HomeStreet (HMST) 8-K HomeStreet, Inc. Reports Fourth Quarter and Year-End 2013 Results

HomeStreet, Inc. Reports Fourth Quarter and Year-End 2013 Results

2013 Net Income of $23.8 Million, or $1.61 per Diluted Share

SEATTLE – January 28, 2014 – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank (the “Bank”), today announced a net loss of $861 thousand, or $(0.06) per diluted share for the fourth quarter of 2013. Excluding acquisition-related expenses of $4.1 million, net income for the quarter was $1.8 million,⁽¹⁾ or $0.12⁽¹⁾ per diluted share, compared to net income of $2.0 million,⁽¹⁾ or $0.13⁽¹⁾ per share, for the third quarter of 2013 and $21.5 million, or $1.46 per share, for the fourth quarter of 2012. For the full year 2013, net income was $23.8 million, or $1.61 per share. Excluding acquisition-related expenses of $4.5 million, net income for 2013 was $26.8 million,⁽¹⁾ or $1.81⁽¹⁾ per diluted share, compared to $82.1 million, or $5.98 per share for 2012.

• Consolidated results:

◦ Fourth quarter 2013

▪ HomeStreet successfully closed the acquisitions of Fortune Bank and Yakima National Bank during the fourth quarter of 2013. Additionally, the acquisition of two retail deposit branches from AmericanWest Bank was completed during the quarter. Through these acquisitions, the Company acquired $208.7 million of portfolio loans and $260.8 million of deposits.

▪ The Company recorded $4.1 million of acquisition-related expenses during the quarter ended December 31, 2013 and $4.5 million of acquisition-related expenses during the year ended December 31, 2013.

▪ Net interest margin of 3.34% compared to 3.41% in the third quarter of 2013.

▪ Loans held for investment of $1.87 billion at December 31, 2013increased$362.5 million, or 24.0%, from September 30, 2013.

▪ Classified assets and nonperforming assets ended the quarter at 1.65% and 1.26% of total assets, respectively, down from 1.90% and 1.37% of total assets at September 30, 2013.

▪ In response to lower than anticipated loan volume in the commercial lending units and falling loan volume in existing mortgage markets, the Company reduced under-performing production personnel and mortgage operations and fulfillment personnel in existing markets. Also in the quarter, the Company added personnel from acquired banks and increased mortgage production and fulfillment personnel in new markets, primarily in California. During the fourth quarter, we hired, or added through acquisition, 216 employees, which was partially offset by the departure of 111 employees.

◦ Year-ended 2013

▪ Net interest margin of 3.17%, up from 2.89% for 2012.

▪ The Company's annual effective income tax rate for the year was 31.6% compared to 20.8% for 2012. The prior year effective income tax rate reflects the benefit of the full reversal of deferred tax asset valuation allowances.

• Fourth quarter segment results:

◦ Commercial and Consumer Banking - loan and deposit growth from strong originations and acquisitions

▪ Commercial and Consumer Banking segment net income of $244 thousand. Excluding acquisition-related expenses, net income of $2.9 million,⁽¹⁾down $1.2 million from the third quarter of 2013.

▪ Loans held for investment of $1.87 billion at December 31, 2013increased$362.5 million, or 24.0%, from September 30, 2013. Excluding the impact of loans added from acquisitions, loans held for investment increased over 11% in the quarter. New loan commitments totaled $378.8 million, up56.2% from $242.5 million in the third quarter of 2013.

▪ Total deposits of $2.20 billion increased 5.0% from September 30, 2013, primarily due to the addition of $260.8 million of deposits from acquisitions.

▪ Classified assets and nonperforming assets ended the quarter at 1.65% and 1.26% of total assets, respectively, down from 1.90% and 1.37% of total assets at September 30, 2013.

◦ Mortgage Banking - reduced loan production volume due to lower refinance volume, expected seasonality and a lack of housing inventory

▪ Mortgage Banking segment net loss of $1.1 million, compared to net loss of $2.1 million in the third quarter of 2013 and net income of $25.8 million in the fourth quarter of 2012.

▪ Single family mortgage interest rate lock commitments of $662.0 million, down15.8% from the third quarter of 2013 and down47.2% from the fourth quarter of 2012.

▪ Single family mortgage closed loan production of $773.1 million, down34.9% from the third quarter of 2013 and down49.1% from the fourth quarter of 2012.

▪ Net gain on single family mortgage origination and sale activities of $23.3 million, down25.7% from the third quarter of 2013 and down65.3% from the fourth quarter of 2012.

▪ The portfolio of single family loans serviced for others increased to $11.80 billion at quarter end, up4.5% from $11.29 billion at September 30, 2013 and up 32.97% from $8.87 billion at December 31, 2012.

▪ Single family mortgage servicing income of $7.4 million, up from $3.7 million in the third quarter of 2013 and up from $287 thousand in the fourth quarter of 2012.

▪ HomeStreet regained its overall ranking as the number two originator by volume of refinance and purchase mortgages in the Pacific Northwest (Washington, Oregon and Idaho), based on the combined results of HomeStreet originations and loans originated through an affiliated business arrangement known as WMS Series LLC.

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• Other highlights:

◦ On January 23, 2014, HomeStreet, Inc.'s board of directors approved a special cash dividend of $0.11 per common share, payable on February 24, 2014 to shareholders of record as of the close of business on February 3, 2014.

"As we execute our strategy to diversify our earnings by expanding our commercial and consumer banking business, we continue to be frustrated by falling mortgage lending volumes driven by macroeconomic forces, volume changes and continuing low levels of new and resale homes. Our strategy of continuing to grow our mortgage banking market share in new and existing markets while reducing operations staff in response to lower mortgage volume levels have not been able to fully offset these forces,” said CEO Mark K. Mason. “On a positive note, lower interest rates in October and early November spurred additional mortgage refinance activity compared to earlier months. Despite the challenging market, we continue to be successful in growing our mortgage originator ranks with top-level people and we expanded our market share, regaining our number two ranking overall for refinance and purchase mortgage loans in the Pacific Northwest.

“We made substantial progress in the fourth quarter toward our goal of business diversification. We increased our loans held for investment by 24 percent over the quarter, and of that amount, over 11 percent came from organic loan growth, primarily in multifamily, construction and C&I lending. We successfully closed three high quality bank and deposit branch acquisitions, adding six retail deposit branches and teams of seasoned commercial lenders and customer service personnel. Additionally, we recently announced our entry into the California market as a diversified commercial real estate lender.”

Consolidated Results of Operations

Net Interest Income

Net interest income in the fourth quarter of 2013 was $21.4 million, up$1.0 million, or 4.8%, from the third quarter of 2013 and up$4.8 million, or 28.9%, from the fourth quarter of 2012. In the fourth quarter of 2013, net interest margin, on a tax equivalent basis, was 3.34% compared to 3.41% in the third quarter of 2013, and 3.06% in the fourth quarter of 2012. The decline in the net interest margin from the third quarter of 2013 primarily reflects a lower yield on investment securities due to premium amortization caused primarily by higher than expected prepayments. 

Improvement in our net interest margin from the fourth quarter of 2012 resulted primarily from a 42 basis point decline in average interest-bearing cost of funds, due in part to the re-pricing of maturing time deposits.

Total average interest-earning assets increased from the three and twelve months ended December 31, 2012 primarily as a result of growth in portfolio loans, both from originations and from acquisitions, and in the investment securities portfolio, partially offset by a decrease in loans held for sale. The increase in average balances of portfolio loans primarily reflects year-over-year growth in loan production volume from all commercial and consumer business lines. Total average interest-bearing deposit balances increased from the prior periods primarily due to acquisition-related growth in transaction and savings deposits, partially offset by a decline in higher-cost retail certificates of deposit.

Noninterest Income

Noninterest income in the fourth quarter of 2013 was $36.1 million, down$2.1 million, or 5.5%, from $38.2 million in the third quarter of 2013 and down$35.9 million, or 49.9%, from $71.9 million in the fourth quarter of 2012. The decrease from the prior quarter was primarily driven by lower mortgage loan origination and sale revenue, due in part to expected seasonality and continuing low levels of new and resale housing inventory that has led to substantially lower loan origination volume. The decrease from the fourth quarter of

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2012 was primarily due to the significant reduction in mortgage refinance volumes driven by higher mortgage interest rates in 2013.

Partially offsetting the decrease in noninterest income during the fourth quarter of 2013 was a $3.8 million increase in mortgage servicing income from the third quarter of 2013, primarily driven by higher mortgage servicing rights ("MSR") values net of risk management results and increased servicing fees collected in the quarter on the Company's single family mortgage servicing. Higher MSR values were the result of lower expected prepayments. Additionally, gain on sale of investment securities increased $2.0 million from the third quarter of 2013, as the Company decreased the overall size of its securities portfolio to provide liquidity for the growth in lending volumes.

