HomeStreet (HMST) 8-K HomeStreet, Inc. Reports Record Quarterly Net Income in Commercial and Consumer Banking Segment

HomeStreet, Inc. Reports Record Quarterly Net Income in Commercial and Consumer Banking Segment

Third Quarter 2017 Consolidated Net Income of $13.8 million, or $0.51 per Diluted Share

SEATTLE – October 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 $13.8 million, or $0.51 per diluted share, for the quarter ended September 30, 2017, compared with net income of $11.2 million, or $0.41 per diluted share for the quarter ended June 30, 2017, and $27.7 million, or $1.11 per diluted share for the quarter ended September 30, 2016. Core net income^(1), which for the third quarter of 2017 excludes $2.5 million in restructuring costs, net of tax and $229 thousand in acquisition-related costs, net of tax, for the quarter ended September 30, 2017, was $16.6 million, or $0.61 per diluted share, compared with core net income⁽¹⁾ of $11.4 million, or $0.42 per diluted share, for the quarter ended June 30, 2017, and $28.0 million, or $1.12per diluted share, for the quarter ended September 30, 2016.

Key developments and results of Q3 2017 include:

▪ Continued our strong performance in Commercial and Consumer Banking segment with record quarterly net income of $14.0 million compared with $9.4 million for the second quarter of 2017 and $10.1 million in the third quarter of 2016

▪ Implemented a restructuring plan in our Mortgage Banking segment to reduce our cost structure to align with market conditions, resulting in charges of $3.9 million, comprised of $3.3 million in real estate related charges and $545 thousand in severance costs

▪ Placed 80th on Fortune Magazine's 100 Fastest Growing Companies list of 2017

▪ Completed the purchase of one retail deposit branch and related deposits in El Cajon, California

▪ Grew loans held for investment to $4.34 billion, an increase of $155.8 million, or 4%, from $4.18 billion at June 30, 2017

▪ Grew total assets to $6.80 billion, an increase of $209.8 million, or 3%, from $6.59 billion at June 30, 2017

Consolidated results:

▪ Annualized return on average shareholders' equity was 8.10% in the third quarter of 2017 compared with 6.71% in the second quarter of 2017 and 18.83% in the third quarter of 2016

▪ Annualized return on average shareholders' equity⁽¹⁾ excluding restructuring-related and acquisition-related expenses, net of tax, was 9.71% in the third quarter of 2017 compared with 6.82% in the second quarter of 2017 and 19.07% in the third quarter of 2016

▪ Average interest-earning assets of $6.10 billion in the third quarter of 2017 increased $260.1 million, or 4%, from $5.84 billion in the second quarter of 2017 and increased $405.1 million, or 7%, from $5.69 billion in the third quarter of 2016

(1) For notes on non-GAAP financial measures, see pages 12 and 33.

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▪ Net interest income was $50.8 million in the third quarter of 2017 compared with $46.9 million in the second quarter of 2017 and $46.8 million in the third quarter of 2016

▪ Noninterest income was $83.9 million in the third quarter of 2017 compared with $81.0 million in the second quarter of 2017 and $111.7 million in the third quarter of 2016

Segment results:

◦ Commercial and Consumer Banking

▪ Segment net income of $14.0 million for the current quarter compared with $9.4 million for the second quarter of 2017 and $10.1 million in the third quarter of 2016

▪ Net interest income of $45.3 million for the current quarter compared with $42.4 million for the second quarter of 2017 and $39.3 million in the third quarter of 2016

▪ Noninterest income of $12.0 million for the current quarter compared with $8.3 million for the second quarter of 2017 and $9.8 million in the third quarter of 2016

▪ Deposits of $4.67 billion decreased $77.3 million, or 2%, from June 30, 2017 and increased $240.8 million, or 5% from December 31, 2016

▪ Nonperforming assets were $18.8 million, or 0.28% of total assets at September 30, 2017, compared to $20.1 million, or 0.30% of total assets at June 30, 2017 and $25.8 million, or 0.41% of total assets at December 31, 2016

▪ Past due loans excluding those with U.S. government credit support were $18.4 million, or 0.44% of total such loans at September 30, 2017, compared to $18.4 million, or 0.45% of total such loans at June 30, 2017 and $21.6 million, or 0.58% of total such loans at December 31, 2016

◦Mortgage Banking

▪ Segment net loss was $123 thousand for the current quarter compared with net income of $1.8 million in the second quarter of 2017 and net income of $17.6 million for the third quarter of 2016

▪ Core net income⁽¹⁾ for the segment was $2.4 million for the current quarter compared with core net income of $1.8 million in the second quarter of 2017 and core net income of $17.6 million for the third quarter of 2016

• Net interest income of $5.5 million for the current quarter compared with $4.4 million for the second quarter of 2017 and $7.5 million in the third quarter of 2016

▪ Noninterest income of $71.9 million for the current quarter compared with $72.7 million for the second quarter of 2017 and $102.0 million in the third quarter of 2016

▪ Single family mortgage interest rate lock commitments were $1.87 billion in the third quarter of 2017, down 4% from $1.95 billion in the second quarter of 2017 and down 30% from $2.69 billion in the third quarter of 2016

(1) For notes on non-GAAP financial measures, see pages 12 and 33

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▪ Single family mortgage closed loan volume was $2.03 billion in the third quarter of 2017, up 1% from $2.01 billion in the second quarter of 2017 and down 23% from $2.65 billion in the third quarter of 2016

▪ The composite margin increased to 342 basis points in the third quarter of 2017 from 331 basis points in the second quarter of 2017 and 334 basis points in the third quarter of 2016

▪ The portfolio of single family loans serviced for others increased to $21.89 billion at September 30, 2017, up 4% from $21.10 billion at June 30, 2017 and up 12% from $19.49 billion at December 31, 2016

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“HomeStreet delivered solid financial results in a challenging environment during the third quarter of 2017,” said Mark K. Mason, Chairman, President, and Chief Executive Officer. “Higher interest rates reduced refinance mortgage originations and the ongoing housing shortages in our primary markets have reduced purchase mortgage originations. In response, we instituted a restructuring plan in the Mortgage Banking segment to reduce our cost structure to better align with market conditions. Restructuring initiatives included a reduction in staffing; production office closures, consolidations, and space reductions affecting nine single family lending centers; and a streamlining of the single family lending senior leadership team. These actions resulted in approximately $3.9 million of pre-tax charges recorded in the quarter. We expect these actions to result in annual pre-tax expense savings of approximately $13.2 million beginning in the fourth quarter. We believe that these restructuring steps will align our cost structure with our current production opportunities and return the profitability of the Mortgage Banking segment to the levels that we expect. We continue to focus on achieving additional branch, product, and operating efficiencies to reduce volatility and improve overall profitability going forward.

“Our Mortgage Banking segment remains an important part of HomeStreet’s heritage and business going forward,” Mason continued. “Our retail focus, broad product mix, and competitive pricing continue to attract some of the best retail originators in our markets and reinforce our position as the top purchase mortgage originator in the Pacific Northwest during the third quarter of 2017.”

“We are happy to report that our Commercial and Consumer Banking segment achieved $14.0 million of net income for the third quarter, a record for the segment. Loans held for investment grew by 4% during the quarter contributing to strong growth in net interest income; and $227.6 million of SBA and commercial real estate loans sold during the quarter contributed to a sizeable increase in noninterest income. Additionally, during the quarter we closed on the acquisition of a retail deposit branch in El Cajon, California, a fast growing suburb in eastern San Diego County bringing our total branches to four in San Diego County and 16 in Southern California. Asset quality continues to be strong with nonperforming assets declining to 0.28% of total assets, representing the lowest absolute and relative levels of problem assets since 2006.”

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Consolidated Results of Operations

Net Income

Net income in the third quarter of 2017 was $13.8 million, up $2.6 million, or 23% from the second quarter of 2017 and down $13.9 million, or 50%, from the third quarter of 2016. The increase in net income from the second quarter of 2017 was primarily due to higher net interest income resulting from growth in both loans held for sale and loans held for investment, together with higher gain on sale income driven by higher SBA and commercial real estate loan sales volume. The decrease in net income from the third quarter of 2016 was primarily the result of lower income in the Mortgage Banking segment driven by a decrease in mortgage origination volume as well as costs relating to the restructuring of this segment.

Net Interest Income

Net interest income in the third quarter of 2017 was $50.8 million, up $4.0 million, or 8% from the second quarter of 2017 and up $4.0 million, or 9%, from the third quarter of 2016. The increases in net interest income from the second quarter of 2017 and the third quarter of 2016 were primarily due to growth in average earning assets.

Our net interest margin, on a tax equivalent basis, increased 11 basis points to 3.40% compared with 3.29% in the second quarter of 2017 and increased six basis points from 3.34% in the third quarter of 2016. The increases from both periods were primarily due to changes in the composition of, and yield on, earning assets, which increased more than borrowing costs.

Total average interest-earning assets in the third quarter of 2017 increased $260.1 million, or 4%, from the second quarter of 2017 primarily due to increases in loans held for investment. Total average interest-earning assets increased 7% from the third quarter of 2016 due to overall growth in the Company, both organically and through acquisition.

Noninterest Income

Noninterest income in the third quarter of 2017 was $83.9 million, up $2.9 million, or 4%, from $81.0 million in the second quarter of 2017 and down $27.9 million, or 25%, from $111.7 million in the third quarter of 2016. The increase in noninterest income compared to the second quarter of 2017 was primarily due to a $5.1 million increase in gain on sale income driven by higher SBA and commercial real estate loan sales volume. The decrease in noninterest income compared to the third quarter of 2016 was primarily due to a $21.6 million decrease in gain on loan origination and sale activities resulting from a 30% decrease in single family rate lock volume.

Noninterest Expense

Noninterest expense for the third quarter of 2017 was $114.7 million compared with $111.2 million for the second quarter of 2017 and $114.4 million for the third quarter of 2016. Excluding charges related to the Mortgage Banking restructuring plan and acquisition-related expenses, noninterest expense for the third quarter of 2017 was $110.5 million compared with $111.0 millionfor the second quarter of 2017 and $113.9 million for the third quarter of 2016.

The decrease in noninterest expense, excluding restructuring-related and acquisition-related items, of $3.4 million, or 3.0%, from the third quarter of 2016 was primarily due to decreased commissions on lower closed loan volume.

As of September 30, 2017, we had 2,463 full-time equivalent employees, a 3% net decrease from 2,542 employees as of June 30, 2017, and a 1% net increase from 2,431 employees as of September 30, 2016. The decrease in employees compared to the prior quarter is primarily due to a reduction in force in our Mortgage Banking segment related to a decrease in single family mortgage origination volume. During the quarter

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ended September 30, 2017, we closed or consolidated five single family lending centers as part of our mortgage banking restructuring, and added one de novo retail branch, bringing our total retail deposit branches to 58, our primary stand-alone home loan centers to 45 and our primary commercial loan centers to seven.

Income Taxes

For the third quarter of 2017, income tax expense was $5.9 million compared with income tax expense of $4.9 million for the second quarter of 2017 and $15.2 million for the third quarter of 2016.

Our effective income tax rate of 30.02% for third quarter of 2017 differs from the Federal statutory tax rate of 35% primarily due to the impact of state income taxes, tax-exempt interest income, bank-owned life insurance ("BOLI"), low-income housing tax credit investments and tax expense accrual true-up for prior quarters.

Business Segments

Commercial and Consumer Banking Segment

Commercial and Consumer Banking Segment net income was $14.0 million in the third quarter of 2017 compared with net income of $9.4 million in the second quarter of 2017 and net income of $10.1 million in the third quarter of 2016.

The $4.5 million increase in segment net income in the third quarter of 2017 compared to the second quarter of 2017 was primarily due to a $3.7 million increase in noninterest income related to an increase in gain on sale income driven by higher SBA and commercial real estate loan sales volume and a $2.9 million increase in net interest income resulting from higher average balances of interest earning assets, partially offset by a $529 thousand increase in noninterest expense which was primarily the result of organic growth.

The $3.8 million increase in segment net income compared to the third quarter of 2016 was primarily due to a $6.0 million increase in net interest income resulting from higher average balances of interest-earning assets and a $2.2 million increase in noninterest income, partially offset by a $5.0 million increase in noninterest expense. These increases were primarily the result of organic growth.

We recorded a $250 thousand provision for credit losses in the third quarter of 2017 compared to a provision of $500 thousand in the second quarter of 2017 and $1.3 million in the third quarter of 2016. The decrease from the second quarter of 2017 was primarily due to continued improvements in credit quality reflected in the qualitative reserves and lower expected future loss rates combined with $475 thousand of net recoveries. The decrease from the third quarter of 2016 was primarily due to higher net recoveries in the third quarter of 2017 and lower expected future loss rates compared to the third quarter of 2016.

Loans Held for Investment

Loans held for investment, net of reserves, were $4.31 billion at September 30, 2017, an increase of $156.8 million, or 4%, from June 30, 2017 and an increase of $549.0 million, or 15%, from September 30, 2016. Included in the increase from September 30, 2016 were $40.3 million of loans acquired from the acquisition of the banking assets of The Bank of Oswego. New loan commitments in the third quarter of 2017 totaled $805.4 million and originations totaled $515.4 million. During the quarter, new commitments included $269.1 million of consumer loans, $207.3 million of commercial real estate and multifamily permanent loans, $29.1 million of commercial business loans and $299.8 million of construction loans, including $166.6 million in residential construction, $61.0 million in single family custom construction and $72.2 million in multifamily construction.

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Asset Quality

Nonaccrual loans were $15.1 million at September 30, 2017 a decrease of $0.4 million compared to $15.5 million at June 30, 2017. Total non-performing assets decreased $1.2 million at September 30, 2017 compared to June 30, 2017 primarily due to payoffs and payments. Delinquent loans of $69.4 million, or 1.60% of total loans at September 30, 2017, increased from $65.2 million, or 1.56% of total loans at June 30, 2017. 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 $18.4 million, or 0.44% of total non-guaranteed loans at September 30, 2017, compared to $18.4 million, or 0.45% of total non-guaranteed loans at June 30, 2017.

The allowance for loan losses was $37.1 million at September 30, 2017 compared to $36.1 million at June 30, 2017 and $34.0 million at September 30, 2016. The allowance for loan losses as a percentage of loans held for investment was 0.85%, 0.86% and 0.89% at September 30, 2017, June 30, 2017 and September 30, 2016, respectively. Excluding acquired loans, the allowance for loan losses as a percentage of total loans was 0.93% at September 30, 2017, compared with 0.95% at June 30, 2017 and 1.05% at September 30, 2016. Net recoveries in the third quarter of 2017 totaled $475 thousand, compared with net recoveries of $928 thousand in the second quarter of 2017 and net charge-offs of $18 thousand in the third quarter of 2016.

Deposits

Deposit balances were $4.67 billion at September 30, 2017 compared with $4.75 billion at June 30, 2017 and $4.50 billion at September 30, 2016. The increase from September 30, 2016 includes $104.5 million in deposits from the acquisition of two branches in Southern California in the fourth quarter of 2016 and $21.5 million in deposits from the acquisition of a branch in El Cajon, California in the third quarter of 2017. The decrease of $77.3 million from June 30, 2017 was primarily due to fewer deposit promotions during the third quarter and several large depositors withdrawing funds to meet seasonal cash needs.

Noninterest Expense

Commercial and Consumer Banking segment noninterest expense was $37.2 million for the third quarter of 2017 compared with $36.6 million for the second quarter of 2017 and $32.2 million for the third quarter of 2016. Included in noninterest expense for these periods were acquisition-related expenses of $353 thousand, $177 thousand and $512 thousand, respectively. Excluding acquisition-related expenses, noninterest expense increased primarily due to higher salary and related costs, general and administrative costs and information service costs all related to the continued growth of personnel in the Commercial and Consumer Banking segment, our commercial real estate and commercial business lending units, and the expansion of our branch banking network.

Mortgage Banking Segment

Mortgage Banking segment net loss was $123 thousand in the third quarter of 2017, compared with a $1.8 million net income in the second quarter of 2017 and $17.6 million net income in the third quarter of 2016. Excluding restructuring-related items, net of tax, in all periods, net income was $2.4 million in the third quarter of 2017, compared with $1.8 million in the second quarter of 2017 and $17.6 million in the third quarter of 2016. The $17.7 million decrease in net income from the third quarter of 2016 was primarily due to lower gain on loan origination and sale activities from $817.0 million lower rate locks and lower loan servicing income in addition to the restructuring charges noted above.

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Mortgage Origination for Sale

Single family mortgage interest rate lock and purchase loan commitments, net of estimated fallout, totaled $1.87 billion in the third quarter of 2017, a decrease of $77.8 million, or 4%, from $1.95 billion in the second quarter of 2017 and a decrease of $817.0 million, or 30%, from $2.69 billion in the third quarter of 2016. The decrease from both periods reflects the impact of a decreased supply of available housing in our markets, which limited our ability to originate purchase mortgages. The decrease from the third quarter of 2016 also reflects the impact of higher mortgage interest rates, which reduced the volume of refinance activity in the period.

Single family closed loan volume designated for sale was $2.03 billion in the third quarter of 2017, up$23.6 million, or 1%, from $2.01 billion in the second quarter of 2017 and down$613.2 million, or 23%, from $2.65 billion in the third quarter of 2016. At September 30, 2017, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $1.45 billion, compared with $1.46 billion at June 30, 2017 and $2.02 billion at September 30, 2016.

Gain on single family mortgage loan origination and sale activities in the third quarter of 2017 was $64.0 million, a decrease of $163 thousand, or 0.25% from $64.2 million, in the second quarter of 2017 and a decrease of $24.9 million, or 28%, from $88.9 million, in the third quarter of 2016.

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 third quarter of 2017 was 342 basis points, an increase of 3% compared with 331 basis points in the second quarter of 2017 and an increase of 2% from 334 basis points in the third quarter of 2016.

Loan Servicing

Single family loan servicing income in the third quarter of 2017 was $7.4 million, comprised of $5.6 million of net servicing income and $1.8 million of risk management results. Loan servicing income decreased $470 thousand, or 6%, from income of $7.9 million in the second quarter of 2017 and decreased $4.4 million, or 37%, from income of $11.8 million in the third quarter of 2016. The decrease from the prior quarter was primarily due to lower risk management results. The decrease from the third quarter of 2016 was primarily due to lower risk management results partially offset by higher servicing fees. Risk management results fluctuate as market conditions change, including changes in interest rates.

Single family mortgage servicing fees collected in the third quarter of 2017 increased $465 thousand, or 3% from the second quarter of 2017 and increased $2.2 million, or 17%, from the third quarter of 2016. The increase was primarily due to higher average balances of loans serviced for others. Our portfolio of single family loans serviced for others was $21.89 billion at September 30, 2017 compared with $21.10 billion at June 30, 2017 and $18.20 billion at September 30, 2016.

Noninterest Expense

Mortgage Banking segment noninterest expense of $77.5 million increased $2.9 million, or 4%, from the second quarter of 2017 and decreased $4.7 million, or 5.7%, from the third quarter of 2016. The increase from the second quarter of 2017 was primarily due to the $3.9 million charge related to the restructuring of our mortgage segment. Restructuring charges were comprised of real estate related charges of $3.3 million and severance costs of $545 thousand. The decrease from the third quarter of 2016 was primarily due to decreased commissions, salary and related costs on lower closed loan volumes.

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Conference Call

HomeStreet, Inc., the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday, October 24, 2017 at 1:00 p.m. EDT. Mark K. Mason, President and CEO, and Mark R. Ruh, Executive Vice President and CFO, will discuss third quarter 2017 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/10112489 or may join the call by dialing 1-877-508-9589 (1-855-669-9657 in Canada) shortly before 1:00 p.m. EDT.

A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10112489.

The information to be discussed in the conference call will be posted on the Company's web site after the market closes on Monday, October 23, 2017.

About HomeStreet

Now in its 97th 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) and is keenly focused on serving the communities where we conduct business. 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 and our expectations about the future regarding recent and planned growth. 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 management's control. 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, or implied or projected by, such forward-looking statements. Among other things, we face limitations and risks associated with the recent restructuring of our mortgage banking segment and to anticipate and address similar issues affecting this and our other business segment, as well as our ability to continue to strategically expand our banking operations, meet our growth targets, maintain our competitive position 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, including new or changing interpretations of existing statutes or regulations and restrictions that could be imposed by our regulators on certain aspects of our operations or on our growth initiatives and acquisition activities, our ability to maintain electronic and physical security of our customer data and our information systems, our ability to maintain compliance with current and evolving 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, our ability to operate our business efficiently in a time of lower revenues, increases in the competition in our industry and across our markets and the extent of our success in resolving problem assets. The results of our acquisitions as well as our restructuring activities in the mortgage banking segment may fall short of our financial and operational expectations. We may not realize the benefits from completed or future acquisitions in the anticipated time frame (or at all). We may not be able to achieve the full benefit of cost efficiency programs we have previously implemented or those we may develop in the future. 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, the impact of natural disasters on housing availability and the ability of our customers to meet their debt obligations, 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 Company directly, 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 fiscal quarter ended June 30, 2017, and updated from time to time in our filings with the Securities and Exchange Commission. We strongly recommend readers 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, 2016 has been derived from our audited financial statements for the year then ended as included in our 2016 Form 10-K. All financial data should be read in conjunction with the notes to the

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consolidated financial statements of HomeStreet, Inc., and subsidiaries as of and for the fiscal year ended December 31, 2016, 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 2017 net income to the corresponding periods of fiscal 2016. We believe this information is useful to investors who are seeking to exclude the after-tax impact of restructuring charges and the after-tax impact of acquisition-related expenses, which we recorded in connection with our merger with Orange County Business Bank on February 1, 2016, with our acquisition of two retail deposit branches in Lake Oswego, Oregon on August 12, 2016, two retail deposit branches in Southern California on November 11, 2016 and one retail deposit branch in Southern California on September 15, 2017. 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 (other than loan 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 restructuring-related expenses, as well as 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										Nine Months Ended
(dollars in thousands, except share data)	Sept. 30, 2017		June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		Sept. 30, 2017		Sept. 30, 2016
Income statement data (for the period ended):
Net interest income	$	50,840	$	46,868	$	45,651	$	48,074	$	46,802	$	143,359	$	131,975
Provision for credit losses	250		500		—		350		1,250		750		3,750
Noninterest income	83,884		81,008		74,461		73,221		111,745		239,353		285,929
Noninterest expense	114,697		111,244		106,874		117,539		114,399		332,815		326,783
Restructuring-related expenses (included in noninterest expense)	3,877		103		—		—		—		3,980		—
Acquisition-related expenses (included in noninterest expense)	353		177		—		401		512		530		6,735
Income before income taxes	19,777		16,132		13,238		3,406		42,898		49,147		87,371
Income tax expense	5,938		4,923		4,255		1,112		15,197		15,116		31,514
Net income	$	13,839	$	11,209	$	8,983	$	2,294	$	27,701	$	34,031	$	55,857
Basic income per common share	$	0.51	$	0.42	$	0.33	$	0.09	$	1.12	$	1.27	$	2.29
Diluted income per common share	$	0.51	$	0.41	$	0.33	$	0.09	$	1.11	$	1.26	$	2.27
Common shares outstanding	26,884,402		26,874,871		26,862,744		26,800,183		24,833,008		26,884,402		24,833,008
Weighted average number of shares outstanding:
Basic	26,883,392		26,866,230		26,821,396		25,267,909		24,811,169		26,857,006		24,398,683
Diluted	27,089,040		27,084,608		27,057,449		25,588,691		24,996,747		27,077,032		24,595,348
Shareholders' equity per share	$	24.98	$	24.40	$	23.86	$	23.48	$	23.60	$	24.98	$	23.60
Tangible book value per share (1)	$	23.86	$	23.30	$	22.73	$	22.33	$	22.45	$	23.86	$	22.45
Financial position (at period end):
Cash and cash equivalents	$	55,050	$	54,447	$	61,492	$	53,932	$	55,998	$	55,050	$	55,998
Investment securities	919,459		936,522		1,185,654		1,043,851		991,325		919,459		991,325
Loans held for sale	851,126		784,556		537,959		714,559		893,513		851,126		893,513
Loans held for investment, net	4,313,225		4,156,424		3,957,959		3,819,027		3,764,178		4,313,225		3,764,178
Loan servicing rights	268,072		258,222		257,421		245,860		167,501		268,072		167,501
Other real estate owned	3,704		4,597		5,646		5,243		6,440		3,704		6,440
Total assets	6,796,346		6,586,557		6,401,143		6,243,700		6,226,601		6,796,346		6,226,601
Deposits	4,670,486		4,747,771		4,595,809		4,429,701		4,504,560		4,670,486		4,504,560
Federal Home Loan Bank advances	1,135,245		867,290		862,335		868,379		858,923		1,135,245		858,923
Shareholders’ equity	$	671,469	$	655,841	$	640,919	$	629,284	$	586,028	$	671,469	$	586,028
Financial position (averages):
Investment securities	$	925,545	$	1,089,552	$	1,153,248	$	962,504	$	981,223	$	1,055,281	$	791,749
Loans held for investment	4,242,795		4,119,825		3,914,537		3,823,253		3,770,133		4,093,588		3,616,222
Total interest-earning assets	6,098,054		5,837,917		5,782,061		5,711,154		5,692,999		5,907,168		5,171,456
Total interest-bearing deposits	3,622,606		3,652,036		3,496,190		3,413,311		3,343,339		3,590,741		3,051,279
Federal Home Loan Bank advances	1,034,634		872,019		975,914		938,342		988,358		961,070		944,020
Federal funds purchased and securities sold under agreements to repurchase	272		4,804		978		951		2,242		2,015		753
Total interest-bearing liabilities	4,783,142		4,654,064		4,598,243		4,477,732		4,459,213		4,679,288		4,089,016
Shareholders’ equity	$	683,186	$	668,377	$	649,439	$	616,497	$	588,335	$	667,124	$	549,242
Other data:
Full-time equivalent employees (ending)	2,463		2,542		2,581		2,552		2,431		2,463		2,431

13

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

	Quarter Ended															Nine Months Ended
(dollars in thousands, except share data)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Financial performance:
Return on average shareholders’ equity(2)	8.10		%	6.71		%	5.53		%	1.49		%	18.83		%	6.80		%	13.56		%
Return on average shareholders’ equity, excluding restructuring-related and acquisition-related expenses (net of tax)(1)(2)	9.71		%	6.82		%	5.53		%	1.67		%	19.07		%	7.39		%	14.62		%
Return on average tangible shareholders' equity, excluding restructuring-related and acquisition-related expenses (net of tax) (1)	10.15		%	7.14		%	5.81		%	1.74		%	20.04		%	7.74		%	15.41		%
Return on average assets	0.83		%	0.70		%	0.57		%	0.15		%	1.79		%	0.70		%	1.33		%
Return on average assets, excluding restructuring-related and acquisition-related expenses (net of tax)(1)	0.99		%	0.71		%	0.57		%	0.16		%	1.81		%	0.76		%	1.43		%
Net interest margin (3)	3.40		%	3.29		%	3.23		%	3.42		%	3.34		%	3.31		%	3.46		%
Efficiency ratio (4)	85.13		%	86.99		%	88.98		%	96.90		%	72.15		%	86.96		%	78.20		%
Core efficiency ratio (1)(5)	82.00		%	86.77		%	88.98		%	96.57		%	71.83		%	85.78		%	76.58		%
Asset quality:
Allowance for credit losses	$	38,195		$	37,470		$	36,042		$	35,264		$	35,233		$	38,195		$	35,233
Allowance for loan losses/total loans(6)	0.85		%	0.86		%	0.87		%	0.88		%	0.89		%	0.85		%	0.89		%
Allowance for loan losses/nonaccrual loans	245.02		%	233.50		%	185.99		%	165.52		%	131.07		%	245.02		%	131.07		%
Total nonaccrual loans(7)(8)	$	15,123		$	15,476		$	18,676		$	20,542		$	25,921		$	15,123		$	25,921
Nonaccrual loans/total loans	0.35		%	0.37		%	0.47		%	0.53		%	0.68		%	0.35		%	0.68		%
Other real estate owned	$	3,704		$	4,597		$	5,646		$	5,243		$	6,440		$	3,704		$	6,440
Total nonperforming assets(8)	$	18,827		$	20,073		$	24,322		$	25,785		$	32,361		$	18,827		$	32,361
Nonperforming assets/total assets	0.28		%	0.30		%	0.38		%	0.41		%	0.52		%	0.28		%	0.52		%
Net (recoveries) charge offs	$	(475	)	$	(928	)	$	(778	)	$	319		$	18		$	(2,181	)	$	(824	)

14

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

	Quarter Ended																Nine Months Ended
(dollars in thousands, except share data)	Sept. 30, 2017				June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			September 30, 2017				September 30, 2016
Regulatory capital ratios for the Bank:
Tier 1 leverage capital (to average assets)	9.83		%	(9)	10.13		%	9.98		%	10.26		%	9.91		%	9.83		%	(9)	9.91		%
Tier 1 common equity risk-based capital (to risk-weighted assets)	13.01		%	(9)	13.23		%	13.25		%	13.92		%	13.61		%	13.01		%	(9)	13.61		%
Tier 1 risk-based capital (to risk-weighted assets)	13.01		%	(9)	13.23		%	13.25		%	13.92		%	13.61		%	13.01		%	(9)	13.61		%
Total risk-based capital (to risk-weighted assets)	13.78		%	(9)	14.01		%	14.02		%	14.69		%	14.41		%	13.78		%	(9)	14.41		%
Risk-weighted assets	$	4,949,240			$	4,814,330		$	4,680,840		$	4,569,227		$	4,442,518		$	4,949,240			$	4,442,518
Regulatory capital ratios for the Company:
Tier 1 leverage capital (to average assets)	9.29		%	(9)	9.55		%	9.45		%	9.78		%	9.52		%	9.29		%	(9)	9.52		%
Tier 1 common equity risk-based capital (to risk-weighted assets)	9.82		%	(9)	10.01		%	9.96		%	10.54		%	10.37		%	9.82		%	(9)	10.37		%
Tier 1 risk-based capital (to risk-weighted assets)	10.87		%	(9)	11.10		%	11.07		%	11.66		%	11.55		%	10.87		%	(9)	11.55		%
Total risk-based capital (to risk-weighted assets)	11.54		%	(9)	11.79		%	11.74		%	12.34		%	12.25		%	11.54		%	(9)	12.25		%
Risk-weighted assets	$	5,620,010			$	5,434,895		$	5,331,674		$	5,221,455		$	5,042,699		$	5,620,010			$	5,042,699

(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) 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 0.93%, 0.95%, 0.97%, 1.00% and 1.05% at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, 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 $1.4 million, $732 thousand, $750 thousand, $1.9 million and $2.1 million of nonperforming loans guaranteed by the SBA at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively.

(9) Regulatory capital ratios at September 30, 2017 are preliminary.

15

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Operations

	Three Months Ended September 30,					%		Nine Months Ended September 30,					%
(in thousands, except share data)	2017			2016		Change		2017			2016		Change
Interest income:
Loans	$	56,547		$	49,752	14	%	$	157,251		$	139,748	13	%
Investment securities	5,264			5,476		(4	)	16,315			12,531		30
Other	170			102		67		431			396		9
	61,981			55,330		12		173,997			152,675		14
Interest expense:
Deposits	6,020			5,362		12		17,510			13,380		31
Federal Home Loan Bank advances	3,405			1,605		112		8,174			4,486		82
Federal funds purchased and securities sold under agreements to repurchase	—			2		(100	)	5			2		150
Long-term debt	1,520			1,440		6		4,513			2,574		75
Other	196			119		65		436			258		69
	11,141			8,528		31		30,638			20,700		48
Net interest income	50,840			46,802		9		143,359			131,975		9
Provision for credit losses	250			1,250		(80	)	750			3,750		(80	)
Net interest income after provision for credit losses	50,590			45,552		11		142,609			128,225		11
Noninterest income:
Net gain on loan origination and sale activities	71,010			92,600		(23	)	197,199			239,493		(18	)
Loan servicing income	8,282			12,595		(34	)	26,285			33,330		(21	)
Income from WMS Series LLC	166			1,174		(86	)	757			2,474		(69	)
Depositor and other retail banking fees	1,839			1,744		5		5,306			4,991		6
Insurance agency commissions	535			441		21		1,432			1,205		19
Gain on sale of investment securities available for sale	331			48		590		888			145		512
Other	1,721			3,143		(45	)	7,486			4,291		74
	83,884			111,745		(25	)	239,353			285,929		(16	)
Noninterest expense:
Salaries and related costs	75,374			79,164		(5	)	223,072			221,615		1
General and administrative	16,147			14,949		8		49,147			47,210		4
Amortization of core deposit intangibles	470			579		(19	)	1,477			1,636		(10	)
Legal	352			639		(45	)	662			1,687		(61	)
Consulting	914			1,390		(34	)	2,743			4,239		(35	)
Federal Deposit Insurance Corporation assessments	791			919		(14	)	2,312			2,419		(4	)
Occupancy	12,391			7,740		60		29,480			22,408		32
Information services	8,760			7,876		11		24,580			23,857		3
Net (benefit) cost from operation and sale of other real estate owned	(502		)	1,143		(144	)	(658		)	1,712		(138	)
	114,697			114,399		—		332,815			326,783		2
Income before income taxes	19,777			42,898		(54	)	49,147			87,371		(44	)
Income tax expense	5,938			15,197		(61	)	15,116			31,514		(52	)
NET INCOME	$	13,839		$	27,701	(50	)	$	34,031		$	55,857	(39	)
Basic income per share	$	0.51		$	1.12	(54	)	$	1.27		$	2.29	(45	)
Diluted income per share	$	0.51		$	1.11	(54	)	$	1.26		$	2.27	(44	)
Basic weighted average number of shares outstanding	26,883,392			24,811,169		8		26,857,006			24,398,683		10
Diluted weighted average number of shares outstanding	27,089,040			24,996,747		8		27,077,032			24,595,348		10

16

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Operations

	Quarter Ended
(in thousands, except share data)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017		Dec. 31, 2016			Sept. 30, 2016
Interest income:
Loans	$	56,547		$	51,198		$	49,506	$	50,919		$	49,752
Investment securities	5,264			5,419			5,632		5,863			5,476
Other	170			125			136		80			102
	61,981			56,742			55,274		56,862			55,330
Interest expense:
Deposits	6,020			5,867			5,623		5,629			5,362
Federal Home Loan Bank advances	3,405			2,368			2,401		1,544			1,605
Federal funds purchased and securities sold under agreements to repurchase	—			5			—		2			2
Long-term debt	1,520			1,514			1,479		1,469			1,440
Other	196			120			120		144			119
	11,141			9,874			9,623		8,788			8,528
Net interest income	50,840			46,868			45,651		48,074			46,802
Provision for credit losses	250			500			—		350			1,250
Net interest income after provision for credit losses	50,590			46,368			45,651		47,724			45,552
Noninterest income:
Net gain on loan origination and sale activities	71,010			65,908			60,281		67,820			92,600
Loan servicing income (loss)	8,282			8,764			9,239		(271		)	12,595
Income (loss) from WMS Series LLC	166			406			185		(141		)	1,174
Depositor and other retail banking fees	1,839			1,811			1,656		1,799			1,744
Insurance agency commissions	535			501			396		414			441
Gain on sale of investment securities available for sale	331			551			6		2,394			48
Other	1,721			3,067			2,698		1,206			3,143
	83,884			81,008			74,461		73,221			111,745
Noninterest expense:
Salaries and related costs	75,374			76,390			71,308		81,739			79,164
General and administrative	16,147			15,872			17,128		15,996			14,949
Amortization of core deposit intangibles	470			493			514		530			579
Legal	352			150			160		180			639
Consulting	914			771			1,058		719			1,390
Federal Deposit Insurance Corporation assessments	791			697			824		995			919
Occupancy	12,391			8,880			8,209		8,122			7,740
Information services	8,760			8,172			7,648		9,206			7,876
Net (benefit) cost from operation and sale of other real estate owned	(502		)	(181		)	25		52			1,143
	114,697			111,244			106,874		117,539			114,399
Income before income tax expense	19,777			16,132			13,238		3,406			42,898
Income tax expense	5,938			4,923			4,255		1,112			15,197
NET INCOME	$	13,839		$	11,209		$	8,983	$	2,294		$	27,701
Basic income per share	$	0.51		$	0.42		$	0.33	$	0.09		$	1.12
Diluted income per share	$	0.51		$	0.41		$	0.33	$	0.09		$	1.11
Basic weighted average number of shares outstanding	26,883,392			26,866,230			26,821,396		25,267,909			24,811,169
Diluted weighted average number of shares outstanding	27,089,040			27,084,608			27,057,449		25,588,691			24,996,747

17

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(in thousands, except share data)	Sept. 30, 2017			Dec. 31, 2016			% Change
Assets:
Cash and cash equivalents (including interest-earning instruments of $7,002 and $34,615)	$	55,050		$	53,932		2	%
Investment securities (includes $862,851 and $993,990 carried at fair value)	919,459			1,043,851			(12	)
Loans held for sale (includes $730,042 and $656,334 carried at fair value)	851,126			714,559			19
Loans held for investment (net of allowance for loan losses of $37,055 and $34,001; includes $5,546 and $17,988 carried at fair value)	4,313,225			3,819,027			13
Mortgage servicing rights (includes $244,106 and $226,113 carried at fair value)	268,072			245,860			9
Other real estate owned	3,704			5,243			(29	)
Federal Home Loan Bank stock, at cost	52,486			40,347			30
Premises and equipment, net	104,389			77,636			34
Goodwill	22,564			22,175			2
Other assets	206,271			221,070			(7	)
Total assets	$	6,796,346		$	6,243,700		9
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	4,670,486		$	4,429,701		5
Federal Home Loan Bank advances	1,135,245			868,379			31
Accounts payable and other liabilities	193,866			191,189			1
Long-term debt	125,280			125,147			—
Total liabilities	6,124,877			5,614,416			9
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, 26,884,402 shares and 26,800,183 shares	511			511			—
Additional paid-in capital	338,283			336,149			1
Retained earnings	337,067			303,036			11
Accumulated other comprehensive loss	(4,392		)	(10,412		)	(58	)
Total shareholders’ equity	671,469			629,284			7
Total liabilities and shareholders’ equity	$	6,796,346		$	6,243,700		9

18

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Financial Condition

(in thousands, except share data)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Assets:
Cash and cash equivalents	$	55,050		$	54,447		$	61,492		$	53,932		$	55,998
Investment securities	919,459			936,522			1,185,654			1,043,851			991,325
Loans held for sale	851,126			784,556			537,959			714,559			893,513
Loans held for investment, net	4,313,225			4,156,424			3,957,959			3,819,027			3,764,178
Mortgage servicing rights	268,072			258,222			257,421			245,860			167,501
Other real estate owned	3,704			4,597			5,646			5,243			6,440
Federal Home Loan Bank stock, at cost	52,486			41,769			41,656			40,347			39,783
Premises and equipment, net	104,389			101,797			97,349			77,636			72,951
Goodwill	22,564			22,175			22,175			22,175			19,900
Other assets	206,271			226,048			233,832			221,070			215,012
Total assets	$	6,796,346		$	6,586,557		$	6,401,143		$	6,243,700		$	6,226,601
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	4,670,486		$	4,747,771		$	4,595,809		$	4,429,701		$	4,504,560
Federal Home Loan Bank advances	1,135,245			867,290			862,335			868,379			858,923
Accounts payable and other liabilities	193,866			190,421			176,891			191,189			151,968
Long-term debt	125,280			125,234			125,189			125,147			125,122
Total liabilities	6,124,877			5,930,716			5,760,224			5,614,416			5,640,573
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	338,283			337,515			336,875			336,149			276,844
Retained earnings	337,067			323,228			312,019			303,036			300,742
Accumulated other comprehensive (loss) income	(4,392		)	(5,413		)	(8,486		)	(10,412		)	7,931
Total shareholders’ equity	671,469			655,841			640,919			629,284			586,028
Total liabilities and shareholders’ equity	$	6,796,346		$	6,586,557		$	6,401,143		$	6,243,700		$	6,226,601

19

HomeStreet, Inc. and Subsidiaries

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

	Quarter Ended September 30,
	2017						2016
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: (1)
Cash and cash equivalents	$	88,699	$	171	0.76	%	$	39,069	$	104	1.06	%
Investment securities	925,545		6,286		2.72	%	981,223		6,363		2.59	%
Loans held for sale	841,015		8,586		4.08	%	902,574		8,201		3.63	%
Loans held for investment	4,242,795		48,168		4.50	%	3,770,133		41,580		4.38	%
Total interest-earning assets	6,098,054		63,211		4.12	%	5,692,999		56,248		3.93	%
Noninterest-earning assets (2)	597,876						490,242
Total assets	$	6,695,930					$	6,183,241
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	489,743	$	500	0.40	%	$	458,660	$	484	0.42	%
Savings accounts	310,242		259		0.33	%	300,831		261		0.35	%
Money market accounts	1,588,366		2,072		0.52	%	1,443,111		2,064		0.57	%
Certificate accounts	1,234,255		3,381		1.09	%	1,140,737		2,669		0.93	%
Total interest-bearing deposits	3,622,606		6,212		0.68	%	3,343,339		5,478		0.65	%
Federal Home Loan Bank advances	1,034,634		3,404		1.31	%	988,358		1,605		0.65	%
Federal funds purchased and securities sold under agreements to repurchase	272		1		1.37	%	2,242		5		0.85	%
Long-term debt	125,250		1,521		4.82	%	125,274		1,440		4.57	%
Other borrowing	380		3		3.52	%	—		—		—	%
Total interest-bearing liabilities	4,783,142		11,141		0.92	%	4,459,213		8,528		0.76	%
Noninterest-bearing liabilities	1,229,602						1,135,693
Total liabilities	6,012,744						5,594,906
Shareholders’ equity	683,186						588,335
Total liabilities and shareholders’ equity	$	6,695,930					$	6,183,241
Net interest income (3)			$	52,070					$	47,720
Net interest spread					3.20	%					3.17	%
Impact of noninterest-bearing sources					0.20	%					0.17	%
Net interest margin					3.40	%					3.34	%

(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 $1.2 million and $918 thousand for the quarters ended September 30, 2017 and September 30, 2016, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

20

HomeStreet, Inc. and Subsidiaries

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

	Nine Months Ended September 30,
	2017						2016
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: (1)
Cash and cash equivalents	$	89,047	$	432	0.65	%	$	38,893	$	175	0.60	%
Investment securities	1,055,281		19,350		2.46	%	791,749		14,805		2.48	%
Loans held for sale	669,252		20,259		4.04	%	724,592		20,252		3.75	%
Loans held for investment	4,093,588		137,355		4.46	%	3,616,222		119,586		4.39	%
Total interest-earning assets	5,907,168		177,396		4.00	%	5,171,456		154,818		3.99	%
Noninterest-earning assets (2)	582,480						448,172
Total assets	$	6,489,648					$	5,619,628
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	478,589	$	1,480	0.41	%	$	444,782	$	1,465	0.44	%
Savings accounts	308,156		767		0.33	%	299,763		777		0.35	%
Money market accounts	1,576,459		6,200		0.52	%	1,308,760		5,021		0.51	%
Certificate accounts	1,227,537		9,484		1.03	%	997,974		6,374		0.84	%
Total interest-bearing deposits	3,590,741		17,931		0.67	%	3,051,279		13,637		0.59	%
Federal Home Loan Bank advances	961,070		8,174		1.13	%	944,020		4,486		0.63	%
Federal funds purchased and securities sold under agreements to repurchase	2,015		17		1.14	%	753		5		0.28	%
Long-term debt	125,206		4,513		4.80	%	92,964		2,573		3.40	%
Other borrowing	256		3		1.19	%
Total interest-bearing liabilities	4,679,288		30,638		0.87	%	4,089,016		20,701		0.67	%
Noninterest-bearing liabilities	1,143,236						981,370
Total liabilities	5,822,524						5,070,386
Shareholders’ equity	667,124						549,242
Total liabilities and shareholders’ equity	$	6,489,648					$	5,619,628
Net interest income (3)			$	146,758					$	134,117
Net interest spread					3.13	%					3.32	%
Impact of noninterest-bearing sources					0.18	%					0.14	%
Net interest margin					3.31	%					3.46	%

(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 $3.4 million and $2.1 million for the nine months ended September 30, 2017 and September 30, 2016, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

21

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment

	Quarter Ended															Nine Months Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Net interest income	$	45,314		$	42,448		$	40,904		$	40,637		$	39,339		$	128,666		$	113,378
Provision for credit losses	250			500			—			350			1,250			750			3,750
Noninterest income	11,962			8,276			9,425			13,087			9,771			29,663			22,595
Noninterest expense	37,160			36,631			36,470			35,482			32,170			110,261			102,903
Income before income taxes	19,866			13,593			13,859			17,892			15,690			47,318			29,320
Income tax expense	5,904			4,147			4,567			5,846			5,557			14,618			10,566
Net income	$	13,962		$	9,446		$	9,292		$	12,046		$	10,133		$	32,700		$	18,754
Net income, excluding acquisition-related expenses (net of tax)(1)	$	14,191		$	9,561		$	9,292		$	12,307		$	10,466		$	33,044		$	23,131
Efficiency ratio (2)	64.88		%	72.22		%	72.46		%	66.04		%	65.51		%	69.64		%	75.68		%
Core efficiency ratio (1)(3)	64.26		%	71.87		%	72.46		%	65.30		%	64.46		%	69.31		%	70.73		%
Full-time equivalent employees (ending)	1,071			1,055			1022			998			948			1071			948
Net gain on loan origination and sale activities:
Multifamily DUS ® (4)	$	4,152		$	1,273		$	3,360		$	3,518		$	2,695		$	8,785		$	7,879
Other (5)	2,845			459			602			3,231			1,028			3,906			2,242
	$	6,997		$	1,732		$	3,962		$	6,749		$	3,723		$	12,691		$	10,121
Production volumes for sale to the secondary market:
Loan originations
Multifamily DUS ® (4)	$	109,994		$	58,343		$	57,552		$	94,725		$	45,497		$	225,889		$	231,126
Other (5)	18,734			6,126			6,798			3,008			2,913			31,658			8,441
Loans sold
Multifamily DUS ® (4)	102,075			35,312			76,849			85,594			58,484			214,236			215,848
Other (5)	$	125,493		$	24,695		$	13,186		$	75,000		$	50,255		$	163,374		$	82,068

(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.

22

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Commercial Loan Servicing Income

	Quarter Ended															Nine Months Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Servicing income, net:
Servicing fees and other	$	1,690		$	1,652		$	1,840		$	1,402		$	1,476		$	5,182		$	4,212
Amortization of multifamily MSRs	(811		)	(761		)	(931		)	(689		)	(661		)	(2,503		)	(1,946		)
Commercial loan servicing income	$	879		$	891		$	909		$	713		$	815		$	2,679		$	2,266

Commercial Loans Serviced for Others

(in thousands)	Sept. 30, 2017		June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016
Commercial
Multifamily DUS ®	$	1,213,459	$	1,135,722	$	1,140,414	$	1,108,040	$	1,055,181
Other	78,674		75,336		73,832		69,323		67,348
Total commercial loans serviced for others	$	1,292,133	$	1,211,058	$	1,214,246	$	1,177,363	$	1,122,529

Commercial Multifamily Capitalized Mortgage Servicing Rights

	Quarter Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Beginning balance	$	21,600		$	21,424		$	19,747		$	17,591		$	16,366
Originations	3,177			937			2,608			2,845			1,886
Amortization	(811		)	(761		)	(931		)	(689		)	(661		)
Ending balance	$	23,966		$	21,600		$	21,424		$	19,747		$	17,591
Ratio of MSR carrying value to related loans serviced for others	1.96		%	1.89		%	1.86		%	1.77		%	1.65		%
MSR servicing fee multiple (1)	4.02			3.95			3.94			3.84			3.70
Weighted-average note rate (loans serviced for others)	4.41		%	4.42		%	4.45		%	4.52		%	4.60		%
Weighted-average servicing fee (loans serviced for others)	0.49		%	0.48		%	0.47		%	0.46		%	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.

23

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Investment Securities

(in thousands, except for duration data)	Sept. 30, 2017		June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016
Available for sale:
Mortgage-backed securities:
Residential	$	152,362	$	150,935	$	174,060	$	177,074	$	152,236
Commercial	20,214		23,381		29,476		25,536		27,208
Municipal bonds	369,278		372,729		619,934		467,673		355,344
Collateralized mortgage obligations:
Residential	184,936		184,695		182,037		191,201		182,833
Commercial	86,817		76,230		69,144		70,764		120,259
Corporate debt securities	28,731		30,218		51,075		51,122		85,191
U.S. Treasury Securities	10,750		10,740		10,663		10,620		26,004
Agency Debentures	9,763		35,338		—		—		—
Total available for sale	$	862,851	$	884,266	$	1,136,389	$	993,990	$	949,075
Held to maturity	56,608		52,256		49,265		49,861		42,250
	$	919,459	$	936,522	$	1,185,654	$	1,043,851	$	991,325
Weighted average duration in years
Available for sale	4.9		4.6		3.6		4.2		4.0

Five Quarter Loans Held for Investment

(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Consumer loans
Single family (1)	$	1,269,484		$	1,148,229		$	1,100,215		$	1,083,822		$	1,186,476
Home equity and other	436,755			414,506			380,869			359,874			338,155
	1,706,239			1,562,735			1,481,084			1,443,696			1,524,631
Commercial loans
Commercial real estate	986,421			942,122			922,852			871,563			810,346
Multifamily	747,171			780,602			748,333			674,219			562,272
Construction/land development	653,132			648,672			611,150			636,320			661,813
Commercial business	245,859			248,908			222,761			223,653			237,117
	2,632,583			2,620,304			2,505,096			2,405,755			2,271,548
	4,338,822			4,183,039			3,986,180			3,849,451			3,796,179
Net deferred loan fees and costs	11,458			9,521			6,514			3,577			1,974
	4,350,280			4,192,560			3,992,694			3,853,028			3,798,153
Allowance for loan losses	(37,055		)	(36,136		)	(34,735		)	(34,001		)	(33,975		)
	$	4,313,225		$	4,156,424		$	3,957,959		$	3,819,027		$	3,764,178

(1) Includes $5.5 million, $5.1 million, $19.0 million, $18.0 million and $20.5 million of single family loans that are carried at fair value at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively.

24

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Loan Roll-forward

(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Loans - beginning balance	$	4,183,039		$	3,986,180		$	3,849,451		$	3,796,179		$	3,730,836
Originations	515,351			508,263			355,684			425,499			349,900
Purchases and advances	196,275			228,753			186,178			159,226			190,964
Payoffs, paydowns, sales and other	(555,611		)	(540,019		)	(404,385		)	(530,223		)	(474,884		)
Charge-offs and transfers to OREO	(232		)	(138		)	(748		)	(1,230		)	(637		)
Loans - ending balance	$	4,338,822		$	4,183,039		$	3,986,180		$	3,849,451		$	3,796,179
Net change - loans outstanding	$	155,783		$	196,859		$	136,729		$	53,272		$	65,343

Five Quarter Credit Quality Activity

Allowance for Credit Losses (roll-forward)

	Quarter Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Beginning balance	$	37,470		$	36,042		$	35,264		$	35,233		$	34,001
Provision for credit losses	250			500			—			350			1,250
Recoveries, net of (charge-offs)	475			928			778			(319		)	(18		)
Ending balance	$	38,195		$	37,470		$	36,042		$	35,264		$	35,233
Components:
Allowance for loan losses	$	37,055		$	36,136		$	34,735		$	34,001		$	33,975
Allowance for unfunded commitments	1,140			1,334			1,307			1,263			1,258
Allowance for credit losses	$	38,195		$	37,470		$	36,042		$	35,264		$	35,233
Allowance as a % of loans held for investment(1) (2)	0.85		%	0.86		%	0.87		%	0.88		%	0.89		%
Allowance as a % of nonaccrual loans	245.02		%	233.50		%	185.99		%	165.52		%	131.07		%

(1) Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses/total loans was 0.93%, 0.95%, 0.97%, 1.00% and 1.05% at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016andSeptember 30, 2016, respectively.

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

25

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Nonperforming Assets (NPAs) roll-forward

	Quarter Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Beginning balance	$	20,073		$	24,322		$	25,785		$	32,361		$	26,443
Additions	2,231			1,009			5,481			3,137			13,751
Reductions:
Gross charge-offs	(18		)	(103		)	(45		)	(826		)	(251		)
OREO sales	(860		)	(1,162		)	(622		)	(2,001		)	(3,992		)
OREO writedowns and other adjustments	(33		)	—			—			—			(1,160		)
Principal paydowns, payoff advances, equity adjustments	(2,045		)	(1,541		)	(3,759		)	(5,700		)	(602		)
Transferred back to accrual status	(521		)	(2,452		)	(2,518		)	(1,186		)	(1,828		)
Total reductions	(3,477		)	(5,258		)	(6,944		)	(9,713		)	(7,833		)
Net (reductions) additions	(1,246		)	(4,249		)	(1,463		)	(6,576		)	5,918
Ending balance(1)	$	18,827		$	20,073		$	24,322		$	25,785		$	32,361

(1) Includes $1.4 million, $732 thousand, $750 thousand, $1.9 million and $2.1 million of nonperforming loans guaranteed by the SBA at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively.

Five Quarter Nonperforming Assets

(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Nonaccrual loans	$	15,123		$	15,476		$	18,676		$	20,542		$	25,921
Other real estate owned	3,704			4,597			5,646			5,243			6,440
Total nonperforming assets(1)	$	18,827		$	20,073		$	24,322		$	25,785		$	32,361
Nonaccrual loans as a % of total loans	0.35		%	0.37		%	0.47		%	0.53		%	0.68		%
Nonperforming assets as a % of total assets	0.28		%	0.30		%	0.38		%	0.41		%	0.52		%

(1) Includes $1.4 million, $732 thousand, $750 thousand, $1.9 million and $2.1 million of nonperforming loans guaranteed by the SBA at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016 respectively.

26

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
September 30, 2017
Total loans held for investment	$	12,327		$	4,736		$	52,308		$	69,371		$	4,269,451		$	4,338,822
Less: FHA/VA loans(1)	6,908			4,574			37,185			48,667			64,202			112,869
Less: guaranteed portion of SBA loans(2)	888			—			1,368			2,256			5,402			7,658
Total loans, excluding FHA/VA and guaranteed portion of SBA loans	$	4,531		$	162		$	13,755		$	18,448		$	4,199,847		$	4,218,295
As a % of total loans, excluding FHA/VA and guaranteed portion of SBA loans	0.11		%	—		%	0.33		%	0.44		%	99.56		%	100.00		%
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		%

(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.

27

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status

(in thousands)	Sept. 30, 2017		June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016
Accrual (1)	$	77,762	$	81,886	$	81,555	$	76,581	$	81,270
Nonaccrual	2,781		3,511		3,162		4,874		5,680
Total TDRs	$	80,543	$	85,397	$	84,717	$	81,455	$	86,950

(1) Includes single family consumer loan balances insured by the FHA or guaranteed by the VA of $45.5 million, $41.8 million, $39.7 million, $35.1 million and $37.1 million at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016andSeptember 30, 2016, respectively.

Troubled Debt Restructurings (TDRs) - Re-Defaults

	Quarter Ended
(in thousands)	Sept. 30, 2017		June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016
Recorded investment of re-defaults(1)	$	1,743	$	1,382	$	270	$	653	$	1,173

(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.

28

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Deposits

(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Deposits by Product:
Noninterest-bearing accounts - checking and savings	$	587,994		$	572,734		$	581,101		$	537,651		$	499,106
Interest-bearing transaction and savings deposits:
NOW accounts	528,679			541,592			514,271			468,812			501,370
Statement savings accounts due on demand	308,217			311,202			310,813			301,361			303,872
Money market accounts due on demand	1,563,921			1,587,741			1,579,957			1,603,141			1,513,547
Total interest-bearing transaction and savings deposits	2,400,817			2,440,535			2,405,041			2,373,314			2,318,789
Total transaction and savings deposits	2,988,811			3,013,269			2,986,142			2,910,965			2,817,895
Certificates of deposit	1,182,244			1,291,935			1,211,507			1,091,558			1,097,263
Noninterest-bearing accounts - other	499,431			442,567			398,160			427,178			589,402
Total deposits	$	4,670,486		$	4,747,771		$	4,595,809		$	4,429,701		$	4,504,560
Percent of total deposits:
Noninterest-bearing accounts - checking and savings	12.6		%	12.1		%	12.6		%	12.1		%	11.1		%
Interest-bearing transaction and savings deposits:
NOW accounts	11.3			11.4			11.2			10.6			11.1
Statement savings accounts, due on demand	6.6			6.6			6.8			6.8			6.7
Money market accounts, due on demand	33.5			33.4			34.4			36.2			33.6
Total interest-bearing transaction and savings deposits	51.4			51.4			52.4			53.6			51.4
Total transaction and savings deposits	64.0			63.5			65.0			65.7			62.5
Certificates of deposit	25.3			27.2			26.4			24.6			24.4
Noninterest-bearing accounts - other	10.7			9.3			8.6			9.7			13.1
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

29

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment

	Quarter Ended															Nine Months Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Net interest income	$	5,526		$	4,420		$	4,747		$	7,437		$	7,463		$	14,693		$	18,597
Noninterest income	71,922			72,732			65,036			60,134			101,974			209,690			263,334
Noninterest expense	77,537			74,613			70,404			82,057			82,229			222,554			223,880
(Loss) income before income taxes	(89		)	2,539			(621		)	(14,486		)	27,208			1,829			58,051
Income tax (benefit) expense	34			776			(312		)	(4,734		)	9,640			498			20,948
Net (loss) income	$	(123	)	$	1,763		$	(309	)	$	(9,752	)	$	17,568		$	1,331		$	37,103
Efficiency ratio (1)	100.11		%	96.71		%	100.89		%	121.44		%	75.14		%	99.18		%	79.41		%
Full-time equivalent employees (ending)	1,392			1,487			1,558			1,554			1,483			1,392			1,483
Production volumes for sale to the secondary market:
Single family mortgage closed loan volume (2)(3)	$	2,034,715		$	2,011,127		$	1,621,053		$	2,514,657		$	2,647,943		$	5,666,895		$	6,482,690
Single family mortgage interest rate lock commitments(2)	$	1,872,645		$	1,950,427		$	1,622,622		$	1,765,942		$	2,689,640		$	5,445,694		$	6,855,034
Single family mortgage loans sold(2)	$	1,956,129		$	1,808,500		$	1,739,737		$	2,651,022		$	2,489,415		$	5,504,366		$	6,134,390

(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.

30

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Gain on Sale to the Secondary Market

	Quarter Ended										Nine Months Ended
(in thousands)	Sept. 30, 2017		June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		Sept. 30, 2017		Sept. 30, 2016
Gain on loan origination and sale activities:(1)
Single family:
Servicing value and secondary market gains(2)	$	56,657	$	57,353	$	50,538	$	52,719	$	79,946	$	164,548	$	207,758
Loan origination fees	7,356		6,823		5,781		8,352		8,931		19,960		21,614
Total mortgage banking gain on loan origination and sale activities(1)	$	64,013	$	64,176	$	56,319	$	61,071	$	88,877	$	184,508	$	229,372
Composite Margin (in basis points):
Servicing value and secondary market gains / interest rate lock commitments(3)	303		294		312		299		297		302		303
Loan origination fees / retail mortgage originations(4)	39		37		37		35		37		38		36
Composite Margin	342		331		349		334		334		340		339

(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.

31

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Servicing Income

	Quarter Ended															Nine Months Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Servicing income, net:
Servicing fees and other	$	14,790		$	14,325		$	14,339		$	12,792		$	12,628		$	43,454		$	35,248
Changes in fair value of single family MSRs due to amortization (1)	(9,167		)	(8,909		)	(8,520		)	(9,365		)	(8,925		)	(26,596		)	(23,940		)
	5,623			5,416			5,819			3,427			3,703			16,858			11,308
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2)	(1,027		)	(6,417		)	2,132			57,379			4,915			(5,312		)	(37,354		)
Net gain (loss) from derivatives economically hedging MSR	2,807			8,874			379			(61,790		)	3,162			12,060			57,110
	1,780			2,457			2,511			(4,411		)	8,077			6,748			19,756
Mortgage Banking servicing income (loss)	$	7,403		$	7,873		$	8,330		$	(984	)	$	11,780		$	23,606		$	31,064

(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)	Sept. 30, 2017		June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016
Single family
U.S. government and agency	$	21,378,395	$	20,574,300	$	19,760,612	$	18,931,835	$	17,593,901
Other	513,858		530,308		542,557		556,621		605,139
Total single family loans serviced for others	$	21,892,253	$	21,104,608	$	20,303,169	$	19,488,456	$	18,199,040

32

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Single Family Capitalized Mortgage Servicing Rights

	Quarter Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016
Beginning balance	$	236,621		$	235,997		$	226,113		$	149,910		$	130,900
Additions and amortization:
Originations	17,679			15,748			15,918			27,796			22,734
Purchases	—			211			354			393			286
Changes due to amortization (1)	(9,167		)	(8,909		)	(8,520		)	(9,365		)	(8,925		)
Net additions and amortization	8,512			7,050			7,752			18,824			14,095
Changes in fair value due to changes in model inputs and/or assumptions (2)	(1,027		)	(6,426		)	2,132			57,379			4,915
Ending balance	$	244,106		$	236,621		$	235,997		$	226,113		$	149,910
Ratio of MSR carrying value to related loans serviced for others	1.12		%	1.12		%	1.16		%	1.16		%	0.82		%
MSR servicing fee multiple (3)	3.96			3.97			4.11			4.08			2.87
Weighted-average note rate (loans serviced for others)	3.99		%	3.98		%	3.96		%	3.95		%	4.00		%
Weighted-average servicing fee (loans serviced for others)	0.28		%	0.28		%	0.28		%	0.28		%	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.

33

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

Tangible shareholders' equity is calculated by deducting goodwill and intangible assets (excluding loan 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															Nine Months Ended
(dollars in thousands, except share data)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Shareholders' equity	$	671,469		$	655,841		$	640,919		$	629,284		$	586,028		$	671,469		$	586,028
Less: Goodwill and other intangibles	(29,893		)	(29,783		)	(30,275		)	(30,789		)	(28,573		)	(29,893		)	(28,573		)
Tangible shareholders' equity	$	641,576		$	626,058		$	610,644		$	598,495		$	557,455		$	641,576		$	557,455
Common shares outstanding	26,884,402			26,874,871			26,862,744			26,800,183			24,833,008			26,884,402			24,833,008
Book value per share	$	24.98		$	24.40		$	23.86		$	23.48		$	23.60		$	24.98		$	23.60
Impact of goodwill and other intangibles	(1.12		)	(1.10		)	(1.13		)	(1.15		)	(1.15		)	(1.12		)	(1.15		)
Tangible book value per share	$	23.86		$	23.30		$	22.73		$	22.33		$	22.45		$	23.86		$	22.45
Average shareholders' equity	$	683,186		$	668,377		$	649,439		$	616,497		$	588,335		$	667,124		$	549,242
Less: Average goodwill and other intangibles	(29,722		)	(30,104		)	(30,611		)	(29,943		)	(28,769		)	(30,142		)	(28,122		)
Average tangible shareholders' equity	$	653,464		$	638,273		$	618,828		$	586,554		$	559,566		$	636,982		$	521,120
Return on average shareholders’ equity	8.10		%	6.71		%	5.53		%	1.49		%	18.83		%	6.80		%	13.56		%
Impact of goodwill and other intangibles	0.37		%	0.31		%	0.28		%	0.07		%	0.97		%	0.32		%	0.73		%
Return on average tangible shareholders' equity	8.47		%	7.02		%	5.81		%	1.56		%	19.80		%	7.12		%	14.29		%
Return on average shareholders' equity	8.10		%	6.71		%	5.53		%	1.49		%	18.83		%	6.80		%	13.56		%
Impact of restructuring-related expenses (net of tax)	1.49		%	0.04		%	—		%	—		%	—		%	0.52		%	—		%
Impact of acquisition-related expenses (net of tax)	0.12		%	0.07		%	—		%	0.18		%	0.24		%	0.07		%	1.06		%
Return on average shareholders' equity, excluding restructuring-related and acquisition-related expenses (net of tax)	9.71		%	6.82		%	5.53		%	1.67		%	19.07		%	7.39		%	14.62		%
Return on average assets	0.83		%	0.70		%	0.57		%	0.15		%	1.79		%	0.70		%	1.33		%
Impact of restructuring-related expenses (net of tax)	0.15		%	—		%	—		%	—		%	—		%	0.05		%	—		%
Impact of acquisition-related expenses (net of tax)	0.01		%	0.01		%	—		%	0.01		%	0.02		%	0.01		%	0.10		%
Return on average assets, excluding restructuring-related and acquisition-related expenses (net of tax)	0.99		%	0.71		%	0.57		%	0.16		%	1.81		%	0.76		%	1.43		%

34

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding restructuring-related items, net of tax, acquisition-related items, net of tax, noninterest income and noninterest expense, excluding restructuring-related items, acquisition-related items, diluted earnings per share, excluding restructuring related items, net of tax, acquisition-related items, net of tax, and Commercial,Consumer Banking segment net income, excluding acquisition-related items, net of tax and Mortgage Banking segment net income, excluding restructuring-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															Nine Months Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Consolidated results:
Net income	$	13,839		$	11,209		$	8,983		$	2,294		$	27,701		$	34,031		$	55,857
Impact of restructuring-related expenses (net of tax)	2,520			67			—			—			—			2,587			—
Impact of acquisition-related expenses (net of tax)	229			115			—			261			333			344			4,377
Net income, excluding restructuring and acquisition-related expenses (net of tax)	$	16,588		$	11,391		$	8,983		$	2,555		$	28,034		$	36,962		$	60,234
Net interest income	$	50,840		$	46,868		$	45,651		$	48,074		$	46,802		$	143,359		$	131,975
Noninterest income	83,884			81,008			74,461			73,221			111,745			239,353			285,929
Noninterest expense	$	114,697		$	111,244		$	106,874		$	117,539		$	114,399		$	332,815		$	326,783
Impact of restructuring-related expenses	(3,877		)	(103		)	—			—			—			(3,980		)	—
Impact of acquisition-related expenses	(353		)	(177		)	—			(401		)	(512		)	(530		)	(6,735		)
Noninterest expense, excluding restructuring and acquisition-related expenses	$	110,467		$	110,964		$	106,874		$	117,138		$	113,887		$	328,305		$	320,048
Efficiency ratio	85.13		%	86.99		%	88.98		%	96.90		%	72.15		%	86.96		%	78.20		%
Impact of restructuring-related expenses	(2.87		)%	(0.08		)%	—		%	—		%	—		%	(1.04		)%	—		%
Impact of acquisition-related expenses	(0.26		)%	(0.14		)%	—		%	(0.33		)%	(0.32		)%	(0.14		)%	(1.62		)%
Core efficiency ratio, excluding restructuring and acquisition-related expenses	82.00		%	86.77		%	88.98		%	96.57		%	71.83		%	85.78		%	76.58		%
Diluted earnings per common share	$	0.51		$	0.41		$	0.33		$	0.09		$	1.11		$	1.26		$	2.27
Impact of restructuring-related expenses (net of tax)	0.09			—			—			—			—			0.10			—
Impact of acquisition-related expenses (net of tax)	0.01			0.01			—			0.01			0.01			0.01			0.18
Diluted earnings per common share, excluding restructuring and acquisition-related expenses (net of tax)	$	0.61		$	0.42		$	0.33		$	0.10		$	1.12		$	1.37		$	2.45
Return on average tangible shareholders' equity	8.47		%	7.02		%	5.81		%	1.56		%	19.80		%	7.12		%	14.29		%
Impact of restructuring-related expenses (net of tax)	1.54		%	0.05		%	—		%	—		%	—		%	0.54		%	—		%
Impact of acquisition-related expenses (net of tax)	0.14		%	0.07		%	—		%	0.18		%	0.24		%	0.08		%	1.12		%
Return on average tangible shareholders' equity, excluding restructuring and acquisition-related expenses (net of tax)	10.15		%	7.14		%	5.81		%	1.74		%	20.04		%	7.74		%	15.41		%

35

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

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

	Quarter Ended															Nine Months Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Commercial and Consumer Banking Segment results:
Net income	$	13,962		$	9,446		$	9,292		$	12,046		$	10,133		$	32,700		$	18,754
Impact of acquisition-related expenses (net of tax)	229			115			—			261			333			344			4,377
Net income, excluding acquisition-related expenses (net of tax)	$	14,191		$	9,561		$	9,292		$	12,307		$	10,466		$	33,044		$	23,131
Net interest income	$	45,314		$	42,448		$	40,904		$	40,637		$	39,339		$	128,666		$	113,378
Noninterest income	$	11,962		$	8,276		$	9,425		$	13,087		$	9,771		$	29,663		$	22,595
Noninterest expense	$	37,160		$	36,631		$	36,470		$	35,482		$	32,170		$	110,261		$	102,903
Impact of acquisition-related expenses	(353		)	(177		)	—			(401		)	(512		)	(530		)	(6,735		)
Noninterest expense, excluding acquisition-related expenses	$	36,807		$	36,454		$	36,470		$	35,081		$	31,658		$	109,731		$	96,168
Efficiency ratio	64.88		%	72.22		%	72.46		%	66.04		%	65.51		%	69.64		%	75.68		%
Impact of acquisition-related expenses	(0.62		)%	(0.35		)%	—		%	(0.74		)%	(1.05		)%	(0.33		)%	(4.95		)%
Core efficiency ratio, excluding acquisition-related expenses	64.26		%	71.87		%	72.46		%	65.30		%	64.46		%	69.31		%	70.73		%

	Quarter Ended															Nine Months Ended
(in thousands)	Sept. 30, 2017			June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			Sept. 30, 2017			Sept. 30, 2016
Mortgage Banking Segment results:
Net income	$	(123	)	$	1,763		$	(309	)	$	(9,752	)	$	17,568		$	1,331		$	37,103
Impact of restructuring-related expenses (net of tax)	2,520			67			—			—			—			2,587			—
Net income, excluding restructuring-related expenses (net of tax)	$	2,397		$	1,830		$	(309	)	$	(9,752	)	$	17,568		$	3,918		$	37,103
Net interest income	$	5,526		$	4,420		$	4,747		$	7,437		$	7,463		$	14,693		$	18,597
Noninterest income	$	71,922		$	72,732		$	65,036		$	60,134		$	101,974		$	209,690		$	263,334
Noninterest expense	$	77,537		$	74,613		$	70,404		$	82,057		$	82,229		$	222,554		$	223,880
Impact of restructuring-related expenses	$	(3,877	)	$	(103	)	$	—		$	—		$	—		$	(3,980	)	$	—
Noninterest expense, excluding restructuring-related expenses	$	73,660		$	74,510		$	70,404		$	82,057		$	82,229		$	218,574		$	223,880
Efficiency ratio	100.11		%	96.71		%	100.89		%	121.44		%	75.14		%	99.18		%	79.41		%
Impact of restructuring-related expenses	(5.00		)%	(0.13		)%	—		%	—		%	—		%	(1.77		)%	—		%
Core efficiency ratio, excluding restructuring-related expenses	95.11		%	96.58		%	100.89		%	121.44		%	75.14		%	97.41		%	79.41		%

36