HomeStreet (HMST) 8-K HomeStreet, Inc. Reports Second Quarter 2015 Results

HomeStreet, Inc. Reports Second Quarter 2015 Results

Net Income of $12.4 Million, or $0.56 per Diluted Share

SEATTLE – July 24, 2015 – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank, today announced net income of $12.4 million, or $0.56 per diluted share, for the second quarter of 2015, compared to net income of $10.3 million, or $0.59 per diluted share, for the first quarter of 2015 and $9.4 million, or $0.63 per diluted share, for the second quarter of 2014. Core net income (a non-GAAP financial measure that adjusts net income to exclude merger-related expenses incurred in all quarters and a bargain purchase gain recognized in the first quarter of 2015) for the quarter was $14.5 million, or $0.65 per diluted share, compared to net income of $11.6 million, or $0.67per diluted share, for the first quarter of 2015 and $9.8 million, or $0.65 per diluted share, for the second quarter of 2014.

Simplicity Merger

On March 1, 2015, the Company completed its merger with Simplicity Bancorp, Inc. and Simplicity Bank ("Simplicity") located in Southern California. The merger represents a significant expansion of HomeStreet’s banking activities in California. Simplicity's results of operations are included in the consolidated results of operations from the date of the merger. The second quarter of 2015 represents the first full quarter of combined operations.

• Consolidated results:

▪ Net gain on mortgage loan origination and sale activities was $70.0 million in the second quarter of 2015 compared with $61.9 million in the first quarter of 2015 and $41.8 million in the second quarter of 2014. Single family interest rate lock commitments increased 56.7% from the same period a year ago.

▪ Net interest income was $38.2 million in the second quarter of 2015 compared with $30.7 million in the first quarter of 2015 and $23.1 million in the second quarter of 2014, resulting from a 22.8% and a 56.6% increase in average interest-earning assets, respectively. In the first quarter of 2015, $803.7 million of interest-earning assets were added from the Simplicity merger.

▪ Net interest margin was 3.63%compared to 3.60% in the first quarter of 2015 and 3.48% in the second quarter of 2014.

▪ Return on average shareholders' equity for the quarter was 10.86% and return on average assets was 1.06%. Excluding merger-related expenses (net of tax) in the first half of 2015 and a bargain purchase gain in the first quarter of 2015, return on average shareholders' equity for the current quarter was 12.8%and return on average assets was 1.3%, compared with 12.5% and 1.2%, respectively, in the first quarter of 2015.

▪ Average interest-earning assets of $4.27 billion increased $792.7 million, or 22.8% from March 31, 2015. Approximately 70% of the total increase in average interest-earning assets is the result of the Simplicity merger completed on March 1, 2015.

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▪ Non-interest bearing commercial and consumer transaction and savings deposits increased $82.2 million, or 26.9%, in the quarter.

• Segment results:

◦ Commercial and Consumer Banking

▪ Excluding after-tax merger-related expenses in the first half of 2015 and a bargain purchase gain we recognized with the Simplicity merger, the Commercial and Consumer Banking segment recorded net income of $5.0 millionfor the current quarter compared to net income of $1.2 millionfor the first quarter of 2015, mostly due to higher interest income on higher average balances of loans and a lower provision for credit losses.

▪ Loans held for investment balances of $2.90 billion increased $72.5 million, or 2.6%, from March 31, 2015.

▪ Total deposit balances of $3.32 billion decreased $21.6 million, or 0.6%, from March 31, 2015. However, total commercial and consumer transaction and savings deposits increased $63.9 million, or 2.9% and noninterest-bearing commercial and consumer transaction and savings deposits increased $82.2 million, or 26.9%, in the quarter.

▪ We opened a de novo retail deposit branch in the Seattle area during the quarter.

◦Mortgage Banking

▪ Mortgage Banking segment net income was $9.5 million for the quarter compared to net income of $10.3 million for the first quarter of 2015.

▪ Single family mortgage closed loan volume was $2.02 billion, up 25.9% from the first quarter of 2015 and up 83.8% from the second quarter of 2014.

▪ Single family mortgage interest rate lock commitments were $1.88 billion, down $18.3 million, or 1.0%, from the first quarter and up $681.3 million, or 56.7%, from the second quarter of 2014.

▪ The portfolio of single family loans serviced for others increased to $12.98 billion at June 30, 2015, up 9.0% from $11.91 billion at March 31, 2015.

▪ Again in the second quarter, HomeStreet was the number one originator by volume of purchase mortgages in the Pacific Northwest (Washington, Oregon and Idaho) and in the Puget Sound region, based on the combined originations of HomeStreet and loans originated through an affiliated business arrangement known as WMS Series LLC.

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“We are pleased with our results for second quarter,” said Mark K. Mason, Chairman and Chief Executive Officer. “Despite continued investments for growth in both of our business segments, including the addition of new offices and personnel, our core net income (excluding merger-related revenue and expenses) again produced strong returns on equity. In the second quarter, our return on average shareholder’s equity (excluding merger-related revenue and expenses) increased to 12.8% from 12.5% in first quarter. Both of our business segments contributed to our performance. The Company produced a record volume of closed single family mortgages of $2.02 billion in second quarter, primarily due to increased home purchase financing. Additionally, our Commercial and Consumer Banking segment results improved significantly, driven by a 22.8% increase in average interest-earning assets, with approximately 70.0% of the increase resulting from the Simplicity merger completed in March and the remaining from organic growth. Also in the second quarter, we realized substantially all of the anticipated operating cost savings from the Simplicity merger and going forward our expense run-rate will reflect these savings.”

Consolidated Results of Operations

Net Interest Income

Net interest income in the second quarter of 2015 was $38.2 million, up$7.5 million, or 24.4%, from the first quarter of 2015 and up$15.1 million, or 65.2%, from the second quarter of 2014 as a result of a 22.8% and 56.6% growth in average interest-earning assets, respectively. In the second quarter of 2015, our net interest margin, on a tax equivalent basis, was 3.63% compared to 3.60% in the first quarter of 2015 and 3.48% in the second quarter of 2014.

Total average interest-earning assets in the second quarter of 2015 increased $792.7 million, or 22.8%, from the first quarter of 2015 primarily due to a 20.7% increase in average balances of loans held for investment. Approximately 70% of the total increase in average interest-earning assets is the result of the Simplicity merger completed on March 1, 2015. Total average interest-earning assets and interest-bearing liabilities increased from the second quarter of 2014 primarily due to overall growth in the Company, both organically and through the Simplicity merger.

Noninterest Income

Noninterest income in the second quarter of 2015 was $73.0 million, down $2.4 million, or 3.2%, from $75.4 million in the first quarter of 2015 and up $19.3 million, or 36.0%, from $53.7 million in the second quarter of 2014. Included in other noninterest income in the first quarter of 2015 was a bargain purchase gain of $6.6 million related to the Simplicity merger. Excluding the bargain purchase gain, the increases in noninterest income compared with prior periods were primarily due to growth in net gain on mortgage origination and sale activities resulting from higher profit margins. Net gain on mortgage origination and sale activities increased $8.1 million from the prior quarter and $28.2 million from the second quarter of 2014.

Noninterest Expense

Noninterest expense for the second quarter of 2015 was $92.3 million compared with $89.5 million for the first quarter of 2015 and $63.0 million for the second quarter of 2014. Included in noninterest expense for these periods were merger-related expenses of $3.2 million for the second quarter of 2015, $12.2 million for the first quarter of 2015 and $606 thousand for the second quarter of 2014. Excluding merger-related expenses, noninterest expense for the second quarter of 2015 was $89.1 million, compared with $77.3 millionfor the first quarter of 2015 and $62.4 million for the second quarter of 2014. Theincrease of $11.8 million, or 15.3%, from the first quarter of 2015 was primarily due to increased salaries and related costs due to higher headcount and, in large part, due to a full quarter of Simplicity personnel expenses, coupled with higher commissions as a result of a 25.9% increase in single family mortgage closed loan volume. The increase of $26.8 million, or 42.9%, from the second quarter of 2014 was primarily due to increased salary and related costs and other expenses related to growth in the business and higher commissions as a result of a 83.8%

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increase in single family mortgage closed loan volume. As of June 30, 2015, we had 1,964 full-time equivalent employees, a 7.4% increase from 1,829 employees as of March 31, 2015, and a 27.0% increase from 1,546 employees as of June 30, 2014. During the 12-month period ending June 30, 2015, the Company added 9 home loan centers and 10 retail deposit branches to bring our total home loan centers to 59 and our total retail deposit branches to 41. In general, second quarter noninterest expense increases are in part due to a full quarter of Simplicity-related noninterest expenses.

Income Taxes

For the second quarter of 2015 the Company’s income tax expense was $6.0 million, representing an effective tax rate of 32.7% (inclusive of discrete items) compared to an effective tax rate of 24.4% in the first quarter of 2015. In the second quarter of 2014 the Company’s income tax expense was $4.5 million, representing an effective tax rate of 32.3% (inclusive of discrete items).

