Heartland Group Holdings Limited/Announcement

Heartland announces full year NPAT of $87.0 million

Full Year Results23 August 2021HGHFinancials

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Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 17 October 2019

Results for announcement to the market
Name of issuer Heartland Group Holdings Limited
Reporting Period 12 months to 30 June 2021
Previous Reporting Period 12 months to 30 June 2020
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$251,189 6.7%
Total Revenue $251,189 6.7%
Net profit/(loss) from
continuing operations
$87,026 20.9%
Total net profit/(loss) $87,026 20.9%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.07000000
Imputed amount per Quoted
Equity Security
$0.02722222
Record Date 01/09/2021
Dividend Payment Date 15/09/2021
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.16 $1.05
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to the audited financial statements that accompany
this announcement for a further explanation of these figures.
Authority for this announcement
Name of person

authorised
to make this announcement
Andrew Dixson, Chief Financial Officer
Contact person for this
announcement
Andrew Dixson, Chief Financial Officer
Contact phone number 09 927 9274
Contact email address Andrew.Dixson@heartland.co.nz
Date of release through MAP

24/08/2021

Audited financial statements accompany this announcement.

---

Financial Statements
For the yearended 30 June 2021

Contents
Financial Statements
General Information...............................................................................................................................................................................................................3
Auditor....................................................................................................................................................................................................................................3
Other Material Matters........................................................................................................................................................................................................3
Directors................................................................................................................................................................................................................................................4
Directors' Statements.........................................................................................................................................................................................................5
Consolidated Statement of Comprehensive Income..................................................................................................................................................6
Consolidated Statement of Changes in Equity................................................................................................................................................................7
Consolidated Statement of Financial Position.................................................................................................................................................................8
Consolidated Statement of Cash Flows..............................................................................................................................................................................9
Notes to the Financial Statements
1Financial statements preparation.................................................................................................................................................................11
Performance
2Segmental analysis.....................................................................................................................................................................................................17
3Net interest income.....................................................................................................................................................................................................18
4Net operating lease income.....................................................................................................................................................................................................19
5Other income.....................................................................................................................................................................................................19
6Operating expenses.....................................................................................................................................................................................................20
7Compensation of auditor.....................................................................................................................................................................................................20
8Impaired asset expense.....................................................................................................................................................................................................21
9Taxation.....................................................................................................................................................................................................23
10Earnings per share.....................................................................................................................................................................................................24
Financial Position
11Investments.....................................................................................................................................................................................................25
12Derivative financial instruments.....................................................................................................................................................................................................25
13Finance receivables.....................................................................................................................................................................................................27
14Operating lease vehicles.....................................................................................................................................................................................................32
15Borrowings.....................................................................................................................................................................................................33
16Share capital and dividends.....................................................................................................................................................................................................34
17Other reserves.....................................................................................................................................................................................................35
18Other balance sheet items.....................................................................................................................................................................................................35
19Related party transactions and balances.....................................................................................................................................................................................................38
20Fair value.....................................................................................................................................................................................................40
Risk Management
21Enterprise risk management program................................................................................................................................................................................................47
22Credit risk exposure................................................................................................................................................................................................50
23Liquidity risk................................................................................................................................................................................................54
24Interest rate risk................................................................................................................................................................................................55
Other Disclosures
25Significant subsidiaries.........................................................................................................................................................................................57
26Structured entities.........................................................................................................................................................................................57
27Staff share ownership arrangements.........................................................................................................................................................................................58
28Insurance business, securitisation, funds management, other fiduciary activities.........................................................................................................................................................................................60
29Concentrations of funding.........................................................................................................................................................................................60
30Contingent liabilities and commitments.........................................................................................................................................................................................61
31Events after the reporting date.........................................................................................................................................................................................61
Auditor's Report..................................................................................................................................................................................................................62
Page
2

General Information
The Group’s address for service is Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland 1023.
HGH was incorporated in New Zealand under the Companies Act 1993 on 19 July 2018.
Auditor
Other Material Matters
Auckland 1010
These financial statements are issued by Heartland Group Holdings Limited (HGH) and its subsidiaries (the Group) for the year ended 30
June 2021.
Name and address for service
Details of incorporation
KPMG
KPMG Centre
18 Viaduct Harbour Avenue
There are no material matters relating to the business or affairs of the Group that are not disclosed in these consolidated financial
statements which, if disclosed, would materially affect the decision of a person to subscribe for debt or equity instruments of which the
Group is the issuer.
3

Directors
Name: Geoffrey Thomas Ricketts CNZMQualifications: LLB (Hons), LLD (honoris causa), CFInstD
Chairman - Board of Directors
Occupation: Company Director
Type of Director: Independent Non-Executive Director
External Directorships:
Name: Ellen Frances ComerfordQualifications: BEc
Type of Director: Independent Non-Executive DirectorOccupation: Company Director
External Directorships:
Name: Sir Christopher Robert Mace KNZMQualifications: CMInstD
Type of Director: Independent Non-Executive DirectorOccupation: Company Director
External Directorships:
Name: Gregory Raymond TomlinsonQualifications: AME
Type of Director: Non-Independent Non-Executive DirectorOccupation: Company Director
External Directorships:
Name: Jeffrey Kenneth GreensladeQualifications: LLB
Type of Director: Non-Independent Executive DirectorOccupation: Chief Executive Officer of HGH
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, The Aotearoa Circle.
Airtasker Limited, Comerford Gohl Holdings Pty Limited, Hollard Holdings Australia Pty Limited, Lendi Group Pty Limited, The Hollard
Insurance Company Pty Limited.
Janmac Capital Limited, Maisemore Enterprises Limited, MCF2 Message4U Limited, MCF3 Amplify Limited, MCF3 Green Limited, MCF3
E&P Holdco 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, MCF3 Cook Limited, MCF3 TEG Limited, MCF3
Resourceco Limited, MCF3 Squiz Limited, MC Medical Properties Limited, Mercury Capital No.1 Fund Limited, Mercury Capital No. 1
Trustee 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.
Alta Cable Holdings Limited, Chippies Vineyard Limited, Indevin Group Limited, Little Ngakuta Trust Company Limited, Mountbatten
Trustee Limited, Nearco Stud Limited, Oceania Healthcare Limited, Pelorus Finance Limited, St Leonards Limited, Tomlinson Group
Argenta GP Limited, Tomlinson Group NZ Limited, Tomlinson Holdings Limited, Tomlinson Group Investments Limited, Tomlinson
Ventures Limited.
All Directors of HGH reside in New Zealand with the exception of Ellen Frances Comerford who resides in Australia. Communications to
the Directors can be sent to Heartland Group Holdings Limited, Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland 1023. At
the time of the signing of these consolidated financial statements the Directors of HGH and their details were:
Henley Family Investments Limited.
4

Directors' Statements
G T Ricketts (Chair)E F Comerford
J K Greenslade
G R Tomlinson
The consolidated financial statements are dated 23 August 2021 and have been signed by all the Directors.
Sir C R Mace
5

Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
$000's
NoteJune 2021June 2020
Interest income
3
327,935 346,802
Interest expense
3
94,418 130,129
Net interest income
233,517 216,673
Operating lease income
4
5,004 5,946
Operating lease expense
4
3,149 4,063
Net operating lease income1,855 1,883
Lending and credit fee income8,090 10,811
Other income
5
3,634 3,882
Net operating income247,096 233,249
Operating expenses
6
117,658 106,794
Profit before impaired asset expense and income tax129,438 126,455
Fair value gain on investments4,092 2,097
Impaired asset expense
8
14,974 29,419
Profit before income tax118,556 99,133
Income tax expense
9
31,530 27,161
Profit for the year87,026 71,972
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss, net of income tax:
Effective portion of change in fair value of derivative financial instruments8,940 (2,179)
Movement in fair value reserve(5,646) 766
Movement in foreign currency translation reserve(68) 114
Other comprehensive income/(loss) for the year, net of income tax3,226 (1,299)
Total comprehensive income for the year90,252 70,673
Earnings per share
Basic earnings per share10
15c 12c
Diluted earnings per share1015c 12c
Total comprehensive income for the year is attributable to the owners of the Group.
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
6

Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
$000's
Note
Balance at beginning of year576,257 (5,500) 129,223 699,980 558,970 (4,297) 120,995 675,668
NZ IFRS 16 adjustment- - - - - - (751) (751)
576,257 (5,500) 129,223 699,980 558,970 (4,297) 120,244 674,917
Profit for the year- - 87,026 87,026- - 71,972 71,972
- 3,226- 3,226- (1,299)- (1,299)
- 3,226 87,026 90,252- (1,299) 71,972 70,673
Dividends paid16- - (37,861) (37,861)- - (62,993) (62,993)
Dividend reinvestment plan16 7,524 - - 7,524 16,895- - 16,895
- - - - (28) - - (28)
Share based payments- 1,797- 1,797- 516- 516
Shares vested- - - - 420 (420)- -
Total transactions with owners7,524 1,797 (37,861) (28,540) 17,287 96 (62,993) (45,610)
Balance at end of the year583,781(477)178,388761,692576,257(5,500)129,223699,980
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
June 2020June 2021
Share
Capital Reserves
Total
Equity
Retained
Earnings
Total
Equity
Share
Capital Reserves
Retained
Earnings
Transaction costs associated with
capital raising
Other comprehensive income/
(loss), net of income tax
Restated balance at beginning
of year
Total comprehensive income
for the year
Contributions by and
distributions to owners
Total comprehensive income
for the year
7

Consolidated Statement of Financial Position
As at 30 June 2021
$000's
NoteJune 2021June 2020
Assets
Cash and cash equivalents182,333 147,179
Investments11 377,823 413,340
Investment properties11,832 11,132
Derivative financial instruments12 14,139 17,246
Finance receivables13 3,288,466 3,045,195
Finance receivables - reverse mortgages13 1,676,073 1,538,585
Operating lease vehicles14 10,865 17,603
Right of use assets18 15,985 18,362
Other assets18 16,815 19,558
Intangible assets18 69,165 72,813
Deferred tax asset9 14,117 17,123
Total assets5,677,613 5,318,136
Liabilities
Deposits 15 3,183,454 3,264,192
Other borrowings15 1,675,133 1,267,931
Tax liabilities7,440 12,303
Derivative financial instruments124,802 17,012
Lease liabilities18 18,166 20,456
Trade and other payables18 26,926 36,262
Total liabilities4,915,921 4,618,156
Equity
Share capital16 583,781 576,257
Retained earnings and reserves177,911 123,723
Total equity761,692 699,980
Total equity and liabilities5,677,613 5,318,136
Total interest earning and discount bearing assets5,432,181 5,114,348
Total interest and discount bearing liabilities
4,840,310 4,518,174
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
8

Consolidated Statement of Cash Flows
For the year ended 30 June 2021
$000's
NoteJune 2021June 2020
Cash flows from operating activities
Interest received233,447 258,665
Operating lease income received5,046 5,934
Lending, credit fees and other income received4,625 16,037
Operating inflows243,118 280,636
Interest paid(85,058) (117,313)
Payments to suppliers and employees(97,205) (92,861)
Taxation paid(34,004) (24,619)
Operating outflows(216,267) (234,793)
26,851 45,843
Proceeds from sale of operating lease vehicles6,821 4,969
Purchase of operating lease vehicles(1,788) (9,938)
Net movement in finance receivables(296,754) (171,617)
Net movement in deposits(74,608) 110,993
Net cash flows (applied to) operating activities
1
(339,478)(19,750)
Cash flows from investing activities
Sale of property, plant and equipment and intangible assets- 118
Total cash provided from investing activities- 118
Purchase of property, plant and equipment and intangible assets(7,562) (6,739)
Net decrease/(increase) in investments23,276 (45,562)
Total cash from/(applied to) investing activities15,714 (52,301)
Net cash flows from/(applied to) investing activities15,714 (52,183)
Cash flows from financing activities
Net increase in wholesale funding309,680 85,795
Proceeds from issue of Unsubordinated Notes81,801 106,952
Total cash provided from financing activities391,481 192,747
Dividends paid16 (30,337) (46,098)
Payment of lease liabilities(2,226) (2,005)
Transaction costs associated with capital raising- (28)
Total cash (applied to) financing activities(32,563) (48,131)
Net cash flows from financing activities358,918 144,616
Net increase in cash held35,154 72,683
Opening cash and cash equivalents147,179 74,496
Closing cash and cash equivalents
182,333 147,179
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
Net cash flows from operating activities before changes in operating assets and liabilities
1
Cash flows from operating activities do not include cash flows from wholesale funding which are included as part of financing activities.
9

Consolidated Statement of Cash Flows (Continued)
For the year ended 30 June 2021
Reconciliation of profit after tax to net cash flows from operating activities
$000's
NoteJune 2021June 2020
Profit for the year87,026 71,972
Add/(less) non-cash items:
Depreciation and amortisation expense14,615 9,161
Depreciation on lease vehicles142,801 3,634
Capitalised net interest income and fee income(68,755) (77,429)
Impaired asset expense
8 14,974 29,419
Investment fair value movement(4,092) (2,097)
Other non-cash items(24,538) 2,488
Total non-cash items (64,995) (34,824)
Add/(less) movements in operating assets and liabilities:
Finance receivables(296,754) (171,617)
Operating lease vehicles5,033 (4,969)
Other assets3,448 9,528
Current tax (4,863) 4,771
Derivative financial instruments(163) 931
Deferred tax3,006 (7,592)
Deposits(74,608) 110,993
Other liabilities3,392 1,057
Total movements in operating assets and liabilities(361,509) (56,898)
Net cash flows applied to operating activities
1
(339,478) (19,750)
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
1
Cash flows from operating activities do not include cash flows from wholesale funding which are included as part of financing activities.
10

Notes to the Financial Statements
For the year ended 30 June 2021
1Financial statements preparation
Reporting entity
Basis of preparation
Basis of measurement
Principles of consolidation
ThefinancialstatementspresentedaretheconsolidatedfinancialstatementscomprisingHeartlandGroupHoldingsLimited(
HGH)
and its subsidiaries (the Group). Refer Note 25 – Significant subsidiaries for further details.
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 to, or has rights to, variable returns from its involvement with the
entities and has the ability to affect those returns through its power over the entities. Intercompany transactions, balances and any
unrealised income and expense (except for foreign currency translation gains or losses) between controlled entities are eliminated.
Assets and liabilities in a 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 average rate at the balance date. Exchange differences are taken to
the consolidated statement of comprehensive income.
The financial statements are presented in New Zealand dollars which is the Group’s functional and presentation currency. Unless
otherwise indicated, amounts are rounded to the nearest thousand dollars.
The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ
GAAP) and the New Zealand's Exchange (NZX) Main Board Listing Rules and the Australian Securities Exchange (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.
As at 30 June 2021, HGH is a company incorporated in New Zealand under the Companies Act 1993 and a Financial Market
Conduct (FMC) reporting entity for the purposes of the Financial Markets Conduct Act 2013.
Certain comparative balances have been reclassified to align with the presentation used in the current financial year. These
reclassifications have no impact on the overall financial performance or financial position of the comparative year.
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.
The financial statements have been prepared on the basis of historical cost, except for certain financial instruments and
investment properties, which are measured at their fair values as identified in the accounting policies set out in the accompanying
notes to the financial statements.
11

1Financial statements preparation (continued)
Changes in accounting standards
Accounting standards issued but not yet effective
Estimates and judgements
•
•
•
•
Provisions for impairment - The effect of credit risk is quantified based on the Group's best estimate of future cash repayments
and proceeds from any security held or by reference to risk profile groupings, historical loss data and forward-looking
information. Refer to Note 8 - Impaired asset expense, and Note 13 - Finance receivables for further details.
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 statements 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.
Other amendments to existing standards that are not yet effective are not expected to have a material impact on the Group.
Goodwill - Determining the fair value of assets and liabilities of acquired businesses requires the Group to exercise judgement.
The carrying value of goodwill is tested annually for impairment, refer to Note 18 - Other balance sheet items.
There have been no changes to accounting policies or other new or amended standards that are issued and effective that are
expected to have a material impact on the Group.
Fair value of reverse mortgages - Fair value is quantified by the transaction price and the Group’s subsequent best estimate of
the risk profile of the reverse mortgage portfolio. Refer to Note 20 - Fair value for further details.
Investment in equity securities - Judgements have been applied in techniques to determine the fair value of Harmoney equity
securities to reflect the underlying characteristics. Refer to Note 20 - Fair value for further details.
NZ IFRS 17 Insurance Contracts was issued in July 2017 and is applicable to general and life insurance contracts. NZ IFRS 17 will
replace NZ IFRS 4 Insurance Contracts. In March 2020, the effective date of NZ IFRS 17 was deferred by one year. As such the
standard will be effective for the Group's reporting for the financial year ending 30 June 2024, including 30 June 2023
comparatives.
The preparation of the Group’s consolidated financial statements requires the use of estimates and judgements. 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.
Accounting standards issued and effective
MARAC Insurance Limited (MIL), a subsidiary of Heartland Bank Limited (HBL), no longer conducts insurance business as HBL
entered into a distribution agreement with DPL Insurance Limited (DPL) to distribute DPL’s insurance products through HBL's
network. MIL stopped writing insurance policies in the prior year with the last policies expected to expire in 2025.
12

1Financial statements preparation (continued)
COVID-19 pandemic - impact on estimates and judgements
The COVID-19 pandemic resulted in the Group adopting an economic overlay for expected credit losses (ECL) to its portfolios as at
30 June 2020 of pre-tax $9.6 million in response to the uncertain but potential economic impact of COVID-19 on HBL's borrowers
(COVID Overlay). The COVID Overlay was sized based on a range of techniques including stress testing, benchmarking, scenario
analysis and expert judgement.
To date, the impact of COVID-19 on HBL's borrowers has been more benign than was initially forecast, and the COVID Overlay has
not been utilised. However, the continued prevalence of COVID-19 in other countries (including the emergence of new variants),
together with vaccination rates and border closures provides an ongoing risk of further economic disruption in New Zealand.
Furthermore, Government stimulus has given rise to the potential for inflationary pressures, a steepening interest rate
environment, and a higher cost of labour and inputs in the medium term.
Management notes the uncertainties associated with the ongoing economic impacts of COVID-19 and consequently have decided
to retain the COVID Overlay in full at this stage.
The accounting judgement that is most impacted by the COVID Overlay is the ECL on finance receivables at amortised cost. The
Group measures the allowance for ECL using an ECL impairment model in compliance with NZ IFRS 9 Financial Instruments.
The estimates and judgements considered to apply the COVID Overlay adequately in the ECL on finance receivables at amortised
cost is further discussed in Note 8 Impaired asset expense.
13

1Financial statements preparation (continued)
Financial assets and liabilities
Financial Assets
Financial assets are classified based on:
•
•
Whether the contractual cash flows of the instrument represent solely payment of principal and interest (SPPI).
Note
FVOCI11
11
13
13
Financial assets measured at amortised cost
Finance receivables – reverse mortgagesFVTPL
Finance receivablesAmortised cost
Financial assets measured at FVOCI
Bank bonds and floating rate notes
Fair value through other comprehensive
income (FVOCI)
Financial assets are measured at FVOCI if they are held within a business model whose objective is achieved both through
collecting contractual cash flows which represent SPPI on the principal balance or selling the financial asset.
Financial assets at FVOCI are measured at fair value with unrealised gains and losses recognised in other comprehensive income
except for interest income, impairment charges and foreign exchange gains and losses, which are recognised in profit or loss.
Financial Assets Measurement Category
The business model within which the assets are managed; and
The Group determines the business model at the level that reflects how groups of financial assets are managed. When assessing
the business model, the Group considers factors including how performance and risks are managed, evaluated and reported and
the frequency and volume of, and reason for sales in previous periods.
Financial assets are classified into the following measurement categories:
Financial assets are measured at amortised cost if they are held within a business model whose objective is achieved through
holding the financial asset to collect contractual cash flows which represent SPPI on the principal balance.
Financial assets at amortised cost are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest rate method.
Fair value through profit or loss (FVTPL)
11
Public sector securities and corporate bonds
Equity investments
14

1Financial statements preparation (continued)
Financial Assets (continued)

•

•
Financial Liabilities
Financial liabilities are classified into the following measurement categories:
•
•
Financial liabilities measured at amortised cost
Financial liabilities are measured at amortised cost if they are not held for trading or not designated at FVTPL.
Financial liabilities measured at amortised cost are accounted for using the effective interest rate method.

•

•
Recognition
Those to be measured at FVTPL.
They are held within a business model whose objective is achieved through selling or repurchasing the financial asset in the
near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of
short-term profit taking; or
Financial assets measured at FVTPL
Financial assets are measured at FVTPL if:
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 FVTPL) are initially recognised on the trade date at which the Group
becomes a party to the contractual provisions of the instrument.
Financial liabilities at FVTPL are measured at fair value with subsequent changes in fair value recognised in profit or loss.
The Group’s policies for determining the fair value of financial assets and financial liabilities are set out in Note 20 - Fair value.
They are designated at FVTPL upon initial recognition to eliminate or reduce an accounting mismatch.
Further details of the accounting policy for each category of financial asset or financial liability mentioned above is set out in the
note for the relevant item.
They are held for trading whose principal objective is achieved through selling or repurchasing the financial liability in the near
term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of short-
term profit taking; or
Financial assets at FVTPL are measured at fair value with subsequent changes in fair value recognised in profit or loss.
Those to be measured at amortised cost;
They are designated at FVTPL upon initial recognition to eliminate or reduce an accounting mismatch.
Financial liabilities measured at FVTPL
Financial liabilities are measured at FVTPL if:
15

1Financial statements preparation (continued)
Derecognition
Offsetting financial instruments
The Group enters into transactions whereby it transfers assets recognised on its consolidated 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 consolidated 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.
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.
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.
Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. Where an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, the exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability,
with the difference in the respective carrying amounts recognised in profit or loss.
16

Performance
2 Segmental analysis
Operating segments
The Group operates within New Zealand and Australia and comprises the following main operating segments:
Motor
Reverse mortgages
Other personal
Business
Rural
Australia
ReverseOther
$000's
Motor
MortgagesPersonal
BusinessRuralAustraliaOtherTotal
June 2021
Net interest income
65,829 22,257
12,07363,89830,57939,348(467)233,517
Net other income
3,343 2,143
1,9462,7238812,684(141)13,579
Net operating income
69,172 24,400 14,019 66,621 31,460 42,032 (608) 247,096
Operating expenses
3,787 4,284
6,83311,3402,12412,39076,900117,658
65,385 20,116 7,186 55,281 29,336 29,642 (77,508) 129,438
Fair value gain on investment- - - - 700- 3,392 4,092
5,298- 2,081 5,649 1,649 297- 14,974
Income tax expense- - - - - - 31,530 31,530
Profit/(loss) for the year
60,087 20,116 5,105 49,632 28,387 29,345 (105,646) 87,026
Total assets1,287,978 601,505 137,910 1,225,710 586,318 1,149,610 688,582 5,677,613
Total liabilities4,915,921
Certain operating expenses, such as premises, IT, support centre costs and tax expense are not allocated to operating segments
and are included in Other. Finance receivables are allocated across the operating segments as assets and liabilities are managed
centrally and therefore are not allocated across the operating segments.
118,556
Impaired asset expense
The Group's operating segments are different from the industry categories detailed in Note 22 - Credit risk exposure. The
operating segments are primarily categorised by sales channel, whereas Note 22 - Credit risk exposure categorises exposures
based on credit risk concentrations.
5,105 49,632 28,387 29,345 (74,116)
Profit/(loss) before income
tax
Profit/(loss) before impaired
asset expense and income tax
60,087 20,116
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.
Term debt, plant and equipment finance, commercial mortgage lending and working capital
solutions for small-to-medium sized businesses.
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.
Reverse mortgage lending and other financial services within Australia.
Motor vehicle finance.
Reverse mortgage lending in New Zealand.
A range of financial services - including term, transactional and personal loans to individuals.
17

2Segmental analysis (continued)
ReverseOther
$000's
Motor
MortgagesPersonal
BusinessRuralAustraliaOtherTotal
June 2020
Net interest income
56,957
20,118 18,365 57,95029,67430,1273,482216,673
Net other income
3,622
3,430 3,055 3,4651,0284,214(2,238)
16,576
Net operating income60,579 23,548 21,420 61,415 30,702 34,341 1,244 233,249
Operating expenses3,248 4,804 6,776 11,283 2,648 11,680 66,355 106,794
- - - - - - 2,097 2,097
10,160- 11,119 10,110 (1,970)- - 29,419
Income tax expense- - - - - - 27,161 27,161
Profit/(loss) for the year47,17118,7443,52540,02230,02422,661(90,175)71,972
Total assets1,125,295 559,934 214,759 1,126,632 604,938 979,496 707,082 5,318,136
Total liabilities4,618,156
3 Net interest income
Policy
$000'sJune 2021 June 2020
Interest income
Cash and cash equivalents119499
Investments6,979 8,496
Finance receivables232,845 250,606
Finance receivables - reverse mortgages87,992 87,201
Total interest income327,935 346,802
Interest expense
Deposits55,273 90,739
Other borrowings35,609 35,888
Net interest expense on derivative financial instruments3,536 3,502
Total interest expense94,418 130,129
Net interest income 233,517 216,673
50,132 28,054
Profit/(loss) before impaired
asset expense and income tax
126,455
47,171
22,661 (65,111)57,331 18,744 14,644
(63,014)
Fair value gain on investment
Impaired asset expense/
(benefit)
Profit/(loss) before income
tax
Interest income and expense on financial instruments is measured using the effective interest rate method that discounts the
financial instruments' future cash flows to their present value and allocates the interest income or expense over the life of the
financial instrument. The effective interest rate is established on initial recognition of the financial assets or liabilities and is not
subsequently revised. For financial instruments at amortised cost, the calculation of the effective interest rate includes all yield
related fees and commissions paid or received that are an integral part of the underlying financial instrument.
40,022 30,024 22,66199,13318,744 3,525
18

4Net operating lease income
Policy
$000'sJune 2021 June 2020
Operating lease income
Lease income3,908 5,194
Gain on disposal of lease assets1,096752
Total operating lease income5,004 5,946
Operating lease expense
Depreciation on lease assets2,801 3,634
Direct lease costs348429
Total operating lease expense3,149 4,063
Net operating lease income1,855 1,883
5 Other income
Policy
Rental income from investment property
Insurance income
$000'sJune 2021 June 2020
Rental income from investment properties1,055 1,125
Insurance income1,096 1,610
Gain on sale of investments157-
Other income1,117774
FX gain209373
Total other income3,6343,882
Rental income from investment properties is recognised on a straight-line basis over the term of the relevant lease.
As a lessor, the Group retains substantially all the risks and rewards incidental to ownership of the assets and therefore classifies
the leases 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.
Insurance premium income and commission expense are recognised in profit or loss from the date of attachment of the risk over
the period of the insurance contract. Claim expense is recognised in the profit or loss on an accrual basis once our liability to the
policyholder has been confirmed under the terms of the contract.
19

6Operating expenses
Policy
$000'sJune 2021 June 2020
Personnel expenses61,476 54,511
Directors' fees1,129 1,059
Superannuation1,535 1,069
Depreciation - property, plant and equipment2,995 2,380
Legal and professional fees2,876 3,615
Advertising and public relations5,138 6,729
Depreciation - right of use asset2,312 2,324
Technology services7,262 6,372
Telecommunications, stationery and postage1,843 1,886
Customer acquisition costs6,982 7,419
Amortisation of intangible assets9,308 4,456
Other operating expenses
1
14,80214,974
Total operating expenses117,658106,794
1
Other operating expenses include compensation of auditor which is further disclosed in Note 7.
7 Compensation of auditor
$000'sJune 2021 June 2020
Audit and review of the financial statements
1
790774
Other assurance services paid to auditor
2
103133
Total compensation of auditor
893907
2
Other assurance services paid to auditor comprise regulatory assurance services, agreed upon procedures engagements and supervisor reporting.
Operating expenses are recognised as the underlying service is rendered or over a period in which an asset is consumed or a
liability is incurred.
1
Audit and review of the financial statements includes fees paid for both the audit of the annual financial statements and the review of the interim financial
statements.
20

8Impaired asset expense
Policy
$000'sJune 2021 June 2020
Non-securitised
Individually impaired asset expense9,131 3,385
Collectively impaired asset expense6,001 25,637
Total non-securitised impaired asset expense15,132 29,022
Securitised
Collectively impaired asset expense(158) 397
Total securitised impaired asset expense(158) 397
Total
Individually impaired asset expense9,131 3,385
Collectively impaired asset expense5,843 26,034
Total impaired asset expense14,97429,419
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 finance receivables 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.
The calculation of ECL 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.
Stage 2 - Lifetime ECL not credit impaired (greater than 30 but less than 90 days past due)
Stage 3 - Lifetime ECL credit impaired (90 days past due or more)
Where there has been a significant increase in credit risk.
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.
Impairment of finance receivables
The ECL model is a forward looking model where impairment allowances are recognised before losses are actually incurred. On
initial recognition, an impairment allowance is required, based on events that are possible in the next 12 months.
At each reporting date, the Group applies a three stage approach to measuring 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.
For assets that are individually assessed for ECL, the allowance for ECL is calculated directly as the difference between the
defaulted assets carrying value and the recoverable amount (being the present value of expected future cash flows, including cash
flows from the realisation of collateral or guarantees, where applicable).
21

8Impaired asset expense (continued)
The Group’s models for estimating ECL for each of its portfolios are based on the historic credit experience of those portfolios. The
models assume that economic conditions (such as GDP growth, unemployment rates, and house price index forecasts) remain
static over time. If the Group forecasts that economic conditions may change in the foreseeable future, the Group applies
judgement to determine whether the modelled output should be subject to an economic overlay. Judgment is required because
analysis has been unable to establish any clear correlation between key economic indicators and the credit performance of the
Group’s unique portfolios.
The onset of COVID-19 caused a deterioration in economic conditions, creating uncertainty regarding the impact on HBL's
borrowers over and above the modelled ECL. Accordingly, a COVID Overlay was sized based on a range of techniques (including
stress testing, benchmarking, scenario analysis and expert judgement) and adopted by the Group.
The COVID-19 Overlay has not been utilised at this stage. Despite forecasts showing improvements in the economic conditions,
new variants of COVID-19 have emerged and vaccination strategies are varied and as yet unproven across a sufficient population.
Furthermore, Government stimulus has given rise to the potential for inflationary pressures, a steepening interest rate
environment, and a higher cost of labour in the medium term. Management considers that sufficient uncertainty remains such
that the COVID Overlay should be retained in full at this stage.
22

9Taxation
Policy
Income tax
Current tax
Deferred tax
Goods and services tax (GST)
$000'sJune 2021 June 2020
Income tax recognised in profit or loss
Current tax
Current year30,584 30,868
Adjustments for prior year(1,854) 1,834
Tax other rates426335
Deferred tax
Current year1,283 (3,568)
Adjustments for prior year1,145 (2,289)
Tax other rates(54)(19)
Total income tax expense recognised in profit or loss31,530 27,161
Income tax recognised in other comprehensive income
Current tax
Derivatives at fair value reserve(2,197) 768
Fair value movements of cash flow hedge3,457 (1,477)
Total income tax expense recognised in other comprehensive income1,260 (709)
Reconciliation of effective tax rate:
$000'sJune 2021 June 2020
Profit before income tax118,556 99,133
Tax at New Zealand income tax rate of 28%33,196 27,757
Higher tax rate for overseas jurisdiction372316
Adjusted tax effect of items not taxable/deductible(1,330) (457)
Adjustments for prior year(708) (455)
Total income tax expense31,530 27,161
Income tax expense for the year comprises current tax and movements in deferred tax balances, including any adjustment
required for prior years' tax expense. Income tax expense is recognised in profit and loss except to the extent that it relates to
items recognised directly in other comprehensive income, in which case it is recognised in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to the tax payable or receivable in respect of previous years. Current tax for
current and prior years is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
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 to
realise the asset.
Revenues, expenses and assets are recognised net 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 an expense or, if
relevant, as part of the cost of acquisition of an asset.
Income tax expense
23

9Taxation (continued)
Deferred tax assets comprise the following temporary differences:
$000'sJune 2021 June 2020
Employee expenses1,647 1,942
Share based payment503692
Provision for impairment15,097 17,739
Intangibles and property, plant and equipment(3,816) (4,576)
Deferred acquisition costs(475) (936)
Operating lease vehicles479731
Other temporary differences
682 1,531
Total deferred tax assets14,117 17,123
Opening balance of deferred tax assets17,123 9,531
Movement recognised in profit or loss(3,006) 7,336
Movement recognised in retained earnings
- 256
Closing balance of deferred tax assets14,117 17,123
Imputation credit account
$000'sJune 2021 June 2020
Imputation credit account
19,990 5,676
10 Earnings per share
WeightedWeighted
Earnings Net Profit Average No. Earnings Net Profit Average No.
Per Share After Tax of Shares Per Share After Tax of Shares
Cents $000's 000's Cents $000's 000's
Basic earnings15 87,026 583,467 12 71,972 576,929
Diluted earnings15 87,026 583,467 12 71,972 576,929
June 2020June 2021
24

Financial Position
11 Investments
Policy
Fair value through profit or loss
$000'sJune 2021 June 2020
Bank deposits, bank bonds and floating rate notes351,613 366,289
Public sector securities and corporate bonds5,543 30,716
Equity investments20,667 16,335
Total investments377,823413,340
12 Derivative financial instruments
Policy
•
•
•
Investments are classified into one of the following categories:
Investments under this category include equity investments and are measured at fair value plus transaction costs. Changes in fair
value of these investments are recognised in profit or loss in the period in which they occur.
Fair value through other comprehensive income
Investments under this category include bank bonds, floating rate notes, local authority stock, public securities and corporate
bonds. These are initially measured at fair value, including transaction costs, and subsequently carried at fair value. Changes in fair
value of these investments are recognised in other comprehensive income and presented within the fair value reserve.
Amortised cost
Investments under this category include bank deposits and are measured using effective interest rate method. They are held to
collect contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.
Derivatives are recognised at their fair value, with the derivatives being carried as assets when their fair value is positive and as
liabilities when their fair value is negative.
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,
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.
The Group uses derivatives for risk management purposes. Derivatives held for risk management purposes include hedges that
either meet the hedge accounting requirements set out in NZ IAS 39, or economic hedges not placed into an accounting hedge
relationship.
effectiveness testing must be carried out on an on-going basis to ensure the hedge is effective, consistent with the originally
documented risk management strategy, and
Fair value hedge accounting
the instruments or counterparty must be a third party external to the Group.
Refer to Note 20 - Fair value for details of the split between investments measured at fair value through profit or loss, fair value
through other comprehensive income and amortised cost.
25

12Derivative financial instruments (continued)
The criteria that must be met for a relationship to qualify for hedge accounting include:
•
•
•
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 in offsetting changes in fair value of hedged items.
the instruments or counterparty must be a third 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 in offsetting changes in cash flows of hedged items.
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.
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.
Cash flow hedge accounting
the hedging relationship must be formally designated and documented at inception of the hedge,
effectiveness testing must be carried out on an on-going basis to ensure the hedge is effective, consistent with the originally
documented risk management strategy, and
Where the hedged item is carried at amortised cost, 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 carried at
amortised cost 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 a hedged item carried at amortised cost 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.
Subsequent to initial designation, changes in the fair value of derivatives that are designated and qualify for fair value hedge
accounting are recorded through profit or loss alongside any changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk.
26

12Derivative financial instruments (continued)
Notional Fair Value Fair Value Notional
Fair Value
Fair Value
$000's
PrincipalAssetsLiabilitiesPrincipalAssetsLiabilities
Held for risk management
Interest rate related contracts
Swaps 1,121,179 14,122 4,533 1,140,422 17,238 16,938
Foreign currency related contracts
Forwards69,52517 269 237,900874
Total derivative financial instruments1,190,704 14,139 4,802 1,378,322 17,246 17,012
13 Finance receivables
(a)
Finance receivables held at amortised cost
Policy
June 2020June 2021
Financereceivablesare initiallyrecognised atfairvalueplusincrementaldirecttransactioncostsandare subsequentlymeasured
at amortised cost using the effective interest method, less any impairment loss.
The calculation of ECL 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.
Pastduebutnotimpairedassetsareanyassetswhichhavenotbeenoperatedbythecounterpartywithintheirkeytermsbutare
not considered to be impaired by the Group.
IndividuallyimpairedassetsarethoseloansforwhichtheGrouphasevidencethatitwillincuraloss,andwillbeunabletocollect
all principal and interest due according to the contractual terms of the loan.
The Group has entered into credit support annexes (CSAs) which form a part of International Swaps and Derivatives Association
(ISDA) Master Agreement, in respect of certain exposures relating to derivative transactions. As per these CSAs, the Group or the
counterparty needs to collateralise the market value of outstanding derivative transactions. As at 30 June 2021, the Group has
received $4.09 million of cash collateral (2020: nil) and advanced $0.59 million of cash collateral (2020: nil) against derivative
assets and liabilities respectively. The cash collateral received or advanced is not netted off against the balance of derivative assets
and derivative liabilities disclosed in the consolidated statement of financial position.
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.
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 rate method. Lending fees not directly related to the origination of a loan are
recognised over the period of service.
27

13Finance receivables (continued)
(a)
Finance receivables held at amortised cost (continued)
$000'sJune 2021 June 2020
Non-securitised
Neither at least 90 days past due nor impaired 3,140,489 2,945,858
At least 90 days past due 36,882 58,876
Individually impaired 38,143 24,667
Gross finance receivables3,215,515 3,029,401
Less provision for impairment(53,448) (62,272)
Total non-securitised finance receivables3,162,067 2,967,129
Securitised
Neither at least 90 days past due nor impaired 126,638 78,059
At least 90 days past due - 404
Individually impaired - -
Gross finance receivables126,638 78,463
Less provision for impairment(239) (397)
Total securitised finance receivables126,399 78,066
Total
Neither at least 90 days past due nor impaired 3,267,128 3,023,917
At least 90 days past due 36,882 59,280
Individually impaired 38,143 24,667
Gross finance receivables3,342,153 3,107,864
Less provision for impairment(53,687) (62,669)
Total finance receivables3,288,4663,045,195
28

13Finance receivables (continued)
(a)
Finance receivables held at amortised cost (continued)
Movement in provision
LifetimeLifetime
ECLECL
12 - MonthNot CreditCreditSpecific
$000's
ECLImpairedImpairedProvisionTotal
June 2021
Non-securitised
Impairment allowance as at 30 June 2020
32,160 2,143 22,668 5,301 62,272
Changes in loss allowance
Transfer between stages
(2,485) (1,090) (22) 3,597-
(3,207) 1,329 13,715 6,034 17,871
Recovery of amounts written off
- - (2,739)- (2,739)
Credit impairment charge
(5,692) 239 10,954 9,631 15,132
- - 2,739- 2,739
Write offs
- - (19,729) (7,303) (27,032)
Effect of changes in foreign exchange rate
(10)13- (6)
Acquisition of portfolio
13322 188- 343
Impairment allowance as at 30 June 2021
26,591 2,405 16,823 7,629 53,448
Securitised
Impairment allowance as at 30 June 2020
26023 114- 397
Changes in loss allowance
Transfer between stages
(4)(3)7- -
(40)2 (120)- (158)
Recovery of amounts written off
- - - - -
Credit impairment charge
(44)(1) (113)- (158)
- - - - -
Write offs
- - - - -
Effect of changes in foreign exchange rate
- - - - -
Impairment allowance as at 30 June 2021
216221- 239
Total
Impairment allowance as at 30 June 2020
32,420 2,166 22,782 5,301 62,669
Changes in loss allowance
Transfer between stages
(2,489) (1,093) (15) 3,597-
(3,247) 1,331 13,595 6,034 17,713
Recovery of amounts written off
- - (2,739)- (2,739)
Credit impairment charge
(5,736) 238 10,841 9,631 14,974
- - 2,739- 2,739
Write offs
- - (19,729) (7,303) (27,032)
Effect of changes in foreign exchange rate
(10)13- (6)
Acquisition of portfolio
13322 188- 343
Impairment allowance as at 30 June 2021
26,8072,42716,8247,62953,687
Recovery of amounts previously written off
The following table details the movement from the opening balance to the closing balance of the provision for impairment losses
by class.
New and increased provision (net of collective provision
releases)
New and increased provision (net of collective provision
releases)
Recovery of amounts previously written off
Recovery of amounts previously written off
New and increased provision (net of collective provision
releases)
29

