Heartland announces solid FY2024 result

Note: All figures in NZD unless otherwise stated. Endnotes are located at the end of this announcement.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 |
heartlandgroup.info
NZX/ASX release
29 August 2024

Heartland announces solid FY2024 result, sets foundation for
continued growth

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) has announced a net profit after tax
(NPAT) of $74.5 million for the financial year ended 30 June 2024 (FY2024). On an underlying basis
1
,
FY2024 NPAT was $102.7 million.

In a challenging economic environment, Heartland achieved solid gross finance receivables
(Receivables)
2
growth, up 6.4%
3
on the financial year ended 30 June 2023 (FY2023).
4
While some
volatility is expected to continue through the remainder of the 2024 calendar year, the longer-term
outlook for Heartland is positive. Having executed significant strategic milestones in FY2024 (see
page 5), further growth is anticipated in the financial year ending 30 June 2025 (FY2025) as
Heartland continues towards its ambitions for the financial year ending 30 June 2028 (FY2028).

Heartland’s FY2024 result was impacted by the rapidly deteriorating economic conditions in May
and June 2024 which saw the emergence of additional provisions primarily in Heartland Bank
Limited’s (Heartland Bank’s) Asset Finance, Motor Finance and Rural portfolios (see page 4). This
resulted in a 4.9% shortfall to guidance. This late increase in provisions reflects (amongst other
things) enhancements to Heartland Bank’s Motor Finance provisioning model, a more conservative
provisioning approach on certain Rural exposures, and the effect of the sustained inflationary
environment on some consumer and business borrowers.


NPAT NIM
5

Cost-to-income
(CTI) ratio

Receivables
Reported

$74.5m
 22.2%
on FY2023
3.39%
 58 basis points
(bps) on FY2023
48.0%
 311 bps
on FY2023

$7.2b
 6.4%
3

on FY2023
Underlying
1

$102.7m
 6.7%
on FY2023
3.64%
 36 bps
on FY2023
41.9%
 6 bps
on FY2023

11.8%
CAGR
FY2020-FY2024
6


Highlights
‒ Solid FY2024 result achieved in a challenging economic environment.
- One-off or non-cash technical items had a $28.2 million impact on NPAT.
- The shortfall to guidance was largely due to the late increase of $10.1 million of provisions,
detailed on page 4, primarily in Heartland Bank’s Asset Finance, Motor Finance and Rural
portfolios (without which Heartland would have seen a result within guidance).
‒ Growth in Receivables of 6.4% ($432.1 million)
3
on FY2023 to $7.2 billion in FY2024.
- Reverse Mortgages up 20.2% in New Zealand and 19.7%
3
in Australia.
- Asset Finance up 8.0% in a market with difficult trading conditions.
- Motor Finance up 3.8% in a market where total new and used car sales by dealers were
down by 12.7%.
7

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 2

‒ Significant strategic milestones set the foundation to achieve FY2028 growth ambitions.
- Completed the acquisition of Challenger Bank Limited (Challenger Bank) and subsequently
rebranded the authorised deposit taking institution (ADI) to Heartland Bank Australia
Limited (Heartland Bank Australia).
- Successfully completed a $210 million equity raise to fund the acquisition, with strong
investor support.
- Heartland Bank’s core banking system was successfully upgraded, enabling increased
digitalisation and automation.

FY2024 financial results
FY2024 reported results have been normalised to exclude one-off or non-cash technical items.
8

FY2024 FY2023
Reported NPAT $74.5m $95.9m
‒ De-designation of derivatives
$4.7m $6.5m
‒ Fair value changes on equity investments held
$0.3m $4.5m
‒ Bridging loan
n/a $1.3m
‒ Australia Bank Programme transaction costs
$7.7m $2.2m
‒ Other provisions
n/a ($0.5m)
‒ Other
$0.6m $0.2m
Adjusted NPAT
1
$87.9m n/a
‒ Provisions for a subset of legacy lending
$11.5m n/a
‒ Challenger Bank NPAT
$3.3m n/a
Underlying NPAT
1
$102.7m $110.2m
Underlying NPAT guidance range $108-112m $109-114m

FY2024 financial performance

Growth
Consistent with the market, Heartland’s growth in FY2024 was impacted by the challenging
economic environment. Despite this, Heartland grew Receivables by 6.4% ($432.1 million)
3
to $7.2
billion.

Reverse Mortgages, Asset Finance and Motor Finance continued to perform well. Reverse Mortgage
Receivables were up $179.6 million (20.2%)

to $1.07 billion in New Zealand and $298.3 million
(19.7%)
3
to $1.81 billion in Australia. Asset Finance Receivables increased $54.3 million (8.0%) to
$737.0 million in a market with difficult trading conditions. Motor Finance growth of $59.0 million
(3.8%) to $1.63 billion was pleasing in a market where total new and used car sales by dealers in
New Zealand were down 12.7% in FY2024.
6


Heartland’s Australian Livestock Finance business was impacted largely by adverse weather and
market conditions as Receivables decreased $103.0 million (27.5%)
3
to $272.0 million. Receivables
balances stabilised in the second half of FY2024 (2H2024) (down $26.6 million in 2H2024 vs $76.4
million in the first half of FY2024 (1H2024)), in line with lower volatility in cattle and lamb pricing,
and improved trading conditions in New South Wales and Queensland. However, 2H2024 growth
was negatively impacted compared to forecast growth by unseasonably dry conditions across South
Australia and Victoria, presenting limited opportunity for customers to trade livestock and

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 3

accelerating repayments. Product development to meet the growing Australian feedlotting sector, in
combination with new distribution partnerships, is expected to contribute to portfolio growth in
FY2025.

NIM
Heartland’s underlying NIM was 3.64%, a reduction of 36 bps from FY2023.
9


Underlying
NIM
FY2023 1H2024 2H2024 FY2024 FY2024 exit FY2025
expectation
NZ Banking 4.11% 3.81% 3.79% 3.79% 3.92% 4.00%
AU Banking 3.62% 3.35% 3.22% 3.17% 3.19% 3.40%

NZ Banking
Underlying NIM for Heartland Bank was 3.79%, down 32 bps from FY2023 due to a higher cost of
funds, the slower repayment of lower margin Asset Finance and Motor Finance loans as customers
deferred asset upgrades, and a slower pass through of rate increases to Reverse Mortgage
customers.

Underlying NIM stabilised during 2H2024 as cost of funds increases slowed and NIM improvement
accelerated in Asset Finance and Motor Finance, assisted by the pass through of rate increases to
New Zealand Reverse Mortgage customers late in the financial year. FY2024 exit underlying NIM was
3.92% and has improved early into FY2025.

Looking forward, underlying NIM expansion is expected to continue and is forecast to rise above 4%
by the third quarter of FY2025 driven by:
‒ continued NIM improvement in fixed rate portfolios, primarily Motor Finance and Asset Finance
‒ a focus on core lending growth combined with active management of Non-Strategic Assets (see
page 7)
‒ cost of funds benefits from a reducing rate environment.

AU Banking
Underlying NIM for Heartland Bank Australia was 3.17%, down 45 bps from FY2023 primarily due to
the $103.0 million reduction in Australian Livestock Finance Receivables, of which $76.4 million
occurred in 1H2024. This was compounded by the continued increase in wholesale cost of funding
which was not passed onto Australian Livestock Finance customers. Australian Reverse Mortgage
NIM was managed consistently to 3.00% across FY2024.

Base rate stability and an abatement in the retraction of Australian Livestock Finance saw underlying
NIM stabilise across 2H2024. FY2024 exit underlying NIM was 3.19%.

Looking forward, underlying NIM expansion is expected and is forecast to rise above 3.40% for
FY2025. An FY2025 exit underlying NIM above 4% is projected as:
‒ current excess liquidity in Heartland Bank Australia is consumed
‒ the transition from wholesale to retail funding largely concludes
‒ growth in Australian Livestock Finance is expected to return due to more favourable market
conditions and the execution of product and distribution initiatives.

Credit quality
Reflecting the challenging economic conditions, Heartland’s overall credit quality deteriorated year-
on-year during FY2024. The underlying impairment expense ratio increased to 0.44% in FY2024, up 8
bps compared with FY2023.
10

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 4

NZ Banking
Heartland Bank’s non-performing loans ratio deteriorated from 2.56% to 3.66% in FY2024. Most of
this deterioration occurred in 1H2024 which saw an increase of 104 bps. 2H2024 saw a relative
stabilisation with only a 6 bps increase on 1H2024. The trend in total arrears showed a similar
pattern with 1H2024 witnessing a 230 bps deterioration (to a peak of 7.6%) but an improvement of
70 bps in 2H2024 to 6.9%. This deterioration primarily originated from the Motor Finance and Asset
Finance portfolios which remain under pressure.

In contrast, New Zealand’s Reverse Mortgage credit quality continues to be strong, with a weighted
average loan-to-value ratio (LVR) of 23.5%. Given house prices are expected to have troughed and
interest rates are beginning to fall, this portfolio is expected to remain strong in FY2025 and beyond.
Heartland Bank’s Online Home Loans portfolio is similarly robust with a low arrears rate of 0.4%.

Nevertheless, due to the challenging economic conditions, provisions increased by $22 million in
FY2024. This included the $16 million provision raised by Heartland Bank in December 2023 which
was utilised to cover enhanced provision modelling outcomes and to write-off longer standing loans
in Motor Finance and Business lending. As a result, Heartland Bank reduced the subset of longer
standing Motor Finance arrears by 58% between December 2023 and June 2024.

The Reserve Bank of New Zealand’s (RBNZ) August 2024 Monetary Policy Statement noted a
significant deterioration in domestic economic conditions during May and June 2024. During this
period, Heartland Bank witnessed the emergence of additional specific and collective provisions
totalling $10.1 million as follows.

‒ Specific provisions increased by $7.3 million across the Asset Finance and Rural portfolios as the
incidence of businesses that entered voluntary liquidation, receivership, or ceased to trade
increased. Furthermore, recent reductions in land prices led to a more conservative
provisioning approach on certain Rural exposures.

‒ Collective provisions increased by $2.8 million, primarily across the Motor Finance and Open for
Business portfolios as customer arrears spiked, and enhancements to the Motor Finance
provisioning model (implemented in June 2024) took effect.

Heartland Bank remains committed to ongoing investment in operational process efficiency and
systems automation within the Collections & Recoveries area, thereby maintaining the positive
momentum evidenced in 2H2024. Heartland Bank will continue to closely manage Business and
Rural loans, supporting creditworthy customers through the end of a challenging economic cycle.
The recent reduction in the rate of inflation and the associated fall in the Official Cash Rate signals a
positive change for the New Zealand economy. While this is encouraging, the projected
unemployment rate and the lag between interest rates and business outcomes means Heartland
Bank expects some volatility to continue through FY2025.

AU Banking
As farmers responded to extreme weather conditions, many held onto livestock for longer periods of
time through FY2024 to gain weight and recoup value. Heartland expects these remaining livestock
to be sold and replaced through the first half of FY2025. While conditions are improving, Heartland
Bank Australia is continuing to work closely with customers who may be experiencing stress in the
current market conditions. Despite the extreme market and seasonal conditions that Australian
Livestock Finance customers have endured, the relatively low level of provisioning (A$1.2 million) is
an indication of the credit strength and resilience of the portfolio and more broadly the sector.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 5

Whilst in Australia interest rate and cost of living pressures will likely remain until the second half of
FY2025, Australian Reverse Mortgage credit quality is strong, with a weighted average LVR of 23.5%
and only 0.6% of loans with an LVR over 50%.

Costs
While underlying costs in FY2024 were controlled (underlying OPEX decreased by $1.3 million
(1.0%)
11
), the CTI ratio was flat year-on-year despite the reduction in net operating income which
was largely due to NIM compression and is expected to correct during FY2025.

Staff expenses decreased by $6.1 million due to lower discretionary payments following the shortfall
to underlying NPAT guidance.

IT costs increased by $1.9 million due to inflationary pressures influencing higher licensing and
service charges, alongside increased investment in IT security.

Other operating expenses increased $2.1 million due to a combination of higher legal and
professional fees and occupancy expenses.

Heartland’s underlying CTI ratio is expected to increase in FY2025 as the full cost base of the ADI is
absorbed, and Heartland Bank’s core banking system upgrade commences amortisation (adding
approximately $5.4 million of non-cash operating expenditure per annum over a seven-year period).

Despite this, Heartland remains committed to its ambition of an underlying CTI ratio of less than 35%
by the end of FY2028. Several initiatives are underway to achieve this, including:
‒ a strategy to transition from wholesale to retail funding, particularly in Australia
‒ realising cost savings through digitalisation and automation
‒ creating structural efficiencies in New Zealand and Australia as the banking group matures to
build the capacity for growth.

A year of significant strategic milestones

Heartland achieved significant strategic milestones in FY2024, positioning it well for continued
growth as the economy improves. This includes:
‒ completing the Challenger Bank acquisition on 30 April 2024 and raising $210 million to fund
the acquisition through an equity raise in April 2024, with strong investor support
‒ subsequently rebranding the ADI to Heartland Bank Australia
‒ the successful pre-acquisition deposit raising campaign by Challenger Bank, accelerating
Heartland Bank Australia’s cost of funds reduction strategy
‒ completing the upgrade of Heartland Bank’s core banking system in November 2023 and
accelerating Heartland Bank’s digital programme of work.

The achievement of these strategic milestones strengthens the foundation required for Heartland to
achieve its FY2028 ambitions of an underlying NPAT of more than $200 million, underlying CTI ratio
of less than 35% and underlying return on equity (ROE) of 12-14%, to which Heartland remains
committed.

