Heartland publishes Notice of Meeting materials

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
NZX/ASX release
31 August 2026

Heartland publishes Notice of Meeting materials

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) has today published its Notice of Meeting for
its Special Shareholder Meeting on 30 September 2026.

At the Special Shareholder Meeting, shareholders will vote on Heartland’s proposal to acquire from Toi
Foundation all TSB Bank Limited (TSB) shares on issue, and subsequently merge Heartland Bank Limited
(Heartland Bank) and TSB to create TSB Heartland Bank Limited (TSB Heartland Bank) (together, the Proposed
Transaction).

Heartland also advises it has today submitted to the Reserve Bank of New Zealand its application for consent
to the Proposed Transaction.

Heartland CEO Andrew Dixson said the Proposed Transaction is a compelling opportunity to create a stronger
New Zealand challenger bank of scale with a regional focus. He said TSB Heartland Bank would have an
enhanced ability to serve customers throughout their financial lifecycle, support a productive economy and
deliver improved financial returns to Heartland shareholders.

“At its core, the rationale is about bringing together two highly complementary banks while preserving what
makes each bank distinctive. Heartland Bank brings specialist banking expertise in areas such as reverse
mortgages, motor finance, rural and asset finance. TSB brings a strong residential mortgage portfolio,
established transactional banking capability and a cost-effective retail funding base.

“Together they create a full-service capable bank with greater product and funding diversification, while
remaining a proud New Zealand bank with deep regional roots,” said Mr Dixson.

The parties continue to target completion in December 2026, subject to Heartland shareholder approval and
any necessary regulatory approvals.

Resolutions
At the Special Shareholder Meeting, Heartland shareholders will be asked to approve:
1. the proposed acquisition by Heartland of all TSB shares on issue from Toi Foundation, and the
subsequent merger of Heartland Bank and TSB
2. the issue of 200 million Heartland shares to Toi Foundation as part of the consideration for the
Proposed Transaction
3. the appointment of a Toi Foundation nominee (Mark Darrow, current Chair of the TSB board of
directors) to the Heartland Board, and
4. an increase to Heartland's annual fee pool available for director remuneration.

The Heartland Board unanimously recommends that shareholders vote in favour of each resolution. Each
director intends to vote the shares they hold or control in favour, subject to applicable voting restrictions.

Calibre Partners has provided an Independent Expert Report on the merits of the transaction for Heartland
shareholders. They consider the proposed consideration for TSB is reasonable and, on balance, the positives of
the proposed merger outweigh the negatives for Heartland shareholders.

Special Shareholder Meeting
Heartland’s Special Shareholder Meeting will be held online at https://meetings.mpms.mufg.com/hghsm26
and in person at the World Cup Lounge, Eden Park, Auckland, New Zealand on 30 September 2026,
commencing at 3pm (NZDT).

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 2
The Notice of Meeting and Voting and Proxy Form are available from www.heartlandgroup.info/shareholder-
meetings and will be sent to shareholders shortly. Copies of these documents are attached.

Attachments:
- Notice of Meeting
- Voting and Proxy Form
- Investor Presentation
- Independent Expert Report (full)
- Independent Expert Report (summary)
- Independent Board Remuneration Benchmarking Summary Report

– ENDS –

The person who authorised this announcement:
Andrew Dixson, Chief Executive Officer

For further information and media enquiries, please contact:
Nicola Foley, Head of Corporate Communications & Investor Relations
+64 27 345 6809, nicola.foley@heartland.co.nz
Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland, New Zealand

---

1
Notice of
Special Meeting
Proposed merger of Heartland Bank Limited (Heartland Bank) and TSB Bank Limited (TSB)

2
Dear Shareholders,
On behalf of Heartland’s board of directors
(Board), I am pleased to invite you to
Heartland’s Special Meeting in relation to the
proposed merger of Heartland Bank and TSB.
The Special Meeting will be held online at
https://meetings.mpms.mufg.com/hghsm26
and in person at the World Cup Lounge, Eden
Park, Reimers Avenue, Kingsland, Auckland,
New Zealand on Wednesday 30 September
2026, commencing at 3.00pm (NZDT).
On 2 June 2026, Heartland announced that
it had entered into a conditional merger
implementation agreement (MIA) w i t h To i
Foundation and Toi Foundation Holdings
Limited to merge Heartland Bank and TSB.
Under the proposed transaction, Heartland
will acquire from Toi Foundation all TSB shares
on issue for an aggregate consideration
of NZ$620 million, representing 76% of
TSB’s book value as at 31 December 2025.
Immediately following the acquisition,
Heartland Bank and TSB will merge to create
TSB Heartland Bank Limited (TSB Heartland
Bank). Together, this is referred to as the
Proposed Merger.
This Proposed Merger would bring together
two New Zealand banks with strong regional
heritage and complementary strengths.
By combining Heartland Bank’s specialist
product expertise with TSB’s cost-
effective funding platform and established
transactional banking capabilities, TSB
Heartland Bank will be a full-service capable
bank differentiated by its specialist products,
with a lower risk-weighted product portfolio.
Greater scale and diversification across
products and locations will create a more
financially efficient and resilient merged
bank. Over time, this is expected to deliver
improved financial returns and value for
Heartland shareholders – including enhanced
earnings per share and dividend per share
accretion through the transaction structure
and as cost synergies are realised.
We believe the Proposed Merger represents
a positive opportunity for New Zealand
banking, creating a larger domestic bank with
greater scale, broader capability and a strong
regional focus.
The Proposed Merger remains subject to a
number of conditions, including Heartland
shareholder approval and the relevant
regulatory approvals, and is expected to be
completed no earlier than December 2026.
Heartland Group Holdings Limited
(Heartland) invites you, our shareholders,
to join us at our hybrid special meeting
(Special Meeting).

3
NOTICE OF SPECIAL MEETING
At this Special Meeting, Heartland
shareholders will be asked to vote on:
1. the proposed acquisition by Heartland of all
TSB shares on issue from Toi Foundation,
and the subsequent merger of Heartland
Bank and TSB
2. the issue of 200 million Heartland shares to
Toi Foundation as part of the consideration
for the Proposed Merger
3. the appointment of a Toi Foundation
nominee (Mark Darrow, current Chair of the
TSB board of directors) to the Heartland
Board, and
4. an increase to the annual fee pool available
for directors’ remuneration.
The Board unanimously supports each
resolution. More information about each
resolution is available in the Explanatory
Notes to this notice of meeting. Before
casting their vote, Heartland shareholders
are also encouraged to read the supporting
Investor Presentation, full Independent
Expert Report (or the summary of that report)
and Independent Board Remuneration
Benchmarking Summary Report, each
available on Heartland’s website at
heartlandgroup.info/shareholder-meetings.
If you are unable to attend the Special
Meeting either in person or online,
I encourage you to cast a postal vote or
appoint a proxy to attend and vote
at the Special Meeting on your behalf.
Your personalised voting form accompanies
this notice of meeting.
For those shareholders who are attending the
Special Meeting in person, please bring the
enclosed voting form with you to assist with
your registration.
You are invited to join the Board and senior
management for light refreshments at the
conclusion of the meeting.
On behalf of the Board,
Greg Tomlinson
Chair of the Board

4
Executive summary
The proposed acquisition by Heartland of
all TSB shares on issue from Toi Foundation,
and the subsequent merger of Heartland
Bank and TSB remains subject to a number
of conditions in the MIA, including Heartland
shareholder approval.
At the Special Meeting, Heartland
shareholders will be asked to vote on:
• the proposed acquisition by Heartland
of all TSB shares on issue from Toi
Foundation, and the subsequent merger of
Heartland Bank and TSB
• the issue of 200 million fully paid ordinary
Heartland shares to Toi Foundation at
a price of NZ$1.25 per share as partial
consideration for the Proposed Merger,
and
• the appointment of a Toi Foundation
nominee to the Heartland Board,
with effect from completion of the
acquisition by Heartland of all of the shares
in TSB.
Approval of these resolutions will fulfil the
Heartland shareholder approval condition of
the MIA.
While not a condition of the MIA, Heartland
shareholders will also be asked to vote on
a proposed increase to the annual fee pool
available for directors’ remuneration. An
increased fee pool will accommodate the
appointment of:
• a Toi Foundation nominee to the Heartland
Board, with effect from completion of the
acquisition by Heartland of all of the shares
in TSB; and
• two existing TSB directors to the TSB
Heartland Bank Board, with effect from
completion of the Proposed Merger,
and reflect the increased scale and
complexity of the enlarged banking group.
To support Heartland shareholders to make
an informed decision as to how to vote, a brief
description of each resolution is included in
the Explanatory Notes on pages 6-13. Further
information about the Proposed Merger and
the resolutions is available to shareholders at
heartlandgroup.info/shareholder-meetings,
and includes:
• the Investor Presentation (updated
from the presentation published with
Heartland’s announcement of the
Proposed Merger on 2 June 2026) which
sets out further information about the
Proposed Merger, its rationale, the
terms and conditions of the MIA, the
consideration payable, and the key risks
associated with the Proposed Merger
• the full Independent Expert Report by
Calibre Partners opining on the merits
of the Proposed Merger (together with a
summary of that report), and
• the Independent Board Remuneration
Benchmarking Summary Report by
Propero in respect of the increase to the
annual fee pool available for directors’
remuneration.
Information about voting rights, postal voting,
appointing a proxy, and submitting questions
before the Special Meeting is set out on
page 14. Details on how to attend the Special
Meeting online or in person, including parking
and a venue map, can be found on page 15.

5
NOTICE OF SPECIAL MEETING
Agenda for the Special Meeting
A. Chair’s welcome and address
B. Chief Executive Officer’s address
C. Shareholder discussion
D. Formal business
To consider and, if thought fit, pass the following resolutions:
Resolution 1: Merger of Heartland Bank and TSB
That the acquisition by Heartland of all of the shares in TSB and the subsequent amalgamation
of Heartland Bank and TSB (with Heartland Bank being the amalgamated company) under the
merger implementation agreement dated 1 June 2026 between Heartland, Toi Foundation and
Toi Foundation Holdings Limited be approved, confirmed and ratified for all purposes, including
section 129 of the Companies Act 1993 and NZX Listing Rule 5.1.1.
Resolution 2: Issue of consideration shares
That the issue of 200,000,000 fully paid ordinary shares in Heartland to Toi Foundation at an
issue price of NZ$1.25 per share on completion of, and as partial consideration for, the acquisition
by Heartland of all of the shares in TSB be approved, confirmed and ratified for all purposes,
including NZX Listing Rule 4.1.1.
Resolution 3: Election of Mark Darrow as a Heartland Director
That Mark Darrow, having been nominated by the Board of Heartland in each director’s capacity
as a shareholder of Heartland, be elected as a director of Heartland with effect on and from
the completion of the acquisition by Heartland of all of the shares in TSB.
Resolution 4: Directors’ remuneration
That the total annual remuneration available to all non-executive directors of Heartland and its
subsidiaries be increased from NZ$2,400,000 or AU$2,200,000 (whichever is the greater amount
from time to time) to NZ$2,600,000 or AU$2,350,000
1
(whichever is the greater amount from time
to time), an increase of NZ$200,000 or AU$150,000 (8.33% and 6.82% respectively) effective for
the financial year ending 30 June 2027 onwards, with such sum to be divided amongst the non-
executive directors as the Board may determine from time to time.
Resolution 1 is a special resolution, requiring approval by a special majority of 75% or more
of the votes of those Heartland shareholders entitled to vote and voting. Resolutions 2 to
4 are ordinary resolutions, each requiring approval by a majority (being more than 50%) of
the votes of those Heartland shareholders entitled to vote and voting.
Heartland shareholders are encouraged to read this notice of meeting and the supporting
Investor Presentation, Independent Expert Report (or the summary of that report),
and Independent Board Remuneration Benchmarking Summary Report before making
a decision as to how to vote on the resolutions. The Board unanimously supports each
resolution.
NZ RegCo has confirmed it has no objection to this notice of meeting, but takes no
responsibility for any statement made in this notice of meeting.
1

An AUD/NZD exchange rate of 0.90 has been applied on the basis that it provides a more representative estimate of the long-term exchange
rate between the two currencies as compared to the spot rates in recent periods, having regard to historical AUD/NZD movements over the
past decade.

6
Explanatory notes
Resolution 1
Merger of Heartland Bank and TSB
As announced on 2 June 2026, Heartland
entered into the MIA on 1 June 2026. Under
the MIA, Heartland will acquire from Toi
Foundation all of the shares in TSB for an
aggregate consideration of NZ$620,000,000
(Acquisition). Immediately following the
Acquisition, Heartland Bank and TSB will
merge, with Heartland Bank being the
amalgamated (or surviving) company.
The merged bank will be renamed TSB
Heartland Bank.
The Proposed Merger is conditional on
the approval of Heartland’s shareholders,
which is being sought by way of this
resolution. Further information about the
Proposed Merger, its rationale, the terms
and conditions of the MIA, the consideration
payable, and the key risks associated with
the Proposed Merger is set out in the
Investor Presentation.
Listing rules requirements – acquisition
of assets
Under NZX Listing Rule 5.1.1(b), Heartland,
as a listed issuer, must obtain shareholder
approval for an acquisition of assets where
the “Gross Value” exceeds 50% of the listed
issuer’s “Average Market Capitalisation” (each
as defined in the NZX Listing Rules).
The Gross Value of the Proposed Merger,
being NZ$620,000,000, exceeds 50% of
Heartland’s Average Market Capitalisation
of NZ$1,037,509,023. Accordingly, Heartland
shareholder approval is required under NZX
Listing Rule 5.1.1(b). Heartland’s Average
Market Capitalisation has been calculated
using the 20-day volume weighted average
price (V WAP) prior to 2 June 2026, being
the day before the Proposed Merger was
announced to the market. The 20-day VWAP
is used as it is higher than the 5-day VWAP.
NZX Listing Rule 5.1.1 requires shareholder
approval by way of an ordinary resolution
(that is, more than 50% of the votes of those
shareholders entitled to vote and voting
must be in favour), unless approval is required
under section 129 of the Companies Act
1993 (Companies Act) by special resolution
(that is, 75% or more of the votes of those
shareholders entitled to vote and voting must
be in favour).
Based on Heartland’s gross assets of
NZ$1,288,560,000 as at the date of entry into
the MIA, and the aggregate consideration
payable of NZ$620,000,000 by Heartland
to Toi Foundation for the Acquisition, the
value of the Acquisition did not exceed half
the value of Heartland’s assets at the date
of entry into the MIA and did not constitute
a major transaction for the purposes of
section 129 of the Companies Act. However,
the relevant values must be assessed both
at the date of entry into the MIA and the
date of completion of the Acquisition. Given
the aggregate consideration payable by
Heartland to Toi Foundation represented
48% of the value of Heartland’s assets at
entry into the MIA, it is possible that changes
in the value of Heartland’s assets prior to
completion of the Proposed Merger could
result in shareholder approval being required
under section 129 of the Companies Act.
Although the Board does not expect the
value of Heartland’s assets to decrease
prior to completion of the Proposed Merger,
the Board considers it prudent to seek
shareholder approval by way of special
resolution for the purposes of both section
129 of the Companies Act and NZX Listing
Rule 5.1.1 to avoid any risk that the Proposed
Merger may not proceed without further
shareholder approval subsequently
being required.
Although Heartland is not required under the
NZX Listing Rules to appoint an independent
adviser to prepare a report on the merits
of the Proposed Merger, Heartland has
commissioned an Independent Expert Report
from Calibre Partners. In Calibre Partners’
opinion, the proposed consideration for
TSB is reasonable and, on balance, Calibre

7
NOTICE OF SPECIAL MEETING
Partners considers the positives of the
Proposed Merger outweigh the negatives for
Heartland shareholders.
The full Independent Expert Report (together
with a summary of that report) is available at
heartlandgroup.info/shareholder-meetings.
Shareholders are encouraged to read the
report, together with the rest of this notice
of meeting and the Investor Presentation,
before deciding how to vote on this
Resolution.
Consequences if Resolution 1 is not
approved by shareholders
If Resolution 1 is not approved by Heartland
shareholders, the condition to the Proposed
Merger relating to Heartland shareholder
approval will not be satisfied and Heartland
will not be able to proceed with the Proposed
Merger. In that event, either party may terminate
the MIA and the Proposed Merger will not
proceed. Please refer to the “Consequences if
Resolutions are not approved” section below
and the Investor Presentation for further detail
on the consequences of the Proposed Merger
not proceeding.
The Board unanimously supports the
Proposed Merger and recommends
shareholders vote in favour of Resolution 1.
Resolution 2
For the purposes of the Proposed Merger,
Heartland has agreed to issue 200,000,000
fully paid ordinary shares to Toi Foundation
at an issue price of NZ$1.25 per share (being
a 14.6% premium to Heartland’s 10-day VWAP
on the NZX of $1.09 prior to announcement
of the Proposed Merger on 2 June 2026),
as partial satisfaction of the aggregate
consideration payable by Heartland for the
Acquisition (Consideration Shares).
The Proposed Merger, including the issue of
the Consideration Shares, is conditional on
the approval of Heartland’s shareholders,
which is being sought by way of this
resolution. Further information about the
Proposed Merger, its rationale, the terms
and conditions of the MIA, the consideration
payable, and the key risks associated with
the Proposed Merger, is set out in the
Investor Presentation.
The Consideration Shares will rank
equally with all other fully paid ordinary
shares on issue in Heartland and will be
quoted on the NZX Main Board and ASX.
The Consideration Shares will be issued on
completion of the Acquisition, resulting in Toi
Foundation holding approximately 17.5% of
Heartland’s shares.
A consequence of the issue of the
Consideration Shares to Toi Foundation
is that the proportional shareholding
of existing Heartland shareholders will
reduce by approximately 17.5%. For
example, a shareholder holding 5.0% of the
shares on issue in Heartland prior to the
Consideration Shares being issued would
hold approximately 4.1% of the shares on
issue in Heartland following the issue of the
Consideration Shares.
Listing rules requirements – issue of
equity securities
Under NZX Listing Rule 4.1.1, a listed issuer
must obtain shareholder approval for an
issue of shares unless the issuer is eligible
to issue the shares under NZX Listing
Rule 4.1.2. Heartland seeks shareholder
approval by ordinary resolution to issue the
Consideration Shares pursuant to NZX Listing
Ru l e 4.1.1.
Consequences if Resolution 2 is not
approved by shareholders
If Resolution 2 is not approved by
shareholders, Heartland will not be able
to issue the Consideration Shares to
Toi Foundation and the condition to the
Proposed Merger relating to shareholder
approval will not be satisfied. In that event,
either party may terminate the MIA and the
Proposed Merger will not proceed. Please
refer to the “Consequences if Resolutions are
not approved” section below and the
Investor Presentation for further detail on
the consequences of the Proposed Merger
not proceeding.
In accordance with NZX Listing Rule 6.3.1,
Heartland will disregard any votes cast in
favour of this resolution by Toi Foundation
(and its Associated Persons), unless such

8
shareholder is casting a vote under an
expressly directed proxy of a person who is
not disqualified from voting.
Fisher Funds Management Limited is majority
owned (66%) by Toi Foundation. Therefore, as
an Associated Person of Toi Foundation, Fisher
Funds Management Limited is restricted from
voting on Resolution 2.
The Board unanimously supports the issue
of the Consideration Shares as part of
the Proposed Merger and recommends
shareholders vote in favour of Resolution 2.
Resolution 3
Election of Mark Darrow as a Heartland
Director
Under the MIA, Toi Foundation is entitled
to nominate one person for appointment
as a director of Heartland with effect from
completion of the Acquisition. Mark Darrow
has been nominated under the MIA by Toi
Foundation. Each member of the Board
2
,
in their respective capacities as shareholders
of Heartland, directed the Chief Legal Officer
of Heartland Bank to submit a nomination
on their behalf for the appointment of Mark
Darrow as a director of Heartland in the
director nomination period for this Special
Meeting. The Proposed Merger is conditional
on Heartland’s shareholders approving
this resolution.
Mark Darrow having been so nominated for
election, and being eligible, offers himself for
election by Heartland shareholders.
The appointment of Mark Darrow as a director
of Heartland is subject to Reserve Bank of
New Zealand (RBNZ) approval in accordance
with the RBNZ policy statement on the
Review of Suitability of Bank Directors and
Senior Managers issued in March 2011. If RBNZ
approval is not obtained, Mark Darrow will not
be appointed as a director of Heartland as at
completion of the Acquisition.
A brief biography of Mark Darrow is set out
below and includes information about his
current directorships.
Listing rule requirements – appointment
of director
For the purposes of the NZX Listing Rules
3
,
the Board has determined that, if elected,
Mark Darrow will be an independent director
of Heartland. The Board considers that
Mark Darrow does not have a “disqualifying
relationship” (as defined in the NZX Listing
Rules), including after having reviewed
and considered the factors set out in
Recommendation 2.4 of the NZX Corporate
Governance Code with respect to Mark
Darrow, none of which the Board considers
apply to Mark Darrow. The Board has had
regard to the fact that Mark Darrow is
currently the Chair of TSB, which is wholly
owned by Toi Foundation. Mark Darrow has
confirmed to the Board that he does not
have any other association or connection
with Toi Foundation or TSB. The Board is
satisfied that following the Acquisition, Mark
Darrow’s previous chairmanship of TSB and
the fact of his nomination by Toi Foundation
under the MIA will not reasonably influence,
or reasonably be perceived to influence,
in a material way, his capacity to bring an
independent view to decisions in relation
to Heartland, act in the best interests of
Heartland or represent the interests of
Heartland’s shareholders generally.
Biography: Mark Darrow



Mark Darrow is an experienced independent
board Chair and Director with extensive
knowledge across many sectors.
2

Being Simon Beckett, Robert Bell, Edward John Harvey, Kathryn Mitchell and Gregory Raymond Tomlinson.
3

Pursuant to NZX Listing Rule 2.6.1 the Board must determine which of its directors are Independent Directors (as defined in the NZX Listing Rules),
having had regard to the non-exhaustive factors described in the NZX Corporate Governance Code that may impact director independence.

