HomeStreet, Inc. - FORM 8-K - EX-99.1 - EARNINGS RELEASE ISSUED BY HOMESTREET, INC DATED JULY 24, 2017

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8-K - FORM 8-K - HomeStreet, Inc.	form8-k2q2017earningsrelea.htm
EX-99.2 - SUMMARY EARNINGS RELEASE ISSUED BY HOMESTREET DATED JULY 24, 2017 - HomeStreet, Inc.	exhibit992q22017er.htm

HomeStreet, Inc. Reports Second Quarter 2017 Results

Net Income of $11.2 million, or $0.41 per Diluted Share

SEATTLE – July 24, 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 $11.2 million, or $0.41 per diluted share for the quarter ended June 30, 2017, compared with net income of $9.0 million, or $0.33 per diluted share for the quarter ended March 31, 2017 and $21.7 million, or $0.87 per diluted share for the quarter ended June 30, 2016. Core net income⁽¹⁾ for the quarter ended June 30, 2017 was $11.3 million, or $0.42 per diluted share, compared with core net income⁽¹⁾ of $9.0 million, or $0.33 per diluted share, for the quarter ended March 31, 2017 and $22.4 million, or $0.90per diluted share, for the quarter ended June 30, 2016.

Key developments and results of Q2 2017 include:


▪	Strong performance continued in our Commercial and Consumer Banking segment, with net income for the second quarter of 2017 of $9.4 million compared with $9.3 million for the first quarter of 2017 and $7.1 million in the second quarter of 2016


▪	Total assets of $6.59 billion grew $185.4 million, or 3%, from $6.40 billion at March 31, 2017


▪	Loans held for investment of $4.18 billion, grew by $196.9 million, or 5%, from $3.99 billion at March 31, 2017


▪	Total commercial business related deposits increased $69.1 million, or 6%, in the second quarter of 2017 compared to the first quarter of 2017


•	Two de novo retail deposit branches were opened in Baldwin Park, California and Redmond, Washington and an agreement was announced in June 2017 to purchase one retail deposit branch and related deposits in El Cajon (San Diego County), CA


•	Lower levels of mortgage loan origination volume and profit margins drove seasonally lower than expected earnings in the mortgage banking segment

Consolidated results:


▪	Annualized return on average shareholders' equity was 6.71% in the second quarter of 2017 compared with 5.53% in the first quarter of 2017 and 15.87% in the second quarter of 2016


▪	Annualized return on average tangible shareholders' equity⁽¹⁾ excluding acquisition-related items, net of tax, was 7.10% for the quarter ended June 30, 2017, compared to 5.81% for first quarter of 2017 and 17.27% in the second quarter of 2016


▪	Average interest-earning assets of $5.84 billion in the second quarter of 2017 increased $55.9 million, or 1%, from $5.78 billion in the first quarter of 2017 and increased $651.8 million, or 13%, from $5.19 billion in the second quarter of 2016

(1) For notes on non-GAAP financial measures, see pages 11 and 33.


▪	Net interest income was $46.9 million in the second quarter of 2017 compared with $45.7 million in the first quarter of 2017 and $44.5 million in the second quarter of 2016


▪	Noninterest income was $81.0 million in the second quarter of 2017 compared with $74.5 million in the first quarter of 2017 and $102.5 million in the second quarter of 2016

Segment results:


◦	Commercial and Consumer Banking


▪	Segment net income of $9.4 million for the current quarter compared with $9.3 million for the first quarter of 2017 and $7.1 million in the second quarter of 2016


▪	Core net income⁽¹⁾ for the segment of $9.6 million for the current quarter compared with $9.3 million for the first quarter of 2017 and $7.7 million for the second quarter of 2016


▪	Net interest income of $42.4 million for the current quarter compared with $40.9 million for the first quarter of 2017 and $38.4 million in the second quarter of 2016


▪	Noninterest income of $8.3 million for the current quarter compared with $9.4 million for the first quarter of 2017 and $8.2 million in the second quarter of 2016


▪	Loans held for investment of $4.18 billion increased $196.9 million, or 5%, from March 31, 2017 and increased $333.6 million, or 9% from December 31, 2016


