Annual Report | 2015 –16 Contents

Chairman and CEO’s Report 04

Our Community 08

Greater Charitable Foundation 12

Financial Statements 30 June 2016 16 Annual Report | 2015 –16

3 Chairman and CEO’s Report

This is our first report as Greater Bank in what has been a rewarding year of change. The Board, management and our staff have worked closely together on our Blueprint for Change in line with our new strategic approach. This combined Chairman and CEO’s report is a reflection of our united approach to making Greater Bank the customer empowered bank.

Here is an overview of achievements made against We are building on very strong customer service the five pillars of our strategic plan. foundations. We took out a national Roy Morgan Customer Satisfaction Award for the third year running Sustainably grow our customer base with ratings as high as 96%. While these results are We continue to welcome more customers to Greater pleasing, a deeper analysis shows we can do better. Bank with an increase in net customers this year. Our customer experience mapping and voice of This growth stems from our work to better understand customer programs, started this year will continue what customers want from us. Our new distribution to lead to further service improvements. strategy is an integrated, multi-channel one with a Offering the best customer experience and attracting focus on enhancing our physical channels. more customers comes down to more than friendly, As part of that strategy, we joined the Westpac Group expert employees. We continue to review features ATM network (moving from rediATM network) to better and pricing to ensure our products are competitive serve customers via ATMs nationally. We also rolled out and fit for purpose. Electronic valuations, better our new branch design with concierge style service at lending enquiry management and improved, Robina, Muswellbrook and a new branch in Waratah. integrated account opening capabilities are some Branch redesign and enhancements to mobile lending of this year’s improvements. will continue to be rolled out next year. Greater Bank has been a leader among customer Our successful change of name to Greater Bank is owned financial institutions not only in mobile banking a small but important part of future growth. A deeper but in use of social media. This year we added Instagram analysis of our markets, and performance within to our social media stable of channels that are being those markets, revealed that many people do not used to share information and engage with customers, understand the term “building society” and do not our partners and the broader community. equate it with the strength, security and expertise that we deliver. The name change is a tool to make us more relevant and sustainable, and we hope will encourage more people to consider our greater way of customer owned banking. The change has been supported by our new No B.S. campaign which continues beyond the name change. Annual Report | 2015 –16

Improve organisational efficiency Greater Bank has a proud history of good governance and risk management. We manage risks consistent with This year’s solid profit result demonstrates Greater Bank the best interests of customers and the long term, sound is a strong, well-managed, efficient financial institution. financial performance of the business. Our group profit of $29.51M is, as expected, lower than The Board and management have continued to last year. The result is due to increased expenditure strengthen governance and risk management and and investment in people capability and business employ risk-based decision-making and oversight systems, including core banking digital capabilities across all operations. to position us sustainably for the future. It is also because in 2015, unlike many other lenders, Greater Bank chose The Board sets the tone from the top to ensure a sound not to conduct out of RBA cycle increases in home risk culture is maintained and communicated via the loan interest rates. business strategy, risk appetite, understanding of risk and capabilities, as well as how risk management Lending growth is particularly pleasing given modest behaviours are encouraged and rewarded. growth over the past three years. Net loans approved of $1,023M is an increase of 23% on last year. The Board is actively monitoring its risk profile to ensure that activities undertaken to achieve strategic Total deposit growth of 4.5% (retail deposit growth was objectives are within risk appetite. 7.9%) ensures Greater Bank has a strong base from which to lend. We are also seeing steady asset growth. Our three lines of defence structure and Risk At June 30 2016, total assets were $5.72 billion, up Management Framework is incorporated explicitly 5.8% on last year. Capital adequacy was 17.9% into all policies. The framework allows us to identify, at 30 June 2016. analyse and manage the current and emerging risks within the business. Proactively manage regulatory Through the Board committees, Chief Risk Officer change and risk (CRO), and external support we ensure oversight With the rapid changes taking place in banking, of the risk profile and risk management as well as a major strategic focus is to effectively manage risk independent reporting lines to appropriately and regulation. escalate issues.

Left: Wayne Russell, Chairman; Scott Morgan, CEO Top: Greater Bank Board Members, Front L to R: Malcolm McDonald, Jayne Drinkwater, Wayne Russell; Middle L to R: Roger Cracknell, Scott Robinson; Back: Russell Ware

5 Strengthen business capabilities As part of our culture change, we’ve developed new values. We continue to make changes to better We have delivered significant elements of our core define, measure and reward outstanding performance banking system rewrite and have made significant with new employment and remuneration systems enhancements to IT architecture, particularly in relation developed. This forms part of a broader talent to security. A new payments strategy was developed management program backed by improved internal within a new, broader, products and services road map. communication systems. These initiatives will be rolled out next year. Congratulations to Project Manager, Wayne Ranclaud, The newly established Innovation Incubator is an on being named Employee of the Year and to Lending example of our more strategic approach to innovation Services Operations Manager Shane Greig for taking and business improvement. Based on sound data, we out our Ian Nelmes Award for Outstanding Service. are systematically and quickly developing and trialling projects and services. Both Board and Management Commit to Corporate Social are accepting that not all projects will succeed but Responsibility (CSR) that investment is essential for Greater Bank to stay ahead of the game for the benefit of customers. We continue to integrate CSR in to our business strategy to promote innovation and business sustainability. We This year was also about helping our people to be strive to operate our business in an ethical way and more capable of taking on change. A performance minimise our impact on the environment. CSR is about based culture is essential to us achieving our strategic creating value for our business and the communities in plan and ensuring we have the capacity to continue which we operate, which includes risk management to meet changing customer needs and new and giving back to the community. competitive threats. Our customer owned structure means our focus is on customers and community rather than shareholders. One benefit for customers banking with, customer owned, Greater Bank is that profits are invested back into improved services as well as support for their community.

Greater Bank Executive Committee L to R: Craig Newham, Bruce White; Scott Morgan; Marie Hanson-Kentwell; Greg Taylor; Michael King Annual Report | 2015 –16

The Board provided $1.20M to the Greater Charitable The next 12 months Foundation this year. Those funds are being used The future is challenging but we are putting in place by the Foundation to provide grants to a number of the strategy and business capability to be able to outstanding charities that are making a real difference adapt to whatever changing competitive pressure to the lives of families and a stronger community. or customer need is placed before us. Becoming the Major Community Partner of the We will continue implementing the programs Newcastle Jets football club is a great example of our established this year and will build the depth enhanced approach to community engagement and of relationship we have with our customers with sponsorship. Working with the Jets, we have helped the enhanced customer relationship management club to meet a promise to better engage with fans and activities. That includes enhancements to our the community as well as bringing sporting role models customer service centre. and skills development programs to kids in parts of Northern NSW. Another key focus will be on continued IT and core banking improvements. We also focus on Broad support for other grass roots sports such as continuous improvement and business optimisation netball, across most of our area of operations, helps to activities through our innovation incubator as well develop local talent and sustain the benefits of sport as participation in programs with selected fintechs. to communities. Improving a community’s financial literacy is also important. With all of our sponsorships of Thank you to the management, staff and the sport and other community organisations, as well as our other directors, for their contribution to these sound work with Foundation charity partners, we are showing results and their commitment to ongoing change people ways to better manage their money through and improvement. sessions run by our branch managers and lending managers or account giveaways.

Wayne Russell Scott Morgan Chairman CEO

7 Our Community

Community kick for football PARTNER: NEWCASTLE JETS FOOTBALL CLUB The Newcastle Jets has been able to meet its promise to better engage with fans and the community with Greater Bank on its team. Greater Bank is the Major Community Partner of the A-League Football Club. The Jets and Greater Bank share a common purpose of serving community. Under the Greater Bank funded, multifaceted Jets:Connect Program, Jets players and staff collectively spent hundreds of hours in the community this year. They conducted 30 school visits, held four free community clinics and made many other visits to charitable events, hospitals and Greater Bank branches. A senior squad tour of the New England and Mid North Coast enabled the Jets to build its connection beyond Newcastle and the Hunter. The Jets Community Round raised awareness and funds for the work done by Greater Charitable Foundation Partner Cerebral Palsy Alliance. Jets Clinic

Greater support for grass roots netball PARTNERS: LOCAL DISTRICT NETBALL ASSOCIATIONS Tens of thousands of women and girls across NSW and the Gold Coast were able to don a bib and get on the netball court thanks to Greater Bank support for grass roots netball. In addition to providing funding we also gave every player a water bottle and $5 voucher to open a Greater Bank Lifesaver Account, to help them to become financially fit. Greater Bank is also the major sponsor of the Newcastle Netball Championships.

2016 Greater Bank Newcastle Netball Grand Final Annual Report | 2015 –16

Helping aspiring netballers shoot for their dreams PARTNERS: HUNTER ACADEMY OF SPORT/CENTRAL COAST ACADEMY OF SPORT Greater Bank entered into a new partnership with the Central Coast Academy of Sport this year.

It funded the Academy’s Netball Program to help the region’s top 22 aspiring young netballers to shoot for their dream to play representative netball.

This is in line with Greater Bank’s support for the Hunter Academy of Sports’ Netball Squad. At the Academy’s Run NSW – Launch of the Fernleigh 15 request, we moved funding from supporting Olympic Getting the community (fun) running scholarships to supporting its netball program, July 2015 Festival of Sport and annual awards night to help more PARTNER: RUN NSW local athletes and grass roots sports development. Greater Bank again helped Athletics NSW to get the community running to have fun and be active as Both regions’ squads played in the 2016 Academy the major sponsor of the Run NSW Greater Bank Fun Games held on the Central Coast in April at a Greater Run Series. More than 5,500 people ran in 11 events Bank sponsored Australian Invitational Youth Game. covering 43,000 km. Armidale Casino Dubbo Goulburn Newcastle/Lake Macquarie (Fernleigh 15) Nowra Parkes Raymond Terrace Sydney (Sydney Half Marathon and Sydney 10) Wollongong The Wollongong event was expanded this year to include a 10 km run to honour the memory of Kerryn McCann. Kerryn is one of the region’s most decorated athletes and a Commonwealth Games gold medallist. The events are organised with the help of local athletics and running groups as well as local councils. They are a great example of organisations working together to Captains in the 2016 Greater Bank Newcastle Netball benefit local communities. Open Championships

9 BackTrack cheque presentation with Armidale branch manager Wendy Ng

New England youth skills PARTNER: BACKTRACK

At-risk young people in New England have gained valuable skills in agriculture thanks to a $110,000 donation to Armidale-based charity BackTrack. The funding enabled the recruitment of a full-time AgLads Program Co-ordinator, Paul Dawson. It also assisted with program-related costs and allowed researchers at The University of New England to begin to evaluate the program. The young people work on local training farms. The aim is to give them an opportunity to reconnect with their education and training, to become work ready, find jobs, lead happy and productive lives and participate fully in the community. The program will help local farmers overcome skills shortages. The funding came from the $1.5M Greater Bank has committed to spend in the New England area over 10 years after it merged with Armidale Building Society.

Dobre Ivanovski, Stephanie Ivanovski and Shellharbour branch manager Brendan White with Nathan Ivanovski in his stroller

Giving Tree helps overcome family challenges or communication devices to help them to be more PARTNER: KIDZWISH independent in the community and reach their full potential. Five-year-old Nathan, who has high-level In June 2016, Greater Bank presented KidzWish with a autism, received a disability stroller to help him to more further donation of $25,000 to its Giving Tree program to easily go on outings. Another benefactor is 14-year-old make a real difference to the lives of Illawarra families Sebastian Lamas Montero whose $15,000 wheelchair that are overcoming big challenges. gives him mobility at home and other places where Local Branch Manager Brendan White made the his larger wheelchair was unable to operate. presentation to the KidzWish Foundation and five-year- The new donation takes Greater Bank’s contribution old local KidzWish Child Ambassador Nathan Ivanovski. to the program to $50,000. Last year it joined with The program had already helped 15 local children and Stockland to fund construction of an 8 m high Giving their families with items such as wheelchairs, orthotics Tree at Stockland Shellharbour Shopping Centre. Annual Report | 2015 –16

Other organisations helped by Greater Bank in 2015–16

Armidale Business Women Hunter Young Professionals Property Council Hunter Chapter Enterprising Breakfasts and Award Hunter District Cycling Club Salvation Army Red Shield Appeal Big Day In Merewether Surfboard Club The Waratahs Rugby Union Club Hunter Business Awards

Christmas spirit supports job training and community PARTNER: MINGARA

The Central Coast community came together to celebrate Christmas and support training and job opportunities for young people thanks to Mingara and Greater Bank. More than 16,000 people attended Mingara Christmas Under the Stars raising more than $17,000 for the Salvation Army’s Oasis Youth Centre to establish a local pop-up-café. The café is allowing the Salvos to connect with and support people doing it tough GRRA8 Rugby van with Marketown branch manager Jye Smith over a free coffee while providing local young people with skills training in hospitality. Getting kids moving PARTNER: GRRA8 RUGBY

Greater Bank is supporting an acclaimed Super Rugby coach to bring a new grass roots sports participation program for kids, aged three to nine, to regional NSW. Todd Louden has developed the not-for-profit Greater Rugby Communities Program as part of a personal mission to tackle the decline in sports club participation and the increasing lack of movement by young kids. The program uses fun, old-style schoolyard games and multiple ball types to encourage enjoyment of and skills in movement. Game basics such as catching, passing, running, kicking and tracking are also taught. A unique element of the program is concurrent sessions for parents and club officials on youth health and wellbeing, mentoring and leadership as well as financial planning and management to help boost club sustainability. Greater Bank branch managers provide tips on helping kids and Clubs to save and make the most of their money. Greater Bank helped to pilot the program and is supporting it to be taken to regional NSW towns Mingara Christmas Under the Stars 2015 i n 2 016 –17.

11 In mid 2015, social impact consultants New Philanthropy Capital (NPC) were commissioned to undertake an assessment of what Greater Charitable Foundation has achieved since its inception in 2011.

