a long-term credit rating of A- or A3 or above, or its equivalent, or any bank with a long-term credit rating of A- or A3 or above, or its equivalent,
and connected persons) (December 2017: nil; June 2018: nil).
The peak aggregate end-of-day credit exposure is determined by taking the maximum end-of-day aggregate amount of credit exposure over the period
divided by the Group’s equity as at the end of the period. Credit exposures disclosed are based on actual exposures. The credit rating is applicable to an
entity’s long term senior unsecured obligations payable in New Zealand, in New Zealand dollars.

38
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
13 Liquidity risk
The Group holds the following financial assets for the purpose of managing liquidity risk:
$000
Unaudited
Dec 2018
Cash and cash equivalents89,161
Investments309,267
Undrawn committed bank facilities122,056
Total liquidity520,484
Contractual liquidity profile of financial assets and liabilities
The following tables present the Group’s financial assets and liabilities by relevant maturity groupings based upon contractual maturity date. The
amounts disclosed in the table represents undiscounted future principal and interest cash flows. As a result, the amounts in the table below may differ
to the amounts reported in the Consolidated Interim Statement of Financial Position.
The contractual cash flows presented below may differ significantly from actual cash flows. This occurs as a result of future actions by the Group and its
counterparties, such as early repayments or refinancing of term loans and borrowings. Deposits and other public borrowings include customer savings
deposits and transactional accounts, which are at call. History demonstrates that such accounts provide a stable source of long term funding for the
Group.
The Group does not manage its liquidity risk on a contractual liquidity basis.
$000
On
Demand
0-6
Months
6-12
Months
1-2
Years
2-5
Years
5+
YearsTotal
Unaudited – Dec 2018
Financial assets
Cash and cash equivalents89,161 – – – – – 89,161
Investments– 87,940 25,643 107,534 101,253 9,694 332,064
Finance receivables– 862,100 507,227 701,643 1,357,569 4,873,244 8,301,783
Finance receivables - securitised– 38,166 35,096 58,367 41,923 – 173,552
Derivative financial assets– 1,238 – – – – 1,238
Other financial assets– 1,383 – – – – 1,383
Total financial assets89,161 990,827 567,966 867,544 1,500,745 4,882,938 8,899,181
Financial liabilities
Borrowings919,161 1,445,726 592,892 235,175 858,841 682 4,052,477
Borrowings - securitised– 18,795 21,109 93,647 – – 133,551
Derivative financial liabilities148 –– – – – 148
Other financial liabilities– 19,341 – – – – 19,342
Total financial liabilities919,309 1,483,862 614,001 328,822 858,841 682 4,205,518
Net financial (liabilities) / assets(830,148)(493,035)(46,035)538,722 641,904 4,882,256 4,693,663
Unrecognised loan commitments80,633 – – – – – 80,633
Undrawn committed bank facilities122,056 – – – – – 122,056
Undrawn committed bank facilities of $122.1 million are available to be drawn down on demand. To the extent drawn, $122.1 million is contractually
repayable in 1-2 years’ time upon facility expiry.

39
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
14 Interest rate risk
Contractual repricing analysis
The interest rate risk profile of financial assets and liabilities that follows has been prepared on the basis of maturity or next repricing date, whichever is
earlier.
$000
0-3
Months
3-6
Months
6-12
Months
1-2
Years
2+
Years
Non-
interest
bearingTotal
Unaudited – Dec 2018
Financial assets
Cash and cash equivalents89,155 – – – – 6 89,161
Investments63,232 20,080 21,850 125,734 78,370 9,695 318,961
Finance receivables2,811,826 160,972 286,910 435,562 308,624 9,791 4,013,685
Finance receivables - securitised14,880 15,654 30,148 52,732 40,177 – 153,591
Derivative financial assets1,238 – – – – – 1,238
Other financial assets – – – – – 1,383 1,383
Total financial assets2,980,331 196,706 338,908 614,028 427,171 20,875 4,578,019
Financial liabilities
Borrowings2,320,683 605,703 566,112 196,392 194,347 16,604 3,899,841
Borrowings – securitised127,944 – – – – – 127,944
Derivative financial liabilities148 – – – – – 148
Other financial liabilities– – – – – 19,341 19,341
Total financial liabilities2,448,775 605,703 566,112 196,392 194,347 35,945 4,047,274
Effect of derivatives held for risk management427,471 (113,709)(53,942)(277,677)17,857 – –
Net financial assets / (liabilities)959,027 (522,706)(281,146)139,959 250,681 (15,070)530,745

40
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Notes to the Consolidated Interim
Financial Statements
For the six months ended 31 December 2018
OTHER DISCLOSURES
15 Structured entities
(a) Heartland Cash and Term PIE Fund (Heartland PIE Fund)
The Group controls the operations of Heartland PIE Fund which is a portfolio investment entity that invests in the Group’s deposits. Investments of
Heartland PIE Fund are represented as follows:
$000
Unaudited
Dec 2018
Unaudited
Dec 2017
Audited
Jun 2018
Deposits140,012 97,546 115,095
(b) Seniors Warehouse Trust (SW Trust) and ASF Settlement Trust (ASF Trust)
SW Trust and ASF Trust form part of ASF’s reverse mortgage business and were set up by ASF as asset holding entities. The Trustee for both Trusts is
ASF Custodians Pty Limited and the Trust Manager is ASF.The reverse mortgage loans held by the Trusts are set aside for the benefit of the funder and
bank depositors have no recourse to these assets. The balances of SW Trust and ASF Trust are represented as follows:
$000
Unaudited
Dec 2018
Unaudited
Dec 2017
Audited
Jun 2018
Cash and cash equivalents6,8398,940 12,207
Finance receivables674,226616,485 676,837
Borrowings(614,967)(537,969)(614,510)
Derivative financial liabilities–(195)–
(c) Heartland ABCP Trust 1 (ABCP Trust)
At 30 June 2018 and 31 December 2017 the Group had securitised a pool of receivables comprising commercial and motor vehicle loans sold to ABCP
Trust.
The Group continued to recognise the securitised assets and associated borrowings in the Statement of Financial Position. Although the Group
recognised those interests in the ABCP Trust, the loans sold to the ABCP Trust were set aside for the benefit of investors in the ABCP Trust and other
depositors and lenders to the Group had no recourse to those assets.
On 29 August 2018 the assets of the ABCP Trust were purchased by Heartland Bank Limited and the ABCP Trust dissolved.
$000
Unaudited
Dec 2018
Unaudited
Dec 2017
Audited
Jun 2018
Cash and cash equivalents– 11,360 3,625
Finance Receivables – securitised– 124,236 80,269
Borrowings – securitised– (115,059)(47,504)
Derivative financial liabilities – securitised– (822)(496)
(d) Heartland Auto Receivables Warehouse Trust (Auto Warehouse)
At 31 December 2018 the Group had securitised a pool of receivables comprising commercial and motor vehicle loans sold to Auto Warehouse.
The Group continues to recognise the securitised assets and associated borrowings in the Statement of Financial Position. Although the Group
recognises those interests in Auto Warehouse, the loans sold to the Auto Warehouse are set aside for the benefit of investors in Auto Warehouse and
other depositors and lenders to the Group have no recourse to those assets.
$000NOTE
Unaudited
Dec 2018
Unaudited
Dec 2017
Audited
Jun 2018
Cash and cash equivalents – securitised7,821 – –
Finance receivables – securitised6 153,591 – –
Borrowings – securitised7 (127,944)– –
Derivative financial liabilities – securitised(33)– –

41
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
16 Insurance business, securitisation, funds management and other fiduciary activities
Insurance business
The Group conducts insurance business through its subsidiary MARAC Insurance Limited (MIL).
The Group’s aggregate amount of insurance business comprises the total consolidated assets of MIL of $13.3 million, which is 0.28% of the total
consolidated assets of the Group.
The Group’s objective is to minimise the insurance risk to within acceptable levels through the policies and procedures implemented by management.
Should adverse conditions arise, these policies and procedures are expected to mitigate the impact of the conditions on the Group.
Marketing and distribution of insurance products
The Group markets and distributes term life insurance and general insurance covering risks such as redundancy, bankruptcy or suspension of
employment. The insurance products are either underwritten by MIL, a subsidiary of Heartland Bank Limited, or sold by MIL on behalf of other parties
who underwrite those products themselves. There have been no material changes in the Group’s marketing and distribution of insurance products since
the reporting date of the previous Financial statement.
Securitisation, funds management and other fiduciary activities
Changes to the Group’s involvement in securitisation activities are set out in note 15. There have been no material changes to the Group’s involvement
in funds management and other fiduciary activities, in either case since the reporting date of the previous financial statement.
17 Contingent liabilities and commitments
$000
Unaudited
Dec 2018
Unaudited
Dec 2017
Audited
Jun 2018
Letters of credit, guarantee commitments and performance bonds6,417 6,890 6,847
Total contingent liabilities6,417 6,890 6,847
Undrawn facilities available to customers80,633 164,153 180,940
Conditional commitments to fund at future dates73,877 77,410 94,239
Total commitments154,510 241,563 275,179
18 Events after reporting date
There have been no material events after the reporting date that would affect the interpretation of the Consolidated Interim Financial Statements or
the performance of the Group.

© 2019 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.

42

Independent Review Report
To the shareholders of Heartland Group Holdings Limited
Report on the interim consolidated financial statements of Heartland Group Holdings Limited (the
“group”)
Conclusion
Based on our review, nothing has come to our
attention that causes us to believe that the interim
consolidated financial statements on pages 15 to 41
do not:
i.present fairly in all material respects the
group’s financial position as at 31
December 2018 and its financial
performance and cash flows for the 6
month period ended on that date; and
ii.comply with NZ IAS 34 Interim Financial
Reporting.
We have completed a review of the accompanying
interim consolidated financial statements which
comprise:
—the interim consolidated statement of financial
position as at 31 December 2018;
—the interim consolidated statements of
comprehensive income, changes in equity and
cash flows for the 6 month period then ended;
and
—notes, including a summary of significant
accounting policies and other explanatory
information.
Basis for conclusion
A review of the interim consolidated financial statements in accordance with NZ SRE 2410 Review of Financial
Statements Performed by the Independent Auditor of the Entity (“NZ SRE 2410”) is a limited assurance
engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of Heartland Group Holdings Limited, NZ SRE 2410 requires that we comply with the ethical
requirements relevant to the audit of the annual financial statements.
Our firm has also provided other services to the group in relation to AGM scrutineering. Subject to certain
restrictions, partners and employees of our firm may also deal with the group on normal terms within the
ordinary course of trading activities of the business of the group. These matters have not impaired our
independence as reviewer of the group. The firm has no other relationship with, or interest in, the group.
Emphasis of Matter
We draw attention to Basis of Reporting note of the interim consolidated financial statements which explains
the corporate restructure on 31 October 2018 when the group acquired Heartland Bank Limited. As common
control remained after the restructure, the interim consolidated financial statements have been prepared as if
the group had operated for the entire period. Comparative figures shown are for the consolidated Heartland
Bank Limited. Our opinion is not qualified in respect of this matter.

© 2019 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.

42

Independent Review Report
To the shareholders of Heartland Group Holdings Limited
Report on the interim consolidated financial statements of Heartland Group Holdings Limited (the
“group”)
Conclusion
Based on our review, nothing has come to our
attention that causes us to believe that the interim
consolidated financial statements on pages 15 to 41
do not:
i.present fairly in all material respects the
group’s financial position as at 31
December 2018 and its financial
performance and cash flows for the 6
month period ended on that date; and
ii.comply with NZ IAS 34 Interim Financial
Reporting.
We have completed a review of the accompanying
interim consolidated financial statements which
comprise:
—the interim consolidated statement of financial
position as at 31 December 2018;
—the interim consolidated statements of
comprehensive income, changes in equity and
cash flows for the 6 month period then ended;
and
—notes, including a summary of significant
accounting policies and other explanatory
information.
Basis for conclusion
A review of the interim consolidated financial statements in accordance with NZ SRE 2410 Review of Financial
Statements Performed by the Independent Auditor of the Entity (“NZ SRE 2410”) is a limited assurance
engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of Heartland Group Holdings Limited, NZ SRE 2410 requires that we comply with the ethical
requirements relevant to the audit of the annual financial statements.
Our firm has also provided other services to the group in relation to AGM scrutineering. Subject to certain
restrictions, partners and employees of our firm may also deal with the group on normal terms within the
ordinary course of trading activities of the business of the group. These matters have not impaired our
independence as reviewer of the group. The firm has no other relationship with, or interest in, the group.
Emphasis of Matter
We draw attention to Basis of Reporting note of the interim consolidated financial statements which explains
the corporate restructure on 31 October 2018 when the group acquired Heartland Bank Limited. As common
control remained after the restructure, the interim consolidated financial statements have been prepared as if
the group had operated for the entire period. Comparative figures shown are for the consolidated Heartland
Bank Limited. Our opinion is not qualified in respect of this matter.

© 2019 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.

42

Independent Review Report
To the shareholders of Heartland Group Holdings Limited
Report on the interim consolidated financial statements of Heartland Group Holdings Limited (the
“group”)
Conclusion
Based on our review, nothing has come to our
attention that causes us to believe that the interim
consolidated financial statements on pages 15 to 41
do not:
i.present fairly in all material respects the
group’s financial position as at 31
December 2018 and its financial
performance and cash flows for the 6
month period ended on that date; and
ii.comply with NZ IAS 34 Interim Financial
Reporting.
We have completed a review of the accompanying
interim consolidated financial statements which
comprise:
—the interim consolidated statement of financial
position as at 31 December 2018;
—the interim consolidated statements of
comprehensive income, changes in equity and
cash flows for the 6 month period then ended;
and
—notes, including a summary of significant
accounting policies and other explanatory
information.
Basis for conclusion
A review of the interim consolidated financial statements in accordance with NZ SRE 2410 Review of Financial
Statements Performed by the Independent Auditor of the Entity (“NZ SRE 2410”) is a limited assurance
engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of Heartland Group Holdings Limited, NZ SRE 2410 requires that we comply with the ethical
requirements relevant to the audit of the annual financial statements.
Our firm has also provided other services to the group in relation to AGM scrutineering. Subject to certain
restrictions, partners and employees of our firm may also deal with the group on normal terms within the
ordinary course of trading activities of the business of the group. These matters have not impaired our
independence as reviewer of the group. The firm has no other relationship with, or interest in, the group.
Emphasis of Matter
We draw attention to Basis of Reporting note of the interim consolidated financial statements which explains
the corporate restructure on 31 October 2018 when the group acquired Heartland Bank Limited. As common
control remained after the restructure, the interim consolidated financial statements have been prepared as if
the group had operated for the entire period. Comparative figures shown are for the consolidated Heartland
Bank Limited. Our opinion is not qualified in respect of this matter.
42
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

43
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019

43

Use of this Independent Review Report
This report is made solely to the shareholders as a body. Our review work has been undertaken so that we
might state to the shareholders those matters we are required to state to them in the Independent Review
Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the shareholders as a body for our review work, this report, or any of the
opinions we have formed.
Responsibilities of the Directors for the interim consolidated financial
statements
The Directors, on behalf of the group, are responsible for:
—the preparation and fair presentation of the interim consolidated financial statements in accordance with NZ
IAS 34 Interim Financial Reporting;
—implementing necessary internal control to enable the preparation of interim consolidated financial
statements that are fairly presented and free from material misstatement, whether due to fraud or error; and
—assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the review of the interim consolidated
financial statements
Our responsibility is to express a conclusion on the interim consolidated financial statements based on our
review. We conducted our review in accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude
whether anything has come to our attention that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with NZ IAS 34 Interim Financial Reporting.
The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with International Standards on Auditing (New Zealand). Accordingly we do not express an audit
opinion on these interim consolidated financial statements.
This description forms part of our Independent Review Report.

KPMG
Auckland
19 February 2019

44
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
Corporate
Directory
Board of Directors
Geoffrey Ricketts
Chair and Independent Non-Executive
Director, Heartland Group Holdings Limited
Jeff Greenslade
Executive Director and Group Chief
Executive Officer
Ellie Comerford
Independent Non-Executive Director and
Chair, Heartland Australia Holdings Pty
Limited
Sir Christopher Mace
Independent Non-Executive Director,
Heartland Group Holdings Limited
Greg Tomlinson
Non-Executive Director, Heartland Group
Holdings Limited

Strategic Management Group
Jeff Greenslade
Group Chief Executive Officer
Chris Flood
Chief Executive Officer, Heartland Bank
Laura Byrne
Chief People & Culture Officer
Grant Kemble
Chief Risk Officer
David Mackrell
Chief Financial Officer
Rochelle Moloney
Chief Marketing & Communications Officer
Sarah Smith
Chief Technology & Enablement Officer
Lydia Zulkifli
Chief Digital Officer
Registered Office
35 Teed Street
Newmarket
Auckland 1023
PO Box 9919
Newmarket
Auckland 1149
T 0508 432 785
E shareholders@heartland.co.nz
W www.heartland.co.nz
Auditor
KPMG
KPMG Centre, 18 Viaduct Harbour,
Auckland 1010
T 09 367 5800
Share Registry
Link Market Services Limited
Level 11, Deloitte House
80 Queen Street
Auckland 1010
T 09 375 5998
F 09 375 5990
E enquiries@linkmarketservices.co.nz
W www.linkmarketservices.co.nz

45
HEARTLAND GROUP HOLDINGS INTERIM REPORT 2019
insight
creative.co.nz
HEART020

heartland.co.nz

---

Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 28 January 2019

Results for announcement to the market
Name of issuer Heartland Group Holdings Limited
Reporting Period 6 months to 31 December 2018
Previous Reporting Period 6 months to 31 December 2017

Amount (000s) Percentage change
Revenue from ordinary
activities
NZ$166,260 + 9.0%
Profit (loss) from ordinary
activities after tax attributable
to security holder
NZ$33,114 + 6.5%
Net profit (loss) attributable
to security holders
NZ$33,114 + 6.5%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.035
Imputed amount per sec
Quoted Equity Security
$0.035
Record Date 15/03/2019
Dividend Payment Date 29/03/2019
Net tangible assets per
Quoted Equity Security
$1.01
(31 December 2018)
$1.01
(31 December 2017)
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood

Authority for this announcement
Name of person

authorised
to make this announcement
Michael Drumm
Contact phone number
09 927 9136

Contact email address
Michael.drumm@heartland.co.nz

Date of release through MAP

19/02/2019

Unaudited financial statements accompany this announcement.

