2020 Economic Outlook Publication

ECONOMIC OUTLOOK F O R U M TUESDAY, JUNE 23, 2020 STATE REVENUE

REAL ESTATE

AGRICULTURE

HEALTH CARE

RETAIL

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Each year, many of us look forward to the Chamber EDC’s Economic Outlook Forum (EOF) because of the opportunities it affords.

The first of those opportunities is the EOF itself. Those who are able to attend the event (in person or virtually, this year) have the opportunity to learn from our Industry Panel contributors. The Industry Panel brings area business leaders in technology, health care, retail and more to the EOF stage to share their outlooks for their respective industries. That’s not to mention this year’s keynote, Bernard Baumohl, who is a well-known economist having been cited in the New York Times, Washington Post, Business Week, and more.

The second opportunity is to review and compare the data contained in this publication. To populate the EOF publication, we survey the entire Chamber EDC Membership and ask them questions regarding their outlook for the next year as it relates to spending, hiring, and more that directly impacts their businesses. We consolidate all of that data into this publication so that individually, you can see what your colleagues have to say about business in 2020. What’s more is that you can compare this data to that which we’ve gathered over the past few years and utilize it as you’re planning for the future.

Of course, this year’s Economic Outlook Forum is different in a lot of ways. We’re offering members the opportunity to attend in-person or virtually, the timing of the event has been adjusted and we’ve included additional survey data to ensure we reflect our ‘new normal.’ We did all of this to better serve you, our members, and give you the most valuable experience possible.

#BisManEOF20 TABLE OF CONTENTS 4

STATE REVENUE

5

HEALTH CARE

6

REAL ESTATE

8

AGRICULTURE

10

RETAIL

12

SURVEY RESULTS

So thank you for being a part of this year’s very unique EOF and for your continued support of the Chamber EDC. facebook.com/bismancedc twitter.com/bismancedc

Brian Ritter, President Bismarck Mandan Chamber EDC

Presented by:

Gold Sponsor:

@bismancedc # BisManEOF20

Production Sponsor:

INTRODUCTION } 2020 ECONOMIC OUTLOOK } 3

STATE REVENUE BY: RYAN RAUSCHENBERGER, ND TAX COMMISSIONER As warm weather returns to the Great Plains, A small saving grace for states and cities is due to the North Dakotans want to venture out and enjoy the beauty and bounty of the state. decision by the U.S. Supreme Court in June 2018, in the The summer of 2020, however, comes with “South Dakota v. Wayfair, Inc.” case. unique and unprecedented challenges, including economic ones. The onset of the COVID-19 impact arrived in February, broadened in March, and resulted in a statewide partial business shut down as workers and customers were expected to shelter at home to help “flatten the curve” to allow medical facilities the time to prepare for a possible surge of illness. The temporary closure of a portion of the retail trade sector has meant a loss of business income, as well as reduced wages and salaries for affected employees.

As businesses now begin to reopen, the uncertainty surrounding COVID-19 continues as do the challenges for the business community and the customers. New safety measures are being put in place, and limitations on the volume of customers allowed in an establishment must be adhered to.

Measuring the economic cost of the COVID-19 pandemic is also just beginning. In addition to the businesses themselves, which have faced weeks with limited or no revenue, state and local governments have also suffered the loss of sales tax revenue from these businesses, a significant funding source for government services.

Some North Dakota businesses have experienced a surge in the portion of their business that is conducted online. Online sales have soared throughout the nation — indeed the world — during this time of sheltering at home. A small saving grace for states and cities is due to the decision by the U.S. Supreme Court in June 2018, in the “South Dakota v. Wayfair, Inc.” case. In this case, the U.S. Supreme Court affirmed the ability of the states to require remote online sellers — those businesses that do not have a physical presence in the state — to collect the appropriate amount of sales tax from their online customers and remit the tax to the state.

