1. Jim Maras Lead Relationship Manager February 2013

2. Your Water System and the Economy Confidential and Proprietary 2

3.  Employment  Weakness in labor income reflecting the impact of high unemployment on wages and employers’ reluctance to hire aggressively  The U.S. unemployment rate was at 7.8% in December. It peaked at 10% in Oct 2009. Iowa is at 4.9% compared to 5.6% a year ago.  The so-called underemployment rate is 14.7 % as compared to 18.5% last year.  The Consumer Price Index over the last 12 months increased 1.7 %. However, November saw a.3% decrease, the first in three years. Headwinds or Tailwinds? 3

4.  Housing Market  The Case-Schiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index for the 20- City Composite was up 5.52% from last year.  Nationally, home prices are at 2003 levels. Headwinds or Tailwinds? 4

5.  Consumer Saving  Households continue to repair personal balance sheets. Evidence of consumer deleveraging may be seen in the rise of the personal savings rate. Headwinds or Tailwinds? 5

6.  Consumer Credit  In November, consumer credit increased at a seasonally adjusted annual rate of 7%. Headwinds or Tailwinds? 6

7.  Business Concerns  New orders for manufactured goods increased 4.6% in December, up 7 of the last 8 months. This area of the economy has been a key support for the recovery. Headwinds or Tailwinds? Confidential and Proprietary 7

8.  Economic Growth  GDP is expanding 2.1% in 2013, after rising 2.2% last year, steering clear of recession as long as the euro-zone debt crisis is contained.  Uncertainty around political, regulatory and tax environment is delaying and/or reducing business investment.  As a result of the sequester cuts, deficits would be reduced by nearly $1.2 trillion over 10 years - half from Defense and half from Domestic spending. At the same time, economists say it could help push the country back into recession by abruptly pulling so much money out of the economy. Headwinds or Tailwinds? 8

9.  Government Concerns  Fitch said a downgrade was still likely later in the year if Washington failed to use the new breathing space to put in place a credible debt reduction plan.  The Oct – Dec deficit was $292.3 billion, as compared to $321.7 billion last year.  The government has run a surplus two months since September 2008.  We are borrowing $.31 of every dollar we spend. Headwinds or Tailwinds? 9

10.  The European debt league: Greece (163%), Italy (120%), Belgium (98%) Ireland (105%), Portugal (106%), Germany (81%). Headwinds or Tailwinds? 10  Federal debt has breached 100% of GDP twice since 1900:  During World War II & Now  United Kingdom and Canada are 85% and 82%, Japan is 229%

11.  Fiscal Cliff Debt Limit  Januar y legislation kicked the can down the road to May 19 Sequestration  Delayed until end of February Budget Continuing Resolution  Through March 27 Headwinds or Tailwinds? 11

12. What’s Going On In The Credit Markets? 12 50 Years – Ten Year U.S. Treasury Rates The all-time low for the 10-Year was 1.55% reached in 1945 at the end of World War II, until July 24, 2012 when it hit 1.40%

13.  Pressures on interest rates  Government sector taking on new debt, risk of crowding-out private sector  Banks (especially European) still need to raise more capital  European Sovereign Debt Crisis  De-leveraging  Political/Natural events What’s Going On In The Credit Markets? 13

14. What’s Going On In The Credit Markets? 14 5 Years – Ten year U.S. Treasury Rates  Below 2% from May 2012 until Jan 30, 2013

15.  QE 3  Continue purchasing additional mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month  Keep the target range for the federal funds rate at 0 to 1/4 percent  as long as the unemployment rate remains above 6.5%  inflation between one and two years ahead is projected to be no more than 2.5% Federal Reserve Action 15

16. Federal Reserve Action Confidential and Proprietary 16 Since the financial crisis began the Federal Reserve has pumped $1.8 trillion into the financial system with freshly printed cash

17.  Economy and Credit Market Impact  General tightening of credit, making access to credit more difficult  Consumer more sensitive  Growth limited (Ag sector excepted)  Shrinking Federal budget  Recent increases in the monetary base are far greater than any time in American history, surely a "noble experiment" in policymaking. Will these policies be successful without accelerating inflation? How Will People Be Impacted? 17

18.  Credit Opportunities  Refinance to lower rates  Save monthly payments  Shorten maturity  Capital expenditures/Strengthen system  Fix long term interest rates Opportunities Confidential and Proprietary 18

19. CoBank’s Geographic Profile 19

20. CoBank Water Team Contact Info Confidential and Proprietary 20