Heartland’s pathway to achieving these ambitions is driven by modest Receivables growth, NIM
expansion, cost savings from automation, and an improvement in impairments. See page 18 of the
FY2024 IP for more detail on Heartland’s FY2028 ambitions.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 6

Successful completion of Challenger Bank acquisition enabling expansion in Australia
A successful $210 million equity raise in April 2024 enabled the completion of Heartland Bank’s
acquisition of Challenger Bank.

The acquisition made Heartland Bank the first New Zealand registered bank to acquire an Australian
ADI. Importantly, it has created a pathway for further growth and product expansion in the
Australian market.

Post-completion, Heartland transferred its existing Australian businesses (Heartland Finance and
StockCo Australia) to the ADI and rebranded Challenger Bank to Heartland Bank Australia. It is now
the only ADI to offer both reverse mortgages and specialist livestock finance (which it continues to
provide under the StockCo brand).

Heartland Bank Australia has a highly experienced Board and management team to drive expansion
within specialist banking markets. On 22 July 2024, Michelle Winzer commenced her appointment as
Chief Executive Officer of Heartland Bank Australia. Michelle joined Heartland Bank Australia from
her role as Chief Executive Banking of RACQ Bank in Queensland and brings more than 30 years’
experience in banking and financial services, including as Chief Executive Officer of Bank of
Melbourne, and senior roles at Bankwest, the Commonwealth Bank of Australia and Westpac.

With an ADI licence and access to retail deposits, Heartland Bank Australia can now more sustainably
fund its Reverse Mortgage and Livestock Finance lending portfolios. This is expected to have a
positive effect on NIM as Heartland Bank Australia transitions its funding base from 100% wholesale
to a retail and wholesale funding mix, driving a reduction in Heartland Bank Australia’s cost of funds.
Deposit raising campaign accelerating funding transition
Heartland Bank Australia’s funding mix is expected to be predominantly retail deposits (circa 90%) by
the end of FY2025, with wholesale funding sources maintained in the minority for diversification and
additional liquidity support.

Heartland Bank Australia’s transition to retail funding was accelerated in FY2024 by Challenger
Bank’s pre-completion deposit raising programme which enabled the full repayment of a CBA
Reverse Mortgage facility prior to completion. From 1 January 2024 to 30 June 2024, the ADI
achieved deposit growth of A$1,147 million at a weighted average rate of 4.85%, 2.03% lower than
Heartland Australia’s (comprising Heartland Australia Holdings Pty Ltd and its subsidiaries) cost of
funds across the same period.

Since completion, Heartland Bank Australia has been originating and funding all lending through
deposits on its own balance sheet while its wholesale facilities continue to repay, including the
repayment of Heartland Australia’s A$75 million Medium-Term Note on 9 July 2024.

To further diversify and strengthen its capital base, in June 2024, Heartland Bank Australia
successfully completed an inaugural A$50 million Tier 2 Subordinated Note transaction
(Subordinated Notes). The transaction received strong support from a broad range of institutional
investors, with demand for the offer nearly three times oversubscribed. The Subordinated Notes
qualified as Tier 2 Capital under the Australian Prudential Regulation Authority’s capital adequacy
framework for ADIs, and were priced at 370 bps over the 3-month Bank Bill Swap Rate.

All of this leaves Heartland Bank Australia well capitalised, profitable and with strong access to retail
deposits to fund its future growth expectations.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 7

Heartland Bank core banking system upgrade accelerating digitalisation programme
The upgrade of Heartland Bank’s core banking system was completed in November 2023. The
upgrade positions Heartland Bank for increased scalability in the future by enabling greater levels of
digitalisation and automation not possible in the previous version of the system.

Since completion of the upgrade, Heartland Bank has accelerated its digitalisation programme of
work and expects to see the impact of this activity through FY2025. As part of this, several features
have been released to the Heartland Bank Mobile App, including functionality to increase login
security and risk detection, and features to enable increased customer self-service for many of the
reasons for customer inbound calls. Digitalisation combined with employee training and customer
awareness campaigns to increase adoption contributed to a 6% reduction in Retail calls and a 9%
reduction in Customer Service calls in FY2024 compared with FY2023. In addition, most customer
letters and statements will soon be available from the Heartland Bank Mobile App as the primary
method of distribution – this is expected to deliver substantial cost benefit through the reduction of
postage.

Non-Strategic Assets

Heartland Bank has a pool of assets it has accumulated through to its current state of maturity that
are no longer a strategic fit for the organisation. These Non-Strategic Assets (NSAs) earn little or no
income or are returning less than Heartland Bank’s cost of capital.
12
See page 23 of the FY2024 IP for
more detail.

NSAs will be managed and reported separately in FY2025 to provide greater transparency and
enable more focused resolution strategies to be adopted. This will enable underlying capital to be
redeployed to support Heartland Bank’s growth ambitions. Heartland intends to rationalise these
assets over a responsible period of time.

FY2025 outlook

While Heartland expects volatility to continue through the remainder of the 2024 calendar year,
Heartland’s long-term outlook is positive as it continues towards its ambition of an underlying NPAT
of at least $200 million by the end of FY2028.

Looking towards the end of FY2025, Heartland expects to realise the benefits from the significant
strategic milestones achieved in FY2024. This includes from the acquisition of an ADI which provides
a pathway for sustainable growth and increased profitability in Australia. In combination with that,
contributors to growth are expected to include ongoing strong demographic demand for Reverse
Mortgages in both countries and a turnaround in conditions for Australian Livestock Finance.

Heartland’s growth in New Zealand and Australia continues to be driven by Reverse Mortgages, with
CAGR for the period from 1 July 2020 to 30 June 2024 of 17.5% and 17.8% respectively. Ongoing
demographic demand is expected to drive further expansion within each of these portfolios in
FY2025.

Heartland Bank Australia is well positioned for growth beyond FY2025. While Australian Livestock
Finance Receivables decreased in FY2024, a turnaround is expected in FY2025 as market confidence
in the sector returns, supported by the execution of product development initiatives and distribution
network expansion. Australian portfolio growth is expected to be coupled with improvements in
underlying NIM through a combination of cost efficiencies and the conversion of Heartland Bank

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 8

Australia’s funding base from its historic 100% wholesale to a predominantly (circa 90%) retail
funding base.

In New Zealand, Heartland Bank’s FY2025 focus is on simplification, including through the
rationalisation of NSAs as described above. In doing so, Heartland Bank expects to improve its
underlying NIM, leading to an increase in underlying ROE and underlying NPAT.

As Heartland Bank focuses on simplification and working towards its FY2028 ambitions, it remains
cautious around growth expectations within Motor Finance and Asset Finance given the economic
conditions and recent deterioration in credit quality. Overall growth in core lending is expected to be
coupled with the realisation of cost efficiencies through automation and digitalisation initiatives,
stabilisation of impairments over the period, and underlying NIM expansion.

Heartland expects further volatility in the markets within which it operates for the remainder of the
2024 calendar year as rate reductions bed in and the New Zealand and Australian economies
recover. In Heartland’s view, this creates too much uncertainty at this stage to provide an accurate
underlying NPAT guidance range for FY2025. Heartland will revisit its ability to provide an underlying
NPAT guidance range for FY2025 as the financial year progresses.

Final dividend

Heartland has declared a FY2024 final dividend of 3.0 cps, down 3.0 cps on FY2023. Heartland’s final
dividend yield of 8.7%
13
compares with 9.3%
14
in FY2023.

The total dividend payout ratio for FY2024 of 55% of underlying NPAT takes into consideration the
recent $210 million equity raise, acquisition of Challenger Bank and associated growth opportunities.

Having regard to Heartland’s next stage of growth, the Board expects to target a total dividend
payout ratio of at least 50% of underlying NPAT in FY2025. The Board will, as it has historically,
actively manage dividend settings and carefully consider the declaration of any dividends based on
Heartland’s capital needs, ROE accretive growth opportunities, balance sheet flexibility and financial
performance.

The final dividend will be paid on Friday 20 September 2024 (Payment Date) to shareholders on the
company’s register as at 5.00pm NZST on Friday 6 September 2024 (Record Date) and will be fully
imputed.

Heartland has a Dividend Reinvestment Plan (DRP), giving eligible shareholders the opportunity to
reinvest some or all of their dividend payments into new ordinary shares. The DRP will apply to the
final dividend with a 2.0% discount.
15
The DRP offer document and participation form is available on
Heartland’s website at heartlandgroup.info/investor-information/dividends.

– ENDS –

The persons 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

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 9

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).

Heartland’s New Zealand business, Heartland Bank, provides customers with savings and deposit
products, reverse mortgages, online home loans, business loans, car loans and rural loans. In
Australia, Heartland Bank Australia offers competitive term deposits, is Australia's leading provider
of reverse mortgages and provides specialist livestock finance through the StockCo brand.

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: heartlandgroup.info

Endnotes

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 between periods. Underlying results (which are non-GAAP financial
information) exclude the impact of the de-designation of derivatives, the fair value changes on equity
investments held, the Australian Bank Programme costs, an increase in provisions for a subset of legacy
lending, the Challenger Bank NPAT, and any other impacts of one-offs. Adjusted NPAT before excluding the
increase in provisions for a subset of legacy lending and the Challenger Bank NPAT was $87.9 million (Adjusted
NPAT). The use of underlying results is intended to allow for easier comparability between periods and is used
internally by management for this purpose. In the accompanying FY2024 investor presentation (IP), refer to
page 7 for a summary of reported and underlying results, page 8 for details about FY2024 one-offs, and pages
35 and 36 for general information about the use of non-GAAP financial measures.
2
Receivables includes Reverse Mortgages.
3
Excludes the impact of changes in foreign currency exchange (FX) rates.
4
All comparative results are based on the audited full year consolidated Financial Statements of Heartland and
its subsidiaries (the Group) for FY2023.
5
Net interest margin (NIM) is calculated as net interest income over average gross interest earning assets.
6
Compound annual growth rate (CAGR) for the period 1 June 2019 to 30 June 2024.
7
Based on data from Turners, dated June 2024 (data sourced from Waka Kotahi NZ Transport Agency).
8
In the FY2024 IP, refer to page 7 for a detailed reconciliation between reported and underlying financial
information, and page 8 for details about one-offs in the periods covered in this investor presentation.
9
Underlying NIM refers to NIM calculated using underlying results. When calculated using reported results,
NIM was 3.39%, down 58 bps compared with FY2023. For more information, see page 35 of the FY2024 IP.
10
Underlying impairment expense ratio refers to the impairment expense ratio calculated using underlying
results. When calculated using reported results, the impairment expense ratio was 0.66%, up 30 bps compared
with FY2023. For more information, see page 35 of the FY2024 IP.
11
Underlying OPEX refers to OPEX calculated using underlying results. When calculated using reported results,
OPEX was $139.4 million, up $11.3 million compared with FY2023. For more information, see page 35 of the
FY2024 IP.
12
NSAs do not reflect a structural change to Heartland’s operations.
13
FY2024 total fully imputed dividends divided by the closing share price as at 23 August 2024 of $1.12.
14
FY2023 total fully imputed dividends divided by the closing share price as at 25 August 2023 of $1.72.
15
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.

---

FY2024 Results
Investor Presentation
For the year ended 30 June 2024

2
01Highlights3-5
02Financial results6-18
03Australian banking19-20
04New Zealand banking21-23
05Closing remarks24-25
06Additional information26-33
07Presentation of results, disclaimer & glossary34-38
2
Contents

3
01 |
Jeff Greenslade
Chief Executive Officer
Heartland Group
Highlights

Solid result achieved in a challenging economic
environment
•Growth in Receivables up 6.4%
1
on FY2023.
•Reverse Mortgages up 20.2% in New Zealand and 19.7%
1
in Australia.
•Asset Finance up 8.0% in a market with difficult trading conditions.
•Motor Finance up 3.8% in a market where total new and used car sales
by dealers were down by 12.7%.
2
•One-off or non-cash technical items had a $28.2m impact on NPAT.
•The 4.9% shortfall to guidance was largely due to the late increase of $10.1m
of provisions (without which Heartland would have seen a result within
guidance).
Significant strategic milestones set foundation to
achieve growth ambitions
•Completed Challenger Bank acquisition and subsequently rebranded the
ADI to Heartland Bank Australia.
•Raised $210m in April 2024 equity raise to fund the acquisition, with strong
investor support.
•Pre-acquisition deposit raising accelerated Heartland Bank Australia’s cost
of funds reduction strategy.
•Completed Heartland Bank’s core banking system upgrade, accelerating
digitalisation in New Zealand.
4
1
Excludes the impact of changes in FX rates.
2
Based on data from Turners, dated June 2024 (data sourced from Waka Kotahi NZ Transport Agency).
Solid FY2024 result sets foundation for continued growth

5
6,791
7,223
180
59
(22)
(2)
(44)
54
(24)
(30)
(7)
7
10
298
(103)
57
Jun-23Reverse
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
Home Loans
AU
Jun-24
(13.4%)
3.8%
3.4%
8.0%
(46.2%)
19.7%
(0.6%)
(25.9%)
(1.6%)
(27.5%
20.2%
(9.9%)
11.3%
0.0%
Growth achieved in a challenging economic environment
5
Note: The graph shows FY2024 growth in Receivables by portfolio excluding the impact of changes in FX rates. All figures in NZ$m.
$432m (6.4%)
$215m (7.6%)
HouseholdBusiness
$9m (1.3%) $44m (-3.2%)

Rural

6
02 |
Andrew Dixson
Chief Financial Officer
Heartland Group
Financial results

7
Group financial results
7
ReportedUnderlying
FY2024FY2023MovementFY2024FY2023Movement
Financial
performance
NII$277.6m$282.0m

($4.3m)(1.5%)$277.8m$283.9m

($6.1m)(2.1%)
OOI
1
$12.7m$3.3m

$9.4m282.0%$20.2m$16.9m

$3.4m19.9%
NOI$290.4m$285.3m

$5.0m1.8%$298.0m$300.7m

($2.7m)(0.9%)
OPEX$139.4m$128.1m

$11.3m8.8%$124.9m$126.2m

($1.3m)(1.0%)
Impairment Expense$46.4m$23.2m

$23.2m99.7%$30.4m$23.2m

$7.2m30.9%
Tax Expense$30.0m$38.1m

($8.1m)(21.3%)$39.9m$41.1m

$1.1m2.8%
NPAT
2
$74.5m$95.9m

($21.3m)(22.2%)$102.7m$110.2m

($7.4m)(6.7%)
NIM3.39%3.97%

(58 bps)3.64%4.00%

(36 bps)
CTI48.0%44.9%

311 bps41.9%42.0%

(6 bps)
Impairment Expense Ratio
3
0.66%0.36%

30 bps0.44%0.36%

8 bps
ROE6.6%10.4%

(385 bps)9.8%11.9%

(207 bps)
EPS9.8 cps14.0 cps

(4.2 cps)13.5 cps16.0 cps

(2.5 cps)
Financial
position
Liquid Assets$1,708m$627m

$1,082m172.6%
Receivables
4
$7,241m$6,791m

$432m
5
6.4%
5
Borrowings$7,994m$6,627m

$1,366m20.6%
Equity$1,238m$1,031m

$207m20.1%
Equity/Total Assets13.3%13.3%

3 bps
Note: See page 35 for definition of underlying financial metrics. Refer to page 7 for a detailed reconciliation between reported and underlying financial information and page 8 for details about one-offs in the periods covered in this investor presentation.
1
Reported OOI includes fair value gains/losses on investments.
2
Refer to page 8 for details about one-offs in the periods covered in this investor presentation.
3
Impairment expense as a percentage of average Receivables.
4
Receivables also includes Reverse Mortgages .
5
YoY growth excludingthe impact of changes in FX rates.

