Heartland publishes Annual Report and Notice of Meeting

NZX/ASX Release

Heartland publishes Annual Report and Notice of Meeting

30 September 2019

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) has today published its Annual
Report for the year ended 30 June 2019 and the Notice of Meeting for its 2019 Annual Meeting.

Annual Report
Heartland is pleased to release its Annual Report for the year ended 30 June 2019. Heartland’s
Annual Report is made up of the Annual Review and Financial Report. These are being sent to
shareholders today, copies of which are attached.

Notice of Meeting
Heartland’s Annual Meeting will be held on Tuesday 12 November 2019 at Chateau on the Park
(DoubleTree by Hilton), Riccarton, Christchurch commencing at 10am.

The Notice of Meeting and Voting/Proxy Form are being sent to shareholders today, copies of which
are attached.


-ENDS-

For further information, please contact:

Michael Drumm
General Counsel
Heartland Group Holdings Limited
09 927 9136

---

Mahi
tika
Mahi
tahi
Mahi
toa
Mahi
tipu
ANNUAL REVIEW 2019

Our mātāpono
(values) underpin who
we are and everything
we do. They were
created by our people
to be shared with our
customers, partners,
communities and
shareholders.
Mahi tahi
BE ONE TEAM
He waka eke noa. We’re all
in this together.
Mahi tipu
BE ALWAYS EVOLVING
Whāia te iti kahurangi.
Strive for excellence.
Mahi tika
DO THE RIGHT THING
Kia tika, kia pono. Do what’s
right and true.
Mahi toa
HAVE BIG AMBITION
Tū whitia te hopo. Feel the
fear and do it anyway.

P. 2
STRIVE FOR EXCELLENCE
P. 4
FEEL THE FEAR AND
DO IT ANYWAY
P. 6
2019 HIGHLIGHTS
P. 8
OUR BUSINESS
P. 10
FROM THE CHAIR
P. 13
FROM THE CEO
P. 19
CORPORATE RESTRUCTURE
P. 20
EMBRACING A CULTURE
OF INCLUSION
P. 22
BEING DIGITAL
P. 24
HEARTLAND GROUP BOARD
P. 26
HEARTLAND BANK BOARD
P. 28
STRATEGIC
MANAGEMENT GROUP
P. 30
OUR SUSTAINABLE
BUSINESS
P. 40
FINANCIAL COMMENTARY
P. 42
SUMMARY FINANCIALS
P. 4 4
DIRECTORY
See how we’re embracing a
culture of inclusion.
P. 2 0
Find out about our new structure.
P.19
P. 1
Heartland Annual Review 2019
CONTENTS

Our whakapapa goes
back nearly 150 years
and we’re always
evolving – mahi tipu.
We’re constantly
looking for new ways
to grow, deliver more
for our customers and
adapt to their needs.
Find out how we keep our
customers at the heart of
everything we do.
P. 32
Heartland Annual Review 2019
P. 2
WHĀIA TE ITI KAHURANGI

We have big ambition
– mahi toa. This last
year we said kia ora
to a new structure,
new products and
new markets. We
enhanced our digital
platforms, renewed
focus on the values
which underpin our
culture and took our
customer experiences
to new heights.
Kia ora
Find out more about our digital
developments.
P. 22
Heartland Annual Review 2019
P. 3
STRIVE FOR EXCELLENCE

Read what our Chair and CEO
have to say about the year that’s
been and what’s ahead.
P.10
Heartland Annual Review 2019
P. 4
TŪ WHITIA TE HOPO

For the year ahead,
our sights are set
on welcoming more
customers through
even better customer
experiences, benefits
and outcomes. We’re
confident this focus
will deliver greater
opportunities for our
people and more value
for our shareholders.
See our results for the 2019
financial year.
P. 42
Find out how we’re building a
sustainable business.
P. 3 0
Hello
Heartland Annual Review 2019
P. 5
FEEL THE FEAR AND DO IT ANYWAY

2019
Results
Gross finance receivables ($million)
DELIVERING SHAREHOLDER VALUE
Total shareholder return of 132% for the five
years ending 30 June 2019
1
.
132
%
0
1000
2000
3000
4000
5000
Jun-19Jun-18Jun-17Jun-16Jun-15
487554
36
339
767
722
424
55
367
841
804
436
3,125
2,877
679
96
408
934
903
519
3,576
661
155
457
1,061
961
697
4,017
656
205
561
1,118
1,089
758
4,407
AustraliaMotor
BusinessNZ Reverse Mortgages
Harmoney and other
personal lending
Rural
Other
STRONG GROWTH
ACROSS THE GROUP
Growth in gross finance receivables
of 10.5% to $4.4 billion.
10.5
%
1 Total shareholder return (TSR) means share price appreciation
plus dividends received. TSR has been calculated including the
benefit of imputation credits.
2 KPMG FIPS Report March 2019.
Heartland Annual Review 2019
P. 6
2019 HIGHLIGHTS

Net profit after tax
0
10
20
30
40
50
60
70
80
FY19FY18FY17FY16FY15
23.5
24.7
48.2
25.6
28.6
54.2
29.1
31.7
60.8
31.1
36.4
67.5
33.1
40.5
73.6
H1H2
PROFITABILITY CONTINUES TO INCREASE
Net profit after tax of $73.6 million,
an increase of 9.0%.
9.0
%
CONSISTENTLY HIGH NET INTEREST MARGIN
Net interest margin of 4.33% - higher than our
banking peers
2
.
4.33
%
11.1
%

RETURN ON
EQUITY
13.0
CENTS PER SHARE
Earnings per share
10.0
CENTS PER SHARE
Total dividend for the year
BBB
HEARTLAND BANK
CREDIT RATING
(FITCH RATING)
Outlook Stable
Investment Grade
6.5
CENTS PER SHARE
Final dividend declared
Heartland Annual Review 2019
P. 7
2019 HIGHLIGHTS

19.4
%
1,318.8
M
13.3
%
1,088.6
M
Our business
4.4
B
GROSS FINANCE RECEIVABLES
Reverse
Mortgages
AUSTRALIA
–Gross finance receivables $757.6m, up 24.0%.
–Distributed through brokers and our sales team
in Australia.
NEW ZEALAND
–Gross finance receivables $561.2m, up 11.4%.
–Primarily distributed through our sales team
in New Zealand.
Motor Vehicle
Finance
–Gross finance receivables $1,088.6m, up 13.3%.
–Distributed direct to customers and through our
motor vehicle dealer network to enable customers
to access finance at the point of sale.
Heartland Annual Review 2019
P. 8
OUR BUSINESS

24.9
%
224.6
M
0.6
%
656.4
M
3.5
%
1,118 . 2
M
4.4
B
GROSS FINANCE RECEIVABLES
Business Finance
OPEN FOR BUSINESS
–Gross finance receivables $133.3m, up 48.2%.
–Finance for small-to-medium sized businesses
available online through Heartland’s digital
Open for Business platform.
BUSINESS INTERMEDIATED
–Gross finance receivables $425.4m, up 31.4%.
–Working capital and plant and equipment
finance distributed through our partners
and intermediaries.
BUSINESS RELATIONSHIP
–Gross finance receivables $559.4m, down 16.1%.
–Working capital and plant and equipment
finance distributed through our relationship
managers.
Rural Finance
LIVESTOCK FINANCE
–Gross finance receivables $121.6m, up 18.8%.
–Livestock finance for farmers available online
through Heartland’s Open for Livestock platform.
RURAL RELATIONSHIP
–Gross finance receivables $534.8m, down 4.2%.
–Rural loans distributed through Heartland’s
relationship managers.
Harmoney and
other consumer
lending
–Gross finance receivables $224.6m, up 24.9%.
–Distributed through intermediary partners and
brokers, and enabled by Heartland’s partnership
with Harmoney.
Heartland Annual Review 2019
P. 9
OUR BUSINESS

Mahi tika.
Do the
right thing.
On behalf of the Board, it is
my pleasure to report another
successful year for Heartland.
The Group delivered a net
profit after tax of $73.6 million,
representing an increase of 9.0%
in profitability. At the centre of
Heartland’s continued growth
is an intensified focus on our
customers and support for the
communities we serve.
9
%
INCREASE IN PROFITABILITY
FOR HEARTLAND.
Heartland Annual Review 2019
P. 10
FROM THE CHAIR

1 The “Bank Conduct and Culture – Findings from an FMA and RBNZ
review of conduct and culture in New Zealand retail banks” report,
dated November 2018 and published by the FMA and RBNZ, which
summarised the results of their joint review on conduct and culture
found that “conduct and culture issues do not appear to be widespread
in banks in New Zealand”.
2 The Heartland Trust is a registered charitable trust which is independent
from, but closely supported by, Heartland Bank and Heartland Group.
KEEPING CUSTOMERS AT OUR HEART
Doing the right thing for our customers is essential
to building a sustainable, successful business.
We build a strong foundation for this when we
keep our customers’ needs at heart and focus on
their long-term outcomes in everything we do.
Doing the right thing is something we pride
ourselves on, and is reflected in one of Heartland’s
mātāpono (values) – mahi tika.
Heartland is proud to offer products that can
contribute to positive social outcomes. Examples
of this include through our Heartland Reverse
Mortgage, both in New Zealand and Australia,
which provides people with the ability to enjoy
a more comfortable retirement in their own home
– a place that so often connects people with their
friends, family and community.
Heartland’s small business loans are another great
example – we recognise the crucial role these
businesses play in our economy. We support the
growth of these businesses, helping the owners
to reach their goals with secured or unsecured
loans – meaning they don’t have to mortgage
the family home to finance their business.
The financial services sector has seen considerable
regulatory activity this financial year with the FMA
and RBNZ reporting on their findings following a
review of conduct and culture in New Zealand retail
banks. Overall, the findings from the review concluded
that there does not appear to be widespread conduct
and culture issues in New Zealand banks
1
, but there is
room for improvement.
Heartland is committed to continuous improvement
in all areas identified by the FMA and RBNZ. On
29 March 2019, as required of all banks, Heartland
submitted a workplan to the FMA and RBNZ
addressing improvement in conduct and culture and
is currently working through the plan and focusing
on iterative improvement across the organisation.
$
617.3
k
PAID TOWARDS SPONSORSHIP AND
COMMUNITY ACTIVITIES THIS YEAR
BY THE HEARTLAND TRUST.
SUPPORTING OUR COMMUNITIES
Heartland recognises the responsibility it has to
the communities in which we serve and aims to give
back and provide a positive social impact through
a range of sponsorships from the Heartland Trust
2
.
This year, the Heartland Trust continued its support
of education through the InZone Education
Foundation which aims to enhance the educational
outcomes of Māori and Pasifika youth by providing
them opportunities to access high-performing
state schools through boarding hostels within
school zones.
As part of our support of InZone, Heartland’s
internship programme continued, this time
welcoming 20 students into paid internship
positions over their summer holiday. The internship
programme has been a success so far, leading to
seven interns continuing employment with
Heartland Bank, and we look forward to welcoming
more students in December.
Furthering our support of te reo Māori and
education, the Heartland Trust this year began
sponsorship of Te Matatini festival (New Zealand’s
national kapa haka festival held every two years),
and the Kupe Leadership Scholarship (a scholarship
which aims to develop our country’s future leaders).
Mental wellbeing is another area of high importance
to Heartland, and this year the Heartland Trust
continued to sponsor Lifeline (a confidential phone
line service for New Zealanders going through
difficult times) and Auckland City Mission’s
HomeGround project (a purpose-built facility
which aims to provide much needed support to
those who need it most).
Heartland Annual Review 2019
P. 11
FROM THE CHAIR

3 Total shareholder return (TSR) means share price appreciation plus
dividends received. TSR has been calculated including the benefit of
imputation credits.
This year was the Heartland Trust’s third year as
the platinum sponsor of the Auckland Writer’s
Festival which once again featured a variety of
speakers from a range of backgrounds. We’re
proud to sponsor an event that caters to a diverse
audience, encouraging and inspiring people to fall
in love with the written word.
This year, the Heartland Trust paid $617,309
towards sponsorship and community activities.
BOARD APPOINTMENTS
During the year, we welcomed Kate Morrison to the
Heartland Bank Board as an independent director.
Kate brings outstanding leadership and governance
experience, further diversifying the Board’s skill set.
Kate has 20 years of experience of working in
investment banking and co-runs a Christchurch-
based consulting business, advising SMEs on
succession planning, strategy and governance,
as well as holding directorships with a number
of companies.
CREATING SHAREHOLDER VALUE
The Board resolved to pay a fully imputed final
dividend of 6.5 cents per share on Friday 6
September 2019 to all shareholders on Heartland’s
register at 5.00pm on Friday 23 August 2019.
Together with the interim dividend of 3.5 cents per
share, the total dividend for the year was 10.0 cents
per share, an increase of 1.0 cent per share from the
total dividend for 2018.
Total shareholder return
3
(TSR) was 132% for the
five years ending 30 June 2019, compared with TSR
of 104% for the NZX50. This is an excellent outcome
for our shareholders.
OUTLOOK
The Board is confident in Heartland’s ability to
continue achieving strong growth and profitability,
while maintaining positive outcomes for customers.
Heartland expects its net profit after tax for the
year ending 30 June 2020 to be in the range of
$77 million to $80 million.
Finally, I wish to thank the Heartland team for their
significant efforts this year in helping Heartland
continue to deliver value to its customers,
communities and shareholders.
Geoff Ricketts
Chair
Heartland Annual Review 2019
P. 12
FROM THE CHAIR

Mahi toa.
Have big
ambition.
Heartland achieved another
strong year of growth.
Importantly, we also made
great progress towards non-
financial goals. In particular, our
renewed Heartland mātāpono
(values) reflect the importance
we place on diversity, inclusion,
and supporting the wellbeing
of our people while keeping our
customers’ needs at the forefront
of our business decisions.
FINANCIAL PERFORMANCE
Heartland’s Net Profit after Tax (NPAT) was
$73.6 million (9% increase) and was impacted by
one-off costs of $4.2 million associated with the
corporate restructure and ASX listing. We consider
this to be a good financial result.
A Net Interest Margin (NIM) of 4.33% was
achieved for the year. The NIM was 0.09% lower
than the previous financial year despite relatively
strong growth in lower margin reverse mortgages
and $1.1 million of break costs incurred due to
the early repayment of the Tier 2 Australian dollar
subordinated bond. Excluding the break costs,
NIM was 4.35%.
Return on Equity (ROE) was 11.1%, unchanged
from the previous financial year. However,
ROE in the second half of this financial year
improved to 12.2% from 10.3% in the first half.
Net Tangible Assets (NTA) increased by $9.0 million
to $593.5 million. NTA per share was $1.04,
unchanged from the previous financial year.
Heartland Annual Review 2019
P. 13
FROM THE CEO

Continued efficiencies leveraged through
scalable growth, digital initiatives and cost control
resulted in a cost to income ratio of 41.6%.
Excluding one-off costs related to the corporate
restructure and ASX referred to above, the cost to
income ratio was 39.9% – an improvement from
40.9% the prior year.
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. As a result, impairment expense
for this year was not directly comparable to the
previous year primarily due to the new requirement
to provide for impairment losses on all loans, not
just those past due or impaired. This particularly
impacted Harmoney and Motor which had high
growth and, in the case of Harmoney, higher
expected loss rates than other segments.
GROWTH ACROSS THE GROUP
Our ambitions are big. Heartland’s attention
remains on providing banking and financial products
to people who have traditionally been under-served
by mainstream banks. We do this across our three
areas of strategic focus: New Zealand Banking,
Australian Reverse Mortgages and Digital.
NEW ZEALAND BANKING
Heartland Bank’s focus remains on delivering
best or only products to depositors and borrowers
through continued growth in niche markets.
Strong growth was achieved in New Zealand
Reverse Mortgages, with net receivables growing
by 11.4%. Reported growth increased 22.8%
to $561.2 million due to $54.7 million of Australian
Reverse Mortgages being transferred from
Australia to New Zealand, offset by an adverse
foreign exchange impact of $2.0 million. There are
significant growth opportunities for New Zealand
Reverse Mortgages and increased investment
in marketing is planned for the 2020 financial
year to raise product awareness.
Heartland’s Motor vehicle finance book
continued its strong growth with a 13.3%
increase in net receivables through motor dealer
lending (car dealerships, brokers and partnerships
such as Holden and Jaguar Land Rover).
Business Intermediated lending continues to
deliver growth, with net receivables up 31.4%.
Business Relationship lending continues to be
managed down as part of our strategy to reduce
low margin risk concentration. Accordingly, Business
Relationship receivables reduced by $107.0 million.
Open for Livestock is Heartland’s livestock finance
online channel which helps farmers to purchase and
trade livestock without having to mortgage their
farm. Livestock Finance receivables increased
18.8%. Overall Rural receivables decreased by
0.6% as Heartland continues to manage down larger
Rural Relationship lending to reduce low margin
risk concentration in this area.
Retail deposits increased by $271.9 million (9.4%
growth) to $3.2 billion. Heartland continues to
provide market leading call account and competitive
term deposit offerings, providing customers with
competitive interest rates and unlimited on call
access to their money through the Heartland Direct
Call Account. For the second year in a row, Heartland
was awarded Canstar’s 2019 Bank of the Year –
Savings Award, and for the fourth year in a row,
Heartland’s Direct Call Account was awarded
Canstar’s 5-Star Rating for Outstanding Value
Savings Account.
This year we also entered into a new Retail market
with the launch of YouChoose – a savings account
with an arranged overdraft. YouChoose offers
customers the flexibility to save when they can and
spend when they want to with competitive savings
and overdraft interest rates.
AUSTRALIAN REVERSE MORTGAGES
Australian Reverse Mortgage net receivables
increased by 24.0%, excluding the impact of
changes in foreign currency exchange rates
and reverse mortgage transfers to New Zealand.
Reported growth was $79.6 million (11.7% growth)
to $757.6 million due to the transfer of reverse
mortgages to New Zealand and an adverse foreign
exchange impact of $31.0 million.
Reflecting the work our team does to enable people
to live a more comfortable retirement while staying
in their home, our Australian Reverse Mortgages
business was awarded Best Reverse Mortgage 2019
by Money Magazine for the fourth consecutive year.
DIGITAL
We continue to evolve into a financial technology
group with a bank licence, from a conventional bank.
This distinction ensures a focus on customer
experience which we believe is integral to good
customer outcomes.
Our digital strategy aims to make products more
easily available to customers through online
channels, and to achieve low cost reach to a broad
target market. Uptake of the Heartland Mobile App
continues to rise, increasing by 72% in the six months
from January to June 2019.
Heartland Annual Review 2019
P. 14
FROM THE CEO

