Heartland Group Holdings Stock

[Foreign Language] Good afternoon, ladies and gentlemen. My name is Phoebe Gibbons, and I'm the Chief Legal Officer for Heartland Bank. A very warm welcome to shareholders and guests present both in person and online today at the 2026 Heartland Special Shareholder Meeting. It is our pleasure to convene this meeting for shareholders to vote on the proposed merger of Heartland Bank and TSB.

For those in the room, to ensure your experience at Eden Park is both memorable and safe, we would like to make you aware of the following. Please familiarize yourself with the nearest emergency exits. In the unlikely event of an emergency, the lifts must not be used in the event of an evacuation. Please follow the evacuation instructions of the Eden Park staff members and make your way via the gate F or G stairs identified by the green and white exit sign through the car park and gather at the assembly point on the foot path on Reimers Ave. The restrooms are located outside the World Cup lounge through the doors past the registration desk.

Eden Park is a non-smoking venue. For those who wish to smoke, there is a designated external smoking area on the balcony. Should anyone require first aid or if you see anything unusual, please notify one of our staff members or the Eden Park team, who will be wearing a white shirt and black jacket with the Eden Park logo. Finally, as a courtesy to everyone present, please ensure your phone is now on silent.

For those joining the meeting in person today, we welcome you to join the Board and management for light refreshments after the meeting. For those joining online, I will shortly provide you with instructions on how to vote and ask questions. If you encounter any issues, please refer to the virtual annual meeting online portal guide or phone the help line on 0800-200-220.

Since a quorum is present, I declare the meeting open. I will now outline the agenda of business for today's meeting. I will shortly introduce you to the Board of Directors and the Chief Executive Officer of Heartland Group and the Chair of Heartland Bank, who are joining us in person today. I will then take you through the formalities of the meeting before inviting Greg Tomlinson, Chair of the Heartland Group Board, to explain the strategic rationale for the proposed merger.

This will be followed by an address from Heartland Group's Chief Executive Officer, Andrew Dixson. And following this, there will be an opportunity to answer any questions that you have about the proposed merger. I encourage shareholders attending online to begin to submit questions now if you have not done so already. We will answer as many of these as we can at the appropriate time.

Thereafter, we will move to the formal business of the meeting, including voting on the resolutions posed to you today. I would now like to introduce those on stage with us today. Rob Bell. Rob was appointed as a Director of Heartland Group in June 2024. Simon Beckett. Simon was appointed as a Director of Heartland Group in June 2024. Simon is also a Director of Heartland Bank Australia.

John Harvey. John has been a Director of Heartland Bank since establishment in 2011 and was appointed to the Heartland Group Board in April 2024. Greg Tomlinson, our Chair of the Heartland Group Board. Greg was first appointed a Director of Heartland in March 2013 and was appointed Chair of the Heartland Group Board in February 2023.

Andrew Dixson. Andrew was appointed Chief Executive Officer of Heartland Group in October 2024. He was also appointed to the Heartland Bank Board at the same time. And in February 2025, he joined the Heartland Bank Australia Board. Kate Mitchell. Kate was appointed as a Director of Heartland Group in October 2021. Kate is also a Director of Heartland Bank. Bruce Irvine. Bruce is the Chair of the Heartland Bank Board, where he has been a director since its establishment in 2011. Bruce is also a Director of Heartland Bank Australia.

Returning to the business of the meeting. I advise that all valid proxies and postal votes received from shareholders within the prescribed time limits have been admitted. I can confirm that a total of 1,759 proxies and postal votes have been accepted. This represents some 542 million shares or 57% of the total issued shares in Heartland Group.

I would now like to outline the meeting procedures. This is a meeting of Heartland Group Holdings Limited shareholders. Accordingly, while guests are very welcome to witness the proceedings of this meeting, participation in the shareholder discussion and the business of this meeting is confined to ordinary shareholders present in person, online, by proxy or by authorized representative.

Regarding the voting procedures for today's meeting. The resolution will be decided on by way of a poll. This is in line with the practice increasingly adopted by listed companies and is the preferred method of the NZX and the New Zealand Shareholders' Association. By having the resolution decided by way of a poll, we are counting all postal votes, proxy votes, votes online and votes from the floor.

The resolutions will be put to the meeting. Shareholders joining us in the room should have received a voting card on registration. Please keep your voting card with you until the resolutions have been voted on. Our share registrar, MUFG Pension & Market Services, will then move through the room with the ballot boxes and collect all the voting cards.

If you need to leave before the conclusion of the meeting, you may place your voting card in one of the ballot boxes at the exit with an MUFG Pension & Market Services staff member. For shareholders attending the meeting online, when your online registration is validated, you will receive an electronic voting card, which you can use to cast your vote.

To vote, you will need to click Get Voting Card within the online meeting platform. You will be asked to enter your shareholder number or proxy number to vote. Please then mark your voting card in the way you wish to vote by clicking for, against or abstain on the voting card. Once you have made your selection, please click submit vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online portal guide or phone the help line on 0800-200-220 if you require assistance. Voting will remain open for 5 minutes after the conclusion of the meeting.

The notice calling this annual meeting was published electronically on the 31st of August 2026, with hard copies subsequently sent to shareholders who requested a copy. That notice outlined the formal business for this meeting and also provided background information on the resolutions to be voted on.

I will now invite Heartland Group Board Chair, Greg Tomlinson, to address you, followed by an address by Group CEO, Andrew Dixson. We will then move to the shareholder discussion, which our Chair will facilitate. We invite online questions to be submitted now to allow us time to answer these. Thank you.

Thank you, Phoebe. 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's proposal to acquire 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.

The Board has carefully considered the proposal and unanimously supported it. The proposal brings together 2 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 a 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 strong 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.

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. This made Heartland Bank the only New Zealand registered bank to own an Australian bank.

The 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, strong oversight and an improved overall risk profile. 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.

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 regional 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' history and the trust that have 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 change communicated carefully and clearly. 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 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 intends to remain a long-term supportive shareholder. This would support Toi's ability to fund community initiatives across Taranaki.

Shareholders have also been asked to vote on Mark Darrow's appointment to the Heartland Board. Mark is 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 interest of all shareholders. Mark will address shortly.

On completion of the merger, two existing TSB directors are also expected to join the TSB Heartland Bank Board. Together, these appointments will bring relevant knowledge of TSB and support a well-governed integration of the merged bank. Shareholders are asked -- sorry, excuse me, 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 benchmarking from Propero.

This increase is to reflect the larger and more complex banking group. The additional directors who will join the 2 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 a new director roles would only apply if the proposed merger is completed. 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 interest of Heartland and its shareholders. It would bring together 2 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 of the proposed transaction. Thank you.

Well, thank you, Greg, and 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 group would look like, the financial benefits, the transaction structure and how we would bring the 2 banks together.

In terms of the proposed bank, on completion, Heartland would acquire all of the shares in TSB. Heartland Bank and TSB would then merge and be renamed 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. There would be no impact to Heartland Bank Australia or its current strategy as a consequence of 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 banks 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 receivables. This would be complemented by motor finance, commercial property lending, rural lending and business finance.

The funding base would also be more diverse and introduce a greater proportion of cost-effective interest and noninterest-bearing core 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.

Turning to synergies and financial benefits. Cost synergies are expected to provide an annual benefit of approximately $34 million to profit before tax once fully realized. These estimated efficiencies are associated with bringing the 2 banks together, reducing duplication in activities, processes and shared business overheads. These savings are expected to build progressively over 3 years after completion.

And there is potential for further benefits from funding and liquidity, including access to TSB's deposit base, the opportunity to optimize 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 benefits -- sorry, the estimated one-off costs of achieving these benefits is also approximately $34 million, spread over the same 3-year period.

The transaction is expected to create material value for Heartland shareholders. Normalized earnings per share is expected to increase by more than 20% after completion based on the full run rate cost benefits. The transaction is also expected to support a stronger dividend per share profile and improved return on equity. The combined bank would remain well capitalized, and 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. In terms of 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 to Heartland.

The issue of shares means Toi -- sorry, the issue of shares to Toi 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 uplift in earnings and dividends per share.

The vendor loan has a 2-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'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.

In terms of the 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 0.76x TSB's book value. Calibre Partners considered this to be within the reasonable range of approximately 0.7 to 0.8x book value. The report also recognizes the expected cost benefits, the more diversified loan book, the improved funding mix and the potential for transaction -- the transaction to be earnings and dividend accretive.

On to 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 have been submitted by both Heartland and Toi Foundation, and both parties are continuing to actively engage with the Reserve Bank of New Zealand in respect to 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 2 banks would be integrated progressively over a period of up to 3 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 programs, work remains ongoing in relation to technology integration costs and potential technology synergies. These are not expected to materially impact the transaction economics. Our 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 that they know. Any changes will be communicated clearly and with appropriate notice. We will also continue to support our people through this process. Where changes are needed, they will be managed fairly, openly and in line with our employment obligations.

In 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 through their financial life cycle.

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 very much for your time today and your continued support in Heartland. I'll now pass back to Greg.

Thank you, Andrew. Shareholders joining online who wish to ask questions on the proposed transaction can submit their questions through the online meeting platform now. We will aim to answer as many of those questions as possible. Any comments, questions or matters raised for discussion during the meeting must be relevant to the business before the meeting. If you have other matters you would like to raise, the Board and management will be available to answer your questions during refreshments after the meeting.

For those online, please submit any questions you may have about other matters, and we will respond after the meeting. Shareholders were also invited to submit questions prior to the special meeting. We received 5 questions, which I will address now.

The first question asks, what impact could the merger have on total deposits over the 12 months following completion once the 2 banks become a single deposit taker, given the customers who currently hold deposits with both Heartland Bank and TSB may choose to transfer some funds to another bank once the 2 banks became -- become, sorry, a single deposit taker and the $100,000 depositor compensation scheme limit applies across the combined entity.

Both banks have considered the potential effect of the merger on depositor behavior, and we are actively monitoring our respective depositor bases. While we acknowledge that some depositors who currently hold funds with both banks may choose to redistribute a portion of those funds, our analysis to date indicates that potential impact would be limited.

We do not expect the merger to result in material reduction in deposits over the 12 months following completion. The expected customer overlap is relatively low. The proportion of fully insured deposits is limited, and there has been no material change in depositor behavior since the scheme was introduced. However, both banks have ensured contingency funding options are available should behavior differ from expectations.

The next question. Looking across Heartland Group's business segments, is there an optimal scale and mix the group is seeking to achieve? If so, what time frame and would achieving it require any further significant acquisitions? Our strategic priority is to create long-term shareholder value measured by return on equity. We are focused on investment in activities where risk and returns deliver a 12% to 14% return on equity and driving efficiencies through automation. We believe Heartland is on the right path to achieve these objectives through its existing businesses.

The proposed merger with TSB would accelerate that progress by adding scale, which provides an opportunity to optimize the fixed cost base across a larger bank. Achieving our objectives does not depend on any further significant acquisition. However, acquisitions are a key part of our growth strategy for New Zealand and Australia. We currently consider a range of strategic options, including acquisitions where there is a fit with our strategic vision and the opportunity to add scale or add value by adding scale or technology. The opportunity to merge Heartland Bank with TSB meets this criteria.

The next question relates to potential cost synergies. The question is, how have these synergies been scoped and costed, and is a detailed plan available to shareholders? The $34 million in estimated annual savings has been subject to detailed work. EY was engaged by Heartland and Toi Foundation to help identify and quantify the potential synergies, the pace they could be realized and the cost of achieving them. These savings are not assumed to be available immediately.

There will be one-off integration costs and the benefits are expected to build progressively over a 3-year period as synergies are released. At this stage, these figures are management estimates prepared to evaluate the transaction rather than a final detailed plan. As with any estimates of this kind, delivery will depend on execution, regulatory requirements, market conditions and the final integration design.

Over time, we expect the proposed transaction to strengthen Heartland's earnings and create significant value for shareholders, including material growth in normalized earnings per share and an improved return on equity.

The next question, how will Heartland repay the $264 million loan within 2 years? As Andrew described, the vendor loan provided to Heartland by Toi Foundation as part of consideration will be repayable at any time over the loan term without break fees applying. Heartland has options available for repaying this loan and a strong excess capital position with experience in and access to New Zealand and Australian debt markets.

Okay. The final question asked about the ongoing dividend for existing shareholders. The Heartland Board continues to target a total dividend payout ratio of at least 50% of net profit after tax in this financial year. As always, the dividend payout ratio is subject to the Board considering Heartland's capital needs, ROE, accretive growth opportunities, balance sheet flexibility and financial performance.

I will now open the meeting for questions, starting with those in the room and followed by questions online. For shareholders in the room who wish to ask a question, please raise your hand and then wait for a microphone. Please state your name before asking your question. If you have more than one question, please ask all of your questions and then resume your seat. We will answer each of your questions in turn. This will help to ensure as many shareholders as possible have an opportunity to ask questions.

I'll taking questions from the floor, please.

Good afternoon, Mr. Chairman. My name is [ Karl Trotter ]. Technology integration has been the Achilles' heel of many a merger in financial services, or for many mergers. What degree of confidence can you give shareholders that the technology integration will be done successfully and on budget?

Well, that's a critical question. And so -- and I thank you, Karl, for that question. Now I can convey with you that there has been a lot of uplift in our technology area. We have -- not only have we increased that internally, we've increased it externally. And you'll notice -- and you'll also note Rob Bell's appointment to the Board. Now Rob is a very experienced digital banking person. Thank you.

I have a follow-up question, if I may. Calibre Partners, you reported, were of the view that the positives outweigh the negatives of this merger. What were those negatives?

Well, there haven't really been any negatives to be frank. All right. Any more questions from the floor? Okay. Thank you for that. I will now move to questions online.

Thank you, Greg. We have received a couple of questions. The first one is, what is the rationale for calling the new entity TSB Heartland and not Heartland TSB?

I don't know, really. So I can't answer that. I'm not the branding expert, but I can assure you of that. But look, it's respect to both entities. TSB has got a strong brand, a very old and established brand. But thank you for the question.

Thank you. The next question, for existing Heartland shareholders, when do you expect this transaction to become materially EPS accretive after dilution and all integration and financing costs? And what ROE and dividend outcomes should we reasonably expect once the merged bank reaches steady state?

Well, I have a view, but I'm probably better off to hand this over to Andrew to answer.

Yes. Thanks for the question. I think it's well outlined in the pack. We expect this to be EPS and dividend per share accretive in the first year. And once all synergies are realized after 3 years, it will be materially so after 3 years effectively.

Thank you. We have another question here. With AI becoming an increasing worry, are you confident the process of merging won't be interrupted by a deviant actor?

Well, again, I can't answer that. But this is business and everybody's got -- you've got issues with any business now with AI. But I can assure you, we've had a major upskill within our digital part of the business. Thank you.

Thanks. There are no further questions at this stage.

Well, thank you very much. I will now invite Phoebe Gibbons to take us through the formal business of the meeting. Thank you all.

Thank you, Greg. We now move to the formal business of the meeting, which is to vote on the resolutions set out in the Notice of Meeting. As mentioned earlier, if you are attending online, you can cast your vote using the electronic voting card. Those online with questions about the resolutions can submit these online now so they can be addressed with questions from the floor within the discussion of the resolutions.

The first item of business is the approval of Heartland's acquisition of TSB and subsequent merger of Heartland Bank and TSB. This resolution has the full support of the Board. This resolution is a special resolution requiring approval by a special majority of 75% or more of those votes of shareholders entitled to vote and voting.

I move 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.

Are there any questions from the floor? Are there any questions online?

Yes, there are a couple. The first, PwC is the external auditor to both TSB and Heartland. What role, if any, has PwC played in this merger transaction? And who is likely to be the first signing partner of the merged bank? In terms of synergies, are we expecting to reduce the overall audit costs of the 2 organizations? And is there a plan to go to market and run a tender to help drive down those audit costs once the merger has completed?

Andrew, should I pass to you for that question?

Yes. Thanks, Phoebe. So PwC has not been involved in the merger transaction. They are our external auditor currently. We will go through a process to confirm PwC as continuing to be our auditor. We don't intend to go to market. We went to market a couple of years ago and very comfortable with the service that we're providing and very comfortable with the commercial terms that we are receiving those services under.

Thank you. Final question for this resolution is, will the Reserve Bank review of TSB capital settings have any impact on the proposal?

Andrew, I'll pass to you.

As I said in my address, both banks will benefit from the revised capital settings that will come into place 1st of October. So we will see both banks have an increase in their capital positions, and that will go to benefit the proposal in terms of the new TSB Heartland Bank having a very strong capital position.

One more question, sorry. Could you please speak to the recent press information regarding the TSB regulatory position? I believe this question is in relation to the Section 95 notice.

That Section 95 notice is in relation to TSB, not Heartland Bank, so we won't be providing any comment on that at this time.

Thank you. No further questions.

If you can please mark your intention on your voting card by selecting for, against or abstain at Item 1. For those online, please click submit vote on the bottom of the voting card to lodge your vote.

[Voting]

The next resolution is for the issue of shares to Toi Foundation as partial consideration for Heartland's acquisition of all of the shares in TSB. This resolution also has the full support of the Board. The resolution is an ordinary resolution requiring approval by a majority of the votes of those shareholders entitled to vote and voting.

I move that the issue of 200 million fully paid ordinary shares in Heartland to Toi Foundation at an issue price of $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.

Are there any questions from the floor? Are there any questions online?

No questions.

Please mark your intention on your voting card by selecting for, against or abstain at Item 2. For those online, please click submit vote on the bottom of the voting card to lodge your vote.

[Voting]

The next resolution is for the election of Mark Darrow to the Board of Heartland Group Holdings Limited. Details about Mark's background, qualifications and experience were included in the Notice of Meeting. This resolution has the full support of the Board. The resolution to elect Mark is an ordinary resolution requiring approval by a majority of the votes of those shareholders entitled to vote and voting. Mark will now address the meeting.

Thank you, Phoebe, and good afternoon, everyone. It is a privilege to be considered for appointment to the Heartland Group Board as the nominee of Toi Foundation under the merger implementation agreement. I genuinely appreciate the opportunity to share with you my relevant experience for the Heartland Group Board and for you as shareholders.

When the merger was first proposed, the TSB Board had to consider and opine that the proposal was in the best interest of TSB Bank. That decision was straightforward. I'm on public record as supporting the merger from day 1, pointing out the opportunity to create a genuine challenger bank in New Zealand, noting the incredible change that the banking sector is currently going through, the need for scale and synergy and the need to source growth capital, which TSB does not currently have with a philanthropic shareholder.

The synergy opportunities are clear and obvious, especially in areas like technology and regulatory compliance. The DNA of Heartland and TSB is very close with common regional origins and the product sets are highly complementary with significant cross-sell opportunities on a merged basis. The deal simply makes sense, and the TSB Board strongly supported our shareholder, Toi Foundation, working on this transaction.

TSB has made significant improvements over the last 5 years, stabilizing technology and addressing long-standing regulatory compliance issues, the last of which are being addressed now. All issues have been self-identified as part of our uplift. There is still some residual work to be done, but we are very proud of the results TSB has achieved, not just in compliance, but in governance, executive capability, profitability, cost base reduction and return on even be considered, and I'm personally excited about what this merger could provide.

If shareholders support my appointment, I will bring to the Heartland Group Board a combination of direct knowledge of TSB for important continuity and a deep understanding of the Taranaki community and its key clients. In addition, I have substantial financial services experience and broad governance experience and leadership experience across complex, highly regulated organizations.

In addition to chairing TSB Bank, I also chair New Zealand's largest organization, Health New Zealand Te Whatu Ora and the Civil Aviation Authority underlying central government's confidence in me personally. I'm also Chair of the Advisory Boards of Armstrong's, New Zealand's largest automotive group, and PB Tech, New Zealand's largest electronics company.

In my earlier career, I spent 25 years in senior executive roles. Most relevant to Heartland and to you, I was Executive Director of GE Money in New Zealand, who were a leader in automotive finance and then Chief Executive of PGG Wrightson Finance. That business was essentially a full services rural bank. And coincidentally, I was involved in the sale to Heartland back in 2011.

I was also Managing Director of Sime Darby, New Zealand and Continental Car Services, which, in addition to my work with Armstrong's, has given me a lifetime of experience in the automotive sector, one of Heartland's key financial sectors. I was also CEO for Direct Broking and SAI Life, including running what was then New Zealand's second largest reverse mortgage business. I have significant experience in all of Heartland's key banking areas added to the more recent, TSB experience.