---

Corporate Action Notice
(for a Distribution)
Updated as at 28 January 2019
Page 1 of 2
Section 1: issuer information
Name of issuer Heartland Group Holdings Limited
Financial product name/description Ordinary Shares
NZX ticker code HGH
ISIN NZHGHE0007S9
Type of distribution
(Please mark with an X in the relevant
box/es)
Full Year Quarterly
Half Year X Special
DRP applies YES
Record date Close of trading on: 15/03/2019
Ex-Date (one business day before the
Record Date)
14/03/2019
Payment date (and allotment date for
DRP)
29/03/2019
Total monies associated with the
distribution
$19.8m
Source of distribution (for example,
retained earnings)
Retained Earnings
Section 2: distribution amounts
Total amount $0.048611
Cash per financial product $0.035
Supplementary distribution $0.006176
Section 3:
Is the distribution imputed Fully imputed X
Partial imputation
No imputation
If fully or partially imputed, please state
imputation rate as % applied
100%
Imputation tax credits per financial
product
$0.013611

Page 2 of 2

Resident withhold tax amount per
financial product
1

$0.002431
Section 4: distribution re-investment plan (if applicable)
DRP % discount (if any) 2.5%
Start date and end date for determining
market price for DRP
Close of trading on:
18/03/2019
Close of trading on:
22/03/2019
Date strike price to be announced (if not
available at this time)
Close of trading on: 25/03/2019
Specify source of financial products to
be issued under DRP programme (new
issue or to be bought on market)
New Issue Ordinary Shares
DRP strike price per financial product
Last date to submit a participation
notice for this distribution in accordance
with DRP participation terms
18 March 2019, 5:00pm (New Zealand Time)
Section 5: authority for this announcement
Name of person authorised to make this
announcement
Michael Drumm
Contact phone number 09 927 9136
Contact email address Michael.drumm@heartland.co.nz
Date of release via MAP 19/02/2019

---

Heartland Group 2019 Interim Results | Page 1
Heartland Group Holdings Limited
2019 Interim Results
6 months to 31 December 2018

Heartland Group 2019 Interim Results | Page 2
This presentation has been prepared by Heartland Group Holdings Limited (NZX/ASX : HGH) (the Company or Heartland) for
the purpose of briefings in relation to its financial statements.
The presentation and the briefing (together the Presentation) contain summary information only, and you should not rely on
the information in the Presentation in isolation from the full detail in the financial statements.
The information in the Presentation has been prepared with due care and attention. However, no person (including the
Company and its directors, shareholders and employees) will be liable to any other person for any loss arising in connection
with the Presentation.
The Presentation outlines a number of the Company’s forward-looking plans and projections. Those plans and projections
reflect current expectations, but are inherently subject to risk and uncertainty, and may change at any time. There is no
assurance that those plans will be implemented or that projections will be realised.
No person is under any obligation to update this presentation at any time after its release to you or to provide you with
further information about the Company.
The information in this presentation is of a general nature and does not constitute financial product advice, investment
advice or any recommendation. Nothing in this presentation constitutes legal, financial, tax or other advice.
This announcement is based on the 31 December 2018 unaudited interim consolidated financial statements of Heartland
Group Holdings Limited (HGH). Following a corporate restructure on 31 October 2018, Heartland Bank Limited (HBL) became
a 100% controlled subsidiary of HGH and ownership of the Australian group of companies (comprising Heartland Australia
Holdings Pty Limited and its subsidiaries) transferred from HBL to HGH. The interim consolidated financial statements of HGH
comprise results for HBL up to 31 October 2018, and HGH from 1 November 2018 to 31 December 2018. As common
control has remained the same both before and after the corporate restructure, management believe that the operations of
HGH from 1 November 2018 are directly comparable to those of HBL prior to 1 November 2018. All comparative results are
based on 31 December 2017 unaudited interim consolidated financial statements of HBL.

Important notice

Heartland Group 2019 Interim Results | Page 3
•Corporate restructure successfully completed on 31 October 2018
and Heartland Group Holdings (HGH) listing on NZX and ASX on 1
November 2018
•Gross finance receivables $4.2b – 11.9% annualised growth excl. FX
1
•Net profit after tax $33.1m – up 6.5%

2019 Interim Results – Highlights
Australia
reverse
mortgage
growth of
24.9%
1
Business
intermediated
growth of
44.3%
1
Open for
Business
growth of
56.2%
1
Motor
growth of
16.3%
1
1.Excluding the impact of changes in foreign currency exchange rates and compared to previous corresponding reporting period.
Harmoney
personal
lending
growth of
44.3%
1
2,877
3,125
3,576
4,017
4,226

Heartland Group 2019 Interim Results | Page 4
2019 Interim Results – 31 December 2018
Net operating income
6 months to 31 Dec 2018
$102.1m
8.7%
from 6 months to 31 Dec 2017
Highlights
•Gross finance receivables $4,226m – 11.9% annualised growth, excl. FX
1
•NIM 4.36% – down 6bps from 4.44% for the six months to 31 Dec 2017, primarily due to Tier 2 bond repayment
break costs
•Cost to income ratio 42.5% – improvement from 42.9% for the six months to 31 Dec 2017
•Impairment expense ratio
2
0.64% – up from 0.58% for the year to 30 June 2018 due to how changes in product mix
and growth are provided for under new IFRS9 methodology
•Heartland Bank Tier 1 and Total capital ratio 13.25%
•Return on equity 10.3% (annualised)
•Interim Dividend declared of 3.5cps
Net profit after tax
6 months to 31 Dec 2018
$33.1m
6.5%
from 6 months to 31 Dec 2017
Gross finance receivables
As at 31 Dec 2018
$4.2b
11.9% (excl. FX
1
)
Annualised growth from 30 June 2018
1.Excluding the impact of changes in foreign currency exchange rates and compared to previous corresponding reporting period.
2.Impairment expense ratio is calculated as Impaired asset expense/Average gross finance receivables

Heartland Group 2019 Interim Results | Page 5
Strong growth in Gross Finance Receivables
↑25.5%
↑16.3%
↑56.2%
↑44.3%
↑10.7%
↓20.0%
↓4.5%
↑44.3%
↓34.2%
•The graph shows annualised growth in Gross Finance Receivables excluding the impact of changes in foreign currency exchange rates (FX), which is shown separately.
•Australia includes Reverse Mortgages (up $85.1m, 24.9% annualised growth excl. FX) and Spotcap (up $4.3m, 45.4% annualised growth excl. FX).
•Harmoney and other personal lending includes NZ (up $24.5m, 37.7% annualised growth) and Australia (up $10.2m, 77.0% annualised growth excl. FX).

Heartland Group 2019 Interim Results | Page 6
Growth in profitability
•Operating expenses one off items include corporate restructure and ASX listing costs ($0.9 million) and adverse impact of foreign currency movements ($1.2 million).
•Impairment expenses – new IFRS9 impact is the result of the new IFRS9 standard which requires providing for impairments on an expected loss basis on the date of loan
origination, being $2.2 million in the period.

Heartland Group 2019 Interim Results | Page 7
Operating expenses
•Operating expense ratio 42.5% - 40bps
lower than previous corresponding period
•Operating expenses one off items include
corporate restructure and ASX listing costs
of $0.9 million and adverse impact of
foreign currency movements of $1.2 million
•Excluding one off items, operating expense
ratio improves further to 40.4%

Heartland Group 2019 Interim Results | Page 8
•Gross interest yield = Interest Income divided by Average Interest Bearing Assets
•Cost of funds = Interest Expense divided by Average Interest Bearing Liabilities
•Net Interest Margin (NIM) = (Interest Income – Interest Expense) divided by Average Interest Bearing Assets
Market leading NIM maintained
4.41%

Heartland Group 2019 Interim Results | Page 9
Impairments impacted by IFRS9
•Impairment expense $13.3m (up $2.9m, 27.6% from previous corresponding reporting period)
•Impairment expense ratio
1
increased to 0.64% – up from 0.58% for the year to 30 June 2018
•$2.2 million of the increase is a result of the new IFRS9 methodology, which is greater than anticipated
due to the mix of our loan portfolio at 31 December 2018 differing from initial projections
•Despite the increase, underlying receivables performance is stable. Excluding the $2.2 million of
impairments due to the new IFRS9 methodology, impairment expense ratio
1
reduced to 0.53%;
•Non performing loans ratio improved to 1.70%
IFRS9 adoption
1.Impairment expense ratio is calculated as Impaired asset expense / Average gross finance receivables.

Heartland Group 2019 Interim Results | Page 10
FY19 profitability and outlook
•Operating expenses one off items include corporate restructure and ASX listing costs ($0.9 million) and adverse impact of foreign currency movements ($1.2 million).
•Impairment expenses – new IFRS9 impact is the result of the new IFRS9 standard which requires providing for impairments on an expected loss basis on the date of loan origination, being $2.2
million in the period.
•One-off costs and the impact of IFRS9 have caused some pressure on earnings
•The lower end of guidance remains achievable, however it would come at the expense of further
investment in growth
•An updated range of $73 million to $75 million is now considered prudent
•The midpoint of that range would see the delivery of approximately 10% NPAT growth for FY19
compared to FY18.

Photo credit: Chris Williams
Strategic
update

Heartland Group 2019 Interim Results | Page 12
Heartland Group – threefold strategic focus
Simple, frictionless on-boarding and processing
Australia
Reverse Mortgages
Total estimated market of
approximately A$6bn
Long term funding
Increase use of marketing
campaigns including TVC
planned
New Zealand
Banking
Five core lending activities :
Reverse Mortgages, Motor,
SME, Livestock, Harmoney
Accessible Deposits
Manage down large
relationship legacy Rural and
Business loans
Digital Platform
Services
Open for Business (O4B)
Mobile app
New markets
Capital efficiency

Heartland Group 2019 Interim Results | Page 13
Strategic update
•To support growth in Australia, Heartland continues to diversify sources of funding and to fund
growth with more capital efficiency:
–Favourable population demographics
–Heartland is the largest specialist in the market, currently enjoying the highest rate of growth
–Increased marketing initiatives, including television campaign planned
–Heartland Australia has established an A$ medium-term note programme
–A number of other options are currently being explored, including additional warehouse
facilities and long-term funding sourced offshore
•Heartland Bank Limited:
–Delivering best or only products to depositors and borrowers
–Core lending activities in New Zealand Reverse Mortgages, Motor Finance, SME, Harmoney and
other personal lending
–Strong growth in New Zealand Reverse Mortgages remains core focus
•Digital strategy to provide simple fast customer service, greater customer reach, low cost on-
boarding and transaction processing:
–Growth in retail deposits: 10% of deposit customers use the Mobile App
–Australia Reverse Mortgages: 30% of customers are direct, 93% of these are generated online
–O4B: gross receivables $115.4m, 56.2% annualised growth to 31 Dec 2018

Heartland Group 2019 Interim Results | Page 14
Regulatory update
ASIC Review of Reverse Mortgage Lending (August 2018)
•Thorough and balanced, highlighting growing need for equity release product
•Report finds that reverse mortgages help older Australian achieve their immediate financial objectives
and that customers are satisfied
•The report identified areas for improvement from lenders, and Heartland has already acted on these
and is very much aligned with ASIC in being committed to ensuring customers make informed decisions.
•Heartland is a member of a working group which was formed to ensure that ASIC’s expectations for
improved lending practices for reverse mortgages are satisfied.
•No material impact on business
“Reverse mortgage products can help many Australians achieve a better quality of life in retirement”
ASIC Deputy Chair, Peter Kell, 28 Aug 18

FMA and RBNZ review of conduct and culture in New Zealand retail banks (November 2018):
•RBNZ and FMA review into the culture and conduct of New Zealand’s banking system.
•Two types of findings:
–Thematic observations (generally applicable across the NZ banking industry)
–Specific observations (directly applicable to Heartland)
•No findings of widespread conduct and culture issues, however the findings did reveal opportunities to
strengthen the governance and management of conduct risks industry-wide.
•Heartland is required to develop a plan to address the findings, to be completed by end of March 2019.
•The outcome will be ongoing focus on and iterative improvement of conduct and culture bank-wide.

Heartland Group 2019 Interim Results | Page 15
Regulatory update continued:
RBNZ Capital Review consultation paper (December 2018):
•The capital review is at consultation stage only with many details to be clarified and RBNZ yet to have
made any final decisions.
•If the proposal was to be implemented in its current form, Heartland would be required to lift its Tier 1
capital ratio to 15% over a 5 year transitional period. This equates to an increase in Tier 1 capital of less
than 0.4% (approx. $15m) per year, based on Heartland’s current financial position.
•The corporate restructure provides Heartland Group with the following flexibility in relation to the
Reserve Bank’s capital requirements.
–The Australian business is outside of the New Zealand banking group and therefore not subject to
Reserve Bank capital requirements, reducing the impact of changes in those requirements.
–The options being explored for long-term funding of Heartland Australia and Heartland Group, if
implemented, may potentially result in the Heartland Group requiring less capital, or being able to
redeploy capital to Heartland Bank to satisfy Reserve Bank capital requirements without
necessarily raising more equity in the market.
•In the absence of an unanticipated increase in growth or an acquisition, the Group has no current need
to raise equity from shareholders other than thorough the Dividend Reinvestment Plan. A combination
of retained earnings reinvested through the Dividend Reinvestment Plan and other sources are
sufficient for funding business as usual growth.

Photo credit: Chris Williams
Divisional
summary

Heartland Group 2019 Interim Results | Page 17
Australia
•Australian Reverse Mortgages gross finance receivables $733.3m
24.9% annualised growth excl. FX
•Australia Spotcap small business gross finance receivables $22.2m
45.4% annualised growth excl. FX
•Australia Net Operating Income $11.8m, up 23.3% on previous
corresponding reporting period
•20,000 Australians turn 65 every month
1
•The number of Australians over 65 is projected to grow from 15
percent of the population in 2018 to 23 percent by 2050
2
•Heartland is the largest specialist in this market, currently enjoying
the highest rate of growth.
•Increased marketing activity including planned television campaign
•Corporate restructure allows for flexible funding opportunities
Australia – Gross
Finance Receivables
As at 31 December 2018
$755.5m
25.5% excl. FX
annualised growth from June 2018
1.Australian Bureau of Statistics.
2.Based on peak penetration from the Deloitte annual reverse mortgage report 2015, combined with current Australian Bureau of Statistics population and housing statistics and APRA and HSF
reverse mortgage data.
NB: Harmoney Australia is included in “Harmoney and Other Personal” in the 2019 Interim Report segmental reporting note and is discussed on slide 18.
16.7% incl. FX
annualised growth from June 2018
The combination of favourable demographics, limited active originators and the potential
through raising product awareness presents the opportunity for material growth

Heartland Group 2019 Interim Results | Page 18
Digital
•Open for Business grew strongly with gross receivables increasing
56.2% to $115.4 million
•Increased investment required to raise awareness and reach to a
market estimated to be $5bn
1
•Outside specialist capital being considered
•10% Depositors now on App
•30% Australian Reverse Mortgages accessed direct, 93% of which
are sourced online

1.Based on the number of SMEs in New Zealand (Ministry of Business, Innovation and Employment Small Business Fact Sheet 2017) with a
turnover, risk profile and needs consistent with O4B.

Heartland Group 2019 Interim Results | Page 19
New Zealand reverse mortgages
NZ Reverse Mortgages –
Gross Finance
Receivables
As at 31 December 2018
$481.5m
10.7%
annualised growth from June 2018
•NZ Reverse Mortgage gross finance receivables increased $24.6m in the six months to
31 Dec 2018 to $481.5m, 10.7% annualised growth
•NZ Reverse Mortgage Net Operating Income increased 16.2% to $10.3m
•Increased brand awareness and digital distribution
•We have assisted over 15,000 New Zealanders live a more comfortable retirement,
with currently over 7,000 customers

Heartland Group 2019 Interim Results | Page 20
Business
•Business gross finance receivables increased $32.4m in the six months to 31 Dec 2018 to
$1,093.8m (6.1% annualised growth)
•Business Net Operating Income increased 5.7% to $27.6m
•Intermediated continue to grow strongly with 44.3% annualised growth
•Business relationship lending decreased
Business – Gross
Finance Receivables
As at 31 December 2018
$1,093.8m
6.1%
annualised growth from June 2018

Heartland Group 2019 Interim Results | Page 21
Motor
•Motor gross finance receivables increased $79.0m in the six months to 31 Dec 2018 to
$1,039.9m (16.3% annualised growth)
•Motor Net Operating Income increased 8.9% to $28.2m
•Increased partnership with intermediaries offers customers vehicle finance at point of sale
Motor – Gross Finance
Receivables
As at 31 December 2018
$1,039.9m
16.3%
annualised growth from June 2018

Heartland Group 2019 Interim Results | Page 22
Harmoney and other personal lending
•Harmoney and other personal lending gross finance
receivables increased $34.7m in the six months to 31 Dec
2018 to $188.6m (annualised growth 44.3%, excl. FX)
•NZ Harmoney and other personal lending increased 37.7%
(annualised growth) to $153.6m
•Australia Harmoney increased 77.0% (annualised growth
excl. FX ) to $35.0m
•Harmoney and other personal lending Net Operating Income
(NZ and Australia) increased 38.0% to $9.5m
•Key funder of Harmoney platform across New Zealand and
Australia
Harmoney and other
personal lending –
Gross Finance
Receivables
As at 31 December 2018
$188.6m
44.3% excl. FX
annualised growth from June 2018
42.6% incl. FX
annualised growth from June 2018

Heartland Group 2019 Interim Results | Page 23
Rural
•Rural gross receivables decreased 4.5% (annualised
decrease in gross receivables)
•Reduction in lending through Rural Relationship and
Livestock Direct, but a small increase in Open for Livestock
lending.
•We continue to manage down large Rural Relationship
lending to reduce concentration risk in this area
Rural – Gross Finance
Receivables
As at 31 December 2018
$645.5m
4.5%
annualised decrease from June 2018

Photo credit: Chris Williams
Balance
sheet and
Capital

Heartland Group 2019 Interim Results | Page 25
Balance Sheet
•Gross finance receivables increased 11.9% (annualised growth), offset by adverse FX impact, resulting
in reported 10.3% (annualised growth).
•Net finance receivables increased 10.7% (annualised growth), offset by adverse FX impact, resulting
in reported 9.1% annualised growth.
•Strong 7.3% annualised growth in retail deposits to fund 9.0% growth in New Zealand gross finance
receivables with additional funding through securitised borrowings.
Summary Balance Sheet
31 Dec 2018
($m)
30 June 2018
($m)
Movement
($m)
Annualised
Growth (%)
Gross finance receivables 4,226.2 4,017.4 208.7 10.3%
Provisions for impairment and fair
value adjustment
(58.9) (32.5) (26.3) 160.6%
Net finance receivables 4,167.3 3,984.9 182.4 9.1%
Other assets 534.1 511.0 23.1 9.0%
TOTAL ASSETS 4,701.4 4,495.9 205.5 9.1%
Retail deposits 2,988.4 2,881.8 106.6 7.3%
Other borrowings 1,039.4 914.2 125.2 27.2%
Other liabilities 19.5 35.7 (16.2) -90.1%
Equity 654.2 664.2 (10.0) -3.0%
TOTAL EQUITY & LIABILITIES 4,701.4 4,495.9 205.5 9.1%

Heartland Group 2019 Interim Results | Page 26
Movement in Equity
$m
Heartland Bank Limited as at 30 June 2018 664.2
Profit for the 6 months to December 2018 33.1
Dividends paid (30.8)
Dividend reinvestment plan 8.6
IFRS 9 Adjustment (18.2)
Movement in reserves (2.8)
Heartland Group Holdings Limited as at 31 December 2018 654.2

Heartland Group 2019 Interim Results | Page 27
•Asset growth funded by 12.1% annualised growth in borrowings
•9.0% annualised growth in New Zealand gross finance receivables funded by 7.3%
annualised growth in retail deposits
•16.7% annualised growth in Australia gross finance receivables funded by increased
wholesale funding
•Heartland continues to diversify its sources of funding and to fund growth with greater
capital efficiency

Asset growth and funding growth

Heartland Group 2019 Interim Results | Page 28
•Heartland Group equity ratio was 13.91%
1

as at 31 December 2018.
•Heartland Bank Tier 1 and Total regulatory
capital ratio was 13.25% as at 31
December 2018.
•Following repayment of the Tier 2 capital
as part of the corporate restructure in
October 2018, Heartland Bank no longer
has any hybrid regulatory capital.
•Following the completion of the corporate
restructure, the Australia business is now
outside of the New Zealand banking
group, therefore not included in
Heartland Bank Limited capital ratio.
Capital
1.Total Equity / Total Assets

Heartland Group 2019 Interim Results | Page 29
Return to shareholders
•Interim dividend declared 3.5cps
•Heartland Group Return on Equity 10.3%
(annualised)
•Heartland Group earnings per share for
6 months to 31 Dec 2018 was 5.9cps

Heartland Group 2019 Interim Results | Page 30
Thank you
Any questions?

