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, 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. People you know. Solutions that work.

2018 2018 BUSI BUSINE NESS SS PLAN PLAN EXE EXECUTION UTION

Converted LPO in Oxford to Branch People you know. Solutions that work.

“Right Sized” SBCG Reduced annual volumes so that loan concentrations are appropriate for Paragon’s size Reduced staff to improve profitability People you know. Solutions that work.

Specialty Lending Moved to Fountain Place and subleased previous space Moved to a separate subsidiary of the bank People you know. Solutions that work.

Held First Economic Summit People you know. Solutions that work.

Converted Repurchase Agreements Converted customers who were in Repurchase Agreements to Insured Cash Sweep (ICS) Balances over the FDIC limit are swept to other banks – Paragon receives reciprocal money market deposits – not considered brokered Increases Paragon’s core deposits and frees up previously pledged investment securities People you know. Solutions that work.

People you know. Solutions that work. #33

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% WSJ Prime Interest Rate 3.25% 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 Prime Rate 7/1/2013 12/1/2013 5/1/2014 10/1/2014 3/1/2015 8/1/2015 3.50% 1/1/2016 People you know. Solutions that 6/1/2016 3.75% 11/1/2016 4.00% 4/1/2017 4.25% 4.50% 9/1/2017 4.75% 5.00% 2/1/2018 7/1/2018 5.25% 5.50% 12/1/2018

WSJ Prime Interest Rate People you know. Solutions that work.

Treasury Yield Curve People you know. Solutions that work.

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 People you know. Solutions that work.

Government Shutdow n People you know. Solutions that work.

ASSET ASSET TRENDS TRENDS

Total Assets (end of period in millions) 410 401 400 377 352 350 304 300 272 273 252 250 200 150 100 2012 2013 2014 2015 2016 2017 2018 1Q19

Total Loans (end of period in millions) 5% 332 350 331 9% 315 289 17% 300 14% 246 9% 250 215 198 183 200 150 100 2012 2013 2014 2015 2016 2017 2018 1Q19

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% People you know. Solutions that work.

Total Loans – End of Period (000’s) $ % 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% People you know. Solutions that work.

New Loan Volume Originated (in millions) 250 200 150 208.9 202.9 100 178.0 124.4 125.4 155.9 50 112.1 0 2012 2013 2014 2015 2016 2017 2018

New Loan Volume Originated (in millions) 250 208.9 202.9 225 178.0 18.9 200 11.7 155.9 20.6 3.9 42.3 175 23.1 33.2 150 112.9 41.0 33.0 125 0.9 100 137.4 147.7 75 125.4 124.4 118.0 111.1 114.9 50 25 0 2012 2013 2014 2015 2016 2017 2018 Core Bank SBCG Specialty Oxford

Loans Originated and Sold or Paid Off (in millions) 104.6 92.9 120 82.8 100 71.9 27.4 48.9 80 25.4 60 36.1 22.1 6.9 17.9 40 26.3 19.0 35.0 19.9 20 17.1 19.9 15.9 13.8 0 2015 2016 2017 2018 Construction Lending SBCG Specialty Mortgage

DEPOSI DEPOSIT TRENDS TRENDS

Total Deposits (end of period in millions) 400 356 343 350 302 279 300 251 232 250 224 216 200 150 100 50 2 2 2 2 2 2 2 1 0 0 0 0 0 0 0 Q 1 1 1 1 1 1 1 1 2 3 4 5 6 7 8 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

DDAs to Average Total Assets 24.00% 22.00% 20.83% 20.75% 20.20% 20.36% 20.20% 19.98% 19.94% 19.49% 20.00% 17.72% 17.45% 18.00% 16.89% 16.00% 14.00% FDI C Peer at 3-31-2019 12.00% 13.84% 10.00% 8.00% 6.00% 4.00% 2.00% 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

Core Deposits (end of period in millions) 300 278 273 245 244 250 227 216 213 199 200 150 100 50 0 2 2 2 2 2 2 2 1 0 0 0 0 0 0 0 Q 1 1 1 1 1 1 1 1 2 3 4 5 6 7 8 9 Core Deposits exclude brokered deposits.

Core Deposits – Targeting the Right Mix (in millions)

IN INVESTMENTS

52 1Q19 53 4Q18 48 3Q18 49 2Q18 Total Investments (end of period in millions) 51 1Q18 47 4Q17 41 4Q16 37 4Q15 88 4Q07 90 80 70 60 50 40 30 20 10 0

Unrealized Gain/(Loss) on Investments (in thousands) 554 657 800 478 312 229 300 ( 200) ( 100) ( 217) ( 337) ( 560) ( 700) ( 1,044) ( 1,200) ( 1,118) ( 1,422) ( 1,700) ( 1,846) ( 2,200) 6 6 6 6 7 7 7 7 8 8 8 8 9 1 1 1 1 1 1 1 1 1 1 1 1 1 Q Q Q Q Q Q Q Q Q Q Q Q Q 1 2 3 4 1 2 3 4 1 2 3 4 1

CAPI CAPITAL TRENDS TRENDS

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

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

IN INCOME TRENDS TRENDS

Total Revenue (in 000’s) 5,233 4,913 4,851 4,713 4,567 4,359 4,374 3,494 excludes security gains and losses

Total Revenue (in 000’s)

Interest Income (in 000’s)

Interest Expense

Net Interest Margin 4.50% 4.18% 4.08% 3.94% 4.00% 3.73% 3.88% 3.87% 3.69% 3.64% 3.68% 3.50% 3.59% 3.50% 3.00% 2013 2014 2015 2016 2017 2018 1Q19 ACTUAL WITHOUT RECOVERIES & SPECIALTY LENDING

NONI NONINTERE NTEREST IN INCOME TRENDS TRENDS

Core Non-Interest Income (in 000’s) 5,694 6,000 4,941 4,648 5,000 4,000 3,488 3,052 2,841 3,121 3,000 2,003 1,096 1,689 1,627 2,000 38 939 899 699 530 446 1,040 701 503 1,000 1,361 467 1,257 1,267 1,290 1,086 113 963 988 319 0 2012 2013 2014 2015 2016 2017 2018 1Q19 OTHER CORE NONI NT I NCOME MORTGAGE BANKI NG I NCOME SBCG I NCOME

Gross SBA Loans Sold By Quarter (in 000’s) 16,000 14,000 12,000 10,000 8,000 15,761 6,000 11,299 10,266 8,503 9,743 9,529 4,000 5,211 4,689 2,000 2,966 0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19