Heartland’s FY2023 result demonstrates resilience

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

NZX/ASX release
29 August 2023

Heartland’s FY2023 result demonstrates resilience

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) is pleased to announce a net profit
after tax (NPAT) of $95.9 million for the financial year ended 30 June 2023 (FY2023). On an
underlying
1
basis, FY2023 NPAT was $110.2 million. NPAT increased $0.7 million (0.8%), and on an
underlying basis, $14.1 million (14.6%), compared with the financial year ended 30 June 2022
(FY2022).
2


Highlights for FY2023

Financial highlights
‒ NPAT of $95.9 million, up 0.8% ($0.7 million) on FY2022 NPAT. Underlying NPAT of $110.2
million, up 14.6% ($14.1 million) on FY2022 underlying NPAT.
‒ One-off or non-cash technical items had a $14.3 million net
3
impact on NPAT.
‒ Gross finance receivables (Receivables)
4
of $6.8 billion, up 10.1% ($625.5 million).
5

‒ Underlying return on equity (ROE) of 11.9%, down 68 basis points (bps).
6

‒ Net interest margin (NIM)
7
of 3.97%, down 8 bps. Underlying NIM of 4.00%, down 16 bps.
‒ Net interest income (NII) of $282.0 million, up 12.7%. Underlying NII of $283.9 million, up 14.3%.
‒ Underlying cost to income (CTI) ratio of 42.0%, down 53 bps on FY2022.
8

‒ Underlying impairment expense ratio of 0.36%, up 7 bps.
9

‒ FY2023 final dividend of 6.0 cents per share (cps), resulting in a FY2023 total dividend of 11.5
cps, up 0.5 cps on the FY2022 total dividend.
‒ Earnings per share (EPS) of 14.0 cps, down 2.1 cps. Underlying EPS of 16.0 cps, down 0.3 cps.



1
Financial results are presented on a reported and underlying basis. Reported results are prepared in
accordance with NZ GAAP and include the impacts of positive and negative one-offs, which can make it difficult
to compare performance. Underlying results (which are non-GAAP financial information) exclude any impacts
of 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 6 for a summary of reported and underlying
results. A detailed reconciliation between reported and underlying financial information, including details
about FY2023 one-offs, is set out on page 42 of the FY2023 investor presentation (IP). General information
about the use of non-GAAP financial measures is set out on page 4 and 38 of the FY2023 IP.
2
All comparative results are based on the audited full year consolidated financial statements of Heartland and
its subsidiaries (the Group) for FY2022.
3
Includes tax impact on one-offs (as and where applicable).
4
Receivables includes Reverse Mortgages.
5
Excludes 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 10.4%, down 169 bps compared with FY2022. For more information, see page 4 of the FY2023 IP.
7
NIM is calculated as net interest income over average gross interest earning assets.
8
Underlying CTI ratio refers to the CTI ratio calculated using underlying results. When calculated using reported
results, the CTI ratio was 44.9%, up 126 bps compared with FY2022. For more information, see page 4 of the
FY2023 IP.
9
Underlying impairment expense ratio refers to the impairment expense ratio calculated using underlying
results. When calculated using reported results, the impairment expense ratio was 0.36%, up 11 bps compared
with FY2022. For more information, see page 4 of the FY2023 IP.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
2
Strategic highlights
‒ $199 million raised through 2022 equity raise to fund growth ambitions for existing businesses
and repay acquisition-related bridge debt of $174 million (A$158 million).
‒ Completed the integration of StockCo Australia into Heartland.
‒ Signed a conditional share purchase agreement for the purchase of Challenger Bank Limited
(Challenger Bank) on 20 October 2022, subject to obtaining the requisite regulatory approvals.
‒ Australian Reverse Mortgages business increased market share to 38.4%.
10

‒ Heartland Bank Limited (Heartland Bank) awarded Canstar New Zealand’s Bank of the Year –
Savings award for the sixth consecutive year.
11

‒ Nearing completion of the upgrade of Heartland Bank’s core banking system.

Strategic vision

Heartland is focused on creating sustainable growth and differentiation by providing products which
are the ‘best or only’ of their kind, through scalable digital platforms. This is underpinned by the
following strategic pillars:
1. Frictionless Service at the Lowest Cost – reflected in a superior CTI ratio
2. Expansion in Australia
3. Business as Usual Growth (reported on in Business performance from page 9).

Frictionless Service at the Lowest Cost – CTI ratio
Through technology, Heartland has been able to replicate the scale of big banks. This is evidenced by
Heartland’s CTI ratio, which improved by 53 bps on FY2022 to 42.0% on an underlying basis
8
in
FY2023 – much lower than the average CTI ratio of New Zealand’s main domestic non-major banks
(The Co-operative Bank, Kiwibank, SBS and TSB) and more comparable to the average CTI ratio of
Australia’s major banks (ANZ, CBA, NAB and Westpac).
12


Heartland’s ambition is to achieve an underlying CTI ratio of less than 35% by FY2028 through
revenue growth and ongoing automation and digitalisation initiatives. Key to achieving this ambition
is increasing customer self-service functionality and improving efficiency through streamlining and
digitising internal processes. This activity is intended to contribute to providing customers with
frictionless service and enabling scalable growth possibilities for Heartland.

Ongoing digitalisation enhancements in FY2023 included expanding the secure automatic approval
capabilities of the Asset Finance and New Zealand Livestock Finance application processes, reducing
friction for customers and the need for manual assessment. This resulted in an uplift in approval
rates of 20% and 12% respectively.

The percentage of New Zealand Reverse Mortgage website visitors who used mobile devices
increased from 51% as at 30 June 2022 to 54% as at 30 June 2023. This reflects the inroads mobile
phone technology is making with older demographics and supports Heartland’s digital distribution
strategy and lower cost servicing.


10
Based on Australian Prudential Regulation Authority (APRA) authorised deposit-taking institution (ADI)
Property Exposure and Heartland Finance data as at 31 March 2023.
11
Awarded in July 2023.
12
The average CTI ratio of New Zealand’s main domestic non-major banks excluding Heartland (The Co-
operative Bank, Kiwibank, SBS and TSB) was 68.9% for the 12 months to 31 March 2023 (data from the RBNZ
Financial Strength Dashboard, valid as at 31 July 2023). The average CTI ratio of Australia’s major banks (ANZ,
CBA, NAB and Westpac) was 45.2% for their most recent respective annual reporting periods.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
3
After initially launching to a small set of customers, the Heartland Finance Mobile App was rolled out
to all Australian Reverse Mortgage customers in June 2023, providing the ability to view balances,
transactions and request a cash reserve or redraw from a mobile device. Within one month, more
than 10% of Australian Reverse Mortgage customers had digital access (via the Heartland Finance
Mobile App or online platform). In New Zealand, Heartland Bank has onboarded more than 10,000
new Heartland Mobile App users through recently developed self-service functionality, with Mobile
App users up 65% from 1 July 2022.

The upgrade of Heartland Bank’s core banking system is nearing completion and is due to go live
within this calendar year. The upgraded system provides a platform on which to deliver increased
levels of automation and digitalisation, positioning Heartland for increased scalability in the future.

A number of initiatives are being delivered through a systemised programme of work to further
enhance digital, self-service and automation capabilities. This programme of work includes the
following four key initiatives.

Zero inbound calls
This initiative is focused on digitising basic banking requests to enable customers to self-serve via the
Heartland Mobile App, create a seamless user experience for customers, and reduce inbound
customer call volumes. In doing so, Heartland’s employees will be able to focus on more complex
customer requests.

Heartland Bank’s ambition is to reduce inbound customer call volumes by approximately 73% by 30
June 2025. To achieve this, mobile app self-service features will be developed to address the top
reasons for inbound customer calls.

One-Click Deferral
Customers will be offered increased flexibility to self-manage their Motor Finance loan repayments
digitally via the Mobile App, including customers in arrears. Seven new Heartland Mobile App
functions and features will be developed to enable customers to self-manage their repayments,
reducing the need for them to contact Heartland Bank.

Process automation
Heartland will continue to upgrade its existing back-end technology, and introduce scalable digital
technologies to optimise back-end processes and improve efficiency. Increasing automation will
improve internal workflows and reduce manual effort, thereby reducing friction for customers and
employees. Heartland Bank’s ambition is to automate approximately 65% of operations and
collections manual processes by 30 June 2025.

Motor digitisation
Continued enhancement of Motor Finance digital capabilities will enable faster and easier access to
vehicle finance for customers through online application platforms. Heartland’s intention is to rollout
seven branded online origination platforms to Motor Finance dealer partners in the financial year
ending 30 June 2024 (FY2024).

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

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
4
Strong growth has continued for Australian Reverse Mortgages, with a compound annual growth rate
for the five-year period from 1 July 2018 to 30 June 2023 of 22.8%. Heartland has also maintained its
position as the largest active provider of reverse mortgages in Australia, with market share of 38.4%
as at 31 March 2023 (up from 33.1% at 31 March 2022)
13
. Further positioning itself as a leader in the
sector, Heartland Finance was a finalist for Best Banking Innovation at the Australian Finder
Innovation Awards 2022 and received the Excellence Award for Non-Bank of the Year at the
Australian Mortgage Awards 2022.

The proportion of the Australian population aged over 65 years is expected to reach 21% by 2041 (up
from ~17% in 2021).
14
The addressable market for reverse mortgages is estimated to be A$10-15
billion.
15
Further, the Australian Government’s Home Equity Access Scheme continues to contribute
to a greater awareness of home equity release options, including reverse mortgages. Non-bank
participation in the sector has increased and supports the acceptance of reverse mortgages.

StockCo Australia has been operating in Australia since 2014 and is a leading specialist livestock
financier with established direct and distributor networks. The Australian Livestock Finance portfolio
experienced direct client growth in FY2023 of 11% (see page 11 for more detail), but subdued dollar
growth due to stock market price volatilities and adverse weather conditions. This resulted in a
contribution to FY2023 NPAT below the expected A$10-12 million (before any ongoing cost of
acquisition debt funding). Global consumption and production of beef and veal, and sheep meat are
projected to increase annually by 0.62% and 1.22% respectively between 2022-2031 due to a
combination of income and population growth.
16
This, together with good feedstock conditions,
makes for a positive outlook. The addressable market for livestock finance is estimated to be A$7
billion.
17


The Challenger Bank acquisition remains subject to Reserve Bank of New Zealand (RBNZ) and APRA
approval. The benefits of acquiring Challenger Bank, an established ADI, include:
‒ access to a deep and efficient pool of funding to support ongoing growth in Australian Reverse
Mortgages and Livestock Finance
‒ 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 has continued to consider the appropriate group structure to accommodate the
Challenger Bank acquisition. The final group structure is now expected to include Heartland Bank
acquiring Challenger Bank. If this occurs, Heartland Banking Group's business would be carried out in
both New Zealand and Australia.

Subject to completion of the acquisition, Heartland intends to leverage its extensive operational
experience in New Zealand to drive expansion into Australia, including in Motor Finance and Asset
Finance. Inorganic growth opportunities, through further acquisition, will also be explored in
targeted areas of the market consistent with Heartland’s ‘best or only’ strategy, and where there is
an opportunity to add value as a means of adding scale or technology.


13
Based on APRA ADI Property Exposure and Heartland Finance data as at 31 March 2022 and 31 March 2023.
14
Sourced from ARC Centre of Excellence in Population Ageing Research as at August 2022.
15
Heartland internal analysis based on information from the ABS December 2022, Census 2021 and Deloitte
(2021 Three Pillars Forum). Market size based on reverse mortgage lending from banks and non-banks.
16
Sourced from OECD FAO Agricultural Outlook 2022-2031.
17
Based on 2020 ABS total rural debt and 2021 StockCo Australia data.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
5
Operating environment

FY2023 was challenging for customers across Australia and New Zealand, driven by cost of living
pressures and increasing interest rates. Low commodity prices and adverse weather events have
compounded matters for certain sectors to which Heartland lends, including livestock. In this
environment, Heartland’s asset quality has performed within expectations. Heartland has worked
hard to support its customers, particularly those facing temporary difficulties due to the current
economic environment. During the year, Heartland also reduced its risk appetite for unsecured
personal and unsecured business lending.

The Auckland flooding and Cyclone Gabrielle weather events had limited impact on Heartland’s
customers. A small number of customers were significantly affected and Heartland is working with
the New Zealand Government under the North Island Weather Events Loan Guarantee Scheme to
provide customer support.

Reverse Mortgages
The Reverse Mortgage portfolios in both countries have low average weighted loan-to-value ratios
(LVRs) and continue to demonstrate resilience. Conservative loan origination standards (such as low
LVRs) have enabled Reverse Mortgage customers to weather the challenging combination of falling
house prices and higher interest rates over the last year. As at 30 June 2023, after consecutive cash
rate increases by the RBNZ and the Reserve Bank of Australia, and successive house price reductions,
the average weighted LVR for New Zealand and Australian Reverse Mortgages respectively were
21.3% (up from 18.4% at 30 June 2022) and 21.5% (up from 20.5% at 30 June 2022). Both portfolios
remain strong with good headroom to weather any further stress events.

Additionally, following consultation in which Heartland Bank participated, the RBNZ introduced a
new lower risk weight bucket of 40% for reverse mortgage loans with LVRs of less than 30% to reflect
the credit risk of low LVR loans, which is expected to be effective from 1 September 2023. Heartland
Bank welcomes this change which better reflects the resilience of its low LVR reverse mortgage
portfolio and is expected to provide additional benefit to Heartland Bank’s capital ratio.

Motor Finance
The Motor Finance portfolio has performed as expected given the economic conditions. Arrears have
trended upward across the year to 3.95% as at 30 June 2023, however the level of losses remains
within cyclical norms. Historically, losses have been correlated to unemployment. While rates of
unemployment remain low, current provisions factor in an allowance for the potential impact of
rising unemployment.

Online Home Loans
Online Home Loans experienced subdued growth as property sales and new mortgage volumes
declined in New Zealand. As at 30 June 2023, no loans were impaired (i.e. 30 days overdue on a
payment). The average LVR across the portfolio is circa 59%, despite property value declines since
the end of 2021. The portfolio therefore remains well secured. These factors are a result of the
product’s conservative criteria and strategy of targeting high-quality borrowers.

Livestock Finance
Stock market price volatility is not expected to have a material impact on the quality of the book.
Historically, the impact of the variation in market price has, in most cases, been more than offset
through livestock weight gains.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
6
The book remains well secured, with producers retaining livestock for longer periods to ensure
weight gain exceeds the impact of stock market pricing. StockCo Australia is one of the few livestock
providers in Australia to have a dedicated breeder product. This allows producers to hold onto
female stock for breeding, with the value of the progeny assisting in increasing their returns when
prices are under pressure.

Business
As at 30 June 2023, the balance of Heartland’s Economic Overlay of $8.0 million taken in FY2022 was
$2.4 million. The Economic Overlay has been allocated to specifically provision for Business
Relationship lending and Asset Finance loans that have been impacted by low economic growth, and
remained in place at 30 June 2023.