My governance career spans nearly 20 years and have been full time for the last 10 years, spanning a number of industries, including banking, finance, insurance and technology. It includes chairing MTF Finance, The Lines Company, Primary ITO, and 6 years as Chair of Inland Revenue Risk and Assurance Committee and have been serving on other Boards like NZTA Waka Kotahi, Auckland Transport, Trustees Executors, MTA and VTNZ. I'm a qualified accountant and I'm a fellow of Chartered Accountants Australia and New Zealand as well as a fellow of the New Zealand Institute of Directors.

As the current TSB Chair, I understand the bank's business, its people, the customers and crucial community relationships. That knowledge will provide valuable continuity in the transition, the integration and in the years ahead. I understand importantly that if appointed, I will act solely in the best interest of Heartland Group.

In summary, my career demonstrates deep experience in banking and finance sector, including with TSB for nearly 5 years, career demonstrates deep experience in banking and finance sector, including with TSB for nearly 5 years. My governance experience and capability is self-evident and believe very well suited to the Heartland Group, including having the confidence of Heartland's largest shareholder post-merger. I respectfully ask for your support for my appointment to the Heartland Group Board. Thank you for your time and consideration.

Thank you, Mark. I move 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.

Are there any questions from the floor?

My name is Ray Williams, shareholder. Is this merger with Taranaki Savings Bank will have any implications on the Fisher Funds where they are a fairly large shareholder?

Given that's Toi Foundation's investment, we won't be able to comment on that today. Are there any questions online?

Yes. One question here. Social issues are often the trickiest aspect of merger negotiations. It is not easy, working out who will be Chair, who will be CEO and who will serve on the Board. Could incoming Director, Mark Darrow, comment on his experience of the merger negotiations? Which were the trickiest aspects? And does he have any work history with the Heartland directors that he will be serving on the Board with?

Thank you for the question. Firstly, I've got little experience with the Board, although I have worked with Bruce Irvine back in the PGG Wrightson days. And with Simon, I think we were at GE Money at the same time. So I have some working relationship here. Look, I agree that there are some really difficult issues as you go through this sale process and the integration. The hardest part is the people.

And the establishment panel, which is a combination of TSB Bank directors and Heartland Bank Directors, have worked extremely hard and very sensitively addressing those issues as well as all the other integration issues, whether it's people, whether it's technology, whether it's having a plan, looking at synergies. It's been a very constructive and productive process over the last 5 or 6 months as a joined-up panel.

Thank you. No further questions online.

Thank you. Please mark your intention on your voting card by selecting for, against or abstain at Item 3. For those online, please click submit vote on the bottom of the voting card to lodge your vote.

[Voting]

The final resolution is for the proposed increase in the total annual remuneration available to all nonexecutive directors. The Notice of Meeting explains the rationale for the proposed increase in directors' remuneration and was accompanied by an independent Board remuneration benchmarking summary report prepared by Propero.

This resolution has the full support of the Board. This resolution is an ordinary resolution requiring approval by a majority of the votes of those shareholders entitled to vote and voting. I move that the total annual remuneration available to all nonexecutive directors of Heartland and its subsidiaries be increased from NZD 2.4 million or AUD 2.2 million, whichever is the greater amount from time to time, to NZD 2.6 million or AUD 2.35 million, whichever is the greater amount from time to time.

This is an increase of NZD 200,000 or AUD 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.

Are there any questions from the floor? Are there any questions online?

Yes, we do have one question here. Best practice is to disclose the proxy position to the ASX along with the formal addresses before the meeting has started to allow for a more fully informed debate. Did you consider doing that today? And were there any material protest votes against any of the 4 resolutions, including the proposed increase in the fee cap. Why haven't you disclosed the proxies so far?

I'll make a few comments then pass to Andrew Dixson. We did at the opening of the meeting, disclose the number of votes received and the capital percentage, and we have published materials online prior to the meeting, but I'll pass over to Andrew to answer the rest.

I think you answered it.

Thank you. No further questions online.

Please mark your intention on your voting card by selecting for, against or abstain at Item 4. Sorry, is there a further question?

John here, shareholder. The company is $1.25 a share, and you've got a very big -- you got 2 point whatever million to cover the directors. Why is that so high compared with the share price? And why aren't the deck chairs rearranged to accommodate another director to come on to the Board. To me, your director fees seem very high.

Thank you for the question. Just look, it's quite a complex business if you consider we've got 3 Board structures, the group Board, which is required for the listings, of course. And we've got 2 bank boards, one in Australia, one in New Zealand.

Now we have had all the appropriate benchmarking provided by an independent, and this is what it is. We can't change -- to change the structure would come at a cost to the business in terms of value moving -- sorry, value moving forward. Bruce, you like to say something?

I think we all acknowledge the issue around the fact that with the regulatory compliance that we have, there are certain requirements for a number of independent directors at each level within the organization. So the Australian bank has to have a certain number of independent directors as required by the regulator in Australia. The same thing in New Zealand.

The one thing we have done is that -- I think there's 3 or 4 situations where we have replicated directors on more than one board. And by doing that, we are actually achieving quite significant savings in terms of the total pool. So it may not seem that great, but we actually have worked very hard to meet the regulatory requirements, but reduce the directors' pool as much as possible.

Yes. And we've come from a share was over $2 to $1.25. And I appreciate that you're trying to grow the business, but it's just disappointing to see where we are now, and let's hope that the way forward is going to have a better result.

We all hope for that. But I'll give you a personal example. I sit on the Australian Board. And the benchmarking for a normal Australian director is something like $140,000, $150,000 or something like that. And I get an extra $30,000 sitting on that Board, but I have to take a full share of the workload, and I'm on all of the committees in Australia. So again, what we've tried to do is keep the fees down as much as possible, but we are constrained by the regulatory requirements in the 2 different banking environments.

Thank you. Are there any further questions?

I just personally think this is an absolutely great deal. So well done to the Board, well done to the management. I just see this adding considerable shareholder value. So well done, and I totally support what you're doing. Thank you.

Thank you, William.

Thank you, everyone. If you can please mark your intention on your voting card by selecting for, against or abstain at Item 4. And for those online, click submit vote at the bottom of the voting card to lodge your vote.

[Voting]

Voting cards in the room will now be collected. Please place your voting card in the ballot boxes as they are passed around. If you need help, please raise your hand. Online votes should now be submitted. Voting will be open until the close of the meeting. The results of the poll will be advised on the NZX and ASX tomorrow morning, Thursday, the 1st of October. I will now invite our Chair to address the meeting.

Thank you, Phoebe. That brings us to the end of the Heartland Group's 2026 Special Meeting. Accordingly, I declare the meeting closed. Thank you and your attendance -- sorry, thank you for your attendance and participation here today. You're invited to join the directors and management team for refreshments, which are being served at the back of this room. Again, thank you very much for your attendance.

Thank you for standing by, and welcome to the Heartland Group FY '26 Full Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Andrew Dixson, CEO of Heartland Group. Please go ahead.

Thank you, and good morning. Welcome to the Heartland Group 2026 Full Year Results Call. I am Andrew Dixson, Chief Executive of the Heartland Group, and I'm joined today by Leanne Lazarus, Executive of Heartland Bank in New Zealand; Michelle Winzer, Chief Executive of Heartland Bank in Australia; and Kerry Conway, Chief Financial Officer of Heartland Banking Group.

Starting with Slide 5, the FY 2026 summary. We set ourselves a number of clear objectives for FY 2026, namely to rebuild the profitability and return profile of the group, but in particular, to restore margins, improve asset quality and complete the nonstrategic asset program. Heartland has achieved these objectives, meeting all underlying FY 2026 guidance metrics, delivering an improved return on equity and turnaround of profitability. In doing so, we have established a strong foundation to support the next phase of growth.

Underlying net profit after tax was $90.4 million, up from $46.9 million in FY 2025. Reported NPAT was higher at $93.2 million, and I'll discuss those differences alongside the impact of foreign currency translation on the results shortly.

Underlying return on equity was up 286 basis points to 7.3%. This improvement was driven by a combination of factors. Firstly, a lower cost of funds, both in New Zealand and Australia, drove the group's average NIM expansion of 36 basis points to 3.98%. Heartland Bank Australia completed its transition to being predominantly deposit funded and benefited from this on average for a full year.

Substantial progress was made on asset quality with a significant reduction in nonperforming loans across the business as NSA realization exceeded expectations and all motor finance arrears greater than 180 days past due were cleared. This resulted in a 55 basis point reduction in the impairment expense ratio to 0.45%. Despite a $12.2 million increase in operating expenses, early signs of improved operating leverage are emerging with a 155 basis point improvement in the cost-to-income ratio to 54.6%.

The group strengthened its capital position during the year, providing support for strong organic growth that is being experienced in some of our core portfolios. Reverse mortgages for both Heartland Bank and Heartland Bank Australia continued to perform well with receivables up 16.8% and 19.7%, respectively. Heartland Bank's rural portfolio also delivered strong receivables growth of 10.8%. Importantly, these results have been achieved all while the business continues to build for the future. The NSA realization program has successfully concluded with a $254 million reduction in receivables exposure across the financial year. Technology transformation programs in both countries have progressed to plan in FY 2026 with initial production deployments and the launch of reverse mortgages to their respective platforms. Both remain on track with no change to delivery timetables or implementation costs.

Finally, we were pleased to announce at the start of June, the proposed merger of Heartland Bank and TSB to create a New Zealand challenger bank of scale, with a regional focus.

Moving to Slide 6, group financial results. I will discuss the differences in reporting against underlying NPAT on the next slide, and Kerry will unpack individual bank performance in more detail later. Heartland recorded underlying NPAT for FY 2026 of $90.4 million, with all key metrics showing a strong improvement from the prior comparative period. I would note that movements in FX rates contributed $2.6 million to NPAT relative to FY 2025 and excluding the impact of changes in FX. Aggregate receivables growth was 3.9%, a solid achievement given the $254 million reduction in NSA receivables over the period.

Importantly, our earnings recovery has been broad-based with net operating income of $354.3 million, up $31.5 million, while OpEx of $193.5 million was up $12.2 million, highlighting operating leverage in the business is beginning to reemerge despite carrying costs associated with technology and repositioning the business. The cost-to-income ratio of 54.6% reduced 155 basis points, and the impairment ratio reduced 55 basis points to 0.45%.

Moving to Slide 7, reported versus underlying results. Before detailing the key differences, I wanted to state clearly that from FY 2027 onward, Heartland intends to present its financial results on a reported basis only and will note any exceptional items where applicable. As such, this will be the last time we will see this slide or indeed the dual financial tables throughout the pack.

For FY 2026, reported NPAT was $2.8 million higher than underlying NPAT due to the combination of 3 items: firstly, a fair value gain following the full divestment of the Harmoney equity exposure. Secondly, the net impact of a change in accounting for reverse mortgage commissions in Australia, which is detailed on Slide 33 and will be discussed in more detail by Kerry. And finally, transaction costs incurred in FY 2026 related to the proposed merger of Heartland Bank and TSB.

Moving to Slide 8, capital. The financial year has been a year of positive outcomes that have enhanced the capital position of the group. NSA realization has released approximately $32 million of capital. The RBNZ's final capital settings for deposit takers announced in December 2025 will provide for lower Tier 1 and total capital ratio requirements compared to its prior review. It removes additional Tier 1 capital instruments while allowing for more Tier 2 and introduces more granular and reduced risk weights.

The RBNZ also reduced Heartland Bank's transitional capital overlay imposed after the acquisition of what is now Heartland Bank Australia from 2% down to 0.5%, reflecting the completion of integration activities in relation to Heartland Bank Australia and stronger trans-Tasman oversight arrangements alongside an improvement in the overall risk profile of the banking group. The RBNZ is also expected to review reverse mortgage risk weights in the second half of calendar year 2026, and Heartland Bank intends to participate in this review.

Overall, we enter FY 2027 with considerable excess capital held across the group, which is expected to grow on implementation of the aforementioned changes. This positions Heartland with a stronger, high-quality balance sheet with greater flexibility to support scale, growth and improve shareholder returns.

Moving to Slide 9, NSA realization. The NSA realization program has successfully concluded with the $94 million residual portfolio no longer considered material as at 30 June 2026 and returning to business as usual management. Heartland, therefore, no longer intends to report on the NSA realization program. The total value of NSAs reduced by $270 million during FY 2026, creating $32 million of available capital. As at 30 June 2026, the residual NSA portfolio is either on a scheduled rundown or has a specific exit plan and is well provided for.

Pleasingly, since 30 June 2026, the properties NSA has been successfully realized and further progress has been made across the receivables portfolio. I'd like to specifically acknowledge the incredible work that everyone involved in this program has done. From 31 December 2024, when Heartland began reporting against its NSA realization program to 30 June 2026, the total value of NSAs reduced by $374 million with a 94% recovery rate, creating $42 million of available capital.

Moving to Slides 10 to 12, the proposed transaction. On 2 June 2026, we announced a conditional agreement with Toi Foundation to acquire TSB for an aggregate consideration of $620 million and immediately following that acquisition, merge Heartland Bank and TSB. The proposal would create TSB Heartland Bank, a New Zealand challenger bank of scale with a regional focus. We remain confident in the strategic rationale for the proposed merger and the benefits it has the potential to deliver. At its core, the rationale is about bringing together 2 highly complementary banks.

Heartland Bank brings specialist banking expertise in areas such as reverse mortgages, motor finance, rural and asset finance. TSB brings residential mortgage portfolio, established transactional banking capability and a cost-effective retail funding base. Together, that would create a full-service bank with approximately $15 billion of New Zealand assets, greater product and funding diversification and the ability to support customers through their financial life cycle. Greater scale will provide an opportunity to spread the increasingly significant fixed costs of running a bank, particularly those associated with technology and compliance across a much larger portfolio while delivering greater financial resilience.

Importantly, this isn't about moving away from what has made either bank distinctive. Heartland Bank's specialist products address customer needs that often aren't well served elsewhere, and we intend to retain that specialist focus. We also recognize the importance of TSB's connection with Taranaki and its regional identity. Our intention is for Taranaki to remain a key operational hub with a local branch network and customer-facing roles in the region while maintaining Heartland Bank's existing nationwide presence. Strategically, we see a compelling combination, greater scale, resilience and product diversification, complementary capabilities, and the opportunity to create a stronger New Zealand domestic bank with a regional focus.

In terms of process, the transaction remains conditional. Remaining conditions include Toi Foundation trustee approval, Heartland shareholder approval and necessary regulatory approvals. We await the outcome of the Toi Foundation trustee process. As there is also a matter before the court relating to that process, we won't comment on it or speculate on potential outcomes.

Should the Toi Foundation trustee approval condition be satisfied, our next steps include progressing the RBNZ application and progressing with our shareholder meeting currently scheduled for 30 September. We are continuing to target completion in December, subject to the remaining conditions being satisfied. While there are still important steps ahead, we remain focused on completing the proposed transaction and are confident in the strategic rationale and the potential benefits it could deliver to all stakeholders.

Finally, moving to Slide 13, shareholder return. Heartland has declared an FY 2026 final dividend of $0.035 per share, up $0.015 per share on FY 2025's final dividend. Due to Heartland's strong capital position, the dividend payout ratio of 73% considerably exceeds Heartland's target of at least 50% of underlying NPAT and the DRP will not apply to the final dividend.

I'm pleased to hand to Leanne and Kerry to discuss our New Zealand Bank.

Thank you, Andrew, and good morning, everyone. Turning to Slide 15. Financial year '26 was pivotal for the New Zealand Bank, and I am proud to present these results today. We've used the foundation set from our strategic reset in financial year '25 to deliver what we said we would. We materially met our underlying guidance across key metrics, saw margin expansion on the prior year, significantly improved asset quality and strong reverse mortgage and rural growth.

Against this backdrop, there are 2 key messages I would like to emphasize. Firstly, we reduced risk. We significantly improved the quality of our motor finance portfolio, clearing arrears greater than 180 days past due, accelerated the exit of nonstrategic assets and finished the year with the strongest nonperforming loan position the bank has reported since 2017.

Secondly, we built on our strengths. Core lending has returned to growth, driven by strong performance in our reverse mortgage and rural businesses. Our technology transformation program is underway with the first phase of reverse mortgages now live on the platform. I'll speak to this in more detail a little later.

We maintained very strong liquidity and capital positions throughout the year, and we delivered profit above guidance. One of the strongest external validations of the progress we have made was the Reserve Bank's decision to reduce the transitional capital overlay imposed on Heartland Bank after our acquisition of what is now Heartland Bank Australia. The overlay reduced from 200 basis points to 50 basis points, reflecting an improved risk profile. This means we have released capital, an important enabler for the coming year.

Financial year '27 will be about converting the stronger foundation into sustainable growth and greater efficiency through technology and automation. This will support sustainable returns from the New Zealand business.

I will now hand over to Kerry Conway, Chief Financial Officer, to cover the financial performance of the New Zealand Bank.

Thanks, Leanne. The financial position remains robust across New Zealand and the wider banking group with capital and liquidity ratios well above Board and regulatory minimums. Reported net profit after tax for FY '26 was $49.8 million, up $27.9 million on last year, with profit before impairments and tax of $98.4 million, down $3.5 million. Underlying results exclude the impact of $2.6 million pretax one-offs, largely related to fair value changes on equity in the first half. Stripping out one-offs, underlying NPAT was $47 million, up $24.6 million.

On to receivables, Slide 17. Receivables retracted $121 million in the year, ending at $4.6 billion. Core portfolios grew $157 million, but the growth was offset by successful NSA execution, driving $254 million retraction. Leanne will cover this in more detail later.

Moving to NIM. Average NIM expanded as expected in the year, up 17 basis points to 4.08%. The OCR decreased 100 basis points during the year. Coupled with soft credit demand, this intensified pricing competition in some of our key portfolios, resulting in gross yields down 91 basis points, but this has been mitigated by active funding management in light of excess liquidity, which saw cost of funds reduced by 108 basis points. FY '27 NIM is expected to remain steady at about 4.05%.

On to OpEx on Page 19. OpEx of $126.9 million is down $0.7 million on FY '25 and down $2.3 million on a like-for-like basis. Staff costs increased by $2.2 million, driven by one-off costs and the reintroduction of an LTI program. Inflationary increases were absorbed by active recruitment management in light of the impact of subdued growth. IT costs increased, reflecting higher contract renewal costs and additional IT security investment. A deliberate investment in growth saw marketing expenses increased $1.9 million, notably to support reverse mortgages with a brand refresh and TVC campaign. Disciplined cost management in other areas has helped to fund these investments. The CTI ratio of 55.6% increased 0.8% versus last year. 1.4% of this uplift was a result of reduced income from NSA with the corresponding benefit of that being seen in impairments versus OpEx.

On impairments, provisions and asset quality, net provisions decreased $18.2 million to $50.8 million, with collective provisions down $15.9 million as a result of improvements in staging mix and reduction in provisioning rates across the board. The FY '26 impairment expense of $30.4 million was $38.3 million lower than last year, with the key driver being the nonrepeat of large write-off activity related to the change in approach implemented in FY '25. The impairment ratio of 67 basis points reflects a material improvement in asset quality. We expect FY '27 to stabilize with no further material CP releases, noting the current global instability could put pressure on impairments.

The nonperforming loan ratio continues to improve, down 129 basis points from June '25 to 1.92%. The key drivers being a large number of NSA repayments, continued improvement in motor and a reduction in business finance arrears.

Finally, moving on to capital, Slide 22. With a regulatory capital ratio of 16.6%, the New Zealand Bank continues to operate well above the future regulatory minimum of 14.5%, demonstrating a strong capital position and readiness to support future growth transitioning through the impending regulatory changes.

I'll now hand back to Leanne to talk about portfolio and tech transformation.

Thank you, Kerry. I refer you to Slide 23. Turning to Motor Finance. The portfolio performance reflects the discipline we have applied throughout the year. Overall, Motor Finance receivables grew modestly by 1.5% to $1.72 billion, but the important point is the improved quality of the portfolio. Dealer receivables reduced as we deliberately shifted from low-quality broker and non-franchise lending towards higher-quality franchise lending. Although global supply chain disruption impacted demand in the first half, new business volumes improved in the second half, supported by the Kia wholesale funding partnership and record EV lending in March. At the same time, our direct-to-consumer channel grew strongly, up 25.7%.

