Paragon Banking Group PLC

AGM Information • Jan 3, 2014

This document is important and requires your immediate attention.

If you are in any doubt as to any aspect of the proposals referred to in the document or as to the action you should take, you should seek your own advice from an independent fi nancial adviser authorised under the Financial Services and Markets Act 2000.

If you have sold or otherwise transferred all of your shares, please pass this document together with the accompanying documents to the purchaser or transferee, or to the person who arranged the sale or transfer so they can pass these documents to the person who now holds the shares.

The Paragon Group of Companies PLC

(Incorporated and registered in England and Wales under number 2336032)

Notice of Annual General Meeting

Your attention is drawn to the letter from the Chairman of the Company which is set out on page 3 of this document and which recommends you to vote in favour of the resolutions to be proposed at the Annual General Meeting.

Notice of the Annual General Meeting of the Company to be held at the offi ces of Jefferies Hoare Govett at Vintners Place, 68 Upper Thames Street, London, EC4V 3BJ on 6 February 2014 at 10.00 a.m. is set out on pages 6 to 7 of this circular.

Shareholders will also fi nd enclosed with this document a form of proxy for use in connection with the Annual General Meeting. To be valid, the form of proxy should be completed, signed and returned in accordance with the instructions printed thereon, as soon as possible and, in any event, so as to reach the Registrar of the Company by no later than 10.00 a.m. on 4 February 2014. Completion and return of a form of proxy will not preclude shareholders from attending and voting at the Annual General Meeting should they choose to do so. Further instructions relating to the form of proxy are set out in the notice of the Annual General Meeting.

The Paragon Group of Companies PLC

(Incorporated and registered in England and Wales under number 2336032)

Registered and Head Offi ce:

51 Homer Road Solihull West Midlands B91 3QJ 29 November 2013

To all shareholders

NOTICE OF ANNUAL GENERAL MEETING

Dear Shareholder

I am pleased to be writing to you with details of our Annual General Meeting ('AGM') which we are holding at the offi ces of Jefferies Hoare Govett at Vintners Place, 68 Upper Thames Street, London, EC4V 3BJ on Thursday 6 February 2014 at 10.00 a.m.

The resolutions to be proposed at the meeting are set out in the Notice of AGM on page 6. If you would like to vote on the resolutions but cannot come to the AGM, please fi ll in the proxy card sent to you with this notice and return it to our registrars as soon as possible. They must receive it by 10.00 a.m. on Tuesday 4 February 2014.

Explanatory notes on the business to be considered as special business at the AGM appear on pages 4 and 5 of this document.

The directors consider that all the resolutions to be put at the meeting are in the best interests of the Company and its shareholders as a whole. Those Board members who are also shareholders will be voting in favour of them and the Board unanimously recommends that you do so as well.

Yours sincerely

R G Dench Chairman

Details of resolutions to be proposed as special business at the Annual General Meeting

Resolutions 16 and 17 are proposed as ordinary resolutions. This means that for each of these resolutions to be passed, more than half of the votes cast must be in favour of the resolution. Resolutions 18, 19 and 20 are proposed as special resolutions. This means that for each of these resolutions to be passed, at least three quarters of the votes cast must be in favour of the resolution.

The Board of Directors considers that all the resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a whole and unanimously recommends that shareholders vote in favour of them.

Resolution 16

The current articles of association of the Company contain a limit of £250,000 on the maximum fees per annum payable to directors in respect of directors' fees. The purpose of Resolution 16 is to increase the level of this cap to £400,000 per annum in aggregate. The current cap has been in place for a number of years. Increasing the cap will provide the Board with additional fl exibility and facilitate the effective review and management of the composition of the board. The directors consider that this will ensure a reasonable degree of headroom in the fee limit for the foreseeable future.

The cap does not apply to the remuneration of the executive directors or any directors in respect of services that are outside the scope of the ordinary duties of a director.

Resolution 17

Section 549 of the Companies Act 2006 states that the directors may not exercise a company's power to allot shares or grant rights to subscribe for or convert any security into shares unless given authority to do so by resolution of the shareholders in general meeting.