The economic outlook for FY2024 is difficult to predict. Interest rates appear at or near the peak but
are forecast to remain elevated until 2025. The rate of unemployment remains low despite forecasts
of it rising. The upcoming New Zealand general election provides additional uncertainty. Despite this,
and recognising the lag effect of these economic indicators, Heartland expects FY2024 will be a year
with broadly similar credit outcomes to FY2023.

Financial results

Profitability
FY2023 reported results have been normalised to exclude one-off or non-cash technical items,
including the following.
18

1. Legacy hedge accounting impacts: a $9.1 million loss contributed by the derivatives that were
de-designated from their prior hedge accounting relationships in FY2022. The de-designation
resulted in a $16.7 million 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. The remaining $7.7 million will unwind across FY2024 and the
financial year ending 30 June 2025 (FY2025).
2. Fair value loss on equity investment in Harmoney Corp Limited (Harmoney): a $4.5 million fair
value loss was recognised on investment in Harmoney shares during FY2023. The fair value as at
30 June 2023 was determined based on the closing last traded price of Harmoney shares on the
Australian Stock Exchange of A$0.32 per share.
3. Interest expense on the bridging loan for the acquisition of StockCo Australia: a $1.9 million
interest expense was recognised in relation to a $174 million (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 2022 equity raise.
4. Australia Bank Programme costs: $2.2 million of transaction and other costs in relation to
acquiring an ADI in Australia. In addition, $6.4 million of costs directly attributable to applying to
become an ADI have been capitalised as an intangible asset.

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

18
Refer to page 42 of the FY2023 IP for an exhaustive list of FY2023 one-offs and a detailed reconciliation
between reported and underlying financial information.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
7

Reported Underlying
FY2023 FY2022 Movement FY2023 FY2022 Movement
NOI
19
($m) 285.3 267.6 17.7 300.7 262.0 38.7
Operating expenses
(OPEX) ($m)
128.1 116.8 11.3 126.2 111.4 14.9
NPAT ($m) 95.9 95.1 0.7 110.2 96.1 14.1
NIM 3.97% 4.05% (8 bps) 4.00% 4.16% (16 bps)
CTI ratio 44.9% 43.6% 126 bps 42.0% 42.5% (53 bps)
Impairment expense
ratio
0.36% 0.25% 11 bps 0.36% 0.29% 7 bps
ROE 10.4% 12.1% (169 bps) 11.9% 12.6% (68 bps)
EPS 14.0 cps 16.1 cps (2.1 cps) 16.0 cps 16.3 cps (0.3 cps)

NOI
Total NOI was $285.3 million, an increase of $17.7 million (6.6%) from FY2022.
Underlying NOI was $300.7 million, $38.7 million (14.8%) higher than in FY2022, $21.8 million of
which was contributed by StockCo Australia. This was largely due to a $35.6 million (14.3%) increase
in NII, driven by $1,127.5 million (18.9%) higher average interest earning assets in FY2023 than in
FY2022, and a 16 bps decrease in underlying NIM compared with FY2022.

Underlying other operating income increased by $3.1 million (22.7%) from FY2022, mainly driven by
increases in upfront Reverse Mortgage income and fee income.

NIM
After recording an 8 bps contraction in underlying NIM in the six months to 31 December 2022
(1H2023) compared with the six months to 30 June 2022 (2H2022), this trend stabilised in the six
months to 30 June 2023 (2H2023) through proactive portfolio pricing and margin management.
Underlying NIM for FY2023 decreased only 2 bps compared with 1H2023.

The cash rates in New Zealand and Australia have seen a rapid and sharp increase, rising from 2.00%
and 0.85% as at June 2022, to 5.50% and 4.10% as at June 2023 respectively. This has created a
difficult environment in which 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.

NIM compressions were also due to the continued shift in portfolio composition towards lower risk
exposures. Personal lending and unsecured small-to-medium enterprise (SME) lending continued to
reduce, while Business and Rural Relationship lending experienced larger repayments of higher risk
loans. At the same time, there was growth in higher quality portfolios, such as Reverse Mortgages
and Online Home Loans. Motor Finance experienced market share gains at the expense of margin,
alongside general margin compression due to a shift in asset quality and competitive pressures. The
impacts of this compression were partly offset following the acquisition of StockCo Australia, a higher
NIM portfolio.


19
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
8
Through FY2024, NIM will be assisted by older Asset Finance and Motor Finance loans at lower rates
continuing to be repaid.

OPEX
OPEX was $128.1 million, an increase of $11.3 million (9.7%) on FY2022. Underlying OPEX was $14.9
million (13.4%) higher compared with FY2022.
Higher underlying OPEX was primarily due to the acquisition of StockCo Australia which contributed
$8.9 million to FY2023 OPEX. The remaining underlying OPEX increase is $6.0 million (5.4%), which
was mainly driven by a 4.6% increase in staff expenses, an 18.6% increase in upfront Reverse
Mortgage expenses (noting this is completely offset by an increase in upfront Reverse Mortgage
income), and the balance from increased travel and administration costs.

CTI ratio
The underlying CTI ratio further improved by 53 bps on FY2022 to 42.0%.
20


Heartland’s commitment to efficiencies through technology and digitalisation are anticipated to
provide ongoing benefits in the form of a reduced CTI ratio. The CTI ratio is expected to remain stable
while investment in and delivery of digitalisation initiatives is underway, with CTI benefits to start
materialising from late FY2024.

Impairment expense
Impairment expense was $23.2 million, $9.4 million (68.1%) up on FY2022. On an underlying basis,
impairment expense was $7.5 million (47.9%) up on FY2022, including an allowance for the potential
impact of rising unemployment on the Motor Finance portfolio. The residual increase in underlying
impairment expense was mainly contributed to by the Harmoney book amortising at a slower rate in
FY2023 compared with FY2022 and, to a lesser extent, by deterioration in the quality of unsecured
Personal Lending which is no longer being actively originated in order to manage risk in the current
environment. Underlying impairment expense ratio increased to 0.36% in FY2023, up 7 bps
compared with FY2022.

As at 30 June 2023, the balance of Heartland’s Economic Overlay of $8.0 million taken in FY2022 was
$2.4 million. The Economic Overlay has been allocated to specifically provision for Business
Relationship lending and Asset Finance loans that have been impacted by low economic growth, and
remained in place at 30 June 2023.

ROE
Underlying ROE was 11.9%, down 68 bps compared with FY2022.
21
The result reflects a strengthened
capital position following Heartland’s equity raise in 1H2023, positioning it well for future growth
opportunities.

Financial position
Total assets increased by $657.1 million (9.3%) during FY2023, driven by a $625.5 million (10.1%)
22

increase in Receivables and a $41.7 million (7.1%) increase in liquid assets from FY2022.

20
Underlying CTI ratio refers to the CTI ratio calculated using underlying results. When calculated using
reported results, the CTI ratio was 44.9%, up 126 bps compared with FY2022. See page 4 of the FY2023 IP for
more information about the use of the CTI ratio, a supplementary, non-GAAP measure.
21
Underlying ROE refers to ROE calculated using underlying results. When calculated using reported results,
ROE was 10.4%, down 169 bps compared with FY2022. For more information, see page 4 of the FY2023 IP.
22
Excluding the impact of changes in FX rates.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
9

Receivables growth was experienced across Heartland’s core portfolios of Australian Reverse
Mortgages, New Zealand Reverse Mortgages, Motor Finance, Asset Finance and Online Home Loans,
partly offset by decreases in Business, Rural Relationship, Open for Business (O4B) and Personal
Lending.
Borrowings
23
increased by $456.7 million (7.4%) compared with FY2022. Deposits increased by
$538.5 million (15.0%) from FY2022, partially offset by a decrease in other borrowings of $81.8
million (3.2%) during FY2023. See further information under Funding and liquidity on page 12.

Net assets increased by $222.3 million to $1,031.0 million. Net tangible assets (NTA) increased by
$207.4 million to $774.2 million, primarily as a result of a $199 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 Receivables increased $49.2 million (7.8%) from FY2022 to $682.8 million. Asset
Finance NOI was $30.3 million, a decrease of $0.2 million (0.5%) compared with FY2022.

Heartland’s focus remains on freight transport and yellow goods sectors. NIM has been affected by a
change in the mix of new business weighted toward an improved credit profile. Lower margin loans
are being repaid and replaced, and are expected to have a positive contribution to margin in late
FY2024.

Business
Overall Business NOI was $31.7 million, an increase of $1.1 million (3.6%) compared with FY2022.
Business Receivables decreased $56.6 million (9.0%) to $573.7 million. This was made up of
Wholesale Lending and Business Relationship.
Wholesale Lending includes floorplan lending to vehicle retailers and wholesale facilities to other
lenders, including for medium enterprises that on-lend to their own customers in the consumer
motor and business sectors. Wholesale Lending Receivables decreased $27.1 million (9.9%) from
FY2022 to $245.2 million, reflecting lower utilisation of limits as a result of unpredictable inventory
conditions continuing into 2H2023.
Business Relationship Receivables decreased $29.5 million (8.2%) from FY2022 to $328.5 million, as
this portfolio continues to transition away from legacy business to loans which present lower risk and
are more cost efficient to transact.
Open for Business
O4B NOI was $12.9 million, a decrease of $0.8 million (5.7%) compared with FY2022. O4B
Receivables decreased $24.1 million (17.1%)
22
to $117.1 million.

Heartland stopped actively originating O4B lending in the second quarter of FY2023 (Q2) to manage
risk due to the macro-economic challenges for the SME sector. This has resulted in an amortising
loan book pending improved conditions.


23
Includes retail deposits and other borrowings.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
10
Motor Finance
Motor Finance NOI was $64.2 million, a decrease of $8.7 million (11.9%) compared with FY2022.
Motor Finance Receivables increased $186.8 million (13.5%) to $1.57 billion.

Motor Finance has experienced market share gains at the expense of margin, alongside general
margin compression due to a shift in asset quality and competitive pressures. While total new and
used car sales in the New Zealand market were down by 6.2% in the period
24
, Heartland’s new
business volumes increased by 11.6% from FY2022, with overall growth in FY2023 of 13.5% due to
lower early repayments than expected.

Heartland’s broad distribution network of dealers and partnerships with key distributors and large
dealer franchise groups, along with its digital innovation, have been key contributing factors in
achieving growth in a difficult market.

Heartland intends to expand its branded online origination platforms to other dealer partners in
FY2024 so they can provide customers with swift digital options to apply for vehicle finance and
receive a decision in minutes.

Personal Lending
Personal Lending includes loans originated directly through Heartland Bank, and legacy portfolios
originated by Harmoney in New Zealand and Australia. To manage risk in the current environment,
this portfolio is not actively originating. In addition, Heartland’s Harmoney personal loans channel is
closed to new business and running down.

Personal Lending NOI was $6.6 million, a decrease of $3.1 million (32.2%) compared with FY2022.
Personal Lending Receivables decreased by $17.8 million (27.3%)
22
to $47.3 million. Harmoney
Receivables decreased by $20.3 million (65.7%), made up of a decrease in the New Zealand
Harmoney channel of $12.9 million (70.4%) to $5.5 million, and a decrease in the Australian
Harmoney channel of $7.3 million (58.9%)
22
to $5.1 million. This is partially offset by Heartland
originated personal lending which increased by $2.5 million (7.3%) to $36.7 million in FY2023.
Online Home Loans
25

Online Home Loans NOI was $3.8 million, an increase of $1.7 million (80.2%) compared with FY2022.
Online Home Loans Receivables increased $38.7 million (14.1%)

to $313.4 million.

While subdued compared to FY2022, Online Home Loans experienced good growth in a challenging
economic environment. This was moderated by a sharp decline in property sales and new mortgage
volumes in New Zealand. The number of properties sold in the 12 months to February 2023 was the
lowest observed since 1983.
26
Similarly, the monthly level of new mortgages issued has been at or
near the lowest levels observed since at least 2014 (when the RBNZ began collating this data).
27


Competitive pressures in the refinance market remain intense, with competitors generally offering
large cash-backs and negotiating on rates. Heartland has remained disciplined in respect of its pricing
strategy. Heartland’s low-cost digital origination platform has enabled it to consistently offer
competitive or market-leading rates. Customer retention remained strong, with retention exceeding
90% for customers whose fixed rates came up for renewal over the course of FY2023.

24
Based on data from the Motor Industry Association of New Zealand on new and used vehicle sales from
motor vehicle dealers.
25
Excludes legacy Retail Mortgages.
26
Based on data from CoreLogic’s February 2023 Housing Chart Pack.
27
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
11

New Zealand Reverse Mortgages
New Zealand Reverse Mortgages NOI was $42.4 million, an increase of $9.9 million (30.3%)
compared with FY2022. Receivables increased $167.3 million (23.2%)

to $888.6 million.
The business continues to experience strong demand and growth due to:
‒ cost of living and cashflow pressures faced by older homeowners, with a reverse mortgage
providing an option to fund desired lifestyle enhancements
‒ increased education, awareness and acceptance of reverse mortgages.

Over the last decade, Heartland has helped more than 22,000 New Zealanders to enjoy a more
comfortable retirement by releasing equity from their homes. The outlook for New Zealand Reverse
Mortgages remains positive, with additional demand from cost of living pressures driving growth.
Website improvements will be released making it easier for mobile users, and streamlining the
application process.

Rural
Overall Rural lending NOI was $34.2 million, an increase of $4.1 million (13.5%) compared with
FY2022. Overall Rural portfolio Receivables increased by $11.4 million (1.7%)

to $700.5 million. This
was made up of Livestock Finance, Rural Relationship and Rural Direct.
Livestock Finance Receivables increased by $19.9 million (11.6%) from FY2022 to $191.2 million in a
market impacted by falling commodity prices, difficult climatic conditions and Cyclone Gabrielle in
the Hawke’s Bay and Tairāwhiti regions. Of this growth, 6% originated from the addition of key
intermediary partnerships, with the balance from existing customers.

Rural Relationship Receivables decreased by $17.1 million (3.9%) from FY2022 to $424.4 million, due
to the continued transition of the book away from large, complex, low margin lending. Heartland’s
exposure to the dairy sector reduced to 32.8% of the total Rural book.

Rural Direct includes Heartland’s Sheep & Beef Direct and Dairy Direct digital platforms which
provide online finance to sheep, beef and dairy farmers. Rural Direct Receivables increased by $8.6
million (11.2%) from FY2022 to $84.9 million.

Australia
Australian Reverse Mortgages
Australian Reverse Mortgages NOI was $47.3 million, an increase of $8.2 million (20.9%) compared
with FY2022.

Australian Reverse Mortgages Receivables increased by $263.5 million (20.7%)
22
to $1.54 billion,
driven primarily by:
‒ increased debt consolidation and cost of living requests due to the current economic
environment
‒ customers seeking funds for home improvements to ensure ageing well in place (for a person to
remain in their home and make it more retirement-friendly as they age)
‒ customers looking to enjoy retirement with modest lifestyle spending (such as holidays or a new
car)
‒ 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.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
12
Heartland has now helped more than 26,000 Australians to live a more comfortable retirement since
2004. Growth is expected to remain strong in FY2024 as ongoing improvements and efficiencies are
made to the loan application, approval and maintenance process.

