Heartland 2026 Special Shareholder Meeting

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

NZX/ASX release
30 September 2026

Heartland 2026 Special Shareholder Meeting

The Heartla nd Group Holdings Limited (Heartland) (NZX/ASX: HGH) Special Shareholder Meeting
(Special Meetin g) in relation to Heartland’s proposal to acquire all of the shares in TSB Bank Limited
(TSB) from Toi Foundation and subsequently merge Heartland Bank Limited and TSB (the Proposed
Transaction) will be held online today at https://meetings.mpms.mufg.com/hghsm26 and in person
at Eden Park, Auckland, New Zealand, commencing at 3pm (New Zealand time).

Shareholders joining the online meeting will require their shareholder number for verification
purposes. From the online platform, shareholders will be able to view the presentation, vote and ask
questions during the meeting.

For more information about joining the online meeting, view the attached Virtual Annual Meeting
Online Guide.

Please find attached the following documents relating to the meeting:

1. Special Meeting Presentation
2. Chair’s Address
3. Chief Executive Officer’s Address
4. Virtual Annual Meeting Online Guide.

The results of the meeting will be published on Thursday 1 October 2026.

The webcast will be available on Heartland’s website at heartlandgroup.info after the conclusion of
the live event.

– ENDS –

The person(s) who authorised this announcement:

Andrew Dixson
Chief Executive Officer

For further information, 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

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Special Shareholder
Meeting 2026
30 September 20 26

2
Agenda
01Welcome and formalities
02Chair’s Address
03CEO’s Address
04Shareholder discussion
05Voting and conduct of poll

3
Other formalities
Proxies and postal votes received
Meeting procedures
Voting procedures and declaration of poll
Notice of meeting

4
Voting and asking questions
Voting Card
Question box

5
Other formalities
Proxies and postal votes received
Meeting procedures
Voting procedures and declaration of poll
Notice of meeting

02
Chair’s
Address
Greg Tomlinson Chair, Heartl and Group

7
Creating a larger New Zealand banking platform
Combining two complementary banks to do more together than either could do alone.
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 l enders, 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.

8
8
Proven M&A and integration experience
Heartland has grown by bringing businesses together.
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 what is now known as Heartland Bank Australia – this acquisition made
Heartland Bank the first New Zealand bank to acquire an Australian
authorised deposit-taking institution.
Following completion of integration activities in relation to Heartland
Bank Australia, stronger trans-Tasman oversight arrangements and an
improvement in the overall risk profile of the Banking Group, the RBNZ
reduced Heartland Bank’s transitional capital overlay ( imposed after the
acquisition of what is now Heartland Bank Australia) from 2.0 % to 0.5%.

9
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 Heartl and Bank and 31 December 20 25 for TSB.
•With its combined rich Kiwi heritage,
TSB Heartland Bank will keep its focus
on helping New Zealanders to meet
their banking needs.
•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)

10
Heartland Group governance
Toi Foundation will hold 17.5% of the shares in Heartland. Toi has nominated Mark Darrow 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 initial l y
appointed to the Heartland Board.
3
•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 Heartland’s share register at 30 April 2026.
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%

03
CEO’s
Address
Andrew Dixson Chief Executive Officer, Heartland Group

12
A bank with materially increased scale
1Heartland and its subsidiaries.
2As at 31 December 2025 per RBNZ Banking Dashboard.
3Including Heartland Bank Australia’s assets, held in a subsidiary of Heartland Bank.
Under the proposed transaction, Heartland would acquire all of the shares in TSB, and
subsequently merge Heartland Bank and TSB, to create a larger New Zealand bank.
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
11
th
10
th
9
th
8
th
7
th
New 7
th
6
th
5
th

$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
Greater scale and product diversification will improve
financial efficiency and resilience.
Heartl and Bank’ s New Zeal and
asset base increases by ~1 71 %
$18.3b
2
Proposed structure (post-merger) Total New Zealand assets (NZ$b)
2

