CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC. AND ITS SUBSIDIARY AND AFFILIATE

CHARLOTTE REGIONAL REALTOR ASSOCIATION, INC. AND ITS SUBSIDIARY AND AFFILIATE CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING INFORMATION As of and for the Years Ended December 31, 2017 and 2016 And Report of Independent Auditor

TABLE OF CONTENTS REPORT OF INDEPENDENT AUDITOR... 1-2 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Financial Position... 3 Consolidated Statements of Activities... 4 Consolidated Statements of Cash Flows... 5 Notes to the Consolidated Financial Statements... 6-18 ACCOMPANYING INFORMATION Consolidating Statements of Financial Position... 19-20 Consolidating Statements of Activities... 21-22 Consolidating Statements of Cash Flows... 23-24

Report of Independent Auditor The Board of Directors Charlotte Regional REALTOR Association, Inc. and its Subsidiary and Affiliate Charlotte, North Carolina We have audited the accompanying consolidated financial statements of Charlotte Regional REALTOR Association, Inc. and its Subsidiary (Carolina Multiple Listing Services, Inc.) and Affiliate (Charlotte Regional REALTOR Association Housing Opportunity Foundation), collectively referred to as the ( Association ), which comprise the consolidated statements of financial position as of December 31, 2017 and 2016, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Charlotte Regional REALTOR Association, Inc. and its Subsidiary and Affiliate as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Other Matter Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying information contained in the consolidating statements of financial position, activities, and cash flows is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information referred to above is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Charlotte, North Carolina May 10, 2018 2

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 2017 2016 ASSETS Current Assets: Cash and cash equivalents $ 9,389,866 $ 7,507,602 Funds held in escrow 12,051,277 - Investments 6,101,937 5,012,908 Accounts receivable, net 160,763 50,009 Income taxes receivable 448,806 626,851 Prepaid expenses and other assets 1,055,788 1,097,843 Inventories 189,360 293,623 Total Current Assets 29,397,797 14,588,836 Property and equipment, net 5,045,712 2,617,482 Deferred income tax asset, net 9,800 12,400 Property held for sale - 3,457,973 Beneficial interest in trust 775,435 675,379 Total Assets $ 35,228,744 $ 21,352,070 LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable and accrued expenses $ 2,665,380 $ 1,845,904 Other liabilities 233,859 237,146 Deferred revenue 2,356,392 2,054,962 Total Current Liabilities 5,255,631 4,138,012 Deferred income tax liability, net 116,000 260,000 Total Liabilities 5,371,631 4,398,012 Net Assets: Unrestricted net assets: Undesignated 19,151,368 9,877,208 Equity in fixed assets 5,045,712 2,617,482 Board designated 5,639,187 4,457,642 29,836,267 16,952,332 Temporarily restricted net assets 20,846 1,726 Total Net Assets 29,857,113 16,954,058 Total Liabilities and Net Assets $ 35,228,744 $ 21,352,070 The accompanying notes to consolidated financial statements are an integral part of these statements 3

CONSOLIDATED STATEMENTS OF ACTIVITIES YEARS ENDED 2017 2016 Contributions, grants, and sponsorships Unrestricted revenue and support: Services fees $ 9,714,089 $ 8,711,365 Dues 1,584,913 1,397,728 Lockbox and Supra key income 1,626,415 1,452,496 Initiation and other fees 1,236,197 1,145,210 Education income 923,770 915,024 REALTOR store income 212,534 189,703 Contributions, grants, and sponsorships 120,726 249,211 Special events 295,566 136,686 Rental income 21,924 16,399 Advertising and other revenues 377,280 404,950 Investment income, net 173,564 221,175 Net assets released from restrictions 1,726 418 Total unrestricted revenue and support 16,288,704 14,840,365 Expenses: Payroll, payroll taxes, and employee benefits 3,868,398 3,528,056 MLS system and showing service expense 3,781,703 3,282,897 Lockbox costs and Supra key fees 485,073 495,125 Education and training 838,312 788,216 REALTOR store 160,091 133,320 Events, advocacy, and other services 491,696 397,645 Bank and credit card fees 379,918 372,143 Building operations and insurance 485,355 535,775 Conventions and meetings 350,834 305,615 Computer services 116,179 90,570 Depreciation 102,370 102,981 Interest - 22,582 Legal and other professional services 264,932 238,748 Supplies, printing, and postage 132,970 129,661 Redevelopment of land 1,370 219,432 Other expenses 603,486 451,553 Total expenses 12,062,687 11,094,319 Change in unrestricted net assets from operations 4,226,017 3,746,046 Gain on sale of property 9,608,962 - Change in unrestricted net assets before income tax expense 13,834,979 3,746,046 Income tax expense, net 951,044 992,273 Change in unrestricted net assets 12,883,935 2,753,773 Temporarily restricted revenue and support: Contribution revenue 20,846 1,726 Net assets released from restrictions (1,726) (418) Change in temporarily restricted net assets 19,120 1,308 Change in total net assets 12,903,055 2,755,081 Net assets, beginning of year 16,954,058 14,198,977 Net assets, end of year $ 29,857,113 $ 16,954,058 The accompanying notes to consolidated financial statements are an integral part of these statements 4

CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED 2017 2016 Cash flows from operating activities: Change in net assets $ 12,903,055 $ 2,755,081 Adjustments to reconcile change in net assets to net cash from operating activities: Depreciation 102,370 102,981 Bad debt expense 25,449 29,404 Gain on sale of property and equipment (9,608,962) - Investment in joint venture loss 43,213 20,041 Real estate taxes paid through proceeds from sale 62,144 - Deferred income taxes (141,400) 257,100 Realized and unrealized (gain) loss on investments 65,588 (33,083) Change in beneficial interest (100,056) (37,267) Amortization of deferred loan costs - 1,875 Changes in operating assets and liabilities: Receivables (136,203) (12,395) Prepaid expenses and other assets 101,050 (746,876) Inventories 104,263 95,613 Income taxes receivable/payable 178,045 (626,851) Accounts payable and accrued expenses 319,476 132,486 Deferred revenue 301,430 275,315 Other liabilities (3,287) 3,926 Net cash flows from operating activities 4,216,175 2,217,350 Cash flows from investing activities: Purchases of property and equipment (1,129,294) (18,878) Capital contribution in joint venture (50,000) (50,000) Proceeds from sales of investments - 1,051,795 Purchases of investments (1,154,617) (95,762) Net cash flows from investing activities (2,333,911) 887,155 Cash flows from financing activities: Repayment of long-term debt - (1,009,559) Net change in cash and cash equivalents 1,882,264 2,094,946 Cash and cash equivalents, beginning of year 7,507,602 5,412,656 Cash and cash equivalents, end of year $ 9,389,866 $ 7,507,602 Supplemental non cash investing: Proceeds from sale of property in escrow $ 12,051,277 $ - Land received in conjunction with sale of property $ 1,400,000 $ - Supplemental cash flow information: Income taxes paid $ 1,610,294 $ 1,378,880 Interest paid $ - $ 22,582 The accompanying notes to consolidated financial statements are an integral part of these statements 5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 Nature of operations and summary of significant accounting policies Description of the Business Charlotte Regional REALTOR Association, Inc. ( CRRA ) is a non-profit corporation organized under the laws of North Carolina. CRRA is a trade association for Charlotte, North Carolina area realtors. CRRA's mission is to lead, educate and equip members to be productive. CRRA provides educational opportunities through the Mingle School of Real Estate as well as holding seminars throughout the region. CRRA also provides its members with mediation and arbitration services, information regarding legislative actions that impact the real estate business, and other resources such as its bookstore, computer lab, and online magazine Realtor Reflections. The consolidated financial statements include the accounts of CRRA and its wholly owned subsidiary, Carolina Multiple Listing Services, Inc. ( CarolinaMLS ), which is subject to income tax. CarolinaMLS provides members of CRRA and other associations access to a comprehensive database of local properties that are available for sale. CarolinaMLS also provides certain CRRA members with the ability to purchase and lease unattended lockboxes and electronic keys to open the lockboxes. The consolidated financial statements also include the accounts of CRRA s wholly controlled entity, Charlotte Regional REALTOR Association Housing Opportunity Foundation (the Foundation ), which is exempt from income tax. The Foundation s mission is to provide support, funding and education related to housing opportunities. All significant intercompany balances and transactions have been eliminated in consolidation. Unless separately designated, the entities are collectively referred to as the ( Association ). Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ( GAAP ). Net assets and revenue, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows: Unrestricted Net Assets Net assets that are both undesignated and designated in nature. Undesignated, unrestricted net assets are those currently available for use in the day-to-day operation of the Association. From time to time, the Board of Directors may designate certain amounts to be utilized/invested to meet specific objectives of the Association. Such amounts are reflected as unrestricted, designated net assets. Temporarily Restricted Net Assets Net assets subject to donor-imposed stipulations that may or will be met, either by fulfillment of the donor-stipulated purpose and/or the passage of time. When a restriction expires, that is when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statements of activities as net assets released from restrictions. If a restriction is fulfilled in the same time period in which the contribution is received, the contribution is reported as unrestricted. Permanently Restricted Net Assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Association. Generally, the donors of these assets permit the Association to use all of, or part of, the income earned on the related investments for general or specific purpose. At December 31, 2017 and 2016, the Association did not have any permanently restricted net assets. 