Foundation funding has provided practical support to more than 25,000 beneficiaries

The Foundation is viewed as influential in the not-for-profit sector

Non-financial support in the form of 350 media & Greater Bank volunteers employee volunteering created greater impact

Almost 40% of our funded charities 40% leveraged our grant to attract further funding, in-kind and/or volunteering support

In the majority of cases, the effects of the funding are felt long after the instalments have ceased

Top L to R: Captain Starlight with Greater Bank CSOs Colleen Hodgins and Emily Trowbridge visit Maitland Hospital Bottom: 5 Years of Change event Civic Park, Newcastle, from 8 to 9 July 2016 Annual Report | 2015 –16

13 Celebrating 5 years of the Greater Charitable Foundation Greater Charitable Foundation

Greater Charitable Foundation is funded from the Hunter Medical Research Institute profits of Greater Bank. This year it continued to work Funding of a landmark Phase III international clinical with charity partners to improve the lives of families and trial of a new clot-busting drug therapy designed to create stronger communities. In August 2015, it provided treat stroke patients. more than $800,000 to six different charities. In February, the 2016 funding round opened with the successful Raise Foundation charities to be announced in August 2016. Funding of new, groundbreaking Bump mentoring The Foundation commissioned UK-based social programs for pregnant and parenting young women impact consultancy firm, New Philanthropy Capital in Newcastle and Gosford. (NPC), to assess its achievements since inception in 2011. The report found that Foundation funding has provided Sir David Martin Foundation practical support to more than 25,000 beneficiaries, Funding of the Creative Arts and Vocational Education and in the majority of cases, the effects are felt long (CAVE) Program at the Triple Care Farm (TCF) residential after the funding has ceased. and rehabilitation facility in the Southern Highlands for These are the nine charities supported by the 16–24 year olds with co-occurring mental illness and Foundation in 2015–16. drug and alcohol issues. Autism Spectrum Australia (Aspect) Starlight Children’s Foundation Pilot and expansion of the Early Intervention Readiness Support for two programs: John Hunter Children’s Program (EIRP) to help more than 330 families with a Hospital Starlight Express Room and Starlight child newly diagnosed with autism to gain access to Connection visits by Captain Starlight to hospitals the best possible support while also creating stronger, in regional NSW and the Gold Coast. functional families. YWCA NSW Camp Quality Funding of the Northern Rivers Community in the Funding of the Child Life Therapy program at John Kitchen youth skills program. Two half-year programs, Hunter Children’s Hospital to ensure all families who one in farm skills and one in hospitality, were held to have a child diagnosed with cancer in the Hunter provide 25 disadvantaged young people with formal region have access to a Child Life Therapist from training and life skills to help them to gain employment 2015 until 2017. or further their education. Cerebral Palsy Alliance Funding and volunteer support for year-long mentoring programs for young people living with cerebral palsy. Father Chris Riley’s Youth Off The Streets Funding of the Greater Futures Program to provide early-intervention outreach and education programs for disadvantaged children, young people and their families in Maitland and Cessnock. Annual Report | 2015 –16

Case Study Young mums Raise their skills New partner Raise Foundation received $44,000 for its Bump mentoring program for pregnant and parenting young women in Newcastle and Gosford. Sally Gray is the new Newcastle Bump program co-ordinator and a successful graduate of the program. This is what she said about the benefits of the program at its Newcastle launch. “I had just turned 17 and was about to start my final year of high school when I found out I was pregnant with my son and it was honestly terrifying. “One of the toughest things I found as a young mum Cerebral Palsy Alliance Emerge Program mentee Joseph Popov with his Greater Bank mentor Mark Davison was the pressure I felt to prove myself, to prove that I was capable of being a good mum and that I could Volunteering still achieve the things I wanted in my life. Being part Volunteering is a key platform of the Greater Charitable of the Bump program helped me to be able to feel a Foundation’s activities. This year, close to 200 Greater sense of connectedness and belonging to the group. Bank staff provided volunteer or pro bono assistance “The Bump workshops gave me an opportunity to to a Foundation charity partner. spend some time focusing on myself, which was At the end of 2015, Greater Bank employees who have a rare occurrence as a single parent, as well as providing me with information and skills about things volunteered with the Foundation-funded Cerebral like relationships, education and employment to Palsy Alliance Mentoring programs were recognised as move forward with my life.” a top 3 finalist in the NSW Volunteer of the Year Awards ceremony in the Corporate Volunteering category. During National Volunteer Week (9–15 May 2016), the Foundation announced the winner of its 2016 Greater Charitable Foundation Employee Volunteer of the Year Award. This award recognises Greater Bank employees who go above and beyond in their capacity to give back to their community. The winner was Account Controller Andrew Frith. Andrew has supported the Foundation from the very beginning, volunteering for inaugural charity partner Reachout.com (formerly the Inspire Foundation) as well as being a mentor in the Cerebral Palsy Alliance

Mentoring programs for the past four years. Sally Gray and her son

15 Contents Financial Statements 30 June 2016

Directors’ Report 18

Auditor’s Independence Declaration 22

Directors’ Declaration 25

Statement of Comprehensive Income 26

Balance Sheet 27

Statement of Changes in Equity 28

Statement of Cash Flows 29

Notes to and Forming Part of the Financial Statements 30 Annual Report | 2015 –16

17 Directors’ Report

The Directors of Greater Bank Limited ABN 88 087 651 956 (Company) have much pleasure in presenting their report on the Company and the consolidated entity, Greater Bank Group (Greater Bank), consisting of the Company and the entities it controlled at the end of, or during, the year ended 30 June 2016. Directors The following persons held office as Directors for the whole of the financial year and up until the date of this report.

W M Russell, B.Comm, CA, GAICD, MIIA (Aust) Mr Russell joined the Board in April 2011. He has extensive experience in providing auditing and assurance services, having worked as an audit and assurance partner at PricewaterhouseCoopers for 20 years. He is currently a partner at accountancy firm Pitcher Partners. Mr Russell is involved in a number of industry associations and is a member of the Executive and past President of the Australian Financial Institutions Auditors Association. Mr Russell has been the Chairman of the Board since his appointment on 29 November 2011. Special Responsibilities: Member of the Board Audit Committee, Member of the Board Risk Committee, Member of the Remuneration Committee, Member of the M&A Strategy Committee and Chairman of the Succession Planning Committee.

D S Robinson, B.Surveying (Hons) MAICD Mr Robinson joined the Board in October 2007 and has over 30 years’ experience in surveying, town planning and land development. He is the Managing Director of ADW Johnson, a leading Hunter-based consultancy in surveying, town planning, engineering and land development. Mr Robinson has also previously worked as a part-time teacher at TAFE and was a Junior Officer in the Royal Australian Navy. Special Responsibilities: Deputy Chairman of the Board, Member of the M&A Strategy Committee and Member of the Succession Planning Committee.

W R Ware, LL.M. (Hons), FAICD Mr Ware joined the Board in February 2009. He practised law for 14 years until 1987 when he became a professional Company Director and Business Consultant. He has served on the boards of a number of public companies in diverse industries for over 29 years. He is a co-owner and director of Rosedale Gardens Retirement Living, a retirement village at Cooranbong, south of Newcastle. Special Responsibilities: Chairman of the Remuneration Committee and Member of the Succession Planning Committee.

M L McDonald, B Ec. FCA, GAICD Mr McDonald joined the Board in May 2009. He has practiced as a Chartered Accountant for over 30 years and was a Partner in the Newcastle Offices of Touché Ross & Co and KPMG Peat Marwick until his resignation in 1994. He subsequently practiced on his own account for several years. He served as a Trustee of the Anglican Diocese of Newcastle until earlier this year and has considerable involvement in the Not-for-Profit sector at Board and Committee level. Special Responsibilities: Chairman of the Board Audit Committee and Board Risk Committee, Member of the Succession Planning Committee and Member of the Remuneration Committee.

V J Drinkwater, B Ec. MBA (With merit), GAICD, CAHRI Mrs Drinkwater joined the Board in October 2010. She has extensive experience as a Senior Executive in operations, customer service, IT and marketing. Mrs Drinkwater was previously employed as Interim CEO New Zealand, Chief Marketing Officer and Chief Operating Officer at nib health funds limited. She is also a Trustee of the Anglican Diocese of Newcastle. Special Responsibilities: Member of the Remuneration Committee, Member of the Succession Planning Committee, Member of the Board Audit Committee and Member of the Board Risk Committee. Annual Report | 2015 –16

R J Cracknell, CPA, FAICD Mr Cracknell joined the Board in May 2011. He was Chief Executive of ABS Building Society from 1973 until April 2011 and has over 40 years’ experience in the Building Society Industry. He has held various executive positions with the Australian Permanent Building Societies (NSW Division) and was a Councillor of AAPBS (National). Mr Cracknell was a partner in the accountancy firm of Jones, Cracknell & Starr for over 40 years. Special Responsibilities: Member of the Board Audit Committee, Member of the Board Risk Committee, Member of the Succession Planning Committee and Chairman of the M&A Strategy Committee.

Company Secretary The Company has two company secretaries with Mr G J Taylor continuing to act in this role from his initial appointment on 10 October 2014. Mr Taylor is the incumbent Chief Financial Officer with responsibilities for all financial reporting and governance, treasury and business intelligence operations for Greater Bank. Mr Taylor joined the Company, previously known as the Greater Building Society Ltd, in 1979. Ms A C Saltos ceased acting as company secretary during the year following the appointment of Mr G Nyman on 18 January 2016. Mr Nyman is the Head of Legal at Greater Bank with over 20 years of experience in corporate legal practice, the majority of which as Special Counsel at Sparke Helmore. Mr Nyman holds Bachelor of Laws and Bachelor of Commerce degrees from the University of Newcastle. Mr Nyman is a member of the Australian Institute of Company Directors, the Association of Corporate Counsel Australia and the Law Society of NSW, and is a Fellow of the Taxation Institute of Australia.

Corporate Objectives Greater Bank will ensure its long-term financial viability by achieving the following short and long-term objectives:

Sustainably grow our customer base in target markets,

Improve organisational efficiency,

Proactively manage regulatory change,

Strengthen business capabilities (people, process and systems), and

Commit to corporate social responsibility.

The current strategies in place to achieve these objectives are to maintain a distribution network that supports the increasing needs of customers, to provide a range of products and services to meet the demands of members, to continue to provide a superior service level, and to enhance the member experience at all points of contact. Furthermore, internal strategies are in place to ensure that Greater Bank provides a challenging and enjoyable workplace, continues to build capacity and knowledge with good corporate governance and is an employer of choice. Greater Bank measures its performance using a range of financial and non-financial indicators. The main financial indicators are interest margins, cost to income ratio, return on assets, profit per employee, loan portfolio growth and deposit portfolio growth, while non-financial indicators include number of products and services per member, staff and member satisfaction.

Principal Activities The principal activity during the year of Greater Bank consisted of the provision of financial services to members in the form of taking deposits and providing financial accommodation. Those activities enhanced the financial position of Greater Bank and provided the platform to enable Greater Bank to improve the quality of its distribution channels and expand the range of products and services available to members.

19 Directors’ Report

RESULTS OF THE CONSOLIDATED ENTITY

2016 2015 $’000 $’000

PROFIT AFTER INCOME TAX EXPENSE 29,512 34,950

Review of Operations A review of operations for Greater Bank is contained in the Chairman’s and Chief Executive Officer’s Reports.

Directors’ Meeting The persons holding office as Directors of the Company during the year were: W M Russell, D S Robinson, W R Ware, M L McDonald, V J Drinkwater and R J Cracknell. The number of meetings of the Directors (including meetings of Committees) held during the year and the number of meetings attended by each Director were as follows:

Remuneration Board of Directors Audit Committee Risk Committee Committee Number of Meetings 11 4 4 4 W M Russell 11 (11) 4 (4) 4 (4) 4 (4) D S Robinson 11 (11) - - - M L McDonald 11 (11) 4 (4) 4 (4) 4 (4) W R Ware 11 (11) - - 4 (4) V J Drinkwater 11 (11) 4 (4) 4 (4) 3 (4) R J Cracknell 11 (11) 4 (4) 4 (4) -

No meetings were held in the 2015/2016 financial year for the M&A Strategy Committee or the Succession Planning Committee. Insurance of Officers During the financial year, Greater Bank paid premiums to insure the Directors and Senior Executive officers of the Company and its controlled entities. In accordance with normal commercial practice, disclosure of the total amount of premium payable under, and the nature of the liabilities covered by the insurance contract, is prohibited by a confidentiality clause in the contract. The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the consolidated entity. State of Affairs On 2 March 2016 and effective 1 May 2016, the Australian Prudential Regulation Authority (‘APRA’) approved, under s66 of the Banking Act 1959, a change in the company name from Greater Building Society Ltd to Greater Bank Limited. The change in name has had minimal operational impact. Member Liability Greater Bank Limited is a company limited by shares and guarantee. The Company has not issued shares. The guarantee is provided by members of the Company and is limited to $1 per member. The total amount that members of the Company are liable to contribute if the Company were wound up is $240,681. Annual Report | 2015 –16

After Balance Date Events The Directors are not aware of any matters or circumstances that have arisen since 30 June 2016 that have significantly affected or may significantly affect:

A The operations of Greater Bank, B The results of those operations, or C The state of affairs of Greater Bank in the financial years subsequent to 30 June 2016. Likely Developments and Expected Results of Operations There are no material likely developments in the operations of Greater Bank, other than continued profitable operations, at the date of this report. Proceedings on Behalf of the Company No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under Section 237 of the Corporations Act 2001. Environmental Regulation Greater Bank is not subject to any significant environmental regulation.

Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 22. Rounding of Amounts The amounts in the financial statements have been rounded to the nearest thousand dollars under the option available to the Company under ASIC Class Order 98/100. The Company is an entity to which the Class Order applies. Auditor PricewaterhouseCoopers Australia continues in office in accordance with section 327 of the Corporations Act 2001. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers Australia) for audit and non-audit services provided during the year are disclosed in Note 26.