13
Snapshot of TSB Heartland Bank
TSB Heartland Bank will operate as a full-service capable bank with specialist products and
a cost-effective funding platform.
1
3
1Pro forma TSB Heartland Bank. As at 31 December 2025 for Heartland Bank and TSB. Gross receivables include Heartland Bank’s
NSAs. As at 30 June 2026, the NSA realisation programme had 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 a 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

14
Significant synergies available
Cost synergies are expected to be realised over a three-year period 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 real ise 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.
•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 synergies
-
20%
40%
60%
80%
100%
% of pre
-tax cost synergies
Months from completion

15
Expected to materially enhance earnings and ROE
1LTM as at 31 December 2025 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.
Pro forma LTM NPAT (historical basis)
1

16
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: 14%
CET1: 11%
$947m
+$80 5m
( $50 m)
($56m)
$1,646m
$128m
+$56m
$184m
$1,0 75m
$1,829m
HBL
Banking Group
regul atory
capital
( Dec-25)
TSB
regul atory
capital
( Dec-25)
Pre-completion
cash dividend
to Toi
Pro forma
regul atory
capital
( Dec-25)
CET1 Tier 2Total
Heartland will remain well capitalised post-transaction. 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.
HBL Banking Group regulatory capital movement
1,2
Capital ratio
1,2
RBNZ
requirements
4
Tier 2 instrument to Toi
Foundation
3
5

17
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 standardised credit risk weights from 1 October 20 26. The first annual step change in capital ratios is also taking place on 1 October 20 26.
$620m
aggregate consideration
$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

18
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.
Value for money
Aggregate consideration implies a price to book value
multiple of approximately 0.76x, within the range of
approximately 0 .70 x to 0 .80 x that Calibre 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 external l y, providing capacity for future l ending
growth.
Scale and diversification
More diversified loan book across the expanded
Heartl and Group, reducing concentration risk.
Better positioned to deliver operating leverage benefits.
Financial benefits and other considerations
Expected to be meaningfully EPS and DPS accretive for
existing Heartland shareholders, with an improved ROE
supportive of a higher valuation multiple over time.
Existing sharehol ders’ proportional ownership wil l reduce
by approximately 17.5% ( however, this dilution is not
expected to be value dilutive) .

19
Transaction progress
Several conditions have now been satisfied. Subject to completion, the two banks would be
integrated progressively over a period of up to three years.
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
•Toi Foundation’s trustees have approved the sale of the TSB Shares.
•The RBNZ application has been submitted.
•Heartland shareholder approval will be sought at its special shareholder
meeting on 30 September 2026.
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.

20
Strategic rationale
Materially
increases scale
in New Zealand
Material
synergies
available
Significant
shareholder
value creation
Diversified and
differentiated
product set

04
Shareholder
discussion

05
Voting and
conduct of poll

23
2
3
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.

24
2
4
Resolution 2:
Issue of consideration shares
That the issue of 20 0 ,0 0 0 ,0 0 0 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.

25
2
5
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.

26
2
6
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 (whichever is
the greater amount from time to time) , an increase of NZ$20 0 ,0 0 0 or
AU$150,000 ( 8.33% and 6.82% respectively) effective for the
financial year ending 30 June 20 27 onwards, with such sum to be
divided amongst the nonexecutive directors as the Board may
determine from time to time.

27
2
7
Voting and polling procedures
Mark your intention on your Voting Card by selecting
“For”, “Against” o r “Abstain” for each resolution.
For those online, please click “Submit Vote” on the
bottom of the voting card to lodge your vote.
Once you have voted:
•Place your Voting Card in the ballot boxes as they are
passed around. If you need help, please raise your hand.
•Voting will be open until the close of the meeting.
•The results of the poll will be advised on the NZX and
A SX on Thursday 1 October 20 26 .

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

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

30 September 2026

Heartland Special Shareholder 2026: Chair’s Address

Good afternoon, ladies and gentlemen. Thank you for joining us today, both here at Eden Park and
online.

