HGH HY23 results, HBL considers offer of subordinated notes

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info

NZX/ASX release
28 February 2023

Heartland announces strong half year profit and Heartland
Bank considers offer of subordinated notes

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) is pleased to announce a net profit
after tax (NPAT) of $48.7 million for the six-month period ended 31 December 2022 (1H2023), an
increase of $1.1 million (2.4%) compared with the six-month period ended 31 December 2021
(1H2022)
1
. On an underlying
2
basis, 1H2023 NPAT was $54.7 million, an increase of $7.6 million
(16.2%) compared with the 1H2022 underlying NPAT.

Heartland Bank Limited (Heartland Bank) is considering making an offer of up to $75 million (with
the right to accept oversubscriptions of up to an additional $50 million at Heartland Bank’s
discretion) of unsecured subordinated notes (Notes) to New Zealand investors and certain overseas
institutional investors. See page 12 for more detail.

Highlights for 1H2023

Financial highlights
‒ NPAT of $48.7 million, up 2.4% ($1.1 million). Underlying NPAT of $54.7 million, up 16.2% ($7.6
million) on 1H2022 underlying NPAT.
‒ One-off items had a $6.0 million net
3
impact on NPAT.
‒ Gross finance receivables (Receivables)
4
of $6.5 billion, up 10.1%
5
($264.5 million).
‒ Underlying return on equity (ROE) of 12.1%, down 7 basis points (bps).
6

‒ Net interest margin (NIM)
7
of 3.97%, down 34 bps. Underlying NIM of 4.02%, down 29 bps.
‒ Net interest income (NII) of $138.9 million, up 12.1%. Underlying NII of 140.8 million, up 13.6%.

1
All comparative results are based on the unaudited half year consolidated financial statements of Heartland
and its subsidiaries (the Group) for 1H2022.
2
Financial results in this announcement are presented on a reported and underlying basis. Reported results
are prepared in accordance with NZ GAAP and include the impacts of one-offs, both positive and negative,
which can make it difficult to compare performance between periods. Underlying results (non-GAAP financial
information) exclude any impacts of fair value changes on equity investments held, the de-designation of
derivatives, and other one-offs. This is intended to allow for easier comparability between periods, and is used
internally by management for this purpose. Refer to Profitability on page 5 for a summary of reported and
underlying 1H2023 results. A detailed reconciliation between reported and underlying financial information,
including details about 1H2023 one-offs, is set out in Appendix 3 on page 41 of the accompanying 1H2023
investor presentation. General information about the use of non-GAAP financial measures is set out on page 2
and 5 of that presentation.
3
Includes tax impact on one-offs.
4
Receivables includes Reverse Mortgages.
5
Annualised 1H2023 growth excluding the impact of changes in foreign currency exchange (FX) rates.
6
Underlying ROE refers to ROE calculated using underlying results. When calculated using reported results,
ROE was 10.6%, down 166 bps. See page 5 of the accompanying 1H2023 investor presentation for more
information about the use of ROE, a supplementary, non-GAAP measure.
7
NIM is calculated based on average gross interest earning assets.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
2
‒ Underlying cost to income (CTI) ratio of 42.7%, down 40 bps.
8

‒ Impairment expense as a percentage of average Receivables decreased from 0.33% in 1H2022
to 0.29% in 1H2023, benefitting from an improved book quality.
‒ 1H2023 interim dividend of 5.5 cents per share (cps), flat on 1H2022.
‒ Earnings per share (EPS) of 7.3 cps, down 0.8 cps. Underlying EPS of 8.2 cps, up 0.2 cps from
1H2022.

Strategic highlights
‒ $198.6 million raised through 2022 equity raise to retire bridge debt and fund growth ambitions
for existing businesses.
‒ Substantially completed the integration of StockCo Australia into Heartland, and repaid a A$158
million acquisition finance facility using proceeds from the equity raise.
‒ Signed a share purchase agreement for the purchase of Challenger Bank Limited (Challenger
Bank) on 20 October 2022, conditional only on obtaining regulatory approvals.
‒ Australian Reverse Mortgages business increased market share to 35.9%.
9

‒ Heartland Bank experienced the highest growth rate in retail deposits of all main and domestic
banks in New Zealand for the first quarter (Q1) of the financial year ending 30 June 2023
(FY2023).
10


Strategic vision

Heartland’s strategic vision is to create sustainable growth and differentiation through best or only
products delivered through scalable digital platforms. Underpinning this are four strategic pillars:
1. Business as Usual Growth (reported on in Business performance from page 8)
2. Frictionless Service at the Lowest Cost
3. Expansion in Australia
4. Acquisitions.

Frictionless Service at the Lowest Cost
Digitalisation of product platforms enables Heartland to deliver enhanced customer experience by
reducing customer friction and creating scale without costly processes.

Through 1H2023, Heartland continued to develop new functionality and automated solutions for its
digital platforms to enable increased self-service by customers. As a result, calls per customer to
Heartland’s Motor, Deposits and Business teams reduced by 7% from July to December 2022.
Further, the number of users of Heartland Bank’s Mobile App continued to increase, up 46% from
July 2022.

Despite short-term volatility, the CTI ratio is a measure of efficiency. On an underlying basis, the CTI
ratio reduced from 43.1% in 1H2022 to 42.7% in 1H2023.
8
Heartland remains committed in the long
term to reductions in the CTI ratio.

The banking industry has yet to harness the full benefit of technology. Heartland’s objective is to
differentiate through a continuous focus on reducing its cost of onboarding and customer service via

8
Underlying CTI ratio refers to the CTI ratio calculated using underlying results. When calculated using
reported results, the CTI ratio was 44.8%, up 94 bps. See page 5 of the accompanying 1H2023 investor
presentation for more information about the use of the CTI ratio, a supplementary, non-GAAP measure.
9
Based on Australian Prudential Regulation Authority (APRA) authorised deposit-taking institution (ADI)
Property Exposure and Heartland Finance data as at 30 September 2022.
10
Based on balance sheet data from the Reserve Bank of New Zealand (RBNZ) for Q1 of FY2023.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
3
automation and self-service. This will drive an easier and faster customer experience, and contribute
to reductions in the CTI ratio.

The upgrade of Heartland Bank’s core banking system is almost complete. This upgrade will be an
enabler for greater automation and digitalisation, positioning Heartland for increased scalability in
the future.

Expansion in Australia
Heartland’s focus for expansion in Australia is on:
1. growing its existing Australian Reverse Mortgages business
2. growing Livestock Finance following the recent acquisition of StockCo Australia
3. seeking other opportunities to expand Heartland’s ‘best or only’ strategy into Australia.

The Australian market presents Heartland with the opportunity for growth in areas underserviced by
the larger banks such as livestock finance and reverse mortgages.

The Australian Government’s Home Equity Access Scheme (previously known as the Pension Loan
Scheme) has contributed to a greater awareness of home equity release options, including reverse
mortgages. Non-bank participation has contributed to greater awareness and acceptance of reverse
mortgages as the product continues to be normalised through promotion. Heartland has maintained
its position as the largest active provider, with market share of 35.9% at 30 September 2022 (up
from 30.9% at 30 September 2021)
11
.

StockCo Australia’s livestock finance allows cattle and sheep producers across Australia to maximise
their capital. StockCo Australia offers finance to cover up to 100% of the livestock purchase, with no
repayments required until the livestock is sold. While the portfolio experienced some adverse
weather impacts in 1H2023, the outlook for the second half of the financial year ending 30 June
2023 (2H2023) is positive. See page 10 for more detail.

The purpose of the Challenger Bank acquisition is to fuel expansion in Australia through access to
retail deposits and by creating the opportunity for expansion into new product areas.

Acquisitions
On 20 October 2022, Heartland announced it had signed a conditional share purchase agreement for
the purchase of Challenger Bank from Challenger Limited (ASX: CGF). Completion under the share
purchase agreement remains subject to obtaining the requisite regulatory approvals.

Based in Melbourne, Australia, Challenger Bank is an established authorised deposit-taking
institution (ADI) and offers customers a range of savings and lending products. The benefits of this
acquisition include:
‒ access to a deep and efficient pool of funding to support ongoing growth
‒ potential uplift in margin, to the extent that retail funding rates are less than wholesale rates
‒ a platform to extend Heartland’s ‘best or only’ strategy in Australia.

Heartland’s vision is to create a sustainable and profitable digital bank serving sectors of the
Australian market which Heartland considers are under-serviced by major banks (including older
Australians, rural Australia, and small businesses). Heartland already holds strong positions in
Australia with Reverse Mortgages and Livestock Finance. Further expansion is intended by leveraging

11
Based on APRA ADI Property Exposure and Heartland Finance data as at 30 September 2021 and 30
September 2022.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
4
Heartland’s experience and expertise in New Zealand to offer additional products in the Australian
market (including Auto Finance, Asset Finance and Online Home Loans).

Additional transaction costs are expected in 2H2023 in relation to obtaining an ADI licence, including
for the completion of the Challenger Bank acquisition. Heartland will provide further information to
the market on the Challenger Bank acquisition as updates become available.

Operating environment

1H2023 was affected by rising inflation and the cost of living. The 2023 calendar year is expected to
have similar challenges. New Zealand’s annual inflation rate remains at a 30-year high, while
Australia’s continues to rise. Rising household costs and high interest rates are being felt in both
countries.

Notwithstanding these pressures, Heartland’s loan portfolios have performed well. Overall credit
quality remains good, benefitting from Heartland’s continued move towards higher quality and
lower risk assets.

As an example, the Reverse Mortgage portfolios have remained resilient to economic conditions,
particularly to changes in house prices and rising interest rates, with conservative loan-to-value
ratios (LVRs). The weighted average current LVRs for New Zealand and Australian Reverse Mortgages
respectively were 19.7% and 20.0% at 31 December 2022. In New Zealand, 97.7% of loans had an
LVR under 40% on an index adjusted valuation basis, and no loans had an LVR over 60%. In Australia,
98.1% of loans had an LVR under 40% on an index adjusted valuation basis, and 0.1% of loans had an
LVR over 60%.

Heartland experienced an increase in arrears in its Motor portfolio in the first four months of
1H2023, as rising costs impacted household budgets. This was reflected in the percentage of the
Motor book in arrears increasing from 3.17% at 30 June 2022 to 3.99% at 31 October 2022.
However, this has since moderated with the percentage of the Motor book arrears falling to 3.73%
by 31 December 2022, reflecting the return to pre-COVID-19 levels of arrears at this point in the
financial year for the portfolio. The subsequent seasonal increase experienced in January 2023 was
at a similar level to January 2022.

Heartland is focused on supporting its vulnerable customers and those who may be experiencing
temporary difficulties. In response to the rising interest rate environment, Heartland intentionally
delayed passing the full impact of these increases onto some borrower customers, and did not pass
the full increase onto New Zealand or Australian Reverse Mortgage customers – this was believed to
be the socially responsible approach.

The recent flooding and severe weather in the upper North Island had a devastating impact on many
households and businesses. Heartland has been supporting its customers and employees who have
been affected and will continue to do so. Heartland commenced a proactive call programme to all
customers in the impacted regions to understand customer impact and how Heartland can assist
them. Support has included deferred loan repayments, interest only payments, additional funding or
other solutions determined on a case-by-case basis.

Heartland’s Economic Overlay of $8.0 million taken in the financial year ended 30 June 2022
(FY2022) remains unchanged at 31 December 2022. The Economic Overlay is considered a sufficient
buffer against the potential impacts of a future deterioration in the economic environment.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
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Financial results

Profitability
NPAT was $48.7 million, a $1.1 million (2.4%) increase on 1H2022. Underlying NPAT was $54.7
million, a $7.6 million (16.2%) increase on 1H2022.

Underlying ROE was 12.1%, down 7 bps from 1H2022.
12


EPS was 7.3 cps, down 0.8 cps from 1H2022. Underlying EPS was 8.2 cps, up 0.2 cps from 1H2022.
1H2023 reported results include StockCo Australia earnings contribution of $4.8 million
13
, and one-
off items which should be considered when analysing the underlying result.
14

Significant one-off items included in Heartland’s 1H2023 reported results are outlined below.
1. Legacy hedge accounting impacts: a $3.6 million loss contributed by the derivatives that were
de-designated from their prior hedge accounting relationships in FY2022. The de-designation
resulted in a mark-to-market (MTM) accounting gain on these derivatives being recognised in
FY2022. This MTM gain is subsequently unwound as a loss as the cashflows from these
derivatives are realised.
2. Fair value loss on equity investment in Harmoney Corp Limited (Harmoney): a $2.4 million net
fair value loss was recognised on investment in Harmoney shares during 1H2023. The fair value
as at 31 December 2022 is determined based on the closing mid-market price of Harmoney
shares on the Australian Stock Exchange of A$0.4875, being the last bid/ask price mid-point on
30 December 2022 considering there were no trades on the final trading day of 2022.
3. Interest expense on the bridging loan for the acquisition of StockCo Australia: a $1.9 million
interest expense was recognised in 1H2023 in relation to a A$158 million bridging loan taken by
Heartland to acquire StockCo Australia. The loan was fully repaid in September 2022 using the
proceeds from the recent equity raise.

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


Reported Underlying
1H2023 1H2022 Movement 1H2023 1H2022 Movement
NOI
15
($m) 141.7 130.7 11.0 149.6 130.8 18.8
Operating expenses
(OPEX) ($m)
63.4 57.3 6.2 63.9 56.4 7.5
NPAT ($m) 48.7 47.5 1.1 54.7 47.1 7.6
NIM 3.97% 4.30% (34 bps) 4.02% 4.30% (29 bps)
CTI ratio 44.8% 43.8% 94 bps 42.7% 43.1% (40 bps)

12
Underlying ROE refers to ROE calculated using underlying results. When calculated using reported results,
ROE was 10.6%, down 166 bps from 1H2022. See page 5 of the accompanying 1H2023 investor presentation
for more information about the use of ROE, a supplementary non-GAAP measure.
13
Represents StockCo Australia’s 1H2023 NPAT on a standalone basis.
14
Refer to Appendix 3 on page 41 of the accompanying 1H2023 investor presentation for an exhaustive list of
1H2023 one-offs and a detailed reconciliation between reported and underlying financial information.
15
Net operating income (NOI) includes fair value gains/losses on investments.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
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Reported Underlying
1H2023 1H2022 Movement 1H2023 1H2022 Movement
Impairment expense
ratio
0.29% 0.33% (4 bps) 0.29% 0.33% (4 bps)
ROE 10.6% 12.2% (166 bps) 12.1% 12.1% (7 bps)
EPS 7.3 cps 8.1 cps (0.8 cps) 8.2 cps 8.0 cps 0.2 cps

Income
Total NOI was $141.7 million, an increase of $11.0 million (8.4%) from 1H2022.
Underlying NOI was $149.6 million, $18.8 million (14.4%) higher than in 1H2022, $11.5 million of
which was contributed by StockCo Australia. This was largely due to a $16.9 million (13.6%) increase
in NII, driven by $1,238.3 million (21.7%) higher average interest earning assets in 1H2023 than in
1H2022, and a 29 bps decrease in underlying NIM compared with 1H2022.

The contraction in NIM was partly due to a continued shift in portfolio mix toward higher quality
assets, and margin compression in individual portfolio NIMs.

The change in portfolio composition was a result of the continued run off in higher risk portfolios,
with personal lending and unsecured small-to-medium enterprise (SME) lending both reducing, and
Business and Rural Relationship lending experiencing larger repayments of higher risk exposures. At
the same time, there has been strong growth in higher quality portfolios, such as Reverse Mortgages
and Online Home Loans. The impacts of this compression were partly offset following the acquisition
of StockCo Australia, a higher NIM portfolio.

After being at record lows for a long period of time, the cash rates in New Zealand and Australia
have seen a rapid and sharp increase, rising from 0.75% and 0.10% at December 2021, to 4.25% and
3.10% at December 2022 respectively – creating a difficult environment to manage margins.
Heartland intentionally delayed passing the full impact of these increases onto some borrower
customers, and, in the case of Reverse Mortgages in New Zealand and Australia, did not pass on the
full increases. With depositors, Heartland was quick to pass on the benefits of the rising cash rate. It
is believed that while this did not maximise potential NIM, it was the socially responsible and more
sustainable approach.

Furthermore, competitor activity in Heartland’s key portfolios, primarily Asset Finance and Motor,
intensified with aggressive pricing from smaller competitors attempting to grow their market share.
Heartland proactively managed pricing to remain competitive, while protecting its market position.