8
Reported vs underlying
8
FY2024 one-offs and non-cash technical items included in the reported result (pre-tax)
•De-designation of derivatives: a $6.6m loss was recognised in relation to derivatives that were de-
designated from prior hedge accounting relationships in FY2022.
•Fair value changes on equity investments held: a $0.5m fair value gain was recognised on
investment in Harmoney shares and a $0.8m fair value loss was recognised on investment properties.
•ABP costs: $6.1m of transaction costs in relation to acquiring an ADI in Australia and $3.7m of other
costs related to integration of the ADI into Heartland. In addition, $10.7m of costs directly attributable
to applying to become an ADI have been capitalised as an intangible asset in FY2024.
•Provisions for a subset of legacy lending: a $16.0m increase in provisions to respond to issues
affecting a subset of legacy lending.
•Other non-recurring expenses and other provisions: $0.7m of one-off staff expenses, $0.5m of one-
off legal and professional fees, and ($0.3m) of other provision.
FY2024FY2023
Reported NPAT$74.5m$95.9m
‒De-designation of derivatives$4.7m$6.5m
‒Fair value changes on equity
investments held
$0.3m$4.5m
‒Bridging loann/a$1.3m
‒ABP transaction costs$7.7m$2.2m
‒Other provisionsn/a($0.5m)
‒Other$0.6m$0.2m
Adjusted NPAT
1
$87.9mn/a
‒Provisions for a subset of legacy
lending
$11.5mn/a
‒Challenger Bank NPAT$3.3mn/a
Underlying NPAT
1
$102.7m$110.2m
Underlying NPAT guidance range$108-112m$109-114m
FY2023 one-offs and non-cash technical items included in the reported result (pre-tax)
•De-designation of derivatives: a $9.1m loss was recognised in relation to derivatives that were de-
designated from prior hedge accounting relationships in FY2022.
•Fair value changes on equity investments held: a $4.5m fair value loss was recognised on investment in
Harmoney shares.
•Bridging loan: a $1.9m interest expense was recognised for a $174m (A$158m) bridging loan taken by
Heartland to acquire StockCo Australia, which was fully repaid in September 2022.
•ABP transaction costs: $2.2m of transaction and other costs in relation to becoming an ADI in
Australia. In addition, $6.4m of costs directly attributable to applying to become an ADI have been
capitalised as an intangible asset.
•Other provisions: $0.7m of unwarranted legacy provisions were released.
•Other non-recurring expenses: $0.3m.
Note: All figures in the table on the left are after tax. Figures detailed to the right are pre-tax.
1
See page 35 for definition of underlying financial metrics. Refer to page 7 for a detailed reconciliation between reported and underlying financial information and page 8 for details about one-offs in the periods covered in this investor presentation.

9
Profitability
76.9
87.9
96.1
110.2
102.7
FY20FY21FY22FY23FY24
-7%
+14%
+9%
+15%
7.5%
1
Underlying NPAT ($ million)
Note: All figures in NZ$m. See page 35 for a definition of underlying financial metrics. Refer to page 7 for a detailed reconciliation between reported and underlying financial information and page 8 for details about one-offs in the periods covered in this investor presentation.
1
CAGR for the period FY2020- FY2024.
Heartland Group
Reported: 95.9 → 74.5
21.3 (22.2%)
NPAT ($ million)
72.0
87.0
95.1
95.9
74.5
FY20FY21FY22FY23FY24
-22%
0.9%
1
+1%
+9%
+21%
Underlying: 110.2 → 102.7
7.4 (6.7%)

10
4.33%
4.35%
4.05%
3.97%
3.39%
3.34%
4.33%
4.35%
4.16%
4.00%
3.64%
3.75%
3.81%
FY20FY21FY22FY23FY24FY24 exitFY25
expectation
Reported NIMUnderlying NIM
Net interest margin
Note: NIM is calculated as net interest income/average gross interest earning assets. See pages 35 for definition of underlying financial metrics. Refer to page 7 for a detailed reconciliation between reported and underlying financial information and page 8 for details about one-offs in the periods
covered in this investor presentation.
1
Heartland Bank acquired Challenger Bank (now Heartland Bank Australia) on 30 April 2024. Prior to that, Heartland’s Australian businesses operated as Heartland Australia Group, which did not have an ADI licence or access to deposit funding in Australia.
NIM Underlying NIM expansion expected in FY2025
NZ Banking
•Underlying NIM forecast to rise above 4% by Q3, driven by:
•continued Underlying NIM improvement in fixed rate portfolios, primarily Motor
Finance and Asset Finance
•a focus on core lending growth combined with active management of Non-Strategic
Assets
•cost of funds benefits from a reducing rate environment.
AU Banking
•Underlying NIM forecast to rise above 3.40% for FY2025. An exit underlying NIM above
4% is projected as:
•current excess liquidity in Heartland Bank Australia is consumed
•the transition from wholesale to retail funding largely concludes
•growth in Australian Livestock Finance is expected to return due to favourable
market conditions and the execution of product and distribution initiatives.
Underlying NIMFY2023FY2024FY2024 exit
FY2025
expectation
Heartland Bank4.11%3.79%3.92%4.00%
Heartland Bank
Australia
1
3.62%3.17%3.19%3.40%

11
45.4%
46.8%
43.6%
44.9%
48.0%
44.9%
44.8%
42.5%
42.0%
41.9%
FY20FY21FY22FY23FY24
Reported CTI ratioUnderlying CTI ratio
Costs
Note: CTI ratio is calculated as OPEX/NOI. Underlying CTI ratio excludes one-off impacts. See page 35 for definition of underlying financial metrics. Refer to page 7 for a detailed reconciliation between reported and underlying financial information and page 8 for details about one-offs in the periods
covered in this investor presentation.
1
Heartland Bank acquired Challenger Bank (now Heartland Bank Australia) on 30 April 2024. Prior to that, Heartland’s Australian businesses operated as Heartland Australia Group, which did not have an ADI licence or access to deposit funding in Australia.
CTI ratio
Committed to underlying CTI ratio of <35% by FY2028
FY2025 to set foundation for underlying CTI ratio improvement in FY2026
and onwards
•Heartland’s underlying CTI ratio is expected to increase in FY2025 as the full cost base
of the ADI is absorbed, and Heartland Bank’s core banking system upgrade
commences amortisation.
•Heartland Bank Australia’s underlying CTI ratio is expected to reduce significantly in
FY2025 as it completes its transition from wholesale to predominantly retail deposit
funding.
Heartland remains committed to its ambition of an underlying CTI ratio of
less than 35% by the end of FY2028
Several initiatives are underway to achieve this, including:
•a strategy to transition from wholesale to retail funding, particularly in Australia
•realising cost savings through digitalisation and automation
•creating structural efficiencies in New Zealand and Australia as the banking group
matures to build the capacity for growth.
Underlying CTI ratioFY2023FY2024
FY2025
expectation
Heartland Bank42.9%43.2%45.2%
Heartland Bank
Australia
1
45.8%48.4%45.4%

12
Impairments
Note: See page 35 for definition of underlying financial metrics. Refer to page 7 for a detailed reconciliation between reported and underlying financial information and page 8 for details about one-offs in the periods covered in this investor presentation.
1
Reported impairment expense ratio increased due to a $16.0m increase in provisions in December 2023 to respond to issues affecting a subset of legacy lending.
2
Heartland Bank acquired Challenger Bank (now Heartland Bank Australia) on 30 April 2024. Prior to that, Heartland’s Australian
businesses operated as Heartland Australia Group, which did not have an ADI licence or access to deposit funding in Australia.
Impairment expense ratio
Non-performing loans ratio
0.65%
0.31%
0.25%
0.36%
0.66%
0.44%
0.31%
0.29%
0.36%
0.44%
FY20FY21FY22FY23FY24
Reported Impairment Expense RatioUnderlying Impairment Expense Ratio
1.87%
1.58%
1.81%
1.87%
2.92%
FY20FY21FY22FY23FY24
Underlying impairment expense ratioFY2023FY2024
Heartland Bank0.49%0.60%
Heartland Bank Australia
2
0.02%0.03%
Non-performing loans ratioFY2023FY2024
Heartland Bank2.56%3.66%
Heartland Bank Australia
2
0.0%1.17%
•Impairments are at elevated levels but not outside an expected band based
on the economic environment.
•Heartland expects impairments to remain elevated in the short term.
1

13
57.4
46.6
36.8
37.0
53.9
5.3
7.1
15.2
16.3
22.5
Jun-20Jun-21Jun-22Jun-23Jun-24
Collective ProvisionSpecific Provision
Provisions
Total provisions
FY2024 increase in provisions includes:
•$16m raised in December 2023 for a subset of legacy lending and longer standing
Motor Finance loans
•$10.1m increase in specific and collective provisions as a result of the impact of the
significant deterioration in domestic economic conditions during May and June
2024, made up of:
•$7.3m increase in specific provisions across Asset Finance and Rural
•$2.8m increase in collective provisions primarily across Motor Finance and O4B.
2.54%
2.75%
2.47%
3.89%
3.18%
1.17%
1.26%
1.21%
1.86%
1.99%
2.31%
2.66%
2.95%
3.12%
3.99%
Jun-22Dec-22Jun-23Dec-23Jun-24
5 - 29 DPD %30 - 89 DPD %NPLs %
Motor Finance arrears
1.25%
2.33%
1.99%
4.26%
2.44%
1.07%
0.74%
1.73%
2.93%
3.12%
2.46%
2.91%
3.33%
4.43%
4.90%
Jun-22Dec-22Jun-23Dec-23Jun-24
5 - 29 DPD %30 - 89 DPD %NPLs %
Asset Finance arrears

14
NZ funding & liquidity
234
192
132
173
116
397
317
274
315
372
105
113
221
216
248
736
622
628
704
735
Jun 20Jun 21Jun 22Jun 23Jun 24
Heartland Bank
Liquidity Composition $m
Undrawn limitInvestmentsCash
1
Based on dashboard data from the RBNZ for the periodJuly 2023-June 2024.
2
Includes intercompany deposits.
3,269
3,220
3,597
4,131
4,376
293
395
482
388
179
66
108
268
227
484
3,628
3,723
4,347
4,746
5,039
Jun 20Jun 21Jun 22Jun 23Jun 24
Heartland Bank
Funding Composition
2
$m
DepositsBonds & Tier 2Wholesale
Solid retail deposit growth
•Heartland Bank achieved retail deposit growth of
5.9% compared to market growth of 5.8% in
challenging market conditions.
1
•Market competition resulted in a higher cost of
funds particularly as depositors favoured term
deposits given the interest rate environment. This
resulted in the call:term deposit funding ratio
reducing to 32% (from 36% in FY2023).
•Awarded in July 2024, Heartland Bank received
Canstar NZ’s Savings Bank of the Year Award for the
seventh consecutive year, and Outstanding Value
Awards for its Direct Call Account, 32 Day Notice
Saver and 90 Day Notice Saver.
•Heartland Bank continues to hold liquidity
significantly above its regulatory minimums and
maintains good access to committed facilities.
•Looking forward, Heartland Bank expects a lower
costs of funds as interest rates fall and it reduces
exposure to wholesale funding with a focus on
growing call funding.

