The 846,000 profit for the year to the end of January was down from 954,000 in the previous 12 months. This does not include a 89,000 payment to the Financial Services Compensation Scheme, which is used to compensate savers of failed banks. As a result, pre-tax profits were 757,000.
Gerry Kay, the chief executive of the society, said profits were not of "primary importance" to the firm.
"Being a mutual, we are not here to make vast profits; we make sufficient profits to maintain a satisfactory level of capital or reserves in the business and invest for the future," he added.
Total mortgage lending for the year fell to 35.9 million from 59.4m. As a result, the group's overall mortgage portfolio shrank 2.1 per cent to 236m.
Kay blamed the fall to "cherry-picking" of good customers by government-backed banks. "We have money to lend, we have very high liquidity. We find that banks are cherry-picking - it's not a level playing field." He said that despite "tough times" the society increased the amount it held for savers by 2 per cent to 333m. Its capital ratio remained at 8.3 per cent which Kay claimed was "well ahead of the sector".
The Edinburgh mutual became the country's biggest indigenous building society after the rescue of the Dunfermline by Nationwide and the UK government.