I’m pleased to present to shareholders Heartland Group Holdings Limited’s (Heartland) proposal to
acquire all of the shares in TSB from Toi Foundation and subsequently merge Heartland Bank
Limited (Heartland Bank) and TSB Bank Limited (TSB) (the Proposed Transaction). TSB and merge it
with Heartland Bank. If approved by our shareholders, and if the remaining conditions are satisfied,
the merged bank will be called TSB Heartland Bank Limited (TSB Heartland Bank).

The Board has carefully considered the proposal and unanimously supports it.

A larger New Zealand banking platform
The proposal brings together two established New Zealand banks with different strengths, strong
regional histories and a shared commitment to customers. It would create a bank with
approximately $15 billion in New Zealand assets and the scale to compete, invest and respond to
customers’ changing needs.

Scale is important in banking. It supports investment in technology, customer service and risk
management. It also creates a stronger platform to provide increased competition and choice in a
market dominated by larger banks.

This is about combining complementary banks that can do more together than either could do
alone.

Complementary strengths and proven execution
Heartland Bank has built specialist product expertise, whereas TSB brings established everyday
banking capabilities, together with an efficient funding base.

These products are complementary. Together, they would allow TSB Heartland Bank to support
customers through more stages of their financial lives, while keeping the specialist products that set
Heartland Bank apart. The result would be a bank with a wider mix of products and a broader base
from which to serve customers and grow.

Heartland also brings relevant experience. We have grown by bringing businesses together, including
Heartland’s own formation in 2011. Our reverse mortgage success in New Zealand and Australia has
grown from acquisitions made in 2014. More recently, we acquired and integrated Challenger Bank
to create Heartland Bank Australia Limited (Heartland Bank Australia). This made Heartland Bank
the only New Zealand registered bank to own an Australian bank.

The Reserve Bank of New Zealand (Reserve Bank) also recently reduced Heartland Bank’s
transitional capital overlay which was put in place after the acquisition of the Australian bank. The
reduction reflects the progress made on integration, stronger oversight, and an improved overall risk
profile.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
2
That track record gives us confidence that Heartland understands the discipline required through
careful planning, strong governance and continued attention to customers while change is
underway. We know how to do this, and we know it must be done carefully.

A bank with regional roots and a nationwide presence
TSB Heartland Bank would be regionally focused. TSB was established in Taranaki in 1850.
Heartland’s origins trace back to Ashburton in 1875, and Canterbury remains an important part of
our identity, employment and customer base. These histories would form an important foundation
for the merged bank.

TSB Heartland Bank would have a nationwide presence, with Taranaki and Canterbury remaining
important operational bases. Taranaki will continue to have a customer banking hub, including a
local branch network and local customer roles. The region’s connection with TSB will remain an
important part of the merged bank’s identity and future.

The name TSB Heartland Bank reflects the importance of both banks’ histories and the trust that has
been built with customers over generations. The intention is for customers to continue to be served
through the TSB and Heartland Bank brands and channels they know, with any future changes
communicated carefully and clearly.

The opportunity for customers and shareholders
For customers, employees, communities and shareholders, the Proposed Transaction provides an
opportunity to share in the growth of a larger New Zealand bank.

Customers would benefit from a broader range of banking products and greater investment by the
bank in technology and service. While communities would continue to be served by a bank with
genuine regional connections, including its ongoing presence in Taranaki.

Heartland would remain the listed parent company, with the ability to deploy capital across a more
diverse banking group and benefit from greater efficiency as the bank grows over time.

Being part of a listed banking group also gives customers and communities the chance to invest in
the bank’s success. Heartland’s shareholders include many everyday New Zealanders who supported
the business when it merged and listed in 2011. Their investment reflects the idea that a New
Zealand bank can be owned, supported and grown by New Zealanders.

As part of the Proposed Transaction, Toi Foundation would become Heartland’s largest shareholder,
with a 17.5% shareholding. Toi Foundation intends to remain a long-term, supportive shareholder.
This would support Toi Foundation’s ability to fund community initiatives across Taranaki.

