Increased costs from growth through acquisition could exceed the income growth anticipated from these opportunities, especially in the short term as these acquisitions are integrated into our business;

Increased costs for controls over data confidentiality, integrity, and availability due to growth or to strengthen the security profile of our computer systems and computer networks;

Changes in government-sponsored enterprises and their ability to insure or to buy our loans in the secondary market may result in significant changes in our ability to recognize income on sale of our loans to third parties;

Competition in the mortgage market industry may drive down the interest rates we are able to offer on our mortgages, which will negatively impact our net interest income;

Changes in the cost structures and fees of government-sponsored enterprises to whom we sell many of these loans may compress our margins and reduce our net income and profitability; and

Our hedging strategies to offset risks related to interest rate changes may not prove to be successful and may result in unanticipated losses for the Company.

These and other factors may limit our ability to generate revenue in excess of our costs, which in turn may result in a lower rate of profitability or even substantial losses for the Company.

Federal, state and local consumer protection laws may restrict our ability to offer and/ or increase our risk of liability with respect to certain products and services and could increase our cost of doing business.

Federal, state and local laws have been adopted that are intended to eliminate certain practices considered “predatory” or “unfair and deceptive”. These laws prohibit practices such as steering borrowers away from more affordable products, failing to disclose key features, limitations, or costs related to products and services, selling unnecessary insurance to borrowers, repeatedly refinancing loans, imposing excessive fees for overdrafts, and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. It is our policy not to make predatory loans or engage in deceptive practices, but these laws and regulations create the potential for liability with respect to our lending, servicing, loan investment and deposit taking activities. As a company with a significant mortgage banking operation, we also, inherently, have a significant amount of risk of noncompliance with fair lending laws and regulations. These laws and regulations are complex and require vigilance to ensure that policies and practices do not create disparate impact on our customers or that our employees do not engage in overt discriminatory practices. Noncompliance can result in significant regulatory actions including, but not limited to, sanctions, fines or referrals to the Department of Justice. As we offer products and services to customers in additional states, we may become subject to additional state and local laws designed to protect consumers. The additional laws and regulations may increase our cost of doing business, and ultimately may prevent us from making certain loans, offering certain products, and may cause us to reduce the average percentage rate or the points and fees on loans and other products and services that we do provide.

The significant concentration of real estate secured loans in our portfolio has had and may continue to have a negative impact on our asset quality and profitability.

Substantially all of our loans are secured by real property. Our real estate secured lending is generally sensitive to national, regional and local economic conditions, making loss levels difficult to predict. Declines in real estate sales and prices, significant increases in interest rates, and a degeneration in prevailing economic conditions may result in higher than expected loan delinquencies, foreclosures, problem loans, OREO, net charge-offs and provisions for credit and OREO losses. Although real estate prices are stable in the markets in which we operate, if market values decline, the collateral for our loans may provide less security and our ability to recover the principal, interest and costs due on defaulted loans by selling the underlying

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real estate will be diminished, leaving us more likely to suffer additional losses on defaulted loans. Such declines may have a greater effect on our earnings and capital than on the earnings and capital of financial institutions whose loan portfolios are more geographically diversified.

Worsening conditions in the real estate market and higher than normal delinquency and default rates on loans could cause other adverse consequences for us, including:

The reduction of cash flows and capital resources, as we are required to make cash advances to meet contractual obligations to investors, process foreclosures, and maintain, repair and market foreclosed properties;

Declining mortgage servicing fee revenues because we recognize these revenues only upon collection;

Increasing loan servicing costs;

Declining fair value on our mortgage servicing rights; and

Declining fair values and liquidity of securities held in our investment portfolio that are collateralized by mortgage obligations.

Our allowance for loan losses may prove inadequate or we may be negatively affected by credit risk exposures. Future additions to our allowance for loan losses will reduce our earnings.

Our business depends on the creditworthiness of our customers. As with most financial institutions, we maintain an allowance for loan losses to provide for defaults and nonperformance, which represents management's best estimate of probable incurred losses inherent in the loan portfolio. Management's estimate is the result of our continuing evaluation of specific credit risks and loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions, industry concentrations and other factors that may indicate future loan losses. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and judgment and requires us to make estimates of current credit risks and future trends, all of which may undergo material changes. Generally, our nonperforming loans and OREO reflect operating difficulties of individual borrowers and weaknesses in the economies of the markets we serve. This allowance may not be adequate to cover actual losses, and future provisions for losses could materially and adversely affect our financial condition, results of operations and cash flows.

In addition, as a result of our acquisitions of Simplicity Bank on March 1, 2015 and Fortune Bank, Yakima National Bank and two branches of AmericanWest Bank in the second half of 2013, we have added the loans previously held by the acquired companies or related to the acquired branches to our books. ~~The pending~~We expect that the acquisition of ~~Simplicity~~Orange County Business Bank, which we anticipate completing in early 2016, and any other future acquisitions we may make will have a similar result. Although we review loan quality as part of our due diligence in considering any acquisition, the addition of such loans may increase our credit risk exposure, requiring an increase in our allowance for loan losses or we may experience adverse effects to our financial condition, results of operations and cash flows stemming from losses on those additional loans.

Our real estate lending also exposes us to environmental liabilities.

In the course of our business, it is necessary to foreclose and take title to real estate, which could subject us to environmental liabilities with respect to these properties. Hazardous substances or waste, contaminants, pollutants or sources thereof may be discovered on properties during our ownership or after a sale to a third party. We could be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances or chemical releases at such properties. The costs associated with investigation or remediation activities could be substantial and could substantially exceed the value of the real property. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. We may be unable to recover costs from any third party. These occurrences may materially reduce the value of the affected property, and we may find it difficult or impossible to use or sell the property prior to or following any environmental remediation. If we ever become subject to significant environmental liabilities, our business, financial condition and results of operations could be materially and adversely affected.

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A failure in or breach of our security systems or infrastructure, or those of our third party vendors and other service providers, resulting from cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.

Information security risks for financial institutions have generally increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. Those parties also may attempt to fraudulently induce employees, customers, or other users of our systems to disclose confidential information in order to gain access to our data or that of our customers. Our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks, either managed directly by us or through our data processing vendors. In addition, to access our products and services, our customers may use personal

smartphones, tablet PCs, and other mobile devices that are beyond our control systems. Although we believe we have robust information security procedures and controls, we are heavily reliant on our third party vendors, and our vendors’ or our own technologies, systems, networks and our customers' devices may become the target of cyber-attacks, computer viruses, malicious code, unauthorized access, hackers or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of Company or our customers' confidential, proprietary and other information, or otherwise disrupt the Company's or its customers' or other third parties' business operations.

Third parties with which we do business or that facilitate our business activities, including exchanges, clearing houses, financial intermediaries or vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints. In addition, some of our primary third party service providers may be subject to enhanced regulatory scrutiny due to regulatory findings during examinations of such service provider(s) conducted by federal regulators. While we have and will subject such vendor(s) to higher scrutiny and monitor any corrective measures that the vendor(s) are taking or would undertake, we are not able to fully mitigate any risk which could result from a breach or other operational failure caused by this, or any other vendor’s breach.

To date we are not aware of any material losses relating to cyber-attacks or other information security breaches, but there can be no assurance that we will not suffer such attacks and losses in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, our plans to continue to implement our Internet banking and mobile banking channel, our expanding operations and the outsourcing of a significant portion of our business operations. As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect customer information, our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for the Company. As cyber threats continue to evolve, we may be required to expend significant additional resources to insure, to continue to modify or enhance our protective measures or to investigate and remediate important information security vulnerabilities, however, our measures may be insufficient to prevent physical .and electronic break-ins, denial of service and other cyber-attacks or security breaches.