For the first six months of 2015, income tax expense was $9.3 million with an effective tax rate of 29.1% (inclusive of discrete items), compared to $5.0 million and a 30.0% effective tax rate (inclusive of discrete items) for the same period in 2014.

Our effective income tax rate for the six months ended June 30, 2015 differed from the Federal statutory tax rate of 35% due to the benefit of tax exempt interest income, the benefit of low income housing tax credit investments, the impact of state income taxes and the tax impacts of a bargain purchase gain on the acquisition of Simplicity.  The Company’s six months ended June 30, 2015 discrete amounts resulted in a net reduction of approximately 5.8% to the effective tax rate, largely due to the Simplicity acquisition. For tax purposes, the bargain purchase gain from the Simplicity acquisition is nontaxable and resulted in a discrete reduction of 7.3% to the effective tax rate as of June 30, 2015. Additionally, re-evaluation of the estimated 2015 state effective tax rate as a result of the Simplicity acquisition and other expected changes in the Company’s business resulted in a discrete increase of 3.5% to the effective tax rate as of June 30, 2015.

Business Segments

Commercial and Consumer Banking Segment

Commercial and Consumer Banking segment net income was $2.9 million in the second quarter of 2015 compared to a net loss of $14 thousand in the first quarter of 2015 primarily due to lower merger-related expenses, lower provision for credit losses and higher interest income on increased average balances of loans held for investment in the second quarter of 2015, partially offset by lower noninterest income. Excluding merger-related expenses (net of tax) in both quarters and a bargain purchase gain in the first quarter of 2015, net income was $5.0 million in the second quarter of 2015, compared to net income of $1.2 million in the first quarter of 2015. We recorded $500 thousand of provision for credit losses in the second quarter of 2015 compared to a provision of $3.0 million recorded in the first quarter of 2015. The provision for the first quarter of 2015 included the impact of extending the modeled loan loss emergence period for commercial loans and increasing the qualitative reserves for construction loans. Second quarter provision also benefited from the favorable impact of net loan loss recoveries during the quarter.

During the second quarter of 2015, Commercial and Consumer Banking segment net income, excluding merger-related expenses, increased $872 thousand, or 21.0%, from $4.1 million in the second quarter of 2014, primarily due to a $11.2 million increase in net interest income resulting from higher average balances of interest-earning assets due to the Simplicity merger and organic growth.

Loans Held for Investment

Loans held for investment, net, were $2.90 billion at June 30, 2015, an increase of $72.5 million, or 2.6%, from March 31, 2015 and an increase of $801.5 million, or 38.2%, from December 31, 2014. During the first quarter of 2015, we added $664.1 million of loans to the portfolio from the Simplicity merger. New loan

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commitments in the second quarter of 2015 totaled $313.1 million and originations totaled $203.9 million. During the quarter, we originated $84.9 million of consumer loans, $51.9 million of commercial real estate and multifamily loans, $57.7 million of construction and land development loans and $9.4 million of commercial business loans.

Asset Quality

Nonperforming assets were $32.7 million, or 0.67% of total assets at June 30, 2015, compared to $32.8 million, or 0.71% of total assets at March 31, 2015. Nonaccrual loans were $21.3 million, or 0.73% of total loans at June 30, 2015, compared to $21.2 million, or 0.74% of total loans at March 31, 2015. Other real estate owned ("OREO") balances were $11.4 million at June 30, 2015, a decrease of $161 thousand, or 1.4%, from $11.6 million at March 31, 2015. Delinquent loans of $65.8 million, or 2.24% of total loans at June 30, 2015, decreased from $67.7 million, or 2.37% of total loans at March 31, 2015. Excluding Federal Housing Administration ("FHA")-insured and Department of Veterans' Affairs ("VA")-guaranteed single family mortgage loans, delinquent loans were $26.0 million, or 0.92% of total non-FHA/VA loans at June 30, 2015, compared to $28.9 million, or 1.04% of total non-FHA/VA loans at March 31, 2015.

The allowance for loan losses was $25.8 million at June 30, 2015 compared to $24.9 million at March 31, 2015. The allowance for loan losses as a percentage of loans held for investment was 0.88% at June 30, 2015 compared to 0.87% at March 31, 2015. Excluding acquired loans, the allowance for loan losses as a percentage of total loans was 1.16% at June 30, 2015, compared to 1.19% at March 31, 2015. Net recoveries in the second quarter of 2015 totaled $320 thousand, compared to net recoveries of $104 thousand in the first quarter of 2015 and net charge-offs of $149 thousand in the second quarter of 2014.

Deposits

Deposit balances were $3.32 billion at June 30, 2015 compared to $3.34 billion at March 31, 2015 and $2.42 billion at June 30, 2014. During the first quarter of 2015, we added $651.2 million of deposits from the Simplicity merger. During the second quarter of 2015, transaction and savings deposits increased $63.9 million, or 2.9% from the prior quarter and non-interest bearing commercial and consumer transaction and savings deposits increased $82.2 million, or 26.9%.

Noninterest Expense

Commercial and Consumer Banking segment noninterest expense of $29.3 million decreased $6.4 million, or 17.9%, from the first quarter of 2015. Included in noninterest expense for the second and first quarter of 2015 were merger-related expenses of $3.2 million and $12.2 million, respectively. Excluding merger-related expenses, the additional increase in expense is due to the continued growth of our commercial real estate and commercial business lending units and the expansion of our branch banking network. During the first quarter of 2015, we launched HomeStreet Commercial Capital, a commercial real estate lending group based in Orange County, California providing permanent financing for a range of commercial real estate loans including multifamily, industrial, retail, office, mobile home parks and self-storage facilities. We also added a team specializing in U.S. Small Business Administration ("SBA") lending also located in Orange County, California. Additionally, we opened a de novo retail deposit branch in the Seattle area during the quarter.

Mortgage Banking Segment

Net income for the Mortgage Banking segment was $9.5 million in the second quarter of 2015, compared to net income of $10.3 million in the first quarter of 2015 and net income of $5.6 million in the second quarter of 2014. The $796 thousand decrease in income from the first quarter of 2015 was primarily due to lower risk management results due to higher current and future expected loan prepayments, and the $3.9 million increase in income from the second quarter of 2014 was primarily due to higher net gain on single family mortgage loan origination and sale activities due to higher interest rate lock commitments and composite margin, partially offset by higher commission expense resulting from increased closed loan volume in the quarter.

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Mortgage Origination for Sale

Single family mortgage interest rate lock commitments, net of estimated fallout, totaled $1.88 billion in the second quarter of 2015, a decrease of $18.3 million, or 1.0%, from $1.90 billion in the first quarter of 2015 and up$681.3 million, or 56.7%, from $1.20 billion in the second quarter of 2014. The increase from the second quarter of 2014 was primarily the result of increased purchase single family mortgage activity due to continued low mortgage interest rates and the continued expansion of our mortgage production staff, support staff and offices into new markets.

Single family closed loan volume designated for sale was $2.02 billion in the second quarter of 2015, up$415.8 million, or 25.9%, from $1.61 billion in the first quarter of 2015 and up$922.0 million, or 83.8%, from $1.10 billion in the second quarter of 2014. At June 30, 2015, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $1.65 billion, compared to $1.51 billion at March 31, 2015 and $953.4 million at June 30, 2014.

Net gain on single family mortgage loan origination and sale activities in the second quarter of 2015 was $67.5 million compared to $60.7 million in the first quarter of 2015 and $37.0 million in the second quarter of 2014.

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. In the second quarter, we recognized an additional $2.4 million of gain on mortgage loan origination and sale revenue related to the correction of an error in the mortgage loan pipeline valuation. Adjusting to eliminate the impact of this correction, the Composite Margin for the second quarter of 2015 was 347 basis points, up from 336 basis points in the first quarter of 2015 and 321 basis points in the second quarter of 2014.

Mortgage Servicing

Single family mortgage servicing income of $1.2 million in the second quarter of 2015 decreased $2.7 million, or 69.7%, from the first quarter of 2015 and decreased $8.4 million, or 87.8%, from the second quarter of 2014. The decrease compared to the first quarter of 2015 was the result of lower risk management results.

Single family mortgage servicing fees collected in the second quarter of 2015 increased $745 thousand, or 9.1%, from the first quarter of 2015 and decreased $173 thousand, or 1.9%, from the second quarter of 2014. The decrease from the second quarter of 2014 was primarily due to lower average balances in our loans serviced for others portfolio as a result of our June 30, 2014 sale of $2.96 billion of single family MSRs. The portfolio of single family loans serviced for others was $12.98 billion at June 30, 2015 compared to $11.91 billion at March 31, 2015.

Noninterest Expense

Mortgage Banking segment noninterest expense of $63.1 million increased $9.2 million, or 17.2%, from the first quarter of 2015. This increase was partially attributable to increased commission and incentive expense as closed loan volumes increased 25.9% from the first quarter of 2015 resulting from our growth and expansion into new markets.

