HomeStreet (HMST) 8-K HomeStreet, Inc. Reports Fourth Quarter and Year-End 2015 Results

HomeStreet, Inc. Reports Fourth Quarter and Year-End 2015 Results

Fourth Quarter 2015 Net Income of $8.7 Million, or $0.39 per Diluted Share

2015 Net Income of $41.3 Million, or $1.96 per Diluted Share

SEATTLE – January 26, 2016 – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank, today announced net income of $8.7 million, or $0.39 per diluted share, for the fourth quarter of 2015, compared to net income of $10.0 million, or $0.45 per diluted share, for the third quarter of 2015 and $5.6 million, or $0.38 per diluted share, for the fourth quarter of 2014. Core net income (a non-GAAP financial measure that adjusts net income to exclude merger-related items) for the quarter was $8.8 million, or $0.39 per diluted share, compared to core net income of $9.4 million, or $0.42per diluted share, for the third quarter of 2015 and $6.2 million, or $0.41 per diluted share, for the fourth quarter of 2014.

Key highlights:

▪ Total assets of $4.89 billion grew $1.36 billion, or 38.5%, from $3.54 billion at December 31, 2014. The Simplicity acquisition comprised $851 million of this growth.

▪ Core net income for 2015 was $44.3 million, an increase of $20.1 million, or 82.9%, compared to $24.2 million of core net income for 2014.

▪ Return on average tangible shareholders' equity was 9.78% for 2015 compared to 8.09% for 2014.

▪ Added 11 retail deposit branches during 2015, seven from the Simplicity acquisition, and also added 12 lending centers during the year.

▪ Commercial and Consumer Banking segment grew loans held for investment by $179.8 million, or 6.0%, from September 30, 2015 and total net revenue by $3.1 million, or 8.2%, over the same period.

▪ Completed the purchase of a retail deposit branch, $25.7 million of deposits and certain related assets in Dayton, Washington during the fourth quarter of 2015.

▪ The acquisition of Orange County Business Bank ("OCBB"), a California banking corporation in Irvine, California is anticipated to be completed on February 1, 2016.

Consolidated results:

▪ Net interest income was $39.7 million in the fourth quarter of 2015 compared with $39.6 million in the third quarter of 2015 and $27.5 million in the fourth quarter of 2014.

▪ Net interest margin was 3.61%compared with 3.67% in the third quarter of 2015 and 3.53% in the fourth quarter of 2014.

▪ Average interest-earning assets of $4.45 billion increased $57.8 million, or 1.3% from $4.39 billion in third quarter of 2015 and increased $1.31 billion or 41.8% from $3.14 billion in fourth quarter of 2014.

▪ Net gain on mortgage loan origination and sale activities was $46.6 million in the fourth quarter of 2015 compared with $57.9 million in the third quarter of 2015 and $39.2 million in the fourth quarter of 2014.

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▪ Return on average tangible shareholders' equity was 7.71% for the fourth quarter of 2015 compared to 9.06% for the third quarter of 2015.

Segment results:

◦ Commercial and Consumer Banking

▪ Excluding after-tax merger-related items, the Commercial and Consumer Banking segment recorded net income of $8.5 millionfor the current quarter compared with net income of $6.3 millionfor the third quarter of 2015 and $3.9 million for the fourth quarter of 2014.

▪ Loans held for investment of $3.19 billion increased $179.8 million, or 6.0%, from September 30, 2015.

▪ Nonperforming assets were $24.7 million, or 0.50% of total assets at December 31, 2015, compared to $27.7 million, or 0.56% of total assets at September 30, 2015.

▪ Delinquent loans of $66.2 million, or 2.05% of total loans at December 31, 2015, decreased from $72.9 million, or 2.40% of total loans at September 30, 2015.

▪ Excluding FHA-insured and VA-guaranteed single family mortgage loans, delinquent loans were $21.6 million, or 0.69% of total non-FHA/VA loans at December 31, 2015, compared to $30.6 million, or 1.04% of total non-FHA/VA loans at September 30, 2015.

◦Mortgage Banking

▪ Mortgage Banking segment net income was $301 thousand for the fourth quarter compared with net income of $3.2 million for the third quarter of 2015 and net income of $2.3 million for the fourth quarter of 2014.

▪ Single family mortgage closed loan volume was $1.65 billion, down 14.8% from the third quarter of 2015 and up 23.9% from the fourth quarter of 2014.

▪ Single family mortgage interest rate lock commitments were $1.34 billion, down 25.8%, from the third quarter of 2015 and up 14.4%, from the fourth quarter of 2014.

▪ The portfolio of single family loans serviced for others increased to $15.35 billion at December 31, 2015, up 7.5% from September 30, 2015 and up 36.8% from December 31, 2014.

▪ In the second half of 2015, HomeStreet remained the number one originator by volume of purchase mortgages 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.

“During the past year, we made substantial progress on our strategy to grow and diversify earnings. We completed the acquisition of Simplicity Bank, which added seven retail branches in the desirable Los Angeles metro market,” said HomeStreet Chairman and Chief Executive Officer Mark K. Mason. “Entry into the Los Angeles commercial and consumer banking market provides access to the largest population andsecond largest urban area in the nation. In addition, in the Pacific Northwest we opened three de novo retail branch locations and acquired one bank branch, bringing our retail branch total to 44. Stand-alone lending centers increased by eleven to 70 locations. These include locations in the Bay Area of San Francisco, California, Phoenix, Arizona, Salt Lake City, Utah, and Denver, Colorado. Loan portfolio growth was strong throughout the year, with total loans held for investment increasing 52% over the prior year, which includes 21% organic growth. Net interest income also improved due to strong growth of nearly 45% in average interest-earning assets and a higher net interest margin. Excluding the impact of a bargain purchase gain, non-interest income

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grew by 47% driven primarily by continued growth in our mortgage origination volume but also by growth in fee income from our growing deposit portfolio.”

“We are on track to close our planned acquisition of Orange County Business Bank and we are excited about the potential this acquisition offers us. We expect to receive all regulatory approvals, and the shareholder meeting of Orange County Business Bank is scheduled for January 29, 2016.  Orange County Business Bank is a business focused bank that serves businesses throughout the region and HomeStreet will be able to bring substantially more products and services to better serve their customers, including higher loan limits and a broader menu of commercial and consumer loan, deposit, investment and insurance services.”

Consolidated Results of Operations

Net Interest Income

Net interest income in the fourth quarter of 2015 was $39.7 million, up$106 thousand, or 0.3%, from the third quarter of 2015 and up$12.2 million, or 44.5%, from the fourth quarter of 2014 primarily as a result of growth in average interest-earning assets. In the fourth quarter of 2015, our net interest margin, on a tax equivalent basis, was 3.61% compared to 3.67% in the third quarter of 2015 and 3.53% in the fourth quarter of 2014. The decrease in our net interest margin was primarily due to a decrease in the amount of noninterest-bearing liabilities.

Total average interest-earning assets in the fourth quarter of 2015 increased $57.8 million, or 1.3%, from the third quarter of 2015 primarily due to a 4.9% increase in average balances of loans held for investment. Total average interest-earning assets increased 41.8% from the fourth quarter of 2014 primarily due to overall growth in the Company, both organically and through the Simplicity merger, which was completed during the first quarter of 2015.

Noninterest Income

Noninterest income in the fourth quarter of 2015 was $65.4 million, down $2.1 million, or 3.1%, from $67.5 million in the third quarter of 2015 and up $13.9 million, or 27.0%, from $51.5 million in the fourth quarter of 2014. The decrease in noninterest income compared to the prior quarter was primarily due to an $11.2 million decrease in net gain on mortgage origination and sale activities, partially offset by an $8.8 million increase in mortgage servicing income. The increase in noninterest income compared to the fourth quarter of 2014 was due to a $7.5 million increase in net gain on mortgage origination and sale activities.

Noninterest Expense

Noninterest expense for the fourth quarter of 2015 was $92.7 million compared with $92.0 million for the third quarter of 2015 and $68.8 million for the fourth quarter of 2014. Included in noninterest expense for these periods were merger-related expenses of $754 thousand for the fourth quarter of 2015, $437 thousand for the third quarter of 2015 and $889 thousand for the fourth quarter of 2014. Excluding merger-related expenses, noninterest expense for the fourth quarter of 2015 was $92.0 million compared with $91.6 millionfor the third quarter of 2015 and $67.9 million for the fourth quarter of 2014. The increase of $24.1 million, or 35.4%, from the fourth 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 23.9% increase in single family mortgage closed loan volume.