Alongside this, Heartland must remain responsive to
all customer needs recognising that even in a digital
world, people to people contact is important.
Accordingly, increased investment is being made
in telephony and customer service capability through
our Ashburton office.
Open for Business (O4B) is Heartland’s digital-led
small business lending product. The product supports
small businesses to grow with secured or unsecured
finance. O4B lending was up 48.2% this financial year.
In July 2019 a new television campaign, accompanied
by other marketing activity, was launched to grow
product awareness and target market reach.
CORPORATE RESTRUCTURE
The corporate restructure was completed in
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. In addition, the Australian group
companies were transferred from Heartland Bank
to Heartland Group.
The corporate restructure provides greater
flexibility for growth and access to funding
options in New Zealand and Australia.
MANAGEMENT CHANGES
During the year, Heartland welcomed Cherise Barrie
to the role of Chief Financial Officer. Cherise is a
Chartered Accountant with significant financial
service and executive experience, and is a passionate
advocate of women in business, being a member of
Global Women.
This year we also reviewed our internal structure
and made changes to our Business Enablement
and Technology teams, establishing these teams
as separate functions to enable greater investment
in these areas to set them up to better support the
business and our customers.
Future investment is also planned in Finance
and Compliance, reflecting the increased
regulatory requirements and heightened
demands in these areas.
HE MANAWA TANGATA – OUR PEOPLE
This year, we refreshed Heartland’s mātāpono
(values).
The mātāpono underpin a culture that strives for
excellence (mahi tipu) and respects the diversity we
each bring to the workplace. Heartland must be a
place where people feel included and value each
other’s differences (mahi tahi). Doing the right thing
for our customers, communities and shareholders
(mahi tika) is paramount in an ever changing
environment, where we continue to evolve to meet
their needs and expectations.
This year we continued to improve the gender
balance across the organisation, including increasing
the number of females on the strategic management
group to 37.5% male and 62.5% female.
Our internship initiative ran for the second year, this
time welcoming 20 Māori and Pasifika students to
work at Heartland. See more information in our
‘Embracing a culture of inclusion’ story on page 20.
In 2018, Heartland also began working towards
achieving the Rainbow Tick, and our Diversity
Committee continued to celebrate the diversity of
our people by holding events recognising Diwali,
Matariki, Chinese New Year and Māori Language and
Samoan Language Weeks, among many other events
and initiatives to help create a safe, welcoming and
inclusive environment.
LOOKING FORWARD
In the coming year, we expect to see continued
asset growth from core lending activities,
particularly in Australian and New Zealand reverse
mortgages and small business lending, combined
with the continuation of a managed reduction in
Business and Rural relationship lending.
We will continue to invest in growth through
increased marketing activity to build awareness
and by increasing processing capacity in areas of
new growth.
A lot has been achieved in the past year. I would
like to take this opportunity to thank our people
for living our Heartland mātāpono. I also wish to
thank our shareholders for their continued support
of Heartland.
Ngā mihi nui,
Jeff Greenslade
Chief Executive Officer
Heartland Annual Review 2019
P. 15
FROM THE CEO

He tau hāwere anō tēnei mō Heartland. Mātua rā,
i pai te ahunga whakamuatanga i te wāhi ki ngā
whāinga utukore. Pēnei i te whakahoutanga o
ngā mātāpono o Heartland, e whai nei ki te
whakanui i te kanorau, i te whakakotahitanga, me
te tautoko i te oranga tonutanga o ō mātou
kaimahi, i a mātou e whakamātāmua ana i ngā
hiahia o te kiritaki mō ngā whakatau ā-pakihi.
HE KITENGA PŪTEA
I te $73.6 miriona ngā Painga More i muri i te Tāke
(PMMT) a Heartland (9% te pikinga), ā, i tukia e ngā
utu tukutahi o te $4.2 miriona. E whai pānga ana
tēnei utu ki ngā panonitanga ā-pakihi me te rārangi
ASX. Ki a mātou nei, he pai te hua i puta.
I tae te nui o te Paenga Huamoni More (PHM) ki te
4.33%, 0.09% noa iho te hekenga nō tērā tau pūtea,
ahakoa te tipunga nui i te mōkete tauaro hauraro me
tētahi pūtea tukuwehe $1.1 miriona, nā te whakahoki
wawe o te pūtea ki te pūtea taurewa Ahitereiria
Taumata 2. Ka kore ana e aro ki ēnei utu, kei te
4.35% te PHM.
I te 11.1% te Whakahokinga Tūtanga (WT), kāhore
he rerekētanga nō tērā tau pūtea. Heoi, i pai ake te
wāhanga tuarua o te tau pūtea, i eke ki te 12.2% mai
i te 10.3% nō te wāhanga tuatahi o te tau. I piki ngā
Rawa Tūturu More (RTM) mā te $9.0 miriona, ki te
$593.5 miriona. Ko te utu o ia hea RTM ko te $1.04,
kāhore he rerekētanga nō tērā tau pūtea.
Nā te toaitanga o ngā mahinga i eke ai i roto i ngā
pūtea aupiki auheke, ā, ko te ōwehenga utu ki te
whiwhinga pūtea ko te 41.6%. Hāunga ngā utu
tukutahi e whai pānga ana ki ngā panonitanga
ā-pakihi me ngā kōrero ASX o runga ake, ko te
ōwehenga utu ki te whiwhinga pūtea ko te 39.9% -
he pai ake i te 40.9% nō tērā tau.
I te 1 o Hōngongoi 2018, i whakaturehia te paerewa
kaute hou e whai pānga ana ki ngā whakahauātanga,
IFRS9. I te paerewa nei, me tuku ngā
whakahauātanga me ngā whakakitenga o ngā
whakangarotanga hei te rangi ka mana te pūtea
taurewa. Me te aha, kāore i taea te whakataurite
hāngai i ngā utu whakahauātanga o tēnei tau ki ngā
utu o tērā tau, nā tēnei paerewa hou, ki te whakaora
i ngā ngarohanga whakahauā i ngā pūtea taurewa
katoa, kaua noa iho i ngā pūtea taurewa tārea,
whakahauā rānei. Ko Harmoney me Motor i tino whai
pānga ki tēnei. I tino tipu a Motor, ā, nā Harmoney
ngā whakakitenga whakangarohanga tiketike tēnā i
ētahi atu wāhi.
TE WHAKATIPURANGA WHĀNUI
Kei ngā rangi ō mātou whakaeaea. Ka aro tonu a
Heartland ki te tuku i ngā āhuatanga pūtea katoa ki
ngā tangata, i ōna wā, kua noho-mūhore ki ngā pēke
auraki. Koinā tā mātou i ngā wāhanga aronui e toru:
Te mahi pēke i Aotearoa, Ngā mōkete tauaro o
Ahitereiria, Te Pae Mamati.
TE MAHI PĒKE I AOTEAROA
Ko tā Heartland he aro ki te kounga o te tuku i ngā
hua katoa ki ngā kaiwhakakuhu pūtea me ngā kaitono
pūtea taurewa mā te whakatipu i ngā mākete
motuhake.
He nui te tipu i te wāhanga Mōkete Tauaro o
Aotearoa. I tipu ngā raumata nama mai mā te 11.4%.
Ko te tipunga ā-ripoata ka tipu mā te 22.8%, arā, ki te
$561.2 miriona, nā te $54.7 miriona o ngā Mōkete
Tauaro Ahitereiria i whakawhiti mai i Ahitereiria ki
Aotearoa, i whakatauritehia ai e te pāpātanga
whakawhiti nui, arā, e te $2.0 miriona. He nui ngā
āheinga whakatipu hirahira mō ngā Mōkete Tauaro
Aotearoa, ā, kei te whakamaheretia te whakatipunga
whakangao mō te tau pūtea 2020 ki te
whakatairanga i ngā mahinga pēke.
I tipu tonu te pukapuka Ahumoni Waka a Heartland
mā te pikinga 13.3% o te raumata nama mai mā ngā
ahumoni i ngā wāhi hoko waka (wāhi hoko waka,
kaitakawaenga hoko waka, me ngā haumitanga pērā i
a Holden, Jaguar Land Rover).
Kei te tipu tonu te wāhanga Tuku Pūtea Pakihi
Paewaenga, kua piki ngā raumata nama mai ki te
31.4%. Kei te whakaheketia te tuku pūtea Hononga
Pakihi, inā rā, ko tā mātou rautaki ko te whakaheke i
te tūraru paeraro. Nā konā i whakaheketia te nama
mai o te Hononga Pakihi mā te $107.0 miriona.
Mō te wāhi ki te Kararehe Pāmu, ko te hanga
ahumoni a Heartland e āwhina ana i ngā kaipāmu ki
te hoko me te whakawhiti kararehe pāmu, kāore nei
he take ki te mōkete i tā rātou pāmu. I piki ngā nama
mai o te Ahumoni Kararehe Pāmu mā te 18.8%. I
heke ngā nama mai o te wāhanga Taiwhenua whānui
Nā te kaiwhakahaere
matua
Heartland Annual Review 2019
P. 16
NĀ TE KAIWHAKAHAERE MATUA

mā te 0.6%, i a Heartland e whakaheke tonu ana i
ngā Hononga Taiwhenua nui, e tuku pūtea ana ki te
whakaheke i ngā tūraru paeraro o tēnei wāhanga.
I piki ngā moni kuhu kaihoko mā te $271.9 miriona
(9.4% te tipu) ki te $3.2 piriona. Ka tukuna tonu e
Heartland tētahi o ngā tino kōwhiringa utu moni
kuhu, e tuku nei ki ngā kirihoko ngā utu pūtea āpiti
pai, e wātea ana ki te tango pūtea mā te Heartland
Direct Call Account. Koinei te tau tuarua karapīpiti
kua riro i a Heartland te tohu Pūtea Tiaki a Canstar
Bank of the Year. Mō te tau tuawhā karapīpiti kua riro
i a Heartland te taumata tuarima mō te Outstanding
Value Savings Account.
I tēnei tau, i kuhu mātou ki tētahi mākete hokohoko
hou me te whakaputanga o YouChoose – he pēke
pūtea tiaki me te pūtea tarepa kua whakaritea. Ka
whakangāwari a YouChoose i te ara ki te tiaki pūtea
mō ngā kirihoko, i a rātou e hiahia tonu ana ki te
hokohoko, inā rā, he pai ngā utu āpiti i te wāhi ki ngā
pūtea tiaki me te pūtea tarepa.
MŌKETE TAUARO AHITEREIRIA
I piki ngā raumata nama mai i te wāhi ki te Mōkete
Tauaro Ahitereiria mā te 24.0%, hāunga te whai
pānga o ngā panonitanga i te utu whakawhiti pūtea
o tāwāhi me ngā whakawhitinga mōkete tauaro ki
Aotearoa. I ripoatangia te tipunga $79.6 miriona
(11.7% te tipunga) ki te $757.6 miriona nā te
whakawhitinga o ngā mōkete tauaro ki Aotearoa, ā,
ko te $31.0 miriona te nui o te whai pānga o te utu
whakawhiti pūtea o tāwāhi.
Hei āpiti ki ngā mahi ka tutuki i tō mātou kāhui ki te
whakawātea i te iwi kia hāneanea te tāoki i te noho ki
ō rātou kāinga, tā mātou pakihi Mōkete Tauaro
Ahitereiria te tohu Best Reverse Mortgage 2019 nā
te maheni Money Magazine mō te tau tuawhā
karapīpiti.
PAE MAMATI
Kei te tipu tonu mātou hei rōpū Hangarau Pūtea me
tētahi raihana pēke, tēnā i te pēke noa. Nā tēnei
āhuatanga i aro ai mātou ki te hononga i waenganui i
te wheako kirihoko me ngā putanga kirihoko pai.
Hei tā tā mātou rautaki pae mamati, ka
whakangāwari ake te ara mā ngā kirihoko ki te
wherawhera i ngā mahinga pēke mā te pae ipurangi,
waihoki kia whānui te toro ki te makiu tāngata me te
utu o te paeraro. Kei te whanake tonu te taupānga
Heartland Mobile, i tipu mā te 72% i ngā marama e
ono mai i te Kohitātea ki te Pipiri 2019.
Tuia ki tēnei, me whakawhiti kōrero tonu a Heartland
ki ngā kirihoko, ā, e mōhio ana, ahakoa he ao pae
mamati, me whakawhiti kupu tonu te tangata. Nā
konā kua tino aro ki te whakapiki i ngā pukenga
ā-waea me te manaaki kirihoko i Hakatere.
Ko Open for Business (O4B) te mahinga pūtea o
runga mā ngā pakihi iti. Hei tā tēnei mahinga pēke he
tautoko i ngā pakihi iti ki te tipu me te pūtea
haumaru, pūtea haumaru-kore rānei. I piki te tukunga
pūtea a O4B mā te 48.2% i tēnei tau pūtea. I te
Hōngongoi 2019 i puta tētahi whakatairanga pouaka
whakaata hou, me ētahi atu mahi whakatairanga, kia
mōhio ai te makiu mō ngā mahinga pēke, kia whānui
ake ai te toro ki te makiu.
PANONITANGA Ā-PAKIHI
I tutuki ngā panonitanga ā-pakihi i te
Whiringa-ā-nuku 2018, inā rā te whakawhitinga o
ngā hea katoa i te Heartland Bank ki ngā hea i te
Heartland Group, ā, ka noho a Heartland Bank hei
whakahaeretanga turuki mā Heartland. Tuia ki tērā, i
whakawhiti ngā kamupene i te peka Ahitereira mai i
te Heartland Bank ki te Heartland Group.
Mā te panonitanga ā-pakihi ka wātea ake ngā
kōwhiringa whai pūtea i Aotearoa me Ahitereiria.
PANONITANGA Ā-WHAKAHAERE
I roto i te tau, i pōhiritia a Cherise Barrie e Heartland
ki te tūranga Tumu Whakahaere Pūtea. He Kaikaute
Paerunga a Cherise, ā, he nui ngā wheako whakawhiti
pūtea i te ao paerunga, ā, e ngākaunui ana ki te
wahine i te pakihi, inā rā, he mema ia nō Global
Women.
I tēnei tau, i arotakengia ngā paemahi o roto i te
whare, ā, i panonihia ngā tari Business Enablement
me te Technology. I whakawehea ēnei ohu mahi kia
nui ake ai ngā hua i ēnei wāhanga, kia pai ake ai tā
rātou taunaki i te kamupene me ā mātou kirihoko
anō hoki.
Ā raurangi, ka arohia hoki te tari Finance and
Compliance, inā rā, kua piki ngā here me ngā tono i
ēnei wāhanga.
Heartland Annual Review 2019
P. 17
NĀ TE KAIWHAKAHAERE MATUA

HE MANAWA TANGATA – Ā MĀTOU TĀNGATA
I tēnei tau, i whakahoutia ngā mātāpono o
Heartland. Koinei te tūāpapa o te ahurea mahi e
whai ana i te karamatamata (mahi tipu), ā, ka
whakautengia te pukenga rau o tēnā, o tēnā, e āpiti
nei ki te wāhi mahi. Me wāhi whakauruuru, me wāhi
whakaute tangata rau a Heartland (mahi tahi). E
mātāmua ana te tika o ngā mahi (mahi tika) ki ā
mātou kiritaki, hapori, kaipupuri hea anō hoki, i
tēnei ao tūnekeneke, i a mātou e whanake tonu ana
hoki kia whakaeatia ā rātou hiahia.
I tēnei tau, i whanake hoki mātou i te wāhi ki te
kanorau ira tangata, tae noa ki ngā wāhine i te pae
whakahaere. I tēnei wā, 37.5% he tāne, 62.5% he
wahine.
Koinei te tau tuarua o tā mātou rautaki kaimahi
tauira, ā, i pōhiritia te 20 tauira Māori, Moana Nui a
Kiwa ki Heartland – he tārua i te nama kaimahi
tauira nō tērā tau. Tirohia ngā mokamoka katoa o
tēnei kaupapa i te wāhanga ‘Embracing a culture of
inclusion’ whārangi 20.
I te 2018, i tīmata a Heartland ki te whai i te
Rainbow Tick, waihoki, i whakanui tonutia te Komiti
Kanorau te kanorau o ō mātou tāngata, e whakanui
ana i a Matariki, i te Diwali, i te tau hou Haina, ngā
wiki o te reo Māori me te Hāmoa, me te huhua noa
atu, kia haumaru, kia whakamanuhiri, kia
whakauruuru te taiao mahi.
TE AHUNGA WHAKAMUA
Hei te tau e tū mai nei, ko ngā whakakitenga ko te
whakatipunga tonutanga o ngā rawa nā ngā mahinga
tuku pūtea matua, ina koa ko ngā Mōkete Tauaro i
Ahitereiria me Aotearoa, ngā pakihi iti, waihoki te
whakahaerenga tonutanga o ngā whakahaerenga
whakahekenga i te hononga tuku pūtea i te Pakihi
me te Taiwhenua.
Ka whakangaoa tonutia ngā rawa mā te whakapiki i
ngā mahi whakatairanga, me te whakapiki i te nui o
te whakatutukihanga i ngā wāhanga o te
whakatipunga hou.
Kua nui ngā hua i tēnei tau. Anei e tuku nei i ngā mihi
ki ō tātou tāngata, mō rātou nei e whakatinana ana i
ā mātou mātāpono. E mihi ana hoki ki ngā kaipupuri
hea i tā rātou tautoko nui mai i a Heartland ao noa,
pō noa.
Ngā mihi nui,
Jeff Greenslade
Kaiwhakahaere Matua
9
%
I TE $73.6 MIRIONA NGĀ PAINGA
MORE I MURI I TE TĀKE A HEARTLAND
(9% TE PIKINGA), Ā, I TUKIA E NGĀ UTU
TUKUTAHI O TE $4.2 MIRIONA.
Heartland Annual Review 2019
P. 18
NĀ TE KAIWHAKAHAERE MATUA

Heartland’s corporate
restructure
Other current
Australian subsidiaries
HEARTLAND AUSTRALIA
HOLDINGS LIMITED
HEARTLAND GROUP
HOLDINGS LIMITED
SHAREHOLDERS
Other current
New Zealand subsidiaries
HEARTLAND BANK
LIMITED
NZX Listed
ASX Listed
NON-BANKING GROUPBANKING GROUP
On 31 October 2018, Heartland completed its
corporate restructure. As a result of the
restructure, shares in Heartland Group were
listed on both the NZX Main Board and the ASX
(under a Foreign Exempt Listing) and Heartland
Group commenced trading under the HGH
ticker code from 1 November 2018.
Heartland Bank became a wholly-owned
subsidiary of Heartland Group and all of the shares
in Heartland Bank were exchanged for shares in
Heartland Group. In addition, the Australian group
companies were transferred from Heartland Bank
to Heartland Group.
The restructure and the ASX listing are significant
milestones for the Group and provide a more suitable
platform for future growth. The restructure removes
constraints on growth previously arising from
Reserve Bank of New Zealand regulations, and will
provide greater flexibility to explore and take
advantage of future growth opportunities in
New Zealand and Australia outside the banking
group. A Foreign Exempt Listing on the ASX is
expected to expand the capital sources available to
Heartland in order to fund growth.
As part of the restructure and in order to ensure
greater efficiency and capacity, Chris Flood was
appointed to the new role of CEO of Heartland Bank.
Jeff Greenslade remains CEO of Heartland Group.
Heartland Annual Review 2019
P. 19
CORPORATE RESTRUCTURE