9
NOTICE OF SPECIAL MEETING
Mark is currently the Chair of TSB, Health
New Zealand | Te Whatu Ora, the Civil Aviation
Authority, and the Advisory Boards of
Armstrong and PB Tech.
His previous Chair roles have included Inland
Revenue’s Risk & Assurance Committee,
Primary ITO, The Lines Company, Leighs
Construction and MTF Finance. He also served
as a Council Member for Auckland University
of Technology and was a director for Waka
Kotahi (NZTA), Auckland Transport, Counties
Manukau DHB, Sime Darby New Zealand,
Charlies Group, Trustees Executors, MTA and
VTNZ. He served on Eke Panuku’s Audit and
Risk Committee.
Prior to his governance career, Mark held a
number of senior executive positions over a
25-year period, including as Managing Director
for Sime Darby New Zealand and Continental
Car Services, General Manager of Peugeot
New Zealand, Executive Director for GE Money
and CEO for PGG Wrightson Finance Limited.
Mark is a Chartered Fellow of the Institute
of Directors, a Fellow of the Chartered
Accountants Australia and New Zealand, and a
Justice of the Peace of New Zealand.
Consequences if Resolution 3 is not
approved by shareholders
If Resolution 3 is not approved by
shareholders, the condition to the Proposed
Merger relating to Heartland shareholder
approval of the appointment of Toi
Foundation’s nominee to the Board will not be
satisfied. The condition in the MIA relating to
Heartland shareholder approval of Resolution
3 is for the sole benefit of Toi Foundation and
may only be waived by Toi Foundation. Any
such waiver would not affect the remaining
conditions to the Proposed Merger, nor would
it affect Heartland’s obligations under the NZX
Listing Rules to obtain shareholder approval
of any director appointments. If Resolution
3 is not approved and is not waived by Toi
Foundation, either party may terminate
the MIA and the Proposed Merger will not
proceed. Please refer to the “Consequences if
Resolutions are not approved” section below
and the Investor Presentation for further
detail on the consequences of the Proposed
Merger not proceeding.
The Board unanimously supports the
appointment of Mark Darrow to the Board
with effect on and from completion of the
Acquisition and recommends shareholders
vote in favour of Resolution 3.
Resolution 4
Directors’ remuneration
At its 2023 Annual Meeting, Heartland
obtained shareholder approval of the current
annual fee pool available to all non-executive
directors of Heartland and its subsidiaries
(Heartland group) of NZ$2,400,000 or
AU$2,200,000 (whichever is the greater
amount from time to time). Director fees are
currently paid to non-executive directors of
Heartland, Heartland Bank and Heartland Bank
Australia Limited (Heartland Bank Australia).
Following the Proposed Merger, director
fees will be paid to non-executive directors
of Heartland, TSB Heartland Bank and
Heartland Bank Australia. The Board proposes
an increase in the total annual fee pool to
NZ$2,600,000 or AU$2,350,000
4
(whichever
is the greater amount from time to time) to
address the following matters.
1. Increased number of directors post
Proposed Merger: additional fees are
needed to accommodate the appointment
of the Toi Foundation nominee to the
Heartland Board from completion of the
Acquisition and two existing TSB directors
to the TSB Heartland Bank board from
completion of the Proposed Merger.
2. Recognising time and expertise for
board committee roles: currently, the
Heartland group pays fees to directors who
chair Heartland group board committees,
but does not pay fees to other committee
members. Heartland proposes to commence
paying committee fees to Heartland group
directors who are members of board
committees to reflect the additional time
and expertise contributed by those directors
serving on committees, including as a result
of the additional scale and complexity of the
4 An AUD/NZD exchange rate of 0.90 has been applied on the basis that it provides a more representative estimate of the long-term exchange rate
between the two currencies as compared to the spot rates in recent periods, having regard to historical AUD/NZD movements over the past decade.

10
Heartland group following the Proposed
Merger. The commencement of the
payment of board committee fees reflects
the independent board remuneration
benchmarking obtained by Heartland,
which observes that the Heartland group’s
current approach of not remunerating
committee members is atypical versus
comparators. The number of directors on
the TSB Heartland Bank board audit and risk
committees will increase from completion of
the Proposed Merger in comparison to the
number of directors on current Heartland
Bank board audit and risk committees to
reflect the increased scale and complexity
of the merged bank. The Chair of a
Heartland group board of directors who is
also a member of any of the committees
of that board of directors will not receive
additional remuneration for their committee
memberships, but will (if applicable)
continue to receive additional remuneration
in their capacity as a committee chair.
The base fees payable to Heartland and
Heartland Bank non-executive directors
are not proposed to be increased, the base
fees payable to Heartland and Heartland
Bank Chairs are proposed to be increased,
and the base fees payable to the Heartland
Bank Australia Chair and non-executive
directors are proposed to reduce to
reflect independent board remuneration
benchmarking obtained by Heartland.
Proposed changes to non-executive
director fees
The current fee allocations to non-executive
director roles across the Heartland group and
the proposed fee allocations following the
increase in the annual fee pool are set out
in the following table (fees are stated in NZD
unless otherwise specified).
The changes to the annual fee pool would
come into effect on and from 1 October 2026
if Resolution 4 is passed and will apply on an
annual basis aligned to Heartland’s financial
year (pro rated for the financial year ending
30 June 2027 to reflect the increase only
being in effect for 9 months of the financial
year). However, Heartland will not utilise those
aspects of the annual fee pool applicable to
the new directors proposed to be appointed
to the Heartland Board and the TSB Heartland
Bank board in connection with the Proposed
Merger unless and until the Proposed Merger
completes.
Where a non-executive director of the
Heartland Board is also a non-executive
director of Heartland Bank or Heartland Bank
Australia, that director receives a smaller
fee in respect of their Heartland directorship
as noted in the following table. Similarly,
the Chair of Heartland Bank who is also a
non-executive director of Heartland Bank
Australia receives a smaller fee in respect
of his Heartland Bank Australia directorship
as noted in the following table. This practice
will continue following the Proposed Merger
where it is expected that three of the six non-
executive directors on the Heartland Board
will also be non-executive directors of TSB
Heartland Bank and one of the non-executive
directors on the Heartland Board will also be a
non-executive director on the Heartland Bank
Australia board.
Given Heartland’s operations in both New
Zealand and Australia (including through
Heartland Bank Australia), the Board
proposes that the fees payable to directors
of the Heartland group continue to be fixed in
both New Zealand and Australian dollars, with
whichever is the greater amount from time to
time being the limit. This will minimise the risk
of unfavourable currency movements which
may adversely impact the ability to continue
to pay Board fees at a level that will enable
Heartland to attract and retain directors with
the necessary experience.

11
NOTICE OF SPECIAL MEETING
Board / CommitteePositionCurrent fees
(per annum)
Proposed fees
(per annum)
Board of Directors – Heartland and
Heartland Bank^
Chair$175,000$200,000
Member$120,000$120,000
Board of Directors – Heartland Bank Australia
ChairAU$320,000AU$265,000
MemberAU$155,000AU$110,000
Board of Heartland Ban
k^ or Heartland
Bank Australia, where also a member of
Heartland Board
Member$25,000$25,000
Board of Heartland Ban
k Australia, where
also Heartland Bank^ Chair
MemberAU$35,000AU$25,500
Heartland Audit & Risk Committee
Chair$20,000$20,000
Member*Nil$10,000
Heartland Corporate Governance, People,
Remuneration and Nominations Committee
Chair$20,000$20,000
Member*Nil$10,000
Heartland Sustainability Committee
Chair$20,000$20,000
Member*Nil$10,000
Heartland Bank^ Audit Committee
Chair$20,000$20,000
Member*Nil$10,000
Heartland Bank^ Risk Committee
Chair$20,000$20,000
Member*Nil$10,000
Heartland Bank^ People & Culture
and Remuneration
Committee
Chair$20,000$20,000
Member*Nil$10,000
Heartland Bank Australia Audit Committee
ChairAU$25,000AU$25,000
Member*NilAU$12,500
Heartland Bank Australia Risk Committee
ChairAU$25,000AU$25,000
Member*NilAU$12,500
Heartland Bank Australia People, Remuneration
and Nominations Committee
ChairAU$25,000AU$25,000
Member*NilAU$12,500
^
Subject to completion of the Proposed Merger, Heartland Bank Limited will become TSB Heartland Bank Limited.
* The Chair of a Heartland group board of directors who is also a member of any of the committees of that board of directors will not receive additional
remuneration for their committee memberships.

12
Independent board remuneration
benchmarking review
Prior to setting the proposed base fees and
committee fees for non-executive directors
outlined above, the Board commissioned
an independent board remuneration
benchmarking review by Propero of the
current fee allocations. Propero’s Board
Remuneration Benchmarking Summary
Report is available at heartlandgroup.info/
shareholder-meetings.
Propero’s report concluded that, although
the Proposed Merger will significantly
increase the scale of the Heartland group,
current remuneration across Heartland and
Heartland Bank is generally well positioned
against the relevant comparator groups.
Director fees across Heartland and Heartland
Bank sit above the upper quartile of
comparators, so no significant adjustments
are required. However, the Chair fee of the
Heartland Board sits in the lower quartile of
the comparator range, the Chair fee of the
Heartland Bank board sits between the lower
and median quartiles of the comparator
range, and the Chair premium (being the
Chair fee relative to the base director fee) is
also low by comparison for both Heartland
and Heartland Bank.
Propero’s report concluded that Heartland
Bank Australia’s Chair and director fees are
aligned to the upper quartile of comparators
while its organisational metrics are generally
aligned to the lower quartile of comparators.
Propero recommended that careful
consideration be given to Heartland Bank
Australia board fees in particular.
Propero also noted that the Heartland group’s
current practice of not paying additional fees
to committee members is atypical versus
comparators, given that board committee
members generally receive additional
remuneration to reflect the increased
workload and responsibilities beyond the
base director fee.
Accordingly, Propero recommended an
uplift to the Chair fee of the Heartland and
Heartland Bank boards to maintain relative
market positioning and better align the Chair
premium with comparators, no change to the
base director fees, and the introduction of
committee member fees.
Propero also recommended reducing the
fees payable to the Chair and directors of
Heartland Bank Australia to better align those
fees with the scale of that entity’s operations
relative to its comparator group, and the
introduction of committee member fees.
Listing rule requirements – directors’
remuneration
NZX Listing Rule 2.11.1 requires that
remuneration of directors of a listed issuer
and its subsidiaries (unless such subsidiary
is a listed issuer of quoted equity securities)
be authorised by an ordinary resolution. In
accordance with NZX Listing Rules 2.11.5 and
6.3.1, Heartland will disregard any votes cast in
favour of this resolution by any director who is
intended to receive directors’ fees (and their
respective Associated Persons), unless such
Heartland shareholder is casting a vote under
an expressly directed proxy of a person who
is not disqualified from voting.
Consequences if Resolution 4 is not
approved by shareholders
Resolution 4 is not a condition to the
Proposed Merger under the MIA. If Resolution
4 is not approved by shareholders, the
Proposed Merger may still proceed (subject
to the other conditions being satisfied
or waived), but the increase in the total
remuneration fee pool will not take effect.
In that event, the Board would need to
manage director remuneration within the
existing annual fee pool of NZ$2,400,000
or AU$2,200,000 (whichever is greater),
which may constrain the Board’s ability to
appropriately remunerate the additional
director proposed to be appointed to the
Heartland Board under Resolution 3 following
the Acquisition and the directors to be
appointed to the TSB Heartland Bank board
following the Proposed Merger.

13
NOTICE OF SPECIAL MEETING
The Board unanimously supports the
increase of the total annual fee pool for
non-executive director remuneration and
recommends shareholders vote in favour
of Resolution 4.
Recommendation of the Board
The Board unanimously recommends the
Proposed Merger and associated matters
to Heartland shareholders for approval and
encourages all shareholders to vote in
favour of the Resolutions. In the Board’s view,
the Proposed Merger is in the best interests
of Heartland and its shareholders. The
Heartland directors intend to vote all shares
in Heartland held or controlled by them in
favour of each Resolution, subject to the
applicable voting restrictions disclosed in this
notice of meeting.
Consequences if Resolutions
are not approved
The MIA is conditional on Heartland’s
shareholders approving Resolutions 1, 2 and
3 before 5.00pm (NZDT) on 1 March 2027. The
condition relating to Resolution 3 is for the
sole benefit of Toi Foundation and may only
be waived in writing by Toi Foundation. Any
such waiver would not affect the remaining
conditions to the Proposed Merger, nor
would it affect Heartland’s obligations under
the NZX Listing Rules to obtain shareholder
approval of any director appointments. If
Resolutions 1 and 2 are not approved, or
Resolution 3 is not approved and is not
waived by Toi Foundation, either party may
terminate the MIA and the Proposed Merger
will not proceed.
If the Proposed Merger does not proceed,
Heartland would continue to operate as
it does today. See page 29 of the Investor
Presentation for more information.
Conditional nature of the Resolutions
The implementation of each of Resolution
1, 2 and 3 is effectively conditional upon all
of those Resolutions being approved by the
shareholders of Heartland or, in the case of
Resolution 3 only, waiver by Toi Foundation.
Minority buy-out rights
Heartland shareholders who vote against
Resolution 1 may have certain rights to
require Heartland to purchase their shares
if Resolution 1 is approved. Further detailed
information about these rights and the
procedure for their exercise is set out in the
Appendix to this notice of meeting.
Procedural notes
Voting
Each shareholder will be entitled to one vote
for every share held as at 5.00pm (NZDT) on
Monday 28 September 2026.
Your right to vote may be exercised by:
• attending the meeting and voting in
person
• attending the online meeting and voting
online
• submitting a postal vote
• appointing a proxy (or representative)
to attend the meeting and vote on your
behalf (Proxy).
If you are attending the meeting in person,
please bring the enclosed voting form
that will act as your admission card to
the meeting.
How to submit a postal vote or appoint
a Proxy
If you are not able to attend the Special
Meeting, either in person or online, but wish
to submit a postal vote or appoint a Proxy to
attend the online meeting and vote on your
behalf, you can:
• lodge your postal vote or appoint a Proxy
online at vote.cm.mpms.mufg.com/HGH.
You will be required to enter your CSN/
Holder Number and Authorisation Code
(FIN) (New Zealand Register) or HIN/SRN
and postcode (Australian Register). If you
do not have a FIN number, please contact
MUFG Pension & Market Services at +64 9
375 5998 or enquiriesnz@cm.mpms.mufg.
com
• complete and return the enclosed voting
form in accordance with the instructions
on the voting form.

14
A Proxy need not be a shareholder of
Heartland. If you wish, you may appoint the
Chair of the meeting as your Proxy. To do so,
please write “Chair of the meeting” in the
relevant section of the voting form. The Chair
will vote according to your instructions. If the
Chair is not instructed how to vote, the Chair
intends to vote in favour of the resolutions
(other than Resolution 4 due to the voting
restrictions outlined in the Explanatory Notes).
For your vote or Proxy to be effective, your
completed voting form must be received by
MUFG Pension & Market Services, or your
postal vote or your Proxy appointment lodged
online, by no later than 3.00pm NZDT on
Monday 28 September 2026.
Shareholder questions prior to the
Special Meeting
Shareholders are encouraged to submit
questions in advance of the Special Meeting.
Shareholders present at the Special Meeting,
whether in person or online, will have the
opportunity to ask questions during the
meeting. If you cannot attend the Special
Meeting in person or online, but would like to
ask a question, you can submit a question
by going to vote.cm.mpms.mufg.com/HGH or
emailing your Proxy Form with your question
to enquiriesnz@cm.mpms.mufg.com
(please put the words “Heartland Group
Holdings Proxy Form” in the subject line to
enable easy identification).
Shareholder questions will need to be
submitted by 3.00pm NZDT on Monday
28 September 2026. Questions should
relate to matters being addressed at the
Special Meeting.
How to attend the online meeting
To attend the online meeting, please go to
https://meetings.mpms.mufg.com/hghsm26.
Shareholders attending online will be able to
vote during the Special Meeting.
Shareholders who will be attending
the online meeting and wish to ask a
question are encouraged to submit their
question(s) prior to the Special Meeting
in accordance with the instructions
above. More information regarding virtual
attendance at the Special Meeting (including
how to vote during the meeting) is available in
the Virtual Meeting Guide available at
https://mail.cm.mpms.mufg.com/MUFG/
MUFG_VirtualMeetingGuide.pdf.

