MYSTATE LIMITED — Investor Presentation 2014

Sep 1, 2014

==> picture [792 x 443] intentionally omitted <==

----- Start of picture text -----

ASX Code: MYS
August 2014
Investor Presentation
----- End of picture text -----

�

Nate Austen from the Westbury Community Health Centre – a MyState Community Foundation grant recipient. The centre empowers disadvantaged youth through the craft of woodwork.

==> picture [199 x 72] intentionally omitted <==

==> picture [103 x 33] intentionally omitted <==

Disclaimer

This presentation contains certain forward-looking statements with respect to the financial condition, results of operations, business plans and objectives of management. All such forward-looking statements involve known and unknown risks, significant uncertainties, assumptions, contingencies and other factors many of which are outside the control of MyState Limited (MYS), which may cause the results or actual performance to be materially different from the future results or performance expressed or implied by such forward-looking statements. Such forward-looking statements speak only as of the date of presentation.

No presentation or warranty is or will be made by any legal or natural persons in relation to the accuracy or completeness of all or part of this document, or any constituent or associated presentation, information or material (collectively, the Information), or the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in, or implied by, the information or any part of it. The information includes information derived from third party sources that has not been independently verified.

To the full extent permitted by law, MYS disclaims any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions.

Nothing contained in the information constitutes investment, legal, tax or other advice. You should make your own assessment and take independent professional advice in relation to the information and any action on the basis of the information.

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 2

Agenda 1 Overview Melos Sulicich, Managing Director and Chief Executive Officer 2 Financial Results Tom Taylor, Chief Financial Officer 3 Outlook Melos Sulicich, Managing Director and Chief Executive Officer

==> picture [324 x 443] intentionally omitted <==

�

MyState Student Film Festival.

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 3

This year’s highlights...

A sound result providing a platform for growth

1. 3.9 % increase in NPAT. Final dividend increased by 3.6% to 14.5 cps, bringing full year dividend to 28.5 cps, up 1.8%.

2. Loan portfolio growth soft at 0.4%, but improving – especially 2nd half.

3. Further reduction in cost-to-income ratio to 64.5% due to tight cost management.

4. Successfully completed MyState Financial’s core banking platform transition.

5. Increased contribution from the wealth management business.

“2014 proved to be a difficult year, with modest growth in both profit and EPS, overshadowed by an absence of revenue and portfolio growth. Momentum building from the broker channel is encouraging; however more is required”

==> picture [103 x 33] intentionally omitted <==

4

MyState Limited Investor Presentation

Earnings lift to $29.6m through strong cost and margin management

==> picture [103 x 33] intentionally omitted <==

==> picture [566 x 475] intentionally omitted <==

----- Start of picture text -----

FY2014 FY2013 Change (%)
Revenue ($m) 119.3 122.3 � -2.5%
29.6 28.5 � 3.9%
Net profit after tax ($m)
Earnings per share (cps) 33.91 32.68 � 3.8%
Final dividend – fully franked (cents) 14.5 14.0 � 3.6%
Total dividends for the year – fully
28.5 28.0 � 1.8%
franked (cents)
Payout ratio 84% 86% � -2%
Cost-to-income ratio % 64.5 65.7 � -120bps
Capital ratio 13.8 14.0 � -1.4%
Net interest margin –
MyState Financial 2.74 2.79 � -5bps
The Rock 1.71 1.58 � +13bps
Group 2.43 2.40 � +3bps
Return on average equity 10.5 10.4 � +8bps
Credit performance –
30 day arrears % 0.75 0.54 � +21bps
90 day arrears % 0.35 0.26 � +9bps
BDD cost / portfolio (bps) 2.8 5.4 � -2.6 bps
----- End of picture text -----

MyState Limited Investor Presentation 5

Agenda

1 Overview Melos Sulicich, Managing Director and Chief Executive Officer 2 Financial Results Tom Taylor, Chief Financial Officer 3 Outlook Melos Sulicich, Managing Director and Chief Executive Officer

==> picture [324 x 443] intentionally omitted <==

�

The Rock proudly supporting the CQ NRL bid.

==> picture [103 x 33] intentionally omitted <==

6

MyState Limited Investor Presentation

Economic Following a period of prolonged weakness, the Tasmanian economy shows promising signs of improvement: improvement

• Dwelling approvals moved higher over the 2014 year, supported by record low interest rates and state government incentives.