Inclusion is a vital element of a business’
sustainability and social purpose. It is the
right thing to do – mahi tika.
The vision for Heartland is to be an accepting and
welcoming workplace for all people, where diversity
of thought and cultural intelligence is valued.
Diversity brings fresh ideas and different
perspectives. This is at the heart of our aim to be
always evolving – mahi tipu. A welcoming and
accepting workplace makes it possible to realise the
best of everyone, to have big ambition – mahi toa –
and to work together as one team – mahi tahi.
One of Heartland’s objectives is to be the employer
of choice for Māori. Part of this means creating an
environment where Māori language, culture and
values are embraced. In doing so, the foundation
is built to become an inclusive and welcoming
environment for all cultures.
Embracing a culture
of inclusion
“Kua tawhiti kē te haerenga
mai, kia kore e haere tonu.
He nui rawa te mahi, kia
kore e mahi tonu.”
We’ve gone too far not to go further.
We’ve done too much not to do more.
– Sir James Henare
Piripi Gordon was one of the 20 students to join
Heartland’s internship programme in 2018/19.
Ko tētahi o ngā whāinga a Heartland kia noho
mātāmua hei wāhi mahi mō Ngāi Māori. Inā rā,
ka whakatūria he taiao mahi e manaaki nei i te reo
Māori, i te ahurea Māori me ngā mātāpono Māori.
Mā tēnei ka rite te tūāpapa kia tū ai te whare hei
whakamanuhiri i ngā ahurea katoa.
Initiatives to increase the presence and use of Māori
culture and language underway include:
free reo and tikanga Māori lessons
creation of Manawa Whenua, a group to support
and inform Māori initiatives within Heartland
Māori signage and Mahi Māori video series
increased use of te reo Māori and tikanga in
formal occasions
Māori translations of website and annual reports
Māori language and symbolism within Heartland
mātāpono (values).
The benefits of these initiatives are starting to show
internally, particularly in the increased capability of
Heartland people in respect of te reo Māori. This has
led to more use of te reo Māori throughout daily
work life. The introduction of bilingual values was
warmly welcomed by all employees, including in
Australia, and reo and tikanga Māori lessons are
being extended into an internal video series.
Heartland Annual Review 2019
P. 20
EMBRACING A CULTURE OF INCLUSION

Although progress has been made over the last two
years since we set out on this journey, Māori are still
under-represented in Heartland’s workplace – 4% of
Heartland’s people identify as Māori. While this is
above average for the sector (of those who identify
as Māori in the working population, 2.8% work in the
financial and insurance services sector
1
), it is well
below Māori representation in the workforce, where
Māori make up 13% of the New Zealand labour
force.
2
This lack of representation of Māori in the financial
sector means that the onus on us is not simply to
recruit but to encourage participation generally.
Supporting the Māori community is just as important
as ensuring we continue to encourage and develop
Māori culture and inclusivity internally. In FY2019,
the Heartland Trust sponsored:
Te Matatini Festival – a Māori performing arts
event central to Māori identity and culture
Kupe Leadership Scholar Tāmati Rākena – a
Masters of Education student with a passion
for supporting Māori communities
InZone Education Trust – an organisation that
aims to enhance the outcomes of Māori youth
by providing opportunities for students to attend
high-performing state schools.
In addition, Heartland’s internship programme is
based on the Māori concept of ‘ako’ which means to
learn and to teach. As such, it provides a rich
opportunity for interns to learn from us about the
world of work, and for us to learn from them.
By increasing the presence of Māori culture and
language at Heartland, and by showing our
commitment and support to Māori, we are creating
a workplace where Māori can see a career pathway.
In doing so, we are also providing a valuable
opportunity for our people to increase their cultural
awareness and intelligence by learning more about
New Zealand’s rich and diverse culture, setting
Heartland up to become a place that is welcoming
to all people.
Strong progress in FY2019 has been made towards
inclusivity for Māori, and it is recognised that there
is more to do.
1 Māori Labour Market trends - June 2019. Ministry of Business, Innovation
& Employment.
2 Household labour force survey: March 2019. Statistics New Zealand.
Heartland’s internship cohort for 2018/19.
The internship programme is based on the
Māori concept of ‘ako’.
Heartland Annual Review 2019
P. 21
EMBRACING A CULTURE OF INCLUSION

Being digital
Digital is one of Heartland’s
three core strategic focus
areas alongside Australian
Reverse Mortgages and
New Zealand Banking.
WHAT IS DIGITAL?
The concept of digital is frequently defined by the
internet or mobile phones or APIs (Application
Programming Interface). These are digital tools.
Being digital is a way of doing things:
“Digging down, digital is about two things: speed
and agility – externally to your customers and
market and internally within your organisation.”
– John Rossman
1
One of Heartland’s mātāpono, or values, is mahi
tipu – always evolving. This is the essence of being
digital. The purpose is to deliver great customer
outcomes by always striving to deliver fast and
simple service. Increasingly, how we are judged
will be by how successful we are in delivering
excellent User Experience (UX).
WHAT IS UX?
UX encompasses all aspects of a customer’s
interaction with our products and services.
2
A good UX is one which makes it easy for the
customer to access services and which delivers the
desired outcome quickly. UX is a constantly evolving
challenge: identifying user pain points to address,
gathering insights about how we can do things
better, and letting our customers know that their
experience with us matters.
Examples of UX in action at Heartland include:
usability testing of new websites, updates to the
Heartland Mobile App and new digital products;
the introduction of online, real-time customer
feedback mechanisms on the Heartland website;
and using online qualitative analytics tools to record
UX and customer journeys across all webpages.
Prioritising UX means we keep our customers at
the forefront of decision making. This leads to
better customer loyalty and retention, and better
business outcomes.
DIGITAL AT HEARTLAND
Our Digital strategy has two objectives.
1: To give our customers products accessible
online or via an app, and provide simple,
frictionless and fast on-boarding and processing.
2: To reach as many customers as possible at the
lowest cost, through online and smartphone
access and highly automated processes.
In practice, digital is a way of operating – how we
get things done. A digital mindset enables us to
remain agile and innovate at speed to meet
changing customer expectations.
To deliver low cost on-boarding and transaction
processing we will ensure we have the right
technology and infrastructure in place to provide
a seamless customer experience that ultimately
reduces costs across the business. According to
research by PWC, people who manage their finances
online are more cost effective to serve and are more
likely to purchase financial services products than
those who conduct their banking in person.
3

By automating processes behind the scenes,
Heartland will create more capacity
to do more for customers.
Heartland Annual Review 2019
P. 22
BEING DIGITAL

OUR DIGITAL ACHIEVEMENTS
As Heartland’s digital offering increases,
we expand our reach to customers. This presents an
opportunity for digital innovation to help us grow
and meet the needs of new customers. A number
of digital achievements were realised in FY2019,
including the following.
YouChoose
In May 2019, Heartland Bank launched YouChoose –
a savings account with an arranged overdraft,
designed to provide customers with the flexibility
to save when they can and spend when they want to.
Biometrics, DocuSign and document uploads
Facial recognition technology (biometrics) for ID
verification, online document signing via DocuSign
and document upload functionality was introduced
this year, enabling easier and faster customer
on-boarding
4
.
Heartland Mobile App
App downloads have increased significantly. The app
has been installed over 5,900 times. This is a 72%
increase since the start of 2019. This year, 24 app
improvement updates saw more functionality built
in to provide greater security with PIN and
fingerprint login features, and to allow customers
greater access to Heartland’s products.
Online EFTPOS
In order to provide customers with greater flexibility
in how they spend their money, Heartland Bank has
partnered with Paymark to deliver Online EFTPOS
services to our YouChoose customers. Online EFTPOS
will allow customers to shop online from participating
retailers without the need for a debit card.
Open for Business (O4B)
O4B is Heartland’s digital-led small business
lending product and has been continuously
improved to ensure a frictionless end-to-end
process. The three minute application with real-time
technology manages credit risk by reviewing a
number of data points to assess the applicant’s
situation and give them a more personalised
response. The number of people visiting the O4B
webpages in FY2019 increased by 163%
5
, and the
number of online applications increased by 160%
6
.
Guaranteed Minimum Future Value (GFV)
finance calculator
Heartland Bank, in partnership with Jaguar Land
Rover, launched their first fully integrated online
GFV calculator for a third party finance provider.
Customers can use the calculator to generate an
indicative GFV finance quote which lets them know
what the minimum trade value will be at the end
of the vehicle loan, provided they keep within the
terms of their agreement.
1 John Rossman, Think Like Amazon: 50 ½ Ideas to Become A Digital
Leader (2019).
2 https://www.nngroup.com/articles/definition-user-experience/
3 https://www.pwc.com/us/en/financial-services/publications/assets/pwc-
fsi-whitepaper-digital-bank-transformation.pdf
4 For customers using our biometric solution, the average time taken to
complete is 10 minutes.
5 Data source: Google Analytics, 30 June 2019.
6 Data source: Proprietary data collection platform, 30 June 2019.
THE YEAR AHEAD
In FY2019 we completed beta testing of our
new Heartland Digital platform with a select
group of customers. The Heartland Digital
platform provides an efficient, user-friendly
online banking solution that savings and
deposits customers can access in place of
internet banking on a desktop or devices
which don’t support the app. In FY2020 we
will continue to roll the platform out to our
Heartland customers.
FY2020 welcomes some exciting digital
advancements. Online calculators and
automated application decisioning, based
on lending criteria, for Reverse Mortgage
customers in New Zealand will help customers
get the information they need to progress their
loan applications. Similar online calculators are
also being developed for Australian Reverse
Mortgages to assist the huge broker network
in Australia and will provide customers with
more personalised information that is relevant
to them. Work will also begin on the creation of
a GFV calculator for Holden Financial Services,
similar to the one launched this year for Jaguar
Land Rover Financial Services.
Heartland has also taken a keen interest in the
launch of two new API standards which help
New Zealand take a step towards Open Banking.
The standards provide the opportunity for banks
to work together and with third parties to launch
new financial services for customers. Heartland
is working with PaymentsNZ to register as an
API provider which will allow us to use the new
standards. We believe Open Banking will improve
banking processes and services for customers,
and contribute towards the development of
simple, secure, personalised banking for each
customer’s needs.
Being digital is a mindset and way of working.
We’ve been incorporating that mindset
throughout our products, services and
operations throughout FY2019 and will increase
that focus in the year ahead to ensure we’re
always evolving and continue to strive for
excellence – whāia te iti kahurangi.
Heartland Annual Review 2019
P. 23
BEING DIGITAL

JEFF GREENSLADE
Heartland Group CEO
and Executive Director
Jeff has over 20 years’ experience as
a senior banking executive, including
with the ANZ National Banking Group,
where he last held the position of
Managing Director of Corporate
and Commercial Banking.
GEOFF RICKETTS
Chair, Independent
Non-Executive Director
Geoff is a company director and
investor with wide experience in
the New Zealand and Australian
business environments.
ELLIE COMERFORD
Independent Non-Executive
Director
Ellie has worked for more than
30 years in financial services in
Australia and overseas across a number
of banking and insurance businesses.
P. 24
Heartland Annual Review 2019
HEARTLAND GROUP BOARD

Heartland
Group
Board
SIR CHRIS MACE
Independent Non-Executive
Director
Sir Chris is an Auckland based
businessman and company
director with experience in the
New Zealand and Australian
business environments.
GREG TOMLINSON
Non-Executive
Director
Greg is a Christchurch based
businessman and investor with
40 years’ experience owning,
managing and building businesses.
For full profiles, visit
shareholders.heartland.co.nz
P. 25
Heartland Annual Review 2019
HEARTLAND GROUP BOARD

Heartland
Bank
Board
VANESSA STODDART
Independent Non-Executive
Director
Vanessa is an experienced director
and currently serves on the boards of
New Zealand Refining Company Ltd,
OneFortyOne Plantations Pty
Limited, Tertiary Education
Commission and the Financial
Markets Authority.
JEFF GREENSLADE
Executive Director
Jeff has over 20 years’ experience as
a senior banking executive, including
with the ANZ National Banking Group,
where he last held the position of
Managing Director of Corporate
and Commercial Banking.
BRUCE IRVINE
Chair, Independent
Non-Executive Director
Bruce is a chartered accountant and
was admitted into the Christchurch
partnership of Deloitte in 1988. He
was Managing Partner from 1995 to
2007 before his retirement from
Deloitte in May 2008 to pursue his
career as an independent director.
P. 26
Heartland Annual Review 2019
HEARTLAND BANK BOARD

For full profiles, visit
shareholders.heartland.co.nz
ELLIE COMERFORD
Independent Non-Executive Director
Ellie has worked for more than 30
years in financial services in Australia
and overseas across a number of
banking and insurance businesses.
KATE MORRISON
Independent Non-Executive Director
Kate has 20 years’ experience working
in investment banking in the UK in the
areas of financial risk management,
structured financing and investments.
GEOFF RICKETTS
Independent Non-Executive Director
Geoff is a company director and
investor with wide experience in
the New Zealand and Australian
business environments.
JOHN HARVEY
Independent Non-Executive Director
John has considerable financial
services experience and 36 years in
the professional services industry,
including 23 years as a partner of
PricewaterhouseCoopers.
P. 27
Heartland Annual Review 2019
HEARTLAND BANK BOARD

Strategic
Management Group
Heartland Annual Review 2019
P. 28
STRATEGIC MANAGEMENT GROUP

From left to right:
ROCHELLE MOLONEY
Chief Culture & Communications
Officer ( joint)
GRANT KEMBLE
Chief Risk Officer
LYDIA ZULKIFLI
Chief Digital Officer
JEFF GREENSLADE
CEO, Heartland Group
LAURA BYRNE
Chief Culture & Communications
Officer ( joint)
CHRIS FLOOD
CEO, Heartland Bank
CHERISE BARRIE
Chief Financial Officer
SARAH SMITH
Chief Technology Officer
Strategic
Management Group
For full profiles, visit
shareholders.heartland.co.nz
Heartland Annual Review 2019
P. 29
STRATEGIC MANAGEMENT GROUP

Our sustainable
business
Our community
Making a contribution in our
communities.
Our customers
Delivering great customer
outcomes.
Heartland Annual Review 2019
P. 30
OUR SUSTAINABLE BUSINESS

He manawa whenua:
Our Heartland
Providing a diverse and inclusive
work environment.
He manawa whenua, he
manawa tangata.
Due to regulatory demand,
Heartland is only at the 
start of our journey to
better understand our
environmental impact.
While Heartland has taken
some small steps towards
this, we know we need to do
more and will be evaluating
our overall Environmental,
Social and Governance (ESG)
strategy in FY2020.
Our environment
Considering the impact of our
operations on the environment.
Heartland Annual Review 2019
P. 31
OUR SUSTAINABLE BUSINESS

The sustainability of our business is only possible
if we can demonstrate a relevant positive social
contribution. Heartland seeks to do this in a
number of ways, including by providing support
to customers whose needs aren’t met by
mainstream banking.
–Our Reverse Mortgage product enables us to
provide people with the opportunity to enjoy
a better retirement with the peace of mind,
independence and security that comes from
remaining in their own home.
–Open for Business supports the growth and
development of small businesses through
the provision of business loans – including
unsecured up to $100,000, so business owners
don’t have to mortgage the family home to
finance their business.
–Heartland’s Deposit products provide
New Zealanders with competitive on call and
term deposit rates to reach their savings goals.
–Heartland Bank and MARAC car loans give
New Zealanders the opportunity to buy safer,
more fuel efficient motor vehicles.
–Heartland’s livestock finance supports the
agriculture sector through specialist finance
which gives farmers the opportunity to purchase
livestock in a flexible and efficient way without
having to use the farm as security.
–YouChoose gives customers the flexibility to
choose how they use their money with just
one account – save with a healthy interest rate,
or spend with a competitive overdraft rate.
We recognise that how we behave toward our
customers directly impacts lives and it is imperative
that our products and services meet their needs
over the longer term. The recent FMA and RBNZ
review into banks’ conduct and culture identified
findings across four key themes for all banks:
–greater board ownership and accountability,
including being able to properly measure and
report on conduct and culture risks and issues.
–delivery of good customer outcomes through
product design and management, sales processes,
incentives and vulnerable customer handling.
–prioritising the identification of issues and
accelerating remediation; prioritising investment
in systems and frameworks, processes, controls
and training, including staff reporting channels
such as whistleblower processes.
Thanks to Heartland Bank support, Remarkables
Towing in Central Otago has come a long way
since co-owner Anna Tomkinson started the
company as a side project.
Our customers
Heartland Annual Review 2019
P. 32
OUR CUSTOMERS

Heartland has developed a work plan to address the
regulators’ observations and recommendations and
believes that this work will strengthen the oversight,
controls and processes Heartland has in place to
manage its conduct risks.
ACHIEVEMENTS AND NEW DEVELOPMENTS
FY2019 saw many achievements and new
developments aimed at improving our customers’
experience and outcomes.
Our Australian Reverse Mortgage product was
awarded ‘Best Reverse Mortgage’ in Money
Magazine’s ‘Best of the Best’ awards for the
fourth year running. The award is a testament
to Heartland’s Reverse Mortgage being flexible,
yet simple, with considerable consumer protection
and broad criteria. The Australian Reverse
Mortgages team have helped more than 18,000
Australians live a more comfortable retirement.
Our Australian Reverse Mortgage business was also
recognised as a finalist in the Australian Lending
Awards and the Australian Mortgage Awards.
In April 2019, Heartland Bank celebrated a significant
milestone – helping more than 15,000 New Zealanders
enjoy a better retirement by enabling them to stay
in their own home for as long as they choose.
For the second year, in July 2019 Heartland Bank
received the Bank of Year – Savings Award from
Canstar, recognising Heartland as the financial
institution that provides the strongest combination
of products and services for savers in New Zealand.
Heartland’s Direct Call Account was also awarded
Canstar’s 5-Star Rating for Outstanding Value
Savings Account for the fourth year in a row.
Furthering our offering to New Zealanders,
Heartland Bank this year launched YouChoose –
a new savings account with an arranged overdraft.
YouChoose aims to help people save when they
can and spend when they want to, with competitive
interest rates on credit and debit balances.
The introduction of DocuSign, biometrics and
document upload functionality for Heartland’s
products makes it easier and faster for new
customers to open an account and verify their
identity from a location that suits them –
as customers can use these services online
from their mobile device.
Open for Business customer Kerry Bradburn
recognises the power of an online
business model.
Heartland Annual Review 2019
P. 33
OUR CUSTOMERS