Through proactive portfolio pricing and margin management, the compression in NIM has stabilised.
Heartland’s underlying NIM recorded an 8 bps decrease on the six months to 30 June 2022 (2H2022)
and is expected to remain stable going forward.

Unlike other banks in New Zealand, Heartland Bank did not have the benefit of participating in the
RBNZ’s Funding for Lending Programme (FLP) as the assets required for use as collateral did not
match Heartland Bank’s lending book. The FLP was introduced in December 2020 and allowed
eligible banks to borrow directly from the RBNZ at the Official Cash Rate (OCR) with the borrowing
rate adjusting over the term of the transaction as the OCR changes. At 31 December 2022, $19

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
7
billion had been drawn by eligible banks
16
, allowing them to benefit from the low OCR during this
period.

Underlying other operating income increased by $2.0 million (28.3%) mainly driven by an increase in
upfront Reverse Mortgage income.

Expenses
OPEX was $63.4 million, an increase of $6.2 million (10.8%) on 1H2022. Excluding the impact of one-
offs, the underlying OPEX was $7.5 million (13.3%) higher compared with 1H2022.
Higher underlying OPEX was primarily due to the acquisition of StockCo Australia which contributed
$4.5 million to 1H2023 OPEX. The remaining underlying OPEX increase is $3.0 million (5.3%), which
was mainly driven by a 4.8% increase in staff expenses, a 27.9% increase in upfront Reverse
Mortgages expenses completely offset by an increase in upfront Reverse Mortgages income, and the
balance from increased administration costs.

The underlying CTI ratio decreased to 42.7%, down 40 bps compared with 1H2022.
17


Impairment expense
Impairment expense was $9.2 million, $0.7 million (8.3%) up on 1H2022. Impairment expense ratio
decreased to 0.29% in 1H2023, downs 4 bps compared with 1H2022. While the Receivables portfolio
recorded strong growth during 1H2023, impairment expense benefitted from an improved book
quality as a result of the continued tilt of the portfolio mix towards lower risk assets.

Financial position
Total assets increased by $347.6 million (4.9%) during 1H2023, driven by a $264.5 million (10.1%)
18

increase in Receivables and a $69.6 million (11.9%) increase in liquid assets.

Receivables growth was experienced primarily in Australian Reverse Mortgages, New Zealand
Reverse Mortgages, Motor, Asset Finance and Online Home Loans, partly offset by decreases in
Business, Rural Relationship and the Harmoney originated personal loans channel.
Heartland operates in resilient parts of the market that are relatively insulated against current
economic challenges – such as Livestock (driven by global demand for protein), Asset Finance (driven
by demand in the transport industry) and Reverse Mortgages (driven by demographics). As such, the
majority of Heartland’s portfolios experienced strong growth despite a number of economic
uncertainties and challenges in 1H2023. The increasing cost of funds, alongside the Receivables
portfolio mix continuing to tilt towards higher quality and lower risk assets, contributed to a margin
contraction during 1H2023. These margin pressures were, however, partially relieved through
proactive pricing and portfolio margin management. As previously expected, the improved book
quality also benefitted 1H2023 impairment expense – the lower cost origination model is expected
to contribute further benefits in the future.

16
According to RBNZ ‘Influences on settlement cash’ data.
17
Underlying CTI ratio refers to the CTI ratio calculated using underlying results. When calculated using
reported results, the CTI ratio was 44.8%, up 94 bps compared with 1H2022. See page 5 of the accompanying
1H2023 investor presentation for more information about the use of the CTI ratio, a supplementary, non-GAAP
measure.
18
Annualised 1H2023 growth excluding the impact of changes in FX rates (where applicable).

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
8
Borrowings
19
increased by $158.3 million (2.6%). Deposits increased by $478.0 million (13.3%),
partially offset by a decrease in other borrowings of $319.7 million (12.4%) during 1H2023. See
further information under Funding and liquidity on page 11.

Net assets increased by $207.1 million to $1,015.9 million. Net tangible assets (NTA) increased by
$205.5 million to $772.3 million, primarily as a result of a $198.7 million equity raise completed in
September 2022, resulting in an NTA per share of $1.09 (30 June 2022: $0.96).

Business performance

New Zealand
Asset Finance
Asset Finance NOI was $14.9 million, a decrease of $0.8 million (4.8%) compared with 1H2022. Asset
Finance Receivables increased $42.7 million (13.4%)
18
to $676.3 million.
Asset Finance NIM deteriorated due to the impact of interest rate changes required to maintain
competitive pricing in an aggressive market, and the lag in time taken to fully reprice fixed rate
loans. NOI is expected to improve once market rates stabilise.

Sustained growth stemmed from demand in Heartland’s core asset segments of trucks, trailers and
yellow goods. Weaker demand from the logging sector was offset by strong activity in logistics and
further expansion of Heartland’s intermediary partnership model.

Business
Business NOI was $15.8 million, an increase of $0.3 million (1.6%) compared with 1H2022.
Business Receivables decreased $34.7 million (10.9%)
18
to $595.5 million. The negative movement
was driven by lower floorplan utilisation as stock inventory levels remained impacted by global
supply chain and erratic shipping conditions. Heartland expects this position to improve in 2H2023 as
stock arrivals continue through 2023. The portfolio is also expected to benefit as larger legacy loans
run down, contributing to a book that is lower risk, with low cost origination and superior margins.

Open for Business
Open for Business (O4B) NOI was $6.7 million, a decrease of $0.5 million (6.8%) compared with
1H2022.

O4B Receivables decreased $8.2 million (11.5%)
18
to $133.0 million. A strategy reset occurred in the
second quarter of FY2023 from 1 October 2022 to 31 December 2022 (Q2), following a change in the
demand profile for O4B through COVID-19. This also reflects the sensitivities that SMEs are
experiencing due to changing macro-economic conditions. Amortisation is expected to outperform
growth for the remainder of FY2023.

Motor Finance
Motor Finance NOI was $32.7 million, a decrease of $3.6 million (9.9%) compared with 1H2022.

Motor Finance Receivables increased $75.9 million (10.9%)
18
to $1.46 billion as early repayments
slowed due to customers being less inclined to refinance at higher rates or top-up their mortgages as
interest rates rose.

19
Includes retail deposits and other borrowings.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
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NIM was impacted by competitor activity, and by the change in portfolio mix of business, where 75%
of business came from the quality end of the market. This is expected to have a positive impact on
impairments in 2H2023.

Growth has been a product of market share gains at the higher quality end of the market, and, as
mentioned above, an extension of the Motor book as early repayments slowed. This includes
through branded partners such as Peugeot, Citroen and OPEL (each under the iOWN brand), Kia and
Jaguar Land Rover, and other key partnerships.

In 1H2023, the total new and used car sales in the New Zealand market declined by 8.6%
20
compared
with 1H2022. Whereas Heartland’s Motor portfolio experienced 10.9% growth. Motor is expected to
continue to outperform the market in 2H2023.

This is a pleasing result considering the ongoing challenges of the changes made to the New Zealand
Credit Contracts and Consumer Finance Act 2003 and the Credit Contracts and Consumer Finance
Regulations 2004 (together, the CCCFA) which came into effect in December 2021 with additional
amendments effective in July 2022 and further amendments expected to be effective in March 2023.

Ongoing development and enhancements to the Motor digital platforms are expected to contribute
to improved efficiency, customer experience and growth for the portfolio in 2H2023.

Personal Lending
Personal Lending includes loans originated directly through Heartland Bank, and those originated by
Harmoney in New Zealand and Australia. Heartland’s Harmoney personal loans channel is closed to
new business and running down.

Personal Lending NOI was $3.4 million, a decrease of $1.9 million (35.4%) compared with 1H2022.

Personal Lending Receivables decreased by $2.3 million (6.9%)
18
to $62.8 million. Harmoney
Receivables decreased by $11.4 million (73.3%)
18
, made up of a decrease in the New Zealand
Harmoney channel of $6.8 million (73.6%) to $11.6 million, and a decrease in the Australian
Harmoney channel of $4.6 million (72.8%)
18
to $7.9 million. This is partially offset by Heartland
originated personal lending which increased by $9.1 million (52.9%)
18
to $43.4 million.
Online Home Loans
21

Online Home Loans NOI was $2.1 million, an increase of $1.5 million (267.2%). Online Home Loans
Receivables increased $27.6 million (19.9%)
18
to $302.3 million.

The reduction in the rate of book growth was driven by the sharp decline in property sales and new
mortgage volumes in New Zealand. The number of properties sold during the second half of the
2022 calendar year was the lowest observed in over a decade. The market outlook remains subdued,
with ‘days to sell’ at elevated levels.
22
Similarly, the number of new mortgages has been the lowest
observed since at least 2014 (when the RBNZ began collating this data).
23



20
Based on data from the Motor Industry Association of New Zealand on new and used vehicle sales from
motor vehicle dealers.
21
Excludes legacy Retail Mortgages.
22
Based on data from the Real Estate Institute of New Zealand.
23
Based on RBNZ data on new residential mortgage lending by borrower type.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
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Conversion rates improved towards the end of 1H2023 due to platform updates made off the back
of the CCCFA amendments which came into effect in July 2022. These updates have increased
approval automation and reduced the friction involved in verifying approvals.

Additionally, the Online Home Loans criteria was expanded in Q2 to permit lending against terraced
homes and townhouses. This change is expected to support a 10% uplift in lending volumes
compared with the previous restriction to standalone homes only.

Rural
Rural lending NOI was $16.9 million, an increase of $1.4 million (9.2%) compared with 1H2022.
Overall Rural portfolio Receivables decreased by $13.3 million (3.8%)
18
to $675.8 million. This was
driven from the normal seasonal fluctuations in Heartland’s Livestock Receivables which decreased
by $32.6 million (37.7%) to $139.0 million, offset in part by Rural Receivables increasing by $19.4
million (7.4%)
18
to $536.8 million.

Strong pasture growth late in the season is expected to support cattle restocking, and additional
intermediary partnerships are expected to push utilisation up into 2H2023. Activity in Rural
Receivables continues to be mainly targeted to Heartland’s niche Rural Direct segments (providing
finance specifically for sheep, beef and dairy farmers).

New Zealand Reverse Mortgages
New Zealand Reverse Mortgages NOI was $20.5 million, an increase of $5.1 million (33.4%)
compared with 1H2022. Receivables increased $87.4 million (24.0%)
18
to $808.7 million.

The business continues to experience strong demand and growth due to:
‒ a reverse mortgage being a solution to the ongoing strain placed on older home owners by cost
of living pressures
‒ increased awareness and acceptance of reverse mortgages
‒ nurturing of a lead pool which has been built over a decade
‒ Heartland being recognised as New Zealand’s leading reverse mortgage provider.

The outlook for New Zealand Reverse Mortgages remains positive, with additional demand from cost
of living pressures more than offsetting the impact of lower house prices and higher interest rates.

Australia
StockCo Australia
StockCo Australia NOI was $13.4 million in 1H2023. Receivables increased $12.5 million (6.7%)
18
to
$385.6 million, supported by strong onboarding of new clients, and increased facility limit
requirements and usage. StockCo Australia’s key distribution partner, Elders Limited, also
experienced an increase in new clients and facility limit usage, contributing to the overall growth of
the portfolio.

Growth in 1H2023 slowed due to adverse weather conditions, the rising interest rate environment,
and stock value. Weather conditions across eastern Australia impacted on livestock movement and
activity in 1H2023, while rising interest rates contributed to a reduction in profitability as customer
interest rates were managed to ensure competitiveness. The value of livestock softened during late
2022, resulting in lower dollars per head on the StockCo Australia balance sheet. While stock value
was offset by higher unit numbers, this had an impact on growth. However, as experienced in the
past, these temporary market price volatilities are not expected to have a material impact on the
quality of the book. Historically, the impact of the variation in price has, in most cases, been more

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
11
than offset through livestock weight gains. Additionally, StockCo Australia has options available to
support clients should they need help to return to a profitable position.

The 2022 calendar year saw export volumes at a 19-year low, and slaughter production down
approximately 27% from 2021 volumes. Low export demand, driven by COVID-19 lockdowns across
China, is expected to ease during 2023 and result in strong demand for protein as people return to
pre-COVID-19 activities.

Australian producers’ concerted effort to retain female stock to rebuild the herd post the 2019
drought also contributed to low export volumes. The USA drought breaking is expected to see an
effort by the USA to rebuild their herd, resulting in a reduced volume of beef on the export market.
This will likely benefit the volume and value of Australian exports, especially into Europe and parts of
Asia.

Work is underway to develop a white label offering to complement StockCo Australia’s existing
distribution strategy and support ongoing growth through 2H2023.

Australian Reverse Mortgages
Australian Reverse Mortgages NOI was $23.1 million, an increase of $4.1 million (21.5%) compared
with 1H2022.

Australian Reverse Mortgages Receivables increased by $128.0 million (19.9%)
18
to $1.40 billion,
driven primarily by:
‒ increased debt consolidation and cost of living requests due to the current economic
environment
‒ customers looking to enjoy retirement with modest lifestyle spending (such as holidays or a
new car) following the relaxation of COVID-19 lockdowns in Australia
‒ growing acceptance of the use of reverse mortgages to age in place (for a person to remain in
their home and make it more retirement-friendly as they age)
‒ targeted marketing to new and existing customers to increase uptake and interest at key
seasonal points across the year, leading to record settlements in key months.

Growth is expected to continue in 2H2023 as ongoing improvements and efficiencies are made to
the application, approval and loan maintenance process.

Funding and liquidity

Heartland increased borrowings by $158.3 million (2.6%) to $6,329.1 million.

New Zealand
Heartland Bank increased borrowings by $249.7 million (5.7%) to $4,596.3 million.

Deposits
24
grew $480.5 million (13.4%) during 1H2023 to $4,077.7 million, which was driven by
competitive pricing on targeted products, including Heartland’s Notice Saver offerings which both
received Canstar New Zealand recognition in the half. Heartland Bank’s 32-day Notice Saver won a 5-
Star Rating and the 90-day Notice Saver achieved a Rising Star Rating with all the makings of a 5-star
account in the future. Heartland Bank was awarded Canstar New Zealand’s Bank of the Year –

24
Includes intercompany deposits received by Heartland Bank (31 December 2022: $7.1 million; 30 June 2022:
$4.6 million).

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
12
Savings for the fifth year in a row.
25
In Q1 of FY2023, Heartland Bank experienced the highest growth
rate in retail deposits of all main and domestic banks in New Zealand.
26


Notice Saver increased by $311.5 (60.7%) million. Term deposits increased by $256.2 million (11.7%),
while call deposits decreased by $87.2 million (9.7%) during 1H2023. The call to total deposit ratio
decreased to 20% as at 31 December 2022 (30 June 2022: 25%).

Other borrowings decreased by $230.8 million (30.8%), largely due to the maturity of a $150 million
retail bond, as well as the amount drawn down in Heartland Bank’s committed auto warehouse
facility decreasing by $76.6 million.

Heartland Bank’s total liquidity (including liquid assets and available committed lines) strengthened
further in the half, increasing by $146.9 million (23.4%) to $774.8 million, well in excess of regulatory
minimums. Regulatory liquidity ratios remained strong.

Heartland Bank’s regulatory capital ratio reduced to 13.15% as at 31 December 2022 (30 June 2022:
13.49%) following the removal of any bank dividend restrictions by the RBNZ on 1 July 2022.
Heartland Bank continues to operate significantly in excess of regulatory minimums and is well
positioned to meet the RBNZ’s future higher capital requirements. These requirements are for a core
capital ratio of 11.50% and a total capital ratio of 16.00% by 1 July 2028. In order to accelerate this
journey, diversify its capital base and accommodate future projected growth, Heartland Bank is
considering an offer of Tier 2 Capital notes (discussed below).

Australia
Heartland Australia (comprising Heartland Australia Holdings Pty Ltd and its subsidiaries) increased
borrowings by A$167.8 million (14.0%) to A$1,368.0 million.

Heartland Australia continues to successfully execute on its strategic funding programme to cater for
strong growth in its portfolios. A A$30 million tap issue was completed in August 2022 and a further
A$50 million Medium Term Note (MTN) was issued in October 2022, taking the aggregate
outstanding issuance under Heartland Australia’s MTN programme to A$360 million as at 31
December 2022.

Maturity of Reverse Mortgage securitisation warehouses were extended by two and three years, and
aggregate senior limits were expanded by A$50 million, providing additional headroom to fund
future growth in the portfolio. This provides Heartland Australia with access to A$1.49 billion of
committed funding in aggregate.

