Open for business for 160 yearsMembers’ review including summary financial statement for the year ended 31 December 2015

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Chief Executive’s Review

On 1st of January 2016, Darlington Building Society started its 160th year and it is going to be a year of celebrating this significant achievement. We are determined that the Society will remain an independent, regional building society that shares with and supports its local community. To do this it is not just a matter of resting on our 160 year history but the Society needs to ensure that there is an awareness of who we are, what we offer and what we stand for. This will allow us to remain relevant to current and future borrowers and savers.

Our “Building for the Future” agenda was strong through 2014 and 2015 and the foundation is set for a period of sustained growth but only in a way that is appropriate and sustainable for this Building Society.

Colin FyfeChief Executive18 February 2016

We are determined that the Society will remain an independent, regional building society that shares with and supports its local community.

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Group Financial Highlights

£532.3m

£115.7m

£40.7m

£1.88m

£72.7m £3.5m

For the year ending 31 December 2015

prior year £531.4m

prior year £107.6m

prior year £39.9m

* Profit before tax and changes in fair value of investment properties.

prior year £1.72m

Total Assets

Liquidity

General Reserves

Underlying Profitability*

New Mortgage Lending New Savings Balances

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Chief Executive’s ReviewChief Executive’s Review

Overview of 2015In a year that sees growth in underlying profitability, capital reserves and liquidity together with a reduction in risk there is a sense of satisfaction that good progress is being achieved. Our lack of Balance Sheet growth in 2015 was disappointing but was the result of a deliberate strategy not to chase lending margins down to a potentially damaging level or increase the credit risk that we are willing to take. Volume business is always possible in Financial Services but it can come at a price which is later regretted.

Your Society’s personal approach is something that we pride ourselves on and with every mortgage application we understand the individuals and their personal circumstances before reaching a “human” decision. We communicated this strongly during the second half of 2015 and complimented this approach by empowering our Branch Managers to provide our customers with a personal contact who can address their needs.

We rebranded the Society in 2015. Our rebranding work started in 2014 when we asked our customers, staff and directors what they believe that the Society should stand for. We worked through many pieces of feedback and arrived at a modern, fresher and more visibly prominent brand that clearly communicates our values and culture to the outside world.

We used sponsorships including our involvement with the Festival of Thrift, North Yorkshire & South Durham Cricket League and Darlington Football Club Youth teams to ensure that whilst our “look” was changing the Society was continuing its community focus. There is a significant visual difference but at heart we are aiming to continue to be an organisation that cares about its customers and communities.

We achieved a significant business and technology milestone in November 2015 by creating a digital platform to distribute our mortgage products to our broker network.

The creation of Darlingtonline is the first stepin our digital journey and the next part of thisproject is to distribute mortgages and savings products to consumers direct. We will also provide capability for our members to view and transact on their accounts through mobile applications. This innovation is crucial in providing choices for our members and delivering a proposition that will see us grow our member base. Time pressures face us all and we need to allow the customer the convenience to deal with this Building Society at a time and place that suits them.

In the summer of 2015, we started a new relationship with Wren Sterling who will provide a regulated advice proposition for our Members on their investment and insurance needs. Wren were selected following extensive due diligence work and we believe will provide an excellent service for our members. At a time where stock markets are volatile and pension legislation is complex we are offering the expertise to guide our customers through these decisions.

A revised risk management framework was established with new Committees, new reporting and a refreshed appetite for managing the risks faced operationally and strategically by the Society. We are embracing a risk management culture throughout the organisation and establishing governance that will protect the future of the Society.

We undertook a significant accounting change in 2015 as we transitioned from UK GAAP methodology to FRS 102. Our Finance Team managed this change with the support of our Auditors and provided me with the confidence that we have an increasing capability to manage complex financial changes.

We are headquartered in an ingenious town and during the year we re-named one of our mortgages as the Ingenious Affinity Mortgage. Selected local organisations benefit through a £250 donation each time one of these

mortgages completes and this helps us to demonstrate our desire to support home ownership and the communities that surround them.

SharingThe challenge of describing your Building Society simply in an increasingly regulated and complex world is not easy but one that we rose to through our brand review. We are an organisation that will “share” for the benefit of our Members and Communities. We have plenty to share with our knowledge, resources, spaces such as our branches and skills having been built up over 160 years. During 2015 we started to demonstrate our ability to share and this helped us:

• Share our lending approach and processes with Darlington Credit Union.

• Share our Branch premises to showcase local businesses including Betterdaze in Northallerton, whose jukebox allowed us to play our members’ favourite tunes.

• Share our experience in creating risk frameworks with County Durham Community Foundation.

• Share our Branch premises to host events such as “coffee mornings” including one with GOLD (Growing Old Living in Darlington).

In our business we recognise the importance of a local approach and the benefits this brings to our communities. Local decisions for local people is not just a mantra for mortgage approvals but it allows us to test and learn from new initiatives. During 2015 we partnered with the King James I Academy in Bishop Auckland to offer the chance for young people to run their own School Building Society branch.

Under the guidance of Society staff the students open their School branch during lunchtimes on Mondays and Fridays and they are encouraging the next generation of savers. The School branch is forming part of our “youth programme” which includes mentoring, reverse mentoring and support for the Darlington Youth Forum.

Mortgage Market & Interest RatesInterest rates continued to sit at record low levels throughout 2015 and given the time since we last saw an increase in Bank of England base rate we now have a whole generation of borrowers that have never experienced an interest rate rise. We are mindful that although it is uncertain when it will happen, interest rates will rise and we are ready to support our customers to prepare for this and manage the impact.

The housing market ended 2015 stronger than it started. This was emphasised by the level of monthly property transactions growing on an annual basis for the sixth month in a row to December 2015. The supply of mortgages in the market increased, as well as market competition, driven by new entrants into the Financial Services market and low pricing by high street Banks. The Savings market continued to be artificially supported by Government monies introduced to the system during the Global Financial Crisis and whilst this continues and Bank of England interest rates remain low, returns will continue to be depressed.

Following the introduction of the Mortgage Market Review in 2014, intermediaries took a larger share of mortgage distribution in the UK which was linked to our own strategy to centralise all our intermediary relationships into a central Head Office team. The addition of our Online capability gives us the opportunity to combine our local branch network, serving our local communities, with a central team reviewing mortgage applications across England and Wales.

The Buy to Let market was strong in 2015 with approximately 1 in 5 of new UK mortgages falling into this category. However the Chancellor’s July Budget and the Autumn Statement will introduce tax changes and increased stamp duty which may dampen this market following introduction in 2016.

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Colin Fyfe Colin was appointed Chief Executive of Darlington Building Society in April 2014 after working in Banking with the National Australia Banking Group. Colin has joined the Audit Committee of County Durham Community Foundation, is a member of Teesside Institute of Directors and of the Darlington Partnership.

Alison Thain OBE Alison joined the Society as a non-executive director in October 2011. She has worked in affordable housing for over 30 years and is Group Chief Executive of Stockton-based Thirteen Group the largest in the North East. She is Chairman of Darlington Homes Ltd and the Remuneration Committee.

Andrew Gosling Andrew became a non-executive director of the Society in 2011 following his retirement from Yorkshire Building Society where he was Finance Director. Andrew is Chairman of the Audit Committee.

Chief Executive’s Review

Looking forward to 2016The forthcoming year will allow us to demonstrate the strength of the Darlington Building Society service proposition. As an independent regional Building Society we strive to deliver personal relationships with human decisions at a time and a place that is convenient to the customer. We manually underwrite mortgage applications and given the complex life situations that modern living brings we plan to continue with this. Our customers value our ability to listen and understand their own context be it a new job, starting their own business, divorce or supporting other members of their family.

We will bring new products to the market in 2016 with the Help to Buy ISA and the Help to Buy mortgage being two examples. With a new young person’s account we want to stimulate the habit of saving and the understanding of Financial Services. Our mascot “Darly the Train” that we introduced in 2015 will play a bigger part in encouraging savers as will our School branch initiative.

In our 160th year we have committed that we will share in the following ways:

• Sharing Funds by raising £160,000 for local causes through a variety of activities and events.

• Sharing Resources by giving 160 volunteering days to help local organisations by using our time and skills.

• Sharing Spaces by helping 160 local organisations through using our branches and other facilities.

This focus on sharing will accelerate in 2016 and will benefit from the 2,269 responses from you, our Members regarding the type of organisations you would like us to put our support behind. Making a real difference in our communities is important to us and allows us to demonstrate our local strengths.

SummaryOur mutuality makes a difference to the way we run our business. Whether it is our focus on customer service, our ability to look to the long term, our socially responsible culture or our democratic engagement with our members it is important as it guides the Society and defines us. At Darlington Building Society we believe the Members, Board and staff are all equally focussed on ensuring we retain the building society ethos and the customer and community focus.

In 2015 the Society has been through significant change and the staff have been fully supportive whilst continuing to deliver strong service to the communities and customers we serve. To the staff and Directors I can say that the spirit of the Society is special and I am determined that we will continue to foster it. I am grateful to the staff and Directors for all their support, guidance and encouragement.

We have been in Darlington for 160 years and we embark on this new era with the confidence and resources needed to thrive and prosper as an independent mutual society for many years to come.

Our DirectorsJames Ramsbotham James joined the board in 2006 and was appointed Chairman in April 2013. James is Chief Executive of the North East Chamber of Commerce.

Paul Richardson Paul joined the Society as Operations Director in 2011. In September 2014 he became the Society’s Risk and Governance Director. Paul Chairs the Operational Risk Committee and is a member of Board Risk Committee, ALCO and Credit Committee.

Kate Davies Kate joined the Society in 2011 asa non-executive Director, havingspent much of her career with theBuilding Societies’ Associationand Council of Mortgage Lenders.She currently chairs the Property Codes Compliance Board and is the Standards Officer for the EquityRelease Council. She is a memberof the Society’s Board Risk Committee.

Robert Cuffe Robert was appointed a non-executive director of the Society in April 2013. A Teessider by birth, he has spent over 25 years in local media, mostly in the North East. Robert is Managing Director of Gazette Media Company, publishers of The Gazette in Middlesbrough. He is Chairman of the Society’s Pension Trustees.

Jack Cullen Jack was appointed as a non-executive director of the Society in January 2015 following almost 40 years’ experience in financial services, more latterly holding executive roles within risk management. Jack is Chairman of the Board Risk Committee.

Rachel Turnbull Rachel joined the Board in March 2015 as a non-executive Director and a member of the Audit and Compliance Committee. Rachel is Chief Executive Officer of TT2 Ltd, an organisation that designed, built, financed and now operates the Tyne Tunnels.

Christopher White Christopher joined the Society in 2012 as General Manager - Finance before being appointed as Finance Director in early 2015. He joined the Society from PwC where he had managed the Society’s external audit relationship.

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Sharing Funds for Summary Directors’ ReportFinancial Performance ReportThis year will be the first year the Group presents its annual accounts under the new accounting framework, Financial Reporting Standard 102 (FRS 102). Last year’s results have been restated in this year’s annual accounts under FRS 102. This section comments upon the performance of the Group in the current year and, in places, compares it to the performance in the prior period. For clarity, all comparisons between 2015 and 2014 are made between balances prepared under FRS 102.

SummaryThe current year has been a very positive year for the Group in terms of de-risking its balance sheet.

The final undeveloped site held by the Society’s subsidiary, Darlington Homes Limited, was sold, as well as the Society successfully exiting a loan extended to a third party for a portfolio of development loans.

The Group has maintained its total assets and has made a healthy profit and contribution to capital in the period. This has been a strong achievement in a year of continued low interest rates, highly competitive mortgage market and a volatile economic climate. There has been a reduction in the total balance of mortgages during 2015, however, the Group ends the year with a healthier loan book, with lower arrears and forbearance levels and significantly lower provisioning levels.

Total Group Assets (£’m)

UK GAAPFRS 102

AssetsThe total assets of the Group at 31 December 2015 were £532.3m (2014: £531.4m) representing a small increase from the previous year. The mortgage market has been highly competitive in 2015 resulting in the Group’s gross and net lending being lower than forecast. This has resulted in the Group’s growth being smaller than originally anticipated and the mortgage book seeing a small shrinkage of 1.45%. The Society could have achieved its original lending targets through lending in riskier markets or by reducing mortgage interest rates to levels that could potentially be damaging in the future. However, the Society opted to moderate its initial growth and lending expectations protecting the long term viability of the Society.

LendingThroughout 2015 the Society has maintained a comprehensive portfolio of mortgage products which are available to both new and existing borrowers. The Society has also aimed to provide a competitive range of mortgage products available to, and serving the needs of, our local community.

New mortgage lending in the year was £72.7m which is a marginal increase on the lending in the prior year (2014: £72.2m). The Group ended the year with a smaller total balance of loans and advances to customers of £407.2m (2014: £413.2m).

2011 2012 2013 2014 2015

523.7

511.2

519.8

531.4 532.3

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Summary Directors’ Report

FundingThe Bank of England has maintained base rate at 0.50% throughout 2015 and the return for savers remained low throughout the period. As such, there has been little competition for retail funds during the year and many of our competitors have continued to reduce the rates payable to their savings customers. Continued market pressures have meant that the Society has also needed to take hard decisions in the year to reduce some rates payable to our members. Nonetheless the Society still strives to reward members saving with us by offering good and competitive rates on products such as our cash and junior ISA products. This strong offering to our members has resulted in the Group’s total shares balance (deposits made by members) growing by 1.80% in the year to £456.9m (2014: £448.8m).

The Society traded profitably during 2015 and finished the year with a net profit, after tax and provisions, of £1.46m (2014: £1.34m). At a Group level we achieved a profit before tax of £1.72m (2014: £2.74m) and profit after tax of £1.20m (2014: £2.36m) which was achieved in difficult economic and sector conditions. This underlying profit was £1.88m in the current year (2014: £1.72m)

Profitability and CapitalAs a mutual building society our objective has always been to optimise, rather than to maximise our profit. Indeed this is the essence of the difference between plcs and building societies. Naturally, there is a balance to be struck, and we need to make sufficient profit to protect our capital ratios whilst providing value to our members through our products and services.

If borrowers fall upon hard times, the Society, as a first step will always attempt to make a suitable arrangement with them, we will handle their case with sympathy and understanding whilst balancing and respecting the interests of other existing members. Where the Society considers that there is a possibility of a loss, a provision is made in accordance with policy.

The Group’s Income and Expenditure accounthas seen a significant decrease in the chargefor loan impairment to £0.18m (2014: £0.97m). The total provision held by the Group against the loan book reduced significantly in the year to £2.19m (2014: £3.28m).

The Group and Society profits contribute to their capital positions net of adjustments seen within the statement of comprehensive income for the year. After these adjustments the Group made a strong contribution to its capital base of £0.86m (2014: £1.35m).

Staff and RemunerationOnce again our staff have continued to provide an excellent service to our Members and your directors would like to express their thanks to all of our staff for their dedication and loyalty.

As a mutual run for the benefit of our membership, the Society needs high quality Directors to fulfil the requirements of members and other customers and who, in return, are rewarded fairly for directing and managing the firm.

Remuneration of Directors should be sufficient to ensure high calibre candidates are attracted to the Society as well as retained. It is, however, important that remuneration is not greater than necessary to achieve these goals. Remuneration and incentives are structured to encourage good culture, appropriate behaviour and the long term success of the Society.

The Executive Directors receive a basic salary, a pension entitlement and other taxable benefits. The Executive, including the Executive Directors, are all eligible for a short term incentive bonus and medium term bonus scheme. Disbursement of funds from the Society’s bonus schemes is dependent on performance targets designed to promote the Society’s strength and success being met. The performance targets of the scheme are not limited to financial metrics and include the assessment of criteria such as the management of key projects and goals. The terms and rules of the short term incentive and medium term bonus schemes are detailed further later in this report.

The Chairman and non-executive directors receive an annual fee. No variable or performance related fees or incentives are paid to the non-executive directors or Chairman.

The PRA Remuneration Code whilst designed for large banks and building societies has been adopted, where possible, and relevant details have been incorporated into the Terms of Reference of the Remuneration Committee which are published on our website www.darlington.co.uk.

Summary Directors’ Report

2011 2012 2013 2014 2015415

750 861

1,717 1,883

Profit before tax and changes in Fair Value of Investment Properties (£’000)

The Society applies the principles of the UK Corporate Governance Code September 2014 relating to remuneration. The Society’s Remuneration Policy also complies with relevant regulations including the Remuneration Part of the Prudential Regulation Authority’s Rulebook and the Financial Conduct Authority’s Remuneration Code for dual regulated firms (SYSC 19D).

UK GAAPFRS 102

2011 2012 2013 2014 2015

38.437.6

38.4

39.940.7

Group Capital (£’m)

UK GAAPFRS 102

Maria Postma, Customer Service Consultant with Rachel Tallentyne, representative from Usborne Books. The Bishop Auckland branch pledged money to The Community Book Pledge; an initiative which raises money to buy books for patients of the Children’s and Teenage Cancer Ward in Newcastle.

Customer Service Consultants Clare Mason and Rebecca Russell with Ian MacFarlane, Project Manager for STAMP Revisited, a charity that provides an advocacy service for people affected by mental health difficulties in Teesside.

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Executive DirectorsThe remuneration of the Executive Directors is considered annually by the remuneration committee. Basic salary is assessed based on the roles and responsibilities of individual Directors referenced against the remuneration in comparable organisations (by industry, size and complexity). As a mutual organisation, the Society is not able to offer executive directors the opportunity to participate in, or benefit from share option schemes.

The executive directors are all entitled to become members of the Darlington Building Society defined pension contribution scheme. Janice Lincoln, who retired on 28 February 2015, also had accrued benefits within the defined benefits pension plan which was closed in 2010.

The Service Contract for all executive directors includes a contractual notice period of 12 months. The executive directors are required to provide nine months’ notice of their intent to

Executive Bonus SchemeVariable remuneration of the Executive, including the Executive Directors, is operated in two parts; a short term incentive bonus scheme and a medium term bonus scheme.

Payment of the Society’s short term incentive bonus for 2015 is dependent on a wide range of business performance measures including financial metrics such as the Society’s capital and audited profit. In addition the scheme takes account of other, non-financial factors, including staff engagement, conduct risk and the project management of key initiatives such as the Society’s rebranding and the establishment of online services.

Triggers are in place to ensure that no bonus will be payable from either scheme if profit or capital fall below pre-determined levels. The Remuneration Committee has full discretion over the payment of the short term incentive bonus as well as any additions to or payments from the medium term bonus scheme.

The total balance payable under the 2015 short term incentive bonus scheme is limited to a maximum of £50,000.

There is also a medium term bonus scheme which rewards consistent performance over a three year period. Remuneration Committee may annually increase the balance held within the medium term bonus scheme by a sum limited to the balance paid under the short term incentive bonus.

Payments from the medium term bonus are made after three years to Executives when the Remuneration Committee are satisfied the medium and long term objectives of the Society are being met by the Executive team and individual executives. The payments accrued into the medium term bonus scheme are as follows:

2015 BonusAllocated £

CumulativeBonus £

D Copland 4,027 15,527

C Darnbrook 4,027 4,027

D Ditchburn 5,033 16,533

D A Dodd (retired 17 April 2014) - 10,125

C D Fyfe 5,033 5,033

J Horner 1,000 11,500

J Lincoln (retired 28 February 2015) 814 12,314

P Richardson 5,033 16,533

C B White 5,033 16,533

leave the Society. Executive Directors Service Contracts also state that during the period of employment with the Society executive directors may only carry out remunerated work for another organisation with the express consent of the Board. In such cases any remuneration, other than expenses, are passed to the Society.

During the year there were no severance or sign-on payments made to any director.

Non-Executive DirectorsNon-executive directors receive fees for the provision of their services which are reviewed annually. No variable or performance related fees or incentives are paid to the non-executive directors or Chairman. Non-executive directors do not receive other benefits or a pension entitlement. Non-executive directors do not have service contracts.

Remuneration of DirectorsThe following tables show the remuneration of Directors during 2014 and 2015. Further details are provided within note 7a in “Remuneration of and Transactions with Directors” in the full Annual Report and Accounts.

* Whilst D A Dodd did not act as a Director of the Society during 2015 he received a pro-rata bonus payment of £4,125 in 2015 in relation to his services during 2014.

2015 Fees£

2014 Fees £

R Cuffe 22,780 22,330J Cullen (appointed 1 January 2015) 25,370 -

K A Davies 22,780 22,330A T Gosling 25,883 25,375J D A Ramsbotham 42,630 42,000A C Thain 30,450 30,000R Turnbull (appointed 1 March 2015) 19,280 -

K L H Winskell (retired 30 June 2014) - 11,110

Total 189,173 153,145

2015 TotalRemuneration

£

2014 TotalRemuneration

£

C D Fyfe 192,991 123,663J Lincoln (retired 28 February 2015) 29,184 130,446

P Richardson 122,430 119,060C B White (appointed 1 March 2015) 87,533 -

D A Dodd* (retired 17 April 2014) - 53,801

Total 432,138 426,970

Non-executive Directors

Executive Directors

Summary Directors’ Report Summary Directors’ Report

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Gross Capital as a Percentage of Shares and BorrowingsGross capital comprises the general reserve of profits retained in the business and the revaluation reserve to provide a financial cushion against any difficulties which might arise and therefore protects investors. When gross capital is expressed as a percentage of shares and borrowings, it illustrates the proportion by which the Group’s activities are funded by accumulated reserves. Our gross capital ratio is stable. Strong capital demonstrates that your Society provides a safe home for investors’ funds.

Liquid assets as a Percentage of Shares and BorrowingsLiquid assets comprise cash, short-term deposits, and authorised investments such as government securities which can be converted readily into cash. The liquid asset ratio measures the Group’s assets held as a proportion of the Group’s liabilities to investors. Liquid assets enable the Group to meet investors’ requests for withdrawals from their accounts, to make new mortgage loans and to fund general business activities.

Management Expenses as a Percentage of Mean Total AssetsThe management expenses ratio measures the Group’s administrative expenses (including depreciation) as a proportion of the average of the Group’s total assets during the year.

Management expenses consist mainly of the costs of running the Group’s branches and head office, including the costs of employing staff. Expenses will continue to be tightly controlled to ensure that the Group operates as efficiently as possible while providing the service required by our members.

Group Profit after TaxAs a mutual building society our objective is to optimise, rather than to maximise, our profit.

Directors aim to ensure that the Group generates sufficient profit to protect our capital ratios whilst providing value to members through our products and services.

The Group measures performance and fulfilment of strategic objectives utilising a balanced scorecard within which a number of financial performance indicators are monitored. Below are five financial Key Performance Indicators of the Group required by statute. The Group’s management and Board assess its performance on a range of financial and non-financial metrics. These are discussed on page 9 of the Summary Directors’ Report.

Key Performance Indicator 2015 2014

Gross capital as a percentage of shares and borrowings 8.34% 8.18%

Liquid assets as a percentage of shares and borrowings 23.70% 22.06%

Management expenses as a percentage of mean total assets

1.34% 1.22%

Group profit after tax (£ million) 1.20 2.36

Leverage Ratio 7.73% 7.52%

Year Ended 31 December

Financial Key Performance Indicators

Leverage RatioThe leverage ratio is a measure of capital adequacy: capital divided by total assets, expressed as a percentage. In the UK we normally use the term “gearing” to describe the enhancement of return a business owner expects by using not only his own capital, but also borrowed money, to finance the business. The European Union has now defined the ratio and the ratio has been calculated in line with the Capital Requirements Directive (CRD IV).

A 3% minimum leverage ratio requirement applies to UK Global Systemically Important Institutions and major UK banks and building societies on a consolidated basis. Whilst the Group falls outside of this requirement it continues to measure its position against this benchmark as an example of best practice. As the Society has no external capital, all capital is classed as Tier 1.

James RamsbothamChairman18 February 2016

On behalf of the Board of Directors.

Sharing Resources for

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Summary Directors’ Report

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This Financial Statement is a summary of information in the audited Annual Accounts, the Directors’ Report and Annual Business Statement, which will be available to members and depositors free of charge on demand at every office of Darlington Building Society from 25 March 2016.

Approved by the Board of Directors on 18 February 2016 and signed on its behalf by:

We have examined the Summary Financial Statement of Darlington Building Society (the ‘Society’) set out on pages 17 to 18, which comprises the Group results for the year, the Group financial position as at 31 December 2015 and the Summary of key financial ratios.

Independent auditors’ statement on the Summary Financial Statement to the members of Darlington Building Society

Respective responsibilities of directors and auditorsThe directors are responsible for preparing the Summary Financial Statement, in accordance with applicable United Kingdom law.

Our responsibility is to report to you our opinion on the consistency of the Summary Financial Statement with the full Annual Accounts, the Annual Business Statement and the Directors’ Report and its compliance with the relevant requirements of Section 76 of the Building Societies Act 1986 and the regulations made under it.

We also read the other information contained in the Members’ review including summary financial statement for the year ended 31 December 2015 and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Summary Financial Statement. The other information comprises only the Chief Executive’s Review and the Summary Directors’ Report.

This statement, including the opinion, has been prepared for and only for the Society’s members as a body in accordance with Section 76 of the Building Societies Act 1986 and for no other purpose.

Basis of OpinionOur examination involved agreeing the balances in the Summary Financial Statement to the full Annual Accounts. Our report on the Society’s full Annual Accounts describes the basis of our audit opinion on those Annual Accounts, the Annual Business Statement and the Directors’ Report.

OpinionIn our opinion the Summary Financial Statement is consistent with the full Annual Accounts, the Annual Business Statement and the Directors’ Report of Darlington Building Society for the year ended 31 December 2015 and complies with the applicable requirements of Section 76 of the Building Societies Act 1986, and the regulations made under it.

James RamsbothamChairman

Colin Fyfe Chief Executive

Alison C Thain Vice Chairman

PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsNewcastle upon Tyne18 February 2016

Summary Financial Statement for the year ended 31 December 2015

Summary Financial Statement

Notes:a. The maintenance and integrity of the Darlington Building Society website is the responsibility of

the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

b. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Summary Financial Statement continued

a.

b.

2015 2014£000 £000

Net Interest receivable 9,328 9,178Other income and charges 37 314Changes in fair value of investment properties (165) 1,022Net gains from derivative financial instruments 6 -Administrative expenses and depreciation (7,130) (6,414)Provisions for bad and doubtful debt (177) (967)Operating profit before contribution to the FSCS 1,899 3,133Provision for contribution to the FSCS Note 2 (181) (394)Profit for the year before taxation 1,718 2,739Taxation (516) (384)Profit for the financial year 1,202 2,355

Group Position at End of Year

AssetsLiquid Assets 115,740 107,624Mortgages and other loans 407,180 413,161Derivative financial instruments 3 3Fixed and other assets 9,370 10,586

532,293 531,374

LiabilitiesShares 456,850 448,761Borrowings 31,465 39,065Derivative financial instruments 667 950Other liabilities 2,562 2,705Reserves 40,749 39,893

532,293 531,374

Notes:The maintenance and integrity of the Darlington Building Society website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Group results for the year

We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this statement is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

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Summary Financial Statement Sharing Spaces for

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Summary of Key Financial Ratios

Note

Gross capital as a percentage of shares and borrowingsLiquid assets as a percentage of shares and borrowingsProfit for the year as a percentage of mean total assetsManagement expenses as a percentage of mean total assets

1. The Summary Financial Statement is prepared on a Group basis.

2. In common with all regulated UK deposit takers, the Society pays levies to the Financial Services Compensation Scheme (FSCS) to enable the FSCS to meet claims. The FSCS levy consists of two parts - a management expenses levy and a compensation levy. The management expenses levy covers the cost of running the scheme and the compensation levy covers the amount of compensation the scheme pays, net of any recoveries it makes using the rights that have been assigned to it. The Directors understand that presently the FSCS has met, or will meet, claims by way of loans received from the Bank of England. To recover the interest costs the FSCS will charge a management expense levy to all UK deposit takers, including the Society. Based on notifications the Society has received from the Prudential Regulation Authority, the Society has recognised a provision of £181,000 in this years results to provide the full potential for interest up to and including all amounts due for 2016/2017 and capital balances not felt to be recoverable, repayable to the FSCS for 2015/16.

3. Gross capital comprises the general reserve of profits retained in the business to provide a financial cushion against any difficulties which might arise and therefore protects investors. When gross capital is expressed as a percentage of shares and borrowings, it illustrates the proportion by which the Group’s activities are funded by accumulated reserves. Some financial firms are obliged to bolster retained profits with other forms of capital such as subordinated liabilities, permanent interest bearing shares and revaluation reserves. The Group’s gross capital ratio comprises predominantly retained profits accumulated over many years demonstrating that it provides a safe home for investors’ funds without the need for other forms of supplementary third party funding.

4. Liquid assets comprise cash, short term deposits, and authorised investments such as government securities which can be converted readily into cash. The liquid asset ratio measures the proportion that the Group’s assets so held bears to the Group’s liabilities to investors. Liquid assets enable the Group to meet investors’ requests for withdrawals from their accounts, to make new mortgage loans and to fund general business activities. Darlington Building Society maintains a high level of liquidity consistent with many deposit takers.

5. Mean assets are calculated as the mean of the 2015 and 2014 assets as shown in the Group balance sheet. Profit for the year expressed as a percentage of mean assets shows the proportion that the Group’s profit after taxation for the year bears to the average of the Group’s assets during the year.

The Group needs to make only a sufficient level of profit each year to be retained in the general reserve to maintain capital ratios for the protection of investors’ funds. Our profit for the year as a percentage of mean assets is consistent with this aim.

6. The management expenses ratio measures the proportion that the Group’s administrative expenses (including depreciation) bears to the average of the Group’s total assets during the year. Management expenses consist mainly of the costs of running the Group’s branches, including the costs of employing staff. Expenses need to be controlled so that the Group operates as efficiently as possible while providing the service required by our members.

Note

3456

8.34

23.70

0.23

1.34

8.1822.060.451.22

2015 %

2014%

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Sharing with our community

Total Warrior Raises Funds For Mountain RescueRuth Murray raised more than £300 for Teesdale & Weardale Search & Mountain Rescue team by completing a gruelling assault course.

Ruth took part in the Total Warrior obstacle course in Leeds. The 12 kilometre course consisted of 30 punishing and challenging obstacles and Ruth battled ice cold water, thick mud and even electric shock wires. Ruth Murray, Customer Service Consultant at

Barnard Castle.

Maxine Wylie, Customer Service Consultant with members of Hummersknott Cycling Club.

Support For Local Cycling SocietyThe Cockerton branch pledged its support to their local cycling club, Hummersknott Cycling Club. The club which was formed by students from Hummersknott Academy, successfully rode from Lands’ End to John O’ Groats in late July.

The Society donated £250 to the club; which helped cover the costs of the marathon journey.

Ben Gets In The Saddle For Teesside HospiceA member of the team at Darlington Building Society’s Guisborough branch raised £550 for Teesside Hospice after completing a 70km static bicycle ride.

Ben Harland, cycled the distance between Redcar, Middlesbrough, Stockton, Yarm and Guisborough branches to raise funds for the charity.

Funding Boost For Intensive Care Unit

Support For Hambleton FoodShare

The Middlesbrough branch of Darlington Building Society has helped the families of those in The James Cook’s Intensive Care Unit, thanks to a donation from its community fund.

The Linthorpe Road branch made a £250 donation to purchase essential items for the relatives’ room.

Northallerton branch showed support for Hambleton FoodShare by making a donation of £200 and gifts of food items.

Hambleton FoodShare is a registered charity dedicated to issuing emergency food parcels.

Sharing with our community

Ben Harland and Karen Watson, Customer Service Consultants with Nicola Armstrong, Branch Manager.

Customer Service Consultants, Susan Snee and Tracy Campbell hand over a donation to the ICU.

Customer Service Consultants Duncan Spence, Samantha Talbott and Laura Barnaby with Kayleigh Turner Branch Manager and Margaret Bryce, Project Co-ordinator at Hambleton FoodShare.

Christopher Blewitt, Branch Manager with Darlington Allstars.

Darlington Allstars SponsorshipTubwell Row, Darlington branch helped to kit out Darlington 21st Allstars under 14’s football team.

The donation came from the branch’s Community Fund and paid for away kits for the Under-14s side.

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Sharing with our community Sharing with our community

Craig Gregory, Branch Manager with Pam Jones, Customer Service Consultant.

Hand-Knitted Poppies For The Poppy AppealYarm branch showed their support for this year’s British Legion Poppy Appeal by selling hand-knitted poppies.

The poppies, are individually knitted and sewn by Customer Service Consultant, Pam Jones.

Ice Hockey Club Score DonationThe Stockton branch of Darlington Building Society made a £240 donation from its community fund to local ice hockey team, Billingham Stars.

The money was used to purchase new equipment such as, pucks, sticks and pads.

Dawn Moore, Branch Manager with Colin Fyfe, Chief Executive and Billingham Stars.

Boost For Oxjam DarloDarlington Building Society became a sponsor of the fundraising music festival Oxjam after making a donation from its community fund.

Oxjam Darlo is organised by local people with local bands and musicians playing at local venues; a great way to bring members of the community together.

Jonny Lancaster, Systems Administrator with Alexandra Joy, Customer Service Consultant.

Ingenious Affinity MortgageDarlington Building Society was one of the country’s first mortgage lenders to offer affinity mortgages designed to provide much needed funds to local causes and to benefit the local community.

The Society’s latest affinity is the Ingenious Affinity Mortgage and for every mortgage taken out Darlington Building Society will donate £250 to Age UK Darlington to support their new ingenious activities programme. Ukelele players from Age UK Darlington.

Sharing Our SpacesCustomers who visited Darlington Building Society’s Northallerton branch recently may have been surprised to see a jukebox installed in the branch.

The retro record player was installed by Northallerton based Better Daze as part of the Society’s ongoing mission to promote local business.

Sarah Jefferson and Duncan Spence, Customer Service Consultants with Gary Lewis, owner of Better Daze.

Scooter Boys Compete In World ChampionshipsDarlington Building Society provided sponsorship to two brothers from South Bank, Luke and Nathan Churchill, aged 19 and 15 respectively, enabling them to attend the World Scooter Championships in Barcelona.

Luke is currently ranked 15th in the world rankings and his younger brother Nathan is ranked 20th. Both performed extremely well in Barcelona finishing 15th and 20th respectively.

Melanie Winton, Customer Service Consultant with Luke and Nathan Churchill.

Head office: Sentinel House, Morton Road, Darlington, Co Durham DL1 4PTPhone: 01325 366366 | Fax: 01325 741000 | DX 712851 Darlington 6www.darlington.co.uk

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered Number 205895. We are a member of the Building Societies’ Association.

01325 366366darlington.co.uk

School Gets It’s Own Building Society BranchKing James I Academy in Bishop Auckland launched its own building society thanks to a unique partnership with Darlington Building Society. The facility opens twice a week during lunch times and is overseen by a group of students who have received training from Darlington Building Society to manage and run their own mini-branch. The mini-branch offers many of the services of a regular building society, even allowing students to withdraw a maximum of £10. Colin Fyfe, Chief Executive at Darlington Building Society, said: “When King James I Academy approached Darlington Building Society to ask if we could provide a savings scheme at the school we were only too happy to offer our support.

“It’s often said that people should be taught how to manage their finances whilst they are still at school, so this is an excellent opportunity for all of the students to learn how a building society branch is run.

Katie Lobb, Director of Learning for Business at King James I Academy, said: “The Academy is committed to helping our students develop life skills that extend beyond the classroom. Our aim is to instil good savings habits from an early age and develop money management skills in preparation for their financial futures.”

Sheena Hunter, Business Development Manager, Beverley Toole, Customer Service Consultant and Katie Lobb, Director of Learning For Business at King James I Academy with students from the Academy.

Sharing with our community