MYSTATE LIMITED — Capital/Financing Update 2020

Jun 28, 2020

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ASX/Media release 29 June 2020

Strengthened loan provisions, new investment grade credit rating and potential Tier 2 capital issuance

Monday 29 June 2020: MyState Limited (ASX: MYS) , the banking and wealth management group, today announced that it has strengthened its level of loan provisioning for the potential impact from the COVID-19 pandemic. In addition, Moody’s has assigned an investment grade issuer credit rating to MyState Limited of ‘Baa2/P-2’ (long term/short term). All ratings are under review for possible downgrade, in-line with the credit ratings of MyState Bank. Finally, MyState Limited today will be conducting a fixed income debt investor call with a potential Tier 2 Capital Instrument issuance to follow, to further improve regulatory capital efficiency.

MyState anticipates an increase in the collective provision and general reserve for credit losses of approximately $3.0m to $4.0m.

Managing Director and Chief Executive Officer, Melos Sulicich said “Most of the increase in the collective provision is based on our view on the impacts of COVID-19 and does not reflect any significant deterioration in our underlying credit quality.

“We are assuming a slow economic recovery and the increased provision reflects significant changes to the economic outlook impacting growth in the economy, unemployment and assumptions in respect to residential property prices.

“MyState Bank’s loan book predominantly consists of high-quality housing loans, the vast majority of which are owner-occupied with a loan-to-valuation ratio of less than 80%.

“We are fully committed to supporting our customers through this unique time and have provided more than 1,700 personal and business customers with a comprehensive range of support measures, including the option to pause loan repayments for up to six months to help them through the COVID-19 disruption. It is pleasing to note that some customers are already electing to move back to their normal repayments at the three month check in interval.

“We remain well placed to continue to provide credit to both new and existing customers, recognising the role we play in supporting the economy, our customers and the communities we operate in.”

MyState’s capital is well above regulatory benchmarks with a pro-forma Common Equity Tier 1 (CET1) ratio of approximately 10.93% as at 31 May 2020 and a total capital ratio of approximately 12.87%.

Also announced today, Moody’s Investor Services has assigned an investment grade issuer credit rating to MyState Limited of ‘Baa2/P-2’ (long term/short term).

MyState will conduct a debt investor call in preparation for a potential Tier 2 subordinated note issue to be launched in the coming days, subject to market conditions. The subordinated notes are expected to be rated Baa3 by Moody’s.

All ratings are under review for possible downgrade.

Further information is detailed in the attached – “Presentation to Debt Investors”.

Authorised Melos Sulicich Managing Director and Chief Executive Officer

About MyState Limited

Registered Office: 137 Harrington Street, Hobart 7000 MyState Limited is the ASX-listed (MYS) non-operating holding company of the diversified financial services Group consisting of MyState Bank and TPT Wealth, a trustee and wealth management company. MyState Bank is regulated by the Australian Prudential Regulatory Authority. MyState Bank and TPT Wealth hold Australian Financial Services Licences issued by the Australian Securities and Investments Commission.

Media Enquiries

Christie Thomas, Senior Manager Brand and Corporate Communications, 0400 935 275 and christie.thomas@mystate.com.au

Investor Enquiries

Adrian Mulcahy, Market Eye, 0438 630 422 and adrian.mulcahy@marketeye.com.au

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Subordinated Debt Issuance June 2020

Gary Dickson Chief Financial Officer Transaction details Ryan Sharp Treasurer Strategy & highlights Gary Dickson Chief Financial Officer Financial results Gary Dickson Chief Financial Officer COVID-19 Gary Dickson Chief Financial Officer Ryan Sharp Treasurer

Corporate profile

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Sub Debt Issue | Investor Presentation

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Corporate profile

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MyState Group is a leading regional bank with Banking and Wealth Management operations

• ASX listed company

• • Market capitalisation of c. $377m[1] • Approximately 400 employees, over 140,000 customers

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Banking Wealth
• Banking Home Loan Book: $4.90bn [2]
• TPT Wealth Funds Under Management: $1.19bn [2]
Geographic home loan book spread 87% 13%
Funds
Lending
management
NT
0.1%
QLD
WA 16.8% Deposits
1.6%
SA
Trustee
0.8% Transactions
NSW services
21.6%
% of net revenue
Concentration
VIC TAS
17.2% 40.9%
Low High
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1. At 26 June 2020 2. At 31 December 2019

Sub Debt Issue | Investor Presentation

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Key metrics and perf ~~ormance drivers~~