15
NOTICE OF SPECIAL MEETING
Venue and parking information
Venue
The physical meeting is being held in the
World Cup Lounge at Eden Park, Reimers
Avenue, Kingsland, Auckland.
Eden Park is centrally located and well-
connected to key transport hubs, including
major train stations and bus routes.
Parking at Eden Park
Please enter Eden Park via Gate G,
42 Reimers Avenue.
Parking in and around this area (P5) is
free of charge. Options include accessible
bays, EV charging stations and permanent
bicycle racks.
Arriving via train
Trains stop at Kingsland Station.
Follow directional signage onto Sandringham
Road.
Take a quick stroll down Sandringham Road to
Gate M, through the Bus Hub to Gate G.
Arrival
Upon arrival, make your way to reception
where you will be warmly welcomed by the
Eden Park concierge. The World Cup Lounge
is located on Level 4 and can be accessed via
the lift. For more information about getting
to the venue, visit edenpark.co.nz/plan-your-
visit/getting-here
REIMERS
BUS HUB
AVENUE
CRICKE
T
AVENUE
EAS
T
STAND
SAND
RINGHAM
RO
AD
NE
W NOR
TH R
OAD
WALTERS ROAD
NORTH STAND
SOUTH STAND
W
EST S
TAND
BELLWOOD AVENUE
RALEIGH STREET
E D EN PA R K
G

GATE
M
GATE




P5
KINGSLAND STATION

16
Appendix - Minority buy-out rights
Section 110 of the Companies Act may confer
minority buy-out rights on Heartland shareholders
who vote against Resolution 1.
For a shareholder to exercise those minority
buyout rights, the shareholder must cast all
the votes attached to shares registered in the
shareholder’s name and having the same beneficial
owner against Resolution 1. If Resolution 1 is
nevertheless passed, a shareholder who wishes
to exercise minority buy-out rights must, within 10
working days of the passing of Resolution 1, give
written notice to Heartland that the shareholder
requires Heartland to purchase the shareholder’s
shares.
Within 20 working days of receipt of the notice, the
Board must:
• agree to the purchase of the relevant shares by
Heartland; or
• arrange for some other person to agree to
purchase the relevant shares; or
• apply to the court for an order exempting
Heartland from the obligation to purchase
the relevant shares on the grounds that
the purchase would be disproportionately
damaging to Heartland or that Heartland
cannot reasonably be required to finance the
purchase or it would not be just and equitable
to require Heartland to purchase the relevant
shares or on the grounds that the Board has
resolved that the purchase of the relevant
shares by Heartland would result in it failing to
satisfy the solvency test and Heartland has,
having made reasonable efforts to do so, been
unable to arrange for the relevant shares to be
purchased by another person; or
• arrange for Resolution 1 to be rescinded by
special resolution of shareholders, or decide in
the appropriate manner not to take the action
concerned, as the case may be; and
• give written notice to the shareholder of the
Board’s decision as to which of the above
actions it will take.
Where the Board agrees to the purchase of the
relevant shares by Heartland, it must give notice to
the relevant shareholder within five working days
after the written notice of the Board’s decision
referred to in the preceding paragraph, setting
out the price the Board offers to pay for those
shares and certain information relating to how that
price was calculated. That price must be a fair and
reasonable price (as at the close of business on
the day before Resolution 1 was passed) for the
relevant shares held by the shareholder, calculated
(subject to the following two sentences) using a
default methodology described in the Companies
Act designed to allocate to the relevant shares
held by the shareholder a pro rata portion of the
fair and reasonable value of all shares in Heartland
adjusted to exclude any fluctuation in the value
of all of Heartland’s shares that occurred and that
was due to, or in expectation of, the Proposed
Merger.
The Board may use a different methodology to
calculate the fair and reasonable price if using the
default methodology would be clearly unfair to
the shareholder or Heartland (and in that case the
Board must also state in the notice that a different
methodology has been used and why calculating
the price under the default methodology would be
clearly unfair).
A shareholder may object to the price offered by
the Board by giving written notice to Heartland no
later than 10 working days after the date the Board
gave written notice to the shareholder of the price
offered by the Board. If, within that 10 working day
period, no objection to the price offered by the
Board has been received by Heartland, it must
purchase the relevant shareholder’s shares at
the nominated price. If, within that 10 working
day period, an objection to the price has been
received by Heartland, the fair and reasonable
price offered by the Board must be submitted to
arbitration. Heartland must within five working
days of receiving the objection pay to the
shareholder on a provisional basis the price offered
by the Board. The arbitration is to be conducted
in accordance with the Arbitration Act 1996. If the
price determined by the arbitrator:
• exceeds the provisional price paid by Heartland,
then the arbitrator must order Heartland to pay
the balance owing to the shareholder; or
• is less than the provisional price paid by
Heartland, then the arbitrator must order the
shareholder to pay the excess to Heartland.
Except in exceptional circumstances, the
arbitrator must award interest on any balance
payable or excess to be repaid. If a balance is owing
to the shareholder, the arbitrator may award to the
shareholder, in addition to or instead of interest,
damages for loss attributable to the shortfall in the
initial payment.
Where the Board agrees to the purchase of the
relevant shares by Heartland, on the day on which
the Board gives written notice of the Board’s
decision that Heartland will purchase the relevant
shares by Heartland, the legal title to those
shares passes to Heartland and the rights of the
relevant shareholder in relation to those shares
end. If the Board arranges for some other person
to agree to purchase the shares, the process and
terms set out in the paragraphs above apply (with
such modifications as may be necessary) to the
purchase of shares by such person. In addition,
Heartland must indemnify the shareholder in
respect of any losses suffered by the shareholder
by reason of the failure by the person to purchase
the shares at the price nominated or fixed by
arbitration, as the case may be.

20
heartlandgroup.info

---

World Cup Lounge, Eden Park, Reimers Avenue, Kingsland, Auckland, New Zealand
and online at https://meetings.mpms.mufg.com/hghsm26 at 3pm (NZDT)
Wednesday, 30 September 2026.
Admission card
If you are attending the Special Meeting, keep this form intact
and bring it to the Special Meeting for registration purposes.
If you are not attending the Special Meeting, but wish to make a
postal vote or appoint a proxy (Proxy), you can do so online or
by completing and returning this form to MUFG Pension & Market
Services. It must be received by no later than 3.00pm (NZDT) on
Monday, 28 September 2026.
This is the cut-off time for postal votes to be cast and proxies to
be appointed online.
Signing this form
If your shares are held by:
a. an individual, this form must be signed by the individual (or his or
her duly authorised attorney);
b. a company, this form must be signed by a duly authorised
signatory of the company (including a director);
c. a trust, this form should be signed as above by at least
one trustee in accordance with the relevant trust deed (in
accordance with (a) or (b) above, as applicable if the trustee is an
individual or a company);
d. a partnership, this form should be signed by at least one partner
in accordance with the rules governing the partnership (in
accordance with (a) or (b) above, as applicable if the partner is an
individual or a company); or
e. joint shareholders, this form should be signed by at least one
joint shareholder (or as otherwise required by the arrangements
between the joint shareholders) in accordance with the relevant
method for that joint shareholder set out above.
If this form is completed by an attorney or representative, a copy
of the power of attorney or letter of appointment of representative
(unless previously provided), must accompany this form together
with a completed certificate of non-revocation of authority.
Postal voting
If you are entitled to vote at the meeting, you may cast a postal
vote by ticking the Postal Vote box, completing the Resolutions
section, and signing and returning this form. Alternatively, you
can cast your postal vote online.
If you return a postal vote without indicating how you wish to
vote on a resolution, you will be deemed to have abstained
from voting on that resolution. If you lodge a postal vote and
appoint a Proxy, your postal vote will take priority over your Proxy
appointment.
Appointing a Proxy
If you are entitled to vote at the meeting, you may appoint a
Proxy by completing the Appointment of Proxy and Resolutions
sections and signing and returning this form. Alternatively,
you can appoint a Proxy online. If you return this form without
appointing a Proxy, it will be treated as a postal vote.
A Proxy does not have to be a Heartland shareholder. If your
Proxy does not attend the meeting, your vote will not be counted
(unless you have cast a postal vote before the meeting).
If you appoint a Proxy to vote on your behalf and tick the “Proxy’s
Discretion” box for a resolution, or do not direct your Proxy how
to vote on a resolution, your Proxy will vote as he/she sees fit
on that resolution. If you wish, you may appoint the Chair of
the meeting as your Proxy. To do so, please write “Chair of the
meeting” in the Appointment of Proxy section. The Chair will vote
according to your instructions. If the Chair is not instructed how
to vote, the Chair intends to vote in favour of the resolutions
(other than Resolution 4 due to the voting restrictions outlined
in the Explanatory Notes in the notice of meeting).
You may still attend the meeting virtually should you appoint a
Proxy, noting that you will not be able to vote if a Proxy has been
appointed.
2026 Heartland
Special Meeting
How to lodge your postal
vote/proxy appointment:
Online: vote.cm.mpms.mufg.com/HGH
Email: meetings.nz@cm.mpms.mufg.com
Mail: Use the enclosed reply paid envelope or send to:
MUFG Pension & Market Services, PO Box 91976,
Auckland 1142, New Zealand
Deliver: MUFG Pension & Market Services
Level 30, PwC Tower,
15 Customs Street West,
Auckland 1010
QR code: Scan this QR code with your
smartphone and vote online
Voting and
Proxy form

Postal vote
Complete this section if you will not attend the meeting but wish to cast a postal vote.
I/We wish to vote by Postal Vote (please tick the box).
Appointment of Proxy
Complete this section if you will not attend the meeting but wish to appoint someone to attend on your behalf.
I/We being a shareholder/s of Heartland hereby appoint:
Full name:
Email address:
as my/our Proxy (or representative, if a body corporate) to attend the meeting on my/our behalf and any adjournment of the meeting and
to vote on my/our behalf at the meeting and any adjournment of the meeting in accordance with my/our directions below, and to vote
on any resolutions to amend the resolution, on any resolution so amended and on any other resolution proposed at the meeting (or any
adjournment thereof).
Resolutions
Cast a postal vote, or instruct a Proxy to vote, by placing a tick in the relevant box.
If you have appointed a Proxy and want them to decide how to vote on the resolution, tick the
box “Proxy’s discretion”. Proxy’s discretion is not applicable for a postal vote.
ForAgainst
Prox y’s
discretionAbstain
1. That the acquisition by Heartland of all of the shares in TSB and the subsequent
amalgamation of Heartland Bank and TSB (with Heartland Bank being the amalgamated
company) under the merger implementation agreement dated 1 June 2026 between
Heartland, Toi Foundation and Toi Foundation Holdings Limited be approved, confirmed
and ratified for all purposes, including section 129 of the Companies Act 1993 and NZX
Listing Rule 5.1.1.
2. That the issue of 200,000,000 fully paid ordinary shares in Heartland to Toi Foundation at
an issue price of NZD$1.25 per share on completion of, and as partial consideration for, the
acquisition by Heartland of all of the shares in TSB be approved, confirmed and ratified for
all purposes, including NZX Listing Rule 4.1.1.
3. That Mark Darrow, having been nominated by the Board of Heartland in each director’s
capacity as a shareholder of Heartland, be elected as a director of Heartland with effect on
and from the completion of the acquisition by Heartland of all of the shares in TSB.
4. That the total annual remuneration available to all non-executive directors of Heartland
and its subsidiaries be increased from NZD$2,400,000 or AUD$2,200,000 (whichever is
the greater amount from time to time) to NZ$2,600,000 or AU$2,350,000 (whichever is the
greater amount from time to time), an increase of NZ$200,000 or AU$150,000 (8.33% and
6.82% respectively) effective for the financial year ending 30 June 2027 onwards, with such
sum to be divided amongst the non-executive directors as the Board may determine from
time to time.
Voting and
Proxy form
Voting restrictions
In accordance with NZX Listing Rule 6.3.1 and as set out in the notice of meeting in connection with this Special Meeting,
certain persons are restricted from voting on certain resolutions. Heartland will disregard any votes cast in favour of:
• Resolution 2 by Toi Foundation (and its Associated Persons, including Fisher Funds Management Limited); and
• Resolution 4 by any director of Heartland who is intended to receive directors’ fees (and their respective Associated
Persons),
unless such shareholder or person is casting a vote as a directed Proxy for a person who is not disqualified from voting.

Signature of shareholder(s)
Signature(s) of shareholder(s) Signature(s) of shareholder(s) Signature(s) of shareholder(s)
/ / 2026
Date of signing Day time contact phone number
Electronic Investor Communication
If you received the notice of meeting and this form by mail and would like to receive all future shareholder communications electronically
(by email) where possible, please write your email address below.
Email address:
Voting and
Proxy form
Shareholder questions
Shareholders present at the Special Meeting will have the opportunity to ask questions during the meeting. If you cannot attend but
would like to ask a question, you can submit a question online by going to vote.cm.mpms.mufg.com/HGH and completing the online
validation process or complete the question section below and return to MUFG Pension & Market Services. Questions will need to be
submitted by 3.00pm (NZDT) on Monday 28 September 2026. The Board will address and answer questions during the meeting.
Question:

---

Investor Presentation
Proposed merger of
Heartland Bank and TSB
31 August 2026

2
Contents
2
01Summary of proposed transaction3 – 11
02Funding and governance12 – 14
03Financial overview15 – 21
04Process and timing22 – 29
Appendix 01Overview of Heartland Bank and TSB30 – 36
Appendix 02Glossary and disclaimers37 - 42
Note: Any material updates to Heartland’s NZX/ASX announcements dated 2 June 20 26 or 20 August 20 26 are clearly marked throughout this presentation.
Where a slide has been updated, it is labeled as updated with changes highlighted in blue. Where a new slide has been included, it is labeled as supplementary.
Changes have been made to reflect transaction progress, updates to transaction cost estimates and NSA realisation progress as published within Heartland’s
FY20 26 financial results announcement, and to expand on the potential risks of the proposed transaction. Although Heartland and TSB’s FY20 26 financial
results have each since been released, pro forma information within this investor presentation uses financial reporting for Heartland and TSB as at 31 December
20 25, being the most recent date to which publicly available financial information is available for both banks on a comparable basis.

01
Summary of
proposed
transaction

4
Summary of proposed transaction
Proposed
transaction
summary
•On 1 June 20 26, Heartland Group Holdings Limited (Heartland) signed a conditional merger implementation agreement (MI A) with Toi
Foundation and Toi Foundation Holdings Limited ( together, Toi Foundation) to merge Heartland Bank Limited (Heartland Bank) and TSB Bank
Limited (TSB).
•Under the proposed transaction, Heartland will acquire from Toi all TSB shares on issue for an aggregate consideration of $620m.
•Immediately following the acquisition, Heartland Bank and TSB will merge via a short form amalgamation to create TSB Heartland Bank Limited
(TSB Heartland Bank).
1
•The proposed merger will create a New Zealand challenger bank of scale with a regional focus – increasing banking competition and choice for
New Zealanders. It will be a full-service capable bank differentiated by its specialist product offerings, with a lower risk-weighted product portfolio.
Financial
outcomes
•Material synergies will be progressively realised over a 3-year period post-completion by reducing shared costs across TSB Heartland Bank.
When fully realised, these synergies are expected to deliver a ~$34m p.a. benefit to profit before tax.
•Material normalised EPS accretion in excess of 20% is expected to be generated in the first year post-completion based on full run-rate
synergies
2
, alongside an enhanced DPS profile.
Consideration
•The aggregate consideration to Toi Foundation of $620 m includes a $50 m pre-completion cash dividend from TSB.
The remaining consideration comprises:
•$250 m of ordinary equity issued to Toi Foundation by Heartland ( 20 0 m shares issued at a price of $1.25 per share
3
, representing a 17.5%
ownership interest in Heartland post-completion of the proposed transaction)
•$56m subordinated debt ( issued to Toi Foundation by Heartland Bank as RBNZ eligible Tier 2 capital)
•$264m vendor loan provided to Heartland by Toi Foundation
4
.
•The aggregate consideration to Toi Foundation implies:
•0.76x TSB’s book value
5

•12.1x TSB’s LTM
5
NPAT
•8.2x TSB’s LTM
5
NPAT post achievement of full run-rate synergies realised across TSB Heartland Bank.
2, 6
1Heartland Bank will be the surviving entity following completion of the proposed merger.
2Based on steady state pre-tax cost synergies of ~$34m p.a. which will be realised over time across TSB Heartland Bank. Excludes
integration costs as these are non-recurring in nature.
3Issue price is a 14.6% premium to Heartland’s 10-day volume weighted average share price on the NZX of $1.09 prior to
announcement.
4Less the value of any non-permitted pre-completion dividend paid by TSB ( if any) , noting this would not reduce the aggregate
consideration to Toi Foundation.
5As at 31 December 2025.
6Excludes capital structure ( Tier 2 and vendor loan cost) adjustments from the proposed transaction.
The proposed merger will create a New Zealand challenger bank of scale with a regional focus.
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

5
Summary of proposed transaction
Brand and
regional
presence
•Recognising each bank’s long history and deep connection to regional New Zealand, the Heartland
Bank and TSB brands will be reflected in the merged bank’s name and branding strategies.
•TSB Heartland Bank will continue to focus on helping New Zealanders to meet their banking needs.
•It is intended that TSB Heartland Bank will retain Heartland Bank’s existing nationwide presence,
with Taranaki as a key operational hub for customer-based banking services – including
maintaining a local branch network and customer-facing roles in Taranaki.
Governance
•As part of the consideration, Toi Foundation will hold 17.5% of the shares in Heartland.
•Subject to Heartland shareholder approval, it is expected that one Toi Foundation nominee will be
initially appointed to the Heartland Board.
2

•It is also expected that on completion of the proposed transaction, two existing TSB directors will
initially join the TSB Heartland Bank Board.
3
Timing and
conditions
•Completion is being targeted in December 20 26, subject to satisfaction of the remaining
conditions in the MIA. See page 24 for the full list of conditions and page 25 for an update on the
status of each condition.
•The initial conditions (including completion of confirmatory due diligence, execution of the W&I
Deed and obtaining W&I insurance), Toi Foundation’s Taranaki community consultation and
trustee approval conditions have been satisfied.The RBNZ application has been submitted.
Heartland shareholder approval will be sought at the special shareholder meeting on 30 September
2026.
•As is the case with any acquisition, the proposed transaction is subject to various risks, including
that it may not complete if the conditions are not satisfied. See pages 27-29 for more detail on the
risks.
1Heartland and its subsidiaries.
2Effective from and subject to completion of the proposed transaction.
3Subject to the approval of the respective boards of Heartland Bank and TSB.
TSB Heartland Bank will continue to have a regional focus and nationwide presence.
Proposed structure
(post-merger)
Heartland Bank Australia Limited
Heartl and Group
1
Heartland Group Holdings Limited
NZX/ASX: HGH
New Zealand Banking
TSB Heartland Bank Limited
New Zealand company
Australian company
Australian Banking
Updated discl osure to NZX/ASX announcement dated 2 June 20 26

6
Strategic rationale
1Based on steady state pre-tax cost synergies of ~$34m p.a. which will be realised over time across TSB Heartland Bank. Excludes
integration costs as these are non-recurring in nature.
2Heartland Bank currently has a long-term credit rating of BBB stable ( issued by Fitch Australia Pty Ltd (Fitch Ratings)).
3See page 17 for further detail.
4As at 31 December 2025.
5Excludes capital structure ( Tier 2 and vendor loan cost) adjustments from the proposed transaction.
•Material 171% increase in Heartland Bank’s asset base and 72% increase in pro forma NPAT ( post synergies)
1
to create a
New Zealand challenger bank of scale.
•Greater scale and diversification across products and locations will provide improved financial efficiency and resilience.
•Enhanced regional presence through Heartland Bank’s existing nationwide presence and the intention to retain
Taranaki as a key operational hub for customer-based banking services.
Materially
increases scale in
New Zealand
•Material synergies are expected to be progressively realised over a 3-year period post-completion by reducing shared
costs across TSB Heartland Bank.
•When fully realised, these synergies are expected to deliver a ~$34m p.a. benefit to profit before tax.
3
•Potential for further upside from funding and liquidity synergies in addition to the ability to further leverage Heartland’s
investment in current and future technology programmes.
Material synergies
available
•The aggregate consideration to Toi Foundation of $620 m implies an acquisition multiple of 0 .76x TSB’s book value
4
and
8.2x TSB’s LTM
4
NPAT post achievement of full run-rate synergies realised across TSB Heartland Bank
1, 5
.
•Synergy realisation and the transaction structure are expected to drive material normalised EPS accretion in excess of
20 % for Heartl and sharehol ders in the first year post-completion
1
, alongside an enhanced DPS profile.

