The international financial crisis saw the Stroud & Swindon Building Society suffer losses of £2.7 million after tax last year.

The building society finished the year with a profit of £3.1 million despite the crisis gripping the financial sector.

But the figure does not take into account the loss of just under £5 million as a result of the collapse of the Icelandic financial system and the Bradford & Bingley.

The building society's operating profit was £3.1 million, down from £7.7 million in 2007, as a result of the rising cost of wholesale funding and increased competition for retail funds.

This position was made worse by distortions in the savings market created by the Government's guarantees to the large banks and Northern Rock, resulting in significant inflows to these institutions.

The tendency for savers with balances above £50,000 – the maximum protected under the compensation scheme – to spread their investments increased the cociety's cost of funding and reduced margins.

The society's Laurence James said: "Following a tumultuous year in the financial markets and considerable losses reported by many of the banks it is pleasing that we were still able to record an operating profit.

"The compensation scheme levy is, however, a disproportionate burden on institutions that are predominantly funded by retail savings such as building societies".

He added: "The society remains strongly capitalised with over £160 million of profits built up over many years and other borrowings in the form of subordinated liabilities. We are more than capable of absorbing this small loss and I am confident we can navigate our way through these difficult times".

Stroud & Swindon's chief executive David Hill said: "We expect the housing market and wider economy to remain depressed and see little prospect of any significant upturn before 2010.

The building society model is resilient in such circumstances and we will continue to act prudently for the benefit of our savers and borrowers who value the safety and security that building societies offer.

"We remain committed to our mutual status as an independent building society".

He added: "The entire financial system came close to collapse."