Annual Shareholders Meeting May 28, 2019 Forw ard-Looking Statements - - PowerPoint PPT Presentation

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Annual Shareholders Meeting May 28, 2019 Forw ard-Looking Statements - - PowerPoint PPT Presentation

Annual Shareholders Meeting May 28, 2019 Forw ard-Looking Statements Certain statements in this presentation include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995,


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Annual Shareholders’ Meeting May 28, 2019

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Forw ard-Looking Statements

Certain statements in this presentation include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which statements generally can be identified by the use of forward-looking terminology, such as "may," "will," "expect," "estimate," "anticipate," "believe," "target," "plan," "project" or "continue" or the negatives thereof or other variations thereon or similar terminology, and are made on the basis of management's plans and current analyses of Paragon Financial Solutions (the “Company”), its business and the industry as a whole. These forward-looking statements are subject to risks and uncertainties, including, but not limited to, economic conditions in the markets in which The Company operates, the company's short operating history, possible borrower credit problems, potential loss of key executives and employees, competition, interest rate sensitivity and exposure to regulatory and legislative changes. The above factors, in some cases, have affected, and in the future could affect, the Company's financial performance and could cause actual results for the current fiscal year and beyond to differ materially from those expressed or implied in such forward- looking statements. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

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2018 2018 BUSI BUSINE NESS SS PLAN PLAN EXE EXECUTION UTION

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Converted LPO in Oxford to Branch

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“Right Sized” SBCG

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Reduced annual volumes so that loan concentrations are appropriate for Paragon’s size Reduced staff to improve profitability

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SLIDE 6

Specialty Lending

Moved to Fountain Place and subleased previous space Moved to a separate subsidiary of the bank

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Held First Economic Summit

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SLIDE 8

Converted Repurchase Agreements

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Converted customers who were in Repurchase Agreements to Insured Cash Sweep (ICS) Balances over the FDIC limit are swept to

  • ther banks – Paragon receives reciprocal

money market deposits – not considered brokered Increases Paragon’s core deposits and frees up previously pledged investment securities

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#33

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WSJ Prime Interest Rate

3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00% 5.25% 5.50%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%

12/1/2008 5/1/2009 10/1/2009 3/1/2010 8/1/2010 1/1/2011 6/1/2011 11/1/2011 4/1/2012 9/1/2012 2/1/2013 7/1/2013 12/1/2013 5/1/2014 10/1/2014 3/1/2015 8/1/2015 1/1/2016 6/1/2016 11/1/2016 4/1/2017 9/1/2017 2/1/2018 7/1/2018 12/1/2018

Prime Rate People you know. Solutions that

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WSJ Prime Interest Rate

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Treasury Yield Curve

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Impact of Rising Rates/Flat Yield Curve

The unrealized loss on Paragon’s investment securities increased Short-term funding cost rose dramatically w hile yields on loans rose modestly Customers didn’t move fixed rate loans Decrease in SBA premiums Decrease in mortgage volume due to rate volatility

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Government Shutdow n

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SLIDE 15

ASSET ASSET TRENDS TRENDS

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Total Assets

(end of period in millions)

252 273 272 304 352 377 401 410 100 150 200 250 300 350 400

2012 2013 2014 2015 2016 2017 2018 1Q19

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Total Loans

(end of period in millions)

183 198 215 246 289 315 331 332 100 150 200 250 300 350

2012 2013 2014 2015 2016 2017 2018 1Q19

5% 14% 17% 9% 9%

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Total Loans – End of Period (000’s)

$ % 12/31/2018 12/31/2017 Difference Difference Memphis Bank 244,159 245,338 (1,179)

  • 0.5%

Small Business Capital Group 46,910 32,877 14,033 42.7% Specialty Lending 7,972 5,553 2,419 43.6% Oxford 13,803 9,769 4,034 41.3% Purchased Loans 17,709 20,716 (3,007)

  • 14.5%

Special Assets 641 808 (167)

  • 20.7%
  • ----------- ------------

331,194 315,061 16,133 5.1%

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Total Loans – End of Period (000’s)

People you know. Solutions that work. $ % 3/31/2019 12/31/2018 Difference Difference Memphis Bank 255,085 244,159 10,926 4.5% Small Business Capital Group 38,412 46,910 (8,498)