▪	Deposits of $4.75 billion increased $152.0 million, or 3%, from March 31, 2017 and increased $318.1 million, or 7% from December 31, 2016


▪	Nonperforming assets were $20.1 million, or 0.30% of total assets at June 30, 2017, compared to $24.3 million, or 0.38% of total assets at March 31, 2017 and $26.4 million, or 0.45% of total assets at June 30, 2016


▪	Past due loans excluding those with U.S. government credit support were $18.4 million, or 0.45% of total such loans at June 30, 2017, compared to $19.5 million, or 0.50% of total such loans at March 31, 2017 and $16.3 million, or 0.45% of total such loans at June 30, 2016

◦Mortgage Banking


▪	Segment net income was $1.8 million for the current quarter compared with a net loss of $309 thousand in the first quarter of 2017 and net income of $14.7 million for the second quarter of 2016


▪	Net interest income of $4.4 million for the current quarter compared with $4.7 million for the first quarter of 2017 and $6.1 million in the second quarter of 2016


▪	Noninterest income of $72.7 million for the current quarter compared with $65.0 million for the first quarter of 2017 and $94.3 million in the second quarter of 2016


▪	Single family mortgage interest rate lock commitments were $1.95 billion in the second quarter of 2017, up 20% from $1.62 billion in the first quarter of 2017 and down 17% from $2.36 billion in the second quarter of 2016

(1) For notes on non-GAAP financial measures, see pages 11 and 33


▪	Single family mortgage closed loan volume was $2.01 billion, in the second quarter of 2017, up 24% from $1.62 billion in the first quarter of 2017 and down 11% from $2.26 billion in the second quarter of 2016


▪	The composite margin decreased to 331 basis points in the second quarter of 2017 from 349 basis points in the first quarter of 2017 and 347 basis points in the second quarter of 2016


▪	The portfolio of single family loans serviced for others increased to $21.10 billion at June 30, 2017, up 4% from $20.30 billion at March 31, 2017 and up 24% from $17.07 billion at June 30, 2016

“Second quarter 2017 results demonstrated the benefit of our investment in growth and diversification of our business lines,” said Mark K. Mason, Chairman, President and Chief Executive Officer. “While the Mortgage Banking segment continues to suffer from a limited supply of available housing in our markets, this effect was partially offset by strong growth in our Commercial & Consumer Banking segment. Loans held for investment increased by 5% from the first quarter of 2017, and total deposits increased by 3%, with business deposit balances increasing by 6% during the quarter. During the quarter we opened retail deposit branches in Baldwin Park, California, and Redmond, Washington. We’re proud to report that as a result of this growth, the net interest margin increased by six basis points from the first quarter of 2017. Asset quality also remains strong with nonperforming assets declining to 0.30% of total assets, representing the lowest absolute and relative levels of problem assets since 2006.

“We find ourselves in a more challenging mortgage market than we anticipated at the start of this year. Historically, the second quarter is the strongest quarter of the year for mortgage volume and mortgage banking profitability. Lower than expected single family mortgage origination volume and profit margins this quarter were driven by extremely low levels of new and resale homes available for sale in our markets. Competitively, our market share actually improved this quarter. As a result of the significantly lower mortgage origination volume than anticipated, we are implementing cost reduction strategies that included reducing mortgage origination personnel by 73 employees during the quarter. If lending volumes do not support our current capacity or profit margins overall, or in specific markets, we will continue to downsize our origination capacity and streamline operations.

“We are committed to being a leading mortgage originator in our markets and our retail focus, broad product mix, and competitive pricing continue to attract the best retail originators in our markets. These strengths will allow us to successfully manage through today’s market challenges and maintain our status as a market leading mortgage originator and servicer.”

Consolidated Results of Operations

Net Income

Net income in the second quarter of 2017 was $11.2 million, up $2.2 million, or 25% from the first quarter of 2017 and down $10.5 million, or 48%, from the second quarter of 2016. The increase in net income from the first quarter of 2017 was primarily due to higher income in the Mortgage Banking segment due to higher lending volume. The decrease in net income from the second quarter of 2016 was primarily the result of lower income in the Mortgage Banking segment driven by a decrease in demand for refinance mortgages and limited housing inventory in our primary markets.