	~~o~~	~~mance drivers~~
	FINANCIAL PERFORMANCE			Change*
	Net profit after tax1:		$15.1m	+5.4%
	Earnings per share:		16.57cps	+4.4%
	Return on tangible equity:		12.6%	+20bps
	BALANCE SHEET + CAPITAL
	Customer deposits:		$3.7b	+0.6%
	Level 2 CET1 capital ratio:		11.38%	+29bps
	Level 2 Total capital ratio:		13.21%	+31bps
	Total loan book:		$5.1b	+7.4%

STRONG 1H20 PROFIT

driven by solid uplift in total operating income

INCREASED NET INTEREST INCOME driven by balance sheet growth and focused margin management

HIGH CUSTOMER SERVICE AND ADVOCACY underpinning growth in bank assets and deposits

EVERMORE DIGITALLY ENABLED

89% of all customer transactions performed online up 3% on 1H19

• Financial performance figures compare 1H20 to 1H19 as the previous corresponding period (pcp). Balance sheet and capital figures compare 30 June 2019 as pcp. All amounts shown represent statutory results inclusive of discontinued operations unless otherwise stated.

• Excludes discontinued operations

Sub Debt Issue | Investor Presentation

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APRA regulatory group

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Level 1 Level 2
MyState Bank MyState Limited
MyState Bank
Connect Asset
Management
TPT Wealth sits outside the APRA Regulatory Group
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Sub Debt Issue | Investor Presentation

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Capital markets issuance

Strong capital markets brand

Well established NCD programme

Programmatic RMBS issuer via the Conquest RMBS programme. c. $2.9bn of capital markets RMBS issued since

inception of the programme across 9 Trusts (8 public, 1 private placement)

• $2bn debt issuance programme MyState Limited and MyState Bank Limited

• $25m of 10nc5 Tier 2 qualifying subordinated notes issued by MyState Bank Limited on 14 August 2015

• $10m of 10nc5 Tier 2 qualifying subordinated notes issued by MyState Bank Limited on 28 September 2016

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Transaction details

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Sub Debt Issue | Investor Presentation

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Proposed subordinated debt structure

Issuer:	MyState Limited (ABN 26 133 623 962)
Issuer Rating:	Baa2/P-2
Expected Issue Rating	Baa3
Documentation	Information Memorandum, Pricing Supplement
Instrument	Subordinated Notes
Offer Size	AUD25,000,000
Structure	10NC5
Format	Floating (quarterly payments) at the aggregate of 90 day BBSW plus the Margin
Margin	[*]
Ranking	Subordinated Notes will constitute direct, subordinated and unsecured obligations of the Issuer ranking in a Winding-Up as set out in Condition 4.3, subject to the provisions for Conversion and Write-off, pari passu with all Equal Ranking Instruments. The claims of Holders against the Issuer in respect of Subordinated Notes that have not been Converted or Written- off will: (A) be subordinated in right of payment to the claims of all Senior Creditors and all such claims of Senior Citizens shall be entitled to be paid in full before any payment shall be paid on account of any sums payable in respect of such Subordinated Notes; (B) rank equally with the obligations of the Issuer to the holders of other Subordinated Notes that have not been Converted or Written-off, and the obligations of the Issuer to holders of Equal Ranking Instruments; and (C) rank prior to, and senior in right of payment to, the obligations of the Issuer to holders of Ordinary Shares and other Junior Ranking Capital Instruments.

This is a summary of the proposed Terms and Conditions for MyState Limited Subordinated Notes – Further information and complete terms in connection to any issuance is included in the Information Memorandum dated 23 December 2016 as supplemented by the preliminary Pricing Supplement dated 29 June 2020

Sub Debt Issue | Investor Presentation

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Proposed subordinated debt structure

Tax	The Issuer intends to issue the Subordinated Notes in a manner which will satisfy the public offer test under section 128F of theIncome Tax Assessment Act 1936 (Cth)
Governing Law	New South Wales, Australia
Settlement Eligibility	Austraclear, Euroclear, Clearstream
Listing	Unlisted
Regulatory Treatment	Tier 2 Capital
Payment Subject to Issuer Solvency	At any time prior to a Winding-Up: (a) the obligation of the Issuer to make any payment of principal or interest in respect of Subordinated Notes shall be conditional upon the Issuer being Solvent at the time the payment or other amount owing falls due; and (b) no amount is payable by the Issuer in respect of the Subordinated Notes unless, at the time of and immediately after such payment, the Issuer is Solvent.
Early Redemption	Subject to the prior written approval of APRA, the Subordinated Notes may be redeemed before the Maturity Date for certain tax and regulatory reasons at par plus accrued interest. Holders should not expect that APRA’s approval will be given for any early redemption of Subordinated Notes. Holders have no right to request redemption before the Maturity date.
Non-Viability Trigger Event	A Non-Viability Trigger Event occurs when APRA has notified the Issuer in writing that it believes: (a) Conversion or Write-off of all or some Subordinated Notes or conversion or write down of all or some of the capital instruments of the Issuer is necessary because, without it, the Issuer would become non-viable; or (b) a public sector injection of capital, or equivalent support, is necessary because, without it, the Issuer would become non-viable.