6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 Nature of operations and summary of significant accounting policies (continued) Revenue is reported as increases in unrestricted net assets unless use of the related assets is limited by donorimposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications between the applicable classes of net assets. Contributions, including unconditional promises to give, are recognized as revenue in the period received. Conditional promises to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value. Contributions of cash and other assets are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are restricted for future periods or are restricted by the donor for specific purposes are reported as temporarily restricted support. Unconditional promises to give due in the next year are recorded at their net realizable value. Unconditional promises to give due in subsequent years are recorded at the present value of their estimated future cash flows, using credit risk adjusted interest rates applicable to the years in which the pledge was received. Amortization of the resulting discount is taken into income as a contribution in subsequent years. Revenue Recognition Service fees, dues and other revenues are recorded when earned (in the applicable membership period for dues). Members initiation fees (non-refundable) are recorded as revenue when billed. Revenue from the sale of lock boxes and Supra keys is recorded on the date of the sale. Amounts billed or collected in advance of being earned are recorded as deferred revenue. Income Taxes CRRA and the Foundation are exempt from federal income taxes under Section 501(c)(6) and Section 501(c)(3), respectively, of the Internal Revenue Code (the Code ). CRRA and the Foundation are liable for federal and state taxes on any unrelated business income, as defined in the Code. CarolinaMLS is subject to income tax. The Association accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and attributable to certain tax deduction carryforwards. The Association follows the Financial Accounting Standards Board ( FASB ) guidance on accounting for uncertainty in income taxes. The Association s policy is to record a liability for any tax position taken that is beneficial to the Association, including any related interest and penalties, when it is more likely than not the position taken by management with respect to a transaction or class of transactions will be overturned by a taxing authority upon examination. Management believes there are no such positions as of December 31, 2017 and 2016 and, accordingly, no liability has been accrued. Property Held for Sale Property held for sale as of December 31, 2016 consists of the Greenwood Cliff Campus, 5.1 acres of land surrounding the CRRA office building. The Association has partnered with the city, county, and other stakeholders and has begun developing the land. The sale will occur in two phases with the first phase having closed in September 2017. The book value of assets held for sale, net of accumulated depreciation for the first phase was $3,457,973 at December 31, 2016. The Association was no longer depreciating this property and the property was sold in 2017 resulting in a gain on sale of $9,608,962. The Association has no assets held for sale at December 31, 2017. The property to be sold in Phase 2 is still in use by the Association and has not met the requirements to be classified as held for sale. 7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 Nature of operations and summary of significant accounting policies (continued) Advertising Expense The Association expenses advertising costs as they are incurred. Total advertising costs for the years ended December 31, 2017 and 2016, were $201,885 and $147,440, respectively. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Association considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents, except those cash equivalents managed as part of investment strategies. Funds Held in Escrow Funds held in escrow represent proceeds held by a title insurance company related to the sale of the Greenwood Cliff Campus, 5.1 acres of land surrounding the CRRA office building. The funds will be released to the Association for construction per the development agreement. Of the $12,051,277 held in escrow at December 31, 2017, $500,000 and $350,000 are reserved for payment to the Seller for sitework and parking rights, respectively. Investments Investments in marketable securities with readily determinable fair values are valued in the consolidated statements of financial position at their fair value. Fair value is determined by reference to exchange or dealer-quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar investment securities. Changes in the fair value of securities are reflected as investment gains or losses in the accompanying consolidated statements of activities. Accounts Receivable Accounts receivable, consisting of trade accounts receivable, and contributions receivable are stated at cost less an allowance for doubtful accounts. Management s determination of the allowance for doubtful accounts is based on an evaluation of the accounts and contributions receivable, past experience, current economic conditions, and other risks inherent in the accounts receivable portfolio. Chargeoffs are determined on a case-by-case basis. Pledges Receivable Unconditional promises to give are recorded at net realizable value and are presented within Accounts Receivable on the accompanying Consolidated Statements of Financial Position. An allowance for doubtful accounts is based on specific identification of possible doubtful accounts