The present authority of the directors to allot the unissued ordinary share capital of the Company was granted at an Annual General Meeting on 7 February 2013 and will expire at the end of the forthcoming Annual General Meeting. Resolution 17 seeks to give the directors authority to allot shares or grant rights to subscribe for or convert any security into shares up to an aggregate nominal value of £101,800,000 representing approximately one third of the Company's issued share capital, excluding treasury shares, at 31 October 2013. At 31 October 2013 the Group held 668,900 treasury shares, representing 0.2% of the Company's issued capital, excluding treasury shares, at that date. The directors have no present intention of exercising this authority, which will expire at the conclusion of the following Annual General Meeting or, if earlier, on 5 May 2015.

Resolution 18

Under Section 561 of the Companies Act 2006, any shares allotted (or, in the case of any shares held in treasury, sold) wholly for cash must be offered to existing shareholders in proportion to their holdings, but this requirement may be modifi ed by the authority of a special resolution of the shareholders in general meeting.

The authority given at the Annual General Meeting held on 7 February 2013 will expire at the end of the forthcoming Annual General Meeting and Resolution 18 seeks to renew it. The resolution authorises the directors to allot or sell shares for cash, other than to existing shareholders or holders of other equity securities in proportion to their holdings, up to an aggregate nominal value of £15,200,000, representing approximately 5% of the Company's issued share capital, excluding treasury shares, at 31 October 2013. In respect of this aggregate nominal amount, the directors confi rm their intention to follow the provisions of the Pre-Emption Group's Statement of Principles regarding cumulative usage of authorities within a rolling three year period where the Principles provide that usage in excess of 7.5% should not take place without prior consultation with shareholders. This authority will expire at the conclusion of the following Annual General Meeting or, if earlier, on 5 May 2015.

Resolution 19

This resolution, which is being proposed as a Special Resolution, will enable the Company to purchase, in the market, up to a maximum of 30.5 million of the Company's ordinary shares (approximately 10% of the issued share capital, excluding treasury shares, at 31 October 2013) for cancellation, or to be held in treasury, at a minimum price of 10p per share and a maximum price of not more than 105% of the average middle market quotation for an ordinary share as derived from the London Stock Exchange Daily Offi cial List for the fi ve business days immediately prior to purchase.

The directors would not expect to purchase ordinary shares in the market unless, in the light of market conditions prevailing at the time, they considered that to do so would enhance earnings per share and would be in the best interests of shareholders generally. Any purchases made by the Company will be announced no later than 7.30 a.m. on the business day following the transaction. This authority will expire at the conclusion of the following Annual General Meeting or, if earlier on 5 May 2015.

Resolution 20

Shareholders may give approval to shorten the notice period required for general meetings (other than Annual General Meetings) from 21 clear days to 14 clear days. At an Annual General Meeting on 7 February 2013 shareholders approved the reduction of the notice period for general meetings (other than Annual General Meetings) to 14 clear days' notice. In order to preserve this reduction, Resolution 20 seeks to renew this approval. The approval will be effective until the Company's next Annual General Meeting, when it is intended that a similar resolution will be proposed. The shorter notice period would not be used as a matter of routine for such meetings, but only where fl exibility is merited by the business of the meeting and is thought to be to the advantage of the shareholders as a whole.

Notice of Annual General Meeting

To all shareholders

NOTICE IS HEREBY GIVEN that the twenty-fi fth Annual General Meeting of The Paragon Group of Companies PLC will be held at the offi ces of Jefferies Hoare Govett at Vintners Place, 68 Upper Thames Street, London, EC4V 3BJ on 6 February 2014 at 10.00 a.m. for the following purposes:

As ordinary business

• 1 To receive and consider the Company's Accounts for the year ended 30 September 2013, the Strategic Report and the Reports of the Directors and the Auditors.
• 2 To consider and adopt the Annual Remuneration Report section of the Directors' Remuneration Report for the year ended 30 September 2013.
• 3 To consider and approve the policies on directors' remuneration set out in the Policy Report section of the Directors' Remuneration Report for the year ended 30 September 2013.
• 4 To declare a dividend.
• 5 To re-appoint as a director Mr R G Dench.
• 6 To re-appoint as a director Mr N S Terrington.
• 7 To re-appoint as a director Mr N Keen.
• 8 To re-appoint as a director Mr J A Heron.
• 9 To re-appoint as a director Mr R J Woodman.
• 10 To re-appoint as a director Mr E A Tilly.
• 11 To re-appoint as a director Mr A K Fletcher.
• 12 To re-appoint as a director Mr P J N Hartill.
• 13 To re-appoint as a director Ms F J Clutterbuck.
• 14 To re-appoint Deloitte LLP as Auditors.
• 15 To authorise the directors to fi x the remuneration of the Auditors.

