1. Babson Capital/UNC Charlotte Economic Forecast March 11, 2014

2. Outline for Today Review of 2013 Positive Economic Signs Negative Economic Signs North Carolina Outlook for 2014 The Employment Picture Regional Perspective Housing Trends

3. Current Expansion Began July 2009 56 months 7 th longest of 33 total expansions since December 1854

4. North Carolina in 2013

5. Quarterly Growth Rates in Forecasted RGSP

6. 2013 Sector Analysis Wholesale Trade 3.6 Percent of Real Sector Growth Total Real GSP Growth 2.5 % Mining 1.2 TWU 4.3 E&H Services 4.9 Agriculture 22.7 Percent of Total Real GSP 0.8 0.0 3.7 9.1 10.7 3.2 5.0 5.8 3.6 10.6 2.0 Construction 1.9 Durables 0.7 Retail Trade 1.8 Government 1.7 FIRE 2.9 Nondurables -0.5 B&P Services 4.1 Information 2.0 H&L Services 2.1 Other Services 2.9 7.3 21.7 13.3 3.2

7. Wholesale Trade 1.1 Percent of Employment Growth Total Employment Growth 1.6% Mining 0.0 TWU 3.8 E&H Services 1.4 Percent of Total Employment 0.1 3.1 5.8 5.1 4.1 11.5 4.3 1.8 13.8 17.5 Construction -2.2 Durables 0.4 Retail Trade 2.7 Government -0.1 FIRE 1.3 Nondurables 0.2 B&P Services 4.1 Information 7.6 L&H Services 2.1 Other Services 1.0 10.6 5.0 13.8 3.5 2013Year-End Employment Trends 64,500 Net Jobs

8. 2013 North Carolina Unemployment Rate December Rate 6.9%

9. Housing Stock/Prices Interest Rates Inflation Consumer Credit Consumer Confidence Dollar Gas Prices Budget Deficit Positive Indicators

10. U.S. Monthly New Home Inventory (Seasonally Adjusted)

11. Current Rate 0 -.25% Monthly Federal Funds Rate 1996-2013

12. Percentage Changes in CPI 1949-2013

13. 1980-2013 U.S. Household Debt Payments as a Percent of Income Peak 2007 III 13.18% Current 9.93%

14. Consumer Confidence October 1992 54.6 March 2009 25.0 January 2014 81.7

15. $0.87 $1.36 2000-2013 Dollar Price of Euro

16. Monthly Gas Prices 2012-2014

17. Effect of Energy Price Increase on U.S. Economy Annual Transportation Usage – 187 billion gallons per year Annual Total Usage – 288 billion gallons per year Effect of a $.50 increase in price – Transportation$93.5 billion per year – Total $144.0 billion per year

18. 1980 – 2023 U.S. Budget Deficit 2013 Budget Deficit $672 billion 2015 Budget Deficit $388 billion

19. Excess Reserves Trade Deficit Tax Increases Negative Indicators

20. 2008 – 2014 Banking System Excess Reserves February Excess Reserves $2,517 billion

21. 1992-2013 U.S. Trade Deficits 2009 Trade Deficit $382 Billion 2008 Trade Deficit $681 Billion 2006Trade Deficit $799 Billion 2013TradeDeficit $475 Billion

22. Spending Cuts 2014 - 2015 Fiscal Year 2014 Original Sequestration – $100 billion New Sequestration – $50 billion Fiscal Year 2015 Original Sequestration – $100 billion New Sequestration – $75 billion

23. North Carolina Forecast 2014

24. Quarterly Growth Rates in Forecasted RGSP

25. 2014 Sector Analysis Wholesale Trade 3.6 Percent of Real Sector Growth Total Real GSP Growth 3.0 % Mining 1.9 TWU 3.4 E&H Services 2.2 Agriculture 11.9 Percent of Total Real GSP 0.9 0.0 3.7 9.1 10.7 3.2 5.0 5.8 3.6 10.5 2.0 Construction 4.2 Durables 2.9 Retail Trade 2.4 Government 3.8 FIRE 3.3 Nondurables 2.5 B&P Services 1.8 Information 2.1 H&L Services 1.7 Other Services 4.1 7.2 21.8 13.4 3.1

26. Wholesale Trade 3.2 Percent Employment Growth Total Employment Growth 1.5% Mining -4.4 TWU 3.3 E&H Services 1.7 Percent of Total Employment 0.1 3.2 5.8 5.0 4.2 11.5 4.4 1.8 13.8 17.2 Construction 3.7 Durables 1.7 Retail Trade 1.8 Government 0.0 FIRE 0.1 Nondurables 0.3 B&P Services 1.7 Information 0.7 L&H Services 1.8 Other Services 2.3 10.7 5.0 13.8 3.5 2014 Year-End Employment Trends 60,000 Net Jobs