W M Russell Chairman

Signed at Hamilton this 5th day of October 2016 in accordance with a resolution of the Directors.

21

Annual Report | 2015 –16

23

Annual Report | 2015 –16

Directors’ Declaration

In the Directors’ opinion:

A The financial statements and notes set out on pages 26 to 66 are in accordance with the Corporations Act 2001, including: i) Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and ii) Giving a true and fair view of Greater Bank Limited’s and consolidated entity’s financial position as at 30 June 2016 and of their performance, as represented by the results of their operations, changes in equity and their cash flows, for the financial year ended on that date; and B There are reasonable grounds to believe that Greater Bank Limited will be able to pay its debts as and when they become due and payable; and C Note 1(A) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

This declaration is made in accordance with a resolution of the Directors.

W M Russell Chairman

Signed at Hamilton this 5th day of October 2016.

25 Statement of Comprehensive Income for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 Notes $’000 $’000 $’000 $’000 Interest revenue 2 249,126 259,260 263,062 274,821

Interest expense 3 (119, 5 42) (132,289) (133,954) (148,507)

Net interest income 129,584 126,971 129,108 126,314

Non-interest income 4 21,602 25,030 21,911 25,374

151,186 152,001 151,019 151,688

Non-interest expense 5 (108,975) (102,361) (109,181) (102,310)

Profit before income tax 42,211 49,640 41,838 49,378

Income tax expense 6 (12,699) (14,690) (12,626) (14,651)

Profit for the year 29,512 34,950 29,212 34,727

OTHER COMPREHENSIVE INCOME

Items that may be reclassified to profit or loss

Cash flow hedges 23 (2,149) (966) (2,149) (966)

Income tax relating to these items 23 645 290 645 290

Items that will not be reclassified to profit or loss

Revaluation of land and buildings 23 1,622 2,970 1,710 2,954

Income tax relating to these items 23 (487) (891) (513) (886)

Fair value assets through other 23 - 46 - 46 comprehensive income

Income tax relating to these items 23 - (14) - (14)

Total other comprehensive income (369) 1,435 (307) 1,424

Total comprehensive income 29,143 36,385 28,905 36,151

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. Annual Report | 2015 –16 Balance Sheet for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 Notes $’000 $’000 $’000 $’000

ASSETS Cash and cash equivalents 7 173,498 171,254 144,152 152,875 Investment securities 8 951,477 859,214 1,403,756 1,292,875 Current tax asset 9 - 2,798 - 2,798 Other receivables 10 1,625 1,075 5,821 2,822

Derivative financial instruments 11 692 3,067 692 3,067

Loans and advances 12 4,544,409 4,323,687 4,544,409 4,323,687

Other financial assets 13 320 320 923 923

Deferred tax assets 14 3,640 3,331 3,728 3,405

Property, plant and equipment 15 28,624 27,932 28,624 27,932

Investment properties 16 5,656 4,995 5,656 4,995

Intangible assets 17 5,374 3,576 5,374 3,576

Total assets 5,715,315 5,401,249 6,143,135 5,818,955

LIABILITIES

Payables and other liabilities 18 9,647 8,655 10,241 8,629

Unearned income 19 2,401 3,998 2,401 3,998

Deposits 20 4,911,888 4,699,078 4,916,114 4,702,357

Current tax liabilities 9 431 - 431 -

Derivative financial instruments 11 736 189 736 189

Other financial liabilities 21 327,961 256,319 754,424 673,997

Provisions 22 9,465 9,367 9,465 9,367

Total liabilities 5,262,529 4,977,606 5,693,812 5,398,537

Net assets 452,786 423,643 449,323 420,418

MEMBERS’ FUNDS

Reserves 23 30,900 28,809 28,519 26,366

Retained profits 24 421,886 394,834 420,804 394,052

Total members’ funds 452,786 423,643 449,323 420,418

The above Balance Sheet should be read in conjunction with the accompanying notes.

27 Statement of Changes in Equity for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 Notes $’000 $’000 $’000 $’000

TOTAL EQUITY AT THE START OF THE FINANCIAL YEAR Reserves 23 28,809 30,051 26,366 27,619

Retained profits 24 394,834 357,207 394,052 356,648

423,643 387,258 420,418 384,267

TOTAL PROFIT & LOSS FOR THE YEAR

Retained profits 24 29,512 34,950 29,212 34,727

29,512 34,950 29,212 34,727

TOTAL OTHER COMPREHENSIVE INCOME FOR THE YEAR

Reserves 23 (369) 1,435 (307) 1,424

(369) 1,435 (307) 1,424

OTHER TRANSACTIONS WITHIN EQUITY FOR THE YEAR

Transfer from retained profits to reserves 23 2,460 (2,677) 2,460 (2,677)

Transfer from reserves to retained profits 24 (2,460) 2,677 (2,460) 2,677

- - - - -

TOTAL EQUITY AT THE END OF THE FINANCIAL YEAR

Reserves 23 30,900 28,809 28,519 26,366

Retained profits 24 421,886 394,834 420,804 394,052

452,786 423,643 449,323 420,418

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. Annual Report | 2015 –16 Statement of Cash Flows for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000 Notes Inflows/ Inflows/ Inflows/ Inflows/ (Outflows) (Outflows) (Outflows) (Outflows)

CASH FLOWS FROM OPERATING ACTIVITIES Interest received 248,994 2 57,74 0 262,929 273,294 Fees and commissions received 21,213 24,707 21,213 24,707 Other income received 279 528 627 825 Interest paid (123,927) (134,185) (138,093) (150,987)

Operating expenses paid (105,739) (97,6 41) (107,961) (97,6 3 3)

Income taxes paid (9,621) (22,763) (9,621) (22,763)

Net advances and repayments in loans and advances (221,270) (94,769) (221,255) (94,026)

Net placements and redemptions in investment securities (91,158) (276,059) (109,775) (276,305)

Net acceptances and payments in deposits 216,723 278,022 217,678 278,369

Net cash provided by operating activities 29 (64,506) (64,420) (84,258) (64,519)

CASH FLOWS FROM INVESTING ACTIVITIES

Net purchases and sales in other financial assets and liabilities 860 (189) 860 (189)

Payments for property, plant and equipment (6,257) (3,720) (6,257) (3,720)

Proceeds from sale of property, plant and equipment 287 592 287 592

Cash flows from investing activities (5,110) (3,317) (5,110) (3,317)

CASH FLOWS FROM FINANCING ACTIVITIES

Net issue/(repayment) of commercial notes 71,860 4,553 80,645 4,712

Net cash provided by financing activities 71,860 4,553 80,645 4,712

Net increase/(decrease) in cash held 2,244 (63,184) (8,723) (63,124)

CASH AT THE BEGINNING OF THE FINANCIAL YEAR 171,254 234,438 152,875 215,999

Cash at the end of the financial year 7 173,498 171,254 144,152 152,875

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

29 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

1. Summary of Significant Accounting Policies A Basis of Preparation The financial report includes separate financial statements for Greater Bank Limited (Company) as an individual entity and the consolidated entity (Greater Bank) consisting of the Company and all its subsidiaries. The financial statements of Greater Bank are general purpose financial reports prepared in accordance with provisions of Australian Accounting Standards and the Corporations Act 2001 in Australia. Greater Bank’s financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Greater Bank is a for-profit entity for the purposes of preparing financial statements. The financial statements of Greater Bank are prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair value, certain classes of property and investment property. All amounts are expressed in Australian dollar currency. Notes containing prior year comparatives may have been restated to provide the user with additional details. Such changes do not alter the total balance as previously disclosed. The significant accounting policies adopted in the preparation of these financial statements and that of the previous financial year are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.

i) Critical account estimates and significant judgements The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the accounting policies. The notes of the financial statements set out the areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to Greater Bank’s financial statements. The most significant of these are: impairment losses on loans and advances, consolidation of special purpose entities, and fair valuation estimates. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including reasonable expectations of future events. Management believes the estimates used in preparing the financial statements are reasonable. Actual results in the future may differ from those reported.

ii) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2016 reporting period. Greater Bank’s assessment of the impact of these new standards and interpretations is set out below. Revenue from contracts with customers (effective 1 January 2018) The IASB has issued a new standard, AASB 15 Revenue from contracts with customers, for the recognition of revenue. This will replace IAS18, which covers contracts for goods and services and IAS11, which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer, so the notion of control replaces the existing notion of risks and rewards. Whilst Greater Bank does not expect the new standard to have an impact on how revenue is recognised, it is yet to perform a detailed assessment. Recognition and accounting for leases (effective 1 January 2019) The IASB has issued a new standard, AASB 16 Leases, for the recognition and accounting for lease transactions. This will replace AASB 117. The new standard removes the classification and distinction between finance and operating leases. Lessees will now bring to account a ‘right-to-use’ asset and lease liability onto the balance sheet for all leases. Greater Bank expects the change will result in the recognition of additional assets and liabilities. This standard, and the associated impact, remains subject to a more detailed review by Greater Bank. Annual Report | 2015 –16

B Consolidation

i) Controlled entities The consolidated financial statements comprise the financial statements of Greater Bank Limited (Company) and its controlled entities. Collectively, the Company and its controlled entities are referred to as the Greater Bank Group (Greater Bank). Greater Bank controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. The effects of all transactions between entities in the Greater Bank Group have been eliminated in full. Non-controlling interest in the results and equity of controlled entities, where the Company owns less than 100% of the issued capital, are shown separately in the consolidated statement of comprehensive income, statement of changes of equity and balance sheet. Where control of an entity was obtained during the financial period, its results have been included in the consolidated statement of comprehensive income from the date on which control commenced. Where control of an entity ceased during the financial period, its results are included for that part of the financial period during which control existed. Investments in subsidiaries are accounted for by the Company at cost.

ii) Business combinations The acquisition method of accounting is used to account for all business combinations. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. Acquisition-related transaction costs are expensed as incurred. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquired entity, over the fair value of the net identifiable assets acquired, is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

iii) Securitisation Securitised positions are held through a number of Special Purpose Entities (‘SPEs’). These securitised positions allow the Company to access funding. The Company does not consolidate an SPE it does not control. Where it can sometimes be difficult to determine whether the Company does control the SPE, it makes judgements about its exposure to the variable returns of the entity and its ability to affect those returns. The Company has consolidated its SPEs. Accordingly, their underlying assets, liabilities, revenues and expenses are reported in the Company’s consolidated balance sheet and statement of comprehensive income.

C Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. All operating segments are less than the quantitative threshold required for separate disclosure.

31 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

D Revenue Recognition

i) Interest revenue Interest income arising from loans and held to maturity investment securities is brought to account using the effective interest rate method. Incremental fees and transaction costs associated with the origination of loans and held to maturity investment securities that are an integral part of the effective interest rate are deferred and recognised in the statement of comprehensive income on a yield basis over the expected life of the financial instrument. The effective interest rate is that rate that exactly discounts estimated future cash flows throughout the life of the financial instrument. The balance outstanding of the deferred origination income and expense is recognised in the balance sheet as an adjustment to the carrying amount of the loans and held to maturity investment securities outstanding.

ii) Other revenue Other income, commission and fee income is recognised in the statement of comprehensive income as revenue on an accruals basis when the service has been provided or incurred.

E Income Tax Greater Bank has adopted the balance sheet liability method of tax-effect accounting, which focuses on the tax effect of transactions and other events that affect amounts recognised in either the balance sheet or a tax-based balance sheet. Deferred tax assets and liabilities are recognised for temporary differences, except where the deferred tax asset/liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that the future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. The Company and certain wholly owned Australian controlled entities implemented the tax consolidation legislation as of 1 July 2002. The Australian Taxation Office has been notified of the decision. As a consequence, those entities are taxed as a single entity and the deferred tax assets and liabilities of those entities are set off in the consolidated financial statements. Tax funding and sharing agreements between the Company and certain wholly owned Australian controlled entities, known as ‘group member entities’, apply from 1 July 2013. Broadly, group member entities are required to calculate their notional tax liability as if they were standalone taxpayers before transferring their tax liability to the head entity. Such transfers will be effected on intercompany account. The Company has responsibility for settling the consolidated entity’s income tax liability with the ATO.

F Financial Assets Greater Bank has elected to apply AASB 9 Financial Instruments and AASB2009-11 Amendments to Australian Accounting Standards arising from AASB 9 from 1 July 2010, because the new accounting standards provide more reliable and relevant information for users to assess the amounts, timing and uncertainty of future cash flows. All financial assets are initially recognised at fair value plus, in the case of financial assets and liabilities not classified as at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset. Financial assets are then classified as either a debt or equity financial asset, which in turn determines their subsequent accounting measurement. The categories and measurement treatments are:

i) Debt financial asset A debt financial asset is classified as at amortised cost only if both of the following criteria are met: the asset is held within a business model with the objective to collect the contractual cash flows, and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The nature of any derivatives embedded in the debt financial asset are considered in determining whether the cash flows of the asset are solely payment of principal and interest on the principal outstanding and are not accounted for separately. Annual Report | 2015 –16

A gain or loss on a debt financial asset that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the financial asset is derecognised or impaired and through the amortisation process using the effective interest rate method. If either of the two criteria above are not met, the debt financial asset is classified as at fair value through profit or loss. A gain or loss on a debt financial asset that is subsequently measured at fair value and is not part of a hedging relationship is recognised in profit or loss and presented net in the income statement within other income or other expenses in the period in which it arises. ii) equity financial asset All equity financial assets are measured at fair value. Equity financial assets that are held for trading are measured at fair value through profit or loss. Changes in the fair value of financial assets at fair value through profit or loss are recognised in other income or other expenses in the income statement as applicable. Interest income from these financial assets is included in the net gains/(losses). Dividend income is presented as other revenue. For all other equity financial assets (i.e. equity financial assets other than held for trading), Greater Bank can make an irrevocable election at initial recognition of each equity financial asset to recognise changes in fair value through other comprehensive income (OCI) rather than through profit or loss. Where management has elected to present fair value gains and losses on equity financial assets in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Gains and losses arising from subsequent changes in fair value for equity financial assets nominated as fair value through other comprehensive income are recognised directly in the financial asset at fair value through other comprehensive income reserve in equity, until the asset is derecognised, at which time the cumulative gain or loss will be transferred to retained profits. Dividends from equity financial assets continue to be recognised in profit or loss as other revenue when the right to receive payments is established and as long as they represent a return on investment. Equity financial assets are measured at fair value. Fair values of quoted equity financial assets in active markets are based on current bid prices. If the relevant market is not considered active (or the securities are unlisted), Greater Bank establishes fair value by using valuation techniques, including recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. Where equity financial assets cannot be reliably valued they are recorded at cost.