As special business

To consider and, if thought fi t, to pass resolutions 16 and 17 as ordinary resolutions and resolutions 18, 19 and 20 as special resolutions:

Ordinary Resolutions

• 16 'THAT the limit on directors' fees set out in Article 95 of the Company's articles of association be and is hereby amended by ordinary resolution of the Company, as provided for in the terms of the said Article 95, from £250,000 to £400,000.'
• 17 'THAT the Board be and it is hereby generally and unconditionally authorised (in substitution for all subsisting authorities to the extent unused) to exercise all powers of the Company to allot shares in the Company and to grant rights to subscribe for or convert any security into shares in the Company up to an aggregate nominal amount of £101,800,000 PROVIDED THAT this authority shall expire at the earlier of the conclusion of the next Annual General Meeting of the Company after the passing of this resolution and the close of business on 5 May 2015 (unless previously revoked or varied by the Company in general meeting) save that the Company may before such expiry make an offer or agreement which would or might require shares to be allotted after such expiry and the Board may allot shares or grant rights to subscribe for or convert securities into shares in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.'

Special Resolutions

• 18 'THAT, subject to the passing of resolution 17, the Board be and it is hereby empowered pursuant to Section 571 of the Companies Act 2006 (the 'Act') to allot equity securities (within the meaning of Section 560 of the Act) for cash pursuant to the authority conferred by resolution 17 and/or where allotment is treated as an allotment of equity securities under section 560(3) as if sub-section (1) of Section 561 of the Act did not apply to any such allotment, PROVIDED THAT this power shall be limited to:
• (a) the allotment of equity securities in connection with a rights issue, open offer or any other pre-emptive offer in favour of ordinary shareholders and in favour of all holders of any other class of equity security in accordance with the rights attached to such class where the equity securities respectively attributable to the interests of all such persons on a fi xed record date are proportionate (as nearly as may be) to the respective numbers of equity securities held by them or are otherwise allotted in accordance with the rights attaching to such equity securities (subject in either case to such exclusions or other arrangements as the Board may deem necessary or expedient to deal with treasury shares, fractional entitlements, record dates or legal or practical problems arising in any overseas territory, the requirements of any regulatory body or any stock exchange in any territory or any other matter whatsoever); and
• (b) the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate nominal value of £15,200,000

and shall expire upon the renewal of this power or, if earlier, at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution (or, if earlier, the close of business on 5 May 2015), save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Board may allot equity securities in pursuance of such an offer or agreement as if the power conferred hereby had not expired.'

• 19 'THAT the Company be and is hereby generally and unconditionally authorised for the purposes of Section 701 of the Companies Act 2006 ('the Act') to make one or more market purchases (within the meaning of Section 693(4) of the Act) on the London Stock Exchange PLC of ordinary shares of £1 each in the share capital of the Company ('Ordinary Shares') provided that:-
• (a) the maximum aggregate number of Ordinary Shares hereby authorised to be purchased is 30,500,000 (representing approximately 10 per cent of the Company's issued ordinary share capital excluding treasury shares);
• (b) the minimum price which may be paid for an Ordinary Share is 10p;
• (c) the maximum price which may be paid for an Ordinary Share is an amount equal to 105 per cent of the average of the middle market price shown in the quotations for an Ordinary Share as derived from the London Stock Exchange Daily Offi cial List for the fi ve business days immediately preceding the day on which the Ordinary Share is contracted to be purchased;
• (d) unless previously renewed, varied or revoked, the authority hereby conferred shall expire on the earlier of the conclusion of the next Annual General Meeting of the Company and the close of business on 5 May 2015; and
• (e) the Company may make a contract or contracts to purchase Ordinary Shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority, and may make a purchase of Ordinary Shares in pursuance of any such contract or contracts.'
• 20 'THAT a general meeting other than an annual general meeting may be called on not less than 14 clear days' notice.'