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As of December 31, 2015, we had 2,139 full-time equivalent employees, a 1.9% increase from 2,100 employees as of September 30, 2015, and a 32.8% increase from 1,611 employees as of December 31, 2014. During the year, we added nine home loan centers, three commercial lending centers and 11 retail deposit branches to bring our total home loan centers to 64, commercial loan centers to six and our total retail deposit branches to 44.

Income Taxes

For the fourth quarter of 2015, we recorded income tax provision of $1.8 million, compared to a provision of $4.4 million for the third quarter of 2015, and $4.1 million for the fourth quarter of 2014.

For the year ended December 31, 2015, income tax provision was $15.6 million with an effective tax rate of 27.4% (inclusive of discrete items), compared to $11.1 million and a 33.2% effective tax rate (inclusive of discrete items) for 2014.

Our effective income tax rate for the year ended December 31, 2015 differs from the Federal statutory tax rate of 35% primarily due to the impact of state income taxes, the benefit of tax exempt interest income, the benefit of low income housing tax credit investments, the tax impacts related to the Simplicity transaction, the impacts of our 2014 tax return true-up adjustments, and a tax benefit from a prior valuation allowance adjustment.

Our discrete items for the year ended December 31, 2015 resulted in a net reduction of approximately 7.0% to the effective tax rate, largely due to the Simplicity acquisition and the reversal of a prior valuation allowance adjustment. For tax purposes, the bargain purchase gains from the Simplicity and Dayton acquisitions are nontaxable and represent a discrete reduction of 4.8% to the effective tax rate.  Additionally, the reversal of a valuation allowance adjustment previously booked to the other comprehensive income account resulted in a tax benefit equivalent to a discrete reduction of 1.9% to the effective tax rate.

Business Segments

Commercial and Consumer Banking Segment

During the fourth quarter of 2015, we completed the purchase of a retail deposit branch and certain related assets in Dayton, Washington. This acquisition increased our network of branches in Eastern Washington to a total of five retail deposit branches and resulted in a bargain purchase gain of $381 thousand. Additionally, we expect to complete the acquisition of OCBB during the first quarter of 2016. Management believes that this acquisition will complement our recent expansion of banking activities into California, which in 2015 included the Simplicity acquisition as well as the launch of two specialized lending groups based in California, a real estate lending group and an SBA lending group.

Commercial and Consumer Banking segment net income was $8.4 million in the fourth quarter of 2015 compared with $6.8 million in the third quarter of 2015 and $3.3 million in the fourth quarter of 2014. Excluding after-tax merger-related items, net income was $8.5 million in the fourth quarter of 2015, compared to net income of $6.3 million in the third quarter of 2015 primarily due to higher net interest income from the growth of our loans held for investment as well as higher gain on sale from the first sale of loans by HomeStreet Commercial Capital.

During the fourth quarter of 2015, Commercial and Consumer Banking segment net income, excluding after-tax merger-related items, increased $4.6 million, or 116.3%, from $3.9 million in the fourth quarter of 2014, primarily due to a $10.6 million increase in net interest income resulting from higher average balances of interest-earning assets, partially offset by a $8.4 million increase in noninterest expense. These increases were the combined result of the Simplicity merger and organic growth.

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We recorded a $1.9 million provision for credit losses in the fourth quarter of 2015 compared to a provision of $700 thousand in the third quarter of 2015 and $500 thousand in the fourth quarter of 2014. The increases in the provision from the prior periods primarily reflects the growth in loans held for investment.

Loans Held for Investment

Loans held for investment, net, were $3.19 billion at December 31, 2015, an increase of $179.8 million, or 6.0%, from September 30, 2015 and an increase of $1.09 billion, or 52.1%, from December 31, 2014. A portion of the growth from 2014 is related to $664.1 million of loans added to the portfolio from the Simplicity merger during the first quarter of 2015. New loan commitments in the fourth quarter of 2015 totaled $574.9 million and originations totaled $361.7 million. During the quarter, we added loan commitments that included $153.7 million of consumer loans, $136.4 million of commercial real estate and multifamily loans, $266.3 million of construction and land development loans and $18.6 million of commercial business loans.

Asset Quality

Reflecting improved asset quality, nonperforming assets and nonaccrual loans decreased $3.0 million and $2.3 million, respectively, at December 31, 2015 compared to September 30, 2015. Delinquent loans of $66.2 million, or 2.05% of total loans at December 31, 2015, decreased from $72.9 million, or 2.40% of total loans at September 30, 2015. Excluding Federal Housing Administration ("FHA")-insured and Department of Veterans' Affairs ("VA")-guaranteed single family mortgage loans, delinquent loans were $21.6 million, or 0.69% of total non-FHA/VA loans at December 31, 2015, compared to $30.6 million, or 1.04% of total non-FHA/VA loans at September 30, 2015.

The allowance for loan losses was $29.3 million at December 31, 2015 compared with $26.9 million at September 30, 2015 and $22.0 million at December 31, 2014. The allowance for loan losses as a percentage of loans held for investment was 0.91% at December 31, 2015 compared with 0.89% at September 30, 2015 and 1.04% at December 31, 2014. Excluding acquired loans, which were recorded at a net discount at the time of acquisition, the allowance for loan losses as a percentage of total loans was 1.12% at December 31, 2015, compared with 1.14% at September 30, 2015 and 1.10% at December 31, 2014. Net recoveries in the fourth quarter of 2015 totaled $872 thousand, compared to net recoveries of $739 thousand in the third quarter of 2015 and net charge-offs of $87 thousand in the fourth quarter of 2014.

Deposits

Deposit balances were $3.23 billion at December 31, 2015 compared to $3.31 billion at September 30, 2015 and $2.45 billion at December 31, 2014. Transaction and savings deposits decreased $35.6 million, or 1.6%, from September 30, 2015, while certificates of deposit increased $13.7 million, or 1.9%, during the same period. The change from the prior year includes $651.2 million of deposits added from the Simplicity merger during the first quarter of 2015.

Noninterest Expense

Commercial and Consumer Banking segment noninterest expense was $29.5 million for the fourth quarter of 2015 compared with $28.1 million for the third quarter of 2015 and $21.2 million for the fourth quarter of 2014. Included in noninterest expense for these periods were merger-related expenses of $754 thousand, $437 thousand and $889 thousand, respectively. Excluding the merger-related expenses in all periods, noninterest expense increased primarily 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. We also added a team specializing in U.S. Small Business Administration ("SBA") lending also located in Orange County, California. We acquired seven retail deposit branches in California during the first quarter of 2015 and one retail deposit branch in Eastern Washington during the fourth quarter of 2015. During 2015, we opened three de novo retail deposit branches in the Seattle area.

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Mortgage Banking Segment

Net income for the Mortgage Banking segment was $301 thousand in the fourth quarter of 2015, compared with $3.2 million in the third quarter of 2015 and $2.3 million in the fourth quarter of 2014. The $2.9 million decrease in net income from the third quarter of 2015 was primarily due to lower net gain on single family mortgage loan origination and sale activities resulting from lower interest rate lock commitments. The $2.0 million decrease in net income from the fourth quarter of 2014 was primarily due to higher commission expense resulting from increased closed loan volume in the quarter, partially offset by higher net gain on single family mortgage loan origination and sale activities due to higher interest rate lock commitments and composite margin.

Mortgage Origination for Sale

Single family mortgage interest rate lock commitments, net of estimated fallout, totaled $1.34 billion in the fourth quarter of 2015, a decrease of $466.6 million, or 25.8%, from $1.81 billion in the third quarter of 2015 and up$168.6 million, or 14.4%, from $1.17 billion in the fourth quarter of 2014. The increase from the fourth quarter of 2014 was primarily the result of increased single family purchase mortgage activity due to the continued expansion of our mortgage production staff, support staff and offices into new markets.

Single family closed loan volume designated for sale was $1.65 billion in the fourth quarter of 2015, down$285.4 million, or 14.8%, from $1.93 billion in the third quarter of 2015 and up$318.0 million, or 23.9%, from $1.33 billion in the fourth quarter of 2014. At December 31, 2015, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $1.06 billion, compared to $1.45 billion at September 30, 2015 and $891.4 million at December 31, 2014.