Slide 24. Turning to reverse mortgages, which had another strong year, growing 16.8% to $1.44 billion. That growth has been supported by our investment in market awareness, our regional presence and our process improvements that make it easier for customers to engage with us. Reverse mortgages remains one of the clearest growth opportunities in the New Zealand Bank. Our customers continue to use their reverse mortgage for a range of purposes, including easing cost of living pressures. Credit quality for this portfolio remains very strong with an average current loan size of $163,000 and a weighted average current loan-to-value ratio of 27.5%. Looking ahead to financial year '27, our focus is to convert the current momentum into more high-quality growth, supporting more New Zealanders to access the equity in their home while maintaining the discipline and safeguards that underpin the strength of this product.

Slide 25. The rural portfolio delivered a very strong result in financial year '26 with receivables up 10.8% to $675 million, ahead of sector growth of 1.8%. This was supported by stronger livestock finance intermediary partnerships and expanded regional presence and improved market conditions. For financial year '27, we are focused on sectors, customers and partnerships at the smaller end of the market where Heartland Bank's specialist capability is valued and where the risk-adjusted returns support sustainable performance.

Slide 26. Business Finance is a different story, and we have been very deliberate in how we manage this portfolio in current economic conditions. Receivables reduced 18.1% to $639 million, which is within guidance and reflects our continued focus on asset quality and pricing for risk. The market remains subdued, particularly in construction and transport, which are important sectors that we lend to. As conditions improve, this portfolio is well positioned to participate in a quality-led recovery. But the emphasis remains the same. We will grow where the return is appropriate and where the credit quality supports sustainable performance.

Slides 27 and 28. The New Zealand technology program is a critical tool to lift efficiency and scale the New Zealand Bank. We have continued investing in simplifying and modernizing our technology from the modern foundations implemented through financial year '23 to financial year '25 to now leveraging those modern platforms with an AI-enabled layer of automation and integration.

Our objectives are simpler digital journeys for customers, faster lending decisions, more automated, lower-cost operations and a less complex, more resilient technology landscape. Over time, this will improve our ability to serve our customers, make product changes and scale without adding equivalent operational cost.

The initial Pega capability went live in June 2026, focused on reverse mortgages and represents the first production release of the program. We have invested $3.3 million towards implementation in financial year '26, and this is within our budget expectations. The primary expected benefit for reverse mortgages is scalable growth. In the year ahead, the technology program is focused on completing the reverse mortgage back book migration, improving the customer self-service experience and starting the motor finance migration and automation.

To conclude, overall, financial year '26 has been a year of significant progress and renewed momentum for the New Zealand Bank. I want to thank our people for their commitment and our customers and Heartland's shareholders for their continued trust and support.

I'll now hand over to Michelle Winzer, Chief Executive Officer of Heartland Bank Australia.

Thank you, Leanne, and good morning, everyone. I'm pleased to share Heartland Bank Australia's results for FY '26.

Moving to Slide 30. In FY '26, Heartland Bank Australia materially met its underlying guidance across all key financial metrics. Despite an evolving macroeconomic backdrop, performance was anchored by strong reverse mortgage growth and market leadership. Disciplined balance sheet and funding management supported margin expansion and improved the cost-to-income ratio, while customer service remained strong. For the reverse mortgage portfolio, we delivered 19.7% growth, bringing total receivables to $2.37 billion. Maintaining this momentum while concurrently executing a major core technology transformation demonstrates the operational resilience and capability of our team.

As Australia's leading reverse mortgage provider, Heartland reinforced its total market share of over 40%, while capturing 55% of new business market share across the financial year. Customer and partner engagement metrics also remained strong. We recorded an 85% customer satisfaction score and a Net Promoter Score of plus 49 in our reverse mortgage business. Borrowers highlighted processes, transparent communication and empathetic support as defining features of their experience. This positive momentum extended across our deposit suite with our savings and term deposit customers reporting a customer satisfaction score of 77% and a Net Promoter Score of plus 20.

A key strategic milestone in FY '26 was commencing a program to simplify the Bank's core infrastructure. We went live on our new platform in July 2026 for new reverse mortgage application origination, commencing initially with our direct channel and a cohort of pilot brokers. We are also seeing clear evidence of operational consistency across our servicing channels. Our contact center maintained positive service levels despite call volumes increasing by 46%. Across our distribution channels, we expanded key broker partnerships, which contributed directly to increased reverse mortgage origination volumes.

In our livestock portfolio, we deepened our regional footprint by onboarding 13 new service providers under StockCo, strengthening key industry partnerships across regional markets. The livestock portfolio is positioned for growth in 2027, supported by repeat customer demand, specialist capability with targeted partnerships and stronger agent channels, helping to expand distribution while maintaining credit quality and risk-adjusted returns.

I will now hand over to Kerry to cover the financials.

Thanks, Michelle. Like New Zealand, the financial position for HBL is robust with capital and liquidity ratios well above Board and regulatory minimums. Reported NPAT for FY '26 was $43 million, up $15.8 million on last year. Underlying results exclude the impact of $6.6 million pretax one-offs relating to a change in accounting treatment of reverse mortgage commissions, which I'll cover a bit later. Stripping out one-offs, underlying NPAT was $38.4 million, up $10.3 million.

Moving to receivables, Slide 32. Receivables grew $373 million in FY '26 to $2.6 billion with strong growth in reverse mortgages and a marginal retraction in livestock, which Michelle has covered.

On Slide 33, as mentioned, we've refined the way we account for broker commissions on our reverse mortgage book backdated to the 1st of January. We now include both upfront and trail commissions as part of the fair value of those loans and release this cost as contract income over the life of the loan rather than expensing immediately as invoiced through OpEx. This aligns us with the majors and removes the distortion where previously margin looked overstated with the commission sitting separately in OpEx. We now match the commissions cost against the income it earns.

The resulting adjustments net to $6.6 million, a 7 basis point reduction in NIM and 392 basis point improvement in CTI. In summary, a $2 million reduction in net NII from reclassifying second half trail commission from OpEx and second half amortization of the upfront commission pool. $5.7 million increase in other operating income from recognizing the life-to-date upfront commissions in the carrying value of the loans and $2.9 million reduction in OpEx from reclassifying second half trail commissions to net NII and recognizing second half upfront commissions in the carrying value of the loans.

On NIM, Slide 34, excluding the impact of the accounting change, average NIM expanded 73 basis points to 3.81%, primarily driven by a meaningful reduction in cost of funds. A key driver has been our deliberate transition away from wholesale funding to deposits, now at 84% as well as liquidity balances now normalized through no longer needing to prefund large securitization date-based calls or wholesale funding maturities. Looking ahead, we expect NIM to contract by about 13 basis points to around 3.68%. 7 basis points is driven by the accounting change and the remainder from competitive pressure on price and reverse mortgages and the margin compression from higher TD rollover rates.

Moving to OpEx. OpEx of $57.6 million is up $11 million versus last year, with the key drivers being staff costs, investments in the tech program and costs linked to growth. Increase in staff cost is driven by the full year impact of FTE hired in FY '25 and additional FTE in FY '26 to support growth, the tech program and to ensure customer experience has not been impacted while we've been implementing the new platform. Total project costs of $2.4 million are as expected with the investment in Constantinople. Although OpEx has increased, CTI has reduced by 340 basis points from growth in reverse mortgage income.

Funding and liquidity on Slide 36. Repayment of the final $100 million MTN was completed on October, funded through customer deposit growth. Deposits increased to $2.5 billion, further strengthening the funding mix and reducing reliance on wholesale funding as well as contributing to lower funding costs supporting NIM performance.

And finally, on capital, Slide 37. The Bank maintains a strong capital position while supporting portfolio growth. Total capital increased to $360 million, driven by retained earnings of $43 million during the period. The total capital ratio remained strong at 19.3% above regulatory minimum requirements.

I'll now hand back to Michelle to discuss portfolio performance and the tech transformation.

Thank you, Kerry. Turning to Slide 38, which outlines the lending performance of our core Australian reverse mortgage portfolio for FY '26. As I mentioned, total receivables reached $2.37 billion as of 30 June '26, representing an increase of $391 million or 19.7% over the prior year. This sustained portfolio expansion translated directly into top line earnings growth. Net operating income for the portfolio reflected both volume growth and disciplined margin management. Growth across the period was supported by ongoing customer demand alongside balanced momentum across both our direct and broker channels.

Our diversified broker network continues to positively impact our market reach, ensuring we capture growing market demand as awareness of equity release solutions increases. This growth has been achieved while maintaining strong credit metrics and underwriting standards across the portfolio. Our nonperforming loan ratio remains low at 0.74%. Our average current loan size is AUD 223,000 and our weighted average current loan-to-valuation ratio stands at 24.8%. We expect strong growth to continue in FY '27.

Moving to Slide 39 for an update on our livestock finance portfolio in Australia. As of 30 June '26, our receivables stood at $250 million, down by 1.7% or $4.3 million compared to the prior corresponding period. This variance reflects higher trading velocity within the portfolio, where livestock sales exceeded purchases over the 12 months. Underlying customer activity remained healthy with the business funding a solid volume of livestock trades amidst supportive cattle market conditions. Despite a lower year-end receivables position, earnings performance was strong. The net operating income for the portfolio increased 20% to $15.1 million, up from $12.6 million in FY '25. This growth was driven by improved funding costs and higher overall portfolio quality, while average receivables remained stable across the financial year.

A key milestone for this portfolio was the significant improvement in asset quality. Through active portfolio management and targeted customer workouts, nonperforming loans reduced from $36.9 million at 30 June '25, down to $26.5 million at 30 June 2026. While livestock markets are expected to remain dynamic in FY '27, the improved quality of the portfolio and ongoing customer activity provide a solid foundation for 10% growth and sustainable earnings performance.

Moving to Slide 40 on our transformation program. To support our growth ambitions and streamline our operating model, we have partnered with Constantinople to consolidate multiple legacy platforms into a single cloud-based core banking system. Consolidating onto one infrastructure simplifies our architecture, removes legacy platform complexity and eliminates redundant manual processes.

As this new platform matures, the program will deliver operational and financial benefits over time, including streamlined digital workflows and automated decisioning, which will deliver faster turnaround times, improving the experience for our customers, broker partners and employees, higher reverse mortgage origination volumes and future product growth and a simplified cloud-based architecture, which reduces vendor complexity, enables total legacy system decommissioning and drives down our overall cost to serve on a per account basis. Following migration completion and full adoption of the target operating model, these efficiency gains will drive sustainable long-term improvements in our operating leverage and cost-to-income ratio.

On to Slide 41. As mentioned, in July '26, we launched the first phase of our reverse mortgage origination on the Constantinople platform. The program remains on schedule and within scope with FY '26 external implementation costs estimated at $2.4 million. We are already seeing early proof of execution with approximately 40% of all new reverse mortgage origination volumes currently being processed through the new platform.

Looking ahead to FY '27, our focus shifts to platform utilization and our legacy retirement schedule. We plan to transition our remaining reverse mortgage broker channels onto the new platform to achieve 100% of new reverse mortgage originations on the system, to deploy additional digital functionality to further streamline processing and enhance decisioning speed and to migrate existing deposit portfolios onto the core platform while introducing new digital savings and deposit products.

In summary, in FY '26, Heartland Bank Australia materially met underlying guidance, delivering 19.7% reverse mortgage growth, expanding net interest margin by 73 basis points and going live with the first phase of our core cloud platform. With strong customer outcomes and a clear transformation road map, we enter FY '27 focused on delivering continued business growth and further improvements in our operational performance.

Finally, I would like to thank our people for looking after our customers and partners with so much care and dedication this year as well as our Board and shareholders for their ongoing guidance and support.

I will now hand back to Andrew.

Thanks, Michelle. So just finishing with the outlook and starting with Slide 43 in terms of our focus for the current financial year. Our priority for FY 2027 is to continue improving shareholder return by growing return on equity to at least 7.5% and lifting profitability to at least $102 million. As our FY 2026 results demonstrate, Heartland has reset its core strategic foundation. Margin and asset quality have been restored to target levels.

Our enhanced collections, recoveries and write-off strategies are embedded as BAU now and the NSA program has successfully concluded. We will use this foundation in FY 2027 to focus on building and acquiring scale through accelerating growth in core portfolios with reverse mortgage growth targets greater than 18% in both countries and successfully completing the proposed transaction, subject to satisfying all MIA conditions. This will be supported by executing the next phase of our technology transformation programs to enhance operating leverage and to unlock future growth and commencing merger integration subject to completion of the proposed transaction. These activities will provide the opportunity for Heartland to optimize capital held within the business as the financial year progresses.

Turning to Slide 44 and FY 2027 guidance. Heartland expects NPAT for FY 2027 to be at least $102 million, excluding any costs related to the proposed transaction. Subject to satisfaction of all MIA conditions as the proposed transaction nears completion, guidance will be updated to reflect the impact of Heartland Bank merging with TSB.

As previously mentioned, FY 2027 guidance is provided by Heartland on a reported basis only, and we intend to take this approach to guidance and the presentation of our financial results going forward with any exceptional items disclosed where applicable. The Board continues to target a total dividend payout ratio of at least 50% of NPAT in FY 2027.

In closing, thank you all for joining the call. As you will have seen, FY 2026 has been a big year, and we have achieved a lot. I'd like to acknowledge the efforts and hard work of our dedicated staff who have worked tirelessly to achieve these outcomes.

I will now open it up for questions.

[Operator Instructions] Your first question comes from Stephen Hudson with Macquarie Securities.

Can you hear me okay?

We seem to have an issue with the questioner's line. [Operator Instructions] We are showing no further questions at this time. I'll now hand back to Mr. Dixson for closing remarks.

I think we have a first of no questions. I think that's a positive sign. So thank you all for joining us for what has been a great result, and we look forward to future updates. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Good morning, and thank you all for joining us today. I'm joined today by Michael Jonas, Chief Strategy Officer; and Phoebe Gibbons, Chief Legal Officer. I'm pleased to share that Heartland has this morning announced the proposed merger of Heartland Bank and TSB. At its core, this proposed transaction is about building a stronger New Zealand domestic bank, combining scale, capability and regional strength to deliver improved outcomes for customers, communities and our shareholders.

In the presentation today, I will take you through the transaction structure, the strategic rationale, the profile of the combined business and the expected financial outcomes. I will then finish with an overview of the path to completion before we open up for questions.

Moving to Slide 4, a summary of the proposed transaction. Heartland has entered into a merger implementation agreement with Toi Foundation to acquire 100% of TSB. Following the acquisition, Heartland Bank and TSB will amalgamate to form a new combined entity, TSB Heartland Bank. This will create a New Zealand challenger bank of scale with a strong regional focus, increasing competition and expanding choice for customers. TSB Heartland Bank will be a full-service capable bank differentiated by its specialist product offerings with a lower risk-weighted product portfolio.

The total consideration for the transaction is $620 million, which includes a $50 million pre-completion dividend from TSB. The remaining consideration comprises $250 million in equity issued to Toi at $1.25 per share being a near 15% premium to Heartland's last 10-day VWAP, a $56 million subordinated note issued to Toi by Heartland Bank, which is RBNZ compliant Tier 2 regulatory capital; and finally, a $264 million vendor loan provided to Heartland by Toi for a 2-year term repayable by Heartland at any time without break fees.

From a valuation perspective, this implies about 0.76x book value, around 12x of TSB's last 12 months NPAT or around 8x TSB's last 12 months NPAT when including full run rate synergies. From a financial outcome perspective, the transaction is expected to deliver material cost synergies over a 3-year period, approximately $34 million per annum in pretax benefits at full run rate and earnings per share accretion in excess of 20% in the first year post completion, alongside an enhanced dividend per share profile.

I'll come back to those financial outcomes in more detail shortly. Before doing that, I will set out how we intend to bring the 2 businesses together. Turning to Slide 5. Both Heartland Bank and TSB have long histories and deep regional roots, and we intend to reflect that in the combined bank's name and branding approach. Operationally, the combined business will retain Heartland Bank's nationwide presence while maintaining Taranaki as a key operational hub for customer-facing services.

That includes continuing a local branch network and preserving customer-facing roles in the region. From a governance perspective, Toi will become a significant shareholder, holding 17.5% of Heartland. Subject to shareholder approval, Toi will have initial representation at Heartland Board level, and we also expect continuity at the bank level through the inclusion of two existing TSB directors. Completion is targeted for December 2026, subject to shareholder approval, regulatory approvals and community consultation.

Turning to Slide 6. There are four key drivers underpinning the strategic rationale for this transaction. The first is scale. Increasing compliance costs, regulatory complexity and sustained technology investment all disproportionately affect smaller subscale banks. The transaction will materially increase Heartland's scale in New Zealand, delivering a 171% increase in its New Zealand asset base, along with a 72% increase in pro forma net profit after tax, including synergies.

The increase in scale is significant and provides greater distribution reach, alongside diversification of products and locations that will provide enhanced financial efficiency and resilience. The second driver is a diversified and differentiated product set. The combined bank will be full service capable with a broader and more differentiated product set. This allows us to support customers across their financial life cycle while retaining Heartland's specialist strengths. It also provides access to a cost-effective deposit base and established transactional banking capability.

This may support an uplift to the merged bank's long-term credit rating as a reflection of its strengthened asset quality and risk profile. The third driver is synergies. Material synergies are expected to be realized progressively over a 3-year period post completion by reducing shared costs across the merged bank. When fully realized, we expect these synergies to deliver a $34 million benefit in NPAT per annum. I will discuss synergies in more detail soon.

Finally, shareholder value. Synergy realization and the structure of the transaction are expected to deliver strong earnings accretion alongside an improved dividend profile and return on equity.

Turning to Slide 7. Following completion, TSB Heartland Bank will have approximately $15 billion in total New Zealand assets, making it the seventh largest bank in the country. That increase in scale is not just about size, it translates directly into operational benefits. It enables more effective capital deployment. It improves cost efficiency through better utilization of the fixed cost base and allows us to further leverage our investment in technology. It also strengthens our competitive position in the New Zealand market.

Turning to Slide 9. The proposed merger is not a change to Heartland's specialist product focus across New Zealand and Australia, but rather an enhancement to it through the addition of full-service banking capabilities in New Zealand, enabling scalable growth within our existing specialist product portfolios. TSB Heartland Bank will offer a broader product suite, including home loans, reverse mortgages, motor finance, commercial property lending, rural lending, business finance and personal lending.

On the funding side, the merged bank will have an optimized funding base through the greater proportion of noninterest and interest-bearing on-core products held by TSB. The addition of home lending at scale is a key step change. This is an area where Heartland Bank has not been able to achieve meaningful scale organically and the acquisition of TSB addresses that directly. At $6.5 billion, we believe this portfolio is capable of generating an appropriate return on equity in the combined bank assisted by the planned reduction in risk weights following implementation of the RBNZ capital changes from October 2026.

The proposed transaction will create opportunities for Heartland to deploy its specialist product strategy across a large base to better serve customers through their financial life cycle. Alongside this expanded capability, it is equally important to maintain the community and regional connections that underpin both businesses.

Turning to Slide 10. Both Heartland Bank and TSB has strong and long-standing connections to regional New Zealand. This is reflected in each bank's deposit bases with almost half of TSB deposits coming from Taranaki and about half of Heartland Bank's deposits distributed across Canterbury and Auckland with strong representation in other regions. TSB Heartland Bank will continue to be grounded in delivering good outcomes for its customers and the communities it serves. We will maintain a nationwide presence while retaining Taranaki as a key operational hub, including local branches and customer-facing roles. This combination of scale and regional focus is a defining feature of the proposed bank.

Turning to Slide 13. As I mentioned earlier, Toi will become a 17.5% shareholder in Heartland following completion, providing the register with a good balance of retail and institutional holding. Toi intends to be a long-term supportive shareholder aligned with the ongoing success of the business. Governance arrangements reflect that alignment with expected initial representation at both Heartland Group and the combined bank levels. This structure supports continuity while also enabling effective oversight through the transition.

Turning to Slide 15. The proposed transaction is expected to create significant value for Heartland shareholders. The acquisition price implies a 0.76x multiple of TSB's book value and represents 12.1x earnings after tax, excluding synergies and 8.2x including. From an earnings perspective, we expect normalized earnings per share accretion in excess of 20% in the first year post completion and an enhanced dividend per share profile. Return on equity is also expected to improve over time.