As a result of the Wayfair decision, the North Dakota Office of State Tax Commissioner began working with remote sellers to register them to collect and remit state and local sales taxes beginning in October 2018. To date, the collection of state and local sales taxes by remote sellers has totaled $57.944 million, with $17.032 million coming in the first four months of 2020. These next several months of collections from remote sellers are likely to be very strong, providing much needed revenue to the state and local governments. In addition to the revenue boost, the Wayfair decision will level the playing field for the brick and mortar stores that no longer are at an immediate competitive disadvantage due to the requirement that they alone must collect sales taxes while their online competition is relieved of that obligation. The timing of the Wayfair decision was an unexpected benefit as no one could predicted the impacts of an unexpected global pandemic.

While we will continue to see the impacts of the COVID-19 precautions over the coming year, factors like Wayfair, the reopening of business, and the return of customers give hope that an economic rebound is on the horizon.

4 } 2020 ECONOMIC OUTLOOK } STATE REVENUE

HEALTH CARE } 2020 ECONOMIC OUTLOOK } 5

REAL ESTATE BY: MIKE ILSE, ASPEN GROUP LLP

BY: NANCY DEICHERT, BISMARCK MANDAN BOARD OF REALTORS

BY: BILL DANIEL, DANIEL COMPANIES

Q: Looking back, how was 2019 for the Real Estate industry?

A: 2019 was a very consistent year for commercial real estate in Bismarck-Mandan.

We continued to witness gradual growth and recovery from the last five years. The slow but steady absorption of office, retail, and industrial property can be seen throughout Bismarck-Mandan. The Hay Creek Shopping Center has established the addition of new tenants like Pizza Ranch, Aspen Dental, and T-Mobile.

Phase 1 of the Sunrise Square addition that’s attached to Williquors is already approximately 75 percent leased and currently in construction.

Companies like Roers Construction out of Fargo have decided to lease industrial property in Bismarck and everyday there is less and less office space available.

Q: Looking back, how was 2019 for the Real Estate industry?

A: As with the rest of the country, the first part of 2019 was a bit sluggish for sales. But then there was an unusual uptick in activity later in the year. During December overall residential sales were up 22 percent over December of 2018. It isn’t readily apparent why the uptick happened. At the close of the year, statistics for Bismarck-Mandan-Lincoln showed an increase in home sales of 3.3 percent. Overall home sales were up by 4.5 percent (this reflects all sales in the Multiple Listing Service, including those areas outside of Bismarck-Mandan-Lincoln).

Q: Looking back, how was 2019 for the Real Estate industry?

A: The commercial real estate market in Bismarck-Mandan was a year with steady and predictable growth in most sectors of the market.

There was caution in some areas with decreasing demand for office and industrial space and growing vacancies in the big box retail sector including the former Sears, Herberger’s and Kmart locations. At the same time, Costco and Cashwise Foods were under construction adding new future retail opportunities to shoppers.

The strongest sectors driving commercial real estate sales, leasing and development were those in the healthcare, multi-unit apartment projects, senior living, financial, small retail, restaurants, mixed use developments and service-related companies.

Q: Looking forward, what is the outlook in 2020 for the Real Estate industry?

A: 2020 started out with more energy and excitement than in have seen in the Bismarck-Mandan area in the last five years. 2020 should have been remembered for high profile projects like 157,000 square foot Costco or the redevelopment of Herberger’s at Kirkwood Mall with the addition of Blaze Pizza, Chick-Fil-A, and Five Guys. But obviously now it’s going to be remembered for COIVD 19 and the economic shut down. With businesses slowly reopening and trying to figure out what the new normal looks like, it is very hard to predict the next 1224 months. I always like to stay optimistic and never forget that no matter what is happening outside our community, the Bismarck-Mandan area is a great place to invest.

6 } 2020 ECONOMIC OUTLOOK } REAL ESTATE

Q: Looking forward, what is the outlook in 2020 for the Real Estate industry?