StockCo Australia (comprising StockCo Australia Management Pty Ltd, StockCo Holdings 2 Pty Ltd
and their subsidiaries) increased borrowings by A$15.0 million (4.6%) to A$344.2 million.

Heartland Bank considers offer of subordinated notes

Heartland Bank is considering making an offer of up to $75 million (with the right to accept
oversubscriptions of up to an additional $50 million at Heartland Bank’s discretion) of unsecured
Notes to New Zealand investors and certain overseas institutional investors.

The Notes are expected to constitute Tier 2 Capital for Heartland Bank’s regulatory capital

25
Awarded July 2022.
26
Based on balance sheet data from the RBNZ.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
13
requirements. The Notes are expected to have a 10-year maturity date, but may be redeemed early
in some circumstances. If certain conditions are met, Heartland Bank may redeem the Notes after 5
years or on any quarterly Interest Payment Date after that date, or on any quarterly Interest
Payment Date for tax or regulatory reasons.

The Notes are expected to have a credit rating of BB+ from Fitch Australia Pty Limited (Fitch).
Heartland Bank has a long-term unsecured credit rating of BBB (stable) from Fitch.

It is expected that full details of any offer will be released in mid-March 2023.

Heartland Bank has appointed Westpac Banking Corporation (ABN 33 007 457 141) (acting through
its New Zealand branch) (Westpac) as Arranger, and Bank of New Zealand (contact 0800 284 017),
Craigs Investment Partners Limited (contact 0800 226 263), Forsyth Barr Limited (contact 0800 367
227) and Westpac (contact 0800 772 142) as Joint Lead Managers in relation to the offer. Investors
can register their interest in the offer by contacting a Joint Lead Manager or their usual financial
advice provider. Indications of interest will not be an obligation or commitment to buy the Notes.

No money is currently being sought and applications for the Notes cannot currently be made. If
Heartland Bank offers the Notes, the offer will be made in accordance with the Financial Markets
Conduct Act 2013. The Notes are expected to be quoted on the NZX Debt Market.

Regulatory update

Heartland continues to monitor the significant volume of regulatory change.

Initial changes to the CCCFA came into force on 1 December 2021, with additional changes
announced in June 2022 (effective 7 July 2022). Heartland Bank implemented new processes and
technologies to enable it to comply with these changes, and continues to refine them. Following the
completion of the New Zealand Government’s investigation into the impact of the December 2021
changes, further amendments which seek to reduce the unintended impacts of the initial changes
are expected to be implemented in March 2023.

The Financial Markets (Conduct of Financial Institutions) Amendment Act 2022 (Conduct Act) was
passed in June 2022, and is planned to come into force in early 2025, following a transitional period.
The Conduct Act applies to registered banks, licensed insurers and licensed non-bank deposit takers,
and is regulated by the Financial Markets Authority (FMA). The Conduct Act introduces a new
conduct licensing regime, the requirement to establish, implement, maintain and comply with a fair
conduct programme, and the regulation of incentives (via new regulations which are yet to be
published). Incentives regulations will apply both to Heartland Bank and its intermediaries involved
in the distribution of its products.

The Deposit Takers Bill (DT Bill) was introduced to Parliament on 22 September 2022 and had its first
reading on 27 September before being referred to the Select Committee. The DT Bill:
1. strengthens the regulatory framework for all institutions that take deposits (including Heartland
Bank) through the strengthening of the RBNZ’s supervision and enforcement powers
2. introduces a new depositor compensation scheme, overseen by the RBNZ.
Heartland has begun considering the impact of the DT Bill on Heartland’s operations and is actively
participating in industry submissions on the bill.

In July 2021, the New Zealand Government announced it would implement a legislative framework
for a new consumer data right (CDR), with a decision announced in November 2022 to designate

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
14
banks into the new regime first. A consumer data right in the banking sector (in other words, ‘open
banking’) would allow customers to consent to share their banking data with third parties. Work is
now underway by the Government on the design and cost of the CDR and this is intended to be
completed later in 2023. Following this, an exposure draft of a data sharing Bill is anticipated to be
released for industry feedback.

Work is underway to meet the climate-related disclosures obligations introduced through the
Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021, with
Heartland’s first climate statement required as part of reporting for its financial year ending 30 June
2024.

Sustainability update

Heartland’s sustainability strategy is built on three pillars: environmental conservation, social equity
and economic prosperity. Key progress in 1H2023 is outlined below. For more detail, visit
heartlandgroup.info/sustainability.

Environmental conservation
‒ Heartland’s unaudited FY2022 Greenhouse Gas (GHG) inventory shows a 56% absolute
reduction from Heartland’s FY2019 base year in GHG emissions generated from operations,
near doubling Heartland’s reduction target of 35% by 2025. While partly due to COVID-19
restrictions during FY2022, this also shows the effects of Heartland’s continuous transition to
low emitting new generation vehicles, using carbon neutral paper and renewable electricity
within New Zealand offices.
‒ New generation vehicle lending increased from 5% in 1H2022 to 14% in 1H2023 as distributors
reported a higher ratio of EV, PHEV and HEV sales to internal combustion engine sales.
‒ Heartland launched a green vehicle rate to dealers and customers in December 2022 and will
continue this through 2H2023.
‒ Heartland introduced a guaranteed future value product across the Opel range, including two
dedicated EVs.
‒ Heartland undertook Australian and New Zealand Standard Industrial Classification (ANZSIC)
code analysis to understand Heartland’s exposure to customers in high emitting industries, and
industries susceptible to governmental regulations in New Zealand’s journey to carbon-zero by
2050, with the aim to educate identified customers on how they can directly reduce their
emissions and mitigate the risks climate change poses to their business.

Social equity
‒ The Manawa Ako internship programme recently concluded its sixth year, welcoming 25 Māori
and Pasifika interns to Heartland Bank in December 2022. More than 110 rangatahi (young
people) have participated in the programme since inception.
‒ Heartland Bank was pleased to renew its Rainbow Tick accreditation and deliver several
LGBTTQIA+ education workshops to its employees across New Zealand.
‒ The diversity of Heartland’s people was celebrated through various events, which included
opportunities to raise cultural awareness and understanding. Celebrations included Te Wiki o Te
Reo Māori (Māori Language Week), Diwali and several Pasifika language weeks.

Economic prosperity
‒ Heartland Bank consistently offered market leading and competitive deposit rates, enabling
New Zealanders to grow their savings in a high cost of living environment. Of all main and

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
15
domestic banks in New Zealand, Heartland Bank experienced the greatest percentage of retail
deposit growth in Q1 of FY2023, up 9.3%.
‒ A refix comparison calculator was developed for Online Home Loans, allowing potential
applicants to see how much could be saved by refinancing their mortgage with Heartland Bank.
‒ An 18-month fixed term rate was also introduced, providing New Zealand home owners with
more options to suit their financial needs when setting or refixing their mortgage.

Interim dividend

Heartland is pleased to declare a 1H2023 interim dividend of 5.5 cps, flat on 1H2022. Heartland’s
interim dividend yield of 8.7%
27
compares with 7.4%
28
in 1H2022.

The interim dividend will be paid on Wednesday 22 March 2023 (Payment Date) to shareholders on
the company’s register as at 5.00pm NZDT on Wednesday 8 March 2023 (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
interim dividend with a 2.0% discount.
29
The DRP offer document and participation form is available
on Heartland’s website at heartlandgroup.info/investor-information/dividends.

Looking forward

The pleasing result in 1H2023 highlights the resilience of Heartland’s product portfolios despite the
ongoing current economic challenges in New Zealand and Australia. Strong growth continued in core
portfolios, though softened elsewhere due to suppressed credit demand.

It is currently anticipated that 2H2023 will deliver a similar result to 1H2023 on an underlying basis.
In particular, continued growth is expected in Motor through white label and key partnerships, and
in Asset Finance which has become one of Heartland’s fastest growing portfolios. Usual seasonal
fluctuations are expected to contribute to a better half for StockCo Australia and Heartland Bank’s
Rural portfolio in New Zealand. Further, increased demand is expected for Reverse Mortgages in
both countries where the product has proven to offer a good solution for many seniors wanting to
live a more comfortable retirement, especially as the cost of living rises.

Heartland’s NIM is expected to stabilise at its current level as Heartland continues to proactively
manage portfolio pricing and margin in competitive markets.

Efficiencies through digitalisation and the upgrade of Heartland Bank’s core banking system are
critical pathways to a lower CTI ratio. As the results demonstrate, Heartland continues to grow its
revenue line, contributing favourably to its CTI ratio. However, ultimate efficiency requires that costs
are also addressed. This will remain a focus of Heartland’s through 2H2023.


27
Total fully imputed dividends for 1H2023 (interim) and 2H2022 (final) divided by the closing share price as at
24 February 2023 of $1.75.
28
Total fully imputed dividends for 1H2022 (interim) and 2H2021 (final) divided by the closing share price as at
14 February 2022 of $2.35.
29
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 the Heartland DRP offer document dated 10 December 2018.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
16
The remainder of the 2023 calendar year will be significant for Heartland as it progresses towards
the completion of the acquisition of Challenger Bank, therefore becoming an ADI in Australia, and
realises the benefits this will provide its existing Australian businesses Heartland Finance and
StockCo Australia – as well as future product opportunities.

Heartland expects NPAT for FY2023 to be within the guidance range of $109 million to $114 million,
excluding any impacts of fair value changes on equity investments held and the impact of the de-
designation of derivatives.

– ENDS –

The person(s) who authorised this announcement:

Jeff Greenslade
Chief Executive Officer, Heartland Group Holdings Limited

Andrew Dixson
Chief Financial Officer, Heartland Group Holdings Limited

Leanne Lazarus
Chief Executive Officer, Heartland Bank Limited

For further information and media enquiries, please contact:

Nicola Foley
Group Head of Communications, Heartland Group Holdings Limited
+64 27 345 6809
nicola.foley@heartland.co.nz
Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland, New Zealand

About Heartland
Heartland Group Holdings Limited (Heartland) is a financial services group with operations in
Australia and New Zealand. Heartland has a long history with roots stretching back to 1875, and is
listed on the New Zealand and Australian stock exchanges (NZX/ASX: HGH) with a market cap in
excess of NZ$1 billion.

Heartland’s New Zealand business, Heartland Bank, provides customers with savings and deposit
products, Online home loans, reverse mortgages, business loans, car loans and rural loans. In
Australia, Heartland’s main business is currently in reverse mortgages through Heartland Finance
which is a market leader. Heartland also operates StockCo Australia, a specialist livestock financier,
which was acquired by Heartland in May 2022.

Heartland’s point of differentiation is its ‘best or only’ strategy – where it focuses on providing
products which are the best or only of their kind through scalable digital platforms. Heartland is
committed to delivering financial solutions through speed and simplicity, particularly via digital
platforms which reduce the cost of onboarding and make it easier for customers to open accounts or
apply for funds when they need it.

More about Heartland: heartlandgroup.info

---

FY2023
Half yearresults
28 February 2023

Importantnotice
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 financial statements.
2
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 financial statements.
The information in the Presentation has been prepared with due care and attention, but its accuracy, correctness and completeness cannot be guaranteed. No person (including the Company and
its directors, shareholders and employees) will be liable to any other person for any loss arising in connection with the Presentation.
The Presentation outlines a number of the Company’s forward-looking plans and projections. Those plans and projections reflect current expectations, but are inherently subject to risk and
uncertainty, and may change at any time. There is no assurance that those plans will be implemented or that projections will be realised. You are strongly cautioned not to place undue reliance on
any forward-looking statements, particularly in light of the current economic climate.
No person is under any obligation to update this presentation at any time after its release or to provide further informationabout the Company.
The information in this presentation is of a general nature and does not constitute financial product advice, investment advice or any recommendation. Nothing in this presentation constitutes legal,
financial, tax or other advice.
Non-GAAP measures
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 41.
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, can make it difficult to compare profits between years. However, these non-GAAP measures do not have standardisedmeanings prescribed
by GAAP and should not be viewed in isolation nor considered a substitute for measures reported in accordance with NZ GAAP.
Non-GAAP financial information has not been subject to review by PricewaterhouseCoopers, Heartland’s external auditor.
All amounts are in New Zealand dollars unless otherwise indicated. Financial data in this presentation is as at 31 December 2022unless otherwise indicated. Any other financial information
provided as at a date after 31 December 2022 has not been audited or reviewed by any independent registered public accountingfirm.

Contents
3
01
1H2023 highlightsPage 4 –7
02
Financial resultsPage 8 –12
03
Strategic updatePage 13 –16
04
Divisional summariesPage 17 –30
05
Funding, liquidity, capital and regulatory updatePage 31 –35
06
OutlookPage 36 –37
07
AppendicesPage 38 –41

4
1H2023 highlights
Jeff Greenslade
Chief Executive Officer
Heartland Group

5
Presentation of results
Financial results in this investor presentation are presented on a reported and
underlying basis.
•Reported results are prepared in accordance with NZ GAAP and include the
impacts of one-offs, both positive and negative, which can make it difficult to
compare performance between periods.
•Underlying results exclude the impacts of fair value changes on equity
investments held, the de-designation of derivatives, and other one-offs. This is
intended to allow for easier comparability between periods, and is used internally
by management for this purpose.
Adjustments for underlying results impact net operating income (NOI), operating
expenses (OPEX), net profit after tax (NPAT), net interest margin (NIM) and earnings
per share (EPS). Return on equity (ROE) and cost to income (CTI) ratio are
supplementary, non-GAAP measures that may be used by investors, industry
analysts and others in assessing and benchmarking profitability and performance
against the industry and/or other companies. A GAAP and non-GAAP comparative is
provided for each of these measures.
Refer to Appendix 3 on page 41 for a detailed reconciliation between reported and
underlying financial information, including details about one-offs in the periods
covered in this investor presentation.
General information about the use of non-GAAP financial measures is set out on
page 2 of this investor presentation.

1
OOI includes fair value gains/losses oninvestments.
2
Refer to Appendix 3 for a reconciliation between reported and underlying NPAT result.
3
Impairment expense as a percentage of average Receivables.
4
Receivables also includes ReverseMortgages and StockCo Australia.
5
Annualised1H2023 growth excluding the impact of changes in foreign currency exchange (FX) rates.
6
REPORTEDUNDERLYING
Financial
performance
Net Interest Income$138.9m 12.1% vs 1H2022$140.8m 13.6% vs 1H2022
Other Operating Income (OOI)
1
$2.8m 58.6% vs 1H2022$8.9m 28.3% vs 1H2022
OPEX$63.4m 10.8% vs 1H2022$63.9m 13.3% vs 1H2022
Impairment Expense$9.2m 8.3% vs 1H2022$9.2m 8.3% vs 1H2022
Tax Expense$20.4m 17.3% vs 1H2022$21.8m 15.8% vs 1H2022
NPAT
2
$48.7m 2.4% vs 1H2022$54.7m 16.2% vs 1H2022
NIM3.97% 34 bps vs 1H20224.02% 29 bps vs 1H20228 bps vs 2H2022
CTI Ratio44.8% 94 bps vs 1H202242.7% 40 bps vs 1H2022
Impairment Expense Ratio
3
0.29% 4 bps vs 1H2022
Financial
return
ROE10.6% 166 bps vs 1H202212.1% 7 bps vs 1H2022
EPS7.3 cps 0.8 cps vs 1H20228.2 cps 0.2 cps vs 1H2022
Financial
position
Gross Finance Receivables (Receivables)
4
$6,460m 10.1%
5
vs June 2022
Borrowings$6,329m 2.6% vs June 2022
Equity$1,016m 25.6% vs June 2022
Equity/Total Assets13.7% 2.3 ppsvs June 2022
Financial highlights

Operating environment
Overall credit quality remains good, benefitting from Heartland’s
continued move towards higher quality and lower risk assets.
Reverse Mortgages have remained resilient to economic conditions,
particularly to changes in house prices and rising interest rates, with
conservative loan-to-value ratios (LVRs). Reverse Mortgage weighted
average LVRs as at 31 December 2022 were 19.7% in NZ and 20.0%
in AU.
The percentage of the Motor book in arrears increased from 3.17% at
30 June 2022 to 3.99% at 31 October 2022. However, this has since
moderated with the percentage of the Motor book arrears falling to
3.73% by 31 December 2022, reflecting the return to pre-COVID-19
levels of arrears at this point in the financial year for the portfolio. The
subsequent seasonal increase in January 2023 was at a similar level
to January 2022.
Heartland intentionally delayed passing the full impact of rising cash
rate increases onto some borrower customers, and, in the case of
Reverse Mortgages, did not pass on the full increases. With
depositors, Heartland was quick to pass on the benefits of the rising
cash rate.
7
Heartland’s Economic Overlay of $8.0 million taken in the financial year
ended 30 June 2022 (FY2022) remains unchanged at 31 December
2022. The Economic Overlay is considered a sufficient buffer against
the potential impacts of a future deterioration in the economic
environment.
The banking industry has yet to harness the full benefit of technology.
Heartland’s objective is to differentiate through a continuous focus on
reducing its cost of onboarding and customer service via automation
and self-service. This will drive an easier and faster customer
experience, and contribute to reductions in the CTI ratio.
6,196
6,511
128
87
43
76
27
13
...
(35)
19
(33)
(2)
13
Jun-22
AU Reverse
Mortgages
NZ Reverse
Mortgages
Asset Finance
Open for
BusinessBusiness
Rural
Relationship
Livestock
Motor Finance
Personal
Lending
Home Loans
StockCo
Australia
Dec-22
(10.9%)
24.0%
(6.9%)
7.4%
13.4%
19.3%
(11.5%)
(37.7%)
10.9%
6.7%
19.9%
↗$315.7m (10.1%)
1
(8)
1
Annualised 1H2023 growth excluding the impact of changes in FX rates.
Note: The graph shows 1H2023growth in Receivables by portfolio excluding the impact of changes in FX rates. All figures inNZ$m.