In addition, pretax cost synergies of approximately $34 million per annum are expected to be realized over 3 years. These are balanced by one-off integration costs of similar magnitude over the same period. Importantly, the transaction maintains a strong balance sheet with sound funding, liquidity and capital positions. Costs associated with the transaction are expected to be approximately $15 million.

We expect approximately $7 million to be expensed and reflected in Heartland's FY 2026 NPAT and approximately $8 million will be expensed and reflected in Heartland's FY 2027 NPAT, assuming the transaction completes in FY 2027. The difference between Heartland's reported and underlying NPAT in FY 2026 is now expected to include these transaction costs as well as any fair value changes on equity investments held and other one-off nonrecurring expenditure.

Moving to Slide 16, synergies. The core drivers of synergies primarily reflect the opportunity to reduce duplication across the two organizations, streamline processes and consolidate shared overheads. These efficiencies are expected to be realized progressively over a 3-year period. In addition to these cost synergies, there is also further upside potential, which has not been included in the base case, including funding efficiencies from TSB's deposit base, liquidity optimization and additional leverage from our technology investments.

Turning to Slide 18. The pro forma financials show a clear uplift in net profit after tax for the combined group. This uplift drives higher earnings per share, improved return on equity and greater capacity to support dividend growth. We also expect the cost-to-income ratio to improve over time as synergies are realized. Maintaining this improved earnings profile is supported by a strong capital position, which I will now cover.

Turning to Slides 19 and 20. The combined group is expected to remain well capitalized throughout. Importantly, no new ordinary equity is required to complete the transaction and the vendor loan provided by Toi will provide flexibility in managing capital over time. In addition, recent RBNZ decisions on key capital settings position TSB Heartland Bank well for future growth. On a pro forma basis, the combined bank is expected to hold approximately $289 million of regulatory capital above requirements. I will now turn briefly to the pathway to completion.

Turning to Slides 22 and 23. The transaction is subject to a range of conditions, including completion and satisfaction of confirmatory due diligence, the execution of warranty indemnity arrangements, any necessary regulatory approvals, including approvals from the Reserve Bank of New Zealand, the Financial Markets Authority, FMA, APRA and other relevant agencies. We also require confirmation from Fitch that the combined bank will maintain a credit rating of at least BBB.

There will be community consultation undertaken by Toi with Taranaki residents, reflecting the importance of TSB's ownership structure and regional connection. And finally, Heartland shareholder approval is required to proceed with the transaction and associated governance changes. As with any transaction of this nature, there are also conditions relating to the absence of material adverse changes prior to completion.

Moving to Slide 24, indicative timetable. In terms of timing, Toi's Taranaki community consultation is expected through June and July. We expect to complete confirmatory due diligence and obtain warranty and indemnity insurance during the next fortnight. The Reserve Bank of New Zealand application for approval is expected to be submitted in July. And the Heartland shareholder meeting is expected to take place in August 2026. The Notice of Meeting will be distributed to shareholders at least 20 working days prior to the meeting.

The shareholder meeting will be a key milestone, providing shareholders with the opportunity to vote on the proposed transaction and any new Heartland Board appointment. Subject to shareholder and regulatory approvals, we are targeting completion to take place earlier than December 2026.

Finally, turning to Slide 32. In closing, this proposed merger combines two complementary banks to create a New Zealand challenger bank of scale with a continued focus on regional New Zealand, combining our shared heritage with greater capability and reach. The combined entity will have approximately 320,000 customers, will have a full-service product offering and a strong regional and national distribution footprint.

Together, we will be better positioned to increase banking competition and importantly, to expand choice for New Zealanders, providing a broader full-service offering while maintaining the customer focus and community connection that underpin both organizations. At the same time, this is a transaction that delivers strong financial outcomes and positions us to deliver improved returns for our shareholders over the long term.

It provides a meaningful uplift in earnings, material cost efficiencies over time and clear earnings per share accretion alongside an enhanced dividend profile. Importantly, this will all be achieved while maintaining a strong balance sheet and capital position. Thank you all again for dialing in, and I will now open for questions.

Your first question comes from Ben Crozier from Forsyth Barr.

Can you just give a more breakdown on the synergies? I think on the product side of things, there doesn't seem to be a lot of overlap with your current products. Obviously, there's a lot on the deposit side. Is that where all the synergies sit is more on deposit and head office rather than on the product side of things?

It's more in terms of duplication of shared overheads rather than anything on frontline or lending or deposit-related functions.

Perfect. And then you sort of indicated appropriate -- you're confident that you can generate an appropriate ROE from the residential mortgage book. What is that ROE in your -- you think you can get and the growth ambitions or the growth that you need to get in that book to get -- reach scale? Or is it sort of sufficient scale already and it's just these synergies need to come through to get to an ROE that's appropriate for your level?

Yes. So we've publicly announced our target return on equity of at least 12%. So we are confident we can get to that point with this portfolio. We believe it's at scale in its current form. And it will be enhanced both, as you say, through synergies and the upcoming Reserve Bank risk weight changes as well.

Yes. So getting to that 12% is just all the cost synergy side of things rather than growth in the book or...

The combination of cost synergies as well as the risk weight changes obviously help.

Yes. And presumably on the lending side of things, it's quite dominated in Taranaki as well. Is there a plan to grow a bit more nationwide on the residential mortgage side of things as well?

We'll continue with the current growth strategy. As we've said, this increases our distribution reach across the nation, very much focused on the regions, but we will continue with the current growth strategy that TSB has in that particular product.

Your next question comes from Wade Gardiner from Craigs Investment Partners.

Page 16, when you talk about the synergies, you -- it says in the bottom, it excludes technology related. I would have thought that, that would constitute a reasonable amount of the synergies possible. So can you explain why you have left those out? And also, I guess, in that regard, given that you're currently going through an IT upgrade yourselves, what the IT stack of the combined bank will look like? I'll start with that.

Yes. Thanks, Wade. We've left them out because those decisions are to be made. So whilst during our diligence process, we have scoped the respective technology infrastructure across both banks. As we go through this next phase, we will need to understand an appropriate technology strategy for the merged bank. And on that basis, at this stage, we haven't been able to scope how much that may cost and how much that may deliver in terms of synergies until we actually make a firm decision around the direction of travel on that particular front.

So does that mean you don't know whether their or your -- or the IT stack that you are sort of implementing for Heartland, whether either of those would be suitable and we could be looking at a whole new one?

No. Look, we have a view on the direction forward and which technology infrastructure is the way to go, and it will be one of the existing banks infrastructure, not a completely different one. But we just need to work through that over the next phase to make a firm decision and come up with an appropriate project for it.

Okay. And the integration costs, what does that primarily consist of?

It's the cost of extracting the synergies. Do you mean the $34 million or the transaction cost...

Yes. No, no, the $34 million.

It just reflects the cost involved in extracting the synergies. I can't add much more than that.

Okay. I take it the $8 million of transaction costs, is all of that $8 million conditional on approval of this?

So total transaction cost of $15 million. $7 million in this financial year and $8 million next.

The $7 million is not conditional, but the $8 million is?

Not all of the $8 million. So some -- I can't give you a fair number, but the majority of the $8 million, I would say, is conditional.

Okay. What discussion -- I mean, you say it may support an uplift in the credit rating. What sort of discussions have you had so far with the rating agencies or Fitch?

A lot of discussions. We've been through a formal ratings impact assessment service with Fitch. I can't disclose the outcome of that. But as we have said, we expect this to support an uplift in the credit rating.

Your next question is a follow-up from Ben Crozier from Forsyth Barr.

Just one more for me. Just looking at the March quarter results from TSB, it was down a bit year-on-year and down a bit sequentially. Is there anything you'd call out abnormal in the fourth quarter March results? -- we annualize that quarterly NPAT was $35 million, which is quite a bit of a gap between the $51 million on the last 12 months reported, which was up to December. What would you call out as the biggest drivers? Because it looks like it's OpEx up, NIM is down. Is there anything to worry? Like why should we not annualize that quarter?

Not that I'm aware of, Ben, I'd have to come back to you on the specifics of that.

There are no further questions at this time. I'll now hand back to Mr. Dixson for any closing remarks.

Thank you all for dialing in. I appreciate it's a lot to take in at a pretty short notice, and we look forward to the engagement over the next week or so. Thanks again for dialing in.

Thank you for standing by, and welcome to the Heartland Group 1H '26 Half Year Results Call. [Operator Instructions]

I would now like to hand the call over to Mr. Andrew Dixson, CEO, Heartland Group. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Heartland Group 2026 Interim Results Call. I'm Andrew Dixson, Chief Executive of the Heartland Group, and I'm joined today by Leanne Lazarus, Chief Executive of Heartland Bank New Zealand; Michelle Winzer, Chief Executive of Heartland Bank Australia; and Kerry Conway, Chief Financial Officer of the Heartland Banking Group.

So I'm going to start on Slide 5, the executive summary. And I'm very pleased to announce a strong turnaround in net profit after tax for the first half of the 2026 financial year of $48.8 million, which was $46.1 million on an underlying basis. Underlying return on equity was up 540 basis points from the first half 2025 to 7.3%, which is 142 basis points above the second half of 2025. Our strategic reset, focusing on core portfolio growth and strong arrears management, has built on momentum from the second half of the 2025 financial year to deliver considerable improvement in all key metrics across the business.

Average net interest margin expanded 51 basis points to 3.92% from favorable deposit market conditions in both jurisdictions and Heartland Bank Australia benefiting from the full year of its funding transition. Operating expenses remained steady, up $3.6 million, which included $1.9 million of restructuring costs and the remainder of the increase from investment in marketing and technology programs, which I will discuss in some detail a bit later. There was a significant improvement in asset quality metrics with an impairment expense ratio of 0.35%, which was a reduction of 105 basis points and a sharp reduction in nonperforming loans.

Prescriptive collections and recoveries, policies are [indiscernible] with Motor Finance arrears continuing to perform better than industry average. Aggregate receivables growth of $157 million was steady at 4.3% on an annualized basis. However, this included $173 million of nonstrategic asset realization, which continues to progress ahead of expectations at an overall recovery rate in excess of 90%. Underneath this, Reverse Mortgages are consistently delivering strong growth across both banks with annualized growth rates of over 15% in New Zealand and around 19% in Australia. Despite usual seasonality and some extreme weather impacts, Livestock Finance saw nearly 15% growth in Australia. There was a retraction in our Motor and Business Finance portfolios, but this reflects our strategic shift to quality.

At our AGM last year, I highlighted 2 critical themes for Heartland in FY '26. Firstly, investing in a targeted technology uplift to resume and reinvigorate digital transformation within each bank. With vendor selection and contract finalization in December, both technology programs are now underway within each bank to deliver greater capability and efficiency to meet customer demand at scale. Secondly, ensuring capital is deployed efficiently into return on equity-accretive activity against the backdrop of continued regulatory change. It has improved, and there is more work to do to reach our targets. Successful nonstrategic asset realization and recent regulatory capital decisions have positioned Heartland extremely well for growth with excess capital held across the group.

I'll conclude the summary by announcing an interim dividend of $0.035 per share and affirming our full year 2026 net profit after tax and return on equity guidance.

Moving to Slide 6, group financial results. I will discuss the differences in reported and underlying briefly on the next slide, and Kerry will unpack the individual bank performance in more detail later. However, Heartland reported an underlying NPAT for the first half of 2026 of $46.1 million with all key metrics showing a strong improvement from the prior comparative period. Net operating income was up $15.4 million. The cost-to-income ratio reduced 304 basis points to 54.6%, and the impairment ratio reduced to 0.35%.

Moving to Slide 7, reported versus underlying. As previously noted, we have minimized the gap between reported and underlying NPAT with only a $2.7 million difference for the first half, which is primarily due to a $3.1 million fair value gain from the full exit of our Harmoney equity investment above its carrying value. While we will retain the 2 NPAT measures for the remainder of this financial year, it is our intention to adopt a single statutory reported measure from FY '27, and we are already transitioning towards this with our recording of certain one-off costs within reported net profit after tax.

Moving to Slide 8, technology investment. I'm pleased to confirm that investment in multiyear technology programs has commenced for each bank with Pega selected in New Zealand and Constantinople in Australia. In New Zealand, the program will leverage investment in our modern Oracle core banking system to unify origination and servicing activities across our product sets, enabling greater automation. In Australia, the program will consolidate its 3 origination and servicing platforms into a single banking solution. These platforms will integrate with other key investments made in finance, people, data and contact center platforms, being Workday, Snowflake and Genesis, to deliver new capabilities with each bank, including embedded AI capability, resulting in greater operational efficiency and enhanced customer intermediary and employee experience. Implementation has commenced with Reverse Mortgages for each bank, and this will progress through other product sets. The anticipated implementation costs for these technology programs are estimated to be no more than $17 million over a 3-year period, being approximately $11 million in New Zealand and $5 million in Australia in local currency.

On Slide 9, capital, Heartland remains well placed to cater for organic growth with excess capital held across the group, following nonstrategic asset realization and recent RBNZ decisions on capital settings. In December 2025, the RBNZ announced final decisions on key capital settings for deposit takers, which are set to benefit Heartland Bank from a reduction in total capital requirements relative to the 2028 settings previously determined, the removal of additional Tier 1 capital instruments while allowing a higher mix of Tier 2 capital, and more granular and reduced risk weights, particularly in the productive sectors of the economy that Heartland Bank focuses on, being small business and Rural lending. These settings are targeted for implementation in October 2026 with the Reserve Bank of New Zealand providing further information about this process on 27 February 2026.

In addition to these changes and effective 1st of March 2026, the RBNZ has reduced Heartland Bank's transitional capital overlay, which was imposed after the acquisition of now Heartland Bank Australia, by 1.5%, from 2% down to 0.5%. The remaining capital overlay is expected to remain in place until the Reserve Bank of New Zealand implements a formal group supervision policy for deposit takers, which is expected to come into force in December 2028. The Reserve Bank has also indicated it will review reverse mortgage risk weights in 2026. As at 31 December 2025, Heartland Bank holds approximately $125 million of regulatory capital in excess of expected regulatory requirements. And applying expected risk weight changes to the 31 December 2025 balance sheet, that excess is approximately $190 million.

Moving to Slide 10, nonstrategic asset realization. This continues to progress ahead of expectation and is tracking to be largely concluded by the end of this financial year. In the first half of 2026, the total value of NSA has reduced by nearly $190 million, creating more than $21 million of available capital. Since the establishment of the NSA portfolio and a dedicated team, Heartland has achieved a recovery rate in excess of 90%.

Moving to Slide 11, shareholder return. Heartland has declared a first half interim dividend of $0.035 per share, up $0.015 per share on the first half of 2025. The dividend payout ratio of 72% for the first half exceeds Heartland's target of at least 50% of underlying NPAT, reflecting Heartland's turnaround in performance and the excess capital position. While return on equity has improved, we are some ways from our target. However, factoring in this excess capital would have ROE at around 8.6%.

Looking forward on Slide 12. Heartland affirms its FY 2026 guidance to deliver an underlying return on equity of at least 7% and underlying net profit after tax of at least $85 million. Net interest margin remains on track to meet Heartland's FY 2026 underlying average and exceed NIM guidance, while further asset quality improvements in the first half have resulted in a positive adjustment to the FY '26 underlying impairment expense ratio guidance. Heartland has also revised its underlying CTI ratio guidance due to the first half retraction in certain Heartland Bank portfolios and the impact of investment in the bank technology programs. In addition, underlying OpEx guidance has now been provided at a Heartland Group level, which was previously only provided at the respective bank level.

I'm pleased now to hand over to Leanne and Kerry to discuss our New Zealand Bank's performance.

Thank you, Andrew, and good morning. This is Leanne Lazarus, the Chief Executive of the New Zealand Bank. Heartland Bank New Zealand reset its strategy in financial year 2025. The results today highlight the progress we are making and the positive momentum that is building, following the strategic reset and tight strategic focus in our specialist areas. After we refined our lending portfolios, we have seen consistent growth in Reverse Mortgages, further momentum in our Rural portfolio, and a strategic shift to higher-quality motor and business finance.

While receivables remain below plan, we have confidence in our outlook with solid lending pipelines going into the second half. Over this period, we have delivered significant improvements in asset quality, exited assets within the nonstrategic asset portfolio ahead of expectations, seen expansion in the bank's net interest margin and have been disciplined in cost management. The bank also received capital overlay relief effective 1 March from the Reserve Bank of New Zealand. This reflects the focus we have put on derisking the bank, completing all transitional work relating to the acquisition of Heartland Bank Australia and exercising appropriate risk oversight of our Australian subsidiary. Over this period, the New Zealand Bank also embarked on an automation program that leverages and integrates with our upgraded core banking system, which I will talk to later.

In summary, there are 3 key areas of focus for the second half. These are growth, cost discipline and execution of the technology program. I will now hand over to Kerry Conway to go through the financial performance of the New Zealand Bank.

Thanks, Leanne, and good morning. The financial position remains robust across New Zealand and the wider banking group with capital and liquidity ratios well above board and regulatory minimums. Reported net profit after tax for the bank in the first half of '26 was $31 million, an increase of $30 million versus first half last year. Profit before impairments and tax of $54 million is an increase of $2.1 million or 4.1% versus first half last year.

As Andrew talked about, underlying results exclude the impact of $2.7 million pretax one-off items, largely related to fair value changes in equity investments. For the rest of this section, I'll talk to results on an underlying basis.

In a challenging economic environment, the underlying NPAT of $28.3 million is an increase of $25 million versus first half last year, noting the material impact of impairments in first half '25. Profit before impairments and tax for first half '26 is $54.6 million, an increase of $3.2 million. I'll go through more detail in the following pages.

Moving to receivables, Slide 16. Receivables retracted $254 million, 10%, in the 6 months to December '25, exiting at $4.5 billion. In our core portfolios, Reverse Mortgages maintained growth momentum at 15% annualized and Rural grew 8% annualized, excluding Livestock, which has seasonal contraction. However, this growth has been more than offset by retraction in the Motor, Asset Finance and Business Relationship portfolios, which continue to be impacted by economic headwinds and heightened competition, as well as the impact of a strategic shift to higher quality in the Motor portfolio. $173 million or 68% of the total retraction was driven by successful nonstrategic asset execution, as discussed earlier. The retraction in receivables is driving around $7 million net interest income reduction. However, this is largely offset by NIM improvement. Leanne will talk in more detail to individual portfolio performance later.

Moving on to net interest margin, Slide 17. December exit NIM of 4.11% was steady to the June exit position. NIM continues to track strongly, and we expect to exit the financial year greater than 4.20%. This is slightly lower than the initial expectation of 4.25% as a result of changes in portfolio mix and earlier-than-planned pricing adjustments. Average NIM continues to expand, up 27 basis points versus first half last year to 4.05%. Gross yields have gone down 88 basis points, but this has been mitigated by active funding management, which saw cost of funds reduce by 122 basis points half-on-half and 85 basis points versus the full year '25. The OCR has dropped 100 basis points from June '25 to today. Coupled with soft credit demand, this has resulted in intensified pricing competition in some of our key portfolios. We've endeavored to maintain a balanced pricing strategy, while actively managing cost of funds to drive NIM expansion through exiting $159 million of wholesale funding since June '25 and more aggressively pricing term deposits in line with funding needs. Average NIM is expected to expand further through the second half as cost of fund benefits continue, and growth is focused on higher-NIM portfolio. The outlook for the FY '26 is expected to be greater than 4.10%.

Moving on to operating expenses, Page 18. OpEx of $62.6 million is up $0.5 million on the first half last year. However, on a like-for-like basis, when adjusted for the transfer of staff from HGH during FY '25, the underlying movement is a reduction of $1.1 million. Staff costs increased $2.2 million to $35.1 million. Of this increase, $1.5 million is driven by one-off costs related to structural changes and $0.6 million result from the reintroduction of a long-term incentive scheme. In light of the impact of subdued growth, recruitment has been actively managed to contain costs, with FTE down 6% since December '24, as well as a reduction in contractors, resulting in inflation impacts being absorbed by lower people costs. IT and [ amort ] costs increased $0.3 million, reflecting higher contract renewal costs. And marketing increased $0.4 million, a deliberate investment in growth, particularly to support Reverse Mortgages.

Operational expenses reduced $1.8 million. $1 million of this is due to a classification change of debt collection costs to contra revenue. However, the remaining reduction reflects focused cost control with reduced spend across legal, professional fees, travel and office-related expenditure. The management fee reduction of $2.1 million is another reflection of the staff transfers with all core banking teams now sitting directly within Heartland Bank New Zealand.

