Page | 2
Page | 3
9,166
61.5%
£1,215m
4.9
3,522
£154.6m
1.72%
£4.2bn
£13.9m
12bps
£4.4bn
£22.8m
KEY HIGHLIGHTS
New mortgage
members (2023: 6,957)
Net promoter score
(2023: 64.6%)
Gross new lending
(2023: £887m)
Trustpilot
score (2023: 4.9)
Total interest paid to
savers (2023: £91.8m)
Colleague volunteering
hours (2023: 2,462)
Total mortgage assets
(2023: £3.6bn)
Net interest margin
(2023: 1.94%)
ECL coverage ratio
(2023: 15bps)
Profit before tax
(2023: £8.3m)
Total savings balance
(2023: £3.6bn
)
Underlying profit
before tax (2023: £24.2m)
13.7% 4.9% 172%
CET1 ratio (2023: 15.2%) Leverage ratio (2023:5.2%) Average LCR (2023: 184%)
__________________________________________________________________________________________
Contents
Page | 3 Annual Report & Accounts 2024 Nottingham Building Society
04
Chair’s Statement
05
Chief Executive’s Review
07
Strategic Report
15
Stakeholder Engagement Report
16
Corporate Responsibility Report
18
Sustainability Report
21
Your Board of Directors
23
Directors’ Report
25
Nomination Committee Report
26
Risk Management Report
30
Board Risk Committee Report
31
Corporate Governance Report
34
Board Audit Committee Report
36
Directors’ Remuneration Report
40
Independent Auditor’s Report
46
Income Statements
47
Statements of Comprehensive Income
48
Statements of Financial Position
49
Statements of Changes in Members’ Interests
50
Cash Flow Statements
51
Notes to the Accounts
93
Annual Business Statement
95
Glossary
__________________________________________________________________________________________
Chair’s
Statement
Page | 4 Annual Report & Accounts 2024 Nottingham Building Society
Introduction
2024 was a year of continued success for Nottingham Building Society
(‘NBS’) as we strive to have a positive impact on our members and the
communities we serve.
I am pleased to introduce the Annual Report and Accounts for the first
time in my capacity as Chair.
I would like to start by expressing my heartfelt thanks to our previous
Chair, Andrew Neden who stepped down in June following 10 years of
service on the Board. The Society is benefitting from the progress made
during his tenure to build a strong platform for the future. Andrew had
a strong focus on the needs of our members and this is demonstrated
by his concern for those members impacted by Philips Trust Corporation
and our decision to offer financial support to them. On behalf of all of
the Board we wish Andrew well in his next chapter.
I also express our thanks to Paul Astruc, who stepped down from the
Board at the end of March 2024. Paul joined the Board in 2022 as an
Executive Director in his capacity as Chief Financial Officer (‘CFO’) and
from April 2023 served as a Non-Executive Director for 12-months as
planned, providing continuity. He leaves with our sincere thanks and
best wishes.
In addition, we welcomed Chris Sparks as a new Non-Executive Director
in March 2025. Subject to regulatory approval, Chris will succeed Kerry
Spooner as Chair of the Board Risk Committee (‘BRC’) and Kerry will
continue in her role as Senior Independent Director. Chris most recently
spent nine years as Chief Risk Officer at challenger bank Atom.
I joined the Society’s Board in December 2023, seeing significant
potential for a strong regional building society loved by its members, to
grow and attract new members on a national basis. That perspective has
been reinforced as I have got to know the Society over the past year,
met with colleagues and members in head office and across our branch
network, and worked with Sue and her leadership team as they deliver
our energising growth agenda. I was delighted to take on the role of
Chair in July.
The results we are publishing today are impressive – but even more so
when considered in the context of the overall UK mortgage and savings
market which has been subdued in 2024. We have achieved strong
growth with total assets exceeding £5bn – the highest ever level for NBS
in our 175-year history and an excellent milestone. My thanks to all our
loyal members for trusting us to support them achieve their savings and
homeownership goals.
Global events have meant continued economic volatility, in turn driving
an uncertain environment for UK savers and borrowers. The long-term
sustainability of our Society and the financial well-being of our members
are always the cornerstones of our decision-making, but particularly
during this time. Whilst we have seen inflation falling, we cannot ignore
the cumulative impact of rising prices both on our Society, and the cost
of the goods and services we buy, but also the impact on our members.
We recognise that things are not easy for many at the current time.
However, we are reporting a strong and resilient performance in our
mortgage book over the past 12-months, and we have not seen a
material impact on arrears levels which remain exceptionally low. Our
financial performance has benefitted from interest rates remaining
‘higher for longer' and we have passed this benefit on to our savings
members while being mindful of the impact on borrowers. We expect
further reductions in Bank Rate during 2025.
We continued to embed the changes made in 2023 to ensure that we
deliver good member outcomes as required by the Financial Conduct
Authority’s (‘FCA’) Consumer Duty rules. As a mutual, our members
remain at the heart of our thinking. The Board was pleased to be able to
offer financial support to those members impacted by Philips Trust
Corporation, alongside other building societies, and this is outlined in
greater detail later in this report.
The pace of change and use of technology in our sector is increasing
rapidly and the market has never been more competitive. Greater
competition and a desire to improve consumer awareness of the service
and propositions we offer, drove the decision to update our brand. We
want to ensure we are perceived as a future focused modern mutual,
with a broad member appeal. In 2024 we were delighted to welcome an
increase in new members primarily through digital savings channels. We
decided to rename our savings app from Beehive Money to Nottingham
Building Society, bringing all our savings members together under one
brand name. We want all of them to recognise they are members of our
mutual building society.
We have made a number of prudent strategic investment decisions to
invest in technology to develop both competitive advantage in the
future and the resilience of the Society.
As a mutual, playing our part in the community is fundamental and I am
delighted that the Society is making a difference with partnerships to
tackle homelessness, an issue that is increasing within Nottingham
region as well as nationally.
The Board was also pleased to see that colleague engagement remains
strong, with a small improvement on 2023. It has been good to see the
superb service from our branch teams that we know our members value
continuing to be validated through very high Trustpilot scores.
On behalf of the Board, I would like to thank all our colleagues for their
commitment and hard work on behalf of our members.
As Chair I will ensure members continue be at the heart of our Society
and at the forefront of all our decisions.
Thank you to our members for your continued custom and loyalty.
Robin Ashton
Chair
5
th
March 2025
__________________________________________________________________________________________
Chief Executive’s Review
Page | 5 Annual Report & Accounts 2024 Nottingham Building Society
A successful year delivered together
I am pleased to report that 2024 was a successful year for Nottingham
Building Society. In a challenging mortgage market, we have helped more
people than ever before own their own home, and we have attracted
more savings members than at any point in our 175-year history.
I would like to start by thanking and recognising the contribution of our
511 colleagues without whom this would not have been possible. I’d also
like to thank our 300,000+ members for their loyalty and continued
custom. Finally, I would like to recognise the contribution of our
partners, including the mortgage intermediaries who help our members
secure funding to buy their home, in helping us deliver these results. Our
success would not be possible without our highly committed team of
people or without the support of our members and partners.
Thank you too, to our Board which has continued to support and provide
strong governance on our strategy of growth and change. This year we
said farewell to Andrew Neden and welcomed Robin Ashton as our new
Chair. I would like to express my personal thanks to Andrew for
everything he did for the Society. Robin has an extensive and deep
Executive and Non-Executive Director background which is proving
invaluable in taking the Society forward.
A strong financial performance
The 2024 annual results and the strategy delivery have been
comprehensive, with strong growth in total assets underpinned by
growth in both branch and digital deposits. Total assets in the Society
have now exceeded £5bn. New mortgage lending margin has increased
by 38 basis points year on year in an extremely competitive market.
These results demonstrate our focus on helping a broader cross section
of borrowers in more specialist segments of the market.
The financial results since we embarked on our strategy in 2022 have
been supported by higher interest rates which is good news for savers
but less so for borrowers. Despite this, we have remained competitive
and focussed on people whose needs correspond to the ‘more difficult
to find mortgages’, which has meant we have grown our Balance Sheet
by 40% over the last two years.
As part of our growth plans, we have continued our partnership with our
third-party forward flow partner, Gen H. We share a common purpose
to help broaden homeownership to those who in the past have been
excluded from obtaining a mortgage. Their customer focus and
innovation approach is similar to our own.
Our branch network and digital savings members have supported this
lending growth through an increase in savings deposits. We are
particularly proud of the performance of our digital savings app which
was formerly known as Beehive Money and now re-branded to
Nottingham Building Society. The number of members signed up to our
app has increased significantly over the past two years; digital savings
now total over £1bn with the app providing access to a range of savings
propositions. Branches have also contributed strongly to growth, and in
October we reached a key milestone of £3bn of branch savings balances.
Market conditions continue to be fierce. In mortgages, pricing in the
mainstream markets has only been commercially viable for those players
with current account funding and / or considerable scale. The constraints
on household finances have led to more subdued purchases and in the
Buy-to-Let sector, the Government’s taxation changes, as part of the
Budget in October 2024, appear to have had an impact.
The savings market has also become much more competitive over the
past year. This has been a result of more banks and building societies
having to repay the money they had previously borrowed via the Bank of
England’s liquidity scheme, Term Funding Scheme with additional
incentives for Small and Medium sized Enterprises (‘TFSME’). This
represents a significant change to the cost of savings compared to the
last 10-years. This competition is only likely to increase further in 2025
ahead of the scheme ending. NBS has repaid the remaining £180m under
this scheme in February 2025.
In February 2025, we also successfully completed our first public
securitisation for part of our mortgage book, which has provided us with
further funding diversification.
We have grown at an impressive rate with increased margins on new
business in the last 2 years.
The mutual sector supporting its members
We joined with three other building societies in order to support those
members who were impacted by the actions of Philips Trust Corporation.
As we reported in our interim results, our overall profit before tax has
been impacted this year by £10.2m as a result. The Board and I consider
that supporting these members was the right thing to do and the steps
we took to do so formed part of a voluntary solution offered by all four
building societies.
This concern for members and willingness to support them
demonstrates our mutual sector ethos. Together we have taken action
to support 2,000 members who lost investments which they placed in
trusts in good faith with one company and which were subsequently
moved to another which lost a substantial proportion of the
investments.
Delivering the change we need to serve our
members in the future
In addition to our strong trading performance, I am delighted to
announce that we are making good progress in strengthening
foundations as well as transforming the Society. This transformation is
needed to ensure we can continue to be sustainable, safe and secure for
all our members and offer great mortgage and savings products in the
future.
Systems support and resilience
Many of the IT systems which required upgrading have now been
upgraded but this is a continuous process to keep on top of new
capability and security. Upgrading our core banking platform which
supports member transactions every day has proved to be more complex
than originally anticipated and we are aiming to complete this activity
over the next 18 months, after which any changes should become more
business as usual.
Supporting mortgage lending decisions
Our new mortgage application system, Origo, was launched in December
initially as a pilot scheme. In the first phase of its implementation, we
have now seen our first mortgages starting to progress using this
platform. We will be adding more intermediaries and more product
types to it throughout 2025. This will provide the technical capability to
meet the more specialist market needs. It will also support us to provide
great member and broker experiences through reducing the time
between member application and mortgage offer, better document
collection and Artificial Intelligence to help support the process.
We also moved our lending credit decision engine system onto Lending
Metrics, which supports much quicker changes to products and
propositions so we can react to member and broker feedback more
quickly. This will then be integrated into the new Origo mortgage
platform along with new data sources which will enable us to help more
potential mortgage members and intermediaries more efficiently.
__________________________________________________________________________________________
Chief Executive’s Review
Page | 6 Annual Report & Accounts 2024 Nottingham Building Society
Targeting new market segments
In-line with our purpose to help the Extra Ordinary own their own home,
we started to establish ourselves as a specialist mortgage lender by tackling
some new market segments in 2024. Specifically, we started with a new
mortgage product designed to meet the needs of foreign nationals looking
to buy property in the UK. At the end of 2024, we had received over £65m
of applications. As we become better known in these specialist areas, we
anticipate more and more of our members will be able to receive more
specialist products and propositions which will be enabled by our
technology, data, and lending decision capability.
Updating our Nottingham Building Society brand
To ensure we are well positioned for the future, we reviewed and updated
our brand and changed from ‘The Nottingham’ to ‘Nottingham Building
Society’ with a new brand identity and logo. In December we also
rebranded Beehive Money to Nottingham Building Society bringing all of
our members together under one name, so they all recognise they are part
of a mutual building society owned by its members.
By way of background to this, five years ago the Society launched its new
savings app under the Beehive Money brand to appeal to younger people
and attract Lifetime ISA balances. Whilst this worked to some extent, the
Beehive brand did not gather high levels of recognition, and did not
resonate more broadly. Further research which has been conducted over
the last five years, has continually shown that 'The Nottingham' did not
resonate with younger people nor did it build on the mutual aspect. It had
very low levels of brand awareness even in Nottingham which only had 3%
awareness and less than 1% nationally. As a result of these factors, we
needed to change.
Recent research demonstrated ‘The Nottingham’ brand was seen as
outdated and the most powerful element for members is that we are a
building society. We needed to modernise our brand in a way which would
stand the test of time, to be more relevant and memorable and would
support our strategy. We want to demonstrate supporting the different
needs of members both through the specialist types of mortgages we offer
and the myriad of reasons why people save.
We also wanted to provide proof points to go with the strategy such as a
broader range of savings products in the digital channels and the ability to
support different types of mortgage products and propositions. For us this
is not just about colours and logos, it is about presenting our organisation
as a future-focused modern building society ready to meet the needs of all
our members now and in the decades to come. We will continue the roll-
out of our new brand in our branch network over 2025 and beyond.
Serving our members better now and in the
future
We continue to invest in our people, systems and processes to support the
growth of the Society in a robust and sustainable way. This has included
updating and strengthening our IT systems as well as widening and
deepening our capability in finance, products, pricing and risk.
Putting our members first
We continue to value our members’ feedback and to look to deliver first
class member experiences. Our Trustpilot score of 4.9/5.0 is testament to
the great service we provide in our branch network. Our digital savings app
has strong scores of 4.5/5.0 and we will be combining the scores going
forward.
Net Promoter Score is another measure of the level of member satisfaction
in our service as well as in the interest rates we pay to our savers; and in
all areas, we are above the score of 50 which is high in the financial services
sector.
In 2025 we will have our first in-person Annual General Meeting (‘AGM’)
since the pandemic. We are looking forward to seeing our members
either at our AGM or at other events we will be holding.
Supporting our communities
As a mutual, playing our part in the community, and supporting an
inclusive society are central elements in our business. We have
continued to focus on the combination of volunteering days which
support a wide number of local initiatives and charitable donations
primarily focussed on homelessness both locally and nationally.
Our commitment to our two key charity partners, Shelter on a national
basis, and Emmanuel House in Nottingham, has continued this year. We
are delighted to make financial donations as well as share skills and
experience with both organisations, for homeless people to benefit. Our
total volunteering hours increased to over 3,500 in 2024.
Within our own workplace community, I have been delighted to
welcome new and developing colleague networks, run by colleagues,
tackling and supporting a range of issues. We were a proud sponsor of
Nottingham Pride 2024, and I was delighted to join colleagues in our
Pride Network and allies in taking part in the celebrations in central
Nottingham in the summer.
Investing in our people
Our ambition is to make Nottingham Building Society one of the best
places to work. The UK employment market within the financial sector is
highly competitive and we continue to attract great people and develop
the capabilities of our team.
Engagement survey scores are a key indicator of how motivated our
colleagues feel to work for the Society and at the end of 2023 whilst
good, they were not above the median. In 2024 we put a great deal of
energy into the areas that we know make a real difference to colleague
engagement. I am pleased to say we have seen a rise in engagement
levels as a result.
We also sponsored a number of our leaders to develop their market and
leadership skills undertaking the University of Loughborough MSc in
Strategic Leadership as well as launching an apprenticeship scheme. In
2025 we are increasing development opportunities for all colleagues.
Outlook
Following two years of strong growth, we are purposely managing to
achieve a lower level of growth in 2025. We want to consolidate our
position, and ensure a solid platform for future growth as we embed
technology enhancements and capture the benefits of investments
made in recent years.
The service we provide, and providing real value to all our members is
key to our strategy. These are important factors as we build a stronger
more resilient building society, to enable us to lend more to those eager
to buy their own homes and weather the uncertain macro environment
that lies ahead.
In summary
In a world of increasing complexity and challenge, 2024 was further
evidence of a successful year for Nottingham Building Society.
We are delighted with the progress that has been made but we are not
complacent. We know there is more to do, and we are determined to
continue the momentum we have generated over the past few years.
We will continue to put our members, our colleagues and our
communities at the heart of everything we do.
Thank you for supporting us for the last 175 years and over our future
journey.
Sue Hayes
Chief Executive Officer
5
th
March 2025
__________________________________________________________________________________________
Strategic Report
Page | 7 Annual Report & Accounts 2024 Nottingham Building Society
Our blueprint for the future
There is a constant requirement to assess how the world is changing and
how our strategy needs to adapt to meet the expectations of our members.
This need has become more critical in the face of the current economic
climate, marked by higher inflation and interest rates. These challenges are
compounded by global instability, including the ongoing war in Ukraine and
the conflict in the Middle East, which have further disrupted supply chains,
driven energy price volatility, and intensified economic uncertainty.
Building societies are the original purpose-led financial services
organisations. Redefining our purpose is a crucial step in concentrating our
efforts to maintain a positive impact on our members.
We have continued with our strategic blueprint that consists of three
elements:
• Our purpose - the role we play in our members’ lives, why we do what
we do;
• Our strategic drivers - what we need to prioritise; and
• Our behaviours - how we all need to operate.
The journey we undertook involved our entire organisation, gaining
significant insights into our present and future customers and members, our
competitors and the broader ecosystem. This deep thinking ensured we
landed on something meaningful that demonstrates how we can help
people when they need it the most.
We know home ownership is a life changing milestone, with the potential
to provide happiness, security and opportunity for generations to come.
Whilst we have been helping people buy houses for over 175 years, we
know that home ownership is becoming increasingly difficult for significant
parts of the population and as a Society we want to be there to support
people to achieve this milestone.
We also recognise that treating traditional borrowers in a consistent and
fair way is something that we and the mainstream banks can do well. This
has meant that those audiences are well catered for by mainstream banks
who operate at scale and building societies therefore need to compete on
service and differentiation. We are focused on supporting people who want
to buy their own homes but find it hard to get onto the housing ladder
because they don’t have regular monthly incomes or have hit bumps in the
road but are fundamentally good financial risks. This Extra Ordinary group
has grown significantly over the last few years and so offers a real
opportunity for us to meet the true mutual purpose and to pay our savers
appropriate rates for supplying the funding to help them.
As a result, our purpose is: “Together we fight for the Extra Ordinary to
own their own home.”
We define Extra Ordinary as hard-working people with circumstances that
many lenders might view as out of the ordinary - from self-employed
professionals to those who have had a setback in their career or financial
history. We believe this community has a right to be understood and that
their needs and circumstances are known so they can achieve their dream
of owning a home. This is something that is worth us all fighting for and we
commit to going the extra mile to do this.
This purpose lives at the core of our blueprint for the future. To support
delivery of this, we have also given clear direction of what we need to do to
deliver this through our strategic drivers and the behaviours our team needs
to embrace.
To achieve our purpose, our decisions will be driven by these principles:
• Mighty Foundations - the right foundations for our business are in
place. The processes, governance, people and technology will
underpin our Society to ensure we are strong and resilient now and in
the future;
• Extra Ordinary Depth - to help our members, customers and partners
including brokers, we must build a deep and ongoing understanding
of them and their circumstances. A journey of deep listening, learning
and adjusting using internal and external data to help us;
• Purposeful Innovation - we want to create and deliver leading
propositions and member experiences that will support long term
sustainable advantage to lead in these markets and to enable us to
deliver our purpose; and
• 10X Allies - we want our allies to be crucial partners who are
passionate about our purpose and work with us to accelerate and
multiply the impacts we can make. We want to create a movement of
people who are on the journey with us to help more and more people
own their own home.
As a mutual, it is in our DNA to understand the power of working together
and we know our purpose cannot be achieved in isolation. We will identify
the partners and like-minded allies that will join us in pursuit of our purpose.
This includes our saving community who are integral to the movement that
will enable home ownership for thousands of people every year. It also
includes our colleagues, and through our behaviours we will build a culture
where our purpose can be realised.
We encourage them to:
• Have the brave conversation - we create an environment where
people feel confident to speak up and challenge with the intent to
support ongoing improvements in what we do and how we do it;
• Make the bold leap - we take action. We lean into the change and
drive it forward, challenging the status quo to continuously make
things better; and
• Seek the big insight - We demonstrate curiosity, leaving no stone
unturned to find different perspectives and to understand problems
and opportunities equally.
__________________________________________________________________________________________
Strategic Report
Page | 8 Annual Report & Accounts 2024 Nottingham Building Society
Business model and Group strategy
Nottingham Building Society is a Top Ten UK building society with Total
Assets in excess of £5bn.
The Society operates under three membership hubs:
• Mortgages - via our intermediary-led lending hub, offering a wide
variety of mortgages and more recently through our partnership
agreement with a fintech mortgage provider;
• Branches - via our regional presence of 31 locations across 8 counties;
and
• Digital - our online platform and mobile app, providing access to
digital savings accounts.
Mortgages
During 2024, we continued our focus on gaining a deeper understanding of
our customers and members to ensure our mortgage products and services
help make borrowing easier to access for those who currently find it harder
to do so for lifestyle or career choices.
Our aim is to provide prospective borrowing members with a choice of
mortgage propositions that suits their needs, through our mortgage broker
network or via our mortgage originator partnership.
In 2024, we began positioning ourselves as a specialist mortgage lender by
entering new market segments. A key initiative we launched was a tailored
mortgage product for foreign nationals seeking to purchase property in the
UK. As our reputation in these niche areas grows, we expect an increasing
number of members to benefit from our specialised products and services,
driven by advancements in our technology, data, and lending decision
capabilities.
Branches
We provide traditional branch services to serve those who prefer face-to-
face propositions, offering branch-based savings accounts alongside
financial planning, estate planning and mortgage advice through our
independent partners. Our colleagues strive to provide members with an
excellent member service and ensure their financial needs are met.
Digital
The Nottingham Building Society app, formerly Beehive Money, is the
Society’s online and mobile app proposition providing savings accounts to
members that prefer to manage their savings themselves, but also
supported by our online web chat and telephony member advocates.
The digital membership hub offers several tax-free and taxable savings
products and provides several advice partnerships, accessible on the
platform, to help first-time buyers achieve their home purchase goals
including access to mortgage advice, conveyancing services and ways to
help manage and improve their credit scores.
Overall business performance
The economic environment in the UK remained challenging across 2024.
Throughout this period of economic instability, we have continued to
deliver on our purpose and stay focused on the long-term sustainability of
the Society, whilst balancing the interests of both savings and mortgage
members throughout.
The mortgage market in 2024 has remained subdued due to higher interest
rates and cost-of-living pressures, consequently reducing demand and
further compounding competitive pressures. Nevertheless, against this
backdrop we have delivered a record high total asset position of £5.2bn for
the Society, with growth across both organic and inorganic mortgage
volumes, supported by a diversified funding base.
Throughout the period, we have continued to serve our members with a
range of mortgage products, enabling us to generate growth in application
volumes despite the subdued market, reflecting the strength of our
proposition and service we provide for brokers, partners and ultimately our
members. The achievement of significant new lending volumes of £1,215m
in 2024, an increase of 37% over the prior year, is a testament to the
enhancements we have made (and will continue to embed) with planned
investment in our mortgage / credit platforms to make it even easier to deal
with us, ultimately resulting in a better experience for members and
brokers.
We are conscious of the impact that the higher cost-of-living has had on
mortgage affordability and have proactively supported members facing
difficulties in meeting monthly payments. We were among the first lenders
to sign up to the Mortgage Charter, providing assurance to our members
that they will be helped through these testing times.
Our savings members are of utmost importance to the delivery of our
strategy as their deposits support borrowers achieve their goal of home
ownership. We remain committed to providing savers with secure
propositions that offer easy access to their savings and competitive interest
rates. Following the closures completed in 2022 we have maintained our
network at 31 branches, whilst improving our online digital proposition to
ensure an excellent experience for our members when accessing their
savings through their preferred channel.
The Group’s business activities are focused within the UK and
predominantly relate to mortgage lending which is funded primarily
through domestic deposits.
Both the Chair’s Statement and Chief Executive’s Review include a summary
of factors affecting our performance in 2024 and should be read in
conjunction with this report.
Overall financial performance
This section is presented on a group basis only as the financial performance
of the Group is assessed by Management at this level given the relatively
simple group structure.
Our financial performance is reviewed regularly by our Board using several
measures, including statutory profit before tax and underlying profit before
tax. Underlying profit represents an alternative performance measure
which excludes items such as fair value volatility and significant one-time
charges that do not reflect the Group’s day-to-day activities. Our Board
considers underlying profit before tax to be an appropriate measure of the
underlying performance of the business.
The presentation of underlying profit before tax remains consistent with
that in prior years. Further information is provided in this Strategic Report
with a reconciliation of the underlying profit to statutory profit included on
page 9.
__________________________________________________________________________________________
Strategic Report
Page | 9 Annual Report & Accounts 2024 Nottingham Building Society
KEY PERFORMANCE INDICATORS
Total Group basis
Gross new lending
£1,215m
2023: £887m
Total mortgage assets
£4.2bn
2023: £3.6bn
ECL coverage ratio
12bps
2023: 15bps
Total savings balance
£4.4bn
2023: £3.6bn
Interest paid to savers
£154.6m
2023: £91.8m
Net interest margin
1.72%
2023: 1.94%
Underlying cost to income ratio
73.0%
2023: 70.5%
Profit before tax
£13.9m
2023: £8.3m
Underlying profit before tax
£22.8m
2023: £24.2m
CET1 ratio
13.7%
2023: 15.2%
Leverage ratio
4.9%
2023: 5.2%
Average LCR
172%
2023: 184%
Financial highlights
As a mutual we do not pay dividends to external shareholders; our profit
requirements are driven solely by our need for ongoing capital to support
our activities. We look to ensure capital remains sufficient to ensure we are
resilient to severe economic stresses and enable continued investment to
help more members in the future. In 2024, the key financial highlights
included:
• Statutory profit before tax in 2024 of £13.9m (2023: £8.3m);
• Underlying profit for the year decreased to £22.8m (2023: £24.2m),
reflecting income growth, offset to a greater extent by higher costs;
• Interest receivable and similar income has increased to £267.3m
(2023: £200.6m) due to growth in mortgage balances and interest
rates remaining ‘higher for longer’, with Net Interest Margin (‘NIM’)
decreasing to 1.72% (2023: 1.94%) due to the impact of rising funding
costs;
• Gross mortgage balances increased to £4.2bn (2023: £3.6bn), whilst
Member deposit balances increased by £0.8bn to £4.4bn (2023:
£3.6bn);
• Underlying cost to income ratio increased to 73.0% (2023: 70.5%), due
to growth in the cost base exceeding growth in net interest income;
• Management expenses were £61.7m, an increase of £4.1m versus
2023. A significant proportion of this increase relates to a rise in
people costs and investment in our brand and transformation
programme;
• £nil charge was recognised in 2024 on provisions relating to
impairments (2023: credit of £0.1m), due to an improved
macroeconomic outlook and improvements in the House Price Index
(‘HPI’), whilst retaining an elevated provision balance of £5.2m (2023:
£5.2m) for the continued affordability pressures on borrowers;
• Common Equity Tier 1 (‘CET1’) and Leverage Ratio decreased to 13.7%
and 4.9% respectively (2023: 15.2% and 5.2%), primarily due to growth
in mortgage assets: and
• Voluntary payments made with regards to Philips Trust Corporation of
£11.2m, with £1.0m recovered through the administration process.
The results are prepared in accordance with the, UK-adopted, International
Financial Reporting Standards (‘IFRS’) as set out in Note 1 to the Financial
Statements. Underlying results are shown opposite, together with a
reconciliation to the statutory results.
Income Statement review
INCOME STATEMENT
TOTAL GROUP BASIS
Group
2024
£m
Group
2023
£m
Underlying net interest income
83.6
79.3
Underlying net fees and commissions receivable
0.9
2.4
Underlying Net income
84.5
81.7
Management expenses
(61.7)
(57.6)
Impairment credit on loans and advances to members
-
0.1
Underlying profit before tax
22.8
24.2
Voluntary payment expense associated with Philips
Trust Corporation
(11.2)
-
Recoveries against Philips Trust Corporation expense
1.0
-
Gains / (losses) from derivative financial instruments
3.9
(14.2)
Net strategic investment costs
(2.6)
(0.2)
Other
-
0.3
Loss on disposal of treasury assets
-
(1.8)
Profit before tax 13.9 8.3
Profitability
We made a statutory profit before tax in 2024 of £13.9m (2023: £8.3m) and
an underlying profit before tax of £22.8m (2023: £24.2m). The decrease in
underlying profit is primarily due to a rise in management expenses due to
the cumulative impact of higher inflation in recent years, continued
investment in both people and transformation activities and an uplift in
GenH fees. Net interest income increased in 2024 as a result of mortgage
book growth and careful margin management, offsetting the impact of
higher funding costs.
On a statutory basis, the Group’s profitability has been impacted by the
proactive and voluntary support offered in light of issues surrounding
Philips Trust Corporation. The background behind the voluntary support is
provided within the Chief Executive’s Review, on page 5, with further
information available on the Society’s website. In addition, statutory profit
benefitted from gains on derivative financial instruments in 2024 compared
to losses in 2023.
Profit after tax is our primary source of new capital and is essential in
ensuring long term security for members, as well as meeting the regulator’s
capital requirements. We continue to operate from a position of financial
strength and adopt a cautious approach to ensure we can best serve our
members, colleagues and the communities in which we operate.
__________________________________________________________________________________________
Strategic Report
Page | 10 Annual Report & Accounts 2024 Nottingham Building Society
Total Income and Net Interest Margin
2024
2023
Net Interest Margin
1.72%
1.94%
Statutory net interest income was £83.6m in 2024 (2023: £80.3m),
increasing £3.3m year on year, and reflects growth in income together with
a reduction in NIM to 1.72% (2023: 1.94%).
The fall in the Society’s NIM is attributable to an increase in funding costs,
as fixed term deposits have continued to reprice at higher rates throughout
2024. The Society has also enhanced its liability hedging strategy which
results in higher interest payable in 2024 but will help mitigate against the
impact of falling interest rates in the future.
The average rate paid to our savers above the average paid across the
market amounted to 49bps
1
(2023: 48bps), rewarding our savers with an
additional £19.0m in interest in 2024 (2023: £14.7m). Savings rates have
increased, due to higher average interest rates and a competitive market in
2024, coupled with additional savings balances to support growth and to
enable repayment of funding received through the TFSME. Nottingham
Building Society is committed to ensuring depositors are rewarded
appropriately for placing their funds with the Society and we have
continued to offer competitive rates to our members.
Other Income
Net fees and commissions receivable relates to fees, commissions and other
operating income; with 2023 benefitting to a greater extent from a change
in approach to the recognition of valuation fees.
Management Expenses
The Group’s management expenses include administrative expenses,
depreciation / amortisation and strategic investment costs.
2024
£m
2023
£m
Underlying administrative expenses
56.8
50.9
Depreciation and amortisation – underlying
4.9
6.7
Management expenses – underlying
61.7
57.6
Strategic investment costs
2.6
0.2
Change in accounting estimate
-
0.7
Other
-
0.5
Management expenses – strategic
2.6
1.4
Total management expenses
64.3
59.0
Represents:
Administrative expenses
59.4
52.3
Depreciation & amortisation
4.9
6.7
64.3
59.0
Management expenses have risen due to a combination of inflation and
ongoing investment in both technology and people to support the Society
in achieving its strategic goals. We continue to invest in a multi-year
transformation programme to improve the experience for our members.
We have focused on operating the Society efficiently with close control over
our costs and associated ratios which remain important measures as we
work to deliver our strategy.
As a result of these investments, management expenses have increased by
7.1%, with underlying management expenses increasing by 9.0% compared
to prior year. We continue to carefully manage our costs in line with internal
targets and are continuously looking to identify appropriate efficiencies,
whilst at the same time investing for the long-term future of the Society.
Impact of Philips Trust Corporation
The Society has incurred net expenditure of £10.2m, reflecting the
anticipated cost of voluntary payments to impacted members and
customers, after taking account of recoveries. Further information is
provided within Note 27.
1
CACI’s CSDB, Stock, January 2024 to December 2024, latest data available. CACI is an independent
company that provides financial benchmarking data of the retail cash savings market.
Gains / (losses) from derivative financial instruments
The Society uses derivative financial instruments to manage the interest
rate risk arising from its fixed mortgage treasury asset and savings accounts
and applies hedge accounting where possible. Changes in fair value are
primarily due to timing differences, which will trend to zero as the asset or
liability reaches maturity.
During the year, fair value gains amounted to £3.9m (2023: loss of £14.2m),
including:
2024
£m
2023
£m
Fair value movements on swaps held against the
mortgage pipeline
2.1
(2.8)
Amortisation gains / (losses) from the reversal of (losses)
/ gains recognised in both the prior and current periods
0.8
(6.6)
Movements in the ineffectiveness of the hedge
accounting portfolio
0.8
(4.5)
Fair value movements associated with treasury micro
hedge relationships
-
-
Fair value movements on swaps associated with the
secured funding vehicle
0.2
(0.3)
Gains / (losses) from derivative financial instruments
3.9
(14.2)
More detail on the fair value gains and losses in the period is available in
Note 5.
Impairment Credit on Loans and Advances to Members
We hold provisions for expected credit losses across all loans, based on the
probability of each loan defaulting and resulting in a loss, whilst considering
a range of assumptions about future economic scenarios and an assessment
of whether the credit risk of the loan has increased.
Despite the continued challenges faced by borrowers, the number of
borrowers in arrears by 30 days or more remains low at 0.55% at 31
st
December 2024 (December 2023: 0.35%).
An impairment charge of £nil was recorded in 2024 (2023: credit of £0.1m),
reflecting an improved macroeconomic outlook, resulting in a lower
coverage ratio of 0.12% (2023: 0.15%), offsetting the expense associated
with growth in mortgage assets. Total impairment loss provisions at 31
st
December 2024 were £5.2m (December 2023: £5.2m). The key judgements
and estimates involved in the calculation of impairment loss provisions,
including the use of post model adjustments, are set out in Note 15.
Taxation
The tax charge for the period amounts to £4.6m (2023: £nil), reflecting the
higher level of profitability within the Society as a standalone entity.
Further information is provided in Note 8 to the Financial Statements.
