Teachers Mutual Bank Limited Annual Report and Sustainability Update 2016-2017 Teachers Mutual Bank Limited Contents Our vision To be the largest, most successful and respected Australian mutual bank primarily focused on serving the Australian education sector and other niche markets in the professional and essential services sector. Contents Key financial performance 02 Chairperson and Chief Executive Officer’s report 04 Members 06 Employees 10 Sustainability 12 Community 14 Environment 16 Sustainability KPIs and targets 18 Directors’ report 28 Auditor’s independence declaration 32 Financial statements and notes 33 Statement of comprehensive income 34 Statement of changes in member equity 35 Statement of financial position 36 Statement of cash flows 37 Notes to the financial statements 38 Directors’ declaration 83 Independent auditor’s report 84 Annual Report and Sustainability Update 2016-2017 1 Financial Performance Key Financial Performance Our focus is to maintain sustainable growth to ensure we provide competitive products and services to enable our members to secure their financial future. Capital adequacy ratio Membership Capital adequacy is a ratio which protects depositors Membership refers to all shareholders that are eligible to and investors by indicating the strength of an institution. join under the common bond. We are well above APRA’s minimum requirement of 8%. 15.98% 15.85% 15.72% 15.74% 15.09% 191,415 177,357 166,046 157,765 161,898 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Profit after income tax Loan balances Profit after income tax1 is the amount of money we Loan balances is the total of money owed to us by our generate from operating our products and services members from personal loans, secured (home) loans, minus the cost of providing those products and services, credit cards and overdrafts. including all taxes. $5,476,770,660 $30,212,047 $29,781,877 $28,098,211 $27,877,584 $4,595,064,694 $25,805,683 $4,077,415,960 $3,685,371,474 $3,354,473,152 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 1 Parent (Bank) – not consolidated group. 2 Teachers Mutual Bank Limited “We achieved a healthy net profit of $27.7 million after tax, and maintained a high capital adequacy ratio at 15.09%, comfortably above prudential requirements. Our capital reserves increased to $492.2 million and our asset base grew by 20.6% or $1.2 billion, to $6.7 billion.” Return on assets Reserves Return on assets measures how profitable a company Reserves are accumulated profits held by us to ensure is relative to its total average assets and shows how our ability to safely grow. efficiently a company uses its assets. 0.72% 0.64% 0.61% 0.58% 0.46% $492,226,302 $437,098,930 $396,137,919 $364,987,639 $341,273,773 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Assets Member deposits Assets are the total of all Teachers Mutual Bank Member deposits are made up of savings, investments Limited assets. and shares, excluding interest accrued. $5,294,128,446 $6,682,013,296 $4,550,804,608 $5,542,509,266 $3,975,178,055 $4,862,320,334 $3,579,079,484 $3,388,746,104 $4,394,472,040 $4,088,611,686 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Annual Report and Sustainability Update 2016-2017 3 Chairperson and CEO’s Report Chairperson and Chief Executive Officer’s Report Teachers Mutual Bank Limited continued to reach milestones in 2017, growing to more than $6.6 billion in assets, and completing another successful merger. In a year that saw us merge with Our capital reserves increased to $492.2 Firefighters Mutual Bank and expand million and our asset base grew by 20.6% our national footprint by opening a or $1.2 billion, to $6.7 billion. multi-brand office in Brisbane, we can A significant contributor to this growth confirm that our multi-brand strategy is was our continued success in growing our maturing successfully. home loan portfolio, which now stands The UniBank brand has demonstrated at $5.2 billion, up by 20.6% from last year. strong home loan growth during the The financial year saw a record number of last year, and has recently undergone home loans secured through our home a refreshing rebrand which reflects its loan broking channel which complements university focus and innovative appeal. the strong results from our mobile lending Our merger in November 2016 with the team. In keeping with our pledge in last NSW-based Fire Brigades Credit Union, year’s Annual Report to invest further now known as Firefighters Mutual Bank, resources in third party loan brokering, we saw us welcome their staff and over seven now have a network of 11 aggregators and thousand members of the extended almost 2,800 accredited brokers, up from firefighting community to our Teachers 2,000 last year. Mutual Bank Limited family. Rigorous regulatory conditions continued to As the mutual banking