8
Financial results
Andrew Dixson
Chief Financial Officer
Heartland Group

9
11H2023 one-offs: $1.9 million interest expense on bridging loan to acquire StockCoAustralia.
21H2022 one-offs: ($0.1 million) net fair value gain on equity investments. 1H2023 one-offs: (i) $3.6 million hedge accounting impacts, (ii) $2.4 million net fair value loss on equity investments.
31H2022 one-offs: $0.9 million other non-recurring items. 1H2023 one-offs: ($0.5 million) other non-recurring items.
41H2022 one-offs: (i) $1.2 million non-recurring adjustments, (ii) $0.2 million tax impact on one-offs. 1H2023 one-offs: $1.4 million tax impact on one-offs.
47.1
47.5
64.4
58.8
58.1
55.1
54.7
11.5
(4.6)
(2.1)
5.4
1.9
(2.9)
(0.7)
(0.9)
1H2022 NPATNet Interest
Income
Other Operating
Income
Operating
Expenses
Impairment
Expense
Tax1H2023 NPAT
StockCo AustraliaResidual movement
↗1.1 (2.4%)
↗7.6 (16.2%)
Underlying: 47.1 →54.7
Reported: 47.5 →48.7
1
2
3
4
Growth in profitability
Note:All figures in NZ$m. Refer to Appendix 3 for a reconciliation between reported and underlying NPAT result. Chart is not to scale.

Note:
•NIM is calculated as net interest income/average gross interest earning assets.
•Impairment expense ratio is calculated as impairment expense/average gross
finance receivables.
•Underlying CTI ratio and impairment expense ratio exclude one-off impacts.
Refer to Appendix 3 for a reconciliation between reported and underlying result.
Key
performance
measures
4.35%
4.30%
4.05%
3.97%
4.16%
4.02%
Jun-21Dec-21Jun-22Dec-22
NIM
Reported NIMUnderlying NIM
46.8%
43.8%
43.6%
44.8%
44.8%
43.1%
42.5%
42.7%
Jun-21Dec-21Jun-22Dec-22
CTI
Reported CTIUnderlying CTI
0.33%
0.25%
0.29%
0.31%
0.33%
0.29%0.29%
Jun-21Dec-21Jun-22Dec-22
Impairment Expense Ratio
Reported Impairment Expense Ratio
Underlying Impairment Expense Ratio
79.4
90.9
112.0
132.4
1.58%
1.70%
1.81%
2.05%
Jun-21Dec-21Jun-22Dec-22
Non Performing Loans
Non Performing LoansNon Performing Loans Ratio
10
1
39.9
44.1
47.5
48.7
32.1
42.9
47.6
FY20FY21FY22FY23
NPAT ($ million)
+11%
+8%
+2%
1
1
Increase in non performing loans is primarily driven by Business and Motor. In Business, the increase was driven by several large exposures with strong security and longer-term remediation plans in place.
In Motor, the increase reflects the impact rising costs have had on customers’ household budgets. However, this has since moderated with arrears falling to 3.73% in December 2022 (from 3.99% at 31
October 2022), reflecting the return to pre-COVID-19 levels of arrears at this point in the financial year for the portfolio.
38.2
43.3
47.1
54.7
38.7
44.6
49.0
FY20FY21FY22FY23
Underlying NPAT
($ million)
+13%
+9%
+16%
1

1
Underlying ROE refers to ROE calculated using underlying results. When calculated using reported results, ROE was 10.6%, down166 bps. See page 5 for more information about the use of ROE, a supplementary, non-GAAP measure.
2
Total fully imputed dividends for 1H2023 (interim) and 2H2022 (final)
divided by the closing share price as at 24 February 2023 of $1.75.
3
Total fully imputed dividends for 1H2022 (interim) and 2H2021 (final) divided by the closing share price as at 14 February 2022 of $2.35.
4
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 the Heartland DRP offer document dated 10 December 2018.
•Underlying return on equity (ROE) 12.1%
(down 7 bps vs 1H2022).
1
•Earnings per share (EPS) of 7.3 cps,
down 0.8 cps compared with 1H2022.
•Underlying EPS of 8.2 cps (up 0.2 cps vs 1H2022).
•Interim dividend of 5.5 cps, flat on 1H2022.
•Dividend yield of8.7%
2
(1H2022: 7.4%
3
).
•Heartland’s Dividend Reinvestment Plan (DRP) will
apply to the interim dividend with a 2.0% discount.
4
Shareholderreturn
11
6.9
7.6
8.1
7.3
5.6
7.3
8.0
FY20FY21FY22FY23
Earnings per share (cps)
Interim EPSFinal EPS
12.0%
12.1%
12.6%
12.1%
Jun-21Dec-21Jun-22Dec-22
Underlying ROE

Growth in Receivables
Note: The graph shows 1H2023growth in Receivables by portfolio excluding the impact of changes in FX rates. All figures inNZ$m.
1
Annualised 1H2023 growth excluding the impact of changes in FX rates.
12
6,196
6,511
128
87
43
-
76
27
13
(8)
(35)
19
(33)
(2)
13
Jun-22
AU Reverse
Mortgages
NZ Reverse
Mortgages
Asset Finance
Open for
BusinessBusiness
Rural
Relationship
Livestock
Motor Finance
Personal
Lending
Home Loans
StockCo
Australia
Dec-22
(10.9%)
24.0%
(6.9%)
7.4%
13.4%
19.3%
(11.5%)
(37.7%)
10.9%
6.7%
19.9%
↗$315.7m (10.1%)
1

13
Strategic update
Jeff Greenslade
Chief Executive Officer
Heartland Group

Strategic progress
1
Based on balance sheet data from the RBNZ for the first quarter (Q1) of FY2023.
2
Awarded July 2022.
3
Underlying CTI ratio refers to the CTI ratio calculated using underlying results. When calculated using reported results, theCTI ratio was 44.8%, up 94 bps. See page 5 for more information about the use of
the CTI ratio, a supplementary, non-GAAP measure.
4
Based on APRA ADI Property Exposure and Heartland Finance data as at 31 March 2022.
14
Expansion in
Australia
$198.6 million raised
through 2022 equity
raise to retire bridge
debt and fund growth
ambitions for existing
businesses.
AU Reverse Mortgage
market share of 35.9%
at 30 September 2022.
4
Business as
usual growth
Heartland’s strategic vision is to provide best or only products via scalable digital platforms,
achieved through the four pillars below.
Acquisitions
Signed a conditional
share purchase
agreement for the
purchase of
Challenger Bank
Limited (Challenger
Bank).
Substantially completed
the integration of
StockCo Australiainto
Heartland.
Repaid A$158 million
StockCo Australia
acquisition finance
facility using proceeds
from the equity raise.
Heartland Bank
experienced the highest
growth rate in retail
deposits of all main and
domestic banks in NZ
for Q1 of FY2023.
1
Expanded Online Home
Loans criteria to permit
lending against terraced
homes and townhouses.
Heartland Bank awarded
Canstar NZ’s Bank of
the Year –Savings for
fifth consecutive year.
2
Introduced a Guaranteed
Future Value product
across the Opel vehicle
range.
Frictionless service
at the lowest cost
Core banking system
upgrade almost
complete.
Underlying CTI ratio
reducedfrom 43.1% in
1H2022 to 42.7% in
1H2023.
3
Heartland Bank Mobile
Appusers up 46% from
July 2022.
Calls per customer to
Motor, Deposits and
Businessteams reduced
by 7% from July to
December 2022.

Challenger Bank acquisition
•Additional transaction costs are expected in 2H2023 in relation to obtaining an ADI licence,
including for the completion of the Challenger Bank acquisition.
•Heartland will provide further information to the market on the Challenger Bank acquisition as
updates become available.
15
On 20 October 2022, Heartland announced it had signed a
conditional share purchase agreement for the purchase of
Challenger Bank, an established ADI, from Challenger Limited
(ASX: CGF). Completion under the share purchase agreement
remains subject to obtaining the requisite regulatory approvals.
The benefits of this acquisition include:
•access to a deep and efficient pool of funding to support
ongoing growth
•potential uplift in margin, to the extent that retail funding rates
are less than wholesale rates
•a platform to extend Heartland’s ‘best or only’ strategy in
Australia.
Heartland’s vision is to create a sustainable and profitable digital
bank serving sectors of the Australian market which Heartland
considers are under-serviced by major banks (including older
Australians, rural Australia and small businesses). Heartland
already holds strong positions in Australia with Reverse Mortgages
and Livestock Finance. Further expansion is intended by leveraging
Heartland’s experience and expertise in New Zealand to offer
additional products in the Australian market (including Auto
Finance, Asset Finance and Online Home Loans).

Sustainability
16
Heartland Bank consistently
offered market leading and
competitive deposit rates,
enabling New Zealanders to
grow their savings in a high
cost of living environment.
Rainbow Tick accreditation
renewed and several LGBTTQIA+
education workshops delivered
across NZ.
The Manawa Ako internship welcomed
25 Māori and Pasifika interns in its sixth
intake.
Celebrated the diversity of
Heartland’s people through
various events, including Te Wiki o
Te ReoMāori (Māori Language
Week), Diwali and several Pasifika
language weeks.
Developed a refixcomparison
calculator for Online Home
Loans, allowing potential
applicants to see how much
could be saved by refinancing
with Heartland Bank.
Delivered shareholder return
as described on page 11.
Social
equity
Economic
prosperity
FY2022 emissions show a 56% absolute
reduction in Greenhouse Gas emissions
from FY2019 baseline.
1
Lending to new generation vehicles
comprised 14% of all vehicle lending in
1H2023.
Launched a green vehicle lending rate in
December 2022.
Undertook ANZSIC
2
code analysis to
understand Heartland’s exposure to
customers in high emitting industries, and
industries susceptible to governmental
regulations in NZ’s journey to carbon-zero
by 2050.
Heartland’s sustainability framework is built on three key pillars:
environmental conservation, social equity and economic prosperity.
1
Unaudited, and partially referable to COVID-19.
2
Australian and New Zealand Standard Industrial Classification (ANZSIC).
Environmental
Conservation

1717
NZ divisional summary
Leanne Lazarus
Chief Executive Officer
Heartland Bank

As at 31 December 2022
+33.4%
$20.5m
$808.7m+24.0%
As at 31 December 2022
annualised growthsince June 2022
RECEIVABLES
18
•New Zealand Reverse Mortgages net operating income (NOI)
was up 33.4% from 1H2022.
•Receivables increased $87.4 million (24.0%) to $808.7 million.
•Strong demand and growth continues due to:
–a reverse mortgage being a solution to the ongoing strain
placed on older home owners by cost of living pressures
–increased awareness and acceptance of reverse
mortgages
–nurturing of a lead pool which has been built over a decade
–Heartland being recognised as New Zealand’s leading
reverse mortgage provider.
NET OPERATINGINCOME
increase since 1H2022
NZ Reverse Mortgages

19
Averageloansize
$122,751
Weighted average borrowers’ age
78
AverageoriginationLVR
10.0%
WeightedaverageLVR
19.7%
Proportion ofthe loan book over75%LVR
0.0%
Number ofloans in the book over75%LVR
0
1H2023 origination
$109m
(+$33m vs 1H2022)
Total repayments in 1H2023
$51m
(+$5m vs 1H2022)
1H2023 repayment rate
14.0%
(vs 15.2% in 1H2022)
Compounded annual growth rate
1
13.4%
Repayments from vintage loans (+11 years)
31.4%
(vs 36.0% in 1H2022)
$809m
NZ Reverse Mortgages
+$87m (24.0%)
2
vs June 2022
NZ Reverse Mortgages portfolio analytics
1
Compounded annual growth rate for the period 1 January 2018–31 December 2022.
2
Annualised growth.

As at 31 December 2022
-4.8%
$14.9m
As at 31 December 2022
+13.4%
$676.3m
1
Previously referred to as Business Intermediated.
20
•Asset Finance NOI was down 4.8% from 1H2022.
•Receivables increased $42.7 million (13.4%) to $676.3 million.
•NIM deteriorated due to the impact of interest rate changes
required to maintain competitive pricing in an aggressive
market, and the lag in time taken to fully reprice fixed rate
loans. NOI is expected to improve once market rates stabilise.
•Sustained growth stemmed from demand in core asset
segments: trucks, trailers and yellow goods.
•Weaker demand from the logging sector offset by strong
activity in logistics and further expansion of intermediary
partnership model.
NET OPERATINGINCOME
decreasesince 1H2022
annualised growth since June2022RECEIVABLES
Asset Finance
1

As at 31 December 2022
+1.6%
$15.8m
As at 31 December 2022
-10.9%
$595.5m
21
•Business includes floorplan lending to vehicle retailers and
wholesale facilities to other lenders. The portfolio includes what
was previously known as Business Relationship.
•Receivables decreased $34.7 million (10.9%) to $595.5 million.
•Negative movement driven by lower floorplan utilisationas
stock inventory levels remained impacted by global supply
chain and erratic shipping conditions.
•This position is expected to improve in 2H2023 as stock arrivals
continue through 2023.
•The portfolio is also expected to benefit as larger legacy loans
run down, contributing to a book that is lower risk, with low
cost origination and superior margins.
increasesince 1H2022
RECEIVABLES
annualised decrease since June2022
NET OPERATINGINCOME
Business

1
Excludingthe impact of changes in FXrates.
As at 31 December 2022
-6.8%
$6.7m
-11.5%
1
As at 31 December2022
$133.0m
22
•1H2023 saw a decrease of $0.5 million (6.8%) in O4B NOI.
•Receivables decreased $8.2 million (11.5%)
1
to $133.0 million.
•A strategy reset occurred in Q2 following a change in the
demand profile through COVID-19, and the sensitivities that
small-to-medium enterprises are experiencing due to changing
macro-economic conditions.
•Amortisationis expected to outperform growth for the
remainder of FY2023.
NET OPERATINGINCOME
decrease since 1H2022
RECEIVABLES
annualised decrease since June2022
Open for Business

As at 31 December 2022
-9.9%
$32.7m
$1.46b
As at 31 December 2022
annualised growth since June2022
RECEIVABLES
23
•Motor Finance NOI was down 9.9% from 1H2022.
•Receivables increased $75.9 million (10.9%) to $1.46 billion as
early repayments slowed.
•NIM was impacted by competitor activity, and by the change in
portfolio mix of business, where 75% of business came from the
quality end of the market. This is expected to have a positive
impact on impairments in 2H2023.
•Motor arrears, while increasing in the first four months of
1H2023, have returned to pre-COVID-19 levels of arrears at
this point in the financial year for the portfolio.
•Growth has been a product of market share gains at the higher
quality end of the market.
•Total new and used car sales in the New Zealand market
declined by 8.6%
1
compared with 1H2022. Motor is expected to
continue to outperform the market in 2H2023.
•Increased lending to new generation vehicles (comprising 14%
of all vehicle lending in 1H2023) and launched a green vehicle
lending rate in December 2022.
•Ongoing development and enhancements to the Motor digital
platforms are expected to contribute to improved efficiency,
customer experience and growth for the portfolio in 2H2023.
NET OPERATINGINCOME
decreasesince 1H2022
+10.9%
Motor Finance
1
Based on data from the Motor Industry Association of New Zealand on new and used vehicle sales from motor vehicle dealers.