15
Note: Heartland Bank acquired Challenger Bank (now Heartland Bank Australia) on 30 April 2024. Prior to that, Heartland’s Australian businesses operated as Heartland Australia Group, which did not have an ADI licence or access to deposit funding in Australia.
1
Prior to 30 April 2024, Heartland did not have an ADI license or deposit funding in Australia. .
2
Predominantly Australian Government Securities.
AU funding & liquidity
Funding mix expected to be ~90% retail deposits
by the end of FY2025
•Funding transition was accelerated by Challenger
Bank’s pre-completion deposit raising programme
which enabled full repayment of CBA Reverse Mortgage
facility prior to completion.
•From 1 January 2024 to 30 June 2024, the ADI achieved
deposit growth of A$1,147m at a weighted average rate
of 4.85%, 2.03% lower than Heartland Australia’s cost of
funds across the same period.
•Completed an inaugural A$50m Tier 2 Subordinated
Note transaction in June 2024.
1
5
145
111
158
105
313
37
60
76
87
347
646
183
171
233
191
1,306
Jun 20Jun 21Jun 22Jun 23Jun 24
Heartland Bank Australia
Liquidity Composition
1
A$m
Undrawn limitCashInvestment
1,454
705
877
919
1,119
809
145
221
281
242
453
121
850
1,098
1,200
1,482
2,715
Jun 20Jun 21Jun 22Jun 23Jun 24
Heartland Bank Australia
Funding Composition
1
A$m
DepositSecuritised fundingMTNs & Tier 2Other Borrowings
6.89%
4.85%
WholesaleDeposits
Cost of funds
1 Jan 2024 to 30 Jun 2024
54%
90%
46%
10%
Jun-24Jun-25 expectation
Funding mix
DepositsWholesale
~
2

16
Capital
1
6
Heartland Capital Allocation $m
Heartland Capital Movement $m
761
436
41
Heartland BankHeartland Bank AustraliaHeartland Group
$1,238m (13.3% of total assets) as of 30 June 2024
Banking
Group
NZBG
HBA Level
One
HBA Level
Two
Equity$1,196m$1,200mA$399mA$395m
Deductions$(304m)$(584m)A$(273m)A$(149m)
CET1 Capital$892m$616mA$126mA$246m
Tier Two
Capital
$98m$100mA$50mA$50m
Total
Regulatory
Capital
$990m$716mA$176mA$296m
Total Risk
Weight
Assets
$6,436$4,973A$625mA$1,479m
Total Capital
Ratio
15.39%14.40%28.11%20.03%

17
11.1%
12.0%
12.6%
11.9%
9.8%
Jun 20Jun 21Jun 22Jun 23Jun 24
Shareholder return
2
Total fully imputed dividends divided by the closing share price as at 23 August 2024 of $1.12.
2
Total fully imputed dividends divided by the closing share price as at 25 August 2023 of $1.72.
3
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.
4
Underlying ROE refers to ROE calculated using underlying results. When calculated using reported results,
ROE was 6.6%, down 385 bps. See page 35 for more information about the use of ROE, a supplementary, non-GAAP measure.
Underlying ROE
4
•Final dividend of 3.0 cps, down 3.0 cps on FY2023.
•Dividend yield of 8.7%
1
(FY2023: 9.3%
2
).
•The total dividend payout ratio for FY2024 of 55% of underlying NPAT takes into
consideration the recent $210m equity raise, acquisition of Challenger Bank (now
Heartland Bank Australia) and associated growth opportunities.
•Heartland’s DRP will apply to the final dividend with a 2.0% discount.
3
•Having regard to Heartland’s next stage of growth, the Board expects to target a total
dividend payout ratio of at least 50% of underlying NPAT in FY2025. The Board will, as it
has historically, actively manage dividend settings and carefully consider the
declaration of any dividends based on Heartland’s capital needs, ROE accretive growth
opportunities, balance sheet flexibility and financial performance.
EPS (cps)
12.5
14.9
16.3
14.0
9.8
13.3
15.1
16.3
16.0
13.5
FY20FY21FY22FY23FY24
ReportedUnderlying

18
FY2028 growth ambitions
FY2028 ambitions are driven by modest Receivables growth, NIM expansion, cost savings from automation, and an improvement in impairments.
Financial
metric
FY2024
FY2028
ambition
Commentary
Receivables$7.2b
> 10%
CAGR p.a.
•Assumes modest Receivables growth below Heartland’s track record of 11.8% over the last 4 years.
1
•Organic growth in existing Australia and New Zealand portfolios which are aligned with Heartland’s
strategic ambitions.
•Increased competitiveness in Australian Reverse Mortgages and Livestock Finance through
utilisation of bank cost of funds.
•Further upside from launch of Motor Finance and Asset Finance in Australia if it is ROE accretive.
2
Underlying
NIM
3
3.64%> 4%
•Continued shift of asset mix towards higher quality portfolios and focus on recycling capital related
to Non-Strategic Assets.
•Transition of Australian funding base from 100% wholesale to a retail/wholesale funding mix to drive a
reduction in the cost of funds in the Australian business through cheaper retail deposit costs relative
to wholesale.
Underlying CTI
ratio
3
41.9%< 35%
•Investing in digitalisation and automation in New Zealand with a focus on Heartland Bank’s
Collections & Recoveries area to improve internal workflows and reduce manual effort.
•Motor digitalisation through branded online origination platforms for Motor Finance dealer partners in
New Zealand.
•Flow-on benefit of improved revenue margins.
Underlying
impairment
expense ratio
3
0.44%< 0.30%
•Heartland’s long term underlying impairment expense has been 0.37%.
4
•FY2028 ambition of < 0.30% underlying impairment expense ratio through the cycle reflects portfolio
mix transitioning towards higher quality assets (i.e. Reverse Mortgages and Livestock Finance).
12%-14%
FY2028 underlying
ROE
3
ambition
$200m+
FY2028 underlying
NPAT
3
ambition
1
CAGR calculated for the period from 30 June 2020 to 30 June 2024.
2
Subject to meeting minimum ROE hurdles and APRA consultation.
3
See pages 35-36 for definition of underlying financial metrics.
4
Average of impairment expense ratio between FY2020 and FY2024.
The ratios and growth rates provided for the financial metrics underlying the FY2028 ambitions are not targets. They represent an indication of how the financial metrics may work in combination to achieve the FY2028
underlying NPAT and ROE ambitions. The FY2028 ambitions and underlying key metrics assumes current growth in Receivables being maintained and no material deterioration in the economic environment.

19
03 |
Michelle Winzer
Chief Executive Officer
Heartland Bank Australia
Australian banking

20
AU FY2025 focus
Business growth
Continue to focus on expansion within existing
specialist lending portfolios: Reverse Mortgages and
Livestock Finance.
•Leverage the strong ongoing demographic demand
for Reverse Mortgages, providing older Australians
with a solution to remaining in their home as they
age.
•Execute on Livestock Finance product development
initiatives, including meeting demand within the
growing feedlotting sector.
•Expand distribution networks and strengthen
partnerships to increase product reach.
Service excellence
Through a commitment to strategy execution and
discipline, deliver service excellence for customers
while progressing towards FY2028 ambitions.
•Execute on strategic initiatives towards FY2028
ambitions.
•Focus on cost optimisation and discipline to realise
underlying CTI ratio expectations.
•Review end-to-end processes and identify
opportunities to streamline and deliver faster time
to service for customers.
•Invest in digitalisation and automation to improve
service delivery, and ultimately lead to enhanced
customer experience.
Operational efficiency
Increase the capacity to do more through operational
efficiencies as the ADI continues to establish itself as
Heartland Bank Australia.
•Create structural efficiencies by removing duplication
and identifying process improvement as the cultures
of the three previous AU businesses (Heartland
Finance, StockCo Australia and Challenger Bank)
come together.
•Transition from historic 100% wholesale to
predominantly (~90%) retail funding – the benefits of
which are expected to flow through to improvements
in the underlying CTI ratio and underlying NIM.
Heartland Bank Australia is well positioned for sustainable growth beyond FY2025 through its focus on business growth, operational efficiency, service
excellence and risk management.

21
04 |
Leanne Lazarus
Chief Executive Officer
Heartland Bank
New Zealand banking

22
NZ FY2025 focus
In New Zealand, Heartland Bank aims to expand its margin and reduce costs to deliver better returns. These key strategic priorities will drive a strong
contribution to the Group’s FY2028 ambitions.
Margin expansion
NIM expansion >4%
•Growth in Reverse Mortgages and Motor Finance.
•Proactive management of fixed back book portfolios in
Asset Finance and Motor Finance.
•Actively increase mix of retail funding focused on
growth in call deposits.
Cost reduction
Reduce costs by $5m
•Cost savings through digitalisation and automation
($3.8m).
•Digitalise 58% of basic banking functions to enable
customers to self-serve.
•Mobile app customer usage uplift to 60% and
reduction of customer calls by 35%.
•Automate 35% of processes.
•Offer customers flexibility to self manage loan
repayments for Motor Finance (from October 2024).
•Cost savings through structural and supplier efficiency
with disciplined cost management ($1.2m).
Simplification and better returns
Accelerate growth in strategic portfolios
•Simplify the business through identifying lending
that no longer aligns to Heartland Bank’s strategy.
•Develop focused strategies to separately manage
Non-Strategic Assets, within an appropriate time
frame.

23
Non-Strategic Assets
Non-Strategic Assets includes assets that earn little or no income or are returning less than Heartland’s cost of capital.
1
•Non-Strategic Assets will be managed and reported separately in FY2025 to provide greater transparency and enable more focused resolution strategies to be
adopted. This will enable underlying capital to be redeployed to support Heartland Bank’s growth ambitions.
•Heartland intends to rationalise these assets over a responsible period of time.
Non-Strategic AssetsJune 2024
Equity investments$13.5m
Investment properties$3.7m
Property $12.6m
Receivables
2
- Business$74.4m
- Rural$113.7m
Total$217.8m
1
Non-Strategic Assets do not reflect a structural change to Heartland’s operations.
2
Receivables as at 30 June 2024 excluding provisions.

24
05 |
Jeff Greenslade
Chief Executive Officer
Heartland Group
Closing remarks

25
Looking forward
Long-term outlook remains positive
towards FY2028 ambitions
•Long-term outlook is positive as Heartland expects to realise benefits
from the significant strategic milestones achieved in FY2024.
•In Australia, Heartland Bank Australia is well positioned for growth
beyond FY2025.
•In New Zealand, Heartland Bank’s FY2025 focus is on simplification and
strategic core lending.
Volatility to continue through the
remainder of CY2024
•In Heartland’s view, this creates too much uncertainty at this stage for
Heartland to provide an accurate underlying NPAT guidance range for
FY2025.
•Heartland will revisit its ability to provide an underlying NPAT guidance
range for FY2025 as the financial year progresses.

26
06 |
Additional information

$1.07b
NZ Reverse Mortgages
+$179.6m (20.2%)

vs June 2023
$141,183
Average
loan size
77
Average age of youngest borrower
on a loan
17.5%
CAGR FY2020-FY2024
1
9.1%
Average
origination LVR
23.5%
Weighted
average LVR
0.1%
Proportion of the
loan book over 75% LVR
2
Number of loans in the
book over 75% LVR
$197m
(+$0.6m vs FY2023)
FY2024 origination
$113m
(+$16.2m vs FY2023)
Total repayments in FY2024
12.7%
(vs 13.4% in FY2023)
FY2024 repayment rate
24.8%
(vs 31.8% in FY2023)
Repayments from vintage loans
(+11 years)
1
CAGR for the period 1 July 2020 – 30 June 2024.
27
27
NZ Reverse Mortgage portfolio analytics

1
CAGR for the period 1 July 2020 – 30 June 2024.
A$1.67b
AU Reverse Mortgages
+A$276m (19.6%)

vs June 2023
A$188,756
Average
loan size
76
Average age of youngest borrower
on a loan
17.8%
CAGR FY2020-FY2024
1
11.5%
Average
origination LVR
23.5%
Weighted
average LVR
0.0%
Proportion of the
loan book over 75% LVR
2
Number of loans in the
book over 75% LVR
A$331m
(+A$1.4m vs FY2023)
FY2024 origination
A$200m
(+A$15.5m vs FY2023)
Total repayments in FY2024
14.3%
(vs 16.0% in FY2023)
FY2024 repayment rate
13.8%
(vs 16.1% in FY2023)
Repayments from vintage loans
(+11 years)
28
28
AU Reverse Mortgage portfolio analytics

As part of the new Climate-Related Disclosures obligations introduced through the Financial Sector (Climate-Related Disclosures and Other Matters) Amendment Act
2021, Heartland’s first climate statement is required as part of its full year reporting for FY2024. Heartland’s first climate statement will be published on 30 September
2024, alongside its Annual Report. Further detail can be found within the accompanying FY2024 Heartland Bank Limited Disclosure Statement.
Heartland’s climate commitment is part of its broader sustainability strategy which is built on three pillars: environment, people and financial wellbeing.
Environment
Support the just transition to a net-zero economy.
•Build the capability to appropriately take climate
change risks into consideration when making
lending decisions.
•Fund Heartland’s borrowers’ transition to a net-
zero economy.
•Embed sustainability into what Heartland does.
Financial wellbeing
Support the financial wellbeing of Heartland’s
customers and communities.
•Enhancing economic outcomes for customers
through digitalisation.
•Ensuring customers can benefit from Heartland’s
digitalisation journey.
•Ensuring Heartland’s values and commitments
are shared by its suppliers.
People
Caring for Heartland’s people, customers and
communities.
•Care for the communities Heartland operates in.
•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 Heartland’s customers.
29
Sustainability strategy
More: heartlandgroup.info/sustainability

30
Regulatory update
With the completion of the acquisition of (now) Heartland Bank Australia, the
Heartland group now includes an APRA-regulated ADI which is subject to
prudential regulation in Australia.
In New Zealand, Heartland Bank has recently updated its processes for assessing
consumer loans in response to the revocation of the prescriptive affordability
requirements from the Credit Contracts and Consumer Finance Regulations 2004.
The Government is continuing to assess, amongst other matters, the disclosure
obligations and liability settings for directors and senior managers under the
Credit Contracts and Consumer Finance Act 2003, which Heartland is closely
monitoring.
On 20 August 2024, the Commerce Commission published its final report into
competition in the personal banking sector. Heartland Bank welcomes the review
and broader mandate to introduce more competition in personal banking and is
supportive of the Commerce Commission’s recommendations.
In mid-June 2024, the Finance Minister announced a joint Select Committee
inquiry into banking competition with a focus on rural banking. Terms of reference
have now been released with submissions due to the Select Committee on 25
September 2024.
The Depositor Compensation Scheme under the Deposit Takers Act 2023 (Act) is
expected to commence mid-2025. Heartland Bank is continuing to contribute to
industry consultations that are underway.
In May 2024, the Customer and Product Data Bill (Bill), known as ‘open banking’
was introduced to Parliament and the first sectors to be designated are banking
and electricity. The Bill has been referred to the Select Committee with
submissions due in September 2024.
Heartland Bank continues its preparations for the new conduct regime which
comes into force from 31 March 2025, and expects to make its conduct licence
application to the Financial Markets Authority by October 2024.