This is a summary of the proposed Terms and Conditions for MyState Limited Subordinated Notes – Further information and complete terms in connection to any issuance is included in the Information Memorandum dated 23 December 2016 as supplemented by the preliminary Pricing Supplement dated 29 June 2020

Sub Debt Issue | Investor Presentation

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Proposed subordinated debt structure

Conversion Following a Non- Viability Trigger Event

If a Non-Viability Trigger Event occurs, the primary method of loss absorption is Conversion. Upon a Non-Viability Trigger Event occurring, the Issuer may be required to Convert all or, in some cases a proportion of the Subordinated Notes into Ordinary Shares. If for any reason Conversion is not effected within five Business Days, Subordinated Notes will be Written-Off and Holders’ rights, including any rights to unpaid interest or Additional Amounts and repayment of principal, will be immediately and irrevocably terminated with effect on and from the Conversion Date.

Conversion Number

On the Conversion Date, the Issuer will, for the Principal Amount of Subordinated Notes held by the Holder that is required to be Converted, allot and issue that number of fully paid ordinary shares in the capital of the Issuer which is the lesser of the number calculated according to the following formula and the Maximum Conversion Number: (the “Conversion Number”) where: Principal Amount(including where these words are used for the purposes of the definition of Residual Outstanding Principal Amount) means in respect of any Subordinated Note which is outstanding at any time, the outstanding principal amount of the Subordinated Note, and for such purposes: (a) the principal amount of a Subordinated Note issued at a discount, par or at a premium is at any time to be taken to be equal to its Denomination; and (b) if the principal amount of a Subordinated Note has from time to time been Converted or Written-off as described in, and in accordance with, Conditions 5 (“Non-Viability, Conversion and Write-off”) and 6 (“Procedures for Conversion”) the principal amount of the Subordinated Note will be reduced by the principal amount so Converted or Written-off; CDmeans 1%; and VWAP Periodmeans in the case of a Conversion resulting from the occurrence of a Non-Viability Trigger Event, the period of 5 ASX Business Days on which trading in Ordinary Shares took place immediately preceding (but not including) the Non-Viability Trigger Event Date.

This is a summary of the proposed Terms and Conditions for MyState Limited Subordinated Notes – Further information and complete terms in connection to any issuance is included in the Information Memorandum dated 23 December 2016 as supplemented by the preliminary Pricing Supplement dated 29 June 2020

Sub Debt Issue | Investor Presentation

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Proposed subordinated debt structure

MyState Limited will be the issuer of the proposed Subordinated Notes

Non-Operating Holding Company (NOHC) and head entity of the MyState Group and is ASX listed entity

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Regulated by APRA as an authorised NOHC of an APRA Level 2 group

Issuing subordinated notes by MyState Limited improves the overall regulatory capital efficiency of the APRA Level 2 group

MyState Limited holds 100% of the equity in MyState Bank and TPT Wealth

Strong cash flow generation and capital position of subsidiary businesses supports capacity to upstream dividends

All existing Group debt is issued by MyState Bank (including the existing subordinated notes)

MyState Limited does not issue debt or have any external borrowings (outside of the proposed Subordinated Notes)

TPT Wealth does not issue debt or have any external borrowings

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Strategy & highlights

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Sub Debt Issue | Investor Presentation

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Our strategic priorities

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Our GOAL is to be

Simple , relevant and easy to “use”

Digitally enabled so that we can attract and retain the target customers we are seeking more cost effectively

Agile with a strong focus on growth, margins and cost management

Our strategy is DRIVEN BY

Our STRATEGY is focused on

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Growing and automating our bank operations, increasing our digital capabilities and building our brand

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Investing in contemporary, scalable wealth management and trustee products and systems and growth through mainland distribution

Marketing, automation and continuous improvement, underpinned by a robust risk culture

Sub Debt Issue | Investor Presentation

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We are building a digital business that is attracting and engaging customers[*]