27. 2013-2014 North Carolina Unemployment Rate December Rate 6.9%

28. Employment Picture

29. Employment Decline: -8,736,000 Employment Gain: 7,557,000 Percent Recovered: 86.5% 2007-2013 United States Payroll Employment

30. Employment Decline: -334,600 Employment Gain: 243,900 Percent Recovered: 72.9% 2007-2013 North Carolina Payroll Employment

31. What’s the Target? 3,000,000 Jobs per Year 250,000 Jobs per Month

32. US Job Growth 2012 2,193,000 jobs 182,750 per month (Second Largest Job Growth Since 1999)

33. US Job Growth 2013 2,186,000 jobs 182,150 per month (Third Largest Job Growth Since 1999)

34. U.S. Job Growth 1990 - 2013

35. NC Job Growth 1990 - 2013

36. NC Job Growth 2012 89,900 jobs 7,490 per month (Second Largest Job Growth Since 1998)

37. NC Job Growth 2013 64,500 jobs 5,375 per month (Sixth Largest Job Growth Since 1998)

38. July 2013 Unemployment Rates StateRate NEVADA 9.5 ILLINOIS 9.2 NORTH CAROLINA 8.9 RHODE ISLAND 8.9 GEORGIA 8.8 MICHIGAN 8.8 CALIFORNIA 8.7 NEW JERSEY 8.6 MISSISSIPPI 8.5 TENNESSEE 8.5

39. December 2013 Unemployment Rates StateRate RHODE ISLAND9.3 NEVADA9.0 ILLINOIS8.9 CALIFORNIA8.3 MICHIGAN8.3 KENTUCKY7.9 MISSISSIPPI7.8 TENNESSEE7.7 ARIZONA7.6 ARKANSAS7.4 CONNECTICUT7.4 GEORGIA7.4 NEW JERSEY7.2 MASSACHUSETTS7.1 OHIO7.1 OREGON7.1 NEW YORK7.0 NORTH CAROLINA6.9 INDIANA6.8 PENNSYLVANIA6.8 WASHINGTON6.7 SOUTH CAROLINA6.6

40. 2013 North Carolina Labor Force

41. 2013 North Carolina Unemployment

42. 2013 North Carolina Employment

43. NC Number of Unemployed per Job Opening (Not Seasonally Adjusted) January 2008 1.21 Persons per Job Opening

44. Regional Perspective

45. MSA Jobs Gained Geography Jobs GainedPercentage North Carolina256.60.77 Charlotte-Gastonia-Rock Hill NC-SC MSA93.51.29 Raleigh-Cary MSA47.81.44 Durham-Chapel Hill MSA20.51.45 Greensboro-High Point MSA14.00.38 Asheville MSA8.40.76 Wilmington MSA7.40.55 Winston-Salem MSA7.20.43 Greenville MSA5.31.23 Burlington MSA3.40.52 Hickory-Lenoir-Morganton MSA2.50.13 Fayetteville MSA2.51.92 Goldsboro MSA1.00.32 Rocky Mount MSA -1.5-0.21

46. MSA Jobs Percentage Geography Jobs GainedPercentage North Carolina256.60.77 Fayetteville MSA2.51.92 Durham-Chapel Hill MSA20.51.45 Raleigh-Cary MSA47.81.44 Charlotte-Gastonia-Rock Hill NC-SC MSA93.51.29 Greenville MSA5.31.23 Asheville MSA8.40.76 Wilmington MSA7.40.55 Burlington MSA3.40.52 Winston-Salem MSA7.20.43 Greensboro-High Point MSA140.38 Goldsboro MSA1.00.32 Hickory-Lenoir-Morganton MSA2.50.13 Rocky Mount MSA -1.5-0.21

47. MSA Number of Unemployed Number of Unemployed (not seasonally-adjusted) January 2008December 2013 Area NameNumber of Unemployed Asheville, NC Metropolitan Statistical Area, NC9,20410,682 Burlington, NC Metropolitan Statistical Area, NC3,8864,601 Charlotte-Gastonia-Concord, NC-SC Metropolitan Statistical A, NC45,91060,303 Durham-Chapel Hill, NC Metropolitan Statistical Area, NC10,93113,287 Fayetteville, NC Metropolitan Statistical Area, NC8,56012,464 Goldsboro, NC Metropolitan Statistical Area, NC2,6483,588 Greensboro-High Point, NC Metropolitan Statistical Area, NC20,14025,011 Greenville, NC Metropolitan Statistical Area, NC4,7946,398 Hickory-Lenoir-Morganton, NC Metropolitan Statistical Area, NC11,58411,718 Jacksonville, NC Metropolitan Statistical Area, NC3,1374,359 Raleigh-Cary, NC Metropolitan Statistical Area, NC22,71730,963 Rocky Mount, NC Metropolitan Statistical Area, NC4,9706,363 Wilmington, NC Metropolitan Statistical Area, NC9,22512,669 Winston-Salem, NC Metropolitan Statistical Area, NC11,98114,403