Noninterest Expense

Noninterest expense for the fourth quarter of 2013 was $58.9 million compared to $58.1 million in the third quarter of 2013. Excluding acquisition-related expenses, noninterest expense was $54.8 million⁽¹⁾ in the fourth quarter of 2013, a decrease of $2.9 million, or 5.0%, from $57.7 million⁽¹⁾ in the third quarter of 2013, and a decrease of $1.2 million, or 2.1%, from $56.0 million in the fourth quarter of 2012. The decreases from both periods are primarily due to a decrease in mortgage origination commissions and incentives, partially offset by increased salary and related costs and general and administrative expenses, including marketing expenses. During the quarter, the Company added seven home loan centers, related to increased expansion in California. At December 31, 2013, our full-time equivalent employees had increased5.3% from September 30, 2013 and our retail deposit branch system increased 32% to 30 branches.

Income Taxes

The Company's income tax benefit was $553 thousand for the quarter. The Company's annual effective income tax rate was 31.6% as compared to 20.8% for 2012. The prior year effective income tax rate reflects the benefit of the full reversal of deferred tax asset valuation allowances.

Business Segments

Commercial and Consumer Banking Segment

Commercial and Consumer Banking segment net income in the fourth quarter of 2013 was $244 thousand, compared to $3.8 million in the third quarter of 2013. Excluding acquisition-related expenses of $4.1 million, net income was $2.9 million⁽¹⁾ in the fourth quarter of 2013, compared to net income of $4.1 million⁽¹⁾ in the third quarter of 2013 and a net loss of $4.4 million in the fourth quarter of 2012. The variance in net income from the third quarter of 2013 was primarily due to the third quarter reversal of loan loss provision of $1.5 million. For the full year 2013, Commercial and Consumer Banking had net income of $2.6 million. Excluding acquisition-related expenses of $4.5 million, net income was $5.6 million⁽¹⁾ for 2013, improving from a net loss of $14.5 million for the full year 2012.

Loans Held for Investment

Loans held for investment, net, were $1.87 billion at December 31, 2013, an increase of $362.5 million, or 24.0%, from September 30, 2013 and an increase of $563.7 million, or 43.1%, from December 31, 2012. Additions to the loan portfolio from acquisitions were $208.7 million. New loan commitments totaled $378.8 million for the fourth quarter of 2013, up56.2% from $242.5 million in the third quarter of 2013.

Asset Quality

Classified assets of $50.6 million, or 1.65% of total assets at December 31, 2013, decreased by $3.8 million, or 6.9%, from $54.4 million, or 1.90% of total assets, at September 30, 2013. Nonperforming assets (NPAs) were $38.6 million, or 1.26% of total assets at December 31, 2013, as compared to $39.0 million, or 1.37% of total assets at September 30, 2013.

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Nonaccrual loans of $25.7 million, or 1.36% of total loans at December 31, 2013, decreased from $26.8 million, or 1.74% of total loans at September 30, 2013. OREO balances were $12.9 million at December 31, 2013, an increase of 5% from $12.3 million at September 30, 2013. Delinquent loans of $84.3 million, or 4.44% of total loans at December 31, 2013, decreased from $86.7 million, or 5.64% of total loans at September 30, 2013. Excluding FHA-insured and Department of Veterans' Affairs (VA)-guaranteed single family mortgage loans, delinquent loans were $29.5 million, or 1.63% of total non-FHA/VA loans at December 31, 2013, as compared to $31.3 million, or 2.16% of total non-FHA/VA loans at September 30, 2013. Included in nonaccrual loans at December 31, 2013 are $6.5 million of acquisition-related loans that are guaranteed by the Small Business Administration ("SBA").

The allowance for credit losses was $24.1 million at December 31, 2013 compared to $24.9 million at September 30, 2013. The allowance for loan losses as a percentage of total loans was 1.26% at December 31, 2013. Excluding acquired loans, the allowance for loan losses as a percentage of total loans was 1.40% of total loans compared to 1.61% of total loans at September 30, 2013. Due to improving credit trends, we recorded no provision for credit losses in the fourth quarter of 2013, compared to a reversal of provision of $1.5 million in the third quarter of 2013 and provision of $4.0 million recorded in the fourth quarter of 2012. Net charge-offs in the fourth quarter of 2013 totaled $805 thousand, down from net charge-offs of $1.5 million in the third quarter of 2013 and $3.9 million in the fourth quarter of 2012. Of the $805 thousand in net charge-offs during the quarter, $392 thousand had been specifically reserved as of September 30, 2013.

Deposits

Deposit balances were $2.20 billion at December 31, 2013 as compared to $2.10 billion at September 30, 2013 and $1.98 billion at December 31, 2012. Transaction and savings deposits increased$109.0 million, or 7.7%, from September 30, 2013, while certificates of deposit increased$54.2 million, or 11.8%, from the prior quarter, mostly the result of our fourth quarter acquisitions which added six retail deposit branches to our network.

Mortgage Banking Segment

Mortgage Banking segment net loss was $1.1 million for the fourth quarter of 2013, driven primarily by a significant decline in interest rate lock commitment volume, compared to net loss of $2.1 million for the third quarter of 2013 and net income of $25.8 million for the fourth quarter of 2012. For the full year 2013, Mortgage Banking net income was $21.2 million, a decrease of 78.1% from $96.6 million in 2012.

Mortgage Origination for Sale

Single family mortgage interest rate lock commitments, net of estimated fallout, totaled $662.0 million in the fourth quarter of 2013, a decrease of $124.1 million, or 15.8%, from $786.1 million in the third quarter of 2013 and down$592.9 million, or 47.2%, from the fourth quarter of 2012. The decrease in interest rate lock commitments in the fourth quarter of 2013 compared to the third quarter of 2013 was primarily the result of a decline in mortgage refinance volume and the expected seasonality of the mortgage loan business as well as continuing low levels of new and resale housing inventory. The decrease from the fourth quarter of 2012 primarily reflects the drop in refinance volume following the rise in mortgage interest rates beginning in June 2013, partially offset by increased loan volume from the expansion of our mortgage production offices and a 35% increase in mortgage production personnel year over year.

Single family closed loan volume designated for sale was $773.1 million in the fourth quarter of 2013, down$413.9 million, or 34.9%, from $1.19 billion in the third quarter of 2013 and down$745.8 million, or 49.1%, from $1.52 billion in the fourth quarter of 2012. At December 31, 2013, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $476.0 million, compared to $631.1 million at September 30, 2013.

Net gain on single family mortgage loan origination and sale activities in the fourth quarter of 2013 was $23.3 million, a decrease of $8.1 million, or 25.7%, from the third quarter of 2013 and a decrease of $43.9 million,

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or 65.3%, from the fourth quarter of 2012. The decrease from the prior quarter is primarily the result of the 15.8% decrease in interest rate lock commitments. The decrease from the fourth quarter of 2012 was primarily due to a decrease in refinance mortgage volume, partially offset by the increase in mortgage production offices and personnel in 2013.

Due to differences in the timing of revenue recognition between components of the gain on loan origination and sale activities, the Company analyzes the profitability of these activities using a 'Composite Margin,' which is comprised of the ratios of the components to their respective populations of interest rate lock commitments and closed loans. The Composite Margin for the fourth quarter of 2013 was 350 basis points, down from 375 basis points in the third quarter of 2013.

Mortgage Servicing

Single family mortgage servicing income of $7.4 million in the fourth quarter of 2013increased$3.8 million, or 103.3%, from the third quarter of 2013 and increased$7.1 million from $287 thousand in the fourth quarter of 2012. The increase from the third quarter of 2013 was primarily driven by higher MSR values net of risk management results due to lower expected prepayments and increased servicing fees collected in the quarter on the Company's single family mortgage servicing.

Single family mortgage servicing fees collected in the fourth quarter of 2013increased$698 thousand, or 8.6%, from the third quarter of 2013 and $2.1 million, or 32.1%, from the fourth quarter of 2012 resulting from growth in the portfolio of single family loans serviced for others. The portfolio of single family loans serviced for others increased to $11.80 billion at year-end compared to $11.29 billion at September 30, 2013.

Noninterest Expense

Mortgage Banking segment noninterest expense of $38.0 million decreased $6.3 million, or 14.1%, from the third quarter of 2013. This decrease was primarily attributable to lower commission and incentive expense as closed loan volumes declined 34.9% from the third quarter of 2013. Partially offsetting this decrease was an increase in salaries and related expenses resulting from the net addition of 28 mortgage originators during the quarter.

Capital

Regulatory capital ratios for the Bank are as follows:

	Dec. 31, 2013 (1)		Sept. 30, 2013		Dec. 31, 2012		Well-capitalized ratios
Tier 1 leverage capital (to average assets)	9.99	%	10.85	%	11.78	%	5.00	%
Tier 1 risk-based capital (to risk-weighted assets)	14.33	%	17.19	%	18.05	%	6.00	%
Total risk-based capital (to risk-weighted assets)	15.51	%	18.44	%	19.31	%	10.00	%

(1) Regulatory capital ratios at December 31, 2013 are preliminary.

The decline in the Bank's capital ratios was primarily attributable to the fourth quarter acquisitions of Fortune Bank and Yakima National Bank, which created $12.6 million of intangible assets not includable in regulatory capital and resulted in an increase in average and risk-weighted assets as well as the consolidated net loss for the quarter.

