HomeStreet (HMST) 8-K HomeStreet, Inc. Reports Year-End and Fourth Quarter 2016 Results

HomeStreet, Inc. Reports Year-End and Fourth Quarter 2016 Results

SEATTLE – January 23, 2017 – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST) (including its consolidated subsidiaries, the “Company” or “HomeStreet”), the parent company of HomeStreet Bank, today announced net income of $58.2 million, or $2.34 per diluted share for the year ended December 31, 2016, compared with net income of $41.3 million, or $1.96 per diluted share for the year ended December 31, 2015. Core net income¹ for the year ended December 31, 2016 was $62.8 million, or $2.53 per diluted share, compared with core net income¹ of $44.3 million, or $2.11per diluted share, for the year ended December 31, 2015. Net income was $2.3 million, or $0.09 per diluted share, for the fourth quarter of 2016, compared with net income of $27.7 million, or $1.11 per diluted share, for the third quarter of 2016 and $8.7 million, or $0.39 per diluted share, for the fourth quarter of 2015. Core net income¹ for the quarter was $2.6 million, or $0.10 per diluted share, compared with core net income¹ of $28.0 million, or $1.12per diluted share, for the third quarter of 2016 and $8.8 million, or $0.39 per diluted share, for the fourth quarter of 2015.

Key highlights of 2016:

▪ Net income for 2016 was $58.2 million, an increase of $16.8 million, or 41% compared to $41.3 million of net income in 2015

▪ Total assets of $6.24 billion grew $1.3 billion, or 28%, from $4.9 billion at December 31, 2015; acquisitions comprised $234.1 million of this growth

▪ Opened thirteen home loan centers, three commercial lending centers and six retail deposit branches

▪ Completed the acquisitions of Orange County Business Bank, certain assets and liabilities, including two branches, from The Bank of Oswego and two retail deposit branches from Boston Private Bank and Trust Company, collectively adding five retail deposit branches

▪ Augmented capital to support growth through the issuance of $65.0 million of senior unsecured notes, with net proceeds of $63.2 million and an equity offering of approximately 2.0 million shares of common stock with net proceeds of $58.6 million

Consolidated results:

▪ Annualized return on average shareholders' equity was 10.27% in the year ended December 31, 2016, compared with 9.35% in the year ended December 31, 2015

▪ Annualized return on average shareholders' equity was 1.49% in the fourth quarter of 2016 compared with 18.83% in the third quarter of 2016 and 7.38% in the fourth quarter of 2015

▪ Annualized return on average tangible shareholders' equity¹, excluding acquisition-related items, net of tax, was 11.68% for the year ended December 31, 2016, compared to 9.78% for the year ended December 31, 2015

▪ Annualized return on average tangible shareholders' equity¹, excluding acquisition-related items, net of tax, was 1.74% in the fourth quarter of 2016 compared with 20.04% in the third quarter of 2016 and 7.80% in the fourth quarter of 2015

(1) For notes on non-GAAP financial measures, see pages 10 and 32.

▪ Net interest income was $180.0 million for the year ended December 31, 2016 compared with $148.3 million for the year ended December 31, 2015

▪ Net interest income was $48.1 million in the fourth quarter of 2016 compared with $46.8 million in the third quarter of 2016 and $39.7 million in the fourth quarter of 2015

▪ Noninterest income was $359.2 million for the year ended December 31, 2016 compared with $281.2 million for the year ended December 31, 2015

▪ Noninterest income was $73.2 million in the fourth quarter of 2016 compared with $111.7 million in the third quarter of 2016 and $65.4 million in the fourth quarter of 2015

▪ Average interest-earning assets of $5.71 billion in the fourth quarter of 2016 increased $18.2 million, or 0.3%, from $5.69 billion in the third quarter of 2016 and increased $1.3 billion, or 28.3%, from $4.45 billion in the fourth quarter of 2015

Segment results:

◦ Commercial and Consumer Banking

▪ Segment net income of $30.8 million for the year ended December 31, 2016 compared with $18.0 million for the year ended December 31, 2015

▪ Segment net income of $12.0 million for the current quarter compared with $10.1 million for the third quarter of 2016 and $8.4 million for the fourth quarter of 2015

▪ Core net income⁽¹⁾ for the segment of $35.4 million for the current year compared with core net income of $21.0 million for the year ended December 31, 2015

▪ Core net income⁽¹⁾ for the segment of $12.3 million for the current quarter compared with $10.5 million for the third quarter of 2016 and $8.5 million for the fourth quarter of 2015

▪ Loans held for investment, net, of $3.82 billion increased $54.8 million, or 1.5%, from September 30, 2016 and increased $626.3 million, or 19.6% from December 31, 2015

▪ Deposits of $4.43 billion decreased $74.9 million, or 1.7%, from September 30, 2016 and increased $1.2 billion, or 37.1% from December 31, 2015

▪ Nonperforming assets were $25.8 million, or 0.41% of total assets at December 31, 2016, compared to $32.4 million, or 0.52% of total assets at September 30, 2016 and $24.7 million, or 0.50% of total assets at December 31, 2015

▪ Past due loans excluding U.S. government credit support were $21.6 million, or 0.58% of total such loans at December 31, 2016, compared to $28.4 million, or 0.77% of total such loans at September 30, 2016 and $20.4 million, or 0.65% of total such loans at December 31, 2015

◦Mortgage Banking

▪ Segment net income was $27.4 million for the year ended December 31, 2016 compared with net income of $23.3 million for the year ended December 31, 2015

▪ Segment net loss was $9.8 million for the fourth quarter of 2016 compared with net income of $17.6 million for the third quarter of 2016 and net income of $301 thousand for the fourth quarter of 2015

▪ Single family mortgage interest rate lock commitments were $8.62 billion for the year ended December 31, 2016, up 24.4% from $6.93 billion for the year ended December 31, 2015

▪ Single family mortgage interest rate lock commitments were $1.77 billion in the fourth quarter of 2016, down 34.3% from $2.69 billion in the third quarter of 2016 and up 31.8% from $1.34 billion in the fourth quarter of 2015

▪ Single family mortgage closed loan volume was $9.00 billion for the year ended December 31, 2016, up 24.7% from $7.21 billion for the year ended December 31, 2015

▪ Single family mortgage closed loan volume was $2.51 billion, in the fourth quarter of 2016, down 5.0% from $2.65 billion in the third quarter of 2016 and up 52.5% from $1.65 billion in the fourth quarter of 2015

▪ The portfolio of single family loans serviced for others increased to $19.49 billion at December 31, 2016, up 7.1% from $18.20 billion at September 30, 2016 and up 27.0% from $15.35 billion at December 31, 2015

▪ For the fourth quarter of 2016, HomeStreet was the number one originator by volume of purchase mortgages in the three state Pacific Northwest region and Puget Sound region, based on the combined originations of HomeStreet and loans originated through an affiliated business arrangement with WMS Series LLC

“While the most recent quarterly results were challenged by the mortgage banking segment, both from the seasonal low point in origination volumes and the added financial market disruption stemming from the unexpected and sustained increase in interest rates, 2016 was a year of significant progress toward our goal of becoming a significant west coast regional bank,” said Mark K. Mason, HomeStreet chairman, president, and CEO. “We completed the acquisitions of two branches and certain assets and liabilities in Oregon, a whole bank in California, and two branches in southern California. We made several key hires that strengthen our leadership in our commercial and consumer banking segment, opened six new retail deposit branches, and sixteen new lending centers. Finally, we positioned ourselves for future growth by strengthening and diversifying our capital base. These achievements during the year have positioned us for continued success this year and in the future.”

(1) For notes on non-GAAP financial measures, see pages 10 and 32

Consolidated Results of Operations

Net Interest Income

Net interest income in the fourth quarter of 2016 was $48.1 million, up$1.3 million, or 2.7%, from the third quarter of 2016 and up$8.3 million, or 21.0%, from the fourth quarter of 2015. The increase from the third quarter of 2016 was primarily due to asset mix shifts to higher yielding loan types. The increase from the fourth quarter of 2015 was primarily due to a result of growth in average interest earning assets. Net interest margin on a tax equivalent basis increased to 3.42% compared with 3.34% in the third quarter of 2016 and decreased compared to 3.61% in the fourth quarter of 2015. The increase in our net interest margin from the third quarter of 2016 was primarily due asset mix shifts to higher yielding loan types. The decrease in our net interest margin from the fourth quarter of 2015 is primarily due to the cost of our May 2016 issuance of $65 million in 6.5% senior notes due 2026.

Total average interest-earning assets in the fourth quarter of 2016 increased $18.2 million, or 0.3%, from the third quarter of 2016 primarily due to a 1.4% increase in average balances of loans held for investment, offset by a 1.9% decrease in average balances of investment securities. Total average interest-earning assets increased 28.3% from the fourth quarter of 2015 due to overall growth in the Company, both organically and through acquisition.