13Finance receivables (continued)
(a)
Finance receivables held at amortised cost (continued)
Movement in provision (continued)
LifetimeLifetime
ECLECL
12 - MonthNot CreditCreditSpecific
$000's
ECLImpairedImpairedProvisionTotal
June 2020
Non-securitised
Impairment allowance as at 30 June 2019
30,422 1,781 18,425 7,863 58,491
Changes in loss allowance
Transfer between stages
(1,190) (294) (109) 1,593-
2,901 2,090 25,047 1,792 31,830
Recovery of amounts written off
- - (2,808)- (2,808)
Credit impairment charge
1,711 1,796 22,130 3,385 29,022
- - 2,808- 2,808
Write offs
- (1,438) (20,705) (5,947) (28,090)
Effect of changes in foreign exchange rate
27410- 41
Impairment allowance as at 30 June 2020
32,160 2,143 22,668 5,301 62,272
Securitised
Impairment allowance as at 30 June 2019
- - - - -
Changes in loss allowance
Transfer between stages
(19) 118- -
27912 106- 397
Recovery of amounts written off
- - - - -
Credit impairment charge
26023 114- 397
- - - - -
Write offs
- - - - -
Effect of changes in foreign exchange rate
- - - - -
Impairment allowance as at 30 June 2020
26023 114- 397
Total
Impairment allowance as at 30 June 2019
30,422 1,781 18,425 7,863 58,491
Changes in loss allowance
Transfer between stages
(1,209) (283) (101) 1,593-
3,180 2,102 25,153 1,792 32,227
Recovery of amounts written off
- - (2,808)- (2,808)
Credit impairment charge
1,971 1,819 22,244 3,385 29,419
- - 2,808- 2,808
Write offs
- (1,438) (20,705) (5,947) (28,090)
Effect of changes in foreign exchange rate
27410- 41
Impairment allowance as at 30 June 2020
32,4202,16622,7825,30162,669
New and increased provision (net of collective provision
releases)
Recovery of amounts previously written off
New and increased provision (net of collective provision
releases)
Recovery of amounts previously written off
Recovery of amounts previously written off
New and increased provision (net of collective provision
releases)
30

13Finance receivables (continued)
(a)
Finance receivables held at amortised cost (continued)
Impact of changes in gross finance receivables held at amortised cost on allowance for ECL
LifetimeLifetime
ECLECL
12 - monthNot CreditCreditSpecific
$000's
ECLImpairedImpairedProvisionTotal
June 2021
Gross finance receivables as at 30 June 20202,826,208 183,260 73,729 24,667 3,107,864
Transfer between stages(103,233) 67,419 13,314 22,499-
Additions1,435,408- - 955 1,436,363
Deletions(1,065,730) (84,886) (20,337) (466) (1,171,419)
Write offs- - (21,142) (9,512) (30,655)
Gross finance receivables as at 30 June 20213,092,653165,79345,56438,1433,342,153
June 2020
Gross finance receivables as at 30 June 20192,799,282 206,882 57,043 26,412 3,089,619
Transfer between stages(61,191) 12,570 41,245 7,376-
Additions1,497,073 87,843 23,610- 1,608,526
Deletions(1,402,340) (118,572) (37,334) (3,174) (1,561,420)
Write offs(6,616) (5,463) (10,835) (5,947) (28,861)
Gross finance receivables as at 30 June 20202,826,208183,26073,72924,6673,107,864
(b) Finance receivables held at fair value
Policy
$000'sJune 2021 June 2020
Finance receivables - reverse mortgages1,676,073 1,538,585
Total finance receivables - reverse mortgages1,676,0731,538,585
Credit risk adjustments on financial assets designated at fair value through profit or loss
There were no credit risk adjustments on individual financial assets.
Finance receivables – reverse mortgages are initially recognised, and subsequently measured, at fair value through profit or loss.
Note 20 (a) - Financial instruments measured at fair value discloses further information regarding the Group’s valuation policy.
Note 22 - Credit risk exposure discloses further information regarding how reverse mortgages operate.
31

14Operating lease vehicles
Policy
$000'sJune 2021 June 2020
Cost
Opening balance24,098 21,623
Additions1,788 9,938
Disposals(9,772) (7,463)
Closing balance16,11424,098
Accumulated depreciation
Opening balance6,495 6,107
Depreciation charge for the year2,801 3,634
Disposals(4,047) (3,246)
Closing balance5,2496,495
Opening net book value17,603 15,516
Closing net book value10,86517,603
Operating lease vehicles are stated at cost less accumulated depreciation.
The future minimum lease payments receivable under operating leases not later than one year is $2.141 million (2020: $3.487
million), within one to five years is $1.406 million (2020: $2.053 million) and over five years is nil (2020: nil).
Operating lease vehicles are depreciated on a straight line basis over their expected useful 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.
32

15Borrowings
Policy
$000'sJune 2021 June 2020
Deposits3,183,454 3,264,192
Total deposits3,183,454 3,264,192
Unsubordinated Notes521,399 448,228
Securitised borrowings1,043,516 819,703
Certificate of deposit69,853-
Repurchase agreement
1
40,365-
Total other borrowings1,675,133 1,267,931
Deposits and unsubordinated notes rank equally and are unsecured.
PrincipalValuation
Issue Date
$150 millionAmortised cost
$125 millionAmortised cost
AU $100 millionAmortised costQuarterly
AU $45 millionAmortised costQuarterly
AU $75 millionAmortised costQuarterly
At 30 June 2021 the Group had the following securitised borrowings outstanding:
•
•
•
•
1
The amounts disclosed as securities sold under arrangements to repurchase include $40.0 million (face value) of high quality liquid assets. The cash
consideration received (recognised as a liability) was $40.4 million.
13 November 2019
Maturity DateInterest Repayment
Frequency of
Semi annually
12 April 2019
21 September 2017
12 April 2024
15 January 202121 April 2023
Senior Warehouse Trust securitisation facility AU $600 million, drawn AU $556 million (2020: AU $600 million, drawn AU $544
million). Notes issued to investors are secured over the assets of Seniors Warehouse Trust. The facility has a maturity date of
30 September 2022.
Heartland Auto Receivables Warehouse Trust 2018-1 securitisation facility $300 million, drawn $108 million (2020: $300
million, drawn $66 million). Notes issued to investors are secured over the assets of the Heartland Auto Receivables
Warehouse Trust 2018-1. The facility has a maturity date of 29 August 2022.
Atlas 2020-1 Trust securitisation facility AU $137 million, drawn AU $137 million (2020: nil). Loans issued to investors are
secured over the assets of Atlas 2020-1 Trust and has a maturity date of 24 September 2050.
The Group has the following unsubordinated notes on issue at reporting date. Australian (AU) borrowings are stated in their
functional currency AU dollars.
21 April 2023
13 May 2022
8 March 2021
21 September 2022
Semi annually
Senior Warehouse Trust No. 2 securitisation facility AU $250 million, drawn AU $182 million (2020: AU $250 million, drawn AU
$160 million). Notes issued to investors are secured over the assets of Seniors Warehouse Trust No. 2. The facility has a
maturity date of 1 July 2022.
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.
33

16Share capital and dividends
Policy
June 2021June 2020
Number ofNumber of
000'sShares Shares
Issued shares
Opening balance580,979 569,338
Shares issued - performance rights plan- 817
Shares issued - dividend reinvestment plan4,925 10,824
Closing balance585,904580,979
Dividends paid
CentsDate Cents
Per Share$000'sDeclaredPer Share
$000's
Final dividend
2.5
14,524
6.5
37,007
Interim dividend4.0 23,337
4.5
25,986
Total dividends paid37,86162,993
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.
Under dividend reinvestment plans, 2,482,921 new shares were issued at $1.8035 per share on 16 March 2021 and 2,442,338 new
shares at $1.2470 per share on 9 October 2020 (2020: 7,313,501 new shares were issued at $1.5444 per share on 6 September
2019 and 3,511,020 at $1.5948 on 11 March 2020).
18 February 2020
15 August 2019
June 2020June 2021
17 September 2020
Date
Declared
22 February 2021
34

17Other reserves
Foreign
Currency
EmployeeTranslationDefinedCash Flow
BenefitsReserveFair ValueBenefitHedge
$000's
Reserve
(FCTR)Reserve
Reserve
ReserveTotal
June 2021
Balance as at 30 June 2020934 (3,907) 5,324 171 (8,022) (5,500)
- (68) (5,646)- 8,940 3,226
Share based payments1,797- - - - 1,797
Balance as at 30 June 20212,731 (3,975) (322) 171 918 (477)
June 2020
Balance as at 30 June 2019838 (4,021) 4,558 171 (5,843) (4,297)
- 114 766- (2,179) (1,299)
Share based payments516- - - - 516
Shares vested(420)- - - - (420)
Balance as at 30 June 2020934 (3,907) 5,324 171 (8,022) (5,500)
18 Other balance sheet items
Policy
$000'sJune 2021 June 2020
Other assets
Trade receivables643 1,952
GST receivable1,763 985
Prepayments3,699 4,857
Property, plant and equipment9,061 10,153
Other receivables1,059 1,611
Collateral paid on derivatives590-
Total other assets16,81519,558
Other comprehensive income, net of income tax
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 revalued amount of each asset over its expected life to its estimated residual
value.
Other comprehensive income, net of income tax
35

18Other balance sheet items (continued)
Policy
Intangible assets
Intangible assets with finite useful lives
Goodwill
$000'sJune 2021 June 2020
Computer software
Cost44,371 42,534
Accumulated amortisation20,349 14,864
Net carrying value of computer software
24,022 27,670
Goodwill
Cost45,143 45,143
Net carrying value of goodwill45,143 45,143
Total intangible assets69,165 72,813
•
•
Goodwill is tested for impairment at a cash generating unit (CGU) level. The recoverable amounts are determined on a value in use
basis using a five-year discounted cash flow methodology based on financial budget and forecasts. Key assumptions used in the
models included a discount rate of 10% and a terminal growth rate of 2% which reflect both past experience and external sources
of information. The recoverable amounts for each CGU are compared to the respective carrying value of net assets.
For the purposes of impairment testing, goodwill is allocated to cash generating units (CGU's). A CGU is the smallest identifiable
group of assets that generate independent cash inflows. The Group has assessed that goodwill should be allocated to the following
smallest identifiable CGUs:
Heartland Australia Holdings Pty Limited: $15.3 million (2020: $15.3 million).
Heartland Bank Limited: $29.8 million (2020: $29.8 million).
Software acquired or internally developed by the Group is stated at cost less accumulated amortisation and any accumulated
impairment losses. 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 varies up to ten years.
Goodwill arising on acquisition represents the excess of the cost of the acquisition over the Group’s interest in the fair value of the
identifiable net assets acquired. 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.
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 2021 (30 June 2020: nil). Uncertainty associated with the effects from the COVID-19 pandemic were
considered in the impairment tests to determine the resilience of the headroom and no impairment was identified from the
assessments.
36

18Other balance sheet items (continued)
Policy
Employee benefits
$000'sJune 2021 June 2020
Trade and other payables
Trade payables11,243 20,657
Insurance liability3,353 6,094
Employee benefits7,616 8,223
Other tax payables623 1,288
Collateral received on derivatives4,091-
Total trade and other payables26,92636,262
Policy
Leases
$000'sJune 2021June 2020
Right of use assets
Balance at beginning of year18,362 10,728
Depreciation charge for the year, included within depreciation expense in the income statement(2,313) (2,324)
(Terminations)/additions to right of use assets(64) 9,958
Total right of use assets15,98518,362
Lease liability
Current2,339 2,222
Non-current15,827 18,234
Total lease liability18,16620,456
Interest expense relating to lease liability568570
In determining the lease term, all facts and circumstances that create an economic incentive to exercise an extension option are
considered. Extension options are only included in the lease term if the lease is reasonably certain to be extended.
Lease liabilities are measured at the present value of the remaining lease payments and discounted using the Group’s incremental
borrowing rate (IBR). Lease liabilities are measured using the effective interest method. Carrying amounts are remeasured only
upon reassessments and lease modifications.
The Group leases office space, car parks, equipment and cars. Rental contracts are typically made for fixed periods but may have
extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
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.
Right of use assets are depreciated at the shorter of lease term or the Group’s depreciation policy for that asset class.
37

19Related party transactions and balances
Policy
a)
A person or a close member of that person's family if that person:
b)
(a)
Transactions with key management personnel
$000'sJune 2021 June 2020
Transactions with key management personnel
Interest income receivable3918
Interest expense payable(22) (47)
Key management personnel compensation
Short-term employee benefits(9,384) (8,814)
Share-based payment expense(1,797) (828)
Total transactions with key management personnel(11,181) (9,671)
Due (to)/from key management personnel
Lending415 239
Borrowings - deposits(23,409) (1,646)
Total due (to) key management personnel(22,994) (1,407)
iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
vi) The entity is controlled, or jointly controlled by a person identified in (a); and
vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of
the entity (or of a parent of the entity).
An entity is related to HGH if any of the following conditions applies:
ii) has significant influence over HGH; or
A person or entity is a related party under the following circumstances:
i) has control or joint control over HGH;
KMP receive personal banking and financial investment services from the Group in the ordinary course of business. The terms and
conditions, for example interest rates and collateral, and the risks to the Group are comparable to transactions with other
employees and did not involve more than the normal risk of repayment or present other unfavourable features.
v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity
related to HGH;
iii) is a member of the key management personnel of HGH.
iii) Both entities are joint ventures of the same third party;
i) The entity and HGH are members of the same group;
ii) One entity is an associate or joint venture of the other entity;
All other transactions with KMPs and their related entities are made on terms equivalent to those that prevail in arm's length
transactions.
Key management personnel (KMP), are those who, directly or indirectly, have authority and responsibility for planning, directing
and controlling the activities of the Group. This includes all executive staff, Directors and their close family members.
38

19Related party transactions and balances (continued)
(b)
Transactions with related parties
$000's
June 2021June 2020
Southern Cross Building Society Staff Superannuation (SCBS)
Interest expense payable to SCBS
12
33
Management fees receivable from SCBS
10
10
ASF Custodians Pty Limited
Audit fees
7
7
Heartland Trust (HT)
Dividends paid
421
712
HT held 6,475,976 shares in HGH (2020: 6,475,976 shares).
(c)
$000'sJune 2021 June 2020
Southern Cross Building Society Staff Superannuation
Deposits
1,760
1,934
HGH is the ultimate parent company of the Group.
Entities within the Group have regular transactions between each other on agreed terms. The transactions include the provision of
administrative services, tax transactions, and customer operations and call centre. Banking facilities are provided by Heartland
Bank Limited to other Heartland Group entities on normal commercial terms as with other customers. There is no lending from
subsidiaries within the Group to HGH.
The Trustees of HT and certain employees of the Group provided their time and skills to the oversight and operation of HT at no
charge.
Related party transactions between the Group eliminate on consolidation. Related party transactions outside of the Group are as
follows:
Other balances with related parties
39

20Fair value
Policy
(a) Financial instruments measured at fair value
Investments
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.
Investments in equity securities are classified as fair value through profit or loss unless an irrevocable election is made by the
Group to measure at FVOCI. Investments in listed equity securities that trade on a liquid, active market (e.g. stock exchange)
where quoted prices are readily observable are measured under Level 1 of the fair value hierarchy without adjustment. A liquid,
active market is one in which transactions take place with sufficient frequency and volume to provide pricing information on an
ongoing basis.
The Group measures fair values using the following fair value hierarchy, which reflects the observability of the inputs used in
measuring fair value:
Investments in listed equity securities that trade on an illiquid, inactive market, and investments in unlisted equity securities are
measured under Level 3 of the fair value hierarchy. In these cases, fair value is measured through market based valuation
techniques using unobservable inputs that reflect assumptions market participants would use when pricing the investment in an
equity security, including assumptions about risk.
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.
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 following methods and assumptions were used to estimate the fair value of each class of financial asset and liability measured
at fair value on a recurring basis in the consolidated statement of financial position.
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 has an established framework in performing valuations required for financial reporting purposes including level 3 fair
values. The Group regularly reviews and calibrates significant unobservable inputs and valuation adjustments in accordance with
market participants’ views. If external valuation specialists are engaged to measure fair values, the Group assesses the evidence
obtained from these specialists to support the conclusion of these valuations. All significant valuations are reported to the Group's
Board Audit and Risk Committee for approval prior to its adoption in the financial statements.
Investments in public sector securities and corporate bonds are classified at FVOCI, with the fair value being based on quoted
market prices (Level 1 under the fair value hierarchy) or modelled using observable market inputs (Level 2 under the fair value
hierarchy). Refer to Note 11 - Investments for more details.
InvestmentsvaluedunderLevel2ofthefairvaluehierarchyarevaluedeitherbasedonquotedmarketpricesordealerquotesfor
similar instruments, or discounted cash flows analysis.
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.
40

20Fair value (continued)
(a) Financial instruments measured at fair value (continued)
Investments (continued)
Equity Investment in Harmoney Corp Limited
Investment properties
The investment is primarily measured using the volume weighted average price (VWAP) of Harmoney shares traded on the ASX
across a period required to capture sufficient volume and moderate share price volatility attributable to the aforementioned
factors. The VWAP period considered to be the most appropriate, reflecting the characteristics of the underlying share trading that
has occurred, is 6 months to reporting date. This VWAP has been further evaluated through a composite valuation weighting the
closing price of Harmoney shares, revenue multiples of comparable public companies, IPO price and analyst valuations. Both the
VWAP and composite valuation approaches derive consistent outcomes.
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).
Harmoney Corp Limited (Harmoney) listed on the ASX with a foreign exempt listing on the NZX on 19 November 2020, raising AU
$92.5 million as part of its Initial Public Offering (IPO). As part of the IPO, HGH, alongside other major shareholders, employees and
directors, entered into escrow arrangements that restrict the ability to sell its Harmoney shares, with approximately 72% of the
shares being in escrow (Escrow Restrictions). The escrowed shares are released from escrow in two stages, with the first 50% of
escrow shares released in August 2021 and the final 50% of escrowed shares released in February 2022.
Investment properties are initially recorded at their fair value, with subsequent changes in fair value recognised in profit or loss.
Fair value are determined by qualified independent valuers or other similar external evidence, adjusted for changes in market
conditions.
The Escrow Restrictions have significantly reduced the available trading pool of shares, resulting in an illiquid market for the
instrument, wide bid-ask spreads and volume that is insufficient to meet the definition of an active market under New Zealand
Equivalent to International Financial Reporting Standard 13 Fair Value Measurement (NZ IFRS 13) for purposes of Harmoney
shares traded. As such the quoted price of Harmoney as at 30 June 2021 is not considered the most reliable evidence of fair value
and accordingly HGH’s equity investment in Harmoney has not been measured under Level 1 of the fair value hierarchy.
Instead, and consistent with prior reporting periods, the fair value of HGH’s investment in Harmoney has been measured under
Level 3 of the fair value hierarchy using unobservable inputs under a market approach valuation technique. Factors considered
relevant to market participants such as observed trading volumes, bid-ask spreads, market prices of Harmoney’s shares, revenue
multiples, analyst valuations, the impact of Escrow Restrictions, as well as publicly available financial information for Harmoney
have all been taken into account when measuring fair value at reporting date.
The fair value measurement of HGH’s equity investment in Harmoney was AU $1.90 per share as at reporting date. This was a 26%
premium to the market closing price of AU $1.51 as at 30 June 2021, which if used as the basis for measuring fair value would
result in a $3.9 million lower fair value than that reported. The fair value of the Investment was previously measured at AU $2.11
per share at 31 December 2020.
41

20Fair value (continued)
(a) Financial instruments measured at fair value (continued)
Finance receivables - reverse mortgages
•
Mortality and move to care;
•
Voluntary exits;
•
House price changes;
•
No negative equity guarantee; and
•
Interest rate margin.
Derivative financial instruments
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.
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:
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 (income approach) including actuarial assessments to consider the fair value.
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).
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 tenor, the fair value as
recorded is regarded as not being highly sensitive to the above assumptions, particularly to house prices and interest rates, that
would impact the fair value at balance date. While noting the uncertainty around future economic conditions, based on current
judgement there is no evidence that COVID-19 has impacted and will have a long-term adverse impact on market conditions,
particularly regarding the key elements of house prices or interest rates, that would materially influence the fair value of the
reverse mortgage portfolio at balance date.
The Group will continue to reassess the existence of a relevant active market and movements in expectations on an on-going basis.
42

20Fair value (continued)
(a) Financial instruments measured at fair value (continued)
$000'sLevel 1 Level 2 Level 3 Total
June 2021
Assets
Investments259,041 92,476 20,667 372,184
Investment properties- - 11,832 11,832
Derivative financial instruments- 14,139- 14,139
Finance receivables - reverse mortgages- - 1,676,073 1,676,073
Total financial assets measured at fair value259,041 106,615 1,708,572 2,074,228
Liabilities
Derivative financial instruments- 4,802- 4,802
Total financial liabilities measured at fair value- 4,802- 4,802
June 2020
Assets
Investments295,300 94,354 16,335 405,989
Investment properties- - 11,132 11,132
Derivative financial instruments- 17,246- 17,246
Finance receivables - reverse mortgages- - 1,538,585 1,538,585
Total financial assets measured at fair value295,300111,6001,566,0521,972,952
Liabilities
Derivative financial instruments- 17,012- 17,012
Total financial liabilities measured at fair value- 17,012- 17,012
The following table analyses financial instruments measured at fair value at the reporting date by the level in the fair value
hierarchy into which each fair value measurement is categorised. The amounts are based on the values recognised in the
consolidated statement of financial position.
43

20Fair value (continued)
(a) Financial instruments measured at fair value (continued)
The movement in Level 3 assets measured at fair value are below:
Investment
$000's
InvestmentsPropertiesTotal
June 2021
As at 30 June 2020
1,538,58516,33511,1321,566,052
New loans
300,689- - 300,689
Repayments
(257,999)- - (257,999)
Capitalised interest and fees
91,812- - 91,812
Purchase of investments
- 940- 940
Fair value gain on investment
- 3,3927004,092
Other
2,986- - 2,986
As at 30 June 2021
1,676,07320,66711,8321,708,572
June 2020
As at 30 June 2019
1,318,67712,43511,1321,342,244
New loans
290,488- - 290,488
Repayments
(182,653)- - (182,653)
Capitalised Interest and fees
91,288- - 91,288
Purchase of investments
- 1,803- 1,803
Fair value gain on investment
- 2,097- 2,097
Other
20,785- - 20,785
As at 30 June 2020
1,538,58516,33511,1321,566,052
(b) Financial instruments not measured at fair value
Cash and cash equivalents
Finance receivables
Borrowings
There were no transfers between levels in the fair value hierarchy in the year ended 30 June 2021 (2020: nil).
Cash and cash equivalents are measured at amortised cost and their carrying value is considered equivalent to their fair value due
to their short term nature.
Finance Receivables
- Reverse Mortgages
The following assets and liabilities of the Group are not measured at fair value in the consolidated statement of financial position.
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 average current market rate used to fair
value borrowings is 1.23% (2020: 2.24%).
The current weighted average lending rate used to fair value finance receivables with a fixed interest rate was 7.08% (2020:
8.06%). 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.
The fair value of the Group's finance 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.
44

20Fair value (continued)
(b) Financial instruments not measured at fair value (continued)
Other financial assets and financial liabilities
Total
Total
Fair Value Total Fair Carrying Fair Value Total Fair Carrying
$000'sHierarchy Value Value Hierarchy Value Value
Assets
Cash and cash equivalentsLevel 1 182,333 182,333 Level 1 147,179 147,179
Investments
1
Level 25,6405,639Level 27,3757,351
Finance receivablesLevel 2 3,362,536 3,288,466 Level 2 3,092,150 3,045,195
Other financial assetsLevel 3 2,292 2,292 Level 3 3,563 3,563
Total financial assets3,552,801 3,478,7303,250,267 3,203,288
Liabilities
DepositsLevel 2 3,192,708 3,183,454 Level 2 3,278,483 3,264,192
Other borrowingsLevel 2 631,617 631,617 Level 2 448,626 448,228
Borrowings - securitisedLevel 2 1,043,516 1,043,516 Level 2 819,305 819,703
Other financial liabilitiesLevel 3 18,687 18,687 Level 3 26,751 26,751
Total financial liabilities4,886,528 4,877,2744,573,165 4,558,874
(c) Classification of financial instruments
Total
AmortisedCarryingTotal Fair
$000's
FVOCIFVTPLCost
ValueValue
June 2021
Assets
Cash and cash equivalents- - 182,333 182,333 182,333
Investments351,517 20,667 5,639 377,823 377,824
Investment properties- 11,832- 11,832 11,832
Finance receivables- - 3,288,466 3,288,466 3,362,536
Finance receivables - reverse mortgages- 1,676,073- 1,676,073 1,676,073
Derivative financial instruments3,230 10,909- 14,139 14,139
Other financial assets- - 2,292 2,292 2,292
Total financial assets354,747 1,719,481 3,478,730 5,552,958 5,627,029
Liabilities
Deposits- - 3,183,454 3,183,454 3,192,708
Other borrowings- - 1,675,133 1,675,133 1,675,133
Derivative financial instruments4,408 394- 4,802 4,802
Other financial liabilities- - 18,687 18,687 18,687
Total financial liabilities4,408 394 4,877,274 4,882,076 4,891,330
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 out financial instruments not measured at fair value, compares their carrying value against their fair value
and analyses them by level in the fair value hierarchy.
The following table summarises the categories of financial instruments and the carrying value and fair value of all financial
instruments of the Group:
1
Included within investments are bank deposits which are held to support the Group's contractual cash flows. Such investments are measured at amortised
cost.
June 2021June 2020
45

20Fair value (continued)
(c) Classification of financial instruments (continued)
Total
AmortisedCarryingTotal Fair
$000's
FVOCIFVTPLCost
ValueValue
June 2020
Assets
Cash and cash equivalents- - 147,179 147,179 147,179
Investments389,654 16,335 7,351 413,340 413,364
Investment properties- 11,132- 11,132 11,132
Finance receivables- - 3,045,195 3,045,195 3,092,150
Finance receivables - reverse mortgages- 1,538,585- 1,538,585 1,538,585
Derivative financial instruments32 17,213- 17,246 17,246
Other financial assets- - 3,563 3,563 3,563
Total financial assets389,686 1,583,265 3,203,288 5,176,240 5,223,219
Liabilities
Deposits- - 3,264,192 3,264,192 3,278,483
Other borrowings- - 1,267,931 1,267,931 1,267,931
Derivative financial instruments15,408 1,604- 17,012 17,012
Other financial liabilities- - 26,751 26,751 26,751
Total financial liabilities15,408 1,604 4,558,874 4,575,886 4,590,177
46

Risk Management
21 Enterprise risk management program
Role of the Board and the Board Audit Risk Committee
•
Financial reporting and application of accounting policies as part of the internal control and risk assessment framework.
•
•
•
•
Internal Audit
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 Program (RMP).
The Board, through its Board Audit Risk Committee (BARC) is responsible for oversight and governance of the development of the
RMP. The role of the BARC is to assist the Board to formulate its risk appetite, and to monitor the effectiveness of the RMP. The
BARC has the following specific responsibilities:
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 processes.
To review any reports, policies, standards, other risk documents or matters, or minutes which have been prepared by or in
respect of the HGH's Board.
To advise and make recommendations to the Board as to the key parameters for Internal Capital Adequacy Assessment
Process (ICAAP), delegated authorities, risk appetite and stress testing for its subsidiary, Heartland Bank Limited.
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
BARC receives regular reports from internal audit.
To advise the Board on the formulation of the Board's Risk Appetite Statement at least annually.
Internal Audit is allowed full, free and unfettered access to any and all of the organisation’s 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 identified. The audit plan takes into account cyclical review 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 performed in
accordance with the 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.
47

21Enterprise risk management program (continued)
Internal Audit (continued)
Asset and Liability Committee (ALCO)
•
Market risk (including non-traded interest rate risk and the investment of capital);
•
Liquidity risk (including funding);
•
Foreign exchange rate risk;
•
Balance sheet structure; and
•
Capital management;
Operational and compliance risk
•
•
•
Market 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 losses. 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, 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, 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 third line of defence is Internal Audit which is responsible for independently assessing how effectively the Group is
managing its risk according to the stated risk appetite.
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 (RCSA), incident
management, independent evaluation of the adequacy and effectiveness of the internal control framework, and the
attestation process.
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.
The ALCO comprises the CEO HGH, CEO HBL, CFO HGH, Chief Legal & Bank Risk Officer, Head of Retail, Financial Controller HBL and
Chief Distribution Officer. The ALCO generally meets monthly, and provides reports to the BARC. ALCO's specific responsibilities
include decision making and oversight of risk matters in relation to:
The Head of Internal Audit has a direct reporting line to the Chairman of the BARC. Internal audit has accountability to the BARC of
the Group. A schedule of all outstanding internal control issues is maintained and presented to the BARC to assist the and 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.
48

21Enterprise risk management program (continued)
Interest rate risk
•
•
•
•
Foreign exchange risk
Counterparty Credit Risk
•
•Finance receivables;
•
•
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.
Mismatches between the repricing dates of interest bearing assets and liabilities (yield curve and repricing risk);
Banking products repricing differently to changes in wholesale market rates (basis risk);
Interest rate risk refers to exposure of an entity’s earnings and / or capital because of a mismatch between the interest rate
exposures of its assets and liabilities. Interest rate risk for the Group arises from the provision of non-traded retail banking
products and services and from traded wholesale transactions entered into to reduce aggregate interest rate risk (known as
hedges). This risk arises from four key sources:
The effect of internal or market forces on a bank’s net interest margin where, for example, in a low rate environment any fall in
rates will further decrease interest income earned on the assets whereas funding cost cannot be reduced as it is already at the
minimum level (margin compression risk).
Loan prepayment or deposit early withdrawal behaviour from customers that deviates from the expected or contractually
agreed behaviour (optionality risk); and
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.
The Group has on-going credit exposure associated with:
Cash and cash equivalents;
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 derivative contracts,
bilateral set-off arrangements, cash and cash equivalents and investment securities.
Refer Note 24 - Interest rate risk for further details regarding interest rate risk.
49

22Credit risk exposure
•Credit origination meets agreed levels of credit quality at point of approval;
•Sector concentrations are monitored;
•Maximum total exposure to any one debtor is actively managed; and
•Changes to credit risk are actively monitored with regular credit reviews.
Reverse mortgage loans and negative equity risk
Business Finance Guarantee Scheme (BFGS)
Reverse mortgage loans are a form of mortgage lending designed for the needs of people over 60 years. These loans differ to
conventional mortgages in that they typically are not repaid until the borrower ceases to reside in the property. Further, interest is
not required to be paid, it is capitalised into the loan balance and is repayable on termination of the loan. As such, there are no
incoming cash flows and therefore no default risk to manage during the term of the loan. Negative equity risk arises from the
promise by the Group that the maximum repayment amount is limited to the net sale proceeds of the borrowers' property.
The BARC also oversees the Group's credit risk exposures to monitor overall risk metrics having regard to risk appetite set by the
Board.
HBL's Board Risk Committee (BRC) has authority for approval of all credit exposures. Lending authority has been provided to the
HBL's Credit Committee, and to the business units under a detailed Delegated Lending Authority framework. Application of credit
discretions in the business operation are monitored through a defined review and hindsight structure as outlined in the Credit Risk
Oversight Policy. Delegated Lending Authorities are provided to individual officers with due cognisance of their experience and
ability. Larger and higher risk exposures require approval of senior management, the Credit Committee and ultimately through to
HBL's BRC.
To manage this risk, HBL's Executive Risk Committee (ERC) oversees the formal credit risk management strategy. The ERC reviews
the Group's credit risk exposures typically on a monthly basis. The credit risk management strategies aim to ensure that:
Credit risk is managed to achieve sustainable risk-reward performance whilst maintaining exposures within acceptable risk
“appetite” parameters. This is achieved through the combination of governance, policies, systems and controls, underpinned by
commercial judgement as described below.
Creditriskistheriskthataborrowerwilldefaultonanytypeofdebtbyfailingtomakepaymentswhichitisobligatedtomake.The
risk is primarily that of the lender and includes loss of principal and interest, disruption to cash flows and increased collection
costs.
The Group’s exposure to negative equity risk is managed by the Credit Risk Oversight Policy in conjunction with associated lending
standards specific for this product. In addition to usual criteria regarding the type, and location, of security property that the Group
will accept for reverse mortgage lending, a key aspect of the Group's policy is that a borrower’s age on origination of the reverse
mortgage loan will dictate the loan-to-value ratio of the reserve mortgage on origination. Both New Zealand and Australia reverse
mortgage operations are similarly aligned. The policy is managed and reviewed periodically to ensure appropriate consistency
across locations.
HBL, along with other registered banks in New Zealand, has entered into a Deed of Indemnity with the New Zealand Government
to implement the New Zealand Government's Business Finance Guarantee Scheme. The purpose of the scheme is to provide short
term credit to eligible small and medium size businesses, who have been impacted by economic effects of COVID-19. The scheme
allows banks to lend to a maximum of $5 million for a maximum of five years. The New Zealand Government will guarantee 80% of
any loss incurred (credit risk) with HBL holding the remaining 20%. As at 30 June 2021 the Group had a total exposure of $64.3
million (2020, $6.5 million) to its customers under the scheme. BFGS has concluded on 30 June 2021 with scheme loans no longer
being available.
The Group employs a process of hindsighting loans to ensure that credit policies and the quality of credit processes are
maintained.
50

22Credit risk exposure (continued)
Maximum exposure to credit risk at the relevant reporting dates
$000'sJune 2021 June 2020
On balance sheet:
Cash and cash equivalents182,333 147,179
Investments357,156 397,005
Finance receivables3,288,466 3,045,195
Finance receivables - reverse mortgages1,676,073 1,538,585
Derivative financial assets14,139 17,246
Other financial assets2,292 3,563
Total on balance sheet credit exposures5,520,459 5,148,773
Off balance sheet:
Letters of credit, guarantee commitments and performance bonds13,484 6,515
Undrawn facilities available to customers299,544 260,098
Conditional commitments to fund at future dates19,083 58,045
Total off balance sheet credit exposures332,111 324,658
Total credit exposures 5,852,570 5,473,431
Concentration of credit risk by geographic region
$000'sJune 2021 June 2020
New Zealand4,402,656 4,086,184
Australia1,243,522 1,154,567
Rest of the world
1
260,079295,349
Total5,906,257 5,536,100
Provision for impairment(53,687) (62,669)
Total credit exposures5,852,570 5,473,431
1
These overseas assets are primarily NZD-denominated investments in AA+ and higher rated securities issued by offshore supranational agencies ("Kauri
Bonds").
The following table represents the maximum credit risk exposure, without taking account of any collateral held. The on balance
sheet exposures set out below are based on net carrying amounts as reported in the consolidated statement of financial position.
As at 30 June 2021 there was $0.216 million undrawn lending commitments available to counterparties for whom drawn balances
were classified as individually impaired (2020: nil).
51

22Credit risk exposure (continued)
Concentration of credit risk by industry sector
$000'sJune 2021 June 2020
Agriculture670,428 695,661
Forestry and fishing153,160 149,871
Mining12,684 13,425
Manufacturing76,951 80,776
Finance and insurance674,854 609,657
Wholesale trade56,522 48,055
Retail trade and accommodation
279,388 278,768
Households2,994,980 2,752,641
Other business services148,011 168,326
Construction241,668 202,685
Rental, hiring and real estate services185,320 154,318
Transport and storage297,920 262,078
Other114,371 119,839
Total5,906,257 5,536,100
Provision for impairment(53,687) (62,669)
Total credit exposures5,852,570 5,473,431
Credit risk grading
The Australian and New Zealand Standard Industrial Classification (ANZSIC) codes have been used as the basis for categorising
customer industry sectors.
The Group's finance receivables are monitored either by account behaviour (Behavioural portfolio) or a regular assessment of
their credit risk grade based on an objective review of defined risk characteristics (Judgemental portfolio).
Finance receivables - reverse mortgages have no arrears characteristics and are assessed on origination against a pre-determined
criteria.
The Judgemental portfolio consists mainly of business and rural lending where an on-going and detailed working relationship with
the customer has been developed while the Behavioural portfolio consists of consumer, retail and smaller business receivables.
Judgemental loans are individually risk graded based on loan status, financial information, security and debt servicing ability.
Exposures in the Judgemental portfolio are credit risk graded by an internal risk grading mechanism where grade 1 is the strongest
risk. Grade 8 and grade 9 are the weakest risk grades where a loss is probable. Behavioural loans are managed based on their
arrears status.
Upon adoption of NZ IFRS 9 all loans past due but not impaired have been categorised into three impairments stages (see Note 8)
which are in most cases based on arrears status. If a Judgemental loan is risk graded 6 or above it will be classified as stage 2 as a
minimum and carry a provision based on lifetime ECL.
52

22Credit risk exposure (continued)
Credit risk grading (continued)
Lifetime
ECLLifetime
12 Months Not CreditECL CreditSpecifically
$000's
ECLImpairedImpairedProvidedFair ValueTotal
Judgemental portfolio
Grade 1 - Very Strong34- - - -
34
Grade 2 - Strong10,85464- - -
10,918
Grade 3 - Sound50,816 163- - -
50,979
Grade 4 - Adequate580,289 4,675 1,734- -
586,698
Grade 5 - Acceptable877,393 5,658 1,882- -
884,933
Grade 6 - Monitor- 58,178 1,038- -
59,216
Grade 7 - Substandard- 71,718 8,107- -
79,825
Grade 8 - Doubtful- - - 33,228-
33,228
Grade 9 - At risk of loss- - - 4,915-
4,915
Total judgemental portfolio1,519,386 140,456 12,761 38,143- 1,710,746
Total behavioural portfolio1,573,267 25,337 32,803- 1,676,073 3,307,480
Gross finance receivables3,092,653 165,793 45,564 38,143 1,676,073 5,018,226
Provision for impairment(26,807) (2,427) (16,824) (7,629)- (53,687)
Total finance receivables3,065,846 163,366 28,740 30,514 1,676,073 4,964,539
June 2020
Judgemental portfolio
Grade 1 - Very Strong28- - - - 28
Grade 2 - Strong9,323- - - - 9,323
Grade 3 - Sound65,084- 189- - 65,273
Grade 4 - Adequate509,154 5,117 4,238- - 518,509
Grade 5 - Acceptable817,190 4,613 1,938- - 823,741
Grade 6 - Monitor- 112,586 2,558- - 115,144
Grade 7 - Substandard- 27,289 17,652- - 44,941
Grade 8 - Doubtful- - - 16,025- 16,025
Grade 9 - At risk of loss- - - 8,642- 8,642
Total Judgemental portfolio1,400,779 149,605 26,575 24,667- 1,601,626
Total Behavioural portfolio1,425,429 33,655 47,154- 1,538,585 3,044,823
Gross finance receivables2,826,208 183,260 73,729 24,667 1,538,585 4,646,449
Provision for impairment(32,420) (2,166) (22,782) (5,301)- (62,669)
Total finance receivables2,793,788 181,094 50,947 19,366 1,538,585 4,583,780
June 2021
53

23Liquidity risk
Reserve Bank of New Zealand (RBNZ) facilities
$000'sJune 2021June 2020
Cash and cash equivalents182,333 147,179
Investments357,156 397,005
Undrawn committed bank facilities311,993 390,762
Total liquidity851,482 934,946
Contractual liquidity profile of liabilities
Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due. The timing mismatch of cash flows
and the related liquidity risk in all banking operations are closely monitored by the Group.
Measurement of liquidity risk is designed to ensure that the Group has the ability to generate or obtain sufficient cash in a timely
manner and at a reasonable price to meet its financial commitments on a daily basis.
In March 2020, HBL was onboarded by the RBNZ as an approved counterparty and executed a 2011 Global Master Repo
Agreement providing an additional source for intra-day liquidity for the Group if required.
The Group holds the following liquid assets and committed funding sources for the purpose of managing liquidity risk:
On 16 March 2020, as a result of COVID-19, the RBNZ announced that it would provide term funding through a Term Auction
Facility (TAF) to give banks the ability to access term funding using repurchase agreements with qualifying collateral for a term of
up to twelve months. On 10 March 2021, RBNZ announced to remove TAF and the final TAF tenders was held on 16 March 2021.
From 26 May 2020, the RBNZ also made available, for a period of 6 months, a Term Lending Facility (TLF) to offer loans for a fixed
term of three years at the Official Cash Rate, with access to the funds linked to banks’ lending under the Business Finance
Guarantee Scheme. On 20 August 2020, RBNZ announced the change of the lending term to five years. The availability of TLF was
extended to 1 February 2021, and further extended to 28 July 2021.
Additional stimulus provided through a funding for lending programme also commenced in December 2020 designed to enable
banks to provide low-cost lending.
The Group had not utilised any of these facilities as at 30 June 2021.
The Group’s exposure to liquidity risk is governed by the liquidity policy approved by the Board and managed by the ALCO. This
policy sets out the nature of the risk which may be taken and aggregate risk limits. The objective of the ALCO is to derive the most
appropriate strategy for the Group in terms of a mix of assets and liabilities given its expectations of future cash flows, liquidity
constraints and capital adequacy to meet the requirements of the policy. The Group employs asset and liability cash flow modelling
to determine appropriate liquidity and funding strategies.
The contractual cash flows presented below may differ significantly from actual cash flows. This occurs as a result of future actions
by the Group and its counterparties, such as early repayments or refinancing of term loans and borrowings. Deposits and other
public borrowings include customer savings deposits and transactional accounts, which are at call. These accounts provide a stable
source of long term funding for the Group.
The following tables present the Group's liabilities by relevant maturity groupings based upon contractual maturity date. The
amounts disclosed in the tables represent undiscounted future principal and interest cash flows. As a result, the amounts in the
tables below may differ to the amounts reported on the consolidated statement of financial position.
54

