Paragon Secondary Stock Offering Oversubscribed

Volume 2 Issue 1

the Shield

July 2006 1

On February 22, Paragon opened our third full-service banking center, located in the lobby of the Loewenberg Building adjacent to St. Francis Hospital in East Memphis. The offi ce provides an opportunity to expand our Medical Management Banking service as the bank continues to grow with emphasis on local needs.

Alex Thesmar, vice president of medical banking, notes, “Physicians have a limited amount of time to think about the business side of the medical practice until after the offi ce has closed.” Paragon’s Medical Management Banking focuses our fi nancial team’s experience on the medical practitioner’s unique fi nancial and credit issues, combining traditional private banking and our cutting edge technology.

A grand opening reception was held on March 9, in the newly remodeled banking center where Paragon bankers hosted guests from the St. Francis medical community. We are committed to providing the best possible service to this specialized customer base.

Paragon Opens Third Banking Center

With more demand for stock than was available, Paragon National Bank’s recently closed secondary stock offering was a big success. Paragon completed the sale of 980,000 shares of its common stock at a price of $12.50 per share. The bank announced, on May 12, 2006, that it had fi led a registration statement with the Offi ce of the Comptroller of the Currency (OCC) to seek permission for the secondary stock offering. The offering was for the sale of up to 880,000 shares of its common stock, with an option to sell an additional 100,000 shares to cover over-allotments, if any. The 980,000 shares sold at $12.50 will generate net proceeds of approximately $11.7 million in capital for Paragon. Shares of Paragon’s stock closed at $13.01 on July 27, 2006.

Investor meetings were held on July 11 and 13, at the Dixon Gallery and Gardens to provide details of the offering. Invitations were sent to all shareholders and others who had expressed an interest in purchasing additional Paragon stock. Both sessions were attended by more than 100 people interested in investing. Robert Shaw, Paragon president and CEO, explained that the proceeds from the stock sale will be used to fi nance additional growth by increasing the bank’s lending limits, improving capital ratios, and funding operations. Shaw also introduced Team Paragon members and representatives from Howe Barnes Investments, Inc, the

underwriter of the offering on a best efforts basis. Howe Barnes makes a market in Paragon’s stock.

Paragon was launched in 2005, with $23.2 million in capital, a record for de novo banks in the Memphis/Shelby County area. Since its inception, Paragon has experienced rapid growth. It was the second fastest growing de novo formed during that year in the U.S. Current assets exceed $210 million.

After the offering closed Shaw stated, “Original shareholders should be happy with the 25% increase in value from their initial purchase price. We are gratifi ed by the response to this stock offering. We believe our growth since the bank opened and the response to this offering are confi rmations that the Memphis area needs a locally-owned bank that provides the broad range of products and services and the high level of customer service that Paragon provides. We believe this stock offering will allow us to continue to grow and provide Paragon’s brand of banking to more Memphians.” Shareholders should fi nd further comfort in their investment because over 92% of Paragon employees own stock in the bank including an additional $1.4 million invested by the Directors and employees in this recent offering.

PARAGON NATIONAL BANK

From l to r: Sam Patterson,

Alex Th esmar and Kathy Bomar.

Staff members from

our Paragon Place

and Fountain Place

locations gathered at the

St. Francis Banking Center

on March 9, for a

Grand Opening reception.

Paragon Community Involvement

Lisa Barthol,

Patrick O'Hearn,

Lisa Yaff e and

Alison Deiter

receive a certifi cate

of apprection from

the students at

Hawkins Mill.

Paragon continues to participate in activities with Kimberly Martin’s second grade class at Hawkins Mill Elementary School, which we adopted in the fall of 2005. During the fall semester Lisa Yaffe and Kim Hall led the students in the Junior Achievement program and were joined by other Paragon staff members to celebrate both the Thanksgiving and Christmas holidays with the students.

In February, several Paragon staff members took valentines for a pink and red celebration of Valentine’s Day. They helped the children create gift bags decorated with construction paper, markers and ribbon, and they decorate heart magnets. Each child was given a valentine card made by a Paragon employee to let the child know we care about him or her.

The Shield of Excellence

Paragon staff members returned to Ms. Martin’s class this spring to celebrate with the students their accomplishments during the year and their completion of the second grade. The students used balloons and other supplies to make imaginary creatures after they had listened to a funny story. The activities ended with a show of the creatures the children had created.