Noninterest Income

Noninterest income in the fourth quarter of 2016 was $73.2 million, down $38.5 million, or 34.5%, from $111.7 million in the third quarter of 2016 and up $7.8 million, or 11.9%, from $65.4 million in the fourth quarter of 2015. The decrease in noninterest income compared to the prior quarter was primarily due to a $24.8 million decrease in gain on mortgage origination and sale activities resulting from a 34.3% decrease in single family rate lock volume and a $14.5 million decrease in mortgage servicing income, partially offset by a $2.3 million increase in gain on sale of AFS securities. The increase in noninterest income compared to the fourth quarter of 2015 was primarily due to a $21.2 million increase in gain on mortgage origination and sale activities resulting from a 31.8% increase in single family rate lock volume and a $13.5 million decrease in mortgage servicing income.

Noninterest Expense

Noninterest expense for the fourth quarter of 2016 was $117.5 million compared with $114.4 million for the third quarter of 2016 and $92.7 million for the fourth quarter of 2015. Excluding acquisition-related expenses, noninterest expense for the fourth quarter of 2016 was $117.1 million compared with $113.9 millionfor the third quarter of 2016 and $92.0 million for the fourth quarter of 2015.

The increase in noninterest expense, excluding acquisition-related items, of $3.3 million, or 2.9%, from the third quarter of 2016 was primarily due to increased commissions on higher closed mortgage loan volume related to our commercial and consumer banking segment. The increase of $25.2 million, or 27.4%, from the fourth quarter of 2015 was primarily due to increased salary and related costs and other expenses related to growth of the Company, both organically and through acquisition activities.

As of December 31, 2016, we had 2,552 full-time equivalent employees, a 5.0% increase from 2,431 employees as of September 30, 2016, and a 19.3% increase from 2,139 employees as of December 31, 2015. During the twelve-month period ended December 31, 2016, we added 13 home loan centers, three commercial lending centers and 11 retail deposit branches, including six de novo branches, to bring our total home loan centers to 77, commercial loan centers to nine and our total retail deposit branches to 55.

Income Taxes

For the fourth quarter of 2016, income tax expense was $1.1 million compared with an income tax expense of $15.2 million for the third quarter of 2016 and $1.8 million for the fourth quarter of 2015.

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For the full year of 2016, income tax expense was $32.6 million with an effective tax rate of 35.9% (inclusive of discrete items) compared to an income tax expense of $15.6 million and an effective tax rate of 27.4% (inclusive of discrete items) for the full year of 2015.

Our effective income tax rate for 2016 differs from the Federal statutory tax rate of 35% primarily due to the impact of state income taxes, tax-exempt interest income and low-income housing tax credit investments.

Business Segments

Commercial and Consumer Banking Segment

Segment net income was $12.0 million in the fourth quarter of 2016 compared with net income of $10.1 million in the third quarter of 2016 and net income of $8.4 million in the fourth quarter of 2015. Excluding acquisition-related items, net of tax, in all periods, net income was $12.3 million in the fourth quarter of 2016, compared with net income of $10.5 million in the third quarter of 2016 and net income of $8.5 million in the fourth quarter of 2015.

The $1.8 million increase in segment net income, excluding acquisition-related items, net of tax, in the quarter compared to the third quarter of 2016 was due to a $3.3 million increase in noninterest income primarily related to higher gains on sale from both securities and single family HFI loans and a $1.3 million increase in net interest income resulting from higher average balances of interest-earning assets.

The $3.8 million increase in segment net income, excluding acquisition-related items, net of tax, in the quarter compared to the fourth quarter of 2015 was primarily due to a $7.9 million increase in net interest income resulting from higher average balances of interest-earning assets and a $4.3 million increase in noninterest income, partially offset by a $6.3 million increase in noninterest expense. These increases were the combined result of acquisition activities and organic growth.

We recorded a $350 thousand provision for credit losses in the fourth quarter of 2016 compared with a provision of $1.3 million in the third quarter of 2016 and $1.9 million in the fourth quarter of 2015. The decrease from the third quarter of 2016 was primarily due to a decline in specific reserves for impaired loans reserves. The decrease from the fourth quarter of 2015 was primarily due to lower loss rates which have steadily declined due to declining charge-offs.

Loans Held for Investment

Loans held for investment, net, were $3.82 billion at December 31, 2016, an increase of $54.8 million, or 1.5%, from September 30, 2016 and an increase of $626.3 million, or 19.6%, from December 31, 2015. Included in the increase from December 31, 2015 are $125.8 million of loans acquired from the Orange County Business Bank acquisition and $40.3 million of loans acquired from the acquisition of substantially all of the assets of The Bank of Oswego. New loan commitments in the fourth quarter of 2016 totaled $704.0 million and originations totaled $425.5 million. During the quarter, new commitments included $123.1 million of consumer loans, $266.8 million of commercial real estate and multifamily permanent loans, $28.9 million of commercial business loans and $285.3 million of construction loans, including $132.0 million in residential construction, $57.8 million in single family custom construction and $95.4 million in multifamily construction.

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Asset Quality

Nonaccrual loans decreased $5.4 million at December 31, 2016 compared to September 30, 2016. Total non-performing assets decreased $6.6 million at December 31, 2016 compared to September 30, 2016 primarily due to several large commercial nonperforming loan paydowns and a decrease in single family residential non-performing assets. Delinquent loans of $72.3 million, or 1.88% of total loans at December 31, 2016, increased from $71.7 million, or 1.89% of total loans at September 30, 2016. Excluding Federal Housing Administration ("FHA")-insured and Department of Veterans' Affairs ("VA")-guaranteed single family mortgage loans and Small Business Administration ("SBA")-guaranteed loans, delinquent loans were $21.6 million, or 0.58% of total such loans at December 31, 2016, compared to $28.4 million, or 0.77% of total such loans at September 30, 2016.

The allowance for loan losses was $34.0 million at December 31, 2016 remaining unchanged from $34.0 million at September 30, 2016 and compared to $29.3 million at December 31, 2015. The allowance for loan losses as a percentage of loans held for investment was 0.88%, 0.89% and 0.91% at December 31, 2016, September 30, 2016 and December 31, 2015, respectively. 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 1.00% at December 31, 2016, compared with 1.05% at September 30, 2016 and 1.10% at December 31, 2015. Net charge-offs in the fourth quarter of 2016 totaled $319 thousand, compared with net charge-offs of $18 thousand in the third quarter of 2016 and net recoveries of $872 thousand in the fourth quarter of 2015.

Deposits

Deposit balances were $4.43 billion at December 31, 2016 compared with $4.50 billion at September 30, 2016 and $3.23 billion at December 31, 2015. The increase from December 31, 2015 includes $126.5 million in deposits from the Orange County Business Bank acquisition, $104.5 million in deposits from the acquisition of two branches from Boston Private Bank and Trust and $48.1 million in deposits from the acquisition of two branches from The Bank of Oswego. The decrease from September 30, 2016 was primarily due to a decrease of $162.2 million, or 27.5% in non-interest bearing deposits associated with seasonal mortgage loan servicing activity, partially offset by an increase in transaction and savings deposits of $93.1 million, or 3.3%. Certificates of deposit decreased $5.7 million, or 0.5%, during the same period.

Noninterest Expense

Commercial and Consumer Banking segment noninterest expense was $35.5 million for the fourth quarter of 2016 compared with $32.2 million for the third quarter of 2016 and $29.5 million for the fourth quarter of 2015. Included in noninterest expense for these periods were acquisition-related expenses of $401 thousand, $512 thousand and $754 thousand, respectively. Excluding the acquisition-related expenses, noninterest expense increased primarily due to commissions on higher closed loan volume, as well as salary and related costs related to the continued growth of our commercial real estate and commercial business lending units and the expansion of our branch banking network. During 2016, we opened three commercial lending centers, added five retail deposit branches through mergers and branch acquisitions, two in California, two in Oregon and one in Eastern Washington, and opened six de novo retail deposit branches in the Seattle area, California and Hawaii.

Mortgage Banking Segment

Segment net loss was $9.8 million in the fourth quarter of 2016, compared with $17.6 million net income in the third quarter of 2016 and $301 thousand net income in the fourth quarter of 2015. The $27.3 million and $10.1 million decreases in net income (loss) from the third quarter of 2016 and the fourth quarter of 2015, respectively, were primarily due to lower net gain on mortgage loan origination and sale activities and lower mortgage servicing income.

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Mortgage Origination for Sale

Single family mortgage interest rate lock and purchase loan commitments, net of estimated fallout, totaled $1.77 billion in the fourth quarter of 2016, a decrease of $923.7 million, or 34.3%, from $2.69 billion in the third quarter of 2016 and an increase of $425.8 million, or 31.8%, from $1.34 billion in the fourth quarter of 2015. The decrease from the third quarter of 2016 reflects the result of the higher mortgage interest rate environment in the period. The increase from the fourth quarter of 2015 reflects the result of the impact of our expansion of mortgage production staff in existing and new markets.

Single family closed loan volume designated for sale was $2.51 billion in the fourth quarter of 2016, down$133.3 million, or 5.0%, from $2.65 billion in the third quarter of 2016 and up$865.9 million, or 52.5%, from $1.65 billion in the fourth quarter of 2015. At December 31, 2016, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $1.34 billion, compared with $2.02 billion at September 30, 2016 and $1.06 billion at December 31, 2015.

Gain on single family mortgage loan origination and sale activities in the fourth quarter of 2016 was $61.1 million compared with $88.9 million in the third quarter of 2016 and $43.5 million in the fourth quarter of 2015.