Net Interest Income

Net interest income in the second quarter of 2017 was $46.9 million, up $1.2 million, or 3% from the first quarter of 2017 and up $2.4 million, or 5%, from the second quarter of 2016. The increases in net interest income from the first quarter of 2017 and the second quarter of 2016 were primarily due to growth in average earning assets.

Our net interest margin, on a tax equivalent basis, increased 6 basis points to 3.29% compared with 3.23% in the first quarter of 2017 and decreased from 3.48% in the second quarter of 2016. The increase from the first quarter of 2017 was primarily due to changes in the composition of, and yield on, earning assets, which increased more than borrowing costs. The decrease in our net interest margin from the second quarter of 2016 was due to both higher cost of funds and lower yield on earning assets, primarily from interest expense related to our long term debt issuance in the second quarter of 2016, and higher FHLB borrowing costs.

Total average interest-earning assets in the second quarter of 2017 increased $55.9 million, or 1%, from the first quarter of 2017 primarily due to increases in loans held for investment. Total average interest-earning assets increased 13% from the second quarter of 2016 due to overall growth in the Company, both organically and through acquisition.

Noninterest Income

Noninterest income in the second quarter of 2017 was $81.0 million, up $6.5 million, or 9%, from $74.5 million in the first quarter of 2017 and down $21.5 million, or 21%, from $102.5 million in the second quarter of 2016. The increase in noninterest income compared to the first quarter of 2017 was primarily due to a $5.6 million increase in gain on loan origination and sale activities resulting from a 20% increase in single family rate lock volume. The decrease in noninterest income compared to the second quarter of 2016 was primarily due to a $19.7 million decrease in gain on loan origination and sale activities resulting from a 17% decrease in single family rate lock volume.

Noninterest Expense

Noninterest expense for the second quarter of 2017 was $111.2 million compared with $106.9 million for the first quarter of 2017 and $111.0 million for the second quarter of 2016. Excluding acquisition-related expenses, noninterest expense for the second quarter of 2017 was $111.1 million compared with $106.9 millionfor the first quarter of 2017 and $110.0 million for the second quarter of 2016.

The increase in noninterest expense, excluding acquisition-related items, of $4.2 million, or 4%, from the first quarter of 2017, was primarily due to increased commissions on higher closed mortgage loan volume in our mortgage banking segment. The increase of $1.1 million, or 1%, from the second quarter of 2016 was primarily due to increased salary and related costs and other expenses related to growth of the Company, both organically and through acquisition activities.

As of June 30, 2017, we had 2,542 full-time equivalent employees, a 2% net decrease from 2,581 employees as of March 31, 2017, and a 9% net increase from 2,335 employees as of June 30, 2016. The decrease in

employees compared to the prior quarter is primarily due to a reduction in force in our single family lending area related to decreased refinance activity and loan processing efficiencies associated with our new single family loan origination system. During the quarter ended June 30, 2017, we added two de novo retail deposit branches - bringing our total retail deposit branches to 57, primary stand-alone home loan centers to 47 and our primary commercial loan centers to seven.

Income Taxes

For the second quarter of 2017, income tax expense was $4.9 million compared with income tax expense of $4.3 million for the first quarter of 2017 and $13.1 million for the second quarter of 2016.

Our effective income tax rate of 30.52% for second 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 excess tax benefits from share-based compensation.

Business Segments

Commercial and Consumer Banking Segment

Commercial and Consumer Banking Segment net income was $9.4 million in the second quarter of 2017 compared with net income of $9.3 million in the first quarter of 2017 and net income of $7.1 million in the second quarter of 2016. Excluding acquisition-related items, net of tax, in all periods, net income was $9.6 million in the second quarter of 2017, compared with net income of $9.3 million in the first quarter of 2017 and net income of $7.7 million in the second quarter of 2016.

The $269 thousand increase in segment net income, excluding acquisition-related items, net of tax, in the second quarter of 2017 compared to the first quarter of 2017 was primarily due to a $1.5 million increase in net interest income. This increase is the result of organic growth, as well as a shift in interest-earning asset mix from short-term investment securities, which were purchased in December 2016 as a temporary investment of funds through an equity issuance, to investment of those funds into loans held for investment in the second quarter.