G Cash and Cash Equivalents Cash and cash equivalents includes cash on hand and deposits at call and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to cash and are subject to an insignificant risk of changes in value.

H Investment Securities

i) Asset recognition Investment securities are classified as debt financial assets and are measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any discount or premium on acquisition, over the period to maturity. Any gains or losses from investments are recognised in profit and loss when the investments are derecognised, on impairment, as well as through the amortisation process.

ii) Revenue recognition Interest income arising from investment securities is recognised in the statement of comprehensive income using the effective interest rate method (refer Note 1D).

iii) Investments in associates Associates are those entities over which Greater Bank exercises significant influence, but not control. Investments in associates are accounted for in the financial statements using the equity accounting method. Under this method, Greater Bank’s share of the post-acquisition profits or losses of associates is recognised in the consolidated statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in consolidated reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Investments in associates are accounted for by the Company at cost.

33 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

I Loans and Advances

i) Asset recognition Loans and advances are classified as loans and receivable assets and are recognised when cash is advanced to members. They are carried at amortised cost using the effective interest rate method (refer Note 1F). ii) Revenue recognition Interest income arising from loans is brought to account using the effective interest rate method (refer Note 1D). Loan fees received and transaction costs directly attributable to the acquisition of the loan are deferred and included as an adjustment to the interest revenue of the loan on a yield basis over the expected life of the loan using the effective interest rate method. The deferred revenues and costs are included in the balance sheet as part of the value of the loans and advances outstanding. Other loan fees, commissions and other service fees provided in relation to services are recognised as profit and loss as other income on an accruals basis.

iii) Loan impairment All loan assets are subject to regular review and assessment for possible impairment. Allowances for impairment losses on loans are based on an incurred loss model, which recognises an allowance where there is objective evidence of impairment. Specific allowances are raised for losses that may be incurred for loans that are known to be impaired. Estimated losses on these loans are measured at the difference between the loan’s carrying amount and the present value of the estimated cash flows discounted at the loan’s effective interest rate. Where individual loans are found to not be impaired they are grouped together with loans of similar credit risk characteristics and then assessed collectively for impairment. Any loan that has been individually assessed and considered impaired is excluded from the collective assessment. Loans that are collectively assessed for impairment are estimated on the basis of historical loss experience adjusted for any current conditions that may have impacted on the historical loss experience. A credit loss reserve is maintained in equity to cover credit risks inherent in the loan portfolio. Movement in the credit loss reserve is recognised as an appropriation of retained profits (refer Note 1S).

iv) Restructured loans A restructured loan is a non-commercial facility where the original contractual terms have been modified to provide concessional changes for reasons relating to financial difficulties of the borrower. Where the loan after restructuring remains doubtful and it is not well secured the loan shall be subject to impairment. Loans will only be recognised as restructured once the customer has formally agreed to the new terms.

v) Assets acquired through enforcement of security Assets acquired through enforcement of security are assets acquired in full or partial settlement of a loan or similar facility through enforcement of security arrangements.

vi) Bad debts written off Bad debts are written off as identified by management and the Board of Directors when it is reasonable to expect that the recovery of the debt is unlikely. Bad debts will be written off directly to profit and loss in the period in which they are identified. Bad debts can be written off directly against the allowance for impaired losses only to the extent that the allowance balance includes a specific allowance in respect of the debt being written off. Annual Report | 2015 –16

J Plant, Property and Equipment

i) Asset recognition Land and buildings are initially recognised at cost and then subsequently carried at fair value less accumulated depreciation. Plant and equipment are initially recognised at cost and then subsequently carried at cost less accumulated depreciation and less any impairment adjustment. Assets are reviewed for impairment annually. Cost includes expenditure directly attributable to the acquisition of the asset. Items of equipment, furniture and fittings and other small assets, which cost less than $1,000, are expensed at the time of purchase. ii) Revaluations Land and buildings are carried at fair value at the date of the revaluation less any subsequent accumulated depreciation of buildings and accumulated impairment losses. Increases in the carrying amounts arising on revaluation of land and buildings are recognised, net of tax, in other comprehensive income and accumulated in the property revaluation surplus reserve in equity. To the extent that the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of the same asset are first recognised in other comprehensive income to the extent of the remaining surplus attributable to the asset; all other decreases are charged to profit or loss. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation surplus reserve relating to the particular asset being disposed is transferred to retained profits. The balances in the asset revaluation surplus reserve for each particular asset are net of any potential capital gains tax liability. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit and loss in the year the item is derecognised. Fair value is determined by reference to market-based evidence, which is the amount that the assets could be exchanged for between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the valuation date. Annual assessments of the fair value are made by the Directors, supplemented by independent valuations performed every three years (or more often if circumstances require), ensuring that the carrying amount does not differ materially from the asset’s fair value at the balance sheet date.

35 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

iii) Depreciation Depreciation is calculated so as to write off the net cost or revalued amount of each item of property, plant and equipment (excluding land) over its expected useful life. Additions are depreciated from the date of acquisition. Greater Bank uses the following rates and methods of depreciation:

RATE / LIFE METHOD

Buildings 2.5% straight line Office Furniture 25% reducing balance Office Equipment 25% reducing balance Motor Vehicles 30% reducing balance Computer Hardware 40% reducing balance Cash Dispensing Units 15% straight line

Leasehold improvements are amortised over the shorter of the unexpired period of the lease or the useful life of the leasehold improvements on a prime cost basis. Useful lives and residual values are reviewed annually and reassessed in light of commercial and technological developments. If an asset’s carrying value is greater than its recoverable amount due to a useful life, residual value or impairment adjustment, the carrying amount is written down immediately to its recoverable amount. Adjustments arising from such restatements and on disposal of fixed assets are recognised in profit and loss. For taxation purposes, Greater Bank adopts an effective life for the asset as determined by Taxation Rulings made public by the Commissioner of Taxation. Greater Bank generally uses the reducing balance method of depreciation for tax purposes.

K Investment Properties Investment properties are initially recognised at cost and then subsequently carried at fair value. Cost includes expenditure directly attributable to the acquisition of the asset. Fair value is determined by reference to market-based evidence, which is the amount that the assets could be exchanged for between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the valuation date. Annual assessments of the fair value are made by the Directors, supplemented by independent valuations performed every three years (or more often if circumstances require) ensuring that the carrying amount does not differ materially from the asset’s fair value at the balance sheet date. Changes in fair values for investment properties are recognised directly in profit and loss. Where the property is used by Greater Bank for its own occupation, the property is classified as plant, property and equipment.

L Inventory No expenditure is treated as an asset where it has no realisable value or it is insignificant in size and nature. Items such as printed internal forms, advertising brochures, etc are not treated as inventory. All inventories are stated at the lower of cost and net realisable value.

M Intangible Assets

i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of Greater Bank’s share of the net identifiable assets of the acquired entity at the date of acquisition. Goodwill on acquisitions of controlled entities is included in intangible assets. Goodwill on acquisitions of associates is included in the carrying value of investments in associates. Goodwill is not amortised but tested for impairment annually, or more frequently if events indicate that it might be impaired. In this event, it is carried at cost less accumulated impairment losses.

Annual Report | 2015 –16

ii) Computer software Costs directly incurred in acquiring computer software, plus costs incurred in developing major products or systems that will contribute to future period financial benefits through revenue generation and/or cost reductions are capitalised to computer software and amortised over the estimated useful life. Costs incurred on research and software maintenance are expensed as incurred. Greater Bank uses the following rates and methods of depreciation:

RATE / LIFE METHOD

Major System or Product Development 3 to 7 years straight line Computer Software 40% reducing balance

N Members’ Deposits Members’ deposits are measured at amortised cost using the effective interest rate method (refer Note 1F). Interest on deposits is brought to account using the effective interest rate method (refer Note 1D).

O Financial Liabilities Financial liabilities are measured at amortised cost using the effective interest rate method (refer Note 1D) except for derivatives, financial liabilities designated as at fair value through profit and loss, and in other limited circumstances as allowed under AASB 9 Financial Instruments, which are subsequently measured at fair value through profit and loss. All Greater Bank’s financial liabilities except for derivatives are classified at amortised cost.

P Provisions Greater Bank makes provision where it has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation. A provision for promotion and reward scheme costs is recognised when the present obligations arise. The provision is measured as the amount unpaid at the balance date discounted by an estimated rate of non-usage.

Q Derivative Instruments Greater Bank uses derivative financial instruments to hedge its exposure to interest rate risks arising from operational, financing and investment activities. In accordance with its treasury management policy, Greater Bank does not hold or issue derivative financial instruments for trading purposes. All derivatives, including those used for balance sheet hedging purposes, are recognised on the balance sheet at fair value and are disclosed as an asset where they have a positive fair value at balance date or as a liability where the fair value at balance date is negative (refer Note 1F). Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently remeasured to their fair value at balance date. Fair values for interest rate swaps is the estimated amount that the Company would receive or pay to terminate the swap at the balance date, taking into account current interest rates and the credit worthiness of the swap counterparties. Movements in the carrying amounts of derivatives are recognised in profit and loss, unless the derivative is designated as a hedge and meets the requirements for hedge accounting.

i) Cash flow hedges For a derivative designated as hedging a cash flow exposure arising from a recognised asset or liability (or a highly probable forecast transaction), the gain or loss on the derivative associated with the effective portion of the hedge is initially recognised in equity in the cash flow hedge reserve and reclassified into the statement of other comprehensive income when the hedged item is brought to account. The gain or loss relating to the ineffective portion of the hedge is recognised immediately in profit and loss.

ii) Fair value hedges For a derivative designated as hedging a fair value exposure arising from a recognised asset or liability (or a firm commitment), the gain or loss on the derivative is recognised in profit and loss together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

37 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

R Employee Entitlements

i) Wages and salaries and annual leave Liabilities for wages and salaries, annual leave and sick leave are recognised and are measured at the amounts expected to be paid when the liabilities are settled.

ii) Long service leave A liability for long service leave is recognised and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the balance date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.

iii) Superannuation Contributions are made by the Company to an employee’s superannuation fund and are charged as expenses when incurred. The Company has no legal obligation to cover any shortfall in the fund’s liability to provide benefits to employees on retirement.

iv) On-costs On-costs associated with employees, including payroll tax, are recognised as liabilities and expenses when the employment to which they relate has occurred.

S Reserves With effect from 1 July 2005, the Company has established a reserve for credit losses to cover credit risks inherent but not yet incurred in the loan portfolio (refer Note 1I (iii)). Movement in the credit loss reserve is recognised as an appropriation of retained profits.

T Goods and Services Tax Where capital or expense acquisitions relate to input taxed activities, goods and services tax is generally non-recoverable from taxation authorities. Accordingly, where the amount of goods and services tax incurred is not recoverable, the tax is recognised as part of the cost of acquisition of an asset or as part of an item of expense. For the purposes of the statement of cash flows, receipts and payments from operations are inclusive of goods and services tax.

U Impairment The carrying amounts of Greater Bank’s assets are reviewed at least at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Any impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit and loss unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal but only to the extent of the previous revaluation amount.