23Liquidity risk (continued)
Contractual liquidity profile of liabilities (continued)
On 0-6 6-12 1-2 2-55+
$000'sDemand Months Months Years Years Years Total
June 2021
Financial liabilities
Deposits971,924 1,291,863 560,232 292,091 91,107- 3,207,217
Other borrowings- 124,431 120,855 1,205,547 157,855 181,244 1,789,932
Lease liabilities- 1,419 1,433 2,836 7,605 7,085 20,378
Derivative financial liabilities- 2,499 1,564 5164- 4,583
Other financial liabilities- 18,688- - - - 18,688
Total financial liabilities971,924 1,438,900 684,084 1,500,990 256,571 188,329 5,040,798
299,544- - - - - 299,544
Undrawn committed bank facilities311,993- - - - - 311,993
June 2020
Financial liabilities
Deposits813,140 1,418,656 833,440 162,221 86,615- 3,314,072
Other borrowings- 13,517 61,038 196,835 1,039,462- 1,310,852
Lease liabilities- 1,400 1,415 5,730 7,634 7,085 23,264
Derivative financial liabilities- 5,722 4,665 5,297 1,354- 17,038
Other financial liabilities- 26,751- - - - 26,751
Total financial liabilities813,140 1,466,046 900,558 370,083 1,135,065 7,085 4,691,977
260,098- - - - - 260,098
Undrawn committed bank facilities390,762- - - - - 390,762
24 Interest rate risk
•
Monitoring maturity profiles and seeking to match the re-pricing of assets and liabilities;
•
Monitoring interest rates daily and regularly (at least monthly) reviewing interest rate exposures; and
•
The objective of the Group’s interest rate risk policies is to limit underlying net profit after tax (NPAT) volatility. The measurement
comprises net interest income the Group generates from its interest earning assets and interest bearing liabilities.
The exposure to net interest income comes from a reduction in margins on interest earning assets or interest bearing liabilities and
is managed when setting rates by taking into consideration wholesale rates, liquidity premiums, as well as appropriate lending
credit margins.
An analysis of the Group’s sensitivity to an increase (+) or decrease (-) in market interest rates by 100 basis points (BP
) is as follows.
An (+)/(-) to market interest rates of 100 BP would result in a $0.45 million (+)/(-) to NPAT (2020: $1.5million (+)/(-)) with a
corresponding impact to equity.
The Group also manages interest rate risk by:
Undrawn facilities available to customers
Undrawn facilities available to customers
The Group's market risk is derived primarily of exposure to interest rate risk, predominantly from raising funds through the retail
and wholesale deposit market, the debt capital markets and committed and uncommitted bank funding, securitisation of
receivables, and offering loan finance products to the commercial and consumer market in New Zealand and Australia.
The Group’s exposure to market risk is governed by a policy approved by the Board and managed by the ALCO. This policy sets out
the nature of risk which may be taken and aggregate risk limits, and the ALCO must conform to this. The objective of the ALCO is to
derive the most appropriate strategy for the Group in terms of the mix of assets and liabilities given its expectations of the future
and the potential consequences of interest rate movements, liquidity constraints and capital adequacy.
Entering into derivatives to hedge against movements in interest rates.
55

24Interest rate risk (continued)
Contractual repricing analysis
Non-
0-3 3-6 6-12 1-22+ Interest
$000'sMonths Months Months Years Years Bearing Total
June 2021
Financial assets
Cash and cash equivalents182,323- - - - 10 182,333
Investments31,896 8,034 19,669 53,505 244,052 20,667 377,823
Finance receivables1,587,718 151,674 299,305 462,900 715,032 71,837 3,288,466
1,676,073- - - - - 1,676,073
Derivative financial assets- - - - - 14,139 14,139
Other financial assets- - - - - 2,292 2,292
Total financial assets3,478,010 159,708 318,974 516,405 959,084 108,945 5,541,126
Financial liabilities
Deposits1,670,667 570,068 554,340 285,025 85,077 18,277 3,183,454
Other borrowings1,342,612 50,837- 153,751 127,933- 1,675,133
Derivative financial liabilities- - - - - 4,802 4,802
Lease liabilities- - - - - 18,166 18,166
Other financial liabilities- - - - - 18,687 18,687
Total financial liabilities3,013,279620,905554,340438,776213,01059,9324,900,242
474,010 (9,023) (146,067) (85,669) (233,251)- -
Net financial assets/(liabilities)938,741(470,220)(381,433)(8,040)512,82349,013640,884
June 2020
Financial assets
Cash and cash equivalents147,172- - - - 7 147,179
Investments43,863 18,425 52,708 59,296 222,713 16,335 413,340
Finance receivables1,522,837 198,446 352,076 557,569 400,658 13,609 3,045,195
1,538,585- - - - - 1,538,585
Derivative financial assets- - - - - 17,246 17,246
Other financial assets- - - - - 3,563 3,563
Total financial assets3,252,457 216,871 404,784 616,865 623,371 50,760 5,165,108
Financial liabilities
Deposits1,616,521 585,482 815,366 155,219 77,655 13,949 3,264,192
Other borrowings976,638 970- - 290,323- 1,267,931
Derivative financial liabilities- - - - - 17,012 17,012
Lease liabilities- - - - - 20,456 20,456
Other financial liabilities- - - - - 26,751 26,751
Total financial liabilities2,593,159586,452815,366155,219367,97878,1684,596,342
557,955 (51,349) (239,137) (237,212) (30,257)- -
Net financial assets/(liabilities)1,217,253(420,930)(649,719)224,434225,136(27,408)568,766
Effect of derivatives held for risk
management
The tables above illustrate the periods in which the cash flows from interest rate swaps are expected to occur and affect profit or
loss.
Finance receivables - reverse mortgages
Effect of derivatives held for risk
management
Finance receivables - reverse mortgages
The interest rate risk profile of financial assets and liabilities that follows has been prepared on the basis of maturity or next
repricing date, whichever is earlier.
56

Other Disclosures
25Significant subsidiaries
Proportion of ownership
and voting power held
Country of
Incorporation and
Significant SubsidiariesPlace of Business Nature of BusinessJune 2021 June 2020
Heartland Bank LimitedNew ZealandBank100% 100%
100% 100%
MARAC Insurance Limited New ZealandInsurance services100% 100%
Australia100% 100%
Australia100% 100%
Australia100%100%
26Structured entities
(a) Heartland Cash and Term PIE Fund (Heartland PIE Fund)
$000'sJune 2021June 2020
Deposits153,244166,676
(b) Heartland Auto Receivables Warehouse Trust 2018-1 (Auto Warehouse)
$000'sJune 2021 June 2020
Cash and cash equivalents9,047 5,493
Finance receivables126,399 78,066
Other borrowings(128,125)(79,012)
The Group controls the operations of the Heartland PIE Fund which is a portfolio investment entity that invests in the Group's
deposits. Investments of Heartland PIE Fund are represented as follows:
Heartland Australia Holdings Pty Limited
A structured entity is one which has been designed such that voting or similar rights are not the dominant factor in deciding who
controls the entity. Structured entities are created to accomplish a narrow and well-defined objective such as the securitisation or
holding of particular assets, or the execution of a specific borrowing or lending transaction. Structured entities are consolidated
where the substance of the relationship is that the Group controls the structured entity.
Heartland Australia Group Pty Limited
VPS Properties LimitedNew Zealand
Investment property holding company
Australian Seniors Finance Pty Limited
Financial services
Financial services
Management services
The Auto Warehouse securitises motor loan receivables as a source of funding.
The Group continues to recognise the securitised assets and associated borrowings in the consolidated statement of financial
position as the Group remains exposed to and has the ability to affect variable returns from those assets and liabilities. Although
the Group recognises those interests in Auto Warehouse, the loans sold to Auto Warehouse are set aside for the benefit of
investors in Auto Warehouse and other depositors and lenders to the Group have no recourse to those assets.
57

26Structured entities (continued)
(c) Seniors Warehouse Trust, Seniors Warehouse Trust No.2 (together the SW Trusts) and ASF Settlement Trust (ASF Trust)
$000'sJune 2021 June 2020
Cash and cash equivalents29,170 26,491
Finance receivables - reverse mortgages934,523 929,179
Other borrowings(822,112) (783,373)
(d) Atlas 2020-1 Trust (Atlas Trust)
$000'sJune 2021
Cash and cash equivalents17,592
Finance receivables - reverse mortgages140,044
Other borrowings(145,943)
27 Staff share ownership arrangements
(a) Share-based compensation plan details
Heartland performance rights plan (PR plan)
SW Trusts and ASF Trust (collectively the Trusts) form part of ASF's reverse mortgage business and were set up by ASF as asset
holding entities. The Trustee for the Trusts is ASF Custodians Pty Limited and the Trust Manager is ASF. The reverse mortgage loans
held by the Trusts are set aside for the benefit of the investors in the Trusts. The balances of SW Trusts and ASF Trust are
represented as follows:
Atlas Trust was set up on 11 September 2020 as part of ASF's reverse mortgage business similar to the existing SW Trusts and ASF
Trust. The Trustee for the Trust is BNY Trust Company of Australia Limited and the Trust Manager is ASF. The balances of Atlas
Trust are represented as follows:
The Group operates a number of share-based compensation plans that are equity settled. The fair value determined at the grant
date is expensed on a straight line basis over the vesting period, based on the Group’s estimate of equity instruments that will
eventually vest, with a corresponding increase in equity. At the end of each reporting period the Group revises its estimate of the
number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit
or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the employee benefits
reserve.
The PR plan was established to enhance the alignment of participants' interests with those of the Group’s shareholders. Under the
PR plan participants are issued performance rights which will entitle them to receive shares in the Group. As at June 2020, there
were 3 tranches being 2017, 2018 and 2022. The 2017 and 2018 tranche rules have been aligned to the PR Plan 2022, and
therefore they all have the same terms and conditions applying regarding participants, awarding of PR, measurement date and
vesting as outlined below:
58

27Staff share ownership arrangements (continued)
(a) Share-based compensation plan details (continued)
PR Plan 2022 Tranche (PR plan 2022)
PR Plan 2023 Tranche (PR plan 2023)
June 2021June 2020
PR PlanPR Plan
Number of Number of
Rights Rights
Opening balance3,216,927 3,121,340
Granted- (816,858)
Issued5,342,289 1,230,740
Forfeited(816,940) (318,295)
7,742,276 3,216,927
(b) Effect of share-based payment transactions
$000'sJune 2021 June 2020
Award of Shares
PR Plan1,797 516
Total expense recognised1,797 516
(c) Number of rights outstanding
Rights
Remaining
Rights
Remaining
000'sOutstanding Years Outstanding Years
PR Plan - 20171,9431 2,0392
PR Plan - 20181701 2592
PR Plan - 20227221 9192
PR Plan - 20234,9082- -
Total7,7433,217
Closing balance
Performance rights will vest on the measurement date to the extent these criteria have been met, but subject to caps and also to
retesting on a later measurement date if the criteria are not met on the initial measurement date.
The performance rights are issued subject to the participants’ continued employment with the Group until the measurement date
and the Group achieving its financial measures, strategic objectives and culture and conduct objectives, over the period
commencing 1 July 2019 and ending on 30 June 2022. The targets are dynamic and may be adjusted by the Board from time to
time in order to account for unanticipated capital changes during the performance period. The measurement date is the business
days following the date on which the Group announces its full year results for the financial year ended 2022.
June 2021June 2020
As at 30 June 2021, $3.0 million of the share scheme awards remain unvested and not expensed (2020: $1.9 million). This expense
will be recognised over the vesting period of the awards.
PR plan 2023 was issued for period commencing 1 July 2020 and ending on 30 June 2023. The tranche rules have been aligned
with PR plan 2022. The measurement date for this tranche is the business date on which the Group announces its full year results
for the financial year ended 2023.
The number of performance rights offered is determined by the participant’s long-term incentive (LTI) value over the volume
weighted average price (VWAP) of the Group's ordinary shares on the NZX Main Board for the 20 business days immediately
before (and excluding) the issue date. The issue date is 14 September 2019. Performance rights do not entitle participants to
dividends or voting rights.
59

28Insurance business, securitisation, funds management, other fiduciary activities
Insurance business
Securitisation, funds management and other fiduciary activities
29 Concentrations of funding
(a) Concentrations of funding by industry
$000'sJune 2021 June 2020
Agriculture102,107 109,268
Forestry and fishing14,226 14,901
Mining9435
Manufacturing11,592 6,976
Finance and insurance1,669,055 1,431,320
Wholesale trade11,218 10,855
Retail trade and accommodation28,521 20,423
Households2,322,514 2,263,668
Rental, hiring and real estate services46,245 41,348
Construction24,231 19,702
Other business services58,334 63,697
Transport and storage4,337 4,552
Other 44,714 97,150
Total4,337,188 4,083,895
Unsubordinated notes521,399 448,228
Total borrowings4,858,587 4,532,123
(b) Concentration of funding by geographical area
$000'sJune 2021 June 2020
New Zealand3,599,337 3,470,744
Overseas1,259,250 1,061,379
Total borrowings4,858,587 4,532,123
The Australian and New Zealand Standard Industrial Classification (ANZSIC) codes have been used as the basis for categorising
customer industry sectors:
Changes to the Group’s involvement in securitisation activities are set out in Note 26. There have been no material changes to the
Group’s involvement in funds management and other fiduciary activities during the year.
The Group's aggregate amount of insurance business comprises the total consolidated assets of MIL of $8.5 million (2020: $10.9
million), which represents 0.15% of the total consolidated assets of the Group (2020: 0.20%).
Marac Insurance Limited, a subsidiary of HBL, no longer conducts Insurance business as HBL entered into a distribution agreement
with DPL Insurance Limited to distribute DPL's insurance products through HBL's network. MIL stopped writing insurance policies
in the prior year with the last policies expected to expire in 2025.
60

30Contingent liabilities and commitments
$000'sJune 2021 June 2020
Letters of credit, guarantee commitments and performance bonds13,484 6,515
Total contingent liabilities13,484 6,515
Undrawn facilities available to customers299,544 260,098
Conditional commitments to fund at future dates19,083 58,045
Total commitments318,627 318,143
31 Events after the reporting date
The Group in the ordinary course of business will be subject to claims and proceedings against it whereby the validity of the claim
will only be confirmed by uncertain future events. In such circumstances the contingent liabilities are possible obligations, or
present obligations if known, where the transfer of economic benefit is uncertain or cannot be reliable measured. Contingent
liabilities are not recognised, but are disclosed, unless they are remote. Where some loss is probable, provisions have been made
on a case by case basis.
On Tuesday 17 August 2021 the New Zealand Government, in response to a community outbreak of the Delta COVID variant,
placed New Zealand into an immediate Level 4 lockdown. The Directors have considered the impact of this, on the reported
performance of the Group, and consider the reported performance has adequately allowed for the potential impact of COVID at
this time, and that the current lockdown does not affect the reported result for the 12 months ended 30 June 2021.
There have been no other material events after the reporting date that would affect the interpretation of the consolidated
financial statements or the performance of the Group.
The Group declared a fully imputed final dividend of 7 cents per share on 23 August 2021.
HGH subsidiary Heartland Australia Group Pty Limited completed a senior unsecured bond issuance of AU $45 million on 9 July
2021.
Contingent liabilities and credit related commitments arising in respect of the Group's operations were:
61

© 2021 KPMG, a New Zealand Partnership and a member firm of the KPMG global organisation of independent member
firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Independent Auditor’s Report
To the shareholders of Heartland Group Holdings Limited
Report on the audit of the consolidated financial statements
Opinion
We have audited the accompanying consolidated
financial statements of Heartland Group Holdings
Limited and its subsidiaries (the “Group”) which
comprise:
— the consolidated statement of financial position
as at 30 June 2021;
— the consolidated statements of comprehensive
income, changes in equity and cash flows for
the year then ended; and
— notes, including a summary of significant
accounting policies and other explanatory
information.
In our opinion, the accompanying consolidated
financial statements of the Group on pages 6 to 61:
i. present fairly in all material respects the Group’s
financial position as at 30 June 2021 and its
financial performance and cash flows for the
year ended on that date; and
ii. comply with New Zealand Equivalents to
International Financial Reporting Standards and
International Financial Reporting Standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of
Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the
New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International Independence
Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the Group in relation to the review of the Group’s consolidated
interim financial statements, regulatory assurance services, agreed upon procedure engagements and supervisor
reporting. Subject to certain restrictions, partners and employees of our firm may also deal with the Group on
normal terms within the ordinary course of trading activities of the business of the Group. These matters have
not impaired our independence as auditor of the Group. The firm has no other relationship with, or interest in, the
Group.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial statements
as a whole was set at $5,820,000 determined with reference to a benchmark of the Group’s profit before tax.
We chose the benchmark because, in our view, this is a key measure of the Group’s performance.
62

We agreed with the Audit Committee that we would report to them, misstatements identified during our audit
above $290,000 as well as misstatements below that amount that, in our view, warranted reporting for
qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements in the current period. We summarise below those matters and our key
audit procedures to address those matters in order that the shareholders as a body may better understand the
process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely
for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not
express discrete opinions on separate elements of the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
Provision for impairment of finance receivables
Refer to notes 1, 13 and 22 to the consolidated financial statements.
The provision for impairment of finance
receivables is a key audit matter due to the
financial significance and the inherent
complexity of the Group’s expected credit loss
(“ECL”) models.
Significant judgement and estimates are
required to incorporate forward-looking
information to reflect future economic
conditions.
The collective provision is estimated through
the ECL models using historical data which is
adjusted for forward looking information and
the assigned risk grade or arrears status.
Additionally, management apply judgement in
the determination of provision overlays to
adjust for future market conditions.
The level of judgement involved in determining
the provision for collectively impaired assets
requires us to challenge the appropriateness
of management’s assumptions.
The provision for individually impaired assets is
based on the application of management
judgement regarding expected future
cashflows, which are inherently uncertain.
Together with KPMG credit risk specialists we assessed the Group’s
collective and individual provisions. Our procedures, amongst others,
included:
Assessing the Group’s governance and oversight, including the
continuous reassessment of overall provisioning;
Assessing the Group’s significant accounting policies and
expected credit loss (“ECL”) modelling methodology against
the requirements of the standards and underlying accounting
records;
Testing key controls including the arrears calculations,
customer loan ratings, annual loan reviews, credit risk reviews
and data reconciliations between the ECL models and source
systems;
Assessing the model output against actual losses incurred by
the Group;
Challenging the key assumptions, including forward looking
economic assumptions, against external information including
benchmarking management’s estimates to a range of different
market forecasts;
Evaluating individual credit assessments for a sample of ‘rural’
and other ‘corporate’ loans on management’s credit watchlist.
This included inspection of the latest correspondence with the
borrower, assessment of the provision estimates prepared by
credit risk officers, and consideration of the resolution strategy.

We challenged assumptions and assessed collateral values by
comparing them to valuations performed by independent
valuers; and
Assessing the disclosures in the consolidated financial
statements against the requirements of NZ IFRS.
From the procedures performed we consider the Group
appropriately identified and considered the uncertainties in the
provision estimates.

63

The key audit matter How the matter was addressed in our audit

Valuation of finance receivables – reverse mortgages
Refer to note 20 of the consolidated financial statements.
The Group’s reverse mortgage portfolio is held
at fair value.
The fair value calculation is based on the
application of management judgement. In
assessing the fair value, the Group
continuously considers evidence of a relevant
active market. In the absence of such a
market, in the current period, the Group
considered changes since loan origination and
expected future cashflows.
The inherent uncertainties include estimated
exits, interest rates and security property
values.
Our procedures over the fair value loan portfolios, amongst others,
included:
Testing key controls over the accuracy of data impacting the
fair value assessment;
Assessing evidence of a relevant active market or observable
inputs; and
Challenging the key assumptions used by the Group in
determining the portfolio’s fair value.
The estimates and assumptions used to determine the valuation of
finance receivables are reasonable, with no evidence of management
bias or influence identified from our procedures.
Operation of IT systems and controls
The Group is reliant on complex IT systems for
the processing and recording of significant
volumes of transactions and other core
banking activity.
For significant financial statement balances,
such as finance receivables and deposits,
where relevant, our audit involves an
assessment of the design of the Group’s
internal control environment. There are some
areas of the audit where we seek to test and
place reliance on IT systems, automated
controls and reporting.
The effective operation of these controls is
dependent upon the Group’s general IT control
environment, which incorporates controls
relevant to IT system changes and
development, IT operations, and developer
and user access.
Our audit procedures, amongst others, included:
Gaining an understanding of business processes, key controls
and IT systems relevant to significant financial statement
balances, including technology services provided by a third
party;
Assessing the effectiveness of the IT control environment,
including core banking IT systems, key automated controls and
reporting; and
Evaluating general IT controls relevant to IT system changes
and development, IT operations, and developer and user
access.
Where we noted design or operating effectiveness matters relating
to IT system or application controls relevant to our audit, we
performed alternative audit procedures. We also identified and tested
mitigating controls in order to respond to the impact on our overall
audit approach.
We did not identify any material issues or exceptions from those
additional procedures.

Other information
The Directors, on behalf of the Group, are responsible for the other information included in the entity’s Annual
Report. Other information may include the Chairman’s Report, Chief Executive Officer’s Report and disclosures
relating to corporate governance. Our opinion on the consolidated financial statements does not cover any other
information and we do not express any form of assurance conclusion thereon.
The Annual Report is expected to be made available to us after the date of this Independent Auditor's
Report. Our responsibility is to read the Annual Report when it becomes available and consider whether the
other information it contains is materially inconsistent with the consolidated financial statements, or our
knowledge obtained in the audit, or otherwise appear misstated. If so, we are required to report such matters to
the Directors.
64

Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders those matters we are required to state to them in the
independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent
auditor’s report, or any of the opinions we have formed.
Responsibilities of the Directors for the consolidated financial statements
The Directors, on behalf of the Group, are responsible for:
— the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards;
— implementing necessary internal control to enable the preparation of consolidated financial statements that
are fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated financial
statements

Our objective is:
— to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error; and
— to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at
the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Graeme Edwards.
For and on behalf of

KPMG
Auckland
23 August 2021

65

---

Distribution Notice

Updated as at 18 December 2019

Please note: all cash amounts in this form should be provided to 8 decimal places

Section 1: Issuer information
Name of issuer Heartland Group Holdings Limited
Financial product name/description Ordinary shares
NZX ticker code HGH
ISIN (If unknown, check on NZX
website)
NZHGHE0007S9
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies X
Record date 01/09/2021
Ex-Date (one business day before the
Record Date)
31/08/2021
Payment date (and allotment date for
DRP)
15/09/2021
Total monies associated with the
distribution
1

$41,013,305.55
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.09722222
Gross taxable amount
3
$0.09722222
Total cash distribution
4
$0.07000000
Excluded amount (applicable to listed
PIEs)
NIL
Supplementary distribution amount $0.01235294
Section 3: Imputation credits and Resident Withholding Tax
5

Is the distribution imputed Fully imputed - YES
Partial imputation
No imputation

1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is
fully imputed the imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not constitute
advice as to whether or not RWT needs to be withheld.

If fully or partially imputed, please
state imputation rate as % applied
6

28%
Imputation tax credits per financial
product
$0.02722222
Resident Withholding Tax per
financial product
$0.00486111
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
2.0%
Start date and end date for
determining market price for DRP
02/09/2021 08/09/2021
Date strike price to be announced (if
not available at this time)
09/09/2021
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
New issue
DRP strike price per financial product
$

Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
02/09/2021, 5:00pm (NZT)

Section 5: Authority for this announcement
Name of person

authorised to make
this announcement
Andrew Dixson, Chief Financial Officer
Contact person for this
announcement
Andrew Dixson, Chief Financial Officer
Contact phone number 09 927 9274
Contact email address Andrew.Dixson@heartland.co.nz
Date of release through MAP

24/08/2021

6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.

---

Disclosure Statement
For the yearended 30 June 2021

Contents
Page
General Information..........................................................................................................................................................................................................3
Priority of Creditors' Claims............................................................................................................................................................................................3
Guarantee Arrangements............................................................................................................................................................................................3
Auditor..........................................................................................................................................................................................................................3
Directors...................................................................................................................................................................................................................................4
Directors' Statements................................................................................................................................................................................................................5
Consolidated Statement of Comprehensive Income.....................................................................................................................................................................7
Consolidated Statement of Changes in Equity......................................................................................................................................................8
Consolidated Statement of Financial Position...............................................................................................................................................................9
Consolidated Statement of Cash Flows..............................................................................................................................................................................10
Notes to the Financial Statements
1Financial statements preparation.......................................................................................................................................................................................................12
Performance
2Segmental analysis.......................................................................................................................................................................................................17
3Net interest income.......................................................................................................................................................................................................18
4Net operating lease income.......................................................................................................................................................................................................19
5Other income.......................................................................................................................................................................................................19
6Operating expenses.......................................................................................................................................................................................................20
7Compensation of auditor.......................................................................................................................................................................................................20
8Impaired asset expense.......................................................................................................................................................................................................21
9Taxation.......................................................................................................................................................................................................22
Financial Position
10Investments.......................................................................................................................................................................................................24
11Derivative financial instruments.......................................................................................................................................................................................................25
12Finance receivables.......................................................................................................................................................................................................27
13Operating lease vehicles.......................................................................................................................................................................................................31
14Borrowings.......................................................................................................................................................................................................31
15Share capital and dividends.......................................................................................................................................................................................................32
16Other reserves.......................................................................................................................................................................................................33
17Other balance sheet items.......................................................................................................................................................................................................33
18Related party transactions and balances.......................................................................................................................................................................................................35
19Fair value.......................................................................................................................................................................................................37
Risk Management
20Enterprise risk management program.......................................................................................................................................................................................................43
21Credit risk exposure.......................................................................................................................................................................................................46
22Asset quality.......................................................................................................................................................................................................50
23Liquidity risk.......................................................................................................................................................................................................56
24Interest rate risk.......................................................................................................................................................................................................58
25Concentrations of funding.......................................................................................................................................................................................................60
Other Disclosures
26Significant subsidiaries.......................................................................................................................................................................................................62
27Structured entities.......................................................................................................................................................................................................62
28Capital adequacy.......................................................................................................................................................................................................63
29Insurance business, securitisation, funds management, other fiduciary activities.......................................................................................................................................................................................................70
30Contingent liabilities and commitments.......................................................................................................................................................................................................71
31Events after the reporting date.......................................................................................................................................................................................................71
Historical Summary of the Financial Statements .........................................................................................................................................................................................................................72
Amendments to Conditions of Registration.........................................................................................................................................................................................................................73
Conditions of Registration.........................................................................................................................................................................................................................73
Conditions of Registration Non-Compliance.........................................................................................................................................................................................................................80
Pending Proceedings..........................................................................................................................................................................................................81
Credit Ratings......................................................................................................................................................................................................................81
Other Material Matters......................................................................................................................................................................................................81
Auditor's Report.........................................................................................................................................................................................................................82
P. 2

General Information
Name
Percentage held
Heartland Group Holdings Limited
100%
Priority of Creditors' Claims
Guarantee Arrangements
Auditor
In the event of the Bank becoming insolvent or ceasing business, certain claims set out in legislation are paid in priority to others. These
claims include secured creditors, taxes, certain payments to employees and any liquidator’s costs. After payment of those creditors, the
claims of all other creditors are unsecured and would rank equally, with the exception of holders of subordinated bonds and notes which
rank below all other claims.
This Disclosure Statement has been issued by Heartland Bank Limited (HBL or the Bank) and its subsidiaries (the Banking Group) for the
year ended 30 June 2021 in accordance with the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks)
Order 2014 (as amended) (the Order). The financial statements of the Bank for the year ended 30 June 2021 form part of, and should be
read in conjunction with, this Disclosure Statement.
Words and phrases defined by the Order have the same meanings when used in this Disclosure Statement.
Name and address for service
The name of the Registered Bank is Heartland Bank Limited.
The Banking Group consists of the Bank and all of its subsidiaries.
The Bank's address for service is Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland 1023.
The address for service of the ultimate parent, Heartland Group Holdings Limited, is Level 3, Heartland House, 35 Teed Street,
Newmarket, Auckland 1023.
Details of incorporation
The Bank was incorporated under the Companies Act 1993 on 30 September 2010.
Interests in 5% or more of voting securities of the Bank
Heartland Group Holdings Limited has the ability to appoint 100% of Directors, subject to Reserve Bank of New Zealand (RBNZ)
restrictions and RBNZ Director approval.
As at the date this Disclosure Statement was signed, no material obligations of the Bank were guaranteed.
KPMG
KPMG Centre
18 Viaduct Harbour Avenue
Auckland 1010
P. 3

Directors
Chairman - Board of Directors
Name: Bruce Robertson IrvineQualifications: BCom, LLB, FCA, CF Inst D, FNZIM
Type of Director: Independent Non-Executive DirectorOccupation: Company Director
External Directorships:
External Directorships:
Type of Director: Non-Independent Non-Executive DirectorOccupation: Chief Executive Officer of Heartland Group Holdings
All Directors of the Bank reside in New Zealand. Communications to the Directors can be sent to Heartland Bank Limited, Level 3,
Heartland House, 35 Teed Street, Newmarket, Auckland 1023.
On 12 March 2021, Ellen Frances Comerford resigned as director of the Bank.
The Directors of the Bank and their details at the time this Disclosure Statement was signed were:
Air Rarotonga Limited, Amaia Day Spa (Tonga) Limited, Amaia Luxury Spa Limited, Amyes Road Limited (in liquidation), B R Irvine Limited,
Blackbyre Horticulture Limited, Bowdens Mart Limited, Bray Frampton Limited, Britten Motorcycle Company 1992 Limited, Chambers
@151 Limited, Clipper Investments (2002) Limited, Cockerill and Campbell (2007) Limited, Embassy Hotels Limited, GZ Capital Limited,
GZ NZ Limited, GZ RES Limited, Hansons Lane International Holdings Limited, Hawling Holdings Limited, House of Travel Holdings Limited,
J.S. Ewers Limited, Kaipaki Holdings Limited, Kaipaki Properties Limited, Lake Angelus Holdings Limited, Lamanna Bananas (NZ) Limited,
Lamanna Premier Group Pty Limited, Lamanna Limited, Market Fresh Wholesale Limited, Market Gardeners Limited, MG Group Holdings
Limited, MG Marketing Limited, MG New Zealand Limited, Monarch Hotels Limited, Noblesse Oblige Limited, Paradise Islands Limited;
Phimai Holdings Limited, Quitachi Limited, Rakon ESOP Trustee Limited, Rakon Limited, Rakon PPS Trustee Limited, Scenic Hotels
(Karapiro) Limited, Scenic Hotels (Hamilton) Limited, Scenic Circle Convention Services Limited, Scenic Hotel (Haast) Limited, Scenic Circle
(Napier) Limited, Scenic Hotel Group Limited, Scenic Hotels (Ashburton) Limited, Scenic Hotels (International) Limited, Scenic Circle MLC
Café & Bar Limited, Skope Industries Limited, Southland Produce Markets Limited, Stark Holdings (NZ) Limited, USC Investments Limited,
Wavell Resources Limited.
Name: Jeffrey Kenneth GreensladeQualifications: LLB
External Directorships:
Heartland Australia Group Pty Limited, Heartland Australia Holdings Pty Limited, Australian Seniors Finance Pty Limited, ASF Custodians
Pty Limited, Heartland Group Holdings Limited, Henley Family Investments Limited.
Name: Edward John HarveyQualifications: BCom, FCA, CFInstD
Type of Director: Independent Non-Executive DirectorOccupation: Company Director
External Directorships:
Heartland Group Holdings Limited, Janmac Capital Limited, Maisemore Enterprises Limited, MCF2 Message4U Limited, MCF3 Amplify
Limited, MCF3 Green Limited, MCF3 E&P Holdco Limited, MCF3 Resourceco 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, MCF3 Cook Limited, MCF3 TEG Limited, MCF3 Squiz Limited, MC Medical Properties Limited, Mercury Capital No.1 Fund
Limited, Mercury Capital No. 1 Trustee 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.
Investore Property Limited, Evnex Limited, Kathmandu Holdings Limited, Napier Port Holdings Limited, Pomare Investments Limited,
Port of Napier Limited, Stride Holdings Limited, Stride Investment Management Limited, Stride Property Limited.
Name: Geoffrey Thomas Ricketts CNZMQualifications: LLB (Hons), LLD (honoris causa), CFInstD
Type of Director: Non-Independent Non-Executive DirectorOccupation: Company Director
P. 4

Directors (continued)
Conflicts of interest policy
Audit committee composition
Edward John Harvey (Chairperson) Independent Non-Executive Director
Bruce Robertson IrvineIndependent Non-Executive Director
Geoffrey Thomas RickettsNon-Independent Non-Executive Director
Shelley Maree Ruha Independent Non-Executive Director
Directors' Statements
1.
(a)
(b)
2.
(a)
(b)
(c)
Name: Kathryn MitchellQualifications: BA, CMInstD
Type of Director: Independent Non-Executive DirectorOccupation: Company Director
DirectorsarerequiredtotakeanynecessaryandreasonablemeasurestotrytoresolvetheconflictandcomplywiththeCompaniesAct
1993 by disclosing interests and restrictions on voting. Any Director with a material personal, professional or business interest in a
matterbeingconsideredbytheBoardmustdeclaretheirinterestand,unlesstheBoardresolvesotherwise,maynotbepresentduring
the boardroom discussions or vote on the relevant matter.
Interested transactions
There have been no transactions between the Bank or any member of the Banking Group and any Director or immediate relative or
close business associate of any Director which either has been entered into on terms other than those which would, in the ordinary
course ofbusinessoftheBank or anymemberoftheBanking Group, begiventoanyother person oflike circumstances or means,or
could be reasonably likely to influence materially the exercise of the Directors' duties.
External Directorships:
Qualifications: BCom, DipBank
Type of Director: Independent Non-Executive DirectorOccupation: Company Director
External Directorships:
Analey Holdings Limited, Analey Investment Limited, Hobson Wealth Holdings Limited, Hobson Wealth Partners Limited, IT & Business
Consulting Limited, New Zealand Rural Land Management Limited, Partners Group Holdings Limited, Partners Life Limited, 9 Spokes
International Limited, TaxGift Limited.
Chambers@151 Limited, Christchurch International Airport Limited, Farmright Limited, Firsttrax Limited, Helping Hands Holdings
Limited, Link Engine Management Limited, Link Engine Management International (NZ) Limited, Morrison Horgan Limited, The New
Zealand Merino Company Limited.
Members of the Bank's Audit Committee as at the date of this Disclosure Statement are as follows:
Name: Shelley Maree Ruha
Each Director of the Bank states that he or she believes, after due enquiry, that:
As at the date on which this Disclosure Statement is signed:
the Disclosure Statement contains all the information that is required by the Order; and
the Disclosure Statement is not false or misleading.
During the year ended 30 June 2021:
the Bank complied with all Conditions of Registration applicable during the period except as noted on page 80;
credit exposures to connected persons were not contrary to the interests of the Banking Group; and
the Bank had systems in place to monitor and control adequately material risks of the Banking Group, including credit risk,
concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business
risks, and that those systems were being properly applied.
AllDirectorsarerequiredtodisclosetotheBoardanyactualorpotentialconflictsofinterestwhichmayexistoristhoughttoexistupon
appointmentandarerequiredtokeepthesedisclosuresuptodate.ThedetailsofeachdisclosuremadebyaDirectortotheBoardmust
be entered in the Interests Register.
P. 5

Directors' Statements (continued)
B R Irvine (Chair - Board of Directors)
K Mitchell
E J Harvey
S M Ruha
This Disclosure Statement is dated 23 August 2021 and has been signed by all the Directors.
G T Ricketts
J K Greenslade
P. 6

Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
$000'sNote
June 2021
June 2020
Interest income
3
272,562 297,512
Interest expense
3
73,753 108,476
Net interest income
198,809 189,036
Operating lease income
4
5,004 5,946
Operating lease expense
4
3,149 4,063
Net operating lease income1,855 1,883
Lending and credit fee income6,455 7,894
Other income
5
6,696 5,965
Net operating income213,815 204,778
Operating expenses
6
100,852 90,782
Profit before impaired asset expense and income tax112,963 113,996
Fair value gain on investments215-
Impaired asset expense
8
14,579 29,372
Profit before income tax98,599 84,624
Income tax expense
9
27,090 23,924
Profit for the year71,509 60,700
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss, net of income tax:
Effective portion of change in fair value of derivative financial instruments8,928 (2,179)
Movement in fair value reserve(5,646) 766
Other comprehensive income/(loss) for the year, net of income tax3,282 (1,413)
Total comprehensive income for the year74,791 59,287
Total comprehensive income for the year is attributable to the owner of the Bank.
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
P. 7

Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
$000's
Note
Balance at beginning of year553,239 (2,527) 46,325 597,037 553,239 (1,114) 51,265 603,390
NZ IFRS 16 adjustment- - - - - - (640) (640)
553,239 (2,527) 46,325 597,037 553,239 (1,114) 50,625 602,750
Profit for the year- - 71,509 71,509- - 60,700 60,700
16
- 3,282- 3,282- (1,413)- (1,413)
- 3,282 71,509 74,791- (1,413) 60,700 59,287
15- - (30,000) (30,000)- - (65,000) (65,000)
Total transactions with owners- - (30,000) (30,000)- - (65,000) (65,000)
Balance at end of the year553,23975587,834641,828553,239(2,527)46,325597,037
Other comprehensive income
/(loss), net of income tax
Total comprehensive income
for the year
Dividend to Heartland Group
Holdings Limited
Contributions by and
distributions to owners
Restated balance at beginning
of year
Total comprehensive income
for the year
June 2020June 2021
Share
Capital Reserves
Retained
Earnings
Total
Equity
Share
Capital Reserves
Retained
Earnings
Total
Equity
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
P. 8

Consolidated Statement of Financial Position
As at 30 June 2021
$000's
NoteJune 2021
June 2020
Assets
Cash and cash equivalents112,903 105,463
Investments10 358,975 399,308
Investment properties11,832 11,132
Derivative financial instruments11 14,111 17,246
Due from related parties18146 1,481
Finance receivables12 3,213,593 3,044,960
Finance receivables - reverse mortgages12 601,505 609,346
Operating lease vehicles
13 10,865 17,603
Right of use assets17 15,654 17,843
Other assets17 14,822 17,380
Intangible assets17 52,831 57,470
Deferred tax asset9 12,251 15,327
Total assets4,419,488 4,314,559
Liabilities
Deposits14 3,219,522 3,269,239
Other borrowings14 502,885 358,732
Due to related parties18 3,210 7,944
Lease liabilities17 17,780 19,871
Tax liabilities7,556 11,271
Derivative financial instruments11 4,789 16,974
Trade and other payables17 21,918 33,491
Total liabilities3,777,660 3,717,522
Equity
Share capital15 553,239 553,239
Retained earnings and other reserves88,589 43,798
Total equity641,828 597,037
Total equity and liabilities4,419,488 4,314,559
Total interest earning and discount bearing assets4,215,116 4,143,158
Total interest and discount bearing liabilities3,704,130 3,614,022
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
P. 9

Consolidated Statement of Cash Flows
For the year ended 30 June 2021
$000's
NoteJune 2021
June 2020
Cash flows from operating activities
Interest received236,081 258,797
Operating lease income received5,046 5,934
Lending, credit fees and other income received8,431 17,422
Operating inflows249,558 282,153
Interest paid(88,635) (103,793)
Payments to suppliers and employees(86,261) (77,904)
Taxation paid(27,518) (20,281)
Operating outflows(202,414) (201,978)
47,144 80,175
Proceeds from sale of operating lease vehicles6,821 4,969
Purchase of operating lease vehicles(1,788) (9,938)
Net movement in finance receivables(136,202) (51,372)
Net movement in deposits(43,587) 116,040
Net movement in related party balances(3,399) 27,640
Net cash flows (applied to)/from operating activities
1
(131,011)167,514
Cash flows from investing activities
Sale of property, plant and equipment and intangible assets- 95
Total cash provided from investing activities- 95
Purchase of property, plant and equipment and intangible assets(6,520) (6,602)
Net decrease/(increase) in investments24,215 (33,627)
Total cash from/(applied to) investing activities17,695 (40,229)
Net cash flows from/(applied to) investing activities17,695 (40,134)

Cash flows from financing activities
Net increase in wholesale funding152,783 5,745
Total cash provided from financing activities152,783 5,745
Dividends paid15 (30,000) (65,000)
Payment of lease liabilities(2,027) (1,802)
Total cash (applied to) financing activities(32,027) (66,802)
Net cash flows from/(applied to) financing activities120,756 (61,057)
Net increase in cash held7,440 66,323
Opening cash and cash equivalents105,463 39,140
Closing cash and cash equivalents112,903 105,463
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
Net cash flows from operating activities before changes in operating assets and liabilities
1
Cash flows from operating activities do not include cash flows from wholesale funding which are included as part of financing activities.
P. 10