The $1.8 million increase in segment net income, excluding acquisition-related items, net of tax, compared to the second quarter of 2016 was primarily due to a $4.1 million increase in net interest income resulting from higher average balances of interest-earning assets, partially offset by a $2.5 million increase in noninterest expense. These increases were the result of growth in income related to assets gained in acquisitions as well as organic growth.

We recorded a $500 thousand provision for credit losses in the second quarter of 2017 compared to a provision of $1.1 million in the second quarter of 2016. We did not record a provision for credit losses in the first quarter of 2017. The increase from the first quarter of 2017 was primarily due to loan growth, partially offset by $928 thousand of net recoveries combined with lower expected future loss rates. The decrease from the second quarter of 2016 was primarily due to higher net recoveries in the second quarter of 2017 compared to the second quarter of 2016.

Loans Held for Investment

Loans held for investment, net, were $4.16 billion at June 30, 2017, an increase of $198.5 million, or 5%, from March 31, 2017 and an increase of $457.5 million, or 12%, from June 30, 2016. Included in the increase from June 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 second quarter of 2017 totaled $807.6 million and originations totaled $508.3 million. During the quarter, new commitments included $235.7 million of consumer loans, $228.7 million of commercial real estate and multifamily permanent loans, $62.4 million of commercial business loans and $280.8 million of construction loans, including $153.5 million in residential construction, $62.6 million in single family custom construction and $64.7 million in multifamily construction.

Asset Quality

Nonaccrual loans were $15.5 million at June 30, 2017 a decrease of $3.2 million compared to $18.7 million at March 31, 2017. Total non-performing assets decreased $4.2 million at June 30, 2017 compared to March 31, 2017 primarily due to upgrades to accrual status for borrowers now performing per their contract terms. Delinquent loans of $65.2 million, or 1.56% of total loans at June 30, 2017, decreased from $66.6 million, or 1.67% of total loans at March 31, 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 0.45% of total such loans at June 30, 2017, compared to $19.5 million, or 0.50% of total such loans at March 31, 2017.

The allowance for loan losses was $36.1 million at June 30, 2017 compared to $34.7 million at March 31, 2017 and $32.7 million at June 30, 2016. The allowance for loan losses as a percentage of loans held for investment was 0.86%, 0.87% and 0.88% at June 30, 2017, March 31, 2017 and June 30, 2016, respectively. Excluding acquired loans, the allowance for loan losses as a percentage of total loans was 0.95% at June 30, 2017, compared with 0.97% at March 31, 2017 and 1.03% at June 30, 2016. Net recoveries in the second quarter of 2017 totaled $928 thousand, compared with net recoveries of $778 thousand in the first quarter of 2017 and net recoveries of $478 thousand in the second quarter of 2016.

Deposits

Deposit balances were $4.75 billion at June 30, 2017 compared with $4.60 billion at March 31, 2017 and $4.24 billion at June 30, 2016. The increase from June 30, 2016 includes $104.5 million in deposits from the acquisition of two branches from Boston Private Bank and Trust in the fourth quarter of 2016 and $48.1 million in deposits from the acquisition of two branches from The Bank of Oswego in the third quarter of 2016. The increase from March 31, 2017 was primarily due to an increase in certificates of deposits of $80.4 million, $44.4 million in non-interest bearing deposits associated with seasonal mortgage loan servicing activity, and transaction and savings deposits of $27.1 million.

Noninterest Expense

Commercial and Consumer Banking segment noninterest expense was $36.6 million for the second quarter of 2017 compared with $36.5 million for the first quarter of 2017 and $34.1 million for the second quarter of 2016. Included in noninterest expense for these periods were acquisition-related expenses of $177 thousand, zero and $1.0 million, respectively. Excluding acquisition-related expenses, noninterest expense increased primarily due to higher salary and related costs related to the continued growth of our commercial real estate and commercial business lending units and the expansion of our branch banking network.