V Rounding of Amounts The Company is of a kind referred to in ASIC Class Order 98/100, issued by Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

2. INTEREST REVENUE Cash and cash equivalents 5,296 6,054 4,854 5,454 Investment securities 32,867 29,875 47,24 5 46,036 Loans and advances 210,963 223,331 210,963 223,331 249,126 259,260 263,062 274,821

3. INTEREST EXPENSE

Deposits 109,951 122,920 109,98 0 122,943

Other financial liabilities 9,591 9,369 23,974 25,564

119,542 132,289 132,954 148,507

4. NON-INTEREST INCOME

Commission 3,963 4,744 3,963 4,744

Fee income 15,512 16,125 15,512 16,125

Impaired losses recovered 37 23 37 23

Net gain on revaluation of investment properties 44 660 - 660

Net gain on revaluation of land and buildings - 124 - 140

Net gain on disposal of investment securities 1,455 2,771 1,455 2,771

Net gain on disposal of property, plant and equipment 55 96 55 96

Rental revenue 386 267 386 267

Other revenue 150 220 503 548

21,602 25,030 21,911 25,374

5. NON-INTEREST EXPENSE

Amortisation of computer software 875 582 875 582

Depreciation – buildings 399 361 399 361

Depreciation – leasehold improvements 1,363 1,512 1,363 1,512

Depreciation – plant and equipment 1,574 1,565 1,574 1,565

Donations and sponsorships 1,269 1,057 1,766 1,541

Employee related expense 56,548 53,226 56,548 53,226

Marketing and promotions 9,240 8,257 9,223 8,240

Net loss on revaluation of investment properties - - 44 -

Net loss on revaluation of land and buildings 4 - 4 -

Net loss on disposal of property, plant and equipment 325 180 325 180

Operating rental expense 9,549 9,855 9,549 9,855

Payment system processing costs 8,818 8,006 8,816 8,004

Other general and administration expenses 19,011 17,76 0 18,695 17,24 4

108,975 102,361 109,181 102,310

39 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 Notes $’000 $’000 $’000 $’000

6. INCOME TAX EXPENSE

A Income Tax Expense Current tax 12,940 14,755 12,881 14,753

Deferred tax (309) (52) (323) (89)

Adjustment to current tax of prior years 68 (13) 68 (13)

12,699 14,690 12,626 14,651

Income tax expense attributable to

Profit from operations 12,699 14,690 12,626 14,651

Aggregate income tax expense 12,699 14,690 12,626 14,651

Deferred income tax expense/(revenue) included in income tax expense comprises

Decrease/(increase) in deferred tax assets 14 419 (857) 405 (894)

Increase/(decrease) in deferred tax liabilities 14 (728) 805 (728) 805

(309) (52) (323) (89)

B Numerical Reconciliation of Income Tax Expense to Prima Facie Tax Payable Profit from operations before income tax expense 42,211 49,640 41,838 49,378

Prima facie tax payable at 30% (2015 – 30%) 12,663 14,892 12,551 14,813

Tax effect of amounts which are not deductible (taxable) in calculating taxable income

Non-assessable income (exempt: Charitable Foundation) (43) (50) - -

Research and development - (154) - (154)

Entertainment expenses 11 17 11 17

Debt forgiveness for consolidated entity - - (4) (10)

Sundry items - (2) - (2)

Under/(over) provision prior year 68 (13) 68 (13)

36 (202) 75 (162)

Income tax expense 12,699 14,690 12,626 14,651

C Amounts Recognised Directly in Equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity

Current tax – credited directly to equity (205) 111 (205) 111

Net deferred tax – debited/(credited) 14 363 (726) 337 (721) directly to equity

Reserves – debited/(credited) - - - - - directly to equity

23 158 (615) 132 (610) Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

7. CASH AND CASH EQUIVALENTS

All Cash and Cash Equivalents are current assets

Cash on hand 18,917 18,711 18,944 18,731

Financial institution balance – at call 61,879 62,832 32,506 44,433

Financial institution balance – short-term 92,702 89,711 92,702 89,711

173,498 171,254 144,152 152,875

Short-term cash and cash equivalents are those where original maturity is less than 90 days.

8. INVESTMENT SECURITIES

Financial institutions balance 806,259 755,643 808,427 757, 3 0 5

Investments in other securities 145,218 103,571 595,329 535,570

951,477 859,214 1,403,756 1,292,875

Investments with financial institutions are those where original maturity is greater than 90 days.

Investment securities expected to mature within 12 months 152,445 240,289 152,445 239,8 02

Investment securities expected to mature after 12 months 799,032 618,925 1,251,311 1,053,073

951,477 859,214 1,403,756 1,292,875

9. CURRENT TAX LIABILITY

All current tax assets (liabilities) are expected to be settled within 12 months

Income Tax Refundable/(Payable) (431) 2,798 (431) 2,798

(431) 2,798 (431) 2,798

10. OTHER RECEIVABLES

All Other Receivables are current assets

Accrued income 242 383 242 383

Prepayments 1,079 681 1,075 677

Other receivables 304 11 4,504 1,762

1,625 1,075 5,821 2,822

41 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

11. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instrument asset

Interest rate swap contracts – cash flow hedges 692 3,067 692 3,067

692 3,067 692 3,067

Derivatives expected to mature within 12 months 422 917 422 917

Derivatives expected to mature after 12 months 270 2,150 270 2,150

692 3,067 692 3,067

Derivative financial instrument liability

Interest rate swap contracts – cash flow hedges 736 189 736 189

736 189 736 189

Derivatives expected to mature within 12 months 516 189 516 189

Derivatives expected to mature after 12 months 220 - 220 -

736 189 736 189

Cash flow hedge ineffectiveness – gain/(loss) - - - -

12. LOANS AND ADVANCES

Overdrafts 99,738 111, 36 3 99,738 111, 36 3

Term loans 4,445,895 4,213,443 4,445,895 4,213,443

Gross loans and advances 4,545,633 4,324,806 4,545,633 4,324,806

Allowance for specific impairment losses (1,224) (1,119) (1,224) (1,119)

Net loans and advances 4,544,409 4,323,687 4,544,409 4,323,687

Loans and advances expected to be paid within 12 months 914,790 1,355,177 914,790 1,355,177

Loans and advances expected to be paid after 12 months 3,629,619 2,968,510 3,629,619 2,968,510

4,544,409 4,323,687 4,544,409 4,323,687

A Allowance for Specific Impairment Losses Movement in the allowance for specific impairment losses are as follows

Opening balance 1,119 1,031 1,119 1,031

Bad debt write-off (479) (222) (465) (188)

New/(Released) provision 584 310 570 276

1,224 1,119 1,224 1,119 Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

B Impaired Loans Impaired loans with specific provision for impairment 3,013 3,115 3,013 3,115

Less provision (1,224) (1,119) (1,224) (1,119)

1,789 1,996 1,789 1,996

Impaired loans will be either assessed individually or grouped together with similar credit risk assets and assessed collectively for impairment. Individual assessment will usually be performed where the risk exposure is either significant by amount or of a particular product type. Greater Bank, in assessing individual specific impairment, will consider the counterparties’ willingness to meet their contractual arrangements, the counterparties’ economic circumstances and their future financial prospects and the security provided.

Security for housing loans is in the form of registered mortgage over residential property real estate. Security for commercial loans is in the form of registered mortgage over residential and/or commercial real estate. Security for personal loans is in the form of either registered mortgage over real estate, mortgage over other property or charges against funds held on deposit.

C Assets Acquired Through the Enforcement of Security Net fair value of assets acquired through the enforcement of security still held at the end of the financial year

Real estate 655 225 655 225

Other assets - 9 - 9

655 234 655 234

Assets acquired during the year are disposed of as soon as practically possible with the proceeds used to reduce the outstanding indebtedness. Any residual proceeds after the debt is repaid are returned to the borrower.

There were no assets through the enforcement of security during the year that were used by Greater Bank in its operations.

D Past Due Loans Analysis of loans that have not met their contractual repayment schedule but are not impaired

Less than 3 months past due 96,151 99,011 96,151 99,011

3 months to less than 6 months past due 2,759 3,054 2,759 3,054

6 months or more past due 3,972 425 3,972 425

102,882 102,490 102,882 102,490

Security for housing loans is in the form of registered mortgage over residential property real estate. Security for commercial loans is in the form of registered mortgage over residential and/or commercial real estate. Security for personal loans is in the form of either registered mortgage over real estate, mortgage over other property or charges against funds held on deposit.

43 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

13. OTHER FINANCIAL ASSETS

All other financial assets are non-current assets.

Equity financial assets 320 320 320 320

Controlled entities - - 603 603

320 320 923 923

Controlled Entities

INVESTMENT HOLDING

NAME OF ENTITY CLASS OF SHARE 2016 2015 2016 2015 NATURE OF BUSINESS % % $’000 $’000

Greater Investment Ordinary 100% 100% 603 603 Management Services Services Pty Ltd

Greater Property Holdings Ordinary 100% 100% - - Dormant Entity Number 1 Pty Ltd

Greater Charitable N/A 100% 100% - - Charitable Foundation Foundation Trust

Greater Charitable Ordinary 100% 100% - - Trustee Foundation Pty Ltd

GBS Receivables Trust No 4 N/A N/A N/A - - Mortgage securitisation special purpose entity

GBS Receivables Repo Trust N/A N/A N/A - - Mortgage securitisation special purpose entity

Waratah GBS Mortgages N/A N/A N/A - - Mortgage securitisation special Trust No 1 purpose entity (nil assets at 30 June and in the process of wind-up)

GBS Secured Funding Trust N/A N/A N/A - - Mortgage securitisation No 1 special purpose entity (commenced March 2016)

Notes: a) All the above entities are incorporated in Australia. b) The Company has control of GBS Receivables Trust No 4, GBS Receivables Repo Trust and GBS Secured Funding Trust No 1 as the Company is exposed to, and has the ability to affect, the variable returns associated with these special purpose entities. c) The GBS Receivables Repo Trust is an internal securitisation and the Company holds all of the notes on issue. d) The investment holding in Greater Property Holdings Number 1 Pty Ltd was impaired as at 30 June 2016 and written down to nil (2015 nil). Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

14. DEFERRED TAX ASSETS

Net deferred tax assets 3,640 3,331 3,728 3,405

A Composition of Net Deferred Tax Assets Deferred Tax Assets

The balance comprises temporary differences attributable to

Doubtful debts 367 336 367 336

Impaired assets - - 89 89

Employee benefits 2,836 2,799 2,836 2,799

Loan origination costs and fair value adjustments 3 12 3 12

Property, plant and equipment 1,611 1,664 1,611 1,664

Deferred revenue 720 1,199 720 1,199

Investment securities 28 27 28 27

Accruals 931 902 930 887

6,496 6,939 6,584 7, 013

Amounts recognised directly in equity

Cash flow hedges 24 - 24 -

6,520 6,939 6,608 7, 013

Deferred tax liabilities

Less set-off of deferred tax liabilities

The balance comprises temporary differences attributable to

Property, plant and equipment (1,270) (514) (1,244) (1,561)

Investment securities (33) (116) (33) (116)

Securitisation trust establishment costs (15) (31) (15) (31)

(1,318) (661) (1,292) (1,708)

Amounts recognised directly in equity

Property revaluation surplus reserve (1,562) (2,122) (1,588) (1,075)

Cash flow hedges - (825) - (825)

(1,562) (2,947) (1,588) (1,900)

Total set-off amount of deferred tax liabilities (2,880) (3,608) (2,880) (3,608)

45 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

B Movements in Net Deferred Tax Assets Attributable to deferred tax assets

Opening balance 6,939 6,082 7, 013 6,119

Credited/(charged) to the statement of comprehensive income (358) 874 (344) 911

Under/(over) provision in prior year (61) (17) (61) (17)

6,520 6,939 6,608 7, 013

Less off-set of deferred tax liabilities

Attributable to deferred tax liabilities

Opening balance 3,608 2,803 3,608 2,803

Charged/(credited) to the statement of comprehensive income (75) 669 (101) 674

Charged/(credited) to equity (363) 726 (337) 721

Under/(over) provision in prior year (290) 104 (290) 104

Transferred (to)/from retained profits - (694) - (694)

Total set-off amount of deferred tax liabilities 2,880 3,608 2,880 3,608

Net deferred tax assets 3,640 3,331 3,728 3,405

C Recovery of Deferred Tax Assets Attributable to deferred tax assets

Deferred tax assets to be recovered after more than 12 months 3,313 3,554 3,402 3,644

Deferred tax assets to be recovered within 12 months 3,207 3,385 3,206 3,369

6,520 6,939 6,608 7, 013

Attributable to deferred tax liabilities

Deferred tax liabilities to be settled after more than 12 months 2,801 3,320 2,801 3,320

Deferred tax liabilities to be settled within 12 months 79 288 79 288

2,880 3,608 2,880 3,608

Net deferred tax assets 3,640 3,331 3,728 3,405 Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

15. PROPERTY, PLANT AND EQUIPMENT

All property, plant and equipment are non-current assets

Land and buildings 21,785 21,183 21,785 21,183

Less accumulated depreciation - - - -

21,785 21,183 21,785 21,183

Leasehold improvements 12,246 11,6 0 5 12,246 11,6 0 5

Less accumulated depreciation (10,112) (8,984) (10,112) (8,984)

2,134 2,621 2,134 2,621

Plant and equipment 17,171 16,454 17,171 16,454

Less accumulated depreciation (12,466) (12,326) (12,466) (12,326)

4,705 4,128 4,705 4,128

Property, plant and equipment 28,624 27,932 28,624 27,932

A Valuation of Land and Buildings The valuation of land and buildings is on the basis of fair market values based on existing use and are classified as level 3 assets. During the financial year, land and buildings assets were transferred to investment properties due to an update in tenancies. In determining fair value, Greater Bank uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Specifically, inputs include observations of the net rental market and current commercial capitalisation rates. An annual assessment is made by the Directors to ensure that the carrying values do not differ materially from the fair value. The Directors’ assessments are supported by independent valuations. Details of the independent valuations are shown below.

June 2016 – the Directors’ valuation considered the independent valuations performed at 30 June 2016 by D Rich (AAPI), Reg Valuer No. 6173 and H Pawlik (FAPI, CPV), Reg Valuer No. 67837 and B Green (AAPI), Reg Valuer No. 6283.

June 2015 – the Directors’ valuation considered the independent valuations performed at 30 June 2015 by B Player (AAPI, CPV), Reg Valuer No. 019427 and H Pawlik (FAPI, CPV), Reg Valuer No. 1192 and B Green (AAPI), Reg Valuer No. 6283.

B Carrying Amounts that would have been Recognised if Land and Buildings were Stated at Cost Freehold land and buildings stated on the historical cost basis, would be as follows

Land and buildings

Cost 18,587 18,587 18,587 18,587

Accumulated depreciation (4,489) (4,113) (4,489) (4,113)

Net book amount 14,098 14,474 14,098 14,474

47 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

C Movement in Land and Buildings Balance as at start of year 21,183 18,435 21,183 18,435

Additions - 15 - 15

Disposals - - - -

Building in course of construction - - - -

Revaluation increment/(decrement) recognised (4) 124 (4) 140 in profit and loss

Revaluation increment/(decrement) recognised 1,622 2,970 1,710 2,954 in other comprehensive income

Transfer to Investment Properties (617) - (705) -

Depreciation expense (399) (361) (399) (361)

Balance as at end of year 21,785 21,183 21,785 21,183

D Movement in Leasehold Improvements Balance as at start of year 2,621 4,076 2,621 4,076

Additions 876 57 876 57

Disposals - - - -

Depreciation expense (1,363) (1,512) (1,363) (1,512)

Balance as at end of year 2,134 2,621 2,134 2,621

E Movement in Plant and Equipment Balance as at start of year 4,128 5,248 4,128 5,248

Additions 2,704 1,113 2,704 1,113

Disposals (553) (668) (553) (668)

Depreciation expense (1,574) (1,565) (1,574) (1,565)

Balance as at end of year 4,705 4,128 4,705 4,128

16. INVESTMENT PROPERTIES

All investment properties are non-current assets

Investment properties 5,656 4,995 5,656 4,995

A Valuation of Investment Properties The valuation of investment properties is on the basis of fair market values based on existing use and are classified as level 3 assets. During the financial year, no investment properties were transferred between categories. In determining fair value, Greater Bank uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Specifically, inputs include observations of the net rental market and current commercial capitalisation rates. An annual assessment is made by the Directors to ensure that the carrying values do not differ materially from fair value. The Directors’ assessments are supported by independent valuations. Details of the independent valuations are shown below.

