Head Office117 Camberwell Road Hawthorn East VIC 3123

PO Box 338 Camberwell VIC 3124

Branch Office

687 Mt Alexander Road Moonee Ponds VIC 3039

PO Box 210 Moonee Ponds VIC 3039

victeach.com.au1300 654 822

Victoria Teachers Limited ABN 44 087 651 769 AFSL/Australian Credit Licence Number 240 960200917

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Annual Review2017

As a bank that began to support the financial wellbeing of the education community in 1972, we are proud that our purpose still rings true today. As a customer owned bank, our customers are at the forefront of every decision we make. We are invested in you.

Our competitive range of financial products, online services and customer service are designed to support customer needs. Along with a customer-based philosophy, we are focused on adding value at every interaction. This is only part of what differentiates us from other financial services providers.

Throughout this year’s Annual Review you’ll find numbers that demonstrate how we provide value to our customers in everything we do.

It is the people behind these numbers that make the difference. It is the 48 founding Members who created the bank, the staff who live our values, and most importantly, our customers who make a difference in people’s lives every day.

A bank with purpose

Proud to be customer owned

As part of our commitment to the customer owned banking sector, we follow the Customer Owned Banking Code of Practice, which is our promise to you that:1. We will be fair and ethical in our dealings with you.2. We will focus on our customers.3. We will give you clear information about our products

and services.4. We will be responsible lenders.5. We will deliver high customer service and standards.6. We will deal fairly with any complaints.7. We will recognise our customers’ rights as owners.8. We will comply with our legal and industry obligations.9. We will recognise our impact on the wider community.10. We will support and promote this Code of Practice.

We are here to support you

n We put our customers first.

n We achieved 95% customer satisfaction in the 2016 - 17 financial year.

n We’re an award winning, secure and trusted bank.

n We’re an ethical bank with sustainable business practices.

n We empower our customers with knowledge, competitive products and support.The amount our customers

were better off on average, over the last 5 years by banking with us rather than the big four banks

$936

Chair’s ReportBernie Lloyd

On behalf of the Board of Directors I would like to thank our CEO, William Wolke, his highly capable and committed management team, and all the staff for their dedication and service to the Mutual Bank and our Member community which has resulted in yet another year of successful outcomes and results for 2017.

The targets set for the financial year have been achieved or exceeded and you will see in the Annual Report itself that we have grown yet maintained strong balance sheet metrics which is very impressive considering the dynamic and at times challenging financial environment in which we find ourselves. Victoria Teachers Mutual Bank is a highly regarded player in the mutual sector – we have always been recognised as an exemplar for others – and this year is no exception.

Our net operating profit result of $12.1m and return on average assets (ROA) of 0.54% were above our targeted

results for the year. Cash rates have never been lower as you know, so maintaining our net margin as a percentage of average assets at 2.13% is quite pleasing. Total assets of $2.32b are a far cry from that $480 we started with forty-five years ago. Strong lending and deposit growth played into these figures. We outstripped system growth of 5% in lending with our own portfolio growth of 11.5%. Similarly, deposit growth was 7.5% against a target of 5.1%. Our membership growth rate is also worth noting as we’ve had the highest net growth since 2009/10. This is testament to us that our products are competitive and our services valued by our customers.

We have a strong relationship with our customers and our bond with the education community, their families and supporters, is vital to us. At the heart of it is the value of trust. Trust is the key to the strength of any organisation and anecdotal evidence via word of mouth and other communications confirm that trust levels in us are high.

A Member letter of thanks included this statement: “...in our recent times of stress we truly appreciated the meaning of being a VTMB Member. We felt you were part of our family, looking out for our interests and supporting us...”.

Other evidence of high regard as far as quality standards and delivery of products and customer service go is the swag of awards that have come our way. We were Money Magazine’s Personal Lender of the Year, we won seven Five Star awards with Canstar, we were the Roy Morgan Customer Satisfaction Bank of the Month on two occasions, and were awarded six Expert Choice Awards by MOZO.