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Special Cash Dividend Declaration

As we announced on January 24, 2014, HomeStreet, Inc.'s board of directors approved a special cash dividend of $0.11 per common share, payable on February 24, 2014 to shareholders of record as of the close of business on February 3, 2014.

⁽¹⁾ The press release contains certain non-GAAP financial disclosures for consolidated net income excluding acquisition-related expenses, diluted earnings per share, excluding acquisition-related expenses, and Commercial and Consumer Banking segment net income, excluding acquisition-related expenses. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. For corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures beginning on page 30 of this earnings release.

Conference Call

HomeStreet, Inc. will conduct a quarterly earnings conference call on Tuesday, January 28, 2014 at 1:00 p.m. EST. The Company will discuss fourth quarter 2013 results and provide an update on recent activities. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may join the call by dialing 1-888-317-6016 shortly before 1:00 p.m. EST. A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10037782.

About HomeStreet, Inc.

HomeStreet, Inc. (NASDAQ:HMST) is a diversified financial services company headquartered in Seattle, Washington, and the holding company for HomeStreet Bank, a Washington state-chartered, FDIC-insured savings bank. HomeStreet Bank offers Commercial and Consumer banking, investment and insurance products and services in Washington, Oregon and Hawaii. HomeStreet Bank conducts lending activities in Washington, Oregon, Hawaii, Idaho, California, Arizona, Utah and Alaska.  For more information, visit http://ir.homestreet.com. Information contained in or linked from our website is not incorporated into, and does not form a part of, this release.

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Forward-Looking Statements

This press release contains forward-looking statements concerning HomeStreet, Inc. and HomeStreet Bank and their operations, performance, financial conditions and likelihood of success. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are based on many beliefs, assumptions, estimates and expectations of our future performance, taking into account information currently available to us, and include statements about the competitiveness of the banking industry. When used in this press release, the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” and similar expressions (including the negative of these terms) may help identify forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date.

We caution readers that a number of factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Among other things, our ability to expand our banking operations geographically and across market sectors, grow our franchise and capitalize on market opportunities, and generate positive net income and cash flow, may be limited due to future risks and uncertainties including, but not limited to, changes in general economic conditions that impact our markets and our business, actions by the Federal Reserve affecting monetary and fiscal policy, regulatory and legislative actions that may constrain our ability to do business, significant increases in the competition we face in our industry and market and the extent of our success in problem asset resolution efforts. We may not immediately realize the benefits expected from our recently completed bank and branch acquisitions and may incur unexpected costs in integrating these acquisitions into our operations. In addition, we may not recognize all or a substantial portion of the value of our rate-lock loan activity due to challenges our customers may face in meeting current underwriting standards, a decrease in interest rates, an increase in competition for such loans, unfavorable changes in general economic conditions, including housing prices, the job market, consumer confidence and spending habits either nationally or in the regional and local market areas in which the Company does business and legislative or regulatory actions or reform (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act). Further, our ability to pay cash dividends in the future is dependent upon a variety of factors, including our net income, liquidity, capital resources, regulatory and financial condition, and our compliance with the terms of our trust preferred securities and applicable banking laws and regulations. A discussion of the factors that we recognize to pose risk to the achievement of our business goals and our operational and financial objectives is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. These factors are updated from time to time in our filings with the Securities and Exchange Commission, and readers of this release are cautioned to review those disclosures in conjunction with the discussions herein.

Information contained herein, other than information at December 31, 2012 and for the twelve months then ended, is unaudited. All financial data should be read in conjunction with the notes to the consolidated financial statements of HomeStreet, Inc., and subsidiaries as of and for the fiscal year ended December 31, 2012, as contained in the Company's Annual Report on Form 10-K for such fiscal year.

Source: HomeStreet, Inc.

Contact:	Investor Relations & Media:
	HomeStreet, Inc.
	Terri Silver, 206-389-6303
	terri.silver@homestreet.com
	http://ir.homestreet.com

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HomeStreet, Inc. and Subsidiaries

Summary Financial Data

	Quarter Ended												Year Ended
(dollars in thousands, except share data)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012		Dec. 31, 2013		Dec. 31, 2012
Income statement data (for the period ended):
Net interest income	$	21,382		$	20,412		$	17,415	$	15,235	$	16,591	$	74,444	$	60,743
Provision (reversal of provision) for loan losses	—			(1,500		)	400		2,000		4,000		900		11,500
Noninterest income	36,072			38,174			57,556		58,943		71,932		190,745		238,020
Noninterest expense	58,868			58,116			56,712		55,799		55,966		229,495		183,591
Acquisition-related expenses (included in noninterest expense)	4,080			463			6		—		—		4,549		—
Net income before taxes	(1,414		)	1,970			17,859		16,379		28,557		34,794		103,672
Income tax expense	(553		)	308			5,791		5,439		7,060		10,985		21,546
Net income	$	(861	)	$	1,662		$	12,068	$	10,940	$	21,497	$	23,809	$	82,126
Basic earnings per common share (1)	$	(0.06	)	$	0.12		$	0.84	$	0.76	$	1.50	$	1.65	$	6.17
Diluted earnings per common share(1)	$	(0.06	)	$	0.11		$	0.82	$	0.74	$	1.46	$	1.61	$	5.98
Common shares outstanding (1)	14,799,991			14,422,354			14,406,676		14,400,206		14,382,638		14,799,991		14,382,638
Weighted average common shares
Basic	14,523,405			14,388,559			14,376,580		14,359,691		14,371,120		14,412,059		13,312,939
Diluted	14,812,391			14,790,671			14,785,481		14,804,129		14,714,166		14,798,168		13,739,398
Dividends per share	$	0.11		$	0.11		$	0.11	$	—	$	—	$	0.33	$	—
Book value per share	$	17.97		$	18.60		$	18.62	$	18.78	$	18.34	$	17.97	$	18.34
Tangible book value per share (2)	$	17.08		$	18.57		$	18.60	$	18.75	$	18.31	$	17.08	$	18.31
Financial position (at period end):
Cash and cash equivalents	$	33,908		$	37,906		$	21,645	$	18,709	$	25,285	$	33,908	$	25,285
Investment securities	498,816			574,894			539,480		416,561		416,517		498,816		416,517
Loans held for sale	279,941			385,110			471,191		430,857		620,799		279,941		620,799
Loans held for investment, net	1,872,716			1,510,169			1,416,439		1,358,982		1,308,974		1,872,716		1,308,974
Mortgage servicing rights	162,463			146,300			137,385		111,828		95,493		162,463		95,493
Other real estate owned	12,911			12,266			11,949		21,664		23,941		12,911		23,941
Total assets	3,066,054			2,854,323			2,776,124		2,508,251		2,631,230		3,066,054		2,631,230
Deposits	2,203,238			2,098,076			1,963,123		1,934,704		1,976,835		2,203,238		1,976,835
FHLB advances	446,590			338,690			409,490		183,590		259,090		446,590		259,090
Shareholders’ equity	265,926			268,208			268,321		270,405		263,762		265,926		263,762
Financial position (averages):
Investment securities	$	565,869		$	556,862		$	512,475	$	422,761	$	418,261	$	515,000	$	410,819
Loans held for investment	1,732,955			1,475,011			1,397,219		1,346,100		1,297,615		1,496,146		1,303,010
Total interest-earning assets	2,624,287			2,474,397			2,321,195		2,244,563		2,244,727		2,422,136		2,167,363
Total interest-bearing deposits	1,698,550			1,488,076			1,527,732		1,543,645		1,609,075		1,590,492		1,644,859
FHLB advances	343,366			374,682			307,296		147,097		122,516		293,871		93,325
Repurchase agreements	—			—			10,913		—		558		2,721		17,806
Total interest-bearing liabilities	2,268,826			2,045,155			1,917,098		1,752,599		1,794,006		2,023,409		1,817,847
Shareholders’ equity	268,328			271,286			280,783		274,355		262,163		249,081		211,329

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HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