The enlarged
capital base and enhanced returns profile of Heartland Group may support improved share liquidity.
Significant
shareholder value
creation
•Creation of a full-service capable bank differentiated by its specialist product offerings, with a lower risk-weighted
product portfolio – and an enhanced ability to serve customers throughout their financial lifecycle.
•Access to a cost-effective deposit funding base and established transactional banking capability.
•May support an uplift in the merged bank’s long-term credit rating compared with Heartland Bank, reflecting
strengthened asset quality and risk profile.
2
Diversified and
differentiated
product set
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

7
Snapshot of TSB Heartland Bank
11
th
10
th
9
th
8
th
7
th
New 7
th
6
th
5
th

A New Zealand challenger bank of scale with a regional focus – increasing banking competition and
choice for New Zealanders.
7
Material increase in scaleScale drives efficiency opportunities
Total New Zealand assets (NZ$b)
1
$43.1b
$16.8b
$15.1b
$9.5b
$6.8b
$5.6b
$4.6b
$3.7b
KiwibankRabobankHeartland Bank + TSBTSBSBSHeartland BankBank of ChinaCo-Operative Bank
Scale, ranked by total assets
1As at 31 December 2025 per RBNZ Banking Dashboard.
2Including Heartland Bank Australia’s assets, held in a subsidiary of Heartland Bank.
Greater scale and product diversification will improve financial
efficiency and resilience.
Heartl and Bank’ s New Zeal and
asset base increases by ~1 71 %
$18.3b
2
Ability to deploy capital more effectively across a
l arger, optimised banking business.
Leverage Heartland’s investment in current and
future technology programmes.
Additional scale will drive an improved CTI ratio by
leveraging the existing fixed cost base, with a
streamlined operating model.
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

8
Snapshot of TSB Heartland Bank
TSB Heartland Bank will operate as a full-service capable bank with specialist products, benefiting
from TSB’s cost-effective funding platform.
8
1Pro forma TSB Heartland Bank. As at 31 December 20 25 for Heartland Bank and TSB. Gross receivables include Heartland Bank’s
NSAs. As at 30 June 2026, the NSA realisationprogrammehad successfully concluded ( for more information, see Heartland’s
FY2026 financial results announcement and accompanying investor presentation, available at heartl andgroup.info
).
2Business Finance includes Heartland Bank’s Asset Finance and Business Relationship portfolios.
Diversified and differentiated product setOptimised funding mix
Gross receivables
1
Funding
1
Optimised funding base through TSB’s greater proportion of
non-interest and interest bearing on call products.
Full-service capable banking with specialist products,
underpinned by low-risk reverse mortgages and home loans.
Home Loans,
54%
Motor
Finance, 13%
Reverse
Mortgages, 11%
Commercial
Property, 9%
Rural, 6%
Business
Finance
2
, 6%
Personal &
Other, 1%
Term deposit,
60%
On call bearing
interest, 30%
On call non-interest
bearing, 9%
Wholesale,
2%
$12.3b
$13.0 b
Updated discl osure to NZX/ASX announcement dated 2 June 20 26

9
Snapshot of Heartland Group
The expanded Heartland Group will retain its existing specialist product focus across New Zealand
and Australia, enhanced by full-service banking capabilities in New Zealand.
9
1Heartland Bank’s lending portfolio also includes Home Loans and Unsecured Lending portfolios in addition to core product
portfolios. Home Loans and Unsecured Lending are winding down.
2Business Finance includes Asset Finance and Business Relationship.
3Includes credit card balances and other retail lending (including personal lending which is no longer accepting new applications).
4As at 31 December 2025 for Heartland and TSB. Heartland Bank’s gross receivables include NSAs.
5Pro forma combination.
6Including Heartland Bank’s Unsecured Lending portfolio which is winding down.
Formed through the merger of several
New Zealand financial institutions in
20 11, the addition of TSB extends
Heartland Bank’s scale and capability.
Strong M&A and integration track
record, including the recent acquisition
of Challenger Bank Limited ( now
Heartland Bank Australia) – the first
Australian authorised deposit-taking
institution (ADI) to be acquired by a
New Zealand registered bank.
Continued focus on providing
specialist products in New Zealand and
Australia.
Continued investment in technology
and automation to enhance customer
and employee experience.
Key highlights
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26
New Zealand
5
A ustral iaHeartl and Group
5
Core lending products
1
Home Loans

44%
Reverse Mortgages

25%
Motor Finance

11%
Commercial Property

7%
Rural

7%
Business Finance
2

5%
Personal
3

1%
6
Gross receivabl es
4
NZ$12.3bA$2.5bNZ$15.1b
Total assets
4
NZ$15.1bA$3.1bNZ$18.3b
Funding
4
NZ$13.0 bA$2.7bNZ$16.1b
Regulatory capital
4
NZ$1.5bA$0 .3bn.a.
The acquisition of TSB provides
requisite scale in New Zealand
home loans which Heartland has
been unable to achieve organically
Gross receivabl es %

10
Continued regional focus and nationwide presence
Heartland Bank and TSB each have long histories and a deep connection to regional New Zealand,
with each bank’s portfolio reflecting its community roots.
1

1Portfolio details as at 31 March 20 25 for Heartland Bank and 31 December 20 25 for TSB.
•The proposed merger will be grounded in ensuring
good outcomes for both Heartland Bank’s and
TSB’s customers, and the communities they serve.
•With its combined rich Kiwi heritage, TSB
Heartland Bank will keep its focus on helping New
Zealanders to meet their banking needs.
•It is intended that TSB Heartland Bank will retain
Heartland Bank’s existing nationwide presence,
with Taranaki as a key operational hub for
customer-based banking services – including
maintaining a local branch network and customer-
facing roles in Taranaki.
•Key operational centre
and 7 branches in Taranaki
( of 12 nationwide)
•$4.2b Taranaki deposits
(
of $8.6b total)
•2 key offices in Canterbury
( of 8 nationwide)
•$1.1b Canterbury deposits
(
of $4.3b total)
•2 key offices in Auckland
( of 8 nationwide)
•$1.3b Auckland deposits
(
of $4.3b total)
•$0 .4b Wellington deposits
(
of $4.3b total)
•Key offices in Hamilton and
Tauranga
( of 8 nationwide)
•$0 .6b Waikato, Bay of Plenty
deposits (
of $4.3b total)
•1 branch in Auckland
( of 12 nationwide)
•$0 .9b Auckland deposits
(
of $8.6b total)
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

11
Independent Expert Report
On balance, Cal ibre Partners considers the positives of the proposed transaction outweigh the
negatives for Heartland shareholders, and that the proposed consideration for TSB is reasonable.
•Ongoing cost synergies of approximately $34m p.a. expected over a 3-year period post-completion. Revenue synergies also expected but not quantified.
•Expected to be meaningfully EPS and DPS accretive for existing Heartland shareholders, with an improved ROE supportive of a higher valuation multiple
over time.
•Expected to improve TSB Heartland Bank’s cost of funding through a diversified funding mix and may support an uplift to its long-term credit rating.
Financial
benefits
•See pages 27-29 for more detail on the risks associated with the proposed merger.
•Subject to conditions outside shareholders’ control. No certainty it will proceed even if approved by Heartland shareholders, until remaining MIA
conditions are satisfied.
•Existing shareholders’ proportional ownership will reduce by approximately 17.5% ( however, this dilution is not expected to be value dilutive) .
Other
considerations
•Total New Zealand assets would almost triple from $5.6b to $15.1b, making TSB Heartland Bank the seventh largest bank by assets in New Zealand and
better positioned to deliver operating leverage benefits.
•More diversified loan book across the expanded Heartland Group, including exposure to residential lending. Heartland’s reverse mortgage exposure
decreases from approximately half the total portfolio across New Zealand and Australia, to just under a quarter, reducing concentration risk.
•Broader product offering enables customers to be served throughout their financial lifecycle.
Scale and
diversification
Value for money
•Aggregate consideration of $620 m implies a price to book value multiple of approximately 0 .76x, within the range of approximately 0 .70 x to 0 .80 x that
Cal ibre Partners considers reasonable for TSB.
•Heartland acquires TSB at a discount to book value, reflecting benefit of economies of scale.
•Effectively acquires regulatory capital at a discount, more cheaply than Heartland could generate organically or raise externally, providing capacity for
future lending growth.
Although not required by the NZX Listing Rules, Heartland has sought an independent opinion from Cal ibre Partners on the merits of the transaction.
Shareholders are encouraged to read the Independent Expert Report ( or the summary of that report) before deciding how to vote.
Suppl ementary discl osure to NZX/ASX announcement dated 2 June 20 26

02
Funding and
governance

13
Proposed transaction funding
As part of the consideration, Toi Foundation will receive a diversified range of banking investments
with greater flexibility and liquidity than is currently possible through its ownership of TSB.
$264m
$56m
$250m
$50m
1The RBNZ has confirmed that banks may apply any of the new standardisedcredit risk weights from 1 October 20 26. The first annual step change in capital ratios is also taking place on 1 October 20 26.
Aggregate consideration to Toi Foundation of $620m comprises:
$50 m pre-completion cash dividend from TSB
$250m of ordinary equity: Ordinary shares issued in Heartl and
•Shares issued: 200m
•Issue price: $1.25 per share ( being a 14.6% premium to Heartland’s 10-day volume weighted average share price
on the NZX of $1.09 prior to announcement)
$56m subordinated debt: Issued to Toi Foundation by Heartland Bank as RBNZ eligible Tier 2 capital
•Margin: 220 bps over NZ 5Y swap rate
•Term: 10 years, callable after 5 years
$264m vendor loan: Provided to Heartland by Toi Foundation
•Term: 2 years
•Repayable at any time over the loan term without break fees applying, providing TSB Heartland Bank flexibility
to optimise capital levels post-merger and following implementation of new RBNZ capital requirements
1
Updated discl osure to NZX/ASX announcement dated 2 June 20 26

14
Heartland Group governance
Toi Foundation will hold 17.5% of the shares in Heartland. As a condition of the MIA, Toi has nominated
one person for appointment to the Heartland Board, subject to Heartland shareholder approval.
NZX / ASX listed
•Toi Foundation is strongly aligned to the continued growth and
prosperity of TSB Heartland Bank, and intends to be a long-
term, supportive sharehol der.
•As a condition of the MIA, and subject to Heartland shareholder
approval of the proposed transaction and appointment, Toi
Foundation has nominated Mark Darrow ( current TSB Chair) to
be initially appointed to the Heartland Board.
3
See Heartland’s
notice of special meeting for more information.
•It is also expected that on completion of the proposed
transaction, two existing TSB directors will initially join the TSB
Heartland Bank Board.
4
1Based on Heartl and’s share register at 30 April 20 26 .
2Related interest of Greg Tomlinson, Chair and Non-Executive, Non-Independent Director of Heartland.
3With effect on completion, subject to Heartland shareholder approval.
4Subject to the approval of the respective boards of Heartland Bank and TSB.
Heartland indicative shareholdings
1
Governance
Tomlinson Group
HGH Limited, 7.3%
2
Existing
institutional
investors, 22.7%
Existing retail
investors, 52.5%
Toi
Foundation,
1 7.5%
Updated discl osure to NZX/ASX announcement dated 2 June 20 26

03
Financial
overview

16
Financial summary
The proposed transaction is expected to create significant value for Heartland shareholders.
1
•Aggregate consideration to Toi Foundation of $620m for 100% of the shares in TSB implies:
•0.76x book value
1
•12.1x LTM
1
earnings after tax ( excluding synergies)
•8.2x LTM
1
earnings after tax ( including achievement of steady state synergies
2, 3
).
2
•The proposed transaction is expected to generate material normalised EPS accretion in excess of 20 % including steady state synergies
2
in the first
year post-completion, alongside an enhanced DPS profile.
•In addition to synergies ( see point 4 below) , returns are enhanced through the vendor loan component offered by Toi Foundation.
3•The proposed transaction is expected to enhance normalised ROE including steady state synergies.
2
4
•Pre-tax cost synergies of ~$34m p.a. are expected to be realised over time across TSB Heartl and Bank, with ful l run-rate achieved 3 years post-completion.
•Estimated total one-off integration costs of ~$34m are expected to be incurred over a 3-year period post-completion.
•Potential for further upside from funding and liquidity synergies, in addition to the ability to further leverage Heartland’s investment in current and future
technology programmes.
5
•Strong balance sheet, funding and liquidity position maintained.
•Strengthened capital position, with TSB Heartland Bank well placed to benefit from the reduction in certain RBNZ risk weightings expected from October 2026.
•The proposed transaction may support an uplift in TSB Heartland Bank’s long-term credit rating reflecting its strengthened asset quality and risk profil e.
4
6
•Transaction costs are estimated to be approximately $15m. In FY2026, transaction costs of $5.5m were expensed and therefore reflected in Heartland’s
FY2026 NPAT. It is expected that approximately $9.5m will be expensed and reflected in Heartland’s NPAT for FY20 27 ( subject to the transaction completing
in FY2027).
1As at 31 December 2025.
2Based on steady state pre-tax cost synergies of ~$34m p.a. which will be realised over time across TSB Heartland Bank. Excludes
integration costs as these are non-recurring in nature.
3Excludes capital structure ( Tier 2 and vendor loan cost) adjustments from the proposed transaction.
4Heartland Bank has a long-term credit rating of BBB stable ( issued by Fitch Ratings) .
Updated discl osure to NZX/ASX announcement dated 2 June 20 26

17
Significant synergies available
Ongoing cost synergies are expected to be realised over a three-year period across TSB
Heartland Bank.
Synergies overview
1,2
•Material synergies
3
will be realised over a 3-year period post-completion by
reducing shared costs across TSB Heartland Bank. When fully realised, these
synergies are expected to deliver a ~$34m p.a. benefit to profit before tax.
•Total one-off integration costs to realise the synergies are estimated at
~$34m and are expected to be incurred over a three-year period post-
completion.
Potential further upside
•Enhanced ability to serve evolving customer needs throughout their financial
lifecycle ( e.g. transitioning from traditional mortgage to reverse equity
product) .
•Funding synergies based on access to TSB’s cost-effective deposit base.
•Liquidity synergies based on optimising TSB Heartland Bank’s liquid asset base
post-completion.
•Ability to further leverage Heartland’s investment in current and future
technology programmes.

Work remains ongoing in relation to technology
integration costs and potential technology synergies, however these are not
expected to materially impact the transaction economics.
1EY was engaged by Heartland and Toi Foundation to assist in identifying and quantifying synergies, the pace at which they could be
realised, and the cost of extracting them.
2Assessed synergies and one-off integration costs exclude technology-related items.
3Estimated synergies are management estimates prepared for transaction evaluation purposes and are forward-looking. Cost
synergies ( ~$34m p.a.) represent expected annual pre-tax run-rate benefits anticipated to be progressively realised within 3 years
post-completion, subject to execution risk, regulatory requirements, market conditions and final integration design. Synergy
estimates have not been audited and may differ materially from actual outcomes.
Indicative phasing of pre-tax cost synergies
-
20%
40%
60%
80%
100%
% of pre
-tax cost synergies
Months from completion
Estimated cost efficiencies associated with bringing the two
banks together include reducing duplication in activities and
processes, and shared business overheads.
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

18
Heartland Group pro forma balance sheet
Balance sheet
1
HGH
( Dec-25)
TSB
( Dec-25)
Transaction
adjustments
2
HGH
pro forma
Liquid assets
$1,173.6m$1,676.1m($50.0m)$2,799.7m
Finance receivables ( net)
$7,240.2m$7,788.1 m- $15,028.3m
Other assets
$394.9m$73.7m- $468.5m
Total assets
$8,808.6m$9,537.9m($50.0m)$18,296.6m
Deposits
$6,895.2m$8,625.7m- $15,520.8m
Other borrowings
$554.6m- $320.0m$874.6m
Other liabilities
$70 .3m$97.7m- $1 67.9m
Total liabilities
$7,520.1m$8,723.3m$320.0m$16,563.4m
Total equity
$1,288.6m$814.6m($370.0m)$1,733.2m
The proposed transaction will significantly increase the size of Heartland Group.
Pro forma adjustments
•$50 m pre-completion cash dividend
from TSB to Toi Foundation
•$320m increase in borrowings,
comprising:
•$56m subordinated debt
(issued to Toi Foundation by
Heartland Bank as RBNZ eligible
Tier 2 capital)
•$264m vendor loan (provided to
Heartland by Toi Foundation)
•Change in total equity of $445m is
equal to TSB’s total equity of $815m
plus $250 m ordinary equity in
Heartland issued to Toi Foundation,
less the aggregate consideration of
$620m to Toi Foundation.
1As at 31 December 20 25 for Heartland ( unaudited) and TSB ( unaudited) .
2Excludes transaction costs.
1
1
2
2
3
3
$445m increase in book value of equity
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

19
Heartland Group pro forma NPAT
The proposed transaction is expected to materially enhance the earnings and ROE of
Heartl and Group.
Commentary
•Uplift in pro forma NPAT is
expected to drive material
normalised EPS accretion and
enhance ROE.
•Uplift is expected to support a
higher dividend payment and
DPS accretion.
•Returns are enhanced
through the vendor loan
component provided by Toi
Foundation.
•Normalised CTI ratio is
expected to improve on
Heartland’s standalone LTM
CTI ratio, underpinned by
synergy realisation.
Pro forma LTM NPAT (historical basis)
1
$84m
+$51m
$135m
( $21m)
+$6m
$120m
+$34m
($10m)
$145m
Heartland Group
standalone
NPAT
TSB
standalone
NPAT
Pro forma NPA T
( pre-capital
structure changes)
Tier 2 and
vendor loan
cost
Tax
adjustment
Pro forma
NPAT
( pre-synergies)
Cost synergies
( steady state)
Tax
adjustment
Pro forma
NPAT
(post-synergies)
1LTM as at 31 December 20 25 for Heartland and TSB.
2Base rates based on average 1m BKBM bid for 2025.
3Average balances used in ratio calculations are based on period-end balances as at 31 December 2024 and 31 December 2025.
4Percentage change relative to Heartland Group standalone.
Heartland
Group
Standalone
2
NIM
3
~3.9%~2.2%~3.0 %~2.9%~2.9%
CTI ratio~56%~67%~60%~63%~54%
Impairment
ratio
3
~0.5%~0.0%~0.2%~0.2%~0.2%
EPS8.9 cps
n.a.n.a.1 0 .5 cps1 2.6 cps
ROE
3
~6.7%~6.5%~6.6%~7.2%~8.6%
EPS accretion
4
~18%~42%
ROE accretion
4
~7%~29%
Pro forma
pre-synergies
Pro forma
post-synergies
Pro forma
pre-capital
structure changes
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

