ANNUAL REPORT 2017 MEMBER CONTINUOUS TEAMWORK PERFORMANCE INTEGRITY SERVICE IMPROVEMENT

We will We will We will work We will ensure We will act provide service continuously collaboratively excellence in with integrity, excellence evaluate our at all times, performance honesty and through every actions in order developing and to realise transparency in member to improve the maintaining our strategic all things – with contact, by truly quality of our productive objectives for our members, understanding member service. working the benefi t of our partners and our members’ relationships our members. each other. needs. We put based on mutual our members respect. at the centre of everything we do. CONTENTS

Page 03 Key Statistics

Page 04 A Year of Growth & Performance

Page 07 Directors

Page 09 Directors’ Report

Page 12 Corporate Governance Statement

Page 15 Auditor’s Independence Declaration

At G&C Mutual Bank, Page 16 Declaration by Directors our culture is Page 17 Independent Auditor’s Report underpinned by our values. We strive to Page 20 Statement of Comprehensive Income live these values in all Page 21 Balance Sheet aspects of our work. Page 22 Statement of Changes in Equity

Page 23 Statement of Cash Flows

Page 24 Notes to Financial Statements KEY STATISTICS TO 30 JUNE 2017

$1,088m $960m Total Assests Total Deposits

1100 1000

1000 900

900 800

800 700

700 600

600 500

500 400 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

$676m $100m Total Loans Member Equity

700 100

600 90

500 80

400 70

300 60 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

3 A YEAR OF GROWTH & PERFORMANCE

“G&C Mutual Bank fi nished the 2016/17 fi nancial year with Assets of $1,088.114 million, Member Equity of $99.97 million and a risk-weighted Capital Ratio of 18.11% - with the latter ratio remaining substantially higher than those of the 4 major banks.”

to be in a position later this year to provide members with a detailed overview of the benefi ts of these changes and the likely 2018 implementation dates.

Julian Kennelly STRONG LOAN GROWTH Chair G&C Mutual Bank once again experienced strong loan growth, with total loan balances increasing by 34.28% (or $172.468 million) through the 2016/17 fi nancial year. The merger with Quay QUAY MERGER SUPPORTS STRONG PERFORMANCE contributed a substantial proportion (19.44% or $97.780 million) of the growth in G&C Mutual Bank’s year-end loan balances, with The successful completion of the merger with Quay Credit Union the remaining 14.84% (or $74.688 million) representing organic (Quay) on 1 September 2016 helped drive the bank’s exceptional loan growth and resulting in G&C Mutual Bank’s non-merger loan fi nancial performance during the 2016/17 fi nancial year, with total growth exceeding 14% for the second year in a row. assets passing through the $1 billion milestone (and fi nishing the year at $1.088 billion), member equity reaching $100 million In the year ahead, however, it is anticipated that the softening for the fi rst time, and impressive increases in loan balances (up housing market and the impact of regulatory restrictions on 34.28%), total deposits (up 25.57%), and strong product take-up investor lending will cause G&C Mutual Bank’s loan growth rate across all major business lines. to fall to around 6.00% - broadly in line with that of the overall banking system. The past fi nancial year also saw G&C Mutual Bank continue its signifi cant investment in new payments technology and member G&C Mutual Bank’s commitment to maintaining conservative access channels, with the launch of our new Mobile Banking App, lending standards, our focus on customer segments that are well improvements to online banking services and the introduction of known and trusted, and our use of in-house origination channels enhanced fraud prevention tools. rather than brokers, have together driven the bank’s very low level of loan arrears and continue to underpin our proud 58 year record of never having incurred a loss on a home loan.

“G&C Mutual Bank once again experienced strong loan growth, with total loan balances increasing by 34.28% (or $172.468 million) through the 2016/17 fi nancial year.“

OVERVIEW OF FINANCIAL PERFORMANCE

G&C Mutual Bank fi nished the 2016/17 fi nancial year with Assets of $1,088.114 million, Member Equity of $99.97 million and a risk- weighted Capital Ratio of 18.11% - with the latter ratio remaining substantially higher than those of the 4 major banks.

As part of our commitment to provide members with improved G&C Mutual Bank’s 2016/17 results are summarised in the charts products and services, G&C Mutual Bank has given particular on page 3 and are set out in detail in the accompanying fi nancial priority to our preparations for the roll-out in 2018 of what is being statements. In summary, the bank fi nished the year with a 56% referred to as the “New Payments Platform” (or NPP). The NPP is increase in pre-tax profi t to $5.117 million (2016: $3.292 million), an an industry wide and RBA-backed initiative that will revolutionise increase in Member Equity of $19.059 million to $99.974 million, payments in Australia and ultimately enable members to make and a Net Interest Margin (NIM) as at 30 June 2017 of 2.29%. payment transfers in real time. G&C Mutual Bank is a strong supporter of these reforms to the payment system and we expect

4 A YEAR OF GROWTH & PERFORMANCE

“2016/17 fi nancial year once again saw G&C Mutual Bank’s products independently recognised for their great value, fl exibility and innovative features.”