We manage our tax obligations to ensure compliance with all statutory
requirements and do not intentionally structure transactions to give a tax
result which is contrary to the intentions of Parliament. We maintain an
open and transparent relationship with His Majesty’s Revenue and Customs
(‘HMRC’) and the Board Audit Committee (‘BAC’) reviews our Tax policy
annually. This provides a framework for the operation, planning and
oversight of tax and tax risk to ensure compliance with relevant legislation.
The policy has been complied with throughout the year.
__________________________________________________________________________________________
Strategic Report
Page | 11 Annual Report & Accounts 2024 Nottingham Building Society
Statement of Other Comprehensive Income review
The defined pension scheme’s liabilities are suitably hedged by the pension
scheme’s assets due to the hedging strategy undertaken by the Society. This
can be observed in both 2024 and 2023, where gains / (losses) on the
pension scheme’s liabilities have been appropriately offset by (losses) /
gains on the pension scheme’s assets.
Micro fair value hedge accounting has been implemented during the year
to mitigate the impact of interest rate movements on fixed rate treasury
assets. Treasury disposals in 2023 crystalised Income Statement losses of
£1.8m, with a corresponding gain in other comprehensive income.
Statement of Financial Position review
Group
2024
£m
Group
2023
£m
Loans and advances to members
4,201.8
3,543.9
Liquid assets
917.0
801.3
Other assets
107.9
129.7
TOTAL ASSETS
5,226.7
4,474.9
Retail & wholesale funding
4,908.3
4,150.4
Other liabilities
65.1
81.0
Reserves
253.3
243.5
TOTAL LIABILITIES & RESERVES
5,226.7
4,474.9
We provide residential mortgages in the UK, through a network of approved
mortgage brokers. We fund most of the mortgage lending with members’
savings, through a range of channels, while the remainder is funded from
other financial institutions, including Central Bank facilities, on competitive
terms.
Mortgage lending
Gross balances
2024
£m
2023
£m
Residential
3,650.3
3,155.0
SBL 589.5 437.4
Total
4,239.8
3,592.4
Total gross mortgage balances were higher than in the prior period at
£4.2bn (2023: 3.6bn). Net lending in the year reached £647.4m (2023:
£555.5m), driven by strong market sentiment to the Society’s propositions.
Balance growth of 18% was fuelled by increased exposure to owner-
occupied residential mortgages through organic and inorganic channels,
outperforming the UK market.
Residential mortgage balances, including owner-occupied and traditional
buy-to-let, rose to £3.7bn (2023: £3.2bn), while Secured Business Lending
(‘SBL’) balances, including commercial and portfolio buy-to-let, increased to
£0.6bn (2023: £0.4bn). Buy-to-let remains a key part of our lending mix,
complementing our core focus on supporting extraordinary borrowers,
balancing risks, and enhancing financial resilience. We acknowledge the
vital role of quality rental housing as a stepping stone to homeownership.
The Society is also executing a planned exit from the commercial segment.
Our lending policy strikes a balance between supporting homeownership
and safeguarding borrowers and the Society. In 2024, we maintained this
policy while enhancing lending through optimised scorecards and strategies
within our risk appetite. Average loan-to-value (‘LTV’) for new lending was
69.7% for Residential and 61.0% for Buy-to-Let (2023: 71.5% and 61.2%),
with overall book indexed LTV at 52.4% and 50.0%, respectively (2023:
50.2% and 49.5%).
The mortgage portfolio is well distributed throughout England and Wales
and is predominantly focused in the three broad areas of East Midlands,
Yorkshire & Humberside and London & South-East.
Retail and wholesale funding
The Society funds its mortgages through a combination of retail savings and
wholesale funds.
Gross balances
2024
£m
2023
£m
Branch savings
3,188.1
2,672.3
Non-branch savings
1,162.1
895.0
Retail savings
4,350.2
3,567.3
Secured wholesale
494.5
515.0
Unsecured wholesale
45.4
48.8
Collateral liabilities
17.9
19.3
Retail & Wholesale funding
4,908.0
4,150.4
The Group operates a diverse funding strategy to ensure an optimum mix
and duration of retail and wholesale funding. Retail savings are, and will
continue to be, the cornerstone of our funding requirement, with the
remainder acquired via the secured and unsecured wholesale funding
markets.
As a mutual, we remain committed to providing savers with a secure home
for their deposits, by offering competitive products through both our online
channels and branch network, which remains a critical part of our strategy.
Notably, savings balances acquired through digital channels exceeded £1bn
for the first time in 2024. Our savings balances now stand at £4.4bn (2023:
£3.6bn) with growth in 2024 particularly driven via digital which has offered
market-leading rates during the year. We aim to support our members
through this challenging period by paying attractive rates while managing
current and future financial risks.
Total wholesale funding at 31
st
December 2024 was £0.6bn (31
st
December
2023: £0.6bn), representing 11.4% (2023: 14.0%) of total funding. The
movement in wholesale funding in 2024 reflects a £25m repayment of some
of our drawings from the Bank of England’s TFSME significantly ahead of its
contractual maturity date, and the rollover of the existing secured bilateral
funding facility to £186.1m (2023: £246.2m).
Subsequent events
On 5
th
February 2025, Lace Funding 2025-1 PLC raised £350m of funding in
the Group’s debut public Residential Mortgage-Backed Securities (‘RMBS’)
issuance and on 7
th
February 2025, the Society repaid the remaining TFSME
funding balance to £nil, reducing the amounts owed by the Society to £nil.
Further information is provided in notes 16 and 37.
Liquid assets
The Society maintains a prudent level of liquid resources, of an appropriate
level and quality, to meet its financial obligations as they fall due under
normal and stressed conditions. This is demonstrated by the strong Liquid
Asset Ratio which amounted to 18.66% at 31
st
December 2024 (2023:
19.31%).
The level of liquidity required is closely monitored and considers forecasted
and stressed outflows on a dynamic basis. We have increased our levels of
liquidity during 2024 and the year-end position is strong, which provides
protection and flexibility in this uncertain economic environment.
The Group’s liquidity resources comprise a combination of ‘On-Balance
Sheet’ liquid assets and access to contingent funding from the Bank of
England secured against approved mortgage portfolios. By holding liquid
resources of the highest quality, which can be turned readily into cash, the
Group is able to manage the excess liquidity it holds to a lower level.
The Group’s ‘On-Balance Sheet’ liquidity is made up as follows:
2024
£m
2023
£m
Balances held with the Bank of England
443.3
429.1
Multilateral Development Banks
60.4
28.8
UK Gilts & T-Bills
109.8
63.2
Mortgage-backed securities
70.3
97.8
Covered Bonds
159.4
150.3
Other
73.8
32.1
Liquid assets
917.0
801.3
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Strategic Report
Page | 12 Annual Report & Accounts 2024 Nottingham Building Society
At 31
st
December 2024 liquidity included £0.9 billion of High-Quality Liquid
Assets (‘HQLA’) (2023: £0.8 billion), which are either in cash or are readily
realisable as cash when required. 100% of our liquidity assets are rated A or
above (2023: 100%).
The Prudential Regulatory Authority (‘PRA’) monitors liquidity under the
Capital Requirements Regulation (‘CRR’) framework. The two key measures
are the Liquidity Coverage Ratio (‘LCR’) and Net Stable Funding Ratio
(‘NSFR’). These are being reported in accordance with the transitional CRR
/ CRD rules, which came into force on 1
st
January 2022. The Society was in
excess of the minimum levels required for both measures at the end of the
year with the LCR being 172% (2023: 184%) and NSFR being 150% (2023:
143%).
Capital
The Society continues to focus on maintaining capital ratios to protect
members’ interests, with all capital ratios in excess of the regulatory
minima.
Our regulatory capital predominantly comprises accumulated retained
profits in the general reserve and subscribed capital provided through
Permanent Interest-Bearing Shares (‘PIBS’). Capital is ultimately held for the
protection of depositors and other creditors by providing a buffer against
unexpected losses.
The Regulator requires that the Society holds a certain amount of capital
against the assets it holds. This is referred to as its Total Capital Requirement
(‘TCR’). As at 31
st
December 2024, the Society’s TCR was set at 8.4% (2023:
8.5%) of Risk Weighted Assets (‘RWAs’) or £151.2m (2023: £133.2m).
Total regulatory capital has increased by £6.6 million during 2024 to £268.5
million (2023: £261.9m). This is mainly due to retained profits accumulated
during the year, which are added to the general reserve.
As a result of the growth in our mortgage book, RWAs have grown by
£225.1m during 2024. Our CET 1 Ratio, calculated on a transitional basis,
has reduced to 13.7% from 15.2% at 31
st
December 2023.
The following table shows the composition of our regulatory capital as at
31
st
December:
2024 2023
Transitional
CRD
Transitional
CRD
CAPITAL RESOURCES £m £m
COMMON EQUITY TIER 1 CAPITAL
General reserves
253.2
243.3
Fair value reserves
0.1
0.2
Regulatory adjustments & deductions
(8.7)
(5.5)
TOTAL COMMON EQUITY TIER 1 CAPITAL
244.6
238.0
TOTAL ADDITIONAL TIER 1 CAPITAL
-
-
TIER 2 CAPITAL
Permanent Interest Bearing Shares
23.9
23.9
TOTAL TIER 2 CAPITAL
23.9
23.9
TOTAL REGULATORY CAPITAL
268.5
261.9
RISK WEIGHTED ASSETS
1,790.4
1,565.3
CAPITAL RATIOS
%
%
Common Equity Tier 1 (‘CET1’) ratio
13.7
15.2
Total Tier 1 ratio
13.7
15.2
Total Capital ratio
15.0
16.7
Leverage ratio
4.9
5.2
Capital requirements
Pillar 1 – we hold capital to meet Pillar 1 requirements for credit risk,
operational risk and market risk.
Pillar 2A – PRA requires us to hold additional Pillar 2A capital for the risks
not covered under Pillar 1. At 31
st
December 2024, the regulatory
requirement was 0.4% of RWAs, a point in time estimate set by the PRA
during the year.
Capital Buffers – in common with other banks and building societies, we are
required to hold capital buffers that can be utilised to absorb the impact of
a stress scenario. Our buffer comprises the following elements:
• sector-wide capital conservation buffer, set at 2.5%;
• macroprudential countercyclical capital buffer currently set at 2.0% of
RWAs for exposures to the UK; and
• additional requirements calculated through the Internal Capital
Adequacy Assessment Process (‘ICAAP’) to satisfy our risk appetite
over the planning horizon and absorb the impact of a severe, but
plausible, stress scenario.
The ICAAP is reviewed by the PRA when setting the Society’s Total Capital
Requirement (Pillar 1 and Pillar 2A). We perform regular stress tests on our
capital base and these tests have consistently demonstrated a surplus
above requirement after applying management actions.
We have utilised available transitional arrangements in relation to the
impact of adopting IFRS 9 on regulatory capital and the figures above reflect
those arrangements.
The Leverage Ratio, which is calculated as Tier 1 capital divided by total
Balance Sheet exposure, has decreased to 4.9%. This is being reported as
per the transitional CRD rules. This is driven primarily by higher asset
exposures due to growth in the mortgage book.
Further information regarding the Society’s capital management can be
found in the Pillar 3 report available at www.thenottingham.com.
Principal risks and uncertainties
Nottingham Building Society is a low-risk, UK-based organisation and, in
common with other financial institutions, the nature of the business results
in several unavoidable or inherent risks.
The Society captures the most material risks to which it is exposed within
eight principal risks. These risk categories were updated through revisions
to the Risk Management Framework (‘RMF’) in March 2024. The Society
now defines the following eight Principal Risks:
Strategy &
Business Model
Risk
The risk that Nottingham Building Society does not have
an appropriate strategy and Corporate Plan to deliver
sustainable long-term value to members and / or fails to
effectively implement and execute the strategy.
Strategy Risk includes consideration of climate related
risks.
Capital
Management
The risk that Nottingham Building Society does not have
sufficient capital or allocates it ineffectively. This
includes Society
’s ability to manage its capital
effectively in a range of business and economic
environments.
Market &
Interest Rate
The risk to Nottingham Building Society’s net interest
income and economic value arising from changes in
market interest rates and mismatches in the Society’s
Balance Sheet.
Retail Credit
The risk of loss stemming from a borrower’s failure to
repay a loan or otherwise meet a contractual obligation.
[Note: wholesale credit risk is covered under Liquidity
and Funding Risk].
Liquidity &
Funding
The risk that Nottingham Building Society, although
solvent, does not have sufficient financial resources
available to meet its obligations as they fall due. This
includes consideration of wholesale credit risks.
Legal &
Regulatory
Legal and Regulatory Risk is the risk that Nottingham
Building Society fails to comply with legal and regulatory
requirements and / or fails to meet its contractual
obligations.
Customer &
Conduct
The risk associated with failure to deliver good
outcomes for Nottingham Building Society’s members.
Operational
The risk of loss resulting from human factors,
inadequate or failed internal processes and systems or
from external events.
__________________________________________________________________________________________
Strategic Report
Page | 13 Annual Report & Accounts 2024 Nottingham Building Society
The Society continues to identify new or evolving risks through its RMF.
Looking ahead, and taking note of the external environment, the Society is
conscious of economic uncertainties and other horizon risks. In recent
times, the change of government in the UK, change of president in the US,
continued conflict in Ukraine and the Middle East, as well as the continued
volatile interest rate environment, give rise to a number of risks and
uncertainties. Added to this, the ever-competitive trading environment, the
increasing rate of change of technology, and the continued evolution of the
regulatory environment, give rise to further challenges which must be
navigated in the pursuit of the Society’s strategy.
Economic uncertainties
As headline inflation has continued to fall, the BoE has responded with
reductions in the Bank Rate. As wage growth continues, the combined effect
of these trends is anticipated to reduce pressure on cost-of-living for UK
homeowners, with consequent reduction in inherent credit risk in retail
mortgage portfolios.
The reducing interest rate environment does, however, give rise to
downside risks of margin compression, and market risks due to uncertainty
around the quantum and timing of rate changes.
In addition, heightened geopolitical uncertainty continues, with war
persisting in Ukraine giving rise to significant global economic risks. This,
added to changes in the US administration and signalled changes to US
economic policy (a more protectionist stance, tariffs etc), gives rise to
significant economic uncertainty.
Domestically, the new UK government has delivered its first Budget, with
some significant changes, the economic impact of which have yet to be
seen. In particular, changes to stamp duty on Buy To Let (‘BTL’) property
could have an impact on demand in this sector, with increased employer
National Insurance having the potential to impact unemployment, with
consequent second order risks for the Society.
While changes to fiscal policy do give rise to some uncertainty, the new
government has also delivered positive messages on its support of the
mutual sector and financial services more broadly, seeing the sector as a key
driver of its growth agenda going forward.
As always, the Society remains mindful of these sources of economic
uncertainty, and it continues to maintain significant surpluses of financial
resources, both capital and liquidity, to navigate through any turbulence.
The Society has historically had low levels of arrears and defaults, and its
mortgage book has proved extremely resilient during economic turbulence
over the past several years.
However, the Society remains ever vigilant, and undertakes regular stress-
testing, conducts an annual ICAAP, regularly assesses the levels of
provisions held against bad debts and sets a capital appetite requirement at
a level that is designed to be more than adequate to absorb credit losses
should they arise. The Society maintains a capital position in excess of its
regulatory capital requirement (TCR plus combined buffers).
Lending decision-making is supported by models which are regularly
reviewed and overseen as part of the governance framework to ensure they
remain relevant in an uncertain macroeconomic environment. The Society
will continue to take a prudent approach both in its assessment of house
prices and in its forecast of arrears levels.
The Society will also continue to monitor closely all relevant economic
forecasts to ensure that all emerging risks and shifts in dynamics are
considered.
Trading environment
Trading conditions continue to be challenging as the mortgages and savings
markets remain highly competitive.
On the mortgages side, the Society’s strategy and business plan is seeking
to increase margin, while growing the Balance Sheet, the combination of
which is only possible by identifying and catering for underserved niches in
the market. The Society has been successful in this regard in recent years,
having significantly grown its Balance Sheet while delivering strong lending
margins on new business. However, to maintain this trajectory, the Society
will need to continue to innovate and develop its underlying capabilities in
credit decisioning, operations and technology more broadly.
On the Savings side, as rates continue to fall, there is a risk of margin
compression. In addition, the closing and repayment of the BoE TFSME
facility creates a sectoral increase in demand for funding which is expected
to put upward pressure on pricing.
Noting the challenges of this environment, the Society has made
developments in several areas that should help to offset some of these risks.
The delivery of the rebrand and unification of the digital and branch
channels under Nottingham Building Society brand is anticipated to provide
some differentiation and benefit on the savings side, with improved
capabilities around proposition development and pricing continuing to
provide benefit on the lending side.
Strategy risk
As the Society continues on its journey to modernise its capabilities and
proposition, grow the Balance Sheet, and enhance its model to build a
sustainable business for the long term, there continue to be risks to the
delivery of this vision.
The Society is particularly focused on the risk that we do not realise the
lending margins anticipated in the plan, that cost of funds is higher than we
anticipate, that costs related to transformation are higher than anticipated,
or that expected efficiencies and lower cost to income ratio generated
through delivery of transformation are not realised.
With these risks in mind, the Society has clear guardrails within which the
business is required to operate to ensure that any deviations from expected
outcomes are identified early and addressed. These guardrails ensure that
as we grow and transform the business, we are doing so in a measured,
deliberate and stable manner.
Reputational risk
The Society has recently launched its new brand, with broadly positive
feedback from staff, sector and our members. However, any major rebrand
exercise brings inherent reputational risk which must be anticipated,
monitored and managed.
While the Society experienced some negative sentiment from some corners
of the press and public around the announcement of the new brand, this
was isolated and did not have any notable impact on complaints, business
operations, or business volumes.
However, the Society remains vigilant to the heightened reputational risk at
this time given the context of the recent rebrand and noting that the roll-
out and embedding of the brand will continue for some time.
Funding risk
Volatile markets and elevated interest rates have resulted in increases to
costs of funds and balancing the reward of saving members with margin
management will need continued careful consideration. The higher interest
rate environment has led to an increasingly competitive landscape.
Furthermore, the closure of the TFSME facility does create an additional
sector-wide pressure on demand for funding, which must be taken account
of in funding plans.
The Society possesses a diverse mix of funding options to allow it to secure
retail funding at competitive rates, including the digital capability provided
by the app, and has worked to enhance capabilities and funding options
over the past year. Liquidity is assessed as part of the Internal Liquidity
Adequacy Assessment Process (‘ILAAP’) which includes robust stress
testing.
__________________________________________________________________________________________
Strategic Report
Page | 14 Annual Report & Accounts 2024 Nottingham Building Society
Partnerships risk
Nottingham Building Society works closely with key partners who provide
services to members on its behalf. As the Society explores new ways of
meeting the needs of its members, it is likely that the number of key
strategic partners will continue to increase.
Nottingham Building Society has existing relationships with a number of key
strategic partners who support elements of the strategy, such as a forward-
flow lending partner, lending and decisioning platform providers, core-
banking platform provider, and infrastructure and networking providers.
The Society recognises that working with external parties requires close and
continuous oversight, and has robust measures in place to support this. The
Society continues to manage such relationships closely enabled by rigorous
contractual requirements and strict service delivery standards. All partners
are monitored to ensure that their services meet the Society’s high
standards at all times and, where applicable, ensuring that they meet
defined financial adequacy requirements. Metrics on service delivery are
reviewed regularly at management committees.
Transformation risk
The Society continues to make significant investment in its IT infrastructure,
to both enhance operational resilience and provide enhanced capability to
facilitate its strategic goals.
The inherent risks associated with technological change, including potential
business disruption and / or operational loss, will be at heightened levels
during this transformation. This has been recognised by the Society and is
being appropriately managed using a defined change framework, with
additional investment in change management capabilities, including the
appointment of several suitably experienced professionals.
Cyber risk
In tandem with the Society’s increasing digital presence, cyber security risk
continues to rank highly on the Society’s agenda and over recent years the
Society has observed an increase in the volume of external cyber-attacks.
This, combined with the increasing technological and organisational
sophistication of malicious actors, represents an increasing challenge and
threat to the business, in common with the reported experience of other
businesses across all sectors.
Work is constantly undertaken to enhance and monitor the effectiveness of
risk management in this space. The investment of resources to support this
will continue, with the support of third parties who are working closely with
the Society to ensure information security controls remain robust against
the fluid external threat environment.
The Society remains proactive and will continue to invest in its cyber
capabilities as this ‘arms race’ continues. Technical expertise is
complemented with education and awareness activities to ensure that
employees are equipped to recognise and manage the risks associated with
cyber activity. The capability to respond to and recover from cyber events
is kept under continuous review including contingency planning, crisis
management and disaster recovery plans.
Operational resilience risk
Operational Resilience remains a significant focus for the Society, reflecting
the important role that the Society plays in its members’ lives and the
potential impact on members due to disruption to our services. In addition,
Operational Resilience remains a key regulatory focus.
Nottingham Building Society has worked to develop a clear understanding
of its most important business services which, if significantly disrupted, have
the potential to cause intolerable harm to its members. In parallel with
broader transformation and change activities, the Society continues to
invest in improvements to the reliability and resilience of its business
services generally, with a particular focus on those that could have a
detrimental impact to its members.
Climate change risk
Enhancement of the Society’s approach to climate-related risks continues
with greater definition around responsibility frameworks for climate risk
and metrics to monitor objectives related to carbon neutrality and Net Zero.
Risks remain however around interpreting the impact of climate on the
Society’s assets and members with modelling and the sourcing of reliable
data being an industry-wide challenge.
Regulatory and legal risk
Several regulatory requirements are currently being delivered. The
implementation of Consumer Duty was completed in line with regulatory
prescribed timeframes, while the potential impact of incoming Basel 3.1 and
associated Small Domestic Deposit Takers (‘SDDT’) requirements is a key
consideration for the Society. The timeframe for implementing the new
regulatory regime has been delayed to the 1
st
January 2027.
Activities for areas like Climate Risk, Operational Resilience and Consumer
Duty are enduring and require continued dedication of resources to
facilitate effective embedding, evolution of approaches and ongoing
monitoring and management. The volume of new regulatory activities
shows no sign of abating, with further developments expected into 2025,
with government having signalled intended reforms to Senior Manager
Certification Regime (‘SMCR’) and a review of the impact of the Consumer
Duty.
The Society monitors the regulatory environment actively to ensure that it
can comply fully with all new and changing regulatory requirements.
Horizon scanning is a key process that supports the work of the Legal,
Regulatory & Conduct Risk Committee (‘LR&CC’), which oversees the
Society’s approach to developing new processes in line with regulatory
changes.
Anthony Murphy
Chief Financial Officer
5
th
March 2025
__________________________________________________________________________________________
Stakeholder Engagement Report
Page | 15 Annual Report & Accounts 2024 Nottingham Building Society
The Board acknowledges the variety of stakeholders we have and the significance of evaluating and comprehending their requirements. We have established
communication channels for each stakeholder group to guarantee that their perspectives are considered in the overall decision-making process.
The table below outlines our primary stakeholder groups and how we engage with them:
Stakeholder
Who they are
What is expected from us?
How do we listen and engage?
Members and
customers
• Retail borrowers
• Retail savers
• Offer mortgages that are affordable and
fairly priced;
• offer good value savings accounts;
• provide a friendly, efficient service;
• tailor help for vulnerable members; and
• support broader societal goals.
• AGM;
• member newsletter;
• member panels;
• focus groups and panels;
• Society’s website;
• face-to-face;
• telephone;
• e-mails; and
• volunteering.
Colleagues
• Colleagues
• Contractors
• Implement equitable reward and
remuneration policies;
• support a good work-life balance;
• encourage and support personal
development and training;
• foster an inclusive culture that values
diversity and celebrates it;
• prioritise the well-being of physical, mental,
and financial aspects;
• demonstrate empathy, respect, and fairness
in all interactions;
• show genuine concern for the physical,
mental, and financial well-being of
colleagues; and
• show empathy, respect, and fairness to all.
• Engagement via leadership;
• colleague surveys;
• provide engagement via leadership
teams;
• connect through colleague networks;
• keep colleagues up to date on all things
Society related; and
• data analytics and monitoring activities
on key engagement and employee value
proposition key performance indicators.
Community
• Local communities
• Charities and community
groups
• Dedicate resources to promote the economic
well-being of communities;
• actively contribute to broader societal goals;
• cultivate an inclusive culture that values and
celebrates diversity; and
• operate as a sustainable business while
embodying social responsibility.
• Advocacy on matters important to
stakeholders;
• addressing climate change,
encompassing carbon footprint
reduction and achieving Net Zero
emissions;
• supporting local community initiatives;
and
• charity donations and charity days for
staff to volunteer their time.
Partners
• Brokers
• Suppliers
• Auditors
• Industry bodies
• Investors
• Ensure ease of interaction and simplicity in
dealings;
• collaborate as trusted partners to achieve
shared success;
• provide helpful, efficient, and approachable
service; and
• take tangible steps to contribute to broader
societal goals.
• Direct engagement through specialist
teams;
• direct engagement through face-to-face
meetings and events;
• Annual Report and Accounts;
• Regulatory News Service
announcements; and
• investor reporting.
Regulators
• Central and local
governments
• PRA
• FCA
• Swiftly and proactively resolve member
issues;
• act within the law and regulations and in the
interests of our members;
• operate in line with the requirements of
Consumer Duty, ensuring products are fit-
for-purpose and represent fair value;
• be financially strong and secure by
maintaining adequate resources, including
capital and liquidity;
• act with integrity and transparency; and
•
prioritise operational resilience.
• Operate in accordance with the law and
regulations, prioritising the well-being
of our members and customers;
• quickly and pre-emptively address
member concerns; and
• ensure financial strength and security
by upholding sufficient resources,
including capital and liquidity.
__________________________________________________________________________________________
Corporate Responsibility Report
Page | 16 Annual Report & Accounts 2024 Nottingham Building Society
As a mutual building society, it’s important for us to have a meaningful and
lasting impact on our local communities. This impact spans across our 31
branch locations, our Nottingham head office and our colleagues’ home
locations. Our impact takes many forms: through volunteer time, given by
colleagues; charitable fundraising and donation of goods to support
charities and non-profit organisations, in addition to financial donations to
our chosen charities. Our total spend on community investment in 2024 was
£124,437, equivalent to 1.49% of 2023 pre-tax profit.
Continuing to support people who are
homeless and at risk
Our social impact programme continues to focus on supporting people who
are homeless or at risk of homelessness to access both emergency and
longer-term services to help them towards a safe home. In 2024 we
sustained our charity partnerships with Emmanuel House and Shelter. To
start the year, we hosted both of our charity partners at our all-colleague
annual event, ‘POP Live’. The opportunity to sit down with both partners,
on stage in front of 500 colleagues was an apt way to begin the year, raising
awareness for the work they do, empowering colleagues to engage with our
partners as well as raising vital awareness of the struggles currently faced
by people experiencing homelessness or at risk of becoming homeless.
Many colleagues sited the session as a stand-out part of the whole event,
cementing our commitment to our communities as an important priority for
the Society.
Our partnership with Emmanuel House, who are a Nottingham-based
independent charity working to support people who are homeless, rough
sleeping, in crisis or, at risk of homelessness in and around the city has been
supported by colleagues and members through donations of goods and
funds throughout the year. Our colleagues have collectively given 240 hours
of volunteer time to the charity, serving meals, supporting with site
maintenance and sorting donations at the Support Centre. As well as this,
our colleagues have contributed their professional skills in the form of
membership on the charity’s Marketing and Fundraising committee as well
as a recruitment and onboarding best-practice deep dive to improve the
quality and suitability of applications for roles with the organisation. Rosie
Needham-Smith, Marketing and Fundraising Manager at Emmanuel House
said of our partnership, “We continue to enjoy our mutually beneficial
partnership with Nottingham Building Society, the support they have given
enables us to continue our work tackling homelessness in our city. It is the
support of the wider community that enables us to succeed in helping
people out of homelessness and we are deeply grateful for the variety of
support that Nottingham Building Society continues to provide.”
To complement working with a Nottingham-based organisation, our other
charity partnership with Shelter allows us to support people across England,
meaning any of our colleagues or members could signpost people to receive
assistance wherever they are in the country. Our colleagues have continued
to fundraise for Shelter in 2024, creatively taking part in events such as the
charity’s ‘Vertical Rush’ challenge, climbing 420 steps, (42 floors) in
London’s Tower 42 building and raising over £750, as well as holding
multiple bake sales in branch and contributing to Shelter’s ‘Super Santa’ gift
drive.
In August colleagues from our Lending teams, predominantly Payment
Support advisors visited Shelter’s Sheffield-based Helpline, of which our
charitable funding has been supporting. The day gave an opportunity for
our colleagues to hear from people working on the Helpline, sharing the
complex scenarios people accessing support are experiencing as well as
learning more about Shelter’s resources and processes that support the
wellbeing of their Helpline advisors. We have taken some of these learnings
to improve our own processes for colleagues in payment support roles.
Bradley Ewles, Corporate Partnerships Executive at Shelter shared “It was a
delight to host colleagues from Nottingham Building Society at our Helpline
in August. After a generous donation to our Helpline last year, we were keen
to show the amazing work of our Helpline colleagues and the impact that it
has. The day was also a learning experience for Shelter teams too as we
reflected on best practice and factors affecting homelessness and mortgage
repayments. Days like this are crucial to strengthening the bond between
our two organisations and have laid the foundations for an even more
successful partnership going forward.”
We will continue to work with both Emmanuel House and Shelter in 2025,
building on our mighty foundations to enable further colleague and
member involvement with each of them.
At the heart of our branch communities
Beyond our partnerships with Emmanuel House and Shelter, our branch
colleagues continued to lean in to causes most in need in their local areas.
This culminated in gifting of volunteer time, donations of goods and
awareness raising as well as fundraising through events such as bake sales,
themed weeks and physical challenges.
Our 31 branch locations collectively gave 2,119 volunteer hours, an increase
from the year before as our teams committed to focusing on positive
community impact as a core part of their purpose. Our branch teams
organised more in-house events than ever before - seeking to benefit both
members and non-members in their local area - such as fraud and scam
awareness sessions, bereavement cafes and charity-led coffee mornings to
bring people together and provide a safe space for people to connect and
share life experiences with one another.
Empowering our colleagues to go further
Alongside our branch teams, colleagues across all locations invested more
than ever in relationships with charities and non-profits needing support. In
fact, over 50% of our colleagues gave their working time to benefit causes
in 2024. This accumulated in 3,522 hours (2023: 2,462 hours) of volunteer
time, a record all-time high for the Society since we began formally
recording our social impact.
We’ve also seen further uplift in colleague sentiment around our social
impact programmes, with 90% of colleagues agreeing that our commitment
to our communities is genuine, a 10% increase on 2023’s results.
Colleagues have not only given time to personal passions and local
connections, but they have also engaged with centrally organised activities
such as our ThinkForward business mentoring programme, a six-week
commitment working with young people identified as at risk of becoming
Not in Education, Employment or Training (‘NEET’) when they leave
secondary education. For the third year running, our volunteers supported
young people to build confidence in their own skills and to open their minds
to the various opportunities they have beyond secondary education.
As we reflect on 2024, we’re pleased that our ambition to embed our social
impact programmes and continue to offer colleagues accessible
opportunities to engage with these has seen results. In 2025 we will
continue to focus our work on supporting people who are homeless or at
risk of homelessness to access essential services as well as further
empowering our branch network to show up for causes and issues faced by
our local communities through giving their working time and resources to
make a continued, sustainable impact.
__________________________________________________________________________________________
Corporate Responsibility Report
Page | 17 Annual Report & Accounts 2024 Nottingham Building Society
Building an inclusive culture
Aligned with our new brand promise, our culture focus has been on
facilitating an inclusive environment to support delivering the best
outcomes for our members.
Creating an inclusive workplace is a journey we're fully committed to; in
2024 we launched four of our five colleague-led inclusion networks. These
networks focus on a range of personal characteristics and interests
including: mental health, gender, identity, sexuality, race, ethnicity and
menopause. They are now playing a key role with awareness, education and
celebration of our difference, acknowledging that when we can bring our
authentic selves to work, we have a greater opportunity to perform at our
best – and this helps make our building society a brilliant place to work.
Our colleague networks build strong internal communities, and act as a
sounding board for our Diversity, Equity and Inclusion, (‘DE&I’) strategy and
our people policies, ensuring we protect and support our colleagues to the
highest standard.
It's an evolving journey that sometimes means trying things for the first
time. For example, our Embrace network, (focusing on inclusivity from the
perspective of race and ethnicity) did just that earlier this year. Raji Sidhu-
Housden, Business Development Manager, shared; “My experience being
at Nottingham Building Society, at the height of the riots earlier on this year
was good and refreshing. As a British Asian, to feel targeted, isolated and
frankly confused about the mood of the nation towards me being here in
the UK in my home was rather unnerving. However, that changed when the
Society very quickly responded with action, setting up support groups on
Teams and in-person at Head Office for colleagues and leaders to get
together and simply ‘talk, discuss and acknowledge’ what was going on
around us. It made me feel valued and ‘seen’ and that was a truly
remarkable moment in my journey with the Society and personally for me
it was an affirmation that I had finally arrived at an organisation that I am
truly aligned with and vice versa.”
2024 was a year of many firsts for our inclusion networks - our Pride group,
(focusing on inclusivity for the LGBTQIA+ community) led our inaugural
sponsorship of NottsPride in July. Nearly 40 colleagues came together,
including CEO Sue Hayes, to celebrate and march in the parade. For many
colleagues this was both a happy and proud occasion, seeing us stand
publicly as a society who show up for all colleagues, no matter their personal
characteristics.
We also celebrated our first ‘Family at work’ morning in the summer - led
by members of our Women’s network - inviting children and young people
connected with our colleagues to come into both our branches and head
office building for a morning of education and enjoyment. Our colleagues
facilitated introductions to our history, saving versus spending as well as a
scavenger hunt, crafts and face painting. It was a great way to bring
colleagues together whilst giving children and young people an insight into
the breadth of careers and opportunity at Nottingham Building Society.
Beyond our inclusion networks, in 2024 we made great progress with our
overall investment in our colleagues, providing more opportunities for
learning-based development - introducing a brand-new e-learning platform
and piloting additional training for colleagues on topics such mental health
and wellbeing as well as change excellence and process improvement.
We saw out the year with the appointment of Lisa Winnard into the role of
Chief People Officer (‘CPO’). Since joining us in 2023, Lisa has been
dedicated to our mission of cultivating an inclusive and forward-thinking
Society, where every colleague has the means to fulfil their true potential.
__________________________________________________________________________________________
Sustainability Report
Page | 18 Annual Report & Accounts 2024 Nottingham Building Society
The Financial Stability Board created the Task Force on Climate-Related
Financial Disclosures (‘TCFD’) to improve and increase consistent reporting
of climate-related financial information. The following Sustainability Report
presents the Society’s climate-related disclosures under the TCFD
requirements.