and the Association s historical collection experience. Management has determined an allowance for doubtful accounts was not necessary as of December 31, 2017 and 2016. Inventories Inventories, consisting of supplies used by real estate agents, are stated at lower of cost or market with cost based on the average cost method. Property and Equipment Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Expenditures for acquisitions, renewals and betterments are capitalized, whereas maintenance and repair costs are expensed as incurred. Expenditures paid to third parties for the development of computer software are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation thereon are removed from the accounts and any gains or loss are included in unrestricted revenue. These assets are reviewed for impairment whenever changes in circumstances indicate the carrying value of an asset may not be recoverable. Property and equipment in excess of $5,000 is capitalized. The estimated useful lives of assets are as follows: Buildings Building improvements Leasehold improvements & Systems development costs Furniture and equipment Computer equipment 40 years 7-27.5 years 10 years 7-10 years 3-5 years 8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 Nature of operations and summary of significant accounting policies (continued) Deferred Revenue Annual membership dues are billed during the last quarter of the calendar year. Dues received in advance are recorded as deferred revenue until earned in the next calendar year. Deferred revenue also includes fee income, grant and sponsorship revenues received for future periods. Comprehensive Income and Accumulated Other Comprehensive Income As a for-profit entity, CarolinaMLS is required to present unrealized gain (loss) on securities available for sale arising during the year in other comprehensive income (loss). For purposes of presentation in the Association s consolidated financial statements, $37,283 of unrealized losses and $51,904 of unrealized gains on securities available for sale by CarolinaMLS for the years ended December 31, 2017 and 2016, respectively, have been included in investment income in the accompanying consolidated statements of activities. Related accumulated other comprehensive loss of $159,757 and $122,474 as of December 31, 2017 and 2016, respectively, has been eliminated as part of the consolidation of CarolinaMLS with the Association. Equity Interest in Joint Venture Investee companies that are not consolidated but over which CarolinaMLS exercises significant influence are accounted for under the equity method of accounting. Whether or not CarolinaMLS exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company s board of directors and ownership level. Under the equity method of accounting, an investee company s accounts are not reflected within the Association s consolidated statement of financial position and consolidated statement of activities; however, CarolinaMLS s share of the earnings or losses of a joint venture investee company is reflected in the caption MLS system and showing service expenses in the consolidated statements of activities and totaled $43,213 and $20,041 for the years ended December 31, 2017 and 2016, respectively. CarolinaMLS s carrying value in this equity method joint venture is reflected in the caption prepaid expenses and other assets in the Association s consolidated statement of financial position and totaled $30,863 and $29,959 as of December 31, 2017 and 2016, respectively. When CarolinaMLS s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in CarolinaMLS s financial statements unless CarolinaMLS guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, CarolinaMLS will not record its share of such income until it equals the amount of its share of losses not previously recognized. Functional Allocation of Expenses The costs of providing the various programs and other activities are summarized below on a functional basis. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 2017 2016 Programs: Education, advocacy, and other member services $ 2,082,852 $ 2,023,122 CarolinaMLS services 6,108,661 5,281,771 Foundation programs 450,843 370,880 8,642,356 7,675,773 Management and general 1,826,218 1,894,075 Supporting services 1,559,403 1,468,341 Fundraising 34,710 56,130 $ 12,062,687 $ 11,094,319 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 Nature of operations and summary of significant accounting policies (continued) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from management s estimates. Future Pronouncements In August of 2016, the FASB issued Accounting Standards Update ( ASU ) 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. This standard changes presentation and disclosure requirements of not-for-profit entities. The primary changes are a decrease in the number of net asset classes from three to two, requiring disclosures of qualitative and quantitative information on how the not-for-profit entity manages its liquid available resources and liquidity risks, and requires reporting of expenses by function and nature. This standard is effective for all fiscal years beginning after December 15, 2017. In May 2014, the FASB issued ASU 2014-09. The amendments in this update create Topic 606, Revenue from Contracts with Customers, and supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605-35, Revenue Recognition Construction-Type and Production-Type Contracts, and create new Subtopic 340-40, Other Assets and Deferred Costs Contracts with Customers. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of the ASU 2014-09 one year, making it effective for annual reporting periods beginning after December 15, 2018. The amendments in this update will be effective for the Association s fiscal year 2019 with early adoption permitted in certain circumstances. In January 2017, the FASB issued ASU 2017-01. The guidance in this ASU amends the Business Combination guidance in Topic 805, Business Combinations. The new guidance provides a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted in certain circumstances. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the statement of financial position for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classifications affecting the pattern of expense recognition in the statement of activities. The new standard is effective for fiscal years beginning after December 15, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, with certain practical expedients available. Management is currently evaluating the impact of these standards on the Association s financial statements. 10

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 2 Concentration of credit risk The Association s revenues and membership dues are received principally from individuals and companies engaged in the service and sale of real estate. Membership and revenue sources are generally dispersed in Charlotte and the surrounding counties of Mecklenburg, Iredell, Gaston, Cabarrus, Lincoln, Union, Rowan, Haywood, Henderson and Buncombe. The Association s ability to collect on these accounts receivable is directly affected by economic conditions in these geographic regions. The Association places its cash and cash equivalents on deposit with financial institutions in the United States of America. The Federal Deposit Insurance Corporation covers $250,000 for substantially all depository accounts. During the year, the Association from time to time may have had amounts on deposit in excess of the insured limits. Note 3 Accounts receivable Accounts receivable consists of the following at December 31: 2017 2016 MLS fees $ 161,088 $ 36,174 Pledges to the Foundation 20,000 - Advertising, Mingle, events 49,655 95,323 230,743 131,497 Less allowance for doubtful accounts (69,980) (81,488) Accounts receivable, net $ 160,763 $ 50,009 The pledges receivable are due to the Foundation in an amount of $10,000 for each of the years ending December 31, 2018 and 2019. Note 4 Investments and beneficial interest in trust Investments are subject to fluctuations in market values and expose the Association to a certain degree of interest and credit risk. The following is a summary of investments and beneficial interest in trust at December 31: 2017 2016 Investments: Government bond mutual funds $ 6,101,937 $ 5,012,908 Beneficial interest in trust 775,435 675,379 $ 6,877,372 $ 5,688,287 11

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 4 Investments and beneficial interest in trust (continued) The beneficial interest in trust is held at the Foundation for the Carolinas ( FFTC ) and is invested in pooled funds of primarily common stock equities, bonds and fixed income investments, which are subject to fluctuations in market values and expose the Foundation to a certain degree of interest and credit risk. Investments include fund managers that invest in private investment funds and alternative investments as part of the asset allocation, as an alternative investment strategy with the purpose of increasing the diversity of the holdings and being consistent with the overall investment objectives. These investments are not traded on an exchange, and accordingly, may not be as liquid as investments in marketable equity or debt securities. These investment funds may invest in other investment funds, equity or debt securities, which may or may not have readily available fair values, and foreign exchange or commodity forward contracts. Management of the Foundation receives the estimate of fair value of these investments from FFTC and relies on various factors, processes and procedures to determine if the estimate of value is reasonable. However, information used by FFTC and by management is subject to change in the near term, and, accordingly, investment values and performance can be affected. The effect of these changes could be material to the financial statements. Investment income is comprised of the following for the years ended December 31: 2017 2016 Dividends and interest $ 139,096 $ 150,825 Unrealized gains (losses) (65,588) 27,583 Realized gains - 5,500 Change in beneficial interest in trust 100,056 37,267 $ 173,564 $ 221,175 Note 5 Property and equipment Property and equipment consists of the following at December 31: 2017 2016 Land and land improvements $ 3,785,335 $ 2,385,334 Buildings and building improvements 1,879,233 1,879,233 Furniture and equipment 467,481 467,481 Systems developments - 27,595 Computer equipment 1,410,557 1,408,738 Construction-in-progress 861,590-8,404,196 6,168,381 Less accumulated depreciation (3,358,484) (3,550,899) $ 5,045,712 $ 2,617,482 Depreciation expense for the years ended December 31, 2017 and 2016 was $102,370 and $102,981, respectively. 12