---

MEDIA RELEASE
19 February 2019
Heartland announces half-year results and
strategic growth direction
Heartland Group Holdings (Heartland) has reported a half year result, with continued focus on
growth opportunities in the Australian Reverse Mortgage market, and small business lending via its
Open for Business (O4B) platform. This was achieved during a period of restructure which has
positioned Heartland to grow and more efficiently access funding and capital.
 Heartland achieved a net profit after tax of $33.1 million for the six months ending 31
December 2018. This is an increase of 6.5 percent from the previous corresponding
reporting period.

 Gross finance receivables grew $240.7 million in the six months to 31 December 2018, an
annualised growth rate of 11.9 percent, excluding the impact of changes in foreign currency
exchange rates.

 The key drivers of this growth were our Australian Reverse Mortgages, O4B, Business
Intermediated, Harmoney and Motor divisions.

 Growth in profitability was achieved notwithstanding one-off corporate restructure and ASX
listing costs ($0.9 million) and one-off foreign currency costs of $1.2 million incurred in
relation to the corporate restructure.

 Impaired asset expense increased $2.9 million (27.6%) to $13.3 million for the six months
ended 31 December 2018, but $2.2 million of that increase is a result of the new IFRS9
methodology.

 In October 2018, Heartland completed its corporate restructure and became listed on the
ASX under a Foreign Exempt Listing.

 Heartland Bank is now a wholly-owned subsidiary of Heartland Group.

 Following the corporate restructure, Heartland Group’s activity comprises three areas of
strategic focus: Australia Reverse Mortgages, Digital Platform Services (including O4B, the
mobile app and new markets) and New Zealand Banking (including the five core lending
areas: New Zealand Reverse Mortgages, Motor, SME, Livestock and Harmoney).

 The corporate restructure provides Heartland greater flexibility to explore and take
advantage of future growth opportunities and funding options in New Zealand and Australia
outside of the banking group.

 As part of the restructure, Chris Flood (previously Deputy CEO) has been appointed as
dedicated CEO for Heartland Bank Limited, subject to Reserve Bank of New Zealand non-
objection. Jeff Greenslade will remain CEO for Heartland Group Holdings, providing oversight
of all Heartland Group activities, including banking, and will take direct responsibility for
Australia and Digital as well as managing the Group’s strategy, capital and corporate finance.

 New Zealand Banking is expected to continue to grow. Alongside this, there are two areas
with potential high growth opportunities - Australia Reverse Mortgages and O4B.

 More resources will be dedicated to these areas to unlock these opportunities while
maintaining a strong bank which continues to grow and deliver valued customer services.
Across the Group, the common theme is to deliver simple, frictionless on-boarding and
processing solutions for the customer. Heartland also aims to grow while utilising the
flexibility of the new corporate structure to access broader funding and capital sources.
For more detail about Heartland’s half year results, including financials, go to
www.nzx.com/companies/HGH/announcements.
ENDS
For more information, please contact: Nicola Foley, Communications Manager, 09 927 9564,
027 345 6809, nicola.foley@heartland.co.nz
About Heartland
Heartland Group Holdings Limited (NZX:HGH) is a financial services group with operations in New
Zealand and Australia. In New Zealand, Heartland Bank Limited (NZX:HBL) is a registered bank that
focuses on ‘best or only’ banking products in three key markets: Household (which includes
investment products, consumer lending, reverse mortgages and motor vehicle lending); Business;
and Rural. In Australia, Heartland is a specialist provider of reverse mortgage loans and also provides
funding to partners in the Small Business and Consumer Lending sectors.
Since first listing on the NZX Main Board in February 2011, Heartland has successfully progressed
through several strategic phases, establishing itself as a specialist financial services group that is
listed on both the NZX Main Board and ASX under a Foreign Exempt Listing. A corporate restructure
of the Heartland group was implemented in October 2018.
Heartland is proud of its Kiwi heritage and aims to provide a first-class customer experience whether
it’s online, over the phone or in person. It’s currently focused on channels to deliver its innovative
banking products, with an emphasis on digital platforms that are designed to deliver a fast and
simple customer experience.
To find out more, visit www.heartland.co.nz.

---

Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 28 January 2019

Results for announcement to the market
Name of issuer Heartland Bank Limited
Reporting Period 6 months to 31 December 2018
Previous Reporting Period 6 months to 31 December 2017

Amount (000s) Percentage change
Revenue from ordinary
activities
NZ$143,367 + 6.3%
Profit (loss) from ordinary
activities after tax attributable
to security holder
NZ$30,396 - 2.2%
Net profit (loss) attributable
to security holders
NZ$30,396 - 2.2%
Interim/Final Dividend
Amount per Quoted Equity
Security
N/A
Imputed amount per sec
Quoted Equity Security
N/A
Record Date N/A
Dividend Payment Date N/A
Net tangible assets per
Quoted Equity Security
N/A N/A
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood

Authority for this announcement
Name of person

authorised
to make this announcement
Michael Drumm
Contact phone number
09 927 9136

Contact email address
Michael.drumm@heartland.co.nz

Date of release through MAP

19/02/2019

Unaudited financial statements accompany this announcement.

---

Disclosure
Statement
For the six months ended 31 December 2018

CONTENTS
Page
General Information.......................................................................................................................................................................................4
Guarantee Arrangements..................................................................................................................................................................................4
Directors......................................................................................................................................................................................................4
Auditors ................................................................................................................................................................................................4
Amendments to Conditions of Registration......................................................................................................................................................................4
Conditions of Registration......................................................................................................................................................................5
Pending Proceedings or Arbitration..........................................................................................................................................................................................................9
Credit Ratings................................................................................................................................................................................................9
Other Material Matters...........................................................................................................................................................................................10
Directors' Statements............................................................................................................................................................................................10
Consolidated Interim Statement of Comprehensive Income...........................................................................................................................................................................................11
Consolidated Interim Statement of Changes in Equity...........................................................................................................................................................................................12
Consolidated Interim Statement of Financial Position........................................................................................................................................................................................14
Consolidated Interim Statement of Cash Flows..................................................................................................................................................................................................15
Basis of Reporting...............................................................................................................................................................................................................................................................17
Performance
1Segmental analysis......................................................................................................................................................................................................................................................................20
2Net interest income............................................................................................................................................................................................................................................................22
3Operating expenses............................................................................................................................................................................................................................................................22
4Impaired asset expense............................................................................................................................................................................................................................................................23
5Discontinued operations............................................................................................................................................................................................................................................................23
Financial Position
6Finance receivables............................................................................................................................................................................................................................................................25
7Borrowings............................................................................................................................................................................................................................................................28
8Share capital and dividends............................................................................................................................................................................................................................................................28
9Related party transactions and balances............................................................................................................................................................................................29
10Fair value............................................................................................................................................................................................................................................................29
Risk Management
11Risk management policies............................................................................................................................................................................................................................................................31
12Credit risk exposure............................................................................................................................................................................................................................................................31
13Asset quality............................................................................................................................................................................................................................................................33
14Liquidity risk............................................................................................................................................................................................................................................................36
15Interest rate risk............................................................................................................................................................................................................................................................38
16Concentrations of funding............................................................................................................................................................................................................................................................38
Other Disclosures
17Structured entities............................................................................................................................................................................................................................................................39
18Capital adequacy............................................................................................................................................................................................................................................................40
19Insurance business, securitisation, funds management and other fiduciary activities............................................................................................................................................................................................................................................................46
20Contingent liabilities and commitments............................................................................................................................................................................................................................................................46
21Events after reporting date............................................................................................................................................................................................................................................................46
Independent Auditor's Review Report............................................................................................................................................................................................................................................................47
3

GENERAL INFORMATION
GUARANTEE ARRANGEMENTS
DIRECTORS
AUDITOR
AMENDMENTS TO CONDITIONS OF REGISTRATION
Gregory R Tomlinson
KPMG
KPMG Centre
18 Viaduct Harbour Avenue
Auckland
TheConditionsofRegistrationapplyingtotheBankwereamendedon1October2018torefertorevisedversionsoftheRBNZBankingSupervision
Handbook documents:
- Liquidity Policy (BS13) which includes changes to the calculation of liquidity ratios as a consequence of the removal of off-quarter disclosure statements;
and
- Framework for Restrictions on High-LVR Residential Mortgage Lending (BS19) which includes changes to the High-LVR restrictions.
This Disclosure Statement has been issued by Heartland Bank Limited (the Bank) and its subsidiaries (the Banking Group) for the six months ended 31
December 2018 in accordance with the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 (as amended)
(the Order). The financial statements of the bank for the six months ended 31 December 2018 form part of, and should be read in conjunction with, this
Disclosure Statement.
Words and phrases defined by the Order have the same meanings when used in this Disclosure Statement.
The Bank's address for service is Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland.
As at the date this Disclosure Statement was signed, no material obligations of the Bank were guaranteed.
Jeffrey K Greenslade
Vanessa C M Stoddart
Edward J Harvey
Ellen F Comerford
The following Directors have resigned since the signing of the 30 June 2018 Disclosure Statement.
Bruce R Irvine (Chair)
As at the date this Disclosure Statement was signed, the Directors of the Bank are:
Geoffrey T Ricketts
Graham R Kennedy
On 19 September 2018, Heartland Bank Limited shareholders approved a corporate restructure that resulted in Heartland Bank Limited becoming a wholly
owned subsidiary of a new company, Heartland Group Holdings Limited. On 31 October 2018, shares in Heartland Bank Limited were exchanged for shares
in Heartland Group Holdings Limited, and Heartland Bank Limited's Australian group of companies transferred to Heartland Group Holdings Limited.
Sir Christopher R Mace
The address for service of the ultimate parent, Heartland Group Holdings Limited, is Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland.
4

CONDITIONS OF REGISTRATION
1.That—
(a)
the Total capital ratio of the Banking Group is not less than 8%;
(b)
the Tier 1 capital ratio of the Banking Group is not less than 6%;
(c)
the Common Equity Tier 1 capital ratio of the Banking Group is not less than 4.5%;
(d)
the Total capital of the Banking Group is not less than $30 million;
(e)
(f)
1A. That—
(a)
(b)
(c)
1B.
That, if the buffer ratio of the Banking Group is 2.5% or less, the Bank must:
(a)
(b)
(c)
For the purposes of this condition of registration, -
2.
3.
(a)
These conditions apply on and after 1 October 2018.
The registration of Heartland Bank Limited ("the Bank") as a registered Bank is subject to the following conditions:
theBankmustnotincludetheamountofanAdditionalTier1capitalinstrumentorTier2capitalinstrumentissuedafter1January2013inthe
calculation of its capital ratios unless it has received a notice of non-objection to the instrument from the Reserve Bank; and
theBankmeetstherequirementsofPart3oftheReserveBankofNewZealanddocument"Applicationrequirementsforcapitalrecognitionor
repayment and notification requirements in respect of capital" (BS16) dated November 2015 in respect of regulatory capital instruments.
For the purposes of this condition of registration, -
theTotalcapitalratio,theTier1capitalratio,theCommonEquityTier1capitalratioandTotalcapitalmustbecalculatedinaccordancewiththe
Reserve Bank of New Zealand document: “Capital Adequacy Framework (Standardised Approach)” (BS2A) dated November 2015.
anAdditionalTier1capitalinstrumentisaninstrumentthatmeetstherequirementsofsubsection8(2)(a)or(c)oftheReserveBankofNewZealand
document "Capital Adequacy Framework (Standardised Approach)" (BS2A) dated November 2015.
aTier2capitalinstrumentisaninstrumentthatmeetstherequirementsofsubsection9(2)(a)or(c)oftheReserveBankofNewZealanddocument
"Capital Adequacy Framework (Standardised Approach)" (BS2A) dated November 2015.
theBankhasaninternalcapitaladequacyassessmentprocess(“ICAAP”)thataccordswiththerequirementssetoutinthedocument“Guidelines
on a Bank’s internal capital adequacy assessment process ('ICAAP')” (BS12) dated December 2007;
underitsICAAPtheBankidentifiesandmeasuresits“othermaterialrisks”definedasallmaterialrisksoftheBankingGroupthatarenotexplicitly
capturedinthecalculationoftheCommonEquityTier1capitalratio,theTier1capitalratioandtheTotalcapitalratioundertherequirementsset
out in the document “Capital Adequacy Framework (Standardised Approach)” (BS2A) dated November 2015; and
the Bank determines an internal capital allocation for each identified and measured “other material risk”.
accordingtothefollowingtable,limittheaggregatedistributionsoftheBank’searningstothepercentagelimittodistributionsthatcorrespondsto
the Banking Group's buffer ratio:
Banking Group's buffer ratioPercentage limit to distributions of the Banks' earnings
0% - 0.625%0%
>0.625% - 1.25%20%
>1.25% - 1.875%40%
>1.875% - 2.5%60%
prepareacapitalplantorestoretheBankingGroup'sbufferratiotoabove2.5%withinanytimeframedeterminedbytheReserveBankfor
restoring the buffer ratio; and
have the capital plan approved by the Reserve Bank.
“bufferratio”,“distributions”,and“earnings”havethesamemeaningasinPart3oftheReserveBankofNewZealanddocument:“CapitalAdequacy
Framework (Standardised Approach)” (BS2A) dated November 2015.
That the Banking Group does not conduct any non-financial activities that in aggregate are material relative to its total activities.
In this condition of registration, the meaning of “material” is based on generally accepted accounting practice.
That the Banking Group’s insurance business is not greater than 1% of its total consolidated assets.
For the purposes of this condition of registration, the Banking Group’s insurance business is the sum of the following amounts for entities in the Banking
Group:
ifthebusinessofanentitypredominantlyconsistsofinsurancebusinessandtheentityisnotasubsidiaryofanotherentityintheBankingGroup
whosebusinesspredominantlyconsistsofinsurancebusiness,theamountoftheinsurancebusinesstosumisthetotalconsolidatedassetsof
the group headed by the entity; and
5

CONDITIONS OF REGISTRATION (CONTINUED)
(b)
(a)
(b)
4.
5.
6.
(a)
(b)
(c)
(d)
(i)
(ii)
(e)
(f)
(g)
(a)
(b)
(i)
(ii)
1
AA-/Aa370
Credit rating of the Bank
1
Connected exposure limit (% of the Banking Group’s Tier 1 capital)
AA/Aa2 and above
iftheentityconductsinsurancebusinessanditsbusinessdoesnotpredominantlyconsistofinsurancebusinessandtheentityisnotasubsidiary
ofanotherentityintheBankingGroupwhosebusinesspredominantlyconsistsofinsurancebusiness,theamountoftheinsurancebusinessto
sumisthetotalliabilitiesrelatingtotheentity’sinsurancebusinessplustheequityretainedbytheentitytomeetthesolvencyorfinancial
soundness needs of its insurance business.
In determining the total amount of the Banking Group’s insurance business—
all amounts must relate to on balance sheet items only, and must comply with generally accepted accounting practice; and
ifproductsorassetsofwhichaninsurancebusinessiscomprisedalsocontainanon-insurancecomponent,thewholeofsuchproductsorassets
must be considered part of the insurance business.
For the purposes of this condition of registration,—
"insurance business" means the undertaking or assumption of liability as an insurer under a contract of insurance:
“insurer” and “contract of insurance” have the same meaning as provided in sections 6 and 7 of the Insurance (Prudential Supervision) Act 2010.
Thataggregatecreditexposures(ofanon-capitalnatureandnetofanyallowancesforimpairment)oftheBankingGrouptoallconnectedpersonsdo
not exceed the rating-contingent limit outlined in the following matrix:
75
A+/A160
A/A240
A-/A330
BBB+/Baa1 and below15
Withintherating-contingentlimit,creditexposures(ofanon-capitalnatureandnetofanyallowancesforimpairment)tonon-bankconnectedpersons
shall not exceed 15% of the Banking Group’s Tier 1 capital.
Forthepurposesofthisconditionofregistration,compliancewiththerating-contingentconnectedexposurelimitisdeterminedinaccordancewiththe
Reserve Bank of New Zealand document entitled “Connected exposures policy” (BS8) dated November 2015.
Thatexposurestoconnectedpersonsarenotonmorefavourableterms(e.g.asrelatestosuchmattersascreditassessment,tenor,interestrates,
amortisation schedules and requirement for collateral) than corresponding exposures to non-connected persons.
That the Bank complies with the following corporate governance requirements:
the board of the Bank must have at least five directors;
the majority of the board members must be non-executive directors;
at least half of the board members must be independent directors;
an alternate director,—
for a non-executive director must be non-executive; and
for an independent director must be independent;
at least half of the independent directors of the Bank must be ordinarily resident in New Zealand;
the chairperson of the board of the Bank must be independent; and
theBank’sconstitutionmustnotincludeanyprovisionpermittingadirector,whenexercisingpowersorperformingdutiesasadirector,toactother
than in what he or she believes is the best interests of the company (i.e. the Bank).
For the purposes of this condition of registration,—
“independent,”—
inrelationtoapersonotherthanapersontowhomparagraph(b)applies,hasthesamemeaningasintheReserveBankofNewZealand
document entitled “Corporate Governance” (BS14) dated July 2014; and
in relation to a person who is the chairperson of the board of the Bank, means a person who—
meets the criteria for independence set out in section 10 except for those in paragraph 10(1)(a) in BS14; and
doesnotraiseanygroundsofconcerninrelationtotheperson’sindependencethatarecommunicatedinwritingtotheBankbytheReserve
Bank of New Zealand:
ThistableusestheratingscalesofStandard&Poor's,FitchRatingsandMoody'sInvestorService.(FitchRatings'scaleisidenticaltoStandard&
Poor's.)
6