A: 2020 started out at steady pace, and then COVID-19 hit which temporarily deterred some buyers. By May buyers were actively back in the market. The number of homes under contract exceeds 2019 at this time. Low interest rates offer more buying power to shoppers; with sales in the $300,000-$399,999 price range matching the popular $200,000-$250,000 price range. Expectations are for a healthy market for the remainder of 2020.

Q: Looking forward, what is the outlook in 2020 for the Real Estate industry?

A: The 2020 commercial real estate market was off to a solid start with a strong demand from buyers for leased investment properties and owner/user buildings. The current market has been challenged with uncontrolled outside factors including COVID-19 shutdown, low oil prices, a volatile stock market, low ag prices and concern about the future of coal in North Dakota. There are opportunistic buyers/investors who want to diversify their portfolios and they continue to have interest in attractively priced real estate which they can finance at record low interest rates. Business and professional office space users will find that 2020 will be a good opportunity to lease new space or become a building owner. Bismarck-Mandan commercial real estate market is well positioned for a solid future.

HEALTH CARE BY: KURT SCHLEY, CHI ST. ALEXIUS HEALTH Q: What challenges is the Health Care industry facing?

A: The overarching challenge the health care industry faces is three-fold: increasing quality of care and improving the health of the community as a whole while also lowering costs. No longer can health care providers simply care for people when they are sick. It is imperative that we keep them well.

A particularly timely challenge is maintaining the ability to respond in real time to emerging health care needs. We must be out ahead of the curve, whether it be for a difficult flu season or a potential pandemic. The onus in on health care providers to prepare and respond for the good of our communities.

For that reason, the onus is on the health care industry to bring value to patients who may be facing another year of projected increases in health care costs. Our shared challenge is to find new ways to deliver that value which will keep utilization down and ultimately help control costs.

Inherent in that challenge is sustaining the ability to provide health care for the most vulnerable, the most in need, those most frequently left behind in our modern society. Health care’s faith-based roots lie in serving all who reside in our communities.

A particularly timely challenge is maintaining the ability to respond in real time to emerging health care needs. We must be out ahead of the curve, whether it be for a difficult flu season or a potential pandemic. The onus in on health care providers to prepare and respond for the good of our communities.

Q: What opportunities do you see in the Health Care industry?

A: Those of us in health care come to work every day wanting to make a difference in someone’s life. For too long, health care was something “done to you.” We see potential in making it a partnership where the patients’ needs, voice and availability are just as loud as the providers’.

Opportunities to do just that touch nearly every aspect of the process of delivering care. It might be decreasing ER usage by offering after-hours, weekend and holiday Urgent Care. It could be decreasing readmissions by reaching out to patients to schedule follow-up visits. There’s also potential to improve care of chronic conditions — and reduce hospital admissions – with individualized, one-on-one care.

A wider example of opportunity here at St. Alexius is in our relationship with employers. It’s pivotal to the mutual success of the employers and employees we collectively serve. That’s one reason we are working on several tactics to make health care more accessible across western North Dakota.

CHI St. Alexius Health is committed to being transparent with you in the ways we are working to improve care for our communities. We aren’t waiting for someone else to “fix” health care. We are jumping in, heart first, to provide the necessary services in western North Dakota.

HEALTH CARE } 2020 ECONOMIC OUTLOOK } 7

AGRICULTURE BY: DAN RORVIG, NORTH DAKOTA STOCKMEN’S ASSOCIATION

BY: NEAL FISHER, NORTH DAKOTA WHEAT COMMISSION

Q: Looking back, how was 2019 for the Agriculture industry?

A: For many North Dakota agricultural producers, the most positive thing they can say about 2019 is that it was a character-builder.

Marked by soft markets, erratic weather and a topsy-turvy trade picture, 2019 was undoubtedly challenging. In most areas, winter’s abrupt debut and record amounts of precipitation in the third and fourth quarters stressed cattle and delayed or even prevented the harvest of important feedstuffs and the gathering of hay.

A fire that temporarily closed a Kansas beef packing plant also sent shockwaves throughout the industry, depressing markets and creating much uncertainty.

