The Economy: Getting Through the Recession(updated)HRLBFebruary 19th, 2009

Presented by: Morris Segall, President SPG Trend Advisors

Gross Domestic ProductQ1 2001 – Q4 2008

Source: Bureau of Economic Analysis

Contributions to GDP Growth by Component

Q3 2007 - Q4 2008

Source: Bureau of Economic Analysis

Corporate Profits (before taxes on corporate income)

Q1 2000 – Q3 2008

Source: Bureau of Economic Analysis* The corporate profits is adjusted for inventory valuation and capital consumption.

Net Change in U.S. Jobs (Total Non-farm)June, 2005 – January, 2009

Source: Bureau of Labor Statistics

National Nonfarm Employment by Industry Sector GroupsJanuary, 2008 – January, 2009

Source: Bureau of Labor Statistics

Nonfarm Employment by Industry Sector Groups in Maryland:

December 2007-December 2008

Source: Bureau of Labor and Statistics

Unemployment rate by Education LevelsJanuary, 2007-January, 2009

Source: Bureau of Labor Statistics

Continued Unemployment Claims January, 2006 – January 31st, 2009

Source: Department of Labor

Source: (Left) Census Bureau, (Right) Federal Reserve Bank

Retail Sales Less Food and Fuel April, 2007 – December, 2008

Consumer CreditQ4 2005 – December, 2008

Existing Home SalesOctober, 2001-December, 2008

Source: (Left) National Association of Realtors, (Right) Census Bureau

New Home Sales Units Sold vs. Length on Market

February, 2006-December, 2008

Change in Home sales by Maryland JurisdictionDecember, 2007 – December, 2008

Source: Maryland Association of Realtors

County 2008 2007%

change County 2008 2007%

changeQueen Anne's 13 31 -58.10% Allegany 35 38 -7.90%

Baltimore City 319 445 -28.30%Baltimore County 450 471 -4.50%

Cecil 39 53 -26.40% Garrett 25 26 -3.80%Anne Arundel 301 401 -24.90% St. Mary's 66 68 -2.90%Carroll 81 107 -24.30% Prince George's 385 390 -1.30%Washington 63 81 -22.20% Somerset 10 10 0.00%Howard 171 196 -12.80% Caroline 19 19 0.00%Wicomico 45 51 -11.80% Calvert 48 48 0.00%Worcester 68 76 -10.50% Harford 160 159 0.60%Worcester 68 76 -10.50% Talbot 18 17 5.90%Charles 85 94 -9.60% Kent 14 13 7.70%Frederick 145 160 -9.40% Montgomery 644 576 11.80%MARYLAND 3,227 3,550 -9.10% Dorchester 23 20 15.00%