CONDITIONS OF REGISTRATION (CONTINUED)
7.
(a)
(b)
8.
(a)
(b)
9.
(a)
(b)
(c)
(d)
(e)
10.
11.
(a)
(b)
(c)
12.
(a)
(b)
(c)
(d)
13.
(a)
(b)
(c)
“total assets” means all assets of the Banking Group plus any assets held by any SPV that are not included in the Banking Group’s assets:
to whom any member of the Banking Group has sold, assigned, or otherwise transferred any asset;
who carries on no other business except for that necessary or incidental to guarantee the obligations of any member of the Banking Group under a
covered bond:
“coveredbond”meansadebtsecurityissuedbyanymemberoftheBankingGroup,forwhichrepaymenttoholdersisguaranteedbyaSPV,and
investors retain an unsecured claim on the issuer.
That a person must not be appointed as chairperson of the board of the Bank unless:
the mandate of the committee must include: ensuring the integrity of the Bank’s financial controls, reporting systems and internal audit standards;
“non-executive” has the same meaning as in the Reserve Bank of New Zealand document entitled “Corporate Governance” (BS14) dated July 2014.
Thatnoappointmentofanydirector,chiefexecutiveofficer,orexecutivewhoreportsorisaccountabledirectlytothechiefexecutiveofficer,ismadein
respect of the Bank unless:
the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and
the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and
the Reserve Bank has advised that it has no objection to that appointment.
the Reserve Bank has advised that it has no objection to that appointment.
That the Bank has a board audit committee, or other separate board committee covering audit matters, that meets the following requirements:
the committee must have at least three members;
every member of the committee must be a non-executive director of the Bank;
the majority of the members of the committee must be independent; and
the chairperson of the committee must be independent and must not be the chairperson of the Bank.
For the purposes of this condition of registration, “independent” and “non-executive” have the same meanings as in condition of registration 6.
That a substantial proportion of the Bank’s business is conducted in and from New Zealand.
That the Banking Group complies with the following quantitative requirements for liquidity-risk management:
the one-week mismatch ratio of the Banking Group is not less than zero percent at the end of each business day;
the one-month mismatch ratio of the Banking Group is not less than zero percent at the end of each business day; and
the one-year core funding ratio of the Banking Group is not less than 75 percent at the end of each business day.
Forthepurposesofthisconditionofregistration,theratiosidentifiedmustbecalculatedinaccordancewiththeReserveBankofNewZealand
documents entitled “Liquidity Policy” (BS13) dated January 2018 and “Liquidity Policy Annex: Liquid Assets” (BS13A) dated October 2018.
ThattheBankhasaninternalframeworkforliquidityriskmanagementthatisadequateintheBank’sviewformanagingtheBank’sliquidityriskata
prudent level, and that, in particular:
is clearly documented and communicated to all those in the organisation with responsibility for managing liquidity and liquidity risk;
identifies responsibility for approval, oversight and implementation of the framework and policies for liquidity risk management;
identifies the principal methods that the Bank will use for measuring, monitoring and controlling liquidity risk; and
“SPV” means a person—
who has granted, or may grant, a security interest in its assets for the benefit of any holder of any covered bond; and
For the purposes of this condition,—
That no more than 10% of total assets may be beneficially owned by a SPV.
considers the material sources of stress that the Bank might face, and prepares the Bank to manage stress through a contingency funding
plan.
7

CONDITIONS OF REGISTRATION (CONTINUED)
14.That—
(a)
(i)
(ii)
(b)
(i)
(ii)
(iii)
15.
(a)
(i)
(ii)
(b)
(c)
(d)
(e)
(f)
16.
(a)
(b)
17.
(a)
(i)
(ii)
(b)
(c)
Forthepurposesofthisconditionofregistration,“qualifyingacquisitionorbusinesscombination”,“notificationthreshold”and“non-objectionthreshold”
havethesamemeaningasintheReserveBankofNewZealandBankingSupervisionHandbookdocument“SignificantAcquisitionsPolicy”(BS15)
dated December 2011.
That the Bank is pre-positioned for Open Bank Resolution and in accordance with a direction from the Reserve Bank, the Bank can—
close promptly at any time of the day and on any day of the week and that effective upon the appointment of the statutory manager—
atthetimeofnotifyingtheReserveBankoftheintendedacquisitionorbusinesscombination,theBankprovidedtheReserveBankwiththe
informationrequiredundertheReserveBankofNewZealandBankingSupervisionHandbookdocument“SignificantAcquisitionsPolicy”
(BS15) dated December 2011; and
the Reserve Bank has given the Bank a notice of non-objection to the significant acquisition or business combination.
nomemberoftheBankingGroupmaygiveeffecttoaqualifyingacquisitionorbusinesscombinationthatmeetsthenotificationthreshold,and
does not meet the non-objection threshold, unless:
theBankhasnotifiedtheReserveBankinwritingoftheintendedacquisitionorbusinesscombinationandatleast10workingdayshave
passed; and
nomemberoftheBankingGroupmaygiveeffecttoaqualifyingacquisitionorbusinesscombinationthatmeetsthenon-objectionthreshold
unless:
the Bank has notified the Reserve Bank in writing of the intended acquisition or business combination;
atthetimeofnotifyingtheReserveBankoftheintendedacquisitionorbusinesscombination,theBankprovidedtheReserveBankwiththe
informationrequiredundertheReserveBankofNewZealandBankingSupervisionHandbookdocument“SignificantAcquisitionsPolicy”
(BS15) dated December 2011; and
reopenbynolaterthan9amthenextbusinessdayfollowingtheappointmentofastatutorymanagerandprovidecustomersaccesstotheir
unfrozen funds;
maintain a full freeze on liabilities not pre-positioned for open bank resolution; and
reinstate customers' access to some or all of their residual frozen funds.
Forthepurposesofthisconditionofregistration,“deminimis”,“partialfreeze”,“customerliabilityaccount”,and“frozenandunfrozenfunds”havethe
samemeaningasintheReserveBankofNewZealanddocument“OpenBankResolution(OBR)Pre-positioningRequirementsPolicy”(BS17)dated
September 2013.
That the Bank has an Implementation Plan that—
is up-to-date; and
at the product-class level lists all liabilities, indicating which are—
all liabilities are frozen in full; and
demonstratesthattheBank'sprepositioningforOpenBankResolutionmeetstherequirementssetoutintheReserveBankdocument:"Open
Bank Resolution Pre-positioning Requirements Policy" (BS 17) dated September 2013.
Forthepurposesofthisconditionofregistration,“ImplementationPlan”hasthesamemeaningasintheReserveBankofNewZealanddocument
“Open Bank Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated September 2013.
That the Bank has a compendium of liabilities that—
pre-positioned for Open Bank Resolution; and
not pre-positioned for Open Bank Resolution;
is agreed to by the Reserve Bank; and
if the Reserve Bank's agreement is conditional, meets the Reserve Bank's conditions.
Forthepurposesofthisconditionofregistration,“compendiumofliabilities”,and“pre-positionedandnonpre-positionedliabilities”havethesame
meaningasintheReserveBankofNewZealanddocument“OpenBankResolution(OBR)Pre-positioningRequirementsPolicy”(BS17)dated
September 2013.
no further access by customers and counterparties to their accounts (deposits, liabilities or other obligations) is possible;
apply a de minimis to relevant customer liability accounts;
apply a partial freeze to the customer liability account balances;
8

CONDITIONS OF REGISTRATION (CONTINUED)
18.
19.
20.
21.
PENDING PROCEEDINGS OR ARBITRATION
CREDIT RATINGS
AAAAaa
AAAa
AA
BBBBaa
BBBa
BB
CCCCaa
CC - CCa - C
D-
unhide above
In these conditions of registration,—
“BankingGroup”meansHeartlandBankLimited(asreportingentity)andallotherentitiesincludedinthegroupasdefinedinsection6(1)ofthe
Financial Markets Conduct Act 2013 for the purposes of Part 7 of that Act.
"generally accepted accounting practice" has the same meaning as in section 8 of the Financial Reporting Act 2013.
In conditions of registration 19 to 21,—
“loan-to-valuationratio”,“nonproperty-investmentresidentialmortgageloan”,“property-investmentresidentialmortgageloan”,“qualifyingnewmortgage
lendingamountinrespectofproperty-investmentresidentialmortgageloans”,“qualifyingnewmortgagelendingamountinrespectofnonproperty-
investmentresidentialmortgageloans”,and“residentialmortgageloan”havethesamemeaningasintheReserveBankofNewZealanddocument
entitled “Framework for Restrictions on High-LVR Residential Mortgage Lending” (BS19) dated January 2018:
“loan-to-valuationmeasurementperiod”meansaperiodofsixcalendarmonthsendingonthelastdayofthesixthcalendarmonth,thefirstofwhich
ends on the last day of March 2018.
TherearenopendinglegalproceedingsorarbitrationsconcerninganymemberoftheBankingGroupatthedateofthisDisclosureStatementthatmayhave
a material adverse effect on the Bank or the Banking Group.
AsatthedateofsigningthisDisclosureStatement,theBank'screditratingissuedbyFitchAustraliaPtyLtd(FitchRatings)wasBBBstable.ThisBBBcredit
ratingwasissuedon14October2015andisapplicabletolongtermunsecuredobligationspayableinNewZealand,inNewZealanddollars.ThisBBB
stable credit rating was affirmed by Fitch Ratings on 1 November 2018.
The following is a summary of the descriptions of the ratings categories for rating agencies for the rating of long-term senior unsecured obligations:
ThatonanannualbasistheBanktestsallthecomponentpartsofitsOpenBankResolutionsolutionthatdemonstratestheBank'sprepositioningfor
Open Bank Resolution as specified in the Bank's Implementation Plan.
Forthepurposesofthisconditionofregistration,“ImplementationPlan”hasthesamemeaningasintheReserveBankofNewZealanddocument
“Open Bank Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated September 2013.
That,foraloan-to-valuationmeasurementperiod,thetotaloftheBank’squalifyingnewmortgagelendingamountinrespectofproperty-investment
residentialmortgageloanswithaloan-to-valuationratioofmorethan65%,mustnotexceed5%ofthetotalofthequalifyingnewmortgagelending
amount in respect of property-investment residential mortgage loans arising in the loan-to-valuation measurement period.
That,foraloan-to-valuationmeasurementperiod,thetotaloftheBank’squalifyingnewmortgagelendingamountinrespectofnonproperty-investment
residentialmortgageloanswithaloan-to-valuationratioofmorethan80%,mustnotexceed15%ofthetotalofthequalifyingnewmortgagelending
amount in respect of non property-investment residential mortgage loans arising in the loan-to-valuation measurement period.
ThattheBankmustnotmakearesidentialmortgageloanunlessthetermsandconditionsoftheloancontractorthetermsandconditionsforan
associatedmortgagerequirethataborrowerobtaintheregisteredBank’sagreementbeforetheborrowercangranttoanotherpersonachargeoverthe
residential property used as security for the loan.
BB
Significant uncertainties exist which could affect the payment of principal and interest on a timely basis.
B
Greater vulnerability and therefore greater likelihood of default.
AAA
Ability to repay principal and interest is extremely strong. This is the highest investment category.
AA
Very strong ability to repay principal and interest in a timely manner.
A
Strongabilitytorepayprincipalandinterestalthoughsomewhatsusceptibletoadversechangesineconomic,
business or financial conditions.
CC - C
Highest risk of default.
RD to D
Obligations currently in default.
CreditratingsfromFitchRatingsandStandard&Poor’smaybemodifiedbytheadditionofaplusorminussigntoshowrelativestatuswithinthemajor
ratingcategories.Moody’sInvestorsServiceapplynumericalmodifiers1,2,and3toshowrelativestandingwithinthemajorratingcategories,with1
indicating the higher end and 3 the lower end of the rating category.
Fitch Ratings
Standard &
Poor's
Moody's
Investors
Service
Description of Grade
CCC
Likelihoodofdefaultconsideredhigh.Timelyrepaymentofprincipalandinterestisdependentonfavourable
financial conditions.
BBB
Adequate ability to repay principal and interest. More vulnerable to adverse changes.
9

DIRECTORS' STATEMENTS
1.
(a )
(b )
2.
(a )
(b )
(c )
B. R. Irv ine (Chair - Board o f Di re cto rs )G. R. Kennedy
J. K. Gre ensladeG. T. Ri ckett s
E. F. Comerf ordV. C. M. Stoddart
E. J. Harvey
Thereareno mate ri al matt ersrelati ng to th e business or aff airsof th e Bankor th e Banking Gro up th at arenotcontainedelsewherein th is Di sclosure
State mentwhichwould, if disclosed in th is Di sclosureState ment,mate ri allyaff ect th e decision of a person to subscri be fo r debtsecuri ti es of whichth e Bank
or any member of th e Banking Gro up is the issuer.
th e Bank h ad syste ms i n p lace t o monito r and control a dequately mate ri al r isks o f th e Banking Gro up, including cre dit ri sk, concentrati on of
cre dit ri sk, i nte re st ra te r isk, currency r isk, equity r isk, liquidity r isk, operati onal r isk a nd oth er business r isks, and that th ose s yste ms were
being pro perly a pplied.
This Disclosure State ment is d ate d 1 9 F ebruary 2 019 and has b een signed by a ll t he Dire cto rs .
Each Dire cto r of th e Bank s ta te s t hat he or she belie ves, aft er due enquiry , th at:
As a t th e d ate o n which t his Disclosure State ment is s igned:
th e Disclosure State ment contains a ll t he info rmati on that is r equire d b y t he Ord er; a nd
th e Disclosure State ment is n ot fa lse o r misleading.
During the six months e nded 31 December 2018:
th e Bank c omplied with a ll Conditi ons o f Registr ati on;
cre dit exposure s t o c onnecte d p ers ons were n ot contrary t o t he inte re sts o f th e Banking Gro up; and
10
OTHER MATERIAL MATTERS

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2018
UnauditedRestatedRestated
6 mths to6 mths to12 mths to
$000NOTE
Dec 2018Dec 2017Jun 2018
Continuing Operations
Interest income2143,367134,920272,323
Interest expense257,24454,275108,737
Net interest income86,12380,645163,586
Operating lease income2,8713,0825,675
Operating lease expenses1,8012,1324,005
Net operating lease income1,0709501,670
Lending and credit fee income1,2719621,837
Other income1,7021,8259,176
Net operating income90,16684,382176,269
Operating expenses341,15938,23976,291
Profit before impaired asset expense and income tax49,00746,14399,978
Impaired asset expense413,16410,13321,833
Profit before income tax from continuing operations35,84336,01078,145
Profit before income tax from discontinued operations4, 56,1697,23516,149
Income tax expense11,61612,15926,781
Profit for the period30,39631,08667,513
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges, net of income tax781(492)72
Movement in debt instrument fair value reserve, net of income tax1701,034981
(4,241)2,5102,315
Items that will not be reclassified to profit or loss:
Movement in defined benefit reserve, net of income tax- 231340
Other comprehensive income / (loss) for the period, net of income tax(3,290)3,2833,708
Total comprehensive income for the period27,10634,36971,221
Total comprehensive income for the period is attributable to the shareholder(s).
The notes on pages 17 to 46 are an integral part of these consolidated interim financial statements.
Movement in foreign currency translation reserve, net of income tax
11

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2018
$000
NOTE
Unaudited - Dec 2018
Balance at 1 July 2018
544,927(2,612)2,5581,2601,590257(1,080)117,260664,160
Impact of NZ IFRS 9 (net of tax)
(18,231)(18,231)
Restated opening balance
544,927(2,612)2,5581,2601,590257(1,080)99,029645,929
Profit for the period- - - - - - - 30,39630,396
- - - (4,241)170- 781- (3,290)
- - - (4,241)170- 78130,39627,106
Dividends paid8- - - - - - - (30,808)(30,808)
5- - - - - - - (62,095)(62,095)
Dividend reinvestment plan88,584- - - - - - - 8,584
Transfer of treasury shares(2,340)2,340- - - - - - -
Release of FCTR on demerger- - 2,981- - - (2,981)-
Shares cancelled(272)272- -
Share based payments - - 383- - - - - 383
Total transactions with owners
5,9722,6123832,981- - - (95,884)(83,936)
Balance at 31 December 2018550,899- 2,941- 1,760257(299)33,541589,099
Unaudited - Dec 2017
Balance at 1 July 2017
473,128(2,612)3,118(1,055)609(83)(1,152)97,642569,595
Profit for the period
- - - - - - - 31,08631,086
- - - 2,5101,034231(492)- 3,283
- - - 2,5101,034231(492)31,08634,369
Dividends paid
8- - - - - - - (28,393)(28,393)
Dividend reinvestment plan
87,495- - - - - - - 7,495
Issue of share capital
59,225- - - - - - - 59,225
(681)- - - - - - - (681)
Share based payments
- - 216- - - - - 216
Shares vested
709- (1,196)- - - - - (487)
Total transactions with owners66,748- (980)- - - - (28,393)37,375
Balance at 31 December 2017539,876(2,612)2,1381,4551,643148(1,644)100,335641,339
The notes on pages 17 to 46 are an integral part of these consolidated interim financial statements.
Hedging
Reserve
Retained
Earnings
(restated)
Total
Equity
(restated)
Share
Capital
Treasury
Shares
Reserve
Employee
Benefits
Reserve
Foreign
Currency
Translation
Reserve
Debt
Instrument
Fair Value
Reserve
Defined
Benefit
Reserve
Other comprehensive income / (loss) , net of
income tax
Other comprehensive income/(loss), net of
income tax
Total comprehensive income for the period
Total comprehensive income for the period
Total comprehensive income for the period
Contributions by and distributions to owners
Special Dividend to Heartland Group Holdings
Limited
Transaction costs associated with capital raising
Contributions by and distributions to owners
Total comprehensive income for the period
12