48. MSA Number of Job Openings January 2008December 2013 Area NameNumber of Job Openings Asheville, NC Metropolitan Statistical Area, NC7,0829,961 Burlington, NC Metropolitan Statistical Area, NC2,1732,558 Charlotte-Gastonia-Concord, NC-SC Metropolitan Statistical A, NC54,91049,251 Durham-Chapel Hill, NC Metropolitan Statistical Area, NC19,72415,268 Fayetteville, NC Metropolitan Statistical Area, NC7,4877,795 Goldsboro, NC Metropolitan Statistical Area, NC1,8751,538 Greensboro-High Point, NC Metropolitan Statistical Area, NC8,67317,695 Greenville, NC Metropolitan Statistical Area, NC5,3154,619 Hickory-Lenoir-Morganton, NC Metropolitan Statistical Area, NC4,8615,151 Jacksonville, NC Metropolitan Statistical Area, NC2,1222,893 Raleigh-Cary, NC Metropolitan Statistical Area, NC34,93733,956 Rocky Mount, NC Metropolitan Statistical Area, NC2,1192,274 Wilmington, NC Metropolitan Statistical Area, NC6,7177,868 Winston-Salem, NC Metropolitan Statistical Area, NC9,3698,072

49. MSA Job Supply and Demand Number of Unemployed to Number of Job Openings January 2008December 2013 Area NameNumber of Unemployed per Job Opening Asheville, NC Metropolitan Statistical Area, NC1.301.07 Burlington, NC Metropolitan Statistical Area, NC1.791.80 Charlotte-Gastonia-Concord, NC-SC Metropolitan Statistical A, NC0.841.22 Durham-Chapel Hill, NC Metropolitan Statistical Area, NC0.550.87 Fayetteville, NC Metropolitan Statistical Area, NC1.141.60 Goldsboro, NC Metropolitan Statistical Area, NC1.412.33 Greensboro-High Point, NC Metropolitan Statistical Area, NC2.321.41 Greenville, NC Metropolitan Statistical Area, NC0.901.39 Hickory-Lenoir-Morganton, NC Metropolitan Statistical Area, NC2.382.27 Jacksonville, NC Metropolitan Statistical Area, NC1.481.51 Raleigh-Cary, NC Metropolitan Statistical Area, NC0.650.91 Rocky Mount, NC Metropolitan Statistical Area, NC2.352.80 Wilmington, NC Metropolitan Statistical Area, NC1.371.61 Winston-Salem, NC Metropolitan Statistical Area, NC1.281.78

50. Housing in 2013

51. US Residential Construction (NIPA) 2007-2013

52. US Residential Building Permits YearTotal PermitsSingle Family Permits 1991948.8753.5 19921,094.9910.7 19931,199.1986.5 19941,371.61,068.5 19951,332.5997.3 19961,425.61,069.5 19971,441.11,062.4 19981,612.31,187.6 19991,663.51,246.7 20001,592.31,198.1 20011,636.71,235.6 20021,747.71,332.6 20031,889.21,460.9 20042,070.11,613.4 20052,155.31,682.0 20061,838.91,378.2 20071,398.4979.9 2008905.4575.6 2009583.0441.1 2010604.6447.3 2011624.1418.5 2012829.7518.7 2013957.0608.5

53. NC Residential Building Permits YearTotal PermitsSingle Family Permits 200279,82466,400 200379,22666,883 200493,07777,147 200597,91084,975 200699,97982,672 200785,77770,339 200854,65239,082 200933,80025,388 201033,88926,047 201132,80424,863 201248,69229,945 2013*50,51035,399 * Based on 11 months of data

54. U.S. Monthly New Home Inventory (Seasonally Adjusted)

55. US Case Schiller Housing Price Index (Composite 20) MonthIndexConditionPercent Change January 2000100.00Base July 2006206.52Peak106.5% March 2012134.07Trough-35.1% December 2012146.089.0% December 2013165.69Current13.4%

56. Charlotte Case Schiller Housing Price Index MonthIndexConditionPercent Change January 2000100.00Base July 2007135.61Peak35.6% January 2012108.39Trough-20.1% December 2012115.056.1% December 2013124.07Current7.8%

57. Keys to Watch Consumer Confidence Consumer Debt Housing Prices Excess Reserves US Monthly Job Growth (1 st Friday) Gasoline Prices

58. Babson Capital/UNC Charlotte Economic Forecast March 11, 2014

60. Current Expansion Began July 2009 54 months 7 th longest of 33 total expansions since December 1854

61. Updated Sept 2013 1980 1974 1969 1948 1953 1957 1981 1990 2001 2007 1960