  • 18.1%

Specialty Lending 5,608 7,972 (2,364)

  • 29.7%

Oxford 15,014 13,803 1,211 8.8% Purchased Loans 17,322 17,709 (387)

  • 2.2%

Special Assets 681 641 40 6.2%

  • ----------- ------------

332,122 331,194 928 0.3%

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New Loan Volume Originated

(in millions)

124.4 125.4 112.1 155.9 208.9 202.9 178.0 50 100 150 200 250 2012 2013 2014 2015 2016 2017 2018

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New Loan Volume Originated

(in millions)

124.4 125.4 111.1 0.9 114.9 41.0 147.7 42.3 18.9 137.4 33.2 20.6 11.7 118.0 33.0 23.1 3.9 25 50 75 100 125 150 175 200 225 250 2012 2013 2014 2015 2016 2017 2018

Core Bank SBCG Specialty Oxford

178.0 112.9 208.9 202.9 155.9

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Loans Originated and Sold or Paid Off

(in millions)

15.9 19.9 36.1 13.8 35.0 6.9 48.9 17.1 26.3 22.1 27.4 19.9 19.0 17.9 25.4 20 40 60 80 100 120 2015 2016 2017 2018

Construction Lending SBCG Specialty Mortgage

71.9 104.6 82.8 92.9

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DEPOSI DEPOSIT TRENDS TRENDS

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Total Deposits

(end of period in millions)

216 232 224 251 279 302 343 356 50 100 150 200 250 300 350 400

2 1 2 2 1 3 2 1 4 2 1 5 2 1 6 2 1 7 2 1 8 1 Q 1 9 Brokered Deposits 12/31/2015 12/31/2016 12/31/2017 12/31/2018 3/31/2019 (in millions) 23.9 34.2 57.7 70.3 78.3

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19.49% 19.98% 19.94% 20.20% 20.36% 20.83% 20.75% 20.20% 17.72% 17.45% 16.89%

2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 22.00% 24.00%

4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

FDI C Peer at 3-31-2019 13.84%

DDAs to Average Total Assets

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Core Deposits

(end of period in millions)

199 213 216 227 245 244 273 278 50 100 150 200 250 300 2 1 2 2 1 3 2 1 4 2 1 5 2 1 6 2 1 7 2 1 8 1 Q 1 9

Core Deposits exclude brokered deposits.

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Core Deposits –

Targeting the Right Mix

(in millions)

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IN INVESTMENTS

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Total Investments

(end of period in millions)

88 37 41 47 51 49 48 53 52 10 20 30 40 50 60 70 80 90

4Q07 4Q15 4Q16 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

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Unrealized Gain/(Loss) on Investments

(in thousands)

478 554 657 ( 560) ( 217) 312 229 ( 337) ( 1,118) ( 1,422) ( 1,846) ( 1,044) ( 100) ( 2,200) ( 1,700) ( 1,200) ( 700) ( 200) 300 800

1 Q 1 6 2 Q 1 6 3 Q 1 6 4 Q 1 6 1 Q 1 7 2 Q 1 7 3 Q 1 7 4 Q 1 7 1 Q 1 8 2 Q 1 8 3 Q 1 8 4 Q 1 8 1 Q 1 9

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CAPI CAPITAL TRENDS TRENDS

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Capital Ratios

16.19% 16.31% 15.94% 15.37% 14.22% 14.19% 14.48% 14.40% 14.94% 15.06% 14.69% 14.11% 12.96% 12.94% 13.22% 13.15% 10.52% 10.65% 10.92% 10.50% 10.51% 10.21% 10.43% 10.48% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 1Q19

Total RBC Tier One Leverage

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Capital Ratios

Memphis-Based Community Banks December 31, 2018

Total Risk-Based Tier 1 Leverage Capital Capital Ratio Landmark 15.68% 14.57% 9.00% Financial Federal 15.67% 14.42% 13.14% Paragon Bank 14.48% 13.22% 10.43% Bank of Bartlett 13.88% 12.83% 8.06% ** First Alliance 13.29% 12.41% 10.41% ** BankTN 12.94% 11.69% 10.03% ** First Capital 12.90% 12.13% 11.20% ** Bank of Fayette County 12.27% 11.04% 8.68% ** Triumph Bank 11.32% 10.33% 8.57% * * Capital includes Trust Preferred and Holding Company Loans