	Quarter Ended																	Year Ended
(dollars in thousands, except share data)	Dec. 31, 2013				Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013				Dec. 31, 2012			Dec. 31, 2013				Dec. 31, 2012
Financial performance:
Return on average common shareholders’ equity (3)	(1.28		)%		2.45		%	17.19		%	15.95		%		32.80		%	9.56		%		38.86		%
Return on average tangible common shareholders' equity(2)	(1.33		)%		2.45		%	17.22		%	15.97		%		32.85		%	9.66		%		38.94		%
Return on average assets	(0.12		)%		0.24		%	1.86		%	1.75		%		3.46		%	0.88		%		3.42		%
Net interest margin (4)	3.34		%		3.41		%	3.10		%	2.81		%	(5)	3.06		%	3.17		%	(5)	2.89		%
Efficiency ratio (6)	102.46		%		99.20		%	75.65		%	75.22		%		63.22		%	86.54		%		61.45		%
Asset quality:
Allowance for credit losses	$	24,089			$	24,894		$	27,858		$	28,594			$	27,751		24,089				$	27,751
Allowance for loan losses/total loans	1.26		%	(7)	1.61		%	1.92		%	2.05		%		2.06		%	1.26		%	(7)	2.06		%
Allowance for loan losses/nonaccrual loans	93.00		%		92.30		%	93.11		%	88.40		%		92.20		%	93.00		%		92.20		%
Total classified assets	$	50,600			$	54,355		$	74,721		$	90,076			$	86,270		$	50,600			$	86,270
Classified assets/total assets	1.65		%		1.90		%	2.69		%	3.59		%		3.28		%	1.65		%		3.28		%
Total nonaccrual loans(8)	$	25,707		(9)	$	26,753		$	29,701		$	32,133			$	29,892		$	25,707		(9)	$	29,892
Nonaccrual loans/total loans	1.36		%		1.74		%	2.06		%	2.32		%		2.24		%	1.36		%		2.24		%
Other real estate owned	$	12,911			$	12,266		$	11,949		$	21,664			$	23,941		$	12,911			$	23,941
Total nonperforming assets	$	38,618		(9)	$	39,019		$	41,650		$	53,797			$	53,833		$	38,618		(9)	$	53,833
Nonperforming assets/total assets	1.26		%		1.37		%	1.50		%	2.14		%		2.05		%	1.26		%		2.05		%
Net charge-offs	$	805			$	1,464		$	1,136		$	1,157			$	3,876		$	4,562			$	26,549
Regulatory capital ratios for the Bank:
Tier 1 leverage capital (to average assets)	9.99		%	(10)	10.85		%	11.89		%	11.97		%		11.78		%	9.99		%	(10)	11.78		%
Tier 1 risk-based capital (to risk-weighted assets)	14.33		%	(10)	17.19		%	17.89		%	19.21		%		18.05		%	14.33		%	(10)	18.05		%
Total risk-based capital (to risk-weighted assets)	15.51		%	(10)	18.44		%	19.15		%	20.47		%		19.31		%	15.51		%	(10)	19.31		%
Other data:
Full-time equivalent employees (ending)	1,502				1,426			1,309			1,218				1,099			1,502				1,099

(1) Share and per share data shown after giving effect to the 2-for-1 forward stock splits effective March 6, 2012 and November 5, 2012.

(2) Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. Other companies may define or calculate these measures differently. Tangible book value is calculated by dividing shareholders' common equity less average goodwill and intangible assets, net (excluding MSRs) by the number of common shares outstanding. The return on average tangible common shareholders' equity is calculated by dividing net earnings available to common shareholders (annualized) by average shareholders' common equity less average goodwill and intangible assets, net (excluding MSRs). For additional information on these ratios and for corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures in this earnings release.

(3) Net earnings available to common shareholders (annualized) divided by average common shareholders’ equity.

(4) Net interest income divided by total average interest-earning assets on a tax equivalent basis.

(5) Net interest margin for the first quarter of 2013 included $1.4 million in interest expense related to the correction of the cumulative effect of an error in prior years, resulting from the under accrual of interest due on the TruPS for which the Company had deferred the payment of interest. Excluding the impact of the prior period interest expense correction, the net interest margin was 3.06% for the quarter ended March 31, 2013 and 3.23% for the year ended December 31, 2013.

(6) Noninterest expense divided by total net revenue (net interest income and noninterest income).

(7) Includes acquired loans. Excluding acquired loans, allowance for loan losses/total loans is 1.40% at December 31, 2013.

(8) Generally, loans are placed on nonaccrual status when they are 90 or more days past due.

(9) Includes $6.5 million of nonperforming loans at December 31, 2013 that are guaranteed by the SBA.

(10) Regulatory capital ratios at December 31, 2013 are preliminary.

10

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Operations

	Three Months Ended December 31,					%		Year Ended December 31,					%
(in thousands, except share data)	2013			2012		Change		2013		2012			Change
Interest income:
Loans	$	21,522		$	18,713	15	%	$	76,442	$	71,057		8
Investment securities available for sale	2,839			2,186		30		12,391		9,391			32
Other	61			27		126		143		243			(41	)
	24,422			20,926		17		88,976		80,691			10
Interest expense:
Deposits	2,338			3,756		(38	)	10,416		16,741			(38	)
Federal Home Loan Bank advances	419			282		49		1,532		1,788			(14	)
Securities sold under agreements to repurchase	—			1		(100	)	11		70			(84	)
Long-term debt	272			292		(7	)	2,546		1,333			91
Other	11			4		175		27		16			69
	3,040			4,335		(30	)	14,532		19,948			(27	)
Net interest income	21,382			16,591		29		74,444		60,743			23
Provision for credit losses	—			4,000		(100	)	900		11,500			(92	)
Net interest income after provision for credit losses	21,382			12,591		70		73,544		49,243			49
Noninterest income:
Net gain on mortgage loan origination and sale activities	24,842			68,881		(64	)	164,712		210,564			(22	)
Mortgage servicing income	7,807			651		NM		17,073		16,121			6
(Loss) income from WMS Series LLC	(359		)	516		(170	)	704		4,264			(83	)
Loss on debt extinguishment	—			—		NM		—		(939		)	NM
Depositor and other retail banking fees	899			800		12		3,172		3,062			4
Insurance commissions	252			193		31		864		743			16
Gain on sale of investment securities available for sale	1,766			141		NM		1,772		1,490			19
Other	865			750		15		2,448		2,715			(10	)
	36,072			71,932		(50	)	190,745		238,020			(20	)
Noninterest expense:
Salaries and related costs	36,110			38,680		(7	)	149,440		119,829			25
General and administrative	9,932			8,534		16		40,366		27,838			45
Legal	498			325		53		2,552		1,796			42
Consulting	3,294			1,291		155		5,637		3,037			86
Federal Deposit Insurance Corporation assessments	496			803		(38	)	1,433		3,554			(60	)
Occupancy	4,098			2,425		69		13,765		8,585			60
Information services	4,369			2,739		60		14,491		8,867			63
Net cost of operation and sale of other real estate owned	71			1,169		(94	)	1,811		10,085			(82	)
	58,868			55,966		5		229,495		183,591			25
(Loss) income before income taxes	(1,414		)	28,557		(105	)	34,794		103,672			(66	)
Income tax (benefit) expense	(553		)	7,060		(108	)	10,985		21,546			(49	)
NET (LOSS) INCOME	$	(861	)	$	21,497	(104	)	$	23,809	$	82,126		(71	)
Basic (loss) income per share	$	(0.06	)	$	1.50	(104	)	$	1.65	$	6.17		(73	)
Diluted (loss) income per share	$	(0.06	)	$	1.46	(104	)	$	1.61	$	5.98		(73	)
Basic weighted average number of shares outstanding	14,523,405			14,371,120		1		14,412,059		13,312,939			8
Diluted weighted average number of shares outstanding	14,812,391			14,714,166		1		14,798,168		13,739,398			8
Dividends per share	$	0.11		$	—	N/A		$	0.33	$	—		N/A

11

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Operation

	Quarter ended
(in thousands, except share data)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Interest income:
Loans	$	21,522		$	19,425		$	17,446		$	18,049		$	18,713
Investment securities available for sale	2,839			3,895			2,998			2,659			2,186
Other	61			28			24			30			27
	24,422			23,348			20,468			20,738			20,926
Interest expense:
Deposits	2,338			2,222			2,367			3,489			3,756
Federal Home Loan Bank advances	419			434			387			292			282
Securities sold under agreements to repurchase	—			—			11			—			1
Long-term debt	272			274			283			1,717			292
Other	11			6			5			5			4
	3,040			2,936			3,053			5,503			4,335
Net interest income	21,382			20,412			17,415			15,235			16,591
Provision (reversal of provision) for credit losses	—			(1,500		)	400			2,000			4,000
Net interest income after provision for credit losses	21,382			21,912			17,015			13,235			12,591
Noninterest income:
Net gain on mortgage loan origination and sale activities	24,842			33,491			52,424			53,955			68,881
Mortgage servicing income	7,807			4,011			2,183			3,072			651
(Loss) income from WMS Series LLC	(359		)	(550		)	993			620			516
Depositor and other retail banking fees	899			791			761			721			800
Insurance commissions	252			242			190			180			193
Gain (loss) on sale of investment securities available for sale	1,766			(184		)	238			(48		)	141
Other	865			373			767			443			750
	36,072			38,174			57,556			58,943			71,932
Noninterest expense:
Salaries and related costs	36,110			39,689			38,579			35,062			38,680
General and administrative	9,932			9,234			10,270			10,930			8,534
Legal	498			844			599			611			325
Consulting	3,294			884			763			696			1,291
Federal Deposit Insurance Corporation assessments	496			227			143			567			803
Occupancy	4,098			3,484			3,381			2,802			2,425
Information services	4,369			3,552			3,574			2,996			2,739
Net cost (benefit) of operation and sale of other real estate owned	71			202			(597		)	2,135			1,169
	58,868			58,116			56,712			55,799			55,966
(Loss) income before income tax expense	(1,414		)	1,970			17,859			16,379			28,557
Income tax (benefit) expense	(553		)	308			5,791			5,439			7,060
NET (LOSS) INCOME	$	(861	)	$	1,662		$	12,068		$	10,940		$	21,497
Basic (loss) income per share	$	(0.06	)	$	0.12		$	0.84		$	0.76		$	1.50
Diluted (loss) income per share	$	(0.06	)	$	0.11		$	0.82		$	0.74		$	1.46
Basic weighted average number of shares outstanding	14,523,405			14,388,559			14,376,580			14,359,691			14,371,120
Diluted weighted average number of shares outstanding	14,812,391			14,790,671			14,785,481			14,804,129			14,714,166
Dividends per share	$	0.11		$	0.11		$	0.11		$	—		$	—