We recognise we have a responsibility to assist
the communities we’ve served for over a century.
We get involved and do what’s right for our
communities, local businesses and families –
mahi tika. We aim to make a positive difference
by providing support and opportunity to those
in need.
Through Heartland Bank and the Heartland Trust,
we support a number of organisations, clubs
and schools both regionally and nationally.
The Heartland Trust is a registered charitable
trust which is independent from, but closely
supported by, Heartland Bank.
NURTURING MĀORI LEADERSHIP
The Heartland Trust is a proud supporter of
the InZone Education Foundation, a registered
charitable trust that aims to enhance the
educational outcomes of Māori and Pasifika youth.
It does this by establishing and running boarding
hostels that provide an opportunity for motivated
students to access high-performing state schools
within the school zones.
As part of our support of InZone, Heartland
runs an internship programme each year. The
programme welcomes a number of students to
work in paid internship positions throughout the
business over their summer holiday. The internship
programme is based on the Māori concept of
‘ako’ which means to learn and to teach. The
programme provides students with experience
in and exposure to the corporate world, and
enables Heartland to learn how it can become
a more welcoming and inclusive environment
for its people.
Heartland also provided scholarships to a number
of Māori students, enabling them to attend
high-performing schools they would otherwise
be unable to attend.
The Heartland Trust this year began sponsoring
Kupe Leadership Scholarship recipient Tāmati
Rākena, a Masters of Education student at
Auckland University.
Our community
Heartland Annual Review 2019
P. 34
OUR COMMUNITY

Through the Kupe Leadership Scholarship,
Heartland provides funding to Heartland Scholar
and Masters of Education student, Tāmati
Rākena. The prestigious Kupe scholarship aims
to develop future leaders who are committed to
New Zealand and to creating a successful future
for our country. Through the scholarship, Tāmati
receives a generous stipend, personal mentor and
participation in the leadership programme.
CELEBRATING THE ARTS AND SPORT
The Heartland Trust was once again the platinum
sponsor of the Auckland Writers Festival, an
event that caters for a diverse range of ages,
interests and cultures, inspiring people to fall in
love with books. The Trust also sponsored the
WORD Christchurch Festival, the largest literary
event in the South Island. WORD partnered with
Auckland Writers Festival in May this year for an
autumn season event.
In 2019, the Heartland Trust was proud to
sponsor Te Matatini Festival. Te Matatini is the
pinnacle cultural event of Māori performing arts,
central to Māori identity and culture, aligned to
our aspirations to develop cultural awareness
and intelligence at Heartland.
Heartland has, for a long time, been involved
in supporting school and club rugby. This year,
we continued to support many school First XV
rugby teams across the country, with an
increased focus on girls’ rugby. Our support has
assisted the teams with funding uniforms and
training equipment.
WELLBEING IN THE COMMUNITY
Heartland employees volunteer annually at the
Special Children’s Christmas Party, an event
established for children who suffer from life
threatening illness, physical and intellectual
impairment, domestic violence or who are living
in underprivileged circumstances.
Heartland also supports Lifeline. With Heartland’s
sponsorship, among others, Lifeline is able to offer
a free 24-hour, 7 days a week phone line service.
The confidential service supports Kiwis going
through difficult times.
Heartland Bank has provided sponsorship to
Silverline, to support their establishment.
Silverline is a free confidential 24/7 helpline
offering information, friendship and advice to
people over 55 throughout New Zealand.
The Heartland Trust provides donations towards
Auckland City Mission’s HomeGround project.
Due to be complete in 2020, HomeGround is a
purpose-built facility that will include 80 apartments
for permanent housing, space for the Mission to
continue to support those who need it most, a place
where low-cost medical treatment will be offered
and a commercial kitchen where the Mission will
prepare meals and teach basic cooking skills.
The Heartland Trust continues to
provide sponsorship for school and club
rugby, including the Otago University
women’s team.
In 2019, Heartland was the platinum
sponsor of the Auckland Writers
Festival for the third year.
Heartland Annual Review 2019
P. 35
OUR COMMUNITY

A DIVERSE WORKFORCE
Our vision is for Heartland to be an accepting and
welcoming workplace to all people, where diversity
of thought and culture is valued and we come
together as one team – mahi tahi.
To help us achieve this, we have a few key areas of
focus: addressing imbalances in gender and ethnic
representation, becoming an employer of choice
for Māori, celebrating diversity and inclusion, and
providing best practice support to our people in
relation to mental health and wellbeing.
Led by Heartland’s Diversity Committee, several
celebrations of Heartland’s diversity have taken
place throughout the year, including events
celebrating cultural identity, gender diversity
and overall inclusion in the workplace. A Rainbow
Committee has also been formed to work towards
obtaining the Rainbow Tick for Heartland.
The Rainbow Tick will acknowledge Heartland
as a workplace that supports and values our
rainbow community.
In 2017, Heartland partnered with Global Women
to access thought leadership and best practice
in the promotion and facilitation of diversity.
Heartland Group Chief Executive Officer Jeff
Greenslade is a member of Champions for Change,
demonstrating Heartland’s commitment to creating
a more diverse workplace.
Heartland’s Kia Eke group, established in 2018,
continues to provide support and development
opportunities for female employees at an early
stage in their career, supporting them to grow into
leadership roles. While gender diversity at different
levels across the organisation has improved on last
year, there is more work to be done.
See the Diversity report in Heartland’s 2019
Financial Report for more information about
Heartland’s progress towards encouraging
diversity and inclusion in the workplace, including
an employee gender breakdown.
He manawa whenua:
our Heartland
Ten of the 12 people who make up
Heartland’s recently formed shadow board.
Heartland Annual Review 2019
P. 36
HE MANAWA WHENUA

AN INCREASINGLY YOUNGER WORKFORCE
The workforce in New Zealand continues to evolve
with Millennials now making way for Generation Z
in the workplace. At a macro level, these generations
are driving changes, among other things, around
the way people relate to and interact with brands
and consume products. Attitudes, beliefs and
behavioural changes are also showing up in the
workplace at an employment level and shifting
the way employees have traditionally approached
the workplace and their career.
At Heartland, 49% of our total workforce are aged
35 and under, and 76% of that group are aged 30
and under. The 25-30 age group are currently the
largest demographic cohort in the organisation,
making up 21% of our people. Heartland recognises
the importance of understanding more about the
needs of our younger people, and specifically what
drives and motivates them about a workplace and
career. A number of initiatives are in place to support
this understanding.
This group is relatively balanced in gender
and inherently more diverse across ethnicity –
for example, 45% identify as New Zealanders,
11% as Indian, 7% as European, 6% as Chinese
and 4% as Māori.
Heartland has recently formed a shadow board
with the dual purpose of providing meaningful
career development opportunities for our people
aged under 35, as well as ensuring that the unique
perspectives and expectations of the Millennial
and Gen Z generations form part of our business
decision-making. The shadow board is made up of
12 of our people, all aged under 35. The shadow
board will be tasked with providing insights and
perspectives to Heartland’s Strategic Management
Group, and ultimately the Board, in relation to a
number of areas including our sales and distribution
strategy, customer experience, internal culture and
digital projects.
OUR WELLBEING – WELL AT HEART
Heartland’s Wellbeing Committee has organised
various wellbeing events for Heartlanders, including
facilitating yoga and mindfulness sessions, access
to corporate massages, sport and team challenges,
and has hosted a number of speakers to present to
our people about managing and supporting their
mental health and wellbeing.
Heartland employees are also encouraged to take a
day to give back by volunteering. The volunteer day
gives teams an opportunity to connect outside of
the office, give back to their community and look
after their mental wellbeing.
In May 2019, Heartland launched its new
Prevention of Harassment, Discrimination and
Bullying Framework. The framework intends to
provide our people with a safe and inclusive work
environment that is free from all forms of
harassment, discrimination and bullying, to ensure
all people feel valued and treat one another with
dignity and respect. The framework consists of four
pillars: discuss, inform and educate, support and
respond. As part of the support pillar, 18 people
across the organisation have been identified and
trained as support people. Their role is to be the first
point of contact for anyone who would like to talk to
someone about having potentially experienced or
witnessed harassment, discrimination or bullying.
Heartland also provides financial support for our
people to participate in team sports with their
colleagues to support wellbeing and teamwork.
Heartland Annual Review 2019
P. 37
OUR HEARTLAND

Heartland is committed to operating a
sustainable business that delivers excellent
customer experiences and outcomes while
operating in a way that minimises our impact
on the environment. We know this is important
to our customers, our communities, our people
and our shareholders and it’s the right thing to
do – kia tika, kia pono.
We are at the start of our journey to better
understand our environmental impact. To catalyse
action, we’ve recently joined the Climate Leaders
Coalition and committed to measuring and
reporting our greenhouse gas emissions and
setting an emissions reduction target. We also
hope to use the experience of other members in
the Coalition to guide us in making faster progress
toward this commitment.
OUR PROGRESS SO FAR
Over the last year we have made small steps
toward improving our operations so that they
are more environmentally sustainable. Pepa Iti and
the implementation of various online technologies
are some of the ways we’re working towards
achieving this.
Pepa Iti aims to build scalability and create capacity
without increasing our impact on the environment.
The project will enable an end-to-end digital process,
improving customer experience, reducing print
costs and paper wastage, and automating manual
processes. Introducing secure facial recognition,
online document uploading and digital signature
solutions have been core deliverables of the project.
The introduction of facial recognition,
document upload and digital signature
solutions enables our people to work
more digitally.
Our environment
Heartland Annual Review 2019
P. 38
OUR ENVIRONMENT

The volume of printing from office printers in
FY2019 has only slightly increased by 1% from
FY2018. Given the business growth (receivables are
7% higher in June 2019 versus June 2018), this is a
good result. Encouragingly, print volumes for the
month of June 2019 are down 12% on June 2018.
We anticipate further roll out of automation and
paperless initiatives will see continued efficiencies
in this space. This is both a good outcome for our
environmental footprint and cost efficiencies.
LOOKING AHEAD
We are committed to working together to do the
right thing and start the journey towards helping
New Zealand transition to a zero carbon economy.
While we have taken some small steps toward this,
we know we need to do more and are evaluating
our overall sustainability strategy.
To achieve this, we will assess our current state
and set reduction targets to monitor and
measure Heartland’s progress. Initiatives we
are considering include:
–establishing a decarbonisation roadmap for
the business to identify initial projects that
can be implemented
–looking for opportunities to fund research
and development initiatives that are aligned
to and share our sustainability goals
–converting our vehicle fleet to electric and/or
hybrid vehicles
–encouraging our people to use their volunteer
days to support organisations and projects
which align with our sustainability goals.
Heartland is looking to convert
its vehicle fleet to electric or
hybrid vehicles.
Heartland Annual Review 2019
P. 39
OUR ENVIRONMENT

Financial commentary
Net profit after tax (NPAT) was
$73.6 million for the year ended
30 June 2019, an increase of 9.0%
from the previous financial year
ended 30 June 2018.
Heartland has achieved excellent growth in net finance
receivables of 9.1% after the adoption of the new
accounting standard for provisioning, IFRS9. Excluding the
impact of IFRS9, net finance receivables increased by 10.7%.
NET OPERATING INCOME
Net Operating Income (NOI) was $205.8 million for the
year ended 30 June 2019, an increase of $9.0 million
(4.6% growth). Excluding the impact of the prior year’s
one off income of $5.4 million, the growth was $14.4 million
(7.3% growth).
Heartland’s Net Interest Margin (NIM) for the year ended
30 June 2019 was 4.33% compared to 4.42% for the year
ended 30 June 2018. NIM was impacted by the proportional
changes in Receivables, in particular the strong growth in
reverse mortgages which has a lower NIM relative to other
products (but with correspondingly lower impairments). NIM
was further impacted by $1.1 million of break cost incurred
due to the early repayment of the Tier 2 Australian dollar
subordinated bond. Excluding these costs, NIM was 4.35%.
COSTS
Operating costs were $85.6 million for the year ended 30
June 2019, an increase of $5.1 million (6.4% growth). Higher
operating expenses were due to growth, one-off corporate
restructure and ASX listing costs of $1.8 million and one-off
foreign currency costs of $1.3 million also incurred in
relation to the corporate restructure.
The cost to income ratio increased to 41.6%, compared
to 40.9% for 2018. Excluding one-off costs related to the
corporate restructure and ASX listing referred to above, the
cost to income ratio was 39.9% compared to 40.9% for 2018.
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. As a result,
impairment expense for the year ended 30 June 2019 is
not directly comparable to the year ended 30 June 2018
primarily due to the new requirement to provide for
impairment losses on all loans, not just those past due or
impaired. This particularly impacted Harmoney and Motor
which had high growth and, in the case of Harmoney,
higher expected loss rates than other segments.
Impaired asset expense decreased by $1.4 million (6.3%) to
$20.7 million for the year ended 30 June 2019. $3.1 million
of that was the result of increases in provisions on loans
not past due or impaired as a result of the application of
the new IFRS9 methodology. This would not have been
recognised in the year ended 30 June 2019 under the
previous applicable accounting standard.
Impaired asset expense as a percentage of average
Receivables decreased from 0.58% in 2018 to 0.49% in 2019.
Excluding the impact of IFRS9, the ratio was 0.42% in 2019.
Impairment and collection rates in Motor improved during
the year following changes to collection processes, and as
a result reduced impairment expense by $2.1 million.
Impaired and past due loans over 90 days decreased by
$3.0 million to $70.9 million, and decreased from 1.84%
to 1.61% as a percentage of Receivables.
IFRS ADJUSTMENTS
The initial adoption of IFRS9 also resulted in opening
adjustments to provisions for impairments of $25.3 million
and retained earnings of $19.3 million, after allowance for
a deferred tax benefit. IFRS9 also introduced a change in
the way Reverse Mortgages are valued. Under IFRS9 they
are ‘fair-valued’.
BUSINESS PERFORMANCE
New Zealand Reverse Mortgages
New Zealand Reverse Mortgage Receivables increased
$52.0 million (11.4%). Reported growth was $104.4 million
(22.8% growth) to $561.2 million due to $54.7 million of
Australian Reverse Mortgages transferred from Australia
to New Zealand, offset by an adverse foreign exchange
impact of $2.0 million.
New Zealand Reverse Mortgages net operating income
was $20.9 million, an increase of $2.4 million (13.3%).
Motor
Motor Receivables increased $127.6 million (13.3%)
to $1,088.6 million through Motor dealer lending
(car dealerships, brokers and partnerships such as
Holden and Jaguar/Land Rover).
Motor net operating income was $57.1 million,
an increase of $4.2 million (8.0%).
Heartland Annual Review 2019
P. 40
FINANCIAL COMMENTARY

Harmoney and other personal lending
Harmoney and other personal lending Receivables increased
$45.1 million (24.9%), excluding the impact of changes in
foreign currency exchange rates. New Zealand Harmoney
and other personal lending increased $31.5 million (20.3%)
to $186.3 million and Australia Harmoney increased $13.6
million (52.0%), excluding the impact of changes in foreign
currency exchange rates, to $38.3 million.
Harmoney and other personal lending net operating income
was $18.9 million, an increase of $4.1 million (27.6%).
Business
Business Receivables increased by $38.0 million (3.5%
growth) to $1,118.2 million. 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 $101.7 million (31.4%) to
$425.4 million and Open for Business lending up
$43.4 million (48.2%) to $133.3 million. Business
Relationship lending continues to be managed down
as part of our strategy to reduce low margin risk
concentration resulting in Business Relationship
Receivables reducing by $107.0 million.
Business lending net operating income was $55.9 million,
an increase of $3.5 million (6.8%).
Rural
Rural Receivables decreased by $4.1 million (0.6%) to
$656.4 million. We continue to manage down large
Rural Relationship lending to reduce low margin risk
concentration in this area resulting in Rural Relationship
Receivables reducing by $23.4 million. Livestock Receivables
increased by $19.3 million (18.8%) to $121.6 million.
Rural lending net operating income was $31.7 million,
a decrease of $0.6 million (1.9%).
Australia
Australian Reverse Mortgage Receivables increased $163.0
million (24.0%) excluding the impact of changes in foreign
currency exchange rates and reverse mortgage transfers
to New Zealand. Reported growth was $79.6 million (11.7%)
to $757.6 million due to $54.7 million of reverse mortgage
transfers to New Zealand and an adverse foreign exchange
impact of $31.0 million.
Net operating income from Australian operations was
$22.7 million, an increase of $2.2 million (10.7%).
NET ASSETS
During the reporting period, Net Assets increased by
$11.5 million to $675.7 million after taking into account
a reduction of $19.3 million as a result of the initial
adoption of IFRS9. Net Tangible Assets (NTA) increased
by $9.0 million to $593.5 million. On a per share basis,
NTA was $1.04, unchanged from 2018.
FUNDING AND LIQUIDITY
Heartland operates a diversified funding base that
continues to grow with the business.
Deposits increased by $271.9 million (9.4% growth) to
$3.2 billion. Heartland continues to provide market leading
call and competitive term deposit offerings, providing
customers with competitive interest rates and unlimited
on call access to their money through the Heartland Direct
Call Account.
In August 2018, the Asset-Backed Commercial Paper
programme was replaced with a new externally rated auto
loan warehouse which is bank funded. The facility was
utilised during the year but undrawn as at 30 June 2019.
Heartland Bank successfully completed a $125 million
five-year unsubordinated, unsecured, medium term
fixed rate note offer, which included $50 million of
oversubscriptions. The notes were issued on 12 April 2019
with a maturity date of 21 September 2022 and are quoted
on the NZX Debt Market.
Heartland Australia Group Pty Limited issued an A$50
million two-year unsubordinated, medium-term note on
8 March 2019 with a maturity date of 8 March 2021.
The Seniors Warehouse Trust Securitisation facility
increased A$50m during the year.
In May 2019, Heartland introduced leverage capacity to the
holding company with a $50 million corporate debt facility,
which was undrawn as at 30 June 2019.
CAPITAL
Heartland did not need to undertake an issue of capital
during the current financial year, with the increase in new
shares being due to the Dividend Reinvestment Plan (DRP).
A 2019 final ordinary dividend of 6.5 cents per share
was declared bringing the 2019 full year ordinary declared
dividend to 10.0 cents per share, 1.0 cent higher than the
total dividend paid for 2018. The increase in the dividend
reflects the performance of Heartland, particularly
Australia, and also allows for investment in growth.
The DRP remained in effect for the final dividend
with a 2.0% discount.
Return on Equity (ROE) of 11.1% was consistent with
2018 as was Earnings per Share (EPS) at 13.0 cents.
CHANGE IN PROFITABILITY ($MILLION)
June 2018 net profit after tax67. 5
Net Interest Income14.9
Lease, fee and other income(4.7)
Selling and administration expenses( 2.1)
Impairment expense1.4
Fair value movement on investment property1.9
One-off operating expenses and break cost(4.2)
Income tax expense(1.1)
June 2019 net profit after tax73.6
Heartland Annual Review 2019
P. 41
FINANCIAL COMMENTARY

$000’sJune 2019June 2018
Interest income 334,330 309,284
Interest expense 136,747 125,483
Net interest income 197,583 183,801
Net operating lease income 1,835 1,670
Lending and credit fee income3,117 2,351
Other income3,307 8,972
Net operating income 205,842 196,794
Operating expenses 85,589 80,433
Profit before impaired asset expense and income tax 120,253 116,361
Fair value movement on investment property1,936 –
Impaired asset expense 20,676 22,067
Profit before income tax 101,513 94,294
Income tax expense 27,896 26,781
Net profit attributable to shareholders 73,617 67,513
Other comprehensive income for the year, net of income tax (7,161) 3,708
Total comprehensive income for the year 66,456 71,221
Basic and diluted earnings per share (cents) 13 13
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2019
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
$000’sJune 2019June 2018
Operating inflows314,339 295,810
Operating outflows(250,906)(221,273)
Changes in operating assets and liabilities(113,345)(125,716)
Net cash flows applied to operating activities(49,912)(51,179)
Net cash flows from investing activities(15,981)(35,931)
Net cash flows from financing activities96,889 79,658
Net increase/(decrease) increase in cash held30,996 (7,452)
Cash and cash equivalents at the beginning of the year49,588 57,040
Closing cash and cash equivalents80,584 49,588
Summary financials
Heartland Annual Review 2019
P. 42
SUMMARY FINANCIALS