20
14.2%
16.6%
1.6%
2.9%
15.8%
19.5%
Pro forma HBL Banking
Group
HBAL
CET1Tier 2Total
Pro forma capital impact
Total
Capital: 1 4%
CET1: 11%
$ 947m
+$80 5m
($50 m)
($56m)
$1,646m
$128m
+$56m
$184m
$ 1,0 75m
$1,829m
HBL
Banking Group
regulatory capital
( Dec-25)
TSB
regul atory
capital
( Dec-25)
Pre-completion
cash dividend to
Toi
Pro forma
regulatory capital
( Dec-25)
CET1 Tier 2Total
Heartland will remain well capitalised post-transaction, with TSB Heartland Bank and Heartland Bank
Australia each maintaining strong regulatory capital positions. No ordinary equity share capital
issuances by Heartland are expected to be needed to meet future capital requirements.
1As at 31 December 2025 for Heartland and TSB, assuming no pre-completion dividend above $50m.
2HBL Banking Group includes all of Heartland Bank’s subsidiaries, including Heartland Bank Australia and Marac Insurance Limited.
3As the $56m Tier 2 instrument is issued by Heartland Bank ( rather than by Heartland as purchaser) , a corresponding liability arises
from Heartland to Heartland Bank. Heartland Bank intends to declare a $56m dividend, reducing CET1 by $56m, which will be set off
against that Heartland liabil ity.
4Based on RBNZ’s final decisions on key capital settings for deposit takers ( see next page for further detail) .
5HBAL includes Heartland Bank Australia and its subsidiaries.
The $264m vendor loan is repayable by Heartland at any
time over its two-year loan term, providing TSB Heartland
Bank with flexibility to optimise capital levels post-
merger.
HBL Banking Group regulatory capital movement
1,2
Capital ratio
1,2
RBNZ
requirements
4
Tier 2 instrument to Toi
Foundation
3
5
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

21
Pro forma capital impact
Recent RBNZ decisions on key capital settings position TSB Heartland Bank well for future growth.
1Relative to the 20 28 settings under the 20 19 RBNZ review of New Zealand’s capital adequacy.
2As at 31 December 20 25 for Heartland Bank and TSB, adjusted for the transaction consideration structure.
3Assuming a target implementation date of 1 October 2026.
4The exact timing of the RBNZ’s review of reverse mortgage risk weights has not yet been confirmed.
5In relation to New Zealand Banking Group and including ordinary internal buffers.
On a pro forma basis
2
, having regard to the impact of the recent RBNZ decision on key capital settings
3
, TSB Heartland Bank is expected to
hold approximately $289m of regulatory capital in excess of expected regulatory requirements.
5
•The RBNZ’s final decisions on key capital settings for deposit takers include the following key features set to benefit TSB Heartland Bank:
•a reduction in Tier 1 ( to 11% from 14%) and total capital ( to 14% from 16%) ratio requirements
1
;
•removal of Additional Tier 1 capital instruments, while allowing a higher mix of Tier 2 capital (to 3% from 2%)
1
; and
•more granul ar and reduced standardised risk weights, particul arl y in the productive sectors of the economy TSB Heartl and Bank will focus
on – including rural loans and residential mortgages. The RBNZ has confirmed that banks may apply any of the new standardisedcredit risk
weights from 1 October 20 26. The first annual step change in capital ratios is also taking place on 1 October 20 26.
•The RBNZ is expected to review reverse mortgage risk weights in the second half of calendar year 2026, and Heartland Bank intends to
participate in this review.
4
•Effective 1 March 20 26, the RBNZ reduced Heartland Bank’s transitional capital overlay ( imposed after the acquisition of what is now Heartland
Bank Australia) by 1.5%, from 2.0% to 0.5%.
Updated discl osure to NZX/ASX announcement dated 2 June 20 26

04
Process and
timing

23
Summary of MIA
Implementation
•A Steering Committee ( comprised of three members nominated by Heartland and three by Toi Foundation) has oversight of the
implementation process and will keep the parties informed of material developments.
•On completion of the proposed transaction:
•Heartland will acquire all of the TSB Shares from Toi Foundation (Step 1 Completion) . Step 1 Completion will occur after the parties
determine that the merged bank will be able to operate in accordance with its conditions of registration and all relevant prudential
standards.
•Immediately following Step 1 Completion, Heartland Bank and TSB will be amalgamated by way of short-form amalgamation.
•The parties have agreed an Implementation Plan which provides for the steps and actions to be undertaken by the parties to give effect
to the merger.
Consideration
•As set out on page 13.
I nterim period
•Both banks are subject to certain customary interim period covenants in the interim period between signing of the MIA and Step 1
Completion, including to operate in the ordinary course consistent with past practice. Heartland also has certain rights of reasonable
access to certain TSB executives for the purpose of planning the merger.
Termination events
•Either party may terminate if any condition is incapable of being satisfied, or is not satisfied or waived, by 5.0 0 pm NZDT on the agreed
sunset date ( being 1 March 20 27)
•If a party materially defaults in performing its completion obligations for remediable defaults, the non-defaulting party may terminate
after 5 business days notice if unremedied ( except if the default relates to certain legal documents required to effect the amalgamation,
in which case the non-defaulting party may terminate after 20 business days’ notice if unremedied) . For non-remediable defaults, the
non-defaulting party may immediately sue for specific performance or cancel the MIA, with documents and consideration to be returned.
The proposed transaction will be effected in accordance with the MIA, a summary of which is set out
on the following pages.
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

24
Summary of MIA: Conditions
Initial conditions
•Completion of confirmatory due diligence by Heartland and Toi Foundation.
•Execution of Warranty and Indemnity deed.
•W&I insurance obtained by both parties.
Rating condition
•Fitch Ratings reaffirming that TSB Heartland Bank will have a Long-Term Issuer Default Rating of at least BBB with outlook “Stabl e”.
Regulatory and
approval
conditions
•All necessary New Zealand or Australian regulatory approvals obtained by the parties as may be required, including RBNZ, FMA, APRA, and
any other New Zealand government agencies.
•The trustees of the Toi Foundation completing a community consultation process with Taranaki residents
1
in respect of the proposed
transaction and the trustees approving the sale of the TSB Shares.
•Heartland shareholders providing all necessary approvals for the proposed transaction and the appointment of the person nominated by Toi
Foundation as a director of Heartland.
Material adverse
change
•No Heartland or TSB material adverse change occurring, or coming to the attention of the parties, between signing and Step 1 Completion.
•A material adverse change for each bank, respectively, means any event which has had, or is reasonably likely to have, a material adverse
effect on the business, operations, assets, financial condition or results of the relevant bank
2
, or the ability of the relevant bank to carry on
its business, or has resulted in a reduction in the relevant bank's NPAT compared to the twelve months ended 30 April 2026 or net assets
compared to net assets as at 30 April 20 26 above specified levels ( for Heartland, on a consolidated basis) .
•Carve-outs apply for general market, economic or political conditions or changes in applicable laws or accounting rules, except to the extent
that they disproportionately impact the relevant bank.
Completion of the proposed transaction is subject to the satisfaction of conditions set out in the
MIA and summarised here.
1Residents are defined as any people residing in the Taranaki region.
2In the case of Heartland, the relevant bank will be Heartland Bank and Heartland Bank Australia assessed as a whole.
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

25
Status of MIA conditions
Completion is targeted for December 20 26, subject to satisfaction or waiver ( where applicable) of
all remaining conditions.
ConditionStatusCommentary
Initial conditions
Satisfied
•Confirmatory due diligence has been completed by both Heartland and Toi Foundation. The W&I deed has been
executed and W&I insurance has been obtained by both parties.
Rating condition
I n progress
•Heartland has engaged Fitch Ratings. The point-in-time assessment is expected to be provided immediately
following completion.
Regulatory and
approval
conditions
I n progress
•The RBNZ application has been submitted. Toi Foundation’s community consultation with Taranaki residents has
been completed and the trustees have approved the sale of the TSB Shares. Heartland shareholder approval will be
sought at its special shareholder meeting on 30 September 20 26. See the notice of meeting which accompanies this
presentation for more information on the Heartl and sharehol der approval process.
Material adverse
change
No change
•No material adverse change has occurred or come to the attention of either party as at the date of this
presentation.
Suppl ementary discl osure to NZX/ASX announcement dated 2 June 20 26

26
Indicative timetable
Key eventIndicative timing
Confirmatory due diligence completed and conditions satisfiedCompleted
Warranties and indemnities insurance obtained
Completed
TSB FY20 26 financial results
Completed
Toi Foundation community consultation period with Taranaki residents
1
Completed
Heartland FY20 26 financial results
Completed
Toi Foundation trustee approval condition satisfied
Completed
RBNZ application submitted
Completed
Notice of Meeting dispatched to Heartland shareholders
Completed
Heartland shareholder meeting to vote on proposed transaction
30 September 20 26
Targeted merger implementation date
2
December 2026
The proposed transaction remains subject to Heartland shareholder and regulatory approvals.
Heartland’s shareholder meeting to vote on the Proposed Transaction will be held on
30 September 20 26.
1Residents are defined as any people residing in the Taranaki region.
2Prior to 1 December 20 26, TSB is permitted to pay to Toi Foundation dividends of an equivalent amount to those declared or paid by
Heartland in the same period, based on the relative values of TSB and Heartland and, if the merger implementation date is delayed
beyond the 1 December 20 26 target, TSB is permitted to pay to Toi Foundation a dividend of up to $2.4m per full calendar month (pro-
rated for any partial month) from 1 December 2026 to completion, in each case funded solely from TSB’s NPAT generated during the
relevant period.
Updated discl osure to NZX/ASX announcement dated 20 August 20 26

27
Risks
As with any acquisition, there are risks associated with the proposed transaction. The key risks as at
the date of this presentation are described below. These risks do not include all risks applicable to
Heartland or the merged bank as a registered bank.
Completion risks
•There is a risk that the proposed transaction does not proceed. This may be due to the conditions not being satisfied by the requisite date or
being unable to be satisfied, including if any of the regulatory or shareholder approvals are not obtained or if regulatory approvals are on
terms and conditions which are unacceptable to either party. Heartland has incurred costs and expended resource in progressing the
transaction and if the transaction does not proceed for any reason, including in relation to the completion of the conditions and obtaining
the necessary approvals, these costs will not be recouped.
Forecast risks
•The information in this presentation includes forecasts for TSB Heartland Bank and statements about the expected benefits and fi nancial
position of the merged bank, including expected synergies. Although Heartland believes the forecasts in this presentation are well founded,
there is a risk that, as with any forecast, the actual outcome is different to that expected. The actual position may be worse than expected,
including if provisions are required which are greater than assumed to be necessary, the synergies are not achieved in full or take longer to
real ise than is anticipated, or if Heartland’s assumptions about the market and economic conditions and the customer profile of the merged
bank are incorrect. Work remains ongoing in relation to technology integration strategy, the economics of which are yet to be determined,
and therefore may cause forecasts to differ from those presented.
I nformation risk
•In progressing the transaction, including in the preparation of this presentation, Heartland has relied on information provided by or on behalf
of TSB. While Heartland has completed its confirmatory due diligence on TSB and did not in the course of that become aware of any new
information material to the proposed transaction, there remains a risk that after completion Heartland discovers that information provided
by or on behalf of TSB is incorrect, incomplete or misleading. However, Heartland emphasises that it has no reason to believe TSB has not
provided complete and accurate disclosures to Heartland and therefore believes the likelihood of this risk materialising is low.
Updated discl osure to NZX/ASX announcement dated 2 June 20 26

28
Risks
As with any acquisition, there are risks associated with the proposed transaction. The key risks as at
the date of this presentation are described below. These risks do not include all risks applicable to
Heartland or the merged bank as a registered bank.
I ntegration risks
•There may be challenges in integrating the operations, systems, processes and personnel of Heartland Bank and TSB, considering each
bank's established brand identity and operating history. Integration may take longer or be more costly than anticipated, which could delay
synergy realisation. However, Heartland has a strong M&A and integration track record, including the recent acquisition and operational
integration of what is now Heartland Bank Australia, and intends to manage integration through a structured integration plan, run via an
integration management office, and overseen by the TSB Heartland Bank board.
Key personnel
risks
•Due to the nature of the banking industry, Heartland considers certain employees of both Heartland Bank and TSB to be important for the
ongoing success of TSB Heartland Bank. If key personnel were to leave ahead of or following the merger, significant time and cost may be
spent to replace those personnel and may impact the merged bank's ability to achieve its business objectives, including the anticipated
synergies. Heartland is managing this risk through engagement with key personnel and careful integration planning.
Regul atory risks
•TSB Heartland Bank will be subject to extensive regulatory requirements and supervision, including by the RBNZ, FMA and other government
bodies. Changes in applicable laws, regulations or regulatory policy ( including prudential standards, capital requirements and risk weight
settings) could adversely affect the merged bank's operations, financial condition or compliance costs. This risk may be heightened due to
the greater scale of the merged bank ( though noting that this may also, conversely, be a mitigating factor, depending on the particul ar
regulatory impact) . While Heartland monitors regulatory developments closely, the timing and impact of future regulatory changes cannot
be predicted with certainty.
Macroeconomic
risks
•There may be broader macroeconomic events which have an adverse effect on Heartland or TSB, and if those events have a disproportionate
effect on Heartland or TSB compared to other New Zealand or Australian registered banks the Material Adverse Change (MA C) condition to
the proposed transaction may be triggered ( see page 24 for more information on this condition) , resulting in the transaction not proceeding.
Events that could give rise to a MAC include ( but are not limited to) macroeconomic factors ( such as severe economic downturn or
geopolitical instability) that cause deterioration in assets or earnings. Macroeconomic factors may impact on or exacerbate other risks,
including any challenges in integrating Heartland Bank and TSB and the expected benefits and forecast performance of the merged bank.
Suppl ementary discl osure to NZX/ASX announcement dated 2 June 20 26

29
What happens if the merger does not proceed?
The impacts of a scenario where the merger does not proceed are outlined below.
•If Heartland shareholders do not approve the merger, the shareholder approval condition will not be satisfied and the MIA will be terminable by
either party. The merger would not proceed.
•In these circumstances, Heartland would continue to operate as it does today ( under its existing regulatory licenses and conditi ons) , with
Heartland Bank and Heartland Bank Australia continuing under their respective existing strategies and operating models, which in cludes the
pursuit of value accretive acquisition opportunities.
•Heartland would not real ise the expected benefits of the merger, including the ~$34m p.a. pre-tax cost synergies, the enhanced scale and
diversification of the merged bank or the expected EPS accretion in excess of 20% or the enhanced DPS profile.
•Heartland has incurred, and will continue to incur, significant costs in connection with the proposed transaction (estimated at approximately
$15m) , including advisory, legal and regulatory costs. These costs are unlikely to be recouped if the proposed transaction does not proceed.
•There are no break fees payable by either party under the MIA if the proposed transaction does not proceed.
Suppl ementary discl osure to NZX/ASX announcement dated 2 June 20 26

Appendix 01
Overview of
Heartland Bank
and TSB

31
Overview of Heartland Bank
33%
31%
12%
26%
54%
41%
1%
3%
Lending Funding
AucklandCanterbury
Rest of NZUnallocated
Heartland Bank is the 9
th
largest New Zealand bank by total assets with core product portfolios
including Motor Finance, Reverse Mortgages, Rural and Business Finance.
1See page 34 for a detailed history of Heartland.
2As at 31 December 2025. Receivables includes NSAs.
3For New Zealand Banking Group, excluding Heartland Bank Australia.
4In addition to its core products, Heartland Bank’s lending portfolio also includes Home Loans ( ~$0.1b / ~2% of total lending) and
Unsecured Lending (~$0.05b / ~1% of total lending) which are winding down.
5As at 30 June 2025.
6Fitch credit rating.
7As at 31 March 20 25. Funding split is based on deposit mix.
Snapshot of Heartland Bank
Geographic mix
Business overview
•Heartland Bank offers specialist products with over 150 years of
banking and finance experience with regional roots dating back to
Ashburton in 1875.
1
•Heartland Bank NZ’s lending portfolio
2,3,4
includes core products
5
:
•Motor Finance ( ~$1.7b / ~37% of total lending)
Loans secured against motor vehicles or wholesale floorplan
lending.
•Reverse Mortgages ( ~$1.3b / ~30 % of total lending)
Equity release lending for older homeowners secured against
residential property.
•Rural ( ~$0 .6b / ~14% of total lending)
Lending to farming businesses including livestock finance
and farm financing.
•Business Finance ( ~$0 .8b / ~16% of total lending)
Equipment and machinery finance provided to SME
borrowers.
•In 2024, Heartland Bank became the first New Zealand registered
bank to acquire an Australian ADI.
$1.2b
Book
equity
2,3
$53m
LTM
NPAT
2,3
$5.6b
Total
assets
2,3
BBB
Credit rating
6
160k
Customers
3, 5
$4.5b
2
$4.4b
2
Bank of the Year
Savings
2018 – 2025
Outstanding Val ue
Direct Call Account2018 – 2025
32 Day Notice Saver2022 – 2025
90 Day Notice Saver2023 – 2025
Digital Saver2025
7
7
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

32
Overview of TSB
TSB is the 7
th
largest New Zealand bank by total assets with core product portfolios including Home
Loans, Commercial Property and Personal .
Snapshot of TSBGeographic mix
Business overview
•TSB offers a range of personal and business banking services
nationwide with a significant presence in the Taranaki region.
1
•TSB’s lending portfolio
2
includes core products
3
:
•Home Loans ( ~$6.5b / ~84% of total lending)
Combination of owner-occupied housing and lending for the
purpose of investment in residential property.
•Commercial Property ( ~$1.1b / ~14% of total lending)
Business loans and commercial property lending secured by
residential or commercial properties.
•Personal ( ~$0 .1b / ~1% of total lending)
Other retail lending and credit card balances.
•TSB has a low-cost funding base through transactional and
savings accounts, in addition to everyday banking.
$815m
Book
equity
2
$51m
LTM
NPAT
2
$9.5b
Total
assets
2
BBB+
Credit rating
4
12
Branches
5
160k
Customers
2
Bank of the Year
Everyday Banking2023 – 2024
Credit Cards2023 – 2025
Home Loans2025
1See page 34 for a detailed history of TSB.
2As at 31 December 2025.
3In addition to its core products, TSB’s lending portfolio also includes Rural ( ~$0.1bn / ~2% of total lending) .
4Fitch credit rating.
5In addition to 5 Banking Hubs that TSB customers can access.
6Geographic split of lending at 31 March 20 24.
$ 7.8b
2
$8.6b
2
2
6
31%
49%
46%
10%
23%
39%
3%
Lending Funding
TaranakiAuckland
Rest of NZOutside of NZ
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