Net gain on single family mortgage loan origination and sale activities in the fourth quarter of 2015 was $43.5 million compared to $56.0 million in the third quarter of 2015 and $36.5 million in the fourth quarter of 2014.

Due to differences in the timing of revenue recognition between components of the gain on loan origination and sale activities, we analyze 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 2015 was 319 basis points, compared with 311 basis points in the third quarter of 2015 and 310 basis points in the fourth quarter of 2014.

Mortgage Servicing

Single family mortgage servicing income of $12.8 million in the fourth quarter of 2015 increased $8.7 million, or 213%, from $4.1 million in the third quarter of 2015 and increased $3.6 million, or 38.4%, from $9.3 million in the fourth quarter of 2014. The increase from the third quarter of 2015 was primarily the result of improved risk management results and slower long-term prepayment speed expectations. The increase from the fourth quarter of 2014 was primarily the result of an increase in servicing fees collected.

Single family mortgage servicing fees collected in the fourth quarter of 2015 increased $728 thousand, or 7.3%, from the third quarter of 2015 and increased $3.1 million, or 41.7%, from the fourth quarter of 2014. The increases were primarily due to higher average balances in our loans serviced for others portfolio. The portfolio of single family loans serviced for others was $15.35 billion at December 31, 2015 compared with $14.27 billion at September 30, 2015 and $11.22 billion at December 31, 2014.

Noninterest Expense

Mortgage Banking segment noninterest expense of $63.2 million decreased $733 thousand, or 1.1%, from the third quarter of 2015 primarily due to lower closed loan volume during the quarter. Noninterest expense increased $15.5 million, or 32.6%, from the fourth quarter of 2014, primarily due to a 23.9% increase in closed loan volume resulting from the continued expansion of our mortgage production staff, support staff and offices into new markets.

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Conference Call

HomeStreet, Inc., the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Wednesday, January 27, 2016 at 1:00 p.m. ET. Mark K. Mason, President and CEO, and Melba Bartels, Senior Executive Vice President and CFO, will discuss fourth quarter and year-end 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/10078363 or may join the call by dialing 1-877-508-9589 (1-855-669-9657 in Canada) shortly before 1:00 p.m. ET. A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10078363.

The information to be discussed in the conference call will be available on the company's web site after the market closes on Tuesday, January 26, 2016.

About HomeStreet

HomeStreet, Inc. (NASDAQ:HMST) is a diversified financial services company headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii through its various operating subsidiaries. The company operates two primary business segments: Mortgage Banking, which originates and purchases single family residential mortgage loans, primarily for sale into the secondary markets; and Commercial & Consumer Banking, including commercial real estate, commercial lending, residential construction lending, retail banking, private banking, investment and insurance services. Its principal subsidiaries are HomeStreet Bank and HomeStreet Capital Corporation. Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com.

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, 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. Closing of the acquisition of Orange

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County Business Bank discussed in this press release will be contingent on meeting certain conditions, that have not yet been met, including the receipt of state regulatory approvals and shareholder approvals from the shareholders of OCBB. This transaction may be delayed in closing, may require significant management attention, and, along with other recent transactions, including the acquisition of the Dayton branch from AmericanWest Bank, may fall short of anticipated size and value. We may not realize the benefits expected from our anticipated acquisition or 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 September 30, 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.

The information contained herein is unaudited.  The certain information related to the year ended December 31, 2014 has been derived from our audited financial statements for the year then ended as included in our 2014 Form 10-K. 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 quarters and year-to-date fiscal 2015 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 and with our acquisition of a retail deposit branch in Dayton, Washington on December 11, 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' 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.

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Source: HomeStreet, Inc.

Contact:	Investor Relations:
	HomeStreet, Inc.
	Gerhard Erdelji (206) 515-4039
	Gerhard.Erdelji@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, 2015		Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Dec. 31, 2015		Dec. 31, 2014
Income statement data (for the period ended):
Net interest income	$	39,740	$	39,634	$	38,230	$	30,734	$	27,502	$	148,338	$	98,669
Provision (reversal of provision) for credit losses	1,900		700		500		3,000		500		6,100		(1,000		)
Noninterest income	65,409		67,468		72,987		75,373		51,487		281,237		185,657
Noninterest expense	92,725		92,026		92,335		89,482		68,791		366,568		252,011
Merger-related expenses (included in noninterest expense)	754		437		3,208		12,165		889		16,564		3,055
Income before taxes	10,524		14,376		18,382		13,625		9,698		56,907		33,315
Income tax expense	1,846		4,415		6,006		3,321		4,077		15,588		11,056
Net income	$	8,678	$	9,961	$	12,376	$	10,304	$	5,621	$	41,319	$	22,259
Basic earnings per common share	$	0.39	$	0.45	$	0.56	$	0.60	$	0.38	$	1.98	$	1.50
Diluted earnings per common share	$	0.39	$	0.45	$	0.56	$	0.59	$	0.38	$	1.96	$	1.49
Common shares outstanding	22,076,534		22,061,702		22,065,249		22,038,748		14,856,611		22,076,534		14,856,611
Weighted average common shares
Basic	22,050,022		22,035,317		22,028,539		17,158,303		14,811,699		20,818,045		14,800,689
Diluted	22,297,183		22,291,810		22,292,734		17,355,076		14,973,222		21,059,201		14,961,081
Dividends per share	$	—	$	—	$	—	$	—	$	—	$	—	$	0.11
Book value per share	$	21.08	$	20.87	$	20.29	$	19.94	$	20.34	$	21.08	$	20.34
Tangible book value per share (1)	$	20.16	$	19.95	$	19.35	$	18.97	$	19.39	$	20.16	$	19.39
Financial position (at period end):
Cash and cash equivalents	$	32,684	$	37,303	$	46,197	$	56,864	$	30,502	$	32,684	$	30,502
Investment securities	572,164		602,018		509,545		476,102		455,332		572,164		455,332
Loans held for sale	650,163		882,319		972,183		865,322		621,235		650,163		621,235
Loans held for investment, net	3,192,720		3,012,943		2,900,675		2,828,177		2,099,129		3,192,720		2,099,129
Mortgage servicing rights	171,255		146,080		153,237		121,722		123,324		171,255		123,324
Other real estate owned	7,531		8,273		11,428		11,589		9,448		7,531		9,448
Total assets	4,894,495		4,975,653		4,866,248		4,604,403		3,535,090		4,894,495		3,535,090
Deposits	3,231,953		3,307,693		3,322,653		3,344,223		2,445,430		3,231,953		2,445,430
FHLB advances	1,018,159		1,025,745		922,832		669,419		597,590		1,018,159		597,590
Federal funds purchased and securities sold under agreements to repurchase	—		—		—		9,450		50,000		—		50,000
Shareholders’ equity	465,275		460,458		447,726		439,395		302,238		465,275		302,238
Financial position (averages):
Investment securities	$	584,519	$	539,330	$	506,904	$	462,762	$	454,127	$	523,756	$	459,060
Loans held for investment	3,120,644		2,975,624		2,861,223		2,370,763		2,044,873		2,834,511		1,890,537
Total interest-earning assets	4,452,326		4,394,557		4,266,382		3,473,652		3,140,708		4,150,089		2,869,414
Total interest-bearing deposits	2,587,125		2,573,512		2,626,925		2,205,585		1,892,399		2,499,538		1,883,622
FHLB advances	987,803		887,711		783,801		515,958		606,753		795,368		431,623
Federal funds purchased and securities sold under agreements to repurchase	100		—		4,336		41,734		23,338		11,397		8,977
Total interest-bearing liabilities	3,636,885		3,523,080		3,476,919		2,825,134		2,584,347		3,368,160		2,386,537
Shareholders’ equity	470,635		460,489		455,721		370,008		305,068		442,105		289,420
Other data:
Full-time equivalent employees (ending)	2,139		2,100		1,964		1,829		1,611		2,139		1,611