31
Corporate structure
3
1
1
StockCo Australia is a group of companies.
Introducing Heartland Bank Australia
•On 30 April 2024, Heartland Bank completed the
acquisition of Challenger Bank and became the first
registered New Zealand bank to acquire an Australian ADI.
•The ADI was subsequently rebranded to Heartland Bank
Australia.
•On 2 May 2024, Heartland Australia Holdings Pty Limited
and its subsidiaries (which include Heartland Australia
Group and StockCo Australia) were transferred to
Heartland Bank Australia.
•With the inclusion of Heartland’s existing Australian
businesses, Australian Seniors Finance (offering Reverse
Mortgages under the Heartland Finance brand) and
StockCo Australia as part of the regulated banking group
(the “Australian Banking Group”), Heartland Bank Australia
is now Australia’s only specialist provider of both reverse
mortgages and livestock finance.
•Drawing on Heartland’s expertise in New Zealand, and its
successful track record in Australia, Heartland Bank
Australia will focus on providing Australians with specialist
banking products that are the best or only of their kind,
through digital channels.
Heartland Group
(NZX/ASX: HGH)
Heartland Bank
Heartland Bank Australia
(previously Challenger Bank)
Heartland Australia
Holdings
StockCo Australia
1
Heartland Australia Group
Australian Seniors Finance
BBB (stable) Fitch
NZ Banking Group
BBB (stable) Fitch
AU Banking Group
BBB (stable) Fitch
BBB- (stable)
Fitch
NZ company
AU company

32
Geoff
Summerhayes
Chair & Independent Non-Executive
Director
Appointed in 2024
Shane Buggle
Independent Non-Executive Director
Appointed in 2024
Lyn McGrath
Independent Non-Executive Director
Appointed in 2024
Vivienne Yu
Independent Non-Executive Director
Appointed in 2024
Leanne Lazarus
Non-Independent Non-Executive Director
Appointed in 2024
Jeff
Greenslade
Non-Independent Non-Executive Director
Appointed in 2024
Bruce Irvine
Non-Independent Non-Executive Director
Appointed in 2024
Board of Directors
Greg
Tomlinson
Chair & Non-Independent Non-Executive
Director
Appointed in 2018 (2013 to Heartland NZ Ltd
Board)
1
Jeff
Greenslade
CEO & Non-Independent Executive
Director
Appointed in 2018 (2010 to Heartland NZ Ltd
Board)
1
Kate Mitchell
Independent Non-Executive Director
Appointed in 2021
John Harvey
Independent Non-Executive Director
Appointed in 2024
Simon Beckett
Independent Non-Executive Director
Appointed in 2024
Rob Bell
Independent Non-Executive Director
Appointed in 2024
Note: See heartlandgroup.info/about-heartland/board-of-directors for full profiles.
1
Heartland changed its name from Heartland New Zealand Limited to Heartland Bank Limited on 31 December 2015 (in conjunction with the amalgamation of Heartland New Zealand Limited and Heartland Bank Limited).
Heartland Group
Bruce Irvine
Chair & Independent Non-Executive
Director
Appointed in 2015 (2013 to Heartland NZ Ltd
Board)
1
Jeff
Greenslade
Non-Independent Non-Executive Director
Appointed in 2015 (2010 to Heartland NZ Ltd
Board)
1
John Harvey
Non-Independent Non-Executive Director
Appointed in 2015 (2013 to Heartland NZ Ltd
Board)
1
Kate Mitchell
Non-Independent Non-Executive Director
Appointed in 2019
Shelley Ruha
Independent Non-Executive Director
Appointed in 2020
Simon Tyler
Independent Non-Executive Director
Appointed in 2022
Heartland Bank (New Zealand)Heartland Bank (Australia)

33
Michelle Winzer
Chief Executive Officer
Joined in 2024
David Brown
Chief Risk Officer
Joined Challenger Bank in 2021
Sarah
Burgemeister
General Counsel
Joined Heartland Finance in 2023
Medina Cicak
Chief Commercial Officer
Joined in 2024
Richard Collier
Chief Financial Officer
Joined Challenger Bank in 2024
Vaughan Dixon
Chief Technology & Operations Officer
Joined in 2024
Sharon Yardley
Chief Compliance & Sustainability Officer
Joined Heartland Finance in 2004
1
Management
Jeff
Greenslade
Chief Executive Officer
Joined in 2009
Chris Flood
Deputy Chief Executive Officer
Joined in 1997
Andrew Dixson
Group Chief Financial Officer
Joined in 2010
Aleisha
Langdale
Chief Performance Officer
Joined in 2015
Heartland Group
Leanne Lazarus
Chief Executive Officer
Joined in 2022
Andy Wood
Chief Risk Officer
Joined in 2022
Kerry Conway
Chief Financial Officer
Joined in 2024
Michael Drumm
Chief Operating Officer
Joined in 2015
Phoebe
Gibbons
General Counsel
Joined in 2020
Lana West
Chief People & Culture Officer
Joined in 2021
Heartland Bank (New Zealand)Heartland Bank (Australia)
Note: See heartlandgroup.info/about-heartland/board-of-directors for full profiles.
1
Prior to Heartland’s acquisition in 2014.

34
07 |
Presentation of results,
disclaimer & glossary

Audited 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 (which are non-GAAP financial information) exclude the impact of the de-designation of derivatives,
the fair value changes on equity investments held, the Australian Bank Programme costs, an increase in provisions for a
subset of legacy lending, the Challenger Bank NPAT, 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 page 7 for a detailed reconciliation between reported and underlying financial information, and page 8 for 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 36 of this investor presentation.
Presentation of results
35

This presentation has been prepared by Heartland Group Holdings Limited (NZX/ASX: HGH)
(the Company or Heartland) for the purpose of briefings in relation to its Financial
Statements.
The presentation and the briefing (together the Presentation) contain summary information
only, 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, underlying impairment expense ratios and
underlying EPS. A reconciliation between reported and the non-GAAP measure of underlying
financial information is included on page 7.
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
standardised meanings 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 2024 unless otherwise indicated. Any other financial
information provided as at a date after 30 June 2024 has not been audited or reviewed by any
independent registered public accounting firm.
Disclaimer
36

ABPAustralia Bank Programme
Heartland Australia
Group
Heartland Australia Holdings Pty Ltd and its direct and indirect
wholly-owned subsidiaries
ADIAuthorised deposit-taking institutionHeartland BankHeartland Bank Limited
APRAAustralian Prudential Regulation AuthorityHeartland Bank AustraliaHeartland Bank Australia Limited
bpsBasis pointsLVRLoan-to-value ratio
CAGRCompound annual growth rateNIINet interest income
Challenger BankChallenger Bank LimitedNIMNet interest margin
cpsCents per shareNOINet operating income
CTI ratioCost to income ratioNPATNet profit after tax
CY2024The calendar year ending 31 December 2024O4BOpen for Business
DRPDividend Reinvestment PlanOOIOther Operating Income
EPSEarnings per shareOPEXOperating expenses
FXForeign currency exchangeppsPercentage points
FY2023The financial year ended 30 June 2023RBNZReserve Bank of New Zealand
FY2024The financial year ended 30 June 2024ReceivablesGross Finance Receivables
FY2025The financial year ending 30 June 2025ROEReturn on Equity
FY2028The financial year ending 30 June 2028
StockCo, StockCo
Australia
Comprised of StockCo Australia Management Pty Ltd, StockCo
Holdings 2 Pty Ltd and their subsidiaries
HarmoneyHarmoney Corp LimitedQ3The third quarter of FY2025 (1 January to 31 March 2025)
HeartlandHeartland Group Holdings Limited or the CompanyYoY
Year-on-year
Glossary
37

Investor information
For more information, go to
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)





Results for announcement to the market
Name of issuer Heartland Group Holdings Limited
Reporting Period 12 months to 30 June 2024
Previous Reporting Period 12 months to 30 June 2023
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$290,354 1.8%
Total Revenue $290,354 1.8%
Net profit/(loss) from
continuing operations
$74,549 -22.2%
Total net profit/(loss) $74,549 -22.2%
Interim/Final Dividend
Amount per Quoted Equity
Security
$ 0.03000000
Imputed amount per Quoted
Equity Security
$ 0.01166667
Record Date 06/09/2024
Dividend Payment Date 20/09/2024
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.00 $1.09
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 027 345 6809
Contact email address nicola.foley@heartland.co.nz
Date of release through MAP

29/08/2024

Audited financial statements accompany this announcement.

---

Distribution Notice





Section 1: Issuer information
Name of issuer Heartland Group Holdings Limited
Financial product name/description Ordinary shares
NZX ticker code HGH
ISIN (If unknown, check on NZX
website)
NZHGHE0007S9
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies X
Record date 06/09/2024
Ex-Date (one business day before the
Record Date)
05/09/2024
Payment date (and allotment date for
DRP)
20/09/2024
Total monies associated with the
distribution
1

$27,916,839.87
Source of distribution (for example,
retained earnings)
Retained earning
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$ 0.04166667
Gross taxable amount
3
$ 0.04166667
Total cash distribution
4
$ 0.03000000
Excluded amount (applicable to listed
PIEs)
NIL
Supplementary distribution amount $ 0.00529412
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
$ 0.01166667
Resident Withholding Tax per
financial product
$ 0.00208333
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
2.0%
Start date and end date for
determining market price for DRP
09/09/2024 13/09/2024
Date strike price to be announced (if
not available at this time)
16/09/2024
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
New Issue
DRP strike price per financial product
$
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
09/09/2024, 5:00pm NZT
Section 5: Authority for this announcement
Name of person

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

29/08/2024






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 2024

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 2024

P. 2
Contents


Page
General Information........................................................................................................................................................... 3
Auditor.................................................................................................................................................................................. 3
Other Material Matters...................................................................................................................................................... 3
Directors............................................................................................................................................................................... 4
Directors’ Statements......................................................................................................................................................... 5
Statement of Comprehensive Income................................................................................................................................. 6
Statement of Changes in Equity........................................................................................................................................... 7
Statement of Financial Position............................................................................................................................................ 8
Statement of Cash Flows....................................................................................................................................................... 9
Notes to the Financial Statements
1 Financial statements preparation........................................................................................................................ 11
Performance
2 Segmental analysis................................................................................................................................................. 17
3 Net interest income................................................................................................................................................ 19
4 Net operating lease income................................................................................................................................... 20
5 Other income........................................................................................................................................................... 21
6 Operating expenses................................................................................................................................................. 22
7 Compensation of auditor....................................................................................................................................... 22
8 Impaired asset expense.......................................................................................................................................... 24
9 Taxation.................................................................................................................................................................... 25
10 Earnings per share.................................................................................................................................................. 26
Financial Position
11 Investments............................................................................................................................................................ 27
12 Derivative financial instruments.......................................................................................................................... 28
13 Finance receivables measured at amortised cost.................................................................................... 33
14 Operating lease vehicles........................................................................................................................................ 38
15 Borrowings.............................................................................................................................................................. 39
16 Share capital and dividends.................................................................................................................................. 42
17 Other reserves........................................................................................................................................................ 43
18 Other balance sheet items.................................................................................................................................... 44
19 Acquisition.............................................................................................................................................................. 49
20 Related party transactions and balances............................................................................................................ 51
21 Fair value................................................................................................................................................................. 53
Risk Management
22 Enterprise risk management................................................................................................................................. 58
23 Credit risk exposure............................................................................................................................................... 63
24 Liquidity risk............................................................................................................................................................ 68
25 Interest rate risk..................................................................................................................................................... 70
Other Disclosures
26 Significant subsidiaries.......................................................................................................................................... 73
27 Structured entities................................................................................................................................................. 73
28 Staff share ownership arrangements................................................................................................................. 75
29 Securitisation, funds management and other fiduciary activities................................................................. 77
30 Concentrations of funding.................................................................................................................................... 77
31 Offsetting financial instruments.......................................................................................................................... 78
32 Contingent liabilities and commitments............................................................................................................. 79
33 Events after reporting date.................................................................................................................................. 79
Auditor’s Report.................................................................................................................................................................. 80

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 2024.

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 Robert Bell and Simon Beckett who reside in Australia.
Communications to the Directors can be sent to Heartland Group Holdings Limited, Level 3, 35 Teed Street, Newmarket, Auckland
1023.

Geoffrey Edward Summerhayes resigned as Independent Non-Executive Director of HGH, effective 30 April 2024.

Edward John Harvey was appointed as an Independent Non-Executive Director of HGH, effective 30 April 2024.

Ellen Frances Comerford resigned as Independent Non-Executive Director of HGH, effective 26 June 2024.

Robert Bell was appointed as an Independent Non-Executive Director of HGH, effective 27 June 2024.

Simon Beckett was appointed as an Independent Non-Executive Director of HGH, effective 27 June 2024.

There have been no other changes to the composition of the Board of Directors of the Group for the year ended 30 June 2024.