Australian Livestock Finance
Australian Livestock Finance NOI was $31.9 million. Receivables increased $7.7 million (2.1%)
22
from
FY2022 to $380.8 million. Subdued growth was due to macroeconomic events affecting livestock
prices and demand, including adverse weather conditions, the rising interest rate environment, and
low export demand with the USA drought and China’s COVID-19 response contributing to freezers
being full around the world. This resulted in lower dollars per head on the balance sheet.

Despite this, the volume of livestock financed by StockCo has increased. As at 30 June 2023, cattle
transactions were up 25% compared with 30 June 2022. Sheep transactions were flat. This growth
was supported by increasing distribution partner networks with consistent onboarding of new clients
and increased facility limit usage.

Demand for Australian protein, mainly beef, is expected to increase and have a positive effect on
livestock value in FY2024 as the USA drought breaks and their herd rebuild begins, coupled with the
Chinese Government looking to stimulate the Chinese economy as people return to pre-COVID-19
activities.

Processor capacity has been strained due to a lack of skilled workers, the ongoing impacts of COVID-
19 and adverse weather conditions. Slaughter production in 2022 was down approximately 27% from
2021 volumes. This is expected to improve in the first half of FY2024 and have a positive effect on
livestock demand and value, and therefore demand for livestock financing, as processors work
through their backlog.

Digitalisation of the direct channel application is underway to improve efficiency in the application
process. A white label offering is also in development to strengthen and expand the existing
distribution network, supporting ongoing growth through FY2024.

Funding and liquidity

Heartland increased borrowings by $456.7 million (7.4%) from FY2022 to $6,627.4 million.

New Zealand
Heartland Bank increased borrowings by $399.5 million (9.2%) from FY2022 to $4,746.2 million.

Deposits
28
grew $533.9 million (14.8%) during FY2023 to $4,131.0 million, which was driven by
competitive pricing on targeted products, including Heartland’s Notice Saver offerings which both
received Canstar New Zealand recognition in FY2023. 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. In July 2023, Heartland Bank was awarded Canstar New Zealand’s Bank of the
Year – Savings for the sixth year in a row. In the first and second quarters of FY2023, Heartland Bank
experienced the highest growth rate in retail deposits of all main and domestic banks in New
Zealand.
29



28
Includes intercompany deposits received by Heartland Bank (30 June 2023: nil; 30 June 2022: $4.6 million).
29
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
Notice Saver increased by $206.1 million (40.1%) from FY2022. Term deposits increased by $439.6
million (20.1%), while call deposits decreased by $111.8 million (12.5%) during FY2023. The call to
total deposit ratio decreased to 19% as at 30 June 2023 (30 June 2022: 25%).

Other borrowings decreased by $134.4 million (17.9%) from FY2022, 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 $40.7 million. This was partially offset by Heartland Bank’s issuance
of $100 million of unsecured subordinated notes to the retail market in 2H2023, which qualify as Tier
2 capital for regulatory purposes, further solidifying Heartland Bank’s regulatory capital position.

Heartland Bank’s total liquidity (including liquid assets and available committed lines) strengthened
further in FY2023, increasing by $76.3 million (12.1%) to $704.2 million, well in excess of regulatory
minimums.

Heartland Bank’s regulatory capital ratio increased to 14.69% as at 30 June 2023 (30 June 2022:
13.49%). 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
common equity tier 1 ratio of 11.50% and a total capital ratio of 16.00% by 1 July 2028.

Australia
Heartland Australia (comprising Heartland Australia Holdings Pty Ltd and its subsidiaries) increased
borrowings by A$282.0 million (23.5%) from FY2022 to A$1,482.2 million.

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. Heartland Australia’s April 2023 A$120 million MTN
maturity was refinanced. The aggregate outstanding issuance under Heartland Australia’s MTN
programme was A$240 million as at 30 June 2023 (30 June 2022: A$280 million).

The maturities of the two Reverse Mortgage securitisation warehouses were extended by two and
three years respectively, and aggregate senior limits were expanded by A$100 million, providing
Heartland Australia with access to A$1.54 billion of committed funding in aggregate. Conversations
are underway with securitisation lenders to increase headroom in both facilities to support
continued growth experienced in the portfolio.

StockCo Australia (comprising StockCo Australia Management Pty Ltd, StockCo Holdings 2 Pty Ltd and
their subsidiaries) increased borrowings by A$17.2 million (5.2%) from FY2022 to A$346.4 million.
StockCo Australia was transferred from Heartland to Heartland Australia Holdings Pty Ltd on 1 August
2023.

Regulatory update

Heartland continues to monitor and prepare for the significant volume of regulatory change in New
Zealand.

In June 2023, it was announced that the Commerce Commission (ComCom) would conduct a market
study into any factors that may affect competition for the supply or acquisition of personal banking
services. A Preliminary Issues Paper for the market study was published on 10 August 2023 which
sets out the context and proposed focus areas of the study. It is currently proposed that the study
will focus on deposit accounts (transaction, savings, and term deposits, including overdraft facilities)
and home loans. The ComCom will engage with stakeholders and conduct information gathering with
a final report on its findings due 20 August 2024, which will include recommendations that identify

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
14
ways to improve competition in the sector. Heartland Bank welcomes the opportunity to participate
in the market study.

The Financial Markets (Conduct of Financial Institutions) Amendment Act 2022 (Conduct Act) was
passed in June 2022, and will come into force on 31 March 2025, following a transitional period. The
Conduct Act applies to registered banks, licensed insurers and licensed non-bank deposit takers. 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 (including the
prohibition of sales incentives based on volume or value targets). Incentives regulations will apply
both to Heartland Bank and its intermediaries involved in the distribution of its products. Heartland
Bank is preparing for licensing and compliance with the Conduct Act.

The Deposit Takers Act received royal assent (and became law) on 6 July 2023 (DT Act). The DT Act
strengthens the regulatory framework for all institutions that take deposits (including Heartland
Bank) and introduces a new depositor compensation scheme (DCS), overseen by the RBNZ.

Very little of the DT Act comes into force immediately, but Heartland Bank has begun considering the
impact of the DT Act on its operations and is actively participating in submissions on the DCS and
other regulations, guidance and prudential standards relating to the DT Act. The DT Act is expected
to be fully in force by around 2028.

Initial changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) came into force on 1
December 2021, with additional changes effective 7 July 2022. Heartland Bank implemented new
processes and technologies to enable it to comply with these changes. Following the completion of
the New Zealand Government’s investigation into the impact of the December 2021 changes, more
amendments to the CCCFA came into force in May 2023. Heartland Bank has further amended its
processes to reflect these most recent amendments. On 9 August 2023, the Government announced
further changes to the CCCFA, including a wider review of the CCCFA with terms of reference to be
announced in due course. Heartland Bank will monitor for further developments in regards to these
changes.

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
banks into the new regime first. The Ministry of Business, Innovation and Employment recently
consulted on an exposure draft of the Customer and Product Data Bill. 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.

Continued preparation 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 FY2024.

In Australia, Heartland continues to monitor changes to Australian regulatory requirements for its
existing businesses, and is preparing for the acquisition of Challenger Bank (subject to the requisite
regulatory approvals), which is an APRA regulated ADI.

Sustainability update

Heartland’s sustainability strategy continues to evolve as it matures. The framework is built on three
pillars: environment, people and financial wellbeing. Highlights for FY2023 are outlined below. For
more detail, visit heartlandgroup.info/sustainability.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
15
Environment
‒ Heartland’s unaudited operational Greenhouse Gas (GHG) emissions for FY2023 saw a 17%
reduction on the base year for the financial year ended 30 June 2019 (FY2019). This comprised
strong reductions in Scope 1 and Scope 2 emissions, but an increase in travel-related emissions
as a result of business travel requirements between New Zealand and Australia.
‒ Introduced an environment risk screening tool in the credit decisioning process to understand
the sustainability of larger business and rural borrowers by reference to environmental, climate,
reputational and regulatory factors (and mitigating actions being employed by borrowers).
‒ Undertook Australian and New Zealand Standard Industrial Classification (ANZSIC) code analysis
to understand Heartland’s exposure to high emitting industries or industries subject to a
heightened degree of transitional risk as a result of climate factors. Heartland has a low
exposure to customers in those industries.
‒ More than doubled lending to new generation vehicles through the Motor Finance portfolio,
from 5% of all lending in FY2022 to 11% in FY2023. The increase was supported by the launch of
a green vehicle rate in December 2022, and a guaranteed future value product across the Opel
range, including two dedicated electric vehicles.

People
‒ Through its Manawa Ako internship programme, Heartland Bank welcomed 25 Māori and
Pasifika interns to Heartland Bank in December 2022. More than 110 rangatahi (young people)
have participated in the programme since inception in 2017.
‒ Heartland Bank maintained accreditation for the Rainbow Tick, as a Hearing Accredited
Workplace, and Living Wage Employer.
‒ More than $710,000 provided to community groups and organisations by the Heartland Trust, in
the areas of education, arts and culture, and wellbeing. The Heartland Trust is Heartland’s
registered charitable trust which is independent from, but closely supported by Heartland.
‒ Heartland Bank’s products recognised as providing exceptional value for customers through
Canstar New Zealand awards for Savings Bank of the Year and Outstanding Value Home Lender.

Financial wellbeing
‒ Supported more than 48,000 people in New Zealand and Australia to live a more comfortable
retirement by releasing equity from their homes with a reverse mortgage.
‒ Heartland Bank continued to offer the Heartland Extend product to consumer customers,
supporting customers in arrears to make their existing loan repayments more manageable.
‒ Development of new features and automation in Heartland Bank’s mobile app and some online
application forms to enable customers to control their own finances in their own time, without
needing to speak with someone.

Final dividend

Heartland is pleased to declare a FY2023 final dividend of 6.0 cps, taking the FY2023 total dividend to
11.5 cps, up 0.5 cps on FY2022. Heartland’s final dividend yield of 9.3%
30
compares with 7.1%
31
in
FY2022.

The final dividend will be paid on Wednesday 20 September 2023 (Payment Date) to shareholders on
the company’s register as at 5.00pm NZST on Wednesday 6 September 2023 (Record Date) and will
be fully imputed.


30
FY2023 total fully imputed dividends divided by the closing share price as at 25 August 2023 of $1.72.
31
FY2022 total fully imputed dividends divided by the closing share price as at 19 August 2022 of $2.16.

Heartland Group Holdings Limited | 0800 85 20 20 | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
16
Heartland has a Dividend Reinvestment Plan (DRP), giving eligible shareholders the opportunity to
reinvest some or all of their dividend payments into new ordinary shares. The DRP will apply to the
final dividend with a 2.0% discount.
32
The DRP offer document and participation form is available on
Heartland’s website at heartlandgroup.info/investor-information/dividends.

Looking forward

Heartland’s result in FY2023 is pleasing amidst a challenging economic background in New Zealand
and Australia. Portfolio performance demonstrated the resilience of Heartland’s products and ‘best
or only’ strategy.

Heartland’s strength is in its track record of strong growth in core lending portfolios. The business as
usual growth focus in FY2024 will be on Reverse Mortgages (New Zealand and Australia), Motor
Finance, Asset Finance and Livestock Finance (New Zealand and Australia). Growth will be supported
by increased digitalisation and automation, and leveraging the demographic-driven demand being
experienced in Reverse Mortgages.

Key to Heartland’s expansion in Australia is obtaining an ADI licence. Heartland intends to do this
through the acquisition of Challenger Bank, which remains subject to regulatory approvals.
Heartland’s desire is to complete the acquisition during the 2023 calendar year, after which its focus
will be on integration and leveraging its common distribution channels in New Zealand to expand
into Australia.

Heartland’s NIM outlook is stable with repayment and replacement of lower margin Motor Finance
and Asset Finance loans. The growth mix will continue to influence margin, causing acceptable
contraction offset by corresponding growth.

Underpinning everything is Heartland’s ambition to achieve an underlying CTI ratio of less than 35%
by FY2028. This requires change and will take time. Initiatives are underway to increase customer
self-service, reduce telephony and increase automation.

Through a continued focus on the execution of Heartland’s strategic vision and achieving its
underlying CTI ratio ambition, Heartland’s ambition is to double underlying NPAT within five years –
continuing Heartland’s track record of income growth. Since 2012, Heartland’s NPAT has more than
tripled from $23.6 million at 30 June 2012.

Heartland expects NPAT for FY2024 to be within the guidance range of $116 million to $122 million,
excluding any impacts of fair value changes on equity investments held, the impact of the de-
designation of derivatives, and any costs related to the acquisition of Challenger Bank, which remains
subject to RBNZ and APRA approval. As the acquisition nears completion, guidance will be updated to
reflect the impact of Challenger Bank becoming part of Heartland.


– ENDS –




32
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
17
The person(s) who authorised this announcement:

Jeff Greenslade, Chief Executive Officer

Andrew Dixson, Chief Financial Officer

For further information and media enquiries, please contact:

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


About Heartland
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. In October 2022, Heartland announced its intention
to purchase Challenger Bank, a digital bank based in Melbourne, Australia, subject to obtaining the
requisite regulatory approvals.

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 results
Investor presentation
For the year ended 30 June 2023

Contents
2
01Highlights & strategic update3-9
02Financial results, funding & liquidity10-20
03NZ divisional summary21-28
04AU divisional summary29-34
05Outlook35-36
06Disclaimer, glossary & appendices37-43
2

Jeff Greenslade
Chief Executive Officer Heartland Group
01
Highlights & strategic update

Presentation of results
01
4
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 NOI, OPEX, NPAT, NIM and EPS. Underlying ROE, underlying CTI ratio and underlying
impairment expense ratio measures 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 42 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 38 of this investor presentation.

