BANK NORTH INTERIM INVESTOR UPDATE - Wednesday 14th September 2022

Dear Shareholder,

Further to the last update in July, we wanted to update you on various matters,
including the latest position with our Series B fundraise.

Lending operations

Bank North has now lent £18m to UK SMEs over recent months – this represents the
maximum we can lend until further equity capital is secured. Customer and broker
feedback has been outstanding and has unequivocally proven the potency of our Pod
operating model. We have also successfully validated a very substantial market
opportunity - indeed, in just over 6 months, our Manchester Pod received over a quarter
of a billion pounds (£0.25bn) of inbound lending enquiries and developed a substantial
pipeline of high quality opportunities which comfortably exceeds our business plan
assumptions.

Pricing of that asset book and pipeline is ahead of plan, the risk profile is better than
expected, and the quality of our underwriting and control environment has passed audit
by an independent third-party with flying colours.

Regulatory approval to commence deposit-taking

We have also now received formal confirmation from the Prudential Regulation Authority
that the operational development of the Bank is complete. However, as previously
advised, the key regulatory condition is still to be satisfied - namely the equity fundraise
required to capitalise the Bank ahead of its first full year of trading.

When we wrote to you in July, we flagged the requirement to complete this by the end
of August. This deadline has now been extended to the end of September, reflecting the
support and the pragmatism of the Regulators.

Equity fundraising

Bank North is targeting an equity capital injection of £50m through its Series B raise, but
with a minimum of £30m required to satisfy regulatory requirements. This is a
fundamental part of the business plan and will enable the Bank to commence deposit-
taking. In turn, this will facilitate our Pod roll out and will fund growth in our lending
activities as we scale.

As noted in the previous briefing, we have c£10-15m of prior commitments to this raise,
predominantly from existing investors, and continue to engage with potential investors to
close the round.

Unfortunately, the backdrop for equity fundraising has further deteriorated since the last
update. War in Ukraine persists, and the last two months have seen deeper economic
challenges, with the cost-of-living crisis necessitating substantial central government
intervention, the economy under significant inflationary pressure and an increased
probability of recession. Many investors are, therefore, understandably nervous, with a
high proportion pausing front-book investment activities, sitting-out current funding
rounds and instead focusing on their existing portfolios. Unfortunately, our extended
dialogue with a US private equity firm as potential lead investor was ultimately
unsuccessful. Their decision not to invest reflected the early-stage nature of the business
in the face of these unprecedented macro challenges.

Currently, we are in dialogue with certain parties that, if successful, could deliver the
minimum £30m required to lift banking licence restrictions and commence deposit taking.
However, the process is not straightforward and, as noted above, the regulatory window
for completion is short. There is, therefore, material uncertainty that this will result in a
successful conclusion.

If we are unable to secure the necessary investment before the end of September or are
unable to secure interim funding to extend that deadline further, the likely outcome is
that the company would withdraw its banking permissions and commence a winding-up
process. Regrettably, potential returns to shareholders in this scenario would be minimal.

Please rest assured that we are working tirelessly to avoid this scenario and raise the
necessary capital to enable the Bank to move onto the next exciting phase of its
journey. The PRA and FCA remain fully informed of our progress and are supportive of
our approach.

Comments from Bank North Chair, Ron Emerson CBE

In my long experience I have never seen a better executed project than the evolution
and delivery of the Bank North business model, and never was there a more appropriate
time to launch this resource to support the SME community. However, the exceptional
economic circumstances we are seeing that reinforce that need are also those that are
causing investors to hold back at a crucial time in our journey, specifically the closure of
our Series B raise that would allow us to lift our bank licence restrictions and commence
deposit taking.

Over the past four years, which have included Brexit uncertainties, a pandemic and now
possible recession, we have engaged with a vast array of potential investors across
investment funds, sovereign wealth funds, venture capital, private equity, high net worth
individuals, and family offices. In the past year alone we have met with circa 150
institutions. We adopted a policy of “no stone unturned”. During this period, we
developed a very constructive relationship, with the regulator and the licence process
has been very smooth.

Nevertheless, it is important that you are aware that our regulatory time is running out
that may leave us with few options. We continue to look at every possibility and there
are some constructive dialogues that are ongoing. We will keep you updated on how
these develop and remain committed to delivering what I consider to be the best SME
business model in the UK.

We will provide a further update in the coming weeks.

Ron Emerson CBE Jonathan Thompson

Chair Chief Executive Officer