Governance
Shareholders are also being asked to vote on Mark Darrow’s appointment to the Heartland Board.
Mark is the current Chair of TSB and has been nominated by Toi Foundation to join the Board when
the acquisition is completed. Mark is an experienced board Chair and director, and the Heartland
Board considers that he will be able to bring an independent view and act in the best interests of all
shareholders. Mark will address shareholders shortly.

On completion of the merger, two existing TSB directors are also expected to join the TSB Heartland
Bank Board.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
3
Together, these appointments will bring relevant knowledge of TSB and support a well-governed
integration of the merged bank.

Shareholders are also being asked to approve an increase in the total fee pool for non-executive
directors. The new fee pool has been proposed by the Board after receiving the independent
director fee benchmarking from Propero Consulting Limited (Propero). This increase is to reflect the
larger and more complex banking group, the additional directors who will join the two boards, and
the time and expertise required for board committee work. The base fees for Heartland and
Heartland Bank directors are not proposed to increase, and the base fees for Heartland Bank
Australia directors are proposed to decrease. The additional fees for the new director roles would
only apply if the Proposed Transaction is completed.

Confidence in the proposal
The proposal remains subject to shareholder approval, regulatory approvals and other conditions.
I have considered this proposal carefully, both as Chair and as a shareholder. I believe the proposed
transaction is in the best interests of Heartland and its shareholders.

It would bring together two complementary banks to create a larger New Zealand bank with a
regional focus. Heartland has the experience to undertake this work and create long-term value over
time.

I will now hand over to Andrew Dixson, our Chief Executive Officer, who will provide more detail on
the Proposed Transaction.

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

30 September 2026

Heartland Special Shareholder 2026: CEO’s Address

Thank you, Greg.

Good afternoon and thank you all for joining us today.

Greg has outlined the strategic context for the proposed transaction. I will focus on what the
proposed bank and wider Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH), would
look like, the financial benefits and transaction structure, and how we would bring the two banks
together.

The proposed bank
On completion, Heartland would acquire all of the shares in TSB Bank Limited (TSB). Heartland Bank
Limited (Heartland Bank) and TSB would then merge and be renamed TSB Heartland Bank Limited
(TSB Heartland Bank). Heartland would remain the NZX and ASX listed parent, and the New Zealand
bank, TSB Heartland Bank would continue to own Heartland Bank Australia Limited (Heartland Bank
Australia). There would be no impact to Heartland Bank Australia or its current strategy as a
consequence of Heartland’s proposal to acquire all of the shares in TSB from Toi Foundation and
subsequently merge Heartland Bank and TSB (the Proposed Transaction).

On a pro forma basis, TSB Heartland Bank would have approximately $15.1 billion of New Zealand
assets, increasing the New Zealand asset base by approximately 171%.

This increased scale creates a larger base to spread the cost of technology, risk management, and
regulatory compliance which disproportionately affects smaller subscale banks. It also gives the bank
more capacity to invest, respond to customers and compete in the New Zealand market.

The merged bank would have a broader and more balanced loan book. Residential lending through
Home Loans and Reverse Mortgages would be the largest component, constituting approximately
65% of gross finance receivables. This would be complemented by Motor Finance, Commercial
Property Lending, Rural Lending and Business Finance.

The funding base would also be more diverse with a greater proportion of cost-effective interest and
non-interest bearing call deposits.

The result would be a New Zealand bank able to offer a broader range of banking services, while
retaining a specialist product focus and a lower risk-weighted product mix.

In practical terms, TSB Heartland Bank would operate as a national bank with a clear regional
commitment. Taranaki would remain a key operational hub for customer banking services, including
its local branch network and customer-facing roles.

Synergies and financial benefits
Cost synergies are expected to provide an annual benefit of approximately $34 million to profit
before tax once fully realised. These estimated efficiencies are associated with bringing the two
banks together, reducing duplication in activities, processes and shared business overheads. These
savings are expected to build progressively over three years after completion.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
2
There is potential for further benefits from funding and liquidity, including access to TSB’s deposit
base, the opportunity to optimise the combined liquid asset base, and the ability to leverage
Heartland’s existing and future technology investment across a larger bank.