1
Refer to Appendix 3 for a reconciliation between reported and underlying NPAT result.
2
Receivables also includes ReverseMortgages.
3
Excluding the impact of changes in FX rates.
Group financial highlights
5
01
NPATNIMCTI ratio
Impairment
expense ratio
ROEEPS
Reported
$95.9m3.97%44.9%0.36%10.4%14.0 cps


0.8% vs FY2022
8 bps vs FY2022126 bps vs FY202211 bps vs FY2022169 bps vs FY20222.1 cps vs FY2022
Underlying
1
$110.2m4.00%42.0%0.36%11.9%16.0 cps


14.6% vs FY2022
2 bps vs
1H2023
16 bps vs
FY2022
53 bps vs FY20227 bps vs FY202268 bps vs FY20220.3 cps vs FY2022
Receivables
2
BorrowingsEquityFinal dividend
$6,791m$6,627m$1,031m6.0 cps

10.1%
3
vs June 20227.4% vs June 202227.5%vs June 20220.5 cps vs FY2022

Strategic update
Note: The graph shows FY2023growth in receivables by portfolio excluding the impact of changes in FX rates and intercompany balances. All figures inNZ$m.
6
Business as Usual Growth
Frictionless Service at the Lowest CostExpansion in Australia
01
Demonstrated resilience in ‘best or only’ strategy
•Growth in core lending portfolios despite
macroeconomic environment, demonstrating
resilience of ‘best or only’ products.
•Motor Finance grew 13.5% in a market where new
and used vehicles declined 6.2%.
•Heartland Bank awarded Canstar NZ’s Bank of the
Year –Savings award and Outstanding Value Home
Lender Award.
Growth in core product portfolios
•Continued growth in core product portfolio, plus
higher contribution from AU Livestock Finance.
Continue to wind down legacy lending
•Continue the transition away from legacy
business and focus on lower risk lending which
is more cost efficient to transact.
FY2023 achievements
FY2024 focus
(18)
6,196
6,821
167
187
(18)
-
(17)
9
264
8
38
(30)
49
(27)
(24)
20
8
Jun-22Reverse
Mortgages
NZ
MotorPersonal
Lending
Home LoansBusiness
Relationship
Asset
Finance
Wholesale
Lending
Open for
Business
Rural
Relationship
Livestock
Finance NZ
Rural DirectReverse
Mortgages
AU
Livestock
Finance AU
Jun-23
(8.2%)
13.5%
(3.9%)
7.8%
(27.3%)
11.6%
13.4%
(17.1%)
2.1%
(9.9%)
23.2%
11.2%
20.7%
↗$374m(15.3%)
Household
↘$31m(2.2%)
Business
Rural
NZAU
↗$11m(1.7%)
↗$625m (10.1%)

Strategic update
1
The average CTI ratio of New Zealand’s main domestic non-major banks excluding Heartland (The Co-operative Bank, Kiwibank, SBS and TSB) was 68.9% for the 12 months to 31 March 2023 (data from the RBNZ Financial Strength Dashboard, valid as at 31 July
2023). The average CTI ratio of Australia’s major banks (ANZ, CBA, NAB and Westpac) was 45.2% for their most recent respective annual reporting periods.
7
01
Replicating the scale of big banks
•Underlying CTI ratio of 42.0%, much lower than the average CTI ratio of
non-major NZ banks and more comparable to the average CTI ratio of
major AU banks.
1
Increasing uptake of mobile platforms
•Expanded secure automatic approval capabilities of Asset Finance and
NZ Livestock Finance application processes, reducing friction for
customers and the need for manual assessment. This resulted in an
uplift in approval rates of 20% and 12% respectively.
•The Heartland Finance Mobile App was rolled out to all AU Reverse
Mortgage customers in June 2023. Within one month, more than 10%
of customers had digital access.
•Heartland Mobile App users up 65% from 1 July 2022.
•The percentage of NZ Reverse Mortgage website visitors who used
mobile devices increased from 51% as at 30 June 2022 to 54% as at 30
June 2023.
Ambition to achieve underlying CTI ratio <35% by FY2028
•Ambition to reduce the CTI ratio further over time through revenue growth and
ongoing automation and digitalisationinitiatives.
Increasing efficiency through digitalisationand automation
•Deliver One-Click Deferral, enabling customers to self-manage loan repayments.
•Develop self-service mobile app functionality to reduce friction for customers –
progress toward reducing inbound customer calls by 73% by 30 June 2025.
•Improve efficiency in loan servicing and administration through process automation –
progress toward automating 65% of manual back-end processes by 30 June 2025.
•Expand branded online origination platforms to more Motor Finance dealer partners to
provide customers with swift digital options.
Implementation of upgraded core banking system
•Due to go live within this calendar year.
•The core banking upgrade provides a platform on which to deliver increased levels of
automation and digitisation.
Business as Usual Growth
Frictionless Service at the Lowest CostExpansion in Australia
FY2023 achievementsFY2024 focus

Strategic update
1
Based on APRA ADI Property Exposure and Heartland Finance data as at 31 March 2022 and 31 March 2023.
2
Heartland internal analysis based on information from the ABS December 2022, Census 2021 and Deloitte (2021 Three Pillars Forum). Market size based on reverse mortgage lending from
banks and non-banks.
3
Based on 2020 ABS total rural debt and 2021 StockCo Australia data.
8
01
Largest active provider of AU reverse mortgages
•Maintained position as largest active provider of reverse mortgages in
Australia, with market share of 38.4% at 31 March 2023 (up from 33.1%
at 31 March 2022).
1
•Heartland Finance was a finalist for Best Banking Innovation at the
Australian Finder Innovation Awards 2022 and received the Excellence
Award for Non-Bank of the Year at the Australian Mortgage Awards
2022.
Integration of StockCo Australia
•Completed the integration of StockCo Australia into Heartland, and
repaid acquisition-related bridge debt of $174 million (A$158 million)
using proceeds from Heartland’s equity raise in 1H2023.
Challenger Bank acquisition
•Signed a conditional share purchase agreement on 20 October 2022
for the purchase of Challenger Bank, subject to obtaining the requisite
regulatory approvals.
Grow Reverse Mortgages
•Leverage demand being experienced through the growing ageing population to
continue to increase market share with the addressable market estimated to be
A$10-15 billion.
2
Grow Livestock Finance
•Grow the Australian Livestock Finance business through product developments
and digitalisation. Increasing demand for export is expected to contribute to
growth, noting the addressable market estimated to be A$7 billion
3
.
Become an ADI in Australia
•Complete the acquisition of Challenger Bank, enabling sustainable growth of
existing AU portfolios through access to retail deposits.
•Leverage NZ expertise to expand product offering in the Australian market
consistent with Heartland’s ‘best or only’ strategy.
•Opportunity for targeted entry into Motor and Asset Finance markets in Australia.
Business as Usual Growth
Frictionless Service at the Lowest CostExpansion in Australia
FY2023 achievementsFY2024 focus

People
•Create a pathway and place for Heartland’s people to grow,
thrive and be empowered to achieve Heartland’s goals as
one team.
•Care for the communities Heartland operates in.
•Care for Heartland’s customers.
Financial wellbeing
•Support the financial wellbeing of
Heartland’s customers and communities.
Heartland’s sustainability framework is built on three key pillars:
environment, people and financial wellbeing.
1
The Heartland Trust is Heartland’s registered charitable trust which is independent from, but closely supported by Heartland.
Environment
•Support the just transition to a net-zero economy.
Unaudited operational GHG emissions for
FY2023 saw a 17% reduction on the FY2019
base year.
Introduced an environment risk screening
tool in the credit decisioning process to
understand the sustainability of larger
business and rural borrowers.
Undertook ANZSIC code analysis to
understand Heartland’s exposure to
customers in high emitting industries, or
industries subject to a heightened degree of
transitional risk as a result of climate factors.
Lending to new generation vehicles
more than doubled from 5% of all lending in
FY2022 to 11% in FY2023.
Sustainability
9
01
The Manawa Akointernship welcomed 25 Māori
and Pasifika interns in its sixth intake. More than
110 interns welcomed since 2017.
Heartland Bank maintained accreditation for the
Rainbow Tick, as a Hearing Accredited
Workplace, and Living Wage Employer.
More than $710,000 granted through the
Heartland Trust in the areas of education, arts and
culture, and wellbeing.
1
Heartland Bank’s products recognisedas
providing exceptional value for customers
through Canstar NZ awards for Savings Bank of
the Year and Outstanding Value Home Lender.
Supported more than 48,000
people in NZ and AU to live a more
comfortable retirement by
releasing equity from their homes
with a reverse mortgage.
Continued to offer Heartland
Extend to consumer customers,
supporting customers to make
existing loan repayments more
manageable.
Development of new features and
automation to Heartland Bank’s
mobile app and some online
application forms to enable
customers to control their own
finances in their own time.

Andrew Dixson
Chief Financial Officer Heartland Group
02
Financial results, funding & liquidity

ReportedUnderlying
Financial
performance
NII$282.0m

12.7% vs FY2022
$283.9m

14.3% vs FY2022
OOI
1
$3.3m

81.0% vs FY2022
$16.9m

22.7% vs FY2022
NOI$285.3m

6.6% vs FY2022
$300.7m

14.8% vs FY2022
OPEX$128.1m

9.7% vs FY2022
$126.2m

13.4% vs FY2022
Impairment Expense$23.2m

68.1% vs FY2022
$23.2m

47.9% vs FY2022
Tax Expense$38.1m

9.0% vs FY2022
$41.1m

5.8% vs FY2022
NPAT
2
$95.9m

0.8% vs FY2022
$110.2m

14.6% vs FY2022
NIM3.97%

8 bps vs FY2022
4.00%

2 bps vs 1H2023

16 bps vs FY2022
CTI44.9%

126 bps vs FY2022
42.0%

53 bps vs FY2022
Impairment Expense Ratio
3
0.36%

11 bps vs FY2022
0.36%

7 bps vs FY2022
ROE10.4%

169 bps vs FY2022
11.9%

68 bps vs FY2022
EPS14.0 cps

2.1 cps vs FY2022
16.0 cps

0.3 cps vs FY2022
Financial
position
Receivables
4
$6,791m

10.1%
5
vs June 2022
Borrowings$6,627m

7.4% vs June 2022
Equity$1,031m

27.5% vs June 2022
Equity/Total Assets13.3%

1.9 ppsvs June 2022
Group financial results
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
Excluding the impact of changes in FX rates.
11
02

96.1
110.2
21.8
(8.9)
(0.1)
(3.0)
13.8
3.1
(6.0)
(7.4)
0.7
FY2022 NPATNet Interest
Income
Other Operating
Income
Operating
Expenses
Impairment
Expense
TaxFY2023 NPAT
Note:All figures in NZ$m. Refer to Appendix 3 for a reconciliation between reported and underlying NPAT result. Chart is not to scale.
1
Compounded annual growth rate for the period FY2020-FY2023.
Growth in profitability
12
02
Underlying: 96.1 →110.2
↗14.1 (14.6%)
Reported: 95.1 →95.9
↗0.7 (0.8%)
NPAT ($ million)
72.0
87.0
95.1
95.9
FY20FY21FY22FY23
+21%
+9%
+1%
↗10.0%
1
76.9
87.9
96.1
110.2
FY20FY21FY22FY23
+14%
+9%
+15%
↗12.7%
1
StockCo AustraliaResidual movement
Underlying NPAT ($ million)

Underlying
↙16 bps
Reported
↙8 bps
Note: NIM is calculated as net interest income/average gross interest earning assets.
1
Underlying gross interest yield increased 174 bps vs FY2022 to 7.88%, contributing a 163 bps increase in NIM vs FY2022.
2
Underlying cost of funds increased 211 bps vs FY2022 to 3.81%, contributing a 192 bps decrease in NIM vs FY2022
3
Underlying liquid asset yield increased 155 bps vs FY2022 to 2.63%, contributing a 13 bps increase in NIM vs FY2022
4.33%
4.35%
4.05%
3.97%
4.16%
4.00%
FY20FY21FY22FY23
Reported NIMUnderlying NIM
Underlying Gross interest yield
7.88%
NIM contribution ↗163bps
1
vs FY22
Underlying Cost of funds
3.81%
NIM contribution ↘ 192bps
2
vs FY22
Underlying Liquid assets yield
2.63%
NIM contribution ↗13bps
3
vs FY22
Net interest margin
13
02
FY24 NIM
outlook
NIM
Expected to remain
stable through proactive
portfolio pricing and
margin management.
0.13%

Note:
•CTI ratio is calculated as OPEX/NOI.
•Underlying CTI ratio excludes one-off impacts. Refer to Appendix 3 for a reconciliation between reported and underlying result.
45.4%
46.8%
43.6%
44.9%
44.9%
44.8%
42.5%
42.0%
FY20FY21FY22FY23
Reported CTI ratioUnderlying CTI ratio
Reported
↗11.3m (9.7%)
Cost to income ratio
14
02
CTI ratio
FY24 CTI ratio
outlook
Underlying
↗14.9m (13.4%)
Expected to gradually
improve, via continued
cost discipline, efficiency
and digitalisation
initiatives.

Note: Impairment expense ratio is calculated as impairment expense/average gross finance receivables.
Loan provisions
15
02
0.65%
0.31%
0.25%
0.36%
0.44%
0.31%
0.29%
0.36%
FY20FY21FY22FY23
Reported Impairment Expense Ratio
Underlying Impairment Expense Ratio
87.0
79.4
112.0
126.9
1.87%
1.58%
1.81%
1.87%
Jun-20Jun-21Jun-22Jun-23
Non Performing LoansNon Performing Loans Ratio
NPL
↘5.5m
vs 31 December 2022
NPL ratio
↘18 bps
vs 31 December 2022
FY24 outlook
FY2024 economic outlook is difficult to
predict. Interest rates appear at or near the
peak but are forecast to remain elevated
until 2025. The rate of unemployment
remains low despite forecasts of it rising.
The upcoming NZ general election provides
additional uncertainty.
Despite this, and recognisingthe lag effect
of these economic indicators, Heartland
expects FY2024 to have broadly similar
credit outcomes to FY2023.
Impairment Expense RatioNon-Performing Loans
•Impairment expense was $23.2 million (68.1% up on FY2022).
•Underlying impairment expense up $7.5 million (47.9%) on FY2022.
•Increase in underlying impairment expense due to:
oan allowance for the potential impact of rising unemployment on Motor Finance
othe Harmoney book amortisingat a slower rate in FY2023 compared with FY2022
odeterioration in the quality of unsecured Personal Lending, no longer actively originating.
•As at 30 June 2023, the balance of Heartland’s Economic Overlay
of $8.0 million taken in FY2022 was $2.4 million. The Economic
Overlay has been allocated to specifically provision for Business
Relationship lending and Asset Finance loans that have been
impacted by low economic growth, and remained in place at 30
June 2023.