33
Overview of Toi Foundation
Toi Foundation trustees are responsible for the prudent
investment of the Foundation’s assets consistent with the
purposes of the Foundation. We bel ieve this proposal
creates a win-win where we can further strengthen the
bank, retain a strong presence in Taranaki, and grow the
Foundation’s investment returns through both a
stronger, combined, performing bank investment and
some investment portfolio diversification.
Chris Ussher ( Toi Foundation Chair)
Toi Foundation overview
•Toi Foundation is a perpetual philanthropic community trust focused on
building a thriving, inclusive and equitable Taranaki for current and future
generations.
•It has owned TSB since 1988, with its investment portfolio including 100% of
TSB and 66% of Fisher Funds.
•Toi Foundation has invested significantly in its own capability in recent years,
in terms of strategic philanthropy and investment management. Toi
Foundation trustees have a plan to move towards a diversified investment
portfolio, including fixed income investments.
•Toi Foundation recognises that alternate, more cash generative assets
could facilitate improved distributions into the community compared
with more capital-intensive investments such as its current holding of
10 0 % of the ordinary equity in TSB.
•Toi Foundation also sees significant opportunity for earnings and ROE
growth for TSB through merging with Heartland Bank, including benefits
from greater scale and a more diversified product offering of the merged
bank.
Toi Foundation is the 100% owner of TSB and the last community trust to own a registered bank in
New Zealand.
CollaborativeFocusedIntegrityInnovative
Together we are
stronger.
Relationships are
authentic, enduring
and based on trust
Targeted philanthropic
efforts on areas of
greatest need.
Deliberate in our
actions
Open and trustworthy.
Value differences and
knowledge within the
community
Pursue the new. Grow
from success and
learn from failure
Values
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

34
History of Heartland
Heartland’s origins date back to the establishment of the Ashburton Permanent Building &
Investment Society in 1875. In 2011, in the wake of the Global Financial Crisis, Heartland Bank
emerged with a clear ambition to be a bank that could thrive by doing things differently.
Ashburton Permanent
Building & Investment
Society established, later
merged with SMC Building
Society and Loan & Building
Society to become CBS
Canterbury
187519231957200420112012201320142015201820222024
MARAC Finance
established to support
the growth of small to
medium sized
businesses
Southern Cross, CBS
Canterbury and
MARAC merged to
create Heartland
Building Society.
Heartland listed on
the NZX. Heartland
l ater acquires PGG
Wrightson Finance
Heartland Building
Society converted
from a building
society to a company
and became
Heartland Bank
Limited
Heartland Bank Ltd
amalgamated with its
parent company,
Heartland New Zealand
Ltd
StockCo Australia
acquired
Southern Cross opened
in Auckland offering
North Island customers
investments, savings,
loans and day to day
accounts
A ustral ian Seniors
Finance and Sentinel
established
Heartland granted
its bank
registration by the
Reserve Bank of
New Zealand
A ustral ian Seniors
Finance and Sentinel
reverse mortgage
businesses acquired
Corporate restructure
completed. Heartland
Bank Ltd became a
wholly-owned subsidiary
of new parent company,
Heartl and Group
Holdings Ltd, which
listed on the NZX and
ASX
Challenger Bank
Limited acquired and
subsequently
rebranded to
Heartland Bank
A ustral ia
2025
Heartland completes the
operational integration of
its Australian businesses
into Heartland Bank
Australia, an APRA
regulated ADI
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

35
History of TSB
Founded in 1850 to serve the people of Taranaki, today TSB enjoys nationwide trust and high brand
recognition.
1850 – 1970
Regional
Focus
1970 – 1981
Industry
Pioneers
1981 – 1996
Independence
Confirmed
1996 – 2016
National
Expansion
2016 – 2019
Re-branding &
customer
recognition
2019 – Present
Transformational
change
•Established in 1850 as
New Plymouth's
independent, self-
reliant bank
•First New Plymouth
branch opened in 1860,
growing throughout
Taranaki region
•Renamed Taranaki
Savings Bank ( 1964)
•First New Zealand bank
to offer free interest-
bearing cheque
accounts (1975)
•Technology leadership
as the first New Zealand
bank to use bank-wide
real-time computer
processing (1976) and
develop/install ATMs
(1981)
•Remained independent
when 10 of 12 New
Zealand banks merged
during 1 9 85
deregulation
•TSB Community Trust
established in 1988,
renamed TSB Bank
(1989)
•Expanded beyond
Taranaki with TSB Bank
Direct ( 1996) and Loan
Direct (1999)
•Established home loan
centres in Christchurch
( 20 0 1) and Auckland
(2002)
•Opened branches across
New Zealand including
Wellington, Auckland
and other regional cities
•TSB Bank re-branded to
TSB in 2017, leveraging
two decades of national
expansion
•Achieved widespread
recognition for superior
service levels and
customer satisfaction
•Investing in
transformational
change, including
technology, branch
rationalisation and
product offering
•Roadmap to become
New Zealand’s digital
bank of choice, whilst
maintaining award
winning customer care
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

36
Enhanced value proposition for customers and stakeholders
Two complementary banks, grounded in a focus on regional New Zealand, combined to create a New
Zealand challenger bank of scale.
Heartland BankTSBTSB Heartland Bank
A New Zealand bank with a rich Kiwi heritage
dating back to Ashburton in 1875, focused on
providing specialist banking products
Regional community roots since 1850,
delivering award-winning banking solutions
with exceptional customer service
Significant New Zealand challenger bank of
scale, providing New Zealanders with
greater choice and supporting a productive
economy
c. 160k customers
1
c. 160k customers
2
c. 320k customers
3
Digital channels, call centre, relationship
managers, third party brokers / advisors,
dealerships (franchise & non-franchise),
branded vendor financing, stock agents and
meat processors
12 branches, 5 banking hubs, digital channels,
contact centre, business, commercial and
property finance managers, home lenders, third
party mortgage advisors and ATM network
Digital distribution strategy complemented
by physical network across New Zealand
with specialist product distribution
capabilities
Motor Finance, Reverse Mortgages, Rural,
Business Finance, savings and deposits
Home Loans, Commercial Property, and
Personal Lending, savings, deposits and
everyday banking solutions
Full-service capable bank with specialist
products and a broad funding mix
Legacy
Customers
Distribution
Products
4
1As at 30 June 20 25 for Heartland Bank.
2As at 31 December 2025 for TSB.
3Pro forma without adjusting for any potential common customers.
4Includes core product portfolios.
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

Appendix 02
Glossary and
disclaimers

38
Glossary
ADI
Authorised deposit-taking institution
NIM
Net interest margin
APRA
Australian Prudential Regulation Authority
NPAT
Net profit after tax
AU Bank, AU banking, Heartland
Bank Australia, HBAL
Heartland Bank Australia Limited
NSAs
Non-strategic assets
bps
Basis points
On call
Deposits repayable on demand ( short-term) by the depositor
BV, Book value
Book value of equity ( net assets)
Receivables
Gross Finance Receivables ( includes Reverse Mortgages)
CET1
Common Equity Tier 1
RBNZ
Reserve Bank of New Zealand
CTI ratio
Cost-to-income ratio
ROE
Return on equity
DPS
Dividends per share
RWA
Risk-weighted assets
EPS
Earnings per share
S ME
Small-to-medium enterprise
FMA
Financial Markets Authority
Swap rate
Fixed rate exchanged for floating interest rate
FY
Financial year
Tier 1 capital
CET1 and some other equity-like items
HBL Banking Group
HBL Banking Group includes all of the NZ bank’s subsidiaries, including the AU
bank and Marac Insurance
Tier 2 capital
Long-term subordinated debt
Heartland, HGH
Heartl and Group Hol dings Limited or the Company
Total capital, regulatory capital
Tier 1 and Tier 2 capital
Heartland Bank, HBL, NZ Bank,
NZ Banking, Heartland Bank NZ
Heartland Bank Limited
Total capital ratio
Total capital divided by risk-weighted assets
Heartl and Group
Heartland Group Holdings Limited and its subsidiaries (including after
acquiring all of TSB Bank Limited’s shares on issue)
Toi Foundation
Toi Foundation and Toi Foundation Holdings Limited
LTM
Last twelve months
TSB
TSB Bank Limited
New Zealand Banking Group, NZ
Banking Group, NZBG
The New Zealand Banking Group consists of the NZ Bank and its NZ
subsidiaries, excluding Marac Insurance
TSB Heartland Bank
Heartland Bank Limited together with TSB Bank Limited
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26

39
Information
•The presentation ( the Presentation) contains summary information about Heartland
( NZX/ASX: HGH) , TSB, Toi Foundation, and the proposal to merge Heartland Bank with
TSB following the acquisition of all of TSB’s shares by Heartland from Toi Foundation.
•This Presentation should be read in conjunction with Heartland’s financial statements
for the year ended 30 June 20 25 and the interim financial statements for the six
months ended 31 December 20 25, TSB's disclosure statement for the six months
ended 30 September 20 25, Heartland Bank’s disclosure statement for the six months
ended 31 December 2025, TSB’s disclosure statement for the year ended 31 March
20 26, Heartland’s financial statements for the year ended 30 June 20 26 and other
announcements released to NZX and ASX ( which are available at www.nzx.com and
www.asx.com.au under the ticker code "HGH").
•The information in the Presentation has been prepared with due care and attention,
but its accuracy, correctness and completeness cannot be guaranteed. To the
maximum extent permitted by law, no person ( including Heartland, Toi Foundation,
Heartland Bank, TSB, any member of Heartland Group and their respective directors,
shareholders and employees) will be liable to any other person for any loss arising in
connection with this Presentation.
Not advice
•The information in this Presentation is of a general nature and does not constitute
legal, financial, tax, accounting, financial product or investment advice or any
recommendation
•Investors should assess their own individual financial circumstances and consult with
their own legal, tax, business and/or financial advisers before making any investment
decision.
Non-GAAP measures
•This presentation contains references to non-GAAP measures including normal ised
CTI ratio, EPS and ROE.
•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.
•Some figures in this presentation may be rounded, and so actual calculations may
differ from the figures presented.
Important notice and disclaimer and non-GAAP measures
Updated discl osure to NZX/ASX announcement dated 2 June 20 26

40
Past performance
•Past performance information provided in this presentation is given for illustrative
purposes only and should not be relied upon as ( and is not) a promise, representation,
warranty or guarantee as to the past, present or future performance of Heartland,
TSB, Toi Foundation or Heartland Group.
Forward-looking statements
•This presentation contains certain forward-looking statements with respect to the
financial condition, results of operations and business of Heartland Group.
•Forward-looking statements can generally be identified by the use of words such as
'project', 'foresee', 'plan', 'expect', 'aim', 'intend', 'anticipate', 'believe', 'estimate', 'may',
'should', 'will' or similar expressions. Forward-looking statements in this presentation
include statements regarding the Merger, Heartland Group’s strategies and future
plans, estimated synergies, and Heartland Group’s future financial performance. Any
indications of future earnings or financial position or performance and future
distributions are also forward-looking statements.
•Those plans and projections reflect current expectations, but are inherently subject
to risk and uncertainty, and may change at any time. All such forward-looking
statements involve known and unknown risks, significant uncertainties, assumptions,
contingencies, and other factors, many of which are outside the control of Heartland
and Toi Foundation, which may cause the actual results or performance of Heartland
Group to be material l y different from any future resul ts or performance expressed or
impl ied by such forward-looking statements. Such forward-looking statements speak
only as of the date of this presentation. Except as required by law or regulation
( including the NZX Listing Rules and the ASX Listing Rules) , Heartland and Toi
Foundation undertake no obligation to update these forward-looking statements for
events or circumstances that occur subsequent to the date of this presentation or to
update or keep current any of the information contained herein. Any estimates or
projections as to events that may occur in the future ( including projections of
revenue, expense, net income, performance and synergies) are based upon the best
judgement of Heartland and Toi Foundation from the information available as of the
date of this presentation. A number of factors could cause actual results or
performance to vary materially from the projections, including execution risk,
regulatory requirements, market conditions and final integration design. There is no
assurance that those plans will be implemented or that projections will be realised.
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26
Important notice and disclaimer and non-GAAP measures

41
Basis of presentation
•This Presentation has been prepared on the basis that Heartland completes the
Merger pursuant to the Merger Implementation Agreement dated 1 June 2026 (
MI A).
•Unless otherwise stated, figures labelled "Heartland" or "HGH" are sourced from the
consolidated financial statements of Heartland Group Holdings Limited, being the
interim financial statements for the six months ended 31 December 20 25, the annual
financial statements for the year ended 30 June 20 25, and presented on a last twelve
months ( LTM) basis where indicated. TSB figures are sourced from the RBNZ Bank
Financial Strength Dashboard as at 31 December 20 25 and TSB’s disclosure statement
for the six months ended 30 September 2025. Heartland Bank figures ( where used)
relate to Heartland Bank Limited and are sourced from Heartland Bank's disclosure
statement for the six months ended 31 December 2025; these may differ from
Heartland's consolidated figures due to differences in consolidation scope and
accounting presentation.
•Pro forma financial information is presented for illustrative purposes only and is not
intended to represent the actual financial position or performance of Heartland Group
or any part of Heartland Group following completion. Pro forma adjustments reflect the
assumed transaction structure, including a pre-completion dividend paid by TSB to Toi
Foundation, issuance of shares by HGH to Toi Foundation, issuance of a Tier 2
instrument by HBL, and vendor loan, as described on page 13.
•Estimated synergies are management estimates prepared for transaction evaluation
purposes and are forward-looking. See the above paragraph on forward-looking
statements for more information about how these are used in this presentation. Cost
synergies ( ~$34m p.a.) represent expected annual pre-tax run-rate benefits
anticipated to be progressively realised over a three-year period post-completion,
subject to execution risk, regulatory requirements, market conditions and final
integration design. Synergy estimates have not been audited and may differ materially
from actual outcomes.
General
•For the purposes of this disclaimer, "Presentation" means the slides, any oral
presentation of the slides by Heartland, any question-and-answer session that
follows that oral presentation, hard copies of this Presentation and any materials
distributed at, or in connection with, that Presentation.
•All intellectual property, proprietary and other rights and interests in this Presentation
are owned by Heartland or Toi Foundation.
•The information and opinions contained in this Presentation are provided as at the
date of this Presentation and are subject to change without notice. Except as
required by law or the NZX Listing Rules or the ASX Listing Rules, no person is obliged
to update this Presentation after its release, even if things change materially or to
provide further information about Heartland, Toi Foundation, Heartland Bank, or TSB.
Discl osure previousl y provided via NZX/ASX announcement dated 2 June 20 26
Important notice and disclaimer and non-GAAP measures

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

---

Heartland Group Holdings Ltd
Independent Expert’s Report
August 2026

calibrepartners.co.nz page 1
Table of contents
1. Introduction ................................................................................................................................................................................................ 3
1.1 The Proposed Transaction .............................................................................................................................................................................. 3
1.2 Transaction rationale .......................................................................................................................................................................................... 3
1.3 Heartland shareholder approval ................................................................................................................................................................ 4
1.4 Scope of this Report ............................................................................................................................................................................................ 4
1.5 Key issues to be considered by shareholders .................................................................................................................................... 5
1.6 Other ............................................................................................................................................................................................................................. 6
2. Merits of the Proposed Transaction .............................................................................................................................................. 7
2.1 The consideration payable to Toi ............................................................................................................................................................... 7
2.2 The rationale and strategic benefits of the Proposed Transaction .................................................................................... 8
2.3 The potential impact of the Proposed Transaction on HGH’s share price ................................................................ 10
2.4 The likely consequences of the Proposed Transaction being rejected ....................................................................... 11
2.5 Risks and other considerations ............................................................................................................................................................... 11
2.6 Conditions of the Proposed Transaction .......................................................................................................................................... 12
3. New Zealand banking industry..................................................................................................................................................... 13
3.1 Market structure and market participants ..................................................................................................................................... 13
3.2 Products and lending composition ..................................................................................................................................................... 14
3.3 Competitive dynamics .................................................................................................................................................................................. 15
3.4 Digital innovation and disruption.......................................................................................................................................................... 16
3.5 Reserve Bank regulation and capital requirements ................................................................................................................. 16
3.6 Macro-economic considerations ............................................................................................................................................................ 18
3.7 Critical success factors .................................................................................................................................................................................. 19
3.8 Opportunities and risks ................................................................................................................................................................................ 20
4. Heartland company overview ........................................................................................................................................................ 22
4.1 Background and history .............................................................................................................................................................................. 22
4.2 Loan portfolio ...................................................................................................................................................................................................... 23
4.3 Non-Strategic Asset programme .......................................................................................................................................................... 24
4.4 Funding ................................................................................................................................................................................................................... 24
4.5 Capital ....................................................................................................................................................................................................................... 25
4.6 Technology ............................................................................................................................................................................................................ 25
4.7 Financial overview ............................................................................................................................................................................................ 26
4.8 Risks and opportunities ................................................................................................................................................................................ 29

calibrepartners.co.nz page 2
5. TSB company overview ..................................................................................................................................................................... 30
5.1 Background and history .............................................................................................................................................................................. 30
5.2 Loan portfolio ...................................................................................................................................................................................................... 31
5.3 Funding ................................................................................................................................................................................................................... 32
5.4 Capital ....................................................................................................................................................................................................................... 32
5.5 Technology ............................................................................................................................................................................................................ 32
5.6 Financial overview ............................................................................................................................................................................................ 34
6. The proposed consideration ........................................................................................................................................................... 37
6.1 Summary ................................................................................................................................................................................................................ 37
6.2 Price to book value analysis ....................................................................................................................................................................... 38
7. Pro-forma financial statements following the Proposed Transaction ................................................................... 42

Appendix 1: Sources of information ...................................................................................................................................................... 44
Appendix 2: Qualifications and declarations ................................................................................................................................... 45
Appendix 3: Glossary of key terms ......................................................................................................................................................... 46

calibrepartners.co.nz page 3
1. Introduction
1.1 The Proposed Transaction
Heartland Group Holdings Limited (HGH or Heartland), the parent company of Heartland Bank Ltd (HBL or
Heartland Bank), is considering the acquisition of TSB Bank Ltd (TSB) from Toi Foundation (Toi).
Immediately following the acquisition, HBL and TSB would undertake a legal amalgamation to form a
single New Zealand bank of significantly enhanced scale and diversification (the Merged Bank). Together,
this two-step process is referred to as the Proposed Transaction.
The Merged Bank would be wholly owned by HGH.
The proposed consideration to Toi for the acquisition of TSB is $620 million.
If the Proposed Transaction proceeds, the consideration to Toi would be a combination of cash, debt
instruments and shares in HGH, as follows:
Instrument $ million Description
Pre-completion
cash dividend
50.0
Dividend paid by TSB to Toi immediately prior to completion of the Proposed
Transaction.
Equity 250.0
200 million HGH shares issued to Toi at a fixed price of $1.25, resulting in Toi owning
17.5% of HGH.
Vendor
financing
264.0
Vendor finance loan facility provided by Toi. 2-year term, margin over NZ 1-month
BKBM. Repayable at any point within loan term with no break fee.
Tier 2 capital 56.0
Capital issued by HBL to Toi. 10-year term, callable after 5 years with an initial fixed
margin over the NZ 5-year swap, and a floating margin thereafter.
Total 620.0
Following the Proposed Transaction, Toi would become a 17.5% shareholder in HGH.
1.2 Transaction rationale
The rationale for the Proposed Transaction is both strategic and financial. The transaction would result in
the creation of a New Zealand bank with significantly enhanced scale and diversification. Scale is
fundamental to the banking model, as it enables the generation of returns in excess of operating and
funding costs, supporting shareholder value creation.
HGH and TSB offer distinct yet complementary product suites and differ in their regional concentrations of
depositors. Combining these capabilities would broaden the product offering and diversify the loan
portfolio, mitigating concentration and systemic risks.
A larger and more diversified Merged Bank is expected to benefit from a lower cost of funding as the
funding mix will be widened to include more non-interest-bearing deposits via transaction accounts. It
may also achieve an improvement in HBL’s (and the HGH Group’s) credit rating, which would further
reduce funding costs. Collectively, these factors are anticipated to enhance shareholder returns.

