1. By: Anirban Basu Sage Policy Group, Inc. October 19 th, 2015 The Pit and the Pendulum On Behalf of Virginia Association of Community Banks

2. Dawn of the Dead

3. Estimated Growth in Output by Select Global Areas 2015 Projected* *Real GDP. Notes: 1. Data for Lithuania are included in the euro area aggregates but were excluded in the April 2015 World Economic Outlook. Source: International Monetary Fund, October 2015 WEO Database

4. What Lies Beneath Source: BEA, BLS, S&P Case-Shiller, Yahoo! Finance *Through July 2015

5. Source: U.S. Bureau of Labor Statistics Median Weekly Earnings, Full-Time U.S. Workers* 2000Q1 through 2015Q2 *SA, Constant 1982-1984 dollars (adjusted to CPI-U) Wage and salary workers ages 16+

6. Source: Bureau of Labor Statistics Employment Cost Index 12-Month Percent Change (NSA) All Civilian workers, all industries, NSA

7. Source: Moody’s Economy Recession Watch as of July 2015

8. Gross Domestic Product 1990Q2 through 2015Q2* Source: Bureau of Economic Analysis *Final Estimate

9. Contributions to GDP Growth by Component 2014Q2 – 2015Q2* Source: Bureau of Economic Analysis *Final Estimate

10. Invasion of the Body Snatchers

11. Source: U.S. Bureau of Labor Statistics September 2015: +142K Net Change in U.S. Jobs, BLS January 2002 through September 2015

12. National Nonfarm Employment by Industry Sector September 2014 v. September 2015 All told 2,752K Jobs gained Source: U.S. Bureau of Labor Statistics

13. Virginia Nonfarm Employment by Industry Sector Groups (SA) August 2014 v. August 2015 Absolute Change VA Total: +41.1K; +1.1% US Total (SA): +2,860K; +2.1% *According to the Local Area Unemployment Statistics (LAUS) series VA gained 18,140 jobs between August 2014 and August 2015. Source: U.S. Bureau of Labor Statistics

14. Northern VA Nonfarm Employment by Industry Sector Groups (NSA) August 2014 v. August 2015 Absolute Change Source: U.S. Bureau of Labor Statistics Northern VA Total (NSA): +31.4K; +2.3% DC MSA Total (NSA): +41.1K; +1.1% US Total (SA): +2,860K; +2.1%

15. Richmond Nonfarm Employment by Industry Sector Groups (NSA) August 2014 v. August 2015 Absolute Change Richmond Total: -1.1K; -0.2% VA Total: +41.1K; +1.1% US Total (SA): +2,860K; +2.1% Source: U.S. Bureau of Labor Statistics

16. Virginia Beach-Norfolk-Newport News, VA-NC Nonfarm Employment by Industry Sector Groups (NSA) August 2014 v. August 2015 Absolute Change Virginia Beach Total: +5.0K; +0.7% VA Total: +41.1K; +1.1% US Total (SA): +2,860K; +2.1% Source: U.S. Bureau of Labor Statistics

17. U.S. Year-over-year Percent Change: Aug: 2.1% Sept: 2.0% Employment Growth, U.S. States (SA) August 2014 v. August 2015 Percent Change R ANK S TATE %R ANK S TATE %R ANK S TATE % 1UTAH4.014MARYLAND2.034MISSOURI1.1 2OREGON3.519COLORADO1.934OHIO1.1 3FLORIDA3.319DISTRICT OF COLUMBIA1.934VIRGINIA1.1 3NEVADA3.319TENNESSEE1.938MISSISSIPPI1.0 5WASHINGTON3.219TEXAS1.938PENNSYLVANIA1.0 6CALIFORNIA3.023KENTUCKY1.840NEBRASKA0.9 6SOUTH CAROLINA3.024IOWA1.740NEW JERSEY0.9 8IDAHO2.924NEW HAMPSHIRE1.742MONTANA0.8 9MASSACHUSETTS2.624WISCONSIN1.743ILLINOIS0.7 9NORTH CAROLINA2.627SOUTH DAKOTA1.544LOUISIANA0.4 11INDIANA2.528ALABAMA1.445NEW MEXICO0.3 12ARKANSAS2.328NEW YORK1.445OKLAHOMA0.3 13MICHIGAN2.228VERMONT1.447KANSAS0.1 14ARIZONA2.031DELAWARE1.347WYOMING0.1 14CONNECTICUT2.032MINNESOTA1.249ALASKA-0.4 14GEORGIA2.032RHODE ISLAND1.250NORTH DAKOTA-0.7 14HAWAII2.034MAINE1.151WEST VIRGINIA-2.6 Source: U.S. Bureau of Labor Statistics