Growing contribution from digital

62% increase in online customer growth

89% of all customer transactions performed online or on a mobile device

Over 20% growth in eStatement registrations

Leading customer advocacy and product offerings

Customer NPS +40

Bonus Saver account awarded 5 stars by Canstar & winner Mozo Experts Choice 2020 Regular Saver

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Business online saver Loan book 59% winner of Mozo Choice mainland and 2020 Small Business proportion is No Strings Savings increasing

Operating momentum for further high quality growth

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Marketing Re-brand of Wealth investment Management as TPT Wealth up 39%

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Transition of funds Selected as a management to a new panelist on the digital platform Federal Government’s powered by Link First Home Loan Market Services Deposit Scheme

• All statistics compare 1H20 with 1H19 unless otherwise stated

Sub Debt Issue | Investor Presentation

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Outlook

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Revenue growth through:

• Bank balance sheet growth

• Focused margin management

• FUM growth via mainland distribution

Increased marketing spend to increase number of customers. Enhanced customer facing digital proposition.

Robotics technology now in use with more to come reducing operating costs.

Re-engineering cost base , improving productivity and reinvesting in growth.

Further fund product rationalisation.

Further investment in mortgage fund lending systems.

Investing in trust management system.

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Financial results

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Sub Debt Issue | Investor Presentation

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Results summary

	1H20	1H19	Change*	Change*
Net interest income ($m)	48.16	44.15	+9.1%
Total operating income ($m)1	63.34	59.36	+6.7%
Operating expenses (excl. BDD) ($m)1	41.12	39.23	+4.8%
Net profit after tax ($m)1	15.12	14.34	+5.4%
Earnings per share (cps)	16.57	15.87	+0.7cps
Net interest margin (%)	1.82%	1.81%	+1bp
Cost to income ratio (%)1	64.92%	66.08%	-116bp
Level 2 Total capital ratio (%)2	13.21%	12.90%	+31bp
Return on average equity (%)3	9.29%	9.02%	+27bp
Return on tangible equity (%)3	12.64%	12.44%	+20bp
Dividend–fully franked (cps)4	14.25	14.25	0.0cps
Dividend payout ratio (%)	86%	90%	-4%
Credit performance - 30 day arrears (%)	0.56	0.52	+4bp

*Financial performance figures compare 1H20 to 1H19 as the previous corresponding period (pcp). Balance sheet and capital figures compare 30 June 2019 as pcp. All amounts shown represent statutory results inclusive of discontinued operations unless otherwise stated

1. Excludes discontinued operations

2. As at 30 June 2019

3. Annualised FYTD

4. Interim dividend of 14.25cps paid to shareholders on the register at the record date of 2 March 2020

Sub Debt Issue | Investor Presentation

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MSB captures funding tailwinds

BBSW 1M BBSW 3M BBSW 6M

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BBSW
1.50
1.25
Net interest margin up +3bps on 2H19
1.00
Continued fall in wholesale funding costs
0.75
Narrowing of BBSW-OIS spread contributed
10bps
0.50
TD rates falling as book rolls to lower rates
0.25
Lending market remains highly competitive
0.00
Jul 2019 Sep 2019 Nov 2019 Jan 2020 Mar 2020
NIM waterfall Origination costs
Increase NIM trend
Decrease
2.00%
0.24% 0.25%
2.03%
1.80% 0.02% 1.91%
1.81% 1.79% 1.82%
1.60% 0.39% 0.46%
1.81% 1.82%
1.40% 0.01% 0.03%
1.20%
1H19 Asset Price Asset Mix Origination Funding Funding 1H20
1H18 2H18 1H19 2H19 1H20
Costs Price Mix
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Sub Debt Issue | Investor Presentation

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Operating costs well managed

Operating costs increased 4.82% led by increased investment in capability, marketing and digital

Increased investment in marketing of $0.8m, up 39% on pcp

One-off investment costs of $0.65m relating to rebrand of TPT Wealth and launch of new managed funds platform ($0.4m) and re-engineering the cost base ($0.25m)

Underlying cost growth of 3.16% excluding one-off investment costs

Restructuring costs to provide benefits in 2H20

One branch closure, network reduced to 13 branches

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Expenditure breakdown
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Operating expenditure One-off investment costs
42 45
38.7 39.2 39.0 41.1
40 36.8 2.7
42 0.15 1.9 1.9 2.7 2.6
41 0.02 0.12 0.23 3530 6.03.2 6.11.82.9 6.73.1 6.93.0 7.5
0.54 0.64
41 0.73 25 9.1 8.5 9.4 9.0 9.3
20
40 0.38
15
40 0.63 41.12 10 18.5 17.5 18.0 17.4 19.1
5
39
0
39.23
39 1H18 2H18 1H19 2H19 1H20
+4.82% growth
38 Personnel Costs Admin and Governance Technology Occupancy Marketing
1H19 Personnel Restructuring Technology Occupancy Marketing Other 1H20
$ Millions $ Millions
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1H20 Admin and Governance and Occupancy costs impacted by first time adoption of AASB16 Leases