Dave Taylor CEO

NEW PRODUCTS & AWARDS THE YEAR AHEAD

G&C Mutual Bank continues to review and enhance our product G&C Mutual Bank expects market conditions to remain challenging range to ensure we are meeting member needs. We were very in the year ahead, with a continuation of historically low interest rates pleased to launch 2 new housing products over the past 12 for home loans and term deposits. G&C Mutual Bank will continue months – a specially designed and discounted First Home Buyers to explore merger opportunities with like-minded mutuals that will Loan (to help fi rst home buyers compete in what is becoming a enable us to enhance our scale and effi ciency in a lower-growth very challenging market for younger borrowers), and a Basic Home environment. The coming year will also see the commencement of Loan which is designed for new borrowers who are prepared to the RBA-mandated New Payments Platform (NPP), which will enable forfeit some of the “bells and whistles” in order to get access to a customers to undertake real-time payments via a range of electronic more attractive interest rate. channels and devices.

G&C Mutual Bank’s business strategies (including our consideration of future merger partners) will continue to be framed around the two strengths that stand us apart as a member-owned fi nancial institution – our preparedness to work together cooperatively with other member- owned organisations and our dedicated commitment to providing members with valued products and services.”

We would like to extend our thanks to Director Alan Green, who stood down from the G&C Mutual Bank Board upon completion of the Quay merger. Alan made a very valuable contribution to G&C Mutual Bank during his term on the Board and continues to be an active member and supporter of the bank.

As a consequence of the Quay merger, we also welcomed two new Directors to the Board of G&C Mutual Bank (Peter Clarke and Steve Helmich). Both Peter and Steve have brought extensive knowledge, experience and enthusiasm to the Board’s deliberations and have already made major contributions to the To ensure we remain market competitive, G&C Mutual Bank development of G&C Mutual Bank’s business. submits our full range of products for independent assessment and peer benchmarking. As part of those processes, the 2016/17 fi nancial year once again saw G&C Mutual Bank’s products “G&C Mutual Bank’s business strategies (including our independently recognised for their great value, fl exibility and consideration of future merger partners) will continue to be innovative features. We were also granted the following product framed around the two strengths that stand us apart as a awards over the past year: member-owned fi nancial institution – our preparedness to work together cooperatively with other member- owned • 5 Star Canstar rating for Outstanding Value for our organisations and our dedicated commitment to providing Construction Loan; members with valued products and services.” • 5 Star Canstar rating for Outstanding Value for our “Get Ahead Start” Loan; • 5 Star Canstar rating for Outstanding Value for our low rate credit card product; • Mozo Experts Choice Award (2016) for best low rate credit In closing, we’d like to thank all our members and all G&C Mutual Bank card; and staff for their great efforts and loyalty in helping deliver a record year of • Mozo Experts Choice Award (2016) for best premium rewards growth, co-operation and innovation. credit card.