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 both the third and fourth quarter of 2016 was 334 basis points, compared with 319 basis points in the fourth quarter of 2015.

Mortgage Servicing

Single family mortgage servicing loss in the fourth quarter of 2016 was $1.0 million, comprised of $3.9 million of net servicing income and $(4.9) million of risk management results. Mortgage servicing income (loss) decreased $12.8 million, or 108.4%, from $11.8 million in the third quarter of 2016 and decreased $13.8 million, or 107.7%, from $12.8 million in the fourth quarter of 2015. The decreases were primarily due to lower risk management results due in part to the unexpected and sustained increase in interest rates resulting in asymmetrical changes in value between hedging derivatives and servicing valuations. This market dislocation reduced the value of our hedging derivatives to a greater extent that the value increase of our mortgage servicing assets during the quarter.

Single family mortgage servicing fees collected in the fourth quarter of 2016 increased $164 thousand, or 1.3%, from the third quarter of 2016 and increased $2.1 million, or 19.7%, from the fourth quarter of 2015. The increases were primarily due to higher average balances of loans serviced for others. Our portfolio of single family loans serviced for others was $19.49 billion at December 31, 2016 compared with $18.20 billion at September 30, 2016 and $15.35 billion at December 31, 2015.

Noninterest Expense

Mortgage Banking segment noninterest expense of $82.1 million decreased $172 thousand, or 0.2%, from the third quarter of 2016 and increased $18.9 million, or 29.9%, from the fourth quarter of 2015. The decrease from the third quarter of 2016 is primarily due to decreased commissions, salary and related costs on lower closed loan volume. The increase from the fourth quarter of 2015 is primarily due to increased commissions, salary and related costs on higher closed loan volume, the continued expansion of offices in new markets and increased costs resulting from new regulatory disclosure requirements for the mortgage industry.

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Conference Call

HomeStreet, Inc., the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday, January 24, 2017 at 1:00 p.m. EDT. Mark K. Mason, President and CEO, and Melba A. Bartels, Senior Executive Vice President and CFO, will discuss fourth quarter and year-end 2016 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/10098277 or may join the call by dialing 1-877-508-9589 (1-855-669-9657 in Canada) shortly before 1:00 p.m. EST.

A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10098277.

The information to be discussed in the conference call will be available on the company's web site after the market closes on Monday, January 23, 2017.

About HomeStreet

Now in its 96th year 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 commercial bank. HomeStreet offers consumer, commercial and private banking services, investment and insurance products and originates residential and commercial mortgages and construction loans for borrowers located in the Western United States and Hawaii. The bank has consistently received an “outstanding” rating under the federal Community Reinvestment Act (CRA). Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com.

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Forward-Looking Statements

This press release contains forward-looking statements concerning HomeStreet, Inc. and HomeStreet Bank and their operations, performance, financial conditions and likelihood of success, as well as plans and expectations for future actions and events. 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 political and economic conditions that impact our markets and our business, actions by the Federal Reserve Board and financial market conditions that affect 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, including laws and regulations that affect our compliance programs, 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. The results of our recent acquisitions may fall short of our financial and operational expectations. We may not realize the benefits expected from 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, 2016. These factors are updated in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and 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, although certain information related to the year ended December 31, 2015 has been derived from our audited financial statements for the year then ended as included in our 2015 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, 2015, as contained in the Company's Annual Report on Form 10-K for such fiscal year.

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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 quarter-to-date fiscal 2016 net income to the corresponding periods of fiscal 2015. We believe this information is useful to investors who are seeking to exclude the after-tax impact of acquisition-related expenses and a bargain purchase gain, both of which we recorded in connection with our mergers with Simplicity Bancorp on March 1, 2015 and OCBB on February 1, 2016 and with our acquisition of one retail deposit branch in Dayton, Washington on December 11, 2015, two retail deposit branches in Lake Oswego, Oregon on August 12, 2016 and two retail deposit branches in Southern California on November 11, 2016. We also have presented adjusted expenses, which eliminate costs incurred in connection with these acquisitions. Similarly, we have provided information about our balance sheet items, including total loans, total deposits and total assets, adjusted in each case to eliminate acquisition-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.

We also have disclosed tangible equity ratios, return on average tangible shareholders’ equity and tangible book value per share of common stock which are non-GAAP financial measures. Tangible common shareholders' equity is calculated by deducting goodwill and intangible assets (excluding mortgage servicing rights) from shareholders' equity. 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.

Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our results of core operations by excluding certain acquisition-related revenues and expenses that may not be indicative of our expected recurring results of operations. 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 on a normalized basis.

For more information on these non-GAAP financial measures, 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:
	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, 2016		Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015		Dec. 31, 2016		Dec. 31, 2015
Income statement data (for the period ended):
Net interest income	$	48,074	$	46,802	$	44,482	$	40,691	$	39,740	$	180,049	$	148,338
Provision for credit losses	350		1,250		1,100		1,400		1,900		4,100		6,100
Noninterest income	73,221		111,745		102,476		71,708		65,409		359,150		281,237
Noninterest expense	117,539		114,399		111,031		101,353		92,725		444,322		366,568
Acquisition-related expenses (included in noninterest expense)	401		512		1,025		5,198		754		7,136		16,564
Income before income taxes	3,406		42,898		34,827		9,646		10,524		90,777		56,907
Income tax expense	1,112		15,197		13,078		3,239		1,846		32,626		15,588
Net income	$	2,294	$	27,701	$	21,749	$	6,407	$	8,678	$	58,151	$	41,319
Basic income per common share	$	0.09	$	1.12	$	0.88	$	0.27	$	0.39	$	2.36	$	1.98
Diluted income per common share	$	0.09	$	1.11	$	0.87	$	0.27	$	0.39	$	2.34	$	1.96
Common shares outstanding	26,800,183		24,833,008		24,821,349		24,550,219		22,076,534		26,800,183		22,076,534
Weighted average number of shares outstanding:
Basic	25,267,909		24,811,169		24,708,375		23,676,506		22,050,022		24,615,990		20,818,045
Diluted	25,588,691		24,996,747		24,911,919		23,877,376		22,297,183		24,843,683		21,059,201
Shareholders' equity per share	$	23.48	$	23.60	$	22.55	$	21.55	$	21.08	$	23.48	$	21.08
Tangible book value per share (1)	$	22.33	$	22.45	$	21.38	$	20.37	$	20.16	$	22.33	$	20.16
Financial position (at period end):
Cash and cash equivalents	$	53,932	$	55,998	$	45,229	$	46,356	$	32,684	$	53,932	$	32,684
Investment securities	1,043,851		991,325		928,364		687,081		572,164		1,043,851		572,164
Loans held for sale	714,559		893,513		772,780		696,692		650,163		714,559		650,163
Loans held for investment, net	3,819,027		3,764,178		3,698,959		3,523,551		3,192,720		3,819,027		3,192,720
Mortgage servicing rights	245,860		167,501		147,266		148,851		171,255		245,860		171,255
Other real estate owned	5,243		6,440		10,698		7,273		7,531		5,243		7,531
Total assets	6,243,700		6,226,601		5,941,178		5,417,252		4,894,495		6,243,700		4,894,495
Deposits	4,429,701		4,504,560		4,239,155		3,823,027		3,231,953		4,429,701		3,231,953
Federal Home Loan Bank advances	868,379		858,923		878,987		883,574		1,018,159		868,379		1,018,159
Shareholders’ equity	$	629,284	$	586,028	$	559,603	$	529,132	$	465,275	$	629,284	$	465,275
Financial position (averages):
Investment securities	$	962,504	$	981,223	$	766,248	$	625,695	$	584,519	$	834,671	$	523,756
Loans held for investment	3,823,253		3,770,133		3,677,361		3,399,479		3,120,644		3,668,263		2,834,511
Total interest-earning assets	5,711,154		5,692,999		5,186,131		4,629,507		4,452,326		5,307,118		4,150,089
Total interest-bearing deposits	3,413,311		3,343,339		3,072,314		2,734,975		2,587,125		3,145,137		2,499,539
Federal Home Loan Bank advances	938,342		988,358		946,488		896,726		987,803		942,593		795,368
Federal funds purchased and securities sold under agreements to repurchase	951		2,242		—		—		100		803		11,397
Total interest-bearing liabilities	4,477,732		4,459,213		4,110,208		3,693,558		3,636,885		4,189,582		3,368,161
Shareholders’ equity	$	616,497	$	588,335	$	548,080	$	510,883	$	470,635	$	566,148	$	442,105
Other data:
Full-time equivalent employees (ending)	2,552		2,431		2,335		2,264		2,139		2,552		2,139

