Darlington Building Society this week reported that its mortgage lending has risen by a record 30pc to £138m.

There was more good news in the year ending December 31, 2003, when pre-tax profits rose by 31pc to £3m. After tax, more than £2m was added to reserves, which now stand at £37m, more than 6pc higher than 2002 and making the society one of the strongest capitalised financial firms. Total assets rose by 8pc to £545m.

More than 90pc of its lending was on property in County Durham, North Yorkshire and Tees Valley, where it has 13 branches and a mortgage shop.

Applicants were attracted by products which included lower borrowing rates for locals, free valuations and a contribution from the society towards legal fees.

The society, and its wholly owned subsidiary Darlington Mortgage Services, lent more than £138m to just under 2,250 borrowers to buy, improve or re-finance their homes. Total mortgage assets increased by more than 10pc to more than £432m.

The society attracted £239m of gross investment receipts from members, 6pc more than in 2002, in a year when historically low interest rates and improving confidence in shares made for challenging competition among financial firms for deposits to fund buoyant demand for mortgage finance.

Members' share balances grew by more than 4pc to £418m. Deposits from other non-members represented only 17pc of group requirements, well below the statutory maximum of 50pc and the average for building societies generally.

Total assets under management on behalf of 125,000 savers and borrowers were £545m at the year-end, more than 8pc higher than 12 months' previously.

Two affinity accounts, Hospice Supporter and Connexions Purple, were launched.

Hospice Supporter was designed to provide much-needed financial support for St Teresa's Hospice, Darlington; Butterwick Hospice Care, Stockton, Teesside Hospice Care Foundation, Middlesbrough, and Hartlepool and District Hospice. Connexions Purple was developed to benefit thousands of young people, many of them disadvantaged, through local branches of Connexions Tees Valley.

Barnard Castle branch was extensively refurbished and a £2m investment to replace the group's information technology systems began.

The society's wholly-owned housing development subsidiary, Darlington Homes, enjoyed an excellent year, exchanging contracts on 70 units under construction and completing 30 sales by the year-end.

Speaking on Tuesday, Peter Rowley, society chief executive, said: "Market conditions during 2003 were challenging, but our policy of concentrating upon satisfying the needs of local people for popular savings, mortgage and housing services was rewarded by a record performance, and demand for our products and services is continuing at high levels this year.

"We remain committed absolutely to looking after the local interests of our members and customers served by our branch network."