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (CONTINUED)
For the six months ended 31 December 2018
$000
NOTE
Jun 2018
Balance at 1 July 2017
473,128(2,612)3,118(1,055)609(83)(1,152)97,642569,595
Profit for the year
- - - - - - - 67,51367,513
- - - 2,31598134072- 3,708
- - - 2,3159813407267,51371,221
Dividends paid8- - - - - - - (47,895)(47,895)
Dividend reinvestment plan812,745- - - - - - - 12,745
Issue of share capital59,225- - - - - - - 59,225
(910)- - - - - - - (910)
Share based payments- - 666- - - - - 666
Shares vested739- (1,226)- - - - - (487)
Total transactions with owners71,799- (560)- - - - (47,895)23,344
Balance at 30 June 2018544,927(2,612)2,5581,2601,590257(1,080)117,260664,160
The notes on pages 17 to 46 are an integral part of these consolidated interim financial statements.
Total comprehensive income for the year
Transaction costs associated with capital raising
Contributions by and distributions to owners
Total comprehensive income for the year
Other comprehensive income / (loss), net of
income tax
Defined
Benefit
Reserve
Hedging
Reserve
Retained
Earnings
(restated)
Total
Equity
Share
Capital
Treasury
Shares
Reserve
Employee
Benefits
Reserve
Foreign
Currency
Translation
Reserve
Debt
Instrument
Fair Value
Reserve
13

CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
As at 31 December 2018
UnauditedUnauditedAudited
$000
NOTE
Dec 2018Dec 2017Jun 2018
Assets
Cash and cash equivalents75,770117,31649,588
Investments318,961294,197340,546
Investment properties9,1961,7249,196
Due from related parties947,923- -
Finance receivables63,463,9923,783,0913,984,941
Operating lease vehicles16,43017,55117,524
Other assets16,50315,52214,411
Intangible assets58,05171,36574,401
Deferred tax asset11,1926,7185,319
Total assets4,018,0184,307,4844,495,926
Liabilities
Borrowings73,412,7663,633,4233,796,058
Current tax liabilities8516,72211,459
Trade and other payables15,30226,00024,249
Total liabilities3,428,9193,666,1453,831,766
Equity
Share capital550,899539,876544,927
Treasury shares- (2,612)(2,612)
Retained earnings and reserves38,200104,075121,845
Total equity589,099641,339664,160
Total equity and liabilities4,018,0184,307,4844,495,926
Total interest earning and discount bearing assets3,840,4714,179,7774,361,014
Total interest and discount bearing liabilities3,396,3063,626,7523,789,144
The notes on pages 17 to 46 are an integral part of these consolidated interim financial statements.
14

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the six months ended 31 December 2018
UnauditedUnaudited
Audited
6 mths to6 mths to12 mths to
$000
NOTE
Dec 2018Dec 2017Jun 2018
Cash flows from operating activities
Interest received144,412139,100280,471
Operating lease income received2,9612,6184,941
Lending, credit fees and other income received1,8713,33510,398
Operating inflows149,244145,053295,810
Payments to suppliers and employees48,63933,54373,672
Interest paid76,83363,266123,783
Taxation paid15,90714,55923,818
Operating outflows141,379111,368221,273
Net cash flows from operating activities before changes in operating assets and liabilities7,86533,68574,537
Proceeds from sale of operating lease vehicles2,4142,8045,577
Purchase of operating lease vehicles(2,996)(2,887)(7,163)
Net movement in finance receivables(224,748)(237,056)(431,863)
Net movement in deposits105,529131,864307,733
Net cash flows (applied to) / from operating activities(111,936)(71,590)(51,179)
Cash flows from investing activities
Net proceeds from sale of investment properties- 3,1853,185
Proceeds from sale of office fit-out, equipment and intangible assets- 16-
Sale of equity investment- - 300
Net decrease in investments21,92823,159-
Total cash provided from investing activities21,92826,3603,485
Purchase of office fit-out, equipment and intangible assets2,3782,4378,837
Net increase in investments- - 23,107
Purchase of equity investment- - 7,472
Total cash applied to investing activities2,3782,43739,416
Net cash flows from / (applied to) investing activities19,55023,923(35,931)
Cash flows from financing activities
Net increase/(decrease) in wholesale funding232,404(79,703)(93,507)
Proceeds from issue of Unsubordinated Notes- 150,000150,000
Increase in share capital- 59,22558,315
Total cash provided from financing activities232,404129,522114,808
Dividends paid822,22420,89835,150
Repayments of subordinated Notes722,846- -
Transaction costs associated with capital raising- 681-
Total cash applied to financing activities45,07021,57935,150
Net cash flows from financing activities187,334107,94379,658
Net increase / (decrease) in cash held94,94860,276(7,452)
Opening cash and cash equivalents49,58857,04057,040
Cash transferred on corporate restructure(68,766)- -
Closing cash and cash equivalents75,770117,31649,588
The notes on pages 17 to 46 are an integral part of these consolidated interim financial statements.
15

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS (CONTINUED)
For the six months ended 31 December 2018
Reconciliation of profit after tax to net cash flows from operating activities
UnauditedUnauditedAudited
6 mths to6 mths to12 mths to
$000Dec 2018Dec 2017Jun 2018
Profit for the period30,39631,08667,513
Add / (less) non-cash items
Depreciation and amortisation expense2,6972,3114,638
Depreciation on lease vehicles1,6761,9753,771
Capitalised net interest income(13,944)(10,884)(26,373)
Impaired asset expense13,16410,41622,067
Provision transfer on demerger619- -
Total non-cash items 4,2123,8184,103
Add / (less) movements in operating assets and liabilities:
Finance receivables(224,748)(237,056)(431,863)
Operating lease vehicles(582)(488)(2,257)
Other assets(3,356)1,814(635)
Current tax (8,561)(3,134)1,603
Derivative financial instruments revaluation(1,948)(1,273)(1,638)
Deferred tax(7,006)1,1342,533
Deposits105,529131,864307,733
Other liabilities(5,872)6451,729
Total movements in operating assets and liabilities(146,544)(106,494)(122,795)
Net cash flows applied to operating activities(111,936)(71,590)(51,179)
The notes on pages 17 to 46 are an integral part of these consolidated interim financial statements.
16

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

Basis of Reporting
Reporting entity
Basis of preparation
•
•
•
Change in Accounting policy
NZ IFRS 9 Financial Instruments
Impairment of finance receivables
Stage 1 - 12 months ECL
No evidence of impairment (past due 30 days or less)
Stage 2 - Lifetime ECL not credit impaired
Significant increase in credit risk (greater than 30 but less than 90 days past due)
Stage 3 - Lifetime ECL credit impaired
After initial recognition, the Banking Group applies a three stage test to measuring ECL's. Assets may migrate through the following stages based on their
change in credit quality since initial recognition.
Objective evidence of impairment, so are considered to be in default or otherwise credit impaired (90 days past due or more)
The interim financial statements presented are the consolidated financial statements comprising Heartland Bank Limited (the Bank) and its subsidiaries (the
Banking Group).
As at 31 December 2018, the Bank is a company incorporated in New Zealand under the Companies Act 1993, a registered bank under the Reserve Bank of
New Zealand Act 1989 and a FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013.
The interim financial statements presented here are for the following periods:
The interim financial statements of the Banking Group incorporated in this Disclosure Statement have been prepared in accordance with Generally Accepted
Accounting Practice in New Zealand (NZ GAAP), NZ IAS 34 Interim Financial Reporting and the Registered Bank disclosure statement (New Zealand
Incorporated Registered Banks) 2014 (as amended)(the order). They do not include all of the information required for full annual financial statements and should
be read in conjunction with the Bank's Annual Report for the year ended 30 June 2018.
The interim financial statements have been prepared on a going concern basis in accordance with historical cost, unless stated otherwise. The accounting
policies applied by the Banking Group in these consolidated interim financial statements are the same as those applied by the Banking Group in its consolidated
financial statements as at and for the year ended 30 June 2018, with the exception of those noted below.
Certain comparative information has been restated to comply with the current period presentation.
On 31 October 2018, Heartland Bank Limited (the Bank), became a wholly owned subsidiary of Heartland Group Holdings Limited (HGH Ltd). Shares in the
Bank were exchanged on a one for one basis for shares in HGH Ltd. The Australian group of companies that were previously held by the Bank were transferred
to HGH Ltd. The transfer of the Australian group of companies, has resulted in the Australian group being classified as a Discontinued operation as at the six
months ended 31 December 2018. This is disclosed in more detail in Note 5 - Discontinued operations.
The ECL model is a forward looking model where impairment allowances are recognised before losses are actually incurred. On initial recognition, an
impairment allowance is made, based on events that are possible in the next 12 months.
At each reporting date, the Banking Group assess whether there has been a significant increase in credit risk since initial recognition based on the "expected
credit loss" (ECL) model.
The Banking Group adopted NZ IFRS 9 - Financial Instruments and NZ IFRS 15 - Revenue from Contracts with Customers from 1 July 2018 . There have been
no changes in previously reported financials.
As required by NZ IFRS 5 - Non Current Assets Held for Sale and Discontinued Operations, the sale of the Australian group of companies has resulted in the
reclassification of balances in the Statement of Comprehensive Income into 'Profit before income tax from discontinued operations' and 'Profit before income tax
from continuing operations'. The Statement of Financial Position and Statement of Cashflows continue to include items from Discontinued operations within each
line item. A summary of cash flow and net assets and liabilities is presented in the relevant sections of note 5 - Discontinued operations.
In accordance with the transition provisions of NZ IFRS 9 the classification and measurement requirements of this standard have been applied retrospectively by
adjusting affected opening balances at the date of initial application with no restatement of comparative periods.
The following changes have been made to accounting policies as result of the application of NZ IFRS 9.
6 month period ended 31 December 2018 - Unaudited
6 month period ended 31 December 2017 - Restated and unaudited
12 month period ended 30 June 2018 - Restated
17

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

Change in Accounting policy (continued)
Impairment of Investments
The requirements of NZ IFRS 9 also apply to the Banks Investments. The impact of which has been assessed as not material.
Financial instruments
NZ IAS 39
carrying
value
Jun 2018
NZ IFRS 9
carrying
value
Jun 2018
Bank bonds and floating rate notes
Available for sale (AFS)
230,754230,754
Public sector securities & Corporate bonds
AFSFVOCI57,81857,818
Local authority stock
AFSFVOCI42,28042,280
Equity investments
FVOCI – for equity
9,6949,694
Amortised costFVTPL1,129,9561,132,620
Amortised costAmortised cost
2,854,9852,826,974
Trade receivables
Amortised costAmortised cost1,6131,613
AuditedImpact of Restated
12 mths to
NZ IFRS 9
1 July 2018
$000
Jun 2018
Restatement
Assets
Cash and cash equivalents
49,588- 49,588
Investments
340,546- 340,546
Investment properties
9,196- 9,196
Finance receivables
3,984,941(25,347)3,959,594
Operating lease vehicles
17,524- 17,524
Other assets
14,411- 14,411
Intangible assets
74,401- 74,401
Deferred tax asset
5,3197,11612,435
Total assets
4,495,926(18,231)4,477,695
Liabilities
Borrowings
3,796,058- 3,796,058
Current tax liabilities
11,459- 11,459
Trade and other payables
24,249- 24,249
Total liabilities
3,831,766- 3,831,766
Equity
Share capital
542,315- 542,315
Retained earnings and reserves
121,845(18,231)103,614
Total equity
664,160(18,231)645,929
Total equity and liabilities
4,495,926- 4,477,695
The table below shows the changes to classification and measurement of the Banking Group's financial assets due to the adoption of NZ IFRS 9. There are no
changes in the classification or measurement category of the Banking Group's financial liabilities.
Financial assets
Fair Value through other
Comprehensive income
(FVOCI)
In determining whether credit risk has increased all available information relevant to the assessment including information about past events, current conditions
and reasonable and supportable forecasts of economic conditions at the reporting date are taken into consideration.
The calculation of expected credit loss is modelled for portfolios of like assets. For portfolios which are either new or to small to model, judgement is used to
determine impairment provisions.
Finance receivables - Reverse Mortgages
Finance receivables - Other
The table below is a reconciliation of the balance sheet detailing the changes from NZ IAS 39 to NZ IFRS 9.
NZ IAS 39 Measurement
category
NZ IFRS 9 Measurement
category
Fair value through profit or
loss (FVTPL)
18

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

Change in Accounting policy (continued)
Impact of new impairment model
Additional provision for impairment recognised at 1 July 2018 on:
- Finance Receivables - Other
(25,929)
- Finance Receivables - Reverse Mortgages
582
Provision for Impairment at 1 July 2018
(25,347)
Less Tax impact
7,116
Net impact on retained earnings
(18,231)
NZ IFRS 15 Revenue from Contracts with customers
Accounting standards issued not yet effective
Expected to
be initially
applied in
year
ending:
1 Jan 201930 Jun 2020
1 Jan 2021
1 Jan 201930 Jun 2020NZ IFRS 9 Financial Instruments, contains relaxed requirements for hedged effectiveness, and expanded
disclosures.
The Banking Group adopted NZ IFRS 15 on 1 July 2018. This standard provides a principles based approach for revenue recognition and introduces the concept
of recognising revenue for performance obligations as they are satisfied.
The Banking Group has adopted this standard retrospectively with the cumulative effect of initial application recognised as an adjustment to opening balances
and has applied all practical expedients applicable. There have been no changes to previously reported financials.
Standard and description
NZ IFRS 17 Insurance Contracts, establishes principles for the recognition, measurement, presentation and
disclosure of insurance contracts.
30 Jun 2022
The Banking Group is currently assessing the impact of NZ IFRS 16 and NZ IFRS 17, and it is not practicable to quantify the effect at the date of the
publication of these financial statements.
Effective for
annual years
beginning
on or after:
NZ IFRS 16 Leases, contains guidance on identification, recognition, measurement, presentation, and
disclosure of leases by lessees and lessors.
19

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

Performance
1Segmental analysis
Operating segments
The Banking Group operates predominantly within New Zealand and Australia and comprises the following main operating segments:
Motor
Reverse Mortgages
Other Personal
Business
Rural
Australia
$000
Unaudited - 6 months ended 31 December 2018
Net interest income27,7169,9378,30426,90415,426- (2,164)86,123
Net other income4671121,195723404- 1,1424,043
Net operating income28,18310,0499,49927,62715,830- (1,022)90,166
Operating expenses1,2031,2612,9754,5391,89929,28241,159
26,9808,7886,52423,08813,931- (30,304)49,007
Impaired asset expense4,654- 5,0363,812(135)- (203)13,164
Profit / (loss) before income tax22,3268,7881,48819,27614,066- (30,101)35,843
- - - - - 6,169- 6,169
Income tax expense- - - - - - 11,61611,616
Profit / (loss) for the period22,3268,7881,48819,27614,0666,169(41,717)30,396
Total assets1,021,673479,855200,8231,083,029634,486- 598,1524,018,018
Total liabilities- - - - - - 3,428,9193,428,919
Providing reverse mortgage lending within New Zealand
Providing motor vehicle finance
Profit / (loss) before impaired asset
expense and income tax
OtherMotor
Other
Personal
RuralAustralia
Segment information is presented in respect of the Banking Group's operating segments which are those used for the Banking Group's management and
internal reporting structure.
Providing a comprehensive range of financial services – including term, transactional and savings based deposit accounts
and personal loans
The Banking Group's operating segments are different from the industry categories detailed in Note 13 - Asset quality. The operating segments are
primarily categorised by sales channel, whereas Note 13 - Asset quality is based on credit risk concentrations.
Profit / (loss) before income tax from
Discontinued operations
Business
Internal structures have changed during the current year. Previously reported Household segment has been disaggregated to show Motor, Reverse
Mortgages and Other Personal. Prior years have been restated accordingly.
Providing reverse mortgage lending and other financial services within Australia (Discontinued Operations)
Providing specialist financial services to the farming sector primarily offering livestock finance, rural mortgage lending,
seasonal and working capital financing, as well as leasing solutions to farmers.
Providing term debt, plant and equipment finance, commercial mortgage lending and working capital solutions for small-to-
medium sized businesses.
Total
Reverse
Mortgages
Allincomereceivedisfromexternalsources,exceptthosetransactionswithrelatedparties.Certainoperatingexpenses,suchaspremises,ITandsupport
centre costs are not allocated to operating segments and are included in Other.
20

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

1Segmental analysis (continued)
$000
Restated and unaudited - 6 months ended 31 December 2017
Net interest income
24,397 8,739 5,740 25,734 16,245 -
(210) 80,645
Net other income
1,472 116 1,142 402 25 - 580
3,737
Net operating income25,8698,8556,88226,13616,270- 37084,382
Operating expenses 1,551 913 3,383 4,0112,146- 26,23538,239
24,3187,9423,49922,12514,124- (25,865)46,143
Impaired asset expense 4,139 70 2,302 2,259 1,363 - - 10,133
20,1797,8721,19719,86612,761- (25,865)36,010
- - - - - 7,235- 7,235
Income tax expense - - - - - - 12,15912,159
Profit / (loss) for the period20,1797,8721,19719,86612,7617,235(38,024)31,086
Total assets 886,301 427,892 151,588 1,031,647 676,630
609,033
524,3934,307,484
Total liabilities3,666,1453,666,145
$000
Restated - 12 months ended 30 June 2018
Net interest income
50,328 18,189 12,421 51,189 32,122 - (663)
163,586
Net other income
2,515 262 2,392 1,124 163 - 6,227
12,683
Net operating income52,84318,45114,81352,31332,285- 5,564176,269
Operating expenses 2,914 1,670 6,552 8,1304,351- 52,67476,291
49,92916,7818,26144,18327,934- (47,110)99,978
Impaired asset expense 7,778 (362) 5,741 6,275 2,400 - 1 21,833
42,15117,1432,52037,90825,534- (47,111)78,145
- - - - - 16,149- 16,149
Income tax expense- - - - - - 26,78126,781
Profit / (loss) for the period42,15117,1432,52037,90825,53416,149(73,892)67,513
Total assets 955,088 454,016 178,309 1,048,239 654,935 695,251 510,0884,495,926
Total liabilities3,831,7663,831,766
Reverse
Mortgages
Motor
Other
Personal
AustraliaTotal RuralBusinessOther
Reverse
Mortgages
Profit / (loss) before income tax from
Discontinued operations
Profit / (loss) before impaired asset
expense and income tax
Profit / (loss) before income tax from
continuing operations
Profit / (loss) before income tax from
continuing operations
Profit / (loss) before income tax from
Discontinued operations
Total
Profit / (loss) before impaired asset
expense and income tax
AustraliaRuralBusinessOtherMotor
Other
Personal
21