• Tasmanian population growth has turned the corner, but remains relatively soft, running at an annual increase of 0.3%.

• Retail trade increased 9.4% over the year; the strongest annual result of any state.

• These results, which are encouragingly positive (albeit coming off a low base) include an element of catch-up, and thus looking forward improvements are expected to moderate.

Performance of the Queensland economy was mixed during the period:

• The housing market has picked up, with turnover and dwelling approvals showing meaningful growth. House prices too have risen, although this appears to have been more restrained in Queensland than in other major States.

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 7

Increased NPAT generated from strong cost and margin management

NPAT Generation: 2013 vs 2014

==> picture [544 x 270] intentionally omitted <==

----- Start of picture text -----

$32.00
1.53 0.90 0.78 0.06 29.6
$30.00
0.04
28.5 0.96
2.83
$28.00 1.64
0.07 0.42
$26.00
$24.00
$22.00
$20.00
NII Tax
2013 NPAT incomeOther Income Other Costs 2014 NPAT
Banking fees and commissionsWealth management Personnel CostsTechnology CostsAdministrative Costs Net Bad & Doubtfuls
$ Millions
----- End of picture text -----

• Net interest income (NII) contracted due to lower portfolio balances until growth returned late in the year.

• Softer loan activity and greater mix of broker originated loans have also adversely impacted banking fee and commission income, with fewer cross-sale opportunities.

• Revenues from the wealth management business remain flat.

• Tight management of operating expenses has alleviated the effects of soft revenue growth.

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 8

Segment contributions

==> picture [187 x 39] intentionally omitted <==

----- Start of picture text -----

Increased profi t contribution from
the Wealth Management business
Wealth Banking
----- End of picture text -----

Revenue falls slightly due to lower average portfolio

==> picture [535 x 388] intentionally omitted <==

----- Start of picture text -----

Wealth Banking Wealth Banking
140.0 35.0
120.0 30.0
100.0 25.0
80.0 20.0
60.0 15.0
40.0 10.0
20.0 5.0
0.0 0.0
2011 2012 2013 2014 2011 2012 2013 2014
Revenue $ Millions NPAT $ Millions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

9

MyState Limited Investor Presentation

Strong balance sheet, sound capital base, and capacity to grow

==> picture [566 x 214] intentionally omitted <==

----- Start of picture text -----

FY2014 FY2013 Change (%)
Total assets ($m) 3,558.8 3,629.7 � (2.0)
Total liabilities ($m) 3,270.1 3,350.0 � (2.4)
Net assets ($m) 285.6 279.7 � 2.1
Capital base 187.3 185.6 � 0.9
Risk weighted assets ($m) 1,356.0 1,322.6 � 2.5
Capital ratio (%) 13.8 14.0 � (1.4)
----- End of picture text -----

2014 capital ratio change

==> picture [103 x 33] intentionally omitted <==

==> picture [559 x 205] intentionally omitted <==

----- Start of picture text -----

16.5% 2.15% 1.85%
Capitalised I.T. spend Increased use of securitisation
16.0%
15.5%
15.0%
0.27%
14.5% 0.08% 1.43%
14.03% 1.32% 0.24%
14.0% 0.02% 13.81%
13.5%
13.0%
12.5%
12.0%
2013 2014 2014
assets ratio
Capital ratio Profi t earned Dividends paid Core banking capitalisation Other capital movements on-BS mortgagesIncrease in Securitised mortgages Other interest-bearing assetsOther risk weighted 2014 capital
----- End of picture text -----

MyState Limited Investor Presentation 10

● Portfolio ground lost during the first half has impeded the second half earnings.

Banking business

hampered by poor first half loan growth…

● Significant improvement in fourth quarter settlements has recovered the lost ground, and resulted in positive portfolio growth for the year.

● Margins holding, but remain under …benefits pressure from competition, with from the discounting prevalent to win new second half business and retain existing customers. recovery in the ● Year-on-year reduction in bad and portfolio will doubtful debts. Credit quality remains sound with arrears ratios well below flow into FY15 industry benchmarks.

● Margins holding, but remain under pressure from competition, with discounting prevalent to win new business and retain existing customers.