At the end of the year, Paragon was presented with hand-drawn thank you notes from the children and a certifi cate of appreciation from the school. All the staff members who helped at Hawkins Mill Elementary agreed that getting to know and spend time with these children was very rewarding. We look forward to sponsoring Ms. Martin’s class next year.

The Shield of Excellence2

Lisa Yaff e, Bob Word, Jonelle Middlebrook, Dorothy Cleaves, Robert Shaw

and Steve Maury celebrate Valentine's Day at Hawkins Mill

with Ms. Martin, Principal Janet Robbins and the class.

Paragon Continues Involvement With Hawkins Mill Elementary

Jeff Gach, Janie Day, Alison Deiter, Melanie Clinton and George Daley

participated in the Harbortown 5K Run sponsored by the Pheonix Club of

Memphis to raise money for Memphis' Boys & Girls Clubs.

Gordin & Lisa McMurtry, Kim Hall and Robert Shaw

attend the Exchange Club Gala in March benefi tting the Exchange

Club's many programs that help break the cycle of violence in

families around the Memphis area.

Ralph & Carol Yaff e, Lisa Yaff e and Justin Barden attend

the Memphis Heart Gala in February helping to raise funds

and awareness for the American Heart Association.

July 2006 3

Happy Birthday,Paragon!

January 19, 2006, marked the fi rst anniversary of the opening of Paragon National Bank. To celebrate the day,employees at Fountain Place and Paragon Place created unique hats which were judged and winners were recognized at each location. The hats were added to the displays of balloons and confetti

in the bank lobbies. Complimentary bottles of water and cake were served to customers who visited the lobby that day. Paragon also offered a special CD rate in honor of its fi rst birthday.

Carole Hughes

& Rita Fiduccia

tie balloons.

Melanie Clinton and Lisa Barthol

proudly show their creative hats.

As Paragon Grows, So Does Our Staff -Paragon Welcomes:

Congratulations, Steve & Dana!

Vice President of Residential Construction Lending Steve Maury and his wife, Dana, welcomed their fi rst child, Allison Brooke, on May 19, 2006.

Our employees are undoubtedly Paragon’s best assets. Because of our staff’s strong desire to serve our customers in the best ways possible, we are able to offer exceptional products and services. We feel that only if our employees are happy and satisfi ed, will our customers be happy and satisfi ed.

The week b e g i n n i n g January 23, was designated as Employee Appreciat ion Week. Each Paragon banker received a fun treat every day including: an early morning breakfast, chocolates, popcorn, and a professional massage.

Melanie Clinton, Chondrea Black,

Jeff Gach, Chris Platania

and Kathy Bomar enjoy ice cream.

A sweet treat!

Employees Honored

Chondrea BlackVice President,

Compliance & Loan Operations Manager

Cheryl ShackelfordVice President,

Deposit Operations Manager

Tracey WilsonVice President,

Controller

Kathy BomarCustomer Service Representative,

St. Francis

Marita BrooksCustomer Service Representative,Fountain Place

Melanie ClintonCustomer Service,

Paragon Place

Congratulations to these Paragon bankers who were recently promoted:

Memorial Day CelebratedThe Paragon staff celebrated Memorial Day with an employee cookout on Friday, June 2. Picnic tables and chairs were set up under tents where employees enjoyed hamburgers and hot dogs grilled by Paragon’s own Bob Word, Gordin McMurtry, Andy Taylor and Robert Shaw.

Josh MillerVice President,

Commercial Lending

Sam PattersonCustomer Service Representative,

St. Francis

Alex ThesmarVice President,

Medical Banking

Myra Compton,Banking Offi cer,

Mortgage Banking

Alison DeiterMarketing & Public Relations Manager

Pam HiblerDeposit Operations

Trips to Tunica have been very popular with our Sterling customers, so we are pleased to announce that we now plan monthly trips to the casinos. Rita Fiduccia, vice president of Sterling banking, coordinates these trips.

Trips are scheduled through December for the Wednesday after the 15th of each month. The cost, $15 for customers and $20 for noncustomers, includes a small snack on the bus, a goody bag and a lunch voucher. Call Rita at (901) 322-0613 if you would like to join the group next time – which is reported to be lots of fun!