11

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

	Quarter Ended															Year Ended
(dollars in thousands, except share data)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016			Dec. 31, 2015
Financial performance:
Return on average shareholders’ equity(2)	1.49		%	18.83		%	15.87		%	5.02		%	7.38		%	10.27		%	9.35		%
Return on average shareholders’ equity, excluding acquisition-related expenses (net of tax) and bargain purchase gain(1)(2)	1.67		%	19.07		%	16.36		%	7.66		%	7.47		%	11.09		%	10.03		%
Return on average tangible shareholders' equity, excluding acquisition-related expenses (net of tax) and bargain purchase gain (1)	1.74		%	20.04		%	17.27		%	8.08		%	7.80		%	11.68		%	10.50		%
Return on average assets	0.15		%	1.79		%	1.54		%	0.51		%	0.71		%	1.01		%	0.91		%
Return on average assets, excluding acquisition-related expenses (net of tax) and bargain purchase gain(1)	0.16		%	1.81		%	1.59		%	0.78		%	0.72		%	1.09		%	0.97		%
Net interest margin (3)	3.42		%	3.34		%	3.48		%	3.55		%	3.61		%	3.45		%	3.63		%
Efficiency ratio (4)	96.90		%	72.15		%	75.55		%	90.17		%	88.18		%	82.40		%	85.33		%
Core efficiency ratio (1)(5)	96.57		%	71.83		%	74.86		%	85.55		%	87.79		%	81.08		%	82.97		%
Asset quality:
Allowance for credit losses	$	35,264		$	35,233		$	34,001		$	32,423		$	30,659		$	35,264		$	30,659
Allowance for loan losses/total loans(6)	0.88		%	0.89		%	0.88		%	0.88		%	0.91		%	0.88		%	0.91		%
Allowance for loan losses/nonaccrual loans	165.52		%	131.07		%	207.41		%	195.51		%	170.54		%	165.52		%	170.54		%
Total nonaccrual loans(7)(8)	$	20,542		$	25,921		$	15,745		$	16,012		$	17,168		$	20,542		$	17,168
Nonaccrual loans/total loans	0.53		%	0.68		%	0.42		%	0.45		%	0.53		%	0.53		%	0.53		%
Other real estate owned	$	5,243		$	6,440		$	10,698		$	7,273		$	7,531		$	5,243		$	7,531
Total nonperforming assets(8)	$	25,785		$	32,361		$	26,443		$	23,285		$	24,699		$	25,785		$	24,699
Nonperforming assets/total assets	0.41		%	0.52		%	0.45		%	0.43		%	0.50		%	0.41		%	0.50		%
Net charge-offs (recoveries)	$	319		$	18		$	(478	)	$	(364	)	$	(872	)	$	(505	)	$	(2,035	)

12

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

	Quarter Ended																Year Ended
(dollars in thousands, except share data)	Dec. 31, 2016				Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016				Dec. 31, 2015
Regulatory capital ratios for the Bank:
Tier 1 leverage capital (to average assets)	10.24		%	(9)	9.91		%	10.28		%	10.17		%	9.46		%	10.24		%	(9)	9.46		%
Tier 1 common equity risk-based capital (to risk-weighted assets)	14.02		%	(9)	13.61		%	13.52		%	13.09		%	13.04		%	14.02		%	(9)	13.04		%
Tier 1 risk-based capital (to risk-weighted assets)	14.02		%	(9)	13.61		%	13.52		%	13.09		%	13.04		%	14.02		%	(9)	13.04		%
Total risk-based capital (to risk-weighted assets)	14.80		%	(9)	14.41		%	14.33		%	13.93		%	13.92		%	14.80		%	(9)	13.92		%
Risk-weighted assets	$	4,527,861			$	4,442,518		$	4,218,707		$	3,846,203		$	3,490,539		$	4,527,861			$	3,490,539
Regulatory capital ratios for the Company:
Tier 1 leverage capital (to average assets)	9.87		%	(9)	9.52		%	9.88		%	10.50		%	9.95		%	9.87		%	(9)	9.95		%
Tier 1 common equity risk-based capital (to risk-weighted assets)	10.73		%	(9)	10.37		%	10.31		%	10.60		%	10.52		%	10.73		%	(9)	10.52		%
Tier 1 risk-based capital (to risk-weighted assets)	11.88		%	(9)	11.55		%	11.51		%	11.89		%	11.94		%	11.88		%	(9)	11.94		%
Total risk-based capital (to risk-weighted assets)	12.56		%	(9)	12.25		%	12.22		%	12.63		%	12.70		%	12.56		%	(9)	12.70		%
Risk-weighted assets	$	5,177,956			$	5,042,699		$	4,778,947		$	4,383,271		$	4,020,264		$	5,177,956			$	4,020,264

(1) Tangible equity ratios, tangible book value per share of common stock, return on average shareholders' equity, return on average assets and core efficiency ratios 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 excluding acquisition-related expenses (net of tax) and bargain purchase gain (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) Noninterest expense divided by total net revenue (net interest income and noninterest income), adjusted for acquisition-related items.

(6) Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses /total loans was 1.00%, 1.05%, 1.03%, 1.07% and 1.10% at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016 and December 31, 2015, respectively.

(7) Generally, loans are placed on nonaccrual status when they are 90 or more days past due, unless payment is insured by the FHA or guaranteed by the VA.

(8) Includes $1.9 million, $2.1 million, $2.6 million, $2.6 million and $1.2 million of nonperforming loans guaranteed by the SBA at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016 and December 31, 2015, respectively.

(9) Regulatory capital ratios at December 31, 2016 are preliminary.

13

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Operation

	Three Months Ended December 31,						%		Year Ended December 31,				%
(in thousands, except share data)	2016			2015			Change		2016		2015		Change
Interest income:
Loans	$	50,919		$	41,018		24	%	$	190,667	$	152,621	25	%
Investment securities	5,863			3,164			85		18,394		11,590		59
Other	80			256			(69	)	476		903		(47	)
	56,862			44,438			28		209,537		165,114		27
Interest expense:
Deposits	5,629			3,145			79		19,009		11,801		61
Federal Home Loan Bank advances	1,544			1,192			30		6,030		3,668		64
Federal funds purchased and securities sold under agreements to repurchase	2			—			NM		4		8		(50	)
Long-term debt	1,469			289			408		4,043		1,104		266
Other	144			72			100		402		195		106
	8,788			4,698			87		29,488		16,776		76
Net interest income	48,074			39,740			21		180,049		148,338		21
Provision for credit losses	350			1,900			(82	)	4,100		6,100		(33	)
Net interest income after provision for credit losses	47,724			37,840			26		175,949		142,238		24
Noninterest income:
Net gain on mortgage loan origination and sale activities	67,820			46,642			45		307,313		236,388		30
Mortgage servicing income	85			13,535			(99	)	35,940		24,431		47
Income (loss) from WMS Series LLC	(141		)	196			(172	)	2,333		1,624		44
Depositor and other retail banking fees	1,799			1,642			10		6,790		5,881		15
Insurance agency commissions	414			499			(17	)	1,619		1,682		(4	)
Gain on sale of investment securities available for sale	2,394			1,404			71		2,539		2,406		6
Bargain purchase gain	—			381			NM		—		7,726		NM
Other	850			1,110			(23	)	2,616		1,099		138
	73,221			65,409			12		359,150		281,237		28
Noninterest expense:
Salaries and related costs	81,739			60,349			35		303,354		240,587		26
General and administrative	15,996			15,699			2		63,206		56,821		11
Amortization of core deposit intangibles	530			514			3		2,166		1,924		13
Legal	180			895			(80	)	1,867		2,807		(33	)
Consulting	719			671			7		4,958		7,215		(31	)
Federal Deposit Insurance Corporation assessments	995			683			46		3,414		2,573		33
Occupancy	8,122			6,903			18		30,530		24,927		22
Information services	9,206			7,061			30		33,063		29,054		14
Net cost from operation and sale of other real estate owned	52			(50		)	(204	)	1,764		660		167
	117,539			92,725			27		444,322		366,568		21
Income before income taxes	3,406			10,524			(68	)	90,777		56,907		60
Income tax expense	1,112			1,846			(40	)	32,626		15,588		109
NET INCOME	$	2,294		$	8,678		(74	)	$	58,151	$	41,319	41
Basic income per share	$	0.09		$	0.39		(77	)	$	2.36	$	1.98	19
Diluted income per share	$	0.09		$	0.39		(77	)	$	2.34	$	1.96	19
Basic weighted average number of shares outstanding	25,267,909			22,050,022			15		24,615,990		20,818,045		18
Diluted weighted average number of shares outstanding	25,588,691			22,297,183			15		24,843,683		21,059,201		18