10

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

	Quarter Ended																	For The Years Ended
(dollars in thousands, except share data)	Dec. 31, 2015				Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015				Dec. 31, 2014			Dec. 31, 2015				Dec. 31, 2014
Financial performance:
Return on average shareholders’ equity (2)	7.38		%		8.65		%	10.86		%	11.14		%		7.37		%	9.35		%		7.69		%
Return on average tangible shareholders' equity(1)	7.71		%		9.06		%	11.39		%	11.67		%		7.73		%	9.78		%		8.09		%
Return on average assets	0.71		%		0.83		%	1.06		%	1.08		%		0.65		%	0.91		%		0.69		%
Net interest margin (3)	3.61		%		3.67		%	3.63		%	3.60		%		3.53		%	3.63		%		3.51		%
Efficiency ratio (4)	88.18		%		85.92		%	83.02		%	84.33		%		87.09		%	85.33		%		88.63		%
Asset quality:
Allowance for credit losses	$	30,659			$	27,887		$	26,448		$	25,628			$	22,524		$	30,659			$	22,524
Allowance for loan losses/total loans(5)	0.91		%		0.89		%	0.88		%	0.87		%		1.04		%	0.91		%		1.04		%
Allowance for loan losses/nonaccrual loans	170.54		%		138.27		%	120.97		%	117.48		%		137.51		%	170.54		%		137.51		%
Total nonaccrual loans(6)(7)	$	17,168			$	19,470		$	21,308		$	21,209			$	16,014		$	17,168			$	16,014
Nonaccrual loans/total loans	0.53		%		0.64		%	0.73		%	0.74		%		0.75		%	0.53		%		0.75		%
Other real estate owned	$	7,531			$	8,273		$	11,428		$	11,589			$	9,448		$	7,531			$	9,448
Total nonperforming assets(7)	$	24,699			$	27,743		$	32,736		$	32,798			$	25,462		$	24,699			$	25,462
Nonperforming assets/total assets	0.50		%		0.56		%	0.67		%	0.71		%		0.72		%	0.50		%		0.72		%
Net (recoveries) charge-offs	$	(872	)		$	(739	)	$	(320	)	$	(104	)		$	87		$	(2,035	)		$	565
Regulatory capital ratios for the Bank:
Basel III - Tier 1 leverage capital (to average assets)	9.45		%	(8)	9.69		%	9.46		%	11.47		%	(9)	NA			9.45		%	(8)	NA
Basel III - Tier 1 common equity risk-based capital (to risk-weighted assets)	13.03		%	(8)	13.35		%	13.17		%	13.75		%		NA			13.03		%	(8)	NA
Basel III - Tier 1 risk-based capital (to risk-weighted assets)	13.03		%	(8)	13.35		%	13.17		%	13.75		%		NA			13.03		%	(8)	NA
Basel III - Total risk-based capital (to risk-weighted assets)	13.91		%	(8)	14.15		%	13.97		%	14.57		%		NA			13.91		%	(8)	NA
Risk-weighted assets	$3,490,098				$3,454,777			$3,306,325			$3,127,427				NA			$3,490,098				NA
Basel I - Tier 1 leverage capital (to average assets)	NA				NA			NA			NA				9.38		%	NA				9.38		%
Basel I - Tier 1 risk-based capital (to risk-weighted assets)	NA				NA			NA			NA				13.10		%	NA				13.10		%
Basel I - Total risk-based capital (to risk-weighted assets)	NA				NA			NA			NA				14.03		%	NA				14.03		%
Regulatory capital ratios for the Company:
Basel III - Tier 1 leverage capital (to average assets)	9.94		%	(8)	10.00		%	9.87		%	11.95		%	(9)	NA			9.94		%		NA
Basel III - Tier 1 common equity risk-based capital (to risk-weighted assets)	10.51		%	(8)	10.65		%	10.66		%	11.12		%		NA			10.51		%		NA
Basel III - Tier 1 risk-based capital (to risk-weighted assets)	11.93		%	(8)	12.09		%	12.02		%	12.55		%		NA			11.93		%		NA
Basel III - Total risk-based capital (to risk-weighted assets)	12.69		%	(8)	12.79		%	12.72		%	13.26		%		NA			12.69		%		NA
Risk-weighted assets	$4,021,566				$3,950,823			$3,793,345			$3,586,636				NA			$4,021,566				NA

(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 1.12%, 1.14%, 1.16%, 1.19% and 1.10% at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

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

(7) Includes $1.2 million, $1.5 million, $1.2 million, $1.4 million and $4.4 million of nonperforming loans guaranteed by the SBA at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

(8) Regulatory capital ratios at December 31, 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% at March 31, 2015.

11

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Operations

	Three Months Ended December 31,						%		Year Ended  December 31,					%
(in thousands, except share data)	2015			2014			Change		2015		2014			Change
Interest income:
Loans	$	41,018		$	28,242		45	%	$	152,621	$	100,107		52	%
Investment securities	3,164			2,366			34		11,590		10,565			10
Other	256			172			49		903		621			45
	44,438			30,780			44		165,114		111,293			48
Interest expense:
Deposits	3,145			2,351			34		11,801		9,431			25
Federal Home Loan Bank advances	1,192			614			94		3,668		1,980			85
Federal funds purchased and securities sold under agreements to repurchase	—			15			(100	)	8		22			(64	)
Long-term debt	289			269			7		1,104		1,120			(1	)
Other	72			29			148		195		71			175
	4,698			3,278			43		16,776		12,624			33
Net interest income	39,740			27,502			44		148,338		98,669			50
Provision (reversal of provision) for credit losses	1,900			500			280		6,100		(1,000		)	NM
Net interest income after provision for credit losses	37,840			27,002			40		142,238		99,669			43
Noninterest income:
Net gain on mortgage loan origination and sale activities	46,642			39,176			19		236,388		144,122			64
Mortgage servicing income	13,535			9,808			38		24,431		34,092			(28	)
Income from WMS Series LLC	196			170			15		1,624		101			NM
Loss on debt extinguishment	—			—			NM		—		(573		)	NM
Depositor and other retail banking fees	1,642			896			83		5,881		3,572			65
Insurance agency commissions	499			261			91		1,682		1,153			46
Gain on sale of investment securities available for sale	1,404			1,185			18		2,406		2,358			2
Bargain purchase gain	381			—			NM		7,726		—			NM
Other	1,110			(9		)	NM		1,099		832			32
	65,409			51,487			27		281,237		185,657			51
Noninterest expense:
Salaries and related costs	60,349			44,706			35		240,587		163,387			47
General and administrative	16,213			11,240			44		58,745		42,833			37
Legal	895			500			79		2,807		2,071			36
Consulting	671			1,042			(36	)	7,215		3,224			124
Federal Deposit Insurance Corporation assessments	683			442			55		2,573		2,316			11
Occupancy	6,903			4,556			52		24,927		18,598			34
Information services	7,061			6,455			9		29,054		20,052			45
Net (income) cost from operation and sale of other real estate owned	(50		)	(150		)	(67	)	660		(470		)	NM
	92,725			68,791			35		366,568		252,011			45
Income before income taxes	10,524			9,698			9		56,907		33,315			71
Income tax expense	1,846			4,077			(55	)	15,588		11,056			41
NET INCOME	$	8,678		$	5,621		54		$	41,319	$	22,259		86
Basic income per share	$	0.39		$	0.38		3		$	1.98	$	1.50		32
Diluted income per share	$	0.39		$	0.38		3		$	1.96	$	1.49		32
Basic weighted average number of shares outstanding	22,050,022			14,811,699			49		20,818,045		14,800,689			41
Diluted weighted average number of shares outstanding	22,297,183			14,973,222			49		21,059,201		14,961,081			41