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 6 Net assets Temporarily restricted net assets consist of the following at December 31: 2017 2016 Purpose-restricted contribution $ 846 $ 1,726 Time-restricted contribution 20,000 - $ 20,846 $ 1,726 Board-designated reserves are a portion of unrestricted net assets that are available for use at the discretion of the Board. The Board-designated operating reserve is intended to provide an internal source of funds for situations such as sudden increase in expenses, one-time unbudgeted expenses, unanticipated loss in revenues, or uninsured losses. The minimum operating reserve equals three months of average operating costs. The balance of Board-designated net assets held by the Association at December 31, 2017 and 2016, respectively, is calculated as follows: 2017 2016 Total unrestricted net assets $ 29,836,267 $ 16,952,332 Less equity in fixed assets (5,045,712) (2,617,482) Unrestricted net assets available for designation 24,790,555 14,334,850 Less Board designated amounts for: Operating reserves 3,713,800 3,102,100 Technology and capital asset reserves 647,732 249,595 Greenwood Cliff Task Force reserve 202,220 130,568 Legal reserve 300,000 300,000 Quasi-endowment 775,435 675,379 5,639,187 4,457,642 Undesignated net assets $ 19,151,368 $ 9,877,208 Note 7 Board designated endowment fund The Board of Directors has designated a portion of unrestricted net assets as funds functioning as endowments totaling $775,435 and $675,379 at December 31, 2017 and 2016, respectively. The Board designated endowment fund is to be used for the continued support of Foundation operations. It is the intent of the Board to accumulate earnings until the balance in the total fund reaches at least $1,000,000. In 2003, these funds were transferred to the Foundation for the Carolinas creating a trust in which the Foundation has a beneficial interest (see Note 4). As required by GAAP, net assets associated with this endowment fund, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. As of December 31, 2017 and 2016, there were no donor-imposed restrictions on these endowment funds. 13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 7 Board designated endowment fund (continued) The purpose of the endowment is to provide a method for funding of the Foundation s growth and allow the investment of these endowed funds for long-term projects. The funds are invested in the asset allocation strategy recommended by the Foundation for the Carolina s Investment Committee, long-term growth. This diverse mix of investments seeks to provide a predictable stream of funding to programs supported by the endowment while seeking to maintain the purchasing power of the endowment assets. Under this policy, the endowment assets are invested in a manner that is intended to produce results that provide an average annual real rate of return, net of fees, equal to or greater than spending, administrative fees, and inflation (Consumer Price Index). Actual returns in any given year may vary from this amount. To satisfy its long-term rate-of-return objectives, it relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). Accordingly, the investment target allocation guidelines are as follows: global equities 60%, global fixed income 15%, real assets 10%, and diversifying strategies 15%. Funds available for distribution from the fund are based upon a 5% spending plan using a twelve quarter rolling average of fund assets and is evaluated on an annual basis for prudence. No amounts were withdrawn from the fund for 2017 and 2016. The following schedule represents changes in unrestricted, Board designated endowment net assets for the years ended December 31: 2017 2016 Beginning of year $ 675,379 $ 638,112 Investment return 106,136 43,852 Investment fees (6,080) (6,585) End of year $ 775,435 $ 675,379 Note 8 Fair value measurements of assets and liabilities In accordance with guidance on fair value measurements for financial instruments, fair value is defined as the price that the Association would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. The fair value guidance establishes a three-tier hierarchy to distinguish between 1) inputs that reflect the assumptions that market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs), and 2) inputs that reflect the reporting entity s own assumptions about the assumptions that market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. The inputs are summarized in the three levels listed below: Level 1 Quoted prices in active markets that are accessible at the measurement date for identical securities. Level 2 Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable either directly or indirectly. Level 3 Prices or valuations that require using significant unobservable inputs in determining fair value. The inputs into the determination of fair value require significant judgment or estimation by the investment manager. 