Disruptions or failures in the physical infrastructure or operating systems that support our businesses and customers, or cyber-attacks or security breaches of the networks, systems or devices that our customers use to access our products and services could result in customer attrition, financial losses, the inability of our customers to transact business with us, violations of applicable privacy and other laws, regulatory fines, penalties or intervention, additional regulatory scrutiny, reputational damage, litigation, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially and adversely affect our results of operations or financial condition.

The network and computer systems on which we depend could fail or experience security breaches.

Our computer systems could be vulnerable to unforeseen problems. Because we conduct a part of our business over the Internet and outsource several critical functions to third parties, operations will depend on our ability, as well as the ability of third-party service providers, to protect computer systems and network infrastructure against damage from fire, power loss, telecommunications failure, physical break-ins or similar catastrophic events. Any damage or failure that causes interruptions in operations may compromise our ability to perform critical functions in a timely manner and could have a material adverse effect on our business, financial condition and results of operations as well as our reputation and customer or vendor relationships.

In addition, a significant barrier to online financial transactions is the secure transmission of confidential information over public networks. Our Internet banking system relies on encryption and authentication technology to provide the security and authentication necessary to effect secure transmission of confidential information. Advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms our

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third-party service providers use to protect customer transaction data. If any such compromise of security were to occur, it could have a material adverse effect on our business, financial condition and results of operations.

The failure to protect our customers’ confidential information and privacy could adversely affect our business.

We are subject to state and federal privacy regulations and confidentiality obligations that, among other things restrict the use and dissemination of, and access to, the information that we produce, store or maintain in the course of our business. We also have contractual obligations to protect certain confidential information we obtain from our existing vendors and customers. These obligations generally include protecting such confidential information in the same manner and to the same extent as we protect our own confidential information, and in some instances may impose indemnity obligations on us relating to unlawful or unauthorized disclosure of any such information.

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The actions we may take in order to promote compliance with these obligations vary by business segment and may change over time, but may include, among other things:

~~training~~

Training and educating our employees and independent contractors regarding our obligations relating to confidential information;

~~monitoring~~Monitoring changes in state or federal privacy and compliance requirements;

~~drafting~~Drafting and enforcing appropriate contractual provisions into any contract that raises proprietary and confidentiality issues;

~~maintaining~~Maintaining secure storage facilities and protocols for tangible records;

~~physically~~Physically and technologically securing access to electronic information;

Performing vulnerability scanning and penetration testing of our computer systems and computer networks to identify potential weaknesses and to develop mitigating controls; and

inIn the event of a security breach, providing credit monitoring or other services to affected customers.

If we do not properly comply with privacy regulations and protect confidential information, we could experience adverse consequences, including regulatory sanctions, penalties or fines, ~~increase~~increased compliance costs, litigation and damage to our reputation, which in turn could result in decreased revenues and loss of customers, all of which would have a material adverse effect on our business, financial condition and results of operations.

Our operations could be interrupted if our third-party service and technology providers experience difficulty, terminate their services or fail to comply with banking ~~regulations~~regulations.

We depend, and will continue to depend, to a significant extent, on a number of relationships with third-party service and technology providers. Specifically, we receive core systems processing, essential web hosting and other Internet systems and deposit and other processing services from third-party service providers. If these third-party service providers, or if any parties to whom our third party service providers have subcontracted services, experience difficulties or terminate their services and we are unable to replace them with other service providers, our operations could be interrupted and our operating expenses may be materially increased. If an interruption were to continue for a significant period of time, our business financial condition and results of operations could be materially adversely affected. Additionally, if our third-party service and technology providers, including our mortgage loan origination technology provider, fail to update their systems or services in a timely manner to reflect new or changing regulation, our ability to meet regulatory requirements may be impacted and may expose us to heightened regulatory scrutiny and the potential for payment of monetary penalties.

We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our clients by using technology to provide products and services that will satisfy client demands for convenience, as well as to create additional efficiencies in our operations. Many national vendors provide turn-key services to community banks, such as Internet banking and remote deposit capture that allow smaller banks to compete with institutions that have substantially greater resources to invest in technological improvements. We may not be able, however, to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.

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We may be required to recognize impairment with respect to investment securities, including the FHLB stock we hold.

Our securities portfolio currently includes securities with unrecognized losses. We may continue to observe declines in the fair market value of these securities. We evaluate the securities portfolio for any other than temporary impairment each reporting period. In addition, as a condition of membership in the ~~FHLB,~~Federal Home Loan Bank of Des Moines (the “FHLB”), we are required to purchase and hold a certain amount of FHLB stock. Our stock purchase requirement is based, in part, upon the outstanding principal balance of advances from the FHLB. Our FHLB stock is carried at cost and is subject to recoverability testing under applicable accounting standards. Future negative changes to the financial condition of the FHLB may require us to recognize an impairment charge with respect to such holdings. ~~The FHLB is currently subject to a Consent Order issued by its primary regulator,~~See “Regulation and Supervision” in Item 1 of our Form 10-K for the ~~Federal Housing Finance Agency.~~year ended December 31, 2014 filed with the SEC on March 25, 2015.

A change in federal monetary policy could adversely impact our mortgage banking revenues.

The Federal Reserve is responsible for regulating the supply of money in the United States, and as a result its monetary policies strongly influence our costs of funds for lending and investing as well as the rate of return we are able to earn on those loans and investments, both of which impact our net interest income and net interest margin. The Federal Reserve Board's interest rate policies can also materially affect the value of financial instruments we hold, including debt securities and mortgage servicing rights, or MSRs. These monetary policies can also negatively impact our borrowers, which in turn may increase the risk that they will be unable to pay their loans according to the terms or be unable to pay their loans at all. We have no control

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over the monetary policies of the Federal Reserve Board and cannot predict when changes are expected or what the magnitude of such changes may be.

AsFor example, as a result of the Federal Reserve Board's concerns regarding continued slow economic growth, the Federal Reserve Board, in 2008 implemented its standing monetary policy known as “quantitative easing,” a program involving the purchase of mortgage backed securities and United States Treasury securities, the volume of which ~~has been~~was aligned with specific economic targets or measures intended to bolster the U.S. economy. AsAlthough the Federal Reserve Board ~~through the Federal Open Market Committee (the “Committee”), monitors economic performance, the volume of the~~has ended quantitative easing, it still holds the securities purchased during the program ~~continues to be incrementally reduced. The Committee has stated~~and, if economic conditions worsened, could revive that if incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.program.

Because a substantial portion of our revenues and our net income historically have been, and in the foreseeable future are expected to be, derived from gain on the origination and sale of mortgage loans and on the continuing servicing of those loans, the Federal Reserve Board's monetary policies may have had ~~and for so long as the program continues, may continue to have,~~ the effect of supporting higher revenues than might otherwise be available. ~~Contrarily, a reduction in or termination of this policy, absent a significant~~If the rebound in employment and real wages ~~would likely reduce~~is not adequate to offset the termination of the program, or if the Federal Reserve begins selling off the securities it has accumulated, we may see a reduction in mortgage originations throughout the United States, ~~including ours. Continued reduction or termination of the quantitative easing program~~and may ~~likely further raise~~see a corresponding rise in interest rates, which could reduce our mortgage origination revenues and in turn have a material adverse impact upon our business.

A substantial portion of our revenue is derived from residential mortgage lending which is a market sector that experiences significant volatility.