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

2Net interest income
UnauditedRestatedRestated
6 mths to6 mths to12 mths to
$000
NOTE
Dec 2018Dec 2017Jun 2018
Interest income
Cash and cash equivalents312435842
Investments4,9064,7669,515
Finance receivables138,149129,719261,966
Total interest income143,367134,920272,323
Interest expense
Retail deposits48,59544,90490,880
Bank and securitised borrowings2,2005,4168,634
Subordinated and unsubordinated Notes75,0392,5686,596
Net interest expense on derivative financial instruments1,4101,3872,627
Total interest expense57,24454,275108,737
Net interest income*86,12380,645163,586
*
3Operating expenses
UnauditedRestatedRestated
6 mths to6 mths to12 mths to
$000Dec 2018Dec 2017Jun 2018
Personnel expenses20,77421,61143,538
Directors' fees439498943
Superannuation493401768
Audit and review of financial statements
1
319221381
Other assurance services paid to auditor
2
155736
Other fees paid to auditor
3
- 121121
Depreciation - property, plant and equipment8896971,377
Amortisation - intangible assets1,8031,6103,252
Operating lease expense as a lessee8319571,872
Legal and professional fees1,2269492,143
Other operating expenses
4
14,37011,11721,860
Total operating expenses*41,15938,23976,291
1
2
3
4
*
Other operating expenses includes foreign exchange loss as a result of the corporate restructure $2.9m.
Total operating expenses from Discontinued operations is included in Expenses within Note 5 - Discontinued operations.
Other fees paid to the auditor include professional fees in connection with regulatory advisory services and a Health and Safety framework review.
Interest income and expense is recognised in profit or loss using the effective interest method. The effective interest rate is established on initial
recognition of the financial assets and liabilities and is not revised subsequently. The calculation of the effective interest rate includes all yield related
fees and commissions paid or received that are an integral part of the effective interest rate.
Interest on the effective portion of a derivative designated as a cash flow hedge is initially recognised in the hedging reserve. It is released to profit or
loss at the same time as the hedged item or when the hedge relationship is subsequently deemed to be ineffective, should this occur.
Net interest income from Discontinued operations is included in Revenue within Note 5 - Discontinued operations.
Audit and review of financial statements includes fees paid for both the audit of annual financial statements and the review of interim financial statements.
Other assurance services paid to the auditor comprise review of regulatory returns, trust deed reporting, registry audits and other agreed upon procedure
engagements.
22

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

4Impaired asset expense
UnauditedUnauditedUnaudited
6 mths to6 mths to12 mths to
$000Dec 2018Dec 2017Jun 2018
Non-securitised
Individually impaired expense
(425)1,8765,190
Collectively impaired expense
14,2458,38316,889
Total non-securitised impaired asset expense
13,82010,25922,079
Securitised
Collectively impaired expense
(29)157(12)
Total securitised impaired asset expense
(29)157(12)
Total
Individually impaired expense
(425)1,8765,190
Collectively impaired expense
14,2168,54016,877
Total impaired asset expense*13(d)
13,79110,41622,067
*Includes impaired asset expense in discontinued operation (note 5)
5Discontinued operations
(a)
Results of discontinued operation
UnauditedUnauditedUnaudited
4 mths to6 mths to12 mths to
$000Oct 2018Dec 2017Jun 2018
Net operating income8,5339,52720,525
Operating expenses1,7372,0094,142
Results from operating activities6,7967,51816,383
Impaired asset expense4627283234
Profit before income tax6,1697,23516,149
Income Tax expense1,6492,0264,522
Profit/(loss) from discontinued operation 4,520 5,209 11,627
The profit from the discontinued operation of $6.2 million (June 2018: $16.1 million, Dec 2017: $7.2 million) is attributable entirely to the Banking Group.
The Banking Group adopted NZ IFRS 9 which sets out new requirements for impairment of financial assets using the ECL approach. (Refer note 1)
At the Annual Shareholder Meeting in September 2018, Heartland Bank Limited shareholders approved a corporate restructure that resulted in Heartland
Bank Limited becoming a wholly owned subsidiary of a new company, Heartland Group Holdings Limited. On 31 October 2018, shares in Heartland
Bank Limited were exchanged for shares in Heartland Group Holdings Limited, and the Australian group of companies were transferred from Heartland
Bank Limited to Heartland Group Holdings Limited.
To reflect this change, the comparative consolidated statements have been restated to remove the Australian group of companies, and show the
discontinued operation separately from continuing operations.
23

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

5Discontinued operations (continued)
(b)
Cash flow of discontinued operation
UnauditedUnauditedUnaudited
4 mths at6 mths to12 mths to
$000
NOTE
31 Oct 2018Dec 2017Jun 2018
Cash flows from (used in) discontinued operation
Net cash flows (applied to) / from operating activities (8,060) (21,591)(105,259)
Net cash flows from / (applied to) investing activities - 5,492 578
Net cash flows from financing activities 57,883 15,658 113,969
Net cash flows for the year 49,823 (441)9,288
(c)
Financial position of discontinued operation
UnauditedUnauditedUnaudited
as atas atas at
$000
NOTE
31 Oct 2018Dec 2017Jun 2018
Cash and cash equivalents68,7668,94018,943
Finance receivables725,725616,485721,236
Other assets91710580
Deferred tax asset1,13360(524)
Borrowings665,950537,969614,510
Current tax liabilities2,0473,6842,968
Trade and other payables81,86543,14775,425
Net assets and liabilities
46,67940,79046,832
(d)
Profit on disposal$000
In specie dividend to Heartland Group Holdings Limited
62,095
Total consideration received
62,095
Net Assets
46,679
Goodwill
15,416
Gain/(loss) on disposal
-
24

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

Financial Position
6Finance receivables
UnauditedUnauditedAudited
$000
NOTE
Dec 2018Dec 2017Jun 2018
Non-securitised
Neither at least 90 days past due nor impaired3,296,6813,617,8583,863,764
At least 90 days past due34,85436,63427,893
Individually impaired35,88935,94445,186
Gross finance receivables3,367,4243,690,4363,936,843
Less provision for impairment(55,412)(28,256)(29,367)
Less fair value adjustment for present value of future losses over expected life(1,611)(3,325)(2,824)
Total non-securitised finance receivables3,310,4013,658,8553,904,652
Securitised
Neither at least 90 days past due nor impaired154,642124,10379,809
At least 90 days past due197440784
Individually impaired- - -
Gross finance receivables154,839124,54380,593
Less provision for impairment(1,248)(307)(304)
Total securitised finance receivables153,591124,23680,289
Total
Neither at least 90 days past due nor impaired3,451,3233,741,9613,943,573
At least 90 days past due35,05137,07428,677
Individually impaired35,88935,94445,186
Gross finance receivables3,522,2633,814,9794,017,436
Less provision for impairment(56,660)(28,563)(29,671)
Less fair value adjustment for present value of future losses over expected life(1,611)(3,325)(2,824)
Total finance receivables3,463,9923,783,0913,984,941
Refer to Note 13 - Asset quality for further analysis of finance receivables by credit risk concentration.
25

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

6Finance receivables (continued)
(a)
Movement in provision
The following table details the movement from the opening balance to the closing balance of provision for impairment by class
12 month
ECL
Lifetime
ECL Not
credit
impaired
Lifetime
ECL Credit
impaired
Collective
provision
Jun 18
Specific
provisionTotal
Non-securitised
Impairment allowance as at 30 June 2018
- - - 20,3019,06629,367
Restated for adoption of NZ IFRS 9
29,3561,43814,909(20,301)(169)25,233
Restated impairment allowance as at 1 July 2018
29,3561,43814,909- 8,89754,600
Changes in loss allowance
Transfer to 12 month
588(560)(28)- - -
Transfer to lifetime not credit impaired
(1,127)1,189(62)- - -
Transfer to lifetime credit impaired
(1)(731)732- - -
Transfer to specific provision
(1,443)(9)(751)- 2,203-
Effect of changes in foreign exchange rate
(67)(6)(3)- - (76)
Impaired asset expense
2,83034811,067- (425)13,820
Write offs
- - (7,953)- (4,503)(12,456)
Transfer to/from securitised
(776)15484- - (277)
Recovery of amounts written off
- - 293- 13306
Sale of portfolio
(505)- - - - (505)
Impairment allowance as at 31 December 201828,855 1,684 18,688
-
6,185 55,412
Securitised
Impairment allowance as at 30 June 2018
- - - 304- 304
Restated for adoption of NZ IFRS 9
54620434(304)- 696
Restated impairment allowance as at 1 July 2018
54620434- - 1,000
Changes in loss allowance
Transfer to 12 month
12(11)(1)- - -
Transfer to lifetime not credit impaired
(17)19(2)- - -
Transfer to lifetime credit impaired
- (5)5- - -
Transfer to specific provision
- - - - - -
Effect of changes in foreign exchange rate
- - - - - -
Impaired asset expense
(155)13113- - (29)
Write offs
- - - - - -
Transfer to/from un-securitised
776(15)(484)- - 277
Recovery of amounts written off
- - - - -
-
Impairment allowance as at 31 December 20181,162 21 65
- -
1,248
Total
Impairment allowance as at 30 June 2018
- - - 20,6059,06629,671
Restated for adoption of NZ IFRS 9
29,9021,45815,343(20,605)(169)25,929
Restated impairment allowance as at 1 July 2018
29,9021,45815,343- 8,89755,600
Changes in loss allowance
Transfer to 12 month
600(571)(29)- - -
Transfer to lifetime not credit impaired
(1,144)1,208(64)- - -
Transfer to lifetime credit impaired
(1)(736)737- - -
Transfer to specific provision
(1,443)(9)(751)- 2,203-
Effect of changes in foreign exchange rate
(67)(6)(3)- - (76)
Impaired asset expense
2,67536111,180- (425)13,791
Write offs
- - (7,953)- (4,503)(12,456)
Recovery of amounts written off
- - 293- 13306
Sale of portfolio
(505)- - - - (505)
Impairment allowance as at 31 December 201830,017 1,705 18,753
-
6,185 56,660
26

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

6Finance receivables (continued)
(b)
Summary of Provision
$000Securitised
Non
Securitised
Total
Unaudited - 6 months ended 31 December 2018
Specific Provision
- 6,185
6,185
Collective provision measured on a 12 month ECL
1,16228,855
30,017
Collective provision for assets not credit impaired
211,684
1,705
Collective provision for assets credit impaired
6518,688
18,753
Total provision for impairment1,248 55,412 56,660
TotalTotal
Dec 2017Jun 2018
Specific provision for impaired assets8,743 9,066
Collective provision for impaired assets19,820 20,605
Total provision for impairment28,563 29,671
(c)
Impact of changes in gross carrying amount of ECL
The reduction in specific provisions of $2.7 million is primarily the result of the write off of previously provided loans.
(d)
Credit risk adjustment on financial assets designated at fair value through profit and loss
There were no credit risk adjustments in individual financial assets.
Credit risk adjustments on financial assets designated at fair value through profit and loss are presented in the following table.
Dec 2018Dec 2018Dec 2018
Credit risk adjustments on collective groups of financial assets
Opening balance as at 30 June 2018
- 2,824
2,824
Effect of changes in foreign exchange rate
- (26)
(26)
Restated for adoption of NZ IFRS 9
- (582)
(582)
Charge to income statement
- -
-
Sale of assets
(605)
(605)
Closing balance as at 31 December 2018
-
1,611 1,611
Securitised
Non
SecuritisedTotal
The following provides an explanation of how significant change in the gross carrying value of the Finance receivables have contributed to the changes in
the provision for impairment. The provision for impairment reflects ECL measured using the 3 stage approach under NZ IFRS 9 (refer to Basis of
Overall the net increase in the total provision for impairment was $1.1 million which was primarily driven by an increase in stage 3 collective provisions
offset by a reduction in specific provisions.
Collective 12 months ECL provisions (stage 1) increased $0.1m. Growth in receivables of $104 million, primarily consumer lending with higher average
ECL rates, added $2.7m to stage 1 provisions however this was offset by reductions in provisions on loans moving to stage 2 and 3 or specifically
provided.
Collective lifetime not credit impaired provisions (stage 2) increased $0.2m. $45 million of receivables transferred to stage 2 due to deterioration in credit
quality which was offset by a similar amount which was repaid or transferred to stage 1 or 3.
Collective lifetime credit impaired provisions (stage 3) increased $3.4m driven by an increase a net increase in receivables of $12 million most of which
were loans with higher ECL rates.
27

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

7Borrowings
UnauditedUnauditedAudited
6 mths to6 mths to12 mths to
$000
NOTE
Dec 2018Dec 2017Jun 2018
Deposits2,988,3652,703,2342,881,805
Subordinated Bonds- 3,3793,378
Subordinated Notes- 22,27722,172
Unsubordinated Notes151,902151,902151,853
Bank borrowings144,555637,572689,346
Borrowings - securitised17(d)127,944115,05947,504
Total borrowings3,412,7663,633,4233,796,058
8Share capital and dividends
UnauditedUnauditedAudited
Dec 2018Dec 2017Jun 2018
000s
Number of sharesNumber of sharesNumber of shares
Issued shares
Opening balance560,588516,236516,236
Cancelled shares(441)- -
Shares issued during the period- 37,16137,224
Dividend reinvestment plan5,2834,1637,128
Closing balance565,430557,560560,588
Less treasury shares- (2,299)(2,299)
Net closing balance565,430555,261558,289
(a)Dividends paid
Date
declared
Cents per
share
$000
Date
declared
Cents per
share
$000
Date
declared
Cents per
share
$000
Final dividend
15 Aug 18
5.530,808
14 Aug 17
5.528,393
14 Aug 17
5.528,393
Interim dividend- - -- -
20 Feb 18
3.519,502
In specie dividend
31 Oct 18
-62,095-- -
-
- -
Total dividends paid5.592,9035.528,3939.047,895
Jun 2018Dec 2017Dec 2018
On 21 September 2017, the Bank issued unsubordinated fixed rate notes (Unsubordinated Notes). These notes are paid a fixed rate of interest every 6
months.
Deposits and unsubordinated notes rank equally and are unsecured. The subordinated bonds and subordinated notes (settled early on 31 October 2018)
ranked below all other general liabilities of the Banking Group.
Under dividend reinvestment plans, the Bank issued 5,282,619 new shares at $1.6250 per share on 21 September 2018 (December 2017: 4,163,008 new
shares at $1.8004 per share on 21 September 2017; June 2018: 4,163,008 new shares at $1.8004 per share on 21 September 2017 and 2,965,048 new
shares at $1.7707 per share on 3 April 2018).
Securitised borrowings as at 31 December 2018 are held by investors in the Heartland Auto Receivables Warehouse Trust (Auto Warehouse). Securitised
borrowings at previous period end dates were held by investors in the Heartland ABCP Trust 1 (ABCP Trust). Both Trusts were established to acquire
motor vehicle loans as part of a securitisation facility. Securitised borrowings held by investors in Auto Warehouse rank equally with each other and are
secured over the assets of the Auto Warehouse.
Auto Warehouse has bank facilities of $250 million at 31 December 2018, with $128 million drawn. Bank facilities held by ABCP Trust at 31 December
2017 were $175 million and 30 June 2018 were $100 million.
On 29 August 2018 the assets of ABCP Trust were acquired by Heartland Bank Limited. On the same day Heartland Bank Limited sold the acquired assets
to Auto Warehouse at the same value. Refer Note 14.
28

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

9Related party transactions and balances
(a)Transactions with key personnel
UnauditedUnauditedAudited
$000Dec 2018Dec 2017Jun 2018
Transactions with key personnel
Interest income- 35
Interest expense(31)(69)(128)
Total transactions with key personnel(31)(66)(123)
Due from / (to) key personnel
Finance receivables- 63-
Borrowings - deposits(2,960)(8,464)(2,412)
Total due (to) key personnel(2,960)(8,401)(2,412)
(b)Sale of Australian entities
(c)Purchase of Australian receivables
(d)Due from related parties
UnauditedUnauditedAudited
$000Dec 2018Dec 2017Jun 2018
Due from
Australian Seniors Finance Limited47,923- -
Total due from related parties47,923- -
10Fair value
-Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
-
-Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
(a)Financial instruments measured at fair value
Investments
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(derived from prices).
Key personnel, being directors of the Bank, the Chief Executive Officer (CEO) and those executive staff reporting directly to the CEO and their immediate
relatives, have transacted with the Banking Group during the period as follows:
The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For
all other financial instruments, the Banking Group determines fair value using valuation techniques.
The Banking Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the
measurements.
The Banking Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has
occurred.
The following methods and assumptions were used to estimate the fair value of each class of financial asset and liability measured at fair value on a
recurring basis in the Consolidated Interim Statement of Financial Position.
Investments in public sector securities and corporate bonds are classified as being available for sale and are stated at fair value, with the fair value being
based on quoted market prices (Level 1 under the fair value hierarchy) or modelled using observable market inputs (Level 2 under the fair value hierarchy).
On 31 October 2018 the Australian entities owned by Heartland Bank Limited were transferred to Heartland Group Holdings Limited pursuant to a corporate
restructure approved by the shareholders of Heartland Bank Limited. The transfer was effected by an in specie dividend of $62m which equalled the net
asset value of those entities plus allocated goodwill at the date of the transaction.
On 31 October 2018 Heartland Bank Limited purchased NZD $85.2m of receivables from Heartland Group Holdings Limited. These assets were purchased
at market value and settled in AUD.
29

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

10Fair value (continued)
(a)Financial instruments measured at fair value (continued)
Investments (continued)
Finance receivables
Derivative items
$000 Level 1Level 2Level 3Total
Unaudited - Dec 2018
Assets
Investments209,048100,2199,694318,961
Finance receivables- - 479,855479,855
Derivative assets held for risk management- 1,238- 1,238
Total assets measured at fair value209,048101,457489,549800,054
Liabilities
Derivative liabilities held for risk management- 148- 148
Total liabilities measured at fair value- 148- 148
Unaudited - Dec 2017
Assets
Investments284,856- 9,341294,197
Finance receivables- 3,717- 3,717
Total assets measured at fair value284,8563,7179,341297,914
Liabilities
Derivative liabilities held for risk management- 2,568- 2,568
Total liabilities measured at fair value- 2,568- 2,568
Audited - Jun 2018
Assets
Investments140,282190,5709,694340,546
Finance receivables- 454- 454
Total assets measured at fair value140,282191,0249,694341,000
Liabilities
Derivative liabilities held for risk management- 1,639- 1,639
Total liabilities measured at fair value- 1,639- 1,639
Interest rate swaps are classified as held for trading and are recognised in the interim financial statements at fair value. Derivatives are initially recognised
at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. Fair values are determined on
the basis of discounted cash flow analysis using observable market prices and adjustments for counterparty credit spreads (Level 2 under the fair value
hierarchy).
The following table analyses financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy into which each fair
value measurement is categorised. The amounts are based on the values recognised in the Consolidated Interim Statement of Financial Position.
Investments valued under Level 2 of the fair value hierarchy are valued either based on quoted market prices or dealer quotes for similar instruments, or
discounted cash flows analysis.
Investments in unlisted equity securities are classified as being fair valued through profit or loss and are valued under Level 3 of the fair value hierarchy,
with the fair value being based on unobservable inputs.
Reversemortgageloansclassifiedasfinancereceivablesarestatedatfairvaluewiththefairvaluebeingbasedonpresentvalueoffuturecashflows
discounted using observable market interest rates including an assessment of the no negative equity guarantee (Level 3 under the fair value hierarchy).
30