Sub Debt Issue | Investor Presentation

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NPAT bridge

NPAT growth of 5.4%

Net interest income grew 9.1% on pcp off the back of a higher average balance sheet, falling funding costs and focused margin management

Disciplined management of costs while we continue to invest in marketing and digital

Net bad and doubtful debts charge reflects a small increase in late stage arrears Arrears remain well below benchmarks for regional bank peers and major banks

Net profit after tax

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20
19
18 0.4 0.4
1.9
17
4.0
16 1.0
0.4
15
0.1
14
13
15.1
12 14.4 14.3
11
10
1H19 Statutory Profit/loss after 1H19 NPAT Net interest Other banking Wealth Operating Net bad and Income tax 1H20 Statutory
NPAT tax from from continuing income income management expenditure doubtful debts expense NPAT
discontinued operations income
operations
$ Millions
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Sub Debt Issue | Investor Presentation

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Quality, low risk loan book

Emphasis on maintaining quality lending growth amidst strong competition

Loan book growth eased in the half; offset by increases in NIM

Lending momentum has returned with strong application flows towards the end of 2019

Approved as a provider of the National First Home Loans Deposit Scheme

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NT
0.1%
QLD
16.8%
WA
1.6%
SA
0.8%
NSW
21.6%
Concentration
VIC TAS
17.2% 40.9%
Low High
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Home loan book – applications and settlements ($b)

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1H 2H
Applications
Settlements
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2.50
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Settlements
2.00
1.50 1.00
0.98
0.76
1.00 0.71
2H 0.55
0.65
0.50 0.92 1.05 0.98
0.81 0.55
0.64 0.65
0.46
1H
-
FY17 FY18 FY19 FY20
Total book composition ¹ ($m) +1%
4,269 4,550 4,739 5,038 5,088
63 55 54 51 47
63 72 68 69 70
66 64 66 65 67
4,076 4,358 4,551 4,852 4,904
FY17 FY18 1H19 2H19 1H20
Housing Loans Personal Loans Business / Agri / Commercial Overdrafts
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1. Excludes capitalised origination costs

Sub Debt Issue | Investor Presentation

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High credit quality

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Home loan book – LVR profile ($b) Home loan book composition (%)
Consistent focus on $0.20 $0.20 >90%
lower LVR loans with $0.30 $0.35 85% - 90% 18%
$0.20
$0.37 $0.35 80%-85%
high asset quality $0.26
$0.39
Uptick in arrears has
lead to an increase in 79.4% 78.9% 78.9%
<80%
impairment provisions 82% Owner
$3.98 $4.01 Occupier
$3.51
Investor
30 and 90 day arrears
well below industry
20.6% 21.1% 21.1%
Impairments remain at
historic lows FY18 FY19 1H20 FY18 FY19 1H20
SPIN Majors SPIN Majors
SPIN Regionals SPIN Regionals
30+ Days S&P Arrears Data 90+ Days S&P Arrears Data
Group Group
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SPIN Majors
90+ Days S&P Arrears Data SPIN Regionals
Group
2.00%
1.60%
1.20%
0.80%
0.40%
0.00%
Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20
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3.20%
2.80%
2.40%
2.00%
1.60%
1.20%
0.80%
0.40%
0.00%
Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20
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Sub Debt Issue | Investor Presentation

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TPT Wealth

Funds under management ($m)

Net FUM growth to $1.19b

Wealth revenue increased 5.1%* on pcp due to higher trustee fees and funds management revenue

Rebranding of Wealth operations as TPT Wealth and launch of new investor portal supporting plan for national growth

Outsourced registry and funds admin providing business simplification and improved customer experience

Closed Platform Mortgage Fund to simplify product suite

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1,186
1,170
1,159
1,153
1,129
1H18 2H18 1H19 2H19 1H20
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Operating income ($m)

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8.2
8.0 7.9 7.8
7.5
2.61
2.93 2.83 2.50
2.36
5.02 5.10 5.32 5.12 5.60
1H18 2H18 1H19 2H19 1H20
Funds Management Trustees
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*on a continuing business basis

COVID-19

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Sub Debt Issue | Investor Presentation

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COVID-19 assistance to customers

On 24 March 2020, MyState Bank announced a range of new measures to support customers who may be experiencing financial hardship due to COVID-19. These measures included:

• Home loan, personal loan or commercial loan customers can defer their payments for a period of up to six months – with a check in at 3 months

• Allowing early access to Christmas Accounts without penalty

• Raising the maximum threshold on MyState’s high interest Bonus Saver Accounts from $150,000 to $250,000

• Allowing customers to redraw on home and personal loans, with fee-free redraws in-branch or through the Customer Care team as well as online, which has always been free

• Allowing early access to Term Deposit Accounts for business customers

Sub Debt Issue | Investor Presentation

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COVID-19 assistance to customers

Loans that have been provided assistance due to COVID-19:

			Total Balance of COVID-19 Assistance ($m)
	Assistance Type		Home Loan		Personal Loan		MSB Commercial			Total
	Restructure		59.14		0.18		0.11			59.42
	Loan Pause		448.60		1.97		14.04			464.61
	Change to Interest Only		47.09		0.02		0.57			47.67
	Reduced Repayments		9.98		-		-			9.98
	Total Approved		564.80		2.17		14.71			581.68

3 month check-in call (consumer borrowers only):

• Check–in at the midway point through the 6 month loan pauses has been initiated. MSB endeavouring to call all customers and ask them about their financial position and ability to restart payments.

• Resourcing has been increased to meet the additional workload and also maintain the focus on BAU collection activities.

Sub Debt Issue | Investor Presentation

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COVID-19 profile of customers provided assistance

Home Loan LVR Breakdown

Total COVID-19 Loans

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0.9% 1.4%
0.8%
0.3%
96.6%
Housing Personal Loans - Direct
Commercial Overdrafts
Personal Loans - P2P
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6.9%
7.3%
6.1%
79.7%
<=80% 80.01%-85% 85.01%-90% 90%+
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Residential Portfolio - P&I v IO

Residential Portfolio - OO v INV

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88.85%
11.15%
P&I Interest Only
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79.2%
20.8%
Investor Owner Occupier
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Data as at 31 May 2020

Sub Debt Issue | Investor Presentation

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COVID-19 profile of customers provided assistance

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NT
$0.47m, 0.08%
QLD
$114.01m, 19.60%
WA
$9.56m, 1.64% SA
$4.10m, 0.70%
NSW
$170.12m, 29.25%
ACT
VIC $2.29m,
$143.70m, 24.70% 0.39%
TAS
$137.42m,
0% 5% 10% 15% 20% 25% 30% 35% 40%+ 23.63%
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COVID-19 hardship loans are predominantly located in NSW ($170m), followed by VIC ($144m), TAS ($137m) and QLD ($114m)

Data at 31 May 2020

Sub Debt Issue | Investor Presentation

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COVID-19 profile of customers provided assistance

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Number of Advance Payments
$350
$297.47m
$300
$250
$200 $167.31m
$150
$100
$48.39m
$33.68m
$50 $21.84m $6.65m $6.33m
$0
Predominant Hardship Reasons
$300
$259.60m
$250
$200
$138.39m
$150
$117.90m
$100
$36.60m
$50
$0
Reduction in Business Business Unemployment
Income Shutdown Shutdown
Owner Employee
Millions
Millions
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Purpose & Repayment Type

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$468.63m IO P&I
$500
$400
$300
$200 $108.95m
$100
$4.10m
$0
Owner Occupied Investment Non Housing
Employment
$250
$191.45m
$200
$163.46m
$150
$100 $65.83m
$38.56m
$50
$0
Casual Self Part Time Full Time
Employed
Millions
Millions
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Data at 31 May 2020

Sub Debt Issue | Investor Presentation

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COVID-19 profile of customers provided assistance

	State		Average Balance of Loans with COVID-19 Assistance Home Loan Personal Loan Commercial															($) All Lending
	ACT		327,539															327,539
	NSW NT QLD SA TAS		507,721 455,487 344,567 214,965 234,533				22,652 16,356 22,856 16,328 16,428								614,269 170,823 304,464			501,824 235,922 324,824 205,033 207,904
	VIC		401,119				17,667								407,102			398,065
	WA		340,963					9,850										329,546
	All COVID-19		351,680				17,765								350,337			328,633
Total LendingBook			232,518				13,182								277,764			202,020
								LVR change since origination
									(COVID-19 Assistance								loans)
			95%
			60% 65% 70% 75% 80% 85% 90%
				ACT				NSW			NT				QLD SA			TAS VIC	WA
							Average LVR (Origination) Average											LVR (Indexed)

The average loan balance for COVID-19 assistance loans are slightly higher than the Bank’s total loan book.