Banking Business NPAT

==> picture [238 x 358] intentionally omitted <==

----- Start of picture text -----

30
25.2
25.0
25 24.4
19.9
20
15
10
5
0
2011 2012 2013 2014
$ Millions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 11

Re-engagement with broker channel driving uplift in new settlements

44% growth in fourth quarter settlements Total settlements by quarter – actual

Upward trajectory in monthly settlements

==> picture [525 x 388] intentionally omitted <==

----- Start of picture text -----

Broker Retail Broker Retail
250 80
Substantial fi nal
quarter lift
� [44%] 70 45 42
200 114
60
28
25
50
150
23
24
69
60
57
60 40
34
33
100 39
30
31
30 29 30
90
27
80 81 79 81
74 24
71 20
68
50
10
0 0
Sept 12 Dec 12 Mar 13 Jun 13 Sept 13 Dec 13 Mar 14 Jun 14 Jan14 Feb 14 Mar 14 Apr 14 May 14 Jun 14
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
$ Millions $ Millions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

12

MyState Limited Investor Presentation

Portfolio growth remains challenging…

… although 1.8% improvement in second half is very encouraging, suggesting that turnaround is underway

Portfolio losses of fi rst half regained in second half

==> picture [523 x 354] intentionally omitted <==

----- Start of picture text -----

3.100 3.100
� [0.4%] � [1.8%]
3.080 3.080
� [0.5%]
3.060 3.060
3.049
3.047 3.047
� [1.3%]
3.040 3.034 3.040 3.034
3.020 3.020
3.000 3.000
2.994
2.980 2.980
2.960 2.960
2.940 2.940
2.920 2.920
2.900 2.900
FY12 FY13 FY14 FY13 HY14 FY14
$ Billions $ Billions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 13

Broker channel Investment in broker channel ● delivers the BDMs deployed in both Sydney and FY14 portfolio Melbourne markets. improvement ● Implemented NextGen front end

● Implemented NextGen front end technology.

● New loan origination platform planned for FY15 to provide speedier application response and deliver greater level of service to all channels.

Channel portfolio balances: this year vs last year

==> picture [238 x 364] intentionally omitted <==

----- Start of picture text -----

1.600
1.576 1.573
1.550
1.500
1.450
1.400
1.381
1.353
1.350
1.300
1.250
1.200
FY13 FY14 FY13 FY14
Retail Broker
$ Billions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 14

Improvements to funding costs help net interest margin, despite intense price competition in the market

● Significant improvement in funding costs at The Rock has lifted the net interest margin for the banking business, despite a RBA rate reduction in August.

==> picture [528 x 206] intentionally omitted <==

----- Start of picture text -----

Small improvement in NIM%
Banking Business MyState Financial The Rock
2.90
2.70
2.50
2.30
2.10
1.90
1.70
1.50
H1 2013 H2 2013 H1 2014 H2 2014
%
----- End of picture text -----

==> picture [529 x 135] intentionally omitted <==

----- Start of picture text -----

NIM% H1 H2 FULL YEAR H1 H2 FULL YEAR
2013 2013 2013 2014 2014 2014
MyState
2.79% 2.79% 2.79% 2.78% 2.70% 2.74%
Financial
The Rock 1.58% 1.59% 1.58% 1.67% 1.74% 1.71%
Banking
2.39% 2.41% 2.40% 2.45% 2.42% 2.43%
Business
----- End of picture text -----

Comparatives amended to exclude loan offset values to enable better industry comparison

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 15

Funding costs have improved via disciplined balance sheet management

• Funding costs have been reduced through replacement of higher priced wholesale funding with cheaper funds from the RMBS issue in November 2013.

• Downward repricing in term deposits, contraction in customer offset balances, and reduction in liquidity holding costs have all contributed to the improved cost of funds.

• MyState continues to benefit from a strong and stable retail funding base.