June 2016 – the Directors’ valuation considered the independent valuations performed at 30 June 2016 by D Rich (AAPI), Reg Valuer No. 6173 and H Pawlik (FAPI, CPV), Reg Valuer No. 67837 and B Green (AAPI), Reg Valuer No. 6283. June 2015 – the Directors’ valuation considered the independent valuations performed at 30 June 2015 by B Player (AAPI, CPV), Reg Valuer No. 019427 and H Pawlik (FAPI, CPV), Reg Valuer No. 1192 and B Green (AAPI), Reg Valuer No. 6283. Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

B Movement in Investment Properties Balance as at start of year 4,995 4,303 4,995 4,303

Additions - 32 - 32

Revaluation increment/(decrement) recognised in profit and loss 44 660 (44) 660

Transfer from Land and Buildings 617 - 705 -

Balance as at end of year 5,656 4,995 5,656 4,995

C Leasing Arrangements The investment properties are leased to tenants under short-term operating leases with rentals payable monthly. Minimum lease payments receivable on leases of investment properties are as follows.

Minimum lease payments not recognised in the financial statements are receivable as follows

Within one year 335 241 335 241

Later than one year but before five years 473 475 473 475

Balance as at end of year 808 716 808 716

D Amount Recognised in Profit and Loss for Investment Properties Rental income 386 253 386 253

Direct operating expenses (130) (82) (130) (82)

256 171 256 171

17. INTANGIBLE ASSETS

All intangible assets are non-current assets

Computer software 9,905 7, 514 9,905 7, 514

Less accumulated amortisation (4,531) (3,938) (4,531) (3,938)

5,374 3,576 5,374 3,576

A Movement in Software Balances Balance as at start of year 3,576 1,663 3,576 1,663

Additions 2,677 2,502 2,677 2,502

Disposal (4) (7) (4) (7)

Amortisation expense (875) (582) (875) (582)

Balance as at end of year 5,374 3,576 5,374 3,576

18. PAYABLES AND OTHER LIABILITIES

All payables and other liabilities are expected to be settled within 12 months

Creditors and other accruals 9,647 8,655 10,241 8,629

49 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

19. UNEARNED INCOME

Expected to be brought to account within 12 months 1,417 944 1,417 944

Expected to be brought to account after 12 months 984 3,054 984 3,054 2,401 3,998 2,401 3,998

20. DEPOSITS

Call deposits 2,732,372 2,397,315 2,736,598 2,400,085

Term deposits 2,179,516 2,301,763 2,179,516 2,302,272 4,911,888 4,699,078 4,916,114 4,702,357 Refer note 30 E for the split of current and non-current deposits.

21. OTHER FINANCIAL LIABILITIES

Commercial notes 327,961 256,319 - -

Loans – securitisation special purpose entities - - 754,424 673,997

327,961 256,319 754,424 673,997

Other financial liabilities expected to be settled 98,301 117, 0 5 3 206,662 176,779 within 12 months

Other financial liabilities expected to be settled 229,660 139,266 5 47,762 497,218 after 12 months

327,961 256,319 754,424 673,997

22. PROVISIONS

Employee benefits 9,454 9,329 9,454 9,329

Other 11 38 11 38

9,465 9,367 9,465 9,367

Provisions expected to be settled within 12 months 4,343 4,138 4,343 4,138

Provisions expected to be settled after 12 months 5,122 5,229 5,122 5,229

9,465 9,367 9,465 9,367

23. RESERVES

Cash flow hedge reserve 422 1,926 422 1,926

Credit loss reserve 12,555 9,978 12,555 9,978

Property revaluation surplus reserve 6,087 4,952 3,706 2,509

Business combination reserve 10,699 10,699 10,699 10,699

Community support reserve 1,137 1,254 1,137 1,254

30,900 28,809 28,519 26,366 Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

MOVEMENT IN RESERVES

A Fair Value Assets Through Other Comprehensive Income Reserve Balance at beginning of year - 2,547 - 2,547

Revaluation gross - 46 - 46

Deferred tax - (14) - (14)

Transfer (to)/from retained profits - (2,579) - (2,579)

- - - -

The fair value through other comprehensive income reserve relates to equity financial assets designated as fair value through other comprehensive income. Fair value movements on these equity financial assets are held in equity rather than through profit and loss as described in Note 1F. These financial assets were disposed of in the previous year.

B Cash Flow Hedge Reserve Balance at beginning of year 1,926 2,602 1,926 2,602

Recognised in equity during the year (2,012) (595) (2,012) (595)

Transferred to profit and loss during the year (137) (371) (137) (371)

Deferred tax 645 290 645 290

422 1,926 422 1,926

The cash flow hedge reserve represents the future value of hedged instruments that have been designated as effective hedges in accordance with hedge accounting as described in Note 1Q (i).

C Credit Loss Reserve Balance at beginning of year 9,978 9,966 9,978 9,966

Transfer (to)/from retained profits 2,577 12 2,577 12

12,555 9,978 12,555 9,978

The credit loss reserve is a requirement of Australian Prudential Regulation Authority Prudential Standards and represents the potential inherent losses in the loans and advances portfolio under a stressed economic environment.

D Property Revaluation Surplus Reserve Balance at beginning of year 4,952 2,873 2,509 441

Revaluation gross 1,240 2,625 1,328 2,610

Deferred tax (372) (788) (398) (783)

Depreciation transfer gross 382 345 382 344

Deferred tax (115) (103) (115) (103)

6,087 4,952 3,706 2,509

The property revaluation surplus reserve is used to record the unrealised increments and decrements on the revaluation of property as described in Note 1J.

E Business Combination Reserve Balance at beginning of year 10,699 10,699 10,699 10,699

Transfer (to)/from retained profits - - - -

10,699 10,699 10,699 10,699

The business combination reserve recognises the net assets acquired on merger. 51 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

F Community Support Reserve Balance at beginning of year 1,254 1,364 1,254 1,364

Transfer (to)/from retained profits (117) (110) (117) (110)

1,137 1,254 1,137 1,254

The community support reserve has been set aside to provide services and facilities in the communities in which Greater Bank operates.

24. RETAINED PROFITS

Retained profits 421,886 394,834 420,804 394,052

Movement in retained profits Balance at beginning of year 394,834 357,207 394,052 356,648 Net profit in the year 29,512 34,950 29,212 34,727 Transfer (to)/from credit loss reserve (2,577) (12) (2,577) (12) Transfer (to)/from community contribution reserve 117 110 117 110 Transfer to/(from) fair value assets reserve - 2,579 - 2,579

421,886 394,834 420,804 394,052

CONSOLIDATED COMPANY 2016 2015 2016 2015 $ $ $ $

25. RELATED PARTIES

A Controlled Entities Information in respect of controlled entities is disclosed in Note 13.

B Key Management Personnel Key management personnel are the Directors and those Senior Executives who are responsible for the planning, directing and controlling of the activities of Greater Bank. Details of changes to the Directors are shown in the Directors’ Report. i) Compensation paid to key management personnel Short-term employee benefits 3,479,60 0 3,799,957 3,479,60 0 3,799,957 Post-employment benefits 262,863 3 57, 8 32 262,863 3 57, 8 32 Other long-term benefits 215,880 255,174 215,880 255,174 Termination benefits - - - -

3,958,343 4,412,963 3,958,343 4,412,963

ii) Loans to key management personnel (including related parties) Loans outstanding at beginning of year 1,632,954 2,379,752 1,632,954 2,379,752 Net balances from changes in personnel (394,380) (67 7,694) (394,380) (67 7,694) Advances made during the year 3, 3 07,6 67 1,391,318 3, 3 07,6 67 1,391,318 Interest and fees charged 60,443 94,293 60,443 94,293 Repayments made during the year (1,558,546) (1,554,715) (1,558,546) (1,554,715)

Loans outstanding at end of year 3,048,138 1,632,954 3,048,138 1,632,954

Loans granted at commercial terms are provided at the same interest rate and terms available to members generally. Security is taken in the majority of cases in accordance with the Company’s normal credit risk policy. Loans granted at non-commercial terms relate to loans provided to Senior Executives in accordance with the concessional staff loan policy. Under this policy, staff are eligible for loans at concessional rates of interest dependent upon their length of employment, their seniority and their salary level. Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $ $ $ $

iii) Deposits made by key management personnel (including related parties) Deposits outstanding at the beginning of year 2,4 61,211 3,174,747 2,4 61,211 3,174,747 Net balances from changes in personnel (4,171) (1,730,497) (4,171) (1,730,497) Interest paid 56,100 76,592 56,100 76,592 Net movement in deposits during the year 27 7, 0 62 940,369 27 7, 0 62 940,369

Deposits outstanding at the end of the year 2,790,202 2,461,211 2,790,202 2,461,211

The Company has entered into an Enterprise Agreement with its staff. Under this agreement the Company provides each staff member a deposit account upon which no transaction fees are payable. These amounts are included in the above disclosure.

C Transactions with Other Related Parties The Company has related party transactions with the following entities: i)   Greater Rollover and Allocated Pension Fund invests funds with the Company. At balance date these deposits totalled $11,880,000 (2015 $13,212,000). The Company acted as Administrator to the Trust until April 2013. The Company provided administration services to the entity for $NIL (2015 $NIL) consideration; these services ceased at April 2013. ii)  Greater Investment Services Pty Ltd invests funds with the Company. At balance date these deposits totalled $2,279,000 (2015 $2,167,000). In support of the entities AFS licence, the Company has provided a support agreement including a financial support commitment to the entity. The entity acts as the manager for GBS Receivables Trust No 4, GBS Receivables Repo Trust, Waratah GBS Mortgage Trust No 1 (in the process of wind-up) and GBS Secured Funding Trust No 1. The Company provides administration services to the entity for $NIL (2015 $NIL) consideration. iii) The Company provides custodian, basis swap, interest rate swap and redraw commitment facilities to GBS Receivables Trust No 4, GBS Receivables Repo Trust and GBS Secured Funding Trust No 1 as well as acting as servicer of the securitised mortgages. These trusts are special purpose entities that allow the Company to access funding by securitising mortgage loans. The revenues and fees in relation to these services are part of the funding arrangements; accordingly, they are included in the effective interest rate of the loan facility. The Company holds units in and invests funds with GBS Receivables Trust No 4. At balance date the units had a value of $5,111,000 (2015 $7,000,000) and the deposits totalled $2,168,850 (2015 $2,147,635). The Company also holds all the units with GBS Receivables Repo Trust. At balance date the units had a value of $425,000,000 (2015 $425,000,000). In addition, during the year, GBS Secured Funding Trust No 1 accepted the sale of mortgages from the Company and the Company holds units in GBS Secured Funding Trust No 1. At balance date the units had a value of $20,000,000 (2015 $NIL). iv) Waratah GBS Mortgage Trust No 1 (in the process of wind-up) during the year accepted the sale of mortgages from the Company. The Company provides custodian and interest rate swap facilities to the Trusts as well as acting as servicer of the securitised mortgages. These trusts are special purpose entities that allow the Company to access funding by securitising mortgage loans. The revenues and fees in relation to these services are part of the funding arrangements; accordingly, they are included in the effective interest rate of the loan facilities. v) Greater Charitable Foundation invests funds with the Company. At balance date these deposits totalled $1,966,000 (2015 $1,125,000). The Trust’s principal activities are the provision of distributions to other entities or persons to advance or promote a charitable purpose. During the year the Company donated $1,200,000 (2015 $1,200,000) to the foundation and provided administration services for $391,000 (2015 $330,000) consideration.

26. REMUNERATION OF AUDITORS

PricewaterhouseCoopers Australia Income received or due and receivable by the auditors for Auditing services for the financial statements 278,239 284,697 224,139 234,287 of any entity within the consolidated entity Auditing services for prudential regulation reporting 90,797 84,683 90,797 84,683 Other audit-related work 60,327 41,395 53,817 37,79 0 Taxation advisory services - 112, 8 59 - 112, 8 59

429,363 523,634 368,753 469,619

53 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

27. COMMITMENTS

Greater Bank leases various ATM locations and Branch offices under non-cancellable operating leases expiring within two to seven years. The leases have varying terms, escalation clauses and renewal rights.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows.

i) Lease commitments

Within one year 7, 4 3 8 6,831 7, 4 3 8 6,831

Later than one year but not later than five years 10,912 8,892 10,912 8,892

Later than five years 25 - 25 -

18,375 15,723 18,375 15,723

28. SEGMENTAL REPORTING

Greater Bank’s operations are confined to one business segment being the provision of financial services and products to members in the form of taking deposits and providing financial accommodation as prescribed by the constitution.