As at 31 December 2022
-35.4%
$3.4m
As at 31 December 2022
-6.9%
1
$62.8m
1
Excludingthe impact of changes in FXrates.
24
•Personal Lending includes loans originated directly through
Heartland Bank, and those originated by Harmoney Corp
Limited (Harmoney) in New Zealand and Australia.
•Heartland personal loans have increased $9.1 million (52.9%) to
$43.4 million.
•Heartland’s Harmoney personal loans channel is closed to new
business and running down.
•The New Zealand Harmoney channel decreased $6.8 million
(73.6%) to $11.6 million.
•The Australian Harmoney channel decreased by $4.6 million
(72.8%)
1
to $7.9 million.
NET OPERATINGINCOME
decrease since 1H2022
RECEIVABLES
annualiseddecrease since June2022
Personal Lending

1
Excludes legacy Retail Mortgages.
2
Based on data from the Real Estate Institute of New Zealand, and on RBNZ data on new residential mortgage lending by borrowertype.
1
As at 31 December 2022
+19.9%
$302.3m
As at 31 December 2022
+267.2%
$2.1m
25
•Online Home Loans
1
Receivables increased $27.6 million
(19.9%) in 1H2023 to $302.3 million.
•The reduction in the rate of book growth was driven by the
sharp decline in property sales and new mortgage volumes in
New Zealand.
2
•Conversion rates improved towards the end of 1H2023 due to
platform updates made off the back of the CCCFA amendments
which came into effect in July 2022. These updates have
increased approval automation and reduced the friction
involved in verifying approvals.
•Online Home Loans criteria was expanded to permit lending
against terraced homes and townhouses. This change is
expected to support a 10% uplift in lending volumes compared
with the previous restriction to standalone homes only.
NET OPERATINGINCOMEincrease since 1H2022
RECEIVABLESannualisedincrease since June2022
Online Home Loans¹

As at 31 December 2022
+9.2%
$16.9m
As at 31 December 2022
-3.8%
$675.8m
26
•Overall Rural portfolio Receivables decreased by $13.3 million
(3.8%) to $675.8 million. Driven from the normal seasonal
fluctuations in LivestockReceivables which decreased by $32.6
million (37.7%) to $139.0 million, offset in part by Rural
Receivables increasing by $19.4 million (7.4%) to $536.8 million.
•Strong pasture growth late in the season is expected to support
cattle restocking, and additional intermediary partnerships will
push utilisationup into 2H2023.
•Activity in Rural Receivables continues to be mainly targeted to
Heartland’s niche Rural Direct segments (providing finance
specifically for sheep, beef and dairy farmers).
NET OPERATINGINCOME
increase since 1H2022
RECEIVABLES
annualiseddecrease since June2022
Rural

2727
AU divisional summary
Chris Flood
Deputy Chief Executive Officer
Heartland Group

1
Excluding the impact of changes in FX rates.
•Receivables increased by $128.0 million (19.9%)
1
to $1.40
billion.
•Growth was driven by:
–increased debt consolidation and cost of living requests
–customers looking to enjoy retirement with modest lifestyle
spending following the relaxation of COVID-19 lockdowns
–growing acceptance of use of reverse mortgages to
support ageing in place
–targeted marketing to new and existing customers to
increase uptake and interest, leading to record settlements
in key months.
•Growth is expected to continue in 2H2023 as ongoing
improvements and efficiencies are made to the application,
approval and loan maintenance process.
AU ReverseMortgages
As at 31 December 2022
+21.5%
$23.1m
As at 31 December 2022
+19.9%
1
$1.40b
28
NET OPERATINGINCOME
increase since 1H2022
RECEIVABLES
annualised growth since June2022

1
Compounded annual growth rate for the period 1 January 2018–31 December 2022.
2
Annualised growth.
29
Averageloansize
A$156,497
Weighted average borrowers’ age
77
AverageoriginationLVR
11.7%
WeightedaverageLVR
20.0%
Proportion ofthe loan book over75%LVR
0.1%
Number ofloans in the book over75%LVR
3
1H2023 origination
$169m
(+$58m vs 1H2022)
Total repayments in 1H2023
A$97m
(+A$21m vs 1H2022)
1H2023 repayment rate
16.7%
(vs 15.1% in 1H2022)
Compounded annual growth rate
1
18.5%
Repayments from vintage loans (+11 years)
17.2%
(vs 18.5% in 1H2022)
A$1,269m
AU Reverse Mortgages
+A$116m (20.0%)
2
vs June 2022
AU Reverse Mortgagesportfolio analytics

As at 31 December 2022
$13.4m
As at 31 December 2022
+6.7%
$385.6m
30
•StockCo Australia Receivables increased $12.5 million (6.7%) in
1H2023 to $385.6 million.
•Growth was supported by strong onboarding of new clients, and
increased facility limit requirements and usage.
•Growth slowed due to adverse weather conditions, the rising
interest rate environment, and stock value.
•Weather conditions across eastern Australia impacted on
livestock movement and activity in 1H2023.
•Rising interest rates contributed to a reduction in profitability
as rates were managed to ensure competitiveness.
•The value of livestock softened during late 2022, resulting in
lower dollars per head on the balance sheet. While stock
value was offset by higher unit numbers, this had an impact
on growth expectations. However, as experienced in the past,
these temporary market price volatilities are not expected to
have a material impact on the quality of the book.
•Low export demand, driven by COVID-19 lockdowns across
China, is expected to ease and result in strong demand for protein.
•Work is underway to develop a white label offering to
complement StockCo Australia’s existing distribution strategy and
support ongoing growth through 2H2023.
NET OPERATINGINCOME
RECEIVABLES
annualisedincrease since June2022
StockCoAU

3131
Funding, liquidity,
capital & regulatory
update
Andrew Dixson
Chief Financial Officer
Heartland Group

2,245
2,178
2,189
2,445
968
851
895
807
7
307
513
825
108
235
268
191
285
278
273
120
110
110
209
207
3,723
3,959
4,347
4,596
Jun 21Dec 21Jun 22Dec 22
Heartland Bank
Funding Composition
3
$m
Term depositsCall deposits
Savings depositsSecuritised funding
Retail bondsOther wholesale funding
NZ fundingandliquidity
Heartland Group
Heartland increased borrowings by $158.3 million (2.6%) to $6,329.1 million.
New Zealand
•Heartland Bank increased borrowings by $249.7 million (5.7%) to $4,596.3 million.
‒Deposits grew $480.5 million (13.4%) to $4,077.7 million, driven by competitive pricing on
targeted products, including Heartland’s Notice Saver offerings which both received Canstar
New Zealand recognition in the half.
2
‒In Q1 of FY2023, Heartland Bank experienced the highest growth rate in retail deposits of all
main and domestic banks in NZ.
1
‒Other borrowings decreased by $230.8 million (30.8%), largely due to the maturity of $150
million retail bond, as well as the amount drawn down in Heartland Bank’s committed auto
warehouse facility decreasing by $76.6 million.
•Total liquidity strengthened, increasing by $146.9 million (23.4%) to $774.8 million.
•Heartland Bank holds liquidity well in excess of regulatory minimums and maintains strong
regulatory liquidity ratios.
1
Based on balance sheet data from the RBNZ.
2
Awarded July 2022.
3
Includes intercompany deposits.
192
165
132
209
317
296
274
269
113
138
221
297
622
599
628
775
Jun 21Dec 21Jun 22Dec 22
Heartland Bank
Liquidity Composition $m
Undrawn limitInvestmentsCash
32
Core funding ratio
91.2%
as at Dec 22
vs 75% regulatory minimum
↑1.0 pps vs Jun 22
1-week mismatch
10.22%
as at Dec 22
vs 0% regulatory minimum
↑3.1 ppsvs Jun 22
1-month mismatch
9.82%
as at Dec 22
vs 0% regulatory minimum
↓2.9 ppsvs Jun 22

877
865
919
1,005
221
266
281
363
1,098
1,131
1,200
1,368
Jun 21Dec 21Jun 22Dec 22
Heartland Australia
Funding Composition A$m
Securitised fundingMTNs
AU fundingandliquidity
Heartland Australia
1
•Heartland Australia increased borrowings by A$167.8 million (14.0%) to A$1,368.0 million.
•Heartland Australia continues to successfully execute on its strategic funding programmeto cater
for strong growth in its portfolios.
•A A$30 million tap issue was completed in August 2022 and a further A$50 million Medium Term
Note (MTN) was issued in October 2022, taking the aggregate outstanding issuance under
Heartland Australia’s MTN programmeto A$360 million as at 31 December 2022.
•Maturity of Reverse Mortgage securitisationwarehouses were extended by two and three years, and
aggregate senior limits were expanded by A$50 million, providing additional headroom to fund
future growth in the portfolio. This provides Heartland Australia with access to A$1.49 billion of
committed funding in aggregate.
StockCoAustralia
2
•StockCoAustralia increased borrowings by A$15.0 million (4.6%) to A$344.2 million.
33
111
117
154
119
60
64
58
53
171
180
213
172
Jun 21Dec 21Jun 22Dec 22
Heartland Australia
Liquidity Composition A$m
Undrawn limitCash
1
Comprised of Heartland Australia Holdings Pty Ltd and its subsidiaries.
2
Comprised of StockCo Australia Management Pty Ltd, StockCo Holdings 2 Pty Ltd and their subsidiaries.

•Heartland Bank’s regulatory capital ratio reduced to
13.15% as at 31 December 2022 (30 June 2022: 13.49%)
following the removal of any bank dividend restrictions by
the RBNZ on 1 July 2022. Heartland Bank continues to
operate significantly in excess of regulatory minimums and
is well positioned to meet the RBNZ’s future higher capital
requirements.
•The RBNZ future capital requirements are for a core
capital ratio of 11.50% and a total capital ratio of 16.00%
by 1 July 2028.
•In order to accelerate this journey, diversify its capital base
and accommodate future projected growth, Heartland
Bank is considering an offer of Tier 2 Capital notes.
Heartland Bank considers offer of subordinated notes
•Heartland Bank is considering making an offer of up to
$75 million (with the right to accept oversubscriptions of
up to an additional $50 million at Heartland Bank’s
discretion) of unsecured subordinated notes (Notes) to
New Zealand investors and certain overseas institutional
investors. See the accompanying 1H2023 results
announcement for more detail.
•No money is currently being sought and applications for
the Notes cannot currently be made. If Heartland Bank
offers the Notes, the offer will be made in accordance with
the Financial Markets Conduct Act 2013.
Capital
7236645182
Heartland Capital Allocation $m
Heartland BankHeartland Australia
StockCo AustraliaHeartland Group Holdings
$1,016 million (13.7% of total assets)
as at 31 December 2022
34
Note: 1. Increase in share capital is primarily as a result of a $198.7 million equity raise
completed in September 2022. 2. Retained earnings includes current NPAT.
0.07%
(0.03%)
0.01%
(3)

Regulatory update
Heartland continues to monitor the significant volume of regulatory change.
Key changes include:
•changes to the New Zealand Credit Contracts and Consumer Finance Act 2003 and the Credit Contracts
and Consumer Finance Regulations 2004
•the Financial Markets (Conduct of Financial Institutions) Amendment Act 2022, which comes into force
in early 2025
•the Deposit Takers Bill, including the introduction of a depositor compensation scheme, was introduced
to Parliament on 22 September 2022
•the New Zealand government’s work to implement a legislative framework for a new consumer data
right, with a decision announced in November 2022 to designate banks into the new regime first
•the implementation of mandatory climate related disclosures, with Heartland’s first reporting period
being its financial year ending 30 June 2024.
See the accompanying 1H2023 results announcement for further detail about upcoming regulatory change.
35

36
Outlook
Jeff Greenslade
Chief Executive Officer
Heartland Group

Lookingforward
•The pleasing result in 1H2023 highlights the resilience of Heartland’s product portfolios despite the ongoing current economic challenges in New
Zealand and Australia. Strong growth continued in core portfolios, though softened elsewhere due to suppressed credit demand.
•It is currently anticipated that 2H2023 will deliver a similar result to 1H2023 on an underlying basis. In particular, continuedgrowth is expected in
Motor and Asset Finance. Usual seasonal fluctuations are expected to contribute to a better half for StockCo Australia and Heartland Bank’s Rural
portfolio in New Zealand. Increased demand is expected for Reverse Mortgages in both countries where the product has proven to offer a good
solution for many seniors wanting to live a more comfortable retirement, especially as the cost of living rises.
•Heartland’s NIM is expected to stabiliseat its current level as Heartland continues to proactively manage portfolio pricing and margin in
competitive markets.
•Efficiencies through digitalisationand the upgrade of Heartland Bank’s core banking system are critical pathways to a lower CTI ratio. As the
results demonstrate, Heartland continues to grow its revenue line, contributing favourablyto its CTI ratio. However, ultimate efficiency requires
that costs are also addressed. This will remain a focus of Heartland’s through 2H2023.
•The remainder of the 2023 calendar year will be significant for Heartland as it progresses towards the completion of the acquisition of Challenger
Bank, therefore becoming an ADI in Australia, and realisesthe benefits this will provide its existing Australian businesses Heartland Finance and
StockCo Australia –as well as future product opportunities.
Heartland expects NPAT for FY2023 to be in the range of $109 million to $114 million, excluding any impacts
of fair value changes on equity investments held and the impact of the de-designation of derivatives.
37
NPAT for FY2023

38
Appendices

Net Interest Margin
3.97%4.30%(34 bps)4.02%4.30%(29 bps)
Cost to Income Ratio
44.8%43.8%94 bps42.7%43.1%(40 bps)
Impairment Expense Ratio
2
0.29%0.33%(4 bps)0.29%0.33%(4 bps)
Return on Equity
10.6%12.2%(166 bps)12.1%12.1%(7 bps)
Earnings per Share
7.3 cps8.1 cps
(0.8cps)8.2 cps8.0 cps0.2 cps
Appendix 1: Financialperformance
ReportedUnderlying
$m 1H20231H2022Change ($)Change (%)1H20231H2022Change ($)Change (%)
Net Operating Income
1
141.7130.711.08.4%149.6130.818.814.4%
Operating Expenses63.457.36.210.8%63.956.47.513.3%
Impairment Expense9.28.50.78.3%9.28.50.78.3%
Profit Before Tax69.064.94.16.4%76.565.910.616.1%
Tax Expense20.417.43.017.3%21.818.83.015.8%
Net Profit After Tax48.747.51.12.4%54.747.17.616.2%
39
1
Includes fair value movements.
2
Impaired asset expense as a percentage of average Receivables.

Appendix 2: Financialposition
$m31 December 202230 June 2022
Movement
($m)
Movement
(%)
Liquid Assets6555857011.9%
Gross Finance Receivables6,4606,1962644.3%
Provisions(54)(52)(2)(3.2%)
Other Assets377362154.2%
Total Assets7,4387,0903484.9%
Retail Deposits4,0713,59347813.3%
Other Borrowings2,2592,578(320)(12.4%)
Total Funding6,3296,1711582.6%
Other Liabilities93111(18)(16.1%)
Equity1,01680920725.6%
Total Equity & Liabilities7,4387,0903484.9%
40

Appendix 3: Reconciliation
of reported with
underlying results
1H2023 one-offs included in the reported result:
•Hedging: a $3.6 million loss was recognised in relation to derivatives that were
de-designated from prior hedge accounting relationships in FY2022.
•Valuation of equity investment in Harmoney: a $2.4 million fair value loss was
recognised on investment in Harmoney.
•Bridging loan: a $1.9 million interest expense was recognisedfor a A$158m
bridging loan taken by Heartland to acquire StockCo Australia, which was fully
repaid in September 2022.
•Other non-recurring expenses: ($0.5 million).
1H2022one-offs included in the reported result:
•Valuation of equity investment in Harmoney: a $0.2 million fair value gain was
recognisedon the shares acquired during the period.
•Valuation of other investments: a $0.3 million fair value loss was recognised on
Heartland Bank’s rights over a profit-sharing arrangement with a customer.
•Prior period tax adjustments: a $1.2 million release of tax provisions relating to prior
periods.
•Other non-recurring expenses: $0.9 million.
$m1H20231H2022Movement ($m)Movement (%)
Reported NOI141.7130.711.08.4%
Less:
Hedge accounting impacts(3.6)-(3.6)
Net fair value gain/(loss) on investments(2.4)(0.1)(2.4)
StockCo Australia acquisition bridging loan(1.9)-(1.9)
Underlying NOI149.6130.818.814.4%
Reported OPEX63.457.36.210.8%
Less:
Other non-recurring items(0.5)0.9(1.4)
Underlying OPEX63.956.47.513.3%
Reported impairment expense9.28.50.78.3%
Reported NPAT48.747.51.12.4%
Less:
Post-tax impact of one-offs(6.0)(0.7)(5.3)
Tax adjustments relating to prior periods-1.2(1.2)
Underlying NPAT54.747.17.616.2%
Less:
StockCoAustralia NPAT4.8-4.8
Underlying NPAT excluding StockCo
Australia
49.947.12.85.9%
Reported NIM3.97%4.30%(34 bps)
Underlying NIM4.02%4.30%(29 bps)
Reported CTI44.8%43.8%94 bps
Underlying CTI42.7%43.1%(40 bps)
Reported ROE10.6%12.2%(166 bps)
Underlying ROE12.1%12.1%(7 bps)
41

Thank you
For Heartland’s 1H2023 results
announcement, please see
heartlandgroup.info

---

Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)


Results for announcement to the market
Name of issuer Heartland Group Holdings Limited
Reporting Period 6 months to 31 December 2022
Previous Reporting Period 6 months to 31 December 2021
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$141,719 8.4%
Total Revenue $141,719 8.4%
Net profit/(loss) from
continuing operations
$48,663 2.4%
Total net profit/(loss) $48,663 2.4%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.05500000
Imputed amount per Quoted
Equity Security
$0.02138889
Record Date 07/03/2023
Dividend Payment Date 22/03/2023
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.09 $1.17
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood

Authority for this announcement
Name of person

authorised
to make this announcement
Andrew Dixson, Chief Financial Officer
Contact person for this
announcement
Nicola Foley, Group Head of Communications
Contact phone number 027 345 6809
Contact email address Nicola.Foley@heartland.co.nz
Date of release through MAP

28/02/2023

Unaudited financial statements accompany this announcement.