The CTI ratio of 53.8% increased 0.6% compared to first half '25. 1.3% of this uplift was a result of lending contraction reducing revenue. And of this, 0.7% was attributable to the NSA reduction.

Moving to impairments and provisions on Slide 19. Net provisions decreased $2 million to $65 million. Collective provisions reduced by $7 million to $40 million as a result of, firstly, improvements in staging mix in Motor, Asset Finance, Business Relationship and Open for Business; and secondly, a reduction in Motor provisioning rates. Specific provisions increased $5 million to $26 million, largely driven by the NSA portfolio.

First half '26 impairment expense of $11.5 million is $38 million lower than first half '25, with the key driver being the nonrepeat of large write-off activity related to the change in approach last year. Components of the $11.5 million are: $7.7 million in write-offs net of recoveries; $10.8 million increase in specific provisions; partially offset by $7 million collection provisions decrease, predominantly driven by material improvements in staging of Motor arrears. The impaired asset expense ratio of 50 basis points reflects a material improvement in asset quality and collections activity. We expect the full year outlook to be higher than the first half due to stabilization in the Motor portfolio, i.e., we would not expect further material CP releases in the second half.

Next, asset quality on Page 20. The total nonperforming loan ratio continues to improve, down 18 basis points from the first quarter to 3.04%, key drivers being a large number of NSA repayments through the quarter and continuing improvement in Motor and Business Finance arrears. The ratio excluding NSAs and noncore lending was down 29 basis points to 2.07%. In Motor, improvements in collections, write-off and recovery strategies continue to have a positive impact with NPLs down $4 million to $28 million. Total arrears at 4.2% continues to be better than market of 5.8%, and in fact, HBL showing continued improving trend in Q2, while the total market deteriorated.

In Rural, the sector continues to perform strongly, supported by high commodity prices, and as a result, performance is stable with limited NPLs. In Business Finance, operating conditions continue to be challenging with market liquidations continuing to increase, up 17%, alongside an 11% increase in year-on-year company closures. The most affected industries remain construction, property, hospitality and transport, with construction and transport representing a significant portion of our business lending portfolios. Despite these challenges, however, business NPLs dropped to $9 million from the first quarter '26, marking the first quarterly reduction since June '24.

Finally, moving on to capital, Slide 36. With a regulatory capital ratio of 17%, the NZ Bank continues to operate well above the current regulatory minimum of 14.5%, demonstrating a strong capital position and readiness to support future growth transitioning through the impending regulatory changes. Capital optimization continues to be a key focus with further capital releases in the first half, including $20 million relating to the realization of NSAs. ROE has improved from 0.5% this time last year to 5.9% in the second half of last year to now 7.6% in the first half, and we're well on track to deliver better than 6% for the full year.

I'll now hand over to Leanne to discuss the New Zealand Bank strategy and portfolio performance.

Turning to Slide 22, Reverse Mortgages. Reverse mortgage lending has performed consistently through the first half, closing the period at $1.3 billion. This reflects annualized 15.2% growth since June 2025. Throughout the first half, we have reviewed and simplified our lending standards to align to market opportunities and streamline our processes, resulting in increased conversion rates, which drove a material improvement in approval times with application to settlement reducing by 19 days from July of 2025 to December of 2025.

We're seeing encouraging traction in Village Access loans, which continue to gain momentum and broaden our growth mix. We have invested in a refreshed marketing campaign to raise awareness and education, and we've also expanded regional coverage. This investment, combined with strong pipeline development, is expected to drive further growth in the second half to achieve the full year growth outlook of 18%.

Turning to Slide 23, our Rural portfolio. Overall, the Rural portfolio is performing well, and execution is tracking to plan. The Rural portfolio closed at $578 million, minus 9.9% annualized since June 2025. This reflects normal seasonal contraction in Livestock Finance. Excluding Livestock Finance, Rural grew by $15 million, representing 8% annualized growth. That underlying performance highlights the strength and resilience of our core Rural lending activity. Notably, the Livestock Finance seasonal growth returned earlier at the end of the period than it did in the previous year. The growth ambition of 9% is driven by: new partnerships and intermediary channels, which are opening incremental flow and accelerating origination; expanding our regional coverage; strong customer relationships, supported by local on-the-ground presence; and supportive market conditions in the agricultural sector.

Turning to Slide 24, Motor. Overall, Motor Finance reflects a clear quality reset. The deliberate strategy of focusing on high-quality intermediaries to improve asset quality has had an impact on the Motor dealer portfolio. However, we are writing high-quality business and seeing improved credit outcomes across the Motor portfolio. We have moved decisively towards quality used assets, higher-grade franchise dealers and scalable direct-to-consumer channels, positioning this portfolio for more resilient, sustainable growth as conditions continue to normalize.

Motor Finance closed at $1.65 billion, minus 4.8% annualized since June 2025. Direct-to-consumer lending continues to perform strongly, growing 27.8% on an annualized basis in the first half. This reflects disciplined credit settings, sustained customer demand and improved digital execution. In contrast, dealer volumes declined by 7.3% on an annualized basis, consistent with our deliberate shift towards higher-quality intermediary partners with a focus on quality used vehicles and franchise dealerships. A key positive is the material uplift in franchise exposure. As at the 31st of December 2025, franchise dealerships represent over 50% of dealer origination, up from 40% a year earlier. This shift materially improves portfolio quality, loss performance and recoveries. and aligns Heartland Bank with larger, more resilient dealer groups as the dealer market continues to consolidate. Heartland Bank now expects the financial year 2026 Motor receivables to be flat on the financial year 2025 closing position. This is largely a consequence of conditions stabilizing and the continuation of enhancing partnerships.

I will now turn to Business Finance, Slide 25. Our business finance portfolio stood at $690 million as at the 31st of December 2025 and remains predominantly weighted towards Asset Finance, which accounts for $551 million of the portfolio, with the balance in Business Relationship lending. Receivables declined by $90 million or 22.8% annualized since June 2025. This reflects the continued challenging trading conditions across several industry sectors, specifically transport and construction, rather than any deterioration in credit quality.

In this environment, Heartland Bank have remained disciplined in our approach to origination, deliberately prioritizing quality and risk-adjusted returns as business stress has remained elevated. This contraction is, therefore, consistent with our strategy. We have been selective in deploying capital, remaining tighter -- remaining tight credit standards and avoiding quality -- lower-quality growth, which positions the portfolio for more defensively through this part of the cycle. Importantly, as we move into the second half of the financial year '26, we are starting to see encouraging signs of momentum. The Asset Finance pipeline has continued to build. This strengthening pipeline points to early signs of stabilization in underlying demand and suggests the market conditions may be beginning to improve. Our teams are now focused on converting this pipeline into funded receivables, while continuing to apply strong credit discipline. Heartland Bank now expects financial year 2026 business finance receivables outlook to be minus 19%.

And finally, turning to Slide 26, the New Zealand technology program. Through our technology program, we are modernizing and simplifying the way we work and the services we provide to our customers, making sure that they have a seamless and straightforward experience, while reducing complexity and cost. Over the years, Heartland Bank has invested significantly in upgrading: our core banking system, Oracle; our HR and finance systems, Workday; data, which is Snowflake that we use; and telephony, Genesys. Heartland Bank is now partnering with Pega to deliver a technology platform that will leverage and fully integrate with our upgraded modern core banking system. The new platform will replace existing legacy systems and manual processes with a single platform, further modernizing the bank's technology foundations to strengthen control, resilience and competitiveness. The cost to implement the platform is estimated to be under $11 million over a 3-year period.

In closing, following the reset in the last financial year, Heartland Bank has demonstrated positive momentum with improved asset quality and disciplined cost control. As we move forward, our priorities include turning our strong lending pipeline into growth during the second half of 2026, executing on our marketing campaign for Reverse Mortgages and expanding our Rural portfolio through intermediary partnerships and regional growth. Our technology program's first phase is advancing well. And we expect nonstrategic asset exits to be completed by 30 June 2026. The successful realization of nonstrategic assets and the recent Reserve Bank of New Zealand's capital decisions will further strengthen the New Zealand Bank's foundation, positioning the bank for sustained growth and continued value creation.

This concludes the New Zealand Bank's update. I will now hand over to Michelle Winzer to go through the Australian Bank's performance.

Thank you, Leanne, and good morning, everyone. I'm on Slide 28. I'm Michelle Winzer, the Chief Executive for Heartland Bank Australia. I'm pleased to report a period of significant achievement for the Australian business. We have successfully carried the momentum from FY '25 into the first half of FY '26, delivering a performance that reflects the strength of our specialist banking model. We remain focused on our vision to be Australia's leading specialist bank, enriching customers' lives through financial freedom.

In Reverse Mortgages, our performance remains market-leading with the first half yielding record monthly growth. We are focused on refining our customer value proposition and forging key strategic partnerships, directly enhancing our reach and ensuring Heartland remains the first choice. While our Livestock portfolio experienced the typical seasonal softening during the colder first quarter, we finished the calendar year with strong momentum with December net growth at record month levels. Our focus this half has been on continuing to improve the way we operate and the service we provide to our customers, as well as building the awareness of our brand in market. Strategic partnerships remain a key growth lever across our entire portfolio.

A couple of the key highlights for the first half are: our NPAT for the first half is up 39.1% on the prior comparative period of first half '25. Our exit NIM was 3.96%, ahead of our outlook to market, up 37 basis points since June '25. ROE continues to improve as we scale, being 7.7% for the first half with momentum to improve further.

In quarter 2, we finalized and signed the transformation project contract and are well progressed to commence our first pilot with Reverse Mortgages from the 1st of July '26. But while the transformation project was being finalized, we continued to enhance our core business to ensure we remain successful, pending completion of the new platform.

Our focus areas remain business growth, service excellence and diversified distribution. In relation to business growth, by the close of business '25, the Reverse Mortgage portfolio delivered strong and sustained growth, expanding by $188 million to reach $2.17 billion. This performance reflects continued strength in application inflows, effective operational execution and the scalability of the growth model.

From July 25 to December '25, Livestock finance increased from $254 million in receivables to $273 million. The Livestock teams have worked on strategies for business development, including establishing strong relationships with Livestock agency partners through a dedicated service offering. This has resulted in an increase in new opportunities coming through as relationships have strengthened.

We continued our focus on building our deposits to optimize our funding positioning in the market, which enabled us to repay our MTN funding early. We finished the half with a deposit funding mix of 86%, and this has driven the increase in our exit margin to 3.96%. We've maintained our strong focus on asset quality and disciplined nonperforming loan management, which has resulted in a stable impairment ratio at 10 basis points.

In relation to service excellence, our key focus areas have been a well-established focus on service delivery, enabling us to maintain our service standards for Reverse Mortgages. In the reverse mortgage space, scalable growth is driven by education, broker confidence and responsible lending oversight. Following the launch of our inaugural customer satisfaction surveys, we now have sufficient baseline data to commence full reporting in the second half of FY '26. The results for the first half were NPS of 56 and CSAT of 89% for Reverse Mortgages. This is materially higher than the financial services industry benchmarks where the median NPS is approximately 30 to 40 and CSAT average is 75 to 80. Our StockCo customer survey results also demonstrate solid performance, recording NPS of 46% and CSAT of 86%, placing the business above industry norms and supporting confidence in customer advocacy and retention. We'll use these insights from the surveys to further improve the experience our customers and brokers receive.

In relation to diversifying our distribution, our key areas of focus have been the disciplined management of partners and distributor relationships to enable us to help more customers with their needs. This includes the addition of a new aggregator partnership with Specialist Finance Group, bringing established compliant advisers with strong client relationships. The addition of another deposit intermediary has strengthened our funding stability and enhanced liquidity flexibility with access to broader customer segments. Our focus on partnerships and sponsorships has continued in the Livestock business with a key reestablished partnership. We are active in the market in the areas that help our customers most, including helping with extreme weather events.

I'll now hand back to Kerry to cover the financials.

Moving to Slide 31, Net Interest Margin. Average NIM expanded 93 basis points to 3.68%, primarily driven by a meaningful reduction in cost of funds. A key driver of this outcome has been our deliberate transition away from wholesale funding and towards retail deposits as well as liquidity balances now normalized since we are no longer needing to prefund large securitization rate base calls or wholesale funding maturities.

These actions have delivered 121 basis points improvement in cost of funds versus December last year to 4.39%. Looking ahead, we expect NIM to contract slightly in the second half to finish the year above 3.75%. The average NIM is expected to expand further in the second half as the full benefit of the funding optimization flows through with the outlook for the full year average NIM being greater than 3.70%, and that's compared to 3.01% for FY '25.

Next, Page 32, operating expenses. OpEx of $28 million is up $4.8 million versus prior year. Staff expenses have increased $2.1 million in the period, which is a combination of the full impact of additional staff onboarding during FY '25 focused on increasing capability and capacity to support growth as well as investment to support the new technology program.

IT and communication costs increased $0.8 million, which includes $0.6 million of project-related costs, and these will accelerate through second half '26 being the key driver of the change in full year OpEx and CTI expectations. Reverse mortgage fees are customer onboarding costs and increased $1.7 million directly attributable to the record first half growth.

The first half CTI ratio of 51.5% is down significantly from 56.4% last year. Second quarter CTI increased from the first quarter to 53.5%, and this relates to one-off costs from the early repayment of the final MTN, which impacts revenue as well as increasing costs related to the Tech program. If we normalize for the one-off costs, first half CTI was 47.8%.

The one-off MTN early repayment cost will be offset by lower deposit costs in the second half. The FY '26 underlying CTI ratio is now expected to be less than 50%, an increase from our original estimates, reflecting the increased cost from investment in the technology program.

On to funding liquidity, Slide 33. As discussed in reference to NIM, the bank has successfully transitioned from wholesale to retail deposit funding with 86% of funding at December now retail deposits, up from 81% in June. Current liquidity is optimal and above Board and regulatory minimums.

Finally, moving on to capital, Slide 34. Like New Zealand, HBA capital ratio is robust at 19.5%, meeting prudential standards. The NIM benefits from deposit funding are being realized along with the benefits of increased scale from the bank's growth, driving further improvement in ROE.

The ROE for the bank shows a strong improvement from 5.9% in first half '25 to 7.7% in first half '26. As a result, the bank is well placed to support its growth ambitions organically through existing capital reserves and future sustainable profitability.

I'll now hand back to Michelle to talk through portfolio performance.

Thank you, Kerry. I'm on Slide 35. In relation to the reverse mortgage performance, we achieved continued strong growth of 18.9%. Lending growth, tightening our liquidity positions and amalgamation of positive funding initiatives this year have contributed to strong growth in reverse mortgage income.

Our broker engagement has improved materially with NPS increasing from 4 to 34, driven by service quality and process efficiency while communication and technology remain focus areas. As I mentioned, our turnaround times remain low. Competition is very strong with nonbanks and fintech innovators continuing to enter this market. But despite this, we continue to increase our market share.

Our weighted average LVR is 25% with a nonperforming loan rate of less than 1%. Our average loan size is $215,000. Moving on to Slide 36. In relation to the lending performance for Livestock Finance, we saw the highest gross cattle and sheep purchases on a rolling 12-month basis in second quarter '26.

Recent extreme weather events in Australia with floods and fires have impacted growth volumes early in second half '26, and we are working closely with customers and agents to support them in their recovery. Nonperforming loans remained stable at $37.9 million as at 31st of December, and our book is appropriately provisioned for in line with expected credit losses and prevailing economic conditions.

We have uplifted our internal processes in relation to nonperforming loans to ensure we have stronger and earlier connections with customers. Our outlook for FY '26 is for growth of 20% plus. Progressing our platform transformation is our key priority over the coming year and will ensure we provide a better customer and staff experience. We have continued to mature our risk capability with improved frameworks and have met all our regulatory obligations.

Moving on to Slide 37. Heartland Bank Australia's technology program will consolidate its 3 origination and servicing platforms into a single cohesive solution. The transformation project is based around the new lending and core banking platform that will deliver greater capability to our customers, allowing us to grow in all key product lines. We currently have the 3 separate cores and servicing solutions, and this means many processes are duplicated or are inconsistent.

Many of the manual tasks now being performed will be automated. The automation will provide efficiency, but more importantly, will reduce the operational risk associated with manual processes, with new functionality able to be deployed across all products. And this will enable our employees to operate in one platform across all products with reduced overhead to manage the solution.

AI will be leveraged to improve both the customer and our employee experience. Our partner is Constantinople, run by experienced bankers who work with Australian clients and understand the unique domestic landscape across our products. We will maintain ownership of all functions supporting our operational growth.

In terms of the time line, we are on track for delivery with new reverse mortgage customers to be originated in July on the platform. Migration of existing reverse mortgage customers will commence in October. In closing, our CTI -- whilst our CTI was slightly elevated, it included a nonrecurring early break fee and project expenses for our platform transformation.

We continue to work on the culture in the business and aim to build a team and workplace environment that is engaging for all, and I thank our people for their contribution to the business. Our first half performance has been robust, delivering against all strategic benchmarks. We are well-positioned to meet our full year commitments backed by a clear road map.

Our competitiveness is driven by a data-led approach, strategically leveraging customer feedback to stay ahead of evolving market trends. This year also marks a milestone in our ESG maturity. We have completed a comprehensive assessment to embed material environmental, social and governance priorities directly into our core strategy, ensuring our growth is both sustainable and evidence-based.

To support this evolution, we are refining our organizational structure and investing in a significant technology uplift to equip our people for future requirements. We have high confidence in our ongoing platform transformation and the substantial benefits it will unlock for our customers, partners and employees in FY '27. I would like to thank the Board for their continued support as we build this foundation for the future.

And I'll now hand back to Andrew.

Thanks, Michelle. So just to recap, Heartland has delivered steady progress towards its guidance for the financial year 2026, supported by net interest margin expansion, improved asset quality metrics, strong reverse mortgage growth in both countries, cost control and accelerated NSA realization.

As we look forward, in addition to executing our technology programs, we continue to focus on quality, broadening our reach and awareness in reverse mortgages and increasing our regional presence. Thank you all for joining the call. I'd like to acknowledge the efforts and hard work of our staff and support of our shareholders during this first phase of turning around business performance.

I will now open up for questions.

[Operator Instructions] Your first question comes from Grant Lowe from Jarden.

Can you hear me okay? Great. So just around the cost side of things. So I'm just trying to reconcile the $195 million. I think that's the Group total for the full year in terms of guidance. How does that compare to the $189 million provided at FY '25? I think there's some moves between different parts of the business, but I understood the $189 million to be the Group number.

We didn't provide a Group number in terms of guidance for this year. So you're talking about the FY '25 number?

I'm talking about the FY '25 slide pack on Slide 8, there was a number of $189 million in the Group section. I'd interpreted that to be the full year expectation.

No. Well, no, it wasn't. We only provided the individual bank guidances for FY '26.

Right. Okay. So the $195 million, how much of that -- coming back to the -- sorry, the technology investment of $17 million. Just thinking about how much of that is capitalized versus expense, what should we see in the P&L versus capitalized on the balance sheet?

I haven't got the exact numbers of the totals, but I think to answer your question, there's very little capitalization in FY '26. We will see capitalization of some of the New Zealand delivery costs, but not in Australia due to the nature of the build.

Okay. So most of that will be expensed and some of that will be coming through in the second half '26 is what you're saying?

Yes. So part of the uplift in the Australian expenses expected in the second half is -- impact is largely driven by project investment, tech investments.

Yes. Okay. And just in terms of how you think about that $17 million spend, what sort of metrics do you think about when it comes to the return on that in terms of payback period, cost savings or however else you sort of think about that?

From a New Zealand perspective, the way that we've been looking at the business case is kind of twofold. So we're looking at significant efficiencies in the product portfolios, which will drive OpEx savings, but also greater capacity to grow our core portfolios.

Very similar in the Australian business, Grant. It will deliver efficiencies, but it will enable us to grow further.

Yes. Okay. So do you have sort of like a payback period or sort of return metric in mind or is that more sort of?

This is a subject for the Investor Day, Grant. So we'll be presenting this. You need to see this over a long-term period, which is 5 years. So the idea is to present these technology projects in detail, including the costs in detail, including the benefits in detail and how that [indiscernible] but you'll have to wait until June, sorry.

Yes, that's fine. So just around -- no particular order to these questions, but the full year dividend. So you talked about the meaningful step-up in the half, obviously, and you've talked to excess capital and the Reserve Bank reducing that overlay. How should we think about the likely payout on the go forward from here? Because obviously, you've been sort of targeting 50% plus. Does that now sort of step up?