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 Holdings Limited, Indevin Group Investments 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.

Name: Simon Beckett

Qualifications: BSc (Hons), GAICD
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships:
ORDE Holdings Pty Ltd, ORDE Financial Pty Ltd, ORDE Capital Management Limited, ORDE Mortgage Custodian Pty Ltd,
GeoSnapShot Pty Ltd, First Avenue Ventures Pty, First Avenue Capital Pty Ltd.

Name: Robert Bell Qualifications: BBus
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships:
Liveheats Pty Ltd, 86 Elwood Pty Ltd, Home Finance Company PTE Limited.

Name: Jeffrey Kenneth Greenslade Qualifications: LLB
Type of Director: Non-Independent Executive Director Occupation: Chief Executive Officer of Heartland Group Holdings
External Directorships (excluding HGH subsidiaries):
Henley Family Investments Limited.

Name: Edward John Harvey Qualifications: BCom, CA, CFInstD
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships (excluding HGH subsidiaries):
Napier Port Holdings Limited, Pomare Investments Limited, Port of Napier Limited.

Name: Kathryn Mitchell Qualifications: BA, CMInstD
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships (excluding HGH subsidiaries):
Chambers@151 Limited, Christchurch International Airport Limited, Firsttrax Approvals Limited, Link Engine Management Limited,
Link Management International (NZ) Limited, Morrison Horgan Limited, The New Zealand Merino Company Limited, The A2 Milk
Company Limited, Purepods Limited.

P. 5
Directors' Statements
The financial statements are dated 28 August 2024 and have been signed by all Directors.
G. R. Tomlinson (Chair)R. Bell
J. K. GreensladeS. Beckett
K. MitchellE. J. Harvey

P. 6
Statement of Comprehensive Income



For the year ended 30 June 2024



$000's Note
June 2024 June 2023

Interest income
3
661,032 527,710
Interest expense
3
383,387 245,721
Net interest income 277,645 281,989



Operating lease income
4
6,058 5,631
Operating lease expenses
4
4,373 3,827
Net operating lease income 1,685 1,804



Lending and credit fee income

14,284 11,753
Other (expense)
5
(2,946) (5,742)
Net operating income 290,668 289,804



Operating expenses
6
139,386 128,079
Profit before impaired asset expense and income tax 151,282 161,725



Fair value (loss) on investments and investment property

(314) (4,488)
Impaired asset expense
8
46,423 23,244
Profit before income tax 104,545 133,993



Income tax expense
9
29,996 38,125
Profit for the year 74,549 95,868

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 in a cash flow
hedge relationship
(10,701) 7,116
Movement in fair value reserve 925 (533)
Movement in foreign currency translation reserve 1,773 (6,803)
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
(3,152) (2,411)
Other comprehensive income for the year, net of income tax (11,155) (2,631)

Total comprehensive income for the year 63,394 93,237

Earnings per share


Basic earnings per share
10
9.85c 13.96c
Diluted earnings per share
10
9.85c 13.96c

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 financial statements.

P. 7
Statement of Changes in Equity



For the year ended 30 June 2024



June 2024 June 2023


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

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

Total comprehensive income
for the year

Profit for the year - - 74,549 74,549 - - 95,868 95,868
Other comprehensive (loss)/
income, net of income tax
17 - (11,155) - (11,155) - (2,631) - (2,631)
Total comprehensive income for
the year
- (11,155) 74,549 63,394 - (2,631) 95,868 93,237

Transactions with owners

Dividends paid 16 - - (71,190) (71,190) - - (71,402) (71,402)
Dividend reinvestment plan 16 13,476 - - 13,476 7,100 - - 7,100
Transaction costs associated
with capital raising
16 (6,254) - - (6,254) (3,749) - - (3,749)
Share based payments 28 - (2,816) - (2,816) - 105 - 105
Share issuance 16 210,255 - - 210,255 197,006 - - 197,006
Vesting of share based
payments
28 765 (765) - - 1,170 (1,170) - -
Total transactions with owners 218,242 (3,581) (71,190) 143,471 201,527 (1,065) (71,402) 129,060



Balance at end of the year 1,018,954 (8,496) 227,411 1,237,869 800,712 6,240 224,052 1,031,004



















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

P. 8
Statement of Financial Position



As at 30 June 2024



$000's
Note June 2024 June 2023
Assets
Cash and cash equivalents 629,619 311,503
Investments 11 1,092,131 330,240
Derivative financial instruments 12 12,316 36,983
Finance receivables measured at amortised cost 13 4,266,946 4,334,214
Finance receivables - reverse mortgages 21 2,897,818 2,403,810
Investment properties 3,660 11,903
Operating lease vehicles 14 18,261 16,966
Right of use assets 18 15,519 12,318
Other assets 18 35,185 27,990
Current tax asset 16,767 1,960
Intangible assets 18 279,906 235,733
Deferred tax asset 9 23,727 21,105
Total assets 9,291,855 7,744,725

Liabilities
Deposits 15 5,949,116 4,131,025
Other borrowings 15 2,040,763 2,496,375
Derivative financial instruments 12 9,017 7,624
Lease liabilities 18 17,776 14,287
Tax liabilities - 6,112
Trade and other payables 18 37,314 58,298
Total liabilities 8,053,986 6,713,721
Net assets 1,237,869 1,031,004

Equity
Share capital 16 1,018,954 800,712
Retained earnings and other reserves 17 218,915 230,292
Total equity 1,237,869 1,031,004

















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

P. 9
Statement of Cash Flows



For the year ended 30 June 2024


$000's
Note June 2024 June 2023
Cash flows from operating activities
Interest received
433,047 333,874
Operating lease income received
5,288 4,571
Lending, credit fees and other income received
9,345 6,292
Operating inflows 447,680 344,737
Interest paid
(327,643) (193,679)
Payments to suppliers and employees
(155,782) (128,195)
Taxation paid
(46,842) (54,629)
Operating outflows (530,267) (376,503)
Net cash flows applied to operating activities before changes in operating assets and
liabilities

(82,587) (31,766)
Proceeds from sale of operating lease vehicles
2,219 4,492
Purchase of operating lease vehicles
(6,732) (8,766)
Net movement in finance receivables
1

473,912 (448,210)
Net movement in deposits
541,541 526,939
Net cash flows from operating activities
2
928,353 42,689

Cash flows from investing activities

Purchase of property, plant and equipment and intangible assets
(28,091) (24,669)
Proceeds from investment securities
246,490 55,443
Purchase of investment securities
(637,399) (95,000)
Deposit paid for the conditional acquisition of Challenger Bank Limited
- (3,936)
Purchase of equity investment
- (6,952)
Purchase of investment property
- (71)
Cash acquired on acquisition of subsidiary
19
165,620 -
Purchase of subsidiary, net of cash acquired
- (3,047)
Net cash flows applied to investing activities (253,380) (78,232)
Cash flows from financing activities

Proceeds from wholesale borrowings
1,743,510 1,264,359
Repayment of wholesale borrowings
(2,362,786) (1,208,292)
Proceeds from issue of unsubordinated notes
189,588 87,589
Repayment of unsubordinated notes
(123,764) (330,300)
Proceeds from issue of subordinated notes
51,572 97,934
Dividends paid 16
(57,714) (64,303)
Payment of lease liabilities
(3,044) (2,656)
Net issue of share capital 16
204,001 193,364
Net cashflows (applied to)/from financing activities (358,637) 37,695
Net increase in cash held
316,336 2,152
Effect of exchange rates on cash and cash equivalents
1,780 (1,407)
Opening cash and cash equivalents
311,503 310,758
Closing cash and cash equivalents
3
629,619 311,503
1
Includes proceeds from sale of reverse mortgage portfolio from the Group to HBA prior to HBA's acquisition. Refer to Note 21 - Fair value for
further details.
2
Cash flows from operating activities do not include cash flows from wholesale borrowings which are included as part of financing activities.
3
At 30 June 2024, the Group has $176.0 million (2023: $97.0 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 financial statements.

P. 10
Statement of Cash Flows (continued)


For the year ended 30 June 2024


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



$000's
Note June 2024 June 2023
Profit for the year 74,549 95,868

Add/(less) non-cash items:
Depreciation and amortisation expense 12,129 10,124
Depreciation on lease vehicles 14 3,902 3,461
Capitalised net interest income and fee income (186,389) (154,706)
Impaired asset expense 8 46,423 23,244
Fair value movements (11,537) 6,899
Deferred tax (2,622) 1,969
Other non-cash items (3,110) 2,097
Total non-cash items (141,204) (106,912)

Add/(less) movements in operating assets and liabilities:
Finance receivables 473,912 (448,210)
Operating lease vehicles (5,197) (5,266)
Other assets 595 (2,856)
Current tax (20,919) (17,892)
Derivative financial instruments 26,060 9,521
Deposits 541,541 526,939
Other liabilities (20,984) (8,503)
Total movements in operating assets and liabilities 995,008 53,733


Net cash flows from operating activities
1
928,353 42,689
1
Cash flows from operating activities do not include cash flows from wholesale borrowings 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 financial statements.

P. 11
Notes to the Financial Statements

For the year ended 30 June 2024

1 Financial statements preparation

Reporting entity

The financial statements presented are the consolidated financial statements comprising Heartland Group Holdings (HGH) and its
controlled entities (the Group). Refer to Note 26 – Significant subsidiaries and Significant events section within this note 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.

The Group is a designated climate reporting entity (CRE) under the climate-related disclosure regime and is required to meet its
requirements effective from the financial reporting period commencing 1 July 2023. Refer to Note 22 - Enterprise risk
management for further details.

Basis of preparation

The 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 Accounting Standards (IFRS Accounting Standards) as issued by the International
Accounting Standards Board.

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

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

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

Certain comparative 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 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 statement of comprehensive income.

P. 12
1 Financial statements preparation (continued)

Changes in accounting standards

Accounting standards issued and effective

Disclosure of Accounting Policies - Amendments to NZ IAS 1 Presentation of Financial Statements

The Group adopted the amendments to NZ IAS 1 Presentation of Financial Statements. Effective 1 July 2023, these amendments
require the disclosure of material accounting policy information instead of significant accounting policies. The amendments did
not result in any changes to the accounting policies and did not impact the accounting policy information disclosed below.

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.

The Group early adopted the Amendments to FRS-44 from 1 July 2022. Refer to Note 7 - Compensation of auditor for further
details.

There have been no other 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

Presentation and Disclosure in Financial Statements (NZ IFRS 18)

IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18) was issued in April 2024 to replace IAS 1 Presentation of
Financial Statements (IAS 1) when applied. New Zealand Equivalent to IFRS 18 (NZ IFRS 18) was issued on 23 May 2024. Most of
the presentation and disclosure requirements will largely remain unchanged together with other disclosures carried forward from
IAS 1. NZ IFRS 18 primarily introduces the following:

x a defined structure for the statement of comprehensive income by classifying items into one of the five categories:
operating, investing, financing, income taxes and discontinued operations. Entities will also present expenses in the
operating category by nature, function, or a mix of both, based on facts and circumstances;

x disclosure of management-defined performance measures (a subset of alternative performance measures / non-GAAP
measures) in a single note together with reconciliation requirements, and

x additional guidance on aggregation and disaggregation principles (applied to all primary financial statements and notes).

P. 13
1 Financial statements preparation (continued)

Accounting standards issued not yet effective (continued)

Presentation and Disclosure in Financial Statements (NZ IFRS 18) (continued)

NZ IFRS 18 also made limited change to certain presentation and disclosure requirements in the financial statements, e.g., NZ IAS
7 Statement of Cash Flows; as well as consequential changes to various IFRS Accounting Standards.

NZ IFRS 18 will be effective for annual reporting periods beginning on or after 1 January 2027. The Group expects to adopt NZ IFRS
18 and relevant consequential changes of other accounting standards in the financial year beginning 1 July 2027. The Group is
currently assessing the impact and will disclose more detailed assessments in the future.

Other new accounting standards, amendments to accounting standards and interpretations have been published that are not
mandatory for the 30 June 2024 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 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.

x 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 measured at amortised cost
for further details.

x 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 (now Heartland Bank Australia Limited). 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.

x Fair value of reverse mortgages - Fair value is quantified by the transaction price (cash advanced plus accrued capitalised
interest). Judgement is applied in determining the appropriateness of the transaction price as fair value. Refer to Note 21 -
Fair value for further details.

x 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 or group of CGUs for impairment testing. Refer to Note 18 - Other balance sheet
items for further details.

x Acquisition of Challenger Bank Limited (now Heartland Bank Australia Limited) – Fair value of the consideration transferred
and fair value of the identifiable assets acquired and liabilities assumed, measured on a provisional basis. Judgement is
applied in determining consideration and in the valuation of the acquiree’s identifiable assets and liabilities assumed on the
acquisition date. Refer to Note 19 – Acquisition for further details.

Assumptions made at each reporting date (e.g., the calculation of the provision for impairment and fair value adjustments) are
based on best estimates as at that date. Although the Group has internal controls in place to ensure that estimates can be reliably
measured, actual amounts may differ from these estimates. The estimates and judgements used in the preparation of the Group’s
financial statements are continually evaluated. They are based on historical experience and other factors, including expectations
of future events that may have a financial impact on the entity. Revisions to accounting estimates are recognised in the reporting
period in which the estimates are revised and in any future periods affected.

P. 14
1 Financial statements preparation (continued)

Significant events

Heartland Bank Limited (HBL), subsidiary of HGH, completed the acquisition of Challenger Bank Limited (CBL) from Challenger
Limited on 30 April 2024. Completing the acquisition makes HBL the first New Zealand registered bank to acquire an Australian
authorised deposit-taking institution (ADI). From 1 May 2024, CBL began trading as Heartland Bank Australia.