1
Underlying ROE refers to ROE calculated using underlying results. When calculated using reported results, ROE was 10.4%, down169 bps. See page 4 for more information about the use of ROE, a supplementary, non-GAAP measure.
2
Total fully imputed dividends divided by the closing share price as at 25 August 2023 of $1.72.
3
Total fully imputed dividends divided by the closing share price as at 19 August 2022 of $2.16.
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 ROE of11.9% (down 68 bps vs FY2022).
1
•EPS of 14.0 cps, down 2.1 cps compared with FY2022.
•Underlying EPS of 16.0 cps (down 0.3 cps vs FY2022).
•Final dividend of 6.0 cps, taking FY2023 total dividend to 11.5 cps, up 0.5 cps on FY2022.
•Dividend yield of9.3%
2
(FY2022: 7.1%
3
).
•Heartland’s DRP will apply to the final dividend with a 2.0% discount.
4
12.5
14.9
16.1
14.0
FY20FY21FY22FY23
EPS (cps)
11.1%
12.0%
12.6%
11.9%
Jun 20Jun 21Jun 22Jun 23
Underlying ROE
Shareholder return
16
02

6,196
6,821
167
187
(18)
-
(17)
9
264
8
38
(30)
49
(27)
(24)
20
8
Jun-22Reverse
Mortgages NZ
MotorPersonal
Lending
Home LoansBusiness
Relationship
Asset FinanceWholesale
Lending
Open for
Business
Rural
Relationship
Livestock
Finance NZ
Rural DirectReverse
Mortgages AU
Livestock
Finance AU
Jun-23
(8.2%)
13.5%
(3.9%)
7.8%
(27.3%)
11.6%
13.4%
(17.1%)
2.1%
(9.9%)
23.2%
11.2%
20.7%
↗$374m(15.3%)
Household
↘$31m(2.2%)
Business
Rural
NZAU
↗$11m(1.7%)
↗$625m (10.1%)
Note: The graph shows FY2023growth in receivables by portfolio excluding the impact of changes in FX rates and intercompany balances. All figures inNZ$m.
17
Growth in receivables
02

2,456
2,245
2,189
2,629
813
968
895
783
7
513
719
66
108
268
227
293
285
273
220
110
209
168
3,628
3,723
4,347
4,746
Jun 20Jun 21Jun 22Jun 23
HBL Funding Composition
3
$m
Term depositsCall deposits
Savings depositsSecuritised funding
Retail bondsOther wholesale funding
New Zealand
•Heartland Bank increased borrowings by $399.5 million (9.2%) to
$4,746.2 million.
‒Deposits grew $533.9 million (14.8%) to $4,131.0 million, driven by
competitive pricing on targeted products, including Heartland’s
Notice Saver offerings which both received Canstar New
Zealand recognition in the year.
2
‒In Q1 and Q2, Heartland Bank experienced the highest growth
rate in retail deposits of all main and domestic banks in NZ.
1
‒Other borrowings decreased by $134.4 million (17.9%), 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 $40.7 million. This was partially
offset by an issuance of $100 million of unsecured subordinated
notes to the retail market in 2H2023, which qualify as Tier 2
capital for regulatory purposes.
‒Total liquidity strengthened, increasing by $76.3 million (12.1%)
to $704.2 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 and July 2023.
3
Includes intercompany deposits.
234
192
132
173
397
317
274
315
105
113
221
216
736
622
628
704
Jun 20Jun 21Jun 22Jun 23
HBL Liquidity Composition $m
Undrawn limitInvestmentsCash
Core funding ratio
89.6%
as at Jun 23
vs 75% regulatory minimum
↓ 0.6 pps vs Jun 22
1-week mismatch
8.66%
as at Jun 23
vs 0% regulatory minimum
↑ 1.5 ppsvs Jun 22
1-month mismatch
8.31%
as at Jun 23
vs 0% regulatory minimum
↑ 1.4 ppsvs Jun 22
NZ funding & liquidity
18
02

705
877
919
1,119
145
221
281
242
121
850
1,098
1,200
1,482
Jun 20Jun 21Jun 22Jun 23
Heartland Australia
Funding Composition A$m
Securitised fundingMTNsOther Borrowings
145
111
154
55
37
60
58
47
183
171
213
102
Jun 20Jun 21Jun 22Jun 23
Heartland Australia
Liquidity Composition A$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.
AU funding & liquidity
Heartland Australia
1
•Heartland Australia increased borrowings by
A$282.0 million (23.5%) to A$1,482.2 million.
•A A$30 million tap issue was completed in August
2022 and a further A$50 million MTN was issued in
October 2022. Heartland Australia’s April 2023
A$120 million MTN maturity was refinanced. This
now takes the aggregate outstanding issuance
under Heartland Australia’s MTN programme to
A$240 million as at 30 June 2023.
•Maturity of Reverse Mortgage securitisation
warehouses were extended by two and three
years, and aggregate senior limits were expanded
by A$100 million, providing additional headroom to
fund future growth in the portfolio. This provides
Heartland Australia with access to A$1.54 billion of
committed funding in aggregate.
StockCoAustralia
2
•StockCoAustralia increased borrowings by
A$17.2 million (5.2%) to A$346.4 million.
19
02

•Heartland Bank’s regulatory capital ratio increased
to 14.69% as at 30 June 2023 (30 June 2022:
13.49%). Heartland Bank continues to operate
significantly in excess of regulatory minimums and
is well positioned to meet the RBNZ’s future higher
capital requirements.
•In order to accelerate this journey, diversify its
capital base and accommodate future projected
growth, Heartland Bank issued$100 million
unsecured subordinated Tier 2 capital notes in
2H2023.
•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.
Note:
1. Increase in share capital is primarily as a result of a $199 million equity raise completed in September 2022.
2. Retained earnings includes current NPAT.
Capital
20
02
729
75
50
177
Heartland Capital Allocation $m
Heartland BankHeartland Australia
StockCo AustraliaHeartland Group Holdings
$1,031 million (13.3% of total assets) as at 30 June 2023
Total Tier 1 Capital
contribution(0.01%)
0.01%
(0.06%)
(0.04%)
(0.30%)
(4)

Leanne Lazarus
Chief Executive Officer Heartland Bank
03
NZ divisional summary

$4,901m
NZ Receivables
$354m (7.8%)
vs FY2022
22
NZ divisional summary
03
Household
$2,827m,
57.7%
Rural
$701m,
14.3%
Business
$1,373m,
28.0%
$227m
NZ NOI
$4m (1.8%)
vs FY2022
Household
$118m,
51.9%
Rural
$34m,
15.1%
Business
$75m,
33.1%

4,547
4,901
167
187
(18)
-
(17)
9
38
(30)
49
(27)
(24)
20
Jun-22Reverse
Mortgages
MotorPersonal LendingHome LoansBusiness
Relationship
Asset FinanceWholesale
Lending
Open for BusinessRural RelationshipLivestock FinanceRural DirectJun-23
(8.2%)
13.5%
(3.9%)
7.8%
(27.3%)
11.6%
13.4%
(17.1%)
11.2%
(9.9%)
23.2%
23
NZ divisional summary
03
↗$354m (7.8%)
↗$374m(15.3%)
Household
Business
Rural
Note: The graph shows FY2023growth in receivables by portfolio excluding the impact of changes in FX rates and intercompany balances. All figures inNZ$m.
↘$31m(2.2%)
↗$11m(1.7%)

24
NZ Household
03
$2,827m
Household Receivables
$374m (15.3%)
vs 30 June 2022
$118m
Household NOI
$0.3m (0.2%)
vs FY2022
Reverse
Mortgages
$42.4m, 36.0%
$9.9m (30.3%)
Motor
Finance
$64.2m, 54.6%
$8.7m (11.9%)
Reverse
Mortgages
$888.6m, 31.4%
$167.3m (23.2%)
Motor
Finance
$1,571.4m, 55.6%
$186.8m (13.5%)
Home Loans
1
$319.6m, 11.3%
$37.7m (13.4%)
1
Includes Online Home Loans and legacy Retail Mortgages.
2
Excluding the impact of changes in FXrates.
Personal Lending
$47.3m, 1.7%
$17.8m (27.3%)
Personal Lending
$6.6m, 5.6%
$3.1m (32.2%)
Home Loans
1
$4.4m, 3.7%
$1.6m (59.6%)
Motor Finance
•Strong growth of 13.5%. Market share gains
made at the expense of margin, alongside
general margin compression due to a shift in
asset quality and competitive pressures.
•Broad distribution network and digital
innovation were key contributing factors in
achieving system growth in a difficult market.
Reverse Mortgages
•Strong demand due to increased education and
awareness of reverse mortgages as a solution
to the ongoing strains placed on older
homeowners by cost of living and cash flow
pressures.
Online Home Loans
•While subdued compared to FY2022, Online
Home Loans experienced growth in a
challenging economic environment.
•Retention exceeded 90% for customers whose
fixed rates came up for renewal in FY2023.
Personal Lending
2
•Includes loans originated directly through
Heartland Bank, and those originated by
Harmoneyin NZ and AU.
•To manage risk in the current environment, this
portfolio is not actively originating.
•The Harmoney personal loans channel is closed
to new business and running down.

25
NZ Reverse Mortgages portfolio analytics
03
1
Compounded annual growth rate for the period 1 July 2018 –30 June 2023.
$889m
NZ Reverse Mortgages
+$167m (23.2%)vs June 2022
$128,938
Average
loansize
78
Weighted average
borrowers’ age
16.4%
Compounded annual
growth rate
1
9.8%
Average
originationLVR
21.3%
Weighted
averageLVR
0.0%
Proportion ofthe
loan book over75%LVR
0
Number ofloans in the
book over75%LVR
$197m
(+$32m vs FY2022)
FY2023 origination
$97m
(+$12m vs FY2022)
Total repayments in FY2023
13.4%
(vs 14.0% in FY2022)
FY2023 repayment rate
31.8%
(vs 32.1% in FY2022)
Repayments from vintage loans
(+11 years)

26
NZ Business
03
$1,373m
Business Receivables
$31m (2.2%)
vs 30 June 2022
$75m
Business NOI
$0.2m (0.2%)
vs FY2022
Wholesale
Lending
$245.2m, 17.8%
$27.1m (9.9%)
Asset
Finance
$682.8m, 49.7%
$49.2m (7.8%)
Relationship
$328.5m, 23.9%
$29.5m (8.2%)
Wholesale
Lending
$13.5m, 18.0%
$5.4m
(67.4%)
Asset
Finance
$30.3m, 40.4%
$0.2m (0.5%)
Relationship
$18.3m, 24.4%
$4.3m (19.1%)
1
Excludingthe impact of changes in FXrates.
Asset Finance
•Solid growth with continued focus on freight
transport and yellow goods sectors.
•NIM affected by change in mix of new
business weighted toward an improved credit
profile. Lower margin loans being repaid and
replaced, and expected to have a positive
contribution to margin in late FY2024.
Wholesale Lending
•Includes floorplan lending to vehicle retailers
and wholesale facilities to other lenders,
including for medium enterprises that on-lend
to their own customers in the consumer
motor and business sectors.
•Utilisationof floorplan lending limits
decreased due to unpredictable inventory
conditions.
Relationship
•Includes legacy Business Relationship lending
being run down as Heartland transitions to
loans which present lower risk and are more
cost efficient to transact.
O4B
1
•Stopped actively originating in Q2 to manage
risk due to the macro-economic challenges
for the SME sector.
O4B
1
$117.1m, 8.5%
$24.1m (17.1%)
O4B
$12.9m, 17.2%
$0.8m (5.7%)

27
NZ Rural
03
$701m
Rural Receivables
$11m (1.7%)
vs 30 June 2022
Rural
Relationship
$424.4m, 60.6%
$17.1m (3.9%)
Livestock
Finance
$191.2m, 27.3%
$19.9m (11.6%)
Rural Direct
$84.9m, 12.1%
$8.6m (11.2%)
$34m
Rural NOI
$4m (13.5%)
vs FY2022
Rural
Relationship
$24.2m, 70.8%
$1.2m (5.4%)
Livestock
Finance
$7.4m, 21.5%
$1.6m (27.5%)
Rural Direct
$2.6m, 7.7%
$1.2m (85.9%)
RuralRelationship
•Reduction in Receivables of $17.1m due to
the continued transition of the book away
from large, complex, low margin lending.
•Heartland’s exposure to the dairy sector
reduced to 32.8% of the total Rural book.
Livestock Finance
•Growth of 11.6% in a market impacted by
falling commodity prices, difficult climatic
conditions and Cyclone Gabrielle in the
Hawke’s Bay and Tairāwhitiregions.
•6% of growth originated from the addition of
key intermediary partnerships, with the
balance from existing customers.
Rural Direct
•Online platforms which are lower risk and
cost efficient to transact.
•Includes Heartland’s Sheep & Beef Direct
and Dairy Direct products, providing online
finance to sheep, beef and dairy farmers.

A number of initiatives are being delivered through a systemised programme of work to
enhance digital, self-service and automation capabilities.
CTI ratio reduction initiatives
28
03
Four key automation and digitalisation initiatives:
Zero inbound calls
Digitisebasic banking requests to enable
customers to self-serve via the Heartland
Mobile App, create a seamless user
experience, and reduce inbound customer
call volumes. In doing so, employees will be
able to focus on more complex customer
requests.
•Heartland Bank’s ambition is to
reduce inbound customer call
volumes by approx. 73% by 30 June
2025 by developing Mobile App self-
service features to address the top
reasons for inbound customer calls.
Motor digitalisation
•Continued enhancement of
Motor Finance digital capabilities
to enable faster and easier
access to vehicle finance
through online application
platforms.
•Intention to rollout seven
branded online origination
platforms to Motor Finance
dealer partners in FY2024.
One-Click Deferral
Offer flexibility for customers to
self-manage their Motor Finance
loan repayments digitally via the
Mobile App, including customers in
arrears.
•Develop seven new functions
and features to enable
customers to self-manage
repayments, reducing the
need for customers to
contact Heartland Bank.
Process automation
Upgrade and introduce scalable
digital technologies to optimise
back-end processes and improve
efficiency.
Increase automation to improve
workflows and reduce manual
effort, reducing friction for
customers and employees.
•Heartland Bank’s ambition is
to automate approx. 65% of
operations and collections
manual processes by 30
June 2025.

Chris Flood
Deputy Chief Executive Officer Heartland Group
04
AU divisional summary

30
AU divisional summary
04
$1,920m
AU Receivables
1
$271m (16.5%)
vs 30 June 2022
Household
$1,539m,
80.2%
Rural
$381m,
19.8%
$79m
AU NOI
$40m (102.3%)
vs FY2022
Household
$47m,
59.8%
Rural
2
$32m,
40.2%
1
Excluding the impact of changes in FX rates
2
Includesfull year contribution of StockcCoAustralia since the completion of acquisition on 31 May 2022.

31
AU divisional summary
04
Waterfall to show growth
↗$271m (16.5%)
1,649
1,920
264
8
Jun-22Reverse MortgagesLivestock FinanceJun-23
2.1%
20.7%
Note: The graph shows FY2023growth in receivables by portfolio excluding the impact of changes in FX rates and intercompany balances. All figures inNZ$m.

1
Excluding the impact of changes in FX rates.
32
AU Household
04
$1,539m
Household Receivables
1
$263.7m (20.7%)
vs 30 June 2022
$47m
Household NOI
$8.2m (20.9%)
vs FY2022
ReverseMortgages
1
•Growth was driven by increased debt
consolidation and cost of living requests
due to current economic environment, and
customers seeking funds to age in place
more comfortably.
•Growth is expected to remain strong in
FY2024 as ongoing improvements and
efficiencies are made to the loan
application, approval and maintenance
process.

33
AU Reverse Mortgages portfolio analytics
1
1
All figures in NZD, excluding the impact of changes in FX rates (where applicable).
2
Compounded annual growth rate for the period 1 July 2018 –30 June 2023.
$1,539m
AU Reverse Mortgages
+$264m (20.7%)vs June 2022
$180,432
Average
loansize
77
Weighted average
borrowers’ age
22.8%
Compounded annual
growth rate
2
11.7%
Average
originationLVR
21.5%
Weighted
averageLVR
0.0%
Proportion ofthe
loan book over75%LVR
1
Number ofloans in the
book over75%LVR
$349m
(+$78m vs FY2022)
FY2023 origination
$197m
(+$30m vs FY2022)
Total repayments in FY2023
16.0%
(vs 15.7% in FY2022)
FY2023 repayment rate
16.1%
(vs 19.0% in FY2022)
Repayments from vintage loans
(+11 years)
04

AU Rural
34
04
Livestock Finance
•Subdued growth was due to
macroeconomic events affecting livestock
prices and demand, including adverse
weather conditions, the rising interest rate
environment, and low export demand with
the USA drought and China’s COVID-19
response contributing to freezers being full
around the world.
•Despite lower dollars per head, the volume
of livestock financed increased. At 30 June
2023, cattle was up 25% compared with 30
June 2022. Sheep transactions were flat.
•Direct client growth of 11%.
•Processor capacity has been strained due
to a lack of skilled workers, the ongoing
impacts of COVID-19 and adverse weather
conditions. Slaughter production in 2022
was down approximately 27% from 2021
volumes. This is expected to improve in the
first half of FY2024 and have a positive
effect on livestock demand and value, as
processors work through their backlog.
•The outlook is positive with demand for
protein expected to increase and have a
positive effect on livestock value.
$381m
Rural Receivables
1
$7.7m (2.1%)
vs 30 June 2022
$32m
Rural NOI
2
1
Excluding the impact of changes in FX rates
2
Includesfull year contribution of StockcCoAustralia since the completion of acquisition on 31 May 2022.