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

10Fair value (continued)
(b)Financial instruments not measured at fair value
UnauditedUnauditedUnauditedUnauditedAuditedAudited
$000 Dec 2018Dec 2018Dec 2017Dec 2017Jun 2018Jun 2018
Assets
Cash and cash equivalentsLevel 175,77075,770117,316117,31649,58849,588
Finance receivablesLevel 32,817,2182,830,5463,645,5313,655,1383,891,4583,904,198
Finance receivables - securitisedLevel 3154,152153,591124,344124,23680,61480,289
Other financial assetsLevel 31,3371,3375,1895,1891,6131,613
Total financial assets3,048,4773,061,2443,892,3803,901,8794,023,2734,035,688
Liabilities
BorrowingsLevel 23,289,6653,284,8223,521,8733,518,3643,744,6343,748,554
Borrowings - securitisedLevel 2127,944127,944115,059115,05947,50447,504
Other financial liabilitiesLevel 3- - 23,35223,35222,61022,610
Total financial liabilities3,417,6093,412,7663,660,2843,656,7753,814,7483,818,668
Risk Management
11Risk management policies
12Credit risk exposure
The credit risk management strategies ensure that:
- Credit origination meets agreed levels of credit quality at point of approval.
- Sector and geographical risks are actively managed.
- Industry concentrations are actively monitored.
- Maximum total exposure to any one debtor is actively managed.
- Changes to credit risk are actively monitored with regular credit reviews.
Total
Carrying
Value
Total Fair
Value
The following table sets out the fair values of financial instruments not measured at fair value and analyses these by the level in the fair value hierarchy into
which each fair value measurement is categorised.
Total
Carrying
Value
Credit risk is the risk that a borrower will default on any type of debt by failing to make payments when it is obligated to do so. The risk is primarily that of
the lender and includes loss of principal and interest, disruption to cash flows and increased collection costs.
To manage this risk the Board Risk Committee (BRC) has been delegated the task of overseeing a formal credit risk management strategy. The BRC
reviews the Banking Group's credit risk exposures to ensure consistency with the Banking Group's credit policies to manage all aspects of credit risk.
Total Fair
Value
Total
Carrying
Value
Total Fair
Value
FurtherinformationonvaluationtechniquesandassumptionsusedfordeterminingfairvalueisincludedinNote17oftheBank'sAnnualReportfortheyear
ended 30 June 2018.
There have been no material changes in the Banking Group's policies for managing risk, or material exposures to any new types of risk since the reporting
date of the previous disclosure statement, refer to the Bank's Annual Report for the year ended 30 June 2018.
Credit risk is managed to achieve sustainable and superior risk-reward performance whilst maintaining exposures within acceptable risk "appetite"
parameters. This is achieved through the combination of governance, policies, systems and controls, underpinned by sound commercial judgement as
described below.
31

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

12Credit risk exposure (continued)
(a)Maximum exposure to credit risk
Unaudited
$000Dec 2018
Cash and cash equivalents75,770
Investments309,267
Finance receivables3,463,992
Due from related parties47,923
Derivative financial assets1,238
Other financial assets1,337
Total on balance sheet credit exposures3,899,527
(b)Concentration of credit risk by geographic region
New Zealand:
Auckland1,169,145
Wellington248,515
Rest of North Island1,153,880
Canterbury483,656
Rest of South Island598,085
Australia:
Queensland14,292
New South Wales38,699
Victoria19,414
Western Australia8,326
South Australia3,464
Rest of Australia2,662
Rest of the world
1
211,475
3,951,613
Collective provision(50,475)
Less acquisition fair value adjustment for present value of future losses(1,611)
Total on balance sheet credit exposures3,899,527
1
TheseoverseasassetsareprimarilyNZD-denominatedinvestmentsinAA+andhigherratedsecuritiesissuedbyoffshoresupranationalagencies("Kauri
Bonds").
The following table represents the maximum credit risk exposure, without taking account of any collateral held. The exposures set out below are based on
net carrying amounts as reported in the Consolidated Interim Statement of Financial Position.
32

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

12Credit risk exposure (continued)
(c)Concentration of credit risk by industry sector
Agriculture728,971
Forestry and Fishing84,871
Mining16,542
Manufacturing68,032
Finance & Insurance421,247
Wholesale Trade38,530
Retail Trade221,509
Households1,593,276
Property and Business Services418,659
Transport and Storage222,020
Other137,956
3,951,613
Collective provision(50,475)
Less acquisition fair value adjustment for present value of future losses(1,611)
Total on balance sheet credit exposures3,899,527
(d)Credit exposure to individual counterparties
13Asset quality
The disclosures below are categorised by the following credit risk concentrations:
CorporateBusiness lending including rural lending.
Residential
All OtherThis relates primarily to consumer lending to individuals.
Lending secured by a first ranking mortgage over a residential property used primarily for residential purposes either by the
mortgagor or a tenant of the mortgagor.
At 31 December 2018 the Banking Group did not have any period end or peak end-of-day credit exposures over 10% of equity to individual counterparties
(not being members of groups of closely related counterparties) or groups of closely related counterparties (excluding central government of any country
with a long-term credit rating of A- or A3 or above, or its equivalent, or any bank with a long-term credit rating of A- or A3 or above, or its equivalent, and
connected persons) (December 2017: nil; June 2018: nil).
The peak aggregate end-of-day credit exposure is determined by taking the maximum end-of-day aggregate amount of credit exposure over the period
divided by the Banking Group's equity as at the end of the period. Credit exposures disclosed are based on actual exposures. The credit rating is applicable
to an entity's long term senior unsecured obligations payable in New Zealand, in New Zealand dollars.
33

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

13Asset quality (continued)
(a)Finance receivables by credit risk concentration
$000
NOTE
Unaudited - Dec 2018
Neither at least 90 days past due nor impaired2,031,407570,642849,2743,451,323
At least 90 days past due13,09436821,58935,051
Individually impaired32,363323,49435,889
Gross Finance Receivables2,076,864571,042874,3573,522,263
Fair value adjustment for present value of future losses- (1,611)- (1,611)
Provision for impairment13(d)(29,703)(144)(26,813)(56,660)
Total net finance receivables2,047,161569,287847,5443,463,992
(b) Past due but not impaired
Unaudited - Dec 2018
Less than 30 days past due30,4042,07234,01566,491
At least 30 days but less than 60 days past due16,3867211,21527,673
At least 60 days but less than 90 days past due6,4087105,25912,377
At least 90 days past due13,09436821,58935,051
Total past due but not impaired66,2923,22272,078141,592
(c)Individually impaired assets
Unaudited - Dec 2018
Opening41,237303,33744,604
Additions 17,90021,53119,433
Deletions(13,959)- (1,374)(15,333)
Write offs(12,815)- - (12,815)
Closing gross individually impaired assets32,363323,49435,889
Less: provision for individually impaired assets13(d)6,185- - 6,185
Total net impaired assets26,178323,49429,704
CorporateResidentialAll OtherTotal
34

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

13Asset quality (continued)
(d)Movements in credit loss allowance
12 month
ECL
Lifetime
ECL Not
credit
impaired
Lifetime
ECL Credit
impaired
Collective
provision
June 18
Specific
provisionTotal
Corporate
Impairment allowance as at 30 June 2018
- - - 10,8458,67219,517
Restated for adoption of NZ IFRS 9
20,1906972,315(10,845)- 12,357
Restated impairment allowance as at 1 July 2018
20,1906972,315- 8,67231,874
Changes in loss allowance
Transfer to 12 month
93(89)(4)- - -
Transfer to lifetime not credit impaired
(336)342(6)- - -
Transfer to lifetime credit impaired
(685)(80)765- - -
Transfer to specific provision
(1,443)(4)(756)- 2,203-
Effect of changes in foreign exchange rate
- - - - - -
Impaired asset expense
790(14)2,778- (200)3,354
Write offs
- - (1,035)- (4,503)(5,538)
Recovery of amounts written off
- - - -
13 13
Impairment allowance as at 31 December 201818,609 852 4,057
-
6,185 29,703
Residential
Impairment allowance as at 30 June 2018
- - - 1,9211932,114
Restated for adoption of NZ IFRS 9
444- (1,921)(169)(2,042)
Restated impairment allowance as at 1 July 2018
444- - 2472
Changes in loss allowance
Transfer to 12 month
1(1)- - - -
Transfer to lifetime not credit impaired
(1)1- - - -
Transfer to lifetime credit impaired
- (2)2- - -
Transfer to specific provision
- - - - - -
Effect of changes in foreign exchange rate
- - - - - -
Impaired asset expense
(12)2106- (24)72
Write offs
- - - - - -
Recovery of amounts written off
- - - - -
-
Impairment allowance as at 31 December 201832 4 108
- -
144
All other
Impairment allowance as at 30 June 2018
- - - 7,8392018,040
Restated for adoption of NZ IFRS 9
9,66875713,028(7,839)15,614
Restated impairment allowance as at 1 July 2018
9,66875713,028- 20123,654
Changes in loss allowance
Transfer to 12 month
506(481)(25)- - -
Transfer to lifetime not credit impaired
(807)865(58)- - -
Transfer to lifetime credit impaired
684(654)(30)- - -
Transfer to specific provision
- (5)5- - -
Effect of changes in foreign exchange rate
(66)(6)(3)- - (75)
Impaired asset expense
1,8983728,296- (201)10,365
Write offs
- - (6,919)- - (6,919)
Recovery of amounts written off
- - 293- -
293
Sale of portfolio
(505)- - - - (505)
Impairment allowance as at 31 December 201811,378 848 14,587
- -
26,813
Total
Impairment allowance as at 30 June 2018
- - - 20,6059,06629,671
Restated for adoption of NZ IFRS 9
29,9021,45815,343(20,605)(169)25,929
Restated impairment allowance as at 1 July 2018
29,9021,45815,343- 8,89755,600
Changes in loss allowance
Transfer to 12 month
600(571)(29)- - -
Transfer to lifetime not credit impaired
(1,144)1,208(64)- - -
Transfer to lifetime credit impaired
(1)(736)737- - -
Transfer to specific provision
(1,443)(9)(751)- 2,203-
Effect of changes in foreign exchange rate
(66)(6)(3)- - (75)
Impaired asset expense
2,67636011,180- (425)13,791
Write offs
- - (7,954)- (4,503)(12,457)
Recovery of amounts written off
- - 293- 13
306
Sale of portfolio
(505)- - - - (505)
Impairment allowance as at 31 December 201830,019 1,704 18,752
-
6,185 56,660
35

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

13Asset quality (continued)
(e)Movements in credit risk adjustments
Dec 2018Dec 2018Dec 2018Dec 2018
Credit risk adjustments on individual financial assets
Opening balance as at 30 June 2018
8,672193201
9,066
Restated for adoption of NZ IFRS 9
- (169)-
(169)
Restated Impairment allowance as at 30 June 2018
8,672242018,897
Changes in loss allowance
Transfer to 12 month
- - -
-
Transfer to lifetime not credit impaired
- - -
-
Transfer to lifetime credit impaired
- - -
-
7Transfer to specific provision
2,203- -
2,203
Effect of changes in foreign exchange rate
- - -
-
Impaired asset expense 4
(200)(24)(201)
(425)
Write offs
(4,503)- -
(4,503)
Recovery of amounts written off
13- -
13
Closing balance as at 31 December 20186,185
- -
6,185
Credit risk adjustments on collective groups of financial assets
Impairment allowance as at 30 June 201810,8451,9217,83920,605
Restated for adoption of NZ IFRS 912,357(1,873)15,61426,098
Restated Impairment allowance as at 30 June 201823,2024823,45346,703
Changes in loss allowance
Transfer to 12 month- - - -
Transfer to lifetime not credit impaired- - - -
Transfer to lifetime credit impaired- - - -
Transfer to specific provision(2,203)- - (2,203)
Effect of changes in foreign exchange rate- - (75)(75)
Impaired asset expense 43,5549610,56614,216
Write offs(1,035)- (6,919)(7,954)
Recovery of amounts written off- - 293293
Sale of portfolio
- - (505)
(505)
Closing balance as at 31 December 201823,518 144 26,813 50,475
29,703 144 26,813 56,660
(f)Undrawn balances for individually impaired assets
(g)Other assets under administration
14Liquidity risk
The Banking Group holds the following financial assets for the purpose of managing liquidity risk:
Unaudited
$000Dec 2018
Cash and cash equivalents75,770
Investments309,267
Undrawn committed bank facilities122,056
Total liquidity507,093
As at 31 December 2018 there $0.01 million undrawn lending commitments to counterparties for whom drawn balances are classified as individually
impaired (December 2017: $0.20 million; June 2018: $0.20 million).
Other assets under administration are any loans, not being individually impaired or 90 days or more past due, where the customer is in any form of
voluntary or involuntary administration, including receivership, liquidation, bankruptcy or statutory management. As at 31 December 2018, the Banking
Group had $2.29 million assets under administration (December 2017: $1.60 million; June 2018: $1.19 million).
ResidentialAll otherTotalCorporate
36

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

14Liquidity risk (continued)
Contractual liquidity profile of financial assets and liabilities
The Banking Group does not manage its liquidity risk on a contractual liquidity basis.
On0-66-121-22-55+Total
$000DemandMonthsMonthsYearsYearsYears
Unaudited - Dec 2018
Financial assets
Cash and cash equivalents75,770- - - - - 75,770
Investments- 87,94025,643107,534101,2639,694332,074
Finance receivables- 827,498494,834684,7351,285,4242,713,9926,006,483
Finance receivables - securitised- 38,16635,09658,36741,923- 173,552
Derivative financial assets- 1,238- - - - 1,238
Other financial assets- 1,337- - - - 1,337
Total financial assets75,770956,179555,573850,6361,428,6102,723,6866,590,454
Financial liabilities
Borrowings919,1611,434,073 584,482 215,055 208,952 6823,362,405
Borrowings - securitised- 18,79521,10993,647- - 133,551
Derivative financial liabilities- 148- - - - 148
Other financial liabilities- 16,005- - - - 16,005
Total financial liabilities919,1611,469,021605,591308,702208,9526823,512,109
Net financial (liabilities) / assets(843,391)(512,842)(50,018)541,9341,219,6582,723,0043,078,345
Unrecognised loan commitments78,535- - - - - 78,535
Undrawn committed bank facilities122,056- - - - - 122,056
The following tables present the Banking Group's financial assets and liabilities by relevant maturity groupings based upon contractual maturity date. The
amounts disclosed in the table represents undiscounted future principal and interest cash flows. As a result, the amounts in the table below may differ to
the amounts reported in the Consolidated Interim Statement of Financial Position.
The contractual cash flows presented below may differ significantly from actual cash flows. This occurs as a result of future actions by the Banking Group
and its counterparties, such as early repayments or refinancing of term loans and borrowings. Deposits and other public borrowings include customer
savings deposits and transactional accounts, which are at call. History demonstrates that such accounts provide a stable source of long term funding for
the Banking Group.
Undrawncommittedbankfacilitiesof$122millionareavailabletobedrawndownondemand.Totheextentdrawn,$122millioniscontractuallyrepayable
in 1-2 years' time upon facility expiry.
37

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

15Interest rate risk
Contractual repricing analysis
0-33-66-121-22+Non-Total
MonthsMonthsMonthsYearsYearsinterest
$000bearing
Unaudited - Dec 2018
Financial assets
Cash and cash equivalents75,764- - - - 675,770
Investments63,23220,08021,850125,73478,3709,695318,961
Due from related parties47,92347,923
Finance receivables2,108,543160,972286,910435,562308,6249,7903,310,401
Finance receivables - securitised14,87915,65430,14852,73240,179- 153,592
Derivative financial assets1,238- - - - - 1,238
Other financial assets - - - - - 1,3371,337
Total financial assets2,263,656196,706338,908614,028427,17368,7513,909,222
Financial liabilities
Borrowings1,705,660605,703566,112196,392194,34716,6083,284,822
Borrowings - securitised127,944- - - - - 127,944
Derivative financial liabilities148- - - - - 148
Other financial liabilities- - - - - 16,00516,005
Total financial liabilities1,833,752605,703566,112196,392194,34732,6133,428,919
Effect of derivatives held for risk management390,757(110,563)(51,844)(269,285)40,935- -
Net financial assets / (liabilities)820,661(519,560)(279,048)148,351273,76136,138480,303
16Concentrations of funding
(a)Concentration of funding by industry
Unaudited
$000Dec 2018
Agriculture78,120
Forestry and Fishing19,561
Mining155
Manufacturing11,932
Finance & Insurance573,672
Wholesale Trade8,871
Retail Trade15,584
Households2,302,366
Property and Business Services100,142
Transport and Storage4,340
Other146,121
3,260,864
Subordinated notes-
Unsubordinated notes151,902
Total borrowings3,412,766
The interest rate risk profile of financial assets and liabilities that follows has been prepared on the basis of maturity or next repricing date, whichever is
earlier.
38

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

16Concentrations of funding (continued)
(b)Concentration of funding by geographical area
Auckland1,032,541
Wellington273,389
Rest of North Island752,611
Canterbury918,442
Rest of South Island251,470
Overseas184,313
Total borrowings3,412,766
Other Disclosures
17Structured entities
(a)Heartland Cash and Term PIE Fund (Heartland PIE Fund)
UnauditedUnauditedAudited
$000Dec 2018Dec 2017Jun 2018
Deposits140,01297,546115,095
(b)Seniors Warehouse Trust (SW Trust) and ASF Settlement Trust (ASF Trust)
UnauditedUnauditedAudited
$000Dec 2018Dec 2017Jun 2018
Cash and cash equivalents
-
8,94012,207
Finance receivables
-
616,485676,837
Borrowings
-
(537,969)(14,510)
Derivative financial instruments
-
(195)-
(c)Heartland ABCP Trust 1 (ABCP Trust)
UnauditedUnauditedAudited
$000Dec 2018Dec 2017Jun 2018
Cash and cash equivalents
-
11,3603,625
Finance receivables - securitised
-
124,23680,269
Borrowings - securitised
-
(115,059)(47,504)
Derivative financial liabilities - securitised
-
(822)(496)
At 30 June 2018 and 31 December 2017 the Banking Group had securitised a pool of receivables comprising commercial and motor vehicle loans sold to
ABCP Trust.
The Banking Group continued to recognise the securitised assets and associated borrowings in the Consolidated Statement of Financial Position. Although
the Banking Group recognised those interests in the ABCP Trust, the loans sold to the Trust were set aside for the benefit of investors in the ABCP Trust
and other depositors and lenders to the Banking Group had no recourse to those assets.
On 29 August 2018 the assets of the ABCP Trust were purchased by Heartland Bank Limited and the ABCP Trust dissolved.
SW Trust and ASF Trust form part of Australian Seniors Finance reverse mortgage business and were both set up by ASF, as asset holding entities. The
Trustee for both Trusts is ASF Custodians Pty Limited and the Trust Manager is ASF. The reverse mortgage loans held by the Trusts were set aside for the
benefit of the funder and bank depositors had no recourse to these assets. On 31 October 2018 the assets of SW Trust and ASF Trust were sold to
Heartland Group Holdings Limited.
The Banking Group controls the operations of Heartland PIE Fund which is a portfolio investment entity that invests in the Bank's deposits. Investments of
Heartland PIE Fund are represented as follows:
39