NM = not meaningful

12

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Operation

	Quarter Ended
(in thousands, except share data)	Dec. 31, 2015			Sept. 30, 2015		Jun. 30, 2015			Mar. 31, 2015		Dec. 31, 2014
Interest income:
Loans	$	41,018		$	41,012	$	38,944		$	31,647	$	28,242
Investment securities	3,164			2,754		3,278			2,394		2,366
Other	256			224		218			205		172
	44,438			43,990		42,440			34,246		30,780
Interest expense:
Deposits	3,145			3,069		3,005			2,582		2,351
Federal Home Loan Bank advances	1,192			958		906			612		614
Federal funds purchased and securities sold under agreements to repurchase	—			—		3			5		15
Long-term debt	289			278		272			265		269
Other	72			51		24			48		29
	4,698			4,356		4,210			3,512		3,278
Net interest income	39,740			39,634		38,230			30,734		27,502
Provision for credit losses	1,900			700		500			3,000		500
Net interest income after provision for credit losses	37,840			38,934		37,730			27,734		27,002
Noninterest income:
Net gain on mortgage loan origination and sale activities	46,642			57,885		69,974			61,887		39,176
Mortgage servicing income	13,535			4,768		1,831			4,297		9,808
Income from WMS Series LLC	196			380		484			564		170
Depositor and other retail banking fees	1,642			1,701		1,399			1,139		896
Insurance agency commissions	499			477		291			415		261
Gain on sale of investment securities available for sale	1,404			1,002		—			—		1,185
Bargain purchase gain (adjustment)	381			796		(79		)	6,628		—
Other	1,110			459		(913		)	443		(9		)
	65,409			67,468		72,987			75,373		51,487
Noninterest expense:
Salaries and related costs	60,349			60,991		61,654			57,593		44,706
General and administrative	16,213			14,869		14,502			13,161		11,240
Legal	895			868		577			467		500
Consulting	671			166		813			5,565		1,042
Federal Deposit Insurance Corporation assessments	683			504		861			525		442
Occupancy	6,903			6,077		6,107			5,840		4,556
Information services	7,061			8,159		7,714			6,120		6,455
Net (income) cost from operation and sale of other real estate owned	(50		)	392		107			211		(150		)
	92,725			92,026		92,335			89,482		68,791
Income before income tax expense	10,524			14,376		18,382			13,625		9,698
Income tax expense	1,846			4,415		6,006			3,321		4,077
NET INCOME	$	8,678		$	9,961	$	12,376		$	10,304	$	5,621
Basic income per share	$	0.39		$	0.45	$	0.56		$	0.60	$	0.38
Diluted income per share	$	0.39		$	0.45	$	0.56		$	0.59	$	0.38
Basic weighted average number of shares outstanding	22,050,022			22,035,317		22,028,539			17,158,303		14,811,699
Diluted weighted average number of shares outstanding	22,297,183			22,291,810		22,292,734			17,355,076		14,973,222

13

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(in thousands, except share data)	Dec. 31, 2015			Dec. 31, 2014		% Change
Assets:
Cash and cash equivalents (including interest-earning instruments of $2,079 and $10,271)	$	32,684		$	30,502	7	%
Investment securities (includes $541,151and $427,326 carried at fair value)	572,164			455,332		26	%
Loans held for sale (includes $639,087 and $610,350 carried at fair value)	650,163			621,235		5	%
Loans held for investment (net of allowance for loan losses of $29,278 and $22,021; includes $21,544 and $0 carried at fair value)	3,192,720			2,099,129		52	%
Mortgage servicing rights (includes $156,604 and $112,439 carried at fair value)	171,255			123,324		39	%
Other real estate owned	7,531			9,448		(20	)%
Federal Home Loan Bank stock, at cost	44,342			33,915		31	%
Premises and equipment, net	63,738			45,251		41	%
Goodwill	11,945			11,945		—	%
Other assets	147,953			105,009		41	%
Total assets	$	4,894,495		$	3,535,090	38
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	3,231,953		$	2,445,430	32
Federal Home Loan Bank advances	1,018,159			597,590		70
Federal funds purchased and securities sold under agreements to repurchase	—			50,000		(100	)
Accounts payable and other liabilities	117,251			77,975		50
Long-term debt	61,857			61,857		—
Total liabilities	4,429,220			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, 22,076,534 shares and 14,856,611 shares	511			511		—
Additional paid-in capital	222,328			96,615		130
Retained earnings	244,885			203,566		20
Accumulated other comprehensive (loss) income	(2,449		)	1,546		(258	)
Total shareholders’ equity	465,275			302,238		54
Total liabilities and shareholders’ equity	$	4,894,495		$	3,535,090	38

14

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Financial Condition

(in thousands, except share data)		Dec. 31, 2015			Sept. 30, 2015		Jun. 30, 2015			Mar. 31, 2015		Dec. 31,  2014
Assets:
Cash and cash equivalents		$	32,684		$	37,303	$	46,197		$	56,864	$	30,502
Investment securities		572,164			602,018		509,545			476,102		455,332
Loans held for sale		650,163			882,319		972,183			865,322		621,235
Loans held for investment, net		3,192,720			3,012,943		2,900,675			2,828,177		2,099,129
Mortgage servicing rights		171,255			146,080		153,237			121,722		123,324
Other real estate owned		7,531			8,273		11,428			11,589		9,448
Federal Home Loan Bank stock, at cost		44,342			44,652		40,742			34,996		33,915
Premises and equipment, net		63,738			60,544		58,111			49,808		45,251
Goodwill		11,945			11,945		11,945			11,945		11,945
Other assets		147,953			169,576		162,185			147,878		105,009
Total assets		$	4,894,495		$	4,975,653	$	4,866,248		$	4,604,403	$	3,535,090
Liabilities and shareholders’ equity:
Liabilities:	��
Deposits		$	3,231,953		$	3,307,693	$	3,322,653		$	3,344,223	$	2,445,430
Federal Home Loan Bank advances		1,018,159			1,025,745		922,832			669,419		597,590
Federal funds purchased and securities sold under agreements to repurchase		—			—		—			9,450		50,000
Accounts payable and other liabilities		117,251			119,900		111,180			80,059		77,975
Long-term debt		61,857			61,857		61,857			61,857		61,857
Total liabilities		4,429,220			4,515,195		4,418,522			4,165,008		3,232,852
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		222,328			222,047		221,551			221,301		96,615
Retained earnings		244,885			236,207		226,246			213,870		203,566
Accumulated other comprehensive (loss) income		(2,449		)	1,693		(582		)	3,713		1,546
Total shareholders’ equity		465,275			460,458		447,726			439,395		302,238
Total liabilities and shareholders’ equity		$	4,894,495		$	4,975,653	$	4,866,248		$	4,604,403	$	3,535,090

15

HomeStreet, Inc. and Subsidiaries

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

	Quarter Ended December 31,
	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	$	31,429	$	12	0.15	%	$	32,157	$	13	0.16	%
Investment securities	584,519		3,915		2.68	%	454,127		2,940		2.57	%
Loans held for sale	715,734		7,155		4.01	%	609,551		5,706		3.71	%
Loans held for investment	3,120,644		33,894		4.32	%	2,044,873		22,570		4.38	%
Total interest-earning assets	4,452,326		44,976		4.03	%	3,140,708		31,229		3.94	%
Noninterest-earning assets (2)	418,571						304,795
Total assets	$	4,870,897					$	3,445,503
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	418,360	489		0.48	%	$	277,612	282		0.40	%
Savings accounts	293,498		253		0.34	%	193,802		280		0.57	%
Money market accounts	1,149,977		1,287		0.45	%	1,012,043		1,136		0.45	%
Certificate accounts	725,290		1,188		0.64	%	408,942		682		0.63	%
Total interest-bearing deposits	2,587,125		3,217		0.50	%	1,892,399		2,380		0.50	%
FHLB advances	987,803		1,192		0.48	%	606,753		614		0.40	%
Federal funds purchased and securities sold under agreements to repurchase	100		—		—	%	23,338		15		0.25	%
Long-term debt	61,857		290		1.83	%	61,857		269		1.73	%
Total interest-bearing liabilities	3,636,885		4,699		0.51	%	2,584,347		3,278		0.50	%
Noninterest-bearing liabilities	763,377						556,088
Total liabilities	4,400,262						3,140,435
Shareholders’ equity	470,635						305,068
Total liabilities and shareholders’ equity	$	4,870,897					$	3,445,503
Net interest income (3)			$	40,277					$	27,951
Net interest spread					3.52	%					3.44	%
Impact of noninterest-bearing sources					0.09	%					0.09	%
Net interest margin					3.61	%					3.53	%

(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 $537 thousand and $449 thousand for the quarters ended December 31, 2015 and December 31, 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)