Sub Debt Issue | Investor Presentation

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Total portfolio arrears

Home loan arrears profile (%)

99% of home loan book arrears is 30 days or less and therefore considered performing loans.

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98.40%
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0.94% 0.12% 0.13% 0.41%
On time <=30 days <=60 days <90 days 90+ days
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Home loan arrears

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Home loan arrears The increase since Mar 20 partly
reflects the focus of the
1.00% collections team on COVID-19
customer assistance. Resourcing
0.80% of the collections team has been
increased to manage future
0.60% activity.
0.40%
0.20%
0.00%
Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19 Jan 20 Mar 20 May 20
Residential 90+ dpd
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Commercial and personal arrears[1]

2.00%

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1.50%
1.00%
0.50%
0.00%
Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19 Jan 20 Mar 20 May 20
Personal 90+ dpd Commercial 90+ dpd
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1Direct personal loan portfolio only Data at 31 May 2020

Sub Debt Issue | Investor Presentation

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Provisions and coverage ratios

Total Collective Provisions and GRCL ($m)

Loan provisioning strengthened for the potential impact of COVID-19 pandemic

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8.6 [1]
2.0
6.3
5.1 2.3
Total Provision Coverage Ratio 0.5%
4.4 3.6
2.4 (Collective and GRCL)
1.5
4.3
2.7
1.9 2.1 0.4%
Dec 18 Jun 19 Dec 19 May 20
(pro forma) 0.3%
COVID-19 Overlay
General Reserve for Credit Losses (GRCL) Top Up
0.2%
Collective Provisions 0.17%
0.13%
0.10%
0.07%
Dec 18 Jun 19 Dec 19 May 20
(pro forma)
as % of Credit RWA as % of Gross loans
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1The $3.5m increase in Total Collective Provisions and GRCL between Dec-19 and May-20 (pro-forma) is as follows: +$2.0m COVID-19 overlay (Collective Provision)

• +$1.4m GRCL Top-Up

• -$1.5m GRCL Top-up methodology change (contractual life to actual average life for stage 1 loans)

• +$1.6m Increase in total arrears and an ageing of arrears in the total loan book (Collective Provision)

$3.5m has been used for the May-20 pro-forma which is the mid-point of the expected range of $3.0m - $4.0m

Sub Debt Issue | Investor Presentation

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COVID-19 economic outlook and scenario weightings

Housing Prices (%)

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-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21
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Economic outlook – scenario weights – $2.0m
Scenario weightings
Jun-20 5% 50% 45%
Dec-19 15% 70% 15%
Strong recovery Base case Moderate recession
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Base case Strong recovery Moderate recession

Unemployment (%)

Collective provisions - scenario outcomes ($m)*

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14%
12%
10%
8%
6%
4%
2%
0%
Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21
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Base case Strong recovery Moderate recession

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2.0
4.3
3.9
0.5
(0.9)
100% Base case 100% Strong 100% Moderate Probability
recovery recession weighted -
collective provision
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*Excludes GRCL

Capital, funding & liquidity

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Sub Debt Issue | Investor Presentation

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Well capitalised

Capital ratios comfortably above regulatory minimums

Capital position supported by earnings growth and securitised funding

Effective capital strategy underpinning growth and investment in digital capability

Issuance of replacement subordinated notes by MyState Limited will improve Level 2 regulatory capital efficiency

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16%
Tier 1 capital
15% Tier 2 capital
Increase
1.70%
1.40%
14% Decrease
0.42%
13.21% 0.11% 0.80% 0.09% 0.25%
13% 0.11% 0.11% 12.87%
1.83% Impacts Tier 2
12%
Capital only 1.94%
11%
10%
11.38%
9% 10.93%
8%
7%
Dec-19 Capital Securitised Profit Dividends paid Secured Capitalised Other asset Provision GRCL provision May 20 -
initiatives assets mortgage intangibles growth COVID 19 COVID 19 Proforma
lending overlay overlay
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Sub Debt Issue | Investor Presentation

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Capital management approach

Capital is managed under the Board approved ICAAP framework pursuant to APS 110. Capital is monitored on three levels:

• Regulatory Capital (APRA Approach)

• Rating Agency Capital (Moody’s Approach)

• Economic Capital (Internal Risk Management Approach)

MyState’s current capital plan is for capital adequacy to be managed within the Board approved risk appetite over the 3 year ICAAP forecast period.

The capital forecast is based on budget lending and RWA growth, capital expenditure and expected capital management activities and is reported to ALCO and the Board on a monthly basis. Risks to the capital forecast and potential capital actions are discussed at both ALCO and Board.

