Economic Outlook Mark Vitner, Managing Director & Senior Economist March 27, 2012

Economic Outlook 2 Economic Growth We are more than two years into the economic recovery and there is still a considerable amount of uncertainty regarding sovereign debt issues in Europe, the federal budget deficit and the U.S. housing sector Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economic Outlook 33 The Timing of The First Fed Rate Hike The FOMC recently extended its timeline for an “exceptionally low levels for the federal funds rate at least through late 2014.” The FOMC also provided individual member expectations about when the first fed funds rate hike will likely occur. Source: Federal Reserve Board and Wells Fargo Securities, LLC Individual FOMC Member ForecastsConsensus Fed Funds Rate Hike

Economic Outlook 4 Labor Market Technical factors may be exaggerating the recent drop in the unemployment rate Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 5 Employment Growth by State North Dakota, Alaska and Washington, D.C., continue to lead the nation in employment growth, while the labor markets in Nevada, Florida and Arizona remain exceptionally weak Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 6 Homebuilding We believe housing starts have bottomed and will increase modestly through 2012, returning to a “normal” level by 2015 Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economic Outlook 7 Home Prices Various mortgage foreclosure moratoriums and stimulus programs likely supported prices earlier and are now giving way Source: Federal Housing Finance Agency, National Association of Realtors, S&P Corp. and Wells Fargo Securities, LLC

U.S. Commercial Real Estate

Economic Outlook 9 Commercial Real Estate Prices Commercial real estate prices remain weak Source: Moody’s, Standard & Poor's and Wells Fargo Securities, LLC

Economic Outlook 10 Nonresidential Construction Nonresidential construction spending will show modest improvement over the next couple of years Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economic Outlook 11 Apartment The apartment market continues to outperform Source: Real Capital Analytics, Reis, Inc. and Wells Fargo Securities, LLC Supply & DemandPrices

Economic Outlook 12 Office Office fundamentals are still improving, but the recovery has been slow Source: Real Capital Analytics, Reis, Inc. and Wells Fargo Securities, LLC Supply & DemandPrices

Economic Outlook 13 Industrial Operating fundamentals for industrial properties have shown marked improvement Source: Real Capital Analytics, Property & Portfolio Research, Reis, Inc. and Wells Fargo Securities, LLC Supply & DemandPrices

Economic Outlook 14 Retail The recovery in the retail sector continues to struggle Source: Real Capital Analytics, Reis, Inc. and Wells Fargo Securities, LLC Supply & DemandPrices

North Carolina

Economic Outlook 16 North Carolina Employment Picture North Carolina’s labor market is improving, but total payrolls remain well below their prerecession peak level Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 17 North Carolina Unemployment Rate The unemployment rate in North Carolina is well above the national average Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 18 North Carolina – Unemployment Rate Composition Unemployment Rate by County North Carolina Unemployment Rate December 2011 Greater than 15.5% Less than 9.5% 9.5% to 11.0% 12.5% to 15.5% 11.0% to 12.5% Source: US Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 19 Metro-Level Employment (Year Ago) Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 20 Metro-Level Employment (Today) Source: U.S. Department of Labor and Wells Fargo Securities, LLC

Economic Outlook 21 North Carolina – Home Prices & Construction Even though home prices in North Carolina did not become too far out of whack during the boom years, construction took a big hit and continues to struggle Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC Housing PermitsHome Prices

Economic Outlook 22 Charlotte MSA – Employment Growth & Unemployment Rate Employment growth has been choppy, with some gains in professional and business services and information services. The unemployment rate remains well above the national average Source: U.S. Department of Labor and Wells Fargo Securities, LLC Unemployment Rate Employment

Economic Outlook 23 Charlotte Area – Unemployment by County Charlotte Area Unemployment – December 2011 Charlotte Area Unemployment Rate December 2011 Greater than 12.6% Less than 10.0% 11.4% to 12.6% 10.0% to 11.4% Source: US Department of Labor and Wells Fargo Securities, LLC Union 9.0% Rowan 10.9% Cabarrus 9.9% Mecklenburg 10.0% Iredell 10.5% Stanley 10.3% Anson 12.2% Lancaster 13.5% York 12.9% Chester 14.8% Lincoln 10.7% Gaston 11.0 % Cleveland 10.6%

Economic Outlook 24 Charlotte MSA – Population Growth Population growth slowed from its record pace, but remains strong nonetheless Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Economic Outlook 25 Charlotte MSA – Home Prices & Construction Home prices are showing some signs of stabilization, but construction activity remains sluggish Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC Housing PermitsHome Prices

Economic Outlook 26 Charlotte Apartment Market Charlotte’s apartment market continues to outperform. Vacancy rates have fallen dramatically over the past two years. Source: Reis, Inc. and Wells Fargo Securities, LLC

Economic Outlook 27 Charlotte Office Market Charlotte’s office market continues to struggle. Vacancy rates have yet to reach a peak. Source: Reis, Inc. and Wells Fargo Securities, LLC

Economic Outlook 28 Charlotte Retail Market Charlotte’s retail market is showing some modest improvement, but there is very little transaction activity taking place Source: Reis, Inc. and Wells Fargo Securities, LLC

Economic Outlook 29 Charlotte CRE Vacancy Rates Vacancy rates are falling in Charlotte’s apartment and industrial markets, but are showing less improvement in the city’s office and retail markets Source: Reis, Inc., PPR and Wells Fargo Securities, LLC

Economic Outlook 30 Asian Real Estate Bubble? Trade Wars & Currency Devaluations Credit Availability & Financial Reform European Debt Crisis Deleveraging Fiscal & Monetary Policy Geopolitical Tensions Energy/Commodity Price Swings Issues to Watch

Economic Outlook 31 Our Forecast

Appendix

Economic Outlook 33 Recent Special Commentary Wells Fargo Economics Group Publications To view any of our past research please visit: economics To join any of our research distribution lists please visit: economics A Sampling of Our Recent Special, Regional & Industry Commentary

Economic Outlook 34 Wells Fargo Securities, LLC Economics Group 34 John Silvia … Global Head of Research and Economics Diane Schumaker-Krieg ………………… …… Global Head of Research & Economics Chief Economist Mark Vitner, Senior Economist……………....………... Jay Bryson, Global Economist …………………....………. Scott Anderson, Senior Economist…………… Eugenio Aleman, Senior Economist ……………. Sam Bullard, Senior Economist…………………………. Senior Economists Joe Seydl, Economic Analyst ……………………………. Sarah Watt, Economic Analyst ……………………………. Kaylyn Swankoski, Economic Analyst Economists Anika Khan, Economist…………….…. Azhar Iqbal, Ed Kashmarek, Economist Tim Quinlan, Economist Michael Brown, Economist Economic Analysts Peg Gavin ………………………...………………. Executive Assistant Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A, Wells Fargo Advisors, LLC, and Wells Fargo Securities International Limited. The information and opinions herein are for general information use only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company. SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE Important Information for Non-U.S. Recipients For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited (“WFSIL”). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Services Authority. The content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive The FSA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, not will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients. This document and any other materials accompanying this document (collectively, the “Materials”) are provided for general informational purposes only.