18. U.S. Unemployment Rate (Aug & Sept): 5.1% Unemployment Rates, U.S. States (SA) August 2015 Source: U.S. Bureau of Labor Statistics R ANK S TATE %R ANK S TATE %R ANK S TATE % 1NEBRASKA2.818INDIANA4.633RHODE ISLAND5.6 2NORTH DAKOTA2.918KANSAS4.636NEW JERSEY5.7 3HAWAII3.518OKLAHOMA4.636TENNESSEE5.7 4NEW HAMPSHIRE3.621MASSACHUSETTS4.738GEORGIA5.9 4VERMONT3.621OHIO4.738NORTH CAROLINA5.9 6IOWA3.723DELAWARE4.940LOUISIANA6.0 6SOUTH DAKOTA3.724MARYLAND5.140SOUTH CAROLINA6.0 6UTAH3.724MICHIGAN5.142CALIFORNIA6.1 9MINNESOTA4.026KENTUCKY5.242OREGON6.1 9WYOMING4.026NEW YORK5.244ALABAMA6.2 11MONTANA4.128CONNECTICUT5.345ARIZONA6.3 11TEXAS4.128FLORIDA5.345MISSISSIPPI6.3 13COLORADO4.228WASHINGTON5.347ALASKA6.6 13IDAHO4.231ARKANSAS5.448NEW MEXICO6.7 15MAINE4.531PENNSYLVANIA5.449DISTRICT OF COLUMBIA6.8 15VIRGINIA4.533ILLINOIS5.649NEVADA6.8 15WISCONSIN4.533MISSOURI5.651WEST VIRGINIA7.6

19. Unemployment Rates, 20 Largest Metros (NSA) August 2015 Source: U.S. Bureau of Labor Statistics RankMSAUR RankMSAUR 1 Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area 3.3 11 Tampa-St. Petersburg-Clearwater, FL Metropolitan Statistical Area 5.2 2 Dallas-Fort Worth-Arlington, TX Metropolitan Statistical Area 3.9 12 Baltimore-Columbia-Towson, MD Metropolitan Statistical Area 5.5 3 Boston-Cambridge-Nashua, MA-NH Metropolitan NECTA 4.1 13 Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area 5.6 3 Seattle-Tacoma-Bellevue, WA Metropolitan Statistical Area 4.1 14 Atlanta-Sandy Springs-Roswell, GA Metropolitan Statistical Area 5.7 5 San Francisco-Oakland-Hayward, CA Metropolitan Statistical Area 4.2 14 Miami-Fort Lauderdale-West Palm Beach, FL Metropolitan Statistical Area 5.7 6 Washington-Arlington-Alexandria, DC-VA-MD- WV Metropolitan Statistical Area 4.3 14 Philadelphia-Camden-Wilmington, PA-NJ- DE-MD Metropolitan Statistical Area 5.7 7 Houston-The Woodlands-Sugar Land, TX Metropolitan Statistical Area 4.6 17 Phoenix-Mesa-Scottsdale, AZ Metropolitan Statistical Area 5.8 8 New York-Newark-Jersey City, NY-NJ-PA Metropolitan Statistical Area 5.1 18 Detroit-Warren-Dearborn, MI Metropolitan Statistical Area 6.2 8 San Diego-Carlsbad, CA Metropolitan Statistical Area 5.1 19 Los Angeles-Long Beach-Anaheim, CA Metropolitan Statistical Area 6.4 8 St. Louis, MO-IL Metropolitan Statistical Area (1) 5.1 20 Riverside-San Bernardino-Ontario, CA Metropolitan Statistical Area 6.8 1. Area boundaries do not reflect official OMB definitions.

20. Nightmare on Elm Street

21. 15-Year & 30-Year Fixed Mortgage Rates October 1995 through October 2015* Source: Freddie Mac *Week ending 10/15/2015

22. U.S. New Home Sales January 1999 through August 2015 Source: U.S. Census Bureau

23. U.S. Housing Starts August 1999 through August 2015 Source: U.S. Census Bureau

24. U.S. Homeownership

25. Source: U.S. Census Bureau U.S. Private New Multifamily Construction August 1993 through August 2015

26. U.S. Housing Building Permits August 1999 through August 2015 Source: U.S. Census Bureau August 2015: 1 Unit: 699K 5 Units or more: 440K

27. S&P/Case-Shiller Home Price Indices for Select Metros July 2015, 12-Month Percentage Change Source: Standard & Poor’s

28. Psycho

29. Source: Bureau of Labor Statistics Treasury Bond Yield Curve All Civilian workers, all industries, NSA

30. Sales Growth by Type of Business September 2014 v. September 2015* Source: U.S. Census Bureau *September 2015 advanced estimate

31. National Vehicle Sales January 2004 through September 2015 (SAAR) Source: Autodata Corp. September 2015: 18.2M

32. Conference Board Leading Economic Indicators Index August 2007 through August 2015 Source: Conference Board

33. Tell-Tale Heart We are now in the mid-cycle stage of recovery – please enjoy it; It’s all about interest rates – the four segments driving the U.S. economy presently are 1) consumer spending; 2) auto sales and production; 3) residential construction & 4) nonresidential construction – all are interest rate sensitive; The Federal Reserve has successfully managed to put itself in a no win situation – only imperfect policies to choose from; The world is not perfect - black swan threats remain: (1) Iran (2) Israel/Iran (3) Europe (4) contagion (5) cyber (6) EMP; Market is nervous, but perhaps for the wrong reasons; and More people benefit from lower oil prices than are hurt – more contractors and developers are helped than hurt – frankly, low oil prices just don’t make me that nervous (but something else does!)

34. Thank You Follow us on Twitter @SagePolicyGroup You can always reach me at abasu@sagepolicy.com abasu@sagepolicy.com Please look for updates of information at www.sagepolicy.com. www.sagepolicy.com Also, if you need us in a hurry, we are at 410.522.7243 (410.522.SAGE) Please contact us when you require economic research & policy analysis.