5 IT’S YOUR BANK BECAUSE YOU OWN IT

MEMBER EQUITY SERVING THE COMMUNITY FOR 58 YEARS

OUR PRODUCTS ARE AWARD WINNING TOTAL ASSETS

EVERY ONE OF OUR MEMBERS IS AN OWNER WITH A VOICE AND A SAY IN OUR FUTURE

6 BOARD OF DIRECTORS

Julian Kennelly Alexander Hutchison Karin Hawkins Trevor Donegan

Board Chair & Chair of Board Vice Chair and Chair Chair of Board Audit Non-Executive ‘Elected’ Governance, Nominations & of Board Risk Committee, Committee, Non-Executive Director Remuneration Committees, Non-Executive ‘Elected’ ‘Appointed’ Director Period of Appointment: Non-Executive ‘Elected’ Director Period of Appointment: 4 years to 2019 AGM Director Period of Appointment: 1 year to June 2018 Trevor’s professional Period of Appointment: 4 years to 2018 AGM Karin has extensive experience memberships include: 4 years to 2017 AGM Alex has more than 20 years in the fi nancial services Fellow – Certifi ed Practicing Julian was elected to the experience in the fi nancial industry having successfully Accountants; Fellow and Life Board of G&C Mutual Bank services sector and held held executive roles in risk Member – Australian Health in 2002 and has been Chair senior leadership roles in management, strategy and Services Financial Management of the Board since July 2011. both ASX listed and not-for- sales. Karin’s past roles include Association (AHSFMA); Julian has chaired the Board’s profi t organisations. Alex has Head of Prudential Supervision and Member – Australasian former Information Technology consistently been active in – FINCOM; Head of Risk Mutuals Institute. Trevor was Committee and is currently contributing to a number of Management – ANZ Wholesale the President of AHSFMA Chair of the Governance, industry associations during his Mortgages; and Executive from 2001–2003 and also held Nominations and Remuneration career including the FPA, AIST Manager – Mortgages with ANZ. various Association Committee Committees. Julian is also a and ABACUS. Karin has also held a number positions between 1994– 2006. of senior public sector roles member of the Australasian Trevor is an experienced Chief Alex’s early career was in federal including as an adviser to the Mutuals Institute. Financial Offi cer and currently law enforcement with both NSW Premier and Treasurer on provides contract services to For the past 20 years Julian the Australian Federal Police fi nancial services regulation. has been employed by the and the Australian Securities & the following organisations: Community and Public Sector Investments Commission. Karin is also currently a Australia Zoo; Mental Health Union – SPSF Group in Victoria Director of Uniting Financial Professionals Network Ltd; Alex earned a law degree from as the Manager of Media and Services; Director and CEO of MAS Allstruct Pty Ltd; and the the University of Technology Communication Services. Allister Redlands Pty Ltd and Weenthunga Health Network. (Sydney), has a graduate Consulting Director – Executive Prior to 1994 Julian held Trevor has previously held Diploma in Financial Services Advisory Services for CEB. Karin several media strategy and fi nancial management and and attended the Stanford holds a Bachelor of Business communication roles, including accounting roles with Graduate School of Business. (UTS); a Master of Public Policy with the CPSU SPSF Federal Make-a-Wish Foundation of (Sydney); a Master of Arts Offi ce, the Australian Services Australia; the National Youth (MGSM); and is a Graduate Union and the Offi ce of the Mental Health Foundation member of AICD. Leader of the Parliamentary (headspace); Northern Health Labor Party in Victoria. (Victoria); the Kingston Centre; and the North Western HealthCare Network. EXECUTIVE MANAGEMENT

Dave Taylor Rosanna Argall Michael Coburn 7 Chief Executive Offi cer and Director Deputy CEO and Company Secretary Chief Sales Offi cer Gregory Hammond Peter Clarke Steve Helmich Dave Taylor

Non-Executive ‘Appointed’ Elected Director Appointed Director Chief Executive Offi cer Director and Director Period of Appointment: Period of Appointment: Period of Appointment: 3 years to 2019 AGM 1 year to 1 September 2018 Dave Taylor has been the 1 year to December 2017 Chief Executive Offi cer of Peter is a highly qualifi ed and Dip FP (Diploma Financial G&C Mutual Bank since Greg has over 30 years’ experience experienced fi nance professional Planning), FANZII (Fellow ANZ April 2010. Dave has over as a lawyer specialising in and has held a number of senior Insurance Institute), SF Fin (Senior 25 years of fi nance industry banking, capital markets and executive roles at AMP. He was Fellow FINSIA), MAICD (Member experience across a wide range the governance, supervision responsible for the development Australian Institute of Company of management, consulting and regulation of Australia’s of AMP’s funds management Directors) and a graduate of the and Board roles, including 11 fi nancial system. He advised exposure to the Industry Super Advanced Executive Program years as a Senior Executive mutual fi nancial institutions on Funds, growing funds under (Kellogg Institute – Northwestern with Credit Union Services governance, treasury and capital management to over one billion University). Corporation (CUSCAL) and 9 issues for many years. dollars. He was the Managing During his career at AMP (Quay years as Managing Director of Director of Cobalt Solutions, the Finance Industry Consulting He was a partner of King & Wood Credit Union), Steve successfully AMP subsidiary responsible for Services. Mallesons (and its predecessor the run-off of AMP’s reinsurance led the fi nancial planning business fi rm, Mallesons Stephen Jaques) subsidiary that it acquired as a through periods of reform and Previously the holder of for over 27 years, and since retiring result of the purchase of GIO. At change. He was responsible for University and Government from the fi rm in 2014 has taken up the time this was one of the largest the strong growth in AMP Financial advisory positions between a number of roles in academia, run-off portfolios in the world. Planning and Hillross as well as 1984–1989. Dave has held the banking and fi nance sector, Peter joined the Board of AMP the establishment of the Horizons numerous Directorships in charities and not-for-profi t Credit Union (Quay Credit Union) Financial Planning Academy. He the fi nance industry, including organisations. in early 2008 and was the Chair is a past Chairman of the Financial on the Boards of mutual from December 2014 up until the Planning Association of Australia fi nancial institutions, industry He served on the governing board merger with G&C Mutual Bank. (2002 – 2004), a past Trustee & the superannuation funds and of Mallesons Stephen Jaques Chair of Future2 (the foundation of ASX-listed companies, and and the fi rm’s audit committee, Peter holds a Bachelor of the Australian Financial Planning is currently a Director of and has over 20 years’ experience Economics, is a Certifi ed Practising Association) and a past Director Transaction Solutions Limited, on the boards of not-for-profi t Accountant, a Fellow of the and Chair of the global Financial CUFSS Limited and Shared organisations. His current roles Finance Institute of Australia, a Planning Standards Board (FPSB). Service Partners Pty Ltd. Dave include being an Honorary Fellow Senior Associate of the Australian was also previously a Director with the Applied Finance Centre at Steve is currently Chair of the and New Zealand Institute of of the Australian Payments Macquarie University, a director of Affi nia Licensee (TAL Group). Insurance and Finance, a Member Clearing Association and the Australian College of Theology of the Australian Institute of a Government-appointed and a member of the Glebe Company Directors and a Member member of the Australian Administration Board (the trustee of the Australian Mutuals Institute. Payment Systems Council. of the Diocesan Endowment for the Anglican Diocese of Sydney).