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Capital

On January 1, 2015, the Bank and the Company became subject to Basel III capital standards. The Bank and the Company remain above current “well-capitalized” regulatory minimums. At June 30, 2015, regulatory capital ratios for the Bank and the Company were as follows:

At June 30, 2015*	Bank		Company		For Minimum  Capital Adequacy Purposes		To Be Categorized  As “Well Capitalized” Under Prompt Corrective Action Provisions
Tier 1 leverage capital (to average assets)	9.46	%	9.87	%	4.0	%	5.0	%
Common equity risk-based capital (to risk-weighted assets)	13.17	%	10.69	%	4.5	%	6.5	%
Tier 1 risk-based capital (to risk-weighted assets)	13.17	%	12.05	%	6.0	%	8.0	%
Total risk-based capital (to risk-weighted assets)	13.97	%	12.75	%	8.0	%	10.0	%

    *Regulatory capital ratios at June 30, 2015 are preliminary.

Conference Call

HomeStreet, Inc. will conduct a quarterly earnings conference call on Monday, July 27, 2015 at 1:00 p.m. EDT. The Company will discuss second quarter 2015 results and provide an update on recent activities. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at http://dpregister.com/10067115 or may join the call by dialing 1-877-508-9589 (1-855-669-9657 in Canada) shortly before 1:00 p.m. EDT. A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10067115.

The information to be discussed in the conference call will be available on the company's web site at 9:00 a.m. EDT on Monday, July 27, 2015.

About HomeStreet, Inc.

HomeStreet, Inc. (NASDAQ:HMST) is a diversified financial services company headquartered in Seattle, Washington and is the holding company for HomeStreet Bank, a state-chartered, FDIC-insured savings bank.  HomeStreet offers consumer, commercial and private banking services and investment products in Washington, Oregon, California and Hawaii, property and casualty insurance products in Washington, Oregon, California and Arizona, and originates residential and commercial mortgages and construction loans for borrowers located in the Western United States and Hawaii.  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.

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.

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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, we face limitations and risks associated with our ability to expand our banking operations geographically and across market sectors, integrate our recent acquisitions, grow our franchise and capitalize on market opportunities, meet the growth targets that management has set for the Company, maintain our position in the industry and generate positive net income and cash flow. These limitations and risks include without limitation 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 increase capital requirements or otherwise constrain our ability to do business, our ability to maintain electronic and physical security of our customer data and our information systems, our ability to maintain compliance with applicable laws and regulations, our ability to attract and retain key personnel, our ability to make accurate estimates of the value of our non-cash assets and liabilities, 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 realize the benefits expected from our recently completed bank and branch acquisitions in the anticipated time frame (or at all), and integration of acquired operations may take longer or prove more expensive than anticipated. 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 recent and future legislative or regulatory actions or reform that affect our business or the banking or mortgage industries more generally. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. 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, 2014 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, 2014, as contained in the Company's Annual Report on Form 10-K for such fiscal year.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we have disclosed “core net income” to provide comparisons of first-quarter and year-to-date net income to the corresponding periods of fiscal 2014. We believe this information is useful to investors who are seeking to exclude the after-tax impact of merger-related expenses and a bargain purchase gain, both of which we recorded in connection with our merger with Simplicity Bancorp on March 1, 2015. We also have presented adjusted expenses, which eliminate costs incurred in connection with the merger. Similarly, we have provided information about our balance sheet items, including total loans, total deposits and total assets, adjusted in each case to eliminate merger-related impacts. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain merger-related revenues and expenses that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance, as well as comparisons to our competitors'

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operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are available to institutional investors and analysts to help them assess the strength of our business.

For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures," included at the end of this release.

Source: HomeStreet, Inc.

Contact:	Investor Relations & Media:
	HomeStreet, Inc.
	Mark K. Mason (206) 442-5380
	Mark.Mason@HomeStreet.com
	http://ir.homestreet.com

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HomeStreet, Inc. and Subsidiaries

Summary Financial Data

	Quarter Ended										Six Months Ended
(dollars in thousands, except share data)	Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014		Jun. 30, 2014		Jun. 30, 2015		Jun. 30, 2014
Income statement data (for the period ended):
Net interest income	$	38,230	$	30,734	$	27,502	$	25,308	$	23,147	$	68,964	$	45,859
Provision (reversal of provision) for credit losses	500		3,000		500		—		—		3,500		(1,500		)
Noninterest income	72,987		75,373		51,487		45,813		53,650		148,360		88,357
Noninterest expense	92,335		89,482		68,791		64,158		62,971		181,817		119,062
Merger-related expenses (included in noninterest expense)	3,208		12,165		889		722		606		15,373		1,444
Net income before taxes	18,382		13,625		9,698		6,963		13,826		32,007		16,654
Income tax expense	6,006		3,321		4,077		1,988		4,464		9,327		4,991
Net income	$	12,376	$	10,304	$	5,621	$	4,975	$	9,362	$	22,680	$	11,663
Basic earnings per common share	$	0.56	$	0.60	$	0.38	$	0.34	$	0.63	$	1.16	$	0.79
Diluted earnings per common share	$	0.56	$	0.59	$	0.38	$	0.33	$	0.63	$	1.14	$	0.78
Common shares outstanding	22,065,249		22,038,748		14,856,611		14,852,971		14,849,692		22,065,249		14,849,692
Weighted average common shares
Basic	22,028,539		17,158,303		14,811,699		14,805,780		14,800,853		19,593,421		14,792,638
Diluted	22,292,734		17,355,076		14,973,222		14,968,238		14,954,998		19,823,905		14,956,079
Dividends per share	$	—	$	—	$	—	$	—	$	—	$	—	$	0.11
Book value per share	$	20.29	$	19.94	$	20.34	$	19.83	$	19.41	$	20.29	$	19.41
Tangible book value per share (1)	$	19.35	$	18.97	$	19.39	$	18.86	$	18.42	$	19.35	$	18.42
Financial position (at period end):
Cash and cash equivalents	$	46,197	$	56,864	$	30,502	$	34,687	$	74,991	$	46,197	$	74,991
Investment securities	509,545		476,102		455,332		449,948		454,966		509,545		454,966
Loans held for sale	972,183		865,322		621,235		698,111		549,440		972,183		549,440
Loans held for investment, net	2,900,675		2,828,177		2,099,129		1,964,762		1,812,895		2,900,675		1,812,895
Mortgage servicing rights	153,237		121,722		123,324		124,593		117,991		153,237		117,991
Other real estate owned	11,428		11,589		9,448		10,478		11,083		11,428		11,083
Total assets	4,866,248		4,604,403		3,535,090		3,474,656		3,235,676		4,866,248		3,235,676
Deposits	3,322,653		3,344,223		2,445,430		2,425,458		2,417,712		3,322,653		2,417,712
FHLB advances	922,832		669,419		597,590		598,590		384,090		922,832		384,090
Federal funds purchased and securities sold under agreements to repurchase	—		9,450		50,000		14,225		14,681		—		14,681
Shareholders’ equity	447,726		439,395		302,238		294,568		288,249		447,726		288,249
Financial position (averages):
Investment securities	$	506,904	$	462,762	$	454,127	$	457,545	$	447,458	$	484,955	$	462,338
Loans held for investment	2,861,223		2,370,763		2,044,873		1,917,503		1,766,788		2,617,347		1,798,384
Total interest-earning assets	4,266,382		3,473,652		3,140,708		2,952,916		2,723,687		3,872,206		2,689,075
Total interest-bearing deposits	2,626,925		2,205,585		1,892,399		1,861,164		1,900,681		2,417,420		1,890,576
FHLB advances	783,801		515,958		606,753		442,409		350,271		650,620		337,125
Federal funds purchased and securities sold under agreements to repurchase	4,336		41,734		23,338		11,149		1,129		22,932		568
Total interest-bearing liabilities	3,476,919		2,825,134		2,584,347		2,376,579		2,313,937		3,152,829		2,291,049
Shareholders’ equity	455,721		370,008		305,068		295,229		284,365		413,102		278,513