No, we're not changing our policy. So we haven't changed our policy to pay out at least 50% of underlying NPAT subject to all of the usual caveats around prudent capital management and the like. What we've signaled the payout ratio is related to our excess capital position, primarily at this stage driven by the NSA realization.

Obviously, we're not in the business of preempting regulatory change, although what has been announced is expected to provide a considerable amount of excess capital. We wish to put that capital to work to drive organic growth rather than alter our dividend policy. So I don't want to set an expectation that we're changing here, but it is good to be able to increase that payout ratio.

Yes. Okay. And then just around -- so I'm sort of juggling at 2 or 3 results today. So apologies if I missed the context of that. But just with the impairment side of things. So I think the impairments for the half were 0.35% and I think the guidance for the full year is less than 0.45%. What was the -- I think there was some write-back in the New Zealand motor portfolio release of previous provisions. So what was the quantum of that roughly?

It's about $7 million in total, so reduction in collective provisions. So really, what we're saying is that that's really stabilized. I wouldn't expect a repeat of that quantum in the second half.

Yes. Okay. So a reasonable position to assume would be whatever was done in the first half, plus $7 million would be sort of a baseline expectation from our side of things at least?

Yes, plus we will need to continue to monitor specific provisions.

Yes. Understood. Okay. Yes, I think that -- just on the -- sorry, last one. Just on the NIM, that lifted through the period, and you've lifted the guidance for the full year 10 basis points. On the exit for the average. So on the exit run rate, is that like a reasonable starting point for assuming going into FY '27? So obviously, the deposit funding side of things has lifted to 86%. Are we kind of like 3.75% is a reasonable sort of starting point for next year?

Certainly -- the NIM will start to level at that 3.75% level. It is a very competitive market. We are at the deposit ratio of about 86% is the maximum we would want to get to. So that is certainly what we're working towards, Grant.

Your next question comes from Wade Gardiner from Craigs Investment Partners.

Just a few questions from me. So just going back to the $17 million on tech investment over 3 years, so roughly $6 million a year. So are we looking essentially at about $3 million in the current year? Would that be right? That's not lumpy in any way?

Sorry, just back to my earlier point, because of the difference in nature of the build across New Zealand and Australia, Australia's cost will be essentially expensed at a cash payment, whereas the New Zealand costs will be spread -- but more of the New Zealand implementation costs will be spread over the implementation period. So you'll see amortization coming through. So I think in the second half, there's an uplift of.

We've got -- the majority of our expenses will be in '26 and '27.

Sorry, that's in Australia.

Yes. And the New Zealand ones will partially be spread over 3 to 5 years.

As an amortization?

Yes. So part of the cost.

So when is the -- in New Zealand, if you're amortizing it, does that mean you're essentially paying upfront on a cash flow basis?

We're paying as we deliver. So not all upfront, no.

So just breaking it down in the second half at a Group level, what will be the P&L impact of this? I'm just trying to normalize, if you like.

High level, I haven't got detailed numbers in front of me. I mean we will go through this at the Investor Day, but it would be $1 million to $2 million.

Okay. Now I'm not a tech expert, but why are you -- why do you have different platforms in NZ versus Australia, one is Pega and one's Constantinople?

We did look at the same solutions across both sites, Wade. We are solving for different problems and different issues across the businesses. New Zealand have invested heavily in their core where Australia's core is well out of date, it's 8 years old and required a significant improvement.

And we're bringing together all of our products from multiple systems onto the one. We were able to deliver the Constantinople solution, an integrated solution a lot faster for Australia. So when we worked through the different options, that was a better option for us.

And how compatible are they?

In what -- they are completely different platforms. So in New Zealand, we've invested in our modern Oracle core, and we are now leveraging that core. So we've made a decision to put Pega. In Australia, as Michelle highlighted, this is about speed to scale and capital efficiency in a high-growth market. So we're trying to get there a lot quicker given the opportunity that Michelle has before.

And this is a complete managed platform model. So you get the solution all in one go quicker basically. So they're totally different. They're not compatible in that sense. However, the ancillary systems, as I mentioned earlier, the Workdays, the Snowflakes, the Genesis are all compatible and will be integrated into each platform. So they're deliberate strategic choices, not any inconsistency in approach.

Okay. Given the excess capital, why are you continuing with the DRP this time around?

It's a good question. We've always operated it. So we wanted to continue with it for the time being. And like I said, we're not in the habit of preempting regulatory outcomes or opportunities that are before us. So we've offered it there for our retail shareholders.

Okay. And finally, I mean, this is a question, I guess, has evolved over a few years. But given what's happened with house prices over the last few years, particularly in Auckland, has that had an impact on the average LVR in the New Zealand mortgage book?

No, it has not.

Is that because of essentially, you're refreshing the book every couple of years or it just seems hard to imagine that it wouldn't have some impact or is it because you're not revaluing them?

We are revaluing it. But -- and we can go through this more specifically because I'm just mindful of time as well in the individual sessions, just around the quarterly reviews around valuations, how we're managing the portfolio, how we're lending to customers, the lending standards and just managing that against house price and valuations. And so we've actively managed LVR quite strongly and what we lend to customers.

There are no further questions at this time. I'll now hand back to Mr. Dixson for closing remarks.

Well, thank you again, everyone, for joining the call, and all back there. Thanks.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

[Foreign Language] Good morning, ladies and gentlemen. My name is Phoebe Gibbons, and I'm the Chief Legal Officer for the Group and the New Zealand Bank. A very warm welcome to shareholders and guests present both in person and online today at the 2025 Annual General Meeting of Heartland Group Holdings Limited. It is our great pleasure to be here in Ashburton, where Heartland's journey began 150 years ago as the Ashburton Permanent Building & Investment Society just down the road on Tancred Street.

For those in the room, to ensure your experience at Hotel Ashburton is both memorable and safe, we would like to make you aware of the following. This meeting is located in the Valetta and Arrowsmith rooms. Bathrooms can be found in the foyer area near the main entrance to the building or just outside the room. In the unlikely event of an emergency, please remain calm and leave the room immediately through the fire exit doors and head to the evacuation point, which is located in the carpark at the front of the hotel. Smoking, including vaping is permitted only outside the function entrants or by the garden. Finally, it is a courtesy to everyone present today, please ensure your phone is on silent.

For those joining the meeting in person today, we welcome you to please join the Board and management for light refreshments after the conclusion of the meeting.

For those joining online, I will shortly provide you with instructions on how to vote and ask questions. If you encounter any issues, please refer to the virtual annual meeting guide online or phone the helpline on 0800-200-220.

Since a quorum is present, I declare the meeting open. I will now outline the agenda of business for today's meeting. I will shortly introduce you to the Board of Directors and the Chief Executive Officers of Heartland Group Holdings Limited, Heartland Bank Limited, and Heartland Bank Australia Limited, who are joining us in person today. I will then take you through the formalities of the meeting before inviting Greg Tomlinson, Chair of the Heartland Group Board to chair the meeting and provide a high-level overview of Heartland's performance and activities in the 2025 financial year and its focus moving forward. This will be followed by an address from Heartland Group's Chief Executive Officer, Andrew Dixson. This will, in turn, be followed by an address from the New Zealand Bank Chief Executive Officer, Leanne Lazarus; and the Australian Bank Chief Executive Officer, Michelle Winzer. The Chairs of each bank are also here today and available to answer any questions.

Following this, there will be an opportunity to answer any questions you may have about Heartland's performance, strategic direction and operations. I encourage shareholders attending online to begin to submit their questions now, if they have not already done so. We will answer as many of these questions as we can at the appropriate time. Thereafter, we will move to the formal business of the meeting, including voting on the resolution posed to you today.

I would now like to introduce the Directors and Chief Executive Officers. Greg Tomlinson. Greg is the Chair of the Heartland Group Holdings Limited Board. Greg was appointed a Director of Heartland in March 2013, and was appointed Chair of the Heartland Group Board in February 2023.

Andrew Dixson. Andrew was appointed Chief Executive Officer of Heartland Group in October 2024. That same month, he was appointed to the Heartland Bank Board. And in February 2025, he joined the Heartland Bank Australia Board.

Michelle Winzer. Michelle was appointed Chief Executive Officer of Heartland Bank Australia in July 2024.

Geoff Summerhayes. Geoff was appointed Chair of the Heartland Bank Australia Board on establishment in April 2024. Geoff had previously been a Director of the Heartland Group Board.

Kate Mitchell. Kate was appointed as a Director of Heartland Group in October 2021. Kate is also a Director of Heartland Bank New Zealand.

John Harvey. John has been a Director of Heartland Bank New Zealand since establishment in 2011, and he was appointed to the Heartland Group Board in April 2024.

Leanne Lazarus. Leanne was appointed Chief Executive Officer of Heartland Bank New Zealand in August 2022. Leanne is also a Director of Heartland Bank Australia.

Bruce Irvine. Bruce is the Chair of the Heartland Bank New Zealand Board, where he has been a director since its establishment in 2011. Bruce is also a Director of Heartland Bank Australia.

Simon Beckett. Simon was appointed as a Director of Heartland Group in June 2024.

Rob Bell. Rob was appointed as a Director of Heartland Group in June 2024.

Returning now to the business of the meeting. I advise that all valid proxies and postal votes received from shareholders within the prescribed time limits have been admitted. I can confirm that a total of 772 proxies and postal votes have been accepted. This represents some 310,608,790 shares or 33% of total issued shares in Heartland Group. I can say that for the resolution before us today, approximately 91% of these proxy and postal votes are in favor.

I would now like to outline the meeting procedures for today. This is a meeting of Heartland Group Holdings Limited shareholders. Accordingly, while our guests are very welcome to witness the proceedings of the meeting, participation and shareholder discussion and the business of the meeting is confined to ordinary shareholders present in person, online, by proxy or by authorized representative.

Regarding the voting procedures for today's meeting. The resolution will be decided by way of a poll. This is in line with the practice increasingly adopted by listed companies and is the preferred method of the NZX and the New Zealand Shareholders' Association. By having the resolution stated by way of a poll, we are counting all postal votes, proxy votes, votes online and votes from the floor. The resolution will be put to the meeting.

Shareholders joining us in the room should have received a voting card on registration. Please keep your voting card with you until the resolution has been voted on. Our share registrar, MUFG Pension & Market Services will then move through the room with the ballot boxes and collect all voting cards. If you need to leave the meeting before the end, you may place your voting card in one of the ballot boxes at the exit with an MUFG Pension & Market Services staff member.

For shareholders attending the meeting online, when the online registration is validated, you will receive an electronic voting card, which you can use to cast your vote. To vote, you will need to click, Get Voting Card within the online meeting platform. You'll be asked to enter your shareholder or proxy number to validate. Please then mark your voting card in the way you wish to vote by clicking for, against or abstain. Once you have made your selection, please click submit vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online portal guide or phone the help line on 0800-200-220, if you require assistance. Voting will remain open for 5 minutes after the conclusion of the meeting.

The notice calling this Annual General Meeting was published electronically on the September 30, 2025, with hard copies subsequently sent to shareholders who requested a copy. That notice outlined the formal business for this meeting and also provided background information on the resolution to be voted on. The minutes of the last Annual General Meeting held on the October 30, 2024, have been approved and confirmed by directors as is our custom. A digital version is also available on Heartland's website at heartlandgroup.info.

I will now invite Heartland Group Chair, Greg Tomlinson, to address you. Following addresses by Andrew Dixson, Leanne Lazarus and Michelle Winzer, we will then move to the shareholder discussion, which our Chair will facilitate. We invite online questions to be submitted now to allow us to answer these at that time. Thank you.

Thank you, Phoebe. Good morning, ladies and gentlemen. Thank you for joining us on this lovely day here. It's a pleasure to be in Ashburton for this year's Annual General Meeting. 2025 marked 150 years since Heartland's earliest predecessor, the Ashburton Permanent Building & Investment Society, was established. The last time we gathered here was in 2012, making our return even more special as we mark the significant milestone.

As we recognize our rich 150-year history, this is a moment to pause, reflect and celebrate how far we've come. It's a tribute to the many people who have shaped the organization over the years: The founders of our predecessor institutions, the leaders who guide us through the times of change, the employees whose commitment and hard work have shaped our success, the customers who have placed the trust in us, and shareholders who have supported our vision.

One of those leaders was Graham Kennedy, who we will hear from shortly. Graham is a former Chair of Ashburton Permanent, former Director of Heartland Bank, and current trustee of the Heartland Trust -- Heartland's registered charitable trust. While we can trace our history back to Ashburton in 1875, Heartland as a banking organization is still very young. Heartland emerged in 2011, in the wake of the GFC with a clear ambition to build a bank that could thrive by doing things -- sorry, could do things in another way. Heartland chose to concentrate on specific market segments. This strategy has served us well, and we have come a long way since formation.

Receivables have grown from $1.7 billion at the end of FY '11 to $7.2 billion at the end of FY '25. In the same period, Heartland's net profit after tax has increased from $7.1 million to $38.8 million or $46.9 million on an underlying basis.

Building on the momentum achieved in the second half of FY '25, Heartland delivered a solid performance for Q1, and is on-track to deliver an underlying net profit after tax of at least $85 million for FY '26. But we are still young, and just at the beginning of our journey to achieve scale.

In New Zealand, FY '25 saw us renew our focus in certain asset classes, which provide an appropriate return. We are focused on growing our core product sets, reverse mortgages, rural finance, motor finance and asset finance and exiting assets that are no longer a strategic fit. Andrew Dixson will provide more information about our nonstrategic asset progress, which is ahead of plan.

The reverse mortgage portfolio is our core product and where effort is being placed in New Zealand. Our early mover advantage positions us to extract significant value from this segment. In other areas, business performance has been slower. In Motor Finance, we have made meaningful progress in arrears management and have achieved notable successes in recoveries and collections. We're also being more selective in terms of who we are partnering with to ensure we're writing quality business. While these improvements have contributed to the portfolio's contraction, they ensure Heartland remains well positioned in a changing market. Leanne Lazarus will provide a more detailed update.

With regard to Australia, the ADI acquisition and the regulatory requirements associated with it placed increased costs on Heartland. The operational integration of our existing Australian businesses into the ADI was a big change to the organization. With access to retail deposits through the ADI license, we have strengthened our ability to compete and grow in Australia. The reverse mortgage book stands out as a significant area of opportunity and our efforts here are already delivering promising results. While livestock finance hasn't performed as well as we would have hoped, we understand the challenges and remain committed to the sector. Michelle Winzer will provide a more detailed update on the Australian Bank.

Moving now to the Board and management updates. Since our AGM last year, a number of appointments have taken place to ensure Heartland's teams have skills and support needed to deliver value for customers and shareholders. On the February 3, 2025, Andrew Dixson was appointed Non-Independent Non-Executive Director of Heartland Bank Australia. In February this year, Michael Jonas was appointed to the role of Chief Strategy Officer of Heartland Group. While the New Zealand Bank -- within the New Zealand Bank, Peter Griffin, was appointed to the role of Chief Commercial Officer, and we welcomed Alistair Scott as Chief Auto and Asset Finance Officer; and Rebecca Thomas as Chief Digital Transformation Officer.

As our renewed strategic focus bids in, we have seen improvements begin to flow through the key metrics essential to shareholder return. While Heartland's return on equity, earnings and earnings per shares are below historical levels, we saw a strong rebound in the second half of FY '25, with return on equity at 6% and earnings per share at 6% -- $0.046 per share. We have seen this positive momentum continue in the first quarter of FY '26, with underlying return on equity for the quarter of 7.6% and underlying earnings per share of $0.025 per share.

Regarding dividends, in September, we paid a final dividend of $0.02 per share, bringing the total dividend for FY '25 to $0.04 per share. The payout ratio for the second half of FY '25, a 52% was in line with Heartland's targeted dividend payout ratio of at least 50% of underlying net profit after tax. Our dividend policy reflects the realities of our growth strategy. Australia is a growth investment for Heartland, absorbing capital to support expansion and innovation. While this requires patience from shareholders, we are confident that our investments will deliver sustainable returns over time. We remain committed to balancing growth with the delivery of appropriate returns to our shareholders.

Our focus for FY '26 is on maintaining a refined strategic focus, core lending growth, expanding further into reverse mortgages, where the addressable markets present a significant growth opportunity, operational cost control, leveraging technology to unlock efficiency, scalability and future growth, and continuing to prioritize efficient use of capital. Heartland is well positioned to face the future with great confidence. We are investing in areas of opportunity and remaining agile and response to changing market conditions. Our renewed focus on our core product set reflects our beliefs in the value of these segments. With your continued support and patience, I am confident that Heartland will deliver on its promise of sustainable, profitable growth and enhanced shareholder returns.

I would now like to invite Graham Kennedy to provide an update on the Heartland Trust charitable activities. Thank you, Graham.

Thank you, Greg. Good morning, everybody. The Heartland Trust has a registered Charitable Trust and was -- is independent from, but closely supported by Heartland Bank in New Zealand. The purpose of the Trust is to give back to the communities in which Heartland operates. Through the areas of education and learning, arts and culture, mental health and well-being, and sport and physical well-being.

Going back to when Heartland was formed, we found that Southern Cross Building Society had a large number of small shareholders that were gone no address. After an extensive search and the appropriate legal process, these shares were transferred into what is now the Heartland Trust. The Trust now has 6.5 million shares in Heartland Group Holdings Limited. The Trust is governed by 4 trustees: Myself, Bruce Irvine, John Harvey, and Sir Christopher Mace.

The dividends received by the Heartland Trust have enabled the trustees to distribute grants to 17 community organizations in the year ended 2025. That totaled $465,000. We have had a range of local beneficiaries this year, including the Ashburton Schools' Music Festival, Ashburton Performing Arts Center, Ashburton Age Concern, Christchurch Boys' High School Rowing, the [ Mid Canterbury Tennis Center ] Charitable Trust, and Christchurch WORD Festival.

However, there are 2 main beneficiaries. The 2 main beneficiaries were Boost literacy program and Tatai Whetu Waitaha and air fleet support program. Boost is a child literacy program delivered by the Ashburton Learning Center, supporting primary school children across Mid Canterbury, age 7 to 9, helping them develop essential reading and writing schools. This important initiative is jointly funded by the Mackenzie Charitable Foundation, and Advance Ashburton Community Foundation, reflecting a shared commitment to improving education outcomes for young kiwis. Tatai Whetu Waitaha is an athlete support program delivered by the Canterbury sports development academy. This program currently provides 38 aspiring Canterbury athletes with opportunities to develop their potential through access to tailored support, mentoring and professional networks. They are supporting 10 high achieving athletes in Mid Canterbury alone.

As a past Canterbury Director, Canterbury-based Director of Heartland, and particularly as we are today, acknowledging our 150-year milestone, I'm proud to see that the investment by the Trust and community organizations across Canterbury. Thank you.

And thank you, Greg. We look forward to those increasing dividends. We've still got work to do.

Good morning, and welcome, all, and thank you for joining us at this year's Annual General Meeting. FY '25 presented a unique set of challenges and opportunities, marked by a period of significant reset, change and integration. We have deliberately recalibrated our strategy, sharpened our focus on core products, and taken decisive steps to ensure capital is allocated where it delivers the strongest returns. This reset has laid the groundwork for a more resilient and agile banking group, and is something we will continue to test on an ongoing basis.

Our net profit after tax for the year was $38.8 million. On an underlying basis, NPAT was $46.9 million, which while meeting impact guidance of at least $45 million, does not represent our desired performance for Heartland, following a challenging environment and the impact of necessary strategic changes.

Importantly, we restored our net interest margin to near historic levels with each bank delivering strong exit margins. And this positive trend has continued into the first quarter of FY '26, as Heartland delivered a solid performance improving profitability and return on equity across the quarter. Overall, net interest margin continued to expand and cost growth remains stable.

The strong reverse mortgage momentum experienced within both banks has continued through FY '25 into the first quarter, while subdued markets and usual seasonal contractions impact growth in Heartland's other core lending portfolios.

Capital optimization was a key priority for us in FY 2025, and a critical part of our reset. This was reflected in several initiatives undertaken, including the runoff of unsecured lending and the accelerated realization of nonstrategic assets, which has enabled the redeployment of capital into higher return core lending portfolios, and I'll speak more about this shortly.