calibrepartners.co.nz page 4
1.3 Heartland shareholder approval
The Proposed Transaction requires the approval of HGH shareholders.
Relevant to this Report, there are two resolutions (the Resolutions) to be voted on:
Resolution 1: Merger of Heartland Bank and TSB
That the acquisition by Heartland of all of the shares in TSB and the subsequent
amalgamation of Heartland Bank and TSB (with Heartland Bank being the amalgamated
company) under the merger implementation agreement dated 1 June 2026 between
Heartland, Toi Foundation and Toi Foundation Holdings Limited be approved, confirmed
and ratified for all purposes, including section 129 of the Companies Act 1993 and NZX
Listing Rule 5.1.1.
Resolution 2: Consideration shares
That the issue of 200,000,000 fully paid ordinary shares in Heartland to Toi Foundation
at an issue price of NZ$1.25 per share on completion of, and as partial consideration for,
the acquisition by Heartland of all of the shares in TSB be approved, confirmed and
ratified for all purposes, including NZX Listing Rule 4.1.1.
Under the Agreement, completion is conditional on shareholder approval for both above resolutions. If one
were voted down, the transaction would not proceed.
The Shareholder Meeting to consider the Proposed Transaction is proposed to be held on
30 September 2026.
The Board of HGH fully supports the Proposed Transaction and unanimously recommends that HGH
shareholders vote in favour of the Resolutions.
Each Director of the Board of HGH has indicated that he or she will be voting the HGH shares that they
control in favour of the Resolutions.
1.4 Scope of this Report
There is no specific requirement for an independent report on the Proposed Transaction under the
Takeovers Code or the NZX Listing Rules. However, the NZX Listing Rules require that a notice of meeting
include, or be accompanied by, sufficient information to enable a reasonable shareholder to understand
the effect of each proposed resolution.
HGH has obtained this independent expert’s report (Report) to assist shareholders in voting on the
Proposed Transaction.

calibrepartners.co.nz page 5
1.5 Key issues to be considered by shareholders
Key issues for shareholders to consider:
• We consider the proposed consideration for TSB is reasonable, considering TSB’s scale and return on
equity relative to listed peers.
• HGH would acquire TSB at a discount to book value. The discount reflects the lack of economies of
scale characteristic of a small bank, rather than a concern with the quality of the underlying assets that
would require an impairment.
• The Proposed Transaction creates a bank of substantially greater scale, with a larger capital base and a
more diversified loan book.
• The Proposed Transaction is expected to yield significant cost synergies in the Merged Bank; however,
synergies do carry risk in terms of timing, cost to extract and the final value that is realised on a
continuing basis.
• The Proposed Transaction is expected to be meaningfully Earnings Per Share (EPS) and Dividend Per
Share (DPS) accretive. Together with the expected higher Return on Equity (ROE) and growth
opportunities from the enhanced ability to serve customers throughout their financial lifecycle across
respective customer bases, this is supportive of a directional increase in the Price to Book Value (P/BV)
multiple for HGH over time.
• HGH would acquire regulatory capital at a discount to its book value; it would effectively be acquiring
capital more cheaply than it could generate organically or could raise externally.
• A larger, more diversified entity is likely to be less sensitive to systemic risks and provide greater
financial stability to the HGH shareholders.
• The Proposed Transaction increases HGH’s exposure to residential lending which is a competitive
market with lower net interest margins than Heartland’s other product lines. Residential lending
would be the largest component of the loan portfolio in the merged group. Whilst Heartland has
historically offered residential mortgages, it has not previously been able to achieve meaningful scale
in this product line. The acquisition of TSB however provides immediate scale with $6.5 billion of
residential mortgage loans as at 31 December 2025.
• As with all mergers, there are integration risks (especially technology transformation) associated with
the merger of HBL and TSB.
In our opinion, the proposed consideration for TSB is reasonable. On balance we consider the
positives of the Proposed Transaction outweigh the negatives for HGH shareholders.
The above should be read in conjunction with the whole of this Report.
Voting on the Proposed Transaction is a matter for individual shareholders based on their own views as to
the value and future market conditions, risk profile, liquidity preference, portfolio strategy, tax position and
other factors. Shareholders will need to consider these consequences and, if appropriate, consult their
own professional adviser.

calibrepartners.co.nz page 6
1.6 Other
The key sources of information we have relied upon are set out in Appendix 1.
This Report should be read in conjunction with the statements and declarations set out in Appendix 2
regarding our independence, qualifications, general disclaimer and indemnity, as well as restrictions on
the use of this Report.
Unless specified otherwise:
• References to ‘$’ and ‘NZD’ are to New Zealand Dollars.
• References to ‘A$’ and ‘AUD’ are to Australian Dollars.
All amounts are in NZD unless stated otherwise.
When referring to TSB, references to financial years or ‘FY’ mean TSB’s financial years ended 31 March.
References to interim period, half years or ‘HY’ mean TSB’s interim reporting periods ended 30 September.
References to 31 December 2025 mean TSB’s data drawn from the Reserve Bank of New Zealand (RBNZ).
When referring to HGH or the Merged Bank, references to financial years or ‘FY’ mean financial years
ended 30 June. References to interim period, half year or ‘HY’ mean HGH’s interim reporting periods
ended 31 December.
Tables may not add due to rounding.

calibrepartners.co.nz page 7
2. Merits of the Proposed Transaction
We have considered the merits of the Proposed Transaction in the manner typically undertaken by an
independent adviser preparing a report under the Takeovers Code.
The Takeovers Code requires an independent adviser to form an opinion on the merits of a proposed
transaction and, in doing so, to consider matters broader than valuation alone.
The term ‘merits’ has no definition in either the Takeovers Code or in any statute dealing with securities or
commercial law in New Zealand. Although the Takeovers Code does not prescribe a meaning of the term
‘merits’, the Takeovers Panel has interpreted the word to include both positives and negatives in respect of
a transaction. Although we are not preparing this Report under the provisions of the Takeovers Code, we
have adopted this approach in preparing this Report.
2.1 The consideration payable to Toi
We have carried out analysis to assess whether the proposed consideration to Toi for TSB, at $620 million,
is reasonable. As part of the consideration, Toi will receive a pre-completion cash dividend of $50 million,
with the remaining $570 million payable by HGH.
To assess whether this consideration is reasonable, we calculate the valuation multiples and other financial
metrics implied by the proposed price. We benchmark these metrics against equivalent metrics for other
comparable institutions.
The proposed consideration to Toi of $620 million implies a P/BV in the region of 0.76x. This is based on
TSB’s book value of equity as reported to the RBNZ as at 31 December 2025.
The implied P/BV multiple is comparable to the multiples observed for listed companies we consider most
comparable to TSB with reference to or taking into account the ROE generated.
We consider a P/BV multiple of less than 1.0x is appropriate in the circumstances and is not unusual for
sub-scale banks. This reflects the overhead burden in the business model rather than the quality of the
underlying assets. In this scenario, the discount to book value reflects the lack of economies of scale rather
than an impairment of the assets.
Our analysis is provided in more detail in Section 6 of this Report.

calibrepartners.co.nz page 8
2.2 The rationale and strategic benefits of the Proposed Transaction
The Proposed Transaction is expected to deliver significant synergistic value. In this instance, synergistic
value is broader than cost savings or growth opportunities from the enhanced ability to serve customers
throughout their financial lifecycle across respective customer bases. It extends to extracting value from
the benefits of economies of scale and diversification in a banking environment.
Scale benefits
Due to the inherent operating cost structure of banks, scale is critical to delivering operating leverage
benefits. This is evident in larger banks typically reporting substantially lower Cost-To-Income (CTI) ratios.
The Proposed Transaction will create a merged bank of substantially greater scale. The total assets in
New Zealand would almost triple, increasing from $5.6 billion for HBL on a stand-alone basis to
$15.1 billion for the Merged Bank. The Merged Bank would be the seventh largest bank, by assets, in
New Zealand. While the Merged Bank would be substantially larger than HBL, it would remain small
relative to the major Australian owned banks.
Figure 1: Total assets as at 31 December 2025 ($ billions)

Source: Reserve Bank of New Zealand

212.7
139.7
138.4
131.8
43.1
16.8
15.1
9.5
6.8
5.6
ANZ
ASB
BNZ
Westpac
Kiwibank
Rabobank
HBL + TSB
TSB
SBS
HBL
'Merged
Bank'

calibrepartners.co.nz page 9
Portfolio diversification
The Proposed Transaction will create a bank with a substantially more diversified loan book and an
enhanced product offering for existing and prospective customers.
Figure 2: Portfolio diversification (shown for the HGH Group)
HGH Group loan portfolio before merger

HGH Group loan portfolio after merger

HGH has historically not succeeded in organically growing its residential mortgage loan portfolio in a
meaningful way. Following the Proposed Transaction, HGH will have a more diverse loan portfolio with
substantial exposure to residential mortgages.
HBL is currently the largest market participant in reverse mortgages in New Zealand, with a market share
in excess of 90%. Following the merger, HGH’s exposure to reverse mortgages is expected to decrease
from about half the portfolio to around a quarter, reducing concentration risk associated with this product
specifically, particularly in light of potential increased competition in New Zealand in the future (the
Australian market is substantially more competitive which has resulted in lower margins compared to
New Zealand).
Overall, HGH’s loan portfolio will be more diversified and stable, while continuing to present attractive
growth opportunities, supported by relatively low market shares in residential mortgages, motor finance
and commercial lending.
The Merged Bank’s (and HGH’s) product offering will be more extensive, and this is expected to present
opportunities to serve customers throughout their financial lifecycle. TSB customers can be offered motor
vehicle loans, asset finance loans and reverse mortgages. Similarly, HBL customers can be offered
residential mortgages and transaction accounts.
A larger, more diversified bank will be less susceptible to systemic risks and should provide greater
financial stability.
The Proposed Transaction is expected to improve HBL’s cost of funding.
HBL currently has a Fitch credit rating of BBB with a stable outlook, while TSB has a Fitch credit rating of
BBB+ with a stable outlook. The merger of HBL and TSB will result in a significantly larger asset base, with
scale improvement opportunities and a more diversified loan book. The strengthened asset quality and
risk profile of the Merged Bank may result in an uplift in the assessed long-term credit rating, which could
provide further opportunities to lower the cost of funding.
The funding mix of HBL will also be widened to include more non-interest-bearing deposits via transaction
accounts.
1%
51%
23%
12%
12%
Residential lending
Reverse mortgages
Motor finance
Commercial and
asset finance
Agricultural/personal
42%
27%
10%
13%
8%
Residential lending
Reverse mortgages
Motor finance
Commercial and
asset finance
Agricultural/personal

calibrepartners.co.nz page 10
Cost saving and revenue synergies
The Proposed Transaction is expected to deliver cost saving synergies. Ongoing cost synergies of
approximately $34 million per annum have been assessed by an internal working group (supported by
external advisers) to be progressively realised over a 3-year period post-completion. The largest
component of the expected cost savings is through leadership and back-office staff cost savings.
Conservatively, cost savings from future technology synergies have not been factored into the analysis, as
no final decision has been made on technology strategy as at the date of preparing this Report.
The transaction will also result in one-off transaction costs of $15 million. Estimated non-recurring
integration costs of $34 million are expected to be incurred over a 3-year period post completion.
Revenue synergies are also expected to be material but have not been factored into this synergy analysis
given inherent uncertainty and greater execution risk.
Access to regulatory capital at a discount
The discount to book value for the acquisition of TSB is due to a lack of economies of scale, rather than a
discount due to hidden credit losses or asset impairments. As such, HGH will acquire regulatory capital at
a discount – it would be acquiring capital more cheaply than it could generate capital organically or
externally via an equity capital raise.
In a constrained regulatory environment, growing lending typically requires incremental capital.
Acquiring capital at below book value lowers the cost of growth. It also provides a buffer to downside risk,
as purchasing assets at a discount can provide a margin of safety.
Improved financial metrics
HGH shareholders will remain invested in a listed company, but one which will benefit from improved
economies of scale and diversification benefits which will decrease risk and improve returns to
shareholders.
Heartland would acquire TSB at a discount to its book value; however, the underlying assets are not
impaired beyond the existing credit impairment provisions. Merging TSB with HBL to realise operating
and funding efficiencies and removing duplicate overheads means that the acquired assets can quickly
become value accretive.
The expected financial metrics, based on the pro-forma financial statements prepared for the Merged
Bank, are included in Section 7 of this Report.
2.3 The potential impact of the Proposed Transaction on HGH’s share price
Likely to have positive impact on HGH’s share price
All else being equal, we consider the benefits of the Proposed Transaction are likely to be supportive of a
higher share price. The financial metrics that underpin a bank valuation are expected to improve and we
consider a higher P/BV multiple will likely result.
The new shares in HGH will be issued at $1.25 per share, which is a 14.6% premium to the 10-day volume
weighted average share price on the NZX (being $1.09) immediately prior to the announcement of the
Proposed Transaction. This is not expected to be value dilutive to existing shareholders.
May increase share liquidity
The Proposed Transaction is unlikely to reduce share liquidity and may increase share liquidity due to
being a larger company with 21% more shares on issue. There is no lock up agreement for the HGH shares
that will be issued to Toi, however Toi has indicated it plans to be a long-term supportive holder of HGH
shares.

calibrepartners.co.nz page 11
Toi would have influence but could not block resolutions on its own
The Proposed Transaction would result in Toi owning a large interest in HGH. In addition, HGH
shareholders will be asked to approve the appointment of one Toi representative to the Heartland Board.
However, Toi would not be able to block ordinary or special resolutions. It is a proportional interest that
another party could acquire on-market or off-market, without making a formal Takeover Offer or seeking
HGH shareholder consent (given it does not pass the 20% threshold).
The next largest shareholder, after the Proposed Transaction, will be Tomlinson Group HGH Limited with a
7.3% shareholding.
2.4 The likely consequences of the Proposed Transaction being rejected
The alternative to the Proposed Transaction is that the status quo persists and HGH continues in its
current form.
While HGH shareholders will remain invested in a listed bank, HGH will remain significantly concentrated
to the reverse mortgage market segment. Competition within this segment is expected to increase as the
product suite and market participants mature in the New Zealand and Australian markets, likely resulting
in declines to net interest margins.
In the Australian market, new fintech and non-deposit-taking competitors have captured significant
market share in the reverse mortgage segment. As a result, Heartland Bank Australia Limited’s (HBAL)
share of new originations has declined from around 90% five years ago to around 40% currently. The
increased competition has been driven by the attractive Net Interest Margin (NIM) associated with reverse
mortgages, relative to actual impairment levels.
Heartland Bank has a greater than 90% market share in the New Zealand reverse mortgage market. High
NIM combined with low impairments will attract new entrants, and potentially the large banks to re-enter
this market if it is viewed as a growth market with attractive returns and limited reputational risk.
2.5 Risks and other considerations
The Proposed Transaction increases HGH’s exposure to residential lending which is a highly competitive
market with lower net interest margins than HGH’s existing product lines. Residential lending would be
the largest component (close to 45%) of the loan portfolio in the merged HGH group (including the
Australian operations).
TSB is highly reliant on third party mortgage originators (compared to other banks) to generate business.
Accordingly, TSB has less direct control over its mortgage product distribution.
The Proposed Transaction would result in a high deposit exposure to the Taranaki region (around 26%).
Many of these depositors have been long standing customers of TSB.
The merger has integration risks, such as:
• timing and amount of integration costs
• timing and amount of expected cost synergies
• challenges with moving to consistent technology platforms, and
• cultural integration and retention of key staff and customer relationships.
While the Merged Bank will be a larger entity, with the potential for improved shareholder returns, it will
still remain a relatively small bank in comparison to Kiwibank and the four large Australian-owned banks.

calibrepartners.co.nz page 12
2.6 Conditions of the Proposed Transaction
The Proposed Transaction is subject to conditions that are outside the control of HGH shareholders (such
as RBNZ approval, any necessary Australian regulatory approvals, confirmatory due diligence and HGH and
Toi entering into a separate warranty and indemnity deed (together with an associated warranty insurance
policy)). There is no certainty that the Proposed Transaction will proceed, even if supported by HGH
shareholders, until such time as those conditions have been satisfied.
HGH’s one substantial shareholder, Tomlinson Group HGH Limited, currently owns approximately 8.8% of
the HGH shares on issue and has committed to vote in favour of the Proposed Transaction.
If the Proposed Transaction is rejected by HGH shareholders, or the other conditions are not satisfied, the
parties to the Proposed Transaction could elect to renegotiate the transaction terms. In that circumstance
a new set of resolutions could be put to HGH shareholders.
A consequence of the issuance of a significant number of new shares in HGH is that the proportional
ownership of existing HGH shareholders in the merged group will reduce by around 17.5%. For example, a
shareholder owning say 5.0% of the issued shares will own approximately 4.1% of the issued shares in the
larger Merged Group. While this dilution to a shareholder’s proportional ownership interest is not
expected to be value dilutive to the shareholder, it will reduce a shareholder’s ability to affect shareholder
resolutions. The relevance of this dilution may be minimal to many shareholders, in circumstances where
HGH shares are widely held and the new shares will be held by a party without overall control of the
company.

calibrepartners.co.nz page 13
3. New Zealand banking industry
New Zealand’s retail banking sector is highly concentrated and largely driven by mortgage lending, with
total registered bank assets of around $770 billion as at January 2026. Banks supply roughly 94% of all
credit to households and businesses, making the performance of the banking sector closely linked to
overall economic conditions.
Despite economic pressures in recent years, the sector has remained resilient. The 2024 KPMG Financial
Institutions Performance Survey (FIPS) reports modest growth in banks’ loan portfolios and net interest
income, with stable net interest margins at about 2.34%. However, banks are experiencing higher
operating expenses, driven by increased personnel costs, ongoing investment in technology, and broader
inflationary pressures.
3.1 Market structure and market participants
New Zealand has 27 registered banks. However, the four large Australian-owned banks dominate the
sector, accounting for roughly 84% of all bank lending and holding a similar proportion of total banking
assets. New Zealand-owned banks make up about 10% of lending, with the remainder provided by other
registered banks, including branches of overseas institutions.
The Commerce Commission’s August 2024 market study found that the four major banks (ASB, ANZ,
BNZ, and Westpac) face limited competitive pressure from smaller banks. This is primarily due to the
smaller banks’ lack of scale, higher funding costs, and lower brand recognition.
Figure 3 shows the principal market participants. The significant disparity in scale between the major
Australian owned banks and the domestically owned institutions is a defining feature of the sector’s
competitive dynamics.
Figure 3: Market participants and loan book size
1
at December 2025 ($ billion)

Source: Reserve Bank of New Zealand, ‘Financial Strength Dashboard’
The four Australian-owned banks are so dominant that the combined profit of New Zealand’s next four
largest banks amounts to less than 30% of the profits earned by the smallest of the major four.
These Australian-owned banks compete across all major product categories (with the exception of reverse
mortgages and motor and asset finance), operate nationally, and serve all customer segments. Their scale
underpins a strong competitive advantage, supported by nationwide branch networks, substantial
investment in technology, strong brand recognition, access to lower-cost wholesale and offshore funding,
and the implicit backing of their highly rated Australian parent banks.