	Year Ended December 31,
	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	$	36,134	$	67	0.18	%	$	31,137	$	58	0.18	%
Investment securities	523,756		14,270		2.72	%	459,060		12,945		2.82	%
Loans held for sale	755,688		29,165		3.86	%	488,680		18,569		3.80	%
Loans held for investment	2,834,511		123,680		4.36	%	1,890,537		81,659		4.32	%
Total interest-earning assets	4,150,089		167,182		4.03	%	2,869,414		113,231		3.95	%
Noninterest-earning assets (2)	410,404						335,037
Total assets	$	4,560,493					$	3,204,451
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	317,510	1,492		0.46	%	$	270,634	939		0.35	%
Savings accounts	284,309		1,053		0.38	%	173,678		937		0.54	%
Money market accounts	1,122,321		4,930		0.44	%	980,045		4,361		0.45	%
Certificate accounts	775,398		4,501		0.58	%	459,265		3,244		0.71	%
Total interest-bearing deposits	2,499,538		11,976		0.48	%	1,883,622		9,481		0.50	%
FHLB advances	795,368		3,669		0.46	%	431,623		1,990		0.46	%
Federal funds purchased and securities sold under agreements to repurchase	11,397		29		0.31	%	8,977		22		0.25	%
Long-term debt	61,857		1,104		1.78	%	62,315		1,121		1.80	%
Total interest-bearing liabilities	3,368,160		16,778		0.50	%	2,386,537		12,614		0.53	%
Noninterest-bearing liabilities	750,228						528,494
Total liabilities	4,118,388						2,915,031
Shareholders’ equity	442,105						289,420
Total liabilities and shareholders’ equity	$	4,560,493					$	3,204,451
Net interest income (3)			$	150,404					$	100,617
Net interest spread					3.53	%					3.42	%
Impact of noninterest-bearing sources					0.10	%					0.09	%
Net interest margin					3.63	%					3.51	%

(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 $2.1 million and $1.9 million for the years ended 2015 and 2014. 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)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
Net interest income	$	32,759		$	31,509		$	30,645		$	25,107		$	22,187
Provision for credit losses	1,900			700			500			3,000			500
Noninterest income	8,778			6,884			3,624			10,081			5,434
Noninterest expense	29,542			28,110			29,280			35,666			21,155
Income (loss) before income taxes	10,095			9,583			4,489			(3,478		)	5,966
Income tax expense (benefit)	1,718			2,783			1,635			(3,464		)	2,621
Net income (loss)	$	8,377		$	6,800		$	2,854		$	(14	)	$	3,345
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain (1)	$	8,486		$	6,288		$	5,019		$	1,242		$	3,923
Efficiency ratio (2)	71.12		%	73.22		%	85.44		%	101.36		%	76.59		%
Full-time equivalent employees (ending)	828			807			757			768			608
Net gain on mortgage loan origination and sale activities:
Multifamily	$	2,384		$	1,488		$	2,314		$	939		$	2,704
Other	762			422			141			204			(16		)
	$	3,146		$	1,910		$	2,455		$	1,143		$	2,688
Production volumes for sale to the secondary market:
Multifamily mortgage originations	$	53,279		$	47,342		$	79,789		$	24,428		$	57,135
Multifamily mortgage loans sold	63,779			42,333			72,459			26,173			99,285

(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)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
Servicing income, net:
Servicing fees and other	$	1,258		$	1,181		$	1,135		$	886		$	970
Amortization of multifamily MSRs	(551		)	(511		)	(476		)	(454		)	(429		)
Commercial mortgage servicing income	$	707		$	670		$	659		$	432		$	541

18

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Commercial Loans Serviced for Others

(in thousands)	Dec. 31, 2015		Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014
Commercial
Multifamily	$	924,367	$	866,880	$	840,051	$	773,092	$	752,640
Other	79,513		86,567		83,982		83,574		82,354
Total commercial loans serviced for others	$	1,003,880	$	953,447	$	924,033	$	856,666	$	834,994

Commercial Multifamily Capitalized Mortgage Servicing Rights

	Quarter ended
(in thousands)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
Beginning balance	$	13,379		$	12,649		$	11,013		$	10,885		$	9,116
Originations	1,823			1,241			2,112			582			2,198
Amortization	(551		)	(511		)	(476		)	(454		)	(429		)
Ending balance	$	14,651		$	13,379		$	12,649		$	11,013		$	10,885
Ratio of MSR carrying value to related loans serviced for others	1.54		%	1.48		%	1.45		%	1.36		%	1.38		%
MSR servicing fee multiple (1)	3.42			3.34			3.29			3.16			3.20
Weighted-average note rate (loans serviced for others)	4.77		%	4.82		%	4.89		%	5.14		%	5.02		%
Weighted-average servicing fee (loans serviced for others)	0.45		%	0.44		%	0.44		%	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)	Dec. 31, 2015		Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014
Available for sale:
Mortgage-backed securities:
Residential	$	22,076	$	91,005	$	108,626	$	114,175	$	107,280
Commercial	63,876		24,064		13,352		13,667		13,671
Municipal bonds	171,869		187,083		137,250		122,434		122,334
Collateralized mortgage obligations:
Residential	83,381		100,228		80,612		58,476		43,166
Commercial	80,249		43,807		19,271		19,794		20,486
Corporate debt securities	78,736		82,882		82,698		79,769		79,400
U.S. Treasury	40,964		41,013		41,023		41,015		40,989
Total available for sale	$	541,151	$	570,082	$	482,832	$	449,330	$	427,326
Held to maturity	31,013		31,936		26,713		26,772		28,006
	$	572,164	$	602,018	$	509,545	$	476,102	$	455,332
Weighted average duration in years
Available for sale	4.2		3.9		3.9		4.4		4.6

Five Quarter Loans Held for Investment

(in thousands)	Dec. 31, 2015				Sept. 30, 2015				Jun. 30, 2015				Mar. 31, 2015			Dec. 31, 2014
Consumer loans
Single family	$	1,203,180		(1)	$	1,171,967		(1)	$	1,182,542		(1)	$	1,198,605		$	896,665
Home equity and other	256,373				237,491				216,635				205,200			135,598
	1,459,553				1,409,458				1,399,177				1,403,805			1,032,263
Commercial loans
Commercial real estate	600,703				563,241				547,571				535,546			523,464
Multifamily	426,557				382,392				366,187				352,193			55,088
Construction/land development	583,160				529,871				454,817				402,393			367,934
Commercial business	154,262				158,135				166,216				164,259			147,449
	1,764,682				1,633,639				1,534,791				1,454,391			1,093,935
	3,224,235				3,043,097				2,933,968				2,858,196			2,126,198
Net deferred loan fees and costs	(2,237		)		(3,232		)		(7,516		)		(5,103		)	(5,048		)
	3,221,998				3,039,865				2,926,452				2,853,093			2,121,150
Allowance for loan losses	(29,278		)		(26,922		)		(25,777		)		(24,916		)	(22,021		)
	$	3,192,720			$	3,012,943			$	2,900,675			$	2,828,177		$	2,099,129

(1) Includes $21.5 million, $23.8 million and $38.2 million of single family loans that are carried at fair value at December 31, 2015, September 30, 2015 and June 30, 2015 respectively.

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)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
Beginning balance	$	27,887		$	26,448		$	25,628		$	22,524		$	22,111
Provision (reversal of provision) for credit losses	1,900			700			500			3,000			500
(Charge-offs), net of recoveries	872			739			320			104			(87		)
Ending balance	$	30,659		$	27,887		$	26,448		$	25,628		$	22,524
Components:
Allowance for loan losses	$	29,278		$	26,922		$	25,777		$	24,916		$	22,021
Allowance for unfunded commitments	1,381			965			671			712			503
Allowance for credit losses	$	30,659		$	27,887		$	26,448		$	25,628		$	22,524
Allowance as a % of loans held for investment(1) (2)	0.91		%	0.89		%	0.88		%	0.87		%	1.04		%
Allowance as a % of nonaccrual loans	170.54		%	138.27		%	120.97		%	117.48		%	137.51		%

(1) Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses/total loans was 1.12%, 1.14%, 1.16%, 1.19% and 1.10% at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 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)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015				Dec. 31, 2014
Beginning balance	$	27,743		$	32,736		$	32,798		$	25,462			$	30,384
Additions	4,484			2,118			5,919			10,793			(1)	1,754
Reductions:
Recoveries (charge-offs)	872			739			320			104				(87		)
OREO sales	(916		)	(2,756		)	(623		)	(1,375		)		(2,220		)
OREO writedowns and other adjustments	(127		)	(399		)	—			(90		)		—
Principal paydown, payoff advances and other adjustments	(5,925		)	(2,587		)	(4,904		)	(864		)		(2,269		)
Transferred back to accrual status	(1,432		)	(2,108		)	(774		)	(1,232		)		(2,100		)
Total reductions	(7,528		)	(7,111		)	(5,981		)	(3,457		)		(6,676		)
Net additions (reductions)	(3,044		)	(4,993		)	(62		)	7,336				(4,922		)
Ending balance(2)	$	24,699		$	27,743		$	32,736		$	32,798			$	25,462