Consolidated Statement of Cash Flows (Continued)
For the year ended 30 June 2021
Reconciliation of profit after tax to net cash flows from operating activities
$000's
NoteJune 2021June 2020
Profit for the year71,509 60,700
Add/(less) non-cash items:
Depreciation and amortisation expense14,293 8,859
Depreciation on lease vehicles13 2,801 3,634
Capitalised net interest income and fee income(34,555) (39,620)
Impaired asset expense8 14,579 29,372
Investments fair value movement(215)-
Other non-cash items(23,210) 6,310
Total non-cash items (26,307) 8,555
Add/(less) movements in operating assets and liabilities:
Finance receivables(136,202) (51,372)
Operating lease vehicles
5,033 (4,969)
Other assets2,884 32,471
Current tax (3,715) 5,604
Derivative financial instruments(122) 869
Deferred tax3,076 (5,379)
Deposits(43,587) 116,040
Other liabilities(3,580) 4,995
Total movements in operating assets and liabilities(176,213) 98,259
Net cash flows applied to operating activities
1
(131,011) 167,514
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated financial
statements.
1
Cash flows from operating activities do not include cash flows from wholesale funding which are included as part of financing activities.
P. 11

Notes to the Financial Statements
For the year ended 30 June 2021
1Financial statements preparation
Reporting entity
Basis of preparation
Basis of measurement
Principles of consolidation
The consolidated financial statements of the Banking Group incorporate the assets, liabilities and results of all controlled entities.
Controlled entities are all entities in which the Bank is exposed to, or has rights to, variable returns from its involvement with the
entities and has the ability to affect those returns through its power over the entities. 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 in a 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 average rate at the balance date. Exchange differences are taken to
the consolidated statement of comprehensive income.
Certain comparative balances have been reclassified to align with the presentation used in the current financial year. These
reclassifications have no impact on the overall financial performance or financial position of the comparative year.
The financial statements presented are the consolidated financial statements comprising Heartland Bank Limited (HBL or the Bank
)
and its subsidiaries (the Banking Group). Refer Note 26 – Significant subsidiaries for further details.
The financial statements are presented in New Zealand dollars which is the Banking Group's functional and presentation currency.
Unless otherwise indicated, amounts are rounded to the nearest thousand dollars.
The accounting policies adopted have been applied consistently throughout the periods presented in these financial statements.
The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ
GAAP) and with the requirements of the Financial Markets Conduct Act 2013. 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, and the Registered Bank Disclosure Statement (New Zealand Incorporated Registered
Banks) Order 2014 (as amended) (the Order). The financial statements also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board.
As at 30 June 2021, the Bank is a company incorporated in New Zealand under the Companies Act 1993, a registered bank under
the Reserve Bank of New Zealand Act 1989 and a Financial Market Conduct (FMC) reporting entity for the purposes of the Financial
Markets Conduct Act 2013.
The financial statements have been prepared on the basis of historical cost, except for certain financial instruments and
investment properties, which are measured at their fair values as identified in the accounting policies set out in the accompanying
notes to the financial statements.
The financial statements have been prepared on a going concern basis after considering the Banking Group's funding and liquidity
position.
P. 12

1Financial statements preparation (continued)
Accounting standards issued but not yet effective
Estimates and judgements
•
•
•
Accounting standards issued and effective
The preparation of the Banking Group’s consolidated financial statements requires the use of estimates and judgements. 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.
MARAC Insurance Limited (MIL), a subsidiary of HBL, no longer conducts insurance business as HBL entered into a distribution
agreement with DPL Insurance Limited (DPL) to distribute DPL’s insurance products through HBL's network. MIL stopped writing
insurance policies in the prior year with the last policies expected to expire in 2025.
Other amendments to existing standards that are not yet effective are not expected to have a material impact on the Banking
Group.
NZ IFRS 17 Insurance Contracts was issued in July 2017 and is applicable to general and life insurance contracts. NZ IFRS 17 will
replace NZ IFRS 4 Insurance Contracts. In March 2020, the effective date of NZ IFRS 17 was deferred by one year. As such the
standard will be effective for the Banking Group's reporting for the financial year ending 30 June 2024, including 30 June 2023
comparatives.
There have been no changes to accounting policies or other new or amended standards that are issued and effective that are
expected to have a material impact on the Banking Group.
Changes in accounting standards
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 Banking 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
Banking Group’s financial statements 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.
Provisions for impairment - The effect of credit risk is quantified based on the Banking Group's best estimate of future cash
repayments and proceeds from any security held or by reference to risk profile groupings, historical loss data and forward-
looking information. Refer to Note 8 - Impaired asset expense, and Note 12 - Finance receivables for further details.
Fair value of reverse mortgages - Fair value is quantified by the transaction price and the Banking Group’s subsequent best
estimate of the risk profile of the reverse mortgage portfolio. Refer to Note 19 - Fair value for further details.
Goodwill - Determining the fair value of assets and liabilities of acquired businesses requires the Banking Group to exercise
judgement. The carrying value of goodwill is tested annually for impairment, refer to Note 17 - Other balance sheet items.
P. 13

1Financial statements preparation (continued)
COVID-19 pandemic - impact on estimates and judgements
Financial assets and liabilities
Financial assets
Financial assets are classified based on:
•
•
Whether the contractual cash flows of the instrument represent solely payment of principal and interest (SPPI).
To date, the impact of COVID-19 on HBL's borrowers has been more benign than was initially forecast, and the COVID Overlay has
not been utilised. However, the continued prevalence of COVID-19 in other countries (including the emergence of new variants),
together with vaccination rates and border closures provides an ongoing risk of further economic disruption in New Zealand.
Furthermore, Government stimulus has given rise to the potential for inflationary pressures, a steepening interest rate
environment, and a higher cost of labour and inputs in the medium term.
Management notes the uncertainties associated with the ongoing economic impacts of COVID-19 and consequently have decided
to retain the COVID Overlay in full at this stage.
The accounting judgement that is most impacted by the COVID Overlay is the ECL on finance receivables at amortised cost. The
Banking Group measures the allowance for ECL using an ECL impairment model in compliance with NZ IFRS 9 Financial
Instruments.
The estimates and judgements considered to apply the COVID Overlay adequately in the ECL on finance receivables at amortised
cost is further discussed in Note 8 Impaired asset expense.
The COVID-19 pandemic resulted in the Banking Group adopting an economic overlay for expected credit losses (ECL) to its
portfolios as at 30 June 2020 of pre-tax $9.6 million in response to the uncertain but potential economic impact of COVID-19 on
HBL's borrowers (COVID Overlay). The COVID Overlay was sized based on a range of techniques including stress testing,
benchmarking, scenario analysis and expert judgement.
The business model within which the assets are managed; and
The Banking Group determines the business model at the level that reflects how groups of financial assets are managed. When
assessing the business model, the Banking Group considers factors including how performance and risks are managed, evaluated
and reported and the frequency and volume of, and reason for sales in previous periods.
P. 14

1Financial statements preparation (continued)
Financial assets (continued)
Note
FVOCI10
10
12
12
Financial assets measured at amortised cost

•

•
Financial liabilities
Financial liabilities are classified into the following measurement categories:
•
•
Financial liabilities measured at amortised cost
Financial liabilities measured at amortised cost are accounted for using the effective interest rate method.
Bank bonds and floating rate notes
Fair value through profit or loss (FVTPL)
Financial assets are measured at amortised cost if they are held within a business model whose objective is achieved through
holding the financial asset to collect contractual cash flows which represent SPPI on the principal balance.
Financial assets at amortised cost are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest rate method.
FVTPL
Amortised cost
10
Equity investments
Finance receivables – reverse mortgages
Fair value through other comprehensive
income (FVOCI)
Financial Assets Measurement Category
Finance receivables
Financial assets at FVTPL are measured at fair value with subsequent changes in fair value recognised in profit or loss.
Those to be measured at amortised cost;
Financial assets are classified into the following measurement categories:
Financial assets measured at FVOCI
Financial assets are measured at FVOCI if they are held within a business model whose objective is achieved both through
collecting contractual cash flows which represent SPPI on the principal balance or selling the financial asset.
Financial assets at FVOCI are measured at fair value with unrealised gains and losses recognised in other comprehensive income
except for interest income, impairment charges and foreign exchange gains and losses, which are recognised in profit or loss.
Financial assets measured at FVTPL
Financial assets are measured at FVTPL if:
They are designated at FVTPL upon initial recognition to eliminate or reduce an accounting mismatch.
They are held within a business model whose objective is achieved through selling or repurchasing the financial asset in the
near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of
short-term profit taking; or
Financial liabilities are measured at amortised cost if they are not held for trading or not designated at FVTPL.
Those to be measured at FVTPL.
Public sector securities and corporate bonds
P. 15

1Financial statements preparation (continued)
Financial liabilities (continued)

•

•
Financial liabilities at FVTPL are measured at fair value with subsequent changes in fair value recognised in profit or loss.
Recognition
Derecognition
Offsetting financial instruments
They are designated at FVTPL upon initial recognition to eliminate or reduce an accounting mismatch.
Financial liabilities measured at FVTPL
Financial liabilities are measured at FVTPL if:
The Banking 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 FVTPL) are initially recognised on the trade date at which the
Banking Group becomes a party to the contractual provisions of the instrument.
The Banking 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 Banking Group is recognised as a separate asset.
The Banking Group enters into transactions whereby it transfers assets recognised on its consolidated 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 consolidated 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.
They are held for trading whose principal objective is achieved through selling or repurchasing the financial liability in the near
term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of short-
term profit taking; or
Further details of the accounting policy for each category of financial asset or financial liability mentioned above is set out in the
note for the relevant item.
The Banking 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.
Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. Where an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, the exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability,
with the difference in the respective carrying amounts recognised in profit or loss.
The Banking Group’s policies for determining the fair value of financial assets and financial liabilities are set out in Note 19 - Fair
value.
P. 16

Performance
2 Segmental analysis
Operating segments
The Banking Group operates within New Zealand and comprises the following main operating segments:
Motor
Reverse mortgages
Other personal
Business
Rural
ReverseOther
$000's
Motor
MortgagesPersonal
BusinessRuralOtherTotal
June 2021
Net interest income65,829 23,098 13,648 66,112 30,579 (457) 198,809
Net other income3,343 2,369 2,767 2,963 1,581 1,983 15,006
Net operating income69,172 25,467 16,415 69,075 32,160 1,526 213,815
Operating expenses3,787 4,397 6,241 11,340 2,124 72,963 100,852
65,385 21,070 10,174 57,735 30,036 (71,437) 112,963
Fair value gain on investment-
-
- - - 215 215
Impaired asset expense5,298- 1,977 5,655 1,649- 14,579
60,08721,0708,19752,08028,387(71,222)98,599
Income tax expense- - - - - 27,090 27,090
Profit/(loss) for the year60,08721,0708,19752,08028,387(98,312)71,509
Total assets1,287,978 601,505 137,910 1,225,710 586,318 580,067 4,419,488
Total liabilities3,777,660
Segment information is presented in respect of the Banking Group's operating segments which are those used for the Banking
Group's management and internal reporting structure.
Term debt, plant and equipment finance, commercial mortgage lending and working capital
solutions for small-to-medium sized businesses.
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.
Motor vehicle finance.
Reverse mortgage lending in New Zealand.
A range of financial services - including term, transactional and personal loans to individuals.
Profit/(loss) before impaired asset
expense and income tax
Certain operating expenses, such as premises, IT, support centre costs and tax expense are not allocated to operating segments
and are included in Other. Finance receivables are allocated across the operating segments as assets and liabilities are managed
centrally and therefore are not allocated across the operating segments.
The Banking Group's operating segments are different from the industry categories detailed in Note 21 - Credit risk exposure. The
operating segments are primarily categorised by sales channel, whereas Note 21 - Credit risk exposure categorises exposures
based on credit risk concentrations.
Profit/(loss) before income tax
P. 17

2Segmental analysis (continued)
ReverseOther
$000's
Motor
MortgagesPersonal
BusinessRuralOtherTotal
June 2020
Net interest income56,957 20,118 18,365 57,950 29,674 5,972 189,036
Net other income3,622 3,430 3,055 3,465 1,028 1,142 15,742
Net operating income60,579 23,548 21,420 61,415 30,702 7,114 204,778
Operating expenses3,248 4,804 6,776 11,283 2,648 62,023 90,782
57,331 18,744 14,644 50,132 28,054 (54,909) 113,996
Impaired asset expense/(benefit)10,113- 11,119 10,110 (1,970)- 29,372
47,218 18,744 3,525 40,022 30,024 (54,909) 84,624
Income tax expense- - - - - 23,924 23,924
Profit/(loss) for the year47,21818,7443,52540,02230,024(78,833)60,700
Total assets1,125,295 559,934 214,759 1,126,632 604,938 683,001 4,314,559
Total liabilities3,717,522
3 Net interest income
Policy
$000'sJune 2021June 2020
Interest income
Cash and cash equivalents117 482
Investments6,979 8,496
Finance receivables231,659 250,592
Finance receivables - reverse mortgages33,807 37,942
Total interest income272,562 297,512
Interest expense
Deposits55,295 90,786
Other borrowings14,935 14,188
Net interest expense on derivative financial instruments3,523 3,502
Total interest expense73,753 108,476
Net interest income 198,809189,036
Profit/(loss) before income tax
Interest income and expense on financial instruments is measured using the effective interest rate method that discounts the
financial instruments' future cash flows to their present value and allocates the interest income or expense over the life of the
financial instrument. The effective interest rate is established on initial recognition of the financial assets or liabilities and is not
subsequently revised. For financial instruments at amortised cost, the calculation of the effective interest rate includes all yield
related fees and commissions paid or received that are an integral part of the underlying financial instrument.
Profit/(loss) before impaired asset
expense and income tax
P. 18

4Net operating lease income
Policy
$000'sJune 2021June 2020
Operating lease income
Lease income3,908 5,194
Gain on disposal of lease assets
1,096 752
Total operating lease income5,004 5,946
Operating lease expense
Depreciation on lease assets2,801 3,634
Direct lease costs348 429
Total operating lease expense3,149 4,063
Net operating lease income1,855 1,883
5 Other income
Policy
Rental income from investment property
Insurance income
$000'sJune 2021June 2020
Rental income from investment properties1,055 1,124
Insurance income1,096 1,610
Gain on sale of investments157-
Other income4,211 2,810
FX gain/(loss)177 421
Total other income6,6965,965
Rental income from investment properties is recognised on a straight-line basis over the term of the relevant lease.
Insurance premium income and commission expense are recognised in profit or loss from the date of attachment of the risk over
the period of the insurance contract. Claim expense is recognised in the profit or loss on an accrual basis once our liability to the
policyholder has been confirmed under the terms of the contract.
As a lessor, the Banking Group retains substantially all the risks and rewards incidental to ownership of the assets and therefore
classifies the leases 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.
P. 19

6Operating expenses
Policy
$000'sJune 2021June 2020
Personnel expenses57,036 45,759
Directors' fees676 650
Superannuation979 836
Depreciation - property, plant and equipment2,883 2,280
Legal and professional fees2,110 3,049
Advertising and public relations3,972 4,577
Depreciation - right of use asset2,123 2,122
Technology services6,908 6,063
Telecommunications, stationery and postage1,610 1,651
Customer acquisition costs2,123 2,919
Amortisation of intangible assets9,285 4,456
Other operating expenses
1
11,14716,420
Total operating expenses100,85290,782
1
Other operating expenses include compensation of auditor which is further disclosed in Note 7.
7 Compensation of auditor
$000'sJune 2021 June 2020
Audit and review of the financial statements
1
599559
Other assurance services paid to auditor
2
2060
Total compensation of auditor
619 619
Operating expenses are recognised as the underlying service is rendered or over a period in which an asset is consumed or a
liability is incurred.
2
Other assurance related services paid to auditor comprise regulatory assurance services, trust deed reporting and registry audits.
1
Audit and review of the financial statements includes fees paid for both the audit of the annual financial statements and review of interim financial
statements.
P. 20

8Impaired asset expense
Policy
$000'sJune 2021 June 2020
Non-securitised
Individually impaired asset expense9,131 3,385
Collectively impaired asset expense5,606 25,590
Total non-securitised impaired asset expense14,737 28,975
Securitised
Collectively impaired asset expense(158) 397
Total securitised impaired asset expense(158) 397
Total
Individually impaired asset expense9,131 3,385
Collectively impaired asset expense5,448 25,987
Total impaired asset expense14,57929,372
Impairment of finance receivables
The ECL model is a forward looking model where impairment allowances are recognised before losses are actually incurred. On
initial recognition, an impairment allowance is required, based on events that are possible in the next 12 months.
Where there has been no evidence of increased credit risk since initial recognition, and finance receivables 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 3 - Lifetime ECL credit impaired (90 days past due or more)
For assets that are individually assessed for ECL, the allowance for ECL is calculated directly as the difference between the
defaulted assets carrying value and the recoverable amount (being the present value of expected future cash flows, including cash
flows from the realisation of collateral or guarantees, where applicable).
Objective evidence of impairment, so are considered to be in default or otherwise credit impaired.
At each reporting date, the Banking Group applies a three stage approach to measuring 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.
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.
The calculation of ECL 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.
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 Banking Group considers its historical loss experience and adjusts this
for current observable data. In addition to this the Banking 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.
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)
P. 21

8Impaired asset expense (continued)
9 Taxation
Policy
Income tax
Current tax
Deferred tax
Goods and services tax (GST)
The onset of COVID-19 caused a deterioration in economic conditions, creating uncertainty regarding the impact on HBL's
borrowers over and above the modelled ECL. Accordingly, as at 30 June 2020 a COVID Overlay was sized based on a range of
techniques (including stress testing, benchmarking, scenario analysis and expert judgement) and adopted by the Banking Group.
Income tax expense for the year comprises current tax and movements in deferred tax balances, including any adjustment
required for prior years' tax expense. Income tax expense is recognised in profit and loss except to the extent that it relates to
items recognised directly in other comprehensive income, in which case it is recognised in equity or other comprehensive income.
Revenues, expenses and assets are recognised net of GST. As the Banking 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 an expense
or, if relevant, as part of the cost of acquisition of an asset.
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 to
realise the asset.
Current tax is the expected tax payable or receivable on the taxable income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to the tax payable or receivable in respect of previous years. Current tax for
current and prior years is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
The COVID-19 Overlay has not been utilised at this stage. Despite forecasts showing improvements in the economic conditions,
new variants of COVID-19 have emerged and vaccination strategies are varied and as yet unproven across a sufficient population.
Furthermore, Government stimulus has given rise to the potential for inflationary pressures, a steepening interest rate
environment, and a higher cost of labour in the medium term. Management considers that sufficient uncertainty remains such that
the COVID Overlay should be retained in full at this stage.
The Banking Group’s models for estimating ECL for each of its portfolios are based on the historic credit experience of those
portfolios. The models assume that economic conditions (such as GDP growth, unemployment rates, and house price index
forecasts) remain static over time. If the Banking Group forecasts that economic conditions may change in the foreseeable future,
the Banking Group applies judgement to determine whether the modelled output should be subject to an economic overlay.
Judgment is required because analysis has been unable to establish any clear correlation between key economic indicators and the
credit performance of the Banking Group’s unique portfolios.
P. 22

9Taxation (continued)
$000'sJune 2021 June 2020
Income tax recognised in profit or loss
Current tax
Current year24,823 26,281
Adjustments for prior year(483) 1,536
Deferred tax
Current year2,573 (2,418)
Adjustments for prior year177 (1,475)
Total income tax expense recognised in profit or loss27,090 23,924
Income tax recognised in other comprehensive income
Current tax
Derivatives at fair value reserve(2,197) 768
Fair value movements of cash flow hedge3,457 (1,477)
Total income tax expense recognised in other comprehensive income1,260 (709)
Reconciliation of effective tax rate:
$000'sJune 2021 June 2020
Profit before income tax98,599 84,624
Prima facie tax @ 28%27,607 23,695
Adjusted tax effect of items not taxable/deductible(211) 168
Adjustments for prior year(306) 61
Total income tax expense27,090 23,924
Deferred tax assets comprise the following temporary differences:
$000'sJune 2021 June 2020
Employee entitlements
1,009 1,468
Share based payment
202 -
Provision for impairment
14,305 17,547
Intangibles and property, plant and equipment
(3,800) (4,576)
Deferred acquisition costs
(475) (936)
Operating lease vehicles
479 731
Other temporary differences
531 1,093
Total deferred tax assets12,251 15,327
Opening balance of deferred tax assets15,327 9,948
Movement recognised in profit or loss(3,076) 5,136
Movement recognised in retained earnings
- 243
Closing balance of deferred tax assets12,251 15,327
Income tax expense
P. 23

Financial Position
10 Investments
Policy
Fair value through profit or loss
$000'sJune 2021 June 2020
Bank deposits, bank bonds and floating rate notes351,614 366,289
Public sector securities and corporate bonds5,543 30,716
Equity investments1,818 2,303
Total investments358,975399,308
Investments are classified into one of the following categories:
Investments under this category include equity investments and are measured at fair value plus transaction costs. Changes in fair
value of these investments are recognised in profit or loss in the period in which they occur.
Fair value through other comprehensive income
Investments under this category include bank bonds, floating rate notes, local authority stock, public securities and corporate
bonds. These are initially measured at fair value, including transaction costs, and subsequently carried at fair value. Changes in fair
value of these investments are recognised in other comprehensive income and presented within the fair value reserve.
Amortised cost
Investments under this category include bank deposits and are measured using effective interest rate method. They are held to
collect contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.
Refer to Note 19 - Fair value for details of the split between investments measured at fair value through profit or loss, fair value
through other comprehensive income and amortised cost.
P. 24

11Derivative financial instruments
Policy
•
•
•
The criteria that must be met for a relationship to qualify for hedge accounting include:
•
•
•
Subsequent to initial designation, changes in the fair value of derivatives that are designated and qualify for fair value hedge
accounting are recorded through profit or loss alongside any changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk.
Where the hedged item is carried at amortised cost, 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 carried at
amortised cost 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 a hedged item carried at amortised cost 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.
Cash flow hedge accounting
the hedging relationship must be formally designated and documented at inception of the hedge,
effectiveness testing must be carried out on an on-going basis to ensure the hedge is effective, consistent with the originally
documented risk management strategy, and
the instruments or counterparty must be a third party external to the Banking Group.
A hedged item is an asset, liability, firm commitment or highly probable forecast transaction that exposes the Banking Group to risk
of changes in fair value or cash flows, and that is designated as being hedged. The Banking 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 Banking
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.
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 on an on-going basis to ensure the hedge is effective, consistent with the originally
documented risk management strategy, and
the instruments or counterparty must be a third party external to the Banking Group.
Fair value hedge accounting
The Banking 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 Banking 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 in offsetting changes in fair value of hedged items.
The Banking Group uses derivatives for risk management purposes. Derivatives held for risk management purposes include hedges
that either meet the hedge accounting requirements set out in NZ IAS 39, or economic hedges not placed into an accounting hedge
relationship.
Derivatives are recognised at their fair value, with the derivatives being carried as assets when their fair value is positive and as
liabilities when their fair value is negative.
P. 25

11Derivative financial instruments (continued)
June 2021
June 2020
Notional
Fair ValueFair ValueNotional
Fair Value
Fair Value
$000's
PrincipalAssetsLiabilitiesPrincipalAssetsLiabilities
Held for risk management
Interest rate related contracts
Swaps 1,104,012 14,106 4,520 1,140,422 17,238 16,939
Foreign currency related contracts
Forwards27,8465 269 168,100835
Total derivative financial instruments1,131,858 14,111 4,789 1,308,522 17,246 16,974
When a hedging derivative expires or is sold, the hedge no longer meets the criteria for hedge accounting, or the Banking 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.
The Banking 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 Banking 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 in 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.
The Banking Group has entered into credit support annexes (CSAs) which form a part of International Swaps and Derivatives
Association (ISDA) Master Agreement, in respect of certain exposures relating to derivative transactions. As per these CSAs, the
Banking Group or the counterparty needs to collateralise the market value of outstanding derivative transactions. As at 30 June
2021, the Banking Group has received $4.09 million of cash collateral (2020: nil) against derivative assets. The cash collateral
received is not netted off against the balance of derivative assets disclosed in the consolidated statement of financial position.
P. 26

12Finance receivables
(a) Finance receivables held at amortised cost
Policy
$000'sJune 2021 June 2020
Non-securitised
Neither at least 90 days past due nor impaired3,063,258 2,945,623
At least 90 days past due36,602 58,876
Individually impaired38,143 24,667
Gross finance receivables3,138,003 3,029,166
Less provision for impairment(50,809) (62,272)
Total non-securitised finance receivables3,087,194 2,966,894
Securitised
Neither at least 90 days past due nor impaired126,638 78,059
At least 90 days past due- 404
Individually impaired- -
Gross finance receivables126,638 78,463
Less provision for impairment(239) (397)
Total securitised finance receivables126,399 78,066
Total
Neither at least 90 days past due nor impaired3,189,896 3,023,682
At least 90 days past due36,602 59,280
Individually impaired38,143 24,667
Gross finance receivables3,264,641 3,107,629
Less provision for impairment(51,048) (62,669)
Total finance receivables3,213,5933,044,960
Refer to Note 22 - Asset quality for further analysis of finance receivables by credit risk concentration.
The impact of COVID-19 on use of judgements and estimates is discussed in Note 8 - Impaired asset expense.
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.
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 Banking Group.
Individually impaired assets are those loans for which the Banking 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.
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 rate method. Lending fees not directly related to the origination of a loan are
recognised over the period of service.
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 ECL 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.
P. 27

12Finance receivables (continued)
(a) Finance receivables held at amortised cost (continued)
Movement in provision
LifetimeLifetime
ECLECL
12 - MonthNot CreditCreditSpecific
$000's
ECLImpairedImpairedProvisionTotal
June 2021
Non-securitised
Impairment allowance as at 30 June 202032,160 2,144 22,667 5,301 62,272
Changes in loss allowance
Transfer between stages(2,466) (1,081) (50) 3,597-
(3,495) 1,309 13,295 6,034 17,143
Recovery of amounts written off- - (2,406)- (2,406)
Credit impairment charge(5,961) 228 10,839 9,631 14,737
Recovery of amounts previously written off- - 2,406- 2,406
Write offs- - (19,291) (7,303) (26,594)
Effect of changes in foreign exchange rate(33)26- (25)
Acquisition of portfolio133 22 188- 343
Sale of portfolio(2,083) (62) (185)- (2,330)
Impairment allowance as at 30 June 202124,216 2,334 16,630 7,629 50,809
Securitised
Impairment allowance as at 30 June 2020260 23 114- 397
Changes in loss allowance
Transfer between stages(4) (3)7- -
(40)2 (120)- (158)
Recovery of amounts written off- - - - -
Credit impairment charge(44) (1) (113)- (158)
Recovery of amounts previously written off- - - - -
Write offs- - - - -
Effect of changes in foreign exchange rate- - - - -
Impairment allowance as at 30 June 2021
216 221- 239
Total
Impairment allowance as at 30 June 202032,420 2,167 22,781 5,301 62,669
Changes in loss allowance
Transfer between stages(2,470) (1,084) (43) 3,597-
(3,535) 1,311 13,175 6,034 16,985
Recovery of amounts written off- - (2,406)- (2,406)
Credit impairment charge(6,005) 227 10,726 9,631 14,579
Recovery of amounts previously written off- - 2,406- 2,406
Write offs- - (19,291) (7,303) (26,594)
Effect of changes in foreign exchange rate(33)26- (25)
Acquisition of portfolio133 22 188- 343
Sale of portfolio(2,083) (62) (185)- (2,330)
Impairment allowance as at 30 June 2021
24,4322,35616,6317,62951,048
New and increased provision (net of collective provision
releases)
The following table details the movement from the opening balance to the closing balance of the provision for impairment losses
by class.
New and increased provision (net of collective provision
releases)
New and increased provision (net of collective provision
releases)
P. 28

12Finance receivables (continued)
(a) Finance receivables held at amortised cost (continued)
Movement in provision (continued)
LifetimeLifetime
ECLECL
12 - MonthNot CreditCreditSpecific
$000's
ECLImpairedImpairedProvisionTotal
June 2020
Non-securitised
Impairment allowance as at 30 June 201930,422 1,781 18,425 7,863 58,491
Changes in loss allowance
Transfer between stages(1,190) (294) (109) 1,593-
2,901 2,091 24,999 1,792 31,783
Recovery of amounts written off- - (2,808)- (2,808)
Credit impairment charge1,711 1,797 22,082 3,385 28,975
Recovery of amounts previously written off- - 2,808- 2,808
Write offs- (1,438) (20,658) (5,947) (28,043)
Effect of changes in foreign exchange rate27410- 41
Impairment allowance as at 30 June 2020
32,160 2,144 22,667 5,301 62,272
Securitised
Impairment allowance as at 30 June 2019- - - - -
Changes in loss allowance
Transfer between stages(19) 118- -
279 12 106- 397
Recovery of amounts written off- - - - -
Credit impairment charge260 23 114- 397
Recovery of amounts previously written off- - - - -
Write offs- - - - -
Effect of changes in foreign exchange rate- - - - -
Impairment allowance as at 30 June 2020
260 23 114- 397
Total
Impairment allowance as at 30 June 201930,422 1,781 18,425 7,863 58,491
Changes in loss allowance
Transfer between stages(1,209) (283) (101) 1,593-
3,180 2,103 25,105 1,792 32,180
Recovery of amounts written off- - (2,808)- (2,808)
Credit impairment charge1,971 1,820 22,196 3,385 29,372
Recovery of amounts previously written off- - 2,808- 2,808
Write offs- (1,438) (20,658) (5,947) (28,043)
Effect of changes in foreign exchange rate27410- 41
Impairment allowance as at 30 June 2020
32,4202,16722,7815,30162,669
New and increased provision (net of collective provision
releases)
New and increased provision (net of collective provision
releases)
New and increased provision (net of collective provision
releases)
P. 29

12Finance receivables (continued)
(a) Finance receivables held at amortised cost (continued)
Impact of changes in gross finance receivables held at amortised cost on allowance for ECL
LifetimeLifetime
ECLECL
12 - MonthNot CreditCreditSpecific
$000's
ECLImpairedImpairedProvisionTotal
June 2021
Gross finance receivables as at 30 June 20202,825,973 183,260 73,729 24,667 3,107,629
Transfer between stages(102,624) 67,219 12,906 22,499-
Additions1,421,835- - 955 1,422,790
Deletions(1,128,613) (85,751) (20,815) (466) (1,235,645)
Write offs- - (20,621) (9,512) (30,133)
Gross finance receivables as at 30 June 20213,016,571 164,728 45,199 38,143 3,264,641
June 2020
Gross finance receivables as at 30 June 20192,799,220 206,882 57,043 26,412 3,089,557
Transfer between stages(61,191) 12,570 41,245 7,376-
Additions1,496,900 87,843 23,610- 1,608,353
Deletions(1,402,340) (118,572) (37,334) (3,174) (1,561,420)
Write offs(6,616) (5,463) (10,835) (5,947) (28,861)
Gross finance receivables as at 30 June 20202,825,973183,26073,72924,6673,107,629
(b) Finance receivables held at fair value
Policy
$000'sJune 2021 June 2020
Finance receivables - reverse mortgages601,505 609,346
Total finance receivables - reverse mortgages601,505 609,346
Credit risk adjustments on financial assets designated at fair value through profit or loss
There were no credit risk adjustments on individual financial assets.
Finance receivables – reverse mortgages are initially recognised, and subsequently measured, at fair value through profit or loss.
Note 19 (a) - Financial instruments measured at fair value discloses further information regarding the Banking Group’s valuation
policy.
Note 21 - Credit risk exposure discloses further information regarding how reverse mortgages operate.
P. 30

13Operating lease vehicles
Policy
$000'sJune 2021 June 2020
Cost
Opening balance24,098 21,623
Additions1,788 9,938
Disposals(9,772) (7,463)
Closing balance16,11424,098
Accumulated depreciation
Opening balance6,495 6,107
Depreciation charge for the year
2,801 3,634
Disposals(4,047) (3,246)
Closing balance5,2496,495
Opening net book value17,603 15,516
Closing net book value10,86517,603
14 Borrowings
Policy
$000'sJune 2021 June 2020
Deposits3,219,522 3,269,239
Total deposits3,219,522 3,269,239
Unsubordinated notes284,517 293,147
Securitised borrowings108,150 65,585
Certificate of deposit69,853-
Repurchase agreement
1
40,365-
Total other borrowings502,885 358,732
Deposits and unsubordinated notes rank equally and are unsecured.
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.
1
The amounts disclosed as securities sold under arrangements to repurchase include $40.0 million (face value) of high quality liquid assets. The cash
consideration received (recognised as a liability) was $40.4 million.
The future minimum lease payments receivable under operating leases not later than one year is $2.141 million (2020: $3.487
million), within one to five years is $1.406 million (2020: $2.053 million) and over five years is nil (2020: nil).
Operating lease vehicles are depreciated on a straight line basis over their expected useful 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.
Operating lease vehicles are stated at cost less accumulated depreciation.
P. 31

14Borrowings (continued)
PrincipalValuation
Issue DateMaturity
$150 millionAmortised cost
$125 millionAmortised cost
•
15Share capital and dividends
Policy
June 2021June 2020
Number ofNumber of
000'sShares Shares
Issued shares
Opening balance565,430 565,430
Closing balance565,430565,430
Dividends paid
$000's$000's
Dividend to HGH30,00035,000
Dividend to HGH- - 20,000
Dividend to HGH- - 10,000
Total dividends paid30,00065,000
There were no new shares issued during the period (2020: nil).
Heartland Auto Receivables Warehouse Trust 2018-1 securitisation facility $300 million, drawn $108 million (2020: $300
million, drawn $66 million). Notes issued to investors are secured over the assets of the Heartland Auto Receivables
Warehouse Trust 2018-1. The facility has a maturity date of 29 August 2022.
The change in Conditions of Registration (COR) effective from 2 April 2020 restricted the payment of dividends on ordinary shares,
and the redemption on non-CET1 capital instruments as a result of the COVID-19 pandemic. On 29 April 2021, HBL’s COR were
updated to allow a dividend to be paid up to 50% of the most recently completed financial year’s NPAT.
At 30 June 2021 the Banking Group had the following securitised borrowings outstanding:
12 April 2019
21 September 2017
Semi annually
12 April 2024
21 September 2022
Frequency of
Interest Repayment
Semi annually
Date Declared
18 June 2021
The Banking Group has the following unsubordinated notes on issue at reporting date:
June 2020
Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofordinarysharesandshareoptionsare
recognised as a deduction from equity, net of any tax effect.
Date Declared
1 August 2019
15 November 2019
5 December 2019
June 2021
P. 32

16Other reserves
DefinedCash Flow
Fair ValueBenefitHedge
$000'sReserve
Reserve
ReserveTotal
June 2021
Balance as at 30 June 20205,324 171 (8,022) (2,527)
(5,646)- 8,928 3,282
Balance as at 30 June 2021(322) 171 906 755
June 2020
Balance as at 30 June 20194,558 171 (5,843) (1,114)
766- (2,179) (1,413)
Balance as at 30 June 20205,324 171 (8,022) (2,527)
17 Other balance sheet items
Policy
$000'sJune 2021 June 2020
Other assets
Trade receivables635 1,926
GST receivables1,476 742
Prepayments2,832 3,269
Property, plant and equipment8,830 9,839
Other receivables1,049 1,604
Total other assets14,82217,380
Policy
Intangible assets
Intangible assets with finite useful lives
Goodwill
Other comprehensive income, net of income tax
Other comprehensive income, net of income tax
Goodwill arising on acquisition represents the excess of the cost of the acquisition over the Banking Group’s interest in the fair
value of the identifiable net assets acquired. 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.
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 revalued amount of each asset over its expected life to its estimated residual
value.
Software acquired or internally developed by the Banking Group is stated at cost less accumulated amortisation and any
accumulated impairment losses. 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 varies up to ten years.
P. 33

17Other balance sheet items (continued)
$000'sJune 2021 June 2020
Computer software
Cost43,360 42,535
Accumulated amortisation20,328 14,864
Net carrying value of computer software23,032 27,671
Goodwill
Cost29,799 29,799
Net carrying value of goodwill29,799 29,799
Total intangible assets52,831 57,470
Policy
Employee benefits
$000'sJune 2021 June 2020
Trade and other payables
Trade payables9,218 20,006
Insurance liability3,354 6,094
Employee benefits4,625 6,104
Other tax payables630 1,287
Collateral received on derivatives4,091-
Total trade and other payables21,91833,491
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.
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 2021 (30 June 2020: nil). Uncertainty associated with the effects from the COVID-19 pandemic were
considered in the impairment tests to determine the resilience of the headroom and no impairment was identified from the
assessments.
Goodwill is tested for impairment at a cash generating unit (CGU) level. The recoverable amounts are determined on a value in use
basis using a five-year discounted cash flow methodology based on financial budget and forecasts. Key assumptions used in the
models included a discount rate of 10% and a terminal growth rate of 2% which reflect both past experience and external sources
of information. The recoverable amounts for each CGU are compared to the respective carrying value of net assets.
For the purposes of impairment testing, goodwill is allocated to cash generating units. A CGU is the smallest identifiable group of
assets that generate independent cash inflows. The Banking Group has assessed that goodwill should be allocated to Heartland
Bank Limited as the smallest identifiable CGU.
P. 34

17Other balance sheet items (continued)
Policy
Leases
$000'sJune 2021June 2020
Right of use assets
Balance at beginning of year17,843 10,002
Depreciation charge for the year, included within depreciation expense in the income statement(2,123) (2,122)
(Terminations)/additions to right of use assets(66) 9,963
Total right of use assets15,65417,843
Lease liability
Current2,124 2,021
Non-current15,656 17,850
Total lease liability17,78019,871
Interest expense relating to lease liability555550
18 Related party transactions and balances
Policy
a)
A person or a close member of that person's family if that person:
b)
Right of use assets are depreciated at the shorter of lease term or the Banking Group’s depreciation policy for that asset class.
ii) has significant influence over the Bank; or
vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel
of the entity (or of a parent of the entity).
A person or entity is a related party under the following circumstances:
i) has control or joint control over the Bank;
vi) The entity is controlled, or jointly controlled by a person identified in (a); and
v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity
related to the Bank;
Lease liabilities are measured at the present value of the remaining lease payments and discounted using the Banking Group's
incremental borrowing rate (IBR). Lease liabilities are measured using the effective interest method. Carrying amounts are
remeasured only upon reassessments and lease modifications.
In determining the lease term, all facts and circumstances that create an economic incentive to exercise an extension option are
considered. Extension options are only included in the lease term if the lease is reasonably certain to be extended.
The Banking Group leases office space, car parks, equipment and cars. Rental contracts are typically made for fixed periods but
may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions.
iii) is a member of the key management personnel of the Bank.
An entity is related to the Bank if any of the following conditions applies:
i) The entity and the Bank are members of the same group;
ii) One entity is an associate or joint venture of the other entity;
iii) Both entities are joint ventures of the same third party;
iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
P. 35

18Related party transactions and balances (continued)
(a)
Transactions with key management personnel
$000'sJune 2021 June 2020
Transactions with key management personnel
Interest income receivable3918
Interest expense payable(22) (47)
Key management personnel compensation
Short-term employee benefits(2,793) (3,034)
Short-term employee benefits - HGH parent(6,591) (6,240)
Share-based payment expense(1,797) (827)
Total transactions with key management personnel(11,164) (10,130)
Due (to)/from key management personnel
Lending415 239
Borrowings - deposits(23,409) (1,646)
Total due (to)/from key management personnel(22,994) (1,407)
(b)
Transactions with related parties
$000's
June 2021June 2020
Heartland Group Holdings Limited
Interest expense2147
Deposits/(withdrawals)31,000-
Dividends paid to HGH30,000 65,000
Disposal of investment in Harmoney Corp Limited- 11,935
Management fees payable to HGH15,785 4,745
Management fees receivable from HGH1,149 160
Heartland Australia Group Pty Limited (HAG)
Interest income- 678
Funding repaid to the Bank- 27,225
Sale of Spotcap facility28,049-
Sale of Harmoney Australia Fund
40,966-
The Banking Group's ultimate parent company is HGH.
KMP receive personal banking and financial investment services from the Bank in the ordinary course of business. The terms and
conditions, for example interest rates and collateral, and the risks to the Bank are comparable to transactions with other
employees and did not involve more than the normal risk of repayment or present other unfavourable features.
The Bank has regular transactions with its ultimate parent company, fellow subsidiaries and subsidiaries (collectively known as the
Heartland Group) on agreed terms. The transactions include the provision of administrative services, tax transactions, and
customer operations and call centre. Banking facilities are provided by Heartland Bank Limited to other Heartland Group entities
on normal commercial terms as with other customers. There is no lending from the Banking Group to HGH.
Key management personnel (KMP), are those who, directly or indirectly, have authority and responsibility for planning, directing
and controlling the activities of HGH and HBL. This includes all executive staff, Directors and their close family members.
Related party transactions between the Banking Group eliminate on consolidation. Related party transactions outside of the
Banking Group are as follows:
All other transactions with KMPs and their related entities are made on terms equivalent to those that prevail in arm's length
transactions.
P. 36