NM=not meaningful

14

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Operation

	Quarter Ended
(in thousands, except share data)	Dec. 31, 2016			Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015
Interest income:
Loans	$	50,919		$	49,752	$	47,262	$	42,734	$	41,018
Investment securities	5,863			5,476		4,002		3,053		3,164
Other	80			102		27		267		256
	56,862			55,330		51,291		46,054		44,438
Interest expense:
Deposits	5,629			5,362		4,449		3,569		3,145
Federal Home Loan Bank advances	1,544			1,605		1,462		1,419		1,192
Federal funds purchased and securities sold under agreements to repurchase	2			2		—		—		—
Long-term debt	1,469			1,440		823		311		289
Other	144			119		75		64		72
	8,788			8,528		6,809		5,363		4,698
Net interest income	48,074			46,802		44,482		40,691		39,740
Provision for credit losses	350			1,250		1,100		1,400		1,900
Net interest income after provision for credit losses	47,724			45,552		43,382		39,291		37,840
Noninterest income:
Net gain on mortgage loan origination and sale activities	67,820			92,600		85,630		61,263		46,642
Mortgage servicing income	85			14,544		13,182		8,129		13,535
Income (loss) from WMS Series LLC	(141		)	1,174		1,164		136		196
Depositor and other retail banking fees	1,799			1,744		1,652		1,595		1,642
Insurance agency commissions	414			441		370		394		499
Gain on sale of investment securities available for sale	2,394			48		62		35		1,404
Bargain purchase gain	—			—		—		—		381
Other	850			1,194		416		156		1,110
	73,221			111,745		102,476		71,708		65,409
Noninterest expense:
Salaries and related costs	81,739			79,164		75,167		67,284		60,349
General and administrative	15,996			14,949		16,739		15,522		15,699
Amortization of core deposit intangibles	530			579		525		532		514
Legal	180			639		605		443		895
Consulting	719			1,390		1,177		1,672		671
Federal Deposit Insurance Corporation assessments	995			919		784		716		683
Occupancy	8,122			7,740		7,513		7,155		6,903
Information services	9,206			7,876		8,447		7,534		7,061
Net (income) cost from operation and sale of other real estate owned	52			1,143		74		495		(50		)
	117,539			114,399		111,031		101,353		92,725
Income before income tax expense	3,406			42,898		34,827		9,646		10,524
Income tax expense	1,112			15,197		13,078		3,239		1,846
NET INCOME	$	2,294		$	27,701	$	21,749	$	6,407	$	8,678
Basic income per share	$	0.09		$	1.12	$	0.88	$	0.27	$	0.39
Diluted income per share	$	0.09		$	1.11	$	0.87	$	0.27	$	0.39
Basic weighted average number of shares outstanding	25,267,909			24,811,169		24,708,375		23,676,506		22,050,022
Diluted weighted average number of shares outstanding	25,588,691			24,996,747		24,911,919		23,877,376		22,297,183

15

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(in thousands, except share data)	Dec. 31, 2016			Dec. 31, 2015			% Change
Assets:
Cash and cash equivalents (including interest-earning instruments of $34,615 and $2,079)	$	53,932		$	32,684		65	%
Investment securities (includes $993,990 and $541,151 carried at fair value)	1,043,851			572,164			82
Loans held for sale (includes $656,334 and $632,273 carried at fair value)	714,559			650,163			10
Loans held for investment (net of allowance for loan losses of $34,001 and $29,278; includes $17,988 and $21,544 carried at fair value)	3,819,027			3,192,720			20
Mortgage servicing rights (includes $226,113 and $156,604 carried at fair value)	245,860			171,255			44
Other real estate owned	5,243			7,531			(30	)
Federal Home Loan Bank stock, at cost	40,347			44,342			(9	)
Premises and equipment, net	77,636			63,738			22
Goodwill	22,175			11,521			92
Other assets	221,070			148,377			49
Total assets	$	6,243,700		$	4,894,495		28
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	4,429,701		$	3,231,953		37
Federal Home Loan Bank advances	868,379			1,018,159			(15	)
Accounts payable and other liabilities	191,189			117,251			63
Long-term debt	125,147			61,857			102
Total liabilities	5,614,416			4,429,220			27
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, 26,800,183 shares and 22,076,534 shares	511			511			—
Additional paid-in capital	336,149			222,328			51
Retained earnings	303,036			244,885			24
Accumulated other comprehensive income (loss)	(10,412		)	(2,449		)	325
Total shareholders’ equity	629,284			465,275			35
Total liabilities and shareholders’ equity	$	6,243,700		$	4,894,495		28

16

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Financial Condition

(in thousands, except share data)	Dec. 31, 2016			Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015
Assets:
Cash and cash equivalents	$	53,932		$	55,998	$	45,229	$	46,356	$	32,684
Investment securities	1,043,851			991,325		928,364		687,081		572,164
Loans held for sale	714,559			893,513		772,780		696,692		650,163
Loans held for investment, net	3,819,027			3,764,178		3,698,959		3,523,551		3,192,720
Mortgage servicing rights	245,860			167,501		147,266		148,851		171,255
Other real estate owned	5,243			6,440		10,698		7,273		7,531
Federal Home Loan Bank stock, at cost	40,347			39,783		40,414		40,548		44,342
Premises and equipment, net	77,636			72,951		67,884		67,323		63,738
Goodwill	22,175			19,900		19,846		20,366		11,521
Other assets	221,070			215,012		209,738		179,211		148,377
Total assets	$	6,243,700		$	6,226,601	$	5,941,178	$	5,417,252	$	4,894,495
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	4,429,701		$	4,504,560	$	4,239,155	$	3,823,027	$	3,231,953
Federal Home Loan Bank advances	868,379			858,923		878,987		883,574		1,018,159
Accounts payable and other liabilities	191,189			151,968		138,307		119,662		117,251
Long-term debt	125,147			125,122		125,126		61,857		61,857
Total liabilities	5,614,416			5,640,573		5,381,575		4,888,120		4,429,220
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	336,149			276,844		276,303		273,168		222,328
Retained earnings	303,036			300,742		273,041		251,292		244,885
Accumulated other comprehensive income (loss)	(10,412		)	7,931		9,748		4,161		(2,449		)
Total shareholders’ equity	629,284			586,028		559,603		529,132		465,275
Total liabilities and shareholders’ equity	$	6,243,700		$	6,226,601	$	5,941,178	$	5,417,252	$	4,894,495

17

HomeStreet, Inc. and Subsidiaries

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

	Quarter Ended December 31,
	2016						2015
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: (1)
Cash and cash equivalents	$	43,145	$	79	0.73	%	$	31,429	$	12	0.15	%
Investment securities	962,504		6,806		2.82	%	584,519		3,915		2.68	%
Loans held for sale	882,252		8,329		3.78	%	715,734		7,155		4.01	%
Loans held for investment	3,823,253		42,620		4.43	%	3,120,644		33,894		4.32	%
Total interest-earning assets	5,711,154		57,834		4.03	%	4,452,326		44,976		4.03	%
Noninterest-earning assets (2)	535,092						418,571
Total assets	$	6,246,246					$	4,870,897
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	458,058	485		0.42	%	$	418,360	489		0.48	%
Savings accounts	301,477		259		0.34	%	293,498		253		0.34	%
Money market accounts	1,553,197		2,323		0.60	%	1,149,977		1,287		0.45	%
Certificate accounts	1,100,579		2,706		0.98	%	725,290		1,188		0.64	%
Total interest-bearing deposits	3,413,311		5,773		0.67	%	2,587,125		3,217		0.50	%
FHLB advances	938,342		1,544		0.65	%	987,803		1,192		0.48	%
Federal funds purchased and securities sold under agreements to repurchase	951		2		0.73	%	100		—		—	%
Long-term debt	125,128		1,469		4.67	%	61,857		290		1.83	%
Total interest-bearing liabilities	4,477,732		8,788		0.78	%	3,636,885		4,699		0.51	%
Noninterest-bearing liabilities	1,152,017						763,377
Total liabilities	5,629,749						4,400,262
Shareholders’ equity	616,497						470,635
Total liabilities and shareholders’ equity	$	6,246,246					$	4,870,897
Net interest income (3)			$	49,046					$	40,277
Net interest spread					3.25	%					3.52	%
Impact of noninterest-bearing sources					0.17	%					0.09	%
Net interest margin					3.42	%					3.61	%

(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 $972 thousand and $537 thousand for the quarters ended December 31, 2016 and December 31, 2015, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

18

HomeStreet, Inc. and Subsidiaries

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

	Year Ended December 31,
	2016						2015
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: (1)
Cash and cash equivalents	$	39,962	$	254	0.63	%	$	36,134	$	67	0.18	%
Investment securities	834,671		21,611		2.57	%	523,756		14,270		2.72	%
Loans held for sale	764,222		28,581		3.76	%	755,688		29,165		3.86	%
Loans held for investment	3,668,263		162,206		4.40	%	2,834,511		123,680		4.36	%
Total interest-earning assets	5,307,118		212,652		4.00	%	4,150,089		167,182		4.03	%
Noninterest-earning assets (2)	470,021						410,404
Total assets	$	5,777,139					$	4,560,493
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	450,838	1,950		0.43	%	$	317,510	1,492		0.46	%
Savings accounts	299,502		1,029		0.34	%	284,309		1,053		0.38	%
Money market accounts	1,370,256		7,344		0.53	%	1,122,321		4,930		0.44	%
Certificate accounts	1,024,541		9,086		0.88	%	775,398		4,501		0.58	%
Total interest-bearing deposits	3,145,137		19,409		0.61	%	2,499,538		11,976		0.48	%
FHLB advances	942,593		6,030		0.64	%	795,368		3,669		0.46	%
Federal funds purchased and securities sold under agreements to repurchase	803		6		0.40	%	11,397		29		0.31	%
Long-term debt	101,049		4,043		3.73	%	61,857		1,104		1.78	%
Total interest-bearing liabilities	4,189,582		29,488		0.70	%	3,368,160		16,778		0.50	%
Noninterest-bearing liabilities	1,021,409						750,228
Total liabilities	5,210,991						4,118,388
Shareholders’ equity	566,148						442,105
Total liabilities and shareholders’ equity	$	5,777,139					$	4,560,493
Net interest income (3)			$	183,164					$	150,404
Net interest spread					3.30	%					3.53	%
Impact of noninterest-bearing sources					0.15	%					0.10	%
Net interest margin					3.45	%					3.63	%