Q: Looking back, how was 2019 for the Agriculture industry?

A: 2019 was undoubtedly one of the more challenging production seasons in recent memory, for virtually every aspect of agriculture in North Dakota and the surrounding region. A slow, cold start to spring planting evolved into more favorable growing conditions, providing strong yield potential and an opportunity for near-record production. However, the intensity and duration of persistent heavy, late summer rains dramatically impacted harvest progress, leading to heavy market (price) discounts and abnormally high levels of mature crop abandonment (left unharvested/destroyed). Row crop harvest when and where possible, extended throughout the winter and continues into the spring of 2020.

Q: Looking forward, what is the outlook in 2020 for the Agriculture industry?

A: Milder weather and new trade deals with Japan, China and others kicked off the new year and brought renewed hope for cattle producers. Economists were predicting a moderating inventory, stronger fed and feeder cattle prices, increased beef demand and profitability in each of the industry sectors. Those hopes were quickly dashed with the onset of the coronavirus pandemic, which has hammered cattle markets, messed up supply chains and accentuated the uncertainty across live-animal segments. Early estimates of the economic damage of COVID-19 to the U.S. beef industry top $14 billion.

Restoring slaughter capacity and keeping the supply chain moving will be critical moving forward, particularly as the industry prepares for a record protein supply and deals with greatly diminished restaurant sales, which traditionally account for nearly half of the value of U.S. beef production.

8 } 2020 ECONOMIC OUTLOOK } AGRICULTURE

Prices remained under heavy pressure in an increasingly competitive global trade environment with very low-priced supplies available from alternate global origins. The total value of all crops harvested in North Dakota is expected to be lower than the comparatively strong level of a year ago, despite the higher yield and production potential anticipated earlier in the season. Fortunately, crop insurance provisions, trade dispute mitigation payments, and other emergency and disaster programs helped offset the 2019 crop sector challenges and economic impacts in North Dakota and the region. Going forward, recently negotiated trade agreements also offer potential sales and pricing opportunities for U.S. producers in an otherwise very complex global trade environment.

Q: Looking forward, what is the outlook in 2020 for the Agriculture industry?

A: The outlook for North Dakota agriculture in 2020 is one of mixed variables. Soil moisture supplies are described as mostly plentiful to excessive. Historically, that could be a positive in a typically arid region, but heavy fall rains and snowpack in central and eastern areas heightened concerns associated with late and unharvested 2019 crops, and the degree of prevented plantings likely to affect 2020 outcomes. The later spring start-up and eventual success could have significant implications for early versus later seeded crops and actual acreage distribution amongst crop choices in the region. Prices of all commodities remain under pressure from cheaper priced, alternate global suppliers. Although domestic and global demand destruction due to the COVID-19 Pandemic remains a concern, new and recently re-negotiated trade agreements may foster additional sales and pricing opportunities if current expectations are actually fulfilled. Other positives include continued low interest rates, relatively stable land values, and input costs.

In recent years North Dakota and Iowa have led the nation in planted area of USDA’s annual tally of “principal crops” in the United States, with each of the two states coming in at just under 25 million acres. North Dakota crop and livestock production consistently represents an annual total farm gate value in excess of $9.0 billion per year.

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’’

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RETAIL BY: JENNIFER WILSON, KIRKWOOD MALL Q: What challenges is the Retail industry facing?

Over 90 percent or 65 of our tenants were closed in A: The COVID-19 pandemic has impacted every local and national tenant in some way.

April. Kirkwood Mall remained open for several local National closures happened very abruptly and regional stores to remain open matching mall and as a blanket across the U.S. while, local hours to their open hours. tenants attempted to educate themselves, adjusted open hours, or temporarily closed.

Over 90 percent or 65 of our tenants were closed in April. Kirkwood Mall remained open for several local and regional stores to remain open matching mall hours to their open hours. Informing the Bismarck-Mandan market and region of shoppers the mall remained open and what retailers are open has been one of our greatest challenges throughout Q2.