Governance
Nottingham Building Society’s Board is ultimately accountable for all climate
change related matters. The Executive Committee (‘ExCo’) is responsible for
deriving the Society’s strategic response to climate change and overseeing
day to day management of climate-related activities. It provides the focal
point for climate-related decision-making and is supported by Subject
Matter Experts from across the Society. The BRC and the Executive Risk
Committee (‘ERC’) are responsible for oversight of climate-related risks.
Risk oversight committees, include the Asset & Liabilities Committee
(‘ALCo’), Retail Credit Committee, Operational Risk & Resilience Committee,
Model Governance Committee, LR&CC and Change Portfolio Investment
Committee (‘CPIC’). These committees have primary responsibility for
identifying, managing, and reporting of climate-related and other risks. The
ExCo has ultimate responsibility for co-ordinating all climate-related risks
and assessing them collectively as part of the quarterly review of the
Strategy Risk dashboard, of which climate risk is a component.
The BRC (under delegated authority from the Board) has been fully engaged
with the Society’s response to climate change.
Nottingham Building Society operates a ‘three lines of defence’ model for
risk management, in common with many financial sector firms.
Responsibility for identifying, managing and reporting risks, including
climate-related risks, resides with the first line of defence. The second line
of defence is responsible for providing challenge and oversight over the first
line, the risks being assessed and modelled and oversight of the reporting
of them to ensure it remains comprehensive. The third line of defence is
responsible for providing independent assurance and assessment of the
impacts of climate-related risks.
In addition, Nottingham Building Society has several policies and procedures
in place, which define the Society’s approach to climate change and ensure
that activities are performed consistently and in accordance with the
Board’s stated objectives and goals.
Strategy
Throughout 2024 we have targeted the reduction in our Scope 1 and 2
emissions as a priority underpinned with a commitment to reduce our
overall Stage 1 and 2 emissions by a minimum 10% over the year versus
2023. As detailed in our 2023 report this approach was agreed due to Scope
1 and 2 being more within our direct control.
During 2024 we have focused on continued deployment of various energy
efficient and emission reduction initiatives throughout the business,
through our in-house Facilities team. The rollout of temperature control
devices within our branch estate was completed during the year, supporting
further improvements in our Scope 1 and 2 energy usage.
During 2023 we renewed our green electricity to power our entire business
for another three years (removal of all gas boilers from our estate was
completed in 2022). Additionally, we have rolled out smart meters and
introduced passive infrared light sensors across the entire estate. We have
integrated this increased quality data with an energy analysis portal that
allows us to identify where we have spikes in usage, which we can then take
steps to address.
Working closely with our energy consultants and supplier base we will
continue to explore new energy efficient and emission reduction initiatives
as the market evolves with new products and technology.
Climate change scenario analysis
The Society assesses climate change risk across two main categories.
Physical risk considers the impact of physical effects of climate change or
weather-related events such as flooding. Transitional risk assesses the
transition to a low-carbon and climate resilient future such as changes in
policy and regulation.
To ensure strategic decisions are informed appropriately, a range of
scenario analyses are performed in relation to climate change. These
include the impact of flooding across the mortgage portfolio as well as
transitional risks of an increase in minimum Energy Performance Certificate
(‘EPC’) ratings and the potential costs this could incur.
Analysis is considered across three potential lenses in line with the Climate
Biennial Exploratory Scenario (‘CBES’) published in 2022. These include:
• Early policy action: transition to Net Zero starts early with global
warming limited to 2 degrees;
• Late policy action: policy delayed until 2031 and is more sudden and
disorderly. Global warming limited to 2 degrees; and
• No policy action: mitigation is either absent or unsuccessful and global
warming increases to 3 degrees.
Outputs from the scenarios are used to inform the ICAAP assessment and
are also considered across the risk categories in NBS’s RMF. The conclusion
from the ICAAP assessment is that no additional capital is required to cover
climate change risk.
Risk management
Identification
Nottingham Building Society recognises that climate change is far reaching
across its business and to capture all the material touchpoints, climate risk
is embedded within the Society enterprise-wide. Alongside the scenario
analysis, the Society recognises that climate risk can manifest across a broad
range of areas.
Nottingham Building Society has eight principal risk categories and climate
risk is included as a subcategory under the Society’s Strategy Risk Principal
Risk Type (‘PRT’). This provides an elevated and centralised view of climate
related risks.
The risk appetite statement states that the Society has a low-risk appetite
for not meeting the statutory requirements of climate change and our own
stated climate change related goals.
Several targets and metrics have been developed, which support the risk
appetite. These have been informed by several factors, including multiple
scenario analyses. The targets considered for 2025 include:
Short-term
• Physical measures taken to reduce emissions;
• Reduction in Scope 1 and 2 emissions by 10% in 2025; and
Long-term
• Net Zero by 2050.
The metrics and risk appetite are formally assessed by risk oversight
committees (at least quarterly). In addition, climate-related risks are
assessed as part of the half-year forecast and corporate planning processes,
to ensure that the current assessment of climate-related risks and strategic
objectives are aligned and the activities co-ordinated.
Nottingham Building Society recognises that the identification,
measurement and forecasting of climate-related risks present unique
challenges, not least because of the longer-term nature of the risks, the
uncertainty around when and how they will manifest and challenges around
accessing reliable data and modelling it effectively, all of which are
common, to a lesser or greater extent, to organisations. The Society’s
approach to climate change and the effective management of associated
risks will inevitably evolve, as internal and external understanding and
approaches develop.
__________________________________________________________________________________________
Sustainability Report
Page | 19 Annual Report & Accounts 2024 Nottingham Building Society
The most material climate-related risks identified are as follows:
• Credit risk and the impact of climate change on Nottingham Building
Society’s existing and future lending books from both a physical and
transitional risk perspective;
• Operational risks including impacts on how the Society and its third
parties and strategic partners operate and conduct business; and
• Legal, regulatory & conduct risks arising from the need to comply with
challenge laws and regulations and the impacts of them on our
business operations.
As the most material risks, these will form the focus of the Society’s
response to climate risk management in the short-term.
Management and integration
The risk assessment has informed the Society’s risk appetite statement for
climate change risk, which has been approved by the Board.
Metrics and targets
Carbon Footprint
We have strengthened our relationship with our long-standing utilities
partner, Inspired Energy, during 2024 and they will continue to support us
in developing our carbon strategy.
Deliverables as a direct result of our work with Inspired are as follows:
• quarterly assessment and reporting of our Scope 1 and 2 emissions;
• completion of selected site surveys to understand our current
emissions and opportunities for reduction;
• options for carbon offset projects;
• integration of an energy analysis portal within the Estates and
Facilities team; and
• annual review of our performance against targets.
During 2024 we set a target to reduce our Scope 1 and 2 by a minimum of
10% against 2023 full year on a consistent basis. The introduction and
implementation of various energy efficient and emission reduction
initiatives throughout the year have contributed to Scope 1 and 2 emissions
reduction by 32%.
We also set out to reduce our electricity usage in 2024 and have achieved a
5.5% reduction through several measures including the completion of the
rollout of temperature controls across our branch estate and the increased
analysis of our energy usage via the data portal that we now utilise, which
has supported us in taking localised actions where anomalies have been
identified.
Whilst our core objective will be to ensure that the business meets the
Government’s Net Zero target date of 2050, we will be seeking to
understand our pathway and whether we can deliver aspects ahead of that
date.
Key to that understanding has been the establishment of our Carbon
Balance Sheet, which details our emissions against Scope 1, 2 and 3. This
has been updated and we now have four years of data to support us to
monitor trends and performance against targets.
Our internal data has been married with UK Government approved BEIS
greenhouse gas emission conversion factors for calculating carbon
emissions for a range of activities and processes.
Results of the 2024 data analysis show that we continue to generate over
99.5% of our emissions due to Scope 3 which covers indirect emission
sources. Within our Scope 3 emissions over 92.6% are in relation to the
carbon generated by properties where the mortgages that we have granted
provide part of the funding, but where we do not have direct control over
the carbon neutrality or otherwise of those buildings.
In the short-term we have continued to focus on addressing on our Scope 1
and 2 emissions.
Details of the data included in our carbon Balance Sheet are shown in the
following table.
2024
C02 in tonnes
2023
CO2 in tonnes
Scope 1 emissions
1
Direct emissions from owned or controlled sources
Gas
-
-
Other Fuels
-
102
Travel
8
11
Scope 2 emissions
2
Indirect emissions from purchased energy
Electricity
240
254
Total directly attributable
emissions
248 0.5% 367 1%
Scope 3 emissions
Other indirect emissions that occur in an entity’s value chain
Investments (mortgage
portfolio)
3
44,299 44,764
Purchased Goods and
Services
2,396 1,564
Capital Goods 392 374
Other
4
755
672
Total indirect emissions
47,842 99.5% 47,374 99%
Total emissions
48,090 47,741
1
Scope 1 emissions exclude grey fleet emissions as these have been
included within Scope 3.
2
Scope 2 emissions are presented here on a location-based approach,
presenting the average carbon intensity of the local electricity grids.
3
Scope 3 indirect emissions associated with the Society’s mortgage
portfolio have been calculated by estimating energy usage and resultant
emissions at mortgaged properties and these have been allocated to the
Society, based on its proportional share of the investment property.
4
Other includes the impacts of business travel (including grey fleet),
employee commuting and leased assets.
Physical risk metrics
Flood risk
Key metrics of physical risk are potential surface water risk, river and sea
flood risk. This is assessed based on publicly available flood risk data
published by the Environment Agency. The data below categorises our
mortgage exposures by annual flood probability as at 31
st
December 2024
and 2023.
Balance by annual flood probability
31
st
December 2024
Total
£m
%
High
(>3.3%)
89.5
2.11
Medium
(>1.1%-3.3%)
111.5
2.63
Low
(0.1%-1.1%)
505.4
11.92
Negligible
(<0.1%)
3,428.8
80.87
Unable to categorise
N/A
104.7
2.47
Total
4,239.8 100
Balance by annual flood probability
31
st
December 2023
Total
£m
%
High
(>3.3%)
128.5
3.6
Medium
(>1.1%-3.3%)
112.7
3.1
Low
(0.1%-1.1%)
398.8
11.1
Negligible
(<0.1%)
2,836.6
79.0
Unable to categorise
N/A
115.8
3.2
Total
3,592.4 100%
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Sustainability Report
Page | 20 Annual Report & Accounts 2024 Nottingham Building Society
Subsidence risk
Our exposure to high-risk subsidence areas remains low, consistent with
previous assessments. This reflects our prudent approach to property risk
management, which considers factors such as geological conditions,
historical claims data, and underwriting controls. We continue to monitor
this risk closely and will integrate any relevant insights into future
assessments to ensure a comprehensive understanding of our portfolio's
resilience.
Transitional risk metrics
As part of understanding transition risks, The Society’s lending portfolio has
been broken down by EPC rating. This will also allow the Society to work
closely with its members to help manage any impact as potential policy and
regulatory changes occur. The table below reflects current EPC ratings taken
from the England and Wales EPC register across the Residential and BTL
portfolios (including Ltd Co BTL).
Energy Performance Certificate Data
As at 31
st
December 2024
Number
Exposure
£m
EPC Rating A-C
7,436
1,211.0
EPC Rating D-E
12,236
1,808.5
EPC Rating below E
859
138.2
No EPC available
5,148
1,082.1
Total
25,679
4,239.8
Energy Performance Certificate Data
As at 31
st
December 2023
Number
Exposure
£m
EPC Rating A-C
7,582
1,272.6
EPC Rating D-E
11,073
1,705.2
EPC Rating below E
483
78.3
No EPC available
3,693
438.3
Total
22,831
3,494.4
EPC data provides an understanding of the energy efficiency of properties,
with an A rating denoting the most energy efficient. This information also
informs the Society’s scenario analysis for transitional risks.
___________________________________________________________________________________________
Your Board of Directors
Page | 21 Annual Report & Accounts 2024 Nottingham Building Society
Non-Executive Directors
Simon Linares
Remuneration Committee Chair
Simon joined the Board in 2019. Simon is also an
Executive Mentor, Coach, and Chairman of the
charity Dreams Come True. He brings a wealth of
commercial and people and development
experience spanning a range of sectors, including
fast moving consumer goods, telecommunications
and financial services. His most recent position was
Group HR Director at Direct Line, where he led the
HR, communications, public affairs and corporate
social responsibility strategies. Prior to Direct Line,
Simon headed up human resources for O2,
Telefonica’s digital businesses and Diageo, covering
different geographies and cultures, including Africa,
Spain, and Portugal. Simon is a fellow of the
Chartered Institute of Personnel Development
and was ranked amongst the top five most
influential HR Practitioners in the UK.
Peter O’Donnell
Audit Committee Chair
Peter joined the Board in January 2021. Peter has
over 30 years’ experience in financial services and
worked in a variety of senior finance roles at
Prudential, RSA and Aviva. His last executive role was
as Executive Vice President at Unum, a Fortune 500
company where he was also CEO of its UK business
and Chairman of Unum Poland. Peter is a Non-
Executive Director at Queen Victoria Hospital
Foundation Trust and recently joined the Board of
One Family, a mutual insurance company based in
Brighton. Peter has a Bachelor of Commerce Degree
from University College Dublin, is a fellow of
Chartered Institute of Management Accounting
(‘CIMA’) and has significant experience of both
international and UK financial services markets.
Kavita Patel
Non-Executive Director
Kavita joined the Board at the beginning of 2017
and is the Board Consumer Duty Champion. She
was previously a Partner and Head of Investment
Funds at the law firm, Shakespeare Martineau.
Kavita has a wealth of experience gained during
her 25 years at Shakespeare Martineau advising
clients in the financial services arena, both in the
retail and institutional space, on corporate,
regulatory and governance matters. Kavita is also a
Non-Executive Director and Deputy Chair of
Foresight Enterprise VCT plc.
Robin Ashton
Board Chair
Robin joined the Board as a Non-Executive
Director in December 2023 and became Chair in
July 2024. He is also a Non-Executive Director and
Audit & Risk Chair of Domestic & General Limited,
Domestic & General Insurance plc and Deputy
Chair of the supervisory board of Domestic &
General Insurance Europe AG. Robin brings sector
knowledge and extensive leadership experience
to the table, having served as Chair of Leeds
Building Society for seven years and as a Non-
Executive Director and Senior Independent
Director at Shawbrook Group plc and Shawbrook
Bank Limited.
Kerry Spooner
Senior Independent Director and Risk Committee
Chair
Kerry joined the Board in September 2016. Kerry
had 10 years of financial services experience in the
building society sector before joining the Board.
She acted as a Non-Executive Director at two other
building societies and has experience as Vice Chair,
Senior Independent Director and Chair of Board
Risk Committee. Prior to that Kerry worked as a
solicitor for 20 years, the last nine years as a
Corporate Finance Partner of the international law
firm A&O Shearman. Kerry is also independent
Non-
Executive Chair of the Remuneration
Committee of The Bank of Nova Scotia, London
Branch and Non-Executive C
hair of the
Remuneration Committee of ANZ Banking Group
UK Branch.
___________________________________________________________________________________________
Your Board of Directors
Page | 22 Annual Report & Accounts 2024 Nottingham Building Society
Executive Directors
Changes to the Board in the year to 31
st
December 2024
Andrew Neden retired from the Board on 30
th
June 2024.
Paul Astruc resigned from the Board on 5
th
April 2024.
Board Committees
Risk
Audit
Nominations
Remuneration
Kerry Spooner (Chair)
Peter O’Donnell (Chair)
Robin Ashton (Chair)
Simon Linares (Chair)
Simon Linares
Kavita Patel
Simon Linares
Robin Ashton
Peter O’Donnell
Kerry Spooner
Kerry Spooner
Kavita Patel
Kavita Patel
Kerry Spooner
Sue Hayes
Chief Executive
Sue joined the Society in January 2022 and was
appointed as CEO in March 2022. Sue has
focused her career in Retail and Business Banking
and has held senior positions at Lloyds, HBOS,
NatWest, Santander and Barclays. Sue joined
challenger bank Aldermore in 2018 and more
recently was CEO at GB Bank, a new entrant
challenger, which she took through to the first
stage of the banking licence and raised additional
funding. Sue previously sat on the UK Finance
Mortgage Board as Deputy Chair and has been
nominated to UKF Mortgage Board again as a
Mutual representative. Sue holds an Executive
MBA from Cranfield Business School.
Simon Baum
Chief Risk Officer
Simon joined the Board as a Non-Executive Director
in June 2018. Simon has spent over 35 years
specialising in risk management within the financial
services arena, holding several senior positions at
Experian, Alliance & Leicester and Santander, both
within the UK and overseas. His previous roles
include Director of Mortgage Risk at Santander.
Simon ceased to be a Non-Executive Director of the
Society in May 2023, moving to become CRO and an
Executive Director of the Society.
Anthony Murphy
Chief Financial Officer
Anthony joined the Society in March 2023 as CFO.
Anthony was previously CFO of Tandem, a digital
challenger bank, playing a pivotal role in their
strategic transformation and journey towards
profitability. His prior experience includes CFO
positions in a listed regional bank in the United Arab
Emirates and senior roles in finance and strategy at
Lloyds Banking Group, notably as Finance Director
of its Middle East Business and supported its sale
to HSBC in 2012. Anthony's extensive international
and domestic experience in challenger and
established banks continues to support Nottingham
Building Society’s ongoing transformation.
Anthony is also a member of CIMA and is on the
Board of Nottingham University.
___________________________________________________________________________________________
Directors’ Report
Page | 23 Annual Report & Accounts 2024 Nottingham Building Society
The Directors’ Report should be read in
conjunction with the Chair’s Statement, the Chief
Executive’s Review and the Strategic Report on
pages 4 to 14.
Business objectives and activities
Information on the Group’s business objectives and activities are provided
in the Strategic Report on pages 7 to 14.
Business review, future developments and key
performance indicators
The Group’s business activities and future plans are reviewed in the
Strategic Report section of the Annual Report and Accounts on pages 7 to
14. Additionally, within the Strategic Report, we comment upon the
financial (and other) key performance indicators used by the Board during
the year to assist its control, direction and drive for business results.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group are outlined on
pages 12 to 14, and our approach to managing these risks can be found in
the Risk Management Report on pages 26 to 29.
Financial risk management objectives and policies
As a result of its normal business activities, the Group is exposed to a variety
of risks, including credit, market and liquidity risk. The Group’s objective is
to minimise the impact of these risks, as well as financial risk, upon its
performance. The Risk Management Report considers this in detail. A
further explanation of the financial risks and the controls in place to manage
them (including the use of derivatives), is given in Note 31 to the Annual
Report and Accounts. Derivatives, including the impact on the 2024 results,
are disclosed in the Strategic Report on page 10.
Results
Group statutory profit before tax for the year was £13.9m (2023: £8.3m).
The Group profit after tax for the year transferred to general reserves
amounted to £9.3m (2023: profit after tax of £8.3m). As at 31
st
December
2024, total Group reserves and equity amounted to £253.3m (2023:
£243.5m).
Capital
Group gross capital as at 31
st
December 2024 was £277.1m, (2023:
£267.5m) representing 5.65% (2023: 6.45%) of total shares and borrowings.
Free capital, as at the same date, amounted to £265.8m (2023: £251.9m)
and 5.26% (2023: 6.07%) of total shares and borrowings.
The Annual Business Statement set out on page 93 gives the explanation of
these ratios. The Board remains committed to maintaining a capital position
in excess of its regulatory capital requirement.
Loans and advances
During 2024, total new lending was £1,215m (2023: £887m) with the
average advance being £236,405 (2023: £224,191) and the average debt at
the end of the year being £165,109 (2023: £152,246). As at 31
st
December
2024, there were sixteen cases (2023: seven cases) of properties being 12
or more months in arrears or in possession. The total amount of balances
outstanding in those cases was £1,636,782 (2023: £497,443), with arrears
of £190,229 (2023: £77,038).
Mortgage losses realised during the year totalled £nil (2023: £nil).
Provisions for expected credit losses total £5.2m (2023: £5.2m),
representing 0.12% of mortgage balances (2023: 0.15%).
The Group offers several different forbearance options to members
including reduced payment concessions, payment plans, capitalisations and
mortgage term extensions. As at 31
st
December 2024, the Group had 76
loans (2023: 80) subject to some form of forbearance.
Property, plant and equipment
Freehold premises owned by the Group are shown in the Annual Report and
Accounts at cost less depreciation. An estimate of the value of those
properties, prepared in late 2024 by the Group’s Property team, indicates
that market value is £9.7m (2023: £5.0m) higher than book value.
Supplier payment policy
The Group is committed to deal responsibly with suppliers. The policy is that
payment will be made 30 days from the receipt of the invoice, provided that
the supplier has complied with all relevant terms and conditions. Variation
of the 30 day policy can be agreed at the time an order is placed.
As at 31
st
December 2024, the total amount owed to suppliers was
equivalent to 27 days’ credit (2023: 23 days).
Charitable and political donations
During the year, the Group made charitable donations of £124,437 (2023:
£144,979). No contributions were made for political purposes.
Country-by-country reporting
The Capital Requirements (Country-by-Country Reporting) Regulations
place certain reporting obligations on financial institutions within scope of
the Capital Requirements Directive.
The nature of the activities of the Society are set out under business
objectives of this report and for each of the Society’s subsidiaries in Note 16
to the Annual Report and Accounts. All the activities of the Society and its
subsidiaries are conducted in the UK and therefore 100% of the total
income, statutory profit before tax and tax shown in the Income Statement
as well as employee figures disclosed in Note 7, are related to the UK. The
Society and its subsidiaries have not received any public subsidies.
Environment & sustainability
The Sustainability Report on pages 18 to 20 outlines the Society’s position
in line with the requirements of the Financial Stability Board’s TCFD.
Directors’ responsibilities in respect of the Annual
Report, the Annual Business Statement, the
Directors’ Report and the Annual Accounts
The Directors are responsible for preparing the Annual Report, Annual
Business Statement, Directors' Report and the Annual Accounts in
accordance with applicable law and regulations. The Building Societies Act
1986 (‘the Act’) requires the Directors to prepare Group and Society Annual
Accounts for each financial year. Under that law they are required to
prepare the Group Annual Accounts in accordance with UK adopted
International Accounting Standards (‘IAS’) and applicable law and have
elected to prepare the Society Annual Accounts on the same basis.
The Group and Society Annual Accounts are required by law and UK adopted
IAS to present fairly the financial position and the performance of the Group
and the Society; the Act provides in relation to such Annual Accounts that
references in the relevant part of that Act to Annual Accounts giving a true
and fair view are references to their achieving a fair presentation.
___________________________________________________________________________________________
Directors’ Report
Page | 24 Annual Report & Accounts 2024 Nottingham Building Society
In preparing each of the Group and Society Annual Accounts, the Directors
are required to:
• select suitable accounting policies in accordance with International
Accounting Standard 8: Accounting Polices, Changes in Accounting
Estimates and Errors and apply them consistently;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable
information;
• state whether they have been prepared in accordance with UK
adopted IAS and those parts of the Building Societies Act 1986 and
Building Societies (Accounts and Related Provisions) Regulations 1998
applicable to societies reporting under UK adopted IAS; and
• prepare the Annual Accounts on the going concern basis unless it is
inappropriate to presume that the Group and Society will continue in
business.
In addition to the Annual Accounts, the Act requires the Directors to
prepare, for each financial year, an Annual Business Statement and a
Directors' Report, each containing prescribed information relating to the
business of the Group.
Directors’ responsibilities for accounting records
and internal control
The Directors are responsible for ensuring that the Group:
• keeps proper accounting records that disclose with reasonable
accuracy, at any time, the financial position of the Group and Society,
in accordance with the Act; and
• takes reasonable care to establish, maintain, document and review
such systems and controls as are appropriate to its business in
accordance with the rules made by the FCA and the PRA under the
Financial Services and Markets Act 2000.
The Directors have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Society's website.
Legislation in the UK governing the preparation and dissemination of
Financial Statements may differ from legislation in other jurisdictions.
The Directors who held office at the date of approval of this Directors’
Report confirm that, so far as each of them is aware, there is no relevant
audit information of which the Group’s auditor is unaware, and each
director has taken all the steps that they ought to have taken as directors to
make themselves aware of any relevant information and to establish that
the Group’s auditor is aware of that information.
Directors’ statement pursuant to the UK
Corporate Governance Code
As required by the UK Corporate Governance Code, the Directors confirm
their opinion that the Annual Report and Accounts, taken as a whole, are
fair, balanced and understandable and provide the information necessary
for members to assess the performance, strategy and business model of the
Society. Details of the governance procedures that have been implemented
to support this can be found in the Board Audit Committee Report on pages
34 and 35.
Going concern and viability
Going concern
In preparing the Annual Accounts the Directors must satisfy themselves that
it is reasonable to adopt the going concern basis.
The Directors have considered the risks and uncertainties discussed on
pages 12 to 14 and 26 to 29, and the extent to which they might affect the
preparation of the Annual Report and Accounts on a going concern basis.
Key to this consideration were the risks associated to regulatory capital,
liquidity and financial performance, and the impact on these risks arising
from the higher interest rate and high inflationary environment as well as
climate-related considerations.
The Group’s business activities and future plans are reviewed in the Chair’s
Statement and Chief Executive’s Review on pages 4 to 6. In addition, Note
31 to the Annual Report and Accounts includes the Group’s policies and
processes for managing financial instrument risk such as liquidity risk,
interest rate risk and credit risk.
As with many other financial institutions, the Group meets its day-to-day
liquidity requirements through prudent management of its retail and
wholesale funding sources. It ensures it maintains sufficient liquidity to
meet both normal business demands and those that may arise in stressed
circumstances. The Society has a surplus to regulatory capital requirements
and is forecasting this to remain across the going concern assessment
period.
Furthermore, the Group’s forecasts and plans, taking account of current and
possible future operating conditions, including stress tests and scenario
analysis, which have considered income, expenses and overall quality of the
mortgage portfolio, indicate that the Group has sufficient operating liquidity
and capital for the foreseeable future, and specifically for the going concern
assessment period to 5
th
March 2026 – covering a period of at least twelve
months from the date of the approval of the Annual Report and Accounts.
As such, the Directors are satisfied that the Group has adequate resources
to continue in business and to use the going concern basis in preparing the
accounts.
Viability statement
In accordance with the 2018 revision of the UK Corporate Governance Code,
the Board has also assessed the prospects of the Society over a period longer
than the 12-months required by the going concern provision. The Board has
conducted this review for a period of four years. This is consistent with the
planning horizon used for corporate planning.
The corporate plan considers the Group’s profitability, cash flows, liquidity
and capital requirements as well as other key financial ratios over the
period. These ratios are subject to sensitivity analysis and stress testing,
which involves varying the main assumptions of the forecast, both
individually and in unison. Where appropriate, this stress testing is carried
out to evaluate the potential impact of the Group’s principal risks occurring
(which are outlined on pages 12 to 14 of the Strategic Report and the Risk
Management Report on page 26). This includes the associated risks because
of the higher interest rate environment as well as the consideration of
climate-related risks. Based on the reviews completed, the Board considers
that the Society is viable over the medium-term.
Directors
The names of the Directors of the Society who served during the year and
up to the date of signing the accounts, their roles and membership of board
committees are detailed in the Governance section on pages 31 to 33. Other
business interests are shown in the Annual Business Statement. None of the
Directors have any beneficial interest in, or any rights to subscribe for shares
in, or debentures of, any connected undertaking of the Society, as at 31
st
December 2024.
In accordance with the agreement made by the Board and in line with the
rules for re-election outlined on page 32, all directors who wish to continue
in role will stand for re-election at the next AGM.
Auditor
A resolution to reappoint Ernst and Young LLP as auditors of the Society will
be proposed at the AGM.
On behalf of the Board,
Chair
5
th
March 2025
___________________________________________________________________________________________
Nomination Committee Report
Page | 25 Annual Report & Accounts 2024 Nottingham Building Society
Statement by the Chair of the Nomination
Committee
I am delighted to introduce our 2024 Nomination Committee (‘NomCo’)
report, offering an overview and summary of our actions throughout the
calendar year. This report also provides details regarding the Committee's
role and duties.
The Nomination Committee is responsible for:
• selecting and recommending candidates for Leadership roles and Non-
Executive Directors;
• overseeing succession planning;
• promoting diversity;
• evaluating leadership performance;
• managing conflicts of interest; and
• ensuring compliance with legal and ethical standards.
The Committee plays a vital role in building a capable and diverse leadership
team, enhancing governance practices, and fostering the organisation's
long-term success.
Committee structure and operations
The Committee membership at 31
st
December 2024 comprised:
Robin Ashton (Chair)
Non-Executive Director and Chair of the Board
Simon Linares
Non-Executive Director and Chair of the
Remuneration Committee (‘RemCo’)
Kerry Spooner
Non-Executive Director, Senior Independent
Director and Chair of the BRC
The detail of the skills and experience of the Committee members can be
found in their biographies on pages 21 to 22.
The Committee met on four occasions during the year. After each meeting,
the Committee Chair offers the Board updates, condensing the actions
performed during the meeting and highlighting significant decisions made.
Appointments
Following the retirement of previous Chair Andrew Neden, Robin Ashton
was appointed as Chair of the Committee in 2024.
Committee responsibilities
• Oversight of succession planning and pipeline development for
directors and the senior leadership team, ensuring an appropriate
focus on diversity;
• Succession planning for the board and its committees;
• Oversight of the appointment and induction process for board
candidates;
• Agreeing the approach and coordination of the annual board
evaluation review;
• Review of the board conflict of interest policy, including monitoring
any potential or actual conflicts of interest;
• Ongoing assessment of the independence and time commitment of
Non-Executive Directors; and
• Oversight of the Society’s governance structure and practices to
ensure compliance with the Code and best practice, in so far as it is
possible for a building society.
Committee activities
The following outlines the Committee’s activities and areas of focus during
the year:
Appointments
Recommended the appointment of one Non-Executive
Director. This appointment was subject to extensive
external checks and, where necessary, regulatory
approval.
Succession
Planning
Reviewed and agreed the succession plans for both the
Board and Senior Management.
Diversity and
Inclusion
Evaluated the diversity of skills and experience among
Board members.
Board
Composition,
Commitment
and
Development
• Reviewed the size and composition of the Board and
its committees;
• reviewed the time commitments of Non-Executive
Directors; and
• continued a Board development plan and associated
activities to support it.
Equity, diversity and inclusions
The Committee's role is to ensure that both the Board and the Senior
Leadership team mirror the Society's strategic goal of valuing and incorporating
all colleagues embracing their unique perspectives.
Diversity encompasses various dimensions, including a well-rounded mix of
skills, experiences, backgrounds and qualifications in our workforce. We
recognise the substantial benefits that diversity brings, particularly in decision-
making. Our commitment to diversity and inclusion extends beyond numerical
targets. Our new DE&I strategy forms the basis for engaging all colleagues, from
the Board to the branch network.
We remain a signatory to the Women in Finance Charter; however, we narrowly
missed our gender diversity target of 35% this year, with a total of 34% of
women in Senior Management positions. We have also set ourselves an
ambitious target of 42% representation of women in Senior Management
positions for 2025.
In addition to the two employee representation groups set up in 2023 ‘Pride’
and ‘Menopause at Work’, we implemented three further employee
representation Groups which promote women in business, wellbeing and
inclusivity of race and ethnicity, namely: ‘Women in NBS’, ‘Mental Health &
Wellbeing’ and ‘Embrace’. These influential groups represent
various viewpoints, experiences and communities who generate thought-
provoking work to enhance our business and workplace, creating a sense of
belonging and opportunities for all.
Robin Ashton
Chair of the Nomination Committee
5
th
March 2025
___________________________________________________________________________________________
Risk Management Report
Page | 26 Annual Report & Accounts 2024 Nottingham Building Society
Nottingham Building Society recognises risk as a natural consequence of its
business activities and environment. It endeavours, through positive risk
strategies, to manage these in a manner that ensures delivery of its strategic
objectives and business plan, whilst protecting members’ interests and its
financial resources.
The Board is responsible for ensuring that an effective framework is in place
to promote and embed a risk-aware culture that identifies, appropriately
mitigates and manages the risks the Group and Society face while delivering
its strategic objectives. This includes both current risks and future risks,
including those associated with the implementation of strategy.
The Board reviews and approves key risk management policies annually,
including the RMF, ICAAP, ILAAP and the RRP.
In pursuing its strategy, the Board ensures there are appropriate capabilities
and resources available, along with sufficient capital strength to succeed.
This includes focusing on risk and reward to ensure both remain at an
acceptable level.
The Society operates a committee governance structure which enables
focused oversight and has clear lines of accountability and alignment to
responsibilities allocated under the SMCR.
The Risk Management Framework
The RMF is an integral part of the Group’s formal structure, assisting the
Board in overseeing all aspects of risk management. BRC reviews and
approves policy statements, risk appetite statements, and risk management
committee terms of reference. It receives summary management
information and minutes from the individual risk management committees.
The RMF is reviewed annually by the BRC and recommended to the Board
for approval. It is based on the ‘three lines of defence’ model (described on
page 33) and focuses on:
• clear accountability and ownership;
• defined roles and responsibilities;
• identification and definition of PRTs;
• definition of Risk Appetite framework;
• establishment of the generic risk management cycle (Identify, Assess,
Manage, Report);
• articulation of the respective roles of the three lines of defence; and
• approach for monitoring and reporting on risk.
Day-to-day risk management is the responsibility of the ERC, which oversees
the Society’s risk committees, as detailed in the diagram below.
Board Risk Committee
As detailed on page 30, the membership of the BRC comprises of Non-
Executive Directors. It is responsible for ensuring:
• key risks are identified and appropriate steps taken by Management
to mitigate them;
• new and emerging risks are identified and reviewed through the
horizon scanning process;
• due consideration is given to all significant matters relating to
governance, control, regulatory and compliance issues;
• capital and liquidity are maintained to address the Group’s key risk
exposures, both to ensure regulatory compliance and to support the
achievement of strategic goals;
• all conduct risks (including Consumer Duty) are properly considered,
again to ensure regulatory compliance and the achievement of good
outcomes for all our members;
• Nottingham Building Society has considered the risks to operational
resiliency and mitigated them to within approved tolerances;
• climate related financial risks have been appropriately identified,
managed and mitigated; and
• the effective monitoring of the Group’s key risks and controls.
The BRC meets at least four times per year to review risk management
activities and consolidated management information regarding existing and
emerging areas of risk.
The scope of the BRC extends to all types of risk faced by the Group with
the management of certain risks being delegated to the ERC, ExCo and
relevant management committees. The responsibilities of these
committees are described below.
Executive Committee
The ExCo is responsible for acting on behalf of the Board in formulating
strategy, the business plan and for organising the Society’s assets and
resources to deliver value to members in a fair and appropriate manner.
The Committee is chaired by the CEO and comprises all Executive team
members.