18Related party transactions and balances (continued)
(b)
Transactions with related parties (continued)
$000's
June 2021June 2020
Australian Seniors Finance Pty Limited (ASF)
Management fees payable to ASF49
Management fees receivable from ASF1,707 1,790
ASF Settlement Trust
Sale of Australian dollar reverse mortgage loan book45,971-
Southern Cross Building Society Staff Superannuation (SCBS)
Interest expense payable to SCBS1233
Management fees receivable from SCBS1010
(c) Due from/to related parties
$000'sJune 2021 June 2020
Due from
Australian Seniors Finance Pty Limited146 1,481
Total due from related parties146 1,481
Due to
Heartland Group Holdings Limited3,210 5,788
ASF Settlement Trust- 197
Heartland Australia Group Pty Ltd- 1,959
Total due to related parties3,210 7,944
(d)
$000'sJune 2021 June 2020
Heartland Group Holdings Limited
Deposits36,068 5,047
Southern Cross Building Society Staff Superannuation
Deposits1,760 1,934
19 Fair value
Policy
Other balances with related parties
The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or
dealer price quotations. For all other financial instruments, the Banking Group determines fair value using other valuation
techniques.
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.
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.
The Banking Group measures fair values using the following fair value hierarchy, which reflects the observability of the inputs used
in measuring fair value:
P. 37

19Fair value (continued)
(a) Financial instruments measured at fair value
Investments
Investment properties
Finance receivables - reverse mortgages
Investment properties are initially recorded at their fair value, with subsequent changes in fair value recognised in profit or loss.
Fair value are determined by qualified independent valuers or other similar external evidence, adjusted for changes in market
conditions.
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).
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
The Banking Group has an established framework in performing valuations required for financial reporting purposes including level
3 fair values. The Banking Group regularly reviews and calibrates significant unobservable inputs and valuation adjustments in
accordance with market participants’ views. If external valuation specialists are engaged to measure fair values, the Banking Group
assesses the evidence obtained from these specialists to support the conclusion of these valuations. All significant valuations are
reported to the Banking Group's Board Audit and Risk Committee for approval prior to its adoption in the financial statements.
For subsequent measurement the Banking 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 Banking Group has used valuation techniques (income approach) including actuarial assessments to consider the fair
value.
Reverse mortgage loans are classified at fair value through profit or loss. On initial recognition the Banking Group considers the
transaction price to represent the fair value of the loan.
InvestmentsinunlistedequitysecuritiesareclassifiedasbeingfairvaluedthroughprofitorlossandarevaluedunderLevel3ofthe
fair value hierarchy, with the fair value being based on unobservable inputs.
The Banking Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during
which the change has occurred.
The following methods and assumptions were used to estimate the fair value of each class of financial asset and liability measured
at fair value on a recurring basis in the consolidated statement of financial position.
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).
Investments in public sector securities and corporate bonds are classified at FVOCI, with the fair value being based on quoted
market prices (Level 1 under the fair value hierarchy) or modelled using observable market inputs (Level 2 under the fair value
hierarchy). Refer to Note 10 - Investments for more details.
InvestmentsvaluedunderLevel2ofthefairvaluehierarchyarevaluedeitherbasedonquotedmarketpricesordealerquotesfor
similar instruments, or discounted cash flows analysis.
Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
P. 38

19Fair value (continued)
(a) Financial instruments measured at fair value (continued)
Finance receivables - reverse mortgages (continued)
•
Mortality and move to care;
•
Voluntary exits;
•
House price changes;
•
No negative equity guarantee; and
•
Interest rate margin.
Derivative financial instruments
$000'sLevel 1 Level 2 Level 3 Total
June 2021
Assets
Investments259,041 92,476 1,818 353,335
Investment properties- - 11,832 11,832
Derivative financial instruments- 14,111- 14,111
Finance receivables - reverse mortgages- - 601,505 601,505
Total financial assets measured at fair value259,041 106,587 615,155 980,783
Liabilities
Derivative financial instruments- 4,789- 4,789
Total financial liabilities measured at fair value- 4,789- 4,789
The following table analyses financial instruments measured at fair value at the reporting date by the level in the fair value
hierarchy into which each fair value measurement is categorised. The amounts are based on the values recognised in the
consolidated statement of financial position.
When the Banking Group enters into a reverse mortgage loan the Banking 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:
The Banking Group will continue to reassess the existence of a relevant active market and movements in expectations on an on-
going basis.
At balance date the Banking Group does not consider any of the above expectations to have moved outside of the original
expectation range. Therefore the Banking 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
tenor, the fair value as recorded is regarded as not being highly sensitive to the above assumptions, particularly to house prices
and interest rates, that would impact the fair value at balance date. While noting the uncertainty around future economic
conditions, based on current judgment there is no evidence that COVID-19 has impacted or will have a long-term adverse impact
on market conditions, particularly regarding the key elements of house prices or interest rates, that would materially influence the
fair value of the reverse mortgage portfolio at balance date.
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).
P. 39

19Fair value (continued)
(a) Financial instruments measured at fair value (continued)
Derivative financial instruments (continued)
$000'sLevel 1 Level 2 Level 3 Total
June 2020
Assets
Investments295,300 94,354 2,303 391,957
Investment properties- - 11,132 11,132
Derivative financial instruments- 17,246- 17,246
Finance receivables - reverse mortgages- - 609,346 609,346
Total financial assets measured at fair value295,300111,600622,7811,029,681
Liabilities
Derivative financial instruments- 16,974- 16,974
Total financial liabilities measured at fair value- 16,974- 16,974
The movement in Level 3 assets measured at fair value are below:
$000's
InvestmentspropertiesTotal
June 2021
As at 30 June 2020
609,3462,30311,132622,781
New loans
99,510- - 99,510
Repayments
(97,577)- - (97,577)
Capitalised Interest and fees
35,775- - 35,775
(45,650)- - (45,650)
- (485)700215
Other
101- - 101
As at 30 June 2021
601,5051,81811,832615,155
June 2020
As at 30 June 2019
561,13112,43511,132584,698
New Loans
76,729- - 76,729
Repayments
(69,932)- - (69,932)
Capitalised Interest and fees
39,620- - 39,620
Purchase of investments
- 1,803- 1,803
- (11,935)- (11,935)
Other
1,798- - 1,798
As at 30 June 2020
609,3462,30311,132622,781
(b) Financial instruments not measured at fair value
Cash and cash equivalents
Finance Receivables
There were no transfers between levels in the fair value hierarchy in the year ended 30 June 2021 (2020: nil).
The following assets and liabilities of the Banking Group are not measured at fair value in the consolidated statement of financial
position.
Investment
Cash and cash equivalents are measured at amortised cost and their carrying value is considered equivalent to their fair value due
to their short term nature.
- Reverse Mortgages
Disposal
Disposal
Fair value (loss)/gain on
investment
P. 40

19Fair value (continued)
(b) Financial instruments not measured at fair value (continued)
Finance receivables
Borrowings
Due to and from related parties
Other financial assets and financial liabilities
Total
Total
Fair Value Total Fair Carrying Fair Value Total Fair Carrying
$000'sHierarchy Value Value Hierarchy Value Value
Assets
Cash and cash equivalentsLevel 1 112,903 112,903 Level 1 105,463 105,463
Investments
1
Level 25,6405,639Level 27,3757,351
Finance receivablesLevel 2 3,283,159 3,213,593 Level 2 3,092,150 3,044,960
Due from related partiesLevel 3 146 146 Level 3 1,481 1,481
Other financial assetsLevel 3 1,684 1,684 Level 3 3,530 3,530
Total financial assets3,403,532 3,333,9653,209,999 3,162,785
Liabilities
DepositsLevel 2 3,228,791 3,219,522 Level 2 3,283,530 3,269,239
Borrowings - securitisedLevel 2 108,150 108,150 Level 2 65,585 65,585
Other borrowingsLevel 2 394,735 394,735 Level 2 293,147 293,147
Due to related parties
Level 3 3,210 3,210 Level 3 7,944 7,944
Other financial liabilitiesLevel 3 16,663 16,663 Level 3 26,100 26,100
Total financial liabilities3,751,549 3,742,2803,676,306 3,662,015
June 2021June 2020
1
Included within investments are bank deposits which are held to support the Banking Group's contractual cash flows. Such investments are measured at
amortised cost.
The fair value of amounts due to and from related parties is considered equivalent to their carrying value due to their short term
nature.
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 Banking Group for debt of similar maturities. The average current market rate used to
fair value borrowings was 1.23% (2020: 2.24%).
The following table sets out financial instruments not measured at fair value, compares their carrying value against their fair value
and analyses them by level in the fair value hierarchy.
The fair value of financial instruments such as short-term trade receivables and payables is considered equivalent to their carrying
value due to their short term nature.
The fair value of the Banking Group's finance receivables is calculated using a valuation technique which assumes the Banking
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 7.08% (2020:
8.06%). 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.
P. 41

19Fair value (continued)
(c) Classification of financial instruments
Total
AmortisedCarryingTotal Fair
$000's
FVOCIFVTPLCost
ValueValue
June 2021
Cash and cash equivalents- - 112,903 112,903 112,903
Investments351,518 1,818 5,639 358,975 358,975
Investment properties- 11,832- 11,832 11,832
Finance receivables- - 3,213,593 3,213,593 3,283,159
Finance receivables - reverse mortgages- 601,505- 601,505 601,505
Derivative financial instruments3,213 10,898- 14,111 14,111
Due from related parties- - 146 146 146
Other financial assets- - 1,684 1,684 1,684
Total financial assets354,731 626,053 3,333,965 4,314,749 4,384,315
Deposits- - 3,219,522 3,219,522 3,228,791
Other borrowings- - 502,885 502,885 502,885
Derivative financial instruments4,395 394- 4,789 4,789
Due to related parties- - - 3,210 3,210
Other financial liabilities- - 16,663 16,663 16,663
Total financial liabilities4,395 394 3,739,070 3,747,069 3,756,338
June 2020
Cash and cash equivalents- - 105,463 105,463 105,463
Investments389,654 2,303 7,351 399,308 399,332
Investment properties- 11,132- 11,132 11,132
Finance receivables- - 3,044,960 3,044,960 3,092,150
Finance receivables - reverse mortgages- 609,346- 609,346 609,346
Derivative financial instruments32 17,214- 17,246 17,246
Due from related parties- - 1,481 1,481 1,481
Other financial assets- - 3,530 3,530 3,530
Total financial assets389,686 639,995 3,162,785 4,192,466 4,239,680
Deposits- - 3,269,239 3,269,239 3,283,530
Other borrowings- - 358,732 358,732 358,732
Derivative financial instruments15,409 1,565- 16,974 16,974
Due to related parties- - 7,944 7,944 7,944
Other financial liabilities- - 26,100 26,100 26,100
Total financial liabilities15,409 1,565 3,662,015 3,678,989 3,693,280
The following tables summarise the categories of financial instruments and the carrying value and fair value of all financial
instruments of the Banking Group:
P. 42

Risk Management
20 Enterprise risk management program
Role of the Board and the Board Risk Committee
•
The Board's Risk Appetite Statement.
•Heartland’s Internal Capital Adequacy Assessment Program (ICAAP) including appropriate stress testing scenarios.
•
•
•
Conduct, culture and customer outcomes, including emerging risks and any areas of concern.
•
Credit exposures of the Bank, including the Delegated Lending Authority Policy and Framework.
•
New products, including the process for approval of new products.
Board Audit Committee
Internal Audit
The Banking 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 Banking Group in
accomplishing its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk
management, control, and governance processes.
The board of directors (the Board) sets and monitors the Banking 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 Bank's Enterprise Risk Management Program (RMP).
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:
The effectiveness of the ERMF and internal compliance and risk related policies, including approval or variation of policies,
procedures and standards.
Respond to changes anticipated in the economic, business and regulatory environment.
The Board Audit Committee (BAC) focuses on financial reporting and application of accounting policies as part of the internal
control and risk assessment framework. The BAC monitors the identification, evaluation and management of all significant risks
through the Banking Group. This work is supported by Internal Audit, which provides an independent assessment of the design,
adequacy and effectiveness of internal controls. The BAC receives regular reports from Internal Audit.
Charters for both the BRC and the BAC ensure suitable cross representation to allow effective communication pertaining to
identified issues with oversight by the Board. The CRO has a direct reporting line to the Chairman of the BRC. The Head of
Internal Audit has a direct reporting line to the Chairman of the BAC.
The BRC consists of three non-executive directors. Two members of the BRC sit on the BAC. In addition the CEO Heartland Bank
Limited (HBL), CRO, CFO, and Head of Internal Audit (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.
Internal Audit is allowed full, free and unfettered access to any and all of the organisation’s records, personnel and physical
properties deemed necessary to accomplish its activities.
P. 43

20Enterprise risk management program (continued)
Asset and Liability Committee (ALCO)
•
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)
Operational and compliance risk
Internal Audit (continued)
A regular cycle of review has been implemented to cover all areas of the business, focused on assessment, management and
control of risks identified. The audit plan takes into account cyclical review 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 performed in
accordance with the audit procedures.
The Internal Audit function has a direct reporting line to the BAC of the Bank. A schedule of all outstanding internal control issues
is maintained and presented to the BAC to assist the BAC 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.
Audit reports are addressed to the manager of the relevant area that is being audited in addition to other relevant stakeholders
within the Bank. Management comments are obtained from the process owner(s) and are included in the report.
The ERC comprises the CEO HBL, CRO, CFO 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
Banking 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, compliance risk, and credit risk.
The ALCO comprises the CEO HGH, CEO HBL, CFO HGH, Chief Legal & Bank Risk Officer, Head of Retail, Financial Controller HBL
and Chief Distribution Officer. The ALCO has responsibility for overseeing aspects of risk management of the Banking Group's
financial position. The ALCO usually meet monthly, and provide reports to the BRC. ALCO's specific responsibilities include
decision making and oversight of risk matters in relation to:
Operational and compliance risk is the risk arising from day to day operational activities in the execution of the Banking 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, 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 Banking Group operates a “three lines of defence” model which outlines principles for the roles, responsibilities and
accountabilities for operational and compliance risk management:
P. 44

20Enterprise risk management program (continued)
Operational and compliance risk (continued)
•
•
•
Market risk
Interest rate risk
•
•
•
•
Foreign exchange risk
ThethirdlineofdefenceisInternalAuditwhichisresponsibleforindependentlyassessinghoweffectivelytheBankingGroup
is managing its risk according to its stated risk appetite.
Interest rate risk refers to exposure of an entity’s earnings and / or capital because of a mismatch between the interest rate
exposures of its assets and liabilities. Interest rate risk for the Banking Group arises from the provision of non-traded retail
banking products and services and from traded wholesale transactions entered into to reduce aggregate interest rate risk
(known as hedges). This risk arises from four key sources:
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 (RCSA), incident
management, independent evaluation of the adequacy and effectiveness of the internal control framework and the
attestation process.
Market risk is the possibility of experiencing losses or gains due to factors affecting the overall performance of financial markets
in which the Banking Group is exposed. The primary market risk exposures for the Banking 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
Banking 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.
Foreign exchange risk is the risk that the Banking Group’s earnings and shareholder equity position are adversely impacted from
changes in foreign exchange rates. The Banking Group has exposure to foreign exchange translation risks through its holding of
AUD assets.
Loan prepayment or deposit early withdrawal behaviour from customers that deviates from the expected or contractually
agreed behaviour (optionality risk); and
The effect of internal or market forces on a bank’s net interest margin where, for example, in a low rate environment any fall
in rates will further decrease interest income earned on the assets whereas funding cost cannot be reduced as it is already at
the minimum level (margin compression risk).
The Banking 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, including the requirement for the ERC to monitor adherence to this.
Mismatches between the repricing dates of interest bearing assets and liabilities (yield curve and repricing risk);
Banking products repricing differently to changes in wholesale market rates (basis risk);
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 Banking Group's policies.
Refer Note 24 - Interest rate risk for further details regarding interest rate risk.
P. 45

20Enterprise risk management program (continued)
Counterparty Credit Risk
•
•Finance receivables;
•
•
21 Credit risk exposure
•
Credit origination meets agreed levels of credit quality at point of approval;
•
Sector concentrations are monitored;
•
Maximum total exposure to any one debtor is actively managed;
•
Changes to credit risk are actively monitored with regular credit reviews.
Cash and cash equivalents;
Impact of COVID-19 has been considered by the Banking Group as outlined in Note 8 - Impaired asset expense.
Counterparty credit risk is managed against limits set in the Market Risk Policy including credit exposure on derivative contracts,
bilateral set-off arrangements, cash and cash equivalents and investment securities.
Credit risk is the risk that a borrower will default on any type of debt by failing to make payments which it is obligated to make.
The risk is primarily that of the lender and includes loss of principal and interest, disruption to cash flows and increased
collection costs.
To manage thisrisktheERCoverseestheformal credit riskmanagement strategy.The ERCreviewstheBankingGroup'scredit
risk exposures typically on a monthly basis. The credit risk management strategies aim to ensure that:
The Banking Group has on-going credit exposure associated with:
Holding of investment securities; and
Payments owed to the Banking Group from risk management instruments.
Credit risk is managed to achieve sustainable risk-reward performance whilst maintaining exposures within acceptable risk
“appetite” parameters. This is achieved through the combination of governance, policies, systems and controls, underpinned by
commercial judgement as described below.
The BRC has authority from the Board for approval of all credit exposures. Lending authority has been provided to the Banking
Group's Credit Committee, and to the business units under a detailed Delegated Lending Authority framework. Application of
credit discretions in the business operation are monitored through a defined review and hindsight structure as outlined in the
Credit Risk Oversight Policy. Delegated Lending Authorities are provided to individual officers with due cognisance of their
experience and ability. Larger and higher risk exposures require approval of senior management, the Credit Committee and
ultimately through to the BRC.
The Banking Group employs a process of hindsighting loans to ensure that credit policies and the quality of credit processes are
maintained.
The BRC also oversees the Banking Group's credit risk exposures to monitor overall risk metrics having regard to risk appetite set
by the Board.
P. 46

21Credit risk exposure (continued)
Reverse mortgage loans and negative equity risk
Business Finance Guarantee Scheme (BFGS)
Maximum exposure to credit risk at the relevant reporting dates
$000'sJune 2021June 2020
On balance sheet:
Cash and cash equivalents112,903 105,463
Investments357,157 397,005
Finance receivables3,213,593 3,044,960
Finance receivables - reverse mortgages601,505 609,346
Derivative financial assets14,111 17,246
Due from related parties146 1,481
Other financial assets1,684 3,530
Total on balance sheet credit exposures4,301,099 4,179,031
Off balance sheet:
Letters of credit, guarantee commitments and performance bonds13,484 6,515
Undrawn facilities available to customers208,855 177,719
Conditional commitments to fund at future dates19,083 58,045
Total off balance sheet credit exposures241,422 242,279
Total credit exposures 4,542,5214,421,310
The Banking Group’s exposure to negative equity risk is managed by the Credit Risk Oversight Policy in conjunction with
associated lending standards specific for this product. In addition to usual criteria regarding the type, and location, of security
property that the Banking Group will accept for reverse mortgage lending, a key aspect of the Banking Group's policy is that a
borrower’s age on origination of the reverse mortgage loan will dictate the loan-to-value ratio of the reserve mortgage on
origination. Both New Zealand and Australia reverse mortgage operations are similarly aligned. The policy is managed and
reviewed periodically to ensure appropriate consistency across locations.
Reverse mortgage loans are a form of mortgage lending designed for the needs of people over 60 years. These loans differ to
conventional mortgages in that they typically are not repaid until the borrower ceases to reside in the property. Further, interest
is not required to be paid, it is capitalised into the loan balance and is repayable on termination of the loan. As such, there are no
incoming cash flows and therefore no default risk to manage during the term of the loan. Negative equity risk arises from the
promise by the Banking Group that the maximum repayment amount is limited to the net sale proceeds of the borrowers'
property.
As at 30 June 2021 there was $0.216 million undrawn lending commitments available to counterparties for whom drawn
balances are classified as individually impaired (2020: nil).
The Bank, along with other registered banks in New Zealand, has entered into a Deed of Indemnity with the New Zealand
Government to implement the New Zealand Government's Business Finance Guarantee Scheme. The purpose of the scheme is to
provide short term credit to eligible small and medium size businesses, who have been impacted by the economic effects of
COVID-19. The scheme allows banks to lend to a maximum of $5 million for a maximum of five years. The New Zealand
Government will guarantee 80% of any loss incurred (credit risk) with the Bank holding the remaining 20%. As at 30 June 2021
the Bank had a total exposure of $64.3 million (2020: $6.5 million) to its customers under the scheme. BFGS has concluded on 30
June 2021 with scheme loans no longer being available.
The following table represents the maximum credit risk exposure, without taking account of any collateral held. The on balance
sheet exposures set out below are based on net carrying amounts as reported in the consolidated statement of financial
position.
P. 47

21Credit risk exposure (continued)
Concentration of credit risk by geographic region
$000'sJune 2021June 2020
New Zealand4,332,737 4,045,917
Australia753 142,713
Rest of the world
1
260,079295,349
Total4,593,569 4,483,979
Provision for impairment(51,048) (62,669)
Total credit exposures4,542,5214,421,310
Concentration of credit risk by industry sector
$000'sJune 2021June 2020
Agriculture670,428 695,661
Forestry and fishing153,160 149,871
Mining12,684 13,425
Manufacturing76,951 80,776
Finance and insurance577,486 569,422
Wholesale trade56,522 48,055
Retail trade and accommodation 279,388 278,768
Households1,780,799 1,740,788
Other business services148,011 168,326
241,668 202,685
Rental, hiring and real estate services185,320 154,318
Transport and storage297,920 262,078
Other113,232 119,806
Total4,593,569 4,483,979
Provision for impairment(51,048) (62,669)
Total credit exposures4,542,5214,421,310
Credit exposures to connected persons
In accordance with its conditions of registration, the Banking Group's aggregate credit exposures to all connected persons must
not exceed its rating contingent limit of 15% of tier one capital. Within the overall rating contingent limit, there is a sub-limit of
15% of tier one capital which applies to the aggregate credit exposures to non-bank connected persons. There have been no
rating-contingent limit changes during the accounting period.
1
These overseas assets are primarily NZD-denominated investments in AA+ and higher rated securities issued by offshore supranational agencies ("Kauri
Bonds").
The Australian and New Zealand Standard Industrial Classification (ANZSIC) codes have been used as the basis for categorising
customer industry sectors.
The Banking Group's methodology for calculating credit exposure concentrations is on the basis of actual credit exposures and
calculated on a gross basis (net of individual credit impairment allowances and excluding advances of a capital nature) in
accordance with the Bank's conditions of registration and the Reserve Bank's Connected Exposures Policy (BS8). Peak end-of-day
credit exposures to non-bank connected persons are calculated using the Banking Group’s Tier 1 capital at the end of the
reporting period.
Construction
P. 48

21Credit risk exposure (continued)
Credit exposures to connected persons (continued)
Peak End-of-Day for
As at June 2021
Year Ended June 2021
Credit exposures to connected persons ($000's)
1503,070
0.03%0.56%
Credit exposures to non-bank connected persons ($000's)
1503,070
0.03%0.56%
Credit exposure to individual counterparties
Peak End-of-Day over
As at June 2021
6 Months to June 2021
Exposures to banks
1-
- 1
- -
- -
Exposures to non-banks
- -
- -
- -
With a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at
most BBB+ or Baa1, or its equivalent
As at 30 June 2021, the Banking Group had no aggregate contingent exposures to connected persons arising from risk lay-off
arrangements in respect of credit exposures to counterparties (excluding counterparties that are connected persons). The
aggregate amount of the Banking Group's individual credit provisions provided against credit exposure to connected persons was
nil at 30 June 2021.
Number of Exposures
Number of Exposures
The peak end-of-day aggregate concentration of credit exposure to individual counterparties has been calculated by determining
the maximum end-of-day aggregate amount of credit exposure over the relevant six month period and then dividing the amount
by the Banking Group’s common equity tier one capital as at 30 June 2021.
With a long-term credit rating of A- or A3 or above, or its equivalent
As a percentage of Tier 1 capital of the Banking Group at end of the year (%)
As a percentage of Tier 1 capital of the Banking Group at end of the year (%)
The Banking Group’s aggregate concentration of credit exposure to individual counterparties is calculated based on the actual
credit exposure. Credit exposures to connected persons, the central government or central bank of any country with a long term
credit rating of A- or A3 or above, or its equivalent, and any supranational or quasi-sovereign agency with a long-term credit
rating of A- or A3 or above, or its equivalent are excluded.
15% to less than 20% of CET1 capital
20% to less than 25% of CET1 capital
With a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at
most BBB+ or Baa1, or its equivalent
Total number of exposures to non-banks that are greater than 10% of CET1
capital
With a long-term credit rating of A- or A3 or above, or its equivalent:
10% to less than 15% of CET1 capital
P. 49

22Asset quality
Corporate
Residential
All Other
(a) Finance receivables by credit risk concentration
$000'sCorporateResidentialAll OtherTotal
June 2021
Neither at least 90 days past due nor impaired2,054,020 663,891 1,073,490 3,791,401
At least 90 days past due13,854 139 22,609 36,602
Individually impaired37,5619 573 38,143
Gross finance receivables2,105,435 664,039 1,096,672 3,866,146
Provision for impairment(30,277) (88) (20,683) (51,048)
Total net finance receivables2,075,158663,9511,075,9893,815,098
June 2020
Neither at least 90 days past due nor impaired1,889,231 632,894 1,110,903 3,633,028
At least 90 days past due27,098 599 31,583 59,280
Individually impaired22,7749 1,884 24,667
Gross finance receivables1,939,103 633,502 1,144,370 3,716,975
Provision for impairment(34,614) (7) (28,048) (62,669)
Total net finance receivables1,904,489633,4951,116,3223,654,306
(b) Past due but not impaired
$000'sCorporateResidentialAll OtherTotal
June 2021
Less than 30 days past due6,882 357 8,330 15,569
At least 30 but less than 60 days past due11,950- 7,829 19,779
At least 60 but less than 90 days past due4,429- 3,798 8,227
At least 90 days past due13,854 139 22,609 36,602
Total past due but not impaired37,11549642,56680,177
June 2020
Less than 30 days past due14,301 853 20,965 36,119
At least 30 but less than 60 days past due9,361- 10,863 20,224
At least 60 but less than 90 days past due8,041 47 8,280 16,368
At least 90 days past due27,098 599 31,583 59,280
Total past due but not impaired58,8011,49971,691131,991
This relates primarily to consumer lending to individuals.
Lending secured by a first ranking mortgage over a residential property used primarily for
residential purposes either by the mortgagor or a tenant of the mortgagor.
Business lending including rural lending.
The disclosures in this note are categorised by the following credit risk concentrations:
P. 50

22Asset quality (continued)
(c) Individually impaired assets
$000'sCorporateResidentialAll OtherTotal
June 2021
Opening22,7749 1,884 24,667
Additions 23,454- - 23,454
Deletions- - (466) (466)
Write offs(8,667)- (845) (9,512)
Closing gross individually impaired assets37,5619 573 38,143
Less: provision for individually impaired assets7,629- - 7,629
Total net individually impaired assets29,932957330,514
June 2020
Opening26,412- - 26,412
Additions 5,4839 1,884 7,376
Deletions(3,174)- - (3,174)
Write offs(5,947)- - (5,947)
Closing gross individually impaired assets22,7749 1,884 24,667
Less: provision for individually impaired assets5,301- - 5,301
Total net individually impaired assets17,47391,88419,366
(d) Credit risk grading
The Banking Group's finance receivables are monitored either by account behaviour (Behavioural portfolio) or a regular
assessment of their credit risk grade based on an objective review of defined risk characteristics (Judgemental portfolio).
The Judgemental portfolio consists mainly of business and rural lending where an on-going and detailed working relationship
with the customer has been developed while the Behavioural portfolio consists of consumer, retail and smaller business
receivables.
Finance receivables - reverse mortgages have no arrears characteristics and are assessed on origination against a pre-determined
criteria.
Judgemental loans are individually risk graded based on loan status, financial information, security and debt servicing ability.
Exposures in the Judgemental portfolio are credit risk graded by an internal risk grading mechanism where grade 1 is the
strongest risk. Grade 8 and grade 9 are the weakest risk grades where a loss is probable. Behavioural loans are managed based
on their arrears status.
Upon adoption of NZ IFRS 9 all loans past due but not impaired have been categorised into three impairments stages (refer Note
8 Impaired asset expense) which are in most cases based on arrears status. If a Judgemental loan is risk graded 6 or above it will
be classified as stage 2 as a minimum and carry a provision based on lifetime ECL.
P. 51

22Asset quality (continued)
(d) Credit risk grading (continued)
Lifetime
ECLLifetime
12 Months Not CreditECL Credit
$000's
ECLImpairedImpairedProvidedFair valueTotal
June 2021
Judgemental portfolio
Grade 1 - Very Strong34- - - - 34
Grade 2 - Strong10,854 64- - - 10,918
Grade 3 - Sound50,816 163- - - 50,979
Grade 4 - Adequate580,289 4,675 1,734- - 586,698
Grade 5 - Acceptable849,286 5,658 1,882- - 856,826
Grade 6 - Monitor- 58,178 1,038- - 59,216
Grade 7 - Substandard- 71,718 8,107- - 79,825
Grade 8 - Doubtful- - - 33,228- 33,228
Grade 9 - At risk of loss- - - 4,915- 4,915
Total Judgemental portfolio1,491,279 140,456 12,761 38,143- 1,682,639
Total Behavioural portfolio1,525,293 24,272 32,437- 601,505 2,183,507
Gross finance receivables3,016,572 164,728 45,198 38,143 601,505 3,866,146
Provision for impairment(24,432) (2,356) (16,631) (7,629)- (51,048)
Total finance receivables2,992,140 162,372 28,567 30,514 601,505 3,815,098
June 2020
Judgemental portfolio
Grade 1 - Very Strong28- - - - 28
Grade 2 - Strong9,323- - - - 9,323
Grade 3 - Sound65,084- 189- - 65,273
Grade 4 - Adequate509,154 5,117 4,238- - 518,509
Grade 5 - Acceptable817,190 4,613 1,938- - 823,741
Grade 6 - Monitor- 112,586 2,558- - 115,144
Grade 7 - Substandard- 27,289 17,652- - 44,941
Grade 8 - Doubtful- - - 16,025- 16,025
Grade 9 - At risk of loss- - - 8,642- 8,642
Total Judgemental portfolio1,400,779 149,605 26,575 24,667- 1,601,626
Total Behavioural portfolio1,425,194 33,655 47,154- 609,346 2,115,349
Gross finance receivables2,825,973 183,260 73,729 24,667 609,346 3,716,975
Provision for impairment(32,420) (2,167) (22,781) (5,301)- (62,669)
Total finance receivables2,793,553181,09350,94819,366609,3463,654,306
Specifically
P. 52

22Asset quality (continued)
(e) Provision for impairment
Lifetime Lifetime
12 Months Not CreditECL CreditSpecific
$000's
ECLImpairedImpairedProvision
June 2021
Corporate
18,782 829 9,702 5,301 34,614
Changes in loss allowance
Transfer between stages(2,239) (422) (936) 3,597-
Recovery of amounts written off- - (380)- (380)
Credit impairment charge(2,146) 385 48 9,631 7,918
Recovery of amounts previously written off- - 380- 380
Write offs- - (5,282) (7,303) (12,585)
Effect of changes in foreign exchange rate- - - - -
Acquisition of portfolio- - - - -
Sale of portfolio(50)- - - (50)
16,5861,2144,8487,62930,277
Residential
101(4)- 7
Changes in loss allowance
Transfer between stages(1)1- - -
Recovery of amounts written off- - - - -
Credit impairment charge783- - 81
Recovery of amounts previously written off- -
Write offs- - - - -
Effect of changes in foreign exchange rate- - - - -
Acquisition of portfolio- - - - -
Sale of portfolio- - - - -
884(4)- 88
All Other
13,628 1,337 13,083- 28,048
Changes in loss allowance
Transfer between stages(230) (663) 893- -
Recovery of amounts written off- - (2,026)- (2,026)
Credit impairment charge(3,937) (161) 10,678- 6,580
Recovery of amounts previously written off- - 2,026- 2,026
Write offs- - (14,009)- (14,009)
Effect of changes in foreign exchange rate(33)26- (25)
Acquisition of portfolio133 22 188- 343
Sale of portfolio(2,033) (62) (185)- (2,280)
7,7581,13811,787- 20,683
New and increased provision (net of collective provision
releases)
(3,707) 502 11,811- 8,606
New and increased provision (net of collective provision
releases)
792- - 81
Impairment allowance as at 30 June 2020
93 807 1,364
Impairment allowance as at 30 June 2021
6,034 8,298
Total
Impairment allowance as at 30 June 2021
Impairment allowance as at 30 June 2021
Impairment allowance as at 30 June 2020
Impairment allowance as at 30 June 2020
New and increased provision (net of collective provision
releases)
P. 53

22Asset quality (continued)
(e) Provision for impairment (continued)
Lifetime Lifetime
12 Months Not CreditECL CreditSpecific
$000's
ECLImpairedImpairedProvision
June 2021
Total
32,420 2,167 22,781 5,301 62,669
Changes in loss allowance
Transfer between stages(2,470) (1,084) (43) 3,597-
Recovery of amounts written off- - (2,406)- (2,406)
Credit impairment charge(6,005) 227 10,726 9,631 14,579
Recovery of amounts previously written off- - 2,406- 2,406
Write offs- - (19,291) (7,303) (26,594)
Effect of changes in foreign exchange rate(33)26- (25)
Acquisition of portfolio133 22 188- 343
Sale of portfolio(2,083) (62) (185)- (2,330)
24,4322,35616,6317,62951,048
Lifetime Lifetime
12 Months Not CreditECL CreditSpecific
$000's
ECLImpairedImpairedProvision
June 2020
Corporate
Impairment allowance as at 30 June 2019
21,404 670 4,532 7,863 34,469
Changes in loss allowance
Transfer between stages
(254) 61 (1,400) 1,593-
Recovery of amounts written off
- - - - -
Credit impairment charge
(2,622) 158 5,170 3,385 6,091
Recovery of amounts previously written off
- - - - -
Write offs
- - - (5,947) (5,947)
Effect of changes in foreign exchange rate
- 1- - 1
Impairment allowance as at 30 June 202018,7828299,7025,30134,614
Residential
Impairment allowance as at 30 June 2019
213 80- 104
Changes in loss allowance
Transfer between stages
44(1) (43)- -
Recovery of amounts written off
- - - - -
Credit impairment charge
(11) (2) (84)- (97)
Recovery of amounts previously written off
- - - - -
Write offs
- - - - -
Effect of changes in foreign exchange rate
- - - - -
Impairment allowance as at 30 June 2020101(4)- 7
(97)
97
New and increased provision (net of collective provision
releases)
(2,368)
Total
6,570 1,792 6,091
New and increased provision (net of collective provision
releases)
(55) (1) (41)-
New and increased provision (net of collective provision
releases)
Impairment allowance as at 30 June 2020
Impairment allowance as at 30 June 2021
Total
(3,535) 1,311 13,175 6,034 16,985
P. 54

22Asset quality (continued)
(e) Provision for impairment (continued)
Lifetime Lifetime
12 Months Not CreditECL CreditSpecific
$000's
ECLImpairedImpairedProvision
All Other
Impairment allowance as at 30 June 2019
8,997 1,108 13,813- 23,918
Changes in loss allowance
Transfer between stages
(999) (343) 1,342- -
Recovery of amounts written off
- - (2,808)- (2,808)
Credit impairment charge
4,604 1,664 17,110- 23,378
Recovery of amounts previously written off
- - 2,808- 2,808
Write offs
- (1,438) (20,658)- (22,096)
Effect of changes in foreign exchange rate
273 10- 40
Impairment allowance as at 30 June 202013,6281,33713,083- 28,048
Total
Impairment allowance as at 30 June 2019
30,422 1,781 18,425 7,863 58,491
Changes in loss allowance
Transfer between stages
(1,209) (283) (101) 1,593-
Recovery of amounts written off
- - (2,808)- (2,808)
Credit impairment charge
1,971 1,820 22,196 3,385 29,372
Recovery of amounts previously written off
- - 2,808- 2,808
Write offs
- (1,438) (20,658) (5,947) (28,043)
Effect of changes in foreign exchange rate
274 10- 41
Impairment allowance as at 30 June 202032,4202,16722,7815,30162,669
(f)
Other assets under administration
New and increased provision (net of collective provision
releases)
5,603 2,007 18,576- 26,186
Other assets under administration are any loans, not being individually impaired or 90 days or more past due, where the
customer is in any form of voluntary or involuntary administration, including receivership, liquidation, bankruptcy or statutory
management. As at 30 June 2021, the Banking Group had $0.3 million other assets under administration (2020: $0.8 million).
Total
New and increased provision (net of collective provision
releases)
3,180 2,103 25,105 1,792 32,180
P. 55

23Liquidity risk
RBNZ facilities
$000'sJune 2021June 2020
Cash and cash equivalents112,903 105,463
Investments357,157 397,005
Undrawn committed bank facilities191,850 234,415
Total liquidity661,910736,883
On 16 March 2020, as a result of COVID-19, the RBNZ announced that it would provide term funding through a Term Auction
Facility (TAF) to give banks the ability to access term funding using repurchase agreements with qualifying collateral for a term of
up to twelve months. On 10 March 2021, RBNZ announced to remove TAF and the final TAF tenders were held on 16 March
2021.
From 26 May 2020, the RBNZ also made available, for a period of 6 months, a Term Lending Facility (TLF
) to offer loans for a fixed
term of three years at the Official Cash Rate, with access to the funds linked to banks’ lending under the Business Finance
Guarantee Scheme. On 20 August 2020, RBNZ announced the change of the lending term to five years. The availability of TLF was
extended to 1 February 2021, and further extended to 28 July 2021.
Additional stimulus provided through a funding for lending programme also commenced in December 2020 designed to enable
banks to provide low-cost lending.
The Banking Group had not utilised any of these facilities as at 30 June 2021.
The Banking Group holds the following liquid assets and committed funding sources for the purpose of managing liquidity risk:
Liquidity risk is the risk that the Banking Group is unable to meet its payment obligations as they fall due. The timing mismatch of
cash flows and the related liquidity risk in all banking operations are closely monitored by the Banking Group.
Measurement of liquidity risk is designed to ensure that the Banking Group has the ability to generate or obtain sufficient cash in
a timely manner and at a reasonable price to meet its financial commitments on a daily basis.
The Banking Group’s exposure to liquidity risk is governed by the liquidity policy approved by the Board and managed by the
ALCO. This policy sets out the nature of the risk which may be taken and aggregate risk limits. The objective of the ALCO is to
derive the most appropriate strategy for the Banking Group in terms of a mix of assets and liabilities given its expectations of
future cash flows, liquidity constraints and capital adequacy to meet the requirements of the policy. The Banking Group employs
asset and liability cash flow modelling to determine appropriate liquidity and funding strategies.
In March 2020, the Bank was onboarded by the RBNZ as an approved counterparty and executed a 2011 Global Master Repo
Agreement providing an additional source for intra-day liquidity for the Banking Group if required.
P. 56

23Liquidity risk (continued)
Contractual liquidity profile of financial liabilities
On 0-6 6-12 1-2 2-55+
$000'sDemandMonthsMonthsYearsYearsYearsTotal
June 2021
Financial liabilities
Deposits974,984 1,324,902 560,232 292,091 91,107- 3,243,316
Other borrowings- 116,944 6,468 264,639 128,489- 516,540
Derivative financial liabilities- 2,499 1,564 5164- 4,583
Due to related parties- 3,210- - - - 3,210
Lease liabilities- 1,308 1,320 2,663 7,605 7,085 19,981
Other financial liabilities- 16,663- - - - 16,663
Total financial liabilities974,984 1,465,526 569,584 559,909 227,205 7,085 3,804,293
208,855- - - - - 208,855
Undrawn committed bank facilities191,850- - - - - 191,850
June 2020
Financial liabilities
Deposits 813,140 1,418,656 833,440 162,221 86,615- 3,314,072
Other borrowings- 6,228 6,126 76,964 284,462- 373,780
Derivative financial liabilities- 5,683 4,665 5,297 1,354- 16,999
Due to related parties- 7,944- - - - 7,944
Lease liabilities- 1,284 1,304 5,335 7,634 7,085 22,642
Other financial liabilities- 26,100- - - - 26,100
Total financial liabilities813,140 1,465,895 845,535 249,817 380,065 7,085 3,761,537
177,719- - - - - 177,719
Undrawn committed bank facilities234,415- - - - - 234,415
Undrawn facilities available to customers
Undrawn facilities available to customers
The contractual cash flows presented below may differ significantly from actual cash flows. This occurs as a result of future
actions by the Banking Group and its counterparties, such as early repayments or refinancing of term loans and borrowings.
Deposits and other public borrowings include customer savings deposits and transactional accounts, which are at call. These
accounts provide a stable source of long term funding for the Banking Group.
The following tables present the Banking Group's financial liabilities by relevant maturity groupings based upon contractual
maturity date. The amounts disclosed in the tables represent undiscounted future principal and interest cash flows. As a result,
the amounts in the tables below may differ to the amounts reported on the consolidated statement of financial position.
P. 57