Statement of Changes in Equity
For the year ended 30 June 2019
$000’sJune 2019June 2018
Balance at beginning of the year664,160 569,595
NZ IFRS9 adjustment(19,283)–
Restated balance at beginning of the year644,877 569,595
Net profit attributable to shareholders73,617 67,513
Other comprehensive income for the year, net of income tax(7,161)3,708
Dividends paid net of reinvested dividends(36,266)(35,150)
Issue of share capital net of transaction cost(18)58,315
Other movements619 179
Balance at end of the year675,668 664,160
Consolidated Statement of Financial Position
As at 30 June 2019
$000’sJune 2019June 2018
Cash and cash equivalents80,584 49,588
Investments354,928 340,546
Investment properties11,132 9,196
Derivative financial instruments12,675 923
Finance receivables3,029,231 3,984,941
Finance receivables - reverse mortgages1,318,819 -
Operating lease vehicles15,516 17,524
Other assets21,309 14,411
Intangible assets72,679 74,401
Deferred tax asset9,531 5,319
Total assets4,926,404 4,496,849
Retail deposits3,153,681 2,881,805
Other borrowings1,056,653 914,253
Tax liabilities7,532 11,459
Derivative financial instruments10,372 2,562
Trade and other payables22,498 22,610
Total liabilities4,250,736 3,832,689
Equity
Share capital558,970 542,315
Retained earnings and other reserves116,698 121,845
Total equity675,668 664,160
Total equity and liabilities4,926,404 4,496,849
Heartland Annual Review 2019
P. 43
SUMMARY FINANCIALS

DIRECTORS
HEARTLAND GROUP BOARD
Geoff Ricketts
Chair and Independent Non-Executive Director
Jeff Greenslade
Executive Director and CEO
Ellie Comerford
Independent Non-Executive Director
Sir Chris Mace
Independent Non-Executive Director
Greg Tomlinson
Non-Executive Director
HEARTLAND BANK BOARD
Bruce Irvine
Chair and Independent Non-Executive Director
Ellie Comerford
Independent Non-Executive Director
Jeff Greenslade
Executive Director
John Harvey
Independent Non-Executive Director
Kate Morrison
Independent Non-Executive Director
Geoff Ricketts
Independent Non-Executive Director
Vanessa Stoddart
Independent Non-Executive Director
STRATEGIC MANAGEMENT GROUP
Jeff Greenslade
CEO, Heartland Group
Chris Flood
CEO, Heartland Bank
Cherise Barrie
Chief Financial Officer
Laura Byrne
Chief Culture & Communications Officer ( joint)
Grant Kemble
Chief Risk Officer
Rochelle Moloney
Chief Culture & Communications Officer ( joint)
Sarah Smith
Chief Technology 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 Avenue,
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
Heartland Annual Review 2019
P. 44
DIRECTORY
insight
creative.co.nz
HEART022

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FINANCIAL REPORT 2019

Financial statements
This Annual Report of Heartland Group Holdings Limited
(Heartland) is dated 30 September 2019 and comprises this
Financial Report and the accompanying Annual Review.
The Annual Report is signed on behalf of the Board of
Directors by:
GEOFFREY RICKETTS JEFF GREENSLADE
Chair of the Board Chief Executive Officer

Financial statements
General information...............................................................................................2
Directors..................................................................................................................3
Auditor ....................................................................................................................3
Other material matters .........................................................................................3
Directors’ statements ............................................................................................4
Consolidated statement of comprehensive income ..........................................5
Consolidated statement of changes in equity ....................................................6
Consolidated statement of financial position ....................................................7
Consolidated statement of cash flows ................................................................8
Notes to the financial statements
1 Financial statements preparation ...............................................................10
Performance
2 Segment reporting .......................................................................................15
3 Net interest income ......................................................................................17
4 Net operating lease income .........................................................................17
5 Other income.................................................................................................18
6 Operating expenses ......................................................................................18
7 Impaired asset expense ................................................................................19
8 Taxation .........................................................................................................20
9 Earnings per share ........................................................................................21
Financial position
10 Investments ...................................................................................................22
11 Investment properties..................................................................................22
12 Derivative financial instruments .................................................................23
13 Finance receivables .......................................................................................25
14 Operating lease vehicles ...............................................................................28
15 Borrowings .....................................................................................................28
16 Share capital and dividends .........................................................................29
17 Other balance sheet items ...........................................................................30
18 Other reserves ...............................................................................................31
19 Related party transactions and balances ...................................................31
20 Fair value ........................................................................................................32
Risk management
21 Enterprise risk management program .......................................................36
22 Credit risk exposure ......................................................................................39
23 Liquidity risk ...................................................................................................42
24 Interest rate risk ............................................................................................44
Other disclosures
25 Significant subsidiaries .................................................................................46
26 Structured entities........................................................................................46
27 Staff share ownership arrangements .........................................................47
28 Concentrations of funding ...........................................................................50
29 Contingent liabilities and commitments ....................................................50
30 Events after the reporting date ..................................................................50
Auditor’s report ......................................................................................................51
Corporate governance ...........................................................................................56
Disclosures
Directors' disclosures .............................................................................................64
Executive remuneration ........................................................................................72
Diversity report ......................................................................................................73
Shareholder information .......................................................................................76
Other information ..................................................................................................77
Directory ................................................................................................................78
CONTENTS

Financial statements
GENERAL INFORMATION
These financial statements are issued by Heartland Group Holdings Limited and its subsidiaries (the Group) for the year ended 30 June 2019.
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) and subsidiaries (HBL Group) 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 financial statements presented for the year ended 30 June 2019 are for the Group
as if it had operated for the entire period. Comparative figures shown are for the consolidated HBL Group.
Name and address for service
The Group’s address for service is Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland.
Details of incorporation
HGH was incorporated under the Companies Act 1993 on 19 July 2018.
GENERAL INFORMATION
Heartland Financial Report 2019
P. 2

DIRECTORS
All Directors of the Group reside in New Zealand with the exception of Ellen Comerford who resides in Australia. Communications to the Directors
can be sent to Heartland Group Holdings Limited, 35 Teed Street, Newmarket, Auckland. At the time of the signing of these Financial Statements
the Directors of the Group and their details were:
Chairman - Board of Directors
Name: Geoffrey Thomas Ricketts CNZM Qualifications: LLB(Hons), LLD (honoris causa), CFInstD
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships:
Asteron Life Limited, Janmac Capital Limited, Maisemore Enterprises Limited, MCF2 Message4U Limited, MCF 2 Nexus Limited, MCF 7 Limited,
MCF 8 Limited, MCF 9 Limited, MCF 10 Limited, MCF2 (Fund 1) Limited, MCF2A General Partner Limited, MCF2 GP Limited, MCF3 GP Limited,
MCF3B General Partner Limited, MCF3A General Partner Limited, MCF2 FFF-GK Limited, MC Medical Properties Limited, Mercury Capital No.1
Fund Limited, Mercury Capital No. 1 Trustee Limited, Mercury Pharmacy Holdings Limited, Mercury Medical Holdings Limited, New Zealand Catholic
Education Office Limited, NZCEO Finance Limited, O & E Group Services Limited, Oceania and Eastern Finance Limited, Oceania and Eastern
Group Funds Limited, Oceania and Eastern Holdings Limited, Oceania and Eastern Limited, Oceania and Eastern Securities Limited, Oceania North
Limited, Oceania Securities Limited, Quartet Equities Limited, Suncorp Group Holdings (NZ) Ltd, Suncorp Group New Zealand Limited, Suncorp
Group Services NZ Limited, The Centre for Independent Studies Limited, The Todd Corporation Limited, Todd Management Services Limited, Todd
Offshore Limited, Vero Insurance New Zealand Limited, Vero Liability Insurance Limited.
Name: Jeffrey Kenneth Greenslade Qualifications: LLB
Type of Director: Non-Independent Executive Director Occupation: Chief Executive Officer
External Directorships: Nil
Name: Ellen Frances Comerford Qualifications: BEc
Type of Director: Independent Non-Executive Director Occupation: Chief Financial Officer of Hollard Insurance Company Pty Ltd
External Directorships:
Comerford Gohl Holdings Pty Limited, Hollard Holdings Australia Pty Limited, The Hollard Insurance Company Pty Limited.
Name: Sir Christopher Robert Mace KNZM Qualifications: CMInstD
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships:
Akitu Equities Limited, Akitu Capital Limited, Akitu Group Company No 1 Limited, Akitu Group Company No 2 Limited, Akitu Group Company
No 3 Limited, Akitu Health Services Limited, Akitu Investments Limited, Akitu Investments No 2 Limited, Goldburn Resources Limited, Helicopter
Enterprises Limited, Janik Equities Limited, Janmac Capital Limited, J N S Capital Limited, Mace Capital Limited, Mace Construction Limited,
Mace Developments Limited, Mace Enterprises Limited, Mace Investments Limited, Maisemore Enterprises Limited, Nuffield Forestry Limited,
Oceania and Eastern Finance Limited, Oceania and Eastern Group Funds Limited, Oceania and Eastern Holdings Limited, Oceania and Eastern
Limited, Oceania and Eastern Securities Limited, O & E Group Services Limited, Paroa Bay Station Limited, PPT Trustee (NZ) Limited, Quartet
Equities Limited, St. Just Enterprises Limited, Te Puia Tapapa GP Limited.
Name: Gregory Raymond Tomlinson Qualifications: AME
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships:
Alta Cable Holdings Limited, Argenta Limited, Chippies Vineyard Limited, Forte Health Group Limited, Forte Health Limited, Impact Capital
Management Limited, Impact Capital Limited, Indevin Group Limited, Little Ngakuta Trust Company Limited, Mountbatten Trustee Limited, Nearco
Stud Limited, Ngakuta Trust Company Limited, Oceania Healthcare Limited, Pelorus Finance Limited, St Leonards Limited, The Icehouse Limited,
Tomlinson Group NZ Limited, Tomlinson Holdings Limited, Tomlinson Group Investments Limited, Tomlinson Ventures Limited.
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 these Consolidated Financial
statements which would, if disclosed in these Consolidated Financial Statements, materially affect the decision of a person to subscribe for debt
securities of which the Group is the issuer.
DIRECTORS
Heartland Financial Report 2019
P. 3

Financial statements
DIRECTORS’ STATEMENTS
The Consolidated Financial Statements are dated 15 August 2019 and have been signed by all the Directors.
G T Ricketts (Chair) E F Comerford
J K Greenslade Sir C R Mace
G R Tomlinson
DIREC TORS ’ STATEMENTS
Heartland Financial Report 2019
P. 4

Consolidated statement of comprehensive income
For the year ended 30 June 2019
$000’sNOTEJune 2019June 2018
Interest income3 334,330 309,284
Interest expense3 136,747 125,483
Net interest income 197,583 183,801
Operating lease income4 5,262 5,675
Operating lease expenses4 3,427 4,005
Net operating lease income 1,835 1,670
Lending and credit fee income3,117 2,351
Other income5 3,307 8,972
Net operating income 205,842 196,794
Operating expenses6 85,589 80,433
Profit before impaired asset expense and income tax 120,253 116,361
Fair value movement on investment property11 1,936 -
Impaired asset expense7 20,676 22,067
Profit before income tax 101,513 94,294
Income tax expense8 27,896 26,781
Profit for the year 73,617 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 derivative financial instruments, net of income tax (4,762) 72
Movement in fair value reserve, net of income tax 2,968 981
Movement in foreign currency translation reserve (5,281) 2,315
Items that will not be reclassified to profit or loss:
Movement in defined benefit reserve, net of income tax (86) 340
Other comprehensive income for the year, net of income tax (7,161) 3,708
Total comprehensive income for the year 66,456 71,221
Earnings per share
Basic earnings per share9 13c 13c
Diluted earnings per share9 13c 13c
Total comprehensive income for the year is attributable to the owners of the Group.
The notes on pages 10 to 50 are an integral part of this consolidated financial statement.
CONSOLIDATED STATEMENTS
Heartland Financial Report 2019
P. 5

Financial statements
Consolidated statement of changes in equity
For the year ended 30 June 2019
June 2019June 2018
$000’sNote
Share
CapitalReserves
Retained
Earnings
Total
Equity
Share
CapitalReserves
Retained
Earnings
Total
Equity
Balance at beginning of year542,315 4,585 117,260 664,160 470,516 1,437 97,642 569,595
NZ IFRS 9 adjustment1 – – (19,283)(19,283)– – – –
Restated balance at beginning of year542,315 4,585 97,977 644,877 470,516 1,437 97,642 569,595
Total comprehensive income for the year
Profit for the year– – 73,617 73,617 – – 67,513 67,513
Other comprehensive income/(loss) net of
income tax– (7,161)– (7,161)– 3,708 – 3,708
Total comprehensive income for the year– (7,161)73,617 66,456 – 3,708 67,513 71,221
Contributions by and distributions to owners
Dividends paid16 – – (50,599)(50,599)– – (47,895)(47,895)
Dividend reinvestment plan16 14,333 – – 14,333 12,745 – – 12,745
Issue of share capital– – – – 59,225 – – 59,225
Transaction costs associated with capital
raising(18)– – (18)(910)– – (910)
Share based payments– 619 – 619 – 666 – 666
Shares vested2,340 (2,340)– – 739 (1,226)– (487)
Total transactions with owners16,655 (1,721)(50,599)(35,665)71,799 (560)(47,895)23,344
Balance at the end of the year558,970 (4,297)120,995 675,668 542,315 4,585 117,260 664,160
The notes on pages 10 to 50 are an integral part of this consolidated financial statement.
CONSOLIDATED STATEMENTS
Heartland Financial Report 2019
P. 6

Consolidated statement of financial position
As at 30 June 2019
$000’sNOTEJune 2019June 2018
Assets
Cash and cash equivalents80,584 49,588
Investments10 354,928 340,546
Investment properties11 11,132 9,196
Derivative financial instruments12 12,675 923
Finance receivables13 3,029,231 3,984,941
Finance receivables - reverse mortgages13 1,318,819 -
Operating lease vehicles14 15,516 17,524
Other assets17 21,309 14,411
Intangible assets17 72,679 74,401
Deferred tax asset8 9,531 5,319
Total assets4,926,404 4,496,849
Liabilities
Retail deposits15 3,153,681 2,881,805
Other borrowings15 1,056,653 914,253
Tax liabilities7,532 11,459
Derivative financial instruments12 10,372 2,562
Trade and other payables1722,498 22,610
Total liabilities4,250,736 3,832,689
Equity
Share capital16 558,970 542,315
Retained earnings and other reserves116,698 121,845
Total equity675,668 664,160
Total equity and liabilities4,926,404 4,496,849
Total interest earning and discount bearing assets4,773,180 4,361,937
Total interest and discount bearing liabilities4,208,879 3,790,067
The notes on pages 10 to 50 are an integral part of this consolidated financial statement.
CONSOLIDATED STATEMENTS
Heartland Financial Report 2019
P. 7

Financial statements
$000’sNoteJune 2019June 2018
Cash flows from operating activities
Interest received304,991 280,471
Operating lease income received4,761 4,941
Lending, credit fees and other income received4,587 10,398
Operating inflows314,339 295,810
Payments to suppliers and employees89,607 73,672
Interest paid135,404 123,783
Taxation paid25,895 23,818
Operating outflows250,906 221,273
Net cash flows from operating activities before changes in operating assets and liabilities63,433 74,537
Proceeds from sale of operating lease vehicles4,641 5,577
Purchase of operating lease vehicles(5,495)(7,163)
Net movement in finance receivables(384,367)(431,863)
Net movement in deposits271,876 307,733
Net cash flows applied to operating activities(49,912)(51,179)
Cash flows from investing activities
Net proceeds from sale of investment properties– 3,185
Proceeds from equity investments– 300
Total cash provided from investing activities– 3,485
Purchase of property plant equipment and intangible assets4,513 8,837
Net increase in investments11,468 23,107
Purchase of investment properties– 7,472
Total cash applied to investing activities15,981 39,416
Net cash flows applied to investing activities(15,981)(35,931)
Cash flows from financing activities
Net increase/(decrease) in wholesale funding31,000 (93,507)
Proceeds from issue of Unsubordinated Notes125,000 150,000
Increase in share capital– 58,315
Total cash provided from financing activities156,000 114,808
Dividends paid16 36,265 35,150
Repayment of subordinated notes15 22,846 –
Total cash applied to financing activities59,111 35,150
Net cash flows from financing activities96,889 79,658
Net increase/(decrease) increase in cash held30,996 (7,452)
Opening cash and cash equivalents49,588 57,040
Closing cash and cash equivalents80,584 49,588
The notes on pages 10 to 50 are an integral part of this consolidated financial statement.
Consolidated statement of cash flows
For the year ended 30 June 2019
CONSOLIDATED STATEMENTS
Heartland Financial Report 2019
P. 8

Consolidated statement of cash flows
For the year ended 30 June 2019
RECONCILIATION OF PROFIT AFTER TAX TO NET CASH FLOWS FROM OPERATING ACTIVITIES
$000’sNoteJune 2019June 2018
Profit for the year73,617 67,513
Add / (less) non-cash items:
Depreciation and amortisation expense5,760 4,638
Depreciation on lease vehicles3,363 3,771
Capitalised net interest income(29,417)(26,373)
Impaired asset expense7 20,676 22,067
Investment property fair value movement(1,936)–
Total non-cash items (1,554)4,103
Add / (less) movements in operating assets and liabilities:
Finance receivables(384,367)(431,863)
Operating lease vehicles(1,354)(2,257)
Other assets(8,260)(635)
Current tax (3,927)1,603
Derivative financial instruments(8,701)(1,638)
Deferred tax3,759 2,533
Deposits271,876 307,733
Other liabilities8,999 1,729
Total movements in operating assets and liabilities(121,975)(122,795)
Net cash flows applied to operating activities(49,912)(51,179)
The notes on pages 10 to 50 are an integral part of this consolidated financial statement.
CONSOLIDATED STATEMENTS
Heartland Financial Report 2019
P. 9