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

(2) Includes $1.2 million, $1.5 million, $1.2 million, $1.4 million and $4.4 million of nonperforming loans guaranteed by the SBA at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

21

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Nonperforming Assets by Loan Class

(in thousands)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015				Dec. 31, 2014
Loans accounted for on a nonaccrual basis:
Consumer
Single family	$	12,119		$	10,439		$	10,259		$	14,047			$	8,368
Home equity and other	1,576			1,608			1,533			1,306				1,526
	13,695			12,047			11,792			15,353				9,894
Commercial
Commercial real estate	2,341			2,540			3,850			3,070				4,843
Multifamily	119			1,449			1,671			1,005				—
Construction/land development	339			—			—			172				—
Commercial business	674			3,434			3,995			1,609				1,277
	3,473			7,423			9,516			5,856				6,120
Total loans on nonaccrual	$	17,168		$	19,470		$	21,308		$	21,209		(2)	$	16,014
Nonaccrual loans as a % of total loans	0.53		%	0.64		%	0.73		%	0.74		%		0.75		%
Other real estate owned:
Consumer
Single family	$	301		$	916		$	1,257		$	1,223			$	1,613
Commercial
Commercial real estate	4,071			4,113			4,332			4,527				1,996
Construction/land development	3,159			3,244			5,839			5,839				5,839
	7,230			7,357			10,171			10,366				7,835
Total other real estate owned	$	7,531		$	8,273		$	11,428		$	11,589			$	9,448
Nonperforming assets:
Consumer
Single family	$	12,421		$	11,355		$	11,516		$	15,270			$	9,981
Home equity and other	1,575			1,608			1,533			1,306				1,526
	13,996			12,963			13,049			16,576				11,507
Commercial
Commercial real estate	6,412			6,653			8,182			7,597				6,839
Multifamily	119			1,449			1,671			1,005				—
Construction/land development	3,498			3,244			5,839			6,011				5,839
Commercial business	674			3,434			3,995			1,609				1,277
	10,703			14,780			19,687			16,222				13,955
Total nonperforming assets(1)	$	24,699		$	27,743		$	32,736		$	32,798			$	25,462
Nonperforming assets as a % of total assets	0.50		%	0.56		%	0.67		%	0.71		%		0.72		%

(1) Includes $1.2 million, $1.5 million, $1.2 million, $1.4 million and $4.4 million of nonperforming loans guaranteed by the SBA at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

(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
December 31, 2015
Total loans held for investment	$	8,503		$	3,935		$	53,781			$	66,219			$	3,158,016		$	3,224,235
Less: FHA/VA loans(1)	5,762			2,293			36,595				44,650				55,210			99,860
Total loans, excluding FHA/VA loans	$	2,741		$	1,642		$	17,186			$	21,569			$	3,102,806		$	3,124,375
Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family	$	1,336		$	1,244		$	12,119			$	14,699			$	1,088,621		$	1,103,320
Home equity and other	1,095			398			1,576				3,069				253,304			256,373
	2,431			1,642			13,695				17,768				1,341,925			1,359,693
Commercial loans
Commercial real estate	233			—			2,341				2,574				598,129			600,703
Multifamily	—			—			119				119				426,438			426,557
Construction/land development	77			—			339				416				582,744			583,160
Commercial business	—			—			692				692				153,570			154,262
	310			—			3,491				3,801				1,760,881			1,764,682
	$	2,741		$	1,642		$	17,186		(2)	$	21,569		(2)	$	3,102,806		$	3,124,375
As a % of total loans, excluding FHA/VA loans	0.09		%	0.05		%	0.55		%		0.69		%		99.31		%	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 guaranteed by the SBA at December 31, 2015 and December 31, 2014, respectively.

23

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status

(in thousands)	Dec. 31, 2015		Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014
Accrual
Consumer loans
Single family(1)	$	74,685	$	74,408	$	75,655	$	74,126	$	73,585
Home equity and other	1,340		1,395		1,937		2,102		2,430
	76,025		75,803		77,592		76,228		76,015
Commercial loans
Commercial real estate	—		4,431		19,287		19,516		21,703
Multifamily	3,014		3,019		3,041		3,059		3,077
Construction/land development	3,714		4,332		4,601		5,321		5,447
Commercial business	1,658		1,784		1,869		1,492		1,573
	8,386		13,566		28,798		29,388		31,800
	$	84,411	$	89,369	$	106,390	$	105,616	$	107,815
Nonaccrual
Consumer loans
Single family	$	2,452	$	2,158	$	1,419	$	1,443	$	2,482
Home equity and other	271		181		230		230		231
	2,723		2,339		1,649		1,673		2,713
Commercial loans
Commercial real estate	1,023		1,060		1,087		1,121		1,148
Commercial business	185		195		205		228		249
	1,208		1,255		1,292		1,349		1,397
	$	3,931	$	3,594	$	2,941	$	3,022	$	4,110
Total
Consumer loans
Single family(1)	$	77,137	$	76,566	$	77,074	$	75,569	$	76,067
Home equity and other	1,611		1,576		2,167		2,332		2,661
	78,748		78,142		79,241		77,901		78,728
Commercial loans
Commercial real estate	1,023		5,491		20,374		20,637		22,851
Multifamily	3,014		3,019		3,041		3,059		3,077
Construction/land development	3,714		4,332		4,601		5,321		5,447
Commercial business	1,843		1,979		2,074		1,720		1,822
	9,594		14,821		30,090		30,737		33,197
	$	88,342	$	92,963	$	109,331	$	108,638	$	111,925

(1) Includes loan balances insured by the FHA or guaranteed by the VA of $29.6 million, $29.1 million, $28.4 million, $25.4 million and $26.8 million at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

24

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) - Re-Defaults

	Quarter ended
(in thousands)	Dec. 31, 2015		Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31,  2014
Recorded investment of re-defaults(1)
Consumer loans
Single family	$	—	$	552	$	220	$	1,498	$	—
Home equity and other	—		68		—		—		—
	$	—	$	620	$	220	$	1,498	$	—

(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)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31,  2015			Dec. 31, 2014
Deposits by Product:
Noninterest-bearing accounts - checking and savings	$	370,523		$	372,070		$	387,899		$	305,738		$	240,679
Interest-bearing transaction and savings deposits:
NOW accounts	408,477			452,482			453,366			435,178			272,390
Statement savings accounts due on demand	292,092			296,983			300,214			307,731			200,638
Money market accounts due on demand	1,155,464			1,140,660			1,134,687			1,163,656			1,007,213
Total interest-bearing transaction and savings deposits	1,856,033			1,890,125			1,888,267			1,906,565			1,480,241
Total transaction and savings deposits	2,226,556			2,262,195			2,276,166			2,212,303			1,720,920
Certificates of deposit	732,892			719,208			753,327			751,333			494,526
Noninterest-bearing accounts - other	272,505			326,290			293,160			380,587			229,984
Total deposits	$	3,231,953		$	3,307,693		$	3,322,653		$	3,344,223		$	2,445,430
Percent of total deposits:
Noninterest-bearing accounts - checking and savings	11.5		%	11.2		%	11.7		%	9.1		%	9.8		%
Interest-bearing transaction and savings deposits:
NOW accounts	12.6			13.7			13.6			13.0			11.1
Statement savings accounts due on demand	9.0			9.0			9.0			9.2			8.2
Money market accounts due on demand	35.8			34.5			34.2			34.8			41.2
Total interest-bearing transaction and savings deposits	57.4			57.2			56.8			57.0			60.5
Total transaction and savings deposits	68.9			68.4			68.5			66.1			70.3
Certificates of deposit	22.7			21.7			22.7			22.5			20.2
Noninterest-bearing accounts - other	8.4			9.9			8.8			11.4			9.5
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

