1. Economic Outlook 2014 Robert Carreira, Ph.D.

2. Real GDP Growth (%)

3. United States Arizona Cochise County Sierra Vista Pre-Recession High 138.4 mil (Jan 08) 2.69 mil (Oct 07) 39,150 (Oct 06) 19,730 (Mar 11) Recessionary Low 129.7 mil (Feb 10) 2.37 mil (Sep 10) 34,350 (Mar 14) 17,710 (Mar 14) Recessionary Job Losses -8.7 mil -6.3% -312,600 -11.6% -4,800 -12.3% -2,020 -10.2% Current * 138.3 mil2.55 mil34,35017,710 From High -113,000 -0.1% -136,200 -5.1% -4,800 -12.3% -2,020 -10.2% From Low +8.6 mil 6.6% +176,400 7.4% 0 0% 0 0% Jobs Needed for 5% Unemployment 2 mil 1.4% 69,600 2.7% 2,340 6.8% 620 3.5% Jobs * US, April 2014; All others, March 2014

4. Peak Current (Apr 2014) Change from Peak Change from Peak (%) Construction (incl. mining) 2,900 (Jun 2006) 1,125-1,775-61.2% Manufacturing 925 (Oct 2005) 525-400-43.2% Trade, Transportation, and Utilities 7,075 (Dec 2006) 5,950-1,125-15.9% Information 675 (Aug 2009) 350-325-48.1% Financial Activities 1,150 (Jul 2007) 1,000-150-13.0% Professional and Business Services 6,100 (Dec 2009) 4,025-2,075-34.0% Educational and Health Services 5,025 (Mar 2012) 4,750-275-5.5% Leisure and Hospitality 4,325 (Apr 2008) 3,800-525-12.1% Other Services 1,100 (Mar 2004) 900-200-18.2% Federal Government 5,975 (Jun 2006) 5,350-625-10.5% State and Local Government 7,700 (Jun 2008) 6,625-1,075-14.0% Cochise County Jobs by Industry

5. Pre- Recession Low Recessionary High One Year Ago (April 2013) Current (April 2014) United States 4.4% (May 2007) 10.0% (Oct 2009) 7.5%6.3% Arizona 3.5% (Jul 2007) 10.8% (Jan 2010) 8.0%6.9% Cochise County 3.4% (May 2007) 9.4% (Oct 2013) 8.7%7.9% Sierra Vista 2.0% (May 2007) 8.7% (Oct 2013) 7.9%7.5% Unemployment

6. Upside AEGIS hiring New hospital construction Economic development efforts Downside Defense contracting Government (federal, state & local) Population declines Labor Market Outlook

7. Retail Sales Inflation adjusted; compared to same month previous year

8. Retail Sales Sierra VistaCochise CountyArizona 2014 (1 st Quarter)-3.5%0.6%2.8% 20133.5%1.5%7.3% 2012-1.0%4.5% 2011-5.5%-1.2% 2010-1.5%-4.8% 2009-1.4%-4.2% 2008-6.6%-6.5% 20072.6%-1.3% Inflation-adjusted to CPI-U

9. Restaurant & Bar Inflation adjusted; compared to same month previous year

10. Restaurant & Bar Sierra VistaCochise CountyArizona 2014 (1 st Quarter)1.1%3.9%5.6% 2013-5.3%-0.5%2.2% 2012-9.5%-4.4% 20112.8%-0.2% 20103.1%0.0% 20092.1%0.3% 2008-2.0%0.2% 20072.9%0.1% Inflation-adjusted to CPI-U

11. Accommodation Inflation adjusted; compared to same month previous year

12. Accommodation Sierra VistaCochise CountyArizona 2014 (1 st Quarter)9.9%-3.3%7.2% 2013-28.3%-12.2%0.4% 2012-28.2%-17.2% 2011-10.1%-13.1% 201011.0%8.3% 2009-2.0%-9.0% 200819.4%1.0% 200721.1%19.7% Inflation-adjusted to CPI-U

13. Retail AEGIS job creation Defense –related job losses Population declines Restaurant & Bar Continued instability New restaurants without an expanding market Population declines Accommodation Hospital construction Privatized army lodging Sales Outlook

14. Home Sales (Site-built only) 1 st Quarter, 2014 Cochise County: 268 (+5.5%) Sierra Vista Area: 183 (+21.2%)

15. Median Home Price (Site-built only)

16. Foreclosures (% of sales/site-built)

17. New Home Construction

18. Sierra Vista New Home Construction

19. Sierra Vista New Commercial Construction

20. Foreclosures Upward pressure on sales Downward pressure on prices Dampened demand for new construction Lower home values More SFR rentals Less demand for multifamily/apartments Population declines = downward pressure on new construction, sales & rentals Commercial construction = New SVRHC Real Estate & Construction Outlook

21. Recession Kept out of 2008-09 recession by Fort Huachuca/commercial construction Sierra Vista/Cochise County recession began in 2011 Upside New hospital AEGIS hiring Economic development efforts Downside Defense/Fort Huachuca Population declines Foreclosures Conclusion