10

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

	Quarter Ended																	Six Months Ended
(dollars in thousands, except share data)	Jun. 30, 2015				Mar. 31, 2015				Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014			Jun. 30, 2015				Jun. 30, 2014
Financial performance:
Return on average shareholders’ equity (2)	10.86		%		11.14		%		7.37		%	6.74		%	13.17		%	10.98		%		8.38		%
Return on average tangible shareholders' equity(1)	11.39		%		11.67		%		7.73		%	7.09		%	13.85		%	11.51		%		8.82		%
Return on average assets	1.06		%		1.08		%		0.65		%	0.61		%	1.22		%	1.07		%		0.77		%
Net interest margin (3)	3.63		%		3.60		%		3.53		%	3.50		%	3.48		%	3.62		%		3.49		%
Efficiency ratio (4)	83.02		%		84.33		%		87.09		%	90.21		%	82.00		%	83.66		%		88.71		%
Asset quality:
Allowance for credit losses	$	26,448			$	25,628			$	22,524		$	22,111		$	22,168		$	26,448			$	22,168
Allowance for loan losses/total loans(5)	0.88		%		0.87		%		1.04		%	1.10		%	1.19		%	0.88		%		1.19		%
Allowance for loan losses/nonaccrual loans	120.97		%		117.48		%		137.51		%	109.75		%	103.44		%	120.97		%		103.44		%
Total nonaccrual loans(6)(7)	$	21,308			$	21,209			$	16,014		$	19,906		$	21,197		$	21,308			21,197
Nonaccrual loans/total loans	0.73		%		0.74		%		0.75		%	1.00		%	1.16		%	0.73		%		1.16		%
Other real estate owned	$	11,428			$	11,589			$	9,448		$	10,478		$	11,083		$	11,428			$	11,083
Total nonperforming assets(7)	$	32,736			$	32,798			$	25,462		$	30,384		$	32,280		$	32,736			$	32,280
Nonperforming assets/total assets	0.67		%		0.71		%		0.72		%	0.87		%	1.00		%	0.67		%		1.00		%
Net (recoveries) charge-offs	$	(320	)		$	(104	)		$	87		$	57		$	149		$	(424	)		$	421
Regulatory capital ratios for the Bank:
Basel III - Tier 1 leverage capital (to average assets)	9.46		%	(8)	11.47		%	(9)	NA			NA			NA			9.46		%	(8)	NA
Basel III - Tier 1 common equity risk-based capital (to risk-weighted assets)	13.17		%	(8)	13.75		%		NA			NA			NA			13.17		%	(8)	NA
Basel III - Tier 1 risk-based capital (to risk-weighted assets)	13.17		%	(8)	13.75		%		NA			NA			NA			13.17		%	(8)	NA
Basel III - Total risk-based capital (to risk-weighted assets)	13.97		%	(8)	14.57		%		NA			NA			NA			13.97		%	(8)	NA
Basel I - Tier 1 leverage capital (to average assets)	NA				NA				9.38		%	9.63		%	10.17		%	NA				10.17		%
Basel I - Tier 1 risk-based capital (to risk-weighted assets)	NA				NA				13.10		%	13.03		%	13.84		%	NA				13.84		%
Basel I - Total risk-based capital (to risk-weighted assets)	NA				NA				14.03		%	13.95		%	14.84		%	NA				14.84		%
Regulatory capital ratios for the Company:
Basel III - Tier 1 leverage capital (to average assets)	9.87		%	(8)	11.95		%	(9)	NA			NA			NA			9.87		%	(8)	NA
Basel III - Tier 1 common equity risk-based capital (to risk-weighted assets)	10.69		%	(8)	11.12		%		NA			NA			NA			10.69		%	(8)	NA
Basel III - Tier 1 risk-based capital (to risk-weighted assets)	12.05		%	(8)	12.55		%		NA			NA			NA			12.05		%	(8)	NA
Basel III - Total risk-based capital (to risk-weighted assets)	12.75		%	(8)	13.26		%		NA			NA			NA			12.75		%	(8)	NA
Other data:
Full-time equivalent employees (ending)	1,964				1,829				1,611			1,598			1,546			1,964				1,546

(1) Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For additional information on these ratios and for corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures in this earnings release.

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

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

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

(5) Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses /total loans was 1.16%, 1.19%, 1.10%, 1.18% and 1.31% at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively.

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

(7) Includes $1.2 million, $1.4 million, $4.4 million, $6.3 million and $6.5 million of nonperforming loans at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively, which are guaranteed by the SBA.

(8) Regulatory capital ratios at June 30, 2015 are preliminary. On January 1, 2015, the Company and the Bank became subject to Basel III capital standards. Regulatory capital ratios under Basel I may not be comparative.

(9) March 31, 2015 Tier 1 leverage capital (to average assets) includes average assets from the Simplicity merger for one month. If the Simplicity merger had occurred on January 1, 2015, the Bank's Tier 1 leverage capital would have been 9.95% and the Company's Tier 1 leverage capital would have been 10.38%.

11

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Operations

	Three Months Ended June 30,						%		Six Months Ended June 30,						%
(in thousands, except share data)	2015			2014			Change		2015			2014			Change
Interest income:
Loans	$	38,944		$	23,419		66	%	$	70,591		$	46,102		53	%
Investment securities	3,278			2,664			23		5,672			5,634			1
Other	218			142			54		423			299			41
	42,440			26,225			62		76,686			52,035			47
Interest expense:
Deposits	3,005			2,356			28		5,587			4,716			18
Federal Home Loan Bank advances	906			444			104		1,518			857			77
Federal funds purchased and securities sold under agreements to repurchase	3			1			200		8			1			700
Long-term debt	272			265			3		537			580			(7	)
Other	24			12			100		72			22			227
	4,210			3,078			37		7,722			6,176			25
Net interest income	38,230			23,147			65		68,964			45,859			50
Provision (reversal of provision) for credit losses	500			—			NM		3,500			(1,500		)	NM
Net interest income after provision for credit losses	37,730			23,147			63		65,464			47,359			38
Noninterest income:
Net gain on mortgage loan origination and sale activities	69,974			41,794			67		131,861			67,304			96
Mortgage servicing income	1,831			10,184			(82	)	6,128			18,129			(66	)
Income from WMS Series LLC	484			246			97		1,048			53			NM
Gain (loss) on debt extinguishment	—			11			NM		—			(575		)	NM
Depositor and other retail banking fees	1,399			917			53		2,538			1,732			47
Insurance agency commissions	291			232			25		706			636			11
Gain (loss) on sale of investment securities available for sale	—			(20		)	(100	)	—			693			(100	)
Bargain purchase gain (adjustment)	(79		)	—			NM		6,549			—			NM
Other	(913		)	286			(419	)	(470		)	385			(222	)
	72,987			53,650			36		148,360			88,357			68
Noninterest expense:
Salaries and related costs	61,654			40,606			52		119,247			76,077			57
General and administrative	14,502			11,145			30		27,663			21,267			30
Legal	577			542			6		1,044			941			11
Consulting	813			603			35		6,378			1,554			310
Federal Deposit Insurance Corporation assessments	861			572			51		1,386			1,192			16
Occupancy	6,107			4,675			31		11,947			9,107			31
Information services	7,714			4,862			59		13,834			9,377			48
Net cost (income) from operation and sale of other real estate owned	107			(34		)	(415	)	318			(453		)	NM
	92,335			62,971			47		181,817			119,062			53
Income before income taxes	18,382			13,826			33		32,007			16,654			92
Income tax expense	6,006			4,464			35		9,327			4,991			87
NET INCOME	$	12,376		$	9,362		32		$	22,680		$	11,663		94
Basic income per share	$	0.56		$	0.63		(11	)	$	1.16		$	0.79		47
Diluted income per share	$	0.56		$	0.63		(11	)	$	1.14		$	0.78		46
Basic weighted average number of shares outstanding	22,028,539			14,800,853			49		19,593,421			14,792,638			32
Diluted weighted average number of shares outstanding	22,292,734			14,954,998			49		19,823,905			14,956,079			33

12

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Operation

	Quarter Ended
(in thousands, except share data)	Jun. 30, 2015			Mar. 31, 2015		Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Interest income:
Loans	$	38,944		$	31,647	$	28,242		$	25,763		$	23,419
Investment securities	3,278			2,394		2,366			2,565			2,664
Other	218			205		172			150			142
	42,440			34,246		30,780			28,478			26,225
Interest expense:
Deposits	3,005			2,582		2,351			2,364			2,356
Federal Home Loan Bank advances	906			612		614			509			444
Federal funds purchased and securities sold under agreements to repurchase	3			5		15			6			1
Long-term debt	272			265		269			271			265
Other	24			48		29			20			12
	4,210			3,512		3,278			3,170			3,078
Net interest income	38,230			30,734		27,502			25,308			23,147
Provision for credit losses	500			3,000		500			—			—
Net interest income after provision for credit losses	37,730			27,734		27,002			25,308			23,147
Noninterest income:
Net gain on mortgage loan origination and sale activities	69,974			61,887		39,176			37,642			41,794
Mortgage servicing income	1,831			4,297		9,808			6,155			10,184
Income (loss) from WMS Series LLC	484			564		170			(122		)	246
Gain on debt extinguishment	—			—		—			2			11
Depositor and other retail banking fees	1,399			1,139		896			944			917
Insurance agency commissions	291			415		261			256			232
Gain (loss) on sale of investment securities available for sale	—			—		1,185			480			(20		)
Bargain purchase gain (adjustment)	(79		)	6,628		—			—			—
Other	(913		)	443		(9		)	456			286
	72,987			75,373		51,487			45,813			53,650
Noninterest expense:
Salaries and related costs	61,654			57,593		44,706			42,604			40,606
General and administrative	14,502			13,161		11,240			10,326			11,145
Legal	577			467		500			630			542
Consulting	813			5,565		1,042			628			603
Federal Deposit Insurance Corporation assessments	861			525		442			682			572
Occupancy	6,107			5,840		4,556			4,935			4,675
Information services	7,714			6,120		6,455			4,220			4,862
Net cost (income) from operation and sale of other real estate owned	107			211		(150		)	133			(34		)
	92,335			89,482		68,791			64,158			62,971
Income before income tax expense	18,382			13,625		9,698			6,963			13,826
Income tax expense	6,006			3,321		4,077			1,988			4,464
NET INCOME	$	12,376		$	10,304	$	5,621		$	4,975		$	9,362
Basic income per share	$	0.56		$	0.60	$	0.38		$	0.34		$	0.63
Diluted income per share	$	0.56		$	0.59	$	0.38		$	0.33		$	0.63
Basic weighted average number of shares outstanding	22,028,539			17,158,303		14,811,699			14,805,780			14,800,853
Diluted weighted average number of shares outstanding	22,292,734			17,355,076		14,973,222			14,968,238			14,954,998