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

17Structured entities (continued)
(d)Heartland Auto Receivables Warehouse Trust (Auto Warehouse)
UnauditedUnauditedAudited
$000NOTEDec 2018Dec 2017Jun 2018
Cash and cash equivalents - securitised7,821- -
Finance receivables - securitised6153,837- -
Borrowings - securitised7(127,944)- -
Derivative financial liabilities - securitised(33)- -
18Capital adequacy
The capital adequacy tables set out on the following pages summarise the composition of regulatory capital and the capital adequacy ratios for the Banking
Group as at 31 December 2018.
The Banking Group has adopted the Basel II standardised approach per the RBNZ BS2A to calculate its regulatory requirements. Basel II is made up of the
following three Pillars:
Basel III was developed in order to strengthen the regulation, supervision and risk management of the banking sector. The measures aim to improve the
banking sector's ability to absorb shocks arising from financial and economic stress; improve risk management and governance; and strengthen banks'
transparency and disclosures. The requirements that impact capital are as follows:
- Pillar 3 outlines the requirements for adequate and transparent disclosure.
- Pillar 2 is designed to ensure that banks have adequate capital to support all risks (not just those set out under Pillar 1 above) and is enforced
through the requirement for supervisory review.
- Pillar 1 sets out the minimum capital requirements for credit, market and operational and compliance risks.
The Banking Group continues to recognise the securitised assets and associated borrowings in the Consolidated Statement of Financial Position. Although
the Banking Group recognises those interests in Auto Warehouse, the loans sold to the Trust are set aside for the benefit of investors in Auto Warehouse
and other depositors and lenders to the Banking Group have no recourse to those assets.
- The level of capital required to be held by banks increased through the introduction of new minimum capital requirements for Common Equity Tier 1
(CET1) capital, Additional Tier 1 (AT1) capital and Total capital as a percentage of risk-weighted-assets (RWAs).
- Strengthen the calculation of RWAs, particularly in respect of counterparty credit risk.
- A capital conservation buffer held over and above the minimum capital ratio requirements used to absorb losses during periods of financial and
economic stress.
- A counter-cyclical capital buffer be held and to be used at the RBNZ's discretion, to assist in attaining the macro-prudential goal of protecting the
banking sector from periods of extraordinary excess aggregate credit growth.
At 31 December 2018 the Banking Group had securitised a pool of receivables comprising commercial and motor vehicle loans sold to Auto Warehouse.
The Banking Group is subject to regulation by the Reserve Bank of New Zealand (RBNZ). The RBNZ has set minimum regulatory capital requirements for
banks that are consistent with the internationally agreed framework developed by the Basel Committee on Banking Supervision. The resulting Basel II and
III requirements define what is acceptable as capital and provide for methods of measuring the risks incurred by the Banking Group.
The Bank's Conditions of Registration prescribe minimum capital adequacy ratios calculated in accordance with the Capital Adequacy Framework
(Standardised Approach) BS2A.
40

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

18Capital adequacy (continued)
Internal Capital Adequacy Assessment Process (ICAAP)
(a)Capital ratios
Unaudited
$000Dec 2018
Tier 1 capital
CET1 capital
Paid-up ordinary shares issued by the Bank550,899
Retained earnings (net of appropriations)33,541
Accumulated other comprehensive income and other disclosed reserves4,659
Less deductions from CET1 capital
Intangible assets(58,051)
Deferred tax assets(11,192)
Hedging reserve299
Defined benefit superannuation fund asset(813)
Total CET1 capital519,342
AT1 capital
Nil-
Total Tier 1 capital519,342
Tier 2 capital
Nil-
Total Tier 2 capital-
Total capital519,342
(b)Capital structure
Ordinary shares
The Board has overall responsibility for ensuring the Banking Group has adequate capital in relation to its risk profile and establishes minimum internal
capital levels and limits above the regulatory minimum. The Banking Group has established a Capital Management Policy (CMP) to determine minimum
capital levels for Tier 1 and total capital under Basel III and in accordance with its Conditions of Registration. The documented process ensures that the
Banking Group has sufficient available capital to meet minimum capital requirements, even in stressed events. It describes the risk profile of the Banking
Group and the risk appetite and tolerances under which it operates, and assesses the level of capital held against the material risks of the Banking Group
(both Pillar 1 and Pillar 2).
The following details summarise each instrument included within Total capital. None of these instruments are subject to phase-out from eligibility as capital
under the RBNZ's Basel III transitional arrangements.
In accordance with BS2A, ordinary share capital is classified as CET1 capital. The ordinary shares have no par value. Each ordinary share of the Bank
carries the right to vote on a poll at meetings of shareholders, the right to an equal share in dividends authorised by the Board and the right to an equal
share in the distribution of the surplus assets of the Bank in the event of liquidation.
The ICAAP identifies the additional capital required to be held against other material risks, being concentration risk, strategic / business risk, reputational
risk, regulatory risk and model risk. See Note 18(l) for further details.
Compliance with minimum capital levels is monitored by the Asset and Liability Committee (ALCO) and reported to the Board monthly. The ICAAP and
CMP is reviewed annually by the Board.
The Banking Group has an ICAAP which complies with the requirements set out in the "Guidelines on a Bank's Internal Capital Adequacy Assessment
Process (ICAAP)" BS12 and is in accordance with its Conditions of Registration.
41

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

18Capital adequacy (continued)
Retained earnings
Reserves classified as CET1 capital
Employee benefits reserve
Debt instrument fair value reserve
Defined benefit reserve
Hedging reserve
Retained earnings is the accumulated profit or loss that has been retained in the Banking Group. Retained earnings is classified as CET1 capital.
Thedebtinstrumentfairvaluereservecomprisesthechangesinthefairvalueofdebtinstrumentsecurities,net
oftax.Thesechangesarerecognisedinprofitorlossasotherincomewhenthedebtinstrumentiseither
derecognised or impaired.
Thedefinedbenefitplanreserverepresentstheexcessofthefairvalueoftheassetsofthedefinedbenefit
superannuation plan over the net present value of the defined benefit obligations.
The hedging reserve comprises the fair value gains and losses associated with the effective portion of
designated cash flow hedging instruments.
Theemployeebenefitsreservecomprisesemployeeshareoptionswhichhavebeenrecognisedasanexpense
but not yet been exercised and converted into ordinary shares.
42

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

18Capital adequacy (continued)
(c)Credit risk
(i)On-balance-sheet exposures
$000%$000$000
Unaudited - Dec 2018
Cash60%- -
Multilateral development banks98,7360%- -
Multilateral development banks105,21220%21,0421,683
Banks - Tier 1109,33020%21,8661,749
Banks - Tier 28,19050%4,095328
Banks - Tier 319,448100%19,4481,556
Public sector entity (AA- and above)24,27820%4,856388
Public sector entity (A- and above)- 50%- -
Corporates (AA- and above)- 20%- -
Corporates (A- and above)6,29950%3,150252
Corporates (BBB- and above)13,539100%13,5391,083
Welcome Home Loans - loan to value ratio (LVR) <= 90%
1
3,39435%1,18895
Welcome Home Loans - LVR 90% >= 100%
1
19850%998
Reverse Residential mortgages <= 60% LVR518,44250%259,22120,738
Reverse Residential mortgages 60 <= 80% LVR12,51980%10,015801
Reverse Residential mortgages > 80% LVR2,091100%2,091167
Non Property Investment Mortgage Loan <=80% LVR18,50535%6,477518
Non Property Investment Mortgage Loan 80 <= 90% LVR2,75350%1,377110
Non Property Investment Mortgage Loan 90 <= 100% LVR44875%33627
Non Property Investment Mortgage Loan > 100% LVR1,108100%1,10889
Property Investment Mortgage Loan <= 80% LVR9,91540%3,966317
Property Investment Mortgage Loan 80 <= 90% LVR1,00470%70356
Property Investment Mortgage Loan 90 <= 100% LVR- 90%- -
Property Investment Mortgage Loan < 100% LVR- 100%- -
Past due residential mortgages355100%35528
Other past due assets - provision >= 20%22,462100%22,4621,797
Other past due assets - provision < 20%30,834150%46,2523,700
All other equity holdings9,694400%38,7763,102
Other assets2,929,202100%2,929,202234,336
Not risk weighted assets70,0560%- -
4,018,0183,411,624272,928
1
Total on balance sheet exposures
Average
Risk
weight
Total
exposure
after credit
risk
mitigation
Minimum
Pillar 1
capital
requirement
The LVR classification above is calculated in line with the Banking Group's Pillar 1 Capital requirement which includes capital relief for Welcome Home
loans that are guaranteed by the Crown.
Risk
weighted
exposure
43

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

18Capital adequacy (continued)
(ii)Off-balance sheet exposures
$000%$000%$000$000
Unaudited - Dec 2018
Off balance sheet exposures
Direct credit substitute4,236100%4,236100%4,236339
Performance-related contingency2,18150%1,091100%1,09187
88,16150%44,081100%44,0813,526
6,11950%3,06050%1,530122
3,05120%610100%61049
Market related contracts:
1
Interest rate contracts496,702n/a- 20%- -
Interest rate contracts460,8660.5%2,30420%46137
Total off balance sheet exposures1,061,31655,38252,0094,160
1
(d)Additional mortgage information - LVR range
$000
Unaudited - Dec 2018
Does not exceed 80%559,38110,044569,425
Exceeds 80% but not 90%9,242- 9,242
Exceeds 90%2,109- 2,109
570,73210,044580,776
2
(e)Reconciliation of mortgage related amounts
Unaudited
$000Dec 2018
Loans and advances - loans with residential mortgages570,732
On balance sheet residential mortgage exposures subject to the standardised approach570,732
Off balance sheet mortgage exposures subject to the standardised approach10,044
Total residential exposures subject to the standardised approach580,776
Total
exposure
Other commitments where original maturity is less than or equal to
one year
Other commitments where original maturity is more than one year
Off balance
sheet
exposures
2
On balance
sheet
exposures
Credit
equivalent
amount
Other commitments where original maturity is more than one year
Total exposures
Credit
conversion
factor
Total
exposures
At 31 December 2017 $1.12 million relating to Welcome Home Loans, whose credit risk is mitigated by the Crown is included in "Exceeds 90% residential
mortgages". Other loans in the exceeds 90% LVR range are primarily business and rural lending where residential mortgage security is only a part of the
total security. For capital adequacy calculations only the value of first mortgages over residential property is included in the LVR calculation, in accordance
with BS2A. All new residential mortgage loans are in respect of non property investments lending and have a loan-to-valuation ratio of less than or equal to
80%.
The credit equivalent amount for market related contracts was calculated using the current exposure method.
Off balance sheet exposures represent unutilised limits.
Average risk
weight
Risk
weighted
exposure
Minimum
Pillar 1
capital
requirement
44

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

18Capital adequacy (continued)
(f)Credit risk mitigation
(g)Operational risk
$000
Unaudited - Dec 2018
Operational risk235,03618,803
(h)Market risk
$000
Unaudited - Dec 2018
Market risk end-of-period capital chargeInterest rate risk only130,56910,446
Market risk peak end-of-day capital chargeInterest rate risk only149,46911,958
Market risk end-of-period capital chargeForeign currency risk only89,5487,164
Market risk peak end-of-day capital chargeForeign currency risk only183,25214,660
(i)Total capital requirements
$000
Unaudited - Dec 2018
Total credit risk
On balance sheet4,018,0183,411,624272,928
Off balance sheet1,061,31652,0094,160
Operational riskn/a235,03618,803
Market riskn/a220,11717,610
Totaln/a3,918,786313,501
(j)Capital ratios
UnauditedUnaudited
Dec 2018Dec 2017
Capital ratios compared to minimum ratio requirements
Common Equity Tier 1 capital expressed as a percentage of total risk weighted exposures13.25%14.31%
Minimum Common Equity Tier 1 capital as per Conditions of Registration4.50%4.50%
Tier 1 capital expressed as a percentage of total risk weighted exposures13.25%14.31%
Minimum Tier 1 capital as per Conditions of Registration6.00%6.00%
Total capital expressed as a percentage of total risk weighted exposures13.25%14.76%
Minimum Total capital as per Conditions of Registration8.00%8.00%
Buffer ratio5.25%
6.76%
Buffer ratio requirement2.50%2.50%
Total exposure after
credit risk mitigation
Risk weighted exposure
or implied risk weighted
exposure
Total capital requirement
Implied risk weighted
exposure
Total operational risk
capital requirement
Implied risk weighted
exposure
Aggregate capital charge
As at 31 December 2018 the Banking Group has $3.59 million of Welcome Home Loans, whose credit risk is mitigated by the Crown. Other than this the
Banking Group does not have any exposures covered by eligible collateral, guarantees and credit derivatives.
Peak end of day aggregate capital charge at the end of the period is derived by following the risk methodology for measuring capital requirements within
Part 10 of the standardised approach. Peak end of day aggregate capital charge is derived by determining the maximum end of month capital charge over
the reporting period. Based on the portfolio of the Banking Group's risk exposures, it is considered by management that the difference between end of
month aggregate capital charge and end of day aggregate capital charge is insignificant.
45

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 December 2018

18Capital adequacy (continued)
(k)Solo capital adequacy
UnauditedUnaudited
Dec 2018Dec 2017
Common Equity Tier 1 capital expressed as a percentage of total risk weighted exposures13.74%15.70%
Tier 1 capital expressed as a percentage of total risk weighted exposures13.74%15.70%
Total capital expressed as a percentage of total risk weighted exposures13.74%16.19%
(l)Capital for other material risks
19Insurance business, securitisation, funds management and other fiduciary activities
Insurance business
The Banking Group conducts insurance business through its subsidiary MARAC Insurance Limited (MIL).
Marketing and distribution of insurance products
Securitisation, funds management and other fiduciary activities
20Contingent liabilities and commitments
UnauditedUnauditedAudited
$000Dec 2018Dec 2017Jun 2018
Letters of credit, guarantee commitments and performance bonds6,4176,8906,847
Total contingent liabilities6,4176,8906,847
Undrawn facilities available to customers78,535164,153180,940
Conditional commitments to fund at future dates18,79777,41094,239
Total commitments97,332241,563275,179
21Events after reporting date
The Banking Group markets and distributes term life insurance and general insurance covering risks such as redundancy, bankruptcy or suspension of
employment. The insurance products are either underwritten by MIL, a subsidiary of the Bank, or sold by MIL on behalf of other parties who underwrite
those products themselves. There have been no material changes in the Banking Group's marketing and distribution of insurance products since the
reporting date of the previous disclosure statement.
In addition to the material risks included in the calculation of the capital ratios, the Banking Group has identified other material risks to be included in the
capital allocation (being concentration risk, strategic/ business risk, reputational risk, regulatory and model risk). As at 31 December 2018, the Banking
Group has made an internal capital allocation of $48.2million (December 2017: $104.89 million) to cover these risks.
The Banking Group's aggregate amount of insurance business comprises the total consolidated assets of MIL of $13.3 million, which is 0.34% of the total
consolidated assets of the Banking Group.
The Banking Group's objective is to minimise the insurance risk to within acceptable levels through the policies and procedures implemented by
management. Should adverse conditions arise, these policies and procedures are expected to mitigate the impact of the conditions on the Banking Group.
Changes to the Bank's involvement in securitisation activities are set out in note 17. There have been no material changes to the Bank's involvement in
funds management and other fiduciary activities, in either case since the reporting date of the previous disclosure statement.
There have been no material events after the reporting date that would affect the interpretation of the interim financial statements or the performance of the
Banking Group.
For the purposes of calculating capital adequacy on a solo basis, subsidiaries which are both wholly owned and wholly funded by the Bank are to be
consolidated with the Bank. Therefore, capital adequacy on a solo basis is calculated based on the Bank and its subsidiaries excluding Auto Receivables
Warehouse Trust.
46

48

Basis for conclusion
A review of the consolidated half year disclosure statement in accordance with NZ SRE 2410 Review of
Financial Statements Performed by the Independent Auditor of the Entity (“NZ SRE 2410”) is a limited
assurance engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of the bank, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the
audit of the annual financial statements.
Our firm has also provided other services to the bank in relation to AGM scrutineering. Subject to certain
restrictions, partners and employees of our firm may also deal with the banking group on normal terms within
the ordinary course of trading activities of the business of the banking group. These matters have not impaired
our independence as reviewer of the bank. The firm has no other relationship with, or interest in, the banking
group.
Use of this independent review report
This independent review report is made solely to the shareholder as a body. Our review work has been
undertaken so that we might state to the shareholder those matters we are required to state to them in the
independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the shareholder as a body for our review work, this independent
review report, or any of the opinions we have formed.
Responsibilities of the Directors for the consolidated half year
disclosure statement
The Directors, on behalf of the group, are responsible for:
— the preparation and fair presentation of the consolidated half year disclosure statement in accordance with
NZ IAS 34 and Schedules 3, 5, 7, 13, 16 and 18 of the Order;
— the preparation and fair presentation of the supplementary information in regards to capital adequacy and
regulatory liquidity requirements in accordance with the Registered Banks conditions of registration, Capital
Adequacy Framework (Standardised Approach) (BS2A) and Schedule 9 of the Order;
— implementing necessary internal control to enable the preparation of a consolidated half year disclosure
statement that is fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the review of the consolidated half year
disclosure statement
Our responsibility is to express a conclusion on the interim consolidated half year disclosure statement based on
our review. We conducted our review in accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude
whether anything has come to our attention that causes us to believe that the:

49

— the interim consolidated disclosure statement do not present fairly in all material respects the banking
group’s financial position as at 31 December 2018 and its financial performance and cash flows for the 6
month period ended on that date;
— the interim consolidated disclosure statement do not, in all material respects, comply with NZ IAS 34;
— the supplementary information does not, fairly state, in all material respects, the matters to which it relates
in accordance with Schedules 5, 7, 13, 16 and 18 of the Order; and
— the supplementary information relating to capital adequacy and regulatory liquidity requirements is not,
prepared in all material respects, in accordance with the Registered Banks Conditions of Registration,
Capital Adequacy Framework (Standardised Approach) (BS2A) and disclosed in accordance with Schedule 9
of the Order.
The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with International Standards on Auditing (New Zealand). Accordingly we do not express an audit
opinion on the interim consolidated disclosure statement.

KPMG
Auckland
19 February 2019

2019 Interim Results webcast and conference call HGH 2019 Interim Dividend – ASX Appendix 3A

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