Prudential Information for September 2013

Heritage Bank Limited APRA Prudential Standard APS 330 - Public Disclosure of Prudential Information as at 30 SEPTEMBER 2013

TABLE 2: MAIN FEATURES - HERITAGE NOTES AS AT 30 SEPTEMBER 2013

Disclosure Template for Main Features of Regulatory Capital Instruments
1 Issuer Heritage Bank Limited
2 Unique identifier (eg CUSIP, ISIN or Bloomberg identifier for private placement) ASX - HBSHA
3 Governing law(s) of the instrument Queensland
Regulatory treatment
4 Transitional Basel III rules Tier 2
5 Post-transitional Basel III rules Ineligible
6 Eligible at solo/group/group & solo Solo
7 Instrument type (ordinary shares/preference shares/subordinated notes/other) Subordinated Notes
8 Amount recognised in Regulatory Capital (Currency in mil, as of most recent reporting date)

$45 million
(Issue amount $50M less $5M Basel III Transition)
9 Par value of instrument $50 million
($100 per Heritage Note)
10 Accounting classification Liability - fair value option
11 Original date of issuance 26 October 2009
12 Perpetual or dated Dated
13 Original maturity date 25 October 2019
14 Issuer call subject to prior supervisory approval Yes
15 Optional call date, contingent call dates and redemption amount Prior to the Maturity Date, Heritage may, with the prior written approval of APRA, Redeem:
- some or all Heritage Notes on the Step-Up Date (27 October 2014) or any subsequent Interest Payment Date;
- any affected Heritage Notes on any Interest Payment Date if a Tax Event occurs; or
- all Heritage Notes at any time if a Regulatory Event or Change of Control Event occurs Redemption amount will be face value plus accrued interest
16 Subsequent call dates, if applicable Refer item 15 above
Coupons/dividends
17 Fixed or floating dividend/coupon Fixed to Floating
18 Coupon rate and any related index 10% per Annum Fixed until 27 October 2014 following which the interest rate will change to Floating (90 day BBSW plus 4.435% x 1.5)
19 Existence of a dividend stopper Not applicable
20 Fully discretionary, partially discretionary or mandatory Mandatory
21 Existence of step up or other incentive to redeem Yes
22 Noncumulative or cumulative Cumulative
23 Convertible or non-convertible Non-convertible
24 If convertible, conversion trigger(s) Not applicable
25 If convertible, fully or partially Not applicable
26 If convertible, conversion rate Not applicable
27 If convertible, mandatory or optional conversion Not applicable
28 If convertible, specify instrument type convertible into Not applicable
29 If convertible, specify issuer of instrument it converts into Not applicable
30 Write-down feature No
31 If write-down, write-down trigger(s) Not applicable
32 If write-down, full or partial Not applicable
33 If write-down, permanent or temporary Not applicable
34 If temporary write-down, description of write-up mechanism Not applicable
35 Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) In the event of a winding-up of Heritage, the claims of Holders against Heritage in respect of Heritage Notes will be subordinated in right of payments to the claims of all Senior Creditors (including Trade Creditors)
36 Non-compliant transitioned features Yes
37 If yes, specify non-compliant features If Heritage Notes are not redeemed on the Step-Up Date the initial margin will increase, refer item 18. The Noteswill not be eligible for inclusion in Regulatory Capital after this date.

The full prospectus for Heritage Notes can be obtained from the About Heritage section at heritage.com.au

TABLE 3: CAPITAL ADEQUACY AS AT 30 SEPTEMBER 2013

Risk Weighted Assets (A$m)
Capital Requirements
Credit risk
Corporate -
Government -
ADIs 296.3
Residential Mortgage 1,746.1
Other Retail 237.8
Other 43.4
Off Balance Sheet 36.5
2,360.1
Securitisation 24.0
Equity Exposure -
Market Risk -
Operational risk 382.3
Interest Rate Risk -
2,766.4
Common Equity Tier 1 11.51%
Tier 1 11.51%
Total Capital Ratio 13.26%

TABLE 4: CREDIT RISK AS AT 30 SEPTEMBER 2013

Gross Credit Exposure
(A$m)		 Average Gross Credit
Exposure for Quarter
(A$m)
Exposure Type
Cash and investment securities 1,385.2 1,468.8
Loans and advances 5,117.7 5,118.1
Other assets 124.4 137.7
Total on balance sheet exposures 6,627.3 6,724.6
Loans approved not yet advanced 84.8 91.9
Other off balance sheet 5.8 5.3
Total off balance sheet exposures 90.6 97.2
Total exposures 6,717.9 6,821.8
Exposure by Portfolio
Corporate - -
Government 270.0 274.3
ADIs 1,115.2 1,194.5
Residential Mortgage 4,960.4 4,966.5
Other Retail 242.1 243.5
Other 130.2 143.0
6,717.9 6,821.8