There will be no resting on our laurels, however. The Board together with the CEO and his executive team have the responsibility to plan, monitor, review, evaluate, implement and assess. There’s a great deal of self-reflection as well as constant scanning of the horizon and beyond with a ‘future focus’ as the key premise.

Board of DirectorsLeft - Right. Peter Wilson, Jo Dawson, Michael Monester, Bernie Lloyd (Chair), Graeme Willis, Karen Starr, David Temple.

This year I attended an anniversary celebration for one of Australia’s largest mutual banks. Their size comes from multiple mergers over the years, and I was pleased to reflect that we have made it this far, on our own. We have remained true to our original objectives and principles. We’ve updated our values this year as the CEO’s report outlines. We’re proud of our history, who we are now, and what we still have the potential to become. We are, as you know, invested in you.

I also thank my fellow Directors for their support, their expertise and their commitment to the Mutual Bank. Once again we’ve overseen a successful year and there are more to come.

CEO’s ReportWilliam Wolke

I am proud that we are an organisation that continues to adapt and learn, grow and achieve strong financial results whilst staying true to our unique culture and value system.

This is what sets us apart, sustains us and will continue to do so as we face an ever-changing and rapidly evolving society and market place. Banking has its traditional providers, and new and emerging providers who are perhaps not yet clearly defined, competing and coming into and diverging out from financial services at a pace never seen before, but we are confident that in adhering to our values, the Mutual Bank has the ability to keep up and maintain its position and relevance to our customers.

I would like to use this opportunity to share our enduring values with you. These are:

We CareWe listen to our customers and do all we can to meet their needs. We support our people to be their best.

We Learn and GrowWe are passionate about building our collective knowledge. We actively seek to be agile and great.

We EmpowerWe enable our people and customers to achieve the best outcomes by being consistent and present.

We do it for the CustomerWe stand out by being authentic and honest. We are proud to do the right thing for our customers.

Our challenge is to stay abreast of this fast changing world of digital, big data, robotics, machine learning etc and still provide an outstanding customer experience and choice.

Over the year we have achieved what we set out to do and largely that was centered around further development or implementation of the infrastructure or platforms required to meet the needs of our Members in their interactions with us whether it be via the mobile, the internet, our contact centre, or our branches; and consistently deliver on our values.

Some aspects that we will work on in the year ahead:

n We are preparing for the new real time payments system for Australia.

n The sale of our existing Moonee Ponds property gives us the opportunity to open a new and modern branch premises in Moonee Ponds and also develop and implement a modern state of the art business continuity capability.

Executive Management Team Left - Right. Adam Alsbury - Strategy & Marketing, Elsbeth Torelli - Risk & Governance, Mark Thomson - Technology, William Wolke - CEO, David Percival - Finance, Justine Ward - Sales & Service, Glenn Borg - People & Culture.

n We will continue to develop our mobile device offerings and more App features will be released, as well as enhancing our digital platforms such as the website.

n Our investment in technology will improve online application and approval processes through automation and integration of systems to benefit customers.

Our achievements are due to our dedicated staff who are the fabric of our culture and values which translates in value add service to our customers. We continue to provide a flexible, supportive workplace and invest in our people.

Once again, I thank and congratulate our customers, and our staff, directors and management for the results and achievements this year and the sustained track record of all these years without losing focus on our reason for being – to benefit you, our Members, our customers.

Financial performance

2016/17 Financial Year Snapshot

Profit after income tax

$12.1mCustomer base

110,583(Annual change 1.6%)

Return on average assets

0.54%

Loans

$1.85b(Annual change 11.57%)

Deposits

$2.10b(Annual change 7.54%)

Assets

$2.32b(Annual change 7.37%)

We have continued to provide some of the most competitive interest rates on our loans and deposits in the midst of a historically low interest rate environment, particularly in comparison to the major banks.