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
1 Financial statements preparation
Reporting entity
The financial statements presented are the consolidated financial statements comprising Heartland Group Holdings Limited (HGH) and its
subsidiaries (the Group). Refer note 25 – Significant subsidiaries for further details.
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 Financial Markets
Conduct (FMC) reporting entity for the purposes of the Financial Markets Conduct Act 2013.
As common control remained after the restructure, the financial statements presented for the year ended 30 June 2019 are for the Group
as if it had operated for the entire period. Comparative figures shown are for the consolidated HBL Group.
As at 30 June 2019, the Group is a company incorporated in New Zealand under the Companies Act 1993.
Basis of preparation
The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP) and the
NZX Main Board Listing Rules and the ASX Listing Rules. The financial statements comply with New Zealand equivalents to International Financial
Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards as appropriate for profit-oriented entities. The financial
statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
The financial statements are presented in New Zealand dollars which is the Group’s currency. Unless otherwise indicated, amounts are rounded
to the nearest thousand.
The financial statements have been prepared on the basis of historical cost, except for certain financial instruments and investment property,
which are measured at their fair values as identified in the accounting policies set out in the accompanying notes.
The financial statements have been prepared on a going concern basis after considering the Group’s funding and liquidity position.
The accounting policies adopted have been applied consistently throughout the periods presented in these financial statements.
Certain comparative information has been restated to comply with the current year presentation.
Principles of consolidation
The consolidated financial statements of the Group incorporate the assets, liabilities and results of all controlled entities. Controlled entities are
all entities in which the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. Intercompany transactions, balances and any unrealised income and expense (except for foreign
currency transaction gains or losses) between controlled entities are eliminated.
Assets and liabilities with transactional currency that is not the New Zealand dollar, are translated at the exchange rates ruling at balance date.
Revenue and expense items are translated at the spot rate at the transaction date or a rate approximating that rate. Exchange differences are
taken to the Consolidated Statement of Comprehensive Income.
Changes in accounting policy
The Group adopted NZ IFRS 9 - Financial instruments (NZ IFRS 9) and NZ IFRS 15 - Revenue from contracts with customers (NZ IFRS 15) 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 have been made to accounting policies as result of the application of NZ IFRS 9.
Impairment of finance receivables
At each reporting date, the Group applies a three stage approach to measuring expected credit losses (ECL) to Finance receivables not carried
at fair value. The ECL model assesses whether there has been a significant increase in credit risk since initial recognition
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.
Heartland Financial Report 2019
P. 10

NOTES
After initial recognition, the Group applies a three stage test to measuring ECLs. Assets may migrate through the following stages based on their
change in credit quality.
Stage 1 12 months ECL (past due 30 days or less)
Where there has been no evidence of increased credit risk since initial recognition, and are not credit impaired upon origination,
the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months is recognised.
Stage 2 Lifetime ECL not credit impaired (greater than 30 but less than 90 days past due)
Where there has been a significant increase in credit risk.
Stage 3 Lifetime ECL credit impaired (90 days past due or more)
Objective evidence of impairment, so are considered to be in default or otherwise credit impaired.
In determining whether credit risk has increased, all available information relevant to the assessment of economic conditions at the reporting date
are taken into consideration. To do this the Group considers its historical loss experience and adjusts this for current observable data. In addition
to this the Group uses reasonable and supportable forecasts of future economic conditions including experienced judgement to estimate the
amount of an expected impairment loss. Future economic conditions consider macroeconomic factors such as unemployment, interest rate, gross
domestic product, and inflation, and requires an evaluation of both the current and forecast direction of the economic cycle. The methodology and
assumptions including any forecasts of future economic conditions are reviewed regularly as incorporating forward-looking information increases
the level of judgement as to how changes in these macroeconomic factors will affect the ECL.
The calculation of expected credit loss is modelled for portfolios of like assets. For portfolios which are either new or too small to model, judgement
is used to determine impairment provisions.
Impairment of investments
The requirements of NZ IFRS 9 also apply to the Group’s investments. The impact of which has been assessed as not material.
The table below shows 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 Instruments
NZ IAS 39
Measurement category
NZ IFRS 9
Measurement category
NZ IAS 39
Carrying value
June 2018
NZ IFRS 9
Carrying value
1 July 2018
Financial assets
Bank bonds and floating rate notesAvailable for sale (AFS)Fair value through other
comprehensive income (FVOCI)230,754230,754
Public sector securities and Corporate bondsAFSFVOCI57,81857,818
Local authority stockAFSFVOCI42,28042,280
Equity investmentsFair value through profit
or loss (FVTPL)FVOCI 9,6949,694
Finance receivables – reverse mortgagesAmortised costFVTPL1,129,9561,132,838
Finance receivablesAmortised costAmortised cost2,854,9852,824,819
Trade receivablesAmortised costAmortised cost1,6131,613
1 Financial statements preparation (continued)
Heartland Financial Report 2019
P. 11

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
The table below is a reconciliation of the balance sheet detailing the changes from NZ IAS 39 to NZ IFRS 9.
$000’s
Audited
12 months to
June 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
Derivative financial instruments923 – 923
Finance receivables3,984,941 (27,284)3,957,657
Operating lease vehicles17,524 – 17,524
Other assets14,411 – 14,411
Intangible assets74,401 – 74,401
Deferred tax asset5,319 8,001 13,320
Total assets4,496,849 (19,283)4,477,566
Liabilities
Retail deposits2,881,805 – 2,881,805
Other borrowings914,253 – 914,253
Tax liabilities11,459 – 11,459
Derivative financial instruments2,562 2,562
Trade and other payables22,610 – 22,610
Total liabilities3,832,689 – 3,832,689
Equity
Share capital542,315 – 542,315
Retained earnings and reserves121,845 (19,283)102,562
Total equity664,160 (19,283)644,877
Total equity and liabilities4,496,849 – 4,477,566
Impact of NZ IFRS 9 adjustment on adoption
Additional provision for impairment recognised at 1 July 2018 on:
– Finance receivables28,085
– Finance receivables - reverse mortgages (2,824)
Provision for impairment at 1 July 201825,261
Change in valuation basis - reverse mortgages 2,023
Income tax expense(8,001)
Net impact on retained earnings19,283
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.
1 Financial statements preparation (continued)
Heartland Financial Report 2019
P. 12

NOTES
1 Financial statements preparation (continued)
Accounting standards issued but 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 January 201930 June 2020
NZ IFRS 9 Financial instruments: contains relaxed requirements for hedge effectiveness, and
expanded disclosures.
1 January 2019To be confirmed
NZ IFRS 17 Insurance contracts: establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts.
1 January 202130 June 2022
NZ IFRS 16 Leases
NZ IFRS 16 Leases replaces NZ IAS 17 Leases and will be adopted by the Group from 1 July 2019. NZ IFRS 16 requires that a right of use asset
and lease liability is recognised at lease commencement date. The value of the lease liability is the present value of all future payments arising
from a lease contract. The right of use asset will be depreciated over the life of the lease. This could affect the timing on expenses of leased assets.
This change will primarily affect leases relating to properties and car leases. Currently the Group accounts for these as operating leases.
The Group intends to apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption.
All practical expedients available to the Group around short term leases, and low value leases will be applied. Right-of-use assets will be measured
on transition as if the new rules had always been applied, using the transition discount rate. The cumulative effect of adopting NZ IFRS 16 is
estimated at $2 million and will be recognised as an adjustment to the opening balance of retained earnings at 1 July 2019, with no restatement
of comparative information.
NZ IFRS 9 Financial instruments
NZ IFRS 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken
when hedging financial and non-financial risks. NZ IFRS 9 provides the Group with an accounting policy choice to continue to apply the NZ IAS 39
hedge accounting requirements until the International Accounting Standards Board’s ongoing project on macro hedge accounting is completed.
The Group’s current expectation is that it will continue to apply the hedge accounting requirements of NZ IAS 39.
Estimates and judgements
The preparation of the Group’s financial statements requires the use of estimates and judgement. This note provides an overview of the areas that
involve a higher degree of judgement or complexity. Detailed information about each of these estimates and judgements is included in the relevant
notes together with the basis of calculation for each affected item in the financial statements.
▲Provisions for impairment – The effect of credit risk is quantified based on management’s best estimate of future cash repayments and proceeds
from any security held or by reference to risk profile groupings and historical loss data. Refer to Note 13 - Finance receivables for further details.
▲Fair value of reverse mortgages – Fair value is quantified by the transaction price and management’s subsequent best estimate of the risk profile
of the reverse mortgage portfolio. Refer to Note 20 – Fair value for further details.
▲Goodwill – Determining the fair value of assets and liabilities of acquired businesses requires the exercise of management judgement. The carrying
value of goodwill is tested annually for impairment, refer to Note 17 - Other balance sheet items.
Assumptions made at each reporting date (e.g. the calculation of the provision for impairment and fair value adjustments) are based on best
estimates as at that date. Although the Group has internal controls in place to ensure that estimates can be reliably measured, actual amounts may
differ from these estimates. The estimates and judgements used in the preparation of the Group’s financial statement are continually evaluated.
They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity.
Revisions to accounting estimates are recognised in the reporting period in which the estimates are revised and in any future periods affected.
Heartland Financial Report 2019
P. 13

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
1 Financial statements preparation (continued)
Financial assets and liabilities
The Group initially recognises finance receivables and borrowings on the date that they are originated. All other financial assets and liabilities
(including assets and liabilities designated at fair value through profit or loss) are initially recognised on the trade date at which the Group becomes
a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive
the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset
are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
The Group enters into transactions whereby it transfers assets recognised on its Statement of Financial Position, but retains either all risks or
rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not
derecognised from the Statement of Financial Position. Transfers of assets with the retention of all or substantially all risks and rewards include,
for example, securitised assets and repurchase transactions.
Offsetting financial instruments
The Group offsets financial assets and financial liabilities and reports the net balance in the balance sheet where there is currently a legally
enforceable right to set off and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Heartland Financial Report 2019
P. 14

NOTES
PERFORMANCE
2 Segment reporting
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.
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 NZ.
Other PersonalProviding 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 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.
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 and Other Personal. Prior year numbers have been restated accordingly.
Heartland Financial Report 2019
P. 15

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
$000’sMotor
Reverse
Mortgages
Other
PersonalBusiness RuralAustraliaOtherTotal
June 2019
Net interest income 54,753 20,673 16,345 54,334 30,865 21,148 (535)197,583
Net other income2,313 224 2,563 1,524 816 1,582 (763)8,259
Net operating income57,066 20,897 18,908 55,858 31,681 22,730 (1,298)205,842
Operating expenses2,543 2,279 5,602 9,163 3,263 5,115 57,624 85,589
Profit/(loss) before impaired asset expense and
income tax54,523 18,618 13,306 46,695 28,418 17,615 (58,922)120,253
Fair value movement on investment property1,936 1,936
Impaired asset expense5,009 268 8,429 7,102 (132)– – 20,676
Profit/(loss) before income tax49,514 18,350 4,877 41,529 28,550 17,615 (58,922)101,513
Income tax expense– – – – – 5,016 22,880 27,896
Profit/(loss) for the year49,514 18,350 4,877 41,529 28,550 12,599 (81,802)73,617
Total assets 1,074,446 561,211 215,253 1,096,253 643,278 758,268 577,695 4,926,404
Total liabilities– – – – – 740,111 3,510,625 4,250,736
$000’sMotor
Reverse
Mortgages
Other
PersonalBusiness RuralAustraliaOtherTotal
June 2018 (restated)
Net interest income 50,328 18,189 12,421 51,189 32,122 20,215 (663)183,801
Net other income2,515 262 2,392 1,124 163 310 6,227 12,993
Net operating income52,843 18,451 14,813 52,313 32,285 20,525 5,564 196,794
Operating expenses2,914 1,670 6,552 8,130 4,351 4,142 52,674 80,433
Profit/(loss) before impaired asset expense and
income tax49,929 16,781 8,261 44,183 27,934 16,383 (47,110)116,361
Impaired asset expense7,779 (362)5,741 6,275 2,400 234 – 22,067
Profit/(loss) before income tax42,150 17,143 2,520 37,908 25,534 16,149 (47,110)94,294
Income tax expense– – – – – – 26,781 26,781
Profit/(loss) for the year42,150 17,143 2,520 37,908 25,534 16,149 (73,891)67,513
Total assets955,088 453,119 178,309 1,048,239 654,935 695,251 511,908 4,496,849
Total liabilities– – – – – – 3,832,689 3,832,689
2 Segment reporting (continued)
Heartland Financial Report 2019
P. 16

NOTES
3 Net interest income
Policy
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.
$000’sJune 2019June 2018
Interest income
Cash and cash equivalents717 842
Investments10,864 9,515
Finance receivables242,556 231,848
Finance receivables - reverse mortgages80,193 67,079
Total interest income334,330 309,284
Interest expense
Retail deposits97,119 90,880
Other borrowings36,382 31,976
Net interest expense on derivative financial instruments3,246 2,627
Total interest expense136,747 125,483
Net interest income197,583 183,801
4 Net operating lease income
Policy
Leases where the Group retains substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income
and expense from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over
the lease term. Profits on the sale of operating lease assets are included as part of operating lease income. Current year depreciation and losses
on the sale of operating lease assets are included as part of operating lease expenses. The leased assets are depreciated over their useful lives
on a basis consistent with similar assets.
$000’sJune 2019June 2018
Operating lease income
Lease income4,761 5,004
Gain on disposal of lease assets501 671
Total operating lease income5,262 5,675
Operating lease expense
Depreciation on lease assets3,363 3,771
Direct lease costs64 234
Total operating lease expenses3,427 4,005
Net operating lease income1,835 1,670
Heartland Financial Report 2019
P. 17

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
5 Other income
Policy
Investment property
Rental income from investment properties is recognised on a straight-line basis over the term of the relevant lease.
Other income
Other items of income are recognised at the fair value of the consideration received or receivable.
$000’sJune 2019June 2018
Rental income from investment properties662 739
Insurance income2,436 2,238
Gain on sale of investments173 156
Other income
1
36 5,839
Total other income3,307 8,972
1 In June 2018 Other income includes
• A $0.6 million gain on the sale of the HBL’s invoice finance business.
• A $4.8 million gain in relation to the sale of property pertaining to a loan previously written off for which the bank had entered into a profit share arrangement with third parties.
6 Operating expenses
Policy
Operating expenses are recognised as the underlying service is rendered or over a period in which an asset is consumed or once a liability is
incurred.
$000’sJune 2019June 2018
Personnel expenses46,346 45,539
Directors’ fees1,099 972
Superannuation1,081 921
Audit and review of financial statements
1
614 433
Other assurance services paid to auditor
2
52 36
Other fees paid to auditor
3
–171
Depreciation - property, plant and equipment1,867 1,386
Amortisation - intangible assets3,893 3,252
Operating lease expense as a lessee1,807 2,033
Legal and professional fees3,130 2,267
Other operating expenses 25,700 23,423
Total operating expenses85,589 80,433
1 Audit and review of financial statement includes fees paid for both audit of financial statement and review of interim financial statement.
2 Other assurance services paid to the auditor comprise review of regulatory returns, trust deed reporting, registry audits and other agreed upon procedures engagements.
3 Other fees paid to the auditor include professional fees in connection with regulatory advisory services and health and safety framework review.

Heartland Financial Report 2019
P. 18

NOTES
7 Impaired asset expense
Policy
Impairment of finance receivables
At each reporting date, the Group applies a three stage approach to measuring expected credit losses (ECL) to Finance receivables not carried
at fair value. The ECL model assesses whether there has been a significant increase in credit risk since initial recognition.
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.
After initial recognition, the Group applies a three stage test to measuring ECLs. Assets may migrate through the following stages based
on their change in credit quality.
Stage 1 – 12 months ECL (past due 30 days or less)
Where there has been no evidence of increased credit risk since initial recognition, and are not credit impaired upon origination, the portion
of the lifetime ECL associated with the probability of default events occurring within the next 12 months is recognised.
Stage 2 – Lifetime ECL not credit impaired (greater than 30 but less than 90 days past due)
Where there has been a significant increase in credit risk.
Stage 3 – Lifetime ECL credit impaired (90 days past due or more)
Objective evidence of impairment, so are considered to be in default or otherwise credit impaired.
In determining whether credit risk has increased, all available information relevant to the assessment of economic conditions at the reporting
date are taken into consideration. To do this the Group considers its historical loss experience and adjusts this for current observable data.
In addition to this the Group uses reasonable and supportable forecasts of future economic conditions including experienced judgement to
estimate the amount of an expected impairment loss. Future economic conditions consider macroeconomic factors such as unemployment,
interest rate, gross domestic product, and inflation, and requires an evaluation of both the current and forecast direction of the economic cycle.
The methodology and assumptions including any forecasts of future economic conditions are reviewed regularly as incorporating forward-
looking information increases the level of judgement as to how changes in these macroeconomic factors will affect the ECL.
The calculation of expected credit loss is modelled for portfolios of like assets. For portfolios which are either new or too small to model,
judgement is used to determine impairment provisions.
$000’sJune 2019June 2018
Non-securitised
Individually impaired expense1,311 5,190
Collectively impaired expense19,024 16,889
Total non-securitised impaired asset expense20,335 22,079
Securitised
Collectively impaired expense341 (12)
Total securitised impaired asset expense341 (12)
Total
Individually impaired expense1,311 5,190
Collectively impaired expense19,365 16,877
Total impaired asset expense20,676 22,067
Heartland Financial Report 2019
P. 19

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
8 Taxation
Policy
Income tax
Income tax expense for the year comprises current tax and movements in deferred tax balances. Income tax expense is recognised in profit or
loss except to the extent it relates to items recognised directly in other comprehensive income, in which case it is recognised in equity or other
comprehensive income.
Current tax
Current tax is the expected tax receivable or payable on the taxable income for the year, using the tax rate enacted or substantively enacted at
the reporting date, and any adjustment to the tax receivable or payable in respect of previous years. Current tax for current and prior years is
recognised as a liability (or asset) to the extent that is unpaid (or refundable).
Deferred tax
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for accounting purposes and the amounts used for taxation purposes. As required by NZ IAS 12 Income Taxes, a deferred tax asset
is recognised only to the extent that it is probable that a future taxable profit will be available.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST. As the Group is predominantly involved in providing financial services,
only a proportion of GST paid on inputs is recoverable. The non-recoverable proportion of GST is treated as part of the cost of assets at the time
of acquisition or is expensed.
Income tax expense
$000’sJune 2019June 2018
Income tax recognised in profit and loss
Current tax
Current year 25,181 24,861
Adjustments for prior year (1,989) (332)
Tax other rates 277 –
Deferred tax
Current year 3,306 1,898
Tax other rates 54 –
Adjustments for prior year 1,067 354
Total income tax expense recognised 27,896 26,781
Income tax recognised in other comprehensive income
Current tax
Derivatives at fair value reserve (82)(261)
Deferred tax
Defined benefit plan (34)(132)
Fair value movements of cash flow hedges (238)(149)
Total income tax expense recognised in other comprehensive income (354)(542)
Reconciliation of effective tax rate
Profit before income tax 101,513 94,294
Prima facie tax @ 28% 28,424 26,402
Higher tax rate for overseas jurisdiction 331 299
Plus tax effect of items not taxable/deductible 63 58
Adjustments for prior year (922)22
Total income tax expense 27,896 26,781
Heartland Financial Report 2019
P. 20

