Heritage Bank, Australia's largest mutual bank by total asset size, has delivered a record after-tax net profit of A$45.04 million for 2017/18 -  a 13.7 per cent increase on the previous year's result.Nevertheless, the bank has been required to invest in an ongoing digital transformation program to meet future demands from an increasingly diverse customer base, CEO Peter Lock said.Lock said loan volumes were down 27.4 per cent to $1.74 billion in FY18, which reflected a conscious decision to moderate lending after a year of exceptionally high loan growth [of 11 per cent] in 2016/17.Lock: "It's been a good year around managing expectations on asset growth."Heritage's mortgage loan arrears greater than 30 days was just 0.58 per cent at 30 June 2018, well below industry averages.  "We came out of the blocks very strongly [at the start of FY18] and started to come up against the APRA speed bumps. We didn't want a breach any of those rules in terms of investor growth so we took a deliberate decision to slow loan originations this year to better manage our prudential capital requirements," he said."We pulled out of the [investor mortgage] market for about six weeks, starting in October last year. When we came back in, the market momentum had slowed down, and then there was the royal commission."As Heritage dampened the rate of its lending growth, this has meant it didn't need to move aggressively on attracting deposits to fund loans at a frenetic rate.Given these circumstances, and the consequent slight increase in loan rates NIM improved from 1.73 last year to 1.94 in FY18, along with an increase in capital accumulation."At the same time, we remain absolutely committed to maintaining our branch network. That's why next month we are opening a brand new branch at Coomera, while we recently closed a branch at Toombul."Lock said a network branch remains a valid way for his bank to distribute its products to certain customers."The branch hasn't seen its day yet. The digital experience is not quite mature enough yet for customers to say 'I'm just going to rely on my mobile and mothing else'. That day may come, but not yet. The branch is still going to be an important part of how people make decisions."One of the ways that Heritage has been adopting to prepare the way towards a larger southern physical presence has been by the use of existing brokers and aggregators to sell its loans.Lock said the historical average has been 50/50, while currently the balance is tilted towards external brokers, although that has varied over time.Sydney is the next region Lock is examining to establish Heritage branches, followed by Melbourne, although he was quiet on timing.