Skipton, the fourth largest building society in the UK, is merging with small rival Holmesdale and has doubled its provision for PPI and mortgage mis-selling claims.
The society posted a 19 per cent increase in profit before tax to £200.1m for 2017, and a nearly 7 per cent increase in membership.
The company made £5.7m of charges in relation to customer compensation, compared with £2.9m the previous year.
This relates predominantly to provisions for potential claims on payment protection insurance and potential future redress payable following an evaluation during 2017 of some historical terms and conditions within specialist mortgage lenders Amber Homeloans and North Yorkshire Mortgages.
These brands have been closed to new business since 2008.
Holmesdale Building Society has one branch in Reigate, Surrey, and employs 26 people.
The merger is expected to become effective on October, and from that point Holmesdale members will be able to do business in Skipton branches.
Mike Kirsch, chief executive of Holmesdale Building Society, said: "We firmly believe that this proposed merger is in the best interests of our members.
"Without the merger we would not be able to continue to provide the same range of products or good value pricing to our members.
"We believe we can offer enhanced security by merging with a much stronger building society able to offer more choice and value to members in the long-term."
David Cutter, Skipton's group chief executive, said: "Today's results show that 2017 was another year of strong performance for Skipton Building Society, and further demonstrated that our 164-year-old core purpose of helping more people into homes and helping people save for their life ahead is still as relevant today as it was when we were founded."
Skipton's funds under management as part of its financial advice offering increased by 9.7 per cent to £3.4bn during the year.
The group said that its estate agent business, Connells saw a decrease in house sales in the year of 4 per cent, compared with an increase of 8 per cent the previous year.
Lettings income increase by 9 per cent.
Connells marketed 6 per cent of properties available for sale in the UK in 2017.
Mr Cutter said: "The more competitive mortgage environment coincides with a period of increased political uncertainty, as not only is the government in the midst of negotiating the UK's withdrawal from the European Union, but an unexpected general election resulted in a hung Parliament.
"These conditions make forecasting difficult and create a need for caution.
"We remain vigilant regarding potential economic headwinds, but the capital and funding actions taken during 2017 by the society mean we are well placed to manage the risks that we face and to capitalise upon any opportunities that may arise for the benefit of our members."