26

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment

	Quarter ended
(in thousands)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
Net interest income	$	6,981		$	8,125		$	7,585		$	5,627		$	5,315
Noninterest income	56,631			60,584			69,363			65,292			46,053
Noninterest expense	63,183			63,916			63,055			53,816			47,636
Income before income taxes	429			4,793			13,893			17,103			3,732
Income tax expense	128			1,632			4,371			6,785			1,456
Net income	$	301		$	3,161		$	9,522		$	10,318		$	2,276
Efficiency ratio (1)	99.33		%	93.02		%	81.94		%	75.88		%	92.73		%
Full-time equivalent employees (ending)	1,311			1,293			1,207			1,061			1,003
Production volumes for sale to the secondary market:
Single family mortgage closed loan volume (2)(3)	$	1,648,735		$	1,934,151		$	2,022,656		$	1,606,893		$	1,330,735
Single family mortgage interest rate lock commitments(2)	$	1,340,148		$	1,806,767		$	1,882,955		$	1,901,238		$	1,171,598
Single family mortgage loans sold(2)	$	1,830,768		$	1,965,223		$	1,894,387		$	1,316,959		$	1,273,679

(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)	Dec. 31, 2015		Sept. 30, 2015		Jun. 30, 2015			Mar. 31, 2015		Dec. 31, 2014
Net gain on mortgage loan origination and sale activities:(1)
Single family:
Servicing value and secondary market gains(2)	$	37,727	$	49,613	$	61,884		$	56,289	$	29,405
Loan origination and funding fees	5,769		6,362		5,635			4,455		7,083
Total mortgage banking net gain on mortgage loan origination and sale activities(1)	$	43,496	$	55,975	$	67,519		$	60,744	$	36,488
Composite Margin (in basis points):
Servicing value and secondary market gains / interest rate lock commitments(3)	281		275		316			306		251
Loan origination and funding fees / retail mortgage originations(4)	38		36		31			30		59
Composite Margin	319		311		347		(5)	336		310

(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 of 2015, 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)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
Servicing income, net:
Servicing fees and other	$	10,683		$	9,955		$	8,922		$	8,177		$	7,537
Changes in fair value of single family MSRs due to modeled amortization (1)	(7,313		)	(8,478		)	(9,012		)	(9,235		)	(6,823		)
	3,370			1,477			(90		)	(1,058		)	714
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2)	14,779			(19,396		)	18,483			(7,311		)	(7,793		)
Net gain (loss) from derivatives economically hedging MSR	(5,321		)	22,017			(17,221		)	12,234			16,346
	9,458			2,621			1,262			4,923			8,553
Mortgage Banking servicing income	$	12,828		$	4,098		$	1,172		$	3,865		$	9,267

(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, 2015		Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014
Single family
U.S. government and agency	$	14,628,596	$	13,590,706	$	12,361,841	$	11,275,491	$	10,630,864
Other	719,215		680,481		618,204		634,763		585,344
Total single family loans serviced for others	$	15,347,811	$	14,271,187	$	12,980,045	$	11,910,254	$	11,216,208

28

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Single Family Capitalized Mortgage Servicing Rights

	Quarter ended
(in thousands)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014
Beginning balance	$	132,701		$	140,588		$	110,709		$	112,439		$	115,477
Additions and amortization:
Originations	16,437			19,984			20,405			14,813			11,567
Purchases	—			3			3			3			11
Changes due to modeled amortization (1)	(7,313		)	(8,478		)	(9,012		)	(9,235		)	(6,823		)
Net additions and amortization	9,124			11,509			11,396			5,581			4,755
Changes in fair value due to changes in model inputs and/or assumptions (2)	14,779			(19,396		)	18,483			(7,311		)	(7,793		)
Ending balance	$	156,604		$	132,701		$	140,588		$	110,709		$	112,439
Ratio of MSR carrying value to related loans serviced for others	1.03		%	0.93		%	1.08		%	0.93		%	1.00		%
MSR servicing fee multiple (3)	3.59			3.21			3.72			3.17			3.42
Weighted-average note rate (loans serviced for others)	4.08		%	4.09		%	4.10		%	4.14		%	4.18		%
Weighted-average servicing fee (loans serviced for others)	0.29		%	0.29		%	0.29		%	0.29		%	0.29		%

(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.

Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures:

	Quarter Ended															Year Ended
(dollars in thousands, except share data)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Dec. 31, 2015			Dec. 31, 2014
Shareholders' equity	$	465,275		$	460,458		$	447,726		$	439,395		$	302,238		$	465,275		$	302,238
Less: Goodwill and other intangibles	(20,266		)	(20,250		)	(20,778		)	(21,324		)	(14,211		)	(20,266		)	(14,211		)
Tangible shareholders' equity	$	445,009		$	440,208		$	426,948		$	418,071		$	288,027		$	445,009		$	288,027
Book value per share	$	21.08		$	20.87		$	20.29		$	19.94		$	20.34		$	21.08		$	20.34
Impact of goodwill and other intangibles	(0.92		)	(0.92		)	(0.94		)	(0.97		)	(0.95		)	(0.92		)	(0.95		)
Tangible book value per share	$	20.16		$	19.95		$	19.35		$	18.97		$	19.39		$	20.16		$	19.39
Average shareholders' equity	$	470,635		$	460,489		$	455,721		$	370,008		$	305,068		$	442,105		$	289,420
Less: Average goodwill and other intangibles	(20,195		)	(20,596		)	(21,135		)	(16,698		)	(14,363		)	(19,668		)	(14,309		)
Average tangible shareholders' equity	$	450,440		$	439,893		$	434,586		$	353,310		$	290,705		$	422,437		$	275,111
Return on average shareholders’ equity	7.38		%	8.65		%	10.86		%	11.14		%	7.37		%	9.35		%	7.69		%
Impact of goodwill and other intangibles	0.33		%	0.41		%	0.53		%	0.53		%	0.36		%	0.43		%	0.40		%
Return on average tangible shareholders' equity	7.71		%	9.06		%	11.39		%	11.67		%	7.73		%	9.78		%	8.09		%
Return on average shareholders' equity	7.38		%	8.65		%	10.86		%	11.14		%	7.37		%	9.35		%	7.69		%
Impact of merger-related expenses (net of tax) and bargain purchase gain	0.09		%	(0.44		)%	1.90		%	1.36		%	0.76		%	0.68		%	0.69		%
Return on average shareholders' equity, excluding merger-related expenses (net of tax) and bargain purchase gain	7.47		%	8.21		%	12.76		%	12.50		%	8.13		%	10.03		%	8.38		%
Return on average assets	0.71		%	0.83		%	1.06		%	1.08		%	0.65		%	0.91		%	0.69		%
Impact of merger-related expenses (net of tax) and bargain purchase gain	0.01		%	(0.05		)%	0.19		%	0.13		%	0.07		%	0.06		%	0.07		%
Return on average assets, excluding merger-related expenses (net of tax) and bargain purchase gain	0.72		%	0.78		%	1.25		%	1.21		%	0.72		%	0.97		%	0.76		%

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															Year Ended
(in thousands)	Dec. 31, 2015			Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Dec. 31, 2015			Dec. 31, 2014
Net income	$	8,678		$	9,961		$	12,376		$	10,304		$	5,621		$	41,319		$	22,259
Impact of merger-related expenses (net of tax) and bargain purchase gain	109			(512		)	2,165			1,256			578			3,018			1,986
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain	$	8,787		$	9,449		$	14,541		$	11,560		$	6,199		$	44,337		$	24,245
Noninterest expense	$	92,725		$	92,026		$	92,335		$	89,482		$	68,791		$	366,568		$	252,011
Deduct: merger-related expenses	(754		)	(437		)	(3,208		)	(12,165		)	(889		)	(16,564		)	(3,055		)
Noninterest expense, excluding merger-related expenses	$	91,971		$	91,589		$	89,127		$	77,317		$	67,902		$	350,004		$	248,956
Diluted earnings per common share	$	0.39		$	0.45		$	0.56		$	0.59		$	0.38		$	1.96		$	1.49
Impact of merger-related expenses (net of tax) and bargain purchase gain	—			(0.03		)	0.09			0.08			0.03			0.15			0.13
Diluted earnings per common share, excluding merger-related expenses (net of tax) and bargain purchase gain	$	0.39		$	0.42		$	0.65		$	0.67		$	0.41		$	2.11		$	1.62
Commercial and Consumer Banking Segment:
Net income (loss)	$	8,377		$	6,800		$	2,854		$	(14	)	$	3,345		$	18,017		$	14,748
Impact of merger-related expenses (net of tax) and bargain purchase gain	109			(512		)	2,165			1,256			578			3,018			1,986
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain	$	8,486		$	6,288		$	5,019		$	1,242		$	3,923		$	21,035		$	16,734

31