AGM 2008 - CHAIRMANS ADDRESS

Address by Barry Eldred, Society Chairman at the AGM, 21^st April 2008

Each year when this address is given the opening remarks are invariably about how challenging the year has been and how uncertain the financial environment is. Never has that statement been truer than it is today.

Financial Markets and the Credit Crunch

The so-called credit crunch has affected every financial institution worldwide. In recent months we have seen the American sub-prime loan debacle affect the whole of the world’s financial markets with its knock-on effect on banks like Northern Rock and now we also see RBS having to go to the market for £10 billion. The dash for cash by banks to shore up their liquidity, coupled with their own reluctance to lend to each other on the money markets, has and will have a significant dampening effect on the availability of mortgages for some time. Estimates suggest that there could be a reduction of up to 50% in mortgage lending in 2008.

The Society’s Financial Results

What does all this mean for the Barnsley BS and how has the Society been affected? Our long established policies of prudent lending and cautious borrowing have stood us in good stead. You will all have seen from the Annual Accounts that our year-end figures show us to be in a sound position. Our post tax profits grew by 74% putting them at a level not only where I think they should be but also which better enables us to invest in the future of the Society and to maintain the Society’s financial strength and security.

Our total asset growth slowed. Firstly, because of the highly competitive nature of the market and, secondly, because your Board was not prepared to buy business at any price. This policy had the effect of reining in our net mortgage lending. We have never priced product to be at the top of the best-buy tables, but, as other lenders withdrew their products from the market, we bubbled to the top for a short time. This enabled us to build a very sound base for our mortgage lending to take us in to the New Year on terms that we had pre-determined. Currently, along with most other lenders we have limited our exposure in the mortgage market until we see some stability and a way forward that is right for us.

Amid this turmoil we have managed a reduction in our management costs – down from 1.30% to 1.20%. We will continue to reduce costs wherever possible without compromising the quality of our service or products. We will achieve cost reduction through improvement in our efficiency and investment in technology.

Many of you here today are investors with the Society and we are pleased that you have taken the time to come. What I wish to say to you specifically is that there has never been a time when investment in a well run mutual society has offered a greater sense of security and comfort. It is because around 85% of our investments are from the retail sector that our dependence on the wholesale markets is so relatively small. Our exposure to the volatility in the wholesale market is minimised – a true win-win situation. You have greater security and we have greater stability.

The advice that we continue to receive from our external auditors KPMG Audit Plc is of the highest quality and we thank them for the excellent service that they continue to afford us.

Working with the FSA

Our relationship with our supervising body the Financial Services Authority (“FSA”) remains strong. You may have read criticism of some areas of their work but their conversations with us, and indeed I think with most building societies, have been around prudent lending, strong liquidity and sound management - areas in which we have always been strong.

Our policies on Treating Customers Fairly, now required by the FSA, have evolved from our practices over many years and show the inherent values that are at the core of our business

Some of you may be aware that Blakes Financial Services (“Blakes”) have been the subject of a fine by the FSA. Blakes work with us as a provider of Independent Financial Advice and so I believe that it is right to put to rest any doubts that people may have. From the reports that I have read it appears that there was a fundamental misunderstanding of a regulatory requirement. It centred on the need to have in place a subordinated loan in order that the capital adequacy requirement of the company was satisfied. Blakes received inappropriate advice from its then advisers, resulting in a time lag before the loan was put in place. The FSA requirements have now been met in full and Blakes have put in place a new compliance consultant and accountants. No financial gain or loss was incurred and the services of Blakes to their clients were not affected. Blakes co-operated fully with the FSA and the fine was reduced by their prompt payment. We continue to have confidence in the services that Blakes offer to our customers.

Community Award Scheme

Our programme of providing support for local community groups through our Pride in Your Community scheme has continued throughout the year. Many projects have been assisted and this demonstration of our commitment to the communities in which we operate is greatly appreciated by them.

Affinity Account Partners

Our ongoing support for Barnsley Football Club and the Yorkshire Air Ambulance (“YAA”) through the Red Savers and the YAA Saving Saves Lives Accounts respectively continue to be well supported by our investors and I know that I can pass on the thanks of both organisations to you. With the purchase of the second YAA helicopter last year we were delighted to be able to put the Society’s logo on the fuselage.

Head Office Refurbishment and Green Issues

We are currently undertaking a thorough refurbishment of Head Office. It is intended to bring a 70 year old building into the 21^st Century. The improvements will enable the staff to work in a more user-friendly environment and it is hoped that the building will achieve an ‘A’ rating for energy efficiency when completed midyear. In addition, we continue to strive for even better recycling achievements and the minimisation of waste.

Staff, Management and Board

As ever, and I am not sure why this always comes at the end, I must thank the staff, management and fellow Board members for their commitment, energy and co-operation without which none of what I have talked about could have been achieved. None of us accepts change readily, but without change there can be no progress, and we have made great progress this year.

Members

Ladies and Gentlemen, I have talked longer and in more detail this year than I have previously. I feel that in today’s financial conditions you should leave here in the sure knowledge that your finances are securely invested in a soundly run, profitable society and that we have the commitment to continue as an independent mutual society for many years to come.

Thank you for listening to this report, for your attendance and for your continuing support.