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IN INCOME TRENDS TRENDS

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Total Revenue

(in 000’s)

3,494 4,359 4,713 4,374 4,913 4,567 4,851 5,233

excludes security gains and losses

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Total Revenue

(in 000’s)

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Interest Income

(in 000’s)

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Interest Expense

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Net Interest Margin

3.88% 3.87% 3.68% 3.59% 3.64% 3.94% 4.08% 4.18% 3.69% 3.73% 3.50% 3.00% 3.50% 4.00% 4.50% 2013 2014 2015 2016 2017 2018 1Q19

ACTUAL WITHOUT RECOVERIES & SPECIALTY LENDING

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NONI NONINTERE NTEREST IN INCOME TRENDS TRENDS

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Core Non-Interest Income

(in 000’s)

963 1,040 988 701 1,086 503 38 1,257 699 1,096 1,267 939 3,488 1,290 530 3,121 1,361 446 2,841

319 113 467

1,000 2,000 3,000 4,000 5,000 6,000 2012 2013 2014 2015 2016 2017 2018 1Q19 OTHER CORE NONI NT I NCOME MORTGAGE BANKI NG I NCOME SBCG I NCOME 1,689 899 4,648 2,003 3,052 5,694 1,627 4,941

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Gross SBA Loans Sold By Quarter

(in 000’s)

11,299 5,211 9,743 9,529 2,966 10,266 8,503 15,761 4,689

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

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Quarterly Gain on Sale of SBA Loans

(in 000’s)

924 462 811 766 215 610 915 284

100 200 300 400 500 600 700 800 900 1,000 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

872

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Lender City State # of Loans Approved Dollars Paragon Bank Memphis TN 38 $30,109,700 Evolve Bank & Trust West Memphis AR 34 $28,399,800 First Tennessee Bank Memphis TN 16 $18,101,800 First Alliance Bank Cordova TN 4 $1,855,000 Triumph Bank Memphis TN 6 $988,700 Bank of Bartlett Bartlett TN 1 $125,000

Memphis Metropolitan Area SBA Lenders

People you know. Solutions that work. SBA Fiscal Year Ending 9‐30‐18

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Mortgage Loans Closed

(millions)

68,171 54,434 39,280 55,322 68,921 41,568 34,918 8,681

10,000 20,000 30,000 40,000 50,000 60,000 70,000

2012 2013 2014 2015 2016 2017 2018 1Q19

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Mortgage Loan Volumes

68 54 39 55 69 42 35 50 100 2012 2013 2014 2015 2016 2017 2018 Paragon

US Market in billions Paragon in millions

2,044 1,845 1,122 1,630 1,891 1,710 1,643 1,000 2,000 3,000 2012 2013 2014 2015 2016 2017 2018 U S Market Mortgage Bankers' Association

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2018 10 Year Treasury Yield

Lowest 1‐3‐2018 2.44% Highest 11‐8‐2018 3.24% 2.00 2.20 2.40 2.60 2.80 3.00 3.20 3.40

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NONI NONINTERE NTEREST EXPENSE EXPENSE TRENDS TRENDS

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Non-Interest Expense

9,437 9,236 9,697 925 9,992 2,565 10,314 3,019 284 76 10,072 3,129 555 250 10,271 2,697 732 444 5,000 7,000 9,000 11,000 13,000 15,000 17,000 2012 2013 2014 2015 2016 2017 2018 CORE BANK SBCG SPECI ALTY LENDI NG OXFORD

14,006 10,622 12,557 13,693 14,144 1.0% 2.3%

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Efficiency Ratio

73.6% 89.4% 93.4% 94.8% 74.4% 75.8% 97.1% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 2012 2013 2014 2015 2016 2017 2018

Efficiency Ratio

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CREDIT CREDIT QU QUALI ALITY TRENDS TRENDS

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14,675 7,843 4,706 2,087 1,682 1,332 1,447 1,308

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 4 Q 1 2 4 Q 1 3 4 Q 1 4 4 Q 1 5 4 Q 1 6 4 Q 1 7 4 Q 1 8 1 Q 1 9