13

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(in thousands, except share data)	Jun. 30, 2015			Dec. 31, 2014		% Change
Assets:
Cash and cash equivalents (including interest-earning instruments of $33,787 and $10,271)	$	46,197		$	30,502	51	%
Investment securities (includes $482,832 and $427,326 carried at fair value)	509,545			455,332		12
Loans held for sale (includes $955,726 and $610,350 carried at fair value)	972,183			621,235		56
Loans held for investment (net of allowance for loan losses of $25,777 and $22,021; includes $38,224 and $0 carried at fair value)	2,900,675			2,099,129		38
Mortgage servicing rights (includes $140,588 and $112,439 carried at fair value)	153,237			123,324		24
Other real estate owned	11,428			9,448		21
Federal Home Loan Bank stock, at cost	40,742			33,915		20
Premises and equipment, net	58,111			45,251		28
Goodwill	11,945			11,945		—
Other assets	162,185			105,009		54
Total assets	$	4,866,248		$	3,535,090	38
Liabilities and shareholders’ equity:
Liabilities:
Deposits	3,322,653			$	2,445,430	36
Federal Home Loan Bank advances	922,832			597,590		54
Federal funds purchased and securities sold under agreements to repurchase	—			50,000		(100	)
Accounts payable and other liabilities	111,180			77,975		43
Long-term debt	61,857			61,857		—
Total liabilities	4,418,522			3,232,852		37
Commitments and contingencies
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 shares
Issued and outstanding, 22,065,249 shares and 14,856,611 shares	511			511		—
Additional paid-in capital	221,551			96,615		129
Retained earnings	226,246			203,566		11
Accumulated other comprehensive income	(582		)	1,546		(138	)
Total shareholders’ equity	447,726			302,238		48
Total liabilities and shareholders’ equity	$	4,866,248		$	3,535,090	38

14

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Financial Condition

(in thousands, except share data)	Jun. 30, 2015			Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014			Jun. 30, 2014
Assets:
Cash and cash equivalents	$	46,197		$	56,864	$	30,502	$	34,687		$	74,991
Investment securities	509,545			476,102		455,332		449,948			454,966
Loans held for sale	972,183			865,322		621,235		698,111			549,440
Loans held for investment, net	2,900,675			2,828,177		2,099,129		1,964,762			1,812,895
Mortgage servicing rights	153,237			121,722		123,324		124,593			117,991
Other real estate owned	11,428			11,589		9,448		10,478			11,083
Federal Home Loan Bank stock, at cost	40,742			34,996		33,915		34,271			34,618
Premises and equipment, net	58,111			49,808		45,251		44,476			43,896
Goodwill	11,945			11,945		11,945		11,945			11,945
Other assets	162,185			147,878		105,009		101,385			123,851
Total assets	$	4,866,248		$	4,604,403	$	3,535,090	$	3,474,656		$	3,235,676
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	3,322,653		$	3,344,223	$	2,445,430	$	2,425,458		$	2,417,712
Federal Home Loan Bank advances	922,832			669,419		597,590		598,590			384,090
Federal funds purchased and securities sold under agreements to repurchase	—			9,450		50,000		14,225			14,681
Accounts payable and other liabilities	111,180			80,059		77,975		79,958			69,087
Long-term debt	61,857			61,857		61,857		61,857			61,857
Total liabilities	4,418,522			4,165,008		3,232,852		3,180,088			2,947,427
Shareholders’ equity:
Preferred stock, no par value
Authorized 10,000 shares	—			—		—		—			—
Common stock, no par value
Authorized 160,000,000 shares	511			511		511		511			511
Additional paid-in capital	221,551			221,301		96,615		96,650			95,923
Retained earnings	226,246			213,870		203,566		197,945			192,972
Accumulated other comprehensive income (loss)	(582		)	3,713		1,546		(538		)	(1,157		)
Total shareholders’ equity	447,726			439,395		302,238		294,568			288,249
Total liabilities and shareholders’ equity	$	4,866,248		$	4,604,403	$	3,535,090	$	3,474,656		$	3,235,676

15

HomeStreet, Inc. and Subsidiaries

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

	Quarter Ended June 30,
	2015						2014
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: (1)
Cash and cash equivalents	$	36,295	$	17	0.19	%	$	31,545	$	14	0.18	%
Investment securities	506,904		3,922		3.10	%	447,458		3,264		2.93	%
Loans held for sale	861,960		7,952		3.69	%	477,896		4,649		3.90	%
Loans held for investment	2,861,223		31,036		4.34	%	1,766,788		18,792		4.27	%
Total interest-earning assets	4,266,382		42,927		4.03	%	2,723,687		26,719		3.93	%
Noninterest-earning assets (2)	403,591						338,642
Total assets	$	4,669,973					$	3,062,329
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	266,937	329		0.49	%	$	276,887	191		0.28	%
Savings accounts	311,188		277		0.36	%	166,127		218		0.53	%
Money market accounts	1,147,641		1,240		0.43	%	979,610		1,081		0.44	%
Certificate accounts	901,159		1,184		0.53	%	478,057		868		0.73	%
Total interest-bearing deposits	2,626,925		3,030		0.46	%	1,900,681		2,358		0.50	%
FHLB advances	783,801		906		0.46	%	350,271		444		0.36	%
Federal funds purchased and securities sold under agreements to repurchase	4,336		2		0.22	%	1,129		1		0.36	%
Long-term debt	61,857		272		1.76	%	61,856		266		1.72	%
Total interest-bearing liabilities	3,476,919		4,210		0.49	%	2,313,937		3,069		0.53	%
Noninterest-bearing liabilities	737,333						464,027
Total liabilities	4,214,252						2,777,964
Shareholders’ equity	455,721						284,365
Total liabilities and shareholders’ equity	$	4,669,973					$	3,062,329
Net interest income (3)			$	38,717					$	23,650
Net interest spread					3.54	%					3.40	%
Impact of noninterest-bearing sources					0.09	%					0.08	%
Net interest margin					3.63	%					3.48	%

(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 $487 thousand and $503 thousand for the quarters ended June 30, 2015 and June 30, 2014, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

16

HomeStreet, Inc. and Subsidiaries

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

	Six Months Ended June 30,
	2015						2014
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: (1)
Cash and cash equivalents	$	42,799	$	42	0.19	%	$	32,400	$	32	0.20	%
Investment securities	484,955		6,902		2.84	%	462,338		6,864		2.99	%
Loans held for sale	727,105		13,616		3.76	%	395,953		7,470		3.77	%
Loans held for investment	2,617,347		57,059		4.38	%	1,798,384		38,687		4.30	%
Total interest-earning assets	3,872,206		77,619		4.02	%	2,689,075		53,053		3.98	%
Noninterest-earning assets (2)	372,737						353,433
Total assets	$	4,244,943					$	3,042,508
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	221,843	509		0.45	%	$	261,401	356		0.27	%
Savings accounts	272,102		542		0.41	%	162,854		419		0.52	%
Money market accounts	1,106,334		2,375		0.43	%	952,770		2,101		0.44	%
Certificate accounts	817,141		2,212		0.55	%	513,551		1,842		0.72	%
Total interest-bearing deposits	2,417,420		5,638		0.47	%	1,890,576		4,718		0.50	%
FHLB advances	650,620		1,519		0.47	%	337,125		867		0.52	%
Federal funds purchased and securities sold under agreements to repurchase	22,932		28		0.24	%	568		1		0.36	%
Long-term debt	61,857		536		1.75	%	62,780		581		1.87	%
Total interest-bearing liabilities	3,152,829		7,721		0.49	%	2,291,049		6,167		0.54	%
Noninterest-bearing liabilities	679,012						472,946
Total liabilities	3,831,841						2,763,995
Shareholders’ equity	413,102						278,513
Total liabilities and shareholders’ equity	$	4,244,943					$	3,042,508
Net interest income (3)			$	69,898					$	46,886
Net interest spread					3.53	%					3.44	%
Impact of noninterest-bearing sources					0.09	%					0.05	%
Net interest margin					3.62	%					3.49	%