14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 8 Fair value measurements of assets and liabilities (continued) The following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value. Mutual Funds Investments in mutual funds valued at the quoted prices in an active market are classified within Level 1 of the fair value hierarchy. Beneficial Interest in Trust Beneficial interests in trusts are valued using the fair value of the assets in the trust as a practical expedient unless facts and circumstances indicate the fair value of the assets in the trust differs from the fair value of the beneficial interests. Beneficial interests in trust are classified within Level 3 of the fair value hierarchy. The changes in unrestricted, board designated net assets in Note 7 presents a reconciliation of the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The following table summarizes the valuation of the Association s investments measured at fair value on a recurring basis at December 31, 2017 and 2016: Government bond mutual funds Beneficial interest in trust Government bond mutual funds Beneficial interest in trust 2017 Level 1 Level 2 Level 3 Total $ 6,101,937 $ - $ - $ 6,101,937 - - 775,435 775,435 $ 6,101,937 $ - $ 775,435 $ 6,877,372 2016 Level 1 Level 2 Level 3 Total $ 5,012,908 $ - $ - $ 5,012,908 - - 675,379 675,379 $ 5,012,908 $ - $ 675,379 $ 5,688,287 A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. There have been no changes in the methodologies used at December 31, 2017 and 2016. Note 9 Multiple listing services agreement In January 2015, the CarolinaMLS and North Carolina Mountains Multiple Listing Services ( NCMMLS ) entered into a contract for CarolinaMLS to operate and serve as the wholesale vendor for NCMMLS. As the wholesale MLS system vendor, CarolinaMLS provides core services to NCMMLS as well as training and support for its subscribers for a fee. The initial term of the agreement is three years and will continue month to month thereafter unless terminated by either party. Total fees under this service agreement were $1,400,365 and $1,285,010 for the years ended December 31, 2017 and 2016, respectively, and are included in services fees on the accompanying consolidated statements of activities. 15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 10 Employee benefit plan The Association maintains a defined contribution 401(k) Savings and Retirement Plan for all eligible employees. The Association matches employee contributions at 100% of such contributions up to 4% of pay. The Association may make annual discretionary contributions based on a percentage of employee s gross current year earnings. During the years ended December 31, 2017 and 2016, the Association s contributions were $199,203 and $171,664, respectively. Note 11 Income taxes Income tax expense for the Association, including the wholly-owned subsidiary, is comprised of the following components for the years ended December 31: 2017 2016 Current tax expense $ 1,112,444 $ 667,173 Deferred tax (benefit) expense (161,400) 325,100 Income tax expense $ 951,044 $ 992,273 A net deferred income tax asset or liability has been provided for the net income tax effect of temporary differences between the carrying amount of assets and liabilities for tax purposes over the amount for financial reporting purposes and also for net operating loss and charitable contributions available to offset future taxable income. Deferred income tax accounts are detailed as follows at December 31: 2017 Benefit of carryforward of expenses available to offset future taxable income Benefit of unrealized loss on securities available to offset future taxable income Payments on future liabilities made in the current period Financial reporting net carrying value of property and equipment below net carrying value for income tax purposes Less valuation allowance Net deferred income tax asset (liability) By entity: The Association CarolinasMLS Net deferred income tax asset (liability) Asset Liability Net $ 205,000 $ - $ 205,000 48,000-48,000 - (175,000) (175,000) 2,000-2,000 (186,200) - (186,200) $ 68,800 $ (175,000) $ (106,200) Asset Liability Net $ 9,800 $ - $ 9,800 - (116,000) (116,000) $ 9,800 $ (116,000) $ (106,200) 16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 11 Income taxes (continued) 2016 Benefit of carryforward of expenses available to offset future taxable income Benefit of unrealized loss on securities available to offset future taxable income Payments on future liabilities made in the current period Financial reporting net carrying value of property and equipment in excess of net carrying value for income tax purposes Less valuation allowance By entity: The Association CarolinasMLS Net deferred income tax asset (liability) Asset Liability Net $ 262,000 $ - $ 262,000 68,000-68,000 - (336,000) (336,000) - (6,000) (6,000) (235,600) - (235,600) $ 94,400 $ (342,000) $ (247,600) Asset Liability Net $ 12,400 $ - $ 12,400 - (260,000) (260,000) $ 12,400 $ (260,000) $ (247,600) The principal differences between the income tax provision in the consolidated financial statements, and the tax resulting from applying the federal statutory rate to change in unrestricted net assets before income tax expense, results primarily from nondeductible expenses, state income taxes and changes to the valuation allowance. The following charitable contribution carryforwards are available at December 31, 2017. Their future deductibility is subject to future year taxable income. Carryforward Amount Expiration 2013 $ 63,750 2018 2014 84,750 2019 2015 240,500 2020 2016 269,315 2021 2017 273,412 2022 The principal differences between the income tax provision in the financial statements, and the tax resulting from applying the federal statutory rate to net income before tax provision, results primarily from nondeductible expenses, state income taxes and changes to the valuation allowance. Management has provided a valuation allowance for certain deferred tax assets that it believes more likely than not cannot be recovered. The valuation allowance decreased $49,400 and increased $1,000 for the years ended December 31, 2017 and 2016, respectively. 