Local and regional businesses have great financial resources including; Paycheck Protection Program, business loans, and local support through Bismarck Mandan Chamber EDC, Bismarck-Mandan CVB, N.D. Retail Association and so many others. What an amazing gift to help the short-term impact. Landlords worked one on one with businesses to adjust rent timing, defer rents, adjust hours of operation for payroll savings and much more.

Since May 1 the re-opening of bars, restaurants, salons and personal care along with gyms have customers into stores has been slow and steady. Stores have a big task right now, get the customer to walk across your lease line. Whether you are a downtown business, in a strip mall, an outdoor center or traditional covered shopping center, we all have that same challenge. Customers who thrive in social settings have been out and spending. Stores are reporting May numbers that exceed last year and are happy for the quick return of sales. Profit margins are narrow as stores must move 3-months of inventory to make room for incoming shipments. As store managers return, they feel that their stores have a timestamp of mid-March. Store windows and features set with Moto jackets, layers, sweaters and plaid as the focal category and hundreds of markdowns to complete in order to make room for the summer products our customers want today.

Q: What opportunities do you see in the Retail industry?

A: Retail stores have the unique ability to provide exceptional customer service face-to-face with every customer, which separates physical stores from online. Several retailers have added service elements to their current store concepts to keep customers walking across their lease line. JCPenney added Sephora and full-service Window Treatment department. Target added Optical and online order with in-store & Curbside pick-up, all stores at Kirkwood have curbside pick-up locations in the lot for customer use.

Online shopping trend, convenience, and availability erodes sales in every retail category. Stores are faced with offering consistent promotions and discounts to combat online offers — sometimes by their own vendors — eroding profits yet still incurring all the physical location expenses. We have an opportunity for unique leasing options and diversifying our tenant mix as we have store closures. The redevelopment of spaces and properties will shape the future of malls and brick-and-mortar including office space, hotels, entertainment, restaurants, and experiential tenants all attracting customers to visit the tenants.

10 } 2020 ECONOMIC OUTLOOK } RETAIL

SURVEY RESULTS 2020 PARTICIPATING INDUSTRIES BUSINESS/PROFESSIONAL SERVICES

CONSTRUCTION

FINANCE/INSURANCE/REAL ESTATE

HEALTH CARE

LEISURE/HOSPITALITY

MANUFACTURING

NON-PROFIT

RETAIL

TRANSPORTATION/WAREHOUSING

WHOLESALE

TECHNOLOGY SERVICES

ENERGY PRODUCTION

AGRICULTURE

1%

3%

1%

3%

17%

2%

10%

10%

9%

2%

9% 22%

11%

2019 TOP 3 PARTICIPATING INDUSTRIES 18%

8%

17%

2018 TOP 3 PARTICIPATING INDUSTRIES 21%

14%

15%

2017 TOP 3 PARTICIPATING INDUSTRIES 20%

14%

17%

SURVEY RESULTS } 2020 ECONOMIC OUTLOOK } 11

SURVEY RESULTS WHO IS YOUR PRIMARY TARGET MARKET? BISMARCK-MANDAN 45% NORTH DAKOTA 32% MIDWEST 12% NATIONWIDE 9% INTERNATIONAL 2% 2018 RESULTS

2019 RESULTS 43%

31%

15%

10%

1%

43%

32%

19%

6%

BISMARCK-MANDAN

NORTH DAKOTA

MIDWEST

NATIONWIDE

INTERNATIONAL

BISMARCK-MANDAN

NORTH DAKOTA

MIDWEST

NATIONWIDE

2017 RESULTS 45%

37%

8%

37%

1%

BISMARCK-MANDAN

NORTH DAKOTA

MIDWEST

NATIONWIDE

INTERNATIONAL

HISTORICAL UNEMPLOYMENT RATE 10%

8%

6%

4%

2%

0%

2008

2009

2010

2011

UNITED STATES 12 } 2020 ECONOMIC OUTLOOK } SURVEY RESULTS

2012

2013

2014

NORTH DAKOTA

2015

2016

2017

2018

BISMARCK-MANDAN

2019

SURVEY RESULTS } 2020 ECONOMIC OUTLOOK } 13

SURVEY RESULTS WHAT IS YOUR BUSINESS CLASSIFICATION? BUSINESS TO BUSINESS 16% BUSINESS TO CONSUMER 30% BOTH 54% 2019 RESULTS