Sterling Customers Travel

Rita Fuduccia, vice president of Sterling

Banking, talks with Janet Burcham

& Jane Robins before they board the

bus for May's Tunica trip.

Preparation for construction of Paragon’s Saddle Creek Banking Center at 7600 Poplar Avenue began at the celebration of the wall breaking on March 2. Staff members and members of the board of directors took turns with a sledgehammer

trying to knock out parts of the walls of the old building.

Further demolition took place on June 13; the old building was crumbled in 12 minutes. By June 16, all debris had been cleared

from the property and the ground was being prepared for the foundation of the new banking center.

The Saddle Creek location will be a full-service banking center with customer service representatives in the lobby, mortgage and lending departments, two drive-thru lanes, a night depository and a 24-hour ATM. The banking center will be open 8:30-5:30 Monday-Thursday and 8:30-6:00 on Friday.

Saddle Creek Banking Center Construction Started

The Shield of Excellence4

Members of Paragon's Board of Directors Craig Weiss, Deborah Pittman,

John Novarese, Chris Saenger, Dr. James Freeman, Nap Cassibry and

Robert Shaw all took a turn trying to tear down the old convenince store.

Th e architect's rendering of the Saddle Creek Banking Center.

It took only 12 minutes to tear down

the former convenience store.

From l to r: Lisa Barthol. Charlene Frankiln, Lisa Yaff e, Keyonlia Narcisse,

Janie Day, Beth Perry, Debby Giff ord and Kim Hall

Michael Erhardt, Andy Taylor, Gordin McMurtry, Carol McConkey

and Alex Th esmar wait for their turn to hit the building.

Construction on the Saddle Creek

Banking Center in late July.

July 2006 5

2nd Shareholders Meeting:The Art of Excellence

Paragon National Bank held its second shareholders’ meeting April 27, at The Dixon Gallery and Gardens. Shareholders gathered to hear the progress Paragon made during the past year and plans for 2006.

“Paragon National Bank’s employees are driven by the desire to provide superior customer service,” President and CEO Robert Shaw told share- holders in his opening remarks. “We strive to not only meet our customers’ expectations, but to raise those expectations to a new level of excellence.”

On December 31, 2005, Paragon was the second largest de novo bank formed during the year. Paragon National Bank’s employees have an average of 15 years of experience each. “Just because Paragon is new in the Memphis banking scene, doesn’t mean our employees are,” Shaw said. “We have placed an emphasis on hiring professionals who are knowledgeable about particular areas of the banking industry.”

The bank’s cutting edge technology was also highlighted at the meeting. "Paragon is a new bank," Shaw said, "We can’t afford to have branches all over Memphis." To overcome this obstacle and make banking more convenient, Paragon has initiated a myriad of technologies including: user-friendly Internet banking, remote deposit capture, imaged lockbox and a 24-hour telephone banking system. One of Paragon’s priorities is giving back to the community. Our civic efforts have included supporting a second grade class of students at Hawkins Mill Elementary, granting a wish for a Make-A-Wish child and participating in the 2005 Susan G. Komen Race for the Cure. “We are committed to helping make our community a better place to live by raising expectations not only in business, but in our neighborhoods as well,” Shaw said.

2005 accomplishments:• Granted charter by Offi ce of the Comptroller of the Currency• Listed shares on the OTC Bulletin Board• Opened the fi rst two branches, Paragon Place and Fountain Place • Added professionals in residential construction lending, aircraft lending and medical banking• Acquired two properties in Germantown for future expansion.

Paragon employees

gather outside of

the Dixon Museum

after the second

Shareholders Meeting.

President and CEO Robert Shaw

speaks to shareholders about

Paragon's many accomplishments.

Paragon National Bank is insured by the FDIC (Federal Deposit Insurance Corporation). The FDIC is a US Government agency that insures cash deposits, including certifi cates of deposit, that have been placed in member institutions, such as Paragon. The FDIC’s mission is to maintain the stability of and public confi dence in the US banking system. Below are commonly asked questions regarding the FDIC.

Q: What is the FDIC?A: The FDIC – short for the Federal Deposit Insurance Corporation – is an independent agency of the United States government. The FDIC protects you against the loss of your deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government.

Financial institutions will display one of these signs where deposits are received if they are insured by the FDIC.