---

Distribution Notice



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 Quarterly
Half Year X Special
DRP applies X
Record date 08/03/2023
Ex-Date (one business day before the
Record Date)
07/03/2023
Payment date (and allotment date for
DRP)
22/03/2023
Total monies associated with the
distribution
1

$38,792,676.34
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.07638889
Gross taxable amount
3
$0.07638889
Total cash distribution
4
$0.05500000
Excluded amount (applicable to listed
PIEs)
NIL
Supplementary distribution amount $ 0.00970588
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
$0.02138889
Resident Withholding Tax per
financial product
$0.00381944
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
09/03/2023 15/03/2023
Date strike price to be announced (if
not available at this time)
16/03/2023

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
09/03/2023, 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
Nicola Foley, Group Head of Communications
Contact phone number 027 345 6809
Contact email address Nicola.Foley@heartland.co.nz
Date of release through MAP

28/02/2023






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

---

Interim Financial
Statements
For the six months ended 31 December 2022

P. 2
Contents


Page
General Information.......................................................................................................................................................................... 3
Directors............................................................................................................................................................................................. 3
Auditor............................................................................................................................................................................................... 3
Directors’ Statements....................................................................................................................................................................... 4
Consolidated Interim Statement of Comprehensive Income...................................................................................................... 5
Consolidated Interim Statement of Changes in Equity................................................................................................................ 6
Consolidated Interim Statement of Financial Position................................................................................................................. 8
Consolidated Interim Statement of Cash Flows............................................................................................................................. 9
Notes to the Interim Financial Statements
1 Interim financial statements preparation....................................................................................................................... 11
Performance
2 Segmental analysis............................................................................................................................................................. 12
3 Net interest income............................................................................................................................................................ 15
4 Operating expenses........................................................................................................................................................... 15
5 Compensation of auditor.................................................................................................................................................. 15
6 Impaired asset expense.................................................................................................................................................... 16
7 Earnings per share............................................................................................................................................................ 16
Financial Position
8 Finance receivables............................................................................................................................................................ 17
9 Borrowings.......................................................................................................................................................................... 21
10 Share capital and dividends.............................................................................................................................................. 23
11 Related party transactions and balances........................................................................................................................ 23
12 Fair value............................................................................................................................................................................. 25
Risk Management
13 Enterprise risk management............................................................................................................................................ 30
14 Credit risk exposure........................................................................................................................................................... 30
15 Liquidity risk........................................................................................................................................................................ 31
16 Interest rate risk................................................................................................................................................................. 33
Other Disclosures
17 Structured Entities............................................................................................................................................................ 35
18 Insurance business, securitisation, funds management, other fiduciary activities.................................................. 36
19 Contingent liabilities and commitments......................................................................................................................... 37
20 Events after reporting date............................................................................................................................................... 37
Independent auditor’s review report........................................................................................................................................... 38

P. 3
General Information

Heartland Group Holdings Limited (HGH) is incorporated in New Zealand and registered under the Companies Act 1993. The
shares in HGH are listed on the New Zealand Exchange (NZX) main board and the Australian Securities Exchange (ASX) under a
foreign exempt listing.

HGH's address for service is Level 3, 35 Teed Street, Newmarket, Auckland 1023.

Directors

All Directors of HGH reside in New Zealand with the exception of Ellen Frances Comerford and Geoffrey Edward Summerhayes
who reside in Australia. Communications to the Directors can be sent to Heartland Group Holdings Limited, Level 3, 35 Teed
Street, Newmarket, Auckland 1023.

On 20 February 2023 Geoff Ricketts has stepped down as Chairperson of HGH and remains as a director of HGH. The Board has
resolved on 23 February 2023 for Greg Tomlinson to assume the role of Chairperson.

There have been no other changes in the composition of the Board of Directors of HGH since 30 June 2022 to the six months
ended 31 December 2022.

Auditor

PricewaterhouseCoopers
PwC Tower, Level 27
15 Customs Street West
Auckland 1010

P.4
Directors’ Statements
The consolidated interim financial statements for HGH and its subsidiaries (together the Group) are dated 27 February 2023
and have been signed by a majority of the Directors.
G R Tomlinson (Chair) E F Comerford
J K Greenslade K Mitchell
G E Summerhayes

P. 5
Consolidated Interim Statement of Comprehensive Income

For the six months ended 31 December 2022






Unaudited
6 Months to
December 2022
Unaudited
6 Months to
December 2021
Audited
12 Months to
June 2022


$000's Note

Interest income
3
240,716 163,586 342,101
Interest expense
3
101,813 39,683 91,959
Net interest income 138,903 123,903 250,142



Operating lease income

2,696 2,588 5,284
Operating lease expense

1,862 1,545 3,383
Net operating lease income 834 1,043 1,901



Lending and credit fee income

6,397 4,565 9,639
Other (expense)/income

(1,966) 1,295 18,933
Net operating income 144,168 130,806 280,615



Operating expenses
4
63,450 57,292 116,753
Profit before impaired asset expense and income tax 80,718 73,514 163,862



Fair value (loss) on investments

(2,449) (93) (12,998)
Impaired asset expense
6
9,240 8,535 13,823
Profit before income tax 69,029 64,886 137,041



Income tax expense

20,367 17,370 41,916
Profit for the period 48,662 47,516 95,125

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
instruments for cash flow hedging instruments
8,536 6,739 7,041
Movement in fair value reserve (752) (6,356) (712)
Movement in foreign currency translation reserve (9,736) (25) 2,340
Items that will not be reclassified to profit or loss, net of income
tax:

Movement in defined benefit reserve - - (171)
Net loss due to wind-up of superannuation scheme - - (473)
Other comprehensive income for the period, net of income tax (1,952) 358 8,025
Total comprehensive income for the period 46,710 47,874 103,150

Earnings per share

Basic earnings per share 7 7.30c 8.08c 16.13c
Diluted earnings per share 7 7.30c 8.08c 16.13c

Total comprehensive income for the period is attributable to the owners of the Group.

The notes to the interim financial statements form an integral part of, and should be read in conjunction with, these
consolidated interim financial statements.

P. 6
Consolidated Interim Statement of Changes in Equity

For the six months ended 31 December 2022




Share
Capital
Employee
Benefit
Reserve
Foreign
Currency
Translation
Reserve
Fair
Value
Reserve
Defined
Benefit
Reserve
Cash
Flow
Hedge
Reserve
Retained
Earnings
Total
Equity




$000's Note
Unaudited - December 2022



Balance as at 1 July 2022
599,185 4,646 (1,635) (1,034) - 7,959 199,586 808,707


Total comprehensive
income for the period




Profit for the period
- - - - - - 48,662 48,662
Other comprehensive (loss)/gain,
net of income tax

- - (9,736) (752) - 8,536 - (1,952)
Total comprehensive (loss)/
income for the period
- - (9,736) (752) - 8,536 48,662 46,710


Contributions by and
distributions to owners




Dividends paid 10
- - - - - - (32,610) (32,610)
Share based payments
- (263) - - - - - (263)
Vesting of share based payments
1,170 (1,170) - - - - - -
Share issuance
197,006 - - - - - - 197,006
Transaction costs associated with
share issuance

(3,695) - - - - - - (3,695)
Total transactions with owners 194,481 (1,433) - - - - (32,610) 160,438
Balance as at 31 December 2022
793,666 3,213 (11,371) (1,786) - 16,495 215,638 1,015,855


Unaudited - December 2021


Balance as at 1 July 2021
583,781 2,731 (3,975) (322) 171 918 178,388 761,692
Total comprehensive
income for the period




Profit for the period
- - - - - - 47,516 47,516
Other comprehensive (loss)/gain,
net of income tax

- - (25) (6,356) - 6,739 - 358
Total comprehensive (loss)/
income for the period
- - (25) (6,356) - 6,739 47,516 47,874


Contributions by and
distributions to owners




Dividends paid 10
- - - - - - (41,013) (41,013)
Dividend reinvestment plan 10
8,926 - - - - - - 8,926
Share based payments
- 698 - - - - - 698
Total transactions with owners 8,926 698 - - - - (41,013) (31,389)
Balance as at 31 December 2021
592,707 3,429 (4,000) (6,678) 171 7,657 184,891 778,177

The notes to the interim financial statements form an integral part of, and should be read in conjunction with, these
consolidated interim financial statements.

P. 7
Consolidated Interim Statement of Changes in Equity (Continued)

For the six months ended 31 December 2022




Share
Capital
Employee
Benefit
Reserve
Foreign
Currency
Translation
Reserve
Fair
Value
Reserve
Defined
Benefit
Reserve
Cash
Flow
Hedge
Reserve
Retained
Earnings
Total
Equity




$000's Note
Audited - June 2022


Balance as at 1 July 2021
583,781 2,731 (3,975) (322) 171 918 178,388 761,692
Total comprehensive
income for the year




Profit for the year
- - - - - - 95,125 95,125
Other comprehensive gain/ (loss),
net of income tax

- - 2,340 (712) (171) 7,041 (473) 8,025
Total comprehensive income/(loss) for
the year
- - 2,340 (712) (171) 7,041 94,652 103,150


Contributions by and
distributions to owners




Dividends paid 10
- - - - - - (73,454) (73,454)
Dividend reinvestment plan 10
15,404 - - - - - - 15,404
Share based payments
- 1,915 - - - - - 1,915
Total transactions with owners 15,404 1,915 - - - - (73,454) (56,135)
Balance as at 30 June 2022
599,185 4,646 (1,635) (1,034) - 7,959 199,586 808,707

The notes to the interim financial statements form an integral part of, and should be read in conjunction with, these
consolidated interim financial statements.

P. 8
Consolidated Interim Statement of Financial Position


As at 31 December 2022






Unaudited
December 2022
Unaudited
December 2021
Audited
June 2022
$000's
Note
Assets
Cash and cash equivalents 385,277 207,666 310,758
Investments 12 287,258 318,273 289,294
Derivative financial instruments 12 51,374 21,714 45,221
Finance receivables 8 4,234,966 3,526,234 4,146,821
Finance receivables - reverse mortgages 8 2,171,516 1,778,066 1,996,854
Investment properties 12 11,903 11,832 11,832
Operating lease vehicles 15,546 13,009 15,161
Right of use assets 12,775 14,843 14,145
Other assets 23,694 16,444 18,229
Intangible assets 223,061 74,531 218,874
Deferred tax asset 20,504 16,288 23,074
Total assets 7,437,874 5,998,900 7,090,263

Liabilities
Deposits 9 4,070,558 3,332,409 3,592,508
Other borrowings 9 2,258,511 1,822,465 2,578,213
Lease liabilities 14,798 16,980 16,240
Tax liabilities 3,308 5,619 22,044
Derivative financial instruments 12 10,406 3,548 6,341
Trade and other payables 64,438 39,702 66,210
Total liabilities 6,422,019 5,220,723 6,281,556

Equity
Share capital 10 793,666 592,707 599,185
Retained earnings and other reserves 222,189 185,470 209,522
Total equity 1,015,855 778,177 808,707

Total equity and liabilities 7,437,874 5,998,900 7,090,263


Total interest earning and discount bearing assets 6,982,869 5,735,324 6,667,260
Total interest and discount bearing liabilities 6,283,731 5,138,333 6,131,593

The notes to the interim financial statements form an integral part of, and should be read in conjunction with, these
consolidated interim financial statements.

P. 9
Consolidated Interim Statement of Cash Flows

For the six months ended 31 December 2022




Unaudited
6 Months to
December 2022
Unaudited
6 Months to
December 2021
Audited
12 Months to
June 2022


$000's
Note
Cash flows from operating activities
Interest received 155,508 116,664 222,894
Operating lease income received 2,197 1,807 3,913
Lending, credit fees and other income received 1,516 2,920 6,101
Operating inflows 159,221 121,391 232,908

Interest paid (88,759) (51,000) (100,467)
Payments to suppliers and employees (58,118) (38,641) (69,463)
Taxation paid (38,505) (20,988) (32,987)
Operating outflows (185,382) (110,629) (202,917)

Net cash flows from operating activities before changes in
operating assets and liabilities
(26,161) 10,762 29,991

Proceeds from sale of operating lease vehicles 1,643 3,023 4,481
Purchase of operating lease vehicles (3,245) (6,016) (10,758)
Net movement in finance receivables (182,656) (299,163) (693,512)
Net movement in deposits 472,606 149,107 407,484
Net cash flows from/(applied to) operating activities
1
262,187 (142,287) (262,314)

Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (7,744) (8,578) (9,809)
Decrease in investments 4,919 53,101 75,531
Deposit paid for the conditional acquisition of Challenger Bank
Limited
(3,936) - -
Purchase of equity investment (5,667) - -
Net movement of investment property (71) - -
Purchase of subsidiary, net of cash acquired (3,047) - (159,919)
Total cash (applied to)/from investing activities (15,546) 44,523 (94,197)

Net cash flows (applied to)/from investing activities (15,546) 44,523 (94,197)

Cash flows from financing activities
Net movement in wholesale funding - 111,117 468,139
Net movement from issue of unsubordinated notes - 45,265 77,243
Net issue of share capital 197,006 - -
Total cash provided from financing activities 197,006 156,382 545,382

Net decrease in wholesale funding (205,556) - -
Repayment of unsubordinated notes (125,577) - -
Dividends paid 10 (32,610) (32,087) (58,050)
Payment of lease liabilities (1,692) (1,198) (2,396)
Transaction costs associated with capital raising (3,693) - -
Total cash (applied to) financing activities (369,128) (33,285) (60,446)

Net cash flows (applied to)/from financing activities (172,122) 123,097 484,936

Net increase in cash held 74,519 25,333 128,425
Opening cash and cash equivalents 310,758 182,333 182,333
Closing cash and cash equivalents 385,277 207,666 310,758
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 Interim Statement of Cash Flows (Continued)


For the six months ended 31 December 2022



Reconciliation of profit after tax to net cash flows from operating activities






Unaudited
6 Months to
December 2022
Unaudited
6 Months to
December 2021
Audited
12 Months to
June 2022


$000's
Note
Profit for the period 48,662 47,516 95,125

Add/(less) non-cash items:
Depreciation and amortisation expense 5,177 5,624 10,691
Depreciation on lease vehicles 1,692 1,429 3,104
Capitalised net interest income and fee income (81,311) (53,178) (95,271)
Impaired asset expense 6 9,240 8,535 13,823
Investment fair value unrealised movement 2,449 93 12,998
Other non-cash items 1,325 (6,662) (30,408)
Total non-cash items (61,428) (44,159) (85,063)

Add/(less) movements in operating assets and liabilities:
Finance receivables (182,656) (299,163) (693,512)
Operating lease vehicles (1,602) (2,993) (6,277)
Other assets (3,440) (191) (207)
Current tax (18,736) (1,821) 14,604
Derivative financial instruments 5,696 (2,090) (23,214)
Deferred tax 2,570 (2,171) (8,957)
Deposits 472,606 149,107 407,484
Other liabilities 515 13,678 37,703
Total movements in operating assets and liabilities 274,953 (145,644) (272,376)


Net cash flows from/(applied to) operating activities
1
262,187 (142,287) (262,314)
1
Cash flows from operating activities do not include cash flows from wholesale funding which are included as part of financing activities.