Balancing the needs of both borrowers and depositors was achieved with growth reflected in both portfolios (11.57% for loans and 7.54% for deposits).

A net profit of $12.1m was delivered, based on sound management of the balance sheet, interest margin and expenditure. Total assets increased by 7.37% and total equity by 6.4%. Our strong result has enabled us to strengthen our capital base, with our capital adequacy ratio increasing to 15.65%.

In addition, our net customer growth was the strongest it has been since 2009/10, another sound indicator of the strength of our value proposition.

These strong results enable us to continue to reinvest profits back into the Mutual Bank, leading to continued enhancement of our services and the ability to provide continuing value to our customers. It also provides a solid foundation of strength as we enter into the new year and an increasingly competitive marketplace.

A customer focused organisation

Providing ongoing value

We endeavour to provide support and assistance to our customers throughout every stage of life as well as times of financial hardship.

Tailored banking packages for pre-service teachers, graduate teachers and staff working in Universities and TAFEs are part of our value offering to the education community.

Our team of Relationship Officers visit Schools, Preschools and Universities to assist with banking needs, provide financial literacy presentations and continue to be our brand ambassadors at the grassroots of education.

We continue to provide a Mobile Lending service to assist customers with their home loan needs across the state, at a time and place that’s convenient to them.

Our team of Financial Planners provide customers with relevant, ethical and comprehensive advice to help them achieve their financial goals.

Work was undertaken to provide the Mutual Bank with a more in-depth understanding of the customer experience, identifying areas for improvement and those of great success. Based on these insights, initiatives are continually being put into place to ensure our customers have the best experience with the Mutual Bank at every touchpoint.

Industry recognition

We are pleased to receive recognition from various industry bodies. Such acknowledgement highlights our commitment to offering fair, flexible and competitive products to our customers.n Roy Morgan Customer Satisfaction: Bank of the Month

(twice).n Money Magazine Personal Lender of the Year 2017.n CANSTAR – 5 star ratings: - Outstanding Value – Variable Home Loan Owner

Occupied, Variable Home Loan Investor, Variable Home Loan Construction, Fixed Home Loan Owner Occupied and Fixed Home Loan Investor.

- Low Rate – Visa Platinum Credit Card. - Low Fee – Visa Classic Credit Card.n Mozo 2017 Experts Choice Awards: - Home Loan Package - Education Home Loan (Package). - Fixed Home Loan - Education Home Loan (Package). - Fixed Rate Investor Home Loan - Education Home Loan

(Package). - Low Travel Credit Card - Visa Classic Credit Card. - Travel Credit Card - Visa Classic Credit Card. - Travel Debit Card - Everyday.

Customer recognition

We are also pleased to receive positive feedback from both long-term and new customers which reaffirms our efforts to provide the best banking experience for our customers.

An average Customer Satisfaction rating of 95% was achieved. This figure is generated from monthly satisfaction surveys and is testament to the outstanding customer service we aim to provide. These surveys also act as a valuable feedback tool and help us continue to learn and create an even better customer experience.

We also achieved an average Net Promoter Score (a customer satisfaction score based on survey responses) for our Member Contact Centre of +71, which is a fantastic result and confirms that the vast majority of our customers are likely to recommend us to others based on their interactions with us via phone.

customer satisfaction95%

of staff received internal promotions or transfers as part of their development

10%

Our organisation

Our people

We focus on fostering ongoing learning for all of our staff with training available to better equip them in providing the best service to our customers. The Mutual Bank’s commitment to developing our people and providing career opportunities continued through internal movements and a talent environment focused on development.

We also provide a supportive and flexible work environment, including paid maternity and paternity leave. Our employee benefits package was enhanced, with employee engagement improving and demonstrating commitment of our people to their work and the Mutual Bank.

Developing leaders for the future was facilitated via emerging leaders from across the business selected to take part in the ‘LEAP’ program to help them further develop their leadership skills.