29. RECONCILIATION OF NET CASH

Provided by Operating Activities to Operating Profit After Income Tax

Operating profit after income tax 29,512 34,950 29,212 34,727

Depreciation and amortisation 4,211 4,020 4,211 4,020

Impaired losses/(gains) on loans 1,055 310 1,040 276

Profit on sale of investments (1,455) (2,771) (1,455) (2,771)

Profit on sale property, plant and equipment (55) (96) (55) (96)

Loss on sale of property, plant and equipment 325 180 325 180

Fair value movement of land and buildings 4 (124) 4 (140)

Fair value movement of investment properties (44) (660) 45 (660)

Increase/(decrease) in accrued interest payable (4,373) (1,371) (4,219) (2,096)

Decrease/(increase) in accrued interest receivable (132) (1,520) (133) (1,527)

Decrease/(increase) in other receivables 141 (160) 141 (160)

Decrease/(increase) in net deferred tax assets (183) (677) (223) (707)

Decrease/(increase) in sundry debtors and prepaid expenditure (691) 29 (3,140) 125

Increase/(decrease) in deferred revenue (1,597) 3,998 (1,597) 3,998

Increase/(decrease) in income taxes payable 3,229 (7, 4 0 5) 3,229 (7, 4 0 5)

Increase/(decrease) in creditors and accrued expenses 1,155 373 1,612 369

Increase/(decrease) in other provisions 97 (690) 97 (690)

Decrease/(increase) in loans and advances (221,270) (94,769) (221,255) (94,026)

Decrease/(increase) in investment securities (91,158) (276,059) (109,775) (276,305)

Increase/(decrease) in deposits 216,723 278,022 217,678 278,369

Net cash provided by operating activities (64,506) (64,420) (84,258) (64,519) Annual Report | 2015 –16

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

30. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

A Financial Assets and Liabilities The carrying amount of the following categories of financial assets and liabilities are

Financial assets

Financial assets measured at amortised cost 5,672,234 5,356,349 6,099,363 5,773,378

Fair value through other comprehensive income 320 320 923 923

Financial assets that are designated hedging instruments 692 3,067 692 3,067

5,673,246 5,359,736 6,100,978 5,777,368

Financial liabilities

Financial liabilities that are designated hedging instruments 736 189 736 189

Financial liabilities measured at amortised cost 5,251,897 4,968,050 5,683,180 5,388,981

5,252,633 4,968,239 5,683,916 5,389,170

Greater Bank early adopted AASB 9 Financial Instruments and AASB2009-11 Amendments to Australian Accounting Standards arising from AASB 9 from 1 July 2010.

B Risk Management Framework Greater Bank’s activities are principally related to the use of financial instruments. Greater Bank predominantly accepts deposits from members at both fixed and floating rates for various periods and lends to retail borrowers at both fixed and floating rates with a range of credit standings. Surplus funding is invested in high quality liquid or investment securities. Accordingly, Greater Bank’s activities are exposed to the following key financial risks: market risk, credit risk and liquidity risk.

Risks are monitored and managed using an enterprise wide risk management system. This system records all the identified risks, the risk controls and risk mitigants used to manage the risks and an assessment of each risk. These risks are formally reviewed by management and presented to the Board Risk Committee on a quarterly basis.

Risk management is carried out by the Executive Committee, comprising of Senior Management Executives, under policies approved by the Board of Directors (the Board). The Board provides written principles for the overall risk management, as well as written policies covering specific areas as required, to meet minimum Prudential Standards requirements issued by the Australian Prudential Regulation Authority (APRA).

These Risk Management Policies identify Greater Bank’s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address key material risks, financial and non-financial, likely to be faced by Greater Bank. The policies and procedures are reviewed annually by senior management and the Board to take account of changing circumstances. In addition, the Chief Executive Officer annually certifies to APRA that Senior Management and the Board have identified key risks facing Greater Bank. The Board has established systems to monitor those risks, including setting and requiring adherence to a series of prudential limits, adequate timely reporting processes, and compliance reporting demonstrating that these risk management systems are operating effectively and are adequate having regard to the risks they are designed to control.

55 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

C Market Risk The predominant market risk that Greater Bank is exposed to is interest rate risk. Greater Bank is not exposed to foreign exchange or other price risk.

Greater Bank’s interest rate risk arises from the net difference in cash flows from long-term fixed rate assets or liabilities that are funded by or invested in floating rate assets or liabilities. Long-term fixed rate assets include loans advanced to members and other investment securities, while long-term fixed rate liabilities includes deposits raised from members and other wholesale funding arrangements. This exposure creates an interest rate risk because the net balances and cash flows generated from these assets and liabilities are dependent upon movements in interest rates.

Greater Bank has established policy limits for the level of interest rate risk. Current policy measures interest rate risk in terms of the net present value of a basis point (PVBP) movement in interest rates. PVBP measures the net effect on the fair value of financial instruments for every one basis point (0.01%) change in the interest rate yield curve. The policy has limits for the amount of movement in the fair value of net assets or liabilities exposed to a hypothetical basis point variance before the risk requires active management. The limits are placed for specific time periods together with an overall portfolio limit. The risk is managed by, or a combination of, changes to product pricing or product terms to change consumer product purchasing preferences, by the use of interest rate swaps or other derivative instruments, or by the maturity placement of investment securities. When interest rate swaps are used for the above purpose, Greater Bank may use hedge accounting.

For the PVBP model, the cash flows from financial assets and liabilities are allocated into time buckets based on contractual repricing except for ‘at call’ transactional accounts. At call transactional accounts are liabilities raised from members and historically have limited sensitivity to movements in interest rates. The model allocates the portion of the transactional account balances that is sensitive to movements in interest rates into the less than three months’ time bucket while the remaining portion of transaction account balances that are not sensitive to interest rate movements are evenly allocated into each time bucket over a five-year time horizon. The yield curve used in the PVBP model is based on the relevant published interbank interest rates.

The following tables set out the Company’s and Greater Bank’s exposure to interest rate risk, measured by the present value of a basis point change in the yield curve.

Financial Instruments PRESENT VALUE OF BASIS POINT (PVBP) PROFILE 2016 – CONSOLIDATED Less than 3 3 to 12 months 1 to 3 years 3 to 5 years Over 5 years Total months

Net Exposure ($’s) 10,207 9,361 (30,462) 20,990 (9,826) 270

Financial Instruments PRESENT VALUE OF BASIS POINT (PVBP) PROFILE 2016 – COMPANY Less than 3 3 to 12 months 1 to 3 years 3 to 5 years Over 5 years Total months

Net Exposure ($’s) 10,211 9,384 (30,266) 21,365 (9,826) 868

Financial Instruments PRESENT VALUE OF BASIS POINT (PVBP) PROFILE 2015 – CONSOLIDATED Less than 3 3 to 12 months 1 to 3 years 3 to 5 years Over 5 years Total months

Net Exposure ($’s) 3,144 12,063 (16,438) 21,269 (6,023) 14,015

Financial Instruments PRESENT VALUE OF BASIS POINT (PVBP) PROFILE 2015 – COMPANY Less than 3 3 to 12 months 1 to 3 years 3 to 5 years Over 5 years Total months

Net Exposure ($’s) 3,150 12,081 (16,285) 21,557 (6,023) 14,480 Annual Report | 2015 –16

D Credit Risk Greater Bank’s credit risk predominantly arises from the risk that counterparties will not meet their contractual obligations with the consolidated entity. The main exposure to credit risk for Greater Bank is either loans provided to members or investments made for prudential liquidity needs.

Credit risk exposure for loans is minimised by prudent assessment of each individual loan applicant, obtaining security for the majority of loans made and where credit risk warrants undertaking credit insurance.

The credit risk policy assesses the credit worthiness of the applicant considering not only the ability to service the loan but also other factors such as length and stability of employment, asset accumulation and stability of residency. To facilitate this, a credit risk grading system is used that scores or grades loan applicants based on the above criteria. Security still remains an important consideration in assessing the granting of credit. The pricing offered to loan applicants is dependent upon a combination of the loan applicant’s credit risk grade, the security provided and the reason or purpose for the credit request.

Greater Bank minimises concentration of credit risk in relation to loans by dealing with a relatively large number of individual members. Exposure to credit risk is limited to the market area that Greater Bank participates in. Greater Bank is active in the retail finance markets of Newcastle, Hunter Valley, Central Coast, Sydney, South Coast, Central West and North Coast of New South Wales and South East Queensland. The Company imposes portfolio limits for each loan product and for each credit risk grade. These portfolio limits seek to limit Greater Bank’s exposure to certain products that represent a specific credit exposure and also to ensure the portfolio is not concentrated in a specific category of credit risk grade loan applicants.

Security for housing loans is in the form of registered mortgage over residential property real estate. Security for commercial loans is in the form of registered mortgage over residential and/or commercial real estate. Security for personal loans is in the form of either registered mortgage over real estate, mortgage over other property or charges against funds held on deposit. Where appropriate, guarantees are also sought from related parties to a loan. No security is taken for loans via credit cards and some personal loans. Credit risk also arises in relation to financial guarantees given to certain parties. Such guarantees are secured by a registered mortgage over real estate property or by a charge over funds held on deposit.

The Company has entered into a number of residential mortgage backed securitisation arrangements. Loans are equitability assigned to special purpose vehicles. These special purpose vehicles issue commercial notes to note holders secured by the cash flows arising from the loans. A substantial component of the credit risk has been transferred to the unit holders. The Company still retains the market risk, operational risk and some credit risk from these loans. Due to the retention of substantially all the risks and rewards of these loans, Greater Bank continues to recognise these assets as ‘loans and advances’.

The following sets out the carrying value of loans and the associated liabilities. The fair value of the transferred assets and associated liabilities approximates their carrying value.

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

Carrying amount of transferred assets

Loans and advances 320,758 262,330 320,758 262,330

Carrying amount of associated liabilities to the transferred assets

Commercial notes 328,283 264,727 328,283 264,727

Credit risk exposure for treasury transactions (i.e. investment securities, cash and derivative transactions) to counterparties is minimised by limiting transactions to pre-approved financial institutions. Greater Bank also has policies that limit the amount of credit exposure to individual counterparties and limit portfolio exposures based on external credit rating agency bands.

57 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

The maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the carrying amount of these indicated in the balance sheet except for loans and advances. For loans and advances the maximum credit risk exposure for Greater Bank is $4,229m (2015 $4,065m) and for the Company $4,229m (2015 $4,065m). For loans that are securitised, credit risk is transferred to a special purpose vehicle (refer Note 1B). This maximum exposure does not take into account the value of any security.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to the external credit rating (if available) or the security provided. The following table provides an analysis of credit risk for financial assets that are neither past due or impaired by either external credit rating or type of security.

CONSOLIDATED COMPANY 2016 2015 2016 2015 $’000 $’000 $’000 $’000

Financial assets that are neither past due nor impaired

Cash on hand 18,917 18,711 18,944 18,731

Cash and cash equivalents – by external credit rating (S&P)

- A1+/AAA 61,879 62,825 32,506 44,426

- A1/AA+/AA/AA- - 19,909 - 19,909

- A2/A+/A/A- 92,702 69,8 08 92,702 69,8 08

- A3 - - - -

- Unrated - - - -

Investment securities – by external credit rating (S&P)

- A1+/AAA 145,032 96,559 597, 311 530,706

- A1/AA+/AA/AA- 350,068 330,822 350,068 330,336

- A2/A+/A/A- 374,709 330,274 374,709 330,274

- A3 10,046 30,123 10,046 30,123

- BBB+ 30,084 41,701 30,084 41,701

- BBB 17,6 47 11,93 5 17,6 47 11,93 5

- Unrated 23,891 17, 8 0 0 23,891 17, 8 0 0

Other receivables (unsecured) 1,625 1,075 5,821 2,822

Derivative financial instruments

- A1+/AAA 692 3,067 692 3,067

Loans and advances

- mortgage over residential property security 4,033,337 3,878,086 4,033,337 3,878,086

- mortgage over other property 28,005 5,579 28,005 5,579

- other security 49,724 46,140 49,724 46,140

- no security 11, 876 29,920 11, 876 29,920

Other financial assets (unsecured) 320 320 923 320

5,250,554 4,994,654 5,678,286 5,411,683 Annual Report | 2015 –16

Effect of collateral – all loans where the consolidated entity bears the credit risk

For loans where Greater Bank bears the credit risk, the carrying value of the loans and the degree of credit risk involved is shown in the table below. Loans classed as ‘Fully Secured’ are residentially secured loans with either full mortgage insurance or with a loan to valuation ratio of 80% or less. Loans classed as secured are residentially secured loans with either partial or no mortgage insurance or a loan to valuation ratio of more than 80% plus commercial loans secured by non-residential property, plus secured consumer loans and secured guarantees. Loans with no security are unsecured consumer loans or credit cards.

Loans ALL LOANS WHERE ENTITY BEARS THE CREDIT RISK 2016 – CONSOLIDATED Fully Secured Secured No Security Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 3,914,703 196,961 - 4,111,66 4

Mortgage Over Other Property - 28,603 - 28,603

Other Security - 51,216 - 51,216

No Security - - 37, 3 5 4 37, 3 5 4

Total 3,914,703 276,780 37,354 4,228,837

Loans ALL LOANS WHERE ENTITY BEARS THE CREDIT RISK 2015 – CONSOLIDATED Fully Secured Secured No Security Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 3,751,736 212,856 - 3,964,592

Mortgage Over Other Property - 6,795 - 6,795

Other Security - 47, 318 - 47, 318

No Security - - 46,625 46,625

Total 3,751,736 266,969 46,625 4,065,330

Loans ALL LOANS WHERE ENTITY BEARS THE CREDIT RISK 2016 – COMPANY Fully Secured Secured No Security Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 3,914,703 196,961 - 4,111,66 4

Mortgage Over Other Property - 28,603 - 28,603

Other Security - 51,216 - 51,216

No Security - - 37, 3 5 4 37, 3 5 4

Total 3,914,703 276,780 37,354 4,228,837

59 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

Loans ALL LOANS WHERE ENTITY BEARS THE CREDIT RISK 2015 – COMPANY Fully Secured Secured No Security Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 3,751,736 212,856 - 3,964,592

Mortgage Over Other Property - 6,795 - 6,795

Other Security - 47, 318 - 47, 318

No Security - - 46,625 46,625

Total 3,751,736 266,969 46,625 4,065,330

Loans that are past due but not impaired An age analysis of loans that are past due but not impaired is set out in the table below. A loan is considered to be past due when any payment under contractual terms has been missed. The amount included is the carrying value, rather than the overdue amount.