24Interest rate risk
•
Monitoring maturity profiles and seeking to match the re-pricing of assets and liabilities;
•
Monitoring interest rates daily and regularly (at least monthly) reviewing interest rate exposures; and
•
Contractual repricing analysis
The Banking Group’s exposure to market risk is governed by a policy approved by the Board and managed by the ALCO. This
policy sets out the nature of risk which may be taken and aggregate risk limits, and the ALCO must conform to this. The objective
of the ALCO is to derive the most appropriate strategy for the Banking Group in terms of the mix of assets and liabilities given its
expectations of the future and the potential consequences of interest rate movements, liquidity constraints and capital
adequacy.
Entering into derivatives to hedge against movements in interest rates.
The objective of the Banking Group’s interest rate risk policies is to limit underlying net profit after tax (NPAT) volatility. The
measurement comprises net interest income the Banking Group generates from its interest earning assets and interest bearing
liabilities.
An analysis of the Banking Group’s sensitivity to an increase (+) or decrease (-) in market interest rates by 100 basis points (BP) is
as follows. An (+)/(-) to market interest rates of 100 BP would result in a $0.2 million (+)/(-) to NPAT (2020: $1.5 million (+)/(-))
with a corresponding impact to equity.
The Banking Group's market risk is derived primarily of exposure to interest rate risk, predominantly from raising funds through
the retail and wholesale deposit market, the debt capital markets and committed and uncommitted bank funding, securitisation
of receivables, and offering loan finance products to the commercial and consumer market in New Zealand and Australia.
The Banking Group also manages interest rate risk by:
The interest rate risk profile of financial assets and liabilities that follows has been prepared on the basis of maturity or next
repricing date, whichever is earlier.
The exposure to net interest income comes from a reduction in margins on interest earning assets or interest bearing liabilities
and is managed when setting rates by taking into consideration wholesale rates, liquidity premiums, as well as appropriate
lending credit margins.
P. 58

24Interest rate risk (continued)
Contractual repricing analysis (continued)
Non-
0-3 3-6 6-12 1-2 2+ Interest
$000'sMonthsMonthsMonthsYearsYearsBearingTotal
June 2021
Financial assets
Cash and cash equivalents112,893- - - - 10 112,903
Investments31,897 8,034 19,669 53,505 244,052 1,818 358,975
Finance receivables1,554,461 147,303 291,415 450,415 699,967 70,032 3,213,593
601,505- - - - - 601,505
- - - - - 146 146
Derivative financial assets- - - - - 14,111 14,111
Other financial assets- - - - - 1,068 1,068
Total financial assets2,300,756155,337311,084503,920944,01987,1854,302,301
Financial liabilities
Deposits1,706,735 570,068 554,340 285,025 85,077 18,277 3,219,522
Other borrowings170,364 50,837- 153,751 127,933- 502,885
Derivative financial liabilities- - - - - 4,789 4,789
Due to related parties- - - - - 3,210 3,210
Lease liabilities- - - - - 17,780 17,780
Other financial liabilities- - - - - 16,663 16,663
Total financial liabilities1,877,099620,905554,340438,776213,01060,7193,764,849
Net financial assets/(liabilities)897,667(474,591)(389,323)(20,526)497,75926,466537,452
June 2020
Financial assets
Cash and cash equivalents105,456- - - - 7 105,463
Investments43,863 18,425 52,708 59,296 222,713 2,303 399,308
Finance receivables1,522,602 198,446 352,076 557,569 400,658 13,609 3,044,960
609,346- - - - - 609,346
Due from related parties- - - - - 1,481 1,481
Derivative financial assets- - - - - 17,246 17,246
Other financial assets- - - - - 3,530 3,530
Total financial assets2,281,267216,871404,784616,865623,37138,1764,181,334
Financial liabilities
Deposits1,621,568 585,482 815,366 155,219 77,655 13,949 3,269,239
Other borrowings67,439 970- - 290,323- 358,732
Derivative financial liabilities- - - - - 16,974 16,974
Due to related parties- - - - - 7,944 7,944
Lease liabilities- - - - - 19,871 19,871
Other financial liabilities- - - - - 26,100 26,100
Total financial liabilities1,689,007586,452815,366155,219367,97884,8383,698,860
Net financial assets/(liabilities)1,150,215(420,930)(649,719)224,433225,137(46,662)482,474
The tables above illustrate the periods in which the cash flows from interest rate swaps are expected to occur and affect profit or
loss.
474,010 (9,023)
Finance receivables - reverse mortgages
- - (237,213)
Effect of derivatives held for risk
management
(146,067) (85,670) (233,250)- -
Due from related parties
Finance receivables - reverse mortgages
Effect of derivatives held for risk
management
557,955 (51,349) (239,137)(30,256)
P. 59

25Concentrations of funding
(a) Regulatory liquidity ratios
One-week mismatch ratio5.486.46
One-month mismatch ratio6.217.84
Core funding ratio92.6492.54
Ended 30 June 2021
RBNZ requires banks to get a minimum amount of funding from stable sources called core funding. From 2 April 2020, the
minimum amount of core funding was lowered from 75% to 50% of a bank’s total loans. The Banking Group must maintain its
core funding ratio above the regulatory minimum on a daily basis. The below measure of the core funding ratio is averaged over
the quarter. The RBNZ intends to increase the minimum requirement back to 75% on 1 January 2022.
Average for the 3 Months
The table above has not incorporated any recalculations as detailed on page 80 of this Disclosure Statement.
RBNZ requires banks to hold minimum amounts of liquid assets to help ensure that they are effectively managing their liquidity
risks. The mismatch ratio is a measure of a bank’s liquid assets, adjusted for contractual cash inflows and outflows during a 1-
month or 1-week period of stress. It is expressed as a ratio over the bank’s total funding. The Banking Group must maintain its 1-
month and 1-week mismatch ratios above zero on a daily basis. The below 1-month and 1-week mismatch ratios are averaged
over the quarter.
Ended 31 March 2021
Average for the 3 Months
P. 60

25Concentrations of funding (continued)
(b) Concentration of funding by industry
$000'sJune 2021June 2020
Agriculture102,107 109,268
Forestry and fishing14,226 14,901
Mining9435
Manufacturing11,592 6,976
Finance and insurance769,757 682,249
Wholesale trade11,218 10,855
Retail trade and accommodation
28,521 20,423
Households2,322,514 2,263,668
Rental, hiring and real estate services46,245 41,348
Construction24,231 19,702
Other business services58,334 63,697
Transport and storage4,337 4,552
Other 44,714 97,150
Total3,437,890 3,334,824
Unsubordinated notes 284,517 293,147
Total borrowings3,722,4073,627,971

(c) Concentration of funding by geographical area
$000'sJune 2021June 2020
New Zealand3,635,405 3,475,790
Overseas87,002 152,181
Total borrowings3,722,4073,627,971
The Australian and New Zealand Standard Industrial Classification codes have been used as the basis for categorising customer
industry sectors.
P. 61

Other Disclosures
26Significant subsidiaries
Proportion of ownership
and voting power held
Country of Incorporation
Significant Subsidiaries and Place of BusinessNature of BusinessJune 2021 June 2020
VPS Properties Limited New Zealand
Investment property holding company
100% 100%
MARAC Insurance Limited
New ZealandInsurance services100%100%
27Structured entities
(a) Heartland Cash and Term PIE Fund (Heartland PIE Fund)
$000'sJune 2021June 2020
Deposits153,244166,676
(b) Heartland Auto Receivable Warehouse Trust 2018-1 (Auto Warehouse)
$000'sJune 2021 June 2020
Cash and cash equivalents9,047 5,493
Finance receivables126,399 78,066
Other borrowings(128,125)(79,012)
A structured entity is one which has been designed such that voting or similar rights are not the dominant factor in deciding who
controls the entity. Structured entities are created to accomplish a narrow and well-defined objective such as the securitisation or
holding of particular assets, or the execution of a specific borrowing or lending transaction. Structured entities are consolidated
where the substance of the relationship is that the Banking Group controls the structured entity.
The Auto Warehouse securitises motor loan receivables as a source of funding.
The Banking Group controls the operations of the Heartland PIE Fund which is a portfolio investment entity that invests in the
Banking Group's deposits. Investments of Heartland PIE Fund are represented as follows:
The Banking Group continues to recognise the securitised assets and associated borrowings in the consolidated statement of
financial position as the Banking Group remains exposed to and has the ability to affect variable returns from those assets and
liabilities. Although the Banking Group recognises those interests in Auto Warehouse, the loans sold to the Trust are set aside for
the benefit of investors in Auto Warehouse and other depositors and lenders to the Banking Group have no recourse to those
assets.
P. 62

28Capital adequacy
•
•
•
•
•
•
•
Internal Capital Adequacy Assessment Process (ICAAP)
The level of capital required to be held by Banks increased through the introduction of new minimum capital requirements for
CET1 Capital, Additional Tier 1 (AT1) Capital and Total Capital as a percentage of risk-weighted-assets (RWAs).
A capital conservation buffer held over and above the minimum capital ratio requirements used to absorb losses during
periods of financial and economic stress.
A counter-cyclical capital buffer held and to be used at the RBNZ’s discretion, to assist in attaining the macro-prudential goal of
protecting the Banking sector from periods of extraordinary excess aggregate credit growth.
Strengthen the calculation of RWAs, particularly in respect of counterparty credit risk.
The capital adequacy tables set out on the following pages summarise the composition of regulatory capital and the capital
adequacy ratios for the Banking Group as at 30 June 2021.
The Banking Group has an ICAAP which complies with the requirements set out in the "Guidelines on a Bank's Internal Capital
Adequacy Assessment Process (ICAAP)" BS12 and is in accordance with its Conditions of Registration.
The Board has overall responsibility for ensuring the Banking Group has adequate capital in relation to its risk profile and
establishes minimum internal capital levels and limits above the regulatory minimum. The Banking Group has established a Capital
Management Policy (CMP) to determine minimum capital levels for Tier 1 and Total capital under Basel III and in accordance with
its Conditions of Registration. The documented process ensures that the Banking Group has sufficient available capital to meet
minimum capital requirements, even in stressed events. It describes the risk profile of the Banking Group and the risk appetite and
tolerances under which it operates, and assesses the level of capital held against the material risks of the Banking Group (both
Pillar 1 and Pillar 2).
The ICAAP identifies the capital required to be held against other material risks, being strategic / business risk, reputational risk,
regulatory risk and additional credit risk.
Compliance with minimum capital levels is monitored by the ALCO and reported to the Board. The ICAAP and CMP is reviewed
annually by the Board.
The Basel III requirements have not effected the Banking Group's minimum capital requirements as the Banking Group’s
Conditions of Registration prescribe minimum capital requirements higher than the Basel III requirements.
The Banking Group’s Conditions of Registration prescribes minimum capital adequacy ratios calculated in accordance with the
Capital Adequacy Framework (Standardised Approach) BS2A (BS2A).
The Banking Group has adopted the Basel II standardised approach per RBNZ BS2A to calculate its regulatory requirements. Basel II
is made up of the following three Pillars:
The Banking Group is subject to regulation by the Reserve Bank of New Zealand. The RBNZ has set minimum regulatory capital
requirements for Banks that are consistent with the internationally agreed framework developed by the Basel Committee on
Banking Supervision. The resulting Basel II and III requirements define what is acceptable as capital and provide for methods of
measuring the risks incurred by the Banking Group.
Pillar 3 outlines the requirements for adequate and transparent disclosure.
Basel III was developed in order to strengthen the regulation, supervision and risk management of the Banking sector. The
measures aim to improve the Banking sector's ability to absorb shocks arising from financial and economic stress; improve risk
management and governance; and strengthen Banks' transparency and disclosures. The requirements that impact capital are as
follows:
Pillar 1 sets out the minimum capital requirements for credit, market and operational and compliance risks.
Pillar 2 is designed to ensure that Banks have adequate capital to support all risks (not just those set out under Pillar 1 above)
and is enforced through the requirement for supervisory review.
P. 63

28Capital adequacy (continued)
•
The quantum of the capital requirement;
•
That some of the capital requirement may be satisfied through hybrid capital instruments rather than common equity;
•
The length of the transitional period;
•
The Bank’s existing capital position.
(a) Capital
$000'sJune 2021
Tier 1 Capital
CET1 capital
Paid-up ordinary shares issued by the Banking Group plus related share premium553,239
Retained earnings (net of appropriations)87,834
Accumulated other comprehensive income and other disclosed reserves755
Less deductions from CET1 capital
Intangible assets(52,786)
Deferred tax assets(12,251)
Hedging reserve(906)
Defined benefit superannuation fund assets(716)
Reverse mortgage loan greater than value of security(57)
Adjustment under the corresponding deduction approach(60)
Total CET1 capital575,052
AT1 capital-
Total Tier 1 capital575,052
Tier 2 capital-
-
575,052
New requirements (not yet effective)
Total Tier 2 capital
As a result of the impacts of COVID-19 and to support the availability of credit, the RBNZ announced in March 2020 that it has
made the decision to delay the start date of increased capital requirements for banks by 12 months to 1 July 2021. Should
conditions warrant , the RBNZ will reassess whether further delays are necessary.
RBNZ capital review
The RBNZ released a consultation paper in December 2018 in relation to proposed changes to the Capital Adequacy Framework for
Registered Banks in New Zealand (the Framework). On 5 December 2019, the RBNZ released its final decision on the revised
Framework.
The revised Framework requires the Bank, as a standardised registered bank, to increase its Total Capital ratio to 16% over a seven-
year transitional period. The Bank's Total Capital ratio was 12.56% as at 31 December 2019. This means the revised Framework
requires the Bank to increase its Total Capital ratio by 3.44% over the transitional period.
The Bank does not expect the revised Framework to result in any changes to the underlying business model or its approach to
raising equity, given:
The corporate structure of HGH, the ultimate parent company provides the Banking Group with flexibility to mitigate the impact of
the revised Framework. Various capital raising options available include using HGH’s dividend reinvestment plan, or raise debt and
use the proceeds to subscribe for new capital in the Bank.
The Bank will continue to assess the options available to it to meet the requirements of the revised Framework over the
transitional period.
Banking Prudential Requirements (BPRs) are a replacement of the Banking Supervision Handbook and will take effect from 1
October 2021. The Bank is currently assessing the impact.
Total capital
P. 64

28Capital adequacy (continued)
(b) Capital structure
Ordinary shares
Retained earnings
Reserves classified as CET1 capital
Fair value reserve
Defined benefit reserve
Cash flow hedge reserve
The defined benefit reserve represents the excess of the fair value of the assets of the defined
benefit superannuation plan over the net present value of the defined benefit obligations.
The hedging reserve comprises the fair value gains and losses associated with the effective portion
of designated cash flow hedging instruments.
The debt instrument fair value reserve comprises the changes in the fair value of investments, net
of tax.
InaccordancewithBS2A,ordinarysharecapitalisclassifiedasCET1 capital.Theordinaryshareshavenoparvalue.Eachordinary
shareoftheBankcarriestherighttovoteonapollatmeetingsofshareholders,therighttoanequalshareindividendsauthorised
by the Board and the right to an equal share in the distribution of the surplus assets of the Bank in the event of liquidation.
Retained earnings is the accumulated profit or loss that has been retained in the Banking Group. Retained earnings is classified as
CET1 capital.
ThefollowingdetailssummariseeachinstrumentincludedwithinTotalCapital.Noneoftheseinstrumentsaresubjecttophase-out
from eligibility as capital under the RBNZ's Basel III transitional arrangements.
P. 65

28Capital adequacy (continued)
(c) Credit risk
On balance sheet exposures
Total
ExposureMinimum
After CreditAverageRisk Pillar 1
RiskRiskWeightedCapital
MitigationWeightExposureRequirement
$000's%$000's
$000's
June 2021
Cash- 0%- -
Sovereigns and central banks1,4760%- -
Multilateral development banks187,9170%- -
Multilateral development banks71,125 20% 14,225 1,138
Banks - Tier 1- 20%- -
Banks - Tier 2185,237 50% 92,618 7,409
Banks - Tier 313,157 100% 13,157 1,053
Public sector entity (AA- and above)14,384 20% 2,877230
Public sector entity (A- and above)- 50%- -
Public sector entity (BBB+, BBB, BBB-)- 100%- -
Corporates (AA- and above)- 20%- -
Corporates (A- and above)- 50%- -
Corporates (BBB- and above)- 100%- -
Corporates other60,450 20% 12,090967
Corporates other1,663,590 100% 1,663,590 133,087
Welcome Home Loans - loan to value ratio (LVR) <= 80%
1
1,81535%63551
Welcome Home Loans - loan to value ratio (LVR) <= 90%
1
- 35%- -
Welcome Home Loans - LVR 90% >= 100%
1
- 50%- -
Welcome Home Loans - LVR > 100%
1
- 100%- -
Reverse Residential mortgages <= 60% LVR592,913 50% 296,457 23,717
Reverse Residential mortgages 60 <= 80% LVR6,726 80% 5,380430
Reverse Residential mortgages > 80% LVR1,665 100% 1,665133
Reverse Residential mortgages > 100% LVR144 100% 14412
Non Property Investment Mortgage Loan <=80% LVR55,455 35% 19,409 1,553
Non Property Investment Mortgage Loan 80 <= 90% LVR1,656 50% 82866
Non Property Investment Mortgage Loan 90 <= 100% LVR- 75%- -
Non Property Investment Mortgage Loan > 100% LVR- 100%- -
Property Investment Mortgage Loan <= 80% LVR3,373 40% 1,349108
Property Investment Mortgage Loan 80 <= 90% LVR- 70%- -
Property Investment Mortgage Loan 90 <= 100% LVR
- 90%- -
Property Investment Mortgage Loan < 100% LVR
- 100%- -
Past due residential mortgages
148 100% 14812
Other past due assets - provision >= 20%22,292 100% 22,292 1,783
Other past due assets - provision < 20%33,688 150% 50,532 4,043
Equity holdings- 300%- -
All other equity holdings1,803 400% 7,212577
Other assets1,422,253 100% 1,422,253 113,780
Not risk weighted assets65,8690%- -
Total on balance sheet exposures4,407,1363,626,861 290,149
1
The LVR classification above is calculated in line with the Bank’s Pillar 1 Capital requirement which includes relief for Welcome Home loans that are guaranteed
by the Crown.
P. 66

28Capital adequacy (continued)
(c) Credit risk (continued)
Minimum
CreditCreditAverageRiskPillar 1
TotalConversionEquivalentRiskWeightedCapital
ExposureFactorAmountWeightExposureRequirement
$000's%$000's%$000's$000's
5,890 100% 5,890 100% 5,890471
7,594 50% 3,797 100% 3,797304
Interest rate contracts1,104,012n/a 13,432 40% 5,338427
FX forward contracts28,106n/a 55 20%111
Credit valuation adjustment- - 4,481358
Total off balance sheet exposures1,373,540129,609115,611 9,248
1
The credit equivalent amount for market related contracts was calculated using the current exposure method.
(d) Additional mortgage information - LVR range
On BalanceOff Balance
Sheet Sheet Total
$000's
Exposures
Exposures
2
Exposures
June 2021
Does not exceed 80%660,280 22,652 682,932
Exceeds 80% and not 90%2,637- 2,637
Exceeds 90%1,034- 1,034
Total exposures663,951 22,652 686,603
Off balance sheet exposures
At 30 June 2021, there were no Welcome Home loans whose credit risk is mitigated by the Crown included in “Exceeds 90%
residential mortgages”. Other loans in the exceeds 90% LVR range is primarily business and rural lending where residential
mortgage security is only a part of the total security. For capital adequacy calculations only the value of the first mortgages over
residential property is included in the LVR calculation, in accordance with BS2A. All new residential mortgages in respect of non-
property investments lending have a loan-to-valuation ratio of less than or equal to 80%.
Market related contracts
1
49239
Other commitments where original maturity is less
than or equal to one year
June 2021
2,461
Direct credit substitute
Performance-related contingency
20% 492 100%
Other commitments where original maturity is
more than one year
Other commitments where original maturity is
more than one year
177,975 50% 88,988 100% 88,988 7,119
24,850 50% 12,425 35% 4,349348
2
Off balance sheet exposures means unutilised limits.
Other commitments where original maturity is less
than or equal to one year
22,652 20% 4,530 50% 2,265181
P. 67

28Capital adequacy (continued)
(e) Reconciliation of mortgage related amounts

$000'sNote June 2021
Gross finance receivables - reverse mortgages12b601,505
Loans and advances - loans with residential mortgages62,534
On balance sheet residential mortgage exposures subject to the standardised approach22a664,039
Less: collective provision for impairment(88)
Off balance sheet mortgage exposures subject to the standardised approach28d22,652
Total residential exposures subject to the standardised approach686,603
(f) Credit risk mitigation
(g) Operational risk
$000's
June 2021
Operational risk272,08021,766
(h) Market risk
$000's
June 2021
Market risk end-of-period capital chargeEquity rate risk only1,803144
Market risk peak end-of-day capital charge Equity rate risk only1,803144
Market risk end-of-period capital chargeInterest rate risk only125,84410,068
Market risk peak end-of-day capital charge Interest rate risk only130,15010,412
Market risk end-of-period capital chargeForeign currency risk only867
Market risk peak end-of-day capital chargeForeign currency risk only5,312425
Operational risk is calculated based on the previous 12 quarters of the Banking Group.
Market risk is the risk that market interest rates or foreign exchange rates will change and impact on the Banking Group’s earnings
due to either mismatches between repricing dates of interest bearing assets and liabilities and/or differences between customer
pricing and wholesale rates.
The Banking Group’s aggregate market exposure is derived in accordance with BS2A. Peak end-of-day capital charge disclosure is
derived by taking the highest month end market exposure over the six months ended 30 June 2021. Interest rate risk, foreign
exchange risk and equity risk are calculated monthly using the month end position. The Banking Group is currently investigating
the impact a daily aggregate market risk exposure would have on its ratios for future reporting periods.
Implied Risk
Weighted Exposure
Total Operational Risk
Capital Requirement
Implied Risk
Weighted Exposure
Aggregate
Capital Charge
As at 30 June 2021 the Banking Group had $1.8 million of Welcome Home Loans, whose credit risk was mitigated by the Crown.
Other than this the Banking Group does not have any exposures covered by eligible collateral, guarantees and credit derivatives.
P. 68

28Capital adequacy (continued)
(i) Total capital requirements
$000's
June 2021
Total credit risk
On balance sheet4,407,1363,626,861290,149
Off balance sheet1,373,540115,6119,248
Operational riskn/a272,08021,766
Market riskn/a127,73310,219
Total5,780,6764,142,285331,382
(j) Capital ratios
%June 2021 June 2020
Capital ratios compared to minimum ratio requirements
Common Equity Tier 1 Capital expressed as a percentage of total risk weighted exposures13.88% 12.67%
Minimum Common Equity Tier 1 Capital as per Conditions of Registration4.50% 4.50%
Tier 1 Capital expressed as a percentage of total risk weighted exposures13.88% 12.67%
Minimum Tier 1 Capital as per Conditions of Registration6.00% 6.00%
Total Capital expressed as a percentage of total risk weighted exposures13.88% 12.67%
Minimum Total Capital as per Conditions of Registration8.00% 8.00%
Buffer ratio
Buffer ratio5.88% 4.67%
Buffer ratio requirement2.50% 2.50%
(k) Solo capital adequacy
%June 2021June 2020
Capital ratios compared to minimum ratio requirements
Common Equity Tier 1 Capital expressed as a percentage of total risk weighted exposures14.24% 12.81%
Tier 1 Capital expressed as a percentage of total risk weighted exposures14.24% 12.81%
Total Capital expressed as a percentage of total risk weighted exposures14.24% 12.81%
(l) Capital for other material risks
Total Exposure After
Credit Risk Mitigation
Risk Weighted Exposure
or Implied Risk
Weighted ExposureTotal Capital Requirement
In addition to the material risks included in the calculation of the capital ratios, the Banking Group has identified other material
risks to be included in the capital allocation (being strategic risk, securitisation risk, liquidity and funding risk, and additional market
and operational risk). As at 30 June 2021, the Banking Group has made an internal capital allocation of $8.9 million to cover these
risks (2020: $23.2 million).
For the purposes of calculating capital adequacy on a solo basis, subsidiaries which are both wholly owned and wholly funded by
the Bank are to be consolidated with the Bank.
P. 69

29Insurance business, securitisation, funds management, other fiduciary activities
Marketing and distribution of the insurance products
Securitisation
Funds management and other fiduciary activities
Risk management
Provision of financial services and asset purchases
Any assets purchased from such entities have been purchased on arm's length terms and conditions and at fair value.
Pre February 2020's distribution agreement with DPL, the Banking Group marketed and distributed term life insurance and general
insurance covering risks such as redundancy, bankruptcy or suspension of employment. The insurance products were either
underwritten by MIL, a subsidiary of the Banking Group, or sold by MIL on behalf of other parties who underwrite those products
themselves.
As at 30 June 2021, the Banking Group had $126.40 million securitised assets (2020: $78.07 million).
Insurance business
MARAC Insurance Limited (MIL), a subsidiary of HBL, no longer conducts insurance business as HBL entered into a distribution
agreement with DPL Insurance Limited (DPL) to distribute DPL’s insurance products through HBL's network. MIL stopped writing
insurance policies in the prior year with the last policies expected to expire in 2025.
The Banking Group's aggregate amount of insurance business comprises the total consolidated assets of MIL of $8.5 million (2020:
$10.9 million), which represents 0.19% of the total consolidated assets of the Banking Group (2020: 0.25%).
There have been no material changes to the Banking Group's involvement in the securitisation activities.
The Banking Group, through Heartland PIE Fund Limited, controls, manages and administers the Heartland Cash and Term PIE Fund
and its products (Heartland Call PIE and Heartland Term Deposit PIE). Note 27 - Structured entities has further details. The
Heartland Cash and Term PIE Fund deals with the Bank in the normal course of business, in the Bank's capacity as Registrar of the
Fund and also invests in the Bank's deposits. The Banking Group is considered to control the Heartland Cash and Term PIE Fund,
and as such the Heartland Cash and Term PIE Fund is consolidated within the financial statements of the Banking Group.
Heartland NZ Trustee Limited (HNZT), a subsidiary of the Bank, acts as manager for a superannuation scheme. The assets and
liabilities of this scheme are not included in the financial statements of the Banking Group as the Banking Group does not control
the scheme. The Bank provides services to HNZT and its fees for performance of those services are included in other income.
The Banking Group has in place policies and procedures to ensure that the fiduciary activities identified above are conducted in an
appropriate manner. It is considered that these policies and procedures will ensure that any difficulties arising from these activities
will not impact adversely on the Banking Group. The policies and procedures include comprehensive and prominent disclosure of
information regarding products, and formal and regular review of operations and policies by management and internal and
external auditors. Further information on the Banking Group's risk management policies and practices is included in Note 20 -
Enterprise risk management program.
Over the accounting period, financial services provided by the Banking Group to entities which were involved in the activities
above (including trust, custodial, funds management and other fiduciary activities) were provided on arm's length terms and
conditions and at fair value.
P. 70

29Insurance business, securitisation, funds management, other fiduciary activities (continued)
Peak aggregate funding to entities
June 2021 June 2020
Peak end-of-day aggregate amount of funding provided ($000's)
110,000 76,846
19.1%
14.5%
June 2021 June 2020
110,000 76,846
86.5%
98.3%
30Contingent liabilities and commitments
$000'sJune 2021 June 2020
Letters of credit, guarantee commitments and performance bonds13,484 6,515
Total contingent liabilities13,484 6,515
Undrawn facilities available to customers208,855 177,719
Conditional commitments to fund at future dates19,083 58,045
Total commitments227,939 235,764
31
Events after the reporting date
On Tuesday 17 August 2021 the New Zealand Government, in response to a community outbreak of the Delta COVID variant,
placed New Zealand into an immediate Level 4 lockdown. The Directors have considered the impact of this, on the reported
performance of the Banking Group, and consider the reported performance has adequately allowed for the potential impact of
COVID at this time, and that the current lockdown does not affect the reported result for the 12 months ended 30 June 2021.
There were no other events subsequent to the reporting period which would materially affect the consolidated financial
statements.
The Banking Group in the ordinary course of business will be subject to claims and proceedings against it whereby the validity of
the claim will only be confirmed by uncertain future events. In such circumstances the contingent liabilities are possible
obligations, or present obligations if known, where the transfer of economic benefit is uncertain or cannot be reliable measured.
Contingent liabilities are not recognised, but are disclosed, unless they are remote. Where some loss is probable, provisions have
been made on a case by case basis.
Peak end-of-day aggregate amount of funding provided as a percentage of the total
assets of the individual entity as at the end of the year (%)
Peak end-of-day aggregate amount of funding provided ($000's)
Contingent liabilities and credit related commitments arising in respect of the Banking Group's operations were:
For this purpose, peak ratio information was derived by determining the maximum end-of-day aggregate amount of funding and
then dividing that amount by the amount of the entity's assets or the Banking Group's Tier 1 Capital (as the case required) as at the
end of the year.
For this purpose, peak ratio information was derived by determining the maximum end-of-day aggregate amount of funding over
the financial year and then dividing that amount by the amount of the entity's assets or the Banking Group's Tier 1 Capital (as the
case required) as at the end of the year.
Auto Warehouse
The Banking Group did not provide any funding to entities conducting funds management and other fiduciary activities, or
insurance product or marketing and distribution activities described in this note, during the year (2020: nil).
Total Trusts
The Bank provided the following funding in relation to securitisation entities.
Peak end-of-day aggregate amount of funding provided as a percentage of the Banking
Group's Tier 1 Capital as at the end of the year (%)
P. 71

Historical Summary of Financial Statements
For the year ended 30 June 2021
AuditedAuditedAuditedAuditedAudited
$000'sJune 2021June 2020June 2019June 2018June 2017
Interest income272,562 297,512 284,064 272,323 278,279
Interest expense73,753 108,476 111,665 108,737 115,169
Net interest income198,809189,036172,399163,586163,110
Other net income15,006 15,742 9,409 12,683 8,142
Net operating income213,815204,778181,808176,269171,252
Employee benefits- - - - 41,547
Operating expenses100,852 90,782 76,298 76,291 30,137
Profit before impaired asset expense and income tax112,963113,996105,51099,97899,568
Fair value gain on investments215- 1,936- -
Impaired asset expense14,579 29,372 20,554 21,833 15,015
Profit before income tax98,59984,62486,89278,14584,553
- - 6,169 16,149-
Income tax expense27,090 23,924 24,762 26,781 23,745
Profit for the year71,50960,70068,29967,51360,808
(5,646) 766 2,968 981 (353)
Movement in foreign currency translation reserve- - (4,229) 2,315 761
Items that will not be reclassified to profit or loss, net of income tax:
Movement in defined benefit reserve- - (86) 340 (84)
Other comprehensive income/(loss) for the year, net of income tax 3,282 (1,413) (6,109) 3,708 1,432
Total comprehensive income for the year
74,79159,28762,19071,22162,240
Dividends paid to equity holders30,00065,000112,04247,89541,977
As at 30 June 2021
AuditedAuditedAuditedAuditedAudited
$000'sJune 2021June 2020June 2019June 2018June 2017
Total assets4,419,4884,314,5594,143,8284,496,8494,034,671
Individually impaired assets38,14324,66726,41245,18632,084
Total liabilities3,777,6603,717,5223,540,4383,832,6893,465,076
Total equity
641,828597,037603,390664,160569,595
Profit before income tax from discontinued operations
Other comprehensive income
Movement in fair value reserve
Items that are or may be reclassified subsequently to profit or loss,
net of income tax:
Effective portion of change in fair value of derivative financial
instruments
8,928 (2,179) (4,762) 72 1,108
P.72

Amendment to Conditions of Registration
•
•
•
•
Conditions of Registration
1. That—
(a)
the Total capital ratio of the banking group is not less than 8%;
(b)
the Tier 1 capital ratio of the banking group is not less than 6%;
(c)
the Common Equity Tier 1 capital ratio of the banking group is not less than 4.5%;
(d)
the Total capital of the Banking Group is not less than $30 million;
(e)
(f)
For the purposes of this condition of registration, -
“Total capital ratio”, “Tier 1 capital ratio”, and “Common Equity Tier 1 capital ratio” have the same meaning as in Part 3 of the
Reserve Bank of New Zealand document“Capital Adequacy Framework (Standardised Approach)” (BS2A) dated November
2015;
“Total capital” has the same meaning as in Part 2 of the Reserve Bank of New Zealand document “Capital Adequacy Framework
(Standardised Approach)” (BS2A) dated November 2015;
an Additional Tier 1 capital instrument is an instrument that meets the requirements of subsection 8(2)(a) or (c) of the Reserve
Bank of New Zealand document “Capital Adequacy Framework (Standardised Approach)” (BS2A) dated November 2015;
a Tier 2 capital instrument is an instrument thatmeets the requirements ofsubsection 9(2)(a) or (c)ofthe Reserve Bank ofNew
Zealand document “Capital Adequacy Framework (Standardised Approach)” (BS2A) dated November 2015.
Changes to conditions of registration
These conditions apply on and after 29 April 2021, except as provided otherwise.
The registration of Heartland Bank Limited ("the bank") as a registered Bank is subject to the following conditions:
the bank must not include the amount of an Additional Tier 1 capital instrument or Tier 2 capital instrument issued after 1
January2013 inthecalculationofitscapitalratiosunlessithasreceivedanoticeofnon-objectiontotheinstrumentfrom the
Reserve Bank; and
the bank meets the requirements of Part 3 of the Reserve Bank of New Zealand document "Application requirements for capital
recognition or repayment and notification requirements in respect of capital" (BS16) dated November 2015 in respect of
regulatory capital instruments.
With effect from 1 May 2021, LVR restrictions for owner-occupied remains at a maximum of 20% of new lending at LVRs
above 80%(after exemptions); and LVR restrictions for investors were further tightened to 5% of new lending above 60%
after exemption.
With effect from 29 April 2021, the dividend restrictions placed on locally incorporated banks at the height of the COVID-
19 pandemic were eased to allow banks to par up to a maximum of 50% of their earnings as dividends to shareholders. The
50% dividend restriction will remain in place until 1 July 2022.
With effect from 1 March 2021, restrictions on the Banks new residential mortgage lending at high loan -to value (LVR
ratios have been reinstated. LVR restrictions for owner -occupiers have been reinstated to a maximum of 20% of new
lending at LVRs above 80% (after exemption); and LVR restrictions for investors have been reinstated to a maximum of 5%
of new lending at LVRs above 70% (after exemption).
With effect from 1 May 2021, the Reserve Banks Liquidity Policy Annex: Liquid Assets raised residential mortgage securities
eligibility to 5% of total assets for lower level asset encumbrance, but constrained eligibility of RMBS at higher levels
encumbrance.
P. 73

Conditions of Registration (continued)
1A. That—
(a)
(b)
(c)
1B. That, if the buffer ratio of the banking group is 2.5% or less, the bank must:
(a)
(b)
(c)
For the purposes of this condition of registration, -
1C.
2.
3.
>1.25% - 1.875%40%
underitsICAAPthebankidentifiesandmeasuresits“othermaterialrisks”definedasallmaterialrisksofthebankinggroupthat
are not explicitly captured in the calculation of the Common Equity Tier 1 capital ratio, the Tier 1 capital ratio and the Total
capitalratio under therequirements setoutinthedocument“Capital AdequacyFramework (Standardised Approach)”(BS2A)
dated November 2015; and
the bank determines an internal capital allocation for each identified and measured “other material risk”.
accordingtothefollowingtable,limittheaggregatedistributionsofthebank’searnings tothepercentagelimitondistributions
that corresponds to the banking group’s buffer ratio:
Banking group's buffer ratioPercentage limit to distributions of the banks' earnings
For the purposes of this condition of registration,—
the bank has an internal capital adequacy assessment process (“ICAAP”) that accords with the requirements set out in the
document “Guidelines on a bank’s internal capital adequacy assessment process (‘ICAAP’)” (BS12) dated December 2007;
0% - 0.625%0%
>0.625% - 1.25%20%
the bank must not make any individual dividend payment contributing to aggregate distributions for a financial year until it has
completed its interim financial accounts for the first six months of its financial year or its annual financial accounts for its full
financial year, and must not make any such dividend payment less than six months after any previous such dividend payment.
That the banking group does not conduct any non-financial activities that in aggregate are material relative to its total activities.
In this condition of registration, the meaning of “material” is based on generally accepted accounting practice.
>1.875% - 2.5%50%
prepare a capital plan to restore the banking group's buffer ratio to above 2.5% within any timeframe determined by the
Reserve Bank for restoring the buffer ratio; and
have the capital plan approved by the Reserve Bank.
“bufferratio”,“distributions”,and“earnings”havethesamemeaningasinPart3oftheReserveBankofNewZealanddocument:
“Capital Adequacy Framework (Standardised Approach)” (BS2A) dated November 2015.
That, if the buffer ratio of the banking group is more than 2.5%, the bank must limit aggregate distributions, other than
discretionary payments payable to holders of Additional Tier 1 capital instruments, to no more than 50% of the bank’s
earnings.
an Additional Tier 1 capital instrument is an instrument that meets the requirements of subsection 8.2(a) or (c) of the Reserve Bank
of New Zealand document “Capital Adequacy Framework (Standardised Approach)” (BS2A) dated November 2015;
“buffer ratio”, “distributions” and “earnings” have the same meaning as in Part 3 of the Reserve Bank of New Zealand document:
“Capital Adequacy Framework (Standardised Approach)” (BS2A) dated November 2015.
That the banking group’s insurance business is not greater than 1% of its total consolidated assets.
For thepurposes ofthisconditionofregistration, the banking group’sinsurancebusinessisthesumofthefollowing amountsfor
entities in the banking group:
P. 74

Conditions of Registration (continued)
(a)
(b)
(a)
(b)
4.
5.
6.
(a)
(b)
(c)
(d)
(i)
(ii)
1
ifproducts or assetsofwhichaninsurance businessiscomprisedalsocontainanon-insurancecomponent,thewhole ofsuch
products or assets must be considered part of the insurance business.
For the purposes of this condition of registration,—
"insurance business" means the undertaking or assumption of liability as an insurer under a contract of insurance:
“insurer” and “contract of insurance” have the same meaning as provided in sections 6 and 7 of the Insurance (Prudential
Supervision) Act 2010.
That aggregate credit exposures (of a non-capital nature and net of any allowances for impairment) of the banking group to all
connected persons do not exceed the rating-contingent limit outlined in the following matrix:
Credit rating of the bank
1
Connected exposure limit (% of the banking group’s Tier 1
capital)
if the business of an entity predominantly consists of insurance business and the entity is not a subsidiary of another entity in
the banking group whose business predominantly consists of insurance business, the amount of the insurance business to sum
is the total consolidated assets of the banking group headed by the entity; and
iftheentityconductsinsurancebusinessanditsbusinessdoesnotpredominantlyconsistofinsurancebusinessandtheentityis
not a subsidiary of another entity in the banking group whose business predominantly consists of insurance business, the
amount of the insurance business to sum is the total liabilities relating to the entity’s insurance business plus the equity
retained by the entity to meet the solvency or financial soundness needs of its insurance business.
In determining the total amount of the banking group’s insurance business—
all amounts must relate to on balance sheet items only, and must comply with generally accepted accounting practice; and
A/A240
A-/A330
BBB+/Baa1 and below15
AA/Aa2 and above75
AA-/Aa370
A+/A160
at least half of the board members must be independent directors;
an alternate director,—
for a non-executive director must be non-executive; and
for an independent director must be independent;
Withintherating-contingentlimit,creditexposures(ofanon-capitalnatureandnetofanyallowancesforimpairment)tonon-bank
connected persons shall not exceed 15% of the banking group’s Tier 1 capital.
Forthepurposesofthisconditionofregistration,compliancewiththerating-contingentconnectedexposurelimitisdeterminedin
accordance with the Reserve Bank of New Zealand document entitled “Connected exposures policy” (BS8) dated November 2015.
That exposures to connected persons are not on more favourable terms (e.g. as relates to such matters as credit assessment,
tenor, interest rates, amortisation schedules and requirement for collateral) than corresponding exposures to non-connected
persons.
That the bank complies with the following corporate governance requirements:
the board of the bank must have at least five directors;
the majority of the board members must be non-executive directors;
This table uses the rating scales of Standard & Poor's, Fitch Ratings and Moody's Investor Service. (Fitch Ratings' scale is identical to Standard & Poor's.)
P. 75