NOTES
8 Taxation (continued)
Deferred tax assets comprise the following temporary differences:
$000’sJune 2019June 2018
Employee expenses 1,286 1,240
Provision for impairment 14,574 8,427
Investment properties 4 546
Intangibles and property, plant and equipment (4,182) (2,100)
Deferred acquisition costs (1,321) (1,476)
Operating lease vehicles (800) (850)
Other temporary differences (30) (468)
Total deferred tax assets 9,531 5,319
Opening balance of deferred tax assets 5,319 7,852
Movement recognised in profit or loss (4,537) (2,252)
Movement recognised in other comprehensive income (272) (281)
Foreign exchange and other 777 –
Movement recognised in retained earnings 8,244 –
Closing balance of deferred tax assets 9,531 5,319
Imputation credit account
$000’sJune 2019June 2018
Imputation credit account 9,116 6,717
9 Earnings per share
June 2019June 2018
Earnings
per share
cents
Net profit
after tax
$000’s
Weighted average
no. of shares
000’s
Earnings
per share
cents
Net profit
after tax
$000’s
Weighted average
no. of shares
000’s
Basic earnings 13 73,617 563,364 13 67,513 538,594
Diluted earnings 13 73,617 563,364 13 67,513 538,594
Heartland Financial Report 2019
P. 21

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
FINANCIAL POSITION
10 Investments
Policy
The Group holds investments in bank deposits, bank bonds and floating rate notes, local authority stock, public securities, corporate bonds and
equity investments. The fair values are derived by reference to published price quotations in an active market or modelled using observable
market rates. Investments are classified as being fair value through other comprehensive income.
$000’sJune 2019June 2018
Bank deposits, bank bonds and floating rate notes246,724 230,754
Public sector securities and corporate bonds82,370 57,818
Local authority stock13,399 42,280
Equity investments12,435 9,694
Total investments354,928 340,546
11 Investment properties
Policy
Investment properties are initially recorded at fair value, with subsequent changes in fair value recognised in Profit or loss. Fair values are
determined by qualified independent valuers or other similar external evidence, adjusted for changes in market conditions and the time since
last valuation.
Investment properties have been acquired through the enforcement of security over finance receivables and are held to earn rental income or
for capital appreciation (or both).
$000’sJune 2019June 2018
Opening balance9,196 4,909
Acquisition– 7,472
Fair value movement1,936 –
Disposals– (3,185)
Closing balance11,132 9,196
A $1.9 million increase in the fair value of non-core legacy property assets has been recognised, reflecting Management’s view on the current
market value of this portfolio.
Heartland Financial Report 2019
P. 22

NOTES
12 Derivative financial instruments
Policy
Derivative financial instruments are contracts whose value is derived from changes in one or more underlying financial instruments or indices.
They include forward contracts, swaps, options and combinations of these instruments.
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at
their fair value. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
Fair values are obtained from quoted market prices in active markets, including recent market transactions, and valuation techniques, including
discounted cash flow models and options pricing models, as appropriate. Fair values include adjustment for counterparty credit risk. The method
of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. A hedge instrument is a designated derivative, the changes in fair values or cash flows of which are expected to offset
changes in the fair value of cash flows of a designated hedged item.
A hedged item is an asset, liability, firm commitment or highly probable forecast transaction that exposes the Group to risk of changes in fair
value or cash flows, and that is designated as being hedged. The Group applies fair value hedge accounting to hedge movements in the value
of fixed interest rate assets and liabilities subject to interest rate risk. The Group applies cash flow hedge accounting to hedge the variability in
highly probable forecast future cash flows attributable to interest rate risk on variable rate assets and liabilities.
Fair value hedge accounting
The criteria that must be met for a relationship to qualify for hedge accounting include:
▲the hedging relationship must be formally designated and documented at inception of the hedge,
▲effectiveness testing must be carried out to ensure the hedge is effective, consistent with the originally documented risk management
strategy, and
▲the instruments must involve a party external to the Group.
The Group documents, at the inception of the transaction, the relationship between hedged items and hedging instruments, as well as its risk
management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective on offsetting changes
in fair value of hedged items.
Subsequent to initial designation, changes in the fair value of derivatives that are designated and qualify for fair value hedge accounting
are recorded in the Consolidated Statement of Comprehensive Income together with any changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk. The movement in fair value of the hedged item attributable to the hedged risk is made as
an adjustment to the carrying value of the hedged asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, the adjustment to carrying
amount of a hedged item is amortised to the Consolidated Statement of Comprehensive Income on an effective yield basis over the remaining
period to maturity of the hedged item. Where the hedged item is derecognised from the balance sheet, the adjustment to the carrying amount
of the asset or liability is immediately transferred to the Consolidated Statement of Comprehensive Income.
Heartland Financial Report 2019
P. 23

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
Cash flow hedge accounting
The criteria that must be met for a relationship to qualify for hedge accounting include:
▲the hedging relationship must be formally designated and documented at inception of the hedge,
▲effectiveness testing must be carried out to ensure the hedge is effective, consistent with the originally documented risk management
strategy, and
▲the instruments must involve a party external to the Group.
The Group documents, at the inception of the transaction, the relationship between hedged items and hedging instruments, as well as its risk
management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective on offsetting changes
in cash flows of hedged items.
A fair value gain or loss associated with the effective portion of a derivative designated as a cash flow hedge is recognised initially in the hedging
reserve. The ineffective portion of a fair value gain or loss is recognised immediately in the Consolidated Statement of Comprehensive Income.
When a hedging derivative expires or is sold, the hedge no longer meets the criteria for hedge accounting, or the Group elects to revoke the
hedge designation, the cumulative gain or loss on the hedging derivative remains in the cash flow hedging reserve until the forecast transaction
occurs and affects income, at which point it is transferred to the corresponding income or expense line. If a forecast transaction is no longer
expected to occur, the cumulative gain or loss on the hedging derivative previously reported in the cash flow hedging reserve is immediately
transferred to the Consolidated Statement of Comprehensive Income.
$000’s
June 2019June 2018
Notional
principal
Fair value
assets
Fair value
liabilities
Notional
principal
Fair value
assets
Fair value
liabilities
Held for risk management
Interest rate related contracts
Swaps1,958,08311,23210,230744,8229232,562
Foreign currency related contracts
Forwards222,769315142–––
Options177,2551,128––––
Total derivative financial instruments2,358,10712,67510,372744,8229232,562
12 Derivative financial instruments (continued)
Heartland Financial Report 2019
P. 24

NOTES
13 Finance receivables
(a) Finance receivables held at amortised cost
Policy
Finance receivables are initially recognised at fair value plus incremental direct transaction costs and are subsequently measured at amortised
cost using the effective interest method, less any impairment loss.
Fees and direct costs relating to loan origination, financing and loan commitments are deferred and amortised to interest income over the
life of the loan using the effective interest method. Lending fees not directly related to the origination of a loan are recognised over the period
of service.
Past due but not impaired assets are any assets which have not been operated by the counterparty within their key terms but are not
considered to be impaired by the Group.
Individually impaired assets are those loans for which the Group has evidence that it will incur a loss, and will be unable to collect all principal
and interest due according to the contractual terms of the loan.
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 too small to model,
judgement is used to determine impairment provisions.
$000’sJune 2019June 2018
Non-securitised
Neither at least 90 days past due nor impaired - at amortised cost3,016,8443,863,764
At least 90 days past due- at amortised cost44,46627,893
Individually impaired - at amortised cost26,41245,186
Gross finance receivables3,087,7223,936,843
Less provision for impairment(58,491)(29,367)
Less fair value adjustment for present value of future losses over expected life–(2,824)
Total non-securitised finance receivables3,029,2313,904,652
Securitised
Neither at least 90 days past due nor impaired - at amortised cost–79,809
At least 90 days past due- at amortised cost–784
Individually impaired - at amortised cost––
Gross finance receivables–80,593
Less provision for impairment–(304)
Total securitised finance receivables–80,289
Total
Neither at least 90 days past due nor impaired - at amortised cost3,016,8443,943,573
At least 90 days past due - at amortised cost44,46628,677
Individually impaired - at amortised cost26,41245,186
Gross finance receivables3,087,7224,017,436
Less provision for impairment(58,491)(29,671)
Less fair value adjustment for present value of future losses over expected life–(2,824)
Total finance receivables3,029,2313,984,941
Heartland Financial Report 2019
P. 25

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
$000’s
12 month
ECL
Lifetime ECL
Not credit
impaired
Lifetime
ECL Credit
impaired
Collective
provision
June 2018
Specific
provisionTotal
Non-securitised
Impairment allowance as at 30 June 2018–––20,3019,06629,367
Restated for adoption of NZ IFRS 931,7841,36514,945(20,301)(169)27,624
Restated impairment allowance as at 1 July 201831,7841,36514,945–8,89756,991
Changes in loss allowance
Transfer to 12 month1,144(1,071)(73)–––
Transfer to lifetime not credit impaired(2,134)2,268(134)–––
Transfer to lifetime credit impaired(29)(1,399)1,428–––
Transfer to specific provision(1,443)(36)(1,169)–2,648–
Effect of changes in foreign exchange rate(52)(3)(1)––(56)
Impaired asset expense 91160717,505–1,31120,334
Write offs––(15,720)–(4,993)(20,713)
Transfer to/from securitised24049817––1,106
Recovery of amounts written off––829––829
Closing impairment allowance30,4211,78018,427–7,86358,491
Securitised
Impairment allowance as at 30 June 2018–––304–304
Restated for adoption of NZ IFRS 940020345(304)–461
Restated impairment allowance as at 1 July 201840020345––765
Changes in loss allowance
Transfer to 12 month35(34)(1)–––
Transfer to lifetime not credit impaired(42)44(2)–––
Transfer to lifetime credit impaired(1)(17)18–––
Transfer to specific provision––––––
Effect of changes in foreign exchange rate––––––
Impaired asset expense (152)36457––341
Write offs––––––
Transfer to/from non-securitised(240)(49)(817)––(1,106)
Recovery of amounts written off––––––
Closing impairment allowance––––––
Total
Impairment allowance as at 30 June 2018–––20,6059,06629,671
Restated for adoption of NZ IFRS 932,1841,38515,290(20,605)(169)28,085
Restated impairment allowance as at 1 July 201832,1841,38515,290–8,89757,756
Changes in loss allowance
Transfer to 12 month1,179(1,105)(74)–––
Transfer to lifetime not credit impaired(2,176)2,312(136)–––
Transfer to lifetime credit impaired(30)(1,416)1,446–––
Transfer to specific provision(1,443)(36)(1,169)–2,648–
Effect of changes in foreign exchange rate(52)(3)(1)––(56)
Impaired asset expense 75964317,962–1,31120,675
Write offs––(15,720)–(4,993)(20,713)
Transfers––––––
Recovery of amounts written off––829––829
Closing impairment allowance30,4211,78018,427–7,86358,491
13 Finance receivables (continued)
(a) Finance receivables held at amortised cost
Heartland Financial Report 2019
P. 26

NOTES
13 Finance receivables (continued)
(a) Finance receivables held at amortised cost
Summary of impairment allowance
$000’s
Non-securitised
June 2019
Total
June 2019
Collective allowance measured on a 12 month ECL30,421 30,421
Collective allowance not credit impaired1,780 1,780
Collective allowance credit impaired18,427 18,427
Specific allowance7,863 7,863
Total impairment allowance58,491 58,491
Impact of changes in gross carrying amounts 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
Note 1 Financial statement preparation).
Overall the net increase in the total provision for impairment was $0.7 million which was primarily driven by an increase in stage 2 and 3 collective
provisions offset by a reduction in stage 1 provisions and specific provisions.
Collective 12 month ECL provisions (stage 1) decreased $1.8 million. Net growth in receivables of $339 million added $3.0 million to stage 1
provisions. This was offset by a reduction in provisions of $2.1 million as a result of changes to expected loss rates in the Motor book following
changes to and investment in collection processes. Stage 1 provisions were further reduced on $289 million loans moving from stage 2 to stage 3
or specifically provided, offset by $134 million of loans moving from stage 2 and 3 or specifically provided.
Collective lifetime not credit impaired provisions (stage 2) increased $0.4 million. $282 million of receivables transferred to stage 2 due to
deterioration in credit quality and $8 million transferred from stage 3 due to improvement in asset quality. These were offset by $209 million
which was repaid or transferred to stage 1 due to improvement in credit quality and $90m transferred to stage 3 or specifically provided due to
deterioration in credit quality.
Collective lifetime credit impaired provisions (stage 3) increased $3.1 million driven primarily by a net increase in receivables of $17 million. This was
due to a net increase transferred to stage 3 of $57 million offset by $40 million of loans that were repaid or written off in the period.
The reduction in specific provisions of $1.0 million was primarily the result of provisions on $24 million of loans transferred from collectively
provided off set by the release of provisions on $14 million of loans that were repaid or written off in the period.
(b) Finance receivables held at fair value
Policy
Finance receivables – reverse mortgages are initially recognised, and subsequently measured, at fair value through profit or loss .
Advances relating to reverse equity mortgages are recognised in the financial statements at fair value through profit or loss, therefore carrying
amount equals fair value. Note 20 (a) Fair Value of the financial statements discloses further information regarding the Group’s valuation policy.
Note 22 Credit Risk Exposure of the financial statements discloses further information regarding how reverse mortgages operate.
$000’sJune 2019June 2018
Finance receivables - reverse mortgages 1,318,819 -
Total Finance receivables - reverse mortgages at fair value1,318,819 -
Credit risk adjustments on financial assets designated at fair value through Profit or loss
There were no credit risk adjustments on individual financial assets.
Credit risk adjustments on financial assets designated at fair value through Profit or loss are presented in the following table.
$000’s
Non-securitised
June 2019
Total
June 2019
Opening balance as at 30 June 20182,8242,824
Restated for adoption of NZ IFRS 9(2,824)(2,824)
Restated opening balance as at 1 July 2018––
Closing balance as at 30 June 2019––
Heartland Financial Report 2019
P. 27

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
14 Operating lease vehicles
Policy
Operating lease vehicles are stated at cost less accumulated depreciation.
Operating lease vehicles are depreciated on a straight line basis over their expected life after allowing for any residual values. The estimated lives
of these vehicles vary up to five years. Vehicles held for sale are not depreciated but are tested for impairment.
$000’sJune 2019June 2018
Cost
Opening balance24,703 28,137
Acquisitions5,495 7,163
Disposals(8,575)(10,597)
Closing balance21,623 24,703
Accumulated depreciation
Opening balance7,179 9,099
Depreciation charge3,363 3,771
Disposals(4,435)(5,691)
Closing balance6,107 7,179
Opening NBV17,524 19,038
Closing NBV15,516 17,524
The future minimum lease payments receivable under non-cancellable operating leases not later than one year is $3.952 million (2018: $4.380 million),
within one to five years is $3.137 million (2018: $3.897 million) and over five years is nil (2018: nil).
15 Borrowings
Policy
Borrowings and deposits are initially recognised at fair value including incremental direct transaction costs. They are subsequently measured at
amortised cost using the effective interest method.
$000’sJune 2019June 2018
Deposits3,153,681 2,881,805
Total borrowings relating to deposits3,153,681 2,881,805
Subordinated bonds–3,378
Subordinated notes–22,172
Unsubordinated notes337,680 151,853
Bank borrowings25,002 35,004
Certificate of deposit34,836 39,832
Securitised borrowing659,135 662,014
Total borrowings other1,056,653 914,253
Deposits and unsubordinated notes rank equally and are unsecured.
The subordinated notes (settled early on 31 October 2018) and subordinated bonds ranked below all other general liabilities of the Group.
The Group from time to time issues unsubordinated notes. At 30 June 2019 the Group had the following unsubordinated notes outstanding.
▲Issuer HBL
–$125 million five year unsubordinated notes issued 12 April 2019, interest payable six monthly, maturing 12 April 2024.
–$150 million five year unsubordinated notes issued 21 September 2017, interest payable six monthly, maturing 21 September 2022.
▲Issuer Heartland Australia Group Pty Limited
–AU $50 million two year unsubordinated notes issued 8 March 2019, interest payable quarterly, maturing 8 March 2021.
Heartland Financial Report 2019
P. 28

NOTES
The Group from time to time securitises loans. At 30 June 2019 the Group had the following securitised borrowings outstanding.
▲Heartland Auto Receivables Warehouse Trust 2018 - 1 securitisation facility $150 million, undrawn. Securitised borrowings held by investors
are secured over the securitised assets of the Heartland Auto Receivables Warehouse Trust 2018-1.
▲Heartland ABCP Trust 1 (ABCP Trust) securitisation facility nil (2018: $100 million, drawn $47 million). Heartland ABCP Trust 1 was dissolved
29 August 2018.
▲Senior Warehouse Trust securitisation facility AU $650 million (2018: AU $600 million). Drawn AU $631 million (2018: AU $562 million).
The bank facility is secured over the assets of Australian Seniors Finance Pty Limited (ASF) group (comprising ASF, the ASF Settlement Trust
and the Seniors Warehouse Trust). The bank facility has a maturity date of 30 September 2022.
HGH has a $50 million undrawn bank facility at 30 June 2019 (2018: nil).
16 Share capital and dividends
Policy
Ordinary shares are classified as equity, incremental costs directly attributable to the issue of ordinary shares and share options are recognised
as a deduction from equity, net of any tax effect.
000’sJune 2019June 2018
Issued shares
Opening balance560,588516,236
Shares issued during the year–37,224
Dividend reinvestment plan9,1917,128
Cancelled shares(441)–
Closing balance569,338560,588
Less treasury shares–(2,299)
Net closing balance569,338558,289
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, 5,282,619 new shares were issued at $1.6250 per share on 21 September 2018 and 3,907,858 at $1.4709 per
share on 1 April 2019, (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).
Dividends paid
June 2019June 2018
Date declaredCents per share$000’sDate declaredCents per share$000’s
Final dividend15 August 20185.5 30,808 14 August 20175.5 28,393
Interim dividend19 February 20193.5 19,791 20 February 20183.5 19,502
Total dividends paid 50,599 47,895
15 Borrowings (continued)
Heartland Financial Report 2019
P. 29