12

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(in thousands, except share data)	Dec. 31, 2013			Dec. 31, 2012		% Change
Assets:
Cash and cash equivalents (including interest-bearing instruments of $9,436 and $12,414)	$	33,908		$	25,285	34	%
Investment securities (includes $481,683 and $416,329 carried at fair value)	498,816			416,517		20
Loans held for sale (includes $279,385 and $607,578 carried at fair value)	279,941			620,799		(55	)
Loans held for investment (net of allowance for loan losses of $24,089 and $27,561)	1,872,716			1,308,974		43
Mortgage servicing rights (includes $153,128 and $87,396 carried at fair value)	162,463			95,493		70
Other real estate owned	12,911			23,941		(46	)
Federal Home Loan Bank stock, at cost	35,288			36,367		(3	)
Premises and equipment, net	36,260			15,232		138
Goodwill	10,849			424		NM
Accounts receivable and other assets	122,902			88,198		39
Total assets	$	3,066,054		$	2,631,230	17
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	2,203,238		$	1,976,835	11
Federal Home Loan Bank advances	446,590			259,090		72
Accounts payable and other liabilities	85,489			69,686		23
Long-term debt	64,811			61,857		5
Total liabilities	2,800,128			2,367,468		18
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, 14,799,991 shares and 14,382,638 shares	511			511		—
Additional paid-in capital	94,474			90,189		5
Retained earnings	182,935			163,872		12
Accumulated other comprehensive (loss) income	(11,994		)	9,190		NM
Total shareholders’ equity	265,926			263,762		1
Total liabilities and shareholders’ equity	$	3,066,054		$	2,631,230	17

13

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Financial Condition

(in thousands, except share data)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013		Dec. 31, 2012
Assets:
Cash and cash equivalents	$	33,908		$	37,906		$	21,645		$	18,709	$	25,285
Investment securities	498,816			574,894			539,480			416,561		416,517
Loans held for sale	279,941			385,110			471,191			430,857		620,799
Loans held for investment, net	1,872,716			1,510,169			1,416,439			1,358,982		1,308,974
Mortgage servicing rights	162,463			146,300			137,385			111,828		95,493
Other real estate owned	12,911			12,266			11,949			21,664		23,941
Federal Home Loan Bank stock, at cost	35,288			35,370			35,708			36,037		36,367
Premises and equipment, net	36,260			24,684			18,362			16,893		15,232
Goodwill	10,849			424			424			424		424
Accounts receivable and other assets	122,902			127,200			123,541			96,296		88,198
Total assets	$	3,066,054		$	2,854,323		$	2,776,124		$	2,508,251	$	2,631,230
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	2,203,238		$	2,098,076		$	1,963,123		$	1,934,704	$	1,976,835
Federal Home Loan Bank advances	446,590			338,690			409,490			183,590		259,090
Accounts payable and other liabilities	85,489			87,492			73,333			57,695		69,686
Long-term debt	64,811			61,857			61,857			61,857		61,857
Total liabilities	2,800,128			2,586,115			2,507,803			2,237,846		2,367,468
Shareholders’ equity:
Preferred stock, no par value
Authorized 10,000 shares	—			—			—			—		—
Common stock, no par value
Authorized 160,000,000	511			511			511			511		511
Additional paid-in capital	94,474			91,415			91,054			90,687		90,189
Retained earnings	182,935			185,379			185,300			173,229		163,872
Accumulated other comprehensive (loss) income	(11,994		)	(9,097		)	(8,544		)	5,978		9,190
Total shareholders’ equity	265,926			268,208			268,321			270,405		263,762
Total liabilities and shareholders’ equity	$	3,066,054		$	2,854,323		$	2,776,124		$	2,508,251	$	2,631,230

14

HomeStreet, Inc. and Subsidiaries

Average Balances, Yields and Rates Paid (Taxable-equivalent basis)

	Quarter Ended December 31,
	2013						2012
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: (1)
Cash & cash equivalents	$	46,718	$	27	0.23	%	$	28,029	$	26	0.39	%
Investment securities	565,869		3,433		2.43	%	418,261		2,682		2.56	%
Loans held for sale	278,745		2,962		4.25	%	500,822		4,175		3.36	%
Loans held for investment	1,732,955		18,589		4.28	%	1,297,615		14,571		4.48	%
Total interest-earning assets	2,624,287		25,011		3.80	%	2,244,727		21,454		3.82	%
Noninterest-earning assets (2)	298,965						238,433
Total assets	$	2,923,252					$	2,483,160
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	290,028	269		0.37	%	$	159,192	130		0.32	%
Savings accounts	148,029		187		0.50	%	104,748		105		0.40	%
Money market accounts	912,739		1,009		0.44	%	677,135		855		0.50	%
Certificate accounts	347,754		736		0.84	%	668,000		2,666		1.59	%
Total interest-bearing deposits	1,698,550		2,201		0.51	%	1,609,075		3,756		0.93	%
FHLB advances	343,366		419		0.48	%	122,516		282		0.95	%
Securities sold under agreements to repurchase	—		—		—%		558		1		0.26	%
Long-term debt	63,784		272		1.67	%	61,857		292		1.89	%
Other borrowings	163,126		148		0.36	%	—		4		—	%
Total interest-bearing liabilities	2,268,826		3,040		0.53	%	1,794,006		4,335		0.96	%
Noninterest-bearing liabilities	386,098						426,991
Total liabilities	2,654,924						2,220,997
Shareholders’ equity	268,328						262,163
Total liabilities and shareholders’ equity	$	2,923,252					$	2,483,160
Net interest income (3)			$	21,971					$	17,119
Net interest spread					3.31	%					2.86	%
Impact of noninterest-bearing sources					0.07	%					0.20	%
Net interest margin					3.34	%					3.06	%

(1) The average balances of nonaccrual assets and related income, if any, are included in their respective categories.

(2) Includes loan balances that have been foreclosed and are now reclassified to other real estate owned.

(3) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $589 thousand and $528 thousand for the quarters ended December 31, 2013 and December 31, 2012, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

15

HomeStreet, Inc. and Subsidiaries

Average Balances, Yields and Rates Paid (Taxable-equivalent basis)

	Year Ended December 31,
	2013							2012
(in thousands)	Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: (1)
Cash & cash equivalents	$	29,861	$	73	0.24	%		$	94,478	$	231	0.24	%
Investment securities	515,000		14,608		2.84	%		410,819		11,040		2.69	%
Loans held for sale	381,129		14,180		3.72	%		359,056		12,719		3.56	%
Loans held for investment	1,496,146		62,384		4.17	%		1,303,010		58,490		4.49	%
Total interest-earning assets	2,422,136		91,245		3.77	%		2,167,363		82,480		3.81	%
Noninterest-earning assets (2)	296,078							236,497
Total assets	$	2,718,214						$	2,403,860
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	241,348	925		0.38	%		$	151,029	498		0.33	%
Savings accounts	122,602		545		0.44	%		90,246		395		0.44	%
Money market accounts	810,666		3,899		0.48	%		613,546		3,243		0.53	%
Certificate accounts	415,876		4,816		1.16	%		790,038		12,605		1.60	%
Total interest-bearing deposits	1,590,492		10,185		0.64	%		1,644,859		16,741		1.02	%
FHLB advances	293,871		1,532		0.52	%		93,325		1,788		1.91	%
Securities sold under agreements to repurchase	2,721		11		0.40	%		17,806		70		0.39	%
Long-term debt	62,349		2,546		4.03	%	(3)	61,857		1,333		2.16	%
Other borrowings	73,976		257		0.36	%		—		16		—	%
Total interest-bearing liabilities	2,023,409		14,531		0.72	%		1,817,847		19,948		1.10	%
Noninterest-bearing liabilities	445,724							374,684
Total liabilities	2,469,133							2,192,531
Shareholders’ equity	249,081							211,329
Total liabilities and shareholders’ equity	$	2,718,214						$	2,403,860
Net interest income (4)			$	76,714						$	62,532
Net interest spread					3.05	%						2.71	%
Impact of noninterest-bearing sources					0.12	%						0.18	%
Net interest margin					3.17	%	(3)					2.89	%

(1) The average balances of nonaccrual assets and related income, if any, are included in their respective categories.

(2) Includes loan balances that have been foreclosed and are now reclassified to other real estate owned.

(3) Net interest margin for the first quarter of 2013 included $1.4 million in interest expense related to the correction of the cumulative effect of an error in prior years, resulting from the under accrual of interest due on the TruPS for which the Company had deferred the payment of interest. Excluding the impact of the prior period interest expense correction, the net interest margin was 3.23% for the twelve months ended December 31, 2013.