Conditions of Registration (continued)
(e)
(f)
(g)
(a)
(b)
(i)
(ii)
7.
(a)
(b)
8.
(a)
(b)
9.
(a)
(b)
(c)
(d)
(e)
at least half of the independent directors of the bank must be ordinarily resident in New Zealand;
the chairperson of the board of the bank must be independent; and
doesnotraiseanygroundsofconcerninrelationtotheperson’sindependencethatarecommunicatedinwriting tothe
bank by the Reserve Bank of New Zealand:
“non-executive”hasthesamemeaningasintheReserveBankofNewZealanddocumententitled“Corporate Governance”(BS14)
dated July 2014.
That no appointment of any director, chief executive officer, or executive who reports or is accountable directly to the chief
executive officer, is made in respect of the bank unless:
the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and
the Reserve Bank has advised that it has no objection to that appointment.
thebank’sconstitutionmustnotincludeanyprovisionpermittingadirector,whenexercisingpowersorperformingdutiesasa
director, to act other than in what he or she believes is the best interests of the company (i.e. the bank).
For the purposes of this condition of registration,—
“independent,”—
in relation to a person other than a person to whom paragraph (b) applies, has the same meaning asin the Reserve Bank of
New Zealand document entitled “Corporate Governance” (BS14) dated July 2014; and
in relation to a person who is the chairperson of the board of the bank, means a person who—
meets the criteria for independence set out in section 10 except for those in paragraph 10(1)(a) in BS14; and
every member of the committee must be a non-executive director of the bank;
the majority of the members of the committee must be independent; and
the chairperson of the committee must be independent and must not be the chairperson of the bank.
For the purposes of this condition of registration, “independent” and “non-executive” have the same meanings as in condition of
registration 6.
That a person must not be appointed as chairperson of the board of the bank unless:
the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and
the Reserve Bank has advised that it has no objection to that appointment.
That the bank has a board audit committee, or other separate board committee covering audit matters, that meets the following
requirements:
the mandate of the committee must include: ensuring the integrity of the bank’s financial controls, reporting systems and
internal audit standards;
the committee must have at least three members;
P. 76

Conditions of Registration (continued)
10.
11.
(a)
(b)
(c)
11A.
(a)
(b)
(c)
12.
(a)
(b)
(c)
(d)
That a substantial proportion of the Bank’s business is conducted in and from New Zealand.
Before and on 30 April 2021, that the banking group complies with the following quantitative requirements for liquidity-risk
management:
the one-month mismatch ratio of the banking group is not less than zero percent at the end of each business day; and
the one-year core funding ratio of the banking group is not less than 50 percent at the end of each business day.
For thepurposes ofthisconditionofregistration, theratios identifiedmustbecalculatedinaccordance withtheReserve Bankof
New Zealand documents entitled “Liquidity Policy” (BS13) dated May 2021 and “Liquidity Policy Annex: Liquid Assets” (BS13A)
dated May 2021.
Thatthebankhasaninternalframeworkforliquidityriskmanagementthatisadequateinthebank’sviewformanagingthebank’s
liquidity risk at a prudent level, and that, in particular:
is clearly documented and communicated to all those in the organisation with responsibility for managing liquidity and liquidity
risk;
identifies responsibility for approval, oversight and implementation of the framework and policies for liquidity risk
management;
the one-week mismatch ratio of the banking group is not less than zero per cent at the end of each business day;
the one-month mismatch ratio of the banking group is not less than zero per cent at the end of each business day; and
the one-year core funding ratio of the banking group is not less than 50 per cent at the end of each business day.
For the purposes of this condition of registration, the ratios identified must be calculated in accordance with the Reserve Bank
of New Zealand documents entitled “Liquidity Policy” (BS13) dated January 2018 and “Liquidity Policy Annex: Liquid Assets”
(BS13A) dated October 2018.
the one-week mismatch ratio of the banking group is not less than zero percent at the end of each business day;
On and after 1 May 2021, that the banking group complies with the following quantitative requirements for liquidity-risk
management:
identifies the principal methods that the bank will use for measuring, monitoring and controlling liquidity risk; and
considers the material sources of stress that the bank might face, and prepares the bank to manage stress through a
contingency funding plan.
P. 77

Conditions of Registration (continued)
13.
(a)
(b)
(c)
14. That—
(a)
(i)
(ii)
(b)
(i)
(ii)
(iii)
15.
(a)
(i)
(ii)
(b)
(c)
(d)
(e)
(f)
to whom any member of the banking group has sold, assigned, or otherwise transferred any asset;
who has granted, or may grant, a security interest in its assets for the benefit of any holder of any covered bond; and
who carries on no other business except for that necessary or incidental to guarantee the obligations of any member of the
banking group under a covered bond:
“coveredbond”meansadebtsecurityissuedbyanymemberofthebankinggroup,forwhichrepaymenttoholdersisguaranteed
by a SPV, and investors retain an unsecured claim on the issuer.
nomemberofthebankinggroupmaygiveeffecttoaqualifyingacquisitionorbusinesscombinationthatmeetsthenotification
threshold, and does not meet the non-objection threshold, unless:
the bank has notified the Reserve Bank in writing of the intended acquisition or business combination and at least 10
working days have passed; and
That no more than 10% of total assets may be beneficially owned by a SPV.
For the purposes of this condition,—
“total assets” means all assets of the banking group plus any assets held by any SPV that are not included in the banking group’s
assets:
“SPV” means a person—
That the bank is pre-positioned for Open Bank Resolution and in accordance with a direction from the Reserve Bank, the bank
can—
close promptly at any time of the day and on any day of the week and that effective upon the appointment of the statutory
manager—
all liabilities are frozen in full; and
no further access by customers and counterparties to their accounts (deposits, liabilities or other obligations) is possible;
apply a de minimis to relevant customer liability accounts;
apply a partial freeze to the customer liability account balances;
at the time of notifying the Reserve Bank of the intended acquisition or business combination, the bank provided the
Reserve Bank with the information required under the Reserve Bank of New Zealand Banking Supervision Handbook
document “Significant Acquisitions Policy” (BS15) dated December 2011; and
no member of the banking group may give effect to a qualifying acquisition or business combination that meets the non-
objection threshold unless:
the bank has notified the Reserve Bank in writing of the intended acquisition or business combination;
at the time of notifying the Reserve Bank of the intended acquisition or business combination, the bank provided the
Reserve Bank with the information required under the Reserve Bank of New Zealand Banking Supervision Handbook
document “Significant Acquisitions Policy” (BS15) dated December 2011; and
the Reserve Bank has given the Bank a notice of non-objection to the significant acquisition or business combination.
For the purposes of this condition of registration, “qualifying acquisition or business combination”, “notification threshold” and
“non-objection threshold” have the same meaning as in the Reserve Bank of New Zealand Banking Supervision Handbook
document “Significant Acquisitions Policy” (BS15) dated December 2011.
reopen bynolater than9am thenextbusinessdayfollowing theappointmentofastatutorymanagerandprovidecustomers
access to their unfrozen funds;
maintain a full freeze on liabilities not pre-positioned for open bank resolution; and
reinstate customers' access to some or all of their residual frozen funds.
For the purposes of this condition of registration, “de minimis”, “partial freeze”, “customer liability account”, and “frozen and
unfrozen funds” have the same meaning as in the Reserve Bank of New Zealand document “Open Bank Resolution (OBR) Pre-
positioning Requirements Policy” (BS17) dated September 2013.
P. 78

Conditions of Registration (continued)
16.
(a)
(b)
17.
(a)
(i)
(ii)
(b)
(c)
18.
19.
20.
21.
22.
demonstrates that the bank's prepositioning for Open Bank Resolution meets the requirements set out in the Reserve Bank
document: "Open Bank Resolution Pre-positioning Requirements Policy" (BS17) dated September 2013.
For the purposes of this condition of registration, “Implementation Plan” has the same meaning as in the Reserve Bank of New
Zealand document “Open Bank Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated September 2013.
That the bank has a compendium of liabilities that—
at the product-class level lists all liabilities, indicating which are—
pre-positioned for Open Bank Resolution; and
not pre-positioned for Open Bank Resolution;
That the bank has an Implementation Plan that—
is up-to-date; and
That, for a loan-to-valuation measurement period ending on or after 31 October 2021,the total of the bank’s qualifying new
mortgage lending amount in respect of property investment residential mortgage loans with a loan-to-valuation ratio of more
than 60%, must not exceed 5% of the total of the qualifying new mortgage lending amount in respect of property-investment
residential mortgage loans arising in the loan-to valuation measurement period.
That, for a loan-to-valuation measurement period, the total of the bank’s qualifying new mortgage lending amount in respect
of non property-investment residential mortgage loans with a loan-to-valuation ratio of more than 80%, must not exceed 20%
of the total of the qualifying new mortgage lending amount in respect of no property-investment residential mortgage loans
arising in the loan-to-valuation measurement period.
That the bank must not make a residential mortgage loan unless the terms and conditions of the loan contract or the terms
and conditions for an associated mortgage require that a borrower obtain the registered bank’s agreement before the
borrower can grant to another person a charge over the residential property used as security for the loan.
In these conditions of registration,—
“banking group” means Heartland Bank Limited (as reporting entity) and all other entities included in the group as defined in
section 6(1) of the Financial Markets Conduct Act 2013 for the purposes of Part 7 of that Act.
"generally accepted accounting practice" has the same meaning as in section 8 of the Financial Reporting Act 2013.
is agreed to by the Reserve Bank; and
if the Reserve Bank's agreement is conditional, meets the Reserve Bank's conditions.
For the purposes of this condition of registration, “compendium of liabilities”, and “pre-positioned and non pre-positioned
liabilities”havethesamemeaningasintheReserveBankofNewZealanddocument“OpenBankResolution(OBR)Pre-positioning
Requirements Policy” (BS17) dated September 2013.
ThatonanannualbasisthebanktestsallthecomponentpartsofitsOpenBankResolutionsolutionthatdemonstratesthebank’s
prepositioning for Open Bank Resolution as specified in the bank’s Implementation Plan.
For the purposes of this condition of registration, “Implementation Plan” has the same meaning as in the Reserve Bank of New
Zealand document “Open Bank Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated September 2013.
That, for a loan-to-valuation measurement period ending on or before 30 September 2021, the total of the bank’s qualifying
new mortgage lending amount in respect of property-investment residential mortgage loans with a loan-to-valuation ratio of
more than 70%, must not exceed 5% of the total of the qualifying new mortgage lending amount in respect of property-
investment residential mortgage loans arising in the loan-to-valuation measurement period.
P. 79

Conditions of Registration (continued)
In conditions of registration 19 to 22,—
(a)
(b)
Conditions of Registration Non-Compliance
“loan-to-valuation ratio”, “non property-investment residential mortgage loan”, “property-investment residential mortgage loan”,
“qualifying new mortgage lending amount in respect of property-investment residential mortgage loans”, “qualifying new mortgage
lending amount in respect of non property-investment residential mortgage loans”, and “residential mortgage loan” have the same
meaning as in the Reserve Bank of New Zealand document entitled “Framework for Restrictions on High-LVR Residential Mortgage
Lending” (BS19) dated January 2019:
“loan-to-valuation measurement period” means—
the six calendar month period ending on the last day of August 2021; and
thereafter a period of six calendar months ending on the last day of the sixth calendar month, the first of which ends on
the last day of September 2021.
In July 2021 the Bank was made aware of the RBNZ’s Liquidity Thematic review quantitative findings. These identified four
issues where the Bank’s calculation of its liquidity ratios was not in compliance with its Condition of Registration 11 (COR 11).
All non-compliance issues identified have now been remedied, and the ratios when recalculated remained at all times within
the Bank’s Conditions of Registration.
Conditions of Registration Non-Compliance Prior Period
Conditions of Registration Non-Compliance
As disclosed in prior reporting periods, the Bank had not been calculating its regulatory capital and liquidity ratios in
compliance with the requirements of its Conditions of Registration 1 (COR 1), and COR 11.
The Bank completed its remediation programme during the reporting period. The ratios when recalculated correctly have at all
times remained above the requirements of the Bank’s Conditions of Registration.
P. 80

Pending Proceedings
Credit Ratings
AAA Aaa
AAAa
AA
BBB Baa
BBBa
BB
CCC Caa
CC - C Ca - C
D-
Other Material Matters
There are no pending legal proceedings or arbitrations concerning any member of the Banking Group at the date of Disclosure
Statement that may have a material adverse effect on the Bank or the Banking Group.
As at the date of signing this Disclosure Statement, the Bank's credit rating issued by Fitch Australia Pty Ltd (Fitch Ratings) was BBB
stable. This BBB credit rating was issued on 14 October 2015 and is applicable to long term unsecured obligations payable in New
Zealand, in New Zealand dollars. This BBB stable credit rating was affirmed by Fitch Ratings on 19 October 2020.
The following is a summary of the descriptions of the ratings categories for rating agencies for the rating of long-term senior unsecured
obligations:
Fitch Ratings
Standard &
Poor's
Moody's
Investors
Service
Description of Grade
BBB
Adequate ability to repay principal and interest. More vulnerable to adverse changes.
BB
Significant uncertainties exist which could affect the payment of principal and interest on a
timely basis.
B
Greater vulnerability and therefore greater likelihood of default.
AAA
Ability to repay principal and interest is extremely strong. This is the highest investment
category.
AA
Very strong ability to repay principal and interest in a timely manner.
A
Strongabilitytorepayprincipalandinterestalthoughsomewhatsusceptibletoadversechanges
in economic, business or financial conditions.
Credit ratings from Fitch Ratings and Standard & Poor’s may be modified by the addition of a plus or minus sign to show relative status
within the major rating categories. Moody’s Investors Service apply numerical modifiers 1, 2, and 3 to show relative standing within the
major rating categories, with 1 indicating the higher end and 3 the lower end of the rating category.
There are no material matters relating to the business or affairs of the Bank or the Banking Group that are not disclosed in these
consolidated financial statements which, if disclosed, would materially affect the decision of a person to subscribe for debt or equity
instruments of which the Bank or any member of the Banking Group is the issuer.
CCC
Likelihood of defaultconsidered high. Timelyrepayment ofprincipal andinterest isdependent
on favourable financial conditions.
CC - C
Highest risk of default.
RD to D
Obligations currently in default.
P. 81

© 2021 KPMG, a New Zealand Partnership and a member firm of the KPMG global organization of independent member
firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Independent Auditor’s Report
To the shareholder of Heartland Bank Limited
Report on the audit of the consolidated financial statements
Opinion
We have audited the accompanying
consolidated financial statements and
supplementary information (excluding
supplementary information relating to
capital adequacy and regulatory liquidity
requirements) of Heartland Bank Limited
(the “Bank”) and its subsidiaries (the
“Banking Group”) which comprise:
— the consolidated statement of
financial position as at 30 June 2021;
— the consolidated statements of
comprehensive income, changes in
equity and cash flows for the year
then ended;
— notes, including a summary of
significant accounting policies and
other explanatory information; and
— the information that is required to be
disclosed in accordance with
Schedules 4, 7, 13, 14, 15 and 17 of
the Registered Bank Disclosure
Statements (New Zealand
Incorporated Registered Banks)
Order 2014 (as amended) (the
“Order”).
In our opinion, the accompanying consolidated financial
statements and supplementary information (excluding
supplementary information relating to capital adequacy and
regulatory liquidity requirements) of the Banking Group on pages
7 to 71:
i.give a true and fair view of the Banking Group’s financial
position as at 30 June 2021 and its financial performance and
cash flows for the year ended on that date; and
ii.comply with New Zealand Generally Accepted Accounting
Practice, which in this instance means New Zealand
Equivalents to International Financial Reporting Standards
(“ NZ IFRS”) and International Financial Reporting Standards.
In our opinion, the supplementary information (excluding
supplementary information relating to capital adequacy and
regulatory liquidity requirements) that is required to be disclosed
in accordance with Schedules 4, 7, 13, 14, 15 and 17 of the
Order) within the disclosure statement:
i.has been prepared, in all material respects, in accordance
with the guidelines issued pursuant to section 78(3) of the
Reserve Bank of New Zealand Act 1989 and any conditions of
registration;
ii.is in accordance with the books and records of the Banking
Group in all material respects; and
iii.fairly states the matters to which it relates in accordance with
those Schedules.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”) . We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Banking Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand)
issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards
Board for Accountants’ International Code of Ethics for Professional Accountants (including International
Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance
with these requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the
consolidated financial statements and supplementary information (excluding supplementary information relating
to capital adequacy and regulatory liquidity requirements) section of our report.
Our firm has also provided other services to the Banking Group in relation to the review of the Banking Group’s
half year disclosure statement, regulatory assurance services and supervisor reporting. Subject to certain
restrictions, partners and employees of our firm may also deal with the Banking Group on normal terms within

the ordinary course of trading activities of the business of the Banking Group. These matters have not impaired
our independence as auditor of the Banking Group. The firm has no other relationship with, or interest in, the
Banking Group.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial statements
as a whole was set at $5,100,000 determined with reference to a benchmark of the Banking Group's profit
before tax. We chose the benchmark because, in our view, this is a key measure of the Banking Group’s
performance.
We agreed with the Audit Committee that we would report to them, misstatements identified during our audit
above $255,000 as well as misstatements below that amount that, in our view, warranted reporting for
qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements in the current period. We summarise below those matters and our key
audit procedures to address those matters in order that the shareholder as a body may better understand the
process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely
for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not
express discrete opinions on separate elements of the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
Provision for impairment of finance receivables
Refer to notes 1, 12 and 22 to the consolidated financial statements.
The provision for impairment of finance
receivables is a key audit matter due to the
financial significance and the inherent complexity
of the Banking Group’s expected credit loss
(“ECL”) models.
Significant judgement and estimates are
required to incorporate forward-looking
information to reflect future economic
conditions.
The collective provision is estimated through the
ECL models using historical data which is
adjusted for forward looking information and the
assigned risk grade or arrears status.
Additionally, management apply judgement in
the determination of provision overlays to adjust
for future market conditions.
The level of judgement involved in determining
the provision for collectively impaired assets
requires us to challenge the appropriateness of
management’s assumptions.
The provision for individually impaired assets is
based on the application of management
judgement regarding expected future cashflows,
which are inherently uncertain.
Together with KPMG credit risk specialists we assessed the Banking
Group’s collective and individual provisions. Our procedures, amongst
others, included:
 Assessing the Banking Group’s governance and oversight,
including the continuous reassessment of overall provisioning;
 Assessing the Banking Group’s significant accounting policies
and expect
ed credit loss (“ECL”) modelling methodology
against the requirements of the standards and underlying
accounting records;
 Testing key controls including the arrears calculations, customer
loan ratings, annual loan reviews, credit risk reviews and data
reconciliations between the ECL models and source systems;
 Assessing the model output against actual losses incurred by
t
he Banking Group;
 Challenging the key assumptions, including forward looking
economic assumptions, against external information including
benchmarking management’s estimates to a range of different
market forecasts;
 Evaluating individual credit assessments for a sample of ‘rural’
and other ‘corporate’ loans on management’s credit watchlist.
This included inspection of the latest correspondence with the
borrower, assessment of the provision estimates prepared by
credit risk officers, and consideration of the resolution strategy.
We challenged assumptions and assessed collateral values by

The key audit matter How the matter was addressed in our audit
comparing them to valuations performed by independent
valuers; and
 Assessing the disclosures in the consolidated financial
statements against the requirements of NZ IFRS.
From the procedures performed we consider the Banking Group
appropriately identified and considered the uncertainties in the
provision estimates.
Valuation of finance receivables – reverse mortgages
Refer to note 19 of the consolidated financial statements.
The Banking Group’s reverse mortgage portfolio
is held at fair value.
The fair value calculation is based on the
application of management judgement. In
assessing the fair value, the Banking Group
continuously considers evidence of a relevant
active market. In the absence of such a market,
in the current period, the Banking Group
considered changes since loan origination and
expected future cashflows.
The inherent uncertainties include estimated
exits , interest rates and security property values.
Our procedures over the fair value loan portfolios, amongst others,
included:
 Testing key controls over the accuracy of data impacting the fair
value assessment;
 Assessing evidence of a relevant active market or observable
inputs; and
 Challenging the key assumptions used by the Banking Group in
determining the portfolio’s fair value.
The estimates and assumptions used to determine the valuation of
loan portfolio are reasonable, with no evidence of management bias
or influence identified from our procedures.
Operation of IT systems and controls
The Banking Group is reliant on complex IT
systems for the processing and recording of
significant volumes of transactions and other
core banking activity.
For significant financial statement balances, such
as finance receivables and deposits, where
relevant, our audit involves an assessment of the
design of the Banking Group’s internal control
environment. There are some areas of the audit
where we seek to test and place reliance on IT
systems, automated controls and reporting.
The effective operation of these controls is
dependent upon the Banking Group’s general IT
control environment, which incorporates controls
relevant to IT system changes and development,
IT operations, and developer and user access.
Our audit procedures, amongst others, included:
 Gaining an understanding of business processes, key controls
and IT systems relevant to significant financial statement
balances, including technology services provided by a third
party;
 Assessing the effectiveness of the IT control environment,
including core banking IT systems, key automated controls and
reporting; and
 Evaluating general IT controls relevant to IT system changes
and development, IT operations, and developer and user
access.
Where we noted design or operating effectiveness matters relating
to IT system or application controls relevant to our audit, we
performed alternative audit procedures. We also identified and tested
mitigating controls in order to respond to the impact on our overall
audit approach.
We did not identify any material issues or exceptions from those
additional procedures.
Other information
The Directors, on behalf of the Banking Group, are responsible for the other information included in the Bank’s
disclosure statement. Other information comprises the information required to be included in the disclosure
statement in accordance with schedule 2 of the Order. Our opinion on the consolidated financial statements
does not cover any other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Report on other legal and regulatory requirements
In accordance with the requirements of clauses 2(1)(d) and 2(1)(e) of Schedule 1 of the Order, we report that:
— we have obtained all the information and explanations we have required; and
— in our opinion, proper accounting records have been kept by the Banking Group, as far as appears from our
examination of those records.
Responsibilities of Directors for the consolidated financial statements and
supplementary information (excluding supplementary information relating to
capital adequacy and regulatory liquidity requirements)
The Directors, on behalf of the Banking Group, are responsible for:
— the preparation and fair presentation of the consolidated financial statements in accordance with Clause 24
of the Order, NZ IFRS and International Financial Reporting Standards;
— the preparation and fair presentation of supplementary information (excluding the supplementary information
relating to capital adequacy and regulatory liquidity requirements), in accordance with Schedules 2, 4, 7, 13,
14, 15 and 17 of the Order;
— implementing necessary internal control to enable the preparation of consolidated financial statements that
are fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial
statements and supplementary information (excluding supplementary information
relating to capital adequacy and regulatory liquidity requirements)
Our objective is:
— to obtain reasonable assurance about whether the disclosure statement, including the financial statements
prepared in accordance with Clause 24 of the Order, and supplementary information (excluding the
supplementary information relating to capital adequacy and regulatory liquidity requirements), in accordance
with Schedules 4, 7, 13, 14, 15 and 17 of the Order as a whole is free from material misstatement, whether
due to fraud or error; and
— to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (NZ) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at
the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.

Review conclusion on the supplementary information relating to capital
adequacy and regulatory liquidity requirements
We have reviewed the supplementary
information relating to capital adequacy and
regulatory liquidity requirements, as
disclosed in note 25(a) and 28 of the
consolidated financial statements for the
year ended 30 June 2021. The
supplementary information relating to
capital adequacy and regulatory liquidity
requirements comprises the information
that is required to be disclosed in
accordance with Schedule 9 of the Order.
Based on our review, nothing has come to our attention
that causes us to believe that the supplementary
information relating to capital adequacy and regulatory
liquidity requirements, disclosed in note 25 (a) and 28 to
the consolidated financial statements, is not, in all
material respects disclosed in accordance with Schedule
9 of the Order.
Basis for conclusion on the supplementary information relating to capital
adequacy and regulatory liquidity requirements
A review of the supplementary information relating to capital adequacy and regulatory liquidity requirements in
accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of the
Entity (“NZ SRE 2410”) is a limited assurance engagement. Our responsibilities under that standard are further
described in the Auditor’s responsibilities for the review of the supplementary information relating to capital
adequacy and regulatory liquidity requirements section of our report.
As the auditor of Heartland Bank Limited, NZ SRE 2410 requires that we comply with the ethical requirements
relevant to the audit of the annual consolidated financial statements.
Responsibilities of Directors for the supplementary information relating to
capital adequacy and regulatory liquidity requirements
The directors are responsible for the preparation of supplementary information relating to capital adequacy and
regulatory liquidity requirements that is required to be disclosed under Schedule 9 of the Order and prepared in
accordance with the Capital Adequacy Framework (Standardised Approach) (BS2A) and described in notes 25(a)
and 28 to the consolidated financial statements.
Auditor’s responsibilities for the review of the supplementary information
relating to capital adequacy and regulatory liquidity requirements
Our responsibility is to express a conclusion on the supplementary information relating to capital adequacy and
regulatory liquidity requirements based on our review. We conducted our review in accordance with NZ SRE
2410. As the auditor of Heartland Bank Limited, NZ SRE 2410 requires that we plan and perform the review to
obtain limited assurance about whether the supplementary information relating to capital adequacy and
regulatory liquidity requirements is, in all material respects, disclosed in accordance with Schedule 9 of the Order.
A review of the supplementary information relating to capital adequacy and regulatory liquidity requirements in
accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs procedures, primarily
consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with ISAs (NZ). Accordingly, we do not express an audit opinion on the supplementary information
relating to capital adequacy and regulatory liquidity requirements disclosures.

Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholder as a body. Our work has been undertaken so
that we might state to the shareholder those matters we are required to state to them in the independent
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the shareholder as a body for our work, this independent auditor’s report, or
any of the opinions or conclusions we have formed.
The engagement partner on the audit resulting in this independent auditor's report is Graeme Edwards.
For and on behalf of
KPMG
Auckland
23 August 2021

---

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
NZX/ASX release
24 August 2021

Heartland announces full year NPAT of $87.0 million
(or $87.9 million on an underlying basis after removing the impacts of one-offs)

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) is pleased to announce a net profit after tax
(NPAT) of $87.0 million for the financial year ended 30 June 2021 (FY2021), an increase of $15.1 million
(20.9%) compared with the financial year ended 30 June 2020 (FY2020)
1
. On an underlying
2
basis, FY2021
NPAT was $87.9 million, an increase of $11.0 million (14.3%) compared with the FY2020 underlying NPAT.

Highlights for FY2021

‒ NPAT of $87.0 million, up 20.9% ($15.1 million). Underlying NPAT of $87.9 million, up 14.3% ($11.0
million) on FY2020 underlying NPAT.
‒ One-off items had a $0.8 million net
3
impact on NPAT, consisting of $4.1 million of one-off net gains and
$6.9 million of one-off expenses (net of tax).
‒ Gross finance receivables (Receivables)
4
of $5.0 billion, up 7.9%
5
($368.5 million).
‒ Return on equity (ROE) of 11.9%, up 144 basis points (bps).
‒ Net interest margin (NIM)
6
of 4.35%, up 2 bps.
‒ Net interest income (NII) of $233.5 million, up 7.8%.
‒ Cost to income (CTI) ratio of 46.8%, up 1.5 percentage points (pps). Underlying CTI ratio of 44.8%, down
0.1 pps, and CTI ratio of 43.9% for the second half of FY2021 (2H2021).
‒ Impairment expense as a percentage of average receivables decreased from 0.65% in FY2020 to 0.31%
in FY2021.
‒ FY2021 final dividend of 7.0 cents per share (cps), taking FY2021 total dividend to 11.0 cps – an increase
of 4.0 cps from FY2020 due to the easing of restrictions imposed by the Reserve Bank of New Zealand
(RBNZ) on distributions by banks in New Zealand.
‒ Earnings per share (EPS) of 14.9 cps, up 2.4 cps.
‒ Heartland Bank Limited (Heartland Bank) remains one of two Australasian banks to have no reduction
or adverse change to its ratings or outlook by Fitch Ratings since January 2020.
‒ Further digitalisation and continuous integration of product applications and platforms in New Zealand
and Australia.
‒ New Zealand Reverse Mortgages awarded Consumer Trusted Accreditation (fourth consecutive year).
‒ Australian Reverse Mortgages awarded Your Magazine’s 5-Star Lender Award and InfoChoice’s Best
Reverse Mortgage Award.
‒ Heartland Bank awarded Canstar Savings Bank of the Year 2021 (fourth consecutive year), and 5-Star
Ratings for Outstanding Value for its Direct Call and YouChoose accounts.
‒ Heartland Bank became the National Foundation for Deaf and Hard of Hearing’s first Hearing Accredited
Workplace.

1
All comparative results are based on the audited full year consolidated financial statements of Heartland and its
subsidiaries (the Group) for FY2020.
2
Underlying results exclude the impacts of one-offs. Refer to the Profitability section on pages 3 and 4 for details about
FY2021 one-offs. A detailed reconciliation between reported and underlying financial information is set out on page 33
of the accompanying FY2021 investor presentation. General information about the use of non-GAAP financial measures
is set out on page 2 of that presentation.
3
Includes tax impact on one-offs.
4
Receivables include Reverse Mortgages.
5
Excluding the impact of changes in foreign currency exchange (FX) rates.
6
NIM is calculated based on average gross interest earning assets.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
2
Strategic vision

Heartland’s strategic vision is to create sustainable growth and differentiation through providing best or only
products via scalable digital platforms. There are four strategic elements to the fulfilment of this:

1. Business as Usual growth (reported on below)
2. Frictionless Service at the Lowest Cost
3. Expansion in Australia
4. Acquisitions which fit with and add value to the above.

Frictionless Service at the Lowest Cost
Heartland’s digital strategy reached a stage of maturity where digitalisation is now embedded, as opposed to
being a separate activity.

Digitalisation began with the front-end – online mobile platforms providing access for customers. This
allowed Heartland to extend reach beyond the constraints of physical distribution while also reducing
onboarding costs. These platforms have been integrated into business units as the prime means of
distribution. The next stage is to create scale and take out friction, i.e. processes that cause customer
inconvenience and delay.

Providing frictionless service at each stage of a customer’s journey not only eases inconvenience, but also
removes costly operational processes. This produces a virtuous circle of enhanced customer experience and
reduced operational costs, allowing Heartland to provide customers with better value through lower rates or
time-savings.

Heartland Home Loans demonstrates this in action. Through the provision of an online-only application with
automated decisioning, identity verification and documentation, the cost of onboarding is significantly
reduced. This allows savings to be passed on to the borrower through low mortgage rates and allows
customers to apply as and when they want. In this way, Heartland is providing frictionless service at the
lowest cost.

Expansion in Australia
Growth in Australia is a strategic priority.

Heartland has helped more than 22,000 Australians to live a more comfortable retirement by releasing
equity from their homes, and recently achieved a significant milestone as the Reverse Mortgage loan book
surpassed A$1 billion. Research by the Royal Melbourne Institute of Technology (RMIT) University,
supported by Heartland, found that 90% of Australians wish to age in their homes, but that limited
superannuation and the rising cost of living is restricting their ability to do so.
7
As Australasia’s leading
provider of reverse mortgages (with market share in Australia recently increasing from 28.5%
8
to 29.3%
9
),
there is substantial opportunity for Heartland to support a greater number of older Australians.

Heartland’s product offerings will continue to expand, including adjustments to the age requirements for
Heartland’s Reverse Mortgage to enable access to funds sooner – applications can now be accepted for
couples where someone aged 60 or over has a partner aged 55-59. In February 2021, Heartland launched
Well-Life Loans to help those aged 60 and over to get an extra financial boost when taking their next step in
life, without having to mortgage the family home.

7
Reverse mortgages: Financing ageing in place, RMIT University, cur.org.au/cms/wp-
content/uploads/2020/11/financing-ageing-in-place.pdf.
8
Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 31 December 2020.
9
Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 31 March 2021.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
3
Heartland continues to explore expansion into other asset classes in Australia both through existing
relationships with intermediaries that lend to businesses and consumers, as well as Heartland’s own digital
platforms. Further opportunities where Heartland has a compelling service and/or product proposition will
also be progressed where available.

Operating environment

New Zealand and Australia continue to experience flow on effects from the pandemic, through border
closures, restrained supply-chains and lockdowns. In addition, there is evidence of rising inflation and
increasing costs of employment.

Subdued growth in the first half of FY2021 (1H2021) reflected reduced business and consumer confidence.
2H2021 achieved higher levels of growth across most portfolios. Any direct adverse impacts of the pandemic
have been absorbed within business as usual impairments, noting that the demographics most affected by
COVID-19 are under-represented in Heartland’s customer base.
10

Heartland Bank was one of 14 providers of the Government’s Business Finance Guarantee Scheme (BFGS),
brought in to provide access to funds for businesses affected by the pandemic. Heartland’s BFGS book is at
$60.3 million.

Heartland’s COVID-19 economic overlay of $9.6 million, taken in respect of FY2020, remains unutilised. The
overlay does not represent any actual losses, but was taken to provide a buffer against any future losses that
the uncertainty of COVID-19 may give rise to. The overlay remains in place.

Heartland continues to exercise a degree of caution. Heartland’s COVID-19 economic overlay remains
available to be applied to any losses as a consequence of the pandemic. For further discussion, see the
‘Impact of COVID-19’ section on page 5.

Financial results

Profitability
NPAT was $87.0 million, a $15.1 million (20.9%) increase on FY2020. Underlying NPAT was $87.9 million, a
$11.0 million (14.3%) increase on FY2020.

ROE was 11.9%, up 144 bps from FY2020. Underlying ROE was 12.0%, up 86 bps from FY2020.

EPS was 14.9 cps, up 2.4 cps from FY2020. Underlying EPS was 15.1 cps, up 1.8 cps from FY2020.
FY2021 one-offs included in the reported result

1. Fair value gain on equity investment in Harmoney Corp Limited (Harmoney):
11
A $3.9 million fair value
gain was recognised on Heartland’s equity investment in Harmoney. Harmoney listed on the ASX, and
the NZX as a foreign exempt listing, in November 2020, with approximately 72% of shares (including
those owned by Heartland, other major shareholders, employees and directors) subject to escrow
arrangements. The fair value as at 30 June 2021 takes into consideration the impact of the restriction
imposed by the escrow arrangements on observed trading volumes and market prices (including bid

10
Heartland’s total exposure to the retail, accommodation and transport (excluding road freight transport) industries at
30 June 2021, based on borrower ANZSIC codes, was 2.68%, 1.71% and 1.19% respectively. Heartland’s exposure to
customers aged 15-24 years (those most affected by increases in unemployment) at 30 June 2021 was 4.35% in Motor
and 1.47% in personal lending.
11
Refer to Note 20 – Fair Value (page 42) in the FY2021 Heartland Financial Statements for further detail.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
4
and ask spreads) of Harmoney’s shares.

2. Fair value gain on investment property: A $0.7 million fair value gain was recognised following updated
external valuations received on Heartland Bank’s investment property portfolio.

3. Fair value loss on equity investment in Fuelled Limited (Fuelled): A $0.5 million fair value loss was
recognised following Heartland Bank acquiring the remaining shares in Fuelled in April 2021.

4. Voluntarily accelerated amortisation of intangible assets: A $4.3 million expense was recognised,
reflecting an acceleration of amortisation of software assets held on the balance sheet.

5. Write-off and provisioning of aged suspense account items: $1.7 million of aged legacy suspense
account transactions were written off or provisioned where collectability is uncertain.

6. Other non-recurring expenses: $0.9 million.

The impact of these one-off items on the respective financial metrics is outlined in the table below.

Reported Underlying
FY2021 FY2020 Movement FY2021 FY2020 Movement
NOI
12
($m) 251.2 235.3 15.8 247.1 229.8 17.3
Operating expenses 117.7 106.8 10.9 110.8 103.2 7.5
NPAT ($m) 87.0 72.0 15.1 87.9 76.9 11.0
NIM 4.35% 4.33% 2 bps 4.35% 4.33% 2 bps
NIM excl. liquid assets
13
4.69% 4.59% 10 bps 4.69% 4.59% 10 bps
CTI ratio 46.8% 45.4% 1.5 pps 44.8% 44.9% (0.1 pps)
Impairment expense ratio 0.31% 0.65% (34 bps) 0.31% 0.44% (13 bps)
ROE 11.9% 10.5% 144 bps 12.0% 11.1% 86 bps
EPS 14.9 cps 12.5 cps 2.4 cps 15.1 cps 13.3 cps 1.8 cps

Income
Total NOI was $251.2 million, an increase of $15.8 million (6.7%) from FY2020.
Underlying NOI was $247.1 million, $17.3 million (7.5%) higher than FY2020. This was largely due to a $16.8
million (7.8%) increase in NII, driven by $366.2 million (7.3%) higher average interest earning assets in
FY2021 than FY2020, and a 2 bps increase in NIM compared with FY2020 to 4.35%.

Underlying other operating income increased by $0.4 million (3.1%) compared with FY2020, primarily due to
a higher treasury result.

12
Net operating income (NOI) includes fair value gains/losses on investments.
13
NIM is calculated based on average gross interest earning assets excluding liquid assets.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
5
Expenses
Operating expenses were $117.7 million, an increase of $10.9 million (10.2%) on FY2020. Excluding the
impact of one-offs (described above), underlying operating expenses were $110.8 million, $7.5 million (7.3%)
higher compared with FY2020.
Higher underlying operating expenses were primarily due to the following.
1. A $6.7 million (12.2%) increase in staff expenses. On average, Heartland employed 63 more full-time
equivalent (FTE) employees in permanent or fixed term roles compared with FY2020 to provide
additional support to customers in response to COVID-19, and to support digital and technology
capability, enabling Heartland to accelerate its evolution as a digitally-led financial services group. The
teams are now well resourced to deliver on Heartland’s strategic objectives, and the number of people
employed in response to COVID-19 has been reduced.

2. A $2.1 million (17.1%) increase in IT and communication expenses (as a result of software amortisation
and licencing costs for additional FTE).

3. Other non-recurring expenses: $0.9 million.

The CTI ratio increased to 46.8%, up 1.5 pps compared with FY2020. The underlying CTI ratio remained flat at
44.8%, a 0.1 pps decrease on prior year. Heartland’s continued focus on creating end-to-end processing
efficiencies through digitalisation has resulted in the underlying CTI ratio trending downwards in 2H2021, at
43.9% in 2H2021 vs 45.8% in 1H2021.

Impairment expense
Impairment expense was $15.0 million, a $14.4 million decrease (49.1%) on FY2020. On an underlying basis,
which excludes the impact of the $9.6 million COVID-19 economic overlay in FY2020, impairment expense
was $4.8 million (24.4%) lower than FY2020. This was mainly due to remediation activity in 1H2021 together
with retraction in the Harmoney and personal lending portfolios which attract higher rates of provisioning.

Impairment expense in 2H2021 was $5.5 million higher than 1H2021, reflecting the benefit of post COVID-19
remediation activity which occurred in the 1H2021 together with a return to more normal levels of asset
growth and associated provisioning in 2H2021.

Impact of COVID-19
The impact of COVID-19 on Heartland’s portfolios has been more benign than initially forecast, and the
COVID-19 economic overlay remains unutilised. However, there remains significant uncertainty. In particular,
the continued prevalence of COVID-19 (including the emergence of new variants), vaccination rates,
lockdowns in Australia and now in New Zealand, and continued uncertainty regarding when borders will re-
open.

Furthermore, economic stimulus has given rise to the potential for inflationary pressures, a steepening
interest rate environment, and a higher cost of labour and inputs in the medium term. In the circumstances,
a release of the COVID-19 economic overlay is not appropriate at this stage and the overlay has been
retained in full.

Financial position
Total assets increased by $365.0 million (6.9%) during FY2021, driven by a $371.8 million (8.0%) increase in
Receivables.

Receivables growth was experienced primarily in Motor, Australian Reverse Mortgages, Asset Finance,
Business Relationship, digital Home Loans and New Zealand Reverse Mortgages, partly offset by decreases in

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
6
Harmoney and other personal lending, Rural Relationship, Open for Business (O4B) and Livestock.
Momentum in lending and a strong pipeline supported growth in 2H2021 of $312.4 million (13.4%)
14
, a
significant uplift from $59.3 million (2.5%)
15
in 1H2021.
Borrowings
16
increased by $332.0 million (7.3%). Funding other than deposits increased $412.7 million,
mainly driven by an increase in wholesale and securitised funding. This resulted in deposits decreasing $80.7
million. See further information under ‘Funding and liquidity’ on page 8.
Net assets increased by $61.7 million to $761.7 million. Net tangible assets (NTA) increased by $68.3 million
to $678.4 million, resulting in an NTA per share of $1.16 (30 June 2020: $1.05).

Business performance

Asset Finance
17

Asset Finance lending NOI was $28.5 million, an increase of $6.6 million (30.1%) compared with FY2020.
Asset Finance Receivables increased $71.9 million (14.4%) to $570.9 million, reflecting Heartland Bank’s
focus on this portfolio through deepening and expanding the intermediary network, and distributor/vendor
and point of sale support. Strong demand from partners in the transport and logistics sector assisted growth
following increased demand in the aftermath of the COVID-19 restrictions.