(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 $934 thousand and $1.0 million for the six months ended ended June 30, 2015 and June 30, 2014, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

17

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment

	Quarter ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Net interest income	$	30,645		$	25,107		$	22,187		$	20,163		$	19,403
Provision for credit losses	500			3,000			500			—			—
Noninterest income	3,624			10,081			5,434			3,660			6,614
Noninterest expense	29,280			35,666			21,155			18,930			20,434
Income (loss) before income taxes	4,489			(3,478		)	5,966			4,893			5,583
Income tax expense (benefit)	1,635			(3,464		)	2,621			1,359			1,830
Net income (loss)	$	2,854		$	(14	)	$	3,345		$	3,534		$	3,753
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain (1)	$	5,019		$	1,242		$	3,923		$	4,003		$	4,147
Efficiency ratio (2)	85.44		%	101.36		%	76.59		%	79.46		%	78.54		%
Full-time equivalent employees (ending)	757			768			608			605			599
Net gain on mortgage loan origination and sale activities:
Multifamily	2,314			939			2,704			930			693
Other	141			204			(16		)	(101		)	4,087
	$	2,455		$	1,143		$	2,688		$	829		$	4,780
Production volumes for sale to the secondary market:
Multifamily mortgage originations	$	79,789		$	24,428		$	57,135		$	60,699		$	23,105
Multifamily mortgage loans sold	72,459			26,173			99,285			20,409			15,902

(1) Commercial and Consumer Banking segment net income, excluding merger-related expenses, is a non-GAAP financial disclosure. The Company uses this non-GAAP financial measure 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.

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

Commercial Mortgage Servicing Income

	Quarter ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Servicing income, net:
Servicing fees and other	$	1,135		$	886		$	970		$	1,289		$	1,017
Amortization of multifamily MSRs	(476		)	(454		)	(429		)	(425		)	(434		)
Commercial mortgage servicing income	$	659		$	432		$	541		$	864		$	583

18

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Commercial Loans Serviced for Others

(in thousands)	Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014		Jun. 30, 2014
Commercial
Multifamily	$	840,051	$	773,092	$	752,640	$	703,197	$	704,997
Other	83,982		83,574		82,354		86,589		97,996
Total commercial loans serviced for others	$	924,033	$	856,666	$	834,994	$	789,786	$	802,993

Commercial Multifamily Capitalized Mortgage Servicing Rights

	Quarter ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Beginning balance	$	11,013		$	10,885		$	9,116		$	9,122		$	9,095
Originations	2,112			582			2,198			418			461
Amortization	(476		)	(454		)	(429		)	(424		)	(434		)
Ending balance	$	12,649		$	11,013		$	10,885		$	9,116		$	9,122
Ratio of MSR carrying value to related loans serviced for others	1.45		%	1.36		%	1.38		%	1.23		%	1.21		%
MSR servicing fee multiple (1)	3.29			3.16			3.20			2.87			2.83
Weighted-average note rate (loans serviced for others)	4.89		%	5.14		%	5.02		%	5.12		%	5.15		%
Weighted-average servicing fee (loans serviced for others)	0.44		%	0.43		%	0.43		%	0.43		%	0.43		%

(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.

19

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Investment Securities

(in thousands, except for duration data)	Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014		Jun. 30, 2014
Available for sale:
Mortgage-backed securities:
Residential	$	108,626	$	114,175	$	107,280	$	110,837	$	110,266
Commercial	13,352		13,667		13,671		13,571		13,674
Municipal bonds	137,250		122,434		122,334		123,041		125,813
Collateralized mortgage obligations:
Residential	80,612		58,476		43,166		54,887		56,767
Commercial	19,271		19,794		20,486		15,633		16,021
Corporate debt securities	82,698		79,769		79,400		72,114		72,420
U.S. Treasury	41,023		41,015		40,989		42,013		42,010
Total available for sale	$	482,832	$	449,330	$	427,326	$	432,096	$	436,971
Held to maturity	26,713		26,772		28,006		17,852		17,995
	$	509,545	$	476,102	$	455,332	$	449,948	$	454,966
Weighted average duration in years
Available for sale	4.6		4.4		4.6		5.0		4.5

Five Quarter Loans Held for Investment

(in thousands)	Jun. 30, 2015				Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Consumer loans
Single family	$	1,182,542		(1)	$	1,198,605		$	896,665		$	788,232		$	749,204
Home equity and other	216,635				205,200			135,598			138,276			136,181
	1,399,177				1,403,805			1,032,263			926,508			885,385
Commercial loans
Commercial real estate	547,571				535,546			523,464			530,335			476,411
Multifamily	366,187				352,193			55,088			62,498			72,327
Construction/land development	454,817				402,393			367,934			297,790			219,282
Commercial business	166,216				164,259			147,449			173,226			185,177
	1,534,791				1,454,391			1,093,935			1,063,849			953,197
	2,933,968				2,858,196			2,126,198			1,990,357			1,838,582
Net deferred loan fees, costs and discounts	(7,516		)		(5,103		)	(5,048		)	(3,748		)	(3,761		)
	2,926,452				2,853,093			2,121,150			1,986,609			1,834,821
Allowance for loan losses	(25,777		)		(24,916		)	(22,021		)	(21,847		)	(21,926		)
	$	2,900,675			$	2,828,177		$	2,099,129		$	1,964,762		$	1,812,895

(1) Includes $38.2 million of single family loans that are carried at fair value.

20

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)	Jun. 30, 2015				Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Beginning balance	$	25,628			$	22,524		$	22,111		$	22,168		$	22,317
Provision (reversal of provision) for credit losses	500				3,000			500			—			—
(Charge-offs), net of recoveries	320				104			(87		)	(57		)	(149		)
Ending balance	$	26,448			$	25,628		$	22,524		$	22,111		$	22,168
Components:
Allowance for loan losses	$	25,777			$	24,916		$	22,021		$	21,847		$	21,926
Allowance for unfunded commitments	671				712			503			264			242
Allowance for credit losses	$	26,448			$	25,628		$	22,524		$	22,111		$	22,168
Allowance as a % of loans held for investment(1)	0.88		%	(2)	0.87		%	1.04		%	1.10		%	1.19		%
Allowance as a % of nonaccrual loans	120.97		%		117.48		%	137.51		%	109.75		%	103.44		%

(1) Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses /total loans was 1.16%, 1.19%, 1.10%, 1.18% and 1.31% at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively.

(2) In this calculation, loans held for investment includes loans that are carried at fair value.

Nonperforming Assets (NPAs) roll-forward

	Quarter ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015				Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Beginning balance	$	32,798		$	25,462			$	30,384		$	32,280		$	34,912
Additions	5,919			10,793			(1)	1,754			3,414			4,533
Reductions:
Recoveries (charge-offs)	320			104				(87		)	(57		)	(149		)
OREO sales	(623		)	(1,375		)		(2,220		)	(1,183		)	(1,639		)
OREO writedowns and other adjustments	—			(90		)		—			(93		)	—
Principal paydown, payoff advances and other adjustments	(4,904		)	(864		)		(2,269		)	(948		)	(2,753		)
Transferred back to accrual status	(774		)	(1,232		)		(2,100		)	(3,029		)	(2,624		)
Total reductions	(5,981		)	(3,457		)		(6,676		)	(5,310		)	(7,165		)
Net additions (reductions)	(62		)	7,336				(4,922		)	(1,896		)	(2,632		)
Ending balance(2)	$	32,736		$	32,798			$	25,462		$	30,384		$	32,280

(1) Additions to NPAs included $7.4 million of acquired nonperforming assets during the quarter ended March 31, 2015.

(2) Includes $1.2 million, $1.4 million, $4.4 million, $6.3 million and $6.5 million of nonperforming loans at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively, which are guaranteed by the SBA.