The notes to the interim financial statements form an integral part of, and should be read in conjunction with, these
consolidated interim financial statements.

P. 11
Notes to the Interim Financial Statements

For the six months ended 31 December 2022

1 Interim financial statements preparation

Basis of preparation

The interim financial statements presented are the consolidated interim financial statements comprising Heartland Group
Holdings Limited (HGH) and its subsidiaries (the Group). They have been prepared in accordance with Generally Accepted
Accounting Practice in New Zealand (NZ GAAP) as defined in the Financial Reporting Act 2013. These consolidated interim
financial statements comply with NZ IAS 34 Interim Financial Reporting as appropriate for publicly accountable for-profit entities
and IAS 34 Interim Financial Reporting.

The consolidated interim financial statements do not include all notes of the type normally included in an annual financial report.
Accordingly this report is to be read in conjunction with the consolidated financial statements for the year ended 30 June 2022.

The consolidated interim financial statements presented here are for the following periods:

• 6 month period ended 31 December 2022 – Unaudited
• 6 month period ended 31 December 2021 – Unaudited
• 12 month period ended 30 June 2022 – Audited

The consolidated interim financial statements have been prepared on a going concern and historical cost basis, unless stated
otherwise. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim
reporting period.

Certain comparative balances have been reclassified to align with the presentation used in the current period. These
reclassifications have no impact on the overall financial performance or net assets for the comparative year/period.

Estimates and judgements

There have been no material changes to the use of estimates and judgements for the preparation of the interim financial
statements since the reporting date of the previous financial statements. The Group’s financial statements for the year ended 30
June 2022 contain detail on the estimates and judgements used.

In respect of the provision for expected credit loss on finance receivables, the Group has previously created an economic overlay
of $8.0 million as at 30 June 2022 to address economic uncertainty. The economic overlay of $8.0 million remains appropriate at
31 December 2022.

Significant events and transactions

On 20 October 2022 Heartland Group Holdings Limited entered into a conditional share purchase agreement for the purchase of
Challenger Bank Limited (Challenger Bank) from Challenger Limited for a consideration of approximately AU $36 million, subject
to adjustments for net assets delivered at completion. The share purchase agreement is subject to obtaining the requisite
regulatory approvals. A 10% deposit was paid to Challenger Limited on execution of the conditional share purchase agreement.

During the period Heartland Group Holdings Limited settled deferred consideration and payments relating to adjustments for net
assets delivered at completion in relation to the acquisition of StockCo Holdings 2 Pty Ltd (StockCo Australia) which amounted to
AU $2.85 million. A revised provisional goodwill of AU $126.94 million (NZ $136.08 million) was recognised (2022: AU $124.91
million (NZ $137.58 million)).

P. 12
Performance

2 Segmental analysis

Segment information is presented in respect of the Group's operating segments consistent with those used for the Group's
management and internal reporting structure.

Operating segments

The Group operates within New Zealand and Australia and comprises the following main operating segments:

Motor Motor vehicle finance.

Reverse mortgages Reverse mortgage lending in New Zealand.

Personal lending Transactional, home loans and personal loans to individuals.

Business Term debt, plant and equipment finance, commercial mortgage lending and working capital solutions for
small-to-medium sized businesses.

Rural 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 in New Zealand.

StockCo Australia Specialise in livestock finance within Australia. This segment was acquired through the acquisition of
StockCo Holdings 2 Pty Ltd and StockCo Australia Management Pty Ltd on 31 May 2022.

Australia Reverse mortgage lending and other financial services within Australia, excluding StockCo Australia.

Certain operating expenses, such as premises, IT, support centre costs and tax expense are not allocated to operating segments
and are included in Other. Liabilities are managed centrally and therefore are not allocated across the operating segments.

The Group's operating segments are different from the industry categories detailed in Note 14 Credit risk exposure. The operating
segments are primarily categorised by sales channel, whereas Note 14 Credit risk exposure categorises exposures are based on
credit risk concentrations.

P. 13
2 Segmental analysis (continued)


Reverse Personal StockCo
$000's
Motor Mortgages Lending Business Rural Australia Australia Other Total
Unaudited - December
2022


Net interest income 30,936 19,058 5,284 35,843 16,612 13,413 20,526 (2,769) 138,903
Net other
income/(expense)
1,734 1,444 594 1,542 336 2 2,594 (2,981) 5,265
Net operating
income/(expense)
32,670 20,502 5,878 37,385 16,948 13,415 23,120 (5,750) 144,168

Operating expenses 2,055 2,585 3,344 4,867 1,628 4,566 6,473 37,932 63,450
Profit/(loss) before
impaired asset expense
and income tax
30,615 17,917 2,534 32,518 15,320 8,849 16,647 (43,682) 80,718


Fair value (loss) on
investments
- - - - - - - (2,449) (2,449)
Impaired asset expense 3,341 - 1,580 4,092 162 39 26 - 9,240
Profit/(loss) before
income tax
27,274 17,917 954 28,426 15,158 8,810 16,621 (46,131) 69,029

Income tax
(benefit)/expense
- - - - - (11) - 20,378 20,367
Profit/(loss) for the
period
27,274 17,917 954 28,426 15,158 8,821 16,621 (66,509) 48,662
Total assets 1,457,970 808,701 361,870 1,386,602 674,009 374,484 1,370,816 1,003,422 7,437,874
Total liabilities 6,422,019

P. 14
2 Segmental analysis (continued)


Reverse Personal StockCo
$000's
Motor Mortgages Lending Business Rural Australia Australia Other
Total
Unaudited - December
2021


Net interest income 34,687 14,000 4,529 35,888 15,138 - 19,881 (220) 123,903
Net other income 1,703 1,289 726 1,408 365 - 1,143 269 6,903
Net operating income 36,390 15,289 5,255 37,296 15,503 - 21,024 49 130,806

Operating expenses 1,975 2,354 3,268 4,756 1,531 5,507 37,901 57,292
Profit/(loss) before
impaired asset expense
and income tax
34,415 12,935 1,987 32,540 13,972 - 15,517 (37,852) 73,514


Fair value (loss) on
investments
- - - - - - - (93) (93)
Impaired asset
expense/(benefit)
2,518 - 902 4,210 909 - (5) 1 8,535
Profit/(loss) before
income tax
31,897 12,935 1,085 28,330 13,063 - 15,522 (37,946) 64,886

Income tax expense - - - - - - - 17,370 17,370
Profit/(loss) for the
period
31,897 12,935 1,085 28,330 13,063 - 15,522 (55,316) 47,516

Total assets 1,344,866 648,865 272,803 1,294,601 583,026 - 1,185,598 669,141 5,998,900
Total liabilities 5,220,723

Audited - June 2022


Net interest income 69,730 29,957 10,287 70,602 29,460 1,889 38,662 (445) 250,142
Net other income 3,326 2,583 1,562 2,679 741 3 2,690 16,889 30,473
Net operating income 73,056 32,540 11,849 73,281 30,201 1,892 41,352 16,444 280,615

Operating expenses 3,792 4,485 6,419 9,358 3,038 1,692 11,286 76,683 116,753
Profit/(loss) before
impaired asset expense
and income tax
69,264 28,055 5,430 63,923 27,163 200 30,066 (60,239) 163,862


Fair value (loss) on
investments
- - - - - - - (12,998) (12,998)
Impaired asset
expense/(benefit)
1,481 - (877) 11,831 2,256 (291) (577) - 13,823
Profit/(loss) before
income tax
67,783 28,055 6,307 52,092 24,907 491 30,643 (73,237) 137,041

Income tax expense - - - - - - - 41,916 41,916
Profit/(loss) for the
period
67,783 28,055 6,307 52,092 24,907 491 30,643 (115,153) 95,125

Total assets 1,382,367 721,264 332,783 1,387,352 687,232 372,172 1,288,494 918,599 7,090,263
Total liabilities 6,281,556

P. 15
3 Net interest income

Unaudited Unaudited Audited

6 Months to 6 Months to 12 Months to
$000's
December 2022 December 2021 June 2022
Interest income
Cash and cash equivalents
3,525 149 811
Investments
2,399 2,782 5,156
Finance receivables
156,707 113,863 236,916
Finance receivables - reverse mortgages
78,085 46,792 99,218
Total interest income 240,716 163,586 342,101


Interest expense

Deposits
58,667 18,708 45,717
Other borrowings
50,374 20,524 46,110
Net interest (income)/expense on derivative financial instruments
(7,228) 451 132
Total interest expense 101,813 39,683 91,959


Net interest income 138,903 123,903 250,142



4 Operating expenses

Unaudited Unaudited Audited
6 Months to 6 Months to 12 Months to
$000's December 2022 December 2021 June 2022
Personnel expenses
33,682 30,884 61,152
Directors' fees
574 563 1,149
Superannuation
952 768 1,530
Depreciation - property, plant and equipment
948 1,388 2,459
Legal and professional fees
1,876 903 3,112
Advertising and public relations
1,785 2,185 4,510
Depreciation - right of use asset
1,278 1,154 2,310
Technology services
4,940 4,785 9,374
Telecommunications, stationery and postage
1,011 842 1,723
Customer acquisition costs
3,693 2,888 5,974
Amortisation of intangible assets
2,951 3,082 5,922
Other operating expenses
1

9,760 7,850 17,538
Total operating expenses 63,450 57,292 116,753
1
Other operating expenses include compensation of auditor which is disclosed in Note 5 - Compensation of auditor.



5 Compensation of auditor


Unaudited Unaudited Audited

6 Months to 6 Months to 12 Months to
$000's
December 2022 December 2021 June 2022
Fees paid to current auditor - PricewaterhouseCoopers
Audit and review of financial statements
1
275 - -
Other non-assurance services paid to auditor
2
111 - -
Total compensation paid to PricewaterhouseCoopers 386 - -
1
These relates to fees paid for both the audit of the annual financial statements and review of the interim financial statements.
2
Other non-assurance services paid to PricewaterhouseCoopers relates to actuarial services for reverse mortgages for the Group and tax
compliance services for a subsidiary of the Group.

P. 16
5 Compensation of auditor (continued)

Unaudited Unaudited Audited

6 Months to 6 Months to 12 Months to
$000's
December 2022 December 2021 June 2022
Fees paid to predecessor auditor - KPMG
Audit and review of financial statements
1
40 386 879
Other assurance services paid to auditor
2
- 51 103
Total compensation paid to KPMG 40 437 982
1
These relates to fees paid for both the audit of the annual financial statements and review of the interim financial statements for the
comparative periods.
2
Other assurance related services paid to KPMG comprise regulatory assurance services, trust deed reporting and registry audits.

6 Impaired asset expense

At each reporting date, the Group applies a three stage approach to measuring expected credit loss to finance receivables carried
at amortised cost. The following table details impairment charges of those finance receivables for the six months ended 31
December 2022.

Unaudited Unaudited Audited
6 Months to 6 Months to 12 Months to
$000's December 2022 December 2021 June 2022
Non-securitised
Individually impaired asset expense
5,292 6,266 10,783
Collectively impaired asset expense
5,421 3,300 6,466
Total non-securitised impaired asset expense 10,713 9,566 17,249


Securitised

Individually impaired asset expense
155 - -
Collectively impaired asset expense
(311) 392 (70)
Total securitised impaired asset expense (156) 392 (70)


Total

Individually impaired asset expense
5,447 6,266 10,783
Collectively impaired asset expense
5,110 3,692 6,396
Total impaired asset expense excluding recovery amounts previously
written off to the income statement 10,557 9,958 17,179
Recovery of amounts previously written off to the income statement
(1,317) (1,423) (3,356)
Total impaired asset expense
9,240 8,535 13,823



7 Earnings per share


Earnings
Per Share
Net Profit
After Tax
Weighted
Average No.
of Shares


Cents $000's 000's
Unaudited - December 2022
Basic earnings
7.30 48,662 666,186
Diluted earnings
7.30 48,662 666,186

Unaudited - December 2021

Basic earnings
8.08 47,516 588,190
Diluted earnings
8.08 47,516 588,190

Audited - June 2022

Basic earnings
16.13 95,125 589,771
Diluted earnings
16.13 95,125 589,771

P. 17
Financial Position

8 Finance receivables

(a) Finance receivables held at amortised cost

Unaudited Unaudited Audited
$000's
December 2022 December 2021 June 2022
Non-securitised
Neither at least 90 days past due nor impaired
3,570,689 3,203,046 3,404,451
At least 90 days past due
59,274 38,593 41,768
Individually impaired
69,000 63,965 66,183
Gross finance receivables 3,698,963 3,305,604 3,512,402
Less provision for impairment
(52,440)
(52,651)
(50,629)
Total non-securitised finance receivables 3,646,523 3,252,953 3,461,773

Securitised

Neither at least 90 days past due nor impaired
589,320 273,650 686,236
At least 90 days past due
- 263 -
Individually impaired
343 - 188
Gross finance receivables 589,663 273,913 686,424
Less provision for impairment
(1,220) (632) (1,376)
Total securitised finance receivables 588,443 273,281 685,048

Total

Neither at least 90 days past due nor impaired
4,160,009 3,476,696 4,090,687
At least 90 days past due
59,274 38,856 41,768
Individually impaired
69,343 63,965 66,371
Gross finance receivables 4,288,626 3,579,517 4,198,826
Less provision for impairment
(53,660) (53,283) (52,005)
Total finance receivables 4,234,966 3,526,234 4,146,821

P. 18
8 Finance receivables (continued)

(a) Finance receivables held at amortised cost (continued)

Movement in provision for impairment losses

The following table details the movement from the opening balance to the closing balance of the provision for impairment losses
by class.


Lifetime Lifetime
ECL ECL
12 - Month Not Credit Credit Specific
$000's ECL Impaired Impaired Provision Total
Unaudited - December 2022

Non-securitised

Impairment allowance as at 30 June 2022 19,068 1,959 14,601 15,001 50,629
Changes in loss allowance
Transfer between stages (3,946) (1,976) 1,964 3,958 -
New and increased provision (net of provision releases)
2,828 2,314 4,237 1,334 10,713
Credit impairment charge (1,118) 338 6,201 5,292 10,713
Write-offs - - (6,782) (2,071) (8,853)
Effect of changes in foreign exchange rate (33) - (16) - (49)
Impairment allowance as at 31 December 2022 17,917 2,297 14,004 18,222 52,440

Securitised

Impairment allowance as at 30 June 2022 1,188 (1) 1 188 1,376
Changes in loss allowance
Transfer between stages (156) 1 - 155 -
New and increased provision (net of provision releases)
(169) 13 - - (156)
Credit impairment charge (325) 14 - 155 (156)
Write-offs - - - - -
Effect of changes in foreign exchange rate - - - - -
Impairment allowance as at 31 December 2022 863 13 1 343 1,220

Total

Impairment allowance as at 30 June 2022 20,256 1,958 14,602 15,189 52,005
Changes in loss allowance
Transfer between stages (4,102) (1,975) 1,964 4,113 -
New and increased provision (net of provision releases)
2,659 2,327 4,237 1,334 10,557
Credit impairment charge (1,443) 352 6,201 5,447 10,557
Write-offs - - (6,782) (2,071) (8,853)
Effect of changes in foreign exchange rate (33) - (16) - (49)
Impairment allowance as at 31 December 2022 18,780 2,310 14,005 18,565 53,660

P. 19
8 Finance receivables (continued)

(a) Finance receivables held at amortised cost (continued)

Movement in provision for impairment losses (continued)


Lifetime Lifetime
ECL ECL
12 - Month Not Credit Credit Specific
$000's ECL Impaired Impaired Provision Total
Unaudited - December 2021

Non-securitised

Impairment allowance as at 30 June 2021 26,591 2,405 16,823 7,629 53,448
Changes in loss allowance
Transfer between stages (2,323) (1,102) 714 2,711 -
New and increased provision (net of provision releases) (1,149) 391 6,769 3,555 9,566
Credit impairment charge (3,472) (711) 7,483 6,266 9,566
Write-offs - - (9,109) (1,219) (10,328)
Effect of changes in foreign exchange rate (35) - - - (35)
Impairment allowance as at 31 December 2021 23,084 1,694 15,197 12,676 52,651