1
Net loans and advances as per the RBNZ bank dashboard
159.1
118.8
112.7
107.7
37.6
14.0
7.8
5.7
4.4
3.4
0
20
40
60
80
100
120
140
160
180
ANZASBBNZWestpacKiwibankRabobankTSBSBSHeartland
Bank
Bank of
China

calibrepartners.co.nz page 14
Among the domestic institutions, Kiwibank is the only New Zealand-owned bank with a national footprint
and a product suite that is broadly comparable to the major Australian-owned banks. However, it remains
significantly smaller in terms of total assets and does not provide institutional banking services. TSB and
Southland Building Society maintain strong regional bases in Taranaki and Southland respectively, though
both have expanded their reach in recent years through broker partnerships and digital channels.
3.2 Products and lending composition
Residential mortgage lending is central to the New Zealand banking industry and is a key driver of bank
performance.
Figure 4: Historical gross outstanding New Zealand loan balance by purpose ($ billion)

Source: Reserve Bank of New Zealand published data, ‘Banks: Assets – Loans by purpose (S31)’
A defining feature of the New Zealand banking sector is its heavy concentration in residential mortgage
lending, which has increased over the past decade. As a result, banks’ earnings and asset quality are
closely linked to the residential property market, including house‑price movements, interest‑rate settings,
and the financial wellbeing of households. This significant exposure to housing also means that
macro‑prudential tools – such as loan‑to‑value ratio (LVR) requirements and the debt‑to‑income (DTI)
restrictions introduced in 2024 – directly influence lending volumes and, in turn, revenue growth.
The major banks operate across all lending segments and provide a full range of banking services,
including personal banking, business and institutional banking, wealth management, and insurance
distribution. In contrast, smaller banks tend to focus on retail banking – primarily deposits and mortgages
– and in some cases specialise in particular niches. For example, Rabobank focuses on rural and
agricultural lending; Heartland specialises in reverse mortgages, motor‑vehicle finance, asset finance and
rural and livestock lending; and SBS and TSB maintain strong regional banking models.
Most bank funding comes from short‑term deposits, with around 83% of total bank funding maturing
within one year. Although bank assets are generally longer‑term, New Zealand bank lending is mostly at
variable or short‑term fixed interest rates (about 10% is on floating rates and roughly two‑thirds is fixed but
due to reprice within a year). This structure reduces banks’ exposure to interest rate risk but makes
borrowers more sensitive to movements in the Official Cash Rate (OCR), meaning changes in monetary
policy flow through to household cash‑flows relatively quickly.
Until late 2022, growth in outstanding loans was largely driven by rising property prices. Although
demand for new mortgages has since slowed as interest rates have increased, the higher rates have
enabled banks to earn greater overall mortgage revenue, even with lower lending volumes.
50
100
150
200
250
300
350
400
Dec 2016Dec 2017Dec 2018Dec 2019Dec 2020Dec 2021Dec 2022Dec 2023Dec 2024Dec 2025
Housing loansBusiness loansAgriculture loans

calibrepartners.co.nz page 15
Figure 5: OCR and banks interest income

Source: Reserve Bank of New Zealand
3.3 Competitive dynamics
The Commerce Commission’s study found that New Zealand’s banking sector has limited competition,
largely because there is no ‘maverick’ provider willing or able to disrupt the market. It concluded that the
four largest banks operate as a “stable oligopoly,” with little incentive to compete aggressively on price.
Market shares have remained steady over time: ANZ has consistently held around 30%, while ASB, BNZ,
and Westpac each hold between 18% and 20%. No smaller bank has grown its market share beyond
approximately 5%.
Competition has historically centred on mortgage rates, where banks periodically offer short-term special
rates to attract new borrowers. However, these offers are quickly matched by other banks, meaning no
single bank can gain a lasting advantage through pricing alone. The major banks’ CTI ratios, which have
typically remained between 35% and 45%, indicate strong scale efficiencies that are difficult for smaller
banks to replicate.
The introduction of open banking represents a potentially material structural change. Open banking is a
regulated system that will give customers control over their banking data and payment capabilities. It will
allow accredited third-party providers to access customer banking data (with customer consent) through
standardised APIs, potentially enabling new competitive dynamics through:
• Improved product comparison
• Reduced barriers for customers to switch banks
• Deliver lower-cost financial services
• Improved innovation and develop novel financial services products
The Commerce Commission has identified open banking as a potential “game changer” for competition in
the banking sector. However, the pace and scale of its impact remain uncertain. Open banking will be
introduced in stages, beginning on 1 December 2025, when the four major banks were required to have
specific open-banking systems in place. Kiwibank will follow during 2026, while all other banks and
deposit takers may choose to opt in voluntarily.
.0
1.0
2.0
3.0
4.0
5.0
6.0
0
2,000
4,000
6,000
8,000
10,000
12,000
Dec 2021Dec 2022Dec 2023Dec 2024Dec 2025
OCR (%)
$ Millions
Interest incomeOCR%

calibrepartners.co.nz page 16
3.4 Digital innovation and disruption
New Zealand has one of the highest levels of digital banking engagement globally, with more than 60% of
customers regularly using online or mobile banking. Customer behaviour continues to shift towards digital
channels, with only about 3% of customers visiting a branch at least once a week. The major banks have
invested heavily in digital platforms, mobile banking applications, and process automation. While these
investments have contributed to rising operating costs in recent years, they are expected to deliver
longer-term efficiencies by reducing reliance on physical branches and manual processes.
New Zealand’s fintech sector remains relatively early-stage compared with larger markets. The most
significant disruption to date has occurred in the payments sector, through providers such as Wise, Stripe,
and buy-now-pay-later platforms. Fintechs have not yet materially challenged the major banks’ core
businesses of deposit-taking or mortgage lending. A fully implemented open-banking framework may
provide a stronger foundation for fintech-driven competition in the future.
The major banks have responded to digital competition by strengthening their own technology
capabilities and, in some cases, partnering with or acquiring fintech firms (for example, BNZ’s acquisition
of BlinkPay and ASB’s partnership with Qippay). According to KPMG’s latest FIPS survey, technology costs
are a major contributor to rising operating expenses across the sector, reflecting both the need to
maintain competitive digital offerings and the increasing costs associated with cybersecurity, fraud
prevention, and compliance with evolving regulatory requirements.
3.5 Reserve Bank regulation and capital requirements
All banks must be registered with the RBNZ to operate in New Zealand. The RBNZ is the prudential
regulator for the sector.
The regulatory frameworks have undergone significant changes in recent years, with key developments
including:
• Capital adequacy: The Reserve Bank of New Zealand completed its capital review in December 2019,
requiring banks to significantly increase their capital ratios over a seven-year transition period ending
in 2028. For systemically important banks, the total capital requirement increased to 18% of
risk-weighted assets, up from the previous level of around 10.5%. This change required the largest
banks to retain a greater share of their earnings and has affected their return on equity. In December
2025, the RBNZ completed a further review of key capital settings and determined that total capital
requirements should be reduced relative to the levels originally planned for 2028 under the 2019
framework. The key decisions are:
− Systemically important banks (being ANZ, ASB, BNZ and Westpac New Zealand) will now be
subject to a total capital requirement of 15%, made up of 12% Common Equity Tier 1 (CET1)
capital and 3% Tier 2 capital. In addition, these banks must maintain a further 6% of Loss
Absorbing Capacity (LAC). The LAC requirement can be met through pre-positioned debt
instruments, which may be written down or converted into equity if a deposit taker experiences
financial distress.
− For the non-systemically important banks (such as Heartland and TSB) the total capital
requirement reduces to 14%, made up of 11% CET1 and 3% Tier2 capital. This is a decrease from
16% under the 2019 review.
− Removal of Additional Tier 1 (AT1) capital instruments, while allowing a higher mix of Tier 2 capital
(to 3% from 2%).
− More granular and reduced standardised risk weights (including rural loans and residential
mortgages which are sectors that Heartland and TSB focus on).
• The target date for implementation of risk weight reductions and the first annual step changes in
capital ratios is 1 October 2026.

calibrepartners.co.nz page 17
• The RBNZ expects these changes to significantly reduce the amount of CET1 capital required across
the banking sector. Because CET1 is the highest-quality — and most expensive — form of bank capital,
the reduction is expected to lower banks’ overall cost of capital and improve return on equity relative
to the previous capital settings.
Figure 6: Total capital ratios by bank as at December 2025
Source: Reserve Bank of New Zealand published data, ‘Bank Financial Strength Dashboard’
• Deposit Takers Act 2023: This Act introduced a Depositor Compensation Scheme (DCS), providing
protection for deposits up to $100,000 per depositor, per institution. The DCS came into effect on 1
July 2025 and is funded by levies on deposit takers.
• Liquidity policy: The RBNZ’s Liquidity Policy sets out the requirements banks must meet to reduce
liquidity risk in the event of a sudden loss of confidence in an individual bank or in the wider banking
sector. A key component of the policy is the use of mismatch ratios. These ratios recognise that banks
typically have a timing mismatch between their assets and liabilities — with assets often having longer
durations than the liabilities used to fund them. The mismatch ratios are designed to ensure that each
bank maintains sufficient liquid assets to meet its cash outflows during a stress event, when cash
inflows may fall sharply while outflows increase.
• Macroprudential tools: The RBNZ uses LVR restrictions and DTI restrictions to help manage financial
stability risks.
− LVR restrictions reduce the impact of borrower defaults by limiting the volume of high-LVR
lending, which lowers potential losses if the housing market declines. DTI restrictions reduce the
likelihood of default by ensuring borrowers do not take on debt levels that are too high relative to
their income. Together, these tools act as guardrails to prevent the build-up of high-risk lending in
the financial system.
− LVR restrictions were eased from 1 December 2025. For owner-occupiers, the share of new
lending permitted with an LVR above 80% increased to 25% (from 20%). For investors, the share of
new lending permitted with an LVR above 70% increased to 10% (from 5%).
− Under the DTI framework, banks may allocate up to 20% of new owner-occupier lending to
borrowers with a DTI ratio greater than 6, and up to 20% of new investor lending to borrowers with
a DTI ratio greater than 7. These DTI restrictions took effect on 1 July 2024 and may constrain
lending growth during periods of rapid house-price inflation.
17.6%
16.0%16.0%
16.2%
16.5%
16.2%
15.2%
17.0%
17.5%
14.5%
10%
12%
14%
16%
18%
20%
ANZ
ASB
BNZ
Westpac
Kiwibank
Rabobank
TSB
Heartland
Bank
SBS
Bank of China
Total capital ratio (%)
Note, chart
axisdoes not
start at 0%

calibrepartners.co.nz page 18
• Conduct regulation: The Financial Markets (Conduct of Financial Institutions) Amendment Act 2022
(CoFI) introduces conduct obligations for banks and other financial institutions, including fair
treatment duties. Banks have invested significantly in compliance systems, training and processes to
meet these requirements.
• The Credit Contracts and Consumer Finance Act 2003 (CCCFA): The CCCFA protects borrowers by
requiring lenders to act responsibly, ensuring loans are affordable and terms are transparent. Key
requirements include conducting proper affordability assessments, clear disclosure of fees, and fair
treatment, with oversight transitioning from the Commerce Commission to the Financial Markets
Authority (FMA).
3.6 Macro-economic considerations
The macro-economic environment is a key determinant of banking sector performance as it influences
credit demand, asset quality, net interest margins and operating conditions.
Economic cycle and GDP growth
GDP growth is a key driver of credit demand. Periods of weak economic growth are typically associated
with slower loan book expansion and higher impairment charges. Towards the end of 2025 New Zealand
was emerging from a prolonged economic downturn, early signs of recovery were reflected in real GDP
growth recorded in the September and December 2025 quarters.
Prior to the conflict in the Middle East, the rebound was expected to be led by the external sector -
particularly agriculture and tourism - and supported by lower interest rates, which would help lift
household and business spending. However, the Middle East conflict has caused increasing global
commodity prices (4.1% in March), with global dairy prices rising 22% in the year to April 2026. Asian
economies are the key export markets for New Zealand dairy and agricultural products and are among the
most impacted by rising fuel costs. This is expected to impact demand. Aside from the conflict, global
trade remains uncertain, including the impact of United States tariff policies, which continues to weigh on
the outlook. The Treasury has revised down its trading-partner growth assumptions, and a more severe
global slowdown would directly affect the New Zealand economy and, in turn, reduce demand for credit.
The economy is fragile and any economic growth is highly vulnerable given the recent and ongoing
Middle East conflict. The consequent rising fuel costs and imported cost pressures are expected to put
pressure on the near-term growth expectations. According to the April 2026 Parliamentary Monthly
Economic Review, forecasts for the June quarter have turned more ‘downbeat’ in response to the conflict,
but there is not a unanimous view across the major banks; two are predicting positive quarterly growth
while the others are anticipating a contraction.
House price inflation
Residential mortgage lending makes up around two-thirds of total bank lending in New Zealand, meaning
house-price movements are a major influence on banking-sector performance. Changes in house prices
affect the sector through their impact on mortgage demand, collateral values, household confidence and
wealth, and banks’ willingness to extend credit.
While lower interest rates, a falling OCR (although it was held stable in the most recent round), and
improving sentiment may be supportive of growth, several factors are expected to constrain the rate of
appreciation:
• The conflict in the Middle East. The growth outlook and market sentiment, at least in the near term,
are overshadowed by the conflict in the Middle East, with commentators reporting that downside risks
are re-emerging with an expectation for growth to remain flat over 2026.
• Elevated long-term mortgage rates, which have risen since late 2025 as wholesale rates increased
• New housing supply, particularly medium-density developments
• Weak population growth

calibrepartners.co.nz page 19
• The effect of DTI restrictions as house prices rise faster than incomes
The RBNZ’s February 2026 Monetary Policy Statement noted that house prices have continued to decline
despite lower mortgage rates, which may reflect weak population growth and persistently high long-term
interest rates.
The Official Cash Rate and the interest rate yield curve
The OCR is the primary monetary policy lever and it has a direct impact on bank net interest margins,
credit demand and asset quality.
The OCR has been reduced nine times since August 2024, effectively halving it. However, despite the
significant reduction in the OCR, the flow-through to fixed mortgage rates has been uneven. As at
February 2026, the average mortgage rate had declined to around 5.3%, down from peaks above 7%.
Since late 2025, longer-term wholesale interest rates have risen due to higher global rates and growing
expectations of future OCR increases. Banks have passed these higher wholesale funding costs through to
fixed-term mortgage rates, particularly for terms longer than one year.
2
This has created a rate
environment where short-term rates are low (reflecting the accommodative OCR) but longer-term rates
are firming.
The shape of the yield curve has important implications for banks’ NIMs. Banks generally benefit from a
positively sloped curve, where long-term interest rates are higher than short-term rates, as a steeper curve
typically supports wider margins. However, margins can come under pressure when wholesale funding
costs increase and banks have limited scope to pass those higher costs on to borrowers.
Household indebtedness and unemployment
New Zealand households remain highly leveraged, with debt at around 168% of disposable income and
close to 91% of GDP in 2025. Housing debt totals approximately $388.5 billion, or 64% of all private sector
borrowing. The household debt-to-income ratio has eased slightly from its 2021 peak of 170%, but this
decline largely reflects tighter lending conditions, slower credit growth and higher interest rates rather
than a material reduction in debt levels.
Debt-servicing pressures were significant at the height of the interest rate cycle, when mortgage rates of
7% to 8% consumed a large portion of household income. With rates now closer to 5%, servicing pressures
have eased and default risk has moderated. However, given still-elevated debt levels, high house prices
relative to incomes, and the DTI framework, households have limited capacity to take on additional debt.
Rising unemployment increases the likelihood of borrower default, particularly for households with high
leverage. The most recent data show an unemployment rate of 5.4%, the highest since 2015. Towards the
end of 2025 the Treasury’s expectation was for unemployment to peak at 5.5% in the March 2026 quarter
before declining to 4.3% by the end of the forecast period
3
as the economy recovers. Unemployment
typically lags movements in broader economic conditions. More recently, in response to the Middle East
conflict, three of the four banks are forecasting an increase in the unemployment rate over 2026, with the
remaining bank forecasting the rate to remain unchanged.
The RBNZ has revised its inflation forecasts for the March and June 2026 quarters. It expects 3% inflation
for the March quarter, rising to 4.2% in the June quarter. This will put pressure on household budgets.
3.7 Critical success factors
In the New Zealand banking sector, several factors are fundamental to maintaining a durable competitive
advantage and driving long-term value creation:
• Scale and operating leverage: The banking sector is characterised by high fixed costs, including
technology, compliance, branch networks, and personnel, alongside relatively low marginal costs of

2
RBNZ 2026 Monetary Policy Statement
3
Half Year Economic and Fiscal Update 2025, 16 December 2025

calibrepartners.co.nz page 20
incremental lending. Banks that achieve greater scale are better positioned to absorb fixed costs,
resulting in superior cost-to-income ratios and ROEs.
• Funding cost advantage: Access to low-cost funding is a major competitive differentiator. This can
stem from a strong retail deposit base, access to offshore wholesale markets, or the implicit credit
support of highly rated parent banks. Higher credit ratings also enable banks to borrow at lower cost,
improving profitability.
• Brand and customer inertia: Retail banking exhibits high customer stickiness. The rate at which
individuals switch between banks remains low due to strong brand trust, perceived financial stability,
and the convenience of established customer relationships. These factors provide larger, well-known
banks with a natural retention advantage.
• Geographic reach and distribution: While digital banking has reduced reliance on physical branches, a
national presence still matters – particularly for business and rural customers. Banks with limited
geographic footprints face constraints on customer acquisition and overall market reach.
• Technology and digital capability: Effective investment in technology has become a critical source of
competitive advantage. This includes customer-facing digital platforms, back-office automation,
cybersecurity, data analytics, and regulatory technology. Banks with greater financial capacity to invest
in technology are better positioned to compete.
• Asset quality management: Given the sector’s heavy exposure to residential mortgages, strong
credit-risk management across the economic cycle is essential. Banks that can maintain asset quality
during periods of falling house prices or rising unemployment are more likely to deliver sustainable
long-term returns.
3.8 Opportunities and risks
Drivers of growth and contraction since 2020
The period from 2020 to 2024 reflects a full credit cycle, although it was heavily shaped by the COVID-19
pandemic and the monetary policy response that followed.
2020–2021: Pandemic-era stimulus: During 2020 and 2021, the RBNZ reduced the OCR to a record low
of 0.25% and introduced additional stimulus through the Funding for Lending Programme and the
Large-Scale Asset Purchase programme. Combined with significant fiscal support, these measures drove
rapid credit expansion, particularly in residential mortgages, and resulted in strong house-price growth.
Bank profitability was supported by high lending volumes and low impairment charges, although this was
partly offset by compressed net interest margins.
2022–2023: Monetary tightening: In response to rising inflation, the RBNZ increased the OCR from 0.25%
to a peak of 5.50% across 2022 and 2023. Net interest margins widened as banks were able to reprice
lending rates more quickly than deposit rates. However, credit growth slowed, operating costs increased,
and impairment charges began to rise. Over this period, house prices fell by approximately 20% from their
November 2021 peak.
Late 2024: Policy easing and early stabilisation: The RBNZ began cutting the OCR in late 2024. Sector
NPAT remained broadly flat, loan growth returned to modest expansion, and net interest margins
stabilised. However, operating costs continued to rise.
Industry outlook and recent developments
This Report was initially drafted prior to the escalation of the conflict in the Middle East. The subsequent
intensification of the conflict introduced a material economic shock and significantly increased
uncertainty, prompting many economic commentators and the RBNZ to revise their outlooks for the New
Zealand economy.