HomeStreet (HMST) 8-K HomeStreet Reports Third Quarter 2020 Results

HomeStreet Reports Third Quarter 2020 Results

Fully diluted EPS $1.15 Core EPS $1.23 ROTCE: 15.3% ROTCE Core: 16.4% Tangible BV per share $30.15

SEATTLE –October 26, 2020 – (BUSINESS WIRE) – HomeStreet, Inc. (Nasdaq:HMST) (including its consolidated subsidiaries, the "Company" or "HomeStreet"), the parent company of HomeStreet Bank, today announced the financial results for the quarter ended September 30, 2020. As we present non-GAAP measures in this release, the reader should refer to the non-GAAP reconciliations set forth below under the section “Non-GAAP Financial Measures.”

“HomeStreet again delivered solid results despite the continuing challenges of the pandemic in our markets,” said Mark K. Mason, HomeStreet’s Chairman of the Board, President, and Chief Executive Officer.“Our net interest margin increased as a result of decreasing funding costs, and we benefited from continuing high loan volume and profitability in our single family mortgage banking business.In addition, due to our cost control efforts and increasing revenues, we are experiencing significant improvements in our efficiency ratio."

Operating Results

Third quarter 2020 compared to second quarter 2020 Reported Results: •Net income of $26.3 million compared with $18.9 million •Earnings per fully diluted share of $1.15 compared to $0.81 •Net interest margin of 3.20%, compared to 3.12% •Return on average assets of 1.40% compared to 1.05% Core Results: •Net income of $28.2 million compared with $20.2 million •Earnings per fully diluted share of $1.23 compared to $0.86 •Return on average assets of 1.50% compared to 1.12% •Pre provision income before income taxes of $36.1 million compared to $32.0 million •Efficiency ratio of 59.9% compared to 62.6%

Financial Position

Third quarter 2020 compared to second quarter 2020 •Loan portfolio originations: $612 million a 27% decrease •Loans held for sale originations: $573 million, a 7% increase •Deposits increased by $159 million, a 3% increase •Period ending cost of deposits of 0.36%, compared to 0.51% •Tangible book value per share of $30.15, a 5% increase

"Our results for the third quarter are a testament to our consistent approach to credit risk management. We have seen significant decreases in our commercial loans in forbearance and our nonperforming asset levels remained low” added Mr. Mason. “As a result of the performance of our loan portfolio, we did not add any additional provisions for credit losses during the quarter and our ACL ratio to loans increased during the quarter to 1.33%."

1

Other •Repurchased a total of 1,018,772 shares of our common stock at an average price of $25.87 per share during the third quarter, repurchased a total of 209,820 shares in October at an average price of $28.93 per share •Reorganized our Fannie Mae DUS business to move origination, sale and servicing of future originations to HomeStreet Bank from a separate subsidiary of HomeStreet, Inc. •Declared a cash dividend of $0.15 per share in the quarter, payable on November 23, 2020 •Full time equivalent employees: 999 as of September 30, 2020

“Due to our strong results, we were able to complete our $25 million repurchase authorization. In all, we have repurchased 20% of our outstanding shares since the beginning of this program in 2019,” concluded Mr. Mason.

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Conference Call

HomeStreet, Inc. (Nasdaq:HMST), the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday, October 27, 2020 at 1:00 p.m. EDT. Mark K. Mason, President and CEO, and John M. Michel, Executive Vice President and CFO, will discuss third quarter 2020 results and provide an update on recent events. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at http://dpregister.com/10148576 or may join the call by dialing 1-877-508-9589 (1-855-669-9657 in Canada and 1-412-317-1075 internationally) 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 10148576.

About HomeStreet

HomeStreet, Inc. (Nasdaq:HMST) is a diversified financial services company headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii through its various operating subsidiaries. The Company is principally engaged in real estate lending, including mortgage banking activities, and commercial and consumer banking. Its principal subsidiaries are HomeStreet Bank and HomeStreet Capital Corporation. Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com. HomeStreet Bank is a member of the FDIC and an Equal Housing Lender.

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
(dollars in thousands)	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Select Income Statement Data:
Net interest income	$	55,684		$	51,496		$	45,434		$	45,512		$	47,134
Provision for credit losses	—			6,469			14,000			(2,000)			—
Noninterest income	36,155			36,602			32,630			21,931			24,580
Noninterest expense	58,057			57,652			55,184			53,215			55,721
Income from continuing operations: (1)
Before income taxes	33,782			23,977			8,880			16,228			15,993
Total	26,349			18,904			7,139			13,105			13,665
Income per share - diluted	1.15			0.81			0.30			0.54			0.54
Core net income: (2)
Total	28,187			20,155			8,116			14,957			14,388
Income per share - diluted	1.23			0.86			0.34			0.61			0.58
Pre-provision income before income taxes:
Core (2)	36,139			32,033			24,095			16,520			16,840
Selected Performance Ratios:
Return on average equity - annualized	14.6		%	10.9		%	4.1		%	6.3		%	8.0		%
Return on average tangible equity - annualized: (2)
Net income	15.3		%	11.4		%	4.4		%	6.6		%	8.4		%
Continuing operations:
Total	15.3		%	11.4		%	4.4		%	7.9		%	8.3		%
Core (2)	16.4		%	12.2		%	4.9		%	9.0		%	8.8		%
Return on average assets - annualized:
Net income	1.40		%	1.05		%	0.42		%	0.64		%	0.79		%
Continuing operations:
Total	1.40		%	1.05		%	0.42		%	0.76		%	0.78		%
Core (2)	1.50		%	1.12		%	0.48		%	0.87		%	0.82		%
Efficiency ratio (2)	59.9		%	62.6		%	68.5		%	74.8		%	75.9		%
Net interest margin	3.20		%	3.12		%	2.93		%	2.87		%	2.96		%
Other data:
Full-time equivalent employees (ending)	999			987			996			1,071			1,132

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HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

	As of:
(dollars in thousands, except per share data)	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Selected Balance Sheet Data:
Loans held for sale	$	421,737		$	303,546		$	140,527		$	208,177		$	172,958
Loans held for investment, net	5,229,477			5,367,278			5,034,930			5,072,784			5,139,108
Allowance for credit losses ("ACL")	64,892			65,000			58,299			41,772			43,437
Investment securities	1,111,468			1,171,821			1,058,492			943,150			866,736
Total assets	7,409,641			7,351,118			6,806,718			6,812,435			6,835,878
Deposits	5,815,690			5,656,321			5,257,057			5,339,959			5,804,307
Borrowings	514,590			713,590			558,590			471,590			5,590
Long-term debt	125,791			125,744			125,697			125,650			125,603
Total shareholders' equity	696,306			694,649			677,314			679,723			691,136
Other Data:
Book value per share	$	31.66		$	30.19		$	28.97		$	28.45		$	28.32
Tangible book value per share (2)	$	30.15		$	28.73		$	27.52		$	27.02		$	26.83
Tangible common equity to tangible assets (2)	9.0		%	9.0		%	9.5		%	9.5		%	9.6		%
Shares outstanding at end of period	21,994,204			23,007,400			23,376,793			23,890,855			24,408,513
Loans to deposit ratio	98.3		%	101.4		%	99.6		%	99.7		%	92.3		%
Credit Quality:
ACL to total loans (3) (4)	1.33		%	1.30		%	1.17		%	0.82		%	0.84		%
ACL to nonaccrual loans (4)	307.2		%	296.7		%	449.3		%	324.8		%	349.4		%
Nonaccrual loans to total loans	0.40		%	0.40		%	0.25		%	0.25		%	0.24		%
Nonperforming assets to total assets	0.30		%	0.31		%	0.21		%	0.21		%	0.21		%
Nonperforming assets	$	22,084		$	22,642		$	14,318		$	14,254		$	14,186
Regulatory Capital Ratios:(5)
Bank
Tier 1 leverage ratio	9.40		%	9.79		%	10.06		%	10.56		%	10.17		%
Total risk-based capital	13.95		%	14.08		%	13.95		%	14.37		%	14.37		%
Company
Tier 1 leverage ratio	9.34		%	9.73		%	10.15		%	10.16		%	10.04		%
Total risk-based capital	13.33		%	13.48		%	13.50		%	13.40		%	13.69		%

(1)Discontinued operations accounting was terminated effective January 1, 2020.

(2)For additional information on these non-GAAP financial measures and for corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures in this earnings release.

(3)The reserve rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA, including Paycheck Protection Program ("PPP") loan balances as of September 30, 2020 and, June 30, 2020.

(4)Prior to January 1, 2020 and the adoption of ASU 2016-13 CECL, the allowance for loan losses was used in this calculation in place of ACL.

(5)Regulatory capital ratios at September 30, 2020 are preliminary.

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HomeStreet, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)	September 30, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	79,066	$	57,880
Investment securities	1,111,468		943,150
Loans held for sale	421,737		208,177
Loans held for investment, (net of allowance for credit losses of $64,892 and $41,772)	5,229,477		5,072,784
Mortgage servicing rights	78,824		97,603
Premises and equipment, net	69,438		76,973
Other real estate owned	958		1,393
Goodwill and other intangibles	33,222		34,252
Other assets	385,451		291,595
Assets of discontinued operations	—		28,628
Total assets	$	7,409,641	$	6,812,435
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits	$	5,815,690	$	5,339,959
Borrowings	514,590		471,590
Long-term debt	125,791		125,650
Accounts payable and other liabilities	257,264		192,910
Liabilities of discontinued operations	—		2,603
Total liabilities	6,713,335		6,132,712
Shareholders' equity:
Common stock, no par value; 160,000,000 shares authorized
21,994,204 and 23,890,855 shares issued and outstanding	280,422		300,729
Retained earnings	383,107		374,673
Accumulated other comprehensive income	32,777		4,321
Total shareholders' equity	696,306		679,723
Total liabilities and shareholders' equity	$	7,409,641	$	6,812,435

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HomeStreet, Inc. and Subsidiaries

Consolidated Income Statements

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except share data)	2020		2019		2020		2019
Interest income:
Loans	$	57,538	$	64,779	$	172,275	$	194,713
Investment securities	5,667		4,879		16,053		15,327
Cash, Fed Funds and other	532		419		960		799
Total interest income	63,737		70,077		189,288		210,839
Interest expense:
Deposits	5,986		20,502		28,944		51,754
Borrowings	2,067		2,441		7,730		15,207
Total interest expense	8,053		22,943		36,674		66,961
Net interest income	55,684		47,134		152,614		143,878
Provision for credit losses	—		—		20,469		1,500
Net interest income after provision for credit losses	55,684		47,134		132,145		142,378
Noninterest income:
Net gain on loan origination and sale activities	33,130		15,951		85,698		30,736
Loan servicing (loss) income	(1,582)		3,196		6,921		7,119
Deposit fees	1,769		2,079		5,225		5,848
Other	2,838		3,354		7,543		8,798
Total noninterest income	36,155		24,580		105,387		52,501
Noninterest expense:
Compensation and benefits	34,570		33,341		101,429		93,934
Information services	7,401		8,173		22,330		24,001
Occupancy	8,354		6,228		23,082		19,168
General, administrative and other	7,732		7,979		24,052		25,296
Total noninterest expense	58,057		55,721		170,893		162,399
Income from continuing operations before income taxes	33,782		15,993		66,639		32,480
Income taxes from continuing operations	7,433		2,328		14,247		4,865
Income from continuing operations	26,349		13,665		52,392		27,615
Income (loss) from discontinued operations before income taxes	—		190		—		(24,928)
Income tax (benefit) for discontinued operations	—		28		—		(3,837)
Income (loss) from discontinued operations	—		162		—		(21,091)
Net income	$	26,349	$	13,827	$	52,392	$	6,524
Net income (loss) per share:
Basic:
Income from continuing operations	$	1.16	$	0.55	$	2.26	$	1.04
Income (loss) from discontinued operations	—		0.01		—		(0.81)
Total	$	1.16	$	0.55	$	2.26	$	0.23
Diluted:
Income from continuing operations	$	1.15	$	0.54	$	2.24	$	1.03
Income (loss) from discontinued operations	—		0.01		—		(0.80)
Total	$	1.15	$	0.55	$	2.24	$	0.22
Weighted average shares outstanding:
Basic	22,665,069		24,419,793		23,226,109		26,020,172
Diluted	22,877,226		24,625,938		23,403,729		26,204,414

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HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Income Statements

	Quarter Ended
(dollars in thousands, except share data)	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Interest income:
Loans	$	57,538	$	55,728	$	59,009	$	61,330	$	64,779
Investment securities	5,667		5,999		4,387		5,204		4,879
Cash, Fed Funds and other	532		75		353		233		419
Total interest income	63,737		61,802		63,749		66,767		70,077
Interest expense:
Deposits	5,986		8,175		14,783		18,635		20,502
Borrowings	2,067		2,131		3,532		2,620		2,441
Total interest expense	8,053		10,306		18,315		21,255		22,943
Net interest income	55,684		51,496		45,434		45,512		47,134
Provision for credit losses	—		6,469		14,000		(2,000)		—
Net interest income after provision for credit losses	55,684		45,027		31,434		47,512		47,134
Noninterest income:
Net gain on loan origination and sale activities	33,130		30,027		22,541		13,386		15,951
Loan servicing income (loss)	(1,582)		2,402		6,101		2,666		3,196
Deposit fees	1,769		1,566		1,890		2,078		2,079
Other	2,838		2,607		2,098		3,801		3,354
Total noninterest income	36,155		36,602		32,630		21,931		24,580
Noninterest expense:
Compensation and benefits	34,570		34,427		32,432		30,420		33,341
Information services	7,401		7,405		7,524		7,602		8,173
Occupancy	8,354		7,959		6,769		7,951		6,228
General, administrative and other	7,732		7,861		8,459		7,242		7,979
Total noninterest expense	58,057		57,652		55,184		53,215		55,721
Income from continuing operations before income taxes	33,782		23,977		8,880		16,228		15,993
Income taxes for continuing operations	7,433		5,073		1,741		3,123		2,328
Income from continuing operations	26,349		18,904		7,139		13,105		13,665
Income (loss) from discontinued operations before income taxes	—		—		—		(3,357)		190
Income taxes (benefit) for discontinued operations	—		—		—		(1,240)		28
Income (loss) from discontinued operations	—		—		—		(2,117)		162
Net income	$	26,349	$	18,904	$	7,139	$	10,988	$	13,827
Net income (loss) per share:
Basic:
Income from continuing operations	$	1.16	$	0.81	$	0.30	$	0.54	$	0.55
Income (loss) from discontinued operations	—		—		—		(0.09)		0.01
Total	$	1.16	$	0.81	$	0.30	$	0.45	$	0.55
Diluted:
Income from continuing operations	$	1.15	$	0.81	$	0.30	$	0.54	$	0.54
Income (loss) from discontinued operations	—		—		—		(0.09)		0.01
Total	$	1.15	$	0.81	$	0.30	$	0.45	$	0.55
Weighted average shares outstanding:
Basic	22,665,069		23,330,494		23,688,930		24,233,434		24,419,793
Diluted	22,877,226		23,479,845		23,860,280		24,469,891		24,625,938

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HomeStreet, Inc. and Subsidiaries

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

(dollars in thousands)	Quarter Ended									Nine Months Ended
Average Balances:	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Investment securities	$	1,149,196		$	790,313		$	1,082,402		$	827,550
Loans	5,745,653			5,543,167			5,490,900			5,631,378
Total interest earning assets	6,972,626			6,437,903			6,633,203			6,536,426
Deposits: Interest-bearing	4,326,808			4,846,585			4,293,745			4,453,971
Deposits: Non-interest-bearing	1,398,640			1,033,146			1,228,295			1,078,698
Borrowings	735,493			102,270			648,836			553,595
Long-term debt	125,760			125,574			125,713			125,527
Total interest-bearing liabilities	5,188,061			5,074,429			5,068,294			5,133,093
Average Yield/Rate:
Investment securities	2.23		%	2.64		%	2.22		%	2.66		%
Loans	3.96		%	4.69		%	4.16		%	4.77		%
Total interest earning assets	3.66		%	4.38		%	3.82		%	4.46		%
Deposits: Interest-bearing	0.55		%	1.69		%	0.90		%	1.57		%
Total deposits	0.42		%	1.41		%	0.70		%	1.26		%
Borrowings	0.35		%	2.75		%	0.64		%	2.68		%
Long-term debt	4.38		%	5.37		%	4.66		%	5.47		%
Total interest-bearing liabilities	0.62		%	1.81		%	0.96		%	1.78		%
Net interest rate spread	3.04		%	2.57		%	2.86		%	2.68		%
Net interest margin	3.20		%	2.96		%	3.09		%	3.06		%

(dollars in thousands)	Quarter Ended
Average Balances:	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Investment securities	$	1,149,196		$	1,117,449		$	979,825		$	878,901		$	790,313
Loans	5,745,653			5,505,913			5,218,337			5,371,188			5,543,167
Total interest earning assets	6,972,626			6,670,106			6,253,147			6,328,179			6,437,903
Deposits: Interest-bearing	4,326,808			4,220,307			4,333,756			4,674,797			4,846,585
Deposits: Noninterest-bearing	1,398,640			1,274,891			1,009,482			988,686			1,033,146
Borrowings	735,493			726,330			483,733			187,696			102,270
Long-term debt	125,760			125,713			125,666			125,619			125,574
Total interest-bearing liabilities	5,188,061			5,072,350			4,943,155			4,988,112			5,074,429
Average Yield/Rate:
Investment securities	2.23		%	2.40		%	2.03		%	2.51		%	2.64		%
Loans	3.96		%	4.03		%	4.51		%	4.53		%	4.69		%
Total interest earning assets	3.66		%	3.74		%	4.10		%	4.21		%	4.38		%
Deposits: Interest-bearing	0.55		%	0.78		%	1.38		%	1.59		%	1.69		%
Total deposits	0.42		%	0.60		%	1.14		%	1.33		%	1.41		%
Borrowings	0.35		%	0.36		%	1.51		%	1.97		%	2.75		%
Long-term debt	4.38		%	4.55		%	5.04		%	5.23		%	5.37		%
Total interest-bearing liabilities	0.62		%	0.81		%	1.48		%	1.69		%	1.81		%
Net interest rate spread	3.04		%	2.93		%	2.62		%	2.52		%	2.57		%
Net interest margin	3.20		%	3.12		%	2.93		%	2.87		%	2.96		%

9

Results of Operations

Non-core Amounts

During the third quarter of 2020, non-core items included $2.4 millionof impairments related to ongoing restructuring of our facilities and staffing. During the second quarter of 2020, non-core items included $2.2 million of impairments related to ongoing restructuring of our facilities and staffing and $0.7 million of income related to a contingent payout related to our 2019 sale of our discontinued home lending centers.

Third Quarter of 2020 Compared to the Second Quarter of 2020

Our net income and income before taxes were $26.3 million and $33.8 million, respectively, in the third quarter of 2020, as compared to $18.9 million and $24.0 million, respectively, during the second quarter of 2020. The $9.8 million increase in income before taxes was due to higher net interest income and a lower provision for credit losses, partially offset by lower noninterest income and higher noninterest expense.

Our effective tax rate during the third quarter of 2020 was 22.0% as compared to 21.2% in the second quarter of 2020 and a statutory rate of 23.7%. Our effective tax rate was lower than our statutory rate due primarily to the benefits of tax advantaged investments. The higher effective tax rate in the third quarter of 2020 was due to the higher level of earnings which reduced the impact of tax advantaged investments.

Net interest income was higher in the third quarter of 2020 as our net interest margin increased to 3.20% primarily due to an 11 basis point increase in our net interest rate spread and a 5% increase in interest-earning assets. Our costs of interest-bearing liabilities decreased from 0.81% in the second quarter to 0.62% in third quarter due to a decrease in market interest rates which allowed us to reprice our deposits at lower rates. The benefit of these lower funding costs was partially offset by lower yields on interest earning assets. The 8 basis point decrease in yield on interest earning assets was due to the origination of loans and purchases of securities with rates below our current portfolio rates, the ongoing repricing of variable rate loans and the prepayment and paydown of higher yielding loans and investments from our portfolios.

As a result of the favorable performance of our loan portfolio and a stable low level of nonperforming assets, no provision for credit losses was recorded in the third quarter of 2020 as compared to $6.5 million in the second quarter of 2020.

The decrease in noninterest income for the third quarter of 2020 as compared to the second quarter of 2020, was due to a $4.0 million decrease in loan servicing income, partially offset by a $3.1 million increase in gain on loan sales. The decrease in loan servicing income was due primarily to unfavorable risk management results on mortgage servicing rights resulting from a market expectation of an extended period of higher prepayments. The increase in gain on loan sales was due to a higher volume of commercial real estate loan sales in the third quarter.

The $0.4 million increase in noninterest expense in the third quarter of 2020 as compared to the second quarter of 2020 was due to an increase in depreciation expense on reduced leasehold improvement asset lives.

Third Quarter of 2020 Compared to the Third Quarter of 2019

Our income from continuing operations and income from continuing operations before income taxes were $26.3 million and $33.8 million, respectively, in the third quarter of 2020, as compared to $13.7 million and $16.0 million, respectively, during the third quarter of 2019. The $17.8 million increase in income from continuing operations before income taxes was due to higher net interest income and higher noninterest income which were partially offset by higher noninterest expense.

Our effective tax rate during the third quarter of 2020 was 22.0% as compared to 14.6% in the third quarter of 2019 for continuing operations and a statutory rate of 23.7%. Our effective tax rate was lower than our

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statutory rate due primarily to the benefits of tax advantaged investments. In the third quarter of 2019,the benefits of tax advantaged investments were a higher proportion of total earnings, resulting in a lower effective tax rate.

Net interest income was higher in the third quarter of 2020 as compared to the third quarter of 2019

because our net interest margin increased to 3.20% primarily due to a 47 basis point increase in our net interest rate spread. Our costs of interest-bearing liabilities decreased from 1.81% in the third quarter of 2019 to 0.62% in the third quarter of 2020 due to a decrease in market interest rates which allowed us to reprice our deposits and borrowings at lower rates. The benefit of these lower funding costs was partially offset by lower yields on interest earning assets. The 72 basis point decrease in yield on interest earning assets was due to the origination of loans and purchases of securities with rates below our current portfolio rates, the ongoing repricing of variable rate loans and the prepayment and paydown of higher yielding loans and investments from our portfolios.

We had no provision for credit losses for the third quarters of 2020 and 2019.

The increase in noninterest income for the third quarter of 2020 as compared to the third quarter of 2019, was due to a $17.2 million increase in gain on loan sales related to higher volumes of rate locks and an increase in profit margins in our single family operations. The increase in noninterest income was partially offset by a decrease in loan servicing income from unfavorable risk management results on mortgage servicing rights in the third quarter of 2020 resulting from a market expectation of an extended period of higher prepayments.

The $2.3 million increase in noninterest expense in the third quarter of 2020 compared to the third quarter of 2019 was primarily due to $2.4 million in impairments in the third quarter of 2020 related to ongoing restructuring of our facilities and staffing and increases in compensation and benefits costs related to increased commissions on higher closed loan volume. The increase was partially offset by decreases in information system and general and administrative costs related to our cost savings initiatives.

Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019

Our income from continuing operations and income from continuing operations before income taxes were $52.4 million and $66.6 million, respectively, in the nine months ended September 30, 2020, as compared to $27.6 million and $32.5 million, respectively, during the nine months ended September 30, 2019. The $34.1 million increase in income from continuing operations before income taxes was due to higher net interest income and noninterest income which was partially offset by a higher provision for credit losses and higher noninterest expense.

Our effective tax rate during the nine months ended September 30, 2020 was 21.4% as compared to 15.0% in the nine months ended September 30, 2019 for continuing operations and a statutory rate of 23.7%. Our effective tax rate was lower than our statutory rate due primarily to the benefits of tax advantaged investments. In the first nine months of 2019, the benefits of tax advantaged investments were a higher proportion of total earnings, resulting in a lower effective tax rate.

Net interest income was higher in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 because our net interest margin increased to 3.09%. The increase in our net interest margin was due to an increase in our net interest rate spread which increased because decreases in the rates paid on interest bearing liabilities were greater than the decrease in the yield on our interest earning assets. The 64 basis point decrease in yield on interest earning assets was due to the origination of loans and purchases of securities with rates below our current portfolio rates, the ongoing repricing of variable rate loans and the prepayment and paydown of higher yielding loans and investments from our portfolios. Our cost of interest-bearing liabilities decreased from 1.78% in the nine months ended September 30, 2019 to 0.96% in

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the nine months ended September 30, 2020 due to a decrease in market interest rates which allowed us to reprice our deposits and borrowings at lower rates.

The provision for credit losses was $20.5 million for the nine months ended September 30, 2020 as compared to $1.5 million in the nine months ended September 30, 2019. Due to adverse economic conditions related to the COVID-19 pandemic, we recorded additional provisions for credit losses in the first two quarters of 2020 as an estimate of the potential impact of those conditions on our loan portfolio, including an evaluation of the credit risk related to the commercial business loans and commercial real estate loans granted COVID-19 modifications during 2020which we believe will experience a higher probability of default and increased credit losses.

The increase in noninterest income for the nine months ended September 30, 2020 compared to the same period in 2019, was due to an increase in gain on sale of loans. The increase was due to higher volumes of rate locks and an increase in profit margins in our single family operations and the classification of $18 million of gain on loan sales associated with the legacy mortgage business as discontinued operationsin the first quarter of 2019.

The $8.5 million increase in noninterest expense in the nine months ended September 30, 2020 compared to the same period in the prior year was due to increases in compensation and benefits costs and occupancy costs which were partially offset by lower general and administrative and information systems costs. The increase in compensation and benefits costs was due to the classification of $7 million of compensation and benefits costs associated with the legacy mortgage business as discontinued operations in the first quarter of 2019 and increased commissions and bonuses paid on higher loan originations levels, including loans made under PPP, which were partially offset by reduced levels of staffing. Occupancy expenses in the first nine months of 2020 included $4.4 million of impairments related to ongoing restructuring of our facilities and staffing. General and administrative costs, including information systems costs, declined due to the benefits of our cost savings initiatives.

Financial Position

During the first nine months of 2020, total assets increased by $597 million due to a $168 million increase in investment securities, a $214 million increase in loans held for sale, a $157 million increase in loans held for investment, net and a $94 million increase in other assets, which were partially offset by a $19 million decrease in mortgage servicing rights. The increase in the loans held for sale was due primarily to $195 million of multifamily loans held for sale at September 30 in anticipation of a bulk sale in the fourth quarter of 2020. Loans held for investment increased due to $2.1 billion of originations, including the origination of $298 million of loans under PPP, which was partially offset by sales of $345 million and prepayments and scheduled payments of $1.6 billion. The increase in other assets and other liabilities was primarily due to the recognition of our option to acquire, under the GNMA early buyout option process, $115 million of loans serviced for others which are in a delinquent position, primarily due to forbearances. The decrease in mortgage servicing rights reflected the impact of increased prepayments. Total liabilities increased by $581 million due to a $476 million increase in deposits, a $43 million increase in borrowings and a $64 million increase in other liabilities. The increase in deposits was due to a $547 million increase in business and consumer accounts, due in part to the funding of PPP loans to customer accounts and the addition of new customers through PPP, which was partially offset by a $71 million decrease in wholesale deposits.

Credit Quality

As of September 30, 2020, our ratio of nonperforming assets to total assets remained low at 0.30% while our ratio of total loans delinquent over 30 days to total loans was 0.76%. As a result of the COVID-19 pandemic,

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the Company has approved forbearances for some of its borrowers. The status of these forbearances as of September 30, 2020 is as follows:

	Forbearances Approved (2)
	Initiated in the Third Quarter 2020				Second Request					Total			Outstanding
(dollars in thousands)	Number of loans	Amount		Number of loans	Amount		Number of loans	Amount		Number of loans	Amount
Loan type: (1)
Commercial and CRE:
Commercial business	2	$	1,927	18	$	25,052	125	$	78,289	19	$	25,462
CRE owner occupied	—	—		5	$	38,547	29	73,802		4	37,739
CRE nonowner occupied	3	14,622		2	$	2,233	14	58,433		7	35,624
Total	5	$	16,549	25	$	65,832	168	$	210,524	30	$	98,825
Single family and consumer
Single family										170	$	83,896
HELOCs and consumer										175	23,190
Total										345	$	107,086

(1) Does not include any SBA guaranteed loans for which the government made payments as provided for under the CARES Act, or single family loans that are guaranteed by Ginnie Mae.

(2) This schedule does not include $44 million of constructions loans, (8 loans) that were modified as a result of COVID-19 related construction delays to extend the construction or lease-up periods. Each of these loans continued to make monthly payments under the existing or modified payment terms.

The forbearances approved for commercial and industrial loans and CRE nonowner occupied loans were generally for a period of 3 months while the forbearances for single family, HELOCs and consumer loans were generally for a period of 3 to 6 months. During the third quarter, second forbearances were approved to $66 million of loans, including one relationship with 18 loans and $52 million of balances. The forbearance provided to this large relationship was part of an overall restructure of the related loans. These second forbearances were to borrowers whose businesses continue to be impacted by the effects of the COVID-19 pandemic.

As of September 30, 2020, excluding the loans approved for a second forbearance, 97% of the commercial and CRE loans approved for a forbearance prior to the third quarter have completed their forbearance period and have resumed payments. Based on information obtained through discussions with these borrowers, almost all of them have reopened their business at some level and they do not currently foresee the need for additional forbearance.

The forbearance periods for the majority of single family and consumer loans granted forbearance that were not complete as of September 30, 2020 are scheduled to be completed in the fourth quarter of 2020.

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Loans Held for Investment

(in thousands)	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Consumer loans
Single family (1)	$	936,774	$	983,166	$	988,967	$	1,072,706	$	1,190,666
Home equity and other	446,123		484,757		525,544		553,376		589,411
Total consumer loans	1,382,897		1,467,923		1,514,511		1,626,082		1,780,077
Commercial real estate loans
Non-owner occupied commercial real estate	847,079		867,967		872,173		895,546		795,563
Multifamily	1,327,156		1,306,079		1,167,242		999,140		922,445
Construction/land development	590,707		630,066		626,969		701,762		762,341
Total commercial real estate loans	2,764,942		2,804,112		2,666,384		2,596,448		2,480,349
Commercial and industrial loans
Owner occupied commercial real estate	462,613		462,903		473,338		477,316		475,634
Commercial business	683,917		697,340		438,996		414,710		446,485
Total commercial and industrial loans	1,146,530		1,160,243		912,334		892,026		922,119
Total (2)	5,294,369		5,432,278		5,093,229		5,114,556		5,182,545
Allowance for credit losses	(64,892)		(65,000)		(58,299)		(41,772)		(43,437)
Net	$	5,229,477	$	5,367,278	$	5,034,930	$	5,072,784	$	5,139,108

(1)Includes $7.6 million, $5.8 million, $4.9 million, $3.5 million and $5.3 million of single family loans that are carried at fair value at September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

(2) Deferred loans fees and costs of $24.5 million and $25.7 million are now included within the carrying amounts of the respective loan balances as of December 31, 2019 and September 30, 2019, respectively in order to conform to the current period presentation.

Loan Roll-forward

(in thousands)	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Loans - beginning balance	$	5,432,278	$	5,093,229	$	5,114,556	$	5,182,545	$	5,331,113
Originations and advances	612,091		833,111		667,039		833,265		604,574
Sales	(102,879)		—		(242,580)		(238,672)		(186,955)
Payoffs, paydowns and other	(646,646)		(494,009)		(445,562)		(662,242)		(566,171)
Charge-offs and transfers to OREO	(475)		(53)		(224)		(340)		(16)
Loans - ending balance (1)	$	5,294,369	$	5,432,278	$	5,093,229	$	5,114,556	$	5,182,545

(1) Deferred loans fees and costs of $24.5 million and $25.7 million are now included within the carrying amounts of the respective loan balances as of December 31, 2019 and September 30, 2019, respectively, in order to conform to the current period presentation.

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Loan Originations and Advances

(in thousands)	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Consumer loans
Single family	$	83,805	$	122,729	$	61,934	$	55,782	$	74,331
Home equity and other	29,273		31,717		43,252		43,944		59,582
Total consumer loans	113,078		154,446		105,186		99,726		133,913
Commercial real estate loans
Non-owner occupied commercial real estate	23,183		4,279		37,280		125,715		36,740
Multifamily	272,460		191,345		279,948		342,238		161,171
Construction/land development	153,222		137,747		158,800		181,121		189,829
Total commercial real estate loans	448,865		333,371		476,028		649,074		387,740
Commercial and industrial loans
Owner occupied commercial real estate	15,192		5,762		16,767		38,706		27,437
Commercial business	34,956		339,532		69,058		45,759		55,484
Total commercial and industrial loans	50,148		345,294		85,825		84,465		82,921
	$	612,091	$	833,111	$	667,039	$	833,265	$	604,574

Credit Quality Activity

Allowance for Credit Losses (roll-forward)

	Quarter Ended
(in thousands)	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Allowance for credit losses
Beginning balance	$	65,000	$	58,299	$	41,772	$	43,437	$	43,254
Provision for credit losses	273		6,705		14,655		(1,868)		177
Recoveries (charge-offs), net	(381)		(4)		29		203		6
Impact of ASC 326 adoption	—		—		1,843		—		—
Ending balance	$	64,892	$	65,000	$	58,299	$	41,772	$	43,437
Allowance for unfunded commitments:
Beginning balance	$	2,071	$	2,307	$	1,065	$	1,197	$	1,374
Provision for credit losses	(273)		(236)		(655)		(132)		(177)
Impact of ASC 326 adoption	—		—		1,897		—		—
Ending balance	$	1,798	$	2,071	$	2,307	$	1,065	$	1,197
Provision for credit losses:
Allowance for credit losses - loans	$	273	$	6,705	$	14,655	$	(1,868)	$	177
Allowance for unfunded commitments	(273)		(236)		(655)		(132)		(177)
Total	$	—	$	6,469	$	14,000	$	(2,000)	$	—

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Delinquencies

	Past Due and Still Accruing
(in thousands)	30-59 days			60-89 days			90 days or more (2)			Nonaccrual			Total past due and nonaccrual (3)			Current			Total loans
September 30, 2020
Total loans held for investment	$	2,126		$	1,090		$	15,688		$	21,126		$	40,030		$	5,254,339		$	5,294,369		(1)
%	0.04		%	0.02		%	0.30		%	0.40		%	0.76		%	99.24		%	100.00		%
June 30, 2020
Total loans held for investment	$	4,985		$	5,463		$	18,589		$	21,907		$	50,944		$	5,381,334		$	5,432,278		(1)
%	0.09		%	0.10		%	0.34		%	0.40		%	0.94		%	99.06		%	100.00		%

(1)Includes $7.6 million and $5.8 million of loans at September 30, 2020 and June 30, 2020, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in our consolidated income statements.

(2)FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss.

(3)Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $17.7 million and $25.6 million at September 30, 2020 and June 30, 2020, respectively.

Allocation of Allowance for Credit Losses by Product Type

(in thousands)	September 30, 2020						June 30, 2020					January 1, 2020
Allowance for credit losses	Reserve Balance		Reserve Rate (1)		Reserve Balance		Reserve Rate (1)	Reserve Balance		Reserve Rate
Single family	$	6,720	0.80	%	$	8,070	0.93%	$	6,918	0.70	%
Home equity and other	6,004		1.35	%	11,126		2.31%	10,850		1.96	%
Total consumer loans	12,724		0.99	%	19,196		1.42%	17,768		1.16	%
Non-owner occupied commercial real estate	8,923		1.05	%	7,325		0.84%	3,853		0.43	%
Multifamily	4,871		0.37	%	5,387		0.41%	4,038		0.40	%
Construction/land development
Multifamily construction	5,920		4.13	%	3,811		2.38%	3,541		1.88	%
Commercial real estate construction	1,709		3.79	%	440		0.82%	509		0.92	%
Single family construction	5,507		2.31	%	5,869		2.29%	8,080		2.84	%
Single family construction to permanent	1,206		0.74	%	1,515		0.93%	1,221		0.70	%
Total commercial real estate loans	28,136		1.02	%	24,347		0.87%	21,242		0.82	%
Owner occupied commercial real estate	5,688		1.24	%	5,641		1.23%	1,180		0.25	%
Commercial business	18,344		4.87	%	15,816		4.04%	3,425		0.83	%
Total commercial and industrial loans	24,032		2.87	%	21,457		2.52%	4,605		0.52	%
Total	$	64,892	1.33	%	$	65,000	1.30%	$	43,615	0.87	%

(1) The reserve rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA, including PPP loans.

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Production Volumes for Sale to the Secondary Market

	Quarter Ended
(in thousands)	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019			September 30, 2019
Loan originations
Single family loans	$	573,065	$	537,386	$	339,881	$	442,445	(2)	$	652,208	(2)
Commercial and industrial and CRE loans	116,496		65,338		69,818		61,303			60,278
Loans sold (1)
Single family loans	686,280		397,150		309,853		572,430		(2)	893,959		(2)
Commercial and industrial and CRE loans	170,980		48,622		282,457		257,647			270,484
Net gain on loan origination and sale activities (1)
Single family loans	27,632		28,288		17,831		8,074			9,628
Commercial and industrial and CRE loans	5,498		1,739		4,710		5,312			6,693
Amounts attributed to discontinued operations	—		—		—		—			(370)
Total	$	33,130	$	30,027	$	22,541	$	13,386		$	15,951

(1) Includes loans originated as held for investment.

(2) Includes both continuing and discontinued operations.

Loan Servicing Income

	Quarter Ended
(in thousands)	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Single family servicing income, net:
Servicing fees and other	$	4,124	$	4,254	$	4,979	$	5,149	$	5,252
Changes - amortization (1)	(4,401)		(4,351)		(3,494)		(3,776)		(4,489)
Net	(277)		(97)		1,485		1,373		763
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)(3)	(2,960)		(2,166)		(16,844)		5,189		(7,501)
Net gain (loss) from derivatives hedging	(91)		2,318		19,921		(5,482)		9,040
Subtotal	(3,051)		152		3,077		(293)		1,539
Single family servicing income (loss)	(3,328)		55		4,562		1,080		2,302
Commercial loan servicing income:
Servicing fees and other	3,096		3,606		3,014		3,068		2,711
Amortization of capitalized MSRs	(1,350)		(1,259)		(1,475)		(1,412)		(1,315)
Total	1,746		2,347		1,539		1,656		1,396
Amounts attributed to discontinued operations	—		—		—		(70)		(502)
Total loan servicing income (loss)	$	(1,582)	$	2,402	$	6,101	$	2,666	$	3,196

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

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

(3)Includes pre-tax income of $22 thousand and $333 thousand net of transaction costs and prepayment reserves, for the fourth quarter of 2019 and third quarter 2019 respectively, from sales of single family MSRs.

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Capitalized Mortgage Servicing Rights ("MSRs")

	Quarter Ended
(in thousands)	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Single Family MSRs
Beginning balance	$	47,804		$	49,933		$	68,109		$	61,823		$	67,723
Additions and amortization:
Originations	6,569			4,211			2,162			4,895			6,422
Changes - amortization (1)	(4,401)			(4,351)			(3,494)			(3,776)			(4,489)
Net additions and amortization	2,168			(140)			(1,332)			1,119			1,933
Changes in fair value assumptions (2)	(2,954)			(1,989)			(16,844)			5,167			(7,833)
Ending balance	$	47,018		$	47,804		$	49,933		$	68,109		$	61,823
Ratio to related loans serviced for others	0.76		%	0.76		%	0.74		%	0.98		%	0.88		%
CRE MSRs
Beginning balance	$	30,583		$	30,120		$	29,494		$	28,801		27,227
Originations	2,524			1,648			1,957			1,902			2,770
Amortization	(1,301)			(1,185)			(1,331)			(1,209)			(1,196)
Ending balance	$	31,806		$	30,583		$	30,120		$	29,494		$	28,801
Ratio to related loans serviced for others	1.93		%	1.89		%	1.88		%	1.90		%	1.91		%

(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.

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Deposits

(in thousands)	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Deposits by Product:
Noninterest-bearing accounts - checking and savings	$	1,022,786		$	1,049,356		$	768,776		$	704,743		$	698,714
Interest-bearing transaction and savings deposits:
Interest-bearing demand deposit accounts	545,890			484,869			420,606			373,832			421,750
Statement savings accounts due on demand	258,727			246,817			222,821			219,182			220,401
Money market accounts due on demand	2,512,440			2,471,388			2,299,442			2,224,494			2,073,907
Total interest-bearing transaction and savings deposits	3,317,057			3,203,074			2,942,869			2,817,508			2,716,058
Total transaction and savings deposits	4,339,843			4,252,430			3,711,645			3,522,251			3,414,772
Certificates of deposit	1,174,839			1,136,483			1,297,924			1,614,533			2,135,869
Noninterest-bearing accounts - other	301,008			267,408			247,488			203,175			253,666
Total deposits	$	5,815,690		$	5,656,321		$	5,257,057		$	5,339,959		$	5,804,307
Percent of total deposits:
Noninterest-bearing accounts - checking and savings	17.6		%	18.6		%	14.6		%	13.2		%	12.0		%
Interest-bearing transaction and savings deposits:
Interest-bearing demand deposit accounts	9.4			8.6			8.0			7.0			7.3
Statement savings accounts, due on demand	4.4			4.3			4.2			4.1			3.8
Money market accounts, due on demand	43.2			43.7			43.7			41.7			35.7
Total interest-bearing transaction and savings deposits	57.0			56.6			55.9			52.8			46.8
Total transaction and savings deposits	74.6			75.2			70.5			66.0			58.8
Certificates of deposit	20.2			20.1			24.7			30.2			36.8
Noninterest-bearing accounts - other	5.2			4.7			4.8			3.8			4.4
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

19

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance. These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures provided by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirement.

We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate a comparison of our performance to prior periods. We believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures prepared in accordance with GAAP. In the information below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures to the non-GAAP measures used in this press release, or a reconciliation of the non-GAAP calculation of the financial measure.

In this press release, we use (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which excluded intangible assets from the calculation of capital ratios; (ii) core earnings which exclude certain nonrecurring charges primarily related to our discontinued operations and restructuring activities as we believe this measure is a better comparison to be used for projecting future results; (iii) core pre-provision income before taxes which excludes the provision for credit losses as we believe this provides a better understanding of our current and future results after excluding the substantial provision for credit losses required under CECL and the current COVID-19 economic conditions; and (iv) an efficiency ratio which is the ratio of noninterest expenses to the sum of net interest income and noninterest income, excluding certain items of income or expense and excluding taxes incurred and payable to the state of Washington as such taxes are not classified as income taxes and we believe including them in noninterest expenses impacts the comparability of our results to those companies whose operations are in states where assessed taxes on business are classified as income taxes.

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HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

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

	As of or for the Quarter Ended
(dollars in thousands, except share data)	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Tangible book value per share
Shareholders' equity	$	696,306		$	694,649		$	677,314		$	679,723		$	691,136
Less: Goodwill and other intangibles	(33,222)			(33,563)			(33,908)			(34,252)			(36,341)
Tangible shareholders' equity	$	663,084		$	661,086		$	643,406		$	645,471		$	654,795
Common shares outstanding	21,994,204			23,007,400			23,376,793			23,890,855			24,408,513
Computed amount	$	30.15		$	28.73		$	27.52		$	27.02		$	26.83
Tangible common equity to tangible assets
Tangible shareholders' equity (per above)	$	663,084		$	661,086		$	643,406		$	645,471		$	654,795
Tangible assets
Total assets	$	7,409,641		$	7,351,118		$	6,806,718		$	6,812,435		$	6,835,878
Less: Goodwill and other intangibles	(33,222)			(33,563)			(33,908)			(34,252)			(36,341)
Net	$	7,376,419		$	7,317,555		$	6,772,810		$	6,778,183		$	6,799,537
Ratio	9.0		%	9.0		%	9.5		%	9.5		%	9.6		%
Return on average tangible equity (annualized) - Core
Average shareholders' equity	$	716,899		$	698,521		$	691,292		$	701,018		$	693,475
Less: Average goodwill and other intangibles	(33,332)			(33,785)			(34,125)			(35,050)			(36,617)
Average tangible equity	$	683,567		$	664,736		$	657,167		$	665,968		$	656,858
Net income from continuing operations	$	26,349		$	18,904		$	7,139		$	13,105		$	13,665
Adjustments (tax effected)
Restructuring related charges	1,838			1,697			977			1,852			723
Contingent payout	—			(446)			—			—			—
Core earnings	$	28,187		$	20,155		$	8,116		$	14,957		$	14,388
Ratio	16.4		%	12.2		%	4.9		%	9.0		%	8.8		%
Return on average tangible equity (annualized)
Average tangible equity (per above)	$	683,567		$	664,736		$	657,167		$	665,968		$	656,858
Net income	26,349			18,904			7,139			10,988			13,827
Ratio	15.3		%	11.4		%	4.4		%	6.6		%	8.4		%
Return on average assets (annualized) - Core
Average assets	$	7,499,809		$	7,207,996		$	6,825,993		$	6,863,954		$	7,004,208
Core earnings (per above)	28,187			20,155			8,116			14,957			14,388
Ratio	1.50		%	1.12		%	0.48		%	0.87		%	0.82		%

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	As of or for the Quarter Ended
(dollars in thousands, except share data)	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Efficiency ratio
Noninterest expense
Total	$	58,057		$	57,652		$	55,184		$	53,215		$	55,721
Adjustments:
Restructuring related charges	(2,357)			(2,153)			(1,215)			(2,292)			(847)
State of Washington taxes	(677)			(675)			(512)			(507)			(420)
Adjusted total	$	55,023		$	54,824		$	53,457		$	50,416		$	54,454
Total revenues
Net interest income	$	55,684		$	51,496		$	45,434		$	45,512		$	47,134
Noninterest income	36,155			36,602			32,630			21,931			24,580
Adjustments:
Contingent payout	—			(566)			—			—			—
Adjusted total	$	91,839		$	87,532		$	78,064		$	67,443		$	71,714
Ratio	59.9		%	62.6		%	68.5		%	74.8		%	75.9		%
Core diluted earnings per share
Core earnings (per above)	$	28,187		$	20,155		$	8,116		$	14,957		$	14,388
Fully diluted shares	22,877,226			23,479,845			23,860,280			24,469,891			24,625,938
Ratio	$	1.23		$	0.86		$	0.34		$	0.61		$	0.58
Pre-provision income before income taxes - Core
Total revenues - Core (per above)	$	91,839		$	87,532		$	78,064		$	67,443		$	71,714
Noninterest expense - Core (per above)	(55,023)			(54,824)			(53,457)			(50,416)			(54,454)
State of Washington taxes	(677)			(675)			(512)			(507)			(420)
Total	$	36,139		$	32,033		$	24,095		$	16,520		$	16,840
Effective tax rate used in computations above	22.0		%	21.2		%	19.6		%	19.2		%	14.6		%

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Forward-Looking Statements

This press release contains forward-looking statements concerning HomeStreet, Inc., HomeStreet Bank (and any consolidated subsidiaries of HomeStreet, Inc. and HomeStreet Bank) and their operations, performance, financial condition 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 impacts of COVID-19 on our business and operating strategies and plans and on the economies and communities we serve, our expectations about future performance and financial condition, long term value creation, reduction in volatility, reliability of earnings, provisions and allowances for credit losses, cost reduction initiatives, performance of our continued operations relative to our past operations, the nature and magnitude of additional expected charges related the exit of our home loan center-based mortgage operations . 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 ongoing impacts of COVID-19 and the extent to which it has impacted and will impact our business, operations and performance, and which could have a negative impact on our credit portfolio, borrowers, and share price, recent restructuring activities, the ongoing need to anticipate and address similar issues affecting our business, and challenges to our ability to efficiently 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 our inability to implement all or a significant portion of the cost reduction measures we have identified, the risk of adverse impacts to our business of reducing the size of our operations; changes in general political and economic conditions that impact our markets and our business; actions by the Federal Reserve Board, the FDIC, Washington State Department of Financial Institutions 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, fines or penalties 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; employee litigation risk arising from current or past operations including but not limited to various restructuring activities undertaken by the Bank in recent years; 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 and 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 restructuring activities and cost efficiency measures may fall short of our financial and operational expectations. 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; decreases in interest rates; increase in competition for loans; unfavorable changes in general economic conditions, including housing prices, unemployment rates, the job market; the impact of the ongoing COVID-19 pandemic and other similar events or natural disasters; 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 we do business; and recent and future legislative or regulatory actions or reform that affect us directly or our business or the banking or mortgage industries more generally. A discussion of the factors that may pose a risk to the achievement of our business goals and our operational and financial objectives is contained in our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1 of our Form 10-Q for the periods ended March 31, 2020 and June 30, 2020, which we update 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.

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The information contained herein is unaudited, although certain information related to the year ended December 31, 2019 has been derived from our audited financial statements for the year then ended as included in our 2019 Form 10-K. All financial data for the year end December 31, 2019 should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 and the notes to such consolidated financial statements of HomeStreet, Inc. and subsidiaries as of and for the fiscal year ended December 31, 2019, as contained in the Company's Annual Report on Form 10-K for such fiscal year.

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