Securitised

Impairment allowance as at 30 June 2021 216 22 1 - 239
Changes in loss allowance
Transfer between stages (2) (27) 29 - -
New and increased provision (net of provision releases) 231 77 84
-
392
Credit impairment charge 229 50 113 - 392
Write-offs - - - - -
Effect of changes in foreign exchange rate - 1 - - 1
Impairment allowance as at 31 December 2021 445 73 114 - 632

Total

Impairment allowance as at 30 June 2021 26,807 2,427 16,824 7,629 53,687
Changes in loss allowance
Transfer between stages (2,325) (1,129) 743 2,711 -
New and increased provision (net of provision releases) (918) 468 6,853 3,555 9,958
Credit impairment charge (3,243) (661) 7,596 6,266 9,958
Write-offs - - (9,109) (1,219) (10,328)
Effect of changes in foreign exchange rate (35) 1 - - (34)
Impairment allowance as at 31 December 2021 23,529 1,767 15,311 12,676 53,283

P. 20
8 Finance receivables (continued)

(a) Finance receivables held at amortised cost (continued)

Movement in provision for impairment losses (continued)


Lifetime Lifetime
ECL ECL
12 - Month Not Credit Credit Specific
$000's ECL Impaired Impaired Provision Total
Audited - 30 June 2022

Non-securitised

Impairment allowance as at 30 June 2021 26,591 2,405 16,823 7,629 53,448
Changes in loss allowance
Transfer between stages (3,903) (2,447) 1,074 5,276 -
New and increased provision (net of provision releases) (3,652) 1,998 13,396 5,507 17,249
Credit impairment charge (7,555) (449) 14,470 10,783 17,249
Write-offs - - (16,692) (3,411) (20,103)
Effect of changes in foreign exchange rate 32 3 - - 35
Acquisition of portfolio - - - - -
Impairment allowance as at 30 June 2022 19,068 1,959 14,601 15,001 50,629

Securitised

Impairment allowance as at 30 June 2021 216 22 1 - 239
Changes in loss allowance
Transfer between stages (6) (109) 115 - -
New and increased provision (net of provision releases) (14) 85 (141) - (70)
Credit impairment charge (20) (24) (26) - (70)
Write-offs - - 26 - 26
Effect of changes in foreign exchange rate - 1 - - 1
Acquisition of portfolio 992 - - 188 1,180
Impairment allowance as at 30 June 2022 1,188 (1) 1 188 1,376

Total

Impairment allowance as at 30 June 2021 26,807 2,427 16,824 7,629 53,687
Changes in loss allowance
Transfer between stages (3,909) (2,556) 1,189 5,276 -
New and increased provision (net of provision releases) (3,666) 2,083 13,255 5,507 17,179
Credit impairment charge (7,575) (473) 14,444 10,783 17,179
Write-offs - - (16,666) (3,411) (20,077)
Effect of changes in foreign exchange rate 32 4 - - 36
Acquisition of portfolio 992 - - 188 1,180
Impairment allowance as at 30 June 2022 20,256 1,958 14,602 15,189 52,005

P. 21
8 Finance 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


Lifetime Lifetime
ECL ECL
12 - Month Not Credit Credit Specific
$000's ECL Impaired Impaired Provision Total
Unaudited - December 2022

Gross finance receivables as at 30 June 2022 3,967,917 118,424 46,114 66,371 4,198,826
Transfer between stages (106,785) 63,057 34,341 9,387 -
Additions 718,239 - - 7,928 726,167
Deletions (556,132) (47,720) (11,235) (12,427) (627,514)
Write-offs - - (6,782) (2,071) (8,853)
Gross finance receivables as at 31 December 2022 4,023,239 133,761 62,438 69,188 4,288,626

Unaudited - December 2021

Gross finance receivables as at 30 June 2021 3,092,653 165,793 45,564 38,143 3,342,153
Transfer between stages (48,097) (11,584) 20,313 39,368 -
Additions 897,124 - - 906 898,030
Deletions (594,443) (34,662) (8,000) (13,233) (650,338)
Write-offs - - (9,109) (1,219) (10,328)
Gross finance receivables as at 31 December 2021 3,347,237 119,547 48,768 63,965 3,579,517

Audited - June 2022

Gross finance receivables as at 30 June 2021 3,092,653 165,793 45,564 38,143 3,342,153
Transfer between stages (112,179) 25,532 31,253 55,394 -
Additions 2,433,553 - - 3,190 2,436,743
Deletions (1,446,110) (72,901) (14,037) (26,945) (1,559,993)
Write-offs - - (16,666) (3,411) (20,077)
Gross finance receivables as at 30 June 2022 3,967,917 118,424 46,114 66,371 4,198,826


(b) Finance receivables held at fair value

Unaudited Unaudited Audited
$000's December 2022 December 2021 June 2022
Finance receivables - reverse mortgages 2,171,516 1,778,066 1,996,854
Total finance receivables - reverse mortgages 2,171,516 1,778,066 1,996,854



9 Borrowings

Unaudited Unaudited Audited
$000's December 2022 December 2021 June 2022
Deposits 4,070,558 3,332,409 3,592,508
Total deposits 4,070,558 3,332,409 3,592,508

Unsubordinated notes 510,169 560,307 636,407
Securitised borrowings 1,541,163 1,152,521 1,559,108
Certificate of deposit 207,179 109,637 198,715
Bank borrowings - - 173,982
Money market borrowings - - 10,001
Total other borrowings 2,258,511 1,822,465 2,578,213

P. 22
9 Borrowings (continued)

Deposits and unsubordinated notes rank equally and are unsecured.

Unsubordinated notes

The Group has the following unsubordinated notes on issue at 31 December 2022. Australian (AU) borrowings are stated in
AU dollars.



Principal


Valuation


Issue Date


Maturity Date
Frequency of
Interest
Repayment
AU $75 million
AU $45 million
NZ $125 million
AU $45 million
AU $30 million
AU $115 million
AU $50 million
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
21 January 2021
8 March 2021
12 April 2019
9 July 2021
16 August 2022
12 May 2022
5 October 2022
21 April 2023
21 April 2023
12 April 2024
9 July 2024
9 July 2024
13 May 2025
5 October 2027
Quarterly
Quarterly
Semi-annually
Quarterly
Quarterly
Quarterly
Quarterly

Securitised borrowings

At 31 December 2022 the Group had the following securitised borrowings outstanding:

• Heartland Auto Receivables Warehouse Trust 2018 - 1 securitisation facility $400 million, drawn $191 million (December
2021: $400 million, drawn $235 million; June 2022: $400 million, drawn $268 million). Securitised borrowings held by
investors are secured over the assets of the Heartland Auto Receivables Warehouse Trust 2018-1 (predominantly motor
loans). The facility has a maturity date of 26 August 2024.

• Seniors Warehouse Trust securitisation facility AU $600 million, drawn AU $563 million (December 2021: AU $600 million,
drawn AU $552 million; June 2022: AU $600 million, drawn AU $585 million). Notes issued to investors are secured over the
assets of Seniors Warehouse Trust (predominantly reverse mortgage loans). The facility has a maturity date of 30 September
2025.

• Seniors Warehouse Trust No.2 securitisation facility AU $400 million, drawn AU $313 million (December 2021: AU $250
million, drawn AU $180 million; June 2022: AU $350 million, drawn AU $210 million). Notes issued to investors are secured
over the assets of Seniors Warehouse Trust No.2 (predominantly reverse mortgage loans). The facility has a maturity date of
1 July 2024.

• Atlas 2020-1 Trust securitisation facility AU $127 million, drawn AU $127 million (December 2021: AU $136 million, drawn AU
$136 million; June 2022: AU $127 million, drawn AU $127 million). Loans issued to investors are secured over the assets of
Atlas 2020-1 Trust (predominantly reverse mortgage loans) and has a maturity date of 24 September 2050.

• StockCo Securitisation Trust 2022-1 securitisation facility AU $300 million, drawn AU $253 million (December 2021: n/a; June
2022: AU $300 million, drawn AU $249 million). Loans issued to investors are secured over the assets of StockCo
Securitisation Trust 2022-1 (predominantly livestock loans). The facility has a maturity date of 27 May 2024.

P. 23
10 Share capital and dividends

Unaudited Unaudited Audited
December 2022 December 2021 June 2022
000's Number of Shares Number of Shares Number of Shares
Issued shares
Opening balance 592,904 585,904 585,904
Net shares issued during the period 112,417 - -
Dividend reinvestment plan - 3,930 7,000
Closing balance 705,321 589,834 592,904


HGH completed a capital raise during the six months to 31 December 2022, which comprised a share placement (Placement) and
a Share Purchase Plan (SPP). HGH issued 72,222,222 shares on 26 August 2022 under the Placement and 38,822,458 new shares
on 9 September 2022 under the SPP.

On 19 September 2022, HGH issued a further 2,250,625 shares under the Long Term Incentive Scheme of HGH (LTI Scheme), of
which 877,777 shares were acquired by HGH pursuant to a buyback offer to the participants to fund the tax liability arising for
those participants upon receipt of shares under the LTI Scheme.

The dividend reinvestment plan (DRP) was suspended during the period of the capital raise, consequently no new shares were
issued in relation to the DRP (2022: 3,930,116 new shares on 15 September 2021 and 3,069,339 new shares on 16 March 2022).

Dividends paid

6 Months to December 2022 12 Months to June 2022
Date Cents Date Cents
Declared Per Share $000's Declared Per Share $000's
Final dividend 26 August 2022 5.5 32,610 24 August 2021 7.0 41,013
Interim dividend - - - 22 February 2022 5.5 32,441
Total dividends paid 32,610 73,454


11 Related party transactions and balances

(a) Transactions with key management personnel

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.

KMP receive personal banking and financial investment services from the Group in the ordinary course of business. The terms and
conditions such as interest rates and collateral along with the risks to the Group are comparable to transactions with other
employees and customers, and did not involve more than the normal risk of repayment or present other unfavourable features.

All other transactions with KMPs and their related entities are made on terms equivalent to those that prevail in arm's length
transactions.

Unaudited Unaudited Audited

6 Months to 6 Months to 12 Months to
$000's December 2022 December 2021 June 2022
Transactions with key management personnel
Interest income 11 15 26
Interest expense (15) (24) (24)
Net transactions with key management personnel (4) (9) 2

Due from/(to) key management personnel
Lending 831 296 229
Deposits (1,325) (1,425) (508)
Net due (to) key management personnel (494) (1,129) (279)

P. 24
11 Related party transactions and balances (continued)


(b) Transactions with related parties

HGH is the ultimate parent company of the Group.

Entities within the Group have regular transactions with each other on agreed terms. The transactions include the provision of tax
and administrative services and customer operations. Banking facilities are provided by HBL to other Group entities on normal
commercial terms as with other customers. There is no lending from subsidiaries within the Group to HGH.

Related party transactions between the Group eliminate on consolidation. Related party transactions outside of the Group are as
follows:

Unaudited Unaudited Audited
6 Months to 6 Months to 12 Months to
$000's December 2022 December 2021 June 2022
Southern Cross Building Society Staff Superannuation (SCBS)
Interest expense payable to SCBS
1 4 6
Management fees receivable from SCBS
- 5 10
Cash received from SCBS
- - 350

ASF Custodians Pty Limited

Audit fees
4 4 7

Heartland Trust (HT)
Dividend paid to HT 356 453 809



(c) Other balances with related parties

Unaudited Unaudited Audited
$000's December 2022 December 2021 June 2022
Southern Cross Building Society Staff Superannuation
Deposits owing to SCBS 1 1,704 35

P. 25
12 Fair value

(a) Financial instruments measured at fair value

The following methods and assumptions were used to estimate the fair value of each class of financial asset and liability measured
at fair value on a recurring basis in the consolidated interim statement of financial position.

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 debt securities

Investments in public sector securities and corporate bonds are classified as fair value through other comprehensive income
(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).

Investments valued under Level 2 of the fair value hierarchy are valued either based on quoted market prices or dealer quotes for
similar instruments, or discounted cash flows analysis.

Investments in equity securities

Investments in equity securities are classified as fair value through profit or loss (FVTPL) unless an irrevocable election is made by
the Group to measure at FVOCI. Investment in equity securities traded in liquid, active markets where prices are readily
observable are measured under Level 1 of the fair value hierarchy with no modelling or assumptions used in the valuation.
Investments in unlisted equity securities are measured under Level 3 of the fair value hierarchy with the fair value being based on
unobservable inputs using market accepted valuation techniques. Where appropriate, the Group may apply adjustments to the
above mentioned techniques to determine fair value of an equity security to reflect the underlying characteristics. These
adjustments are reflective of market participant considerations in valuing the said security.

Investment properties

Investment properties are initially recorded at their fair value, with subsequent changes in fair value recognised in profit or loss.
Fair value is determined by qualified independent valuers or other similar external evidence, adjusted for changes in market
conditions.

Investment properties are typically acquired through the enforcement of security over finance receivables and are held to earn
rental income or for capital appreciation (or both).

P. 26
12 Fair value (continued)

(a) Financial instruments measured at fair value

Finance receivables - reverse mortgages

Reverse mortgage loans are classified as FVTPL. On initial recognition the Group considers the transaction price to represent the
fair value of the loan.

For subsequent measurement the Group has considered if the fair value can be determined by reference to a relevant active
market or observable inputs, but has concluded relevant support is not currently available. In the absence of such market
evidence the Group has used valuation techniques (income approach) including actuarial assessments to consider the fair value.

When the Group enters into reverse mortgage loans the Group has set expectations regarding the loan’s current and future risk
profile and expectation of performance. This expectation references a wide range of assumptions including:

• Mortality and potential move into care;
• Voluntary exits;
• House price changes;
• No negative equity guarantee; and
• Interest rate margin.

At 31 December 2022, 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. Fair value is not highly sensitive to the above
assumptions in the longer term due to the nature of the reverse mortgage loans. In particular, given conservative origination loan-
to-value ratio criteria, a material deterioration in house prices combined with a material increase in interest rates over a sustained
period of time would likely need to occur before any potential impact to fair value.

The Group continues to assess the existence of a relevant active market and movements in expectations on an on-going basis.

Derivative financial instruments

Interest rate and foreign currency related contracts are recognised in the financial statements at fair value. Fair values are
determined from observable market prices as at the reporting date (Level 1 under the fair value hierarchy), discounted cash flow
models or option pricing models as appropriate (Level 2 under the fair value hierarchy).

The following table analyses financial instruments measured at fair value at the reporting date by the level in the fair value
hierarchy into which each fair value measurement is categorised. The amounts are based on the values recognised in the
consolidated interim statement of financial position.

P. 27
12 Fair value (continued)

(a) Financial instruments measured at fair value (continued)


$000's Level 1 Level 2 Level 3 Total
Unaudited - December 2022

Assets
Investments 269,293 5,602 12,363 287,258
Investment properties - - 11,903 11,903
Derivative financial instruments - 51,374 - 51,374
Finance receivables - reverse mortgages - - 2,171,516 2,171,516
Total financial assets measured at fair value 269,293 56,976 2,195,782 2,522,051

Liabilities
Derivative financial instruments - 10,406 - 10,406
Total financial liabilities measured at fair value - 10,406 - 10,406


Unaudited - December 2021

Assets
Investments 229,453 61,745 22,459 313,657
Investment properties - - 11,832 11,832
Derivative financial instruments - 21,714 - 21,714
Finance receivables - reverse mortgages - - 1,778,066 1,778,066
Total financial assets measured at fair value 229,453 83,459 1,812,357 2,125,269

Liabilities
Derivative financial instruments - 3,548 - 3,548
Total financial liabilities measured at fair value - 3,548 - 3,548

Audited - June 2022

Assets
Investments 279,841 - 7,032 286,873
Investment properties - - 11,832 11,832
Derivative financial instruments - 45,221 - 45,221
Finance receivables - reverse mortgages - - 1,996,854 1,996,854
Total financial assets measured at fair value 279,841 45,221 2,015,718 2,340,780

Liabilities
Derivative financial instruments - 6,341 - 6,341
Total financial liabilities measured at fair value - 6,341 - 6,341


There were no executed trades on Harmoney Corp Limited (ASX:HMY) on the last business day of the financial period. In the
absence of a traded closing price a mid-point of the bid-ask spread was used to fair value the Group’s equity investment in HMY.

Equity investment in HMY amounting to $5.6 million was transferred out from Level 1 into Level 2 during the six months ended 31
December 2022. There were no other transfers between levels in the fair value hierarchy for the period (December 2021: nil; June
2022: $8.1 million of equity investments transferred out of Level 3 to Level 1).