As a result of the above transaction, the Group has obtained control over Heartland Bank Australia Limited (HBA) and has
consolidated its results, assets and liabilities from the transaction date. Refer to Note 19 – Acquisition for further details.

Under the varied conditions of CBL’s banking licence, all the Australian banking business and other Australian financial activities
within HGH and its controlled entities are required to be conducted within CBL or as subsidiaries of CBL. On 2 May 2024, HGH
transferred to CBL 100% shareholding of its Australian subsidiaries, being Heartland Australia Holdings Pty Limited (HAH) and its
controlled entities. This resulted in CBL assuming ownership over HGH’s Australian reverse mortgage lending, specialist livestock
finance and other financial services businesses. Later in May 2024, the legal entity name for CBL officially changed to HBA.

Financial assets and liabilities

Financial Assets

Financial assets are classified based on:

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

x 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
Government securities, bank bonds and
floating rate notes
Fair value through other comprehensive income (FVOCI)
and fair value through profit or loss (FVTPL)
11
Public sector securities and corporate bonds FVOCI 11
Equity investments FVOCI and FVTPL 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.

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.

P. 15
1 Financial statements preparation (continued)

Financial assets and liabilities (continued)

Financial assets (continued)

Financial assets measured at FVTPL
Financial assets are measured at FVTPL if:

x 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

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

x 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:

x those to be measured at amortised cost;

x 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:

x 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

x 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.

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.

P. 16
1 Financial statements preparation (continued)

Financial assets and liabilities (continued)

Financial liabilities (continued)

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

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.


Operating Segments

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

During the year, the Group revised the composition of its reportable segments, following the acquisition of CBL by HBL on 30 April
and transfer of HAH and its subsidiaries from HGH to HBA on 2 May 2024, with HBA assuming ownership over HGH’s Australian
rev
erse mortgage lending, specialist livestock finance and other financial services businesses (refer to Note 19 – Acquisition for
further details). The Group has subsequently aggregated previously reported StockCo Australia and Australia segments into one
reportable segment Australia
n Banking Group.

This change was made to align the presentation with the internal reporting provided to the Group’s CODM where business
performance of HBA and its subsidiaries is assessed as one single segment operating within Australia. Comparative information
within this
note has been adjusted to reflect the change in the Group’s revised composition of reportable segments within
Australian Banking Group.

Australian Banking
Group
Australian Banking Group provides banking and financial services in Australia which consist of reverse
mortgage lending, livestock finance and other financial services within Australia.

All other segments


Other Operating expenses, such as premises, IT and support centre costs are not allocated to operating
segments and are included in Other. These are primarily in relation to the New Zealand business.

Finance receivables are allocated across the operating segments as assets. 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
Mortgages
Personal
Lending

Rural
Australian
Banking
Group
Other



$000's Motor Business
Total
June 2024

Net interest income
58,909 46,586 5,156 62,090 34,652 68,617 1,635 277,645
Lending and credit fee income
3,908 2,651 198 3,935 374 3,218 - 14,284
Net other income/(expense) 1,194 - 543 1,145 (443) (839) (2,861) (1,261)
Net operating income 64,011 49,237 5,897 67,170 34,583 70,996 (1,226) 290,668

Operating expenses 4,628 5,366 6,825 9,113 3,181 41,778 68,495 139,386
Profit/(loss) before fair value (loss)
on investments, impaired asset
expense and income tax
59,383 43,871 (928) 58,057 31,402 29,218 (69,721) 151,282

Fair value (loss) on investments - - - - - - (314) (314)
Impaired asset expense 24,329 - 1,476 17,527 2,428 663 - 46,423
Profit/(loss) before income tax 35,054 43,871 (2,404) 40,530 28,974 28,555 (70,035) 104,545

Income tax expense - - - - - - 29,996 29,996
Profit/(loss) for the year 35,054 43,871 (2,404) 40,530 28,974 28,555 (100,031) 74,549

Total assets 1,608,282 1,068,154 339,110 1,306,689 720,339 3,415,495 833,786 9,291,855
Total liabilities 8,053,986

June 2023

Net interest income 60,681 39,696 9,548 71,630 33,522 73,933 (7,021) 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 (130) (7,617) (3,938)
Net operating income/(expense) 64,200 42,367 10,930 74,899 34,212 77,834 (14,638) 289,804

Operating expenses 4,140 4,929 6,461 9,387 3,068 33,052 67,042 128,079
Profit/(loss) before fair value (loss)
on investments, impaired asset
expense and income tax
60,060 37,438 4,469 65,512 31,144 44,782 (81,680) 161,725

Fair value (loss) on investments - - - - - - (4,488) (4,488)
Impaired asset expense 10,911 - 3,195 8,156 630 352 - 23,244
Profit/(loss) before income tax 49,149 37,438 1,274 57,356 30,514 44,430 (86,168) 133,993

Income tax expense - - - - - - 38,125 38,125
Profit/(loss) for the year 49,149 37,438 1,274 57,356 30,514 44,430 (124,293) 95,868

Total assets 1,563,939 888,600 358,572 1,356,913 712,596 2,110,958 753,147 7,744,725
Total liabilities 6,713,721

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 2024 June 2023
Interest income
Cash and cash equivalents
12,952 10,906
Investments measured at FVOCI
12,082 5,081
Investments measured at FVTPL
4,186 -
Finance receivables measured at amortised cost
380,055 335,070
Finance receivables - reverse mortgages
251,757 176,653
Total interest income
1
661,032 527,710


Interest expense
Deposits
240,758 148,054
Other borrowings
167,796 117,774
Net interest (income) on derivative financial instruments
(25,167) (20,107)
Total interest expense
2
383,387 245,721

Net interest income
277,645 281,989
1
Cash and cash equivalents and Finance receivables are measured at amortised cost. Investments are measured at FVOCI and FVTPL. Total
interest income derived from financial assets measured at amortised cost or FVOCI 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 2024 June 2023
Operating lease income
Lease income
5,374 4,639
Gain on disposal of lease assets
684 992
Total operating lease income 6,058 5,631


Operating lease expense

Depreciation on lease assets
3,902 3,461
Direct lease costs
471 366
Total operating lease expense 4,373 3,827

Net operating lease income
1,685 1,804

P. 21
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 statement of comprehensive income and disclosed within
Other income. Refer to Note 12 - Derivative financial instruments for further details.

Fair value gain or loss on non-derivative financial instruments
A fair value gain or loss on certain non-derivative financial instruments are recognised in the statement of comprehensive income
for financial instruments held at fair value through profit or loss. Refer to Note 11 – Investments for further details.


$000's
June 2024 June 2023
Rental income from investment properties 995 1,064
Insurance income
1

209 756
Fair value (loss) on derivative instruments measured at fair value
(5,074) (8,237)
Fair value (loss) on non-derivative financial instruments
2

(727) -
Other income
4 624
Foreign exchange gain
1,647 51
Total other (expense)
(2,946) (5,742)
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.
2
Includes realised and unrealised losses on HBA's government securities, bank bonds and floating rate notes measured at fair value through
profit and loss. Refer to Note 11
- Investments for further details.

P. 22
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 2024 June 2023
Personnel expenses
1
67,129 66,989
Directors' fees 1,507 1,451
Superannuation 2,088 1,772
Depreciation - property, plant and equipment 1,809 1,904
Legal and professional fees
2
6,240 4,642
Advertising and public relations 3,017 3,089
Depreciation - right of use asset 3,252 2,539
Technology services 13,619 10,296
Telecommunications, stationery and postage 2,103 1,948
Customer administration costs 10,958 9,814
Customer onboarding costs 2,717 2,765
Occupancy costs 2,588 1,741
Amortisation of intangible assets 5,516 5,681
Other operating expenses
3
16,843 13,448
Total operating expenses 139,386 128,079
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.
3
Other operating expenses mainly comprise non-recoverable proportion of goods and services tax (GST), travel, insurance and project expenses.



7 Compensation of auditor

In accordance with the Amendments to FRS-44, 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:

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

P. 23
7 Compensation of auditor (continued)

The fees payable to the auditors, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and predecessor auditor, KMPG, are
outlined in the below table:


$000's
June 2024 June 2023
Fees paid to auditor - PwC
Audit and review of financial statements
1

1,388 1,046
Audit or review related services

Assurance engagements
2

40 62
Agreed-upon procedures engagements
3

- 21
Other assurance services and other agreed-upon procedures engagements

Assurance engagements
4

73 -
Agreed-upon procedures engagements
- -
Taxation services
5

- 54
Other services
6

- 33
Total compensation paid to PwC 1,501 1,216
Fees paid to auditor - EY
Audit and review of financial statements
1

692 -
Audit or review related services
-
Assurance engagements
7

119 -
Agreed-upon procedures engagements
- -
Other assurance services and other agreed-upon procedures engagements

Assurance engagements
- -
Agreed-upon procedures engagements
- -
Taxation services
- -
Other services
8

332 -
Total compensation paid to EY 1,143 -
Fees paid to predecessor auditor - KPMG
Audit and review of financial statements
1

- 40
Total compensation paid to KPMG - 40
Total compensation of auditor 2,644 1,256
1
Fees are for both the audit of the annual financial statements and review of the interim financial statements. This includes limited assurance on
disclosures of capital adequacy and regulatory liquidity requirements.
2
Fees in 2024 are for reasonable assurance engagement for insurance solvency return, reasonable assurance on registry and trust deed suprvisor
reporting. Fees in 2023 are for reasonable assurance engagement for insurance solvency return, reasonable assuranc
e on registry, trust deed
supervisor reporting, Economic and Financial Statistics (EFS) regulatory reporting and Australian Financial Services Licence (AFSL) assurance
engagement.
3
Fees in 2023 are for agreed upon procedures engagements in relation to Seniors Warehouse Trusts.
4
Fees are for pre-conditions assessments and assurance relating to greenhouse gas emissions reporting.
5
For 2023, PwC was engaged to carry out tax work in respect of Stockco Australia's 30 June 2023 tax returns prior to their appointment as
external auditor.
6
Other services paid to PwC in 2023 comprised actuarial services for reverse mortgages carried out prior to their appointment as external
auditors
7
Fees are for assurance services for APRA regulatory reporting and AFSL reporting.
8
Other services paid to EY in 2024 comprised actuarial services for reverse mortgages, actuarial services for stress testing, directors remuneration
review, executive reward survey report, executive remuneration review, CPS 234 information security plan review, hedge accounting and other
accounting advisory services, review of Australian banking policies and periodic assessment of StockCo funding facilities and
facilitation of
strategy review workshop. Except for the actuarial services for reverse mortgages stress testing, all other services were carried out prior to their
appointment as external auditor.

P. 24
8 Impaired asset expense


$000's
June 2024 June 2023
Individually impaired asset expense 13,705 13,010
Collectively impaired asset expense 34,137 12,794
Total impaired asset expense excluding recovery of amounts previously written off 47,842 25,804
to the income statement

Recovery of amounts previously written off to the income statement (1,419) (2,560)
Total impaired asset expense 46,423 23,244

Refer to Note – 13 Finance receivables measured at amortised cost for provision for impairment details.

P. 25
9 Taxation

Policy
Income tax
Income tax expense for the year comprises current tax and movements in deferred tax balances, including any adjustment
required for prior years' tax expense. Income tax expense is recognised in profit and loss except to the extent that it relates to
items recognised directly in other comprehensive income, in which case it is recognised in equity or other comprehensive income.

Current tax
Current tax is the expected tax payable or receivable on the taxable income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to the tax payable or receivable in respect of previous years. Current tax for
current and prior years is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for accounting purposes and the amounts used for taxation purposes. As required by NZ IAS 12
Income Taxes, a deferred tax asset is recognised only to the extent that it is probable that a future taxable profit will be available
to realise the asset.

Goods and services tax (GST)
Revenues, expenses and assets are recognised net of GST. As the Group is predominantly involved in providing financial services,
only a proportion of GST paid on inputs is recoverable. The non-recoverable proportion of GST is treated as an expense or, if
relevant, as part of the cost of acquisition of an asset.

Income tax expense

$000's
June 2024 June 2023
Income tax recognised in profit or loss

Current tax

Current year
35,997 37,159
Adjustments for prior year
(879) (1,556)
Tax at other rates
590 554


Deferred tax

Current year
(5,446) 1,457
Adjustments for prior year
(581) 304
Change in recognition of deferred tax asset
372 -
Tax at other rates
(57) 207
Total income tax expense recognised in profit or loss
29,996 38,125

Income tax recognised in other comprehensive income

Current tax

Investment securities at fair value in fair value reserve
357 (246)
Fair value movements in derivatives held in cash flow hedge reserve
(4,276) 2,418
Total income tax expense recognised in other comprehensive income (3,919) 2,172

Reconciliation of effective tax rate

Profit before income tax 104,545 133,993
Tax at the local income tax rate (NZ: 28%, Australia: 30%)
29,797 38,175
Adjusted tax effect of items not deductible
1,287 1,202
Adjustments for prior year
(1,460) (1,252)
Change in recognition of deferred tax
372 -
Total income tax expense
29,996 38,125

P. 26
9 Taxation (continued)

Deferred tax assets comprise the following temporary differences:

$000's
June 2024 June 2023
Employee expenses 2,636 2,516
Share Based payment - 1,069
Provision for impairment 21,528 14,958
Intangibles and property plant and equipment (1,465) (1,529)
Deferred acquisition costs (6) (55)
Right of use assets (4,180) -
Lease liabilities 4,834 -
Operating lease vehicles (594) 451
Deferred income (6,522) (6,938)
Prior year tax loss 4,911 8,540
Deductible prior year expense 421 593
Other temporary differences
2,164
1,500
Total deferred tax assets 23,727 21,105

Opening balance of deferred tax assets 21,105 23,074
Movement recognised in profit or loss
6,084 (1,969)
Transfer on acquisition of business
820 -
Utilisation of tax loss
(3,910) -
Change in recognition of deferred tax asset
(372)
-
Closing balance of deferred tax assets 23,727 21,105

Imputation credit account


$000's
June 2024 June 2023
Imputation credits available for use in subsequent reporting periods 46,427 37,785


10 Earnings Per Share

June 2024 June 2023

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

Cents $000's 000's Cents $000's 000's
Basic earnings 9.85 74,549 757,046 13.96 95,868 686,781
Diluted earnings 9.85 74,549 757,046 13.96 95,868 686,781

P. 27
Financial Position

11 Investments

Policy
Investments are classified into one of the following categories:

Fair value through other comprehensive income
Investments under this category are held within a business model whose objective is achieved both through collecting contractual
cash flows or selling the financial asset. These investments include bank bonds, floating rate notes, public sector securities,
corporate bonds and equity investments where the Group has irrevocably elected at initial recognition to measure at FVOCI.
These are initially measured at fair value, including transaction costs, and subsequently carried at fair value. Changes in fair value
of these investments are recognised in other comprehensive income and presented within the fair value reserve.