2017 RESULTS

2018 RESULTS

24%

28%

48%

20%

30%

50%

24%

29%

49%

BUSINESS TO BUSINESS

BUSINESS TO CONSUMER

BOTH

BUSINESS TO BUSINESS

BUSINESS TO CONSUMER

BOTH

BUSINESS TO BUSINESS

BUSINESS TO CONSUMER

BOTH

MET EXPECTATIONS

EXCEEDED EXPECTATIONS

PREFORMED BELOW EXPECTATIONS

OVERALL, HOW WOULD YOU COMPARE YOUR ORGANIZATION’S EXPECTED RESULTS TO ACTUAL PERFORMANCE IN 2019

2018 RESULTS

34%

BELOW EXPECTATIONS

26%

EXCEEDED EXPECTATIONS

40%

MET EXPECTATIONS

2017 RESULTS

26%

BELOW EXPECTATIONS

40%

EXCEEDED EXPECTATIONS

34%

MET EXPECTATIONS

2016 RESULTS

21% 14 } 2020 ECONOMIC OUTLOOK } SURVEY RESULTS

31%

48%

43%

BELOW EXPECTATIONS

22%

EXCEEDED EXPECTATIONS

43%

MET EXPECTATIONS

SURVEY RESULTS WHAT ARE THE STRENGTHS OF THE BISMARCK-MANDAN BUSINESS COMMUNITY? 3% 39%

42%

OTHER STABLE AND/OR DIVERSE ECONOMY PRO-BUSINESS CLIMATE CUSTOMER, SUPPLER ACCESSIBILITY QUALITY OF WORKFORCE COST OF LOW LIVING COST OF DOING BUSINESS - LOW

1%

2%

1%

QUALITY OF LIFE FACTORS

2%

10%

Recap of Other Responses: Accommodating now constrained budgets

WHAT ARE THE WEAKNESSES OF THE BISMARCK-MANDAN BUSINESS COMMUNITY? 1% 6% 2% 5%

1%

8% OTHER

56%

ATTRACTING & RETAINING QUALIFIED EMPLOYEES INCREASING COMPETITION INCREASING RAW MATERIAL COSTS INCREASING REGULATIONS DIFFICULTY PROVIDING HEALTH INSURANCE FOR EMPLOYEES

21%

INCREASING TRANSPORTATION/FUEL COSTS CHALLENGES IN ACQUIRING FINANCING

SURVEY RESULTS } 2020 ECONOMIC OUTLOOK } 15

SURVEY RESULTS WHICH BEST REPRESENTS YOUR FORECASTED CHANGES FOR 2020?