21

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Nonperforming Assets by Loan Class

(in thousands)	Jun. 30, 2015			Mar. 31, 2015				Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Loans accounted for on a nonaccrual basis:
Consumer
Single family	$	10,259		$	14,047			$	8,368		$	8,350		$	6,988
Home equity and other	1,533			1,306				1,526			1,700			1,166
	11,792			15,353				9,894			10,050			8,154
Commercial
Commercial real estate	3,850			3,070				4,843			7,058			9,871
Multifamily	1,671			1,005				—			—			—
Construction/land development	—			172				—			—			—
Commercial business	3,995			1,609				1,277			2,798			3,172
	9,516			5,856				6,120			9,856			13,043
Total loans on nonaccrual	$	21,308		$	21,209		(2)	$	16,014		$	19,906		$	21,197
Nonaccrual loans as a % of total loans	0.73		%	0.74		%		0.75		%	1.00		%	1.16		%
Other real estate owned:
Consumer
Single family	$	1,257		$	1,223			$	1,613		$	2,818		$	3,205
Commercial
Commercial real estate	4,332			4,527				1,996			1,822			2,040
Multifamily	—			—				—			—			—
Construction/land development	5,839			5,839				5,839			5,838			5,838
Commercial business	—			—				—			—			—
	10,171			10,366				7,835			7,660			7,878
Total other real estate owned	$	11,428		$	11,589			$	9,448		$	10,478		$	11,083
Nonperforming assets:
Consumer
Single family	$	11,516		$	15,270			$	9,981		$	11,168		$	10,193
Home equity and other	1,533			1,306				1,526			1,700			1,166
	13,049			16,576				11,507			12,868			11,359
Commercial
Commercial real estate	8,182			7,597				6,839			8,880			11,911
Multifamily	1,671			1,005				—			—			—
Construction/land development	5,839			6,011				5,839			5,838			5,838
Commercial business	3,995			1,609				1,277			2,798			3,172
	19,687			16,222				13,955			17,516			20,921
Total nonperforming assets(1)	$	32,736		$	32,798			$	25,462		$	30,384		$	32,280
Nonperforming assets as a % of total assets	0.67		%	0.71		%		0.72		%	0.87		%	1.00		%

(1) Includes $1.2 million, $1.4 million, $4.4 million, $6.3 million and $6.5 million of nonperforming loans at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively, which are guaranteed by the SBA.

(2) Included in these balances are $7.4 million of acquired nonperforming loans at March 31, 2015.

22

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
June 30, 2015
Total loans held for investment	$	9,276		$	3,479		$	53,009			$	65,764			$	2,868,204		$	2,933,968
Less: FHA/VA loans(1)	5,764			2,287			31,700				39,751				52,899			92,650
Total loans, excluding FHA/VA loans	$	3,512		$	1,192		$	21,309			$	26,013			$	2,815,305		$	2,841,318
Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family	$	2,855		$	1,113		$	10,259			$	14,227			1,075,665			$	1,089,892
Home equity and other	658			80			1,533				2,271				214,364			216,635
	3,513			1,193			11,792				16,498				1,290,029			1,306,527
Commercial loans
Commercial real estate	—			—			3,850				3,850				543,721			547,571
Multifamily	—			—			1,671				1,671				364,516			366,187
Construction/land development	—			—			—				—				454,817			454,817
Commercial business	—			—			3,995				3,995				162,221			166,216
	—			—			9,516				9,516				1,525,275			1,534,791
	$	3,513		$	1,193		$	21,308		(2)	$	26,014		(2)	$	2,815,304		$	2,841,318
As a % of total loans, excluding FHA/VA loans	0.12		%	0.04		%	0.75		%		0.92		%		99.08		%	100.00		%
December 31, 2014
Total loans held for investment	$	8,814		$	3,797		$	51,001			$	63,612			$	2,062,586		$	2,126,198
Less: FHA/VA loans(1)	4,121			2,200			34,737				41,058				50,778			91,836
Total loans, excluding FHA/VA loans	$	4,693		$	1,597		$	16,264			$	22,554			$	2,011,808		$	2,034,362
Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family	$	3,711		$	252		$	8,368			$	12,331			$	792,498		$	804,829
Home equity and other	371			81			1,526				1,978				133,620			135,598
	4,082			333			9,894				14,309				926,118			940,427
Commercial loans
Commercial real estate	—			—			4,843				4,843				518,621			523,464
Multifamily	—			—			—				—				55,088			55,088
Construction/land development	—			1,261			—				1,261				366,673			367,934
Commercial business	611			3			1,527				2,141				145,308			147,449
	611			1,264			6,370				8,245				1,085,690			1,093,935
	$	4,693		$	1,597		$	16,264		(2)	$	22,554		(2)	$	2,011,808		$	2,034,362
As a % of total loans, excluding FHA/VA loans	0.23		%	0.08		%	0.80		%		1.11		%		98.89		%	100.00		%

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

(2) Includes $1.2 million and $4.4 million of nonperforming loans at June 30, 2015 and December 31, 2014, respectively, which are guaranteed by the SBA.

23

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status

(in thousands)	Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014		Jun. 30, 2014
Accrual
Consumer loans
Single family(1)	$	75,655	$	74,126	$	73,585	$	72,663	$	69,779
Home equity and other	1,937		2,102		2,430		2,501		2,394
	77,592		76,228		76,015		75,164		72,173
Commercial loans
Commercial real estate	19,287		19,516		21,703		23,964		21,401
Multifamily	3,041		3,059		3,077		3,101		3,125
Construction/land development	4,601		5,321		5,447		5,693		5,843
Commercial business	1,869		1,492		1,573		658		302
	28,798		29,388		31,800		33,416		30,671
	$	106,390	$	105,616	$	107,815	$	108,580	$	102,844
Nonaccrual
Consumer loans
Single family	$	1,419	$	1,443	$	2,482	$	1,379	$	1,461
Home equity and other	230		230		231		20		—
	1,649		1,673		2,713		1,399		1,461
Commercial loans
Commercial real estate	1,087		1,121		1,148		1,182		2,735
Multifamily	—		—		—		—		—
Construction/land development	—		—		—		—		—
Commercial business	205		228		249		9		9
	1,292		1,349		1,397		1,191		2,744
	$	2,941	$	3,022	$	4,110	$	2,590	$	4,205
Total
Consumer loans
Single family(1)	$	77,074	$	75,569	$	76,067	$	74,042	$	71,240
Home equity and other	2,167		2,332		2,661		2,521		2,394
	79,241		77,901		78,728		76,563		73,634
Commercial loans
Commercial real estate	20,374		20,637		22,851		25,146		24,136
Multifamily	3,041		3,059		3,077		3,101		3,125
Construction/land development	4,601		5,321		5,447		5,693		5,843
Commercial business	2,074		1,720		1,822		667		311
	30,090		30,737		33,197		34,607		33,415
	$	109,331	$	108,638	$	111,925	$	111,170	$	107,049

(1) Includes loan balances insured by the FHA or guaranteed by the VA of $28.4 million, $25.4 million, $26.8 million, $24.6 million and $19.0 million at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively.

24

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) - Re-Defaults

	Quarter ended
(in thousands)	Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014		Jun. 30, 2014
Recorded investment of re-defaults(1)
Consumer loans
Single family	$	220	$	1,498	$	—	$	282	$	425
Home equity and other	—		—		—		—		—
	220		1,498		—		282		425
Commercial loans	—		—		—		—		—
	$	220	$	1,498	$	—	$	282	$	425

(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.

25

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Deposits

(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Deposits by Product:
Noninterest-bearing accounts - checking and savings	$	387,899		$	305,738		$	240,679		$	271,669		$	235,844
Interest-bearing transaction and savings deposits:
NOW accounts	453,366			435,178			272,390			300,832			324,604
Statement savings accounts due on demand	300,214			307,731			200,638			184,656			166,851
Money market accounts due on demand	1,134,687			1,163,656			1,007,213			1,015,266			996,473
Total interest-bearing transaction and savings deposits	1,888,267			1,906,565			1,480,241			1,500,754			1,487,928
Total transaction and savings deposits	2,276,166			2,212,303			1,720,920			1,772,423			1,723,772
Certificates of deposit	753,327			751,333			494,526			367,124			457,529
Noninterest-bearing accounts - other	293,160			380,587			229,984			285,911			236,411
Total deposits	$	3,322,653		$	3,344,223		$	2,445,430		$	2,425,458		$	2,417,712
Percent of total deposits:
Noninterest-bearing accounts - checking and savings	11.7		%	9.1		%	9.8		%	11.2		%	9.8		%
Interest-bearing transaction and savings deposits:
NOW accounts	13.6			13.0			11.1			12.4			13.4
Statement savings accounts due on demand	9.0			9.2			8.2			7.6			6.9
Money market accounts due on demand	34.2			34.8			41.2			41.9			41.2
Total interest-bearing transaction and savings deposits	56.8			57.0			60.5			61.9			61.5
Total transaction and savings deposits	68.5			66.1			70.3			73.1			71.3
Certificates of deposit	22.7			22.5			20.2			15.1			18.9
Noninterest-bearing accounts - other	8.8			11.4			9.5			11.8			9.8
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

26

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment

	Quarter ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Net interest income	$	7,585		$	5,627		$	5,315		$	5,145		$	3,744
Noninterest income	69,363			65,292			46,053			42,153			47,036
Noninterest expense	63,055			53,816			47,636			45,228			42,537
Income before income taxes	13,893			17,103			3,732			2,070			8,243
Income tax expense	4,371			6,785			1,456			629			2,634
Net income	$	9,522		$	10,318		$	2,276		$	1,441		$	5,609
Efficiency ratio (1)	81.94		%	75.88		%	92.73		%	95.62		%	83.77		%
Full-time equivalent employees (ending)	1,207			1,061			1,003			993			947
Production volumes for sale to the secondary market:
Single family mortgage closed loan volume (2)(3)	$	2,022,656		$	1,606,893		$	1,330,735		$	1,294,895		$	1,100,704
Single family mortgage interest rate lock commitments(2)	1,882,955			1,901,238			1,171,598			1,167,677			1,201,665
Single family mortgage loans sold(2)	1,894,387			1,316,959			1,273,679			1,179,464			906,342

(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.

