The specialist buy-to-let and commercial lender made an expected credit loss provision of £30mln.
Trading prior to the rapid escalation of the COVID-19 pandemic and UK lockdown had been strong, the group said, but the impairment charge led to underlying profits falling to £57.2mln for the six months to end-March from £79.8mln a year ago.
In that period, total operating income rose 1% to £149.7mln and net interest margin widened to 2.29% from 2.24%.
The lender retained a strong level of capital, with its CET-1 ratio rising to 14.4% at the end of March from 13.7% in September.
On the outlook, the FTSE 250 group said reduced demand across the UK economy will lead to decreased lending volumes which in turn will impact on the group's future income.
“At this stage, it is difficult to predict when lending markets will return to normality.
“Paragon's prudent credit approach, strong balance sheet and management experience have placed the Group in a strong position to meet challenges arising from Covid-19 and to grow lending volumes in its chosen markets when customer confidence returns,” it said.