A substantial portion of our consolidated net revenues (net interest income plus noninterest income) are derived from originating and selling residential mortgages. Residential mortgage lending in general has experienced substantial volatility in recent periods. An increase in interest rates in the second quarter of 2013 resulted in a significant adverse impact on our business and financial results due primarily to a related decrease in volume of loan originations, especially refinancings. The Federal Reserve has indicated that interest rates may rise again as early as the fourth quarter of 2015. Any ~~future additional~~such increase in interest rates may ~~further~~ materially and adversely affect our future loan origination volume, margins, and the value of the collateral securing our outstanding loans, may increase rates of borrower default, and may otherwise adversely affect our business. Additionally, in recent periods we have experienced very low levels of homes available for sale in many of the markets in which we operate. The lack of housing inventory has had a downward impact on the volume of mortgage loans that we originate. Further, it has resulted in elevated costs, as a significant amount of loan processing and underwriting that we perform are to qualifying borrowers for mortgage loan transactions that never materialize. The lack of inventory of homes for sale may continue to have an adverse impact on mortgage loan volumes into the foreseeable future.

We may incur losses due to changes in prepayment rates.

Our mortgage servicing rights carry interest rate risk because the total amount of servicing fees earned, as well as changes in fair-market value, fluctuate based on expected loan prepayments (affecting the expected average life of a portfolio of residential mortgage servicing rights). The rate of prepayment of residential mortgage loans may be influenced by changing national and regional economic trends, such as recessions or depressed real estate markets, as well as the difference between interest rates on

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existing residential mortgage loans relative to prevailing residential mortgage rates. Changes in prepayment rates are therefore difficult for us to predict. An increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest and principal of their obligations. During periods of declining interest rates, many residential borrowers refinance their mortgage loans. The loan administration fee income (related to the residential mortgage loan servicing rights corresponding to a mortgage loan) decreases as mortgage loans are prepaid. Consequently, the fair value of portfolios of residential mortgage loan servicing rights tend to decrease during periods of declining interest rates, because greater prepayments can be expected and, as a result, the amount of loan administration income received also decreases.

We may incur significant losses as a result of ineffective hedging of interest rate risk related to our loans sold with a reservation of servicing rights.

Both the value our single family mortgage servicing rights, or MSRs, and the value of our single family loans held for sale changes with fluctuations in interest rates, among other things, reflecting the changing expectations of mortgage prepayment activity. To mitigate potential losses of fair value of single family loans held for sale and MSRs related to changes in interest rates, we actively hedge this risk with financial derivative instruments. Hedging is a complex process, requiring sophisticated

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models, experienced and skilled personnel and continual monitoring. Changes in the value of our hedging instruments may not correlate with changes in the value of our single family loans held for sale and MSRs, and we could incur a net valuation loss as a result of our hedging activities. Following the expansion of our single family mortgage operations in early 2012 through the addition of a significant number of single family mortgage origination personnel, the volume of our single family loans held for sale and MSRs has increased. The increase in volume in turn increases our exposure to the risks associated with the impact of interest rate fluctuations on single family loans held for sale and MSRs.

Changes in fee structures by third party loan purchasers and mortgage insurers may decrease our loan production volume and the margin we can recognize on conforming home loans, and may adversely impact our results of operations.

Certain third party loan purchasers revised their fee structures in the third quarter of 2013 and increased the costs of doing business with them. For example, certain purchasers of conforming loans, including Fannie Mae and Freddie Mac, raised costs of guarantee fees and other required fees and payments. These changes increased the cost of mortgages to consumers and the cost of selling conforming loans to third party loan purchasers which in turn decreased our margin and negatively impacted our profitability. Additionally, the FHA raised costs for premiums and extended the period for which private mortgage insurance is required on a loan purchased by them. Additional changes in the future from third party loan purchasers may have a negative impact on our ability to originate loans to be sold because of the increased costs of such loans and may decrease our profitability with respect to loans held for sale. In addition, any significant adverse change in the level of activity in the secondary market or the underwriting criteria of these third party loan purchasers could negatively impact our results of business, operations and cash flows.

If we breach any of the representations or warranties we make to a purchaser or securitizer of our mortgage loans or MSRs, we may be liable to the purchaser or securitizer for certain costs and damages.

When we sell or securitize mortgage loans in the ordinary course of business, we are required to make certain representations and warranties to the purchaser about the mortgage loans and the manner in which they were originated. Our agreements require us to repurchase mortgage loans if we have breached any of these representations or warranties, in which case we may be required to repurchase such loan and record a loss upon repurchase and/or bear any subsequent loss on the loan. We may not have any remedies available to us against a third party for such losses, or the remedies available to us may not be as broad as the remedies available to the purchaser of the mortgage loan against us. In addition, if there are remedies against a third party available to us, we face further risk that such third party may not have the financial capacity to perform remedies that otherwise may be available to us. Therefore, if a purchaser enforces remedies against us, we may not be able to recover our losses from a third party and may be required to bear the full amount of the related loss.

In addition, in connection with the sale of a significant amount of our MSRs to SunTrust Mortgage, Inc., we agreed to indemnify SunTrust Mortgage, Inc. for prepayment of a certain amount of those loans. In the event the holders of such loans prepay the loans, we may be required to reimburse SunTrust Mortgage, Inc. for a certain portion of the anticipated MSR value of that loan.

If repurchase and indemnity demands increase on loans or MSRs that we sell from our portfolios, our liquidity, results of operations and financial condition will be adversely affected.

If we breach any representations or warranties or fail to follow guidelines when originating a FHA/HUD-insured loan or a VA-guaranteed loan, we may lose the insurance or guarantee on the loan and suffer losses, pay penalties, and/or be subjected to litigation from the federal government.

We originate and purchase, sell and thereafter service single family loans that are insured by FHA/HUD or guaranteed by the VA. We certify to the FHA/HUD and the VA that the loans meet their requirements and guidelines. The FHA/HUD and VA audit loans that are insured or guaranteed under their programs, including audits of our processes and procedures as well as

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individual loan documentation. Violations of guidelines can result in monetary penalties or require us to provide indemnifications against loss or loans declared ineligible for their programs. In the past, monetary penalties and losses from indemnifications have not created material losses to the Bank. As a result of the housing crisis, the FHA/HUD has stepped up enforcement initiatives. In addition to regular FHA/HUD audits, HUD's Inspector General has become active in enforcing FHA regulations with respect to individual loans and has partnered with the Department of Justice ("DOJ") in filing lawsuits against lenders for systemic violations. The penalties resulting from such lawsuits can be much more severe, since systemic violations can be applied to groups of loans and penalties may be subject to treble damages. The DOJ has used the Federal False Claims Act and other federal laws and regulations in prosecuting these lawsuits. Because of our significant origination of FHA/HUD insured and VA guaranteed loans, if the DOJ were to find potential violations by the Bank, we could be subject to material

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monetary penalties and/or losses, and may even be subject to lawsuits alleging systemic violations which could result in treble damages.

We may face risk of loss if we purchase loans from a seller that fails to satisfy its indemnification obligations.

We generally receive representations and warranties from the originators and sellers from whom we purchase loans and servicing rights such that if a loan defaults and there has been a breach of such representations and warranties, we may be able to pursue a remedy against the seller of the loan for the unpaid principal and interest on the defaulted loan. However, if the originator and/or seller breach such representations and warranties and does not have the financial capacity to pay the related damages, we may be subject to the risk of loss for such loan as the originator or seller may not be able to pay such damages or repurchase loans when called upon by us to do so. Currently, we only purchase loans from WMS Series LLC, an affiliated business arrangement with certain Windermere real estate brokerage franchise owners.

We have previously identified certain deficiencies in our internal controls over financial reporting, and those deficiencies or others that we have not discovered may result in our inability to maintain control over our assets or to identify and accurately report our financial condition, results of operations, or cash flows.