Jeff Greenslade
Chief Executive Officer Heartland Group
05
Outlook

Outlook
36
05
Business as usual growth
•Heartland’s strength is its track record of strong
growth in core lending portfolios.
•Growth focus will be on Reverse Mortgages,
Motor Finance, Asset Finance and Livestock
Finance.
•Supported by ongoing digitalisationand
automation of lending platforms.
•Leverage demographic-driven demand in
Reverse Mortgages.
NIM stabilisation
•NIM outlook is stable with repayment and replacement of legacy lower margin
Motor Finance and Asset Finance loans.
•Growth mix will continue to influence margin, causing acceptable contraction
offset by corresponding growth.
Ambition to double underlying NPAT within 5 years
•Since 2012, Heartland’s NPAT has more than tripled.
•Ambition to continue track record of income growth by doubling underlying
NPAT within 5 years.
Obtain an ADI licence
•Complete Challenger Bank acquisition, which
remains subject to RBNZ and APRA approval.
Heartland’s desire is to complete the acquisition
in the 2023 calendar year.
•Post-completion, Heartland’s focus will be on
integration and leveraging its common
distribution channels in NZ to expand into AU.
Ambition to reduce underlying CTI ratio to <35% by FY2028
•Digitalisationinitiatives underway to improve operational efficiency and increase
customer self-service functionality, including One-Click Deferral, reducing
telephony, and further automation.
•Revenue growth and careful management of costs critical pathways to a
reduced CTI ratio.
•Stable CTI ratio expected while investment and delivery of initiatives continues .
FY2024 NPAT
•Heartland expects NPAT for FY2024 to be within the guidance range of $116 million to $122 million, excluding any impacts of
fair value changes on equity investments held and the impact of the de-designation of derivatives, and any costs related to
the acquisition of Challenger Bank, which remains subject to RBNZ and APRA approval.
•As the acquisition nears completion, guidance will be updated to reflect the impact of Challenger Bank becoming part of
Heartland.

06
Disclaimer, glossary & appendices

Disclaimer
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.
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 information about the Company.
The information in this presentation is of a general nature and does not constitute financial
product advice, investment advice or any recommendation. Nothing in this presentation
constitutes legal, financial, tax or other advice.
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
42.
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 30 June 2023 unless otherwise indicated. Any other financial
information provided as at a date after 30 June 2023 has not been audited or reviewed by any
independent registered public accounting firm.
38
06

Glossary
39
06
ABPAustralia Bank ProgrammeNIINet interest income
ADIAuthorised deposit-taking institutionNIMNet interest margin
ANZSICAustralian and New Zealand Standard Industrial ClassificationNOINet operating income
APRAAustralian Prudential Regulation AuthorityNPATNet profit after tax
bpsBasis pointsO4BOpen for Business
CCCFANew Zealand Credit Contracts and Consumer Finance Act 2003OOIOther Operating Income
Challenger BankChallenger Bank LimitedOPEXOperating expenses
cpsCents per shareppsPercentage points
CTI ratioCost to income ratioRBNZReserve Bank of New Zealand
DRPDividend Reinvestment PlanReceivablesGross Finance Receivables
EPSEarnings per shareROEReturn on Equity
FXForeign currency exchangeSMESmall-to-medium sized enterprise
HarmoneyHarmoney Corp LimitedTSRTotal shareholder return
HeartlandHeartland Group Holdings Limited or the CompanyQ1First quarter of FY2023 (1 July to 30 September 2022)
Heartland Australia
Group
Heartland Australia Holdings Pty Ltd and its direct and indirect
wholly-owned subsidiaries
Q2Second quarter of FY2023 (1 October to 31 December 2022)
Heartland Bank, HBLHeartland Bank LimitedQ4Fourth quarter of FY2023 (1 April to 30 June 2023)
LVRLoan-to-value ratio1H2023First half of FY2023 (1 July to 31 December 2022)
MTNMedium Term Note2H2023Second half of FY2023 (1 January to 30 June 2023)

ReportedUnderlying
$m FY2023FY2022Change ($)Change (%)FY2023FY2022Change ($)Change (%)
NII282.0250.131.812.7%283.9248.335.614.3%
OOI
1
3.317.5(14.1)(81.0%)16.913.73.122.7%
NOI285.3267.617.76.6%300.7262.038.714.8%
OPEX128.1116.811.39.7%126.2111.414.913.4%
Impairment Expense23.213.89.468.1%23.215.77.547.9%
Profit Before Tax134.0137.0(3.0)(2.2%)151.2134.916.312.1%
Tax Expense38.141.9(3.8)(9.0%)41.138.82.35.8%
NPAT95.995.10.70.8%110.296.114.114.6%
NIM
3.97%4.05%(8 bps)4.00%4.16%(16 bps)
CTI
44.9%43.6%126 bps42.0%42.5%(53 bps)
Impairment Expense Ratio
2
0.36%0.25%11 bps0.36%0.29%7 bps
ROE
10.4%12.1%(169 bps)11.9%12.6%(68 bps)
EPS
14.0 cps16.1 cps
(2.1cps)16.0 cps16.3 cps(0.3 cps)
1
Includes fair value movements.
2
Impaired asset expense as a percentage of average Receivables.
Appendix 1: Financial performance
40
06

$m30 June 202330 June 2022Movement ($m)Movement (%)
Liquid Assets627585427.1%
Gross Finance Receivables6,7916,1965969.6%
Provisions(53)(52)(1)(2.4%)
Other Assets383362215.8%
Total Assets7,7477,0906579.3%
Retail Deposits4,1313,59353915.0%
Other Borrowings2,4962,578(82)(3.2%)
Total Funding6,6276,1714577.4%
Other Liabilities89111(22)(19.7%)
Equity1,03180922227.5%
Total Equity & Liabilities7,7477,0906579.3%
Appendix 2: Financial position
41
06

FY2023 one-offs included in the reported result:
•Hedging: a $9.1 million loss was recognised in relation to derivatives that were de-
designated from prior hedge accounting relationships in FY2022.
•Valuation of equity investments: a $4.5 million fair value loss was recognised on
investment in Harmoneyshares.
•Bridging loan: a $1.9 million interest expense was recognisedfor a $174 million
(A$158 million) bridging loan taken by Heartland to acquire StockCo Australia, which
was fully repaid in September 2022.
•Other provisions:$0.7 million of unwarranted legacy provisions were released.
•ABP costs: $2.2 million of transaction and other costs in relation to becoming an ADI
in Australia. In addition, $6.4 million of costs directly attributable to applying to
become an ADI have been capitalisedas an intangible asset.
•Other non-recurring expenses: $0.3 million.
FY2022one-offs included in the reported result:
•Hedging: A $16.7 million gain was recognisedin relation to derivatives that were de-
designated from hedge accounting relationships.
•Valuation of equity investments: a $12.7 million fair value loss was recognisedon
investment in Harmoneyshares, and a further $0.3 million fair value loss was recognised
on Heartland Bank’s rights over a profit-sharing arrangement with a customer.
•Impairment provisions: $9.6 million COVID-19 Overlay, originally raised in FY2020, remained
entirely unutilisedand was released in full. A new $8.0 million Economic Overlay was
created.
•Voluntary amortisationof intangibles: $2.9 million expense was recognisedfor intangibles
that are no longer expected to derive future economic benefits.
•Other non-recurring expenses: $1.0 million.
•Aged items provisions and legacy accruals: a combined $0.5 million of unwarranted
accruals and provisions for aged legacy suspense account transactions were released.
•Tax adjustments: a $1.2 million release of tax provisions relating to prior periods and $0.2
million of other non-recurring tax benefits were recognisedduring the year.
Appendix 3: Reconciliation of reported with underlying results
42
06
$mFY2023FY2022Movement ($)Movement (%)
Reported NOI285.3 267.6 17.7 6.6%
Less:
StockCo Australia impacts(1.9)1.9 (3.8)
Hedge accounting Impacts(9.1)16.7 (25.8)
Net fair value gain/loss on investments(4.5)(13.0)8.5
Underlying NOI300.7 262.0 38.7 14.8%
Reported OPEX128.1 116.8 11.3 9.7%
Less:
StockCo Australia impacts-1.9 (1.9)
Voluntarily accelerated amortisation-2.9 (2.9)
Legacy provisions and accruals(0.7)(0.5)(0.2)
ABP costs2.2 -2.2
Other non-recurring items0.3 1.0 (0.7)
Underlying OPEX
126.2 111.4 14.9
13.4%
Reported impairment expense23.2 13.8 9.4 68.1%
Less:
StockCo Australia impacts
-(0.3)
0.3
COVID-19 overlay release
-(9.6)
9.6
Economic Overlay created
-8.0
(8.0)
Underlying impairment expense
23.2 15.7 7.5
47.9%
Reported NPAT95.9 95.1 0.7 0.8%
Less:
Post-tax impact of one-offs(14.3)(2.3)(12.0)
Tax adjustments relating to prior periods-1.4 (1.4)
Underlying NPAT
110.2 96.1 14.1
14.6%
Reported NIM
3.97%4.05%
(8 bps)
Underlying NIM
4.00%4.16%(16 bps)
Reported CTI
44.9%43.6%126 bps
Underlying CTI
42.0%42.5%(53 bps)
Reported ROE
10.4%12.1%(169 bps)
Underlying ROE
11.9%12.6%(68 bps)

Investor information
For more information
heartlandgroup.info/investor-information
Investor & media relations
Nicola Foley
Group Head of Communications
+64 27 345 6809
nicola.foley@heartland.co.nz
Thank you

---

Results announcement
(for Equity Security issuer/Equity and Debt
Security issuer)
Updated as at June 2023


Results for announcement to the market
Name of issuer Heartland Group Holdings Limited
Reporting Period 12 months to 30 June 2023
Previous Reporting Period 12 months to 30 June 2022
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$285,315 6.6%
Total Revenue $285,315 6.6%
Net profit/(loss) from
continuing operations
$95,868 0.8%
Total net profit/(loss) $95,868 0.8%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.06000000
Imputed amount per Quoted
Equity Security
$0.02333333
Record Date 06/09/2023
Dividend Payment Date 20/09/2023
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.09 $0.96
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to the audited financial statements that accompany
this announcement for a further explanation of these figures.
Authority for this announcement
Name of person

authorised
to make this announcement
Andrew Dixson, Chief Financial Officer
Contact person for this
announcement
Nicola Foley, Group Head of Communications
Contact phone number +64 27 3456 809
Contact email address nicola.foley@heartland.co.nz
Date of release through MAP

29/08/2023

Audited financial statements accompany this announcement.

---

Distribution Notice

Updated as at June 2023




Section 1: Issuer information
Name of issuer Heartland Group Holdings Limited
Financial product name/description Ordinary shares
NZX ticker code HGH
ISIN (If unknown, check on NZX
website)
NZHGHE0007S9
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies X
Record date 6/09/2023
Ex-Date (one business day before the
Record Date)
5/09/2023
Payment date (and allotment date for
DRP)
20/09/2023
Total monies associated with the
distribution
1

$ 42,579,492.00
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$ 0.08333333
Gross taxable amount
3
$ 0.08333333
Total cash distribution
4
$ 0.06000000
Excluded amount (applicable to listed
PIEs)
NIL
Supplementary distribution amount $ 0.01058824
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
$ 0.02333333
Resident Withholding Tax per
financial product
$ 0.00416667
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
7/09/2023 13/09/2023
Date strike price to be announced (if
not available at this time)
14/09/2023
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
07/09/2023
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 +64 27 3456 809
Contact email address nicola.foley@heartland.co.nz
Date of release through MAP

29/08/2023






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

---

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


NZX/ASX release
29 August 2023

ASX Listing Rule 1.15.3 Statement

Heartland Group Holdings Limited’s (Heartland) (NZX/ASX: HGH) (an ASX Foreign Exempt Listing)
confirms, for the purposes of ASX Listing Rule 1.15.3, that it has complied with and continues to
comply with the Listing Rules of NZX Limited, which is its overseas home exchange.

– ENDS –

The person(s) who authorised this announcement:

Jeff Greenslade
Chief Executive Officer

For further information, please contact:

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

---

Financial Statements
For the year ended 30 June 2023

P. 2
Contents


Page
General Information........................................................................................................................................................... 3
Auditor.................................................................................................................................................................................. 3
Other Material Matters...................................................................................................................................................... 3
Directors............................................................................................................................................................................... 4
Directors’ Statements......................................................................................................................................................... 5
Consolidated Statement of Comprehensive Income...................................................................................................... 6
Consolidated Statement of Changes in Equity................................................................................................................ 7
Consolidated Statement of Financial Position................................................................................................................. 8
Consolidated Statement of Cash Flows............................................................................................................................ 9
Notes to the Financial Statements
1 Financial statements preparation........................................................................................................................ 12
Performance
2 Segmental analysis................................................................................................................................................. 17
3 Net interest income................................................................................................................................................ 19
4 Net operating lease income................................................................................................................................... 20
5 Other income........................................................................................................................................................... 20
6 Operating expenses................................................................................................................................................. 21
7 Compensation of auditor....................................................................................................................................... 21
8 Impaired asset expense.......................................................................................................................................... 22
9 Taxation.................................................................................................................................................................... 23
10 Earnings per share.................................................................................................................................................. 24
Financial Position
11 Investments............................................................................................................................................................ 25
12 Derivative financial instruments.......................................................................................................................... 26
13 Finance receivables................................................................................................................................................ 32
14 Operating lease vehicles........................................................................................................................................ 37
15 Borrowings.............................................................................................................................................................. 37
16 Share capital and dividends.................................................................................................................................. 39
17 Other reserves........................................................................................................................................................ 40
18 Other balance sheet items.................................................................................................................................... 41
19 Acquisition.............................................................................................................................................................. 45
20 Related party transactions and balances............................................................................................................ 47
21 Fair value................................................................................................................................................................. 49
Risk Management
22 Enterprise risk management................................................................................................................................. 55
23 Credit risk exposure............................................................................................................................................... 59
24 Liquidity risk............................................................................................................................................................ 64
25 Interest rate risk..................................................................................................................................................... 66
Other Disclosures
26 Significant subsidiaries.......................................................................................................................................... 69
27 Structured entities................................................................................................................................................. 69
28 Staff share ownership arrangements................................................................................................................. 71
29 Securitisation, funds management and other fiduciary activities................................................................. 73
30 Concentrations of funding.................................................................................................................................... 73
31 Offsetting financial instruments.......................................................................................................................... 74
32 Contingent liabilities and commitments............................................................................................................. 75
33 Events after reporting date.................................................................................................................................. 75
Auditor’s Report.................................................................................................................................................................. 76

P. 3
General Information

These financial statements are issued by Heartland Group Holdings Limited (HGH) and its subsidiaries (the Group) for the year
ended 30 June 2023.