A substantial increase in impairment expense was incurred in the first half of FY '25 in response to ongoing economic deterioration in New Zealand, and to derisk and reposition some of the New Zealand Bank's lending portfolios. Necessary changes made to collections, recoveries, policies, processes and leadership have delivered early tangible improvements with the recovery efforts outperforming expectation and total motor finance arrears now outperforming the industry average.

As Greg discussed, we also completed the operational integration of our Australian businesses into Heartland Bank Australian, creating a new and unique bank. The Australian funding transition has continued to be very successful as deposits now form 86% of the bank's funding, providing a deep, stable and diverse platform to efficiently fund the significant lending opportunity we have ahead of us.

As a condition of the ADI acquisition, Heartland required an evolution in its role as the listed parent company of 2 banks, and a number of responsibilities shifted from Heartland into those banks with Heartland's operations now focused on group strategy, Investor Relations, Corporate Finance, capital allocation and strategic and risk management oversight of each bank.

We have made extremely strong progress in the realization of NSAs in FY '25, and I'm pleased to report that in the first quarter of FY '26, our NSA realization has not only continued at pace, but has exceeded our own quarterly estimates. This momentum has carried into the second quarter. Key highlights include the accelerated exits from rural and business relationship borrowers, primarily through the sale of security and refinancing. Notably, the largest relationship exposure was partially settled in the first quarter, with the remaining refinance settled in October 2025. The third largest relationship exposure also went unconditional in September and was repaid in early October.

Home Loans, which closed to new business in March 2025, continues to run off ahead of expectations, driven by early repayments. We also achieved the unconditional sale of 1 of the 2 dairy farms with settlement in October 2025. We completed the exit of Heartland shareholding in harmony as well, achieving a sale price significantly above carrying value as at 30 June 2025. And this generated a fair value gain of $3.1 million, which was the key difference between our underlying and reported results for the first quarter. And we expect this to remain the key difference for the results, for the remainder of FY '26.

Additionally, the sale of Heartland Bank's Australia shareholding Alex Bank was also settled in October 2025. By the end of this calendar year, we estimate the value of NSAs will be a little under $180 million, a reduction of $358 million or nearly 67% since 30 June 2024.

Looking ahead to FY 2026, Heartland expects to deliver an underlying return on equity of at least 7%, and an improved underlying net profit after tax of at least $85 million. While Greg mentioned several areas of focus for FY 2026, 2 critical themes are, firstly, increasing process automation to improve customer experience and deliver true operating leverage. Secondly, ensuring capital is deployed efficiently into return on equity accretive activity against the backdrop of continued regulatory change.

Regarding technology uplift, targeted investments in technology and automation will enable sustainable growth and operational excellence into the future. In late 2023, Heartland Bank completed its upgrade to a modern core banking system. Since then, Heartland has focused on executing and integrating strategic acquisitions made in Australia. With these complete, in FY 2026, Heartland will invest in a targeted technology uplift to resume and reinvigorate digital transformation in each bank. Leanne and Michelle will discuss this further in their addresses.

This technology uplift will modernize our existing infrastructure and deliver new capability within the respective banks, resulting in greater efficiency and enhanced customer intermediary and employee experience, and positioning both banks to be able to meet customer demand at scale.

Regarding capital efficiency, Heartland welcomes and will continue to participate in the Reserve Bank of New Zealand's review of key capital settings. We see this as a critical pathway to support Heartland Bank's ability to remain competitive, reduce the cost to the end customer and deliver a significantly improved return on equity. Heartland Bank made a submission as part of the Reserve Bank of New Zealand's consultation process with a particular focus on capital levels, asset risk weights and the composition of regulatory capital. We remain fully supportive of the Reserve Bank of New Zealand's objective to ensure a resilient and stable financial system that protects depositors in the broader economy.

We will present our updated long-term ambitions at an Investor Day, which is now scheduled to take place in March 2026, following Heartland's interim financial results due to take place on Thursday, 26 February 2026. This timing will allow each bank to complete its contract negotiations, whether it's preferred vendor for its respective technology initiatives. And also takes into account investors' availability over the festive period. At the Investor Day, we will share the key metrics and growth drivers that will underpin our ambitions through to FY 2030, including our continued focus on return on equity, core lending growth, and operational efficiency.

In closing, I want to acknowledge the resilience and commitment of our people, the support of our shareholders, and the trust of our customers. We have faced into a number of issues, made the necessary changes, and are beginning to see the benefits. We have made significant progress and the early signs of positive change are encouraging, and I'm confident that we can deliver on our promise of sustainable, profitable growth and enhanced shareholder return.

I will now hand over to Leanne Lazarus, followed by Michelle Winzer, to provide updates on our respective New Zealand, Australian Banks. Thank you.

[Foreign Language] Hello, everyone. Good morning. It is a privilege to join you in Ashburton for this year's Annual General Meeting, marking 150 years since Heartland's beginning in this community, a testament to our lasting partnership and heritage. As a region, Canterbury hosts 13% of New Zealand's population but provides 26% of Heartland's deposits, so punching twice above its weight in funding Heartland's assets.

Turning to the financial year that has been. As mentioned, financial year '25 was a year of reset and change for the New Zealand Bank. At the beginning of the financial year '25, we faced some challenges, including the need to respond decisively to a changing economic environment. We took proactive steps to de-risk and reposition parts of our lending portfolio, resulting in a $49.6 million impairment expense. While this impacted our first half year results, it was in the long-term interest of our business, our customers and you, Heartland's shareholders.

Since then, we have refined our core product sets, these are reverse mortgages, which continues to experience strong growth. Rural finance, which we are highly committed to, motor finance, asset finance, and savings and deposits. We also focused on improving asset quality, we committed to greater cost discipline, and accelerating nonstrategic asset realization to enable capital to be reallocated to high-return core lending products. Today, Heartland Bank remains strong, stable and well capitalized. We have also made changes to our leadership team to ensure we have the right expertise to give sustain -- to drive sustainable growth within our core product sets, and accelerate digitalization and automation, also to deliver an outstanding customer and originator experience.

Our strategy is clear and well defined with the vision to be New Zealand's leading specialist bank underpinned by the 3 pillars of quality, efficiency and growth. We are already beginning to see the benefits of this strategic reset. As mentioned, we have refined our core lending strategy to support quality, sustainable growth within our core product sets. We have introduced new credit decisioning scorecards for our motor finance and have shifted motor finance focus from lending that's originated primarily through brokers to lending through higher-quality direct-to-consumer channels, known as Motor Direct, also with our franchise dealers and branded distribution partners. The introduction of a more prescriptive collections, recoveries and write-off strategies has had a positive effect on asset quality as both Greg and Andrew have described. We are still on track to have no motor finance arrears greater than 180 days past due by June 30, 2026.

For our business finance customers, trading conditions have been challenging. This was reflected in arrears, which increased throughout financial year '25 and into the first quarter of this financial year. However, we are starting to see an improvement early into the second quarter of the financial year. At the end of October, total business finance arrears were down $2.9 million with nonperforming loans down $5.9 million. Our teams are still working closely with customers to support them through this period, and we expect to see further reduction in nonperforming loans as we near the end of this calendar year. The portfolio remains well provisioned, reflecting the secured nature of this lending.

Our focus on efficiency is about disciplined cost management and efficient use of capital. It also describes our focus on automation to increase speed and ease for both our customers and our employees.

Costs did increase in financial year '25, primarily due to non-repeating benefits in financial year '24. Investment in core functions to enable higher quality growth and to address additional regulatory oversight responsibilities arising from owning an Australian authorized deposit-taking institution, and then the amortization of our core banking upgrade, which completed in 2023. Cost growth has stabilized in the second half of '25, and remained stable throughout the quarter -- first quarter of this financial year. We have actively managed our cost of funds to the end of financial year '25 with a strong margin. Net interest margin was 3.87% with an exit margin of 4.13%. We are pleased to see this positive trend continue through to the first quarter of this year, with 4.06% as our margin and an exit margin of 4.08%.

Leveraging the completion of our core banking system upgrade late in 2023, we're starting to see -- we will be continuing to invest in technology and automation to reduce manual ways of working, which limit how quickly and easily we can convert demand into new business. So it's absolutely imperative that we do this. This investment means that we'll be able to deliver an even better experience for our customers and originators and enable scalable growth within our core lending portfolios.

The New Zealand Bank's growth focus is on our specialist lending portfolios, where our customer value proposition is strongest. We are continuing to see great momentum in reverse mortgages with receivables up 14% in the first quarter of this financial year, reflecting solid ongoing demand. Excluding livestock finance, which experienced the usual seasonal contraction, the rural portfolio grew by 6.1% in the first quarter. Subdued markets impacted growth within motor finance and asset finance, the recent motor finance retraction also reflects our shift to a higher-quality distribution channel better positioning the portfolio for quantity growth.

Building on our strength as the reverse mortgage market leader, we launched Village Access Loans, expanding our offering to better serve older New Zealanders. We also leveraged our vehicle lending expertise by introducing Marac Marketplace, a new online platform that simplifies vehicle purchasing and financing, further strengthening our presence in the motor vehicle finance market. As earlier covered, during financial year 2025 and 2026, the New Zealand Bank's focus was and is unwinding down assets that no longer are a strategic fit. This is progressing ahead of schedule with several large exposures settled in full. This accelerated progress together with holding firm on the quality of the business that we are willing to write contributed to a retraction in Heartland Bank's lending portfolio over the year. These decisions were made with prudence, prioritizing quality, stability and resilience.

We have a very clear focus for this financial year of building our strength across our core portfolios. We are committed to helping older New Zealanders achieve financial freedom through our reverse mortgages, supporting growth for our farmers, making it easier for our customers to get on the road or invest in new assets, offering competitive deposit rates, and investing in technology to enhance efficiency, scalability and customer experience.

Finally, I want to extend a heartfelt thanks to you and this community and to our shareholders for standing with us as we navigate a change to position Heartland for continued success. Your commitment has been foundational to our success from multiple building societies to a trans-Tasman banking group, we are proud to call Ashburton Home.

I will now hand over to Michelle Winzer to discuss the Australian Bank. Thank you.

Thank you, Leanne, and good morning, everyone. It is wonderful to be here with you in Ashburton today. I'm very proud of the way that we finished our first full year of operation in the Australian business. And the enterprise value that we created in FY '25. Our strong performance has continued in the first 4 months of FY '26, and we are well positioned to deliver on our commitments for the current financial year. Our vision is to be Australia's leading specialist bank with a focus on enriching customers' lives through financial freedom.

We are committed to our core specialist areas, reverse mortgages, livestock financing, and deposits. Retaining this focus and deepening our expertise in these markets will ensure we deliver optimal value for our customers.

FY '25 was a year of reset for us, consolidating a bank with Heartland's 2 existing non-bank finance companies to form Heartland Bank Australia. We focused intensely on integration, strengthening our leadership and uplifting capability and processes to meet APRA regulations and protect our customers. We have improved our risk capability and formed partnerships to ensure the business can achieve prudent growth into the future. The work completed in FY '25 has been critical to establish a solid baseline for us to achieve prudent growth.

As we said in our recent results announcements in the last AGM, our key areas of focus in the business remain, business growth, service excellence and diversifying distribution. As our financial results demonstrated, we improved business momentum half-on-half during FY '25, and this has continued in FY '26. Our reverse mortgages achieved a new record level of funding in October at over $51 million, taking our book to over $2.1 billion year-to-date. Our pipeline of new business is at record levels, putting us in a good position to achieve our FY '26 growth aspirations.

Livestock has returned to positive growth with a record result in October, post the seasonally colder months in the first quarter. Purchases for both cattle and sheep are at record levels and significantly higher than the prior 12-month rolling average. We continue to have strong demand for our deposit products, which is funding organic growth and saw the repayment of our final outstanding $100 million medium-term note, before its contractual maturity date in October '27. The bank is now 86% deposit funded within 18 months of its acquisition.

In relation to service excellence, our key focus areas have been: significantly reducing our application turnaround time from over 60 days turnaround time to 8 days. The implementation of a new customer satisfaction survey, providing real-time insights to continually improve the service that we provide. We've enhanced our customer engagement and retention activity through insightful communications, and this ensured repayment volumes held steady at approximately $23 million per month, enabling new business to consistently surpass runoff and drive net portfolio growth. We established new leadership to guide our customer service teams to deliver exceptional customer service to our direct channel.

In relation to diversifying distribution, our key areas of focus have been: deepening relationships and working closely with our accredited partners and brokers. And this is evidenced by more than half of our new reverse mortgage business coming from the broker network and underscoring its pivotal role in our distribution strategy. Expanding partnerships and sponsorships in the livestock business to now include agents. The agent network gives us access to farming communities across Australia wide. And similarly, our expansion of our partners in the deposit business has provided us with access to broader customer segments and enabled us to achieve the growth required to fund our lending.

The work completed to set the business up in FY '25 has provided a strong platform for growth. We executed a comprehensive and successful reset, consolidating our business and taking strong momentum into FY '26. Our reverse mortgages are achieving accelerated growth and our livestock business is recovering robustly, already showing double-digit growth in applications in October. We have extensive market data to support our view on the potential opportunity in Australia, and we have utilized these insights to develop a clearer go-to-market strategy.

While reverse mortgages competition is increasing with nonbanks and fintechs demonstrating interest in our specialist markets, our response remains disciplined and evidence-based. And our market leadership positions us well to meet the significantly untapped potential available to us. Our Australian market share grew from 36% to 40% in FY '25.

Regarding our technology uplift, FY '26 will be a year of transformation for the Heartland Bank Australia. After completing a market search and selecting a preferred vendor, we have embarked on a technology initiative to implement a new unified origination and servicing platform. This initiative will support us with our growth ambitions and digitization.

Costs related to this technology initiative are expected to be elevated in quarter 2 as vendor negotiations and program planning continues. But we are now in the final contract stages and we'll present further detail on the initiative at the Investor Day that Andrew spoke about early in the calendar year.

In summary, we have the talent, the clarity and the discipline to succeed. Our focus is now singular: to maintain this momentum, simplify our business, and strengthen the partnerships that will ensure we deliver exceptional sustained value for our customers and Heartland's shareholders.

Thank you for your time today, and I'll now hand back to Greg.

So shareholder discussions, I'll open that, please, to the floor. Right. Thank you, Michelle. Ladies and gentlemen, before opening the meeting for questions, I advise that Karen Shires of PwC, the company's auditor, is present today and can answer any questions relevant to the conduct of the audit and the preparation and content of the auditor's report of the year ended 30 June '25.

Shareholders joining online who wish to ask a question on Heartland's performance, strategy or operations can submit the questions through the online meeting platform now. We will aim to answer as many of those questions as possible. Any comments, questions or matters raised for discussion during the meeting must be relevant to the business before the meeting. If you have matters you would like to raise as a customer, the Board and management can answer your questions during refreshments after the meeting. For those online, please submit any customer questions, and we will respond after the meeting. Shareholders, we're also invited to submit questions prior to Annual General Meeting.

We received 3 questions, which we want to address now. The first question was, what is the progress on selling noncore assets and realizing cash from them?

Andrew provided more detail on his address. Significant progress was achieved in the realization of nonstrategic assets during FY '25. This has continued into FY '26. First quarter results exceeded our own projections with strong momentum earlier in the second quarter. By the end of this...

[indiscernible]

Yes, look, we'll come to that at the end of this. Thank you. By end of this calendar year, we anticipate total value of nonstrategic assets will be approximately $179.5 million, reflecting a reduction of $358.1 million or 66.6% since June 2024. I hope that's got an answer for you, Mike.

The next question asked, the share price took a dive last financial through poor performance and has moved up slightly lately. What decisions are being made to arrest the situation arising again?

Look, we recognize that performance and key metrics important to shareholder return has been below historical levels. Our priority is to maximize shareholder value through prudent capital management and by concentrating on asset classes where heartland can compete and deliver exceptional customer value while providing an appropriate return. That means keeping things simple, increasing efficiencies and a particular focus on improved return on equity. We're seeing encouraging asset quality improvements, flows through from the changes made to collections and recoveries, strategies in New Zealand and from refining our core product set.

We are also seeing encouraging signs with return on equity and earnings per share both improving in the second half of FY '25. That momentum has continued into the first quarter of FY '26. Underlying guidance and -- sorry, we're on track to meet our FY '26 underlying guidance. And are confident in Heartland's ability to deliver enhanced shareholder return.

The final question came from shareholder -- shareholders in Melbourne. The question asked, what services does Heartland provide in Australia? How do we access these? Are term deposits available? And are they competitive?

Response here. So Heartland Bank Australia was formed in May last year after Heartland acquired the bank and integrated its existing Australian businesses into it. Heartland Bank Australia offers 3 core products: reverse mortgages, livestock finance, and deposits. More information and access to these products can be found from the Bank's website. Its offerings does include term deposits, which are competitive.

I will now open the meeting for questions, starting with those in the room followed by questions online. Mr. Oliver?

Thank you, Greg, and thank you for the presentation and discussion so far. My name is Oliver Mander from New Zealand Shareholders' Association. Look, we have noticed in the accounts, obviously, there was a significant payment made to the former CEO on his departure. It's always a tricky conversation for a Board. I'm well aware of that. I guess in the interest of looking forward, would Heartland be prepared to make disclosures in terms of severance arrangements for the current CEO just to avoid any future surprise for shareholders?

Okay. Thank you, Oliver. And look, that's -- and I suspect that's on other shareholders mind. So it's a good question. I just think -- we've got to put it into context. So this business has been a start-up, and we're just getting through the start-up phase. We've managed amalgamation of a number of assets that were troubled through the GFC. We've managed to obtain a New Zealand banking license and latterly the Australian ADI. So this is quite a big shift. So you think about what the value that Jeff Greenslade bought to this business over that period was nothing but outstanding. And so we've got to put it into perspective. So we don't think that that's unfair. So in Jeff's exit payment on his retirement. Now does that set a precedence for the future? And of course, no. This was a special situation under special times with special results. Thank you.

Thank you for the clarity. Would -- let's get back to the question with the bank -- sorry, would the group be prepared to disclose the severance arrangements for the current CEO, just as a matter of course and that provides greater clarity in terms of those expectations?

Well, I'm sure we can. Yes, is the answer. Well, that is a bit of an unusual request.

Well, sorry, just to clarify that. There are many NZX companies that do that as a matter of course, and it's something that we do encourage.

Noted. Right. Thank you.

Mark Bensman, shareholder. I think in your presentation you talked about achieving a desired level of underlying profit. I just wondered what you thought desired or minimum or target level of underlying profit and return on equity would be. I guess, what is the target moving out beyond next year?

So I mean, we've provided a plan for -- we've got a plan for FY '28. And I mean we've worked pretty hard to achieve that. Of course, it's been quite tough in this current environment. But there is -- you will -- we will be getting back to our historical levels of returns. But you've got to bear in mind, we've got -- we are growing strongly in Australia, which is a drag on capital. Andrew, is there anything else you'd like to add there?

Yes. The reference of desire was really just getting back to above $100 million, which is where we were over the last couple of financial years before. The most recent financial year and getting that return on equity up and above at least 10% in the near term. So those will be our desires. Obviously, there's a longer-term ambition, which we will be presenting back next year, which will be well in excess of those numbers.

Colin Cameron from Taupo. Just driven through the night, so I've got a bit of a fuzzy brain at the moment. First off, with most world economists saying the way the economy is and geopolitical situations, why doesn't the bank stop paying out a dividend and actually build up a lot of cash to keep safe and make certain that we are going to be able to progress further down the line. Secondly, in order to actually have a dividend reinvestment plan. And thirdly, have a buy set at a share set, I'd say, $1 that any time it goes under the dollar, the bank steps in and buys the shares at that minimum amount. And fourthly, which is -- now I just totally forgotten what it was going to be, sorry, I'll pass it off.

Well, thank you for that question. I think look, in simple terms, we're not capital constrained in this business. So we're very focused on returns to the shareholders and growth. Now on -- so -- and we have -- we have been very, very clear on what we are providing to our shareholders. Now on the buyback issue, well, we don't -- we don't buy buyback shares, that's -- we don't need to. There's not a desire or a requirement.

[ Just remember it ]. With the way the 4 big banks in Australia and New Zealand are and then previously, like ANZ buying Trust Bank and all that, do you foresee in the very near future the 4 big banks are looking for an edge in the market? Heartland has got that edge that any one of them may come and knock on?

Well, I can't answer for the other major players. But yes. So we are just carrying on with our business. We're focused on our areas of expertise. And we're not worrying about the others. Thank you.