Our internal controls over financial reporting include those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Each year, our management, under the supervision of the Chief Executive Officer and the Chief Financial Officer, conducts an evaluation of the effectiveness of our internal control over financial reporting. Based on this evaluation, our management concluded that our internal controls over financial reporting were not effective as of December 31, 2014, because of a material weakness in our internal controls related to certain new back office systems, primarily relating to accounts payable processing and payroll processing. Implementation of key systems requires that management perform a thorough risk assessment to adequately assess risk at an appropriate level of detail to allow for (i) the design of controls with the appropriate precision and responsiveness to address those risks, (ii) the timely and effective implementation of controls, including evidence of operating effectiveness, and (iii) effective monitoring of the controls. Management concluded that its risk assessment related to these changes was not comprehensive enough and that sufficient documentation was not maintained. In each of these cases, management determined that no material loss occurred, and that we did not have an actual misstatement of our financial statements. However, management also noted that in the absence of specific management attention, we could have experienced a material loss or could have made a material error in the reporting of our results of operations for the fourth quarter of 2014. Management thus determined that these potential outcomes reflect a material weakness in our internal controls over financial reporting, and that, as a result, our internal controls over financial reporting were not effective as of December 31, 2014.

These deficiencies are discussed in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2014 under Item 9A, “Internal Control over Financial Reporting.” Management identified and implemented certain remedial measures that we believe will resolve these deficiencies. However, if these measures are not effective, or if our internal controls over financial reporting are subject to additional defects we have not identified, we may be unable to maintain adequate control over our assets, or we may experience material errors in recording our assets, liabilities and results of operations. Further, we reported an unrelated material weakness in our internal controls over financial reporting following the end of our third fiscal quarter of 2014 which was remediated prior to December 31, 2014. Repeated or continuing deficiencies may cause investors to question the reliability of our internal controls or our financial statements, and may result in an erosion of confidence in our management or result in penalties or other potential enforcement action by the Securities and Exchange Commission.

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If we fail to maintain effective systems of internal and disclosure control, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting, which in turn may harm our business and the trading price of our securities.

Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. As part of our ongoing monitoring of internal control from time to time we have discovered deficiencies in our internal control as defined under standards adopted by the Public Company Accounting Oversight Board, or PCAOB, that have required remediation. Under the PCAOB standards, a “material weakness” is a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. A “significant deficiency” is a control deficiency or combination of control deficiencies, that adversely affect a company’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is a more than remote likelihood that a misstatement of a company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected.

To support our growth initiatives and to create operating efficiencies the company has implemented, and will continue to implement, new systems and processes. If our project management processes are not sound and adequate resources are not deployed to these implementations we may experience internal control lapses that could expose the company to operating losses.

If we discover additional deficiencies in our internal controls, we may also identify defects in our disclosure controls and procedures that require remediation. If we discover additional deficiencies, we will take affirmative steps to improve our internal and disclosure controls. However, there is no assurance that we will be successful. Any failure to maintain effective controls or timely effect any necessary improvement of our internal and disclosure controls could harm operating results or cause us to fail to meet our reporting obligations. Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our securities or result in penalties or other potential enforcement action by the Securities and Exchange Commission.

Some provisions of our articles of incorporation and bylaws and certain provisions of Washington law may deter takeover attempts, which may limit the opportunity of our shareholders to sell their shares at a favorable price.

Some provisions of our articles of incorporation and bylaws may have the effect of deterring or delaying attempts by our shareholders to remove or replace management, to commence proxy contests, or to effect changes in control. These provisions include:

aA classified board of directors so that only approximately one third of our board of directors is elected each year;

~~elimination~~Elimination of cumulative voting in the election of directors;

~~procedures~~Procedures for advance notification of shareholder nominations and proposals;

~~the~~The ability of our board of directors to amend our bylaws without shareholder approval; and

~~the~~The ability of our board of directors to issue shares of preferred stock without shareholder approval upon the terms and conditions and with the rights, privileges and preferences as the board of directors may determine.

In addition, as a Washington corporation, we are subject to Washington law which imposes restrictions on some transactions between a corporation and certain significant shareholders. These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.

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ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Not applicable.~~a) Sale of Unregistered Securities.

We maintain a 401(k) retirement savings plan that is available to substantially all of our employees. This plan allows participants to allocate up to 10% of their eligible account balances to interests to purchases of HomeStreet common stock. For participants who elect such an allocation, the plan's trustee acquires HomeStreet common stock in the open market and allocates that stock the account of each participant. The plan is considered to be an affiliate of the Company because the trustees ultimately responsible for administering the plan are a committee of our board of directors. The trustees have selected Charles Schwab to administer the plan. During the third quarter of 2015, the plan (our affiliate) sold 2,651 shares of common stock to participants that were not properly registered due to an inadvertent failure to file an S-8 to register such shares. On October 15, 2015, together with the plan, we filed a registration statement on Form S-8 to register future transactions in the 401(k) plan as well as certain resale by plan participants who purchased shares through their accounts in the six months prior to the filing of the registration statement. We did not receive any proceeds from the sales of the securities.



ITEM 3	DEFAULTS UPON SENIOR SECURITIES

Not applicable.



ITEM 4	MINE SAFETY DISCLOSURE

Not applicable.



ITEM 5	OTHER INFORMATION

Not applicable.

~~104~~109



ITEM 6	EXHIBITS

EXHIBIT INDEX



Exhibit
Number		Description

~~2.1~~		~~Agreement and Plan of Merger between HomeStreet, Inc. and Simplicity Bancorp, Inc. dated as of September 27, 2014.~~ ⁽¹⁾

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.⁽²⁾

31.2		Certification of Chief ~~Accounting~~Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.⁽²⁾

32		Certification of Periodic Financial Report by ~~Principal~~Chief Executive ~~Officer~~ and ~~Principal Accounting~~Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350.⁽³⁾⁽¹⁾

101.INS		XBRL Instance Document^(4)(5)(2)(3)

101.SCH		XBRL Taxonomy Extension Schema Document⁽⁴⁾⁽²⁾

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document⁽⁴⁾⁽²⁾

101.DEF		XBRL Taxonomy Extension Label Linkbase Document⁽⁴⁾⁽²⁾

101.LAB		XBRL Taxonomy Extension Presentation Linkbase Document⁽⁴⁾⁽²⁾

101.PRE		XBRL Taxonomy Extension Definitions Linkbase Document⁽⁴⁾⁽²⁾


(1)	~~Previously filed as an exhibit to the registrant's Current Report on Form 8-K dated September 29, 2014.~~


~~(2)~~	~~Filed herewith.~~


~~(3)~~	This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.


~~(4)~~(2)	As provided in Rule 406T of Regulation S-T, this information shall not be deemed “filed” for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.

~~(5)~~(3)

Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in the Firm’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2014~~2015, formatted in XBRL (eXtensible Business Reporting Language) interactive data files: (i) the Consolidated Statements of Operations for the three and nine months ended September 30, ~~2014~~2015 and ~~2013~~2014, (ii) the Consolidated Statements of Financial Condition as of September 30, ~~2014~~2015, and December 31, ~~2013~~2014, (iii) the Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the three and nine months ended September 30, ~~2014~~2015 and ~~2013~~,2014, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2014~~2015 and ~~2013~~2014, and (v) the Notes to Consolidated Financial Statements.

~~105~~110

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Seattle, State of Washington, on November ~~12, 2014~~5, 2015.



	HomeStreet, Inc.

	By:	/s/ Mark K. Mason
		Mark K. Mason
		President and Chief Executive Officer



	HomeStreet, Inc.