Name and address for service

The Group’s address for service is Level 3, 35 Teed Street, Newmarket, Auckland 1023.

Details of incorporation

HGH was incorporated under the Companies Act 1993 on 19 July 2018.


Auditor

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


Other Material Matters

There are no material matters relating to the business or affairs of the Group that are not disclosed in these consolidated financial
statements which, if disclosed, would materially affect the decision of a person to subscribe for debt or equity instruments of
which the Group is the issuer.

P. 4
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, Geoffrey Ricketts stepped down as Chairperson of Heartland Group Holdings Limited and ceased
directorship of Heartland Group Holdings Limited on 10 March 2023.

The Board resolved on 23 February 2023 for Greg Tomlinson to assume the role of Chairperson.

There have been no other changes to the composition of the Board of Directors of the Group for the year ended 30 June 2023.

The Directors of HGH and their details at the time these financial statements were signed were:

Chair – Board of Directors
Name: Gregory Raymond Tomlinson Qualifications: AME
Type of Director: Non-Independent Non-Executive Director Occupation: Company Director

External Directorships:
Alta Cable Holdings Limited, Chippies Vineyard Limited, Indevin Group Limited, Mountbatten Trustee Limited, Nearco Stud
Limited, Oceania Healthcare Limited, Pelorus Finance Limited, St Leonards Limited, Tomlinson Group Argenta GP Limited,
Tomlinson Group NZ Limited, Tomlinson Holdings Limited, Tomlinson Group Investments Limited, Tomlinson Ventures Limited,
Terra Vitae Vineyards Limited, Villa Maria Estate Limited.

Name: Ellen Frances Comerford Qualifications: BEc
Type of Director: Independent Non-Executive Director Occupation: Company Director

External Directorships:
Airtasker Limited, Comerford Gohl Holdings Pty Limited, Lendi Group Pty Ltd, IVM InterSurer B.V, Hollard Investments B.V, Hollard
Investments II BV, Greenstone Holdco Pty Ltd.

Name: Jeffrey Kenneth Greenslade

Qualifications: LLB
Type of Director: Non-Independent Executive Director Occupation: Chief Executive Officer of Heartland Group Holdings

External Directorships:
Henley Family Investments Limited.

Name: Kathryn Mitchell Qualifications: BA, CMInstD
Type of Director: Independent Non-Executive Director Occupation: Company Director

External Directorships:
Chambers@151 Limited, Christchurch International Airport Limited, Farmright Limited, Firsttrax Limited, Helpings Hands Holdings
Limited, Link Engine Management Limited, Morrison Horgan Limited, The New Zealand Merino Company Limited, The A2 Milk
Company Limited

Name: Geoffrey Edward Summerhayes Qualifications: BBA
Type of Director: Independent Non-Executive Director Occupation: Company Director

External Directorships:
OnePath General Insurance Pty Limited, Zurich Australian Insurance Limited, Zurich Australia Limited, Zurich Financial Services
Australia Limited, Zurich Investment Management Limited.

P.5
Directors' Statements
The consolidated financial statements are dated 28 August 2023 and have been signed by all Directors.
G R Tomlinson (Chair) E F Comerford
J K Greenslade G E Summerhayes
K Mitchell

P.6
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023
$000's Note
June 2023 June 2022
Interest income
3
527,710 342,101
Interest expense
3
245,721 91,959
Net interest income 281,989 250,142
Operating lease income
4
5,631 5,284
Operating lease expenses
4
3,827 3,383
Net operating lease income 1,804 1,901
Lending and credit fee income 11,753 9,639
Other (expense)/income
5
(5,742) 18,933
Net operating income 289,804 280,615
Operating expenses
6
128,079 116,753
Profit before impaired asset expense and income tax 161,725 163,862
Fair value (loss) on investments (4,488) (12,998)
Impaired asset expense
8
23,244 13,823
Profit before income tax 133,993 137,041
Income tax expense
9
38,125 41,916
Profit for the year 95,868 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 7,116 7,041
Movement in fair value reserve (533)(712)
Movement in foreign currency translation reserve (6,803) 2,340
Items that will not be reclassified to profit or loss, net of income tax:
Movement in fair value of equity investments at fair value through other comprehensive
income
(2,411) -
Movement in defined benefit reserve -(171)
Net loss due to wind-up of superannuation scheme -(473)
Other comprehensive income for the year, net of income tax (2,631) 8,025
Total comprehensive income for the year 93,237 103,150
Earnings per share
Basic earnings per share
10 13.96c
16.13c
Diluted earnings per share
10 13.96c
16.13c
Total comprehensive income for the year is attributable to the owners of the Group.
The notes to the financial statements form an integral part of, and should be read in conjunction with, these consolidated
financial statements.

P. 7
Consolidated Statement of Changes in Equity



For the year ended 30 June 2023



June 2023 June 2022


Share
Capital Reserves
Retained
Earnings Total Equity
Share
Capital Reserves
Retained
Earnings
Total
Equity
$000's
Note

Balance at beginning of year 599,185 9,936 199,586 808,707 583,781 (477) 178,388 761,692

Total comprehensive income for
the year


Profit for the year - - 95,868 95,868 - - 95,125 95,125
Other comprehensive
(loss)/income, net of income tax
17 - (2,631) - (2,631) - 8,498 (473) 8,025
Total comprehensive income for
the year
- (2,631) 95,868 93,237 - 8,498 94,652 103,150

Contributions by and
distributions
to owners


Dividends paid 16 - - (71,402) (71,402) - - (73,454) (73,454)
Dividend reinvestment plan 16 7,100 - - 7,100 15,404 - - 15,404
Transaction costs associated with
capital raising
(3,749) - - (3,749) - - - -
Share based payments - 105 - 105 - 1,915 - 1,915
Share issuance 16 197,006 - - 197,006
Vesting of share based payments 1,170 (1,170) - - - - - -
Total transactions with owners 201,527 (1,065) (71,402) 129,060 15,404 1,915 (73,454) (56,135)



Balance at end of the year 800,712 6,240 224,052 1,031,004 599,185 9,936 199,586 808,707




















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

P. 8
Consolidated Statement of Financial Position



As at 30 June 2023



$000's
Note June 2023 June 2022
Assets
Cash and cash equivalents 311,503 310,758
Investments 11 330,240 289,294
Derivative financial instruments 12 36,983 45,221
Finance receivables 13 4,334,214 4,146,821
Finance receivables - reverse mortgages 21 2,403,810 1,996,854
Investment properties 11,903 11,832
Operating lease vehicles 14 16,966 15,161
Right of use assets 18 12,318 14,145
Other assets 18 27,990 18,229
Current tax asset 1,960 -
Intangible assets 18 235,733 218,874
Deferred tax asset 9 21,105 23,074
Total assets 7,744,725 7,090,263

Liabilities
Deposits 15 4,131,025 3,592,508
Other borrowings 15 2,496,375 2,578,213
Derivative financial instruments 12 7,624 6,341
Lease liabilities 18 14,287 16,240
Tax liabilities 6,112 22,044
Trade and other payables 18 58,298 66,210
Total liabilities 6,713,721 6,281,556
Net assets 1,031,004 808,707

Equity
Share capital 16 800,712 599,185
Retained earnings and other reserves 17 230,292 209,522
Total equity 1,031,004 808,707



















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

P. 9
Consolidated Statement of Cash Flows



For the year ended 30 June 2023



$000's
Note June 2023 June 2022
Cash flows from operating activities
Interest received 333,874 222,894
Operating lease income received 4,571 3,913
Lending, credit fees and other income received 6,292 6,101
Operating inflows 344,737 232,908

Interest paid (193,679) (100,467)
Payments to suppliers and employees (128,195) (69,463)
Taxation paid (54,629) (32,987)
Operating outflows (376,503) (202,917)

Net cash flows (applied to)/from operating activities before changes in operating assets
and liabilities
(31,766) 29,991

Proceeds from sale of operating lease vehicles 4,492 4,481
Purchase of operating lease vehicles (8,766) (10,758)
Net movement in finance receivables (448,210) (693,512)
Net movement in deposits 526,939 407,484
Net cash flows from/(applied to) operating activities
1
42,689 (262,314)

Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (24,669) (9,809)
Proceeds from investment securities 55,443 82,945
Purchase of investment securities (95,000) -
Deposit paid for the conditional acquisition of Challenger Bank Limited (3,936) -
Purchase of equity investment (6,952) (7,414)
Purchase of investment property (71) -
Purchase of subsidiary, net of cash acquired (3,047) (159,919)
Net cash flows (applied to) investing activities (78,232) (94,197)

Cash flows from financing activities
Proceeds from wholesale funding 1,264,359 1,103,510
Repayment of wholesale borrowings (1,208,292) (635,371)
Proceeds from issue of unsubordinated notes 87,589 77,243
Repayment of unsubordinated notes (330,300) -
Proceeds from issue of subordinated notes 97,934 -
Dividends paid (64,303) (58,050)
Payment of lease liabilities (2,656) (2,396)
Net issue of share capital 16 193,364 -
Total cash provided from financing activities 37,695 484,936

Net increase in cash held 2,152 128,425
Effect of exchange rates on cash and cash equivalents (1,407) -
Opening cash and cash equivalents 310,758 182,333
Closing cash and cash equivalents
2
311,503 310,758
1
Cash flows from operating activities do not include cash flows from wholesale funding which are included as part of financing activities.
2
At 30 June 2023, the Group has $97.0 million (2022: $76.7 million) of cash held by the Trusts which may only be used for the purposes defined
in the underlying Trust documents. Refer to Note 27 - Structured entities for definition of Trusts and further details.



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

P. 10
Consolidated Statement of Cash Flows (continued)


For the year ended 30 June 2023


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



$000's
Note June 2023 June 2022
Profit for the year 95,868 95,125

Add/(less) non-cash items:
Depreciation and amortisation expense 10,124 10,691
Depreciation on lease vehicles 14 3,461 3,103
Capitalised net interest income and fee income (154,706) (113,368)
Impaired asset expense 8 23,244 13,823
Investment fair value movement 6,899 12,998
Deferred tax 1,969 (8,957)
Other non-cash items 2,097 (12,310)
Total non-cash items (106,912) (94,020)

Add/(less) movements in operating assets and liabilities:
Finance receivables (448,210) (693,512)
Operating lease vehicles (5,266) (6,277)
Other assets (2,856) (207)
Current tax (17,892) 14,604
Derivative financial instruments 9,521 (23,214)
Deposits 526,939 407,484
Other liabilities (8,503) 37,703
Total movements in operating assets and liabilities 53,733 (263,419)


Net cash flows from/(applied to) operating activities
1
42,689 (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 financial statements form an integral part of, and should be read in conjunction with, these consolidated
financial statements.

P. 11
Consolidated Statement of Cash Flows (continued)


For the year ended 30 June 2023


Net debt reconciliation



The below table sets out net cash flow and non-cash changes in liabilities arising from financing activities.


$000's
Note June 2023 June 2022
Balance as at beginning of year
1
2,594,453 1,693,299

Proceeds from wholesale funding 1,264,359 1,103,510
Repayment of wholesale borrowings (1,208,292) (635,371)
Proceeds from issue of unsubordinated notes 87,589 77,243
Repayment of unsubordinated notes (330,300) -
Proceeds from issue of subordinated debt 97,934 -
Payment of lease liabilities (2,656) (2,396)
Total cash movements (91,366) 542,986

Acquisition of debt from purchase of subsidiary - 358,942
Capitalised interest and fee expense 34,809 12,630
Fair value movements (473) (11,534)
Foreign exchange and other movements (26,761) (1,870)
Total non-cash movements 7,575 358,168

Balance as at the end of year 2,510,662 2,594,453
1
Includes lease liabilities and other borrowings.



























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

P. 12
Notes to the Financial Statements

For the year ended 30 June 2023

1 Financial statements preparation

Reporting entity

The financial statements presented are the consolidated financial statements comprising Heartland Group Holdings (HGH) and its
subsidiaries (the Group). Refer to Note 26 – Significant subsidiaries for further details.

HGH is a company incorporated in New Zealand under the Companies Act 1993 and a Financial Market Conduct (FMC) reporting
entity for the purposes of the Financial Markets Conduct Act 2013.

Basis of preparation

The consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New
Zealand (NZ GAAP), the New Zealand Exchange (NZX) Main Board Listing Rules and the Australian Securities Exchange (ASX)
Listing Rules. The financial statements comply with New Zealand Equivalents to International Financial Reporting Standards (NZ
IFRS) and other applicable Financial Reporting Standards as appropriate for profit-oriented entities. The financial statements also
comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

The consolidated financial statements are presented in New Zealand dollars which is the Group's functional and presentation
currency. Unless otherwise indicated, amounts are rounded to the nearest thousand dollars.

The consolidated financial statements have been prepared on a going concern basis after considering the Group's funding and
liquidity position.

The accounting policies adopted have been applied consistently throughout the periods presented in these consolidated financial
statements.

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

Basis of measurement

The financial statements have been prepared on the basis of historical cost, except for certain financial instruments and
investment properties, which are measured at their fair values as identified in the accounting policies set out in the accompanying
notes to the financial statements.

Principles of consolidation

The consolidated financial statements of the Group incorporate the assets, liabilities and results of all controlled entities.
Controlled entities are all entities in which the Group is exposed to, or has rights to, variable returns from its involvement with the
entities and has the ability to affect those returns through its power over the entities. Intercompany transactions, balances and
any unrealised income and expense (except for foreign currency transaction gains or losses) between controlled entities are
eliminated.

Assets and liabilities in a transactional currency that is not the New Zealand dollar, are translated at the exchange rates ruling at
balance date. Revenue and expense items are translated at the average rate at the balance date. Exchange differences are taken
to the consolidated statement of comprehensive income.

P. 13
1 Financial statements preparation (continued)

Changes in accounting standards

Accounting standards issued and effective

There have been no changes to accounting policies or new or amended standards that are issued and effective that are expected
to have a material impact on the Group.

Accounting standards issued not yet effective

Disclosure of fees for audit firms’ services (Amendments to FRS-44)

Amendments were issued to FRS-44 New Zealand Additional Disclosures (Amendments to FRS-44) that require an entity to
describe the services provided by its audit or review firm and to disclose the fees incurred by the entity for those services using
prescribed categories. These amendments apply to accounting periods beginning on or after 1 January 2024. Earlier application is
permitted for accounting periods that begin before 1 January 2024 but have not ended or do not end before 15 June 2023.
The Group has early adopted the Amendments to FRS-44 from 1 July 2022. Refer to Note 7 - Compensation of auditor for further
details.

