BELFAST BRIEFING:The Progressive Building Society has taken the high road to sustainable growth, writes FRANCESS McDONNELL

HOW MUCH is a mission statement worth these days? Would a modest £1.5 million pretax profit sound like a good return for sticking with your principles?

It appears principles do add up to profits, at least for the Northern Ireland-based Progressive Building Society, which has bucked a recent trend of massive losses suffered by financial institutions.

The society, which professes to be dedicated to “fairness in our dealings with members”, has become one of the few financial institutions in the North to post a profit for 2009. Latest accounts for the building society show it netted pretax profits of £1.5 million last year.

It does represent a significant decline – they are down from £2.7 million in 2008 – but the standout feature is that the Belfast building society managed to remain in the black last year while many of its larger competitors were driven into losses.

The position of AIB-owned First Trust and Danske Northern Bank, which reported losses of £86 million and £100 million respectively for 2009, underlines exactly the kind of conditions the Progressive was operating in last year.

That makes its achievements all the more remarkable. So, how did the Progressive navigate its way through the stormy economic waters of 2009 so much better than many of its peers?

It may be because the building society, which was formed in 1914, has always prided itself on being firmly rooted in its local community. It has built a reputation largely by word of mouth and, despite growing commercial pressures, it has remained loyal to its aim of sharing profit by “the application of beneficial interest rates that reward its members for their loyalty and association”.

The Progressive also appears to have been one of the few financial institutions not to be seduced by Northern Ireland’s short-lived property boom or driven by a lust for a quick and impressive return.

If the failed Presbyterian Mutual Society had taken a leaf from its book, it might not be in the unholy mess in which it and its 10,000 savers and investors currently find themselves.

The Progressive’s latest financial accounts show that its dedication to its members has paid off for them. Last year the society reported gross receipts to £404 million for the second year in a row and maintained its total assets base at £1.66 billion. Total withdrawals were higher than expected but net receipts of £48 million “compared favourably” with the rest of the sector.

Progressive had planned to lend more than £200 million in mortgages during 2009. However, a lack of demand in the market resulted in its gross lending figure amounting to £141 million.

However it also managed to renegotiate deals with existing borrowers to help the society produce a net lending figure of £61 million for 2009.

Loans and advances to borrowers increased by 1.55 per cent to £1,306 million by the end of the year.

It also held a large volume of liquidity, of more than £347 million, which Progressive said provided “additional security” for its saving members.

Despite being involved primarily in the residential property market, the society’s level of arrears is one of the lowest across the UK.

A total of 25 mortgage accounts were 12 months or more in arrears by the end of 2009. The amount outstanding on these accounts was £4.8 million and Progressive had just eight properties in possession at the close of the year.

The society said it had “applied a prudent lending policy” but perhaps more importantly it combined this with “a sympathetic and efficient arrears procedure”.

Bad loan provisions at the end of 2009 were £1.52 million – 0.12 per cent of the total mortgage book.

It is an enviable position for any financial institution, given the current property market in Northern Ireland, which is unlikely to improve anytime soon.

The society’s latest annual accounts provide reassurance not only for its members, but Northern Ireland generally that there is at least one financial institution that believes in the principle of “fairness in our dealings”.

But if the Progressive Building Society is to be applauded for one notable exception in 2009 it is this – not one of its employees took a salary increase last year and its directors also waived their right to receive an annual bonus.