	By:	/s/ ~~Cory D. Stewart~~Melba A. Bartels
		~~Cory D. Stewart~~Melba A. Bartels
		Executive Vice President and Chief ~~Accounting~~Financial Officer

~~106~~111



Washington		91-0186600
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)



Large Accelerated Filer	o	Accelerated Filer	x

Non-accelerated Filer	o	Smaller Reporting Company	o



PART I – FINANCIAL INFORMATION

ITEM 1	FINANCIAL STATEMENTS

Consolidated Statements of Financial Condition (Unaudited) at September 30, ~~2014~~2015 and December 31, ~~2013~~2014		4

Interim Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, ~~2014~~2015 and ~~2013~~2014		5

Interim Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, ~~2014~~2015 and ~~2013~~2014		6

Interim Consolidated Statements of Shareholders’ Equity (Unaudited) for the Nine Months Ended September 30, ~~2014~~2015 and ~~2013~~2014		7

Interim Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, ~~2014~~2015 and ~~2013~~2014		8

Notes to Interim Consolidated Financial Statements (Unaudited)

Note 1 – Summary of Significant Accounting Policies		10

Note 2 – ~~Investment Securities~~Business Combinations		12

Note 3 – ~~Loans and Credit Quality~~Investment Securities		15

Note 4 – ~~Deposits~~Loans and Credit Quality		3019

Note 5 – ~~Derivatives and Hedging Activities~~		32

~~Note 6 – Mortgage Banking Operations~~Deposits		34

Note 76 – ~~Commitments, Guarantees,~~Derivatives and ~~Contingencies~~Hedging Activities		3835

Note 7 – Mortgage Banking Operations		37

Note 8 – ~~Fair Value Measurement~~Commitments, Guarantees and Contingencies		4041

Note 9 – ~~Earnings Per Share~~Fair Value Measurement		4843

Note 10 – ~~Share-based Compensation Plans~~Earnings Per Share		52

Note 11 – Business Segments		5052

Note 12 – Subsequent Events		5254

ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements		5355

Summary Financial Data		5557

Management’s Overview of Financial Performance		5860

Critical Accounting Policies and Estimates		6163

Results of Operations		6264

Review of Financial Condition		7072

Business Segments		7375

Off-Balance Sheet Arrangements		7880

Enterprise Risk Management		7880

Credit Risk Management		7980

Liquidity and Capital Management		8487

Accounting Developments		8790




ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	8891

ITEM 4	CONTROLS AND PROCEDURES	8893

PART II – OTHER INFORMATION

ITEM 1	LEGAL PROCEEDINGS	9094

ITEM 1A	RISK FACTORS	9094

ITEM 6	EXHIBITS	~~105~~110

SIGNATURES		~~106~~111


(in thousands, except share data)	September 30, 2014			December 31, 2013			September 30, 2015		December 31, 2014

ASSETS
Cash and cash equivalents (including interest-bearing instruments of $16,044 and $9,436)	$	34,687		$	33,908
Investment securities (includes $432,096 and $481,683 carried at fair value)	449,948			498,816
Loans held for sale (includes $614,876 and $279,385 carried at fair value)	698,111			279,941
Loans held for investment (net of allowance for loan losses of $21,847 and $23,908)	1,964,762			1,871,813
Mortgage servicing rights (includes $115,477 and $153,128 carried at fair value)	124,593			162,463
Cash and cash equivalents (including interest-earning instruments of $11,363 and $10,271)							$	37,303	$	30,502
Investment securities (includes $570,082 and $427,326 carried at fair value)							602,018		455,332
Loans held for sale (includes $860,800 and $610,350 carried at fair value)							882,319		621,235
Loans held for investment (net of allowance for loan losses of $26,922 and $22,021; includes $23,755 and $0 carried at fair value)							3,012,943		2,099,129
Mortgage servicing rights (includes $132,701 and $112,439 carried at fair value)							146,080		123,324
Other real estate owned	10,478			12,911			8,273		9,448
Federal Home Loan Bank stock, at cost	34,271			35,288			44,652		33,915
Premises and equipment, net	44,476			36,612			60,544		45,251
Goodwill	11,945			12,063			11,945		11,945
Other assets	101,385			122,239			169,576		105,009
Total assets	$	3,474,656		$	3,066,054		$	4,975,653	$	3,535,090
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	2,425,458		$	2,210,821		$	3,307,693	$	2,445,430
Federal Home Loan Bank advances	598,590			446,590			1,025,745		597,590
Securities sold under agreements to repurchase	14,225			—
Federal funds purchased and securities sold under agreements to repurchase							—		50,000
Accounts payable and other liabilities	79,958			77,906			119,900		77,975
Long-term debt	61,857			64,811			61,857		61,857
Total liabilities	3,180,088			2,800,128			4,515,195		3,232,852
Commitments and contingencies (Note 8)
Shareholders’ equity:
Preferred stock, no par value, authorized 10,000 shares, issued and outstanding, 0 shares and 0 shares	—			—			—		—
Common stock, no par value, authorized 160,000,000, issued and outstanding, 14,852,971 shares and 14,799,991 shares	511			511
Common stock, no par value, authorized 160,000,000, issued and outstanding, 22,061,702 shares and 14,856,611 shares							511		511
Additional paid-in capital	96,650			94,474			222,047		96,615
Retained earnings	197,945			182,935			236,207		203,566
Accumulated other comprehensive income	(538		)	(11,994		)	1,693		1,546
Total shareholders' equity	294,568			265,926			460,458		302,238
Total liabilities and shareholders' equity	$	3,474,656		$	3,066,054		$	4,975,653	$	3,535,090


	Three Months Ended September 30,						Nine Months Ended September 30,					Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands, except share data)	2014			2013			2014			2013		2015		2014			2015			2014