Loans LOANS – PAST DUE BUT NOT IMPAIRED 2016 – CONSOLIDATED Less than 3 to 6 6 months 3 months months or more Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 70,317 2,545 3,518 76,380

Mortgage Over Other Property 369 78 151 598

Other Security 898 136 303 1,337

No Security 24,567 - - 24,567

Total 96,151 2,759 3,972 102,882

Loans LOANS – PAST DUE BUT NOT IMPAIRED 2015 – CONSOLIDATED Less than 3 to 6 6 months 3 months months or more Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 81,104 2,880 357 84,341

Mortgage Over Other Property 1,014 136 66 1,216

Other Security 1,021 38 2 1,061

No Security 15,872 - - 15,872

Total 99,011 3,054 425 102,490

Loans LOANS – PAST DUE BUT NOT IMPAIRED 2016 – COMPANY Less than 3 to 6 6 months 3 months months or more Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 70,317 2,545 3,518 76,380

Mortgage Over Other Property 369 78 151 598

Other Security 898 136 303 1,337

No Security 24,567 - - 24,567

Total 96,151 2,759 3,972 102,882 Annual Report | 2015 –16

Loans LOANS – PAST DUE BUT NOT IMPAIRED 2015 – COMPANY Less than 3 to 6 6 months 3 months months or more Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 81,104 2,880 357 84,341

Mortgage Over Other Property 1,014 136 66 1,216

Other Security 1,021 38 2 1,061

No Security 15,872 - - 15,872

Total 99,011 3,054 425 102,490

The coverage provided by collateral held in support of loans that are past due but not impaired is shown in the table below. The estimated realisable value of collateral held is based on a combination of formal valuations currently held in respect of such collateral and management’s assessment of the estimated realisable value of collateral held given its experience with similar types of loans in similar situations and the circumstances peculiar to the subject collateral. A loan is deemed ‘Fully Secured’ when it is residentially secured with either full mortgage insurance or with a loan to valuation ratio of 80% or less. ‘Partially Secured’ includes other residentially secured loans not considered ‘Fully Secured’ and other loans that have a non-residential property security. A loan is classed as ‘Unsecured’ if there is no security or if the security value is less than the loan carrying amount.

Loans EFFECT OF COLLATERAL – PAST DUE BUT NOT IMPAIRED 2016 – CONSOLIDATED Fully Partially Secured Secured Unsecured Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 74,139 2,241 - 76,380

Mortgage Over Other Property - 598 - 598

Other Security - 1,020 317 1,337

No Security - - 24,567 24,567

Total 74,139 3,859 24,884 102,882

Loans EFFECT OF COLLATERAL – PAST DUE BUT NOT IMPAIRED 2015 – CONSOLIDATED Fully Partially Secured Secured Unsecured Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 79,586 4,755 - 84,341

Mortgage Over Other Property - 1,216 - 1,216

Other Security - 1,061 - 1,061

No Security - - 15,872 15,872

Total 79,586 7,032 15,872 102,490

Loans EFFECT OF COLLATERAL – PAST DUE BUT NOT IMPAIRED 2016 – COMPANY Fully Partially Secured Secured Unsecured Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 74,139 2,241 - 76,380

Mortgage Over Other Property - 598 - 598

Other Security - 1,020 317 1,337

No Security - - 24,567 24,567

Total 74,139 3,859 24,884 102,882

61 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

Loans EFFECT OF COLLATERAL – PAST DUE BUT NOT IMPAIRED 2015 – COMPANY Fully Partially Secured Secured Unsecured Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property 79,586 4,755 - 84,341

Mortgage Over Other Property - 1,216 - 1,216

Other Security - 1,061 - 1,061

No Security - - 15,872 15,872

Total 79,586 7,032 15,872 102,490

Loans that are impaired The following table shows the gross amount of impaired loans, along with the provision for impairment and assessment of the coverage provided by collateral held in support of impaired loans. The classification of a loan as ‘Fully Secured’, ‘Partially Secured’ and ‘Unsecured’ is on the same basis as the loans past due but not impaired.

Loans EFFECT OF COLLATERAL – IMPAIRED LOANS 2016 – CONSOLIDATED Fully Partially Secured Secured Unsecured Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property - 1,947 - 1,947

Mortgage Over Other Property - - - -

Other Security - 155 - 155

No Security - - 911 911

Total - 2,102 911 3,013

Impairment provision - (471) (753) (1,224)

Carrying amount - 1,631 158 1,789

Loans EFFECT OF COLLATERAL – IMPAIRED LOANS 2015 – CONSOLIDATED Fully Partially Secured Secured Unsecured Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property - 2,165 - 2,165

Mortgage Over Other Property - - - -

Other Security - 117 - 117

No Security - - 833 833

Total - 2,282 833 3,115

Impairment provision - (393) (726) (1,119)

Carrying amount - 1,889 107 1,996 Annual Report | 2015 –16

Loans EFFECT OF COLLATERAL – IMPAIRED LOANS 2016 – COMPANY Fully Partially Secured Secured Unsecured Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property - 1,947 - 1,947

Mortgage Over Other Property - - - -

Other Security - 155 - 155

No Security - - 911 911

Total - 2,102 911 3,013

Impairment provision - (471) (753) (1,224)

Carrying amount - 1,631 158 1,789

Loans EFFECT OF COLLATERAL – IMPAIRED LOANS 2015 – COMPANY Fully Partially Secured Secured Unsecured Total $’000 $’000 $’000 $’000

Mortgage Over Residential Property - 2,165 - 2,165

Mortgage Over Other Property - - - -

Other Security - 117 - 117

No Security - - 833 833

Total - 2,282 833 3,115

Impairment provision - (393) (726) (1,119)

Carrying amount - 1,889 107 1,996

E Liquidity Risk Greater Bank’s liquidity risk arises from the risk that Greater Bank will encounter difficulties in financing its obligations associated with financial liabilities. Greater Bank manages liquidity risk by maintaining sufficient cash and highly marketable securities to not only respond to expected cash flow events but also to provide for a range of unexpected cash flow events. Greater Bank has established policy limits around the minimum level of liquidity and the quality of liquid assets that it holds for liquidity management purposes.

The following tables show the contractual maturity of financial liabilities.

Financial Liabilities FINANCIAL LIABILITIES CONTRACTUAL MATURITY PROFILE 2016 – CONSOLIDATED Less than 3 3 to 12 1 to 3 years 3 to 5 years Over 5 years Total months $’000 months $’000 $’000 $’000 $’000 $’000

Payables and other 9,647 - - - - 9,647 accruals

Deposits 3,682,371 1,002,283 189,373 37, 8 61 - 4,911,888

Derivatives 247 316 93 80 - 736

Other financial liabilities 9,488 69,137 233,949 7,613 7,7 74 327,961

Total 3,701,753 1,071,736 423,415 45,554 7,774 5,250,232

Unrecognised loan 70,115 - - - - 70,115 commitments

63 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

Financial Liabilities FINANCIAL LIABILITIES CONTRACTUAL MATURITY PROFILE 2015 – CONSOLIDATED Less than 3 3 to 12 months 1 to 3 years 3 to 5 years Over 5 years Total months $’000 $’000 $’000 $’000 $’000 $’000

Payables and other 8,655 - - - - 8,655 accruals

Deposits 3,711,231 782,316 163,683 41,848 - 4,699,078

Derivatives 60 129 - - - 189

Other financial liabilities 16 111,787 120,828 11,0 8 3 12,605 256,319

Total 3,719,962 894,232 284,511 52,931 12,605 4,964,241

Unrecognised loan 43,041 - - - - 43,041 commitments

Financial Liabilities FINANCIAL LIABILITIES CONTRACTUAL MATURITY PROFILE 2016 – COMPANY Less than 3 3 to 12 months 1 to 3 years 3 to 5 years Over 5 years Total months $’000 $’000 $’000 $’000 $’000 $’000

Payables and other 10,241 - - - - 10,241 accruals

Deposits 3,686,597 1,002,283 189,373 37, 8 61 - 4,916,114

Derivatives 247 316 93 80 - 736

Other financial liabilities 58,027 148,635 373,402 81,901 92,459 754,424

Total 3,755,112 1,151,234 562,868 119,842 92,459 5,681,515

Unrecognised loan 70,115 - - - - 70,115 commitments

Financial Liabilities FINANCIAL LIABILITIES CONTRACTUAL MATURITY PROFILE 2015 – COMPANY Less than 3 3 to 12 months 1 to 3 years 3 to 5 years Over 5 years Total months $’000 $’000 $’000 $’000 $’000 $’000

Payables and other 8,629 - - - - 8,629 accruals

Deposits 3,714,510 782,316 163,683 41,848 - 4,702,357

Derivatives 60 129 - - - 189

Other financial liabilities 34,823 189,782 259,627 86,692 103,073 673,997

Total 3,758,022 972,227 423,310 128,540 103,073 5,385,172

Unrecognised loan 43,041 - - - - 43,041 commitments Annual Report | 2015 –16

F Fair Value Measurements The following tables present Greater Bank’s assets and liabilities measured and recognised at fair value as at the reporting date.

Fair Value Measurements FINANCIAL ASSETS AND LIABILITIES – CONSOLIDATED Consolidated Consolidated Company Company 2016 2015 2016 2015 $’000 $’000 $’000 $’000

ASSETS

LEVEL 1

Interest rate swap contracts – cash flow hedges - - - -

Interest rate swap contracts – at fair value - - - -

Equity financial assets - - - -

LEVEL 2

Interest rate swap contracts – cash flow hedges 692 3,067 692 3,067

Interest rate swap contracts – at fair value - - - -

Equity financial assets - - - -

LEVEL 3

Interest rate swap contracts – cash flow hedges - - - -

Interest rate swap contracts – at fair value - - - -

Equity financial assets 320 320 923 923

Total assets 1,012 3,387 1,615 3,990

LIABILITIES

LEVEL 1

Interest rate swap contracts – cash flow hedges - - - -

Interest rate swap contracts – at fair value - - - -

LEVEL 2

Interest rate swap contracts – cash flow hedges 736 189 736 189

Interest rate swap contracts – at fair value - - - -

LEVEL 3

Interest rate swap contracts – cash flow hedges - - - -

Interest rate swap contracts – at fair value - - - -

Total liabilities 736 189 736 189

The fair value of financial assets and liabilities traded in active markets (such as publicly traded equity financial assets) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the consolidated entity is the current bid price. These instruments are included in level 1. The fair value of financial assets and liabilities that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques. The consolidated entity uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows. These instruments are included in level 2. During the financial reporting period no assets or liabilities were transferred between categories.

65 Notes to and Forming Part of the Financial Statements for the year ended 30 June 2016

Level 3 financial assets and liabilities are investments in non-listed entities, including controlled entities as set out in Note 13. These investments are illiquid and include non-traded shares and units in unit trusts where there are no reliable inputs that can be used to estimate a fair value. The Company therefore measures these investments at cost, which is supported by the net tangible assets of the entities invested in exceeding the cost value of the shares. The carrying value of level 3 financial assets and liabilities has not changed during the financial year.

31. CAPITAL MANAGEMENT

Greater Bank has established a Capital Management Policy and Internal Capital Adequacy Assessment Process (ICAAP) Summary Statement. Their objectives are to ensure that Greater Bank maintains a level of capital that is:

consistent and appropriate to the risks Greater Bank is exposed to from its activities;

sufficient to provide a buffer to absorb any unanticipated losses from its activities and, in the event of any major problem, enable it to continue operating while the problem is being addressed; and

sufficient to provide depositors and creditors confidence that Greater Bank will continue to honour its obligations to them.

The above policies are consistent with the requirements of the Prudential Standards issued by the Australian Prudential Regulation Authority (APRA).

Greater Bank is required by APRA to measure and report capital on a risk weighted basis in accordance with the requirements of the Prudential Standards (known as ‘capital adequacy’). APRA requires Greater Bank to maintain minimum levels of capital to risk weighted assets. Greater Bank has met the capital requirements imposed by the Prudential Standards throughout the current and previous financial year. The Board has a policy of imposing an additional level of capital above the minimum required by APRA.

Capital adequacy is measured as a ratio of capital to risk weighted assets. Capital is split into two tiers. Common Equity Tier 1 is generally retained earnings, property reserves, reserve balances available for general use and other regulatory adjustments relating to items that are included in equity but are treated differently for capital adequacy purposes. It excludes the fair value assets through other comprehensive income reserve. Tier 2 capital includes qualifying subordinated liabilities and the credit loss reserve.

Greater Bank has adopted the standardised approach for measuring credit and operational risk. Credit risk is measured based on allocating weightings to assets that seek to reflect the varying levels of risk associated to on balance sheet assets and off balance sheet exposures. Operational risk is measured based on risk weighting the investment and lending portfolios, plus each significant non-interest income source.

Greater Bank’s capital results can be viewed at: www.greater.com.au/legal/regulatory-disclosures

These results are unaudited, but are consistent with Greater Bank’s prudential reporting requirements.

32. COMPANY DETAILS

Greater Bank Limited (ABN 88 087 651 956) is a company limited by shares and guarantee, incorporated and domiciled in Australia. The registered office and principal place of business is:

Greater Bank Limited 103 Tudor Street Hamilton NSW 2303

The financial report was authorised for issue by the Directors on the 5th day of October 2016. The Directors have the power to amend and reissue the financial report. Annual Report | 2015 –16

67 Head Off ice: 103 Tudor Street Hamilton NSW 2303  PO Box 173 Hamilton NSW 2303 P 1300 651 400 F 02 4921 9112

Greater Bank Ltd. ABN 88 087 651 956. AFSL/Australian Credit Licence No. 237476.