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

Mortgage Banking Net Gain on Sale to the Secondary Market

	Quarter ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014		Sept. 30, 2014		Jun. 30, 2014
Net gain on mortgage loan origination and sale activities:(1)
Single family:
Servicing value and secondary market gains(2)	$	61,884		$	56,289		$	29,405	$	29,866	$	30,233
Loan origination and funding fees	5,635			4,455			7,083		6,947		6,781
Total mortgage banking net gain on mortgage loan origination and sale activities(1)	$	67,519		$	60,744		$	36,488	$	36,813	$	37,014
Composite Margin (in basis points):
Servicing value and secondary market gains / interest rate lock commitments(3)	316			306			251		256		252
Loan origination and funding fees / retail mortgage originations(4)	31			30			59		60		69
Composite Margin	347		(5)	336		(5)	310		316		321

(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) Servicing value and secondary marketing gains have been aggregated and are stated as a percentage of interest rate lock commitments.

(4) 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. In the first quarter of 2015, the Company implemented a new pricing structure where origination fees are no longer charged at funding and instead included in the rate/price of the loan.

(5) In the second quarter, we recognized an additional $2.4 million of gain on mortgage loan origination and sale revenue related to the correction of an error in the mortgage loan pipeline valuation. The Composite Margin in the table above has been adjusted to eliminate the impact of this correction. 

27

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Servicing Income

	Quarter ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Servicing income, net:
Servicing fees and other	$	8,922		$	8,177		$	7,537		$	8,061		$	9,095
Changes in fair value of single family MSRs due to modeled amortization (1)	(9,012		)	(9,235		)	(6,823		)	(6,212		)	(7,109		)
	(90		)	(1,058		)	714			1,849			1,986
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2)	18,483			(7,311		)	(7,793		)	899			(3,326		)	(3)
Net gain (loss) from derivatives economically hedging MSR	(17,221		)	12,234			16,346			2,543			10,941
	1,262			4,923			8,553			3,442			7,615
Mortgage Banking servicing income	$	1,172		$	3,865		$	9,267		$	5,291		$	9,601

(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) Includes pre-tax income of $4.7 million, net of transaction costs, resulting from the sale of single family MSRs during the quarter ended June 30, 2014.

Single Family Loans Serviced for Others

(in thousands)	Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014		Jun. 30, 2014
Single family
U.S. government and agency	$	12,361,841	$	11,275,491	$	10,630,864	$	10,007,872	$	9,308,096
Other	618,204		634,763		585,344		585,393		586,978
Total single family loans serviced for others	$	12,980,045	$	11,910,254	$	11,216,208	$	10,593,265	$	9,895,074

28

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Single Family Capitalized Mortgage Servicing Rights

	Quarter ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014
Beginning balance	$	110,709		$	112,439		$	115,477		$	108,869		$	149,646
Additions and amortization:
Originations	20,405			14,813			11,567			11,944			11,827
Purchases	3			3			11			3			3
Sale of servicing rights	—			—			—			—			(43,248		)
Changes due to modeled amortization (1)	(9,012		)	(9,235		)	(6,823		)	(6,212		)	(7,109		)
Net additions and amortization	11,396			5,581			4,755			5,735			(38,527		)
Changes in fair value due to changes in model inputs and/or assumptions (2)	18,483			(7,311		)	(7,793		)	873			(2,250		)
Ending balance	$	140,588		$	110,709		$	112,439		$	115,477		$	108,869
Ratio of MSR carrying value to related loans serviced for others	1.08		%	0.93		%	1.00		%	1.09		%	1.10		%
MSR servicing fee multiple (3)	3.72			3.17			3.42			3.68			3.67
Weighted-average note rate (loans serviced for others)	4.10		%	4.14		%	4.18		%	4.19		%	4.19		%
Weighted-average servicing fee (loans serviced for others)	0.29		%	0.29		%	0.29		%	0.30		%	0.30		%

(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. Includes fair value adjustment of $5.7 million related to the sale of single family MSRs during the quarter ended June 30, 2014.

(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															Six Months Ended
(dollars in thousands, except share data)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014			Jun. 30, 2015			Jun. 30, 2014
Shareholders' equity	$	447,726		$	439,395		$	302,238		$	294,568		$	288,249		$	447,726		$	288,249
Less: Goodwill and other intangibles	(20,778		)	(21,324		)	(14,211		)	(14,444		)	(14,690		)	(20,778		)	(14,690		)
Tangible shareholders' equity	$	426,948		$	418,071		$	288,027		$	280,124		$	273,559		$	426,948		$	273,559
Book value per share	$	20.29		$	19.94		$	20.34		$	19.83		$	19.41		$	20.29		$	19.41
Impact of goodwill and other intangibles	(0.94		)	(0.97		)	(0.95		)	(0.97		)	(0.99		)	(0.94		)	(0.99		)
Tangible book value per share	$	19.35		$	18.97		$	19.39		$	18.86		$	18.42		$	19.35		$	18.42
Average shareholders' equity	$	455,721		$	370,008		$	305,068		$	295,229		$	284,365		$	413,102		$	278,513
Less: Average goodwill and other intangibles	(21,135		)	(16,698		)	(14,363		)	(14,604		)	(14,049		)	(18,929		)	(14,132		)
Average tangible shareholders' equity	$	434,586		$	353,310		$	290,705		$	280,625		$	270,316		$	394,173		$	264,381
Return on average shareholders’ equity	10.86		%	11.14		%	7.37		%	6.74		%	13.17		%	10.98		%	8.38		%
Impact of goodwill and other intangibles	0.53		%	0.53		%	0.36		%	0.35		%	0.68		%	0.53		%	0.44		%
Return on average tangible shareholders' equity	11.39		%	11.67		%	7.73		%	7.09		%	13.85		%	11.51		%	8.82		%
Return on average shareholders' equity	10.86		%	11.14		%	7.37		%	6.74		%	13.17		%	10.98		%	8.38		%
Impact of merger-related expenses (net of tax) and bargain purchase gain	1.90		%	1.36		%	0.76		%	0.64		%	0.55		%	1.65		%	0.67		%
Return on average shareholders' equity, excluding merger-related expenses (net of tax) and bargain purchase gain	12.76		%	12.50		%	8.13		%	7.38		%	13.72		%	12.63		%	9.05		%
Return on average assets	1.06		%	1.08		%	0.65		%	0.61		%	1.22		%	1.07		%	0.77		%
Impact of merger-related expenses (net of tax) and bargain purchase gain	0.19		%	0.13		%	0.07		%	0.05		%	0.05		%	0.16		%	0.06		%
Return on average assets, excluding merger-related expenses (net of tax) and bargain purchase gain	1.25		%	1.21		%	0.72		%	0.66		%	1.27		%	1.23		%	0.83		%

30

The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding merger-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															Six Months Ended
(in thousands)	Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Jun. 30, 2014			Jun. 30, 2015			Jun. 30, 2014
Net income	$	12,376		$	10,304		$	5,621		$	4,975		$	9,362		$	22,680		$	11,663
Impact of merger-related expenses (net of tax) and bargain purchase gain	2,165			1,256			578			469			394			3,421			939
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain	$	14,541		$	11,560		$	6,199		$	5,444		$	9,756		$	26,101		$	12,602
Noninterest expense	$	92,335		$	89,482		$	68,791		$	64,158		$	62,971		$	181,817		$	119,062
Deduct: merger-related expenses	(3,208		)	(12,165		)	(889		)	(722		)	(606		)	(15,373		)	(1,444		)
Noninterest expense, excluding merger-related expenses	$	89,127		$	77,317		$	67,902		$	63,436		$	62,365		$	166,444		$	117,618
Diluted earnings per common share	$	0.56		$	0.59		$	0.38		$	0.33		$	0.63		$	1.14		$	0.78
Impact of merger-related expenses (net of tax) and bargain purchase gain	0.09			0.08			0.03			0.03			0.02			0.18			0.06
Diluted earnings per common share, excluding merger-related expenses (net of tax) and bargain purchase gain	$	0.65		$	0.67		$	0.41		$	0.36		$	0.65		$	1.32		$	0.84
Commercial and Consumer Banking Segment:
Net income (loss)	$	2,854		$	(14	)	$	3,345		$	3,534		$	3,753		$	2,840		$	7,869
Impact of merger-related expenses (net of tax) and bargain purchase gain	2,165			1,256			578			469			394			3,421			939
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain	$	5,019		$	1,242		$	3,923		$	4,003		$	4,147		$	6,261		$	8,808

31