Interest income:
Loans	$	25,763		$	19,425		$	71,865		$	54,920	$	41,012	$	25,763		$	111,603		$	71,865
Investment securities	2,565			3,895			8,199			9,552		2,754		2,565			8,426			8,199
Other	150			28			449			82		224		150			647			449
	28,478			23,348			80,513			64,554		43,990		28,478			120,676			80,513
Interest expense:
Deposits	2,364			2,222			7,080			8,078		3,069		2,364			8,656			7,080
Federal Home Loan Bank advances	509			434			1,366			1,113		958		509			2,476			1,366
Securities sold under agreements to repurchase	6			—			7			11
Federal funds purchased and securities sold under agreements to repurchase												—		6			8			7
Long-term debt	271			274			851			2,274		278		271			815			851
Other	20			6			42			16		51		20			123			42
	3,170			2,936			9,346			11,492		4,356		3,170			12,078			9,346
Net interest income	25,308			20,412			71,167			53,062		39,634		25,308			108,598			71,167
Provision (reversal of provision) for credit losses	—			(1,500		)	(1,500		)	900		700		—			4,200			(1,500		)
Net interest income after provision for credit losses	25,308			21,912			72,667			52,162		38,934		25,308			104,398			72,667
Noninterest income:
Net gain on mortgage loan origination and sale activities	37,642			33,491			104,946			139,870		57,885		37,642			189,746			104,946
Mortgage servicing income	6,155			4,011			24,284			9,265		4,768		6,155			10,896			24,284
(Loss) income from WMS Series LLC	(122		)	(550		)	(69		)	1,063
Income (loss) from WMS Series LLC												380		(122		)	1,428			(69		)
Gain (loss) on debt extinguishment	2			—			(573		)	—		—		2			—			(573		)
Depositor and other retail banking fees	944			791			2,676			2,273		1,701		944			4,239			2,676
Insurance agency commissions	256			242			892			612		477		256			1,183			892
Gain (loss) on sale of investment securities available for sale (includes unrealized gain (loss) reclassified from accumulated other comprehensive income of $480 and $(184) for the three months ended September 30, 2014 and 2013, and $1,173 and $6 for the nine months ended September 30, 2014 and 2013, respectively)	480			(184		)	1,173			6
Gain on sale of investment securities available for sale (includes unrealized gain reclassified from accumulated other comprehensive income of $1,002 and $480 for the three months ended September 30, 2015 and 2014, and $1,002 and $1,173 for the nine months ended September 30, 2015 and 2014, respectively)												1,002		480			1,002			1,173
Bargain purchase gain												796		—			7,345			—
Other	456			373			841			1,584		459		456			(11		)	841
	45,813			38,174			134,170			154,673		67,468		45,813			215,828			134,170
Noninterest expense:
Salaries and related costs	42,604			39,689			118,681			113,330		60,991		42,604			180,238			118,681
General and administrative	10,326			9,234			31,593			30,434		14,869		10,326			42,532			31,593
Legal	630			844			1,571			2,054		868		630			1,912			1,571
Consulting	628			884			2,182			2,343		166		628			6,544			2,182
Federal Deposit Insurance Corporation assessments	682			227			1,874			937		504		682			1,890			1,874
Occupancy	4,935			3,484			14,042			9,667		6,077		4,935			18,024			14,042
Information services	4,220			3,552			13,597			10,122		8,159		4,220			21,993			13,597
Net cost of operation and sale of other real estate owned	133			202			(320		)	1,740
Net cost (income) from operation and sale of other real estate owned												392		133			710			(320		)
	64,158			58,116			183,220			170,627		92,026		64,158			273,843			183,220
Income before income taxes	6,963			1,970			23,617			36,208		14,376		6,963			46,383			23,617
Income tax expense (includes reclassification adjustments of $168 and $(64) for the three months ended September 30, 2014 and 2013, and $411 and $2 for the nine months ended September 30, 2014 and 2013, respectively)	1,988			308			6,979			11,538
Income tax expense (includes reclassification adjustments of $351 and $168 for the three months ended September 30, 2015 and 2014, and $351 and $411 for the nine months ended September 30, 2015 and 2014, respectively)												4,415		1,988			13,742			6,979
NET INCOME	$	4,975		$	1,662		$	16,638		$	24,670	$	9,961	$	4,975		$	32,641		$	16,638
Basic income per share	$	0.34		$	0.12		$	1.12		$	1.72	$	0.45	$	0.34		$	1.60		$	1.12
Diluted income per share	$	0.33		$	0.11		$	1.11		$	1.67	$	0.45	$	0.33		$	1.58		$	1.11
Dividends paid on common stock per share												$	—	$	—		$	—		$	0.11
Basic weighted average number of shares outstanding	14,805,780			14,388,559			14,797,019			14,374,943		22,035,317		14,805,780			20,407,386			14,797,019
Diluted weighted average number of shares outstanding	14,968,238			14,790,671			14,957,034			14,793,427		22,291,810		14,968,238			20,646,540			14,957,034



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2014			2013			2014			2013

Net income	$	4,975		$	1,662		$	16,638		$	24,670
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on investment securities available for sale:
Unrealized holding gain (loss) arising during the period, net of tax expense (benefit) of $501 and $(362) for the three months ended September 30, 2014 and 2013, and $6,579 and $(9,845) for the nine months ended September 30, 2014 and 2013, respectively	930			(673		)	12,218			(18,283		)
Reclassification adjustment for net gains included in net income, net of tax expense (benefit) of $168 and $(64) for the three months ended September 30, 2014 and 2013, and $411 and $2 for the nine months ended September 30, 2014 and 2013, respectively	(312		)	120			(762		)	(4		)
Other comprehensive income (loss)	618			(553		)	11,456			(18,287		)
Comprehensive income (loss)	$	5,593		$	1,109		$	28,094		$	6,383


(in thousands, except share data)	Number of shares	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income (loss)			Total			Number of shares	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income (loss)			Total

Balance, January 1, 2013	14,382,638	$	511	$	90,189	$	163,872		$	9,190		$	263,762
Net income	—	—		—		24,670			—			24,670
Dividends ($0.11 per share)	—	—		—		(3,163		)	—			(3,163		)
Share-based compensation expense	—	—		1,098		—			—			1,098
Common stock issued	39,716	—		128		—			—			128
Other comprehensive loss	—	—		—		—			(18,287		)	(18,287		)
Balance, September 30, 2013	14,422,354	$	511	$	91,415	$	185,379		$	(9,097	)	$	268,208

Balance, January 1, 2014	14,799,991	$	511	$	94,474	$	182,935		$	(11,994	)	$	265,926		14,799,991	$	511	$	94,474	$	182,935		$	(11,994	)	$	265,926
Net income	—	—		—		16,638			—			16,638			—	—		—		16,638			—			16,638
Dividends ($0.11 per share)	—	—		—		(1,628		)	—			(1,628		)	—	—		—		(1,628		)	—			(1,628		)
Share-based compensation expense	—	—		1,867		—			—			1,867			—	—		1,867		—			—			1,867
Common stock issued	52,980	—		309		—			—			309			52,980	—		309		—			—			309
Other comprehensive income	—	—		—		—			11,456			11,456			—	—		—		—			11,456			11,456
Balance, September 30, 2014	14,852,971	$	511	$	96,650	$	197,945		$	(538	)	$	294,568		14,852,971	$	511	$	96,650	$	197,945		$	(538	)	$	294,568

Balance, January 1, 2015															14,856,611	$	511	$	96,615	$	203,566		$	1,546		$	302,238
Net income															—	—		—		32,641			—			32,641
Share-based compensation expense															—	—		986		—			—			986
Common stock issued															7,205,091	—		124,446		—			—			124,446
Other comprehensive income															—	—		—		—			147			147
Balance, September 30, 2015															22,061,702	$	511	$	222,047	$	236,207		$	1,693		$	460,458



(in thousands)	March 1, 2015

Fair value consideration paid to Simplicity shareholders:
Cash paid (79,399 stock options, consideration based on intrinsic value at a calculated price of $17.53)		$	471
Fair value of common shares issued (7,180,005 shares at $17.30 per share)		124,214
Total purchase price		$	124,685
Fair value of assets acquired:
Cash and cash equivalents	112,667
Investment securities	26,845
Acquired loans	664,148
Mortgage servicing rights	980
Federal Home Loan Bank stock	5,520
Premises and equipment	2,966
Bank-owned life insurance	14,501
Core deposit intangibles	7,450
Accounts receivable and other assets	15,869
Total assets acquired	850,946

Fair value of liabilities assumed:
Deposits	651,202
Federal Home Loan Bank advances	65,855
Accounts payable and accrued expenses	1,859
Total liabilities assumed	718,916
Net assets acquired		$	132,030
Preliminary bargain purchase (gain)		$	(7,345	)



	Nine Months Ended September 30, 2015		Year Ended December 31, 2014
(in thousands)	Nine Months Ended September 30, 2015		Year Ended December 31, 2014

Noninterest expense
Salaries and related costs	$	7,669	$	23
General and administrative	1,256		179
Legal	530		245
Consulting	5,539		388
Occupancy	335		4
Information services	481		50
Total noninterest expense	$	15,810	$	889


	At September 30, 2014									At September 30, 2015
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value

Mortgage-backed securities:
Residential	$	112,131	$	374	$	(1,668	)	$	110,837	$	91,562	$	216	$	(774	)	$	91,004
Commercial	13,119		452		—			13,571		23,824		331		(90		)	24,065
Municipal bonds	120,799		2,713		(470		)	123,042		184,160		3,350		(427		)	187,083
Collateralized mortgage obligations:
Residential	56,359		130		(1,601		)	54,888		88,459		119		(789		)	87,789
Commercial	16,047		—		(415		)	15,632		55,849		468		(71		)	56,246
Corporate debt securities	74,166		50		(2,104		)	72,112		84,304		307		(1,729		)	82,882
U.S. Treasury securities	41,971		43		—			42,014		40,991		22		—			41,013
	$	434,592	$	3,762	$	(6,258	)	$	432,096	$	569,149	$	4,813	$	(3,880	)	$	570,082