Andrew Prichard Anthony Sluiter Mike Fenech Chief Risk Offi cer Chief Financial Offi cer Chief Operations Offi cer 8 G&C Mutual Bank ',5(&7256 5(3257

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14 AUDITOR’S INDEPENDENCE DECLARATION G&C Mutual Bank For the year ended 30 June 2017

15 G&C Mutual Bank DECLARATION BY DIRECTORS

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17 G&C Mutual Bank INDEPENDENT AUDITOR’S REPORT For the year ended 30 June 2017

18 INDEPENDENT AUDITOR’S REPORT G&C Mutual Bank For the year ended 30 June 2017

19 G&C Mutual Bank STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2017

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20 BALANCE SHEET G&C Mutual Bank As at 30 June 2017

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22 STATEMENT OF CASH FLOWS G&C Mutual Bank For the year ended 30 June 2017

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68 CORPORATE DIRECTORY

AUDITORS CONTENTSSERVICE CENTRES PricewaterhouseCoopers Sydney 201 Sussex Street Level 25, 201 Elizabeth Street, Sydney Sydney NSW 2000 Bathurst SOLICITORS PageShop 1 5/201 Howick Street, Bathurst Our Values King & Wood Mallesons Lismore Level 61, Governor Phillip Tower Page60 3Molesworth Street, Lismore Our Brand Story 1 Farrer Place Sydney NSW 2000 PageMalabar 5 TheDetention Year in Review Centre Anzac Parade, Malabar Chief Executive OfÀ cer Dave Taylor PageMelbourne 7 CEOsLevel Report 1, 128 Exhibition Street, Melbourne EXECUTIVE MANAGEMENT Page 9 BoardNewcastle of Directors and Executive Management Rosanna Argall 328 King Street, Newcastle Deputy CEO and Company Secretary Page X At G&C Mutual Bank, CorporateParramatta Governance Statement Michaelour culture Coburn is Level 8, 20 Smith Street, Parramatta underpinnedChief Sales OfÀ bycer our Page X Auditor’s Independence Declaration values. We strive to Wagga Wagga liveAnthony these Sluiter values in all Page125 X Bayliss Street, Wagga Wagga Chief Financial OfÀ cer Directors Declaration aspects of our work. G&C Mutual Bank Limited Andrew Prichard PageIncorporated X in New South Wales Chief Risk OfÀ cer IndependentABN 72 087 Auditor’s 650 637 Report AFSL/ACL 238311 Page X Registered OfÀ ce Statement of Comprehensive Income Level 25, 201 Elizabeth Street Sydney NSW 2000 Page X Phone: 1300 364 400 Balance Sheet Email: [email protected] Web: www.gcmutualbank.com.au Page X Statement of Changes in Equity

Page X Statement of Cash Flows

Page X Notes to Financial Statements

PrudentialPrudential disclosure disclosure informationinformation can can be be located located at www.gcmutualbank.com.au/disclosure-documentsat www.sgecu.com.au/disclosure-documents