Stress testing of capital is undertaken quarterly as part of the enterprise wide stress testing framework, ICAAP and Recovery Plan processes to assess the business’ capacity to withstand and recover from significant shocks.

Organic capital generation, warehouse securitisation and term RMBS are the primary form of capital generation for the Group, supplemented by use of the Dividend Reinvestment Plan and DRP underwrites as appropriate.

Sub Debt Issue | Investor Presentation

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Funding mix

Funding mix enhanced by lower cost at call customer deposits

Programmatic RMBS issuance continues to be well supported by broad investorbase

Retail funding costs continuing to fall off the back of lower wholesale funding rates

Bonus Saver account awarded 5 stars by Canstar and winner of Mozo Experts Choice 2020 Regular Saver

Business Online Saver winner of Mozo Experts Choice 2020 Small Business No Strings Savings

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Funding mix (%)

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22.7 24.5 25.5
8.6 6.9 6.4
68.6 68.6 68.1
1H19 2H19 1H20
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Customer deposits Wholesale deposits Securitisation

Customer deposits ($m)

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3.662 3.684
3.443
1.593 1.742
1.585 +1%
+6%
1.858 2.069 1.942
1H19 2H19 1H20
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Customer deposits at term Customer deposits at call

Sub Debt Issue | Investor Presentation

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Customer deposits

Customer deposits are the core part of the MyState funding strategy and provide a strong, sustainable base from which to support lending growth.

The majority of deposits continue to be originated via the branch channel. Key transformational investment has been made to build out the digital capability of the organisation to access the online channel for growth.

The use of third party introducers and deposit platforms is also available to supplement the branch and online channels.

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MyState Customer Funding Ratio
70%
69%
68%
67%
66%
65%
64%
Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19
Customer Funding Ratio
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Data s at 31 December 2019

Sub Debt Issue | Investor Presentation

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Wholesale funding composition

Securitisation remains the largest portion of wholesale funding. Approximately 80% of this is term RMBS

Securitisation is used for both capital and funding

Wholesale funding is actively managed by caps and maturity limits

Wholesale Funding

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$16m, 1%
$311m, 18%
At Call
Term Deposits
NCDs
Securitisation
$1,383m, 81%
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Wholesale funding provides MyState with diversification of its funding sources

Internal RMBS portfolio sized to cover all short-term wholesale funding maturities (i.e. < 12 months)

Wholesale Deposits

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$16m, 5%
At Call
Term Deposits
NCDs
$311m, 95%
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Data as at 31 December 2019

Sub Debt Issue | Investor Presentation

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Liquidity

MLH Investments by Credit Rating

MyState Bank is an MLH ratio bank

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1 (S&P AA- or above)
2 (S&P A- or above)
3 (S&P BBB- or above)
Unrated
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Holding an elevated level of liquidity assets and contingent liquidity (i.e. internal RMBS) in response to the COVID-19 environment

Majority of MLH Investments are repurchase eligible

Limits in place to manage MLH Porfolio concentration risk by counterpart, credit rating and tenor

MLH Ratio augmented by proxy LCR metric, 60 day cash flow projections and early warning indicators to support liquidity management

MLH Investments by Type

MLH Maturity Profile ($m)

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120.0 113.2
100.0
NCD
80.0
LoanDeposit 67.5
61.8
FRN
50.0
44.5
11am
40.0
1% 17.0 15.1
3.0
0.0
At Call 1 Week 1 Month 2 3 4-6 7-12 1-2 >2 Years
Months Months Months Months Years
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Data at 31 December 2019

Sub Debt Issue | Investor Presentation

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Contingent funding plan & liquidity stress testing

The Contingent Funding Plan (CFP) is undertaken and tested regularly as part of MyState’s liquity risk management framework. Testing includes a fire drill test run by ALCO (at least annually) and regular testing of RBA repurchase capability

The CFP includes detailed contingent funding options and strategies that are available to MyState in the event of deteriorating liquidity conditions

The CFP is supported by a series of risk metrics, early warning indicators (qualitative and quantitative) and escalation protocols that have been designed to identify the emergence of increased risk or vulnerabilities in MyState’s liquidity risk position or potential funding needs and allow MyState to take remediation actions as appropriate

MyState undertakes quarterly liquidity stress testing as part of its enteprise wide stress testing framework. These stress tests consider the efficacy of contingent funding options against idiosyncratic and systemic scenarios at varying degrees of severity and timeframes that are calibrated to the macro-economic environment and MyState’s business model and liquidity risk profile

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Sub Debt Issue | Investor Presentation

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