___________________________________________________________________________________________
Risk Management Report
Page | 27 Annual Report & Accounts 2024 Nottingham Building Society
Strategic Risk
When discussing future strategy, the ExCo and ultimately the Board takes
care to ensure that risks associated with maintaining a sustainable society
are evaluated and that plans are in place to affect any required risk
mitigation. These include risks associated with changes to the external and
economic environment, regulatory and statutory developments, people
and resources, strategic partnerships and alliances and change execution.
The ExCo oversees the detailed evaluation and monitoring of these risks.
The Committee also oversees the management of risks relating to changes
in the external environment, which have the potential to affect the Group’s
business model either through the level of demand for products and
services and / or its ability to meet that demand. This includes responsibility
for monitoring the macroeconomic environment and formulating
Nottingham Building Society’s strategic response to regulatory changes
relating to climate change, operational resilience and Consumer Duty.
The Committee looks to mitigate this exposure through regular review of its
Group corporate plan, ensuring activities remain within risk appetites.
Executive Risk Committee
The ERC is responsible for acting on behalf of the Board and the BRC in the
management and oversight of Nottingham Building Society’s principal risks.
It reviews relevant policies to ensure that the Society acts in such a way as
to organise, manage and protect the Society’s assets to deliver value to
members through the provision of savings and mortgages, whilst remaining
within legal, regulatory and agreed Board risk appetites.
The Committee enables the BRC to fulfil its role by ensuring that:
• there is executive level oversight of the RMF;
• accountability and responsibility for managing risk is clearly defined;
• the risk culture of the Society is defined and embedded;
• the nature and extent of the most material risks to Nottingham
Building Society are determined and understood, including the eight
PRTs and any thematic risks;
• appropriate risk appetites are defined and documented;
• Nottingham Building Society, at all times, operates within stated risk
appetites;
• processes are in place to consistently identify, measure, assess,
monitor and control risks;
• the risk event process is effectively capturing and reporting on
operational failures;
• the horizon scanning process is identifying emerging risks and
regulatory themes;
• Nottingham Building Society is compliant with regulatory
requirements, including the ICAAP and ILAAP process;
• the Society operates within its impact tolerance statements for its
important business services and remains operationally resilient;
• Nottingham Building Society maintains an up to date and adequate
RRP which fully reflects the requirements of the Board and regulators;
and
• conduct related risks are appropriately identified, managed and
reported to the BRC.
The Committee is provided with regular updates on the principal risk
categories by first line management.
To ensure the effective monitoring and reporting of risk, Nottingham
Building Society maintains a risk register to help management assess the
probability and impact of the risks identified, and the effectiveness of
mitigating controls.
The Committee is chaired by the CRO and includes all Executive SMFs, risk
owners and other senior colleagues.
Assets and Liabilities Committee
The ALCo is responsible for overseeing Nottingham Building Society’s
liquidity risk, market and interest rate risk, wholesale credit risk and its
capital risk. In addition, ALCo reviews treasury activity for compliance with
approved treasury policies and procedures. The Committee is chaired by the
CFO and the membership is made up of relevant senior executives including
but not limited to the CEO and CRO; the Head of Treasury; and other
relevant senior managers.
Market and Interest Rate Risk
The Society defines market and interest rate risk as the risk to net interest
income and economic value arising from changes in market interest rates
and mismatches in the Society’s Balance Sheet. Economic value is the
present value of the Society’s future cash flows.
As the uncertain economic environment persists, the Society continues to
actively monitor its position against its interest risk appetite to mitigate the
impact that any future change to interest rates might have in adversely
affecting the Society’s interest margin.
The Society’s limits for the management of market and interest rate risk are
documented in the Market & Interest Rate Risk policy, which is developed,
defined and recommended by ALCo and considered and approved
ultimately by the BRC.
Basis, gap and repricing risk are all elements of interest rate risk captured
by the market and interest rate risk category.
The Prudential Risk team measures the levels of interest rate risk in the
Society’s Balance Sheet, as well as subjecting the Balance Sheet to stress
tests designed to measure the likely impact of a sudden change in interest
rates. This is assessed weekly for stresses to economic value and monthly
for stresses to net interest income and monitored against the Board
approved risk appetite.
The Treasury team is responsible for day-to-day management of the
Society’s interest rate risk exposures within the approved risk appetites.
Typically interest rate risk is managed by taking advantage of natural
hedging opportunities within our Balance Sheet or using appropriate
hedging instruments.
ALCo is responsible for reviewing Treasury activity, performance and
compliance with the approved policy and risk appetites.
Liquidity Risk
The Society defines liquidity risk as the risk that the Society, although
solvent, does not have available sufficient financial resources to enable it to
meet its obligations as they fall due. This risk is managed through holding
cash and other high quality liquid assets and maintaining wholesale funding
facilities.
ALCo develops, defines and recommends the liquidity risk appetite, which
is considered and approved by the Board and documented in the Liquidity
Risk policy. The liquidity risk appetite helps to ensure that the management
of the liquidity portfolio by the Treasury team supports the corporate plan.
The Liquidity policy sets the framework for the day-to-day activities of the
Treasury team to ensure that all liquidity management activities are
conducted within approved risk appetites. The Society maintains a diverse
funding base and ensures compliance with applicable regulatory
requirements. Defined control limits determine the overall level of liquidity
to be maintained. The base level and composition of the Society’s liquidity
is subject to PRA guidance and regular stress testing and is also documented
as part of its ILAAP, as required by the PRA.
The Society is required to be compliant with the LCR, which measures the
amount of HQLA relative to modelled net stressed cash outflows within a
30-day period.
___________________________________________________________________________________________
Risk Management Report
Page | 28 Annual Report & Accounts 2024 Nottingham Building Society
The Society also maintains a funding profile in line with a longer-term
funding measure, the NSFR, which requires financial institutions to hold
sufficient stable funding to cover the duration of their long-term assets.
Based on our current and forecast liquidity positions, the liquidity portfolio
held by the Society comfortably exceeds the minimum requirements of the
LCR. Similarly, the funding profile exceeds the future requirements under
the NSFR.
The Society has documented an RRP, which describes those metrics that
would indicate an emerging market-wide or Society-specific stress event.
The Plan includes a range of options available to the Society should such a
stress event crystalise to ensure adequate levels of liquidity and capital are
maintained.
Regular stress testing is performed to confirm that the Society’s available
liquidity is adequate, within risk appetite and is sufficient to support
extreme levels of net cash outflows.
Responsibility for the day-to-day operational management of liquidity risk
lies with the Head of Treasury, with operational oversight provided by the
Prudential Risk team and reported to ALCo. A detailed analysis of the
Society’s liquidity profile can be found on page 11.
Wholesale Credit Risk
Wholesale credit risk arises from counterparties who may be unable to
repay loans and other financial instruments that the Society holds as part of
its liquidity portfolio.
The Society’s risk of counterparty default is relatively low due to the high
proportion of total liquidity held in UK Sovereign debt securities and the BoE
Reserve Account. The composition of the treasury assets can be found on
page 11.
The Society’s Liquidity policy sets out the amounts, products and
counterparties under which Treasury liquid assets can be held. Credit
worthiness of counterparties is assessed using several factors including
minimum acceptable credit ratings approved by the BRC, together with
lending limits. The policy also allows for investments in multilateral
development banks, covered bonds and RMBS, subject to criteria set by the
BRC. The Board does not permit any lending directly to sovereign states,
other than the UK Government, and all lending is in Sterling.
The Board, via the approved policy, further restricts the level of risk by
placing limits on the amount of exposure that can be taken in relation to
one counterparty or group of counterparties, and to industry sectors and
geographical regions.
The Society’s Treasury team has day-to-day responsibility for operating
within Board approved credit limits. Monitoring and oversight, including
assessment of counterparty credit worthiness, is undertaken by the
Prudential Risk team to ensure all exposures remain within risk appetite.
This information is shared with ALCo.
Capital Risk
Nottingham Building Society conducts timely evaluations of its capital
adequacy and financial resources to determine the level of capital required
to support current and future risks contained within its strategic plan. This
process, which is a regulatory requirement, is known as the ICAAP.
The ICAAP assesses Nottingham Building Society’s future capital
requirements by considering changes to business volumes, the type and mix
of assets, and business activities within the context of current and future
anticipated risks and stress scenarios. The ICAAP also incorporates the
Capital Requirement Directive requirements.
The PRA uses the ICAAP during its Supervisory Review and Evaluation
Process (‘SREP’) through which it determines the amount of capital it
requires Nottingham Building Society to hold.
The Board monitors the current and future level of capital held by the
Society in relation to its TCR on a regular basis. The Society’s current and
future capital levels remain well in excess of the PRA requirements. An
analysis of the components of Nottingham Building Society’s current capital
position can be found in the Strategic report on page 12.
Retail Credit Committee
RCC is comprised of relevant executives and senior managers and chaired
by the CRO. It is responsible for oversight of the Society’s retail credit risks,
which includes exposures to residential and BTL mortgages, limited
company buy-to-let mortgages and SBL.
Retail Credit Risk
The Society defines retail credit risk as the risk of loss stemming from a
borrower’s failure to repay a loan or otherwise meet a contractual
obligation. As a building society, this is most likely to arise through the
inability of borrowers to repay a mortgage. The Society’s exposure to retail
credit risk is limited to the provision of loans secured on property within
England and Wales.
A Retail Credit Risk Policy (incorporating the credit risk appetites) is
developed and proposed by the RCC, reviewed by ERC and considered and
approved by the BRC. The Society manages the level of credit risk it
undertakes by applying various control disciplines, the objectives of which
are to maintain asset quality in line with approved risk appetite. The Board
receives regular monthly information on key risk appetite limits.
Exposure to retail credit risk is carefully monitored by the RCC. Day-to-day
retail credit risk is managed through the application of prudent lending
policies, which are aligned to the stated risk appetites. This ongoing
monitoring provides assurance that current and future exposures, such as
LTV levels, geographic concentration and probability of default, are
managed within the risk appetite limits set by the Board.
The Society remains committed to promoting home ownership and its risk
appetite allows lending to first time buyers, but it restricts the overall level
of high loan-to-value lending to limit concentration risk. Similarly,
Nottingham Building Society continues to follow its long-term policy of also
offering interest-only products to a small number of borrowers, which are
covered by strict policies and monitoring procedures.
The Society regularly stress tests the mortgage portfolio to detect any signs
of potential payment stress or sensitivity for its borrowers to the impact of
future rate rises. The mortgage portfolio shows resilience to the impact of
recent rate rises, but the Society ensures adequate monitoring and analysis
are in place to ensure early detection of any potential deterioration.
Considering recent regulatory developments, the Society has also designed
a stress testing framework for the potential effects of climate change on
property values. This will be an area of increased focus in future years for
the Society, the wider sector and the regulators.
All mortgage loan applications are reviewed by an individual underwriter
supported using application scorecards. Credit reference bureau data is
obtained on all applications, which in turn supports our responsible lending
requirements. The Society also shares account performance data with the
selected bureaux. The Society’s lending has become increasingly
geographically diversified throughout England and Wales over the last few
years with no one area dominating the portfolio.
The Society continues to be a responsible lender and its approach to lending
is based on making sure that members can afford to meet their mortgage
repayments from the outset, using a prudent affordability calculator, as well
as our manual underwriting processes. Should members find themselves in
financial difficulty, the Society responds with appropriate forbearance and
collections activities to ensure good member outcomes. It also supports
members who experience temporary financial difficulties by providing the
assistance they require to enable them to regularise their financial
arrangements. Only as a matter of last resort does the Society seek to take
a property into possession.
___________________________________________________________________________________________
Risk Management Report
Page | 29 Annual Report & Accounts 2024 Nottingham Building Society
The Society is committed to providing support to those members who are
experiencing difficulties in meeting their mortgage payments due to the
impacts of the cost-of-living crisis. We will continue to ensure that members
receive good outcomes and offer appropriate forbearance activities
throughout the cost-of-living crisis and beyond.
The Society does not have any exposure to the sub-prime mortgage market,
it lends only to ‘prime’ customers and has never written ‘self-certified’
lending business.
Legal and Regulatory Risk Committee
The Society, being a provider of mortgage and savings, is regulated by both
the FCA and the PRA.
The LR&CC oversees how Nottingham Building Society manages legal and
regulatory risk to ensure that all services are conducted in line with relevant
legislation and statutory requirements.
The Committee is chaired by the General Counsel, supported by relevant
senior managers.
Each business area is responsible for ensuring that all regulatory and
statutory requirements are complied with on a day-to-day basis. Formal
oversight is provided by the Compliance Function through a programme of
compliance monitoring.
Nottingham Building Society has a very low appetite for breaches of
regulation or for any activity that may breach its legal obligations.
Operational Risk and Resilience Committee
Operational Risk & Resilience Committee (‘ORRC’) is responsible for actively
overseeing the management of operational risk across Nottingham Building
Society. It is also responsible for ensuring that the Society maintains
sufficient operational resilience to ensure the ongoing delivery of key
services to members.
The Committee is chaired by the Chief Technology & Transformation Officer
(‘CTTO’) supported by relevant senior managers.
To allow the Committee to focus on the key elements of operational risk
(which includes ‘people risk’ in respect of our own colleagues and ‘third
party risk’ in respect of reliance on third parties and partners to deliver key
elements of our proposition and our operational resilience framework), the
Committee meets eight times a year with agendas alternating between the
following:
• a quarterly ORRC meeting, covering the full range of operational risks
including review and approval of the operational risk dashboard and
oversight of operational resilience; and
• an information risk focused meeting, largely focused on matters
relating to the management of information security, information
management and technology risks, as well as providing specialist
oversight of the Society’s defences against cyber-attack.
Nottingham Building Society defines operational risk as the risk of loss
resulting from human factors, inadequate or failed internal processes and
systems, or from external events. Operational risk exists in every aspect of
Nottingham Building Society’s business activities. Proactive management of
operational risk is essential in helping Nottingham Building Society achieve
both short-term operational objectives and longer-term strategic goals.
To ensure that Nottingham Building Society’s services are operationally
resilient, the Committee is also responsible for ensuring that processes are
in place to prevent, adapt, respond to, recover and learn from operational
disruptions. The Committee oversees the process by which the Society
identifies its important business services, understands and remediates any
potential weaknesses in the supporting processes, ensures that appropriate
business continuity plans are in place and verifies that third party suppliers
can meet our members’ needs at all times.
One of the key processes that support the effective identification and
management of operational risk is the risk event process, which provides a
mechanism for operational incidents to be reported, their impacts assessed,
remediation to be performed and root cause analysis to be undertaken,
thereby reducing the risk of recurrence.
The Committee also continues to work on embedding the Society’s
approach to operational resilience, in response to the Regulator’s increased
focus in this area.
Customer Conduct Committee
The Customer Conduct Committee is charged with overseeing customer and
conduct risks across all relevant business activities and is chaired by the
Head of Customer. It has general responsibility for monitoring the Society’s
alignment with the Consumer Duty to support good outcomes for members.
The Committee reviews relevant management information and reporting
on customer impacting matters, including but not limited to: Complaints MI,
customer impacting risk events, performance data on customer facing
processes and has general oversight of the impact of product and pricing on
members.
The Committee also exercises specific focus on regulatory obligations to
members around affordability and vulnerability.
Change Portfolio Investment Committee
Change Portfolio Investment Committee (‘CPIC’) is chaired by the CTTO and
is responsible for the oversight and management of Transformation and
Change risk; for which it reports to ERC. It is also responsible for ensuring
that transformation and change activity supports the effective delivery of
the Society’s strategy. In this second role, the Committee also reports to
the ExCo. The CPIC acts on behalf of the ExCo and ERC monitoring delivery
execution and operational tolerance impact of transformational, large and
small business change for the Society through the effective control of a
portfolio of change activity. The CPIC is informed by the Group corporate
plan and specifically owns the change execution plan on behalf of the ExCo,
ensuring effective delivery, balancing risk and benefit in the achievement of
the Society’s strategy.
Nottingham Building Society’s change activity is underpinned by the Project
RMF, which champions clear responsibilities, regular and transparent status
reporting and a high level of oversight and scrutiny by members of the
Executive team and the Board. All material projects must be approved by
both ExCo and the Board.
___________________________________________________________________________________________
Board Risk Committee Report
Page | 30 Annual Report & Accounts 2024 Nottingham Building Society
Statement by the Chair of the Board Risk
Committee
The Board Risk Committee (‘BRC’) is tasked with ensuring fit for purpose risk
management arrangements are in place and for reviewing the Society’s risk
exposures on an ongoing basis, on behalf of the Board. It assesses applicable
policies to ensure that the Society operates in a manner that safeguards and
efficiently administers the Society’s assets, delivering benefits to members
via savings and mortgages, all while adhering to legal requirements,
regulations, and the agreed-upon risk appetites of the Board.
Committee structure
The BRC is a Board Committee and at 31
st
December 2024, the Committee
membership was made up as follows:
Kerry Spooner
(Chair)
Senior Independent Director and Chair of the
BRC
Simon Linares
Non-Executive Director and Chair of the
RemCo
Peter O’Donnell
Non-Executive Director and Chair of the BAC
Kavita Patel
Non-Executive Director and Chair of Conduct
Sub-Committee within BRC
The detail of the skills and experience of the Committee members can be
found in their biographies on pages 21 to 22.
The Committee met on six occasions during the year. After each meeting,
the Committee Chair reports to the Board the activities of the BRC
highlighting significant decisions made.
Appointments
In March 2024, Robin Ashton was appointed to the Board as a Non-
Executive Director and a member of the BRC. Subsequently, in July 2024,
Robin was appointed Chair of the Board of Directors and ceased
membership of the BRC in line with best practice.
In March 2024, Paul Astruc completed his 12-month term as a Non-
Executive Director on the Board and ceased to be a member of the BRC.
Committee responsibilities
The BRC monitors the Society’s overall risk exposure. The BRC enables the
Committee to fulfil its role by ensuring:
• there is executive-level oversight of the RMF;
• accountability and responsibility for managing risk are clearly defined;
• the risk culture of the Society is defined and embedded;
• the nature and extent of the most significant risks to the Society are
determined and understood, including the eight principal risk types
and any thematic risks;
• appropriate risk appetites are defined and documented;
• Nottingham Building Society, at all times, operates within stated risk
appetites;
• processes are in place to consistently identify, measure, assess,
monitor, and control risks;
• the risk event process is effectively capturing and reporting on
operational failures;
• the horizon scanning process is identifying emerging risks and
regulatory themes;
• the Society is compliant with regulatory requirements, including the
ICAAP and ILAAP process;
• the Society operates within its impact tolerance statements for its
important business services and remains operationally resilient;
• the Society maintains an up-to-date and adequate RRP;
• conduct-related risks are appropriately identified, managed, and
reported (including Consumer Duty related); and
• climate related financial risks are appropriately identified, managed
and mitigated.
Committee activities
The following outlines the Committee’s activities and areas of focus during
the year:
Strategy &
risk appetite
• Review of strategic risk appetite statements;
• review of operational resilience self-assessment; and
• review of strategic risk dashboards.
Policy
• Review and update to the Society’s RMF;
• review and update to the Society’s Operational Risk
Management Framework;
• annual review and approval of Capital Adequacy and
Liquidity and Funding Risk Policies;
• annual approval of Compliance Monitoring Plan; and
• approval of Financial Crime Policy.
Stress testing
• Annual review and recommendation of the ICAAP to the
Board;
• annual review and recommendation of the ILAAP to the
Board;
• annual review and recommendation of the RRP to the
Board; and
• annual review and recommendation of Pillar 3 Disclosure
to the Board.
Risk
management
• Review of credit risk profile of mortgage portfolios; and
• review of annual Money Laundering Reporting Officer’s
report.
Risk
monitoring
• Review of risk exposure relative to appetite and tolerance
measures;
• review of CRO’s report;
• horizon scanning;
•oversight of ERC and subsidiary risk management
committees;
•review of compliance and conduct risk monitoring activity
(including Consumer Duty); and
• in tandem with the RemCo, review the management of
key risks in determining the variable pay awards due to the
Executive Directors and Senior Management.
Kerry Spooner
Chair of the Board Risk Committee
5
th
March 2025
___________________________________________________________________________________________
Corporate Governance Report
Page | 31 Annual Report & Accounts 2024 Nottingham Building Society
Nottingham Building Society is committed to best
practice in corporate governance and has
considered the requirements of the UK Corporate
Governance Code.
The Board has reviewed the Society’s corporate governance practices
against the UK Corporate Governance Code (July 2018) (the ‘Code’), which
is intended to apply to listed companies, to the extent that it is relevant to
a building society. In the interest of transparency, each building society is
encouraged to explain in its Annual Report and Accounts whether, and to
what extent, it adheres to the Code. The Board is committed to complying
with best practice in corporate governance.
This report sets out how the Board has operated in 2024 and complied with
the provisions of the Code and concludes that the Board has identified that
it is fully compliant with the provisions of the Code.
The Board is now planning for the changes required to its corporate
governance practices to deliver compliance with the terms of the new
Corporate Governance Code which comes into force from 1
st
January 2025.
Leadership
The Board
As at 31
st
December 2024, the Board consisted of five Non-Executive
Directors (including the Chair) and three Executive Directors, providing a
complementary balance of skills and expertise.
The Board held eleven meetings, one strategy review meeting and one
business planning meeting during 2024. In addition, the Non-Executive
Directors meet periodically, without the Executive Directors present, and
consider all aspects of board responsibilities, governance and performance.
In line with Code principles, the Board operates effectively and is collectively
responsible for the long-term success of the Society and ensuring that the
necessary resources are in place for the Group to meet this objective. It has
a schedule of reserved matters and its principal function is to focus on how
it has considered and addressed the opportunities and risks to the future
success of the Group, and the sustainability of the Group’s business model,
and how its governance contributes to the delivery of its strategy.
Additionally, it ensures the appropriate financial and business systems and
controls are in place to safeguard members’ interests, maintain effective
corporate governance and measure business performance. All Executive
and Non-Executive Directors can obtain independent professional advice, at
the Society’s expense, should that be necessary in the fulfilment of their
duties, and have access to the services and advice of both the General
Counsel and the Company Secretary.
Division of responsibilities
The roles of the Chair of the Board and the CEO are held by different people
and are distinct in their purpose, with division of responsibility set out in
writing.
The CEO has direct charge of the Group on a day-to-day basis and is
accountable to the Board for the financial and operational performance of
the Group, as well as for the formation of its strategy.
The Chair, who is elected by the Board annually, leads the Board in
approving its strategy and in the achievement of its objectives. The Chair is
responsible for organising the business of the Board, ensuring its
effectiveness and setting its agenda.
Non-Executive Directors
Independent Non-Executive Directors play a vital role in challenging and
helping develop strategy for Nottingham Building Society, whilst providing
independent judgement, knowledge and experience.
The Board considers all Non-Executive Directors to be independent and free
of any relationship or circumstances that could interfere with the exercise
of their independent judgement.
One of the independent Non-Executive Directors is appointed as the Senior
Independent Director, to provide a sounding board for the Chair and to
serve as an intermediary for the other directors, as necessary. The Senior
Independent Director is identified on page 21.
Effectiveness
Composition of the Board
The names of the Directors together with brief biographical details are set
out on pages 21 to 22.
The Board has four committees (BRC; NomCo; RemCo; and BAC) to help it
discharge its duties. The terms of reference for these committees are
reviewed annually.
The four committees meet regularly and current membership of these
committees is shown on page 22.
The table below shows the attendance of each director at the relevant
board and board committee meetings. The number to the left is the number
of meetings attended; the number to the right is the number of meetings
the Director was eligible to attend during 2024.
Director
Board
Risk
Nominations
Remuneration
Audit
R Ashton
11/11
2/2
3/3
2/2
1/1
P Astruc
3/4
2/2
-
-
1/1
S Baum
11/11
-
-
S Hayes
11/11
-
-
-
-
S Linares
10/11
6/6
4/4
3/3
-
A Murphy
11/11
-
-
-
-
A Neden
7/7
-
2/2
2/2
-
P O’Donnell
10/11
6/6
-
-
5/5
K Patel
10/11
6/6
4/4
3/3
5/5
K Spooner
10/11
6/6
4/4
3/3
5/5
The minutes of committee meetings are available to the Board. The Board
also receives reports from the Chair of each of the committees and
recommendations arising. The terms of reference for these four
committees are available on the Society’s website.
In addition to the four board committees noted above, ExCo, ERC and ALCo
are delegated authority by the Board to manage the day-to-day operations
of the Group. ALCo was elevated during 2024 to the same level as ExCo and
ERC. Each of these committees generally meets once a month and the
membership of each committee is made up of both Executive Directors and
Senior Management. Together, the committees are responsible for acting
on behalf of the Board in organising, managing and protecting the Society’s
assets to deliver value to members, whilst ensuring the Society operates
within the law, regulation and clearly agreed Board risk appetites. Together
they are therefore responsible for ensuring the management and delivery
of four key areas on behalf of the Board: Strategy, Risk Management,
Business Planning, and Operational Oversight. The Risk Management
Report on pages 26 to 29 covers these committees in further detail.
___________________________________________________________________________________________
Corporate Governance Report
Page | 32 Annual Report & Accounts 2024 Nottingham Building Society
Appointments to the Board
Specialist third party recruitment consultants are engaged to assist with all
Board recruitment activities, whether Executive or Non-Executive
appointments.
The NomCo assists the Board by making timely recommendations on the
Board and Executive succession plan, recruitment and composition and
other relevant matters. The Committee considers, annually, the
competence and suitability of those directors seeking election or re-election
at each annual general meeting.
The Committee meets at least twice a year. Additional meetings may be
convened if necessary.
Appointments to the Board are made on merit and against objective criteria
balancing skills, experience, independence and knowledge on the Board.
The Society considers diversity in respect of gender and other measures,
both at board level and in recruitment throughout the business. Candidates
for both Executive and Non-Executive Directorships are recommended by
the NomCo to the Board for approval, with the assistance of external
consultants.
All directors must meet the requirements of the Senior Managers and
Certification Regime prescribed by the FCA and PRA including, where
appropriate, receiving regulatory approval.
Commitment
Prior to appointment, Non-Executive Directors are required to disclose their
other significant commitments. In addition, Non-Executive Directors
undertake that they will have sufficient time to meet what is expected of
them, recognising the need for availability in the event of crises. In addition,
throughout their tenure with the Society, directors are required to inform
the Board in advance of any other positions they wish to take up so the time
commitment and any potential conflicts of interest can be considered.
Development
Upon appointment, new directors receive a formal and tailored induction
and throughout their tenure all directors receive timely and appropriate
training to enable them to properly fulfil their roles. The information and
training requirements of all directors are reviewed annually.
Information and support
The Chair ensures that all directors receive accurate, timely and clear
information.
The Society has in place appropriate insurance cover in respect of the
Directors.
Evaluation
Executive Directors are evaluated using the Performance Management
Framework for all employees. The CEO is appraised by the Chair. The
performance of the Non-Executive Directors is reviewed annually by the
Chair. The Senior Independent Director conducts interviews with each
director to appraise the performance of the Chair, the results of which are
discussed with the Chair.
Each year the Board and each of its committees undertake an assessment
of the effectiveness of their performance during the year. The Corporate
Governance Code also prescribes that a review should be undertaken by an
independent external party at least every three years, the last review having
been undertaken by board evaluator, Ian White, in 2022. Both the latest
annual review and independent review confirmed that the Board and its
Committees operated effectively.
Re-election
In 2025, all directors will submit themselves for election at the AGM in
accordance with the Code.
Non-Executive Directors can serve up to a maximum of three three-year
terms.
The Code requires that the independence of all Non-Executive Directors is
considered as part of the Annual Report of the Society. It is confirmed that,
all of the Non-Executive Directors are considered to be independent, and in
particular (noting the requirements of the Code) Non-Executive Directors
are required to attest to their independence against the specific criteria set
out in the Code.
The NomCo makes recommendations for the Board concerning the re-
appointment of any Non-Executive Director at the conclusion of their
specified term of office, having due regard to their performance and ability
to continue to contribute to the Board considering knowledge, skills and
experience required.
Accountability and audit
Financial and business reporting
The Directors’ Report on pages 23 to 24 details the responsibilities of the
Directors in preparing the Group’s accounts.
This includes ensuring suitable accounting policies are followed, that a true
and fair view of the Group’s financial position is given and that the Group’s
business is a going concern.
The Board has responsibility to present a fair, balanced and understandable
assessment of the Group’s performance and financial position, business
model and strategy, consideration of which is contained within the Chief
Executive’s Review on pages 5 to 6, the Strategic Report on pages 7 to 14
and within the Annual Report and Accounts taken as a whole.
Viability statement
In accordance with the requirements of the Code, the Board has assessed
the prospects of the Society over a period longer than the 12-months
required by the going concern provision. The Viability Statement is
considered on page 24 within the Directors’ Report.
___________________________________________________________________________________________
Corporate Governance Report
Page | 33 Annual Report & Accounts 2024 Nottingham Building Society
Risk management and internal control
The responsibilities and activities of the BRC are outlined within the Board
Risk Committee Report on page 30.
The Society’s RMF (approved by the Board) sets out the principal risks facing
the Group, including those that would threaten the business model, future
performance, solvency and liquidity. These principal risks are detailed on
pages 12 to 14 of the Strategic Report and further information on risk
management is given in the Risk Management Report on pages 26 to 29.
In accordance with the Code, the Board is committed to maintaining sound
systems and controls to safeguard both its own assets and those of its
members and there is an annual review of risk management and internal
control systems.
The operation of these three lines of defence is embodied in the terms of
reference of the Society’s risk committees. The BRC ensures (on behalf of
the Board) that there are appropriate risk management frameworks and
policies in place for the appropriate identification, assessment, monitoring
and control of all the main sources of risk that the Group faces.
Where weaknesses in controls are identified by the three lines of defence,
the Board monitors the steps taken to remedy the issues and to ensure that
the Society responds to changing external threats and economic
circumstances and to the changing regulatory environment.
Remuneration
Policy and procedures
The level and make-up of director remuneration and the procedure for
developing policy on executive remuneration, (including fixing the
remuneration packages of individual directors), is considered by the RemCo.
The RemCo’s work and the Society’s compliance with the Code principles
relating to remuneration is covered in the Directors’ Remuneration Report
on pages 36 to 39.
Relations with members
Dialogue with members
The Society’s members are all customers of the Society. Engagement with
members is undertaken in various ways including member events, social
media, customer panels, regular literature and mainstream media.
The Society is keen to find out its members’ views so that it can continually
improve. It provides them with several ways and opportunities to give their
feedback. It surveys a selection of its members on a regular basis through
its customer satisfaction survey. The results of this feedback are shared in
Board meetings. The Society also encourages its members to attend its AGM
where they can ask questions and voice their opinions. During 2024, owing
to a desire to protect the health and well-being of members, members were
invited to attend the meeting virtually and invited to pre-submit questions.
Furthermore, each year, the Society produces a Members’ Newsletter,
including the Summary Financial Statement, which provides an abridged
version of information contained within the Annual Report and Accounts.
The Members’ Newsletter is provided to all members as part of its annual
AGM documentation.
Constructive use of the AGM
Each year, notice of the AGM is given to all members who are eligible to
vote. Members are sent voting forms and are encouraged to vote online, by
post, at a local branch or by person or proxy at the AGM.
All postal and proxy votes are counted using independent scrutineers.
All members of the Board are present at the AGM each year (unless,
exceptionally, their absence is unavoidable) and the Chair of the BAC,
NomCo, BRC and RemCo are, therefore, available to answer questions.
The Notice of the AGM and related papers are sent at least 21 days before
the AGM in accordance with the Building Societies Act 1986.
First Line:
Focus: Control
Day-to-day management and control of risk by the
business. Results reported to management and BRC
Second Line:
Focus: Oversight
Development and maintenance of coherent Risk
Management Frameworks and ongoing oversight of first
line risk management and controls. Results reported to
Management and BRC
Third Line:
Focus: Assurance
Independent assurance of effectiveness of risk control
and risk oversight. Results reported to management and
BAC
___________________________________________________________________________________________
Board Audit Committee Report
Page | 34 Annual Report & Accounts 2024 Nottingham Building Society
Board Audit Committee
The principal role of the BAC is providing support to the Board in its
oversight of financial reporting and the financial control environment across
the Society. The Committee’s primary functions are:
• to monitor the integrity of the Financial Statements and any formal
announcements relating to the Society’s financial performance,
reviewing any significant financial reporting judgements which they
contain including that of the Society’s going concern status;
• to keep under review the Society’s financial control systems and
processes that manage and monitor financial risks;
• to review and approve the statements to be included in the Annual
Report and Accounts concerning internal control, financial risk
management and the Viability statement;
• to review the Society’s procedures for detecting fraud and its systems
and controls for the prevention of bribery;
• to monitor and review the effectiveness of the Internal Audit function;
• to approve and review progress of the annual Internal Audit Plan;
• prior to the members’ vote at the AGM, to make recommendations to
the Board for appointment, re-appointment and / or removal of the
external auditor;
• to review and monitor the external auditor’s independence and
objectivity and the effectiveness of the audit process, taking into
consideration relevant UK law, regulation and applicable ethical
standards;
• to approve the remuneration and terms of engagement of the
Society’s external auditor;
• to develop and implement policy on the engagement of the external
auditor to supply non-audit services, considering relevant ethical
guidance regarding the provision of non-audit services by the external
audit firm; and
• to report to the Board on how the Committee has discharged its
responsibilities.
Membership and attendance
The BAC consists of three Non-Executive Directors. The members of the
Committee are Peter O’Donnell, Kavita Patel and Kerry Spooner, who have
a broad range of skills, experience and knowledge relevant to the building
society and financial services sector. The Company Secretary acts as
Secretary to the Committee.
Other individuals such as the CEO, CFO, CRO, Chief Internal Audit Officer
(‘CIAO’) and Finance Director, may be invited to attend all or part of any
meeting as and when appropriate. The external auditor was invited to
attend all the Committee’s meetings held in 2024.
Private meetings are held at least once a year with the external auditor and
with the CIAO in the absence of management to enable issues to be raised
directly if necessary. The Committee Chair meets with the Head of Internal
Audit and the external auditor on a regular basis.
Following each committee meeting, the minutes of the meeting are
distributed to the Board and the Committee Chair provides an update to the
Society’s Board at the next Board meeting on key matters discussed by the
Committee.