	At December 31, 2013									At December 31, 2014
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value

Mortgage-backed securities:
Residential	$	137,602	$	187	$	(3,879	)	$	133,910	$	107,624	$	509	$	(853	)	$	107,280
Commercial	13,391		45		(3		)	13,433		13,030		641		—			13,671
Municipal bonds	136,937		185		(6,272		)	130,850		119,744		2,847		(257		)	122,334
Collateralized mortgage obligations:
Residential	93,112		85		(2,870		)	90,327		44,254		161		(1,249		)	43,166
Commercial	17,333		—		(488		)	16,845		20,775		—		(289		)	20,486
Corporate debt securities	75,542		—		(6,676		)	68,866		80,214		296		(1,110		)	79,400
U.S. Treasury securities	27,478		1		(27		)	27,452		40,976		13		—			40,989
	$	501,395	$	503	$	(20,215	)	$	481,683	$	426,617	$	4,467	$	(3,758	)	$	427,326


	At September 30, 2014															At September 30, 2015
	Less than 12 months					12 months or more					Total					Less than 12 months					12 months or more					Total
(in thousands)	Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value

Mortgage-backed securities:
Residential	$	(40	)	$	11,758	$	(1,628	)	$	69,570	$	(1,668	)	$	81,328	$	(344	)	$	28,158	$	(430	)	$	21,833	$	(774	)	$	49,991
Commercial																(90		)	16,431		—			—		(90		)	16,431
Municipal bonds	(13		)	3,612		(457		)	29,295		(470		)	32,907		(281		)	41,334		(147		)	5,815		(428		)	47,149
Collateralized mortgage obligations:
Residential	(249		)	8,802		(1,352		)	31,346		(1,601		)	40,148		(191		)	37,565		(597		)	27,618		(788		)	65,183
Commercial	—			—		(415		)	15,633		(415		)	15,633		—			—		(71		)	4,698		(71		)	4,698
Corporate debt securities	(281		)	17,145		(1,823		)	45,573		(2,104		)	62,718		(631		)	29,482		(1,098		)	27,152		(1,729		)	56,634
	$	(583	)	$	41,317	$	(5,675	)	$	191,417	$	(6,258	)	$	232,734	$	(1,537	)	$	152,970	$	(2,343	)	$	87,116	$	(3,880	)	$	240,086


	At September 30, 2014																				At September 30, 2015
	Within one year				After one year through five years				After five years through ten years				After ten years				Total				Within one year				After one year through five years				After five years through ten years				After ten years				Total
(in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield

Mortgage-backed securities:
Residential	$	—	—	%	$	—	—	%	$	7,466	1.73	%	$	103,371	1.81	%	$	110,837	1.80	%	$	—	—	%	$	4	0.40	%	$	3,425	1.60	%	$	87,575	1.86	%	$	91,004	1.85	%
Commercial	—		—		—		—		—		—		13,571		4.63		13,571		4.63		—		—		—		—		18,239		2.21		5,826		4.88		24,065		2.83
Municipal bonds	—		—		45		3.43		22,642		3.54		100,355		4.25		123,042		4.12		516		2.10		7,812		3.41		35,836		3.39		142,919		4.04		187,083		3.88
Collateralized mortgage obligations:
Residential	—		—		—		—		—		—		54,887		2.07		54,887		2.07		—		—		—		—		161		0.91		87,628		1.64		87,789		1.64
Commercial	—		—		—		—		9,692		1.93		5,940		1.37		15,632		1.72		—		—		5,461		1.90		40,649		2.28		10,136		2.03		56,246		2.20
Corporate debt securities	—		—		—		—		40,854		3.25		31,259		3.64		72,113		3.42		—		—		13,298		2.61		38,947		3.24		30,637		3.70		82,882		3.31
U.S. Treasury securities	2,002		0.25		40,012		0.35		—		—		—		—		42,014		0.34		40,013		0.35		1,000		0.64		—		—		—		—		41,013		0.35
Total available for sale	$	2,002	0.25	%	$	40,057	0.35	%	$	80,654	3.03	%	$	309,383	2.93	%	$	432,096	2.70	%	$	40,529	0.37	%	$	27,575	2.62	%	$	137,257	2.81	%	$	364,721	2.83	%	$	570,082	2.64	%


(in thousands)	At September 30, 2014			At December 31, 2013			At September 30, 2015				At December 31, 2014

Consumer loans
Single family	$	788,232		$	904,913		$	1,171,967		⁽¹⁾	$	896,665
Home equity	138,276			135,650
Home equity and other							237,491				135,598
	926,508			1,040,563			1,409,458				1,032,263
Commercial loans
Commercial real estate	530,335			477,642			563,241				523,464
Multifamily	62,498			79,216			382,392				55,088
Construction/land development	297,790			130,465			529,871				367,934
Commercial business	173,226			171,054			158,135				147,449
	1,063,849			858,377			1,633,639				1,093,935
	1,990,357			1,898,940			3,043,097				2,126,198
Net deferred loan fees and discounts	(3,748		)	(3,219		)
Net deferred loan fees, costs and discounts							(3,232		)		(5,048		)
	1,986,609			1,895,721			3,039,865				2,121,150
Allowance for loan losses	(21,847		)	(23,908		)	(26,922		)		(22,021		)
	$	1,964,762		$	1,871,813		$	3,012,943			$	2,099,129


	Three Months Ended September 30, 2014												Three Months Ended September 30, 2015
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance		Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	9,111	$	(226	)	$	65	$	(72	)	$	8,878	$	8,997	$	(232	)	$	250	$	(298	)	$	8,717
Home equity	3,517		(135		)	94		87			3,563
Home equity and other													3,882		(255		)	84		541			4,252
	12,628		(361		)	159		15			12,441		12,879		(487		)	334		243			12,969
Commercial loans
Commercial real estate	4,063		—			275		(357		)	3,981		5,046		—			—		(355		)	4,691
Multifamily	887		—			—		(174		)	713		780		(150		)	—		153			783
Construction/land development	2,418		—			123		146			2,687		5,943		—			1,033		435			7,411
Commercial business	2,172		(304		)	51		370			2,289		1,800		(14		)	23		224			2,033
	9,540		(304		)	449		(15		)	9,670		13,569		(164		)	1,056		457			14,918
Total allowance for credit losses	$	22,168	$	(665	)	$	608	$	—		$	22,111	$	26,448	$	(651	)	$	1,390	$	700		$	27,887


	Nine Months Ended September 30, 2014												Three Months Ended September 30, 2014
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance		Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	11,990	$	(509	)	$	106	$	(2,709	)	$	8,878	$	9,111	$	(226	)	$	65	$	(72	)	$	8,878
Home equity	3,987		(694		)	420		(150		)	3,563
Home equity and other													3,517		(135		)	94		87			3,563
	15,977		(1,203		)	526		(2,859		)	12,441		12,628		(361		)	159		15			12,441
Commercial loans
Commercial real estate	4,012		(23		)	431		(439		)	3,981		4,063		—			275		(357		)	3,981
Multifamily	942		—			—		(229		)	713		887		—			—		(174		)	713
Construction/land development	1,414		—			185		1,088			2,687		2,418		—			123		146			2,687
Commercial business	1,744		(592		)	198		939			2,289		2,172		(304		)	51		370			2,289
	8,112		(615		)	814		1,359			9,670		9,540		(304		)	449		(15		)	9,670
Total allowance for credit losses	$	24,089	$	(1,818	)	$	1,340	$	(1,500	)	$	22,111	$	22,168	$	(665	)	$	608	$	—		$	22,111