(4) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $2.3 million and $1.8 million for the twelve months ended December 31, 2013 and December 31, 2012, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

16

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment

	Quarter ended
(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Net interest income	$	18,160		$	16,095		$	13,790		$	11,127		$	12,131
Provision (reversal of reserve) for loan losses	—			(1,500		)	400			2,000			4,000
Noninterest income	2,885			1,229			1,537			2,390			2,530
Noninterest expense	20,822			13,813			13,446			15,686			16,384
Income (loss) before income taxes	223			5,011			1,481			(4,169		)	(5,723		)
Income tax expense (benefit)	(21		)	1,220			65			(1,355		)	(1,373		)
Net income (loss)	$	244		$	3,791		$	1,416		$	(2,814	)	$	(4,350	)
Pre-tax pre-provision profit (loss) (1)	$	223		$	3,511		$	1,881		$	(2,169	)	$	(1,723	)
Efficiency ratio (2)	98.94		%	79.73		%	87.73		%	116.05		%	111.75		%
Full-time equivalent employees (ending)	577			504			476			440			413
Net gain on mortgage loan origination and sale activity:
Multifamily	$	559		$	2,113		$	709		$	1,925		$	1,631
Other	964			—			—			—			—
	$	1,523		$	2,113		$	709		$	1,925		$	1,631
Production volumes:
Multifamily mortgage originations	16,325			10,734			14,790			49,119			40,244
Multifamily mortgage loans sold	15,775			21,998			15,386			50,587			33,689

(1) Pre-tax pre-provision profit is total net revenue (net interest income and noninterest income) less noninterest expense. The Company believes that this financial measure is useful in assessing the ability of a lending institution to generate income in excess of its provision for loan losses.

(2) Noninterest expense divided by total net revenue (net interest income and noninterest income).

Commercial Mortgage Servicing Income

	Quarter ended
(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Servicing income, net:
Servicing fees and other	$	834		$	789		$	739		$	812		$	827
Amortization of multifamily MSRs	(457		)	(433		)	(423		)	(490		)	(463		)
Commercial mortgage servicing income	$	377		$	356		$	316		$	322		$	364

17

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Commercial Loans Serviced for Others

(in thousands)	Dec. 31, 2013		Sept. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012
Commercial
Multifamily	$	720,429	$	722,767	$	720,368	$	737,007	$	727,118
Other	95,673		50,629		51,058		52,825		53,235
Total commercial loans serviced for others	$	816,102	$	773,396	$	771,426	$	789,832	$	780,353

Commercial Multifamily Capitalized Mortgage Servicing Rights

	Quarter ended
(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Beginning balance	$	9,403		$	9,239		$	9,150		$	8,097		$	7,725
Originations	375			597			512			1,543			835
Amortization	(443		)	(433		)	(423		)	(490		)	(463		)
Ending balance	$	9,335		$	9,403		$	9,239		$	9,150		$	8,097
Ratio of MSR carrying value to related loans serviced for others	1.21		%	1.22		%	1.20		%	1.16		%	1.04		%
MSR servicing fee multiple (1)	2.91			2.94			2.93			2.89			2.70
Weighted-average note rate (loans serviced for others)	5.12		%	5.22		%	5.25		%	5.25		%	5.38		%
Weighted-average servicing fee (loans serviced for others)	0.42		%	0.41		%	0.41		%	0.40		%	0.38		%

(1) Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others.

18

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Investment Securities

(in thousands, except for duration data)	Dec. 31, 2013		Sept. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012
Available for sale:
Mortgage-backed securities:
Residential	$	133,910	$	144,263	$	120,939	$	69,448	$	62,853
Commercial	13,433		13,720		13,892		14,407		14,380
Municipal bonds	130,850		147,441		147,675		131,047		129,175
Collateralized mortgage obligations:
Residential	90,327		153,466		137,543		150,113		170,199
Commercial	16,845		16,991		17,533		19,795		9,043
Corporate debt securities	68,866		69,963		70,973		—		—
U.S. Treasury	27,452		27,747		29,609		30,428		30,679
Total available for sale	481,683		573,591		538,164		415,238		416,329
Held to maturity	17,133		1,303		1,316		1,323		188
	$	498,816	$	574,894	$	539,480	$	416,561	$	416,517
Weighted average duration in years:
Available for sale	5.4		5.3		5.5		5.0		4.9

Five Quarter Loans Held for Investment

(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Consumer loans
Single family	$	904,913		$	818,992		$	772,450		$	730,553		$	673,865
Home equity	135,650			129,785			132,218			132,537			136,746
	1,040,563			948,777			904,668			863,090			810,611
Commercial loans
Commercial real estate	477,954			400,150			382,345			387,819			361,879
Multifamily	79,216			42,187			26,120			21,859			17,012
Construction/land development	130,465			79,435			61,125			43,600			71,033
Commercial business	171,646			67,547			73,202			73,851			79,576
	859,281			589,319			542,792			527,129			529,500
	1,899,844			1,538,096			1,447,460			1,390,219			1,340,111
Net deferred loan fees and discounts	(3,219		)	(3,233		)	(3,366		)	(2,832		)	(3,576		)
	1,896,625			1,534,863			1,444,094			1,387,387			1,336,535
Allowance for loan losses	(23,908		)	(24,694		)	(27,655		)	(28,405		)	(27,561		)
	$	1,872,717		$	1,510,169		$	1,416,439		$	1,358,982		$	1,308,974

19

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Credit Quality Activity

Allowance for Credit Losses (roll-forward)

	Quarter ended
(in thousands)	Dec. 31, 2013				Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Beginning balance	$	24,894			$	27,858		$	28,594		$	27,751		$	27,627
Provision (reversal of provision) for credit losses	—				(1,500		)	400			2,000			4,000
(Charge-offs), net of recoveries	(805		)		(1,464		)	(1,136		)	(1,157		)	(3,876		)
Ending balance	$	24,089			$	24,894		$	27,858		$	28,594		$	27,751
Components:
Allowance for loan losses	$	23,908			$	24,694		$	27,655		$	28,405		$	27,561
Allowance for unfunded commitments	181				200			203			189			190
Allowance for credit losses	$	24,089			$	24,894		$	27,858		$	28,594		$	27,751
Allowance as a % of loans held for investment	1.26		%	(1)	1.61		%	1.92		%	2.05		%	2.06		%
Allowance as a % of nonaccrual loans	93.00		%		92.30		%	93.11		%	88.40		%	92.20		%

(1) Includes acquired loans. Excluding acquired loans, allowance for loan losses/total loans was 1.40% at December 31, 2013.

Nonperforming Assets (NPAs) roll-forward

	Quarter ended
(in thousands)	Dec. 31, 2013				Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Beginning balance	$	39,019			$	41,650		$	53,797		$	53,833		$	55,250
Additions	9,959			(1)	5,517			4,340			6,511			9,973
Reductions:
Charge-offs	(805		)		(1,464		)	(1,136		)	(1,157		)	(3,876		)
OREO sales	(1,442		)		(2,573		)	(6,746		)	(2,117		)	(2,028		)
OREO writedowns and other adjustments	(108		)		(208		)	300			(638		)	(1,216		)
Principal paydown, payoff advances and other adjustments	(4,131		)		(3,079		)	(7,423		)	(2,529		)	(1,807		)
Transferred back to accrual status	(3,874		)		(824		)	(1,482		)	(106		)	(2,463		)
Total reductions	(10,360		)		(8,148		)	(16,487		)	(6,547		)	(11,390		)
Net reductions	(401		)		(2,631		)	(12,147		)	(36		)	(1,417		)
Ending balance	$	38,618		(2)	$	39,019		$	41,650		$	53,797		$	53,833

(1) Additions to NPAs include $7.9 million of acquired nonperforming assets during the quarter ended December 31, 2013.

(2) Includes $6.5 million of nonperforming loans at December 31, 2013 that are guaranteed by the SBA.

20

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Nonperforming Assets by Loan Class

(in thousands)	Dec. 31, 2013				Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Loans accounted for on a nonaccrual basis:
Consumer
Single family	$	8,861			$	12,648		$	14,494		$	15,282		$	13,304
Home equity	1,846				2,295			3,367			2,917			2,970
	10,707				14,943			17,861			18,199			16,274
Commercial
Commercial real estate	12,257				6,861			6,051			6,122			6,403
Construction/land development	—				3,544			4,051			5,974			5,042
Commercial business	2,743				1,405			1,738			1,838			2,173
	15,000				11,810			11,840			13,934			13,618
Total loans on nonaccrual	$	25,707			$	26,753		$	29,701		$	32,133		$	29,892
Nonaccrual loans as a % of total loans	1.36		%		1.74		%	2.06		%	2.32		%	2.24		%
Other real estate owned:
Consumer
Single family	$	5,246			$	5,494		$	4,468		$	4,069		$	4,071
Commercial
Commercial real estate	1,688				—			1,184			8,440			10,283
Construction/land development	5,977				5,815			6,297			9,155			9,587
Commercial business	—				957			—			—			—
	7,665				6,772			7,481			17,595			19,870
Total other real estate owned	$	12,911			$	12,266		$	11,949		$	21,664		$	23,941
Nonperforming assets:
Consumer
Single family	$	14,107			$	18,142		$	18,962		$	19,351		$	17,375
Home equity	1,846				2,295			3,367			2,917			2,970
	15,953				20,437			22,329			22,268			20,345
Commercial
Commercial real estate	13,945				6,861			7,235			14,562			16,686
Construction/land development	5,977				9,359			10,348			15,129			14,629
Commercial business	2,743				2,362			1,738			1,838			2,173
	22,665				18,582			19,321			31,529			33,488
Total nonperforming assets	$	38,618		(1)	$	39,019		$	41,650		$	53,797		$	53,833
Nonperforming assets as a % of total assets	1.26		%		1.37		%	1.50		%	2.14		%	2.05		%

(1) Includes $6.5 million of nonperforming loans at December 31, 2013 that are guaranteed by the SBA.

