Heartland announces proposed Heartland Bank and TSB merger

NZX/ASX release 2 June 2026 Proposed merger of Heartland Bank and TSB will create a New Zealand challenger bank of scale with a regional focus Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) is pleased to announce that it has signed a conditional merger implementation agreement (MIA) with Toi Foundation and Toi Foundation Holdings Limited (together, Toi Foundation) to merge Heartland Bank Limited (Heartland Bank) and TSB Bank Limited (TSB). Under the proposed transaction, Heartland will acquire from Toi Foundation all TSB shares on issue for an aggregate consideration of $620 million. Immediately following the acquisition, Heartland Bank and TSB will merge to create TSB Heartland Bank Limited (TSB Heartland Bank). Summary of the proposed transaction and merger ‒ Recognising each bank’s long history and deep connection to regional New Zealand, the merged bank will be called TSB Heartland Bank. ‒ TSB Heartland Bank will be a challenger bank of scale with a regional focus – increasing banking competition and choice for New Zealanders. ‒ By combining Heartland Bank’s specialist product expertise with TSB’s cost-effective funding platform and transactional banking capabilities, TSB Heartland Bank will be a full-service capable bank differentiated by its specialist product offerings, with a lower risk-weighted product portfolio. ‒ Greater scale and product diversification will improve financial efficiency and resilience, which may support an uplift in the merged bank’s long-term credit rating. ‒ Material synergies are expected to be progressively realised over a three-year period post-completion by reducing shared costs across TSB Heartland Bank. ‒ Synergy realisation and the transaction structure are expected to drive material normalised earnings per share accretion for Heartland shareholders, alongside an enhanced dividend per share profile. ‒ The aggregate consideration to Toi Foundation of $620 million represents 76% of TSB’s book value and comprises ordinary equity in Heartland (resulting in a 17.5% shareholding in Heartland by Toi Foundation), a pre-completion cash dividend paid by TSB, a vendor loan provided to Heartland by Toi Foundation, and Toi Foundation subscribing for Heartland Bank Tier 2 capital. ‒ Subject to Heartland shareholder approval, it is expected that one Toi Foundation nominee will be initially appointed to the Heartland Board with effect from completion of the proposed merger. It is also expected that on completion of the proposed merger, two existing TSB directors will initially join the TSB Heartland Bank Board. ‒ The proposed merger is targeting completion in December 2026, subject to satisfaction of a number of conditions in the MIA, including community consultation by Toi Foundation with Taranaki residents, Heartland shareholder approval and any necessary New Zealand and Australian regulatory approvals. The proposed transaction builds on Heartland’s strong merger, acquisition and integration track record, including the recent acquisition of Challenger Bank Limited (now Heartland Bank Australia Limited (Heartland Bank Australia)) – which made Heartland Bank the first New Zealand registered bank to acquire an Australian authorised deposit-taking institution. Transaction costs are estimated to be approximately $15 million. Approximately $7 million will be expensed and therefore reflected in Heartland’s net profit after tax (NPAT) for the financial year ending 30 June 2026 (FY2026) and approximately $8 million will be expensed and reflected in Heartland’s NPAT for the financial year ending 30 June 2027 (FY2027) (subject to the transaction completing in FY2027). Heartland now expects the difference between reported and underlying NPAT in FY2026 to include transaction costs in addition to any fair value changes on equity investments held and other one-off non-recurring expenses. Heartland will host an investor briefing at 10.30am (NZST) today, Tuesday, 2 June 2026. See the full announcement and accompanying investor presentation for more information. – ENDS – The person who authorised this announcement: Andrew Dixson, Chief Executive Officer For further information and media enquiries, please contact: Nicola Foley, Head of Corporate Communications & Investor Relations +64 27 345 6809, nicola.foley@heartland.co.nz Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland, New Zealand About Heartland Heartland is an Australasian financial services group providing specialist banking products to New Zealanders and Australians. Heartland is listed on the New Zealand and Australian stock exchanges under the HGH ticker (NZX/ASX: HGH). Through its various predecessors, Heartland has a long history in financial services, stretching back to Ashburton, New Zealand in 1875. Today, Heartland is the listed holding company for two banks – Heartland Bank in New Zealand and Heartland Bank Australia. Each bank is focused on providing specialist banking products to enable better lives for New Zealanders and Australians. In both countries, these products include Reverse Mortgages, Livestock Finance, and Savings and Deposits. In New Zealand, Heartland Bank also offers Motor Finance and Asset Finance. Heartland’s role as the listed parent company is to ensure capital is allocated to the parts of its business which generate strong returns, and to set the strategy and risk appetite within which the group operates. This enables Heartland to maximise shareholder returns and for each bank to enhance the value it offers customers by helping more New Zealanders and Australians with their specialist banking needs. More: heartlandgroup.info