I'll just open up. Mike, you've got a question?

What's the AI situation [indiscernible]. Maybe Andrew could give us a feel -- maybe Andrew could give us a feel on what benefits that or otherwise that might have on Heartland's activities in the marketplace going forward?

Thanks for the question. So we're very much at the early stages of AI adoption, it's fair to say. We've been partnering with industry leaders to ensure that AI in Heartland is responsibly designed and well governed. For us, the next stage of AI links to our technology programs in both countries. So we will be looking to significantly enhance and get further up that curve with AI.

So Andrew, is that a cost or is that a saving?

Well, look, it's initially going to be across these technology programs, unfortunately costs money. So there will be upfront costs. We will be removing a lot of costs from existing technology and subscriptions that we already have, and we'll be saving a lot from removing the manual processes that we currently have, and we'll be looking to adopt AI through the loan process as much as we can throughout that.

If I can just add to what Andrew has said. So for -- at present, we do use some components of AI within our business. But we've got to make sure that it is safe and secure for our people and also our customers because fraud and scams are on the rise as well as cyber threats. So security is absolutely key. The technology, we are looking at investing in does have components of AI. What it will do is make our people more efficient. It will make the way in which we deliver products to our customers faster for them to access. So that's what we are working on. As Andrew said, whilst it is the cost to invest in some of that, this is not a large cost. It will unlock opportunity for us to deal with the demand for growth because at present, we have components of our business that are manual that you have to add people. The technology we are looking at and we do have components of that just helps our staff be more efficient. So hopefully, that's answered a bit more.

Thank you, Leanne. Yes Stan on the back.

Yes. Look, it's Philip Ben and I'm a shareholder of Heartland, have been sort of for 25 years. So I've been able to watch the progression of CBAs and then going on through into Heartland. Now I've listened to the talks here and it's very rosy going forward. But I would just point out that heartland Bank for the last 2 years has been negative 34% returned to the shareholders. And comparing it to other banks -- 4 other banks and I've just got here as representative examples, they've done a positive 47% to 123% in that same period. So it's fair to say that Heartland has destroyed shareholder value. And anyone who's bought shares in Heartland since 2018, even allowing for the dividends, has actually gone backwards in a cash sense, they have not got a return on their investment. They've actually gone backwards if they were to sell today.

Now for a number of years there, I watched the Heartland results. They went up quite steadily. It was good returns. And then all of a sudden, out of the blue, it seems to just about tip over a cliff. First words of disgruntlement, we're having some issues getting staff for collecting of beats. Then the bad debt start to come through. From what I was sort of looking at and I sort of wonder, had there been some carrying forward of bad debts that were being sitting in the balance sheet that weren't been adequately provisioned or written off at the time. I would wonder at what stage the auditors sort of perhaps looked at that, who picked it up.

Given that the departing CEO got a very handsome reward or sort of -- it would appear that it perhaps wasn't sitting on his desk. The question is, and it's really one for the Board of Directors is, where the systems in place for bad debt reporting for the collection of bad debts. Has that changed? Has that improved? Because the last thing I want to see is for the bank to continue to report increased profits over the forthcoming years, and then have a drop off again. So we've got a problem here, the eyes dropped off the ball, so to speak. So are the directors confident that the appropriate reporting is in place for the collection of debt going forward?

Yes. Look, We will give you confidence on that with the changes. I think just -- let's put it in perspective. We've gone through the GFC. We have supported customers possibly to the extent that would be an overgenerous. But I think we'd be better off to pass this on to Leanne, and she can answer that in a deeper...

Well, I'll start.

Context. So you're going to do it, Bruce.

So to answer the last question first, are we confident about our collection processes and the discipline that we have now? The answer is absolutely yes. And you will have seen there's even been articles about what we're doing around repossessions and what we're doing around all of that discipline. So if you look at the issue of the returns that the shareholders have in the holding company, those returns, obviously, were significantly impacted by the write-offs that we had at the beginning of this year. And so you look back at those write-offs and you go, why didn't we know about those? Where did they come from? And the answer is there's a number of elements, I guess, of what I would describe as the old perfect storm.

The first thing was that when COVID hit, we offered to extend a lot of our debt and $170 million of our debt was extended. A lot of that was in the motor book. So we had a 3-year motor loans. We extended them to 5 to 6 years. We then work to remediate with those customers who had asked for that extension. And we work with them to remediate those accounts and so on. And that was on the basis that what would happen is post-COVID, with an improvement in the economy, they would then be able to pay back the extended debt that we had allowed. We haven't had that improvement in the economy through '24 and early '25. So what we did was we then went and did a deep dive into those books. And so a lot of that additional write-off that we did at the beginning of last year was in the motor book, which were loans that we extended from the COVID period. So -- and it was -- as a result of that, that we then also have gone instead of trying to remediate some of these loans, we've actually taken a far more disciplined approach in terms of collection and recovery of those loans. And that is a transformation that has happened in the current last 12 months. I don't know if that answers your question for you.

Yes. Thank you. That does answer the question. It was going to sort of go on a bit further and say that I've noted that when there's a liquidation that comes out in the paper, Heartland's name seems to appear with frequency. And the revenue department is always there as a creditor that Heartland seems to be coming through a little bit too often as well. So that would be a reflection of...

It's a result of that increased focus.

Correct. Again, as a shareholder, that's my money or the shareholders' money going out for the goodwill of the customer or the person who's borrowed, I'd certainly like to see a few more of them being tapped upside down, shaken up and perhaps...

And I think it's also fair to say that although you might see that in the paper a lot more, that -- those loans are all adequately provisioned as well now.

Okay. And just to close that question of, we do not write that business today. We have changed our business writing strategies in recent years. So these are loans that predate 2019.

Yes. Can I congratulate the Board on the fact that you've managed in very difficult circumstances to -- not only stay in business, but to pay a dividend. I think it's a quite spectacular result. Congratulations.

Thank you. Thank you. Yes, rest I'd say we will bank that one.

[indiscernible], shareholder. My question is relating to -- you've got 612 staff according to your annual report, but I'm looking at the number of executive salaries you're paying out compared to similar banks and similar size. We've got $4 million salaries. We've got 10 more with $0.5 million salaries and that has continued over the last few years. It doesn't seem to show much evidence of really controlling the issue and making sure we're getting good return for our money.

Well, just -- I mean you've got a few questions there, really. But number one, the $4 million, please don't focus on that. That was a one-off. Now...

Talking about the individual salaries of the 4 senior executives.

Yes. Okay. Well, that's -- well, we've got growing businesses and they've got high levels of complexity over 2 jurisdictions. So there's going to be cost. And these are -- like I've tried to restress, these business are pretty much start-ups -- although they're maturing. But look at what we have actually managed to deliver everybody over this period. Now...

You delivered a halving of the asset value of the company, you haven't actually delivered anything?

Well, give us some time. We're all investors here. Mike?

I think we thought shareholders should realize that Greg is relatively new in the chair. He's got 88 million shares of his own to look after. And I think he's made pretty darn good progress with the rest of Heartland Bank towards getting the ship back on its feet again. So I think that's relevant. I think we'll give you another year, Jeff.

Yes. Well, I might end up as Jeff. So thank you, Mike. Yes. Are there any further questions? Oliver?

Thank you, Greg. So just in terms of the new corporate structure and the risk function that supports that. So you've clearly got risk functions in both Australia and New Zealand. The first linked question to that is, is there any sort of overarching framework that ties those together to leverage any learnings on both sides of the Tasman. The -- while also satisfying the independence requirements on each side, in each jurisdiction. The second is relating to the audit of how that has covered through the audit. Is there -- and just talk a little more around some of the structure on how the audited accounts are put together. Is there a separate order for the Australian Bank, New Zealand Bank, how the risks looked at? And how does that start to play through its process? And also just as an aside, how long have PwC been the auditor for?

Okay. So firstly, the -- but yes, the businesses are run separately. They've all got their own structures. They've all got -- there's -- I've got to say the -- yes, we've got a bit of a strange situation here, we're not strange, but it's a unique situation where, for the first time in history, the New Zealand bank owns an Australian bank. All right? So don't underestimate the challenge of that. And with that has come, we're dealing with 2 sensor rules, and they're not necessarily the same, particularly in the Australian market, where there is a higher level of regulatory burden. Now -- so we've got Boards set up on the setup purposely with the skill sets, Board and Management to -- to be able to focus and not only grow the business, but keep us as shareholders and customers keep us all safe. So hence, you have seen an elevated growth there.

In the New Zealand business, well, again, we've got the competencies there, which would vary -- which we're very [ often ]. Now in terms of the auditors, we had a change of auditors now, Karen, I'll just might get this wrong, was it 2023. So PwC have not been with us that long. So it's a focus on meeting best practice. Thank you, Oliver.

Sorry, just one thing. I think just to -- I think I'm answering the first part of your question, which is -- so while we have different legal structures and different regulatory environments, our risk function across Tasman works very closely. Our finance function works very closely. So we are actually benefiting from each other's skills and expertise in those areas. So we're not isolating each business from a practical and commercial perspective in terms of how they operate.

All right. Thank you, Bruce. I missed that piece. Thank you. We've got one other question, please. That will be the last question in the room.

First of all, will be my last question too. And it's a question that won't rise next year because I do have faith that you'll get it right going forward. But I just put the shot across the bars and it follows on a way bit from Lindsay's question. I was talking of the directors' fees of Heartland Bank and it's fair to say various other companies as well. I'll leave you to go and do your own research on the relative sizes of the companies and the fees have got them here. Is there an extra cost and having directors in Australia, they seem to be twice what they are in New Zealand?

Yes. So I mean -- and I'm pleased you raised that because it's -- that's the variation of the markets, number one. So just so we can -- just to give you some more comfort around that, and that will be -- again, that will be around FY '23. We did a benchmarking exercise in the Australian market, understanding the data sets, and that was -- I don't -- remind me if I've got it wrong, but I think it was EY was the consultants there. And when you're looking at what we were -- if you look at their plan, it needed certain expertise to get ourselves of an ADI. So we had to take into account the specialist nature of what we were setting out to achieve now, and we've done that. So it might sound expensive, but in context it's cheap to the shareholders.

I should speak on behalf of the Australian Board, I chair the Australian Board. So I mean, we've had businesses in Australia for some time for -- we've had the reverse mortgage business in Australia since 2014. We bought the livestock business in Australia in 2022, but they operated as finance companies. And in fact they had management boards. So there were no independent directors on those boards. So there wasn't a cost and additional cost for managing those businesses. But they're also wholesale funded that as we borrowed from the financial institutions to fund our growth. With the acquisition of the approved deposit-taking institution the bank in Australia 18 months ago, which is potentially regulated by the Australian Prudential Regulation Authority, there is a requirement that you have a majority of independent nonexecutive directors and indeed an independent chair. And so I was required to step down from the group board and become independent in the context of chairing the Australian Board.

We had to recruit a range of Australian directors as well. We do have -- New Zealand executives and the Chair of the New Zealand Bank, Bruce Irvine, on our Board, but we have to have in the majority of Australian directors. And that is because we operate with a government guarantee. So the Australian government guarantees what we do, guarantees the depositors and there is a cost and a high bar with that -- that privileged position on the license that we hold. I mean they don't hand out banking licenses that often. We were successful in obtaining one. So -- I think in these first couple of years, you draw out the point about the cost of that, and that is fair, and that applies with every aspect of setting up a new bank.

The metal is on us to, in fact, create value for you as shareholders over the foreseeable future. And so if that bank ticks along at nominal growth, and it's not a good idea, but that bank is growing in our first year of operation, we grew in excess of 20%. We're on track to do that again. We're growing it at that sort of level on a monthly basis. And so out into the future that we expect -- and we're the market leader in our chosen segments that we're operating very narrow targeted focus.

So I think to your question, I think it's a fair challenge, and I would hope at this meeting in a couple of years' time, you would say, well, that was a really worthwhile investment. But we sort of feel we've created a lot of value there that perhaps is not recognized currently in the valuation of the company. But that's on us to prove over subsequent reporting periods.

Thank you, Geoff. So here, you could have gone a couple of minutes longer, it would have help me, but -- all right. So look, we will now move to the online questions. There will be an opportunity to ask further questions as the meeting progresses or after the conclusion of the meeting. Are there any questions online?

Thanks, Greg. We have a few. The first one here, are there too many shares? What about a share buyback?

Yes. Well, look, that's not what -- we don't believe there are too many shares, and we won't be doing a share buyback.

The next question, is there a Board policy regarding Director and Chair succession? If not, why not?

So just repeat that.

Is there a Board policy regarding Director and Chair succession? If not, why not?

Yes, there is. Simple. It's on our website.

The next question. How many full-time equivalent staff do we currently have? And is this likely to fall over the coming 12 months with the rapid rollout of AI? Which parts of our business operations are the most prospective for AI productivity gains? And how energetically are we embracing those opportunities?

So I might just pass it over to you, Leanne. Thank you. And then I can have a seat.

So our full-time employees over this next year, all stabilizing. So we had a cost uplift last year. This year it will stabilize. We are preparing for growth. As we embark on our automation journey, we are going to focus on automating our business first, then we're going to look at unlocking AI rather. And where we can use AI, we will. We are all learning and we need to make sure that it is safe.

The middle and back office presents a great opportunity for efficiency but what we believe is that the front office as well unlocks opportunity for growth. So we will be looking across all of our businesses. And Michelle, you can answer for Australia as well for the New Zealand bank across all parts of our business, but I see our employee numbers stabilize because we're also going to utilize our staff to embark on the automation journey. We are not going to bring an external resource to develop what we're about to do. There'll be a limit actually. There will be limited external resource, but that will be around software development. But our staff, we will repurpose them to develop the work we need.

Thank you, Leanne.

Greg, I might just add. Sorry, I was going to give you a little bit more of a seat there. I'm too late. But I might -- it's very similar for the Australian business. We currently have around 120 FTE. As we embark on the technology investment and the improvement, there will be changes to the roles that we have in the business. So there will be several processes that we are able to automate to make life easier and faster for our customers and certainly for our people, and we will be reinvesting a lot of those people into different ways to help our customers and have more direct customer contact. So that's our preferred approach is that we want to be there for our customers and the easy things or some of the processes that don't need people involvement, we were able to automate those. So we don't believe that our FTE will be increasing. It will certainly be stabilizing.

Thank you, Michelle.

The next question. Sorry, Greg, there's a couple more here. In AGM, with the only item of business being the approval of the auditor fees is pretty boring. Why aren't any directors up for election and why didn't we put up a remuneration report for a nonbinding advisory vote complying with the legal system in Australia? Seeing as we are making such a big push into Australia, shouldn't we embrace their governance standards? If not, don't we risk New Zealand being viewed by international investors as a governance back quarter given that rem report voting has become standard in many countries.

But I'll pass it on to Phoebe, Legal Counsel, please.

Thanks, Greg. So shareholders might remember last year, we had 4 of the 5 Heartland Group Holdings Limited Directors stand for reelection. Our directors are required to restand every 3 years or if they're appointed by the Board the year after that appointment or the next AGM. So that is really a timing issue in terms of voting for director reappointment. And in the future, you'll see directors standing again when they need to, with reference to the NZX sustain role requirements.

In terms of governance, we are an NZX listed issuer. We are required to comply with the NZX listing rules, but we also take into account the NZX Corporate Governance code on a comply or explain basis. We include detailed reporting on that in our annual report. We also consider the remuneration template. So we hold ourselves to the standards applicable to NZX listed issuers as to our contemporaries across the market. I just commented our ASX listing is a foreign exempt listing. So it is the New Zealand listing rules that we need to comply with.

Greg, can I just add to that. Two things. Firstly, I don't think the meeting is particularly boring at the moment. But secondly, my understanding is that the NZX is moving closer towards meeting the standards in Australia around rem and rem reporting, and we will obviously comply with it at that time.

Thank you, Bruce.

Two more. Could you please clear up the FY '26 outlook? On some slides you mentioned is above $85 million, however, on others sort of same or greater than $85 million?

All right. Okay. Next question.

Final question. I have mixed feelings about your commitment this morning that you are targeting future profit levels in excess of $100 million. This was, of course, prior to your recent substantial capital raise. I would have expected you to have been much more aspirational than simply returning to $100 million. Why aren't you?

Well, I think we've got to be conservative on where we just -- we don't want to give a message of something that we may see hard to achieve in this environment. So look, it'd be nice to be bigger. And at some point, it will be. Let's hope it is next year. That's all I can say on that.

All right. Are there any further questions?

No further questions online.

All right. So, thank you for your questions. I will now invite Phoebe to take us through the formal business of the meeting, please. Thank you, Phoebe.

Thank you, Greg. We will now move to the formal business of the meeting, which is to vote on the one resolution set out in the notice of meeting. As mentioned earlier, if you're attending online, you can cast your vote using the electronic voting card. Those online with questions about the resolution can submit these online now, so they can be addressed with questions from the floor within the discussion of the resolution.

The only resolution for this meeting is to record the automatic reappointment of PwC as the company's auditor and to pass the following resolution. This resolution has the full support of the Board. I move that the Board be authorized to fix the remuneration of Heartland's auditor, PwC, for the financial year ending June 30, 2026. Are there any questions from the floor?

Christopher McCabe, shareholder. How long before it's up for someone else to be reviewed as auditor? 2 years, 3 years?

I might hand over to Andrew to answer that question. But it is in accordance with our auditor appointment policy.

Yes. So it will be a 5-year process. So we are now approaching 3 years into it. So it will be another couple of years.

Are there any questions online?

When did we last put the external order out to tender? And when are we most likely to run a full competitive tender for the external audit job?

So PwC was appointed in 2023, as we commented on earlier. And as Andrew mentioned, we have a 5-year policy in terms of auditor rotation and considering the appointment of the auditor.

Yes. So just cover that -- I was going to say 2023 was a competitive process, and the incumbent at that time was KPMG, and we had a competitive process. Yes.

Thank you. If you can now please mark your intention on your voting card by selecting for, against or abstain at Item 1. For those online, please click Submit Vote on the bottom of the voting card to lodge your vote. [Voting]

Voting cards in the room will now be collected. Please place your voting cards in the ballot boxes as they are passed around. If you need help, please raise your hand. Online votes should now be submitted. Voting will be open until the close of the meeting. The results of the poll will be advised on the NZX and the ASX after the end of the meeting.

Ladies and gentlemen, that concludes -- I'll just pause while voting cards are collected.

That now concludes the formal business of the meeting. I will now invite our Chair, Greg Tomlinson, to address the meeting.

Thank you, Phoebe. This is now an opportunity for any other matters that may properly be brought before the Annual General Meeting to be considered. Are there any such matters that shareholders wish to raise? Okay. It's -- at the interest -- sorry, we've got one.

We have some online. There's nothing in the room. The first one here in light of the strong performance in reverse mortgages and the improving asset quality and vehicle finance and livestock, what new quality loan products is Heartland considering to diversify revenue streams and drive future receivables growth?

Right. Well, the product that we have been working on is a is -- sorry, is at the reverse mortgage space, but it's helping elderly into aged care. And so by terms of -- I just can't think of the name of the product, what we...

Access.

Yes, sorry -- an access loan, which is -- we think there's -- we believe there's a lot of opportunity and growth aspirations for that sector.

Greg, maybe just to explain how that works. So just essentially, if you own a house and you're looking to go into a retirement village, the issue is about how you pay for the retirement village and the timing of selling your in-house. And so the whole idea is that it is a short-term loan effectively to allow you to get into the retirement village and then take your time. I think we give them 2 years or something like that, 3 years to sell your house before you move into the retirement village. So it's called a village access loan. And it's just designed to make the transition from home ownership into a retirement village easier.

Thank you.

Final question in the interest of time. Thank you for offering our best practice hybrid AGM today and for your past practice of publishing a full copy of the AGM webcast on your website dating back many years. The video quality is also excellent. I was just puzzled where the notice of meeting wasn't lodged with ASX this year. Also, what is the split between Australian and New Zealand shareholders? And is it worth maintaining both listings?

Right. Actually, I can't answer the split, but maybe Phoebe, if you've got -- but I think we can -- no, but we can come back to that. All right. That's it. Yes. Okay. So that brings us to the end of the Heartland Group 2025 Annual Meeting. Accordingly, I declare the meeting closed. Thank you -- and you all for your attendance and participation here today. You're invited to join the directors and management team for refreshments, which are being served at the back of the room. Thank you all, and thank you those that are joining virtually. We appreciate your support. Thank you.