The estimated one-off cost of achieving these benefits is also approximately $34 million, spread over
the same three-year period.

The transaction is expected to create material value for Heartland shareholders. Normalised
earnings per share is expected to increase by more than 20% in the first year after completion, based
on the full run-rate cost benefits. The transaction is also expected to support a stronger dividend per
share profile and improve return on equity.

The combined bank would remain well capitalised. We do not expect to need to issue ordinary
equity to meet future capital requirements. TSB Heartland Bank is also expected to benefit from
recent changes to Reserve Bank capital settings, including lower and more granular risk weights.

The transaction structure
The aggregate consideration to Toi Foundation is $620 million. This comprises:
• a $50 million pre-completion cash dividend from TSB
• $250 million of ordinary shares in Heartland
• $56 million of subordinated debt issued by Heartland Bank as eligible Tier 2 capital, and
• a $264 million vendor loan provided by Toi Foundation to Heartland.
The issue of shares to Toi Foundation means existing shareholders’ proportional ownership of
Heartland would reduce by approximately 17.5%. However, the transaction is not expected to be
value dilutive, given the expected earnings, dividend and return benefits.

The vendor loan has a two-year term and can be repaid at any time during that period without a
break fee. Given Heartland’s strong excess capital position, experience in and access to New Zealand
and Australian debt capital markets, Heartland has sufficient options available for repaying this loan.

For Toi Foundation, the structure provides a diversified portfolio of investments which supports Toi
Foundation’s ability to increase its investment in the Taranaki community.

For Heartland, the structure preserves flexibility to use excess capital for future growth and
investment, while maintaining strong capital and liquidity settings.

Independent expert findings
Heartland commissioned Calibre Partners to provide an independent expert report on the merits of
the proposed transaction.

Calibre Partners concluded that the proposed consideration for TSB is reasonable and that, on
balance, the positives of the proposed transaction outweigh the negatives for Heartland
shareholders.

The $620 million consideration represents approximately 0.76 times TSB’s book value. Calibre
Partners considered this to be within the reasonable range of approximately 0.70 to 0.80 times book
value.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
3
The report also recognises the expected cost benefits, the more diversified loan book, the improved
funding mix, and the potential for the transaction to be earnings and dividend accretive.

Integration and next steps
Several conditions have now been satisfied, including confirmatory due diligence, the entry by
Heartland and Toi Foundation into warranty and indemnity insurance arrangements, and Toi
Foundation trustee approval of the Proposed Transaction. Applications to the Reserve Bank of New
Zealand (RBNZ) have been submitted by both Heartland and Toi Foundation, and both parties are
continuing to actively engage with the RBNZ in respect of the Proposed Transaction. Shareholder
approval, the TSB Material Adverse Change condition, and the remaining regulatory approvals still
need to be satisfied for completion to occur.

Following completion, the two banks would be integrated progressively over a period of up to three
years. Detailed integration work would be coordinated through an Integration Management Office
and overseen by the TSB Heartland Bank Board.

While the proposed transaction provides an opportunity 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. These are not expected to materially impact
the transaction economics.

Our first priority will be to maintain reliable banking services and good outcomes for customers.
Initially, customers are expected to continue using the brands, products, channels and locations they
know. Any changes will be communicated clearly and with appropriate notice.

We will also support our people through the process. Where changes are needed, they will be
managed fairly, openly and in line with our employment obligations.

Conclusion
The proposed transaction materially increases Heartland’s scale in New Zealand. Greater scale and
diversification across products and locations will provide improved financial efficiency and resilience.

TSB Heartland Bank would have a diversified and differentiated product set. This creates 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.

Material synergies are available with the potential for further upside.

We believe this transaction would also create a stronger platform for the wider Heartland Group,
with the potential to improve earnings, dividends and returns for our shareholders over time.

Thank you for your time today, and for your continued support in Heartland.

---

Virtual
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MUFG Corporate Markets
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MUFG Corporate Markets
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MUFG Corporate Markets
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