	Nine Months Ended September 30, 2013												Nine Months Ended September 30, 2015
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance		Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	13,388	$	(2,468	)	$	425	$	787		$	12,132	$	9,447	$	(232	)	$	496	$	(994	)	$	8,717
Home equity	4,648		(1,515		)	526		977			4,636
Home equity and other													3,322		(456		)	225		1,161			4,252
	18,036		(3,983		)	951		1,764			16,768		12,769		(688		)	721		167			12,969
Commercial loans
Commercial real estate	5,312		(1,449		)	—		605			4,468		3,846		(16		)	37		824			4,691
Multifamily	622		—			—		148			770		673		(150		)	—		260			783
Construction/land development	1,580		(148		)	699		(739		)	1,392		3,818		—			1,132		2,461			7,411
Commercial business	2,201		—			173		(878		)	1,496		1,418		(23		)	150		488			2,033
	9,715		(1,597		)	872		(864		)	8,126		9,755		(189		)	1,319		4,033			14,918
Total allowance for credit losses	$	27,751	$	(5,580	)	$	1,823	$	900		$	24,894	$	22,524	$	(877	)	$	2,040	$	4,200		$	27,887



	Nine Months Ended September 30, 2014
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	11,990	$	(509	)	$	106	$	(2,709	)	$	8,878
Home equity and other	3,987		(694		)	420		(150		)	3,563
	15,977		(1,203		)	526		(2,859		)	12,441
Commercial loans
Commercial real estate	4,012		(23		)	431		(439		)	3,981
Multifamily	942		—			—		(229		)	713
Construction/land development	1,414		—			185		1,088			2,687
Commercial business	1,744		(592		)	198		939			2,289
	8,112		(615		)	814		1,359			9,670
Total allowance for credit losses	$	24,089	$	(1,818	)	$	1,340	$	(1,500	)	$	22,111


(1)	Includes $23.8 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.



	Three Months Ended September 30, 2013
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	13,810	$	(606	)	$	179	$	(1,251	)	$	12,132
Home equity	4,879		(377		)	273		(139		)	4,636
	18,689		(983		)	452		(1,390		)	16,768
Commercial loans
Commercial real estate	5,723		(1,306		)	—		51			4,468
Multifamily	690		—			—		80			770
Construction/land development	1,185		—			348		(141		)	1,392
Commercial business	1,571		—			25		(100		)	1,496
	9,169		(1,306		)	373		(110		)	8,126
Total allowance for credit losses	$	27,858	$	(2,289	)	$	825	$	(1,500	)	$	24,894


(1)	Comprised of single family loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.


(1)	Includes partial charge-offs and nonaccrual interest ~~paid.~~paid and purchase discounts and premiums.


(2)	Unpaid principal balance does not include partial charge-offs, purchase discounts and premiums or nonaccrual interest paid. Related allowance is calculated on net book balances not unpaid principal balances.


(3)	Includes ~~$70.0~~$74.4 million in performing troubled debt restructurings ("TDRs").


(3)	Includes $~~70.3~~73.6 million in single family performing TDRs.


~~(1)~~	~~FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss.~~


(1)	Includes $23.8 million of loans at September 30, 2015 where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.


(2)	FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss.



	At September 30, 2014
(in thousands)	Accrual		Nonaccrual			Total

Consumer loans
Single family	$	779,882	$	8,350		$	788,232
Home equity	136,576		1,700			138,276
	916,458		10,050			926,508
Commercial loans
Commercial real estate	523,277		7,058			530,335
Multifamily	62,498		—			62,498
Construction/land development	297,790		—			297,790
Commercial business	170,428		2,798			173,226
	1,053,993		9,856		⁽¹⁾	1,063,849
	$	1,970,451	$	19,906		$	1,990,357


~~(1)~~	~~Includes $6.3 million of nonperforming loans at September 30, 2014 that are guaranteed by the Small Business Administration ("SBA").~~


(1)	Includes ~~$6.5~~$23.8 million of ~~nonperforming~~ loans at ~~December 31, 2013 that~~September 30, 2015 where a fair value option election was made at the time of origination and, therefore, are ~~guaranteed by~~carried at fair value with changes recognized in the ~~SBA.~~consolidated statements of operations.


	Three Months Ended September 30, 2014						Three Months Ended September 30, 2015
(dollars in thousands)	Concession type	Number of loan modifications	Recorded investment		Related charge- offs		Concession type	Number of loan modifications	Recorded investment		Related charge- offs

Consumer loans
Single family
	Interest rate reduction	18	$	3,268	$	—	Interest rate reduction	11	$	1,722	$	—
	Payment restructure	8	1,626		—
Home equity
	Interest rate reduction	1	220		—
Total consumer
	Interest rate reduction	19	3,488		—
	Payment restructure	8	1,626		—
		27	5,114		—

Commercial loans
Commercial real estate
	Interest rate reduction	1	1,181		—
	Payment restructure	—	—		—
Commercial business
	Forgiveness of principal	1	391		266
Total commercial
	Interest rate reduction	1	1,181		—
	Payment restructure	—	—		—		Interest rate reduction	11	1,722		—
	Forgiveness of principal	1	391		266			11	1,722		—
		2	1,572		266
Total loans
	Interest rate reduction	20	4,669		—		Interest rate reduction	11	1,722		—
	Payment restructure	8	1,626		—			11	$	1,722	$	—
	Forgiveness of principal	1	391		266
		29	$	6,686	$	266


	At September 30, 2014								At September 30, 2015
	Notional amount		Fair value derivatives						Notional amount		Fair value derivatives
(in thousands)			Asset			Liability					Asset			Liability

Forward sale commitments	$	1,140,752	$	1,309		$	(3,950	)	$	1,502,462	$	2,448		$	(9,662	)
Interest rate swaptions	40,000		23			—			55,000		—			(18		)
Interest rate lock commitments	457,381		14,074			(7		)	775,136		26,211			(2		)
Interest rate swaps	514,604		3,499			(4,166		)	857,950		13,634			(4,582		)
Total derivatives before netting	$	2,152,737	18,905			(8,123		)	$	3,190,548	42,293			(14,264		)
Netting adjustments			(3,745		)	3,745					(10,146		)	10,146
Carrying value on consolidated statements of financial condition			$	15,160		$	(4,378	)			$	32,147		$	(4,118	)


(1)	Comprised of interest rate lock commitments ("IRLCs") and forward contracts used as an economic hedge of IRLCs and single family mortgage loans held for sale.


(2)	Comprised of interest rate swaps, interest rate swaptions and forward contracts used as an economic hedge of single family MSRs.


~~(1)~~	The Company transferred $310.5 million of loans from the held for investment portfolio into loans held for sale in March of this year and subsequently sold $266.8 million of these loans. At June 30, 2014, the Company had transferred $17.1 million of these loans back to the held for investment portfolio.


(1)	Comprised of gains and losses on interest rate lock commitments (which considers the value of servicing), single family loans held for sale, forward sale commitments used to economically hedge secondary market activities, and changes in the Company's repurchase liability for loans that have been sold.


(in thousands)	September 30, 2014⁽¹⁾		At December 31, 2013		At September 30, 2015		At December 31, 2014

Single family
U.S. government and agency	$	10,007,872	$	11,467,853	$	13,590,706	$	10,630,864
Other	585,393		327,768		680,481		585,344
	10,593,265		11,795,621		14,271,187		11,216,208
Commercial
Multifamily	703,197		720,429		866,880		752,640
Other	86,589		95,673		86,567		82,354
	789,786		816,102		953,447		834,994
Total loans serviced for others	$	11,383,051	$	12,611,723	$	15,224,634	$	12,051,202