Q: What is the purpose of FDIC Deposit Insurance?A: The FDIC protects depositors’ funds in the unlikely event of the fi nancial failure of their bank or savings institution. FDIC deposit insurance covers the balance of each depositor’s account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank’s closing.

Q: What is the FDIC insurance amount?A: The basic insurance amount is $100,000 per depositor, per insured bank. This includes principal and accrued interest up to a total of $100,000.

Q: What does FDIC insure?A: FDIC insures all types of deposits received by a fi nancial institution in its usual course of business. For example, savings and checking accounts, NOW accounts, Christmas club accounts, and time deposits (including certifi cates of deposit, “CDs”) are all subject to FDIC insurance coverage. Cashiers’ checks, offi cers’ checks, expense checks, loan disbursement checks, interest checks, outstanding drafts, negotiable instruments and money orders drawn on the institution are also considered deposits and so are also protected by the FDIC. Collectively, these types of instruments are referred to as “offi cial checks.” For example, a cashier’s check is a type of offi cial check.

Certifi ed checks, letters of credit, and travelers’ checks, for which an insured depository institution is primarily liable, also are insured when issued in exchange for money or its equivalent, or for a charge against a deposit account.

Source: Federal Deposit Insurance Corporation (FDIC), May 2006

What is FDIC insurance?

Paragon

National Bank

is insured

by

the FDIC.

Locations: Paragon Place Poplar at Massey

6300 Poplar Ave., Suite 117

Memphis, TN 38119

Fountain Place Poplar at Valleybrook

5400 Poplar Ave., Suite 150

Memphis, TN 38119

St. Francis 6005 Park Ave., Suite 111

Memphis, TN 38119

Saddle Creek 7600 Poplar Ave.

Germantown, TN 38138

(opening late 2006)

Telephone: 901.273.2900

Branch Hours: 8:30 am – 5:00 pm Mon-Thu

8:30 am – 6:00 pm Fri

ATM: 24 Hours/7 days a week

Paragon Direct: 901.333.0260

24-Hour Voice Response Unit

Online Banking: bankparagon.com

Mailing Address: P.O. Box 2022

Memphis, TN 38101-2022

Equal HousingLender

Local banking from locals.

The Shield of Excellence6

Paragon Hosts Art Show for St. Agnes Academy Seniors

Works of art by 14 senior art students of St. Agnes Academy hung on display at our Fountain Place location during the month of March. On March 7, Paragon staff members, directors, friends, and families gathered to honor the artists and enjoy their work.

The talent was amazing! Janis McCarty, the art teacher at St. Agnes who made the art show possible, deserves much credit for helping these young ladies develop such skill.

This exhibition was a continuation of our commitment to supporting local artists, whether professional or students, as evidenced by the collection of Memphis-created art displayed at our Paragon locations.

We received such positive feedback from the bank staff, our customers, the students and their families, that we have already committed to hosting another art show during the spring of 2007.

This year’s student artisans pictured with art teacher Janis McCarty, President Barbara Daush, and Dean of the Upper School Joy Maness, included: Lauren Carlson, Lindsey Carter, Lauren Childs, Katie DeWood, Jenny Dalmasso, Alex Finnell, Regina Howard, Shelby Luigs, Katy McDowell, Chelsea Miller, Elizabeth Poston, Griffen Wall, Angelica Walsh, and Jenny Williams.

Ron Murphy talks with

Jenny Dalmasso and her parents.

Paragon National Bank and The Society of Entrepreneurs are co-sponsoring a seminar for small business owners, The Kindness Revolution: The Company-wide Culture Shift That Inspires Phenomenal Customer Service. Ed Horrell, well known author, speaker, and radio host, will discuss re-energizing a company’s customer service using the power of kindness on Thursday, October 19, 2006, at 10:00 a.m. at the Holiday Inn at the University of Memphis, 3700 Central Ave.

Combining extensive research with inspiring real-life examples from companies known for their outstanding customer service, Horrell will explain in the presentation on The Kindness Revolution that providing exceptional, compassionate, customer service can only happen when you build a deep and lasting relationship with your employees. And it is kindness, says Horrell, that most characterizes that relationship.

Lunch, courtesy of Paragon National Bank, will follow the presentation. To pre-register or for additional information on the seminar, please contact Alison Deiter at (901) 322-0635.

Paragon to Co-Host Seminar This Fall