17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 12 Leases The Association leases copiers under a noncancelable operating lease that expires December 2018. Rent expense under this lease totaled $23,124 for the years ended December 31, 2017 and 2016. Required future minimum lease payments for the year ending December 31, 2018 is $23,124. Note 13 Subsequent events The Association has evaluated subsequent events through May 10, 2018, in connection with the preparation of these consolidated financial statements, which is the date the consolidated financial statements were available to be issued. In January 2018, CarolinaMLS acquired North Carolina Mountains MLS for a total acquisition cost of $1,578,950. In February 2018, the CarolinaMLS and Multiple Listing Service of Catawba Valley, Inc. ( Catawba MLS ) entered into a contract for CarolinaMLS to operate and serve as the wholesale vendor for Catawba MLS. As the wholesale MLS system vendor, CarolinaMLS will provide core services to Catawba MLS as well as training and support for its subscribers for a fee. 18

ACCOMPANYING INFORMATION

CONSOLIDATING STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2017 ASSETS Current Assets: Cash and cash equivalents 4,640,516 Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated $ $ 4,587,673 $ 161,677 $ - $ 9,389,866 Fund held in escrow 12,051,277 - - - 12,051,277 Investments 3,069,363 3,032,574 - - 6,101,937 Accounts receivable, net 17,070 123,693 20,000-160,763 Income taxes receivable - 448,806 - - 448,806 Due from affiliate organizations - 231,716 - (231,716) - Prepaid expenses and other assets 275,450 777,088 3,250-1,055,788 Inventories 136,907 52,453 - - 189,360 Investment in subsidiary 7,164,675 - - (7,164,675) - Total Current Assets 27,355,258 9,254,003 184,927 (7,396,391) 29,397,797 Property and equipment 8,070,343 333,853 - - 8,404,196 Less accumulated depreciation (3,024,631) (333,853) - - (3,358,484) 5,045,712 - - - 5,045,712 Deferred income tax asset, net 9,800 - - - 9,800 Beneficial interest in trust - - 775,435-775,435 Total Assets $ 32,410,770 $ 9,254,003 $ 960,362 $ (7,396,391) $ 35,228,744 19

CONSOLIDATING STATEMENTS OF FINANCIAL POSITION (CONTINUED) DECEMBER 31, 2017 Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable and accrued expenses $ 2,374,783 $ 289,640 $ 957 $ - $ 2,665,380 Other liabilities 6,592 227,267 - - 233,859 Deferred revenues 899,971 1,456,421 - - 2,356,392 Due to affiliated organization 154,678-77,038 (231,716) - Total Current Liabilities 3,436,024 1,973,328 77,995 (231,716) 5,255,631 Deferred income tax liability, net - 116,000 - - 116,000 Total Liabilities 3,436,024 2,089,328 77,995 (231,716) 5,371,631 Net Assets: Unrestricted net assets: Undesignated 19,065,282-86,086-19,151,368 Equity in fixed assets 5,045,712 - - - 5,045,712 Board designated 4,863,752-775,435-5,639,187 Temporarily restricted net assets - - 20,846-20,846 Accumulated other comprehensive loss - (159,757) - 159,757 - Common stock, $1 par value; 100,000 shares authorized; 75,000 shares issued and outstanding - 75,000 - (75,000) - Retained earnings - 7,249,432 - (7,249,432) - Total Net Assets 28,974,746 7,164,675 882,367 (7,164,675) 29,857,113 Total Liabilities and Net Assets $ 32,410,770 $ 9,254,003 $ 960,362 $ (7,396,391) $ 35,228,744 20

CONSOLIDATING STATEMENTS OF ACTIVITIES YEAR ENDED DECEMBER 31, 2017 Contributions, grants, and sponsorships Unrestricted revenue and support: Services fees - Charlotte Regional Charlotte REALTOR Regional Carolina Association REALTOR Multiple Listing Housing Opportunity Association, Inc. Services, Inc. Foundation Eliminations Consolidated $ $ 9,714,089 $ - $ - $ 9,714,089 Dues 1,584,913 - - - 1,584,913 Lockbox and Supra key income 868,867 1,626,415 - (868,867) 1,626,415 Initiation and other fees 538,175 698,022 - - 1,236,197 Education income 923,770 - - - 923,770 REALTOR store income 212,534 - - - 212,534 Contributions, grants, and sponsorships - - 374,138 (253,412) 120,726 Special events 124,388-171,178-295,566 Rental income 332,592 - - (310,668) 21,924 Advertising and other revenues 53,760 323,520 - - 377,280 Investment income, net 1,931,526 20,046 100,056 (1,878,064) 173,564 Management fees 2,657,541 - - (2,657,541) - Net assets released from restrictions - - 1,726-1,726 Total unrestricted revenue and support 9,228,066 12,382,092 647,098 (5,968,552) 16,288,704 Expenses: Payroll, payroll taxes, and employee benefits 3,868,398 - - - 3,868,398 Management fee and allocated expenses (755,179) 3,159,308 253,412 (2,657,541) - MLS system expenses - 1,397,661 - - 1,397,661 Showing service expense - 2,384,042 - - 2,384,042 Lockbox costs and Supra key fees - 1,353,940 - (868,867) 485,073 Education and training 788,835 49,477 - - 838,312 REALTOR store 160,091 - - - 160,091 Member events 143,325-168,651-311,976 Advocacy and other services 142,095-37,625-179,720 Payments to outlying counties - 86,558 - - 86,558 Bank and credit card fees 126,518 251,811 1,589-379,918 Building rent and operations 440,553 307,500 3,168 (310,668) 440,553 Computer services 88,699 27,480 - - 116,179 Contributions 275,912-81,608 (253,412) 104,108 21