sector continues to prevail in 2016-2017, with investor lending consolidate, we will look for opportunities remaining in the spotlight and a new focus to partner with like-minded institutions on interest-only lending. We continue to to build scale and financial strength. Our maintain our levels of investor property strength and stability as a large mutual lending within the regulator’s expectations. bank means that we are better placed to Our service to our members is the withstand the pressures of the continuing cornerstone on which we have built our low interest rate environment, technology reputation. We are pleased to report that developments and uncertain economic we continued to be among the highest conditions in our economy and worldwide. scoring banks in the nation in the Roy Despite these market challenges, we Morgan Research monthly bank customer are pleased to report that we continued satisfaction surveys throughout the last year. to thrive over the 2016-2017 financial Further industry recognition came from year and strengthen our presence in the the Australian Retail Banking Awards, financial sector. We achieved a healthy when we were named 2017 ‘Mutual of the net profit of $27.7 million after tax, and Year’. This is the first time we have won this maintained a high capital adequacy award, and we take pride in being named a ratio at 15.09%, comfortably above leader among our fine peers in the mutual prudential requirements. banking sector. Thanks to our skilled and experienced Awards like these can only be achieved Board of Directors and management when an organisation has all the right team, excellent control of expenses was ingredients to achieve high performance maintained during a year in which we and a leading reputation: a dedicated conducted a successful merger. Board; talented employees; an innovative 4 Teachers Mutual Bank Limited can-do approach; strong technical performance; and a great For 51 years we have been dedicated to one purpose – sense of community. These have all helped to shape us into assisting our members to build wealth and enjoy financial the successful, award-winning institution we are today. wellbeing throughout their lifetime. Our members are the One of our key values is sustainability, and you can read reason we exist and we are honoured to serve you. about our performance in the detailed sustainability Thank you for choosing Teachers Mutual Bank, UniBank or section in this Report. It is nevertheless noteworthy Firefighters Mutual Bank as your financial services provider. that again in 2017, for the fourth year running, Teachers Mutual Bank Limited has been named one of the World’s Most Ethical Companies, one of only three banks in the world to achieve this. We have continued to invest heavily in technology, not only to provide technical innovations such as Apple Pay and John Kouimanos Steve James Android Pay to our members, but also to ensure that our Chairperson Chief Executive Officer data and member records remain secure and protected against the ever-evolving threat of cyber fraud. Annual Report and Sustainability Update 2016-2017 5 Members ` Growing We put members’ membership Firefighters Mutual Bank has joined our family, bringing the needs first total membership of Teachers Mutual Bank Limited to We help our members to build strong financial over 191,000. futures by providing award-winning competitive ` Member satisfaction products and exceptional, customer-focused service. Consistently above 90% across Teachers Mutual Bank Limited. Named ‘Mutual of the Year’ at the 2017 For more than 51 years we have been efficiency, and friendly, helpful staff are Australian Retail serving employees in the education the main reasons why our members rank Banking Awards. sector – people who have devoted us so highly. themselves to the care and education of ` Digital innovation Apple Pay, Android others, and who deserve the same care Banking accessibility Pay, Samsung Pay and and commitment from their bank. We are constantly striving to make Spriggy introduced. In 2016, we welcomed members of banking easier for our members and New mobile apps Firefighters Mutual Bank into our family. ensure they have access to our services for UniBank and Firefighters Mutual Bank shares our whenever and wherever they need them. Firefighters Mutual commitment to exceptional service, We are working to ensure more of our Bank. ethical practice and community-minded branches are multi-branded, so that behaviour, and we are delighted to ` Convenience UniBank, Firefighters Mutual Bank, and and accessibility be working together to serve more of Teachers Mutual Bank members can New multi-brand Australia’s valued service personnel. As a easily identify their nearest branch. branches for all result of this merger we now have more We understand how hard it can be for members.