Business Relationship
Business Relationship lending NOI was $26.1 million, an increase of $1.0 million (4.1%) compared with
FY2020.
Business Relationship Receivables increased $58.7 million (11.8%)
18
to $555.1 million. Through the BFGS,
Heartland supported more than 150 businesses to access over $60 million in funding to meet their business
needs. In addition, Heartland Bank also provided a funding facility to Go Car Finance in 2H2021 for its New
Zealand loan book. This aligns with its strategy to diversify distribution in motor vehicle finance.

The residual portfolio’s continued downward trend reflects Heartland’s strategy to reduce non-core low
margin Relationship lending or risk concentrations.

O4B
O4B NOI was $14.6 million, a decrease of $0.2 million (1.1%) compared with FY2020.

O4B Receivables decreased $10.8 million (6.9%)
19
to $144.5 million. COVID-19 disruptions and the availability
of Government-backed funding for small businesses slowed down O4B growth from 2H2020. This trend
continued in 1H2021, resulting in O4B Receivables decreasing $14.4 million (9.3%)
19
to $140.7 million.

2H2021 saw growth of $3.6 million in line with improved business confidence and economic sentiment,
which is expected to fuel return to pre-COVID-19 levels of growth.

14
Annualised 2H2021 growth including the impact of changes in FX rates.
15
Annualised 1H2021 growth including the impact of changes in FX rates.
16
Includes retail deposits and other borrowings.
17
Previously referred to as Business Intermediated.
18
Excluding the impact of changes in FX rates.
19
Excluding the impact of changes in FX rates.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
7
Motor
Motor NOI was $69.2 million, an increase of $8.6 million (14.2%) compared with FY2020. Motor Receivables
increased $168.1 million (14.9%) to $1,293.7 million. The growth was mainly from the Motor dealer book via
car dealerships, brokers and partnerships such as Kia Finance and Jaguar/Land Rover Financial Services.
In July 2021, a new vehicle finance service iOWN, provided exclusively by Heartland Bank, was launched in
partnership with Auto Distributors New Zealand Limited (ADNZ) enabling the purchase of a new or used
Peugeot or Citroen from authorised dealerships.

Harmoney and other personal lending
Harmoney NOI was $16.6 million, a decrease of $4.8 million (22.4%) compared with FY2020.
Harmoney Receivables decreased by $79.9 million (37.7%)
16
, with the New Zealand Harmoney portfolio
contracting $69.1 million (47.4%) to $76.7 million, while the Australian Harmoney portfolio decreased by
$5.2 million (9.5%)
16
to $48.8 million. Both New Zealand and Australian portfolios continued to contract in
FY2021 as a result of high repayments combined with greater utilisation by Harmoney of its own on-balance
sheet funding facilities. Heartland is in the latter stages of completing its transition to offer Harmoney on-
balance sheet funding facilities in both New Zealand and Australia.
Home Loans
Following a successful pilot, Heartland’s digital Home Loans product was launched in October 2020 with
conservative lending criteria targeting high quality applicants. Loan drawdowns slowed over the summer
holiday period in 1H2021, however strong application rates have continued in 2H2021. Online enquiries
totalled $895.2 million and more than $200 million was approved from applications received during FY2021.

Growth in the Home Loans market was supported by Heartland’s low interest rates, currently market-leading
for 2- and 3-year fixed rates, as well as for its standard floating rate. In addition, Heartland launched a new
revolving credit home loan product in 2H2021 with the lowest rate in the market at the time. Momentum in
the book is pleasing, with the book expected to continue growing beyond the current rate of $12 million a
month.

Converting applications to drawdowns is driven by the time taken to process refinances from other banks
and, in particular, the struggle faced by approved purchasers to find and secure their desired property in a
buoyant market.

Rural
Rural lending NOI was $32.2 million, an increase of $1.5 million (4.7%) compared with FY2020.
Rural Receivables decreased by $19.0 million (3.1%) to $586.6 million. Rural Relationship Receivables
reduced by $13.1 million (2.7%) to $477.3 million, while Livestock Receivables decreased by $5.9 million
(5.1%) to $109.4 million. The downward trend reflects Heartland’s strategy to reduce non-core low margin
Rural Relationship lending.

Whilst in its infancy, the Sheep & Beef Direct platform has seen a pleasing volume of high-quality
applications since its launch in late 2020. At 5 August 2021, eligible applications totalled $48.0 million, with
$40.5 million approved online and $30.4 million drawn down.

New Zealand Reverse Mortgages
New Zealand Reverse Mortgages NOI was $24.4 million, an increase of $0.9 million (3.6%) compared with
FY2020. Excluding the impact of one-offs (described above) from FY2020, underlying NOI increased $0.4
million (1.5%) compared with FY2020.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
8
New Zealand Reverse Mortgages had a record year for new business, up 30.4% from FY2020 where the final
quarter (Q4) was impacted by COVID-19, and 26.2% ahead of FY2019. Performance was driven by
investment in marketing to increase awareness, education and lead nurturing activity, supported by lower
interest rates and higher property prices.

Receivables increased by $41.6 million (7.4%) to $601.5 million, impacted by elevated repayments in 1H2021
due to:

‒ comparatively lower repayments in Q4 of FY2020 with property sales restricted by COVID-19 related
lockdowns and the built-up demand associated with this
‒ a buoyant property market with higher sales volumes.

Australia
Australian Reverse Mortgages NOI was $36.2 million, an increase of $1.9 million (5.5%) compared with
FY2020.
Australian Reverse Mortgages Receivables increased by $92.7 million (9.5%)
20
to $1,071.4 million, although
impacted by historically high repayments due to a combination of factors, including:

‒ comparatively lower repayments in Q4 of FY2020 with property sales restricted by COVID-19 related
lockdowns
‒ a buoyant property market in 1H2021
‒ seniors moving in with family and pooling financial resources
‒ higher value homes being more cost effective to sell and downsize compared with ‘average’ homes.

Heartland’s Reverse Mortgages received support from mortgage aggregators in Australia, including
partnerships with Australian Finance Group, Choice Aggregation and PLAN Australia.

Funding and liquidity

New Zealand
Heartland Bank increased borrowings by $94.4 million (2.6%), primarily as a result of an increase in other
borrowings of $144.2 million (40.2%) which partly offset a decrease in deposits of $49.7 million (1.5%).

Money market borrowings for short term funding and liquidity management purposes increased by $110.2
million and secured funding increased by $42.6 million.

Heartland Bank continues its focus on reducing risk concentrations in its deposit book while shifting the mix
towards lower rate call deposits where Heartland is relatively underweight. This resulted in the call to total
deposit ratio increasing to 30% as at 30 June 2021 (30 June 2020: 25%).

Heartland Bank’s savings products have also received market recognition, being awarded Canstar’s Bank of
the Year – Savings Award in 2021 (fourth consecutive year), and Canstar’s 5-Star Rating for Outstanding
Value Savings Account for its Direct Call (sixth consecutive year) and YouChoose accounts (second
consecutive year). Heartland Bank also expanded its savings products with the introduction of a 32-day
Notice Saver account.

Heartland Bank decreased total liquidity by $99.1 million (13.7%) primarily due to a $72.5 million (18.6%)
decrease in investments for liquidity management purposes.

20
Excluding the impact of changes in FX rates.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
9
Heartland Bank increased its committed auto warehouse facility from $150 million to $300 million in May
2020, and its target holding of cash and cash equivalents in response to the uncertain economic and liquidity
impacts of COVID-19 in 2H2020, which it continued to maintain in 2H2021. As a result, Heartland Bank holds
liquidity well in excess of regulatory minimums.

Heartland Bank’s capital position has progressively increased during 2H2021, reflecting its continued strong
profitability and the RBNZ restrictions on distributions imposed in 2H2020. Heartland Bank’s regulatory
capital ratio was 13.88% as at 30 June 2021 (30 June 2020: 12.67%), well in excess of regulatory minimums
and providing a strong platform for Heartland Bank to meet RBNZ’s future higher capital requirements.

Australia
The Heartland Australia group (comprising Heartland Australia Holdings Pty Ltd and its subsidiaries)
increased borrowings by A$247.6 million (29.1%), largely as a result of A$36 million further drawdowns of
the existing warehouse funding, new issuance of a A$75 million MTN and, in a first-of-its-kind transaction, a
A$142 million new long-term mortgage-backed syndicated loan for the Australian Reverse Mortgage
business funded by established offshore institutional investors. This transaction achieved another milestone
in executing Heartland’s strategy to diversify type, source and tenor of its Australian funding and,
importantly, evidences market liquidity to existing warehouse funders.

The Heartland Australia group continues to successfully execute on its strategic funding programme to cater
for strong growth in its portfolios, with a further A$45 million MTN issued in July 2021, adding further
diversity to the funding base.

Heartland Australia group has access to A$1.25 billion of committed funding in aggregate. Further expansion
of existing warehouse funding through increased senior limits and the introduction of mezzanine funding is
well advanced, and focus will continue to be on sourcing optimal long-term duration matched funding.

Regulatory update

A significant volume of regulatory change has been signalled, including changes to the New Zealand Credit
Contracts and Consumer Finance Act 2003 and the Credit Contracts and Consumer Finance Regulations 2004
(CCCFA), the Financial Markets (Conduct of Institutions) Amendment Bill (Conduct Bill), Australia’s new
Design and Distribution Obligations, the Deposit Takers Bill, and the RBNZ capital implementation review.

On 1 October 2021, changes to the CCCFA will come into force. These changes touch on a number of aspects
of Heartland’s processes for promotion, origination and fulfilment of its consumer loans. In particular,
Heartland will require more information to satisfy itself as to suitability and affordability. Heartland will
employ technologies that will allow this to be done in a seamless and user-friendly way.

In Australia, issuers and distributors of certain financial products are required to comply with new Design
and Distribution Obligations which come into force on 5 October 2021. The main impact requires Australian
Seniors Finance Pty Ltd to prepare ‘Target Market Determinations’ for its Reverse Mortgage and Well-Life
Loan products, and review its existing processes in relation to marketing, third-party distribution, record
keeping, and ongoing monitoring and assurance activities.

Following the conclusion of Phase 2 of the review of the Reserve Bank of New Zealand Act 1989 (RBNZ Act),
new legislation (to be known as the Deposit Takers Act) is now being developed to strengthen the regulatory
framework for all institutions that take deposits (including Heartland Bank), and introduce a new deposit
insurance scheme, overseen by the RBNZ. An exposure draft of the Deposit Takers Act is expected to be
available for submission later this year, and Heartland will continue to monitor progress.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
10
The RBNZ published the finalised bank capital adequacy requirements, outlined in the new Banking
Prudential Requirements (BPRs) documents on 17 June 2021. The new BPRs come into force from October
2021 and provide further detail regarding the upcoming increased bank capital requirements. Increases in
capital will be phased in over a seven-year period, starting from 1 July 2022, requiring minimum total capital
ratio to gradually be increased from the current 10.5% to 16.0% (Heartland Bank is currently at 13.88%).

Sustainability update

Heartland made significant progress in its sustainability strategy in FY2021, including announcing its
Greenhouse Gas (GHG) emissions reduction targets in March. Heartland’s sustainability framework sets out
the three pillars of its strategy to ensure it is operating sustainably for the communities it serves, the
environment and its stakeholders – those pillars are environmental conservation, social equity and economic
prosperity.

Key achievements in each area of sustainability are noted below. More information and goals for the year
ahead will be included in Heartland’s FY2021 Annual Report, to be published on 27 September 2021 and
available at shareholders.heartland.co.nz.

Environmental conservation
‒ Ambitious emissions reduction targets set to reduce GHG emissions by 35% by 2026.
‒ Reduction in vehicle fleet size by 7%, and transition to a primarily hybrid and electric fleet underway.
‒ Established an internal Green Team to champion environmental initiatives and drive change.
‒ Digitalising paper-based customer letters.

Social equity
‒ Completion of Heartland’s Conduct and Culture Work Plan.
‒ Heartland Bank became New Zealand’s first Hearing Accredited Workplace.
‒ Heartland Trust
21
grants totalled $448,183 to community groups and organisations.
‒ Implementation of Heartland’s Iho Pūmanawa recruitment strategy which supports more equitable
recruitment and selection outcomes.
‒ A 3% increase in the number of Heartland employees who identify as Māori to 7%, compared with 2%
industry average.

Economic prosperity
‒ Launched Rocket, an app for school leavers designed to bridge financial literacy gaps in New Zealand.
‒ Developed a self-serve online home loan application, passing cost-savings to customers in the form of
market-leading rates.
‒ To-date, enabled more than 40,000 seniors across New Zealand and Australia to release equity from
their homes to live a more comfortable retirement.
‒ Sheep & Beef Direct self-serve online application launched allowing farmers to apply in minutes for
finance to buy or refinance a sheep or beef farm – saving time, and providing increased finance options
for farmers.
‒ Delivered total shareholder return (TSR) of 107.2% over the last five years (20 August 2016 – 20 August
2021), compared with the NZX50 Index TSR of 81.9% in the same period.

21
The Heartland Trust is a registered charitable trust which is independent from, but closely supported by, Heartland
and Heartland Bank.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
11
Final dividend

Heartland is pleased to declare a FY2021 final dividend of 7.0 cps, up 4.5 cps from FY2020 due to the easing
of restrictions imposed by the RBNZ on distributions by banks in New Zealand. The dividend yield of 7.1%
22

compares with 8.2%
23
in FY2020.

The final dividend will be paid on Wednesday 15 September 2021 (Payment Date) to shareholders on the
company’s register as at 5.00pm on Wednesday 1 September 2021 (Record Date) and will be fully imputed.
Heartland has a Dividend Reinvestment Plan (DRP), giving eligible shareholders the opportunity to reinvest
some or all of their dividend payments into new ordinary shares. The DRP will apply to the final dividend
with a 2.0% discount.
24
The DRP offer document and participation form is available on Heartland’s
shareholder website at shareholders.heartland.co.nz/shareholder-resources/dividends.

Looking forward

The second half of FY2021 saw growth exceed expectations. Initial anticipation was for this momentum to
continue into the financial year ending 30 June 2022 (FY2022). However, the duration of the current
lockdown may impact on this. Higher growth in Reverse Mortgages, Home Loans and the transition of
Harmoney to an on-balance sheet model will result in NIM contracting. However this will also drive an
offsetting benefit of reduced impairment expenses, reflecting improved quality of the lending portfolio. The
CTI ratio trend downwards as a result of ongoing digitalisation and automation is expected to continue.

FY2022 will see Heartland continuing to extend its best or only product reach through its digital platforms. At
the same time, frictionless service at each stage of the journey will provide better customer experience.

Noting uncertainties associated with the ongoing impacts of COVID-19, Heartland expects its NPAT for
FY2022 to be in the range of $93 million to $96 million.

– ENDS –

For further information, please contact the person(s) who authorised this announcement:
Jeff Greenslade Andrew Dixson
Chief Executive Officer Chief Financial Officer
M 027 382 0023 M 021 263 2666

Address:
Level 3, Heartland House
35 Teed Street
Newmarket, Auckland
New Zealand

For media enquiries, please contact:
Nicola Foley
Head of Communications
M 027 345 6809
E nicola.foley@heartland.co.nz

22
FY2021 total fully imputed dividends divided by the closing share price as at 20 August 2021 of $2.16.
23
FY2020 total fully imputed dividends divided by the closing share price as at 16 September 2020 of $1.19.
24
That is, the strike price under the DRP will be 98.0% of the volume weighted average sale price of Heartland shares
over the five trading days following the Record Date. For the full details of the DRP and the Strike Price calculation,
refer to Heartland Group Holdings Limited DRP offer document dated 10 December 2018.

---

2021 AnnualResults
24 August2021
1

Important
2
notice
This presentation has been prepared by Heartland Group
Holdings Limited (NZX/ASX: HGH) (the Companyor
Heartland) for the purpose of briefings in relation to its
financialstatements.
The presentation and the briefing (together the
Presentation) contain summary information only, which
should not be relied on in isolation from the full detail in
the financialstatements.
The information in the Presentation has been prepared
with due care and attention. However, no person
(including the Company and its directors, shareholders
and employees) will be liable to any other person for any
loss arising in connection with thePresentation.
The Presentation outlines a number of the Company’s
forward-looking plans and projections. Those plans and
projections reflect current expectations, but are inherently
subject to risk and uncertainty, and may change at any
time. There is no assurance that those plans will be
implemented or that projections will berealised.
No person is under any obligation to update this
presentation at any time after its release or toprovide
further information about theCompany.
The information in this presentation is of a general
nature and does not constitute financial productadvice,
investment advice or any recommendation.Nothing in
this presentation constitutes legal, financial,tax or other
advice.
Non-GAAPmeasures
This presentation contains references to non-GAAP
measures including underlying profit or loss, underlying
ROE, underlying CTI ratios and underlying EPS. A
reconciliation between reported and the non-GAAP
measure of underlying financial information is included on
page 33.
Because Heartland complies with accounting standards,
investors know that comparisons can be made with
confidence between reported profits and those of other
companies, and there is integrity in Heartland’s reporting
approach. These non-GAAP figures are provided as a
supplementary measure for readers to assess Heartland’s
performance alongside NZ GAAP reported measures,
where one-offs, both positive and negative, canmake
it difficult to compare profits between years. However,
these do not have standardised meanings and should
not be viewed in isolation nor considered a substitute for
measures reported in accordance with NZGAAP.
Non-GAAP financial information has been subject to
review by KPMG.

FY2021
highlights
3

Financial performancehighlights
1
Refer to Appendix 3 for reconciliation between reported and underlying net profit after tax (NPAT)result.
2
OOI includes fair value gains/losses oninvestments.
3
Gross finance receivables (Receivables) also include ReverseMortgages.
4
Impaired asset expense as a percentage of averagereceivables.
$5,018m
GROSS FINANC ERECEIVABLES
3
+8.0% vs June2020
$4,864m
B O R R O W I N G S
+7.3% vs June2020
$762m
EQUIT Y
+8.8% vs June2020
0.31%
IMPAIRMENT EX PENSERATIO
4
-34 bps vs June 2020
KEY
H I G H L I G H T S
•Continued Receivables
growth incore
lending portfolios
(Motor, Reverse
Mortgages,Asset
Finance
5
).
•StrongNIMmaintained,
anincreaseof2bpson
FY2020to4.35%.
•Downward trend in
FY2021 underlying
cost to income ratio
(CTI), criticalto
achieving scalabilityfor
the future (43.9% in
2H2021vs 45.8% in
1H2021).
•Improved arrears
positiondue to
repayments,
refinancingand
ordinaryrestructures.
$87.0m
$11.0m(+14.3%)
on an underlyingbasis
Underlying other
operating income
(OOI) $13.6m
(+3.1% vsFY2020)
Net interestmargin
(NIM) 4.35% (+2 bps vs
FY2020)
Averageinterest
earningassets
+$366.2m(7.3%) vs
FY2020
Underlying impairment expense
movement -24.4% vsFY2020
CTI 46.8%(+1.5percentage
points(pps) vs FY2020)
Underlying operatingexpenses
(OPEX)$110.8m (+7.3% vs
FY2020)
Underlying CTI44.8%(-0.1 pps
vsFY2020)
Net interest income
$233.5m
+7.8% vs FY2020
5
Previously referred to as Business Intermediated.
NPAT
1
+20.9% vs FY2020
14.9 cps
EARNINGS PER SH ARE
+2.4 cps vs FY2020
11.9%
RET URN ON EQUIT Y
+144 bps vs FY2020
4

5
FY2021
significant
one-off
items
FY2021 one-offs included in the reported result
•Net fair value gains/lossesoninvestments:
•a$3.9m fair value gain was recognised on Heartland’s equity investment in
Harmoney
•a$0.7m fair value gain was recognised following updated external valuations received
on Heartland Bank’s investment propertyportfolio
•a$0.5m fair value loss was recognised following Heartland Bank acquiring
remaining shares in Fuelled Limited in April2021.
•Voluntarily accelerated amortisation of intangible assets: $4.3m expense was recognised,
reflecting an acceleration of amortisationofsoftware assets held on the balance sheet.
•Aged items provision and write-off: $1.7m of aged legacy suspense account transactionswere
written off or provisioned wherecollectability is uncertain.
•Other non-recurring expenses: $0.9m.

Strategichighlights
Further digitalisation and integration of
platformsinNew Zealand andAustralia.
Heartland Bank awarded Canstar’s 2021 Savings Bank of the Year
(fourth year), and awards for Direct Call and YouChooseaccounts.
Australian Reverse Mortgages loan book
surpassed A$1bn.
NZ Reverse Mortgages remains Consumer
Trustedfor the fourth year in arow.
Australian Reverse Mortgagesawarded YourMagazine’s 5-Star
Lender Award and InfoChoice’s Best Reverse MortgageAward.
Quality ofloanbook improved
despite COVID-19 pressures.
Heartland Bank one of two Australasian banks to have no reduction or
adverse change to its ratings or outlookby Fitch Ratings since Jan2020.
6
More than $200m approvedfrom Home Loans
self-serve digitalapplications received during
FY2021.

Impairments
and provisioning
Impact
ofCOVID-19
Impairment expensewas $15.0m, a$14.4mdecrease (49.1%),decreasing the
impairmentexpense ratio
1
from 0.65% inFY2020 to 0.31% inFY2021.
On an underlying
2
basis, impairment expense decreased by $4.8m (24.4%),
decreasing the FY2021 impairment expense ratio by 13 bps from 0.44% in
FY2020.
This was driven by:
•remediation of accounts previously in arrears, and release of provisions held
against those borrowers largely due to repayments, refinancing and ordinary
restructures
•growth in portfolios that attract lower rates of provisioning (Motor, Asset
Finance) or are subject to fair value (Reverse Mortgages), and contraction in
portfolios that attract higher rates of provisioning (Open for Business,
Harmoney).
1
Impaired asset expense as a percentage of average receivables.
2
FY2020 excluding the impact of NZ$9.6m pre-tax economic overlay due to COVID-19.
•Direct impact of COVID-19 has been absorbed within business as usual
activity.
•The COVID-19 economic overlay remains unutilised.
•Business Finance Guarantee Scheme (BFGS) and Extend customers
performing at normal levels:
•BFGS book at $60.3m.
•Given the recent lockdown and remaining uncertainty regarding the border
closure, any release of the overlay is not yet appropriate.
•Heartland continues to exercise a degree of caution due to the ongoing
economic impacts of COVID-19 that continue to be experienced across New
Zealand and Australia.
7

Financial
8
results

Note: All figures inNZ$m.
1.Includes net gain on equity investments and investmentproperties.
2.Post-tax impact of $9.6m economic overlay due toCOVID-19.
9
Growth in
profitability
One-off impacts

10
Growth in
receivables
Note: The graph shows year-to-date (YTD) movement in receivables by portfolio excluding the impact of changes in FX rates. All figures inNZ$m.

Note:
NIM is calculated as net interest income/average gross interest earning assets.
Underlying CTI excludes one-off impacts. Refer to Appendix 3 for reconciliation between reported andunderlying result.
Impairment expense ratio is calculated as impairment expense/average gross finance receivables.
Adjusted impairment expense ratio excludes the impact of the $9.6m pre-tax economic overlay due toCOVID-19.
11
Key
performance
measures
4.42%
4.33%4.33%
4.35%
4.61%
4.46%
4.59%
4.69%
FY18FY19FY20FY21
NIM
Total NIMNIM excl. Liquid Assets
73.9
75.6
87.0
79.4
1.84%
1.72%
1.87%
1.58%
1.40%
1.50%
1.60%
1.70%
1.80%
1.90%
Jun 18Jun 19Jun 20Jun 21
65.0
70.0
75.0
80.0
85.0
90.0
Non Performing Loans
Non Performing LoansNon Performing Loans Ratio
40.9%
41.6%
45.4%
46.8%
40.9%
39.9%
44.9%
44.8%
FY18FY19FY20FY21
CTI
Reported CTIUnderlying CTI
0.58%
0.49%
0.65%
0.44%
0.31%
FY18FY19FY20FY21
Impairment Expense Ratio
Reported Impairment Expense Ratio
Adjusted Impariment Expense Ratio

1
Total fully imputed dividends divided by the closing share price as at 20 August2021 of$2.16.
2
TSR for the period 20 August 2016 –20 August2021.
•Return on equity (ROE) of 11.9%
(up144bps vsFY2020).
•Earnings per share (EPS) of 14.9 cps,
up2.4 cps compared toFY2020.
•Final dividend of 7.0 cps, up 4.5 cpson
FY2020 as pay-out ratio returnsto
historical levels with easing of RBNZ
restrictions.
•Dividend yield of7.1%.
1
•Five year total shareholder return (TSR)
of 107.2%, compared with the NZX50
Index TSR of 81.9% in the same
period.
2
12
Shareholder
return
ROE
Earnings per share (cps)
Dividend per share (cps)

13
Divisional
summary
13

14
1
Compounded annual growth rate for the period 1 January 2017 –30 June2021.
Reverse mortgages portfolioanalytics
602
M
NZ ReverseMortgages
+$42m(7.4%)
vs June 2020
1,001
M
AU ReverseMortgages
+A$86m(9.4%)
vs June 2020
A$136,472Average loan size
77 Weighted average borrowers’ age
11.4%Average origination LVR
22.9%Weighted average LVR
Proportion of the loan
0.4%book over 75% LVR
A$189m
(-A$15m vs FY2020)Origination
A$154mTotal repayments
(+A$41m vs FY2020)in FY2021
16.9%FY2021
(vs 14.6% in FY2020)repayment rate
Compounded annual
19.3%growth rate1
23.3%Repayments from vintage
(vs 24.0% in FY2020)loans (+11 years)
Averageloansize$109,417
Weighted average borrowers’ age 79
AverageoriginationLVR10.1%
WeightedaverageLVR21.5%
Proportion oftheloan
book over75%LVR0%
$102m
Origination(+$24m vs FY2020)
Total repayments$93m
in FY2021(+$29m vs FY2020)
FY202116.5%
repayment rate(vs 12.5% in FY2020)
Compounded annual
growth rate
1
10.5%
Repayments from vintage37%
loans (+11 years)(vs 38% in FY2020)
•comparatively lower repayments in Q4 of FY2020 with property
salesrestricted by COVID-19 relatedlockdowns
•a buoyant property market in1H2021
•seniors moving in with family and pooling financial resources
(loneliness/highpropertyprices)
•higher value homes being more cost effective to sell/downsize from
comparedwith‘average’ homes.
ELEVATED REPAYMENTS IN FY2021 DUETO:

15
1
Excluding the impact of changes in FXrates.
2
Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 31 December2020.
3
Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 31 March2021.
As at 30 June2021
As at 30 June2021
•Receivables growth impacted by elevated
repayments (39%vs FY2020), more on p14.
•Australian Seniors Finance recently rebranded
to Heartland Reverse Mortgages, with all
Australian products now included under the
Heartland Finance brand, ensuring greater
brand alignment and consistency.
•Received support from mortgage aggregators,
including partnerships with Australian Finance
Group, Choice Aggregation and PLAN
Australia.
•As Australia’s leading provider of reverse
mortgages (12-month market share increasing
from 28.5%
2
to 29.3%
3
), there is still
substantial opportunity to support more older
Australians in retirement.
•Launched Well-Life Loans for Australians
entering and in retirement.
•Exploring expansion into other asset classes
through existing relationships with
intermediaries that lend to businesses and
consumers, as well as Heartland’s own digital
platforms.
AuReverse
Mortgages
+5.5%
increase since June2020
+9.5%
1
growthsince June2020
$36.2m
NET OPERATINGINCOME
$1,071.4m
RECEIVABLES

16
1
FY2020 includes one-offs of $1.6m due to the required accounting standard change in respect of upfront reverse mortgagefees.
$601.5m
+7.4%
As at 30 June2021
As at 30 June2021
NZReverse
Mortgages
+3.6%
increase since June2020
growthsince June2020
$24.4m
NET OPERATINGINCOME
RECEIVABLES
•New Zealand Reverse Mortgages had a
record year for new business, up 30.4%
from FY2020 where the final quarter
(Q4) was impacted by COVID-19, and
up 26.2% ahead of FY2019.
•Performance driven by investment in
marketing to increase awareness,
education and lead nurturing activity,
supported by lower interest rates and
higher property prices.
•Receivables growth was impacted by
elevated repayments (43%vs FY2020).
See p14 for more information.

17
1
Excluding the impact of changes in FXrates.
-6.9%
1
As at 30 June2021
As at 30 June2021
Open for
Business(O4B)
-1.1%
decrease since June2020
decrease since June2020
$14.6m
NET OPERATINGINCOME
$144.5m
RECEIVABLES
•Growth slowed in 2H2020 as a result of
COVID-19 disruptions and availability of
Government-backed funding for small
businesses. This trend continued in
1H2021.
•2H2021 saw growth of $3.6m due to
improving economic sentiment.
•Integration of front-end platforms and
back-end processes will reduce friction
for all customers, including O4B, which
will enhance customer experience and
speed up processes.

As at 30 June2021
As at 30 June2021
Asset
Finance
1
+30.1%
increasesinceJune 2020
+14.4%
growth since June2020
$28.5m
NET OPERATINGINCOME
18
Previously referred to as Business Intermediated.
1
$570.9m
RECEIVABLES
•Continued deepening and expansion of
the intermediary network, and
distributor/vendor and point of sale
support.
•Strong demand from partners in the
transport and logistics sector assisted
growth following demand in the
aftermath of the COVID-19 restrictions.
•To support trucking distributors, a digital
quoting tool was developed and
launched in FY2021 to more easily send
finance referrals to Heartland
Relationship Managers.
•Launch of Heartland Extend for
Business customers, providing business
owners with flexibility to manage and
adjust loan repayments to meet their
needs.

As at 30 June2021
As at 30 June2021
Business
Relationship
+4.1%
increasesinceJune 2020
+11.8%
1
growth since June2020
$26.1m
NET OPERATINGINCOME
19
Excluding the impact of changes in FXrates.
1
$555.1m
RECEIVABLES
•Supported more than 150 businesses to
access over $60m in funding under NZ
Government’s Business Finance
Guarantee Scheme.
•Provided Go Car Finance with funding
for its New Zealand loan book, aligning
with Heartland’s strategy to diversify
distribution in motor vehicle finance.
•New wholesale finance system now
successfully implemented after a pilot in
June 2021, allowing wholesale dealers
to manage finance via a digital interface.
•The residual portfolio’s continued
downward trend reflects Heartland’s
strategy to reduce non-core low margin
Relationship lending or risk
concentrations.

20
$1,293.7m
+14.9%
As at 30 June2021
As at 30 June2021
Motor
Finance
+14.2%
increasesinceJune 2020
growth since June2020
$69.2m
NET OPERATINGINCOME
RECEIVABLES
•Growth came mainly from the Motor
dealer book via car dealerships, brokers
and branded partnerships such as Kia
Finance, Jaguar/Land Rover Financial
Services.
•In July 2021, a new vehicle finance
service iOWN, provided exclusively by
Heartland Bank, was launched in
partnership with Auto Distributors New
Zealand Limited, for the purchase of a
new or used Peugeot or Citroen from
authoriseddealerships.
•Guaranteed Future Value product,
available through branded partners,
now been rolled out to 11 vehicle brands
across more than 140 dealerships,
reducing barriers to entry for those
buying a new or used vehicle.

As at 30 June2021
As at 30 June2021
Harmoneyand
otherpersonal
lending
-22.4%
decrease since June2020
-37.7%
1
decrease since June2020
$16.6m
NET OPERATINGINCOME
$132.1m
RECEIVABLES
21
Excluding the impact of changes in FXrates.
1
•The New Zealand Harmoney portfolio
contracted $69.1m (47.4%) to $76.7m,
while the Australian Harmoney
portfoliodecreased by $5.2m (9.5%)
1
to
$48.8m.
•Both New Zealand and Australian
Harmoney portfolios continued to
contract in FY2021 as a result of high
repayments, combined with greater use
by Harmoney of its own on-balance
sheet funding facilities.
•Heartland is in the latter stages of
completing its transition to offer
Harmoney on-balance sheet funding
facilities in both New Zealand and
Australia.

As at 30 June2021
As at 30 June2021
Rural
+4.7%
increase since June2020
-3.1%
decrease since June2020
$32.2m
NET OPERATINGINCOME
$586.6m
RECEIVABLES
22
•Rural Relationship net operating
income increased by 10.5% to $26.6m
and Livestocknet operating income
decreased by 16.2% to $5.5m.
•Rural Relationship receivables reduced
by 2.7% to $477.3m and Livestock
receivables reduced by 5.1% to
$109.4m.
•The downward trend reflects
Heartland’s strategy to reduce non-core
low margin Rural Relationship lending.
•Sheep & Beef Direct platform launched
late 2020. At 5 August 2021, eligible
applications totaled $48.0m, with
$40.5m approved online and $30.4m
drawn down.
•Sheep & Beef platform reflects
implementation of digitalisation
strategy, allowing Heartland to write
more loans.

HomeLoans¹
•Home Loans
1
Receivables increased
$49.3m in FY2021 to $49.9m.
•Following a successful pilot, Home Loans
launched in October 2020 with
conservative lending criteria targeting high
quality applicants.
•Loan drawdowns slowed over the summer
holiday period in 1H2021, however strong
application rates have continued in
2H2021. Online enquiries totalled$895.2m
and more than $200m was approved from
applications received during FY2021.
•A demonstration of Heartland’s
digitalisation strategy in action. Online
applications with automated decisioning
and processing reduces cost of
onboarding, allowing cost savings to be
passed onto customers.
23
Excludes legacy Retail Mortgages.
1

24
Funding
and
liquidity
NewZealand
•Heartland Bank increased borrowings by $94.4m (2.6%) in FY2021.
•Deposits contracted $49.7m (1.5%).
•Decreased total liquidity by $99.1m (13.7%) primarily due to decrease in investments.
•Heartland Bank holds liquidity well in excess of regulatory minimums.
•Continued focus on reducing risk concentrations in the deposit book while shifting the mix
towards lower rate call deposits.
Australia
•Heartland Australia increased borrowings by A$247.6m (29.1%) in FY2021 and has access
to committed Australian reverse mortgage loan funding of A$1.25b in aggregate.
•Heartland completed an A$142m long-term reverse mortgage-backed syndicated loan
funded by established offshore institutional investors. The first-of-its-kind transaction
complements continued efforts to diversify type, source and tenor of funding and evidence
market liquidity to existing warehouse funders.
•The Heartland Australia group continues to successfully execute on its strategic funding
programme to cater for strong growth in its portfolios, with a further A$45m MTN issued in
July, adding further diversity to the funding base.
•Further expansion of existing warehouse funding through increased senior limits and the
introduction of mezzanine funding is well advanced, and focus will continue to be on sourcing
optimal long-term duration matched funding.
1
Includes intercompany deposits.
2,882
3,154
3,269
3,220
615
712
909
1,178
298
343
359
503
Jun 18Jun 19Jun 20Jun 21
Funding composition $m
Deposits1AU wholesale fundingNZ wholesale funding
1

•Heartland Bank’s capital ratio as at 30 June 2021 is 13.88% (up 121bps from 30 June 2020).
•As part of the RBNZ capital implementation review requiring an increase in capital, increases
in capital will be phased in over a seven-year period, starting from 1 July 2022, requiring
minimum total capital ratio to gradually be increased from the current 10.5% to 16.0%.
•Heartland Bank’s current capital position and organic growth in capital is expected to be
sufficient to meet future minimum requirements.
25
Capital
(0.27%)

25
Strategic
update
1
26

Regulatory
update
A significant volume of regulatory change
has been signalled, and Heartland
continues to monitor this.
Key changes include:
•New Zealand Credit Contracts and
Consumer Finance Act 2003 and
the Credit Contracts and Consumer
Finance Regulations 2004
•Financial Markets (Conduct of
Institutions) Amendment Bill
•Deposit Takers Act
•RBNZ capital implementation
review
•Australian Design and Distribution
Obligations.
See the accompanying FY2021 full year
results announcement for further detail
about upcoming regulatory change.
27
27

26
Strategic
objectives
Heartland’s strategic visionto provide best or only products viascalable
digitalplatformswill be achievedthrough:
1.Business as usualgrowth
•Broadening product offerings
and achieving growth across
business as usual activity,
including through product and
platform developments.
2.Frictionless service at
thelowestcost
•Frictionless service at each
stage of a customer’s journey
eases inconvenience and
removes costly operational
processes–enhancing
customer experience and
allowing savings to be passed
onto customers.
•As described by the virtuous
circle to the right.
3.Expansion inAustralia
•Expanding product offerings
to meet the wider needs of the
demographic entering, as well
as in,retirement.
•Exploring expansion into other
asset classesthroughdigital
platforms andexisting
relationships with
intermediariesthat lend to
businesses and consumers.
4.Acquisitions
•Where there is a fit with the
above and the opportunity to
add value, acquisitions will be
explored.
Reduce CTIratio
Provide best or only
productsthroughscalable
digital platforms, at the
lowestcost
Offer best value for
customers (through
price, speedorcustomer
experience)
Increasecustomer
volumes
Increaseincome
earned
Reduce CTI ratio
28

Looking
forward
•Higher growth in Reverse Mortgages,
Home Loans and transition of
Harmoney to on-balance sheet model
will result in NIM contracting.
•However, this will drive an offsetting
benefit of reduced impairment
expenses, reflecting improved lending
portfolio quality.
•Continuing to extend best or only
product reach through digital
platforms, providing frictionless
service at each stage to provide better
customer experience.
•CTI ratio trend downwards expected
to continue, as a result of ongoing
digitalisation and automation.
Noting uncertainties associated with the
ongoing impacts of COVID-19,
Heartland expects NPAT for FY2022to
be in the range of $93m to$96m.
NPAT FORFY2022
29

Appendices
30

Appendix 1
Financial
position
31
$m
30 June
2021
30 June
2020
Movement
($m)
Movement
(%)
Liquid Assets539544(5)(0.9%)
Gross Finance
Receivables
5,0184,6463728.0%
Provisions(54)(63)914.3%
Other Assets179190(11)(5.8%)
TOTAL ASSETS5,6835,3183656.9%
Retail Deposits3,1833,264(81)(2.5%)
Other Borrowings1,6811,26841332.5%
Total Funding4,8644,5323327.3%
Other Liabilities5786(29)(33.4%)
Equity762700628.8%
TOTAL EQUITY &
LIABILITIES
5,6835,3183656.9%

Net Interest Margin4.35%4.33%2 bps
Cost to Income Ratio
46.8%45.4%1.5 pps
Return on Equity
11.9%10.5%144 bps
Earnings per Share
14.9 cps12.5 cps
2.4 cps
Appendix 2
Financial
performance
32
Includes fair value movements.
1
$m FY2021FY2020Change ($)Change (%)
Net Operating Income
1
251.2235.315.86.7%
Operating Expenses117.7106.810.910.2%
Impairment Expense15.029.4(14.4)(49.1%)
Profit Before Tax118.699.119.419.6%
Tax Expense31.527.24.416.1%
Net Profit After Tax87.072.015.120.9%

Appendix3
Reconciliation
of reported
withunderlying
results
FY2021 one-offs included in the reported result
are as detailed on page 5.
FY2020 one-offs included in the reportedresult:
•Required accounting standard change in
respect of upfront reverse mortgageincome
and expenses: $2.8m recognised inother
operating income and $3.3mrecognisedin
operatingexpenses.
•Net fair value gain on equityinvestments:
$2.1m fair value gain was recognisedon
Heartland’s equity investment in
Harmoney.
•COVID-19economic overlay: $9.6m
economic overlay to allow for the
uncertainty created byCOVID-19.
33
$mFY2021FY2020Movement ($m)Movement (%)
Reported NOI251.2235.315.86.7%
Less:
Upfront Reverse Mortgage fees-(2.8)2.8
Net fair value gain on investments(4.1)(2.1)(2.0)
Other non-recurring items(0.6)0.6
Underlying NOI247.1229.817.37.5%
Reported OPEX117.7106.810.910.2%
Less:
Upfront Reverse Mortgage costs-(3.3)3.3
Voluntarily accelerated amortisation(4.3)-(4.3)
Aged items provision and write-off(1.7)-(1.7)
Other non-recurring items(0.9)(0.2)(0.6)
Underlying OPEX110.8103.27.57.3%
Reported impairment expense1529.4(14.4)(49.1%)
Less:
COVID-19 economic overlay-(9.6)9.6
Underlying impairment expense1519.8(4.8)(24.4%)
Reported NPAT877215.120.9%
Less:
Post-tax impact of one-offs0.84.9(4.1)
Underlying NPAT87.976..91114.3%
Reported Average Equity730.8687.843
Underlying Average Equity733.7691.4426.1%
Reported CTI46.8%45.4%1.5%
Underlying CTI44.8%44.9%(0.1%)
Reported ROE11.9%10.5%1.44%
Underlying ROE12.0%11.1%0.86%

Thankyou
For Heartland’s FY2021 Annual Results announcement,
please seeshareholders.heartland.co.nz
34

Heartland market update Heartland Announces new Directors

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