S&P/Case-Shiller Home Price Index 2006 – November, 2008

Source: Standard and Poors

Change in Average Home Price by Maryland Jurisdictions

December, 2007 – December, 2008

Source: Maryland Association of Realtors

County 2008 2007%

change County 2008 2007 % change

Washington 173,375227,69

8 -23.90% Anne Arundel 364,760 395,990 -7.90%

Prince George's 261,422

336,506 -22.30%

Baltimore County 284,627 306,021 -7.00%

Calvert 318,160405,26

5 -21.50% Harford 286,334 302,428 -5.30%

Caroline 175,807223,76

2 -21.40% Charles 305,849 321,100 -4.70%

Dorchester 114,443143,29

4 -20.10% Charles 305,849 321,100 -4.70%

Wicomico 184,842222,57

1 -17.00% Worcester 384,760 402,639 -4.40%

Montgomery 431,397519,01

7 -16.90% Baltimore City 169,907 177,397 -4.20%

Frederick 276,595326,37

3 -15.30% St. Mary's 303,452 316,500 -4.10%

Queen Anne’s 329,823387,48

8 -14.90% Cecil 256,910 262,338 -2.10%

Allegany $94,231 $109,6

60 -14.10% Carroll 344,906 345,820 -0.30%

Howard 416,933463,15

3 -10.00% Garrett 387,300 376,029 3.00%

Somerset 172,000189,90

0 -9.40% Kent 513,253 473,838 8.30%

MARYLAND 315,934$347,2

09 -9.00% Talbot 830,969 344,340 141.30%

Commercial Mortgage Delinquency Rates among Major Investor Groups

Q4 2005 -Q3 2008

Source: Mortgage Bankers Association

Changes in Consumer Price Index in Percentage Terms

2006 v. 2005

2007 v. 2006

2008 v. 2007

6 months ended in Dec. 2008

All items 2.5% 4.1% 0.1% -5.4%Food at Home 1.4% 5.6% 6.6% 4.7%Food Away Home 3.2% 4.0% 5.0% 5.3%Rent of Primary Res 4.3% 4.0% 3.4% 3.5%Owners Equiv of Rent of Prim Res 4.3% 2.8% 2.1% 2.0%Household Energy 2.4% 5.3% 5.9% -9.6%Water/Sewer/Trash 4.8% 5.4% 6.5% 8.1%Houshold Ops 4.4% 2.2% 6.0% 3.7%Car Repair 3.8% 3.3% 5.9% 5.3 %Pub. Transp 0.1% 7.2% 1.8% -11.7%Medical 3.6% 5.2% 2.6% 2.6%Education 6.3% 5.6% 5.6% 5.7%Energy 2.9% 17.4% -21.3% -52.8%Source: Bureau of Labor Statistics

Source: Energy Information Administration

NYMEX Crude Oil Spot rate in U.S. DollarsFebruary, 2001– February 10th, 2009

Value of the Dollar (Broad Dollar Index) January, 2000 – February, 2009

Broad Dollar Index: a weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners.

Source: Federal Reserve Board

ConclusionsWe are in a deep and protracted recession that began in the fourth quarter of 2007. It began in housing and has spread through the entire U.S. and overseas economies. Economic weakness has intensified through 2008 and will worsen through the first half of 2009. Increased near term economic and market pressures include:

stubbornly high inflation in food and basic serviceslower corporate profitsincreased unemploymentcontinued weak levels of corporate capital and consumer spending

Conclusions continuedSevere reductions in State and Local Government spendingWeak exports as overseas economies fall into recessionContinued credit pressures in residential housing and consumer lending spreading to commercial real estate markets and corporate lending

Conclusions continued

However, a bottoming of the housing cycle and an abatement in bank credit losses in the second half of this year, could set the stage for cyclical capital markets and economic improvements in 2009 and 2010. After an expected cyclical recovery in 2010-2012, we believe the longer term socio-economic issues facing this country will result in slower future economic growth for the United States. The availability and cost of credit, particularly to consumers, will be more restricted and expensive in the future.

How do I get through it?Manage business on cash flow basisIncrease efficiency of asset turnover; increase liquidity Intensify customer service initiativesBecome innovative in controlling costs

Outsource where appropriate

Join Co-ops to spread costs over larger group

Look for new ways to leverage existing employees and infrastructure by investigating new sources of revenue from new products and markets. BE A SOLUTIONS PROVIDERSecure access to bank credit; firm up bank lines

How do I get through it? (cont.)

Spend to increase productivity and market shareTake advantage of accelerated equipment write offs as part of government’s economic stimulus packageTake advantage of soft demand in economy to build for future by aggressive bargain purchasingIf access to capital and liquidity are not detriments, look to acquire troubled companies and/or strategic assets of other companiesTrain employees to be more productive and increase their value by enabling them to do more tasks

Increase networking and take advantage of trade associations for additional contacts and leadsPartner with other firms

Where are the opportunities?Healthcare – National ProgramEducationAgricultureEnergy ConservationEnvironmental Solutions Electric PowerTransportation – Increase Mass TransitExports

Water Conservation – New Supplies and RecyclingU.S. Government Procurement and Outsourcing – Base Realignment Program (BRAC)Real Estate – Recycle and Rehab Existing Commercial and Residential Property

Thank YouYou can always reach me at msegall@spgtrend.comAlso, if you need us in a hurry, we are at 410.522.7243 Please contact us when you require economic, financial, business and capital markets research, analysis and strategies.Further information available at www.spgtrend.com and our blog at www.spgtrend.com/blog/www.spgtrend.com