Meeting frequency and reporting
The Committee met five times in 2024 and during the year:
• reviewed the results and draft Annual Report and Accounts for the
year ended 31
st
December 2024;
• challenged the key loan provision assumptions and judgements,
underlying the analysis of expected credit losses proposed by
management;
• reviewed the going concern and viability statement assumptions and
all key issues and areas of judgement relating to the financial
statement reporting;
• reviewed reports from the external auditor, including the
Management Letter highlighting system and control
recommendations, key accounting and audit issues and conclusions
for the interim and full year financial statement reporting;
• reviewed the Annual and Interim Financial Statements and draft press
releases, with consideration of the fair, balanced and understandable
requirements of the UK Corporate Governance Code;
• approved the risk-based 2024 and 2025 Internal Audit Plans;
• received and reviewed reports from Internal Audit;
• reviewed and approved (working with BRC) the statements to be included
in the Annual Report and Accounts concerning internal control, financial
risk management and the Viability Statement; and
• carried out a review of the Committee’s own effectiveness and terms of
reference
Significant matters in relation to the Financial
Statements
The Committee considers a wide range of matters in relation to the Financial
Statements, which relate mainly to key judgements, accounting policies and
estimates which Management must make during the preparation of the
statements, particularly in respect of large or unusual transactions. During
2024, the significant matters considered by the Committee included:
Philips Trust
Corporation
provisioning
The Committee reviewed an accounting paper
presented by Management, ensuring that the threshold
for recognising a provision had been met and that the
provision could be reliably measured. The Committee
also reviewed the disclosures made within the Accounts
and considered these disclosures to be appropriate.
Expected credit
loss
provisioning
The Society reviews the IFRS 9 model outputs to
estimate the level of impairment provision required
across the mortgage portfolio, which uses historical
default and
loss experience as well as applying
judgement. The Committee reviewed and challenged
the approach to calculating the provisions, including the
impact of the uncertain macroeconomic environment,
inflation and affordability stresses.
Effective
Interest Rate
(‘EIR’)
methodology
The Society recognises interest income using a constant
level of interest over the expected behavioural life of
the loan. The Committee reviewed the basis of the EIR
calculations, including
a proposal to spread early
repayment charges over the expected life of a loan as
opposed to the previous
cash receipt basis. The
Committee is satisfied that this change should be
applied prospectively from the 1
st
January 2024 as a
change in accounting estimate.
Fair value of
derivative
financial
instruments
Considering the significant market volatility seen in the
external markets in the year and resulting impact on
derivative fair values, the Committee considered the
Income Statement and Balance Sheet positions.
Calculation of
the defined
benefit pension
plan position
The Society has a defined benefit pension scheme which
was closed to new entrants in 1997 and closed to future
service accrual from 31
st
January 2009. The Committee
reviewed the methodologies and assumptions used in
calculating the latest estimate of the scheme’s assets
and liabilities. This review was supported by a report
provided by the Society’s pension advisors.
Going concern
assumption
The Committee evaluated whether the going concern
basis of accounting was appropriate by considering
forecast profitability, liquidity, funding availability and
regulatory capital positions. The review also considered
the external environment because of the impact of the
uncertain macroeconomic environment, inflation and
affordability stresses.
Fair, balanced
and
understandable
The Committee reviewed the integrity of the Financial
Statements
and any formal announcements. The
content of the Annual Report
and Accounts was
reviewed and the Committee advised the Board that, in
its view, and taken as a whole, it is fair, balanced and
understandable and provides the information necessary
for members to assess the Society’s performance,
business model and strategy. The Committee therefore
___________________________________________________________________________________________
Board Audit Committee Report
Page | 35 Annual Report & Accounts 2024 Nottingham Building Society
recommended that the Board approve the Annual
Report and Accounts.
Viability
Statement
The Committee reviewed the requirements of the UK
Corporate Governance Code to provide the medium-
term Viability statement in the Annual Report and
Accounts and agreed the definition of the medium-term
period.
Corporate
Governance
Code
The Committee reviewed the impacts on the Financial
Statements of the Corporate Governance Code.
Changes to
accounting
standards and
other relevant
developments
The Committee is kept up to date with changes to
accounting standards and relevant developments in
financial reporting and applicable law. In addition, as
appropriate members attend
relevant seminars and
conferences provided by external bodies.
Independence and effectiveness of external auditor
In 2023, the Society tendered its external audit relationship in line with best
practice and Ernst & Young LLP were re-engaged and therefore have now been
in post for ten years as at 31
st
December 2024.
In advance of the commencement of the annual audit, the Committee reviewed
a report presented by the external auditor detailing the audit plan, planning
materiality, areas of audit focus, terms of engagement and fees payable.
Following the review of the Interim Financial Statements and the audit of the
Annual Financial Statements, the Committee received a report detailing the
work performed in areas of significant risk, and a summary of misstatements
and internal control related issues identified. The Committee considered the
matters set out in these reports as part of recommending the Interim and
Annual Financial Statements for approval.
To monitor and assess any threats to the independence of the auditor, the
Committee reviews a report on the level of spend with the auditor on audit and
non-audit services. The Committee has a framework on the Society’s use of the
external auditor for non-audit work, to ensure their continued independence
and objectivity. The external auditor undertook a six-monthly review of the
Society’s interim results, an audit related assurance service, conducted in
accordance with this policy, and details of any fees paid for these services are
outlined in Note 6 to the accounts.
The Committee considered the performance of Ernst & Young LLP as external
auditor for 2024, and is satisfied with their objectivity, independence and
effectiveness and therefore recommended that they be re-appointed at the
AGM for the current year.
Oversight and effectiveness of internal audit
The Committee receives regular reports from the CIAO setting out the results
of assurance activity, proposed changes to the approved audit plan and the
level of resource available. Significant findings and themes identified were
considered by the Committee, alongside Management’s response and the
tracking and completion of outstanding actions. In addition to approving the
annual plan and budget throughout the year, the Committee reviewed and
approved amendments to the Internal Audit Plan and resources.
The Committee regularly monitors whether Internal Audit has delivered its
reports in accordance with the agreed plan and to the expected standard. The
CIAO also carries out an annual review of the effectiveness of the Society’s
system of internal control and reports on the outcome of this review to the
Committee. The CIAO reported an adequate level of assurance in relation to
the Group’s arrangements for risk management, control infrastructure,
governance and fraud prevention controls. The Committee therefore regards
the Internal Audit function to be effective.
Audit Committee performance and effectiveness
As outlined in the Corporate Governance Report on pages 31 to 33, the
Board and each of the committees formally evaluate their own performance
and effectiveness annually. The Committee discussed the results of the
2023 review in June 2024 and concluded that, overall, the Committee
continued to be effective and was adequately discharging its
responsibilities.
Peter O’Donnell
Chair of the Board Audit Committee
5
th
March 2025
___________________________________________________________________________________________
Directors’ Remuneration Report
Page | 36 Annual Report & Accounts 2024 Nottingham Building Society
Statement by the Chair of the Remuneration
Committee
On behalf of the Committee, I am pleased to present the annual Directors’
Remuneration Report, which sets out the Remuneration Policy and details
of the Directors’ remuneration in the year ended 31
st
December 2024.
Nottingham Building Society is committed to best practice in its
remuneration of directors. This report explains how the Society applies the
relevant principles and requirements of the remuneration regulations and
Codes. The report has two sections:
• the Remuneration Policy, which sets out the Society’s Remuneration
Policy for directors; and
• the Annual Remuneration Report, which outlines how the policy was
implemented in 2024.
Committee structure
In 2024, the Remuneration Committee membership was made up as
follows:
Simon Linares
Non-Executive Director and Chair of RemCo
Kerry Spooner
Senior Independent Director and Chair of the BRC
Robin Ashton
Non-Executive Director, Chair of the Board
Kavita Patel
Non-Executive Director and Chair of Conduct Sub-
Committee within BRC
2024 performance and awards
The Chair’s Statement, Chief Executive’s Review and Strategic Report on
pages 4 to 14 describe 2024 as a period of strong performance amidst
turbulent economic conditions. The strong results have been aided by the
higher interest rate environment which positively impacted the Society’s
net interest income. Nottingham Building Society continues to be a top ten
building society with total assets of £5.2 billion. The Society has revitalised
its purpose placing a greater focus on mortgages whilst continuing to
provide a safe and secure home for our members to save with us. We have
ensured that our regulatory capital requirements continue to be maintained
at appropriate levels, whilst continuing to invest in the Society, and
supporting both our savings and mortgage members. We have also finalised
the Society’s reward strategy for the next three years, which focuses on the
improvement of our colleagues’ journey with us, and the enhancement of
our Employee Value Proposition on physical, mental and financial well-
being and ‘moments that matter’ in the lives of our colleagues.
Nottingham Building Society is pleased to confirm its Annual Bonus Plan for
2024. The bonus for 2024 is determined by the Society's financial and
strategic performance, as well as each employee's individual achievements.
Additionally, in 2024, we introduced a one-off Medium-Term Incentive Plan
(‘MTIP’) designed to support the ambitious goals of our EOB strategy and to
engage and retain the leaders in charge of delivering it. This MTIP spans a
three-year performance period, with rigorous performance conditions and
specific benchmarks. The Directors’ variable compensation will be tied
exclusively to these two plans.
It is in this context that the payments to Executive Directors have been
determined and are detailed in this report. In 2024, the Committee
reviewed and approved payment of the deferred element of the 2020
Bonus Plan.
Remuneration Committee
The primary objective of the RemCo, under delegated authority from the Board,
is to make recommendations to the Board on the general Remuneration Policy
of Nottingham Building Society and specifically on the remuneration of
Executive Directors. The Committee also has oversight of the remuneration of
both the Leadership team and Remuneration Code staff, ensuring that
remuneration is in line with the Society’s business drivers, values and ambitions
and adheres to the Remuneration Policy. In addition, the Committee is
responsible for approving the variable pay and reward principles and
compliance with the Remuneration Code and policy statement.
The Committee met three times in 2024 and is made up of a minimum of three
Non-Executive Directors, as detailed within the table above. The CEO, CPO,
Legal Counsel and Company Secretary attend the meetings by invitation.
Nottingham Building Society adheres to the requirements of the Remuneration
Code applicable to a level 3 firm as defined by the Regulator. Non-Executive
Directors do not receive variable remuneration. Information on Nottingham
Building Society’s other Remuneration Code Staff is set out in the Pillar 3
disclosures published on our website www.thenottingham.com, along with the
Committee terms of reference.
Committee activities
RemCo’s activities in 2024 included:
Remuneration
Policy
• Review of the Remuneration Policy for 2024 and
recommending it to the Board for approval;
• reviewing and approving the Remuneration Policy
Statement ensuring its
compliance with the
Remuneration Code; and
• reviewing regulatory updates and assessing the
impact on Nottingham Building Society.
Fixed
Remuneration
• Oversight of the activities undertaken by the ExCo
in relation to reward;
• considering the annual pay review for all eligible
employees; and
• agreeing the terms for any appointments and
leavers for executive level and other Material Risk
Taker roles.
Variable
Remuneration
• Agreeing a new annual bonus plan for 2024; and
• agreeing a new medium-term incentive for a
performance period from 2024 to 2026.
RemCo intends to review the construct of the Annual Bonus Plan in 2025.
Remuneration Policy
Nottingham Building Society’s Remuneration Policy reflects its objectives for
good governance, appropriate risk management and acting in the long-term
best interests of members.
The policy is there to ensure that:
• remuneration should be sufficient to attract, reward, retain and motivate
high quality leaders and employees to run the Society successfully,
delivering value for our members whilst avoiding paying more than is
necessary for this purpose in line with our mutual ethos; and
• remuneration is structured to strike the right balance between fixed and
variable pay. Variable pay schemes are designed to incentivise and reward
appropriate behaviour and performance, aligned with Nottingham
Building Society’s position on risk; rewards are only attributed to the
delivery of success and achievement of objectives.
Nottingham Building Society is classified as a level 3 firm and seeks to apply
appropriate remuneration best practice for all Remuneration Code staff and
other staff.
All pay is benchmarked using externally provided data and the approach to
pay reviews is consistently applied to all colleagues across the Society,
regardless of position.
___________________________________________________________________________________________
Directors’ Remuneration Report
Page | 37 Annual Report & Accounts 2024 Nottingham Building Society
Recruitment policy for Executive Directors
Nottingham Building Society’s approach to recruitment is to pay no more
than is necessary to attract appropriate candidates to roles across the
business, including Executive roles. Any new Executive Director’s
remuneration package will be consistent with our Remuneration Policy as
outlined in this report. Any payments made to Executive Directors on joining
the Society to compensate them for forfeited remuneration from their
previous employer will be compliant with the provisions of the
Remuneration Code and will be approved by the RemCo.
Service contracts
All Executive Directors, in line with best practice, have service contracts
outlining their duties and terms and conditions of employment.
Payment for loss of office of Executive Directors
Any compensation in the event of early termination is subject to RemCo
recommendation and Board approval. Pension contributions cease on
termination under the rules of the pension scheme.
Other directorships
None of the Executive Directors currently hold any paid external
directorships.
Executive Directors’ total remuneration
Executive Directors’ emoluments comprise a basic salary, variable pay,
pension entitlement and other taxable benefits as outlined on pages 38 to
39.
The total remuneration received by Executive Directors is detailed on page
39. The information has been audited and shows remuneration for the years
ended 31
st
December 2023 and 31
st
December 2024 as required under the
Building Societies (Accounts and Related Provisions) Regulations 1998.
The remuneration of Executive Directors is considered annually by the
RemCo attended by Nottingham Building Society’s CEO, who (except in
respect of their own remuneration) makes recommendations regarding
executive pay and agreed recommendations are referred to the Board.
The CEO is the Society’s highest paid employee and no employee earns
more than the CEO.
The salary of Executive Directors increased by 4.0% to 7.0% in 2024. This is
in line with the wider Society, with the basic salary increase for colleagues
ranging from 4.5% to 9.5% depending on grade, with minimum salaries
implemented.
Chief Executive Officer pay ratio
The CEO pay ratio is presented as follows to promote transparency and
encourage good governance. The CEO is the highest paid person within the
organisation, and this is compared with the 25
th
, 50
th
and 75
th
percentile
employees to calculate the CEO pay ratio. This uses a single total figure of
remuneration which includes total salary, variable pay, pension and taxable
benefits.
The Society has chosen to publish the CEO pay ratio using the recommended
and government preferred approach (Option A). Option A involves
calculating the actual full time equivalent remuneration for all relevant
employees for the financial year in question.
These values are then listed in order from lowest to highest and the values
at the three percentile points identified as disclosed below.
Year 25
th
percentile Median 75
th
percentile
2024 21:1 15:1 8:1
2023 20:1 15:1 9:1
25
th
percentile
Median 75
th
percentile
2024
Total remuneration £25,486 £35,034 £64,630
Salary £22,829 £31,130 £56,116
2023
Total remuneration £23,721 £31,919 £57,849
Salary £21,204 £27,649 £48,429
Employee data includes full time equivalent total remuneration for Society
employees as at 31
st
December.
Non-Executive Directors
The Chair and other Non-Executive Directors each receive an annual fee
reflective of the time commitment and responsibilities of the role. Fees for
Non-Executive Directors are set by reference to benchmark information
from a building society comparator group, agreed with the Board and take
into consideration the principles underpinning the annual salary review.
The Non-Executive Directors’ fees are reviewed by the Chair together with
the Executive Directors before recommendations are referred to the Board.
Remuneration of the Chair is considered by the RemCo, together with the
Society’s CEO, without the Chair being present.
Non-Executive Directors do not receive variable pay or pensions to
encourage their independence.
Non-Executive Directors are reimbursed for reasonable expenses incurred
during their work on the Society’s business.
Remuneration Code staff (Material risk takers)
The remuneration of all Remuneration Code staff is overseen directly by the
RemCo. Fixed and variable pay decisions (including appointment packages)
for Remuneration Code Staff (excluding the CIAO where the decision is
made by the Chair of the BAC and approved by the RemCo), are proposed
by the Executive and all decisions are recommended to the RemCo for
approval.
The Society’s Remuneration Code staff are informed of their status through
written communication. This communication includes the implications of
their status including the potential for remuneration that does not comply
with certain requirements of the Remuneration Code to be rendered void
and recoverable by the Society.
___________________________________________________________________________________________
Directors’ Remuneration Report
Page | 38 Annual Report & Accounts 2024 Nottingham Building Society
Component Purpose Operation Performance measures Opportunity
Basic salary
Fixed remuneration set to
attract and retain
executives of appropriate
calibre and experience.
Basic salary is assessed by
reference to roles carrying
similar responsibilities in
comparable organisations. A
comparator group is used
that consists of Executive
Director positions within
banks and building societies
of a similar size and
complexity.
Reviewed annually and linked to personal
performance and market sector
benchmarking, including Willis Towers
Watson benchmark data.
Increases based on:
• overall employee pay increases in the
Group;
• benchmarking comparisons;
• personal performance; and
• role and experience.
The base salaries of Executive
Directors are reviewed as for any
other employee in accordance
with the reward matrix, except in
circumstances where:
•
market peer benchmarking
indicates that remuneration is
moving out of line of the
appropriate peer group; and /
or
•
there has been a material
increase in scope or
responsibility of the Executive
Director’s role.
Variable pay
Annual
Bonus Plan
Linked to the delivery of the
Society and personal
objectives. Used to reward
Executive Directors within
the context of achieving the
Society’s goals and
objectives.
Payments under the variable
pay schemes are not
pensionable.
The bonus will only be awarded if the
threshold criteria and Society and individual
performance targets are met and a
payment is triggered in the Annual Bonus
Plan.
50% of the bonus is deferred for three years
and payment is subject to meeting Society
and individual performance threshold
criteria in each of the years from award to
payment.
The Committee has the discretion to reduce
or withhold the deferred element if it
becomes apparent that the basis on which
the variable pay award was made was
wrong or that financial performance has
deteriorated materially since the award.
The deferred payment, prior to the 2022
performance period, is subject to clawback
for a period of three years after payment.
For performance periods from 2022
onwards, the deferred payment is subject
to clawback for a period of 7 years after
payment.
The scheme is based upon three elements:
• Financial adequacy - achievement of a
minimum level of adjusted Profit Before
Tax before any bonus is payable.
• Annual Bonus Plan measures Society
performance against four strategic
pillars:
growing & rewarding membership;
responsible society;
strategic reinvention; and
safe & secure.
• Individual performance including
achievement of strategic objectives.
Personal performance objectives,
appropriate to the responsibilities of the
Executive Director, including the
achievement of appropriate strategic
progress are set at the start of each year.
Objectives are set within board risk appetite
and regulatory requirements.
The maximum award possible is
50% of basic salary, payable with
50% of the award deferred for
three years.
Variable pay
Medium-
term
Incentive
Plan (‘MTIP’)
One-off incentive used to
reward, engage and retain
Executive Directors on the
desired improvement in our
relative position against
competitors as a result of
the delivery of the Society’s
EOB strategy.
Payments under the variable
pay schemes are not
pensionable.
The incentive will only be awarded if the
threshold criteria and Society performance
targets are met once the performance
period of three years (2024 to 2026) has
concluded.
100% of the incentive payment is deferred
for nine months until September 2027, and
payment is subject to meeting Society and
individual performance threshold criteria
from award to payment.
The Committee has the discretion to reduce
or withhold the payment if it becomes
apparent that the basis on which the
variable pay award was made was wrong or
that financial performance has deteriorated
materially since the award.
The payment is subject to clawback for a
period of seven years after payment.
The scheme is based upon three elements:
• Financial adequacy - achievement of a
minimum level of adjusted underlying
Profit Before Tax before any incentive is
payable.
• MTIP
measures Society’s relative
position against a peer group of Building
Societies on three strategic indicators:
net interest margins;
growth in total savings assets; and
growth in total mortgage assets.
• Risk appetite - performance objectives
were set at the start of performance
period in 2024 within board risk
appetite and regulatory requirements.
Any payment is subject to achieving the
same risk targets as the annual bonus
plan for plan years 2024, 2025 and 2026.
The maximum award possible is a
cash lump sum of £500,000 for
the CEO and £250,000 for the
other Executive Directors, payable
at the end of the performance
period in December 2026,
deferred until September 2027.
Pension or
pension
allowance
A part of fixed remuneration
to attract and retain
Executives of appropriate
calibre and experience.
Executive Directors are invited to join the
Society’s defined contribution pension plan,
or, as an alternative, be provided with an
equivalent cash allowance.
Not applicable.
Pension contributions for new
Executive Directors appointed
post 1
st
January 2020 will be
aligned with the contribution
matrix for all employees.
Benefits
A part of fixed remuneration
to attract and retain
executives of appropriate
calibre and experience.
The benefits received by Executive
Directors are private medical insurance and
a car allowance.
Not applicable.
Set at a level considered
appropriate for each Executive
Director by the Remuneration
Committee in line with market
practice.
___________________________________________________________________________________________
Directors’ Remuneration Report
Page | 39 Annual Report & Accounts 2024 Nottingham Building Society
Annual Report on remuneration
Executive Director remuneration
2024
2024
2024
2024
2023
2023
2023
2023
2023
Audited
Sue
Hayes
Anthony
Murphy
Simon
Baum
Total
Sue
Hayes
Anthony
Murphy
Simon
Baum
Paul
Astruc
Total
Society
£000
£000
£000
£000
£000
£000
£000
£000
£000
Fixed remuneration
Salary
1
391
297
253
941
375
146
173
67
761
Benefits
11
29
12
52
11
15
8
3
37
Variable
remuneration
Annual bonus
2
52
41
35
128
62
46
29
10
147
454
367
300
1,121
448
207
210
80
945
Pension contribution
-
15
-
15
-
7
-
-
7
Payments in lieu of
pension
31
-
26
57
30
-
19
5
54
485 382 326 1,193 478 214 229 85 1,006
The Directors can sacrifice elements of their salary and variable pay. All figures disclosed in the table above are presented pre-sacrifice.
1
Paul Astruc ceased to be an Executive Director on 6
th
April 2023, Anthony Murphy became an Executive Director with effect from 23
rd
June 2023 and Simon Baum
became an Executive Director with effect from 1
st
May 2023 (earnings included above are for the period as an Executive Director).
2
The annual bonus figure reflects the amounts awarded in the year, which are not subject to deferral, and any deferred amount from previous financial years,
paid in year. The remaining element, which is subject to deferral and the achievement of threshold criteria, will be disclosed in the year of payment.
The unpaid deferred elements of the annual bonus scheme are as follows:
Executive Directors
Due
2025
1
Due
2026
1
Due
2027
1
Due
2028
1
Total
Deferred
Performance Year
2021
2022
2023
2024
£000
£000
£000
£000
£000
Paul Astruc
27
40
10
-
77
Simon Baum
-
-
29
35
64
Sue Hayes
-
58
62
52
172
David Marlow
54
15
-
-
69
Anthony Murphy
-
-
46
41
87
81
113
147
128
469
Non-Executive Directors
2024 2023
£000
£000
Paul Astruc (retired from the Board effective 6
th
April 2024)
15
40
Robin Ashton (Chair)
92
5
Simon Linares
70
69
Simon Baum (transferred to Executive Director on 30
th
April 2023)
-
23
Andrew Neden (retired from the Board effective 1
st
July 2024)
87
113
Peter O’Donnell
70
69
Kavita Patel
60
59
Kerry Spooner
95
88
Total emoluments for services as directors
489
466
Simon Linares
Chair of the Remuneration Committee
5
th
March 2025
___________________________________________________________________________________________
Independent Auditor’s Report
Page | 40 Annual Report & Accounts 2024 Nottingham Building Society
Independent Auditor’s Report to the members of Nottingham Building Society
Opinion
In our opinion:
• the Financial Statements of Nottingham Building Society (the “Society”) and its subsidiaries (together the “Group”) give a true and fair view of the state of
the Group’s and the Society’s affairs as at 31
st
December 2024 and of the Group’s and the Society’s income and expenditure for the year then ended;
• the Financial Statements have been properly prepared in accordance with UK adopted international accounting standards; and
• the Financial Statements have been prepared in accordance with the requirements of the Building Societies Act 1986.
We have audited the Financial Statements (as defined in the table below) of the Group and Society for the year ended 31
st
December 2024 which comprise:
Group Society
Income Statement for the year ended 31st December 2024 Income Statement for the year ended 31st December 2024
Statement of Comprehensive Income for the year ended 31st December 2024 Statement of Comprehensive Income for the year ended 31st December 2024
Statement of Financial Position as at 31st December 2024 Statement of Financial Position as at 31st December 2024
Statement of Changes in Members’ Interests for the year ended 31st December
2024
Statement of Changes in Members’ Interests for the year ended 31st December
2024
Cash Flow Statement for the year ended 31st December 2024 Cash Flow Statement for the year ended 31st December 2024
Related Notes 1 to 37 to the Financial Statements, including material accounting policy information, except for tables in Note 31 labelled as “unaudited”
Directors’ Remuneration Report tables identified as “audited”
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and the Society in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the
UK, including the FRC’s Ethical Standard as applied to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Society and we remain independent of the Group and the
Society in conducting the audit.
Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the Financial
Statements is appropriate. Our evaluation of the Directors’ assessment of the Group’s and the Society’s ability to continue to adopt the going concern basis of
accounting included:
• We obtained the Directors’ going concern assessment, which covers a period until 5
th
March 2026, being 12 months from approval of the Annual Reports
and Accounts;
• We compared the historical budgeted financial information with historical actual results, in order to form a view on the reliability of the forecasting process
• We considered the analysis of key relevant going concern assumptions, including those relating to financial performance, regulatory capital and liquidity,
and performed independent reverse stress testing and sensitivity analysis, including considering the impact of ongoing macroeconomic uncertainty;
• We considered the Group and Society’s current funding position and availability of additional capital and liquidity should it be required. We also evaluated
the Group and Society’s ability to replace maturing debt instruments over the going concern period to manage regulatory capital requirements;
• We considered whether there were other events subsequent to the Balance Sheet date which could have a bearing on the going concern conclusion ;
• We reviewed regulatory correspondence, committee and board meeting minutes, and met with the Prudential Regulation Authority, in order to identify
events or conditions that may impact the Group and Society’s ability to continue as a going concern; and
• We reviewed the going concern disclosures included in the Annual Report in order to assess whether the disclosures were appropriate and in conformity
with the reporting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast
significant doubt on the Group’s and Society’s ability to continue as a going concern until 5
th
March 2026, being a period of 12 months from the date of approval
of the Annual Report and Accounts.
In relation to the Group’s and the Society’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the Financial Statements about whether the Directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. However, because
not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and the Society’s ability to continue as a going concern.
___________________________________________________________________________________________
Independent Auditor’s Report
Page | 41 Annual Report & Accounts 2024 Nottingham Building Society
Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of the Group and the Society
Key audit matters
• Expected credit loss provisions
• Risk of of fraud in relation to revenue recognition of mortgage related income.
• Application of hedge accounting
Materiality
• Overall Group materiality of £1.4m which represents 0.55% of members’ interests.
An overview of the scope of the Society and the Group audits
Tailoring the scope
The Society is managed from one location in Nottingham. All audit work performed for the purposes of the audit was undertaken by a single Group Audit team
based in the United Kingdom.
We have followed a risk-based approach when developing our audit approach to obtain sufficient appropriate audit evidence on which to base our audit opinion.
We performed risk assessment procedures to identify and assess risks of material misstatement of the Group and Society Financial Statements and identified
significant accounts and disclosures. When identifying the extent at which audit work needed to be performed to respond to the identified risks of material
misstatement of the Group and Society Financial Statements, we considered our understanding of the Group and its business environment, the potential impact
of climate change, the applicable financial framework, the group’s system of internal control at the entity level, applications and any relevant internal audit results.
Our scoping to address the risk of material misstatement for each key audit matter is set out in the Key audit matters section of our report.
Climate change
Stakeholders are increasingly interested in how climate change will impact the Group and the Society. The Group and Society has determined that the most
significant future impacts from climate change on their operations will be from physical and transitional risks. These are explained on pages 19 and 20 in the
Sustainability Report, including their commitments to achieve net zero emissions by 2050. All of these disclosures form part of the “Other Information,” rather
than the audited Financial Statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether they are materially
inconsistent with the Financial Statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our
responsibilities on “Other Information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group and Society’s business and any consequential material
impact on its Financial Statements.
The Group and Society has explained in Note 1, Accounting policies, how they have reflected the impact of climate change in their Financial Statements. These
disclosures also explain where governmental and societal responses to climate change risks are still developing, and where the degree of certainty of these changes
means that they cannot be taken into account when determining asset and liability valuations under the requirements of UK adopted international accounting
standards.
Our audit effort in considering the impact of climate change on the Financial Statements was focused on evaluating Management’s assessment of the impact of
climate risk, physical and transition, their climate commitments, the effects of material climate risks disclosed in Note 1 and whether these have been
appropriately reflected in asset and liability values, where these are impacted by future cash flows, following the requirements of UK adopted international
accounting standards. As part of this evaluation, we performed our own risk assessment, supported by our climate change specialists, to determine the risks of
material misstatement in the Financial Statements from climate change which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and associated disclosures. Where considerations
of climate change were relevant to our assessment of going concern, these are described above.
Based on our work, whilst we have not identified the impact of climate change on the Financial Statements to be a standalone key audit matter, we have
considered the impact of climate change to principally impact expected credit loss provisions key audit matter. Details of the impact, our procedures and findings
are included in our explanation of key audit matters below.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements of the current period
and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the Engagement team. These matters were
addressed in the context of our audit of the Financial Statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these
matters.
___________________________________________________________________________________________
Independent Auditor’s Report
Page | 42 Annual Report & Accounts 2024 Nottingham Building Society
Risk
Our response to the risk
Expected credit loss provisions
Group and Society – 31 December 2024: £5.2m (2023: £5.2m)
Refer to the Board Audit Committee Report (pages 34-35); Accounting policies
(page 53); and Note 15 of the Consolidated Financial Statements (page 62)
Valuation and completeness of Expected Credit Loss (‘ECL’) provisions is an
area of estimation that requires management judgement. The continuing
higher rate environment has an impact on the level of uncertainty in the
valuation of ECL provisions, particularly in relation to the application of macro-
economic scenarios and the estimation of the probability of default of
customers in the future.
Key judgements and estimates include:
• Accounting interpretations and modelling assumptions used to build the
credit models and calculate the ECL;
• The appropriateness of staging criteria selected to determine whether a
significant increase in credit risk (‘SICR’) has occurred;
• The application of multiple macro-economic scenarios including the
appropriateness of the probability weightings assigned to the various
scenarios; and
• The completeness and valuation of post model adjustments.
We also considered potential consequences of climate change and the impact
of this on the ECL provision.
We understood and evaluated the design effectiveness of key controls over the
ECL process and adopted a substantive approach.
We tested the assumptions, inputs and calculations used in the ECL models with
the involvement of our credit risk modelling specialists. This included assessing
the appropriateness of the model design, model implementation and model
performance along with model assumption testing and sensitivity analysis.
We considered the key data points in the ECL models and performed appropriate
testing procedures to establish completeness and accuracy, including the
valuation of collateral.
With the support of EY economic specialists, we assessed the base case and
alternative macro-economic scenarios, including challenging the probability
weightings and comparing to other scenarios from external sources. We assessed
whether the forecasted macro-economic variables for unemployment, interest
rates and property price indices were appropriate.
We critically assessed the methodology for determining the SICR criteria and
independently tested staging allocation with the support of EY credit risk
modelling specialists.
We assessed the completeness of post-model adjustments using our knowledge
and experience across the UK lending sector and with the involvement of our
credit risk modelling specialists we independently recalculated the additional ECL
provision adjustment applied by management.
On completion of our procedures we performed a stand-back analysis to assess
the overall adequacy of the ECL provisions. This included an analytical review,
assessing whether any contradictory evidence had been obtained from other
parts of the audit and considering the Group and Society’s provision coverage
ratios in comparison to other lenders using available benchmarking data.
Key observations communicated to the Audit Committee
• We communicated that we were satisfied that ECL provisions were reasonable and in compliance with the requirements of IFRS 9.
• We considered that the model methodology, implementation and significant assumptions were materially appropriate.
• We considered that the application of staging criteria was materially appropriate and aligned to the requirements of IFRS 9.
• The basis and calculation of the post model adjustment was considered to be materially appropriate.
• We considered the multiple economic scenarios incorporated in the IFRS 9 models to be materially appropriate.
Risk
Our response to the risk
Risk of fraud in relation to revenue recognition of mortgage related income
Group and Society – 31 December 2024, income included within Interest
receivable and similar income: £169.9m (2023: £114.1m), and Fees and
commissions receivable: £2.0m (2023: £2.5m)
Refer to the Board Audit Committee Report (pages 34-35); Accounting policies
(page 56); and Note 3 of the Consolidated Financial Statements (page 57)
The majority of mortgage and fee income recorded is low value and based on
standard contractual terms. The risk of fraud in the recognition of revenue is
focused on the application of management estimation and judgement in the
accounting for income using the Effective Interest Rate (‘EIR’).
We understood and evaluated the design effectiveness of key controls over the
mortgage income process and adopted a substantive approach.
We critically assessed the accounting policies in relation to revenue recognition
under IFRS 9 and IFRS 15, including EIR accounting.
We validated and challenged assumptions used in the EIR calculations, including
the accounting decisions and assumptions in relation to fees and charges, the
behavioural lives of assets and the allocation of lending fees to loan products.
Our challenge included a comparison of customer redemption assumptions
with recent customer behaviours observable in the Group’s portfolios, and an
assessment of the inclusion of lending fees within the EIR calculations.
We independently recalculated mortgage interest recorded for the year and
recalculated the fee income to be deferred under effective interest rate
accounting.
We agreed, on a sample basis, the initial mortgage fees charged to supporting
evidence.
Key observations communicated to the Audit Committee
• We communicated that we were satisfied that the selection and application of accounting policies, including the application of effective interest rate
accounting, was appropriate under IFRS 9 and IFRS 15.
• We communicated that our independent recalculation of mortgage interest and EIR adjustments did not identify any material differences.
___________________________________________________________________________________________
Independent Auditor’s Report
Page | 43 Annual Report & Accounts 2024 Nottingham Building Society
Risk
Our response to the risk
Application of hedge accounting
Group and Society – 31
st
December 2024, fair value adjustment for hedged
risk relating to mortgages: £34.5m (2023: £39.4m), and savings: £0.3m (2023:
£(1.4)m), net gains / (losses) from derivative financial instruments: £3.9m
(2023: £(14.2)m)
Refer to the Board Audit Committee Report (page 34-35); Accounting policies
(page 52); and Notes 5 and 13 of the Consolidated Financial Statements (pages
58 and 61)
The Group and Society uses derivative instruments to hedge against interest
rate risk exposures on mortgage portfolios and accounts
for hedging
relationships using the provisions of IAS 39. Valuation techniques applied in the
industry have led to greater volatility and complexity, particularly in relation to
fair value hedge accounting.
The Group and Society’s hedge accounting process involves elements of
manual calculation which give rise to a risk of management override of
controls.
Areas of risk and audit focus include:
• valuation of derivatives and underlying hedged items;
• hedge effectiveness calculations; and
• hedge
documentation and compliance with the requirements of
accounting standards.
We understood and evaluated the design effectiveness of key controls over the
hedge accounting process and adopted a substantive approach.
We engaged EY derivative valuation specialists and re-performed the valuation
of a sample of derivatives and underlying hedged items.
We independently recalculated hedge effectiveness for a sample of hedges,
including performing a sample of both prospective and retrospective
effectiveness tests.
We assessed the completeness and accuracy of the data used in the hedging
calculations and performed tests to assess whether data was being interpreted
and categorised appropriately.
We corroborated the adequacy and appropriateness of the disclosures made
within the Financial Statements for compliance with accounting standards.
We obtained and reviewed the relevant hedge accounting documentation to
evaluate and assess whether each hedge was compliant with the requirements
of accounting standards.
Key observations communicated to the Audit Committee
• We communicated that we were satisfied that the hedge accounting methodology applied by the Group and Society was compliant with accounting
standards.
• We communicated that our independent recalculation of underlying hedge calculations did not identify any material differences
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit
opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users
of the Financial Statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group and Society to be £1.4 million (2023: £1.1 million), which is 0.55% (2023: 0.45%) of total members’ interests. We increased
the percentage applied to total members’ interests in the year based on a consideration of results of the Group and Society and benchmarking to relevant
organisations.
We consider total members’ interests provides us with an appropriate measure of materiality given this is a key focus area for the Society’s members and regulators
and is more relevant to users in an uncertain economic environment where profitability and the temporary impact of matters impacting financial reporting is less
predictable.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality
was 75% (2023: 75%) of our planning materiality, namely £1.05m (2023: £0.80m). We have set performance materiality at this percentage after considering our
experience in the prior year, our assessment of an effective control environment and including our perspectives from the current year audit. As a result, we
determined that the higher of our permissible thresholds for our performance materiality was appropriate.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.07m (2023: £0.05m), which is set at 5% of
planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative
considerations in forming our opinion.
___________________________________________________________________________________________
Independent Auditor’s Report
Page | 44 Annual Report & Accounts 2024 Nottingham Building Society
Other information
The Other Information comprises the information included in the Annual Report and Accounts set out on pages 2 to 39 and 93 to 98, including, Key highlights,
Chairman’s statement, Chief Executive’s Review, Strategic Report, Stakeholder Engagement Report, Corporate Responsibility Report, Sustainability Report, Your
Board of Directors, Directors’ Report, Nomination Committee Report, Risk Management Report, Board Risk Committee Report, Corporate Governance Report,
Board Audit Committee Report, Directors’ Remuneration Report, Annual Business Statement and Glossary, other than the Financial Statements and our Auditor’s
Report thereon. The Directors are responsible for the Other Information contained in the Annual Report.
Our opinion on the Financial Statements does not cover the Other Information and, except to the extent otherwise explicitly stated in this report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the Other Information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements
or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material misstatement in the Financial Statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Building Societies Act 1986
In our opinion:
• The Annual Business Statement and the Directors’ Report have been prepared in accordance with the requirements of the Building Societies Act 1986;
• the information given in the Directors’ Report for the financial year for which the Financial Statements are prepared is consistent with the Financial
Statements; and
• the information given in the Annual Business Statement (other than the information upon which we are not required to report) gives a true representation
of the matters in respect of which it is given.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Building Societies Act 1986 requires us to report to you if, in our opinion:
• Proper accounting records have not been kept by the Society; or
• the Group or Society’s Financial Statements are not in agreement with the accounting records; or
• we have not received all the information and explanations and access to documents we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to
the Group and the Society’s voluntary compliance with the provisions of the UK Corporate Governance Code specified for our review by the UK Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement are materially
consistent with the Financial Statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set
out on page 24;
• Directors’ explanation as to its assessment of the Society’s prospects, the period this assessment covers and why the period is appropriate set out on page
24;
• Directors’ statement on fair, balanced and understandable set out on page 24;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 23;
• the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on page 23; and
• the section describing the work of the Audit Committee set out on page 34.
Directors’ Remuneration Report
The Society voluntarily prepares a Report of the Directors on Remuneration in accordance with the provisions of the Companies Act 2006. The Directors have
requested that we audit the part of the Report of the directors on remuneration specified by the Companies Act 2006 to be audited as if the Society were a quoted
company.
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 24, the Directors are responsible for the preparation of the Financial Statements
and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of
Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Directors are responsible for assessing the Group’s and the Society’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the
Society or to cease operations, or has no realistic alternative but to do so.
___________________________________________________________________________________________
Independent Auditor’s Report
Page | 45 Annual Report & Accounts 2024 Nottingham Building Society
Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial
Statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined below,
to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud
rests with both those charged with governance of the Society and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant are the
regulations, licence conditions and supervisory requirements of the Prudential Regulation Authority (‘PRA’), the Financial Conduct Authority (‘FCA’) and the
Building Societies Act 1986;
• we understood how Group and Society are complying with those frameworks by making enquiries of management, internal audit, and those responsible for
legal and compliance matters. We also reviewed correspondence between the Group and UK regulatory bodies; reviewed minutes of the Board and Board
Risk Committee; and gained an understanding of the Group’s approach to governance, demonstrated by the Board’s approval of the Group’s governance
framework and the Board’s review of the Group’s Operational Risk Framework and internal control processes;
• we assessed the susceptibility of the Group and the Society’s Financial Statements to material misstatement, including how fraud might occur by considering
the controls that the Group and Society have established to address risks identified by the entity, or that otherwise seek to prevent, deter or detect fraud.
• based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved enquiries
of legal counsel, executive management, internal audit, and focused testing as referred to in the Key Audit Matters section above; and
• the Group and Society operate in the financial services sector which is a highly regulated environment. As such the Senior Statutory Auditor considered the
experience and expertise of the engagement team to ensure that the team had the appropriate competence and capabilities, which included the use of
specialists where appropriate.
A further description of our responsibilities for the audit of the Financial Statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s Report.
Other matters we are required to address
Following the recommendation from the Audit Committee, we were appointed by the Society on 24 March 2015 to audit the Financial Statements for the year
ending 31
st
December 2015 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is ten years, covering the years ending 31
st
December 2015 to 31
st
December 2024.
The audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
This report is made solely to the Society’s members, as a body, in accordance with Section 78 of the Building Societies Act 1986. Our audit work has been
undertaken so that we might state to the Society’s members those matters we are required to state to them in an Auditor’s Report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Society and the Society’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
for and on behalf of Ernst & Young LLP , Statutory Auditor
Manchester
5
th
March 2025
___________________________________________________________________________________________
Income Statements
for the year ended 31
st
December 2024
Page | 46 Annual Report & Accounts 2024 Nottingham Building Society
Group | Group | Society | Society | ||
2024 | 2023 | 2024 | 2023 | ||
Notes | £m | £m | £m | £m | |
Interest receivable and similar income | |||||
Calculated using the effective interest rate method | 3 | 271.3 | 203.1 | ||
Other | 3 | 1.3 | 0.1 | ||
Interest receivable and similar income | 272.6 | 203.2 | |||
Interest payable and similar charges | 4 | ( | ( | (189.0) | (123.3) |
Net interest income | 83.6 | 79.9 | |||
Fees and commissions receivable | 2.0 | 2.5 | |||
Fees and commissions payable | ( | (1.1) | 0.4 | ||
Net gains / (losses) from derivative financial instruments | 5 | ( | 7.4 | (22.3) | |
Total net income | 91.9 | 60.5 | |||
Administrative expenses | 6 | ( | ( | (59.2) | (52.2) |
Depreciation and amortisation | 17,18,19 | ( | ( | (4.9) | (6.7) |
Operating profit before impairment and loss on disposal of treasury | 27.8 | 1.6 | |||
assets | |||||
Impairment credit - loans and advances to members | 15 | - | 0.1 | ||
Voluntary payment expense associated with Philips Trust Corporation | 27 | ( | (11.2) | - | |
Recoveries against Philips Trust Corporation expense | 27 | 1.0 | - | ||
Loss on disposal of treasury assets | ( | - | (1.8) | ||
| Profit / (loss) before tax | 17.6 | (0.1) | |||
Tax charge | 8 | ( | (4.6) | - | |
Profit / (loss) after tax for the financial year | 13.0 | (0.1) |
The Income Statements only include income and expenditure from continuing operations.
The notes on pages 51 to 92 form part of these accounts.
___________________________________________________________________________________________
Statements of Comprehensive Income
for the year ended 31
st
December 2024
Page | 47 Annual Report & Accounts 2024 Nottingham Building Society
Group | Group | Society | Society | ||
2024 | 2023 | 2024 | 2023 | ||
Notes | £m | £m | £m | £m | |
Profit / (loss) for the financial year | 13.0 | (0.1) | |||
Items that will not be re-classified to the Income Statement | |||||
Remeasurements of defined benefit obligation | 28 | 0.9 | 0.1 | ||
Tax on items that will not be re-classified | 8 | ( | ( | (0.2) | (0.1) |
Items that may subsequently be re-classified to the Income Statement | |||||
Fair Value through Other Comprehensive Income reserve | |||||
Valuation (losses) / gains taken to reserves | 12 | ( | (0.5) | 2.8 | |
Amounts transferred to the Income Statement on micro hedge | 0.3 | - | |||
relationships | |||||
Loss on disposal of treasury assets taken to Income Statement | - | 1.8 | |||
Tax on items that may subsequently be reclassified | 8 | ( | - | (1.0) | |
Other comprehensive income for the period net of income tax | 0.5 | 3.6 | |||
Total comprehensive income for the year | 13.5 | 3.5 |
Both the profit for the financial year and total comprehensive income for the period are attributable to the members of the Society.
The Notes on pages 51 to 92 form part of these accounts.
___________________________________________________________________________________________
Statements of Financial Position
as at 31
Page | 48 Annual Report & Accounts 2024 Nottingham Building Society
Group | Group | Society | Society | ||
2024 | 2023 | 2024 | 2023 | ||
Notes | £m | £m | £m | £m | |
Assets | |||||
Cash in hand and balances with the Bank of England | 9 | 441.2 | 430.2 | ||
Loans and advances to credit institutions | 10 | 12.4 | 19.0 | ||
Debt securities | 12 | 454.2 | 340.1 | ||
Derivative financial instruments | 13 | 69.5 | 90.1 | ||
Loans and advances to members | 14 | 4,201.8 | 3,543.9 | ||
Convertible loan notes | 1.1 | - | |||
Amounts due from subsidiary undertakings | 16 | 33.4 | 33.4 | ||
Other assets | 5.3 | 4.8 | |||
Current tax asset | - | 3.0 | |||
Property, plant and equipment | 17 | 8.0 | 8.4 | ||
Right of use assets | 18 | 2.0 | 1.2 | ||
Intangible assets | 19 | 8.8 | 6.0 | ||
Deferred tax assets | 20 | 0.4 | 1.1 | ||
| Total assets | 5,238.1 | 4,481.2 | |||
Liabilities | |||||
Shares | 21 | 4,350.5 | 3,565.9 | ||
Amounts owed to credit institutions | 22 | 327.1 | 288.1 | ||
Amounts owed to other members | 23 | 45.4 | 48.8 | ||
Amounts owed to subsidiary undertakings | 24 | 208.2 | 266.9 | ||
Debt securities in issue | 25 | - | - | ||
Derivative financial instruments | 13 | 22.9 | 43.9 | ||
Other liabilities and accruals | 26 | 11.7 | 11.3 | ||
Lease liabilities | 18 | 2.4 | 1.8 | ||
Provisions for liabilities | 27 | 2.0 | - | ||
Current tax liabilities | 1.2 | - | |||
Retirement benefit obligations | 28 | - | 1.3 | ||
Subscribed capital | 29 | 24.0 | 24.0 | ||
| Total liabilities | 4,995.4 | 4,252.0 | |||
Reserves | |||||
General reserves | 242.7 | 229.0 | |||
Fair value reserves | 30 | - | 0.2 | ||
Total reserves attributable to members of the Society | 242.7 | 229.2 | |||
| Total reserves and liabilities | 5,238.1 | 4,481.2 |
Society
The Notes on pages 51 to 92 form part of these accounts.
___________________________________________________________________________________________
Statements of Changes in Members’ Interests
for the year ended 31
st
December 2024
Page | 49 Annual Report & Accounts 2024 Nottingham Building Society
| General reserve | FVOCI reserve | ||
Total | |||
Group 2024 | £m | £m | £m |
Balance as at | |||
Profit for the year | |||
Other comprehensive income / (expense) for the period (net of tax) | |||
Net gains / (losses) from changes in fair value | ( | ||
Total other comprehensive income / (expense) | ( | ||
Total comprehensive income / (expense) for the period | ( | ||
Balance as at | |||
Group 2023 | |||
Balance as at 1 st January 2023 | ( | ||
Profit for the year | |||
Other comprehensive income for the period (net of tax) | |||
Net gains from changes in fair value | |||
Total other comprehensive income | |||
Total comprehensive income for the period | |||
Balance as at 31 st December 2023 |
Society 2024
Balance as at 1
st
January 2024
229.0
0.2
229.2
Profit for the year
13.0
-
13.0
Other comprehensive income / (expense) for the period (net of tax)
Net gains / (losses) from changes in fair value
0.7
(0.2)
0.5
Total other comprehensive income / (expense)
0.7
(0.2)
0.5
Total comprehensive income / (expense) for the period
13.7
(0.2)
13.5
Balance as at 31
st
December 2024
242.7
-
242.7
Society 2023
Balance as at 1
st
January 2023
229.1
(3.4)
225.7
Loss for the year
(0.1)
-
(0.1)
Other comprehensive income for the period (net of tax)
Net gains from changes in fair value
-
3.6
3.6
Total other comprehensive income
-
3.6
3.6
Total comprehensive (expense) / income for the period
(0.1) 3.6 3.5
Balance as at 31
st
December 2023
229.0
0.2
229.2
The Notes on pages 51 to 92 form part of these accounts.
___________________________________________________________________________________________
Cash Flow Statements
for the year ended 31
st
December 2024
Page | 50 Annual Report & Accounts 2024 Nottingham Building Society
Group | Group | Society | Society | ||
2024 | 2023 | 2024 | 2023 | ||
Notes | £m | £m | £m | £m | |
Cash flows from operating activities | |||||
Profit / (loss) before tax from continuing operations | 17.6 | (0.1) | |||
Depreciation and amortisation | 5.1 | 6.7 | |||
| Interest on subscribed capital | 34 | 1.9 | 2.0 | ||
Interest on lease payments | 18 | 0.1 | - | ||
Loss on disposal of treasury assets | 12 | - | 1.8 | ||
Amortisation of debt securities | - | 0.2 | |||
Decrease in impairment on loans and advances | 15 | ( | - | (0.1) | |
24.7 | 10.5 | ||||
Changes in operating assets and liabilities | |||||
Decrease / (increase) in loans and advances to credit institutions | ( | 9.8 | (8.4) | ||
Increase in loans and advances to members | ( | ( | (657.9) | (621.0) | |
Decrease / (increase) in other assets | (38.2) | 196.2 | |||
Increase in shares | 21 | 784.6 | 556.2 | ||
Increase / (decrease) in amounts owed to other credit institutions and other members | 22,23 | ( | 35.6 | (90.5) | |
(Decrease) / increase in debt securities in issue | 25 | ( | - | - | |
(Decrease) / increase in accruals and other liabilities | ( | (18.5) | 31.0 | ||
Decrease in retirement benefit obligation | 28 | ( | ( | (0.6) | (1.6) |
Taxation received / (paid) | ( | - | (2.2) | ||
Net cash generated from operating activities | 139.5 | 70.2 | |||
Cash flows from investing activities | |||||
Purchase of convertible loan note | ( | (1.1) | - | ||
Purchase of debt securities | 12 | ( | ( | (268.1) | (169.9) |
Disposal of debt securities | 12 | 153.5 | 245.9 | ||
(Disposal) / purchase of property, plant and equipment | ( | ( | (0.7) | (1.1) | |
Purchase of intangible assets | 19 | ( | ( | (6.5) | (0.2) |
Net cash used in investing activities | ( | (122.9) | 74.7 | ||
Cash flows from financing activities | |||||
Interest paid on subscribed capital | 34 | ( | ( | (1.9) | (1.9) |
Principal element of lease payments | ( | ( | (0.5) | (0.7) | |
Net increase | 14.2 | 142.3 | |||
Cash and cash equivalents at 1 st January | 427.1 | 284.8 | |||
Cash and cash equivalents at 31 st December | 11 | 441.3 | 427.1 |
The Notes on pages 51 to 92 form part of these accounts.
___________________________________________________________________________________________
Notes to the Accounts
Page | 51 Annual Report & Accounts 2024 Nottingham Building Society
1 Accounting policies
The principal accounting policies adopted in the preparation of these
Financial Statements are set out below.
___________________________________________________________________________________________
Notes to the Accounts
Page | 52 Annual Report & Accounts 2024 Nottingham Building Society
1 Accounting policies (continued)
___________________________________________________________________________________________
Notes to the Accounts
Page | 53 Annual Report & Accounts 2024 Nottingham Building Society
1 Accounting policies (continued)
Financial instrument | Definition of significant increase in credit risk | ||||||||||||
Loans and | advances | to | • | over 30 days past due on contractual repayments; | |||||||||
| members - Retail | • | change | in | Probability | of | Default | (‘PD’) | exceeds | relative | ||||
| threshold of 100% and absolute threshold of 0.5%; or | |||||||||||||
• | in forbearance. | ||||||||||||
Loans and advances to | • | over 30 days past due on contractual repayments; | |||||||||||
| members – Secured | • | change | in | PD | exceeds | relative | threshold | of | 100% | and | |||
| Business Lending | absolute threshold of 0.5%; or | ||||||||||||
• | in forbearance. | ||||||||||||
Wholesale | liquidity | • | any arrears or receipt of adverse information. | ||||||||||
instruments | |||||||||||||
___________________________________________________________________________________________
Notes to the Accounts
Page | 54 Annual Report & Accounts 2024 Nottingham Building Society
1 Accounting policies (continued)
___________________________________________________________________________________________
Notes to the Accounts
Page | 55 Annual Report & Accounts 2024 Nottingham Building Society
1 Accounting policies (continued)
___________________________________________________________________________________________
Notes to the Accounts
Page | 56 Annual Report & Accounts 2024 Nottingham Building Society
1 Accounting policies (continued)
___________________________________________________________________________________________
Notes to the Accounts
Page | 57 Annual Report & Accounts 2024 Nottingham Building Society
2 Segmental reporting
The chief operating decision maker has been identified as the Group Board. The Board reviews the Group’s internal reporting in order to assess performance and
allocate resources. Operating segments are reported in a manner consistent with the internal reporting provided to the Board.
Following the disposal of several subsidiaries in prior years, the remaining trade of the Group relates purely to retail financial services which includes the provision
of mortgages, savings, third party insurance and investments. The results of the Society are assessed by Management as one retail business unit as opposed to
separate functional divisions.
As there is only one trade and retail business unit within the Group, the results of the financial services business are presented on the face of the Income Statement
and as such no separate disclosure is required within this note.
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
On loans fully secured on residential property | 142.4 | 94.5 | 142.4 | 94.5 |
On other loans | 27.5 | 19.6 | 27.5 | 19.6 |
On amounts due from group undertakings | - | - | 3.9 | 2.5 |
On liquid assets | 23.3 | 13.5 | 23.3 | 13.5 |
On instruments held at amortised cost | 193.2 | 127.6 | 197.1 | 130.1 |
On debt securities held at FVOCI | 21.0 | 16.2 | 21.0 | 16.2 |
On derivatives hedging of financial assets | 53.1 | 56.8 | 53.2 | 56.8 |
On instruments calculated on an EIR basis | 267.3 | 200.6 | 271.3 | 203.1 |
On derivatives not in a hedge accounting relationship | 10.7 | 4.9 | 1.3 | 0.1 |
278.0 | 205.5 | 272.6 | 203.2 |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
On shares held by individuals | 154.6 | 91.8 | 154.6 | 91.8 |
On amounts due to group undertakings | - | - | 7.4 | 3.1 |
On deposits and other borrowings | 28.2 | 26.5 | 15.4 | 21.5 |
On subscribed capital | 2.0 | 2.0 | 2.0 | 2.0 |
On leases | 0.1 | - | 0.1 | - |
On derivative hedging of financial liabilities | 9.5 | 4.9 | 9.5 | 4.9 |
194.4 | 125.2 | 189.0 | 123.3 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 58 Annual Report & Accounts 2024 Nottingham Building Society
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Derivatives in designated fair value hedge relationships | (2.1) | (71.0) | (2.1) | (71.0) |
Adjustments to hedged items in fair value hedge accounting relationships | 3.7 | 59.8 | 3.7 | 59.8 |
Derivatives not in designated fair value hedge relationships | 2.3 | (3.0) | 5.8 | (11.1) |
3.9 | (14.2) | 7.4 | (22.3) |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Continuing operations | ||||
Wages and salaries | 24.6 | 22.2 | 24.6 | 22.2 |
Social security costs | 2.8 | 2.2 | 2.8 | 2.2 |
Other pension costs | 1.1 | 1.2 | 1.1 | 1.2 |
Total employee costs | 28.5 | 25.6 | 28.5 | 25.6 |
Other administrative costs | 30.9 | 26.7 | 30.7 | 26.6 |
59.4 | 52.3 | 59.2 | 52.2 |
Group | Group | Society | Society | ||
2024 | 2023 | 2024 | 2023 | ||
£000 | £000 | £000 | £000 | ||
Other administrative costs include: | |||||
Remuneration of auditors and associates (excluding VAT) | |||||
Fees payable to the auditor for the audit of the Annual Accounts | 416 | 378 | 416 | 378 | |
Fees payable to the auditor for other services: | |||||
- | Audit of the accounts of subsidiary undertakings | 11 | 11 | - | - |
- | Audit of associated pension schemes | 18 | 18 | 18 | 18 |
- | Audit related assurance services | 74 | 71 | 74 | 71 |
- | Non-audit services | - | - | - | - |
| Total audit fees for the financial year | 519 | 478 | 508 | 467 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 59 Annual Report & Accounts 2024 Nottingham Building Society
7 Employees
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
Number | Number | Number | Number | |
Continuing operations | ||||
The average number of persons employed during the year was: | ||||
Full-time | 406 | 361 | 406 | 361 |
Part-time | 105 | 117 | 105 | 117 |
511 | 478 | 511 | 478 | |
Building Society | ||||
Central Administration | 331 | 296 | 331 | 296 |
Branches | 180 | 182 | 180 | 182 |
478 | 511 | 478 |
The average number of employees on a full-time equivalent basis in the Society was 478 (2023: 444) and all of these are employed within the UK.
8 Tax charge
Group | Group | Society | Society | ||
2024 | 2023 | 2024 | 2023 | ||
Notes | £m | £m | £m | £m | |
Current tax charge | 4.2 | 0.4 | 4.2 | 0.4 | |
Adjustments for prior years | - | - | - | - | |
Total current tax | 4.2 | 0.4 | 4.2 | 0.4 | |
Deferred tax | 0.4 | (0.3) | 0.4 | (0.3) | |
Adjustments for prior years | - | (0.1) | - | (0.1) | |
Total deferred tax | 20 | 0.4 | (0.4) | 0.4 | (0.4) |
4.6 | - | 4.6 | - |
The total tax charge for the period differs from that calculated using the UK standard rate of corporation tax. The differences are explained below:
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Profit / (loss) before taxation | 13.9 | 8.3 | 17.6 | (0.1) |
Expected tax charge at 25% (2023: 23.5%) | 3.4 | 2.0 | 4.4 | - |
Expenses not deductible for corporation tax | 0.2 | - | 0.2 | - |
Effective securitisation | 1.0 | (2.0) | - | - |
Adjustment for prior years | - | - | - | - |
4.6 | - | 4.6 | - |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Tax recognised directly in other comprehensive income | ||||
Tax expense on FVOCI assets | - | 1.0 | - | 1.0 |
Tax expense on pension scheme | 0.2 | 0.1 | 0.2 | 0.1 |
| Tax expense for the year | 0.2 | 1.1 | 0.2 | 1.1 |
The Society as a standalone entity incurred a loss in 2023 primarily due to losses on derivative financial instruments associated with the Group’s secured
funding vehicle, Arrow Mortgage Finance No. 1 Ltd (‘Arrow’). A corresponding gain was recognised within Arrow and as such these transactions are broadly
neutral from a Group perspective.
The tax charge for Arrow has been calculated in accordance with the permanent regime for taxation of securitisation companies and its corporation tax is
calculated by reference to its retained profits and not its accounting profit and loss. As the gains on derivative financial instruments will not be retained by
Arrow, this resulted in a negligible tax charge within this entity on a standalone basis and a lower level of taxation within the Group in 2023.
Factors affecting standard rate of tax
Deferred tax assets and liabilities are measured at the enacted tax rates that are expected to apply when the related asset is realised or liability is settled.
___________________________________________________________________________________________
Notes to the Accounts
Page | 60 Annual Report & Accounts 2024 Nottingham Building Society
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Cash in hand | 1.1 | 1.1 | 1.1 | 1.1 |
Balances with the Bank of England | 440.1 | 429.1 | 440.1 | 429.1 |
441.2 | 430.2 | 441.2 | 430.2 |
10 Loans and advances to credit institutions
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Repayable on call and short notice | 9.3 | 15.6 | 0.1 | 3.6 |
Other loans and advances to credit institutions | 12.3 | 15.4 | 12.3 | 15.4 |
21.6 | 31.0 | 12.4 | 19.0 |
As at 31
st
December 2024 £12.3 million (2023: £15.4 million) of cash has been deposited by the Group and Society as collateral against derivative contracts.
11 Cash and cash equivalents
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Cash in hand and balances with the Bank of England | 441.2 | 423.5 | 441.2 | 423.5 |
Loans and advances to credit institutions | 8.3 | 15.6 | 0.1 | 3.6 |
449.5 | 439.1 | 441.3 | 427.1 |
Group and Society | 2024 | 2023 | |
Notes | £m | £m | |
Debt securities | |||
Gilts | 15.1 | 19.9 | |
Treasury bills | 93.6 | 43.2 | |
Fixed rate notes | 32.8 | - | |
Floating rate notes | 26.6 | 28.8 | |
Mortgage backed securities | 128.6 | 97.9 | |
Floating covered bonds | 157.5 | 150.3 | |
454.2 | 340.1 | ||
Movements on debt securities during the year may be analysed as follows: | |||
As at 1 January | 340.1 | 413.2 | |
Additions | 268.1 | 169.9 | |
Disposals and maturities | (153.5) | (247.6) | |
Loss on disposal of treasury assets taken to Income Statement | - | 1.8 | |
Net (losses) / gains from changes in fair value recognised in other comprehensive income | 30 | (0.5) | 2.8 |
454.2 | 340.1 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 61 Annual Report & Accounts 2024 Nottingham Building Society
Group | 2024 | 2024 | 2024 | 20142023 | 22023 | 22023 |
Contract / | Fair value | Contract / | Fair value | |||
| notional | Fair value | of | notional | Fair value | of | |
amount | of assets | liabilities | amount | of assets | liabilities | |
£m | £m | £m | £m | £m | £m | |
Derivatives not in a hedge accounting relationship | ||||||
Interest rate swaps | 609.6 | 11.4 | (11.9) | 665.0 | 14.1 | (17.5) |
Derivatives designated as fair value hedges | ||||||
Interest rate swaps – macro hedge accounting | 4,662.2 | 69.0 | (11.0) | 2,412.0 | 91.1 | (26.4) |
Interest rate swaps – micro hedge accounting | 48.3 | 0.5 | - | - | - | - |
5,320.1 | 80.9 | (22.9) | 3,077.0 | 105.2 | (43.9) |
Society | 2024 | 2024 | 2024 | 20142023 | 22023 | 22023 |
Contract / | Fair value | Fair value | Contract / | Fair value | Fair value | |
| notional | of assets | of | notional | of assets | of | |
amount | liabilities | amount | liabilities | |||
£m | £m | £m | £m | £m | £m | |
Derivatives not in a hedge accounting relationship | ||||||
Interest rate swaps | 404.8 | 0.3 | (11.9) | 397.5 | (0.5) | (17.5) |
Derivatives designated as fair value hedges | ||||||
Interest rate swaps – macro hedge accounting | 4,662.2 | 68.7 | (11.0) | 2,412.0 | 90.6 | (26.4) |
Interest rate swaps – micro hedge accounting | 48.3 | 0.5 | - | - | - | - |
5,115.3 | 69.5 | (22.9) | 2,809.5 | 90.1 | (43.9) |
14 Loans and advances to members
Group and Society | 2024 | 2023 | |
Notes | £m | £m | |
Loans fully secured on residential property | 3,650.3 | 3,155.0 | |
Other loans fully secured on land | 589.5 | 437.4 | |
Loans gross balance | 4,239.8 | 3,592.4 | |
Effective interest rate adjustment | 1.7 | (3.9) | |
Provision for impairment losses on loans and advances | 15 | (5.2) | (5.2) |
Fair value adjustment for hedged risk | (34.5) | (39.4) | |
4,201.8 | 3,543.9 |
Other loans fully secured on land represents SBL assets.
Encumbrance
The Society pledges a proportion of its loans and advances to members to enable it to access funding either through a secured funding arrangement or as whole
mortgage loan pools with the Bank of England.
Loans and advances to members used to support these funding activities are as follows:
Group and Society | Mortgages | Held by third | Held by the | Held by the |
pledged | parties | Group drawn | Group undrawn | |
2024 | £m | £m | £m | £m |
Bank of England | 710.1 | - | 384.9 | 325.2 |
Other secured funding | 209.5 | 209.5 | - | - |
919.6 | 209.5 | 384.9 | 325.2 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 62 Annual Report & Accounts 2024 Nottingham Building Society
14 Loans and advances to members (continued)
Group and Society | Mortgages | Held by third | Held by the | Held by the |
pledged | parties | Group drawn | Group undrawn | |
2023 | £m | £m | £m | £m |
Bank of England | 857.5 | - | 335.0 | 522.5 |
Other secured funding | 267.7 | 267.7 | - | - |
1,125.2 | 267.7 | 335.0 | 522.5 |
Other secured funding
As at 31
st
December 2024 loans and advances to members also includes balances for both the Group and Society which have been used in secured funding
arrangements, resulting in the beneficial interest of these loans being transferred to Arrow Mortgage Finance No.1 Limited, a SPV consolidated into the Group’s
Accounts. All of the loans pledged, with a book value of £209.5 million (2023: £267.7 million) and a fair value of £205.2 million (2023: £258.0 million) are retained
within the Society’s Statement of Financial Position as the Society retains substantially all the risk and rewards relating to the loans. These loans secure £184.7
million (2023: £246.2 million) of funding for the Group (Note 25) and £218.2million (2023: £279.6 million) of funding for the Society.
Group and Society | Loans fully | Loans fully | ||||
| secured on | Other loans | secured on | Other loans | |||
| residential | fully secured | residential | fully secured | |||
property | on land | Total | property | on land | Total | |
2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
£m | £m | £m | £m | £m | £m | |
Gross carrying amount | ||||||
Stage 1 | 3,279.7 | 550.1 | 3,829.8 | 2,780.0 | 405.2 | 3,185.2 |
Stage 2 | 351.9 | 31.9 | 383.8 | 357.5 | 27.4 | 384.9 |
Stage 3 | 18.7 | 7.5 | 26.2 | 17.5 | 4.8 | 22.3 |
3,650.3 | 589.5 | 4,239.8 | 3,155.0 | 437.4 | 3,592.4 |
Group and Society | Loans fully | Loans fully | ||||
| secured on | Other loans | secured on | Other loans | |||
| residential | fully secured | residential | fully secured | |||
property | on land | Total | property | on land | Total | |
2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
£m | £m | £m | £m | £m | £m | |
Expected credit loss allowance | ||||||
Stage 1 | 2.4 | 1.3 | 3.7 | 2.8 | 1.3 | 4.1 |
Stage 2 | 0.6 | 0.3 | 0.9 | 0.5 | 0.3 | 0.8 |
Stage 3 | 0.1 | 0.5 | 0.6 | - | 0.3 | 0.3 |
3.1 | 2.1 | 5.2 | 3.3 | 1.9 | 5.2 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 63 Annual Report & Accounts 2024 Nottingham Building Society
15 Provision for impairment losses on loans and advances to members (continued)
Group and Society | 2024 | 2024 | 2024 | 2023 | 2023 | 2023 |
Loans fully | Loans fully | |||||
| secured on | Other loans | secured on | Other loans | |||
| residential | fully secured | residential | fully secured | |||
| property | on land | Total | property | on land | Total | |
£m | £m | £m | £m | £m | £m | |
(Release) / charge of provision for impairment | (0.4) | 0.4 | - | 0.2 | (0.3) | (0.1) |
(0.4) | 0.4 | - | 0.2 | (0.3) | (0.1) |
Gross balances | Non-credit impaired | Credit impaired | ||
Subject to 12 | Subject to | Subject to | ||
month ECL | lifetime ECL | lifetime ECL | ||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
At 1 st January 2024 | 3,185.2 | 384.9 | 22.3 | 3,592.4 |
Stage transfers: | ||||
Transfers from Stage 1 to Stage 2 | (257.6) | 257.6 | - | - |
Transfers to Stage 3 | (7.1) | (4.4) | 11.5 | - |
Transfers from Stage 2 to Stage 1 | 147.1 | (147.1) | - | - |
Transfers from Stage 3 | 3.0 | 2.0 | (5.0) | - |
Net movement arising from transfer of stage | (114.6) | 108.1 | 6.5 | - |
New assets originated | 1,185.6 | 14.7 | 1.6 | 1,201.9 |
Net further lending / repayments and redemptions | (426.4) | (123.9) | (4.2) | (554.5) |
At 31 st December 2024 | 3,829.8 | 383.8 | 26.2 | 4,239.8 |
Expected credit loss allowance | Non-credit impaired | Credit impaired | ||
Subject to 12 | Subject to | Subject to | ||
month ECL | lifetime ECL | lifetime ECL | ||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
At 1 st January 2024 | 4.1 | 0.7 | 0.4 | 5.2 |
Stage transfers: | ||||
Transfers from Stage 1 to Stage 2 | (0.2) | 0.2 | - | - |
Transfers to Stage 3 | - | - | - | - |
Transfers from Stage 2 to Stage 1 | 0.2 | (0.2) | - | - |
Transfers from Stage 3 | - | - | - | - |
Net movement arising from transfer of stage | - | - | - | - |
New assets originated 1 | 1.3 | 0.1 | - | 1.4 |
Further lending / repayments and redemptions | (1.5) | (0.2) | - | (1.7) |
Changes in risk parameters in relation to credit quality | (0.2) | 0.3 | 0.2 | 0.3 |
At 31 st December 2024 | 3.7 | 0.9 | 0.6 | 5.2 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 64 Annual Report & Accounts 2024 Nottingham Building Society
15 Provision for impairment losses on loans and advances to members (continued)
Gross balances | Non-credit impaired | Credit impaired | ||
Subject to 12 month | Subject to | Subject to lifetime | ||
ECL | lifetime ECL | ECL | ||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
At 1 st January 2023 | 2,492.5 | 524.7 | 19.8 | 3,037.0 |
Stage transfers: | ||||
Transfers from Stage 1 to Stage 2 | (258.8) | 258.8 | - | - |
Transfers to Stage 3 | (4.0) | (2.2) | 6.2 | - |
Transfers from Stage 2 to Stage 1 | 255.9 | (255.9) | - | - |
Transfers from Stage 3 | 0.5 | 2.2 | (2.7) | - |
Net movement arising from transfer of stage | (6.4) | 2.9 | 3.5 | - |
New assets originated 1 | 993.4 | 22.5 | 2.1 | 1,018.0 |
Net further lending / repayments and redemptions | (294.3) | (165.2) | (3.1) | (462.6) |
At 31 st December 2023 | 3,185.2 | 384.9 | 22.3 | 3,592.4 |
Expected credit loss allowance | Non-credit impaired | Credit impaired | ||
Subject to 12 month | Subject to | Subject to lifetime | ||
ECL | lifetime ECL | ECL | ||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
At 1 st January 2023 | 4.0 | 0.9 | 0.4 | 5.3 |
Stage transfers: | ||||
Transfers from Stage 1 to Stage 2 | (0.3) | 0.3 | - | - |
Transfers to Stage 3 | - | - | - | - |
Transfers from Stage 2 to Stage 1 | 0.3 | (0.3) | - | - |
Transfers from Stage 3 | - | 0.1 | (0.1) | - |
Net movement arising from transfer of stage | - | 0.1 | (0.1) | - |
New assets originated 1 | 1.7 | 0.1 | - | 1.8 |
Further lending / repayments and redemptions | (1.4) | (0.4) | (0.1) | (1.9) |
Changes in risk parameters in relation to credit quality | (0.2) | - | 0.2 | - |
At 31 st December 2023 | 4.1 | 0.8 | 0.3 | 5.2 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 65 Annual Report & Accounts 2024 Nottingham Building Society
15 Provision for impairment losses on loans and advances to members (continued)
As at 31 st December 2024 | Weighting | |
Base | ||
Base scenario assumes that the growth will be below potential for some time as gains from falling inflation fades. Core inflation will trend | 40% | |
| lower with return to 2% target unlikely before 2026, prompting the Bank of England to cut rates gradually. High interest rates limit housing | ||
demand despite ongoing supply shortages. Neither the invasion of Ukraine nor Israel's war against Hamas escalate beyond the regions. | ||
Upside | ||
Upside scenario assumes that the Russia-Ukraine war ends faster than anticipated which results in a boost in demand and supply. Positive | ||
developments relieve recession concerns, causing an uptick in consumer and business sentiment. Improved energy security, a removal of supply bottlenecks and efficiency gains usher in a period of rapid productivity growth. | The strong economy bolsters support for the Labour | 30% |
government, enabling further reforms and investments. | ||
Downside | ||
Downside scenario sees sentiment in Europe turn downwards sharply amid increasing concerns around global growth. Geopolitical tensions | ||
| rise on fears that war in Ukraine spills over into neighbouring states and tensions between China / U.S. increase, leading to temporary barriers | 23% | |
to shipping along Taiwan Strait. Political risks in Europe intensify and pressure sovereigns, resulting in a sell-off in global financial markets that sets scene for a moderate but lengthy recession. | ||
Severe Downside | ||
Global economy fails to pick up and sentiment plummets. Risk that war in Ukraine escalates to the point where NATO is forced to enter the conflict, and heightened geopolitical tensions between the U.S. | and China lead to significant barriers to shipping. Severe increase in | 7% |
geopolitical risk, along with a complete lack of confidence in the economy, leads to a sharp sell-off in financial markets. | ||
As at 31 st December 2023 | Weighting |
Base | |
The Base economic scenario assumes that the growth will be below potential for some time. Inflation declines but does not fall below the target until the end of 2024. Bank of England rates will not rise and will start to fall in mid-2024. Neither the invasion of Ukraine nor Israel's war against Hamas escalate beyond the regions. | 40% |
Upside | |
The Upside scenario assumes that the Russia’s invasion of Ukraine is resolved much faster than the baseline case. Growth is stronger than the baseline with a reduction in unemployment rate. Inflation remains weaker than the baseline as the increase in demand is met by an increase | 30% |
| in supply. The terminal rate of the Bank of England interest rate is higher than in the baseline, taking longer to converge to the long-run | |
interest rate. | |
Downside | |
In the Downside scenario, there are worries that the conflicts in the Middle East and Ukraine will escalate further. The Bank of England cuts | 23% |
| rates sooner than the baseline with interest rates above the neutral level but above zero. There is a moderate recession, and inflation drops | |
below zero before increasing but remains below target for some time. House prices reduce by 23% peak to trough. | |
Severe Downside | |
In the Severe Downside scenario, there are worries that the conflicts in the Middle East and Ukraine will escalate further. The Bank of England | 7% |
cuts rates sooner than the baseline with interest rates becoming close to zero. The economy is in a severe recession with a strong and immediate decline in inflation with inflation remaining below target for a prolonged period. House prices reduce by 31% peak to trough. |
___________________________________________________________________________________________
Notes to the Accounts
Page | 66 Annual Report & Accounts 2024 Nottingham Building Society
15 Provision for impairment losses on loans and advances to members (continued)
As at 31 st December 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | |
% | % | % | % | % | ||
Unemployment rate | Upside | 3.6 | 3.7 | 3.8 | 4.1 | 4.4 |
Base | 4.4 | 4.5 | 4.6 | 4.7 | 4.8 | |
Downside | 6.2 | 7.2 | 7.3 | 6.9 | 6.3 | |
Severe Downside | 7.4 | 8.3 | 8.2 | 8.0 | 7.3 | |
House price index | Upside | 17.0 | 7.0 | 0.1 | (2.6) | (0.3) |
| Base | 2.2 | 3.9 | 2.6 | 1.5 | 2.1 | |
Downside | (8.7) | (5.6) | 1.9 | 4.2 | 5.4 | |
Severe Downside | (14.9) | (9.6) | 2.3 | 2.9 | 4.6 | |
Bank of England interest rate | Upside | 4.0 | 2.7 | 2.6 | 2.5 | 2.5 |
| Base | 4.1 | 2.8 | 2.5 | 2.5 | 2.5 | |
Downside | 2.5 | 0.9 | 1.4 | 1.7 | 2.0 | |
Severe Downside | 1.9 | 0.5 | 0.8 | 0.9 | 1.0 |
As at 31 st December 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | |
% | % | % | % | % | ||
Unemployment rate | Upside | 4.1 | 3.8 | 3.9 | 4.2 | 4.5 |
Base | 4.6 | 4.7 | 4.8 | 4.8 | 4.9 | |
Downside | 6.5 | 7.4 | 7.4 | 7.0 | 6.4 | |
Severe Downside | 7.7 | 8.5 | 8.4 | 8.1 | 7.4 | |
House price index | Upside | 8.2 | 6.2 | 2.1 | (1.5) | (0.9) |
Base | (5.1) | 3.1 | 4.7 | 2.6 | 1.5 | |
Downside | (15.5) | (6.3) | 4.0 | 5.4 | 4.7 | |
Severe Downside | (21.3) | (10.3) | 4.4 | 4.1 | 4.0 | |
Bank of England interest rate | Upside | 4.8 | 2.7 | 2.3 | 2.3 | 2.3 |
Base | 4.6 | 2.7 | 2.3 | 2.3 | 2.3 | |
Downside | 3.2 | 1.0 | 1.2 | 1.5 | 1.8 | |
Severe Downside | 2.6 | 0.7 | 0.5 | 0.7 | 0.8 |
| ECL provision | (Decrease) / | (Decrease) / | |
31 st December 2024 | increase | increase | |
£m | £m | % | |
| IFRS 9 weighted average | 5.2 | - | - |
| Base | 4.1 | (1.1) | (21.0) |
| Downside | 8.5 | 3.2 | 61.4 |
| Severe Downside | 12.4 | 7.2 | 136.4 |
| Upside | 2.6 | (2.6) | (50.6) |
| st | ECL provision | (Decrease) / | (Decrease) / | |
31 | December 2023 | increase | increase | |
£m | £m | % | ||
IFRS 9 weighted average | 5.2 | - | - | |
Base | 4.1 | (1.1) | (21.2) | |
Downside | 8.1 | 2.9 | 55.8 | |
| Severe Downside | 13.4 | 8.2 | 157.7 | |
| Upside | 2.6 | (2.6) | (50.0) |
___________________________________________________________________________________________
Notes to the Accounts
Page | 67 Annual Report & Accounts 2024 Nottingham Building Society
Society | 2024 | 2023 |
Amount due | Amount due | |
£m | £m | |
As at 1 st January | 33.4 | 26.6 |
Further advances | - | 6.7 |
Interest payments / expenses | - | 0.1 |
33.4 | 33.4 |
2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
| Land and | Equipment, | Land and | Equipment, | |||
Group and Society | buildings | fixtures, fittings | Total | buildings | fixtures, fittings | Total |
£m | £m | £m | £m | £m | £m | |
Cost | ||||||
As at 1 st January | 9.7 | 10.4 | 20.1 | 14.7 | 27.6 | 42.3 |
Additions | - | 0.7 | 0.7 | - | 1.2 | 1.2 |
Disposals | (1.9) | (3.2) | (5.1) | (5.0) | (18.4) | (23.4) |
As at 31 st December | 7.8 | 7.9 | 15.7 | 9.7 | 10.4 | 20.1 |
Depreciation | ||||||
As at 1 st January | 4.2 | 7.5 | 11.7 | 9.1 | 24.9 | 34.0 |
Charge for the year | 0.2 | 0.9 | 1.1 | 0.1 | 1.0 | 1.1 |
On disposals | (1.9) | (3.2) | (5.1) | (5.0) | (18.4) | (23.4) |
As at 31 st December | 2.5 | 5.2 | 7.7 | 4.2 | 7.5 | 11.7 |
Net Book Value | ||||||
As at 31 st December | 5.3 | 2.7 | 8.0 | 5.5 | 2.9 | 8.4 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 68 Annual Report & Accounts 2024 Nottingham Building Society
17 Property, plant and equipment (continued)
Group and Society | 2024 | 2023 |
£m | £m | |
The net book value of land and buildings comprises: | ||
Freehold | 5.2 | 5.4 |
Short Leasehold | 0.1 | 0.1 |
5.3 | 5.5 |
Group and Society | 2024 | 2023 |
£m | £m | |
The net book value of land and buildings occupied for own use: | ||
Building Society | 5.0 | 5.1 |
Non-Group | 0.3 | 0.4 |
5.3 | 5.5 |
Group and Society | 2024 | 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | 2023 | |
Right of use assets | Motor | Motor | |||||||
Property | Equipment | vehicles | Total | Property | Equipment | vehicles | Total | ||
£m | £m | £m | £m | £m | £m | £m | £m | ||
Cost | |||||||||
As at 1 st January | 3.7 | 0.3 | 0.2 | 4.2 | 4.6 | 0.3 | 0.2 | 5.1 | |
Additions | 1.0 | - | - | 1.0 | 0.3 | - | - | 0.3 | |
Lease modifications | - | - | - | - | - | - | - | - | |
Disposals | (0.4) | - | - | (0.4) | (1.2) | - | - | (1.2) | |
As at 31 st December | 4.3 | 0.3 | 0.2 | 4.8 | 3.7 | 0.3 | 0.2 | 4.2 | |
Depreciation | |||||||||
As at 1 st January | 2.5 | 0.3 | 0.2 | 3.0 | 3.5 | 0.3 | 0.2 | 4.0 | |
Charge for the year and Impairment | 0.3 | - | - | 0.3 | 0.2 | - | - | 0.2 | |
Charge on disposals | (0.5) | - | - | (0.5) | (1.2) | - | - | (1.2) | |
As at 31 st December | 2.3 | 0.3 | 0.2 | 2.8 | 2.5 | 0.3 | 0.2 | 3.0 | |
Net Book Value | |||||||||
| st | 2.0 | - | - | 2.0 | 1.2 | - | - | 1.2 | |
As at 31 | December |
Group and Society | 2024 | 2023 |
£m | £m | |
Lease liabilities | ||
Current | 0.3 | 0.3 |
Non-current | 2.1 | 1.5 |
2.4 | 1.8 |
Group and Society | 2024 | 2023 | |
Notes | £m | £m | |
Depreciation charge for assets | 0.3 | 0.2 | |
Interest expense (included in interest payable and similar charges) | 4 | 0.1 | - |
Expense relating to short-term leases (included in administrative expenses) | 6 | 0.2 | 0.3 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 69 Annual Report & Accounts 2024 Nottingham Building Society
2024 | 2023 | |
Group and Society | Total | Total |
£m | £m | |
Cost | ||
As at 1 st January | 29.2 | 49.2 |
Additions | 6.5 | 0.2 |
Disposals | (4.9) | (20.2) |
As at 31 st December | 30.8 | 29.2 |
Amortisation | ||
As at 1 st January | 23.2 | 38.1 |
Disposals | (4.9) | (20.2) |
Charge for the year | 3.7 | 5.3 |
As at 31 st December | 22.0 | 23.2 |
| Net Book Value | ||
As at 31 st December | 8.8 | 6.0 |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
At 1 st January | 1.1 | 2.2 | 1.1 | 2.2 |
(Expense) / credit to the Income Statement | (0.4) | 0.4 | (0.4) | 0.4 |
Recognised directly in other comprehensive income | (0.3) | (1.5) | (0.3) | (1.5) |
At 31 st December | 0.4 | 1.1 | 0.4 | 1.1 |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Property plant and equipment | 0.2 | 0.2 | 0.2 | 0.2 |
IFRS transitional adjustments | (0.1) | - | (0.1) | - |
Other timing differences | (0.2) | - | (0.2) | - |
Intangible assets | - | (0.1) | - | (0.1) |
Tax losses | 0.5 | (0.5) | 0.5 | (0.5) |
0.4 | (0.4) | 0.4 | (0.4) |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Origination and reversal of temporary differences | 0.4 | (0.3) | 0.4 | (0.3) |
Adjustment in respect to prior periods | - | (0.1) | - | (0.1) |
0.4 | (0.4) | 0.4 | (0.4) |
___________________________________________________________________________________________
Notes to the Accounts
Page | 70 Annual Report & Accounts 2024 Nottingham Building Society
20 Deferred tax (continued)
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Deferred tax assets | ||||
Pensions and other post-retirement benefits | - | 0.3 | - | 0.3 |
Property, plant and equipment | 0.1 | 0.3 | 0.1 | 0.3 |
Tax losses | - | 0.5 | - | 0.5 |
Other timing differences | 0.4 | 0.2 | 0.4 | 0.2 |
0.5 | 1.3 | 0.5 | 1.3 | |
Deferred tax liabilities | ||||
IFRS transitional adjustments | (0.1) | (0.2) | (0.1) | (0.2) |
Net deferred tax asset | 0.4 | 1.1 | 0.4 | 1.1 |
21 Shares
Group | ||
2024 | 2023 | |
£m | £m | |
Held by individuals | 4,350.2 | 3,567.3 |
Fair value adjustment for hedged risk | 0.3 | (1.4) |
4,350.5 | 3,565.9 |
Group and Society | 2024 | 2023 |
£m | £m | |
Amounts owed to credit institutions | 327.1 | 288.1 |
327.1 | 288.1 |
Group and Society | 2024 | 2023 |
£m | £m | |
Demand accounts | ||
Retail members | 0.5 | 0.6 |
Other | 0.2 | 0.2 |
0.7 | 0.8 | |
Term deposits | ||
Local authorities and universities | 44.7 | 48.0 |
44.7 | 48.0 | |
45.4 | 48.8 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 71 Annual Report & Accounts 2024 Nottingham Building Society
Society | 2024 | 2023 |
£m | £m | |
At 1 st January | 266.9 | 109.4 |
Advance | - | 203.8 |
Repayment | (58.7) | (46.3) |
At 31 st December | 208.2 | 266.9 |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Senior secured debt | 184.7 | 246.2 | - | - |
184.7 | 246.2 | - | - |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
Trade creditors | 0.7 | 0.7 | 0.7 | 0.7 |
Accruals and deferred income | 8.6 | 7.5 | 7.1 | 7.3 |
Other creditors | 3.9 | 3.2 | 3.9 | 3.3 |
13.2 | 11.4 | 11.7 | 11.3 |
Group | Group | Society | Society | |
2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | |
At 1 st January | - | - | - | - |
Anticipated costs associated with voluntary payments | 11.2 | - | 11.2 | - |
Utilised in period | (9.2) | - | (9.2) | - |
At 31 st December | 2.0 | - | 2.0 | - |
___________________________________________________________________________________________
Notes to the Accounts
Page | 72 Annual Report & Accounts 2024 Nottingham Building Society
Group and Society | 2024 | 2023 |
The principal actuarial assumptions used were as follows: | ||
Discount rate | 5.35% | 4.50% |
Rate of increase in salaries | 3.35% | 3.20% |
Rate of increase in pensions | 3.75% | 3.75% |
Inflation | 3.35% | 3.35% |
Post-retirement mortality | S3PMA_L for males, S3PFA for | |
| S3PMA_L (Male) / S3PFA | females tables with CMI 2019 | |
| (Female) base table with | projections using a long-term | |
| CMI_2023 improvement | improvement rate of 1.25% | |
| model | p.a. |
Group and Society | 2024 | 2024 | 2023 | 2023 |
Male | Female | Male | Female | |
Years | Years | Years | Years | |
Expected life at retirement for a new pensioner | 26.3 | 27.7 | 26.5 | 28.0 |
Expected life at retirement in 20 years’ time | 25.3 | 26.6 | 25.5 | 26.8 |
Group and Society | 2024 | 2023 | |
| Change in | |||
assumption | £m | £m | |
Principal actuarial assumption | |||
Discount rate | -0.25% | (1.0) | (1.4) |
Rate of increase in salaries | -0.25% | - | 0.1 |
Rate of increase in pensions | -0.25% | 0.2 | 0.2 |
Mortality age adjustment | +0.25% | 0.2 | 0.2 |
Inflation | -0.25% | 0.2 | 0.2 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 73 Annual Report & Accounts 2024 Nottingham Building Society
28 Retirement benefit obligations (continued)
Group and Society | 2024 | 2023 |
£m | £m | |
Fair value of scheme assets: | ||
As at 1 st January | 45.8 | 43.3 |
Interest on pension scheme assets | 2.0 | 2.1 |
Contributions by employer | 0.6 | 1.5 |
Benefits paid | (2.5) | (2.1) |
Expenses paid | (0.2) | - |
(Losses) / gains on assets | (2.8) | 1.0 |
As at 31 st December | 42.9 | 45.8 |
Present value of defined benefit obligations: | ||
As at 1 st January | (42.9) | (42.1) |
Interest on pension scheme liabilities | (1.9) | (2.0) |
Benefits paid | 2.5 | 2.1 |
Experience loss on liabilities | 1.5 | (0.5) |
Gain on changes in demographic assumptions | 0.5 | 1.1 |
Gains / (losses) on changes in financial assumptions | 3.5 | (1.5) |
As at 31 st December | (36.8) | (42.9) |
Surplus in scheme at 31 st December | 6.1 | 2.9 |
Impact of asset ceiling | (6.1) | (4.2) |
Liability in the Statement of Financial Position as at 31 st December | - | (1.3) |
Group and Society | 2024 | 2023 |
£m | £m | |
Investments quoted in active markets | ||
Listed equity investments | - | 5.9 |
Multi asset growth | 9.0 | 9.8 |
High yield credit | - | 11.0 |
Asset backed securities | 15.6 | - |
Cash and cash equivalents | 3.3 | 2.1 |
Unquoted investments | ||
Liability driven investments | 14.1 | 16.0 |
Secured pensioners | 0.9 | 1.0 |
Fair value of scheme assets | 42.9 | 45.8 |
Group and Society | 2024 | 2023 |
£m | £m | |
Amounts recognised in finance cost in Income Statement: | ||
Interest cost on pension scheme liabilities | (1.9) | (2.1) |
Interest income on pension scheme assets | 2.0 | 2.0 |
0.1 | (0.1) |
Group and Society | 2024 | 2023 |
£m | £m | |
Opening defined benefit obligation at 1 st January | (1.3) | (2.9) |
Amount recognised in Income Statement | (0.2) | (0.1) |
Employer contributions | 0.6 | 1.5 |
Remeasurement gains | 0.9 | 0.2 |
Closing defined benefit obligation as at 31 st December | - | (1.3) |
___________________________________________________________________________________________
Notes to the Accounts
Page | 74 Annual Report & Accounts 2024 Nottingham Building Society
28 Retirement benefit obligations (continued)
Group and Society | 2024 | 2023 |
£m | £m | |
Actual return less expected return on plan assets | (2.8) | (4.7) |
Experience loss arising on scheme liabilities | 1.4 | (0.4) |
Changes in financial assumptions underlying the present value of the scheme liabilities | 3.5 | 3.6 |
Changes in demographic assumptions underlying the present value of the scheme liabilities | 0.5 | 1.1 |
Change in impact of asset ceiling | (1.7) | 0.5 |
| Remeasurement of defined benefit obligation | 0.9 | 0.1 |
Group and Society | 2024 | 2023 |
Years | Years | |
Active members | 15 | 16 |
Deferred members | 16 | 17 |
Retired members | 9 | 11 |
Group and Society | 2024 | 2023 |
£m | £m | |
7.875% sterling permanent interest-bearing shares | 23.9 | 23.9 |
Fair value adjustment for hedged risk | 0.1 | 0.1 |
24.0 | 24.0 |
Group and Society | FVOCI reserve | FVOCI reserve |
2024 | 2023 | |
£m | £m | |
At 1 st January | 0.2 | (3.4) |
Fair value (losses) / gains on treasury assets | (0.5) | 2.8 |
Amounts transferred to Income Statement on micro hedged relationships | 0.3 | - |
Loss on disposal of treasury assets recycled to Income Statement | - | 1.8 |
Deferred tax (expense) / credit | - | (1.0) |
At 31 st December | - | 0.2 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 75 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments
Hedged item | Risk | Fair value interest rate hedge |
Fixed rate mortgage | Increase in interest rates | Group pays fixed, receives variable |
Fixed rate treasury asset | Increase in interest rates | Group pays fixed, receives variable |
Fixed rate savings bond | Decrease in interest rates | Group receives fixed, pays variable |
Fixed rate funding | Decrease in interest rates | Group receives fixed, pays variable |
___________________________________________________________________________________________
Notes to the Accounts
Page | 76 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Classification & Measurement (continued)
Financial instrument | Terms and conditions | Accounting policy: IFRS 9 |
Fixed or reference linked interest rate | Amortised cost | |
| Loans and advances to credit institutions | Fixed term | Accounted for at settlement date |
Short to medium-term maturity | ||
Fixed or reference linked interest rate | Fair value through other comprehensive | |
| Debt securities | Fixed term | income |
Short to medium-term maturity | Accounted for at settlement date | |
Secured on residential property or land | Amortised cost | |
| Loans and advances to members | Standard maximum contractual term of 25 years | Accounted for at settlement date |
Fixed or variable rate interest | ||
Fixed interest rate | Fair Value Through Profit and Loss | |
| Convertible loan notes (‘CLN’) | CLN will either be repaid on maturity or converted | Accounted for at settlement date |
into shares | ||
| Shares | Variable term | Amortised cost |
Fixed or variable interest rates | Accounted for at settlement date | |
Fixed or reference linked interest rate | Amortised cost | |
| Amounts owed to credit institutions | Fixed term | Accounted for at settlement date |
Short to medium-term maturity | ||
Fixed or reference linked interest rate | Amortised cost | |
| Amounts owed to other members | Fixed term | Accounted for at settlement date |
Short to medium-term maturity | ||
Fixed or reference linked interest rate | Amortised cost | |
| Debt securities in issue | Fixed term | Accounted for at settlement date |
Short to medium-term maturity | ||
Fixed interest rate | Amortised cost | |
| Subscribed capital | Issued for indeterminate period | Accounted for at settlement date |
Only repayable upon winding up of the Society | ||
Fixed interest received / paid converted | Fair value through profit and loss | |
| Derivative financial instruments | to variable interest paid / received | Accounted for at trade date |
Based on notional value of the derivative |
Held at amortised | Held at fair value | ||||
Carrying values by category | cost | ||||
Financial | Fair value | Fair value | Unmatched | ||
| assets and | through other | through Profit | Derivatives | ||
| Group | liabilities at | comprehensive | and Loss | ||
As at 31 st December 2024 | amortised cost | income | Total | ||
£m | £m | £m | £m | £m | |
Financial assets | |||||
Cash in hand and balances with the Bank of England | 441.2 | - | - | - | 441.2 |
Loans and advances to credit institutions | 21.6 | - | - | - | 21.6 |
Debt securities | - | 454.2 | - | - | 454.2 |
Derivative financial instruments | - | - | 69.0 | 11.9 | 80.9 |
Loans and advances to members | 4,201.8 | - | - | - | 4,201.8 |
Convertible loan notes | - | - | 1.1 | - | 1.1 |
Other assets | 25.9 | - | - | - | 25.9 |
4,690.5 | 454.2 | 70.1 | 11.9 | 5,226.7 | |
Financial liabilities | |||||
Shares | 4,350.5 | - | - | - | 4,350.5 |
Amounts owed to credit institutions | 327.1 | - | - | - | 327.1 |
Amounts owed to other members | 45.4 | - | - | - | 45.4 |
Debt securities in issue | 184.7 | - | - | - | 184.7 |
Derivative financial instruments | - | - | 11.0 | 11.9 | 22.9 |
Subscribed capital | 24.0 | - | - | - | 24.0 |
Other liabilities | 18.8 | - | - | - | 18.8 |
4,950.5 | - | 11.0 | 11.9 | 4,973.4 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 77 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Classification & Measurement (continued)
Carrying values by category | Held at amortised | Held at fair value | |||
cost | |||||
Financial | Fair value | Derivatives | |||
| assets and | through other | designated | |||
| Group | liabilities at | comprehensive | as fair value | Unmatched | |
As at 31 st December 2023 | amortised cost | income | hedges | derivatives | Total |
£m | £m | £m | £m | £m | |
Financial assets | |||||
Cash in hand and balances with the Bank of England | 430.2 | - | - | - | 430.2 |
Loans and advances to credit institutions | 31.0 | - | - | - | 31.0 |
Debt securities | - | 340.1 | - | - | 340.1 |
Derivative financial instruments | - | - | 91.1 | 14.1 | 105.2 |
Loans and advances to members | 3,543.9 | - | - | - | 3,543.9 |
Other assets | 24.5 | - | - | - | 24.5 |
4,029.6 | 340.1 | 91.1 | 14.1 | 4,474.9 | |
Financial liabilities | |||||
Shares | 3,565.9 | - | - | - | 3,565.9 |
Amounts owed to credit institutions | 288.1 | - | - | - | 288.1 |
Amounts owed to other members | 48.8 | - | - | - | 48.8 |
Debt securities in issue | 246.2 | - | - | - | 246.2 |
Derivative financial instruments | - | - | 27.8 | 16.1 | 43.9 |
Subscribed capital | 24.0 | - | - | - | 24.0 |
Other liabilities | 14.5 | - | - | - | 14.5 |
4,187.5 | - | 27.8 | 16.1 | 4,231.4 |
Group | 2024 | 2024 | 2023 | 2023 | |
Book value | Fair value | Book value | Fair value | ||
£m | £m | £m | £m | ||
Financial assets | |||||
Cash in hand and balances with the Bank of England | a | 441.2 | 441.2 | 430.2 | 430.2 |
Loans and advances to credit institutions | b | 21.6 | 21.6 | 31.0 | 31.0 |
Loans and advances to members | c | 4,201.8 | 4,229.8 | 3,543.9 | 3,498.6 |
Financial liabilities | |||||
Shares | d | 4,350.5 | 4,347.7 | 3,565.9 | 3,551.0 |
Amounts owed to credit institutions | d | 327.1 | 327.1 | 288.1 | 288.1 |
Amounts owed to other members | d | 45.4 | 45.5 | 48.8 | 49.0 |
Debt securities in issue | e | 184.7 | 184.7 | 246.2 | 246.2 |
Subscribed capital | f | 24.0 | 26.1 | 24.0 | 24.8 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 78 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Fair values of financial assets and liabilities carried at amortised cost (continued)
Group | 2024 | 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
Level | Level 2 | Level 3 | Total | Level 1 | Level 2 | Total | ||
1 | ||||||||
Notes | £m | £m | £m | £m | £m | £m | £m | |
Financial assets | ||||||||
FVOCI – Debt securities | 12 | 454.2 | - | - | 454.2 | 340.1 | - | 340.1 |
Convertible loan notes | - | - | 1.1 | 1.1 | - | - | - | |
Derivative financial instruments – interest rate swaps | 13 | - | 80.9 | - | 80.9 | - | 105.2 | 105.2 |
454.2 | 80.9 | 1.1 | 536.2 | 340.1 | 105.2 | 445.3 | ||
Financial liabilities | ||||||||
Derivative financial instruments – interest rate swaps | 13 | - | (22.9) | - | (22.9) | - | (43.9) | (43.9) |
- | (22.9) | - | (22.9) | - | (43.9) | (43.9) |
___________________________________________________________________________________________
Notes to the Accounts
Page | 79 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Fair values of financial assets and liabilities carried at fair value (continued)
Group and Society | 2024 | 2023 |
£m | £m | |
Credit risk exposure | ||
Cash in hand and balances with the Bank of England | 441.2 | 430.2 |
Loans and advances to credit institutions | 21.6 | 31.0 |
Debt securities | 454.2 | 340.1 |
Derivative financial instruments | 80.9 | 105.2 |
Loans and advances to members | 4,201.8 | 3,543.9 |
Convertible loan notes | 1.1 | - |
| Total Statement of Financial Position exposure | 5,200.8 | 4,450.4 |
Off Balance Sheet exposure – mortgage commitments | 453.1 | 262.5 |
5,653.9 | 4,712.9 |
Group | 2024 | 2024 | 2023 | 2023 |
£m | % | £m | % | |
Industry sector | ||||
Banks | 206.9 | 22.5 | 164.0 | 20.5 |
Building Societies | 100.7 | 11.0 | 101.6 | 12.7 |
Multilateral Development Banks | 59.4 | 6.5 | 43.5 | 5.4 |
Central Government | 550.0 | 60.0 | 492.2 | 61.4 |
917.0 | 801.3 |
Group | 2024 | AAA | AA | A | 2023 |
£m | % | % | % | £m | |
Geographic region | |||||
United Kingdom | 857.6 | 90.8 | 6.2 | 3.0 | 757.8 |
Multilateral Development banks | 59.4 | 100.0 | - | - | 43.5 |
917.0 | 801.3 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 80 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Credit risk (continued)
a) Loans and advances to credit institutions, debt securities and derivative financial instruments (continued)
2024 | 2023 | |
Group and Society | % | % |
Geographical analysis | ||
Eastern | 10.7 | 9.9 |
East Midlands | 11.7 | 13.3 |
London | 15.4 | 13.0 |
North East | 3.6 | 4.2 |
North West | 10.4 | 11.2 |
South East | 17.4 | 16.0 |
South West | 9.6 | 9.3 |
Wales | 3.4 | 3.5 |
West Midlands | 8.7 | 9.2 |
Yorkshire & Humberside | 9.0 | 10.3 |
Other | 0.1 | 0.1 |
100.0 | 100.0 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 81 Annual Report & Accounts 2024 Nottingham Building Society
31 `Financial instruments (continued)
Credit risk (continued)
b) Loans and advances to members (continued)
Group and Society | 2024 | 2024 | 2023 | 2023 |
Residential | Buy-to-let | Residential | Buy-to-let | |
% | % | % | % | |
Loan to Value analysis | ||||
< 60% | 40.0 | 68.9 | 43.6 | 74.2 |
60% - 80% | 35.8 | 31.1 | 37.4 | 25.8 |
80% - 90% | 19.6 | - | 14.7 | - |
> 90% | 4.6 | - | 4.3 | - |
100.0 | 100.0 | 100.0 | 100.0 | |
Average loan to value of loans | 52.4 | 50.0 | 50.2 | 49.5 |
Average loan to value of new business | 69.7 | 61.0 | 70.3 | 60.8 |
Group and Society | 2024 | 2024 | 2023 | 2023 |
Indexed | Unindexed | Indexed | Unindexed | |
£m | £m | £m | £m | |
Value of collateral held: | ||||
Stage 1: 12-month expected credit losses | 6,485.1 | 5,596.4 | 5,767.3 | 4,719.3 |
Stage 2: Lifetime expected credit losses | 776.1 | 606.8 | 796.6 | 615.3 |
Stage 3: Lifetime expected credit losses | 45.0 | 32.3 | 43.2 | 30.1 |
7,306.2 | 6,235.5 | 6,607.1 | 5,364.7 |
| Group and Society | 2024 | 2024 | 2023 | 2023 |
| Gross loans | Expected | Gross loans | Expected | |
Credit Loss | Credit Loss | |||
PD % | £m | £m | £m | £m |
0% - 2.5% | 3.2 | - | 1.8 | - |
2.5% - 5.0% | 5.4 | - | 3.4 | - |
5.0% - 7.5% | 2,140.3 | 1.3 | 261.3 | 0.2 |
7.5% - 10.0% | 1,239.1 | 1.0 | 2,672.2 | 2.5 |
10% – 100% | 262.3 | 0.8 | 216.3 | 0.6 |
3,650.3 | 3.1 | 3,155.0 | 3.3 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 82 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Credit risk (continued)
b) Loans and advances to members (continued)
Retail loans (continued)
Group and Society | 2024 | 2024 | 2023 | 2023 |
Expected | Expected | |||
Gross loans | Credit Loss | Gross loans | Credit Loss | |
£m | £m | £m | £m | |
Stage 1: 12-month expected credit losses | ||||
< 30 days past due | 3,279.7 | 2.3 | 2,780.0 | 2.7 |
Stage 2: Lifetime expected credit losses | ||||
< 30 days past due | 338.8 | 0.6 | 349.9 | 0.5 |
> 30 days past due | 13.1 | 0.1 | 7.6 | - |
Stage 3: Lifetime expected credit losses | ||||
< 90 days past due | 11.6 | 0.1 | 14.0 | 0.1 |
> 90 days past due | 7.1 | - | 3.5 | - |
3,650.3 | 3.1 | 3,155.0 | 3.3 |
Unaudited | 2024 | 2023 |
Group and Society | Number | Number |
Type of Forbearance | ||
Interest only concessions | - | - |
Reduced payment concessions | 1 | - |
Payment plans | 13 | 21 |
Capitalisations | 32 | 38 |
Mortgage term extensions | 28 | 34 |
Less: cases with more than one form of forbearance | (26) | (34) |
48 | 59 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 83 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Credit risk (continued)
b) Loans and advances to members (continued)
Unaudited | 2024 | 2024 | 2023 | 2023 |
Group and Society | £m | % | £m | % |
Owner occupied | 33.8 | 5.7 | 37.6 | 8.6 |
Investment property | 555.7 | 94.3 | 399.8 | 91.4 |
589.5 | 100.0 | 437.4 | 100.0 |
2024 | 2023 | |
Group and Society | % | % |
Loan to Value analysis | ||
< 60% | 20.3 | 21.0 |
60% - 80% | 78.6 | 77.7 |
80% - 90% | 0.8 | 1.2 |
> 90% | 0.3 | 0.1 |
100.0 | 100.0 | |
Average loan to value of loans | 50.9 | 59.2 |
Average loan to value of new business | 68.1 | 65.3 |
2024 | 2024 | 2023 | 2023 | |
Group and Society | Indexed | Unindexed | Indexed | Unindexed |
£m | £m | £m | £m | |
Value of collateral held: | ||||
Stage 1: 12-month expected credit losses | 948.4 | 902.9 | 720.8 | 680.8 |
Stage 2: Lifetime expected credit losses | 51.1 | 49.3 | 46.5 | 44.2 |
Stage 3: Lifetime expected credit losses | 17.0 | 16.7 | 11.3 | 10.8 |
1,016.5 | 968.9 | 778.6 | 735.8 |
| Group and Society | 2024 | 2024 | 2023 | 2023 |
| Gross loans | Expected Credit | Gross loans | Expected | |
Loss | Credit Loss | |||
PD % | £m | £m | £m | £m |
0% - 2.5% | 0.3 | - | 0.2 | - |
2.5% - 5.0% | 0.5 | - | 0.2 | - |
5.0% - 7.5% | 459.5 | 1.0 | 22.3 | 0.1 |
7.5% - 10.0% | 34.2 | 0.1 | 314.7 | 1.0 |
10% – 100% | 95.0 | 1.0 | 100.0 | 0.8 |
589.5 | 2.1 | 437.4 | 1.9 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 84 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Credit risk (continued)
b) Loans and advances to members (continued)
Secured Business Loans (continued)
Group and Society | 2024 | 2024 | 2023 | 2023 |
Expected | Expected | |||
Gross loans | Credit Loss | Gross loans | Credit Loss | |
£m | £m | £m | £m | |
Stage 1: 12 month expected credit losses | ||||
< 30 days past due | 550.0 | 1.4 | 405.2 | 1.3 |
Stage 2: Lifetime expected credit losses | ||||
< 30 days past due | 29.9 | 0.3 | 25.0 | 0.2 |
> 30 days past due | 2.0 | - | 2.4 | 0.1 |
Stage 3: Lifetime expected credit losses | ||||
< 90 days past due | 5.7 | 0.2 | 3.9 | 0.2 |
> 90 days past due | 1.9 | 0.2 | 0.9 | 0.1 |
589.5 | 2.1 | 437.4 | 1.9 |
2024 | 2023 | |
Group and Society | Number | Number |
Type of Forbearance | ||
Interest only concessions | 20 | 19 |
Active payment plan | 5 | - |
Mortgage term extensions | 5 | 4 |
Less: cases with more than one form of forbearance | (2) | (2) |
28 | 21 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 85 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
| More than | More than one | |||||
| Group | Not more | three months | year but not | |||
| Residual maturity | than three | but not more | more than five | More than | ||
as at 31 st December 2024 | On demand | months | than one year | years | five years | Total |
£m | £m | £m | £m | £m | £m | |
Financial assets | ||||||
Liquid assets | ||||||
Cash in hand and balances with the Bank of England | 441.2 | - | - | - | - | 441.2 |
Loans and advances to credit | 9.3 | 12.3 | - | - | - | 21.6 |
institutions | ||||||
Debt securities | - | 21.1 | 87.1 | 343.3 | 2.7 | 454.2 |
Total liquid assets | 450.5 | 33.4 | 87.1 | 343.3 | 2.7 | 917.0 |
Derivative financial instruments | - | 4.0 | 15.9 | 58.8 | 2.2 | 80.9 |
Loans and advances to members | 3.1 | 82.7 | 177.6 | 1,002.3 | 2,936.1 | 4,201.8 |
Convertible loan notes | - | - | 1.1 | - | - | 1.1 |
Other assets | - | 4.2 | 4.6 | 0.8 | 16.3 | 25.9 |
453.6 | 124.3 | 286.3 | 1,405.2 | 2,957.3 | 5,226.7 | |
Financial liabilities and reserves | ||||||
Shares | 1,086.8 | 672.4 | 1,498.0 | 1,093.1 | 0.2 | 4,350.5 |
Amounts owed to credit | 18.7 | 40.7 | 267.7 | - | - | 327.1 |
institutions | ||||||
Amounts owed to other members | 0.7 | 17.5 | 27.2 | - | - | 45.4 |
Debt securities in issue | - | - | - | 184.7 | - | 184.7 |
Derivative financial instruments | - | 0.7 | 0.9 | 21.2 | 0.1 | 22.9 |
Subscribed capital | - | 0.1 | - | - | 23.9 | 24.0 |
Reserves | - | - | - | - | 253.3 | 253.3 |
Other liabilities | 2.6 | 9.7 | 3.8 | 2.3 | 0.4 | 18.8 |
1,108.8 | 741.1 | 1,797.6 | 1,301.3 | 277.9 | 5,226.7 | |
Net liquidity gap | (655.2) | (616.8) | (1,511.3) | 103.9 | 2,679.4 | - |
___________________________________________________________________________________________
Notes to the Accounts
Page | 86 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Liquidity risk (continued)
More than | ||||||
| three | More than | |||||
| months but | one year but | |||||
| Group | Not more | not more | not more | |||
| Residual maturity | than three | than one | than five | More than | ||
as at 31 st December 2023 | On demand | months | year | years | five years | Total |
£m | £m | £m | £m | £m | £m | |
Financial assets | ||||||
Liquid assets | ||||||
Cash in hand and balances with the Bank | 423.5 | - | 6.7 | - | - | 430.2 |
of England | ||||||
Loans and advances to credit institutions | 15.6 | 15.4 | - | - | - | 31.0 |
Debt securities | - | 29.9 | 62.8 | 247.4 | - | 340.1 |
Total liquid assets | 439.1 | 45.3 | 69.5 | 247.4 | - | 801.3 |
Derivative financial instruments | - | 2.7 | 11.6 | 89.4 | 1.5 | 105.2 |
Loans and advances to members | 384.6 | 21.2 | 61.7 | 380.9 | 2,695.5 | 3,543.9 |
Other assets | - | 2.4 | 5.6 | 1.0 | 15.5 | 24.5 |
823.7 | 71.6 | 148.4 | 718.7 | 2,712.5 | 4,474.9 | |
Financial liabilities and reserves | ||||||
Shares | 1,037.8 | 900.6 | 778.0 | 849.5 | - | 3,565.9 |
Amounts owed to credit institutions | 19.3 | 61.0 | - | 207.8 | - | 288.1 |
Amounts owed to other members | - | 19.3 | 29.5 | - | - | 48.8 |
Debt securities in issue | - | - | - | 246.2 | - | 246.2 |
Derivative financial instruments | - | - | 1.3 | 40.8 | 1.8 | 43.9 |
Subscribed capital | - | 0.1 | - | - | 23.9 | 24.0 |
Reserves | - | - | - | - | 243.5 | 243.5 |
Other liabilities | 2.7 | 7.0 | 0.5 | 2.6 | 1.7 | 14.5 |
1,059.8 | 988.0 | 809.3 | 1,346.9 | 270.9 | 4,474.9 | |
Net liquidity gap | (236.5) | (916.4) | (660.5) | (628.2) | 2,441.6 | - |
More than | More than one | |||||
| three months | year but not | |||||
| Group | Repayable on | Not more than | but not more | more than five | More than | |
31 st December 2024 | demand | three months | than one year | years | five years | Total |
£m | £m | £m | £m | £m | £m | |
Shares | 1,264.0 | 672.5 | 1,497.8 | 1,092.9 | 0.2 | 4,527.4 |
Amounts owed to credit institutions | 17.9 | 43.0 | 273.5 | - | - | 334.4 |
Amounts owed to other members | 0.8 | 18.3 | 29.3 | - | - | 48.4 |
Debt securities in issue | - | 8.9 | 30.5 | 145.7 | - | 185.1 |
Derivative financial instruments | - | (0.1) | 0.2 | 20.8 | - | 20.9 |
Subscribed capital | - | 0.5 | 1.5 | 7.9 | 23.9 | 33.8 |
| Total liabilities | 1,282.7 | 743.1 | 1,832.8 | 1,267.3 | 24.1 | 5,150.0 |
Group | ||||||
31 st December 2023 | ||||||
Shares | 1,188.1 | 900.6 | 779.1 | 849.8 | - | 3,717.6 |
Amounts owed to credit institutions | 19.4 | 61.6 | - | 207.8 | - | 288.8 |
Amounts owed to other members | 0.8 | 19.4 | 29.7 | - | - | 49.9 |
Debt securities in issue | - | 16.8 | 38.6 | 206.8 | - | 262.2 |
Derivative financial instruments | - | - | 0.9 | 40.3 | 1.8 | 43.0 |
Subscribed capital | - | 0.5 | 1.5 | 7.9 | 23.9 | 33.8 |
Total liabilities | 1,208.3 | 998.9 | 849.8 | 1,312.6 | 25.7 | 4,395.3 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 87 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
2024 | 2023 | |
Group and Society | £m | £m |
| Changes in market value from a 2% parallel upward shift in interest rates | (4.6) | (0.7) |
2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
| Group and Society | Gross | Financial | Net amounts | Gross | Financial | Net amounts |
amounts | collateral * | amounts | collateral * | |||
£m | £m | £m | £m | £m | £m | |
Financial assets | ||||||
Derivative financial instruments | 80.9 | (80.9) | - | 105.2 | (105.2) | - |
Total financial assets | 80.9 | (80.9) | - | 105.2 | (105.2) | - |
Financial liabilities | ||||||
Derivative financial instruments | 22.9 | (22.9) | - | 43.9 | (43.9) | - |
Total financial liabilities | 22.9 | (22.9) | - | 43.9 | (43.9) | - |
___________________________________________________________________________________________
Notes to the Accounts
Page | 88 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Market and interest rate risk (continued)
Fair value hedges (continued)
2024 | 2024 | 2024 | 2024 | |
Group and Society | Changes in fair | |||
| Contract / | value used for | |||
| notional | Fair value of | Fair value of | calculating hedge | |
amount | Assets | Liabilities | ineffectiveness | |
£m | £m | £m | £m | |
Derivatives designated as fair value hedges for interest rate risk (Note 13) | ||||
Fixed rate mortgages | 3,000.2 | 67.6 | (10.1) | (4.0) |
Fixed rate treasury assets | 48.3 | 0.5 | - | 0.3 |
Fixed rate savings | 1,662.0 | 1.4 | (0.9) | 1.6 |
Subscribed capital | - | - | - | - |
4,710.5 | 69.5 | (11.0) | (2.1) |
2023 | 2023 | 2023 | 2023 | |
Group and Society | Changes in fair | |||
| Contract / | value used for | |||
| notional | Fair value of | Fair value of | calculating hedge | |
amount | Assets | Liabilities | ineffectiveness | |
£m | £m | £m | £m | |
Derivatives designated as fair value hedges for interest rate risk (Note 13) | ||||
Fixed rate mortgages | 2,087.0 | 88.8 | (24.9) | 74.5 |
Fixed rate savings | 325.0 | 2.3 | (2.9) | (3.5) |
Subscribed capital | - | - | - | |
2,412.0 | 91.1 | (27.8) | 71.0 |
2024 | 2024 | 2024 | 2024 | 2024 | 2024 | |
Group and Society | Change in fair | |||||
| value of hedged | ||||||
| Accumulated amount of fair | item for | |||||
| Carrying amount of hedged | value adjustments on the | Balance Sheet | ineffectiveness | |||
Item | hedged item | line item | assessment | |||
Assets | Liabilities | Assets | Liabilities | |||
£m | £m | £m | £m | £m | ||
Hedged items in fair value hedges for interest rate risk (Note 13) | Loans & advances | |||||
Fixed rate mortgages | 3,033.3 | - | (34.5) | - | 5.7 | |
to members | ||||||
Fixed rate treasury assets | 48.9 | - | 0.3 | - | Debt securities | (0.3) |
Fixed rate savings | - | 1,706.7 | - | (0.3) | Shares | (1.7) |
Subscribed capital | - | - | - | - | Subscribed capital | - |
3,082.2 | 1,706.7 | (34.2) | (0.3) | 3.7 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 89 Annual Report & Accounts 2024 Nottingham Building Society
31 Financial instruments (continued)
Market risk (continued)
Fair value hedges (continued)
2023 | 2023 | 2023 | 2023 | 2023 | 2023 | |
Group and Society | Change in fair | |||||
| value of hedged | ||||||
| Accumulated amount of fair | item for | |||||
| Carrying amount of hedged | value adjustments on the | Balance Sheet line | ineffectiveness | |||
Item | hedged item | item | assessment | |||
Assets | Liabilities | Assets | Liabilities | |||
£m | £m | £m | £m | £m | ||
Hedged items in fair value hedges for interest rate risk (Note 13) | Loans & advances | |||||
Fixed rate mortgages | 2,206.0 | - | (39.4) | - | 63.2 | |
to members | ||||||
Fixed rate savings | - | 351.1 | - | 1.4 | Shares | (3.4) |
Subscribed capital | - | - | - | - | Subscribed capital | - |
2,206.0 | 351.1 | (39.4) | 1.4 | 59.8 |
2024 | 2024 | |
Group and Society | Hedge ineffectiveness | |
| recognised in Income | Income Statement line item that includes | |
Statement | reclassified amount | |
£m | ||
Fair value hedges | ||
Interest rate swaps | ||
Fixed rate mortgages | 1.7 | Net gains from derivative financial instruments |
Fixed rate treasury assets | - | Net gains from derivative financial instruments |
Fixed rate savings | (0.1) | Net gains from derivative financial instruments |
1.6 |
2023 | 2023 | |
Group and Society | Hedge ineffectiveness | |
| recognised in Income | Income Statement line item that includes | |
Statement | reclassified amount | |
£m | ||
Fair value hedges | ||
Interest rate swaps | ||
Fixed rate mortgages | (11.2) | Net gains from derivative financial instruments |
Fixed rate savings | 0.1 | Net gains from derivative financial instruments |
(11.1) |
___________________________________________________________________________________________
Notes to the Accounts
Page | 90 Annual Report & Accounts 2024 Nottingham Building Society
32 Capital structure
The Society’s policy is to maintain a capital base to maintain member, creditor and market confidence and to sustain future development of the business. The
formal ICAAP assists the Society with its management of capital. Through its quarterly business plan update the Board monitors the Society’s capital position to
assess whether capital is held to mitigate the risks it faces in the course of its business activities. The Society’s actual and expected capital position is reviewed
against stated risk appetite which aims to maintain capital at a specific level above its TCR.
The Board manages the Society’s capital and risk exposures to maintain capital in line with regulatory requirements which includes monitoring of:
• Lending and business decisions - the Society uses application scorecards to help it assess whether mortgage applications fit within its appetite for credit
risk. Once loan funds have been advanced, behavioural scorecards are used to review the ongoing risk profile of both the portfolios and individual members.
In addition, for residential and buy-to-let mortgages property values are updated on a quarterly basis.
• Pricing - pricing models are utilised for all mortgage product launches. The models include expected loss estimates and capital utilisation enabling the
calculation of a risk adjusted return on capital.
• Concentration risk - the design of retail products takes into account the overall mix of products to ensure that exposure to market risk remains within
permitted parameters.
• Counterparty risk - wholesale lending is only carried out with approved counterparties in line with the Society’s lending criteria and is subject to a range
of limits. The limits are monitored daily to ensure the Society remains within risk appetite.
This is subjected to regular stress tests to ensure the Society maintains sufficient capital for future possible events.
The Society’s regulatory capital consists of independently verified general reserves, accumulated gains and losses recognised in the fair value reserve and IFRS
9 transitional adjustments; less adjustments in relation to intangible assets, deferred tax and assets / liabilities held at fair value. Further information can be
found in the Pillar 3 disclosures which are published on the Society’s website.
The Group’s capital requirements are set and monitored by the PRA. During 2024, the Society has complied with the requirements included within the Capital
Requirements Directive V (Basel III). Further details of these requirements and their impact on the Society are provided in the Strategic Report on page 12.
There were no reported breaches of capital requirements during the year. There have been no material changes in the Society’s management of capital during
the year.
Under Basel III Pillar 3, the Society is required to publish further information regarding its capital position and exposures. The Society’s Pillar 3 disclosures are
available on our website.
2024 | 2024 | 2023 | 2023 | |
Amount owed to | Amount owed by | Amount owed to | Amount owed by | |
| subsidiaries | subsidiaries | subsidiaries | subsidiaries | |
£m | £m | £m | £m | |
Arrow Mortgage Finance No. 1 Limited | (208.2) | 33.4 | (266.9) | 33.4 |
(208.2) | 33.4 | (266.9) | 33.4 |
___________________________________________________________________________________________
Notes to the Accounts
Page | 91 Annual Report & Accounts 2024 Nottingham Building Society
33 Related party transactions (continued)
2024 | 2024 | 2023 | 2023 | |
Amounts in | Amounts in | |||
| Number of key | respect of key | Number of key | respect of key | |
| management | management | management | management | |
| personnel and | personnel and | personnel and | personnel and | |
| their close family | their close | their close family | their close | |
members | family members | members | family members | |
Group and Society | Number | £000 | Number | £000 |
Share accounts | ||||
Net movement in the year | (2) | 53 | 2 | 122 |
Balances outstanding 31 st December | 7 | 219 | 9 | 286 |
Subscribed capital | ||||
Net movement in the year | - | - | - | (2) |
Balances outstanding 31 st December | 1 | 5 | 1 | 5 |
Interest payable on share accounts | - | - | ||
Interest payable on subscribed capital | - | - |
___________________________________________________________________________________________
Notes to the Accounts
Page | 92 Annual Report & Accounts 2024 Nottingham Building Society
34 Notes to the cash flow statements
2024 | 2023 | ||
Group and Society | Notes | £m | £m |
Changes in liabilities arising from financing activities | |||
Subscribed capital at 1 st January | 23.9 | 23.9 | |
Accrued interest | 1.9 | 1.9 | |
Interest paid | (1.9) | (1.9) | |
Balance at 31 st December | 29 | 23.9 | 23.9 |
2024 | 2023 | |
Group and Society | £m | £m |
Mortgage commitments | 381.7 | 198.4 |
Committed facilities to fintech mortgage provider | 71.4 | 64.1 |
Balance at 31 st December | 453.1 | 262.5 |
36 Registered office
37 Subsequent events
On 5
th
February 2025, Lace Funding 2025-1 PLC raised £350m of funding in the Group’s debut public RMBS issuance.
On 7
th
February 2025, the Society repaid £180 million of TFSME funding, reducing the amounts owed by the Society to £nil.
__________________________________________________________________________________________
Annual Business Statement
Page | 93 Annual Report & Accounts 2024 Nottingham Building Society
1 Statutory percentages
2024
Statutory
limit
%
%
Lending limit
Proportion of business assets not in the form of loans fully secured on residential property
13.96
25
Funding limit
Proportion of shares and borrowings not in the form of shares held by individuals
11.32
50
The percentages are calculated in accordance with, and the statutory limits are those prescribed by, sections 6 and 7 of the Building Societies Act 1986 and
are based on the Group Statement of Financial Position.
Business assets are the total assets of the Society and its subsidiary undertakings as shown in the Group’s Statement of Financial Position plus impairment for
losses on loans and advances (Note 15), less property, plant and equipment, intangible assets and liquid assets.
Loans fully secured on residential property are the amount of principal owing by borrowers and interest accrued not yet payable.
Total ‘shares and borrowings’ are the aggregate of ‘shares’, ‘amounts owed to credit institutions’, ‘amounts owed to other members’ and ‘debt securities in
issue’ in the Group’s Statement of Financial Position. Shares held by individuals are found in Note 21.
2 Other percentages
2024
2023
%
%
As a percentage of shares and borrowings:
Gross capital
5.65
6.45
Free capital
5.26
6.07
Liquid assets
18.66
19.31
As a percentage of mean total assets:
Profit after taxation
0.19
0.20
Management expenses (Group)
1.33
1.42
Management expenses (Society)
1.32
1.42
As a percentage of year-end assets
Return on assets
0.17
0.19
The above percentages have been calculated from the Group’s Financial Statements.
‘Shares and borrowings’ are the aggregate of ‘shares’, ‘amounts owed to credit institutions’, ‘amounts owed to other members’ and ‘debt securities in issue’
in the Group’s Statement of Financial Position.
‘Gross capital’ is the aggregate of subscribed capital and aggregated reserves as shown in the Group’s Statement of Financial Position.
‘Free capital’ is gross capital less property, plant and equipment, lease assets and intangible assets in the Group’s Statement of Financial Position.
‘Mean total assets’ are calculated by halving the aggregate of total assets at the beginning and end of the financial year for the Group.
‘Liquid assets’ are the first three items on the asset side of the Group’s Statement of Financial Position.
‘Management expenses’ are the aggregate of administrative expenses (excluding acquisition and merger costs) and depreciation and amortisation taken from
the Group’s Statement of Comprehensive Income.
___________________________________________________________________________________________
Annual Business Statement
Page | 94 Annual Report & Accounts 2024 Nottingham Building Society
3 Information about the Directors at 31
st
December 2024
Director’s name
Date of appointment
Age
Business occupation
Other directorships and offices
Robin Ashton
01.12.23
66
Director
Domestic and General Limited
Domestic and General Insurance Europe AG
Domestic and General Insurance plc
Simon Baum
Chief Risk Officer
18.06.18
62
Building Society
Executive
Baum Associates Ltd
Sue Hayes
Chief Executive
08.03.22
57
Building Society
Executive
Simon Linares
01.12.19
60
Director
Dreams Come True charity
Reflective Limited
Anthony Murphy
Chief Financial Officer
23.06.23
45
Building Society
Executive
Nottingham University
Peter O’Donnell
01.01.21
58
Director
Queen Victoria Hospital
One Family
Kavita Patel
01.01.17
48
Director
Foresight Enterprise VCT PLC
Kerry Spooner
01.09.16
64
Non-Executive
ANZ UK branch
The Bank of Nova Scotia, London Branch
Directors’ service contracts:
All contracts are terminable at any time by the Society on six months’ notice and by the individual on six months’ notice. Unless notice to terminate is given
by either party, the contracts continue automatically.
___________________________________________________________________________________________
Glossary
Page | 95 Annual Report & Accounts 2024 Nottingham Building Society
Set out below are the definitions of the terms used within the Annual Report and Accounts to assist the reader and to facilitate comparison with other
financial institutions:
Additional Tier 1 capital (‘AT1’)
Capital that meets certain rules under CRD and which comprises the Society’s PIBS but only
under the transitional provisions.
Arrears
A member is in arrears when they are behind in meeting their contractual obligations with
the result that an outstanding loan payment is overdue. The value of the arrears is the value
of any payments that have been missed.
Basel III
Basel III sets out the details of strengthened global regulatory standards on bank capital
adequacy and liquidity.
Buy-to-let loans (‘BTL’)
Buy-to-let loans are those loans which are offered to members buying residential property
specifically to let out and generate a rental income.
Capital Requirements Directive (‘CRD’)
CRD is made up of the Capital Requirements Regulation (‘CRR’) and the Capital Requirements
Directive, outlining the capital requirements framework and introduced liquidity
requirements, which regulators use when supervising firms.
Common Equity Tier 1 capital
(‘CET1’)
CET1 capital consists of internally generated capital generated from retained profits, other
reserves less intangible assets and other regulatory deductions. CET1 capital is fully loss
absorbing.
Common Equity Tier 1 ratio
Common Equity Tier 1 capital as a percentage of risk weighted assets.
Contractual maturity
The date at which a loan or financial instrument expires, at which point all outstanding
principal and interest is due.
Cost income ratio
A ratio that represents the proportion of administrative expenses to total income. On an
underlying basis, is defined as total administrative expenses (excluding one-off strategic
investment costs) as a percentage of total income (excluding the impact of fair value gains or
losses from derivatives and one off income).
Credit risk
This is the risk that a member or counterparty fails to meet their contractual obligations.
Debt securities
Assets representing certificates of indebtedness of credit institutions, public bodies or other
undertakings excluding those issued by central banks.
Debt securities in issue
Transferable certificates of indebtedness of the Society to the bearer of the certificates.
These are liabilities of the Group and include certificates of deposit.
Derivative financial instruments
A derivative financial instrument is a contract between two parties whose value is based on
an underlying price or index rate it is linked to, such as interest rates, exchange rates or stock
market indices. The Society uses derivative financial instruments to hedge its exposure to
interest rate risk.
Effective interest rate method (‘EIR’)
The method used to measure the carrying value of a financial asset or liability and to allocate
associated interest income or expense over the relevant period. The calculation includes all
fees and penalties paid and received between parties which are integral to the contract.
Expected Credit Loss (‘ECL’)
The present value of all cash shortfalls over the expected life of the financial instrument. The
term is used for accounting for impairment provisions under the IFRS 9 standard.
Exposure
The maximum loss a financial institution might suffer if a borrower, counterparty or group
fails to meet their obligations.
Exposure at Default (‘EAD’)
A component of the IFRS 9 expected credit loss calculation. The EAD model calculates the
balance profile of each mortgage account over its expected behavioural lifetime.
Fair value
Fair value is the amount for which an asset could be exchanged or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction.
Fair value through other comprehensive income
(‘FVOCI’)
Financial assets held at fair value on the Balance Sheet with changes in fair value being
recognised through other comprehensive income.
___________________________________________________________________________________________
Glossary (Continued)
Page | 96 Annual Report & Accounts 2024 Nottingham Building Society
Fair value through profit or loss (‘FVPL’)
Financial assets held at fair value on the Balance Sheet with changes in fair value being
recognised through the Income Statement.
Financial Conduct Authority
(‘FCA’)
The statutory body responsible for conduct of business regulation and supervision of UK
authorised firms.
Financial Services Compensation Scheme (‘FSCS’)
The UK’s compensation fund of last resort for members of authorised financial services
firms. The FSCS may pay compensation to members if a firm is unable, or likely to be unable,
to pay claims against it, usually because it has stopped trading or has been declared in
default. The FSCS is funded by the financial services industry. Every firm authorised by the
FCA is obliged to pay an annual levy, which goes towards its running costs and
compensation payments.
Fintech
A company whose purpose is to create technology enabled financial innovation.
Forbearance strategies
Strategies to support borrowers in financial difficulty, such as agreeing a temporary
reduction in the monthly payment, extending mortgage terms and a conversion to an
interest-only basis. The aim of forbearance strategies is to avoid repossession.
Free capital
The aggregate of gross capital and provisions for collective impairment losses on loans and
advances to members less property, plant and equipment and intangible assets.
Funding limit
Measures the proportion of shares and borrowings (excluding the fair value adjustment for
hedged risk) not in the form of shares held by individuals. The calculation of the funding
limit is explained in the Annual Business Statement.
General reserves
The accumulation of the Society’s historic and current year profits which is the main
component of Common Equity Tier 1 capital.
Gross capital
The aggregate of general reserves, fair value reserves and subscribed capital.
Impaired loans
Loans where there is objective evidence that an impairment event has occurred, meaning
that the Society does not expect to collect all the contractual cash flows or expect to collect
them later than they are contractually due.
Interest rate risk
The risk of loss due to a change in market interest rates. Interest rate risk can have an
impact on Society’s mortgages and savings products.
Internal Capital Adequacy Assessment Process
(‘ICAAP’)
The Society’s own assessment, as part of Basel III requirements, of the levels of capital that
it needs to hold in respect of its regulatory capital requirements for risks it faces under a
business as usual scenario including stress events.
Internal Liquidity Adequacy Assessment Process
(‘ILAAP’)
The Society’s own assessment of the liquidity resources it requires to remain within the risk
tolerances it has set. This will include an evaluation of potential stresses based on multiple
market environments.
Lending limit
Measures the proportion of business assets not in the form of loans fully secured on
residential property.
Leverage ratio
The ratio of Tier 1 capital divided by the total exposures, which includes on and off Balance
Sheet items.
Liquid assets
Total of cash in hand, loans and advances to credit institutions, and debt securities.
Liquid asset ratio
A ratio that expresses liquid assets as a percentage of as a percentage of shares and
borrowings.
Liquidity coverage ratio
A ratio that expresses the proportion of high-quality liquid assets as a percentage of
stressed cash outflows over a 30-day window
Liquidity resources
Assets held to manage liquidity risk. Liquidity resources comprise cash and balances with the
Bank of England, UK Government securities and multilateral development banks, other
securities and bank deposits and Bank of England approved mortgage portfolios. Liquid
resources ratio is expressed as a percentage of shares, deposits and funding liabilities.
Liquidity risk
Liquidity risk is the risk that the Society is unable to meet its financial obligations as they fall
due or can only secure them at excessive cost. This risk arises from timing mismatches of
cash inflows and outflows.
Loan to value ratio (‘LTV’)
LTV expresses the amount of a mortgage as a percentage of the value of the property.
Loans past due
Loans on which a payment has not been made as of its due date.
___________________________________________________________________________________________
Glossary (Continued)
Page | 97 Annual Report & Accounts 2024 Nottingham Building Society
Loss Given Default (‘LGD’)
A component of the IFRS 9 expected credit loss calculation. The LGD model calculates the likely loss on
asset disposal that the Society would suffer if a default event were to occur in any given month over the
expected behavioural lifetime of a mortgage account.
Management expenses
The aggregate of administrative expenses, depreciation and amortisation.
Management expense ratio
A ratio that expresses management expenses as a percentage of mean total assets. On an underlying
basis, excludes one-off strategic investment costs.
Market risk
The risk that movements in market risk factors, including foreign exchange rates, interest rates, credit
spreads and member-driven factors will create potential losses or decrease the value of the Society
Balance Sheet.
Mean total assets
Represents the amount produced by halving the aggregate of total assets at the beginning and end of the
financial year.
Member
A person who has a share investment or a mortgage loan with the Society.
Net interest income
The difference between interest receivable on assets and similar income and interest paid on liabilities
and similar charges.
Net interest margin
A ratio expressing net interest income as a percentage of mean total assets.
Operational risk
The risk of loss arising from inadequate or failed internal processes, people and systems, or from external
events.
Permanent interest bearing shares
(‘PIBS’) / Subscribed capital
Unsecured, deferred shares of the Society which rank behind the claims of all depositors, payables and
investing members of the Society. PIBS are also known as subscribed capital.
Probability of Default (‘PD’)
A component of the IFRS 9 expected credit loss calculation. An estimate of the probability that a
borrower will default on their credit obligation over a fixed time period. A 12 month ECL uses a 12 month
PD, whilst a lifetime ECL uses the estimated PD over the remaining contractual life of the loan.
Prudential Regulation Authority (‘PRA’)
The statutory body responsible for the prudential supervision of banks, building societies, insurers and
small number of significant investment firms in the UK. The PRA is a subsidiary of the Bank of England.
Renegotiated loans
Loans are classed as renegotiated where an agreement between a borrower and a lender has been made
to modify the loan terms either as part of an ongoing relationship or if the borrower is in financial
difficulties. The renegotiated loan may no longer be treated as past due or impaired.
Residential loans
Loans that are loaned to individuals rather than institutions and are secured against residential property.
Right-of-use asset
A lessee’s right to use an asset over the life of a lease. The cost of the asset is calculated as the amount of
lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received.
Risk appetite
The articulation of the level of risk that the Society is willing to accept (or not accept) to safeguard the
interests of the Society’s members whilst also achieving business objectives.
Risk weighted assets (‘RWA’)
The value of assets, after adjustment, under the relevant Basel III capital rules to reflect the degree of risk
they represent.
Secured business lending (‘SBL’)
Loans secured on commercial property which is only made available to Small and Medium sized
Enterprises and includes limited company buy-to-let lending.
Shares
Funds deposited by a person in a retail savings account with the Society. Such funds are recorded as
liabilities for the Society.
Shares and borrowings
The aggregate of shares, amounts owed to credit institutions, amounts owed to other members and debt
securities in issue.
___________________________________________________________________________________________
Glossary (Continued)
Page | 98 Annual Report & Accounts 2024 Nottingham Building Society
Significant increase in credit risk (‘SICR’)
A significant increase in credit risk on a financial asset is judged to have occurred when an assessment,
using quantitative and qualitative factors, identifies at a reporting date that the credit risk has moved
significantly since the last asset was originally recognised.
Special Purpose Vehicle (‘SPV’)
A legal entity (usually a limited company) created to fulfil narrow, specific or temporary objectives. In the
context of the Society, the SPV is used in relation to securitisation activities.
SPPI test
An assessment of whether the contractual terms of the financial asset give rise to cash flows that are in
substance solely payments of principal and interest.
Stage 1
A component of the IFRS 9 expected credit loss calculation. Stage 1 assets are assets which have not
experienced a significant increase in credit risk since the asset was originally recognised on the Balance
Sheet. 12-month ECL are recognised as the impairment provision for all financial assets on initial
recognition. Interest revenue is the EIR on the gross carrying amount.
Stage 2
A component of the IFRS 9 expected credit loss calculation. Stage 2 assets have experienced a significant
increase in credit risk since initial recognition. Lifetime ECL is recognised as an impairment provision.
Interest revenue is the EIR on the gross carrying amount.
Stage 3
A component of the IFRS 9 expected credit loss calculation. Stage 3 assets are identified as in default and
considered credit impaired. Lifetime ECL is also recognised as an impairment provision. Interest revenue
is the EIR on the net carrying amount.
Standardised approach
The basic method used to calculate capital requirements for credit risk. In this approach the risk weighting
used in the capital calculation are determined by specified percentages.
Term Funding with additional incentives
for SMEs (‘TFSME’)
Scheme launched by the Bank of England and HM Treasury, which provides funding to participating banks
and building societies with the aim of stimulating lending within the economy.
Tier 1 capital
A component of regulatory capital, it comprises CET1 and AT1.
Tier 1 ratio
Tier 1 capital as a percentage of risk weighted assets.
Tier 2 capital
Comprises the collective impairment allowance (for exposures treated on a Standardised basis), less
certain regulatory deductions.
Total Capital Requirement (‘TCR’)
The total amount of capital the regulator requires the Society to hold, which is made up of Pillar 1 and
Pillar 2A capital.
Underlying profit
A measure that aims to present Management’s view of the Group’s underlying performance for the
reader of the Annual Report and Accounts with like for like comparisons of performance across years
without the distortion of one-off volatility and items which are not reflective of the Group’s ongoing
business activities.
Wholesale funding
Amounts owed to credit institutions, amounts owed to other members and debt securities in issue.