21

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Delinquencies by Loan Class

(in thousands)	30-59 days past due			60-89 days past due			90 days or more past due				Total past due				Current			Total loans
At December 31, 2013
Total loans held for investment	$	6,841		$	4,976		$	72,518			$	84,335			$	1,815,509		$	1,899,844
Less: FHA/VA loans(1)	4,286			3,730			46,811				54,827				37,177			92,004
Total loans, excluding FHA/VA loans	$	2,555		$	1,246		$	25,707			$	29,508			$	1,778,332		$	1,807,840
Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family residential	$	2,180		$	1,171		$	8,861			$	12,212			$	800,697		$	812,909
Home equity	375			75			1,846				2,296				133,354			135,650
	2,555			1,246			10,707				14,508				934,051			948,559
Commercial loans
Commercial real estate	—			—			12,257				12,257				465,697			477,954
Multifamily residential	—			—			—				—				79,216			79,216
Construction/land development	—			—			—				—				130,465			130,465
Commercial business	—			—			2,743				2,743				168,903			171,646
	—			—			15,000				15,000				844,281			859,281
	$	2,555		$	1,246		$	25,707		(2)	$	29,508		(2)	$	1,778,332		$	1,807,840
As a percentage of total loans, excluding FHA/VA loans	0.14		%	0.07		%	1.42		%		1.63		%		98.37		%	100.00		%
At December 31, 2012
Total loans held for investment	$	12,703		$	4,974		$	70,550			$	88,227		��	$	1,251,884		$	1,340,111
Less: FHA/VA loans(1)	6,839			3,700			40,658				51,197				24,257			75,454
Total loans, excluding FHA/VA loans	$	5,864		$	1,274		$	29,892			$	37,030			$	1,227,627		$	1,264,657
Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family (1)	$	5,077		$	1,032		$	13,304			$	19,413			$	578,998		$	598,411
Home equity	787			242			2,970				3,999				132,747			136,746
	5,864			1,274			16,274				23,412				711,745			735,157
Commercial loans
Commercial real estate	—			—			6,403				6,403				355,476			361,879
Multifamily	—			—			—				—				17,012			17,012
Construction/land development	—			—			5,042				5,042				65,991			71,033
Commercial business	—			—			2,173				2,173				77,403			79,576
	—			—			13,618				13,618				515,882			529,500
	$	5,864		$	1,274		$	29,892			$	37,030			$	1,227,627		$	1,264,657
As a % of total loans, excluding FHA/VA loans	0.46		%	0.10		%	2.36		%		2.93		%		97.07		%	100.00		%

(1) Represents loans whose repayments are insured by the FHA or guaranteed by the VA.

(2) Includes $6.5 million of nonperforming loans at December 31, 2013 that are guaranteed by the SBA.

22

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status

(in thousands)	Dec. 31, 2013		Sept. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012
Accrual
Consumer loans
Single family(1)	$	70,304	$	71,686	$	71,438	$	69,792	$	67,483
Home equity	2,558		2,426		2,326		2,338		2,288
	72,862		74,112		73,764		72,130		69,771
Commercial loans
Commercial real estate	19,620		20,385		21,617		21,046		21,071
Multifamily	3,163		3,190		3,198		3,211		3,221
Construction/land development	6,148		3,122		3,718		4,487		6,365
Commercial business	112		120		129		137		147
	29,043		26,817		28,662		28,881		30,804
	$	101,905	$	100,929	$	102,426	$	101,011	$	100,575
Nonaccrual
Consumer loans
Single family	$	4,017	$	4,819	$	4,536	$	4,593	$	3,931
Home equity	86		132		121		134		465
	4,103		4,951		4,657		4,727		4,396
Commercial loans
Commercial real estate	628		—		—		770		770
Construction/land development	—		3,544		4,051		4,625		5,042
Commercial business	—		—		—		—		—
	628		3,544		4,051		5,395		5,812
	$	4,731	$	8,495	$	8,708	$	10,122	$	10,208
Total
Consumer loans
Single family(1)	$	74,321	$	76,505	$	75,974	$	74,385	$	71,414
Home equity	2,644		2,558		2,447		2,472		2,753
	76,965		79,063		78,421		76,857		74,167
Commercial loans
Commercial real estate	20,248		20,385		21,617		21,816		21,841
Multifamily	3,163		3,190		3,198		3,211		3,221
Construction/land development	6,148		6,666		7,769		9,112		11,407
Commercial business	112		120		129		137		147
	29,671		30,361		32,713		34,276		36,616
	$	106,636	$	109,424	$	111,134	$	111,133	$	110,783

(1) Includes loan balances insured by the FHA or guaranteed by the VA of $17.8 million, $17.6 million, $15.9 million, $15.2 million and $13.1 million at December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013 and December 31, 2012, respectively.

23

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) - Re-Defaults

	Quarter ended
(in thousands)	Dec. 31, 2013		Sept. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012
Recorded investment of re-defaults(1)
Consumer loans
Single family	$	267	$	1,017	$	133	$	1,423	$	1,386
Home equity	—		—		—		22		—
	267		1,017		133		1,445		1,386
Commercial loans
Commercial real estate	—		—		—		770		—
	$	267	$	1,017	$	133	$	2,215	$	1,386

(1) Represents TDRs that have defaulted in the current period within 12 months of their modification date. Defaulted TDRs are reported in the table above based on a payment default definition of 60 days past due for the consumer loans portfolio segment and 90 days past due for the commercial loans portfolio segment.

24

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Deposits

(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Deposits by product:
Noninterest-bearing accounts - checking and savings	$	164,437		$	134,725		$	121,281		$	83,202		$	83,563
Interest-bearing transaction and savings deposits:
NOW accounts	290,382			272,029			279,670			236,744			174,699
Statement savings accounts due on demand	156,181			135,428			115,817			108,627			103,932
Money market accounts due on demand	919,322			879,122			813,608			734,647			683,906
Total interest-bearing transaction and savings deposits	1,365,885			1,286,579			1,209,095			1,080,018			962,537
Total transaction and savings deposits	1,530,322			1,421,304			1,330,376			1,163,220			1,046,100
Certificates of deposit	514,400			460,223			403,636			523,208			655,467
Noninterest-bearing accounts - other	158,516			216,549			229,111			248,276			275,268
Total deposits	$	2,203,238		$	2,098,076		$	1,963,123		$	1,934,704		$	1,976,835
Percent of total deposits:
Noninterest-bearing accounts - checking and savings	7.5		%	6.4		%	6.2		%	4.3		%	4.2		%
Interest-bearing transaction and savings deposits:
NOW accounts	13.2			13.0			14.2			12.2			8.8
Statement savings accounts due on demand	7.1			6.5			5.9			5.6			5.3
Money market accounts due on demand	41.7			41.9			41.4			38.0			34.6
Total interest-bearing transaction and savings deposits	62.0			61.4			61.5			55.8			48.7
Total transaction and savings deposits	69.5			67.8			67.7			60.1			52.9
Certificates of deposit	23.3			21.9			20.6			27.0			33.2
Noninterest-bearing accounts - other	7.2			10.3			11.7			12.9			13.9
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

25

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment

	Quarter ended
(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Net interest income	$	3,222		$	4,317		$	3,625		$	4,108		$	4,460
Noninterest income	33,187			36,945			56,019			56,553			69,402
Noninterest expense	38,046			44,303			43,266			40,113			39,582
Income before income taxes	(1,637		)	(3,041		)	16,378			20,548			34,280
Income tax expense	(532		)	(912		)	5,726			6,794			8,433
Net income	$	(1,105	)	$	(2,129	)	$	10,652		$	13,754		$	25,847
Efficiency ratio (1)	104.50		%	107.37		%	72.54		%	66.13		%	53.59		%
Full-time equivalent employees (ending)	925			922			833			779			686
Production volumes for sale to the secondary market:
Single family mortgage closed loan volume (2)(3)	$	773,146		$	1,187,061		$	1,307,286		$	1,192,156		$	1,518,971
Single family mortgage interest rate lock commitments(2)	662,015			786,147			1,423,290			1,035,822			1,254,954
Single family mortgage loans sold(2)	816,555			1,326,888			1,229,686			1,360,344			1,434,947

(1) Noninterest expense divided by total net revenue (net interest income and noninterest income).