==> picture [526 x 107] intentionally omitted <==

----- Start of picture text -----

2012 2013 2014
30.01% At Call Accounts 30.93% At Call Accounts 32.78% At Call Accounts
39.84% TD’s 42.16% TD’s 41.73% TD’s
6.35% NCD’s 7.17% NCD’s 9.12% NCD’s
23.79% Securitisation 19.75% Securitisation 16.37% Securitisation
----- End of picture text -----

==> picture [529 x 115] intentionally omitted <==

----- Start of picture text -----

FY12 $B FY13 $B FY14 $B
At Call Accounts 0.993 1.017 1.054
TDs 1.319 1.386 1.342
NCDs 0.210 0.236 0.293
Securitisation 0.787 0.649 0.526
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 16

Increasing loans sourced via broker network will help portfolio diversification

==> picture [168 x 169] intentionally omitted <==

==> picture [103 x 33] intentionally omitted <==

==> picture [558 x 469] intentionally omitted <==

----- Start of picture text -----

June 30 2014 home loan portfolio
distribution based on
primary security location
$8.3M
0.2%
$446.6M
15.7%
$60.9M
2.1%
$18.9M
0.7%
$221.8M
7.7%
7.7% NSW
0.2% NT $158.7M
15.7% QLD
0.7% SA 5.5%
68.1% TAS
5.5% VIC
2.1% WA
$1,961.3M
68.1%
----- End of picture text -----

MyState Limited Investor Presentation 17

Arrears bottomed out in 2013…

… although still below majors and well below regional banks

==> picture [103 x 33] intentionally omitted <==

90+ day arrears

==> picture [362 x 207] intentionally omitted <==

----- Start of picture text -----

S & P SPIN – Prime S & P SPIN – Regional Banks MyState Group
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 14 Nov 14 Jan 14 Mar 14 May 14 Jun 14
%
----- End of picture text -----

30+ day arrears

==> picture [362 x 209] intentionally omitted <==

----- Start of picture text -----

S & P SPIN – Prime S & P SPIN – Regional Banks MyState Group
2.20
1.70
1.20
0.70
0.20
Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 14 Nov 14 Jan 14 Mar 14 May 14 Jun 14
%
----- End of picture text -----

Number of 90+ day loans has increased from average 44 in H1 to 67 in H2. Remains very small percentage of 25,000 total loans, and well below peers.

Lift is in line with regional banks’ trend, although MyState still remains at half the level of the regional ADIs.

MyState Limited Investor Presentation 18

Bad debts

expense reflects

conservative credit risk and methodical collections management

• Lower write-offs are the product of 3 years’ of focus on risk.

• ● 2014 write-offs are at historical lows.

==> picture [529 x 322] intentionally omitted <==

----- Start of picture text -----

2012 2013 2014
4.834 4.079 2.206
Bad debts written off ($M)
Less bad debts recovered (1.143) (1.537) (1.609)
Less increase (decrease)
(1.407) (0.914) 0.255
in provisioning
Net charge to P&L 2.284 1.628 0.852
BDD Bps cost 7.5 5.4 2.8
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 19

Wealth

management provides increased contribution through cost reductions and back-office integration

• Solid full year NPAT of $4.6M up $1.5M / 46.4 % on previous year.

● Wealth management revenue remains flat overall, with increased management fees from FUM negated by a decline in estate planning revenues.

● FUM growth of 5.8% to $1.007b the healthiest improvement since 2004 – FUM greater than $1b for the first time since 2010.

• Sound 4.4% growth in FUA to $0.766b.

Wealth Management NPAT

==> picture [238 x 358] intentionally omitted <==

----- Start of picture text -----

50
4.6
45
40
35
3.1
30
25
20
1.6
1.5
15
10
5
0
2011 2012 2013 2014
$ Millions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 20

Wealth

management revenues remain flat overall

==> picture [103 x 33] intentionally omitted <==

Wealth management revenues

Funds management income Trustee services income Financial planning income

==> picture [346 x 165] intentionally omitted <==

----- Start of picture text -----

10.0
8.0
6.0
4.0
2.0
0
2012 2013 2014
$ Millions
----- End of picture text -----

Sound growth in FUM continues

Funds under management ($Billions)

==> picture [347 x 172] intentionally omitted <==

----- Start of picture text -----

1.020
1.000
0.980
0.960
0.940
0.920
0.900
Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 14 Nov 14 Jan 14 Mar 14 May 14 Jun 14
$ Billions
----- End of picture text -----

● Revenue growth continues to be challenging. Opportunity for increased penetration of existing customer base remains.

● Current product development and rationalisation activities aim to improve the attractiveness of the funds.

MyState Limited Investor Presentation 21

Tight cost control in 2014 mitigated the effects of the slow growth environment…

…4.3% cost deflation achieved.