3.82%

SALES REVENUE

TOTAL OPERATING COST AS A % OF REVENUE

CAPITAL EXPENDITURES

PROFITABILITY

14.50%

2.16%

EMPLOYEE LENGTH OF WORKWEEK

67.63%

81.67%

30.22%

8.03%

0.00%

21.90%

EMPLOYEE COMPENSATION

22.30%

70.07%

77.7%

7.24%

2.95%

36.23%

PRICES PAID FOR RAW MATERIALS

50.0%

56.52%

47.06%

8.69%

3.65%

19.57%

PRICES RECEIVED FOR PRODUCTS/SERVICES

38.69%

71.74%

NUMBER OF EMPLOYEES

16 } 2020 ECONOMIC OUTLOOK } SURVEY RESULTS

57.66%

2.92%

DECREASE

54.74%

NO CHANGE

42.34%

INCREASE

SURVEY RESULTS ON AVERAGE, HOW MANY FULL-TIME EQUIVALENT EMPLOYEES DO YOU HAVE? 5%

28% 14% 1-4 5 - 19

9%

20 - 49 50 - 99 100 - 499 500+

17%

27%

2019 RESULTS

2018 RESULTS

27%

35%

17%

5%

12%

4%

28%

32%

18%

8%

10%

4%

1-4

5 - 19

20 - 49

50 - 99

100 - 499

500+

1-4

5 - 19

20 - 49

50 - 99

100 - 499

500+

FACTORS POSITIVELY AFFECTING PERFORMANCE IN 2019 OTHER 20.0% LOWER OPERATING COSTS 8.18% FEDERAL GOVERNMENT REGULATIONS 4.55% STRONG LOCAL ECONOMY 45.45% TECHNOLOGY CHANGES 6.36% INTERNATIONAL SALES INCREASE 0%

FACTORS NEGATIVELY AFFECTING PERFORMANCE IN 2019 OTHER 15.63% RISING GAS PRICES 0.0% HIGHER OPERATING COSTS 15.63% STATE GOVERNMENT REGULATIONS 1.04% INTERNATIONAL SALES SHORTFALLS 1.04% DOMESTIC SALES SHORTFALLS 9.38%

DOMESTIC SALES INCREASE 15.45% SURVEY RESULTS } 2020 ECONOMIC OUTLOOK } 17

SURVEY RESULTS WHAT FACTORS ARE MOST LIKELY TO ADVERSELY IMPACT YOUR BUSINESS IN THE NEXT YEAR? 6%

57%

4% 2%

OTHER

2%

ATTRACTING & RETAINING QUALIFIED EMPLOYEES

8%

INCREASING COMPETITION INCREASING RAW MATERIAL COSTS

7%

INCREASING REGULATIONS DIFFICULTY PROVIDING HEALTH INSURANCE FOR EMPLOYEES INCREASING TRANSPORTATION/FUEL COSTS

14%

CHALLENGES IN ACQUIRING FINANCING Recap of Other Responses: Lorum Ipsum, Lorum Ipsum

2019 RESULTS 8%

38%

28%

10%

5%

1%

5%

5%

41.11%

36.67%

5.71%

7.41%

2.7%

5.13%

9.33%

2018 RESULTS 24.24%

Colors correspond with categories listed above

DO YOU EXPECT TO PREFORM BETTER OR WORSE IN 2020 COMPARED TO 2019?

2019 RESULTS

BETTER 74% WORSE 6% NO CHANGE 20% 18 } 2020 ECONOMIC OUTLOOK } SURVEY RESULTS

72%

8%

20%

BETTER

WORSE

NO CHANGE

2018 RESULTS 66%

18%

16%

BETTER

WORSE

NO CHANGE

65%

16%

19%

BETTER

WORSE

NO CHANGE

2017 RESULTS

COVID-19 SURVEY RESULTS PARTICIPATING INDUSTRIES FINANCE/INSURANCE/REAL ESTATE 16% NON-PROFIT 12% RETAIL 11% LEASURE/HOSPITALITY 10% OTHER 9% BUSINESS/PROFESSIONAL SERVICES 17% CONSTRUCTION 6%

HEALTH CARE 6% TECHNOLOGY SERVICES 4% AGRICULTURE 3% ENERGY PRODUCTION 2% TRANSPORTATION/WAREHOUSING 2% WHOLESALE 2% MANUFACTURING 0%