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
17 Other balance sheet items
Policy
Property, plant and equipment are stated at cost less accumulated depreciation and impairment (if any). Depreciation is calculated on a straight
line basis to write off the net cost or other revalued amount of each asset over its expected life to its estimated residual value.
$000’sJune 2019June 2018
Other assets
Trade receivables3,2771,613
GST receivable3,8371,553
Prepayments4,7342,261
Property, plant and equipment9,4618,984
Total other assets21,30914,411
Policy
Intangible assets
Intangible assets with finite useful lives
Software acquired or internally developed by the Group is stated at cost less accumulated amortisation and any accumulated impairments
losses. Subsequent expenditure on software assets is capitalised only when it increases the future economic value of that asset. Amortisation
of software is on a straight line basis, at rates which will write off the cost over the assets’ estimated useful lives. The expected useful life of the
software has been determined to be ten years. All other expenditure is expensed immediately as incurred.
Goodwill
Goodwill arising on acquisition represents the excess of cost of the acquisition over the Group’s interest in the fair value of the identifiable net
assets of a controlled entity. Goodwill that has an indefinite useful life is not subject to amortisation and is tested for impairment annually.
Goodwill is carried at cost less accumulated impairment losses.
$000’sJune 2019June 2018
Computer software
Cost37,965 36,215
Accumulated depreciation10,429 6,957
Net carrying value of computer software27,536 29,258
Goodwill45,143 45,143
Total intangible assets72,679 74,401
Goodwill was tested for impairment on 31 May 2019. In assessing impairment, an internal valuation model was developed to indicate the value of
the business. This value is compared to the net assets of the Group. There was no indication of impairment and no impairment losses have been
recognised against the carrying amount of goodwill for the year ended 30 June 2019 (30 June 2018: nil).
For the purposes of impairment testing, goodwill is allocated to cash generation units (CGUs). A CGU is the smallest identifiable group of assets
that generate independent cash inflows. The Group has assessed that goodwill should be allocated to HBL and ASF as the smallest identifiable CGU.
Policy
Employee benefits
Annual leave entitlements are accrued at amounts expected to be paid. Long service leave is accrued by calculating the probable future value
of the entitlements and discounting back to present value. Obligations to defined contribution superannuation schemes are recognised as an
expense when the contribution is paid.
$000’sJune 2019June 2018
Trade and other payables
Trade payables11,787 10,406
Insurance liability5,699 6,333
Employee benefits5,012 5,871
Total trade and other payables22,498 22,610
Heartland Financial Report 2019
P. 30

NOTES
18 Other reserves
$000’s
Employee
benefits
reserve
Foreign
currency
translation
reserve (FCTR)
Fair value
reserve
Defined
benefit
reserve
Cash flow
hedge
reserveTotal
June 2019
Balance as at 1 July 20182,5591,2601,590257(1,081)4,585
Other comprehensive income net of tax(5,281)2,968(86)(4,762)(7,161)
Share based payments619619
Shares vested(2,340)(2,340)
Balance as at 30 June 2019838(4,021)4,558171(5,843)(4,297)
June 2018
Balance as at 1 July 20173,119(1,055)609(83)(1,153)1,437
Other comprehensive income net of tax–2,315981340723,708
Share based payments666––––666
Shares vested(1,226)––––(1,226)
Balance as at 30 June 20182,5591,2601,590257(1,081)4,585
19 Related party transactions and balances
Transactions with key management personnel
Key management personnel (KMP), being directors of the Group, the Chief Executive Officer (CEO) and those executive staff reporting directly
to the CEO. Transactions with immediate family members of KMP are also disclosed below.
Loans made to KMP are made in the ordinary course of business on normal commercial terms and conditions no more favourable than those
given to other employees or customers, including the term of the loan, security required and the interest rate.
All other transactions with KMP and transactions with related entities of KMP are made on terms equivalent to those that prevail in arm’s
length transactions.
$000’sJune 2019June 2018
Transactions with key personnel
Interest income–5
Interest expense(76)(128)
Key personnel compensation
Short-term employee benefits(4,633)(6,194)
Share-based payment expense(703)(640)
Total transactions with key personnel(5,412)(6,957)
Due(to)/from key personnel
Borrowings - deposits(3,019)(2,412)
Total due(to)/from key personnel(3,019)(2,412)


Heartland Financial Report 2019
P. 31

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
20 Fair value
Policy
Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
On initial recognition, the transaction price generally represents the fair value of the financial instrument, unless there is observable information
from an active market that provides a more appropriate 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 other valuation techniques.
The Group measures fair values using the 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 at the end of the reporting period during which the change has
occurred.
(a) Financial instruments measured at fair value
The following assets and liabilities of the Bank are measured at fair value on a recurring basis in the Consolidated 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 unobservable 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 flow analysis.
Investments in unlisted equity securities are classified as being FVOCI and are valued under Level 3 of the fair value hierarchy, with the fair value
being based on unobservable inputs.
Finance receivables – reverse mortgages
Reverse mortgage loans are classified at fair value through profit or loss.
On initial recognition the Group considers the transaction price to represent the fair value of the loan.
For subsequent measurement the Group has considered if the fair value can be determined by reference to a relevant active market or observable
inputs, but has concluded relevant support is not currently available. In the absence of such market evidence the Group has used valuation
techniques including actuarial assessments to consider the fair value.
When the Group enters into a reverse mortgage loan the Group has set expectations regarding the loan’s current and future risk profile and
expectation of performance. This expectation references a wide range of assumptions including:
▲mortality and move to care;
▲voluntary exits;
▲house price changes;
▲no negative equity guarantee; and
▲interest rate margin.
Heartland Financial Report 2019
P. 32

NOTES
20 Fair value (continued)
At balance date the Group does not consider any of the above expectations to have moved outside of the original expectation range. Therefore the
Group has continued to estimate the fair value of the portfolio at transaction price. There has been no fair value movement recognised in profit or
loss during the period. Given the nature of the loan terms and the current market conditions the fair value as recorded is not sensitive to changes in
house prices or interest rates.
The Group will continue to reassess the existence of a relevant active market and movements in expectations on an on-going basis.
There have been no losses on reverse mortgage loans during the current year (2018: Nil).
Derivative financial instruments
Interest rate and foreign currency related contracts are recognised in the financial statements at fair value. Fair values are determined from
observable market prices as at the reporting date, discounted cash flow models or option pricing models as appropriate. (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 Statement of Financial Position.
$000’sLevel 1Level 2Level 3Total
June 2019
Investments255,87586,61812,435354,928
Derivative financial instruments–12,675–12,675
Finance receivables - reverse mortgage––1,318,8191,318,819
Total assets measured at fair value255,87599,2931,331,2541,686,422
Derivative financial instruments–10,372–10,372
Total liabilities measured at fair value–10,372–10,372
June 2018
Investments140,282190,5709,694340,546
Derivative financial instruments–923–923
Finance receivables - reverse mortgage–454–454
Total assets measured at fair value140,282191,9479,694341,923
Derivative liabilities held for risk management–2,562–2,562
Total liabilities measured at fair value–2,562–2,562
The movement in Level 3 assets measured at fair value are below:
$000’s
Finance
receivables –
reverse mortgagesInvestmentsTotal
June 2019
As at 1 July 20181,129,9569,6941,139,650
Adjustment for NZ IFRS 92,882–2,882
New loans284,819–284,819
Repayments(104,644)–(104,644)
Capitalised Interest29,417–29,417
Purchase of investments–2,7412,741
Other(23,611)–(23,611)
As at 30 June 20191,318,81912,4351,331,254
Heartland Financial Report 2019
P. 33

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
20 Fair value (continued)
(b) Financial instruments measured not at fair value
The following assets and liabilities of the Group are not measured at fair value in the Consolidated Statement of Financial Position.
Cash and cash equivalents and other financial assets and liabilities
Cash and cash equivalents and other financial assets and liabilities are considered equivalent to their carrying value due to their short term nature.
Finance receivables
The fair value of the Group’s financial receivables is calculated using a valuation technique which assumes the Group’s current weighted average
lending rates for loans of a similar nature and term.
The current weighted average lending rate used to fair value finance receivables with a fixed interest rate was 8.88% (2018: 8.12%). Finance
receivables with a floating interest rate are deemed to be at current market rates. The current amount of credit provisioning has been deducted
from the fair value calculation of finance receivables as a proxy for future losses.
Borrowings
The fair value of deposits, bank borrowings and other borrowings is the present value of future cash flows and is based on the current market
interest rates payable by the Group for the debt of similar maturities. The current market rate used to fair value borrowings is 2.59% (2018: 3.09%).
Other financial assets and financial liabilities
Financial instruments such as short-term trade receivables and payables are considered equivalent to their carrying value due to their short
term nature.
The following table sets financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy.
$000’sLevel 1Level 2Level 3
Total
fair value
Total
carrying value
June 2019
Cash and cash equivalents80,584––80,58480,584
Finance receivables –3,017,327–3,017,3273,029,231
Other financial assets––3,2773,2773,277
Total financial assets80,5843,017,3273,2773,101,1883,113,092
Retail deposits–3,160,426–3,160,4263,153,681
Other borrowings–1,056,653–1,056,6531,056,653
Other financial liabilities––22,49822,49822,498
Total financial liabilities–4,217,07922,4984,239,5774,232,832
June 2018
Cash and cash equivalents49,588––49,58849,588
Finance receivables–3,972,072–3,972,0723,984,487
Other financial assets––1,6131,6131,613
Total financial assets49,5883,972,0721,6134,023,2734,035,688
Retail deposits–2,877,885–2,877,8852,881,805
Other borrowings–914,253–914,253914,253
Other financial liabilities––22,61022,61022,610
Total financial liabilities–3,792,13822,6103,814,7483,818,668
Heartland Financial Report 2019
P. 34

NOTES
20 Fair value (continued)
(c) Classification of financial instruments
The following table summarise the categories of financial instruments and the carrying and fair value of all financial instruments of the Group.
$000’sFVOCIFVTPLAmortised cost
Total
carrying value
Total
fair value
June 2019
Cash and cash equivalents––80,58480,58480,584
Investments354,928––354,928354,928
Finance receivables––3,029,2313,029,2313,017,327
Finance receivables - reverse mortgages–1,318,819–1,318,8191,318,819
Derivative financial instruments2,7589,917–12,67512,675
Other financial assets––3,2773,2773,277
Total financial assets357,6861,328,7363,113,0924,799,5144,787,610
Retail deposits––3,153,6813,153,6813,160,426
Other borrowings––1,056,6531,056,6531,056,653
Derivative financial instruments9,1591,213–10,37210,372
Other financial liabilities––22,49822,49822,498
Total financial liabilities9,1591,2134,232,8324,243,2044,249,949
June 2018
Cash and cash equivalents––49,58849,58849,588
Investments330,8529,694–340,546340,546
Finance receivables––3,984,4873,984,4873,972,072
Finance receivables - reverse mortgages––454454454
Derivative financial instruments923––923923
Other financial assets––1,6131,6131,613
Total financial assets331,7759,6944,036,1424,377,6114,365,196
Retail deposits––2,881,8052,881,8052,877,885
Other borrowings––914,253914,253914,253
Derivative financial instruments2,562––2,5622,562
Other financial liabilities––22,61022,61022,610
Total financial liabilities2,562–3,818,6683,821,2303,817,310
Heartland Financial Report 2019
P. 35

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
RISK MANAGEMENT
21 Enterprise risk management program
The board of directors (the Board) sets and monitors the Group’s risk appetite across the primary risk domains of, credit, capital, liquidity, market
(including interest rate), operational and compliance and general business risk. Management are, in turn, responsible for ensuring appropriate
structures, policies, procedures and information systems are in place to actively manage these risk domains, as outlined within the Enterprise Risk
Management Framework (ERMF). Collectively, these processes are known as the Group’s Enterprise Risk Management Programme (RMP).
Role of the Board and the Board Risk Committee
The Board, through its Board Risk Committee (BRC) is responsible for oversight and governance of the development of the RMP, the role of the BRC
is to assist the Board to formulate its risk appetite, and to monitor the effectiveness of the RMP. The BRC has the following specific responsibilities.
▲To advise the Board on the formulation of the Boards Risk Appetite Statement at least annually.
▲To review reports from management concerning the RMP in the context of the Risk Appetite Statement in order to assure the Board of the
programme’s effectiveness.
▲To review reports from management concerning changes anticipated in the economic, business and regulatory environment (including
consideration of emerging trends) and other factors considered relevant to the risk appetite statement, in order to monitor them and advise
the Board of any new risks or opportunities that could have significant financial, regulatory or reputational impact.
▲To review reports from management concerning the Bank’s internal compliance policies in order to advise the Board of their effectiveness
and recommend their approval or variation (or, where the BRC has been delegated authority to itself approve or vary them).
▲To review the lending standards developed by the Chief Risk Officer of HBL (CRO) at least annually.
The BRC consists of at least three non-executive directors. A member of the BRC sits on the Audit Committee. In addition the CEO, CRO and
Chief Financial Officer of HBL (CFO) (or their nominee, subject to the Chair’s prior approval) attend the BRC meetings, and the directors who
are not members of the BRC are entitled to attend meetings and to receive copies of the BRC papers.
Audit Committee and Internal Audit
The Group has an internal audit function, the objective of which is to provide independent, objective assurance over the internal control
environment. In certain circumstances, Internal Audit will provide risk and control advice to management provided the work does not impede
the independence of the Internal Audit function. The function assists the Group in accomplishing its objectives by bringing a systematic and
disciplined approach to evaluate and improve the effectiveness of risk management, control and governance process.
Internal Audit is allowed full, free and unfettered access to any and all the organisations records, personnel and physical properties deemed
necessary to accomplish its activities.
A regular cycle of review has been implemented to cover all areas of the business, focused on assessment, management and control of risks.
The audit plan ensures a cyclical review process of various business units and operational areas, as well as identified areas of higher identified
risk. The audit methodology is designed to meet the International Standards for the Professional Practice of Internal Auditing of the Institute
of Internal Auditors.
Each audit has specific audit procedures tailored to the area of business that is being reviewed. The audit procedures are updated during each audit
to reflect any process changes. Audit work papers are completed to evidence the testing preformed in accordance with audit procedures.
Audit reports are addressed to the manager of the relevant area that is being audited in addition to other relevant stakeholders within the Group.
Management comments are obtained from the process owner(s) and are included in the report.
The Head of Internal Audit has a direct reporting line to the Chairman of the Audit Committee whilst administratively reporting to the CFO. Internal
audit has accountability to the Audit Committee of the Group. A schedule of all outstanding internal control issues is maintained and presented
to the Audit Committee to assist the Audit Committee to track the resolution of previously identified issues. Any issues raised that are categorised
as high risk are specifically reviewed by internal audit during a follow up review once the issue is considered closed by management. The follow up
review is performed with a view to formally close out the issue.
The Audit Committee focuses on financial reporting and the application of accounting policies as part of the internal control and risk assessment
framework. The Audit Committee monitors the identification, evaluation and management of all significant risks through the Group. This work is
supported by internal audit, which provides an independent assessment of the design, adequacy and effectiveness of internal controls. The Audit
Committee receives regular reports from internal audit.
Heartland Financial Report 2019
P. 36

NOTES
Charters for both the BRC and Audit Committee ensure suitable cross representation to allow effective communication pertaining to identified
issues with oversight by the Board.
Asset and Liability Committee (ALCO)
The ALCO comprises the CEO (Chair), CEO HBL, Chief Digital Officer HGH, CFO , CRO , Chief Sales and Distribution Officer HBL, Head of Corporate
Finance HGH, Deputy CFO – Finance HBL, Deputy CFO – Treasury HBL, Treasurer HBL. The ALCO generally meets monthly, and provides reports to
the BRC. ALCO’s specific responsibilities include decision making and oversight of risk matters in relation to:
▲market risk (including non-traded interest rate risk and the investment of capital)
▲liquidity risk (including funding)
▲foreign exchange rate risk
▲balance sheet structure
▲capital management.
Executive Risk Committee (ERC)
The ERC comprises of the CEO (Chair), CEO of HBL, CRO, General Counsel HGH, CFO of HBL and Head of Internal Audit. The ERC has responsibility
for overseeing risk aspects not considered by ALCO, including that the internal control environment is managed so that residual risk is consistent
with the Group’s risk appetite. The ERC generally meets monthly, and provides minutes to the BRC. ERC’s specific responsibilities include decision
making and oversight of operational and compliance risk, and credit risk.
The Group’s exposure to operational and compliance risk is governed by a risk appetite statement approved by the Board and is used to guide
management activities by the ERC. This statement sets out the nature of risk which may be taken and aggregate risk limits, and the ERC monitors
adherence to this.
Operational and compliance risk
Operational and compliance Risk is the risk arising from day to day operational activities in the execution of the Group’s strategy which may result
in direct or indirect loss. Operational and compliance risk losses can occur as a result of fraud, human error, missing or inadequately designed
processes, failed systems, damage to physical assets, improper behaviour or from external events. The losses range from direct financial losses,
to reputational damage, adverse customer outcomes, unfavourable media attention, injury to or loss of staff or clients or as a breach of laws or
banking regulations. Where appropriate, risks are mitigated by insurance.
To ensure appropriate responsibility is allocated for the management, reporting and escalation of operational and compliance risk, the Group
operates a “three lines of defence” model which outlines principles for the roles, responsibilities and accountabilities for operational and compliance
risk management.
▲The first line of defence is the business line management of the identification, management and mitigation of the risks associated with the
products and processes of the business. This accountability includes regular testing and attestation of the adequacy and effectiveness of
controls and compliance with the Group’s policies.
▲The second line of defence is the Risk and Compliance function, responsible for the design and ownership of the operational risk management
framework. It incorporates key processes including risk and control self-assessment , incident, issue and complaints management, independent
evaluation of the adequacy and effectiveness of the internal control framework and the attestation process.
▲The third line of defence is Internal Audit which is responsible for independently assessing how effectively the Group is managing its risk
according to stated risk appetite.
Market risk
Market risk is the possibility of experiencing losses or gains due to factors affecting the overall performance of financial markets in which the Group
is exposed. The primary market risk exposures for the Group are interest rate risk and foreign exchange risk. The risk being that market interest
rates or foreign exchange rates will change and adversely impact on the Group’s earnings due to either adverse moves in foreign exchange market
rates or in the case of interest rate risks mismatches between repricing dates of interest bearing assets and liabilities and/or differences between
customer pricing and wholesale rates.
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Financial statements
Notes to the financial statements
For the year ended 30 June 2019
NOTES
Interest rate risk
Interest rate risk is principally generated through interest rate risk in the customer loans and deposits (the bank book). This risk arises from three
key sources:
▲mismatches between the repricing dates of interest bearing assets and liabilities;
▲banking products repricing differently to changes in wholesale market rates (basis risk); and
▲the investment of capital in interest bearing assets.
Refer Note 24 - Interest rate risk for further details regarding interest rate risk.
Foreign exchange risk
Foreign exchange risk is the risk that the Group’s earnings and shareholder equity position are adversely impacted from changes in foreign exchange
rates. The Group has exposure to foreign exchange translation risks through its Australian subsidiaries (which have a functional currency of AUD),
in the forms of profit translation risk and balance sheet translation risk.
Profit translation risk is the risk that deviations in exchange rates have a significant impact on the reported profit. Balance sheet translation
risk is the risk that whilst the foreign currency value of the net investment in a subsidiary may not have changed, when translated back to the
New Zealand dollars (NZD), the NZD value has changed materially due to movements in the exchange rates. Foreign exchange revaluation gains
and losses are booked to the foreign currency translation reserve. Foreign exchange rate movements in any given year may have an impact on
other comprehensive income. The Group manages this risk by setting and approving the foreign exchange rate for the upcoming financial year
and entering into hedging contracts to manage the foreign exchange translation risks.
Counterparty credit risk
The Group has on-going credit exposures associated with:
▲cash and cash equivalents;
▲finance receivables;
▲holding of investment securities; and
▲payments owed to the Group from risk management instruments.
Counterparty credit risk is managed against limits set in the market risk policy, including credit exposure on the derivative contracts, bilateral set-off
arrangements, cash and cash equivalents and investment securities.
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