By order of the Board

John G Gemmell Company Secretary

Registered and Head Offi ce: 51 Homer Road, Solihull, West Midlands B91 3QJ 29 November 2013 Registered in England No. 2336032

Notice of Annual General Meeting

A member entitled to attend and vote at this meeting may appoint another person as their proxy to exercise all or any of their rights to attend and to speak and vote at a meeting of the Company. A member may appoint more than one proxy in relation to the Annual General Meeting provided that the member specifi es the number of shares in relation to which each proxy is appointed and each proxy is appointed to exercise the rights attached to a different share or shares held by that member. A proxy need not also be a member of the Company. A proxy form is enclosed for use in connection with the meeting. Proxy forms and any power of attorney or other written authority under which they are executed (or an offi ce or notarially certifi ed copy thereof) should be lodged with the Registrar of the Company at the address shown on the proxy form by 10.00 a.m. on Tuesday 4 February 2014. The appointment of a proxy or any CREST Proxy Instruction (as described below) will not preclude a shareholder from attending and voting at the meeting.

The proxy appointment rights described above do not apply to any person nominated to enjoy information rights under section 146 of the Companies Act 2006 by a member who holds shares on behalf of that person. The rights described in these paragraphs can only be exercised by members of the Company.

Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares.

To be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company of the votes they may cast), shareholders must be registered in the register of members of the Company at 10.00 a.m. on Tuesday 4 February 2014 (or, in the event of any adjournment, on the date which is two days before the time of the adjourned meeting). Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.

Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confi dential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.

As at 28 November 2013 (being the last business day prior to the publication of this notice) the Company's issued share capital consists of 306,222,185 ordinary shares, carrying one vote each, of which 668,900 were held in treasury. Therefore, the total voting rights in the Company as at 28 November 2013 are 305,553,285.

CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifi cations, and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent (ID number 3RA50) by 10.00 a.m. on Tuesday 4 February 2014. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertifi cated Securities Regulations 2001.

Except as provided above, members who have general queries about the Annual General Meeting should call our shareholder helpline on 0870 707 1244 (no other methods of communication will be accepted)

You may not use any electronic address provided either in this notice or any related documents (including the chairman's letter and proxy form) to communicate with the Company for any purposes other than those expressly stated.

Under section 527 of the Companies Act 2006 members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company's accounts (including the auditor's report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance connected with an auditor of the Company ceasing to hold offi ce since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must forward the statement to the Company's auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website.

A copy of this notice, and other information required by section 311A of the Companies Act 2006, can be found at www.paragon-group.co.uk.

Under section 338 and section 338A of the Companies Act 2006, members meeting the threshold requirements in those sections have the right to require the Company (i) to give, to members of the Company entitled to receive notice of the meeting, notice of a resolution which may properly be moved and is intended to be moved at the meeting and/or (ii) to include in the business to be dealt with at the meeting any matter (other than a proposed resolution) which may be properly included in the business. A resolution may properly be moved or a matter may properly be included in the business unless (a) (in the case of a resolution only) it would, if passed, be ineffective (whether by reason of inconsistency with any enactment or the Company's constitution or otherwise), (b) it is defamatory of any person, or (c) it is frivolous or vexatious. Such a request may be in hard copy form or in electronic form, must identify the resolution of which notice is to be given or the matter to be included in the business, must be authorised by the person or persons making it, must be received by the Company not later than Tuesday 24 December 2013, being the date six clear weeks before the meeting, and (in the case of a matter to be included in the business only) must be accompanied by a statement setting out the grounds for the request.

The register of directors' interests, copies of directors' service contracts and letters of appointment of non-executive directors will be available for inspection during normal business hours on any weekday (public holidays excepted) at the Registered Offi ce of the Company from the date of this notice until the date of the meeting and at the place of the meeting from 9.30 a.m. on the date of such meeting until the conclusion thereof.

The Report and Accounts have been sent to the Company's shareholders.

Biographical details of current directors are provided in section B1 of the Annual Report and Accounts circulated with this notice.

The Paragon Group of Companies PLC 51 Homer Road Solihull West Midlands B91 3QJ Telephone: 0121 712 2323 www.paragon-group.co.uk Registered No. 2336032