WHAT CHALLENGES HAVE IMPACTED YOUR BUSINESS? OTHER

16.05%

EMPLOYEES UNABLE OR UNWILLING TO WORK

29.63%

ESTABLISHING REMOTE WORKPLACE OPPORTUNITIES FOR STAFF

25.93%

INCREASED DEMAND/INABILITY TO KEEP ITEMS IN STOCK

35.35%

ABILITY TO COMPLETE UTILITY, DEBT OR OTHER PAYMENT

11.11%

ABILITY TO FULFILL PAYROLL

18.52%

INCREASED CHILDCARE NEED FOR STAFF

27.16%

DIFFICULTY IN ACCESSING SUPPLIES & PRODUCT

37.04%

DECREASED DEMAND

58.02%

SURVEY RESULTS } 2020 ECONOMIC OUTLOOK } 19

COVID-19 SURVEY RESULTS HAS COVID-19 REQUIRED YOU TO FURLOUGH OR LAY OFF EMPLOYEES? NO 70% YES... MORE THAN 50% 12% YES... LESS THAN 50% 18%

HAVE YOU ACQUIRED COVID-19 RELATED FEDERAL AID OR LOANS FOR YOUR BUSINESS? 51.88%

1.23% 3.70% 6.17% YES - (PPP) YES - (EIDL) OTHER STATE FOR FEDERAL ASSISTANCE NO, NOT GRANTED

23.46%

NO, DID NOT PURSUE NO, I WAS NOT AWARE OF AID OTHER

2.47% 11.11%

20 } 2020 ECONOMIC OUTLOOK } SURVEY RESULTS

COVID-19 SURVEY RESULTS HOW DID YOUR BUSINESS OPERATIONS ADJUST TO CONTINUE SELLING SERVICES/PRODUCTS DURING THE EXECUTIVE ORDER FOR BUSINESS CLOSURES? DOES NOT APPLY 29.27% UNABLE TO SELL 15.85% ABLE TO PARTIALLY SHIFT 36.59% COMPLETELY SHIFTED SALE/DELIVERY 18.29%

AS YOUR BUSINESS REOPENS AND ADJUSTS, WHAT DO YOU ANTICIPATE AS YOUR MOST SIGNIFICANT CHALLENGE IN THE NEXT 1-3 MONTHS? OTHER 21.95% INCREASING PRODUCTION/TO MEET DEMAND 9.76% SUPPLY CHAIN AVAILABILITY 18.29% DEVELOPMENT OF BEST PRACTICES 40.24% REAQUIRING WORKFORCE 10.98% CASH-FLOW & LIQUIDITY 42.68% Recap of Other Responses: Adjusting to customer demands, Accommodating now constrained budgets

SURVEY RESULTS } 2020 ECONOMIC OUTLOOK } 21

COVID-19 SURVEY RESULTS WHAT CHANGES TO YOUR BUSINESS OPERATIONS DO YOU PLAN TO IMPLEMENT AND SUSTAIN IN THE NEXT 6 TO 12 MONTHS? OTHER

15%

INCREASED CLEANING

70%

ADJUSTING OFFICE SPACE FOR SAFETY

52.5%

REQUIRING PPE’S

27.5%

INTERNAL BEST PRACTICES

75%

Recap of Other Responses: Complete payment at time of agreement, Expanding virtual options

22 } 2020 ECONOMIC OUTLOOK } SURVEY RESULTS

S M A R T P E O PL E C H A NGE TH EI R

Minds Strategies S M A R T B U S I N E SSES C H A NGE TH EI R

Now more than ever, businesses need to be nimble, and choose partners that not only provide service, but new and innovative solutions.

At Starion, you’ll find both.

Bankers who will work tirelessly to help navigate the “new normal” for your business, and the latest technology to support it. No matter the size, we have the solution.

See for yourself. We’re committed to your success.

888.258.6050 | starionbank.com Member FDIC

Our legacy of Building a Strong AmericaÂŽ began in 1924 when we brought energy to towns on the Montana-North Dakota border. Today, from our headquarters in Bismarck, North Dakota, we operate in 43 states, delivering energy and providing construction materials and services.

We power homes, businesses and industry with electricity and natural gas. We connect homes, factories, offices and stores with pipelines and wiring. We keep our country moving by building and maintaining the transportation network of roads, highways and airports. We are your resources, for today and tomorrow.

1200 W. Century Ave., Bismarck, N.D. | www.MDU.com