Fair value through profit or loss
Investments under this category are held within a business model whose objective is achieved through selling the financial asset.
These investments include government securities, bank bonds, floating rate notes and equity investments and are measured at
fair value plus transaction costs. Changes in fair value of these investments are recognised in profit or loss in the period in which
they occur.


$000's
June 2024 June 2023
Investments measured at FVOCI
Bank bonds and floating rate notes 270,581 305,310
Public sector securities and corporate bonds 101,235 9,882
Equity investments 7,575 9,665
Investments measured at FVTPL
Government securities, bank bonds and floating rate notes
1
706,840 -
Equity investments 5,900 5,383
Total investments 1,092,131 330,240
1
Includes HBA's investments measured at fair value through profit or loss. Refer to Note 21 - Fair value for further details.

P. 28
12 Derivative financial instruments

Policy
The Group uses derivatives for risk management purposes. Derivatives held for risk management purposes are placed into hedges
that either meet hedge accounting requirements, or economic hedges not placed into an accounting hedge relationship.

Derivatives are recognised at their fair value, with the derivatives being carried as assets when their fair value is positive and as
liabilities when their fair value is negative.

A hedged item is an asset, liability, firm commitment or highly probable forecast transaction that exposes the Group to risk of
changes in fair value or cash flows, and that is designated as being hedged. The Group applies fair value hedge accounting to
hedge movements in the value of fixed interest rate assets and liabilities subject to interest rate risk. The Group applies cash flow
hedge accounting to hedge the variability in highly probable forecast future cash flows attributable to
interest rate risk on variable rate assets and liabilities.

Derivative instruments that do not qualify for hedge accounting are held as economic hedges. Changes in the fair value of any
derivative instrument that does not qualify for hedge accounting are recognised immediately in the statement of comprehensive
income and disclosed within Other income.

Fair value hedge accounting
The criteria that must be met for a relationship to qualify for hedge accounting include:

x the hedging relationship must be formally designated and documented at inception of the hedge,

x effectiveness testing must be carried out on an on-going basis to ensure the hedge is effective and consistent with the
originally documented risk management strategy, and

x the instruments or counterparty must be a third party external to the Group.

The Group documents, at the inception of the transaction, the relationship between hedged items and hedging instruments, as
well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair value of hedged items.

Subsequent to initial designation, changes in the fair value of derivatives that are designated and qualify for fair value hedge
accounting are recorded through profit or loss alongside any changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk.

Where the hedged item is carried at amortised cost, the movement in fair value of the hedged item attributable to the hedged
risk is made as an adjustment to the carrying value of the hedged asset or liability. When a hedging instrument expires or is sold,
or when a hedge no longer meets the criteria for hedge accounting, the adjustment to carrying amount of a hedged item carried
at amortised cost is amortised to the statement of comprehensive income on an effective yield basis over the remaining period to
maturity of the hedged item. Where a hedged item carried at amortised cost is derecognised from the balance sheet, the
adjustment to the carrying amount of the asset or liability is immediately transferred to the statement of comprehensive income.

Cash flow hedge accounting
The criteria that must be met for a relationship to qualify for hedge accounting include:

x the hedging relationship must be formally designated and documented at inception of the hedge,

x effectiveness testing must be carried out on an on-going basis to ensure the hedge is effective and consistent with the
originally documented risk management strategy, and

x the instruments or counterparty must be a third party external to the Group.

The Group documents, at the inception of the transaction, the relationship between hedged items and hedging instruments, as
well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in cash flows of hedged items.

P. 29
12 Derivative financial instruments (continued)

Cash flow hedge accounting (continued)

A fair value gain or loss associated with the effective portion of a derivative designated as a cash flow hedge is recognised initially
in the hedging reserve. The ineffective portion of a fair value gain or loss is recognised immediately in the statement of
comprehensive income.

When a hedging derivative expires or is sold, the hedge no longer meets the criteria for hedge accounting, or the Group elects to
revoke the hedge designation, the cumulative gain or loss on the hedging derivative remains in the cash flow hedging reserve until
the forecast transaction occurs and affects income, at which point it is transferred to the corresponding income or expense line. If
a forecast transaction is no longer expected to occur, the cumulative gain or loss on the hedging derivative previously reported in
the cash flow hedging reserve is immediately transferred to the statement of comprehensive income.

Net Investment hedge
The Group held investments in foreign operations, where changes in net assets resulting from changes in foreign currency rate
were recognised in the foreign currency translation reserve.

Where the Group hedges the currency translation risk arising from net investments in foreign operations, the gains and losses on
the hedging instruments are also reflected in other comprehensive income to the extent the hedge is effective. When all or part
of a foreign operation is disposed, the cumulative value of the exchange difference is recognised in profit or loss.

The Group actively manages interest rate risk by entering into derivative contracts to hedge against movements in interest rates.
As permitted by NZ IFRS 9, the Group has elected to continue to apply the hedge accounting requirements of NZ IAS 39.

The Group's approach to managing market risk, including interest rate risk, is disclosed in Note 25 – Interest rate risk. The Group
actively manages residual interest rate risk from the net exposure of its underlying assets and liabilities, associated with the
mismatch of the interest rate repricing profiles of its interest earning assets and interest bearing liabilities, by entering into
interest rate swaps to hedge against movements in interest rates.

Interest rate swaps are bilateral derivative contracts with commitments to exchange one set of cash flows for another resulting in
an economic exchange of interest rates (for example, fixed rate for floating rate) without exchange of principal. Interest rate swap
notional values indicate the volume of transactions outstanding at the end of the financial year and provide basis for comparison
with instruments recognised on the balance sheet but do not necessarily indicate the amounts of future cash flows involved,
therefore don't indicate the Group's exposure to credit or market risks. The fair values of derivative instruments and their
notional values are set out in the below table.

June 2024 June 2023
Notional Fair Value Fair Value Notional
Fair Value
Fair Value
$000's
Principal Assets Liabilities Principal Assets Liabilities
Interest rate related contracts
Held as economic hedges 344,598 293 782 260,650 6,539 -
Designated as cash flow hedges 885,903 4,658 4,609 850,068 15,398 941
Designated as fair value hedges 424,502 7,365 3,626 543,200 15,045 6,683
Interest rate swaps 1,655,003 12,316 9,017 1,653,918 36,982 7,624

Foreign currency related contracts
Held as economic hedges - - - 168 1 -
Foreign currency related contracts - - - 168 1 -
Total derivative financial instruments 1,655,003 12,316 9,017 1,654,086 36,983 7,624

P. 30
12 Derivative financial instruments (continued)

Micro cash flow hedge accounting is applied to interest rate swaps designated as hedges of the Group's floating rate domestic
borrowings and deposits by using 'receive floating / pay fixed' interest rate swaps to fix the cost of floating interest rate
borrowings and deposits.

Micro fair value hedge accounting is applied to receive fixed interest rate swaps designated as hedges of interest rate risk arising
from fixed-rate subordinated notes and retail bond, and to pay fixed interest rate swaps designated as hedges of interest rate risk
arising from fixed-rate investment securities.

The Group determines whether an economic relationship between the hedged item and the hedging instrument exists based on
an assessment of the qualitative characteristics of this hedged item and the hedged risk, supported by quantitative analysis. Close
alignment of the critical terms of the hedged item and hedging instrument is also considered a strong indication of the presence
of an economic relationship by the Group.

The Group establishes a hedge ratio by aligning the par amount of the exposure to be hedged and the notional amount of the
interest rate swap designated as a hedging instrument.

Retrospective testing for each reporting period uses a regression model, which compares the change in the fair value of the
hedged item and the change in the fair value of the hedging instrument. For a hedge to be deemed effective, the change in fair
values should be within 80% and 125% of each other. Should the result fall outside this range the hedge would be deemed
ineffective and recognised immediately through the income statement in line with each hedge relationship policy above.

The hedge relationship is reviewed on a monthly basis and the hedging instruments and hedged items are de-designated and re-
designated, if necessary, based on the effectiveness test results and changes in the hedged exposure.

Hedge ineffectiveness may arise from timing difference on repricing between the hedged item and the hedging instrument,
difference in timing of their cash flows, or due to changes in the counterparties' credit risk affecting the fair value of hedging
instruments.

The following table shows the maturity and interest rate risk profiles of the interest rate swaps as hedging instruments in
continuing fair value and cash flow hedge relationships.


0-6 6-12 1-2 2-5
5+

$000's
Months Months Years Years Years Total
June 2024
Interest rate risk
Cash flow hedge relationships
Pay fixed
Nominal amounts 45,000 40,000 232,851 568,052 - 885,903
Average interest rate 5.20% 5.15% 4.71% 4.59% - -

Fair value hedge relationships
Pay fixed
Nominal amounts 10,002 50,000 55,400 209,100 - 324,502
Average interest rate 1.63% 0.73% 0.47% 4.59% -
Receive fixed
Nominal amounts - - - 100,000 - 100,000
Average interest rate - - - 4.30% -
Total interest rate risk nominal amount 55,002 90,000 288,251 877,152 - 1,310,405

P. 31
12 Derivative financial instruments (continued)


0-6 6-12 1-2 2-5
5+

$000's
Months Months Years Years Years Total
June 2023
Interest rate risk
Cash flow hedge relationships
Pay fixed
Nominal amounts - 20,000 295,000 535,068 - 850,068
Average interest rate - 4.22% 3.78% 4.00% - -

Fair value hedge relationships
Pay fixed
Nominal amounts 54,700 38,000 60,000 160,400 5,100 318,200
Average interest rate 1.17% 0.77% 0.88% 3.06% 1.51% -
Receive fixed
Nominal amounts - 125,000 - 100,000 - 225,000
Average interest rate - 1.78% - 4.30% - -
Total interest rate risk nominal amount 54,700 183,000 355,000 795,468 5,100 1,393,268

The following table sets out the accumulated fair value adjustments arising from the corresponding fair value hedge relationships
and the outcome of the changes in fair value of the hedged item as well as the hedging instruments used as the basis for
recognising effectiveness.

As at 30 June 2024
For the year ended
30 June 2024
Accumulated

amount of fair
Gain/(loss)
Carrying value hedge
recognised in
$000's
value adjustment
income statement
Interest rate risk
Investments 361,808 (4,390) 10,036
Other borrowings (99,706) 721 (4,610)
Total 262,102 (3,669) 5,426
Interest rate swaps 3,739 3,739 (5,303)
Hedge ineffectiveness of financial instruments recognised in
other income
123

P. 32
12 Derivative financial instruments (continued)

As at 30 June 2023
For the year ended
30 June 2023


Accumulated

amount of fair
Gain/(loss)
Carrying value hedge
recognised in
$000's
value adjustment
income statement
Interest rate risk
Investments 290,723 (14,893) 2,620
Other borrowings (221,956) 5,331 473
Total 68,767 (9,562) 3,093
Interest rate swaps 8,362 8,362 (3,133)
Hedge ineffectiveness of financial instruments recognised in
other income
(40)

The accumulated amount of fair value hedge adjustments included in the carrying amount of hedged items that have ceased to be
adjusted for hedging gains and losses is nil (2023: nil).

The balance of the cash flow hedge reserve, amounts recognised in the reserve, and amounts transferred out of the reserve are
shown in the following table.

June 2024 June 2023
Cash flow Cash flow
$000's
hedge reserve FCTR
1
hedge reserve FCTR
1

Cash flow hedges
Balance at beginning of year 15,075 - 7,959 -
Transferred to the income statement (744) - (1,771) -
Net (loss)/gain from change in fair value (14,233) - 11,305 -
Net movement before tax (14,977) - 9,534 -
Tax on net movement in cash flow hedge reserve 4,276 - (2,418) -
Balance at end of year 4,374 - 15,075 -
Net investment hedge - - - 2,537
1
Represents the accumulated effective amount of the hedging instrument deferred to Foreign currency translation reserve (FCTR) and is related
to hedge relationship for which hedge accounting is no longer applied.


During the year ended 30 June 2024, a gain of $0.9 million was recognised in fair value gain on derivative financial instruments in
the statement of comprehensive income related to hedge ineffectiveness from cash flow hedge relationships (2023: $0.7 million).

There were no transactions for which cash flow hedge accounting had to be ceased as a result of the highly probable cash flows
no longer being expected to occur (2023: nil).

There are $2.5 million (2023: $10.1 million) of balances recognised in the cash flow hedge reserve for which hedge accounting is
no longer applied on the basis that the associated variable cash flows are still expected to occur over the lifetime of the original
hedge relationships. The associated cash flow hedge reserve is being released over the period of the original hedge relationship
which has since been de-designated.