Nonperforming assets include loans on nonaccrual status and other bank-owned real estate

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Nonperforming Assets as a % of Total Assets

7.35% 2.88% 1.73% 0.69% 0.48% 0.35% 0.36% 0.32%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%

4 Q 1 2 4 Q 1 3 4 Q 1 4 4 Q 1 5 4 Q 1 6 4 Q 1 7 4 Q 1 8 1 Q 1 9

Peer NPA’s/Total Assets @ 12/31/18 = .61%

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1.49 1.47 1.31 1.17 1.44 1.45 1.39 1.42

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80

4 Q 1 2 4 Q 1 3 4 Q 1 4 4 Q 1 5 4 Q 1 6 4 Q 1 7 4 Q 1 8 1 Q 1 9

Peer Loan Loss Reserve/Gross Loans @ 12/31/18 = 1.08%

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IN INCOME ST STATEMENT EMENT TRENDS TRENDS

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Pre-Tax Net Income

($000)

688 1,104 1,068 132 3,421 4,126 4,138

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2012 2013 2014 2015 2016 2017 2018

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Net Income (Loss)

($000)

2012 2013 2014 2015 2016 2017 2018 Pretax Income 688 1,104 1,068 132 3,421 4,126 4,138 Taxes (436) (41) (1,286) (1,487) (994) Deferred Taxes 3,543 (531) ‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐‐ Net Income 688 4,647 632 91 2,135 2,108 3,144

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Pre-Tax Net Income (Loss)

($000)

( 567) 331 163 522 435 625 ( 315) 986 208 642

  • 600
  • 400
  • 200

200 400 600 800 1,000 1,200 1Q15 1Q16 1Q17 1Q18 1Q19 SBCG Core Bank

(237) 850 685 1,060 671

27%

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Return on Assets

0.59% 0.81%

0.00% 0.20% 0.40% 0.60% 0.80% 1.00%

2017 2018

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Return on Equity

5.65% 8.04%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 2017 2018

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ST STOCK OCK TRENDS TRENDS

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PGNN v. SNL Micro Cap U.S. Bank Index

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PGNN v. KBW Bank Index

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The KBW Bank Index, developed by Keefe, Bruyette and Woods, includes 24 banking stocks. The stocks represent large U.S. national money center banks, regional banks, and thrift

  • institutions. KBW Bank Index is a

benchmark stock index for the banking sector.

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PGNN v. NASDAQ Bank Index

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The NASDAQ Bank Index contains securities of NASDAQ‐listed companies classified according to the Industry Classification Benchmark as Banks.

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PGNN v. SNL Micro Cap U.S. Bank Index

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The SNL Micro Cap U.S. Bank Index includes all publicly traded (NYSE, NYSE MKT, NASDAQ, OTC) Banks in SNL's coverage universe with less than $250M Total Common Market Capitalization.

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Return on PGNN

Prices as of April 30 of each year

Period Total Annual 1 YR ‐15.11% ‐15.11% 2 YR 11.70% 5.85% 3 YR 51.59% 17.20% 5 YR 58.90% 11.78% 10 YR 354.76% 35.48%

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Book Value Per Share

$9.65 $9.35 $8.84 $8.31 $7.95 $7.89 $7.46 $6.83

$5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 $8.50 $9.00 $9.50 $10.00

12/ 31/ 12 12/ 31/ 13 12/ 31/ 14 12/ 31/ 15 12/ 31/ 16 12/ 31/ 17 12/ 31/ 18 3/ 31/ 2019

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SUM SUMMAR ARY AND AND WR WRAP UP UP

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2018 Records

Loan Volumes Total Assets Demand Deposits Total Revenue Loan Income Net Interest Income Efficiency Ratio Income Before Taxes

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Executing Our Long-Term Plan:

Achieve Sustained, Above-Peer Profitability

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Pre-Tax Return on Assets

0.27% 0.42% 0.38% 0.05% 1.07% 1.15% 1.06% 0.40% 0.96% 1.05% 1.06% 1.19% 1.13% 1.04% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 2012 2013 2014 2015 2016 2017 2018

Paragon Peer Group

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QUE QUESTI STIONS? NS?

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Annual Shareholders’ Meeting May 28, 2019