A review of our performance management process was conducted with staff from across the Mutual Bank providing feedback, leading to a new system launched in 2017 that focuses on continuous feedback and recognition.

Review of our values

We undertook a review of the Mutual Bank’s values in early 2017, where staff and the Board were engaged to develop our values. These values are at the core of every decision we make and complement our culture.

A series of ‘Values Café’ sessions were undertaken where staff shared their thoughts on the values Victoria Teachers Mutual Bank embodies and is driven by. Putting our customers first and seeing them as more than ‘just a number’ was paramount, along with empowering both our customers and staff.

Expanded home loan network

Our relationship with a select group of mortgage brokers across Australia who share our same values continues to expand, providing further opportunities for growth.

Our team of Mobile Lenders also continue to provide a personalised home lending service across Victoria.

Enhanced Mobile Banking App

In May 2017 our Mobile App was upgraded with a range of features, including a new design and navigation menu and now allows customers to:

n Login using Touch ID (iPhones only).

n Change the PIN for their Mutual Bank Visa Debit and Credit card(s).

n Lock and unlock their Mutual Bank Visa Debit and Credit card(s).

n Cancel their Mutual Bank Visa Debit and Credit card(s) in the event they are lost or stolen.

n Order a replacement card.

n Edit Payee and Biller details.

n Delete, update and view scheduled payments.

n View pending transactions.

The number of school visits undertaken by our Relationship Officers in the 2016-17 financial year

Supporting the education sector

We contributed over $560,000 to the education community over the past year through the support of various programs, donations and sponsorship, including:

n PASS Scholarship This year’s recipient was Anita from Yarrabah School,

who will use her sponsorship to complete her Master of Education (Special Education Needs).

n VPA study award for Promoting School and Community Links

This year’s recipient was Andrew from Horsham West and Haven Primary School. Andrew will use his sponsorship to develop policies and practices to create an authentic commitment to principal wellbeing.

n Teaching Initiatives Program Our Teaching Initiatives Program was developed in 1993

to support excellence in education by bringing innovative teaching ideas to life. Since inception, 503 schools and preschools have shared $612,000. In 2017, there were 26 grant recipients, with Berwick Secondary College voted the inaugural ‘People’s Choice Award’ winner for their initiative ‘Wominjeka to Berwick College’.

We are also proud to have a number of longstanding and new partnerships within the education sector and support education related charities including Better Buddies and State Schools’ Relief.

Our dedicated team of Relationship Officers visit schools daily across Victoria and attend Universities to engage with students and staff. We also provide tailored banking products for schools and preschools to help them make the most of their funds.

Fostering financial wellbeing

We focus on educating our customers and the wider education community through:n Financial management sessions covering topics such as

budgeting, paying off debt and savings strategies. n Easy to use financial resources such as online

calculators.n Money management tips and helpful information in our

newsletters.n Free Financial Planning and Home Loan seminars.

Ethical investing and sustainability

Your Mutual Bank is proud to not only care about the education community, but the environment too. We adopt an ethical approach to investing and do not invest in fossil fuels. Our Green Car Loan and Green Personal Loans also

reward customers for choosing environmentally friendly products by providing a lower interest rate.

We print on recycled paper wherever possible and utilise digital channels as our primary communication medium and have implemented a range of energy efficiencies in our offices.

We have also partnered with the Sustainability Victoria to sponsor some of the categories in the ResourceSmart School Awards which acknowledge sustainability initiatives in Victorian schools.

Business practices

We adopt a conservative approach to lending to ensure our customers are well equipped to meet their financial commitments. Dedicated staff are available to assist customers who do experience financial hardship, in an ethical and compassionate manner.

Supporting the wider education community

Through donations from our staff we support CUFA’s Village Entrepreneur program - an initiative which helps people in developing countries achieve a better life by starting up a small business. Together with other mutuals we also provide assistance to teachers working and living in disadvantaged communities through the Myanmar Teachers Project.

Corporate Citizenship

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