(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 $3.1 million and $2.1 million for the years ended December 31, 2016 and December 31, 2015, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

19

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment

	Quarter Ended															Year Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016			Dec. 31, 2015
Net interest income	$	40,637		$	39,339		$	38,393		$	35,646		$	32,759		$	154,015		$	120,020
Provision for credit losses	350			1,250			1,100			1,400			1,900			4,100			6,100
Noninterest income	13,087			9,771			8,181			4,643			8,778			35,682			29,367
Noninterest expense	35,482			32,170			34,103			36,630			29,542			138,385			122,598
Income before income taxes	17,892			15,690			11,371			2,259			10,095			47,212			20,689
Income tax expense	5,846			5,557			4,292			717			1,718			16,412			2,672
Net income	$	12,046		$	10,133		$	7,079		$	1,542		$	8,377		$	30,800		$	18,017
Net income, excluding acquisition-related expenses (net of tax) and bargain purchase gain (1)	$	12,307		$	10,466		$	7,745		$	4,920		$	8,486		$	35,438		$	21,035
Efficiency ratio (2)	66.04		%	65.51		%	73.22		%	90.92		%	71.12		%	72.95		%	82.07		%
Core efficiency ratio (1)(3)	65.30		%	64.46		%	71.02		%	78.02		%	69.95		%	69.19		%	74.85		%
Full-time equivalent employees (ending)	998			948			926			903			828			998			828
Net gain on loan origination and sale activities:
Multifamily DUS ® (4)	$	3,518		$	2,695		$	3,655		$	1,529		$	2,384		$	11,397		$	7,125
Other (5)	3,231			1,028			935			279			762			5,473			1,529
	$	6,749		$	3,723		$	4,590		$	1,808		$	3,146		$	16,870		$	8,654
Production volumes for sale to the secondary market:
Loan originations
Multifamily DUS ® (4)	$	94,725		$	45,497		$	146,535		$	39,094		$	53,279		$	325,851		$	204,838
Other (5)	3,008			2,913			5,528			—			—			11,449			—
Loans sold
Multifamily DUS ® (4)	85,594			58,484			109,394			47,970			63,779			301,442			204,744
Other (5)	$	75,000		$	50,255		$	31,813		$	—		$	—		$	157,068		$	29,313

(1) Commercial and Consumer Banking segment net income and core efficiency ratios, excluding acquisition-related items, 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 32 of this earnings release.

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

(3) Noninterest expense divided by total net revenue (net interest income and noninterest income), excluding acquisition-related items.

(4) Fannie Mae Multifamily Delegated Underwriting and Servicing Program (“DUS"^®) is a registered trademark of Fannie Mae.

(5) Includes multifamily loans originated from sources other than DUS^® and $67.0 million of single family portfolio loan sales for $2.8 million net gain during the fourth quarter of 2016.

20

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Commercial Mortgage Servicing Income

	Quarter Ended															Year Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016			Dec. 31, 2015
Servicing income, net:
Servicing fees and other	$	1,758		$	3,425		$	1,871		$	1,441		$	1,258		$	8,495		$	4,460
Amortization of multifamily MSRs	(689		)	(661		)	(648		)	(637		)	(551		)	(2,635		)	(1,992		)
Commercial mortgage servicing income	$	1,069		$	2,764		$	1,223		$	804		$	707		$	5,860		$	2,468

Commercial Loans Serviced for Others

(in thousands)	Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015
Commercial
Multifamily	$	1,108,040	$	1,055,181	$	1,023,505	$	946,191	$	924,367
Other	69,323		67,348		62,466		62,566		79,513
Total commercial loans serviced for others	$	1,177,363	$	1,122,529	$	1,085,971	$	1,008,757	$	1,003,880

Commercial Multifamily Capitalized Mortgage Servicing Rights

	Quarter Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015
Beginning balance	$	17,591		$	16,366		$	15,402		$	14,651		$	13,379
Originations	2,845			1,886			1,612			1,388			1,823
Amortization	(689		)	(661		)	(648		)	(637		)	(551		)
Ending balance	$	19,747		$	17,591		$	16,366		$	15,402		$	14,651
Ratio of MSR carrying value to related loans serviced for others	1.77		%	1.65		%	1.58		%	1.61		%	1.54		%
MSR servicing fee multiple (1)	3.84			3.70			3.62			3.54			3.42
Weighted-average note rate (loans serviced for others)	4.52		%	4.60		%	4.68		%	4.78		%	4.77		%
Weighted-average servicing fee (loans serviced for others)	0.46		%	0.45		%	0.44		%	0.45		%	0.45		%

(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.

21

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Investment Securities

(in thousands, except for duration data)	Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015
Available for sale:
Mortgage-backed securities:
Residential	$	177,074	$	152,236	$	139,074	$	82,395	$	68,101
Commercial	25,536		27,208		24,707		24,630		17,851
Municipal bonds	467,673		355,344		335,801		228,924		171,869
Collateralized mortgage obligations:
Residential	191,201		182,833		163,406		112,176		84,497
Commercial	70,764		120,259		116,099		83,822		79,133
Corporate debt securities	51,122		85,191		85,249		80,852		78,736
U.S. Treasury	10,620		26,004		26,020		41,026		40,964
Total available for sale	$	993,990	$	949,075	$	890,356	$	653,825	$	541,151
Held to maturity	49,861		42,250		38,008		33,256		31,013
	$	1,043,851	$	991,325	$	928,364	$	687,081	$	572,164
Weighted average duration in years
Available for sale	4.2		4.0		4.1		3.9		4.2

Five Quarter Loans Held for Investment

(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 30, 2016			Dec. 31, 2015
Consumer loans
Single family (1)	$	1,083,822		$	1,186,476		$	1,218,216		$	1,231,707		$	1,203,180
Home equity and other	359,874			338,155			309,204			275,405			256,373
	1,443,696			1,524,631			1,527,420			1,507,112			1,459,553
Commercial loans
Commercial real estate	871,563			810,346			762,170			661,932			600,703
Multifamily	674,219			562,272			562,728			543,887			426,557
Construction/land development	636,320			661,813			639,441			629,820			583,160
Commercial business	223,653			237,117			239,077			213,084			154,262
	2,405,755			2,271,548			2,203,416			2,048,723			1,764,682
	3,849,451			3,796,179			3,730,836			3,555,835			3,224,235
Net deferred loan fees and costs	3,577			1,974			779			(979		)	(2,237		)
	3,853,028			3,798,153			3,731,615			3,554,856			3,221,998
Allowance for loan losses	(34,001		)	(33,975		)	(32,656		)	(31,305		)	(29,278		)
	$	3,819,027		$	3,764,178		$	3,698,959		$	3,523,551		$	3,192,720

(1) Includes $18.0 million, $20.5 million, $22.4 million, $18.3 million and $21.5 million of single family loans that are carried at fair value at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016 and December 31, 2015, respectively.

22

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Loan Roll-forward

(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 30, 2016			Dec. 31, 2015
Loans - beginning balance	$	3,796,179		$	3,730,836		$	3,555,835		$	3,224,235		$	3,043,097
Originations	425,499			349,900			439,947			317,905			361,659
Purchases and advances	159,226			190,964			173,082			288,722			166,739
Payoffs, paydowns, sales and other	(530,223		)	(474,884		)	(437,080		)	(274,582		)	(346,565		)
Charge-offs and transfers to OREO	(1,230		)	(637		)	(948		)	(445		)	(695		)
Loans - ending balance	$	3,849,451		$	3,796,179		$	3,730,836		$	3,555,835		$	3,224,235
Net change - loans outstanding	$	53,272		$	65,343		$	175,001		$	331,600		$	181,138

Five Quarter Credit Quality Activity

Allowance for Credit Losses (roll-forward)

	Quarter Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015
Beginning balance	$	35,233		$	34,001		$	32,423		$	30,659		$	27,887
Provision for credit losses	350			1,250			1,100			1,400			1,900
Recoveries, net of (charge-offs)	(319		)	(18		)	478			364			872
Ending balance	$	35,264		$	35,233		$	34,001		$	32,423		$	30,659
Components:
Allowance for loan losses	$	34,001		$	33,975		$	32,656		$	31,305		$	29,278
Allowance for unfunded commitments	1,263			1,258			1,345			1,118			1,381
Allowance for credit losses	$	35,264		$	35,233		$	34,001		$	32,423		$	30,659
Allowance as a % of loans held for investment(1) (2)	0.88		%	0.89		%	0.88		%	0.88		%	0.91		%
Allowance as a % of nonaccrual loans	165.52		%	131.07		%	207.41		%	195.51		%	170.54		%

(1) Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses/total loans was 1.00%, 1.05%, 1.03%, 1.07% and 1.10% at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016 and December 31, 2015, respectively.

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

23

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Nonperforming Assets (NPAs) roll-forward

	Quarter Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015
Beginning balance	$	32,361		$	26,443		$	23,285		$	24,699		$	27,743
Additions	3,137			13,751			5,314			2,401			4,484
Reductions:
Recoveries, net of (charge-offs)	(319		)	(18		)	478			364			872
OREO sales	(2,001		)	(3,992		)	—			(159		)	(916		)
OREO writedowns and other adjustments	—			(1,160		)	—			(393		)	(127		)
Principal paydown, payoff advances and other adjustments	(6,207		)	(835		)	(2,588		)	(918		)	(5,925		)
Transferred back to accrual status	(1,186		)	(1,828		)	(46		)	(2,709		)	(1,432		)
Total reductions	(9,713		)	(7,833		)	(2,156		)	(3,815		)	(7,528		)
Net additions (reductions)	(6,576		)	5,918			3,158			(1,414		)	(3,044		)
Ending balance(1)	$	25,785		$	32,361		$	26,443		$	23,285		$	24,699

(1) Includes $1.9 million, $2.1 million, $2.6 million, $2.6 million and $1.2 million of nonperforming loans guaranteed by the SBA at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016 and December 31, 2015, respectively.

Five Quarter Nonperforming Assets

(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015
Nonaccrual loans	$	20,542		$	25,921		$	15,745		$	16,012		$	17,168
Other real estate owned	5,243			6,440			10,698			7,273			7,531
Total nonperforming assets(1)	$	25,785		$	32,361		$	26,443		$	23,285		$	24,699
Nonaccrual loans as a % of total loans	0.53		%	0.68		%	0.42		%	0.45		%	0.53		%
Nonperforming assets as a % of total assets	0.41		%	0.52		%	0.45		%	0.43		%	0.50		%

(1) Includes $1.9 million, $2.1 million, $2.6 million, $2.6 million and $1.2 million of nonperforming loans guaranteed by the SBA at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, respectively.

24

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Delinquencies

(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, 2016
Total loans held for investment	$	4,834		$	6,106		$	61,388		$	72,328		$	3,777,123		$	3,849,451
Less: FHA/VA loans(1)	3,773			4,219			40,846			48,838			55,393			104,231
Less: guaranteed portion of SBA loans(2)	—			—			1,935			1,935			5,652			7,587
Total loans, excluding FHA/VA and guaranteed portion of SBA loans	$	1,061		$	1,887		$	18,607		$	21,555		$	3,716,078		$	3,737,633
As a % of total loans, excluding FHA/VA and guaranteed portion of SBA loans	0.03		%	0.05		%	0.50		%	0.58		%	99.42		%	100.00		%
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
Less: guaranteed portion of SBA loans(2)	—			—			1,177			$	1,177		$	8,384		$	9,561
Total loans, excluding FHA/VA and guaranteed portion of SBA loans	$	2,741		$	1,642		$	16,009		$	20,392		$	3,094,422		$	3,114,814
As a % of total loans, excluding FHA/VA and guaranteed portion of SBA loans	0.09		%	0.05		%	0.51		%	0.65		%	99.35		%	100.00		%

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

(2) Represents that portion of loans whose repayments are guaranteed by the SBA.

25

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status

(in thousands)	Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015
Accrual (1)	$	76,581	$	81,270	$	83,818	$	84,595	$	84,411
Nonaccrual	4,874		5,680		4,112		3,686		3,931
Total TDRs	$	81,455	$	86,950	$	87,930	$	88,281	$	88,342

(1) Includes single family consumer loan balances insured by the FHA or guaranteed by the VA of $35.1 million, $37.1 million, $37.1 million, $32.9 million and $29.6 million at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016and December 31, 2015, respectively.

Troubled Debt Restructurings (TDRs) - Re-Defaults

	Quarter Ended
(in thousands)	Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015
Recorded investment of re-defaults(1)	$	653	$	1,173	$	2,460	$	271	$	—

(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.

26

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Deposits

(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015
Deposits by Product:
Noninterest-bearing accounts - checking and savings	$	537,651		$	499,106		$	504,988		$	452,267		$	370,523
Interest-bearing transaction and savings deposits:
NOW accounts	468,812			501,370			518,132			495,467			408,477
Statement savings accounts due on demand	301,361			303,872			300,070			300,952			292,092
Money market accounts due on demand	1,603,141			1,513,547			1,366,581			1,244,064			1,155,464
Total interest-bearing transaction and savings deposits	2,373,314			2,318,789			2,184,783			2,040,483			1,856,033
Total transaction and savings deposits	2,910,965			2,817,895			2,689,771			2,492,750			2,226,556
Certificates of deposit	1,091,558			1,097,263			1,139,249			901,559			732,892
Noninterest-bearing accounts - other	427,178			589,402			410,135			428,718			272,505
Total deposits	$	4,429,701		$	4,504,560		$	4,239,155		$	3,823,027		$	3,231,953
Percent of total deposits:
Noninterest-bearing accounts - checking and savings	12.1		%	11.1		%	11.9		%	11.8		%	11.5		%
Interest-bearing transaction and savings deposits:
NOW accounts	10.6			11.1			12.2			13.0			12.6
Statement savings accounts due on demand	6.8			6.7			7.1			7.9			9.0
Money market accounts due on demand	36.2			33.6			32.2			32.5			35.8
Total interest-bearing transaction and savings deposits	53.6			51.4			51.5			53.4			57.4
Total transaction and savings deposits	65.7			62.5			63.4			65.2			68.9
Certificates of deposit	24.6			24.4			26.9			23.6			22.7
Noninterest-bearing accounts - other	9.7			13.1			9.7			11.2			8.4
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

27

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment

	Quarter Ended															Year Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016			Dec. 31, 2015
Net interest income	$	7,437		$	7,463		$	6,089		$	5,045		$	6,981		$	26,034		$	28,318
Noninterest income	60,134			101,974			94,295			67,065			56,631			323,468			251,870
Noninterest expense	82,057			82,229			76,928			64,723			63,183			305,937			243,970
Income (loss) before income taxes	(14,486		)	27,208			23,456			7,387			429			43,565			36,218
Income tax (benefit) expense	(4,734		)	9,640			8,786			2,522			128			16,214			12,916
Net income (loss)	$	(9,752	)	$	17,568		$	14,670		$	4,865		$	301		$	27,351		$	23,302
Efficiency ratio (1)	121.44		%	75.14		%	76.63		%	89.76		%	99.33		%	87.54		%	87.07		%
Full-time equivalent employees (ending)	1,554			1,483			1,409			1,361			1,311			1,554			1,311
Production volumes for sale to the secondary market:
Single family mortgage closed loan volume (2)(3)	$	2,514,657		$	2,647,943		$	2,261,599		$	1,573,148		$	1,648,735		$	8,997,347		$	7,212,435
Single family mortgage interest rate lock commitments(2)	$	1,765,942		$	2,689,640		$	2,361,691		$	1,803,703		$	1,340,148		$	8,620,976		$	6,931,108
Single family mortgage loans sold(2)	$	2,651,022		$	2,489,415		$	2,173,392		$	1,471,583		$	1,830,768		$	8,785,412		$	7,007,337

(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.

28

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Gain on Sale to the Secondary Market

	Quarter Ended										Year Ended
(in thousands)	Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015		Dec. 31, 2016		Dec. 31, 2015
Gain on mortgage loan origination and sale activities:(1)
Single family:
Servicing value and secondary market gains(2)	$	52,719	$	79,946	$	73,685	$	54,127	$	37,727	$	260,477	$	205,513
Loan origination fees	8,352		8,931		7,355		5,328		5,769		29,966		22,221
Total mortgage banking gain on mortgage loan origination and sale activities(1)	$	61,071	$	88,877	$	81,040	$	59,455	$	43,496	$	290,443	$	227,734
Composite Margin (in basis points):
Servicing value and secondary market gains / interest rate lock commitments(3)	299		297		312		300		281		302		296
Loan origination fees / retail mortgage originations(4)	35		37		35		36		38		36		34
Composite Margin	334		334		347		336		319		338		330

(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 fees are stated as a percentage of mortgage originations from the retail channel and excludes mortgage loans purchased from WMS Series LLC.

29

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Servicing Income

	Quarter Ended															Year Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016			Dec. 31, 2015
Servicing income, net:
Servicing fees and other	$	12,792		$	12,628		$	11,531		$	11,089		$	10,683		$	48,040		$	37,737
Changes in fair value of single family MSRs due to modeled amortization (1)	(8,879		)	(8,925		)	(7,758		)	(7,257		)	(7,313		)	(32,819		)	(34,038		)
	3,913			3,703			3,773			3,832			3,370			15,221			3,699
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2)	56,893			4,915			(14,055		)	(28,214		)	14,779			19,539			6,555
Net gain (loss) from derivatives economically hedging MSR	(61,790		)	3,162			22,241			31,707			(5,321		)	(4,680		)	11,709
	(4,897		)	8,077			8,186			3,493			9,458			14,859			18,264
Mortgage Banking servicing income (loss)	$	(984	)	$	11,780		$	11,959		$	7,325		$	12,828		$	30,080		$	21,963

(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, 2016		Sept. 30, 2016		June 30, 2016		Mar. 31, 2016		Dec. 31, 2015
Single family
U.S. government and agency	$	18,931,835	$	17,593,901	$	16,433,411	$	15,302,363	$	14,628,596
Other	556,621		605,139		640,109		678,569		719,215
Total single family loans serviced for others	$	19,488,456	$	18,199,040	$	17,073,520	$	15,980,932	$	15,347,811

30

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Single Family Capitalized Mortgage Servicing Rights

	Quarter Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015
Beginning balance	$	149,910		$	130,900		$	133,449		$	156,604		$	132,701
Additions and amortization:
Originations	28,189			23,020			19,264			12,316			16,437
Purchases	—			—			—			—			—
Changes due to modeled amortization (1)	(9,365		)	(8,925		)	(7,758		)	(7,257		)	(7,313		)
Net additions and amortization	18,824			14,095			11,506			5,059			9,124
Changes in fair value due to changes in model inputs and/or assumptions (2)	57,379			4,915			(14,055		)	(28,214		)	14,779
Ending balance	$	226,113		$	149,910		$	130,900		$	133,449		$	156,604
Ratio of MSR carrying value to related loans serviced for others	1.16		%	0.82		%	0.77		%	0.84		%	1.03		%
MSR servicing fee multiple (3)	4.08			2.87			2.67			2.91			3.59
Weighted-average note rate (loans serviced for others)	3.95		%	4.00		%	4.05		%	4.07		%	4.08		%
Weighted-average servicing fee (loans serviced for others)	0.28		%	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.

31

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

Tangible shareholders' equity is calculated by deducting goodwill and intangible assets (excluding mortgage servicing rights) from shareholders' equity. Tangible 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 shareholders' equity by the number of common shares outstanding. The return on average tangible shareholders' equity is calculated by dividing net earnings available to common shareholders (annualized) by average tangible 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, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016			Dec. 31, 2015
Shareholders' equity	$	629,284		$	586,028		$	559,603		$	529,132		$	465,275		$	629,284		$	465,275
Less: Goodwill and other intangibles	(30,789		)	(28,573		)	(28,861		)	(29,126		)	(20,266		)	(30,789		)	(20,266		)
Tangible shareholders' equity	$	598,495		$	557,455		$	530,742		$	500,006		$	445,009		$	598,495		$	445,009
Common shares outstanding	26,800,183			24,833,008			24,821,349			24,550,219			22,076,534			26,800,183			22,076,534
Book value per share	$	23.48		$	23.60		$	22.55		$	21.55		$	21.08		$	23.48		$	21.08
Impact of goodwill and other intangibles	(1.15		)	(1.15		)	(1.17		)	(1.18		)	(0.92		)	(1.15		)	(0.92		)
Tangible book value per share	$	22.33		$	22.45		$	21.38		$	20.37		$	20.16		$	22.33		$	20.16
Average shareholders' equity	$	616,497		$	588,335		$	548,080		$	510,883		$	470,635		$	566,148		$	442,105
Less: Average goodwill and other intangibles	(29,943		)	(28,769		)	(28,946		)	(26,645		)	(20,195		)	(28,580		)	(19,668		)
Average tangible shareholders' equity	$	586,554		$	559,566		$	519,134		$	484,238		$	450,440		$	537,568		$	422,437
Return on average shareholders’ equity	1.49		%	18.83		%	15.87		%	5.02		%	7.38		%	10.27		%	9.35		%
Impact of goodwill and other intangibles	0.07		%	0.97		%	0.89		%	0.27		%	0.33		%	0.55		%	0.43		%
Return on average tangible shareholders' equity	1.56		%	19.80		%	16.76		%	5.29		%	7.71		%	10.82		%	9.78		%
Return on average shareholders' equity	1.49		%	18.83		%	15.87		%	5.02		%	7.38		%	10.27		%	9.35		%
Impact of acquisition-related expenses (net of tax) and bargain purchase gain	0.18		%	0.24		%	0.49		%	2.64		%	0.09		%	0.82		%	0.68		%
Return on average shareholders' equity, excluding acquisition-related expenses (net of tax) and bargain purchase gain	1.67		%	19.07		%	16.36		%	7.66		%	7.47		%	11.09		%	10.03		%
Return on average assets	0.15		%	1.79		%	1.54		%	0.51		%	0.71		%	1.01		%	0.91		%
Impact of acquisition-related expenses (net of tax) and bargain purchase gain	0.01		%	0.02		%	0.05		%	0.27		%	0.01		%	0.08		%	0.06		%
Return on average assets, excluding acquisition-related expenses (net of tax) and bargain purchase gain	0.16		%	1.81		%	1.59		%	0.78		%	0.72		%	1.09		%	0.97		%

32

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding acquisition-related items, net of tax, noninterest income and noninterest expense, excluding acquisition-related items, diluted earnings per share, excluding acquisition-related items, net of tax, and Commercial and Consumer Banking segment net income, excluding acquisition-related items, net of tax. We refer to these measurements as “Core” measurements. 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, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016			Dec. 31, 2015
Consolidated results:
Net income	$	2,294		$	27,701		$	21,749		$	6,407		$	8,678		$	58,151		$	41,319
Impact of acquisition-related expenses (net of tax) and bargain purchase gain	261			333			666			3,378			109			4,638			3,018
Net income, excluding acquisition-related expenses (net of tax) and bargain purchase gain	$	2,555		$	28,034		$	22,415		$	9,785		$	8,787		$	62,789		$	44,337
Net interest income	$	48,074		$	46,802		$	44,482		$	40,691		$	39,740		$	180,049		$	148,338
Noninterest income	73,221			111,745			102,476			71,708			65,409			359,150			281,237
Impact of bargain purchase gain	—			—			—			—			(381		)	—			(7,726		)
Noninterest income, excluding bargain purchase gain	$	73,221		$	111,745		$	102,476		$	71,708		$	65,028		$	359,150		$	273,511
Noninterest expense	$	117,539		$	114,399		$	111,031		$	101,353		$	92,725		$	444,322		$	366,568
Impact of acquisition-related expenses	(401		)	(512		)	(1,025		)	(5,198		)	(754		)	(7,136		)	(16,564		)
Noninterest expense, excluding acquisition-related expenses	$	117,138		$	113,887		$	110,006		$	96,155		$	91,971		$	437,186		$	350,004
Efficiency ratio	96.90		%	72.15		%	75.55		%	90.17		%	88.18		%	82.40		%	85.33		%
Impact of acquisition-related expenses and bargain purchase gain	(0.33		)%	(0.32		)%	(0.69		)%	(4.62		)%	(0.39		)%	(1.32		)%	(2.36		)%
Core efficiency ratio, excluding acquisition-related expenses and bargain purchase gain	96.57		%	71.83		%	74.86		%	85.55		%	87.79		%	81.08		%	82.97		%
Diluted earnings per common share	$	0.09		$	1.11		$	0.87		$	0.27		$	0.39		$	2.34		$	1.96
Impact of acquisition-related expenses (net of tax) and bargain purchase gain	0.01			0.01			0.03			0.14			—			0.19			0.15
Diluted earnings per common share, excluding acquisition-related expenses (net of tax) and bargain purchase gain	$	0.10		$	1.12		$	0.90		$	0.41		$	0.39		$	2.53		$	2.11
Return on average tangible shareholders' equity	1.56		%	19.80		%	16.76		%	5.29		%	7.71		%	10.82		%	9.78		%
Impact of acquisition-related expenses (net of tax) and bargain purchase gain	0.18		%	0.24		%	0.51		%	2.79		%	0.09		%	0.86		%	0.72		%
Return on average tangible shareholders' equity, excluding acquisition-related expenses (net of tax) and bargain purchase gain	1.74		%	20.04		%	17.27		%	8.08		%	7.80		%	11.68		%	10.50		%

33

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

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

	Quarter Ended															Year Ended
(in thousands)	Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			Mar. 31, 2016			Dec. 31, 2015			Dec. 31, 2016			Dec. 31, 2015
Commercial and Consumer Banking Segment results:
Net income	$	12,046		$	10,133		$	7,079		$	1,542		$	8,377		$	30,800		$	18,017
Impact of acquisition-related expenses (net of tax) and bargain purchase gain	261			333			666			3,378			109			4,638			3,018
Net income, excluding acquisition-related expenses (net of tax) and bargain purchase gain	$	12,307		$	10,466		$	7,745		$	4,920		$	8,486		$	35,438		$	21,035
Net interest income	$	40,637		$	39,339		$	38,393		$	35,646		$	32,759		$	154,015		$	120,020
Noninterest income	$	13,087		$	9,771		$	8,181		$	4,643		$	8,778		$	35,682		$	29,367
Impact of bargain purchase gain	—			—			—			—			(381		)	—			$	(7,726	)
Noninterest income, excluding bargain purchase gain	$	13,087		$	9,771		$	8,181		$	4,643		$	8,397		$	35,682		$	21,641
Noninterest expense	$	35,482		$	32,170		$	34,103		$	36,630		$	29,542		$	138,385		$	122,598
Impact of acquisition-related expenses	(401		)	(512		)	(1,025		)	(5,198		)	(754		)	(7,136		)	(16,564		)
Noninterest expense, excluding acquisition-related expenses	$	35,081		$	31,658		$	33,078		$	31,432		$	28,788		$	131,249		$	106,034
Efficiency ratio	66.04		%	65.51		%	73.22		%	90.92		%	71.12		%	72.95		%	82.07		%
Impact of acquisition-related expenses and bargain purchase gain	(0.74		)%	(1.05		)%	(2.20		)%	(12.90		)%	(1.17		)%	(3.76		)%	(7.22		)%
Core efficiency ratio, excluding acquisition-related expenses and bargain purchase gain	65.30		%	64.46		%	71.02		%	78.02		%	69.95		%	69.19		%	74.85		%

34