==> picture [103 x 33] intentionally omitted <==

Personnel costs

==> picture [248 x 139] intentionally omitted <==

----- Start of picture text -----

45.0
38.422 38.489
40.0 � 35.659
35.0 0.2% �
30.0
7.4%
25.0
20.0
15.0
10.0
5.0
0.0
2012 2013 2014
$ Millions
----- End of picture text -----

• Right-sizing the business delivered a 7.4% cost reduction in 2014, in spite of a 4% EBA rise.

Admin costs

==> picture [248 x 138] intentionally omitted <==

----- Start of picture text -----

25.0
19.128 18.527 19.431
20.0 � �
3.1% 4.9%
15.0
10.0
5.0
0.0
2012 2013 2014
$ Millions
----- End of picture text -----

• Increase relates to new securitisation and additional customer communications from system and fee changes.

Technology costs

==> picture [249 x 146] intentionally omitted <==

----- Start of picture text -----

Technology costs Software Amortisation
12.0
10.042
9.726
10.0
8.196
�
8.0 3.1% �
15.7%
6.0
4.0
2.0
0.0
2012 2013 2014
$ Millions
----- End of picture text -----

• Savings in software maintenance, hardware and network costs; 7 months core banking system amortisation.

Marketing costs

==> picture [249 x 138] intentionally omitted <==

----- Start of picture text -----

4.0
3.545 3.467
3.5 � 3.171
3.0
�
2.2%
2.5 8.5%
2.0
1.5
1.0
0.5
0.0
2012 2013 2014
$ Millions
----- End of picture text -----

• Marketing costs reduced by limiting support to targeted sales activities.

MyState Limited Investor Presentation 22

Cost-to-income ● Cost-to-income ratio improved to ratio benefits 64.5% in 2014 (2013: 65.7%). ● Ratio improvement driven by $3.5m / from reductions 4.3% reduction in operating costs. in cost base

● Ratio improvement driven by $3.5m / 4.3% reduction in operating costs.

● Cost base has been reduced in past 5 consecutive half years.

● Improvement in the cost-to-income ratio to come from revenue growth in future.

Cost to income ratio

Costs (LHS) Income (LHS) Cost to income % (RHS)

==> picture [238 x 356] intentionally omitted <==

----- Start of picture text -----

130.0 71.0%
120.0 69.0%
110.0 67.0%
100.0 65.0%
90.0 63.0%
80.0 61.0%
70.0 60.0%
60.0 59.0%
50.0 58.0%
40.0 57.0%
FY11 FY12 FY13 FY14
$ Millions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 23

Agenda

1 Overview Melos Sulicich, Managing Director and Chief Executive Officer 2 Financial Results Tom Taylor, Chief Financial Officer 3 Outlook Melos Sulicich, Managing Director and Chief Executive Officer

==> picture [324 x 443] intentionally omitted <==

�

MyState Australian Wooden Boat Festival.

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 24

Summary

1. A sound financial result

• Increased NPAT + dividend

• Return on average equity +8 basis points

2. Tight cost control

• Cost-to-income continues to fall to 64.5%

• Future improvements through revenue growth

3. Firmer platform

• Core banking system implemented in MyState Financial

• Bank license likely 1H 15

• Improvement evident in Wealth business

4. Fit for growth

==> picture [103 x 33] intentionally omitted <==

• New organisation structure provides focus on sales + process improvement

• ● A new loan origination system to improve service + efficiency

25

MyState Limited Investor Presentation

Key immediate focus areas

==> picture [36 x 36] intentionally omitted <==

Simplify

Grow

• core business processes by through sales investing in and channel technology management and process improvement

• be prepared to participate in industry rationalisation

Strength in cost control, balance sheet, and credit risk management

Relationships

enhancing staff, customer and community engagement

==> picture [103 x 33] intentionally omitted <==

MyState Limited Investor Presentation 26

Outlook

Low growth environment to continue.

Need to continue to get better at what we do.

1. New organisational structure to provide improved sales management with most growth to come from the broker channel.

2. Recovery in Tasmanian economic fundamentals provides a strong platform for continued improvement in the direct channel.

3. Investment in new loan originations system to provide a platform for greater service and processing efficiency.

4. Fierce competition resulting in margin pressure and need to be nimble.

5. Focus on above system growth supported by disciplined cost and process management.

==> picture [103 x 33] intentionally omitted <==

27

MyState Limited Investor Presentation