CREDIT RISK FOR THE QUARTER ENDED 30 SEPTEMBER 2013

Impaired loans (A$m) Past due loans (A$m) Specific provision balance (A$m) Charges for specific provision (A$m) Write-offs (A$m)
Exposure by Portfolio
Corporate - - - - -
Government - - - - -
ADIs - - - - -
Residential Mortgage 6.5 12.2 0.5 0.1 -
Other Retail 2.9 1.3 1.3 0.3 0.4
Other - - - - -
Total * 9.4 13.5 1.8 0.4 0.4
General Reserve for Credit Losses 3.4
Total impaired items, including restructured loans per statutory financial statements 6.6
Additional items defined as restructured as per the prudential standards 2.8
* 9.4

TABLE 5: SECURITISATION EXPOSURE FOR THE QUARTER ENDED 30 SEPTEMBER 2013

Total Exposures Securitised (A$m) Recognised Gain or Loss on Sale (A$m)
Securitisation Exposure Types
Residential Mortgage 0.0 -
Total Exposures 0.0 -

SECURITISATION AS AT 30 SEPTEMBER 2013

On Balance Sheet(A$m) Off Balance Sheet(A$m) Total Exposures(A$m)
Securitisation Exposure Types
Liquidity Facilities - 10.5 10.5
Funding Facilities - 0.2 0.2
Swaps - 28.4 28.4
Holdings of Securities 36.1 - 36.1
36.1 39.1 75.2

TABLE 3: CAPITAL ADEQUACY AS AT 30 JUNE 2013

Risk Weighted Assets (A$m)
Capital Requirements
Credit risk
Corporate -
Government -
ADIs 314.8
Residential Mortgage 1,745.6
Other Retail 242.6
Other 53.9
Off Balance Sheet 38.4
2,395.3
Securitisation 23.1
Equity Exposure -
Market Risk -
Operational risk 382.3
Interest Rate Risk -
2,800.7
Common Equity Tier 1 11.07%
Tier 1 11.07%
Total Capital Ratio 12.81%

TABLE 4: CREDIT RISK AS AT 30 JUNE 2013

Gross Credit Exposure
(A$m)		 Average Gross Credit
Exposure for Quarter
(A$m)
Exposure Type
Cash and investment securities 1,544.5 1,369.2
Loans and advances 5,119.1 5,278.3
Other assets 172.3 145.8
Total on balance sheet exposures 6,835.9 6,793.3
Loans approved not yet advanced 91.3 93.1
Other off balance sheet 5.1 5.5
Total off balance sheet exposures 96.4 98.6
Total exposures 6,932.3 6,891.9
Exposure by Portfolio
Corporate - -
Government 194.8 189.7
ADIs 1,349.7 1,179.5
Residential Mortgage 4,963.1 5,124.2
Other Retail 247.3 247.2
Other 177.4 151.3
6,932.3 6,891.9

CREDIT RISK FOR THE QUARTER ENDED 30 JUNE 2013

Impaired loans (A$m) Past due loans (A$m) Specific provision balance (A$m) Charges for specific provision (A$m) Write-offs (A$m)
Exposure by Portfolio
Corporate - - - - -
Government - - - - -
ADIs - - - - -
Residential Mortgage 10.4 11.2 0.4 0.1 -
Other Retail 2.7 1.0 1.0 (0.3) 0.5
Other - - - - -
Total * 13.1 12.2 1.4 (0.2) 0.5
General Reserve for Credit Losses 3.7
Total impaired items, including restructured loans per statutory financial statements 6.5
Additional items defined as restructured as per the prudential standards 6.6
* 13.1

TABLE 5: SECURITISATION EXPOSURE FOR THE QUARTER ENDED 30 JUNE 2013

Total Exposures Securitised (A$m) Recognised Gain or Loss on Sale (A$m)
Securitisation Exposure Types
Residential Mortgage 243.9 -
Total Exposures 243.9 -

SECURITISATION AS AT 30 JUNE 2013

On Balance Sheet(A$m) Off Balance Sheet(A$m) Total Exposures(A$m)
Securitisation Exposure Types
Liquidity Facilities - 11.0 11.0
Funding Facilities - 0.2 0.2
Swaps - 28.6 28.6
Holdings of Securities 40.1 - 40.1
40.1 39.8 79.9