Climate-related standards

Climate-related disclosure standards were issued in December 2022, and took effect on 1 January 2023. These include the
Climate-related Disclosures (CS 1), Adoption of Aotearoa New Zealand Climate Standards (CS 2) and General Requirements for
Climate-related Disclosures (CS 3). The Group is a designated climate reporting entity under the climate related disclosure regime
and is required to meet its requirements effective from the financial reporting period commencing 1 July 2023.

Other new accounting standards, amendments to accounting standards and interpretations have been published that are not
mandatory for the 30 June 2023 reporting periods and have not been early adopted by the Group. These standards, amendments
or interpretations are not expected to have a material impact on the current or future reporting periods.

Critical accounting estimates and judgements

The preparation of the Group’s consolidated financial statements requires the use of estimates and judgements. This note
provides an overview of the areas that involve a higher degree of judgement or complexity. Detailed information about each of
these estimates and judgements is included in the relevant notes together with the basis of calculation for each affected item in
the financial statements.

• Provisions for impairment - The effect of credit risk is quantified based on the Group's best estimate of future cash
repayments and proceeds from any security held or by reference to risk profile groupings, historical loss data and forward-
looking information. Refer to Note 8 - Impaired asset expense and Note 13 - Finance receivables for further details.

• Recognition of Banking Licence intangible asset - The recognition of Banking Licence intangible asset required judgement in
determining external and internal costs directly attributable to the Group’s joint application for an Australian Authorised
Deposit-Taking Institution Licence with Challenger Bank Limited (CBL). Judgement is also required to determine whether
such costs fulfil the definition and recognition criteria of an intangible asset. Such costs include professional fees and costs of
employee benefits arising directly from the application. Refer to Note 18 - Other balance sheet items for further details.

• Fair value of reverse mortgages - Fair value is quantified by the transaction price. Management judgement is applied in
determining the appropriateness of the transaction price as fair value. Refer to Note 21 - Fair value for further details.

• Goodwill - The Group carries out impairment testing annually over the carrying value of goodwill of its cash generating units
(CGUs). Uncertainty is involved in estimating fair value less cost to sell and judgement is applied in assumptions used to
determine the recoverable amount of CGU for impairment testing. Refer to Note 18 – Other balance sheet items for further
details.

P. 14
1 Financial statements preparation (continued)

Critical accounting estimates and judgements (continued)

Assumptions made at each reporting date (e.g., the calculation of the provision for impairment and fair value adjustments) are
based on best estimates as at that date. Although the Group has internal controls in place to ensure that estimates can be reliably
measured, actual amounts may differ from these estimates. The estimates and judgements used in the preparation of the Group’s
financial statements are continually evaluated.

They are based on historical experience and other factors, including expectations of future events that may have a financial
impact on the entity. Revisions to accounting estimates are recognised in the reporting period in which the estimates are revised
and in any future periods affected.

Significant events

On 20 October 2022 Heartland Group Holdings Limited entered into a conditional share purchase agreement for the purchase of
CBL 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 and is recorded within other assets in the
consolidated statement of financial position.

Financial assets and liabilities

Financial Assets

Financial assets are classified based on:

• The business model within which the assets are managed; and

• Whether the contractual cash flows of the instrument represent solely payment of principal and interest (SPPI).

The Group determines the business model at the level that reflects how groups of financial assets are managed. When assessing
the business model, the Group considers factors including how performance and risks are managed, evaluated and reported and
the frequency and volume of, and reason for sales in previous periods.

Financial assets are classified into the following measurement categories:

Financial Assets Measurement Category Note
Bank bonds and floating rate notes Fair value through other comprehensive income (FVOCI) 11
Public sector securities and corporate bonds FVOCI 11
Equity investments Fair value through profit or loss (FVTPL) and FVOCI 11
Finance receivables – Reverse mortgages FVTPL 21
Finance receivables Amortised cost 13
Derivative financial instruments FVTPL 12

Financial assets measured at amortised cost
Financial assets are measured at amortised cost if they are held within a business model whose objective is achieved through
holding the financial asset to collect contractual cash flows which represent SPPI.

Financial assets at amortised cost are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest rate method.

P. 15
1 Financial statements preparation (continued)

Financial assets and liabilities (continued)

Financial Assets (continued)

Financial assets measured at FVOCI

Financial assets are measured at FVOCI if they are held within a business model whose objective is achieved both through
collecting contractual cash flows which represent SPPI or selling the financial asset.

Financial assets at FVOCI are measured at fair value with unrealised gains and losses recognised in other comprehensive income
except for interest income, impairment charges and foreign exchange gains and losses, which are recognised in profit or loss.

Financial assets measured at FVTPL

Financial assets are measured at FVTPL if:

• they are held within a business model whose objective is achieved through selling or repurchasing the financial asset in the
near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of
short-term profit taking; or

• the contractual cash flows of the financial asset do not represent SPPI on the principal balance outstanding; or

• they are designated at FVTPL upon initial recognition to eliminate or reduce an accounting mismatch.

Financial assets at FVTPL are measured at fair value with subsequent changes in fair value recognised in profit or loss.

Financial Liabilities

Financial liabilities are classified into the following measurement categories:

• those to be measured at amortised cost;

• those to be measured at FVTPL.

Financial liabilities measured at amortised cost
Financial liabilities are measured at amortised cost if they are not held for trading or designated at FVTPL.

Financial liabilities measured at amortised cost are accounted for using the effective interest rate method.

Financial liabilities measured at FVTPL
Financial liabilities are measured at FVTPL if:

• they are held for trading whose principal objective is achieved through selling or repurchasing the financial liability in the
near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of
short-term profit taking; or

• they are designated at FVTPL upon initial recognition to eliminate or reduce an accounting mismatch.

Financial liabilities at FVTPL are measured at fair value with subsequent changes in fair value recognised in profit or loss.

Further details of the accounting policy for each category of financial asset or financial liability mentioned above is set out in the
note for the relevant item.

The Group’s policies for determining the fair value of financial assets and financial liabilities are set out in Note 21 - Fair value.

P. 16
1 Financial statements preparation (continued)

Financial assets and liabilities (continued)

Financial liabilities (continued)

Recognition

The Group initially recognises finance receivables and borrowings on the date that they are originated. All other financial assets
and liabilities (including assets and liabilities designated at FVTPL) are initially recognised on the trade date at which the Group
becomes a party to the contractual provisions of the instrument.

Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the
Group is recognised as a separate asset.

The Group enters into transactions whereby it transfers assets recognised on its consolidated statement of financial position, but
retains either all risks or rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are
retained, then the transferred assets are not derecognised from the consolidated statement of financial position. Transfers of
assets with the retention of all or substantially all risks and rewards include, for example, securitised assets and repurchase
transactions.

Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. Where an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, the exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability,
with the difference in the respective carrying amounts recognised in profit or loss.

P. 17
Performance

2 Segmental analysis

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

An operating segment is a component of an entity engaging in business activities and whose operating results are regularly
reviewed by the Group's chief operating decision maker (CODM). The CODM, who is responsible for allocating resources and
assessing performance of the Group, has been identified as the Group’s Chief Executive Officer (CEO) and direct reports.

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

Operating segments – New Zealand

Motor Motor vehicle finance.

Reverse mortgages Reverse mortgage lending.

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.

Operating segments - Australia

StockCo Australia Specialising 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. One month of
income and expenses are recognised in this segment for the year ended 30 June 2022.

Australia Reverse mortgage lending and other financial services within Australia.

Certain operating expenses, such as premises, IT and support centre costs are not allocated to operating segments and are
included in Other. Finance receivables are allocated across the operating segments. Other assets and liabilities are managed
centrally and therefore are not allocated across the operating segments. The Group does not rely on any single major customer
for its revenue base.

P. 18
2 Segmental analysis (continued)

Reverse Personal StockCo
$000's
Motor Mortgages Lending Business Rural Australia Australia Other Total
June 2023

Net interest income
60,681 39,696 9,548 71,630 33,522 31,873 43,411 (8,372) 281,989
Lending and credit fee
income
2,034 2,671 447 2,278 292 - 4,031 - 11,753
Net other
income/(expense)
1,485 - 935 991 398 2 (42) (7,707) (3,938)
Net operating
income/(expense)
64,200 42,367 10,930 74,899 34,212 31,875 47,400 (16,079) 289,804

Operating expenses 4,140 4,929 6,461 9,387 3,068 8,909 13,043 78,142 128,079
Profit/(loss) before
impaired asset expense
and income tax
60,060 37,438 4,469 65,512 31,144 22,966 34,357 (94,221) 161,725

Fair value (loss) on
investments
- - - - - - - (4,488) (4,488)
Impaired asset expense 10,911 - 3,195 8,156 630 103 249 - 23,244
Profit/(loss) before
income tax
49,149 37,438 1,274 57,356 30,514 22,863 34,108 (98,709) 133,993

Income tax expense - - - - - - - 38,125 38,125
Profit/(loss) for the year 49,149 37,438 1,274 57,356 30,514 22,863 34,108 (136,834) 95,868

Total assets 1,563,939 888,600 358,572 1,356,913 712,596 374,193 1,520,437 969,475 7,744,725
Total liabilities 6,713,721


June 2022

Net interest income 69,730 29,957 10,287 70,602 29,460 1,889 38,662 (445) 250,142
Lending and credit fee
income
1,582 2,583 364 2,145 269 - 2,583 113 9,639
Net other income 1,744 - 1,198 534 472 3 107 16,776 20,834
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 year 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. 19
3 Net interest income

Policy
Interest income and expense on financial instruments is measured using the effective interest rate method that discounts the
financial instruments' future cash flows to their present value and allocates the interest income or expense over the life of the
financial instrument. The effective interest rate is established on initial recognition of the financial assets or liabilities and is not
subsequently revised. For financial instruments at amortised cost, the calculation of the effective interest rate includes all yield
related fees and commissions paid or received that are an integral part of the underlying financial instrument.

Interest income is calculated based on the gross carrying amount of financial assets in stages 1 and 2 of the Group’s expected
credit losses (ECL) model and on the carrying amount net of the provision for ECL for financial assets in stage 3. For financial
instruments measured at FVTPL, interest is not calculated under the effective interest rate method.


$000's
June 2023 June 2022
Interest income
Cash and cash equivalents
10,906 811
Investments
5,081 5,156
Finance receivables
335,070 236,916
Finance receivables - reverse mortgages
176,653 99,218
Total interest income
1
527,710 342,101


Interest expense
Deposits
148,054 45,717
Other borrowings
117,774 46,110
Net interest (income)/expense on derivative financial instruments
(20,107) 132
Total interest expense
2
245,721 91,959

Net interest income
281,989 250,142
1
Cash and cash equivalents and Finance receivables are measured at amortised cost. Investments are measured at FVOCI. Total interest
income derived from these financial assets is calculated using the effective interest rate method. Finance receivables - reverse mortgages are
measured at FVTPL.

2
Deposits and Other borrowings are measured at amortised cost, therefore interest expense incurred on these financial liabilities is calculated
using the effective interest rate method. Net interest expense on derivative financial instruments is not calculated using the effective interest
rate method as they are measured at FVTPL.

P. 20
4 Net operating lease income

Policy
As a lessor, the Group retains substantially all the risks and rewards incidental to ownership of the assets and therefore,
classifies the leases as operating leases. Rental income and expense from operating leases are recognised on a straight-line basis
over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognised on a straight-line basis over the lease term. Profits on the sale of operating
lease assets are included as part of operating lease income. Current year depreciation and losses on the sale of operating lease
assets are included as part of operating lease expenses. The leased assets are depreciated over their useful lives on a basis
consistent with similar assets.


$000's
June 2023 June 2022
Operating lease income
Lease income
4,639 4,161
Gain on disposal of lease assets
992 1,123
Total operating lease income 5,631 5,284


Operating lease expense

Depreciation on lease assets
3,461 3,103
Direct lease costs
366 280
Total operating lease expense 3,827 3,383

Net operating lease income
1,804 1,901


5 Other income

Policy
Rental income from investment properties
Rental income from investment properties is recognised on a straight-line basis over the term of the relevant lease.

Insurance income
Insurance premium income and commission expense are recognised in profit or loss from the date of attachment of the risk over
the period of the insurance contract. Claim expense is recognised in the profit or loss on an accrual basis once our liability to the
policyholder has been confirmed under the terms of the contract.

Fair value gain or loss on derivative financial instruments
A fair value gain or loss associated with the effective portion of a derivative designated as a cash flow hedge is recognised initially
in the hedging reserve. The ineffective portion of a fair value gain or loss and changes in the fair value of any derivatives not
designated in a hedge relationship are recognised immediately in the consolidated statement of comprehensive income and
disclosed within Other income. Refer to Note 12 - Derivative financial instruments for further details.


$000's
June 2023 June 2022
Rental income from investment properties 1,064 833
Insurance income
1

756 664
Other income
624 703
Fair value (loss)/gain on derivative financial instruments
(8,237) 16,723
Foreign exchange gain
51 10
Total other income
(5,742) 18,933
1
Insurance income includes net income from Marac Insurance Limited (MIL), a subsidiary of Heartland Bank Limited (HBL). MIL ceased writing
insurance policies in 2020 with the periodic policies expected to expire in 2025.

P. 21
6 Operating expenses

Policy
Operating expenses are recognised as the underlying service is rendered or over a period in which an asset is consumed or a
liability is incurred.


$000's
June 2023 June 2022
Personnel expenses
1
66,989 61,152
Directors' fees 1,451 1,149
Superannuation 1,772 1,530
Depreciation - property, plant and equipment 1,904 2,459
Legal and professional fees
2
4,642 4,094
Advertising and public relations 3,089 4,510
Depreciation - right of use asset 2,539 2,310
Technology services 10,296 9,374
Telecommunications, stationery and postage 1,948 1,723
Customer administration costs 9,814 7,058
Customer onboarding costs 2,765 2,533
Occupancy costs 1,741 1,476
Amortisation of intangible assets 5,681 5,922
Other operating expenses 13,448 11,463
Total operating expenses 128,079 116,753
1
Excludes certain personnel expenses directly incurred in acquiring and developing software and capitalised as part of specific application
software.
2
Legal and professional fees include compensation of auditor which is disclosed in Note 7 - Compensation of auditor.


7 Compensation of auditor

In accordance with the Amendments to FRS-44, adopted by the Group from 1 July 2022, the Group is required to disclose the fees
incurred for services received from its audit or review firm, with a description of each service, including audit or review of the
financial statements. Other services performed during the reporting period are required to be disclosed using the following
categories:

• audit or review related services;
• other assurance services and other agreed-upon procedures engagements;
• taxation services and;
• other services.

In accordance with the Group's external auditor independence policy, it is prohibited for the external auditor's firm to perform tax
compliance work. It is also the Group's policy to engage the external auditor's firm on assignments additional to its statutory audit
duties only if they are not perceived to be in conflict with the role of external auditor. All services are pre-approved by the Board
Audit and Risk Committee.

The fees payable to the current auditor, PricewaterhouseCoopers New Zealand (PwC NZ) and to the predecessor auditor, KPMG
are outlined in the below table: