Yorkshire Building Society

1 Yorkshire Building Society Annual Report and Accounts 2020. References to YBS Group' or Yorkshire Group' refer to Head Office: YBS Share Plans, Yorkshire House, Yorkshire Drive, Yorkshire Building Society , the trading names under which it Bradford BD5 8LJ. operates (Chelsea Building Society , the Chelsea, Norwich & Yorkshire Building Society Charitable Foundation is a Peterborough Building Society , N&P and Egg) and its subsidiary Registered Charity (No: 1069082) and a Registered Company companies and where appropriate, its controlled entities. Egg (No:03545437). Registered Office: Yorkshire House, Yorkshire is a registered trademark of Yorkshire Building Society . Drive, Bradford BD5 8LJ. Accord Mortgages Limited is authorised and regulated by End Youth Homelessness (EYH) is a national movement of the financial Conduct Authority. Accord Mortgages Limited is local charities working together to end youth homelessness entered in the financial Services Register under registration in the UK.

2 EYH trades through its designated Administrator, number 305936. Buy to Let mortgages for business purposes Centrepoint (charity number 292411). are not regulated by the financial Conduct Authority. Accord Mortgages Limited is registered In England No: 2139881. Age UK is a charitable company limited by guarantee and Registered Office: Yorkshire House, Yorkshire Drive, Bradford registered in England and Wales (registered charity number BD5 8LJ. Accord Mortgages is a registered Trade Mark of Accord 1128267). Registered address: Tavis House, 1-6 Tavistock Mortgages Limited. Square, London WC1H 9NA. Yorkshire Building Society is a member of the Building YBS Share Plans is part of Yorkshire Building Society . Yorkshire Building Society provides share plan trustee and Societies Association and is authorised by the Prudential Yorkshire Building Society YBM 0019 23 03 21. administration services, including deposit taking, all of which Regulation Authority and regulated by the financial Conduct Annual Report and Accounts 2020.

3 Are subject to English law, with deposit taking being regulated Authority and the Prudential Regulation Authority. Yorkshire by the financial Conduct Authority. The provision of share plan Building Society is entered in the financial Services Register trustee and administration services is not regulated by the and its registration number is 106085. Head Office: Yorkshire financial Conduct Authority. We are not responsible for share House, Yorkshire Drive, Bradford BD5 8LJ. plan deposits held by local savings carriers outside the UK. Our purpose is to provide Real Help with Real Life. We do this by helping people find a place to call home, improve their financial wellbeing and by creating value for our members, our colleagues and our communities. Our purpose-driven strategy puts these stakeholders at the very centre of how we run the Society . Contents Introduction Strategic Report Governance 2. 4. 2 16 52. Introduction Performance at a Glance 2. 16 External Environment 20 Our 2 Stakeholders 52 Our Leadership Team 58 Corporate Governance Report 8 Chairman's Welcome 22 Our Business Model 72 Board Governance and 12 Chief Executive's 24 Our Purpose Nominations Committee Summary Report 30 Customers, Colleagues and Communities 76 Audit Committee Report 36 Environmental Impact 81 Risk Management Report 39 Our financial Review 90 Directors' Remuneration Report 45 Outlook 108 Directors' Report 46 Principal Risks and Uncertainties 113 Independent Auditors' Report to the Members of Yorkshire 50 Non- financial Information Building Society Statement financial financial Other Statements Statements (cont.)

4 Information 125 128 216. 125 Income Statements 126 Statements of Comprehensive Income 128 Statement of Changes in Members' Interest and Equity 216 Annual Business Statement 218 Country-by-Country 127 Balance Sheets 130 Statements of Cash Flows Report 131 Notes to the financial 220 Glossary Statements 2 | Introduction WELCOME. 2020 has been a challenging year for all of us. The COVID-19 pandemic has had deep and far-reaching consequences for the physical, emotional and financial wellbeing of the UK and many of our customers and colleagues have been directly impacted. Throughout the year, the Yorkshire Building Society has prioritised the key services that we provide and the health and safety of our customers, colleagues and all other stakeholders. We are proud of the work that we have done to support our communities and remain guided by our purpose to provide Real Help with Real Life. COVID-19 has led to many challenges. Changing customer needs, as well as our commitment to providing safe working environments, have tested our operational resilience.

5 Some change programmes have been delayed by both working restrictions and the prioritisation of resources. And we have invested significant sums into our resources and premises. Despite all of this, through the combined efforts of our colleagues, we have delivered a strong set of financial results and excellent strategic progress. We have chosen to carry higher levels of liquidity than in previous years, we continue to hold levels of capital comfortably in excess of our regulatory requirements and profitability is broadly in line with 2019. We have continued to simplify our business and have, once again, reduced our overall cost base while still growing both our mortgage and savings balances. We have also refreshed our strategy. Our purpose of Real Help with Real Life remains constant and we have established an ambitious and challenging programme of transformation that will lead to significant improvements in both customer experience and efficiency through investment in technology.

6 Our first deliverables under this programme included the launch of our customer app in 2020 and investments in processes to reduce our use of paper, which also supports our environmental commitments. This remains a challenging time for savers, with the reduction in base rates to a historic low of leading to further reductions in savings rates across the market as well as for our own members. Our strong financial performance has enabled us to increase, in January 2021, the rates we pay to over of our members. There are still substantial challenges for the Society to address. The COVID-19. pandemic poses significant economic threats and operational challenges and whilst we always prioritise risk management and business continuity it is likely that new and unexpected challenges will continue to arise. The economic impacts of Brexit remain uncertain as the practical consequences of the new trading arrangement are worked through in detail. The Yorkshire Building Society goes in to 2021 in a position of financial strength, with robust risk management and an enduring commitment to serving our customers, communities and wider stakeholders.

7 Introduction | 3. Our strong financial performance has enabled us to increase, in January 2021, the rates we pay to over of our members. 4 | Introduction Performance at a Glance PERFORMANCE AT A GLANCE. Member value We are here to deliver long term value to our members. This includes offering flexible products with attractive rates and providing the friendly, practical and efficient customer service they expect from us. In order to deliver value over the long term it is important for our Society to operate in a sustainable way. Statutory Profit before tax Core Operating Profit1 Cost to core income ratio1. in 2019. in 2019. 59%. 60% in 2019. This is the profit we earned from This is the profit we earned, excluding This ratio measures how efficiently we our ongoing business operations, taxes, fair value gains and losses and run our Society by showing how much excluding taxes. material one-time charges. we are spending to generate every pound of our income.

8 Common Equity Tier 1 ratio Liquidity ratio Leverage ratio in 2019 in 2019 in 2019. Maintaining this ratio above a certain This ratio measures our ability to lend This ratio highlights the capital we hold minimum helps to protect ourselves to borrowers, give money back to savers compared to our assets, showing our against unexpected losses. when they want it, and pay our bills. ability to cope with unexpected events. Average savings rate paid Net Promoter Score (NPS )2 Carbon Footprint over 2019. +53. +51 in 2019. +4%. -17% over 2019. This shows the benefit we are This measures how willing our This shows how much our carbon giving to our savings members. customers are to recommend us emissions have changed. to others. 1. Definitions of alternative performance measures are provided on pages 226 to 229. 2. Net Promoter Score and NPS are trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc. Introduction | 5. Place to call home financial wellbeing We are here We are here to to help people help people have a place to towards greater call home.

9 financial This includes people wellbeing. choosing us to be their This includes customers mortgage provider, choosing to build up people renting from their savings with us, our customers who are directly or through our buy-to-let landlords partners, or people who and people living in have benefited from housing association financial literacy and accommodation we employability support have funded. through our Money Minds and Career Minds community programmes. Gross lending Savings accounts opened in 2019. The amount we have lent to customers towards the value of their property over the period. 227,000. 243,000 in 2019. The number of new accounts opened by members over the period. Gross mortgage market share Savings market share in 2019. This represents our share of all new lending in the UK housing market. in 2019. This reflects our share of the UK. savings market. Growth in mortgage balances Retail savings balances in 2019. % This represents the growth in our overall mortgage balance over the period.

10 In 2019. This shows the total deposits we use to fund the mortgages we offer to our customers. Average savings rate differential vs. market average in 2019. % The differential between the average market rate and the average rate paid to members. 6 | Introduction Performance at a Glance PERFORMANCE AT A GLANCE. Awards We are delighted that our work to deliver on our purpose has been recognised by our customers and industry experts, who have chosen to honour the Society and its colleagues with high-calibre awards throughout 2020. AWARDS ACCOLADE. Mortgages Moneynet Personal Best Offset Mortgage Finance Awards Provider Moneynet Personal Best First Time Buyer Finance Awards Mortgage Provider Moneynet Personal Best Overall Mortgage Finance Awards Provider 2020 Moneyfacts Best Building Society Awards Mortgage Provider Mortgage Finance Lenders' Innovation Gazette Awards Award Lenders' customer Mortgage Finance Service / treating Gazette Awards Customers fairly Award financial Adviser 5* Rating for Service Service Awards Gold Ribbon for Fairer Finance Mortgages customer Experience Savings AWARDS ACCOLADE.