(2) Includes loans originated by WMS Series LLC and purchased by HomeStreet, Inc.

(3) Represents single family mortgage production volume designated for sale to the secondary market during each respective period.

26

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Net Gain on Sale to the Secondary Market

	Quarter ended
(in thousands)	Dec. 31, 2013		Sept. 30, 2013		Jun. 30, 2013		Mar. 31, 2013			Dec. 31, 2012
Net gain on mortgage loan origination and sale activities:(1)
Single family:
Servicing value and secondary market gains(2)	$	17,632	$	23,076	$	43,448	$	44,235		$	58,031
Loan origination and funding fees	5,687		8,302		8,267		7,795			9,219
Total mortgage banking net gain on mortgage loan origination and sale activities(1)	$	23,319	$	31,378	$	51,715	$	52,030		$	67,250
Composite Margin (in basis points):
Servicing value and secondary market gains / interest rate lock commitments(4)	266		294		305		385		(6)	452		(7)
Loan origination and funding fees / retail mortgage originations(5)	84		81		75		76			71
Composite Margin	350		375		380		461		(6)	523		(7)

(1) Excludes inter-segment activities.

(2) 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 the estimated fair value of the repurchase or indemnity obligation recognized on new loan sales.

(3) Represents changes in estimated probable future repurchase losses on previously sold loans.

(4) Servicing value and secondary market gains have been aggregated and are stated as a percentage of interest rate lock commitments. In previous quarters, the value of originated mortgage servicing rights was presented as a separate component of the composite margin and stated as a percentage of mortgage loans sold. Prior periods have been revised to conform to the current presentation.

(5) Loan origination and funding fees is stated as a percentage of mortgage originations from the retail channel and excludes mortgage loans purchased from WMS Series LLC.

(6) Excludes the impact of a $4.3 million upward adjustment related to a change in accounting estimate that resulted from a change in the application of the valuation methodology used to value the Company's interest rate lock commitments. Including the impact of this cumulative effect adjustment, the secondary market gain margin and Composite Margin were 427 and 503 basis points, respectively, in the first quarter of 2013.

(7) Excludes the impact of a $1.3 million correction that was recorded in secondary market gains in the fourth quarter of 2012 for the cumulative effect of an error in prior years related to the fair value measurement of loans held for sale. Including the impact of this correction, the secondary market gain margin and Composite Margin were 462 and 533 basis points, respectively, in the fourth quarter of 2012.

27

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Single Family Mortgage Servicing Income

	Quarter ended
(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Servicing income, net:
Servicing fees and other	$	8,843		$	8,145		$	7,216		$	6,795		$	6,696
Changes in fair value of single family MSRs due to modeled amortization (1)	(3,637		)	(5,221		)	(6,569		)	(5,106		)	(6,280		)
	5,206			2,924			647			1,689			416
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2)	10,264			(2,900		)	14,725			3,579			2,489
Net gain (loss) from derivatives economically hedging MSR	(8,040		)	3,631			(13,505		)	(2,518		)	(2,618		)
	2,224			731			1,220			1,061			(129		)
Mortgage servicing income	$	7,430		$	3,655		$	1,867		$	2,750		$	287

(1) Represents changes due to collection/realization of expected cash flows and curtailments.

(2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.

Single Family Loans Serviced for Others

(in thousands)	Dec. 31, 2013		Sept. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012
Single family
U.S. government agency	$	11,467,853	$	10,950,086	$	10,063,558	$	9,352,404	$	8,508,458
Other	327,768		336,158		341,055		348,992		362,230
Total single family loans serviced for others	$	11,795,621	$	11,286,244	$	10,404,613	$	9,701,396	$	8,870,688

28

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Single Family Capitalized Mortgage Servicing Rights

	Quarter ended
(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012
Beginning balance	$	136,897		$	128,146		$	102,678		$	87,396		$	73,787
Additions and amortization:
Originations	9,602			16,862			17,306			16,806			17,397
Purchases	2			10			6			3			3
Changes due to modeled amortization (1)	(3,637		)	(5,221		)	(6,569		)	(5,106		)	(6,280		)
Net additions and amortization	5,967			11,651			10,743			11,703			11,120
Changes in fair value due to changes in model inputs and/or assumptions (2)	10,264			(2,900		)	14,725			3,579			2,489
Ending balance	$	153,128		$	136,897		$	128,146		$	102,678		$	87,396
Ratio of MSR carrying value to related loans serviced for others	1.30		%	1.21		%	1.23		%	1.03		%	0.99		%
MSR servicing fee multiple (3)	4.39			4.08			4.05			3.36			3.13
Weighted-average note rate (loans serviced for others)	4.08		%	4.13		%	4.14		%	4.24		%	4.34		%
Weighted-average servicing fee (loans serviced for others)	0.30		%	0.30		%	0.30		%	0.31		%	0.31		%

(1) Represents changes due to collection/realization of expected cash flows and curtailments.

(2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.

(3) Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others.

29

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

Tangible common shareholders' equity is calculated by deducting goodwill and intangible assets (excluding mortgage servicing rights) from shareholders' equity. Tangible common shareholders' equity is considered a non-GAAP financial measure and should be viewed in conjunction with shareholders' equity.  Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although we believe these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.

Tangible book value is calculated by dividing tangible common shareholders' equity by the number of common shares outstanding. The return on average tangible common shareholders' equity is calculated by dividing net earnings available to common shareholders (annualized) by average tangible common shareholders' equity.

	Quarter Ended															Year Ended
(dollars in thousands, except share data)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012			Dec. 31, 2013			Dec. 31, 2012
Shareholders' equity	$	265,926		$	268,208		$	268,321		$	270,405		$	263,762		$	265,926		$	263,762
Less: Goodwill and other intangibles	(13,073		)	(424		)	(424		)	(424		)	(424		)	(13,073		)	(424		)
Tangible common shareholders' equity	$	252,853		$	267,784		$	267,897		$	269,981		$	263,338		$	252,853		$	263,338
Book value per share	$	17.97		$	18.60		$	18.62		$	18.78		$	18.34		$	17.97		$	18.34
Impact of goodwill and other intangibles	(0.89		)	(0.03		)	(0.02		)	(0.03		)	(0.03		)	(0.89		)	(0.03		)
Tangible book value per share	$	17.08		$	18.57		$	18.60		$	18.75		$	18.31		$	17.08		$	18.31
Average shareholders' equity	$	268,328		$	271,286		$	280,783		$	274,355		$	262,163		$	249,081		$	211,329
Less: Average goodwill and other intangibles	(9,136		)	(424		)	(424		)	(424		)	(424		)	(2,602		)	(424		)
Average tangible shareholders' equity	$	259,192		$	270,862		$	280,359		$	273,931		$	261,739		$	246,479		$	210,905
Return on average common shareholders’ equity	(1.28		)%	2.45		%	17.19		%	15.95		%	32.80		%	9.56		%	38.86		%
Impact of goodwill and other intangibles	(0.05		)%	—			0.03		%	0.02		%	0.05		%	0.10		%	0.08		%
Return on average tangible common shareholders' equity	(1.33		)%	2.45		%	17.22		%	15.97		%	32.85		%	9.66		%	38.94		%

30

The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding acquisition-related expenses, diluted earnings per share, excluding acquisition-related expenses, and Commercial and Consumer Banking segment net income, excluding acquisition-related expenses. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance.

	Quarter Ended															Year Ended
(in thousands)	Dec. 31, 2013			Sept. 30, 2013			Jun. 30, 2013			Mar. 31, 2013			Dec. 31, 2012			Dec. 31, 2013			Dec. 31, 2012
Net (loss) income	$	(861	)	$	1,662		$	12,068		$	10,940		$	21,497		$	23,809		$	82,126
Add back: Acquisition-related expenses, net of tax	2,652			301			4			—			—			2,957			—
Net income, excluding acquisition-related expenses	$	1,791		$	1,963		$	12,072		$	10,940		$	21,497		$	26,766		$	82,126
Noninterest expense	$	58,868		$	58,116		$	56,712		$	55,799		$	55,966		$	229,495		$	183,591
Deduct: acquisition-related expenses	(4,080		)	(463		)	(6		)	—			—			(4,549		)	—
Noninterest expense, excluding acquisition-related expenses	$	54,788		$	57,653		$	56,706		$	55,799		$	55,966		$	224,946		$	183,591
Diluted earnings per common share	$	(0.06	)	$	0.11		$	0.82		$	0.74		$	1.46		$	1.61		$	5.98
Impact of acquisition-related expenses	0.18			0.02			—			—			—			0.20			—
Diluted earnings per common share, excluding acquisition-related expenses	$	0.12		$	0.13		$	0.82		$	0.74		$	1.46		$	1.81		$	5.98
Commercial and Consumer Banking Segment:
Net income	$	244		$	3,791		$	1,416		$	(2,814	)	$	(4,350	)	$	2,637		$	(14,494	)
Impact of acquisition-related expenses, net of tax	2,652			301			4			—			—			2,957			—
Net income, excluding acquisition-related expenses	$	2,896		$	4,092		$	1,420		$	(2,814	)	$	(4,350	)	$	5,594		$	(14,494	)

31