Mortgage Banking Segment

Mortgage Banking segment net income was $1.8 million in the second quarter of 2017, compared with a $309 thousand net loss in the first quarter of 2017 and $14.7 million net income in the second quarter of 2016. The $2.1 million earnings improvement from the first quarter of 2017 was primarily attributable to higher revenue from increased mortgage interest rate lock commitments partially offset by higher noninterest expense

attributable to higher mortgage closed loan volume. The $12.9 million decrease in net income from the second quarter of 2016 was primarily due to $411.3 million lower rate locks and higher noninterest expense from technology investments and the expansion of personnel and offices in new markets.

Mortgage Origination for Sale

Single family mortgage interest rate lock and purchase loan commitments, net of estimated fallout, totaled $1.95 billion in the second quarter of 2017, an increase of $327.8 million, or 20%, from $1.62 billion in the first quarter of 2017 and a decrease of $411.3 million, or 17%, from $2.36 billion in the second quarter of 2016. The increase from the first quarter of 2017 primarily reflects a seasonal increase in mortgage activity. The decrease from the second quarter of 2016 reflects the impact of higher mortgage interest rates, which reduced the volume of refinance activity in the period and the limited supply of available housing in our markets.

Single family closed loan volume designated for sale was $2.01 billion in the second quarter of 2017, up $390.1 million, or 24%, from $1.62 billion in the first quarter of 2017 and down $250.5 million, or 11%, from $2.26 billion in the second quarter of 2016. At June 30, 2017, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $1.46 billion, compared with $1.25 billion at March 31, 2017 and $1.72 billion at June 30, 2016.

Gain on single family mortgage loan origination and sale activities in the second quarter of 2017 was $64.2 million, an increase of $7.9 million, or 14% from $56.3 million, in the first quarter of 2017 and a decrease of $16.9 million, or 21%, from $81.0 million, in the second 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 second quarter of 2017 was 331 basis points compared with 349 basis points in the first quarter of 2017 and 347 basis points in the second quarter of 2016. The decrease in the composite margin from the prior quarters is primarily due to a shift in product mix as a result of market conditions.

Loan Servicing

Single family loan servicing income in the second quarter of 2017 was $7.9 million, comprised of $5.4 million of net servicing income and $2.5 million of risk management results. Loan servicing income decreased $457 thousand, from income of $8.3 million in the first quarter of 2017 and decreased $4.1 million, or 34%, from income of $12.0 million in the second quarter of 2016. The decrease from the prior quarter was primarily due to lower net servicing income. The lower servicing income was primarily attributed to larger amortization due to higher loan repayment. The decrease from the second quarter of 2016 was primarily due to lower risk management results. The lower risk management results were due in part to gains from prepayment model refinements in the second quarter of 2016 to align modeled borrower prepayment behavior with observed borrower prepayment behavior. There were no model refinements in the second quarter of 2017.

Single family mortgage servicing fees collected in the second quarter of 2017 remained consistent with the first quarter of 2017 and increased $2.8 million, or 24%, from the second 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 $21.10 billion at June 30, 2017 compared with $20.30 billion at March 31, 2017 and $17.07 billion at June 30, 2016.

Noninterest Expense

Mortgage Banking segment noninterest expense of $74.6 million increased $4.2 million, or 6%, from the first quarter of 2017 and decreased $2.3 million, or 3.0%, from the second quarter of 2016. The increase from the first quarter of 2017 was primarily due to increased commissions, salary and related costs on higher closed loan volume. The decrease from the second quarter of 2016 was primarily due to decreased commissions, salary and related costs on lower closed loan volumes.

Conference Call

HomeStreet, Inc., the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday, July 25, 2017 at 1:00 p.m. EDT. Mark K. Mason, President and CEO, and Mark R. Ruh, Senior Vice President and Interim CFO, will discuss second 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/10109694 or may join the call by dialing 1-877-508-9589 (1-855-669-9657 in Canada) shortly before 1:00 p.m. EST.

A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10109694.

The information to be discussed in the conference call will be available on the Company's web site after the market closes on Monday, July 24, 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). Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com.

Forward-Looking Statements

This press release contains forward-looking statements concerning HomeStreet, Inc. and HomeStreet Bank and their operations, performance, financial conditions and likelihood of success, as well as plans and expectations for future actions and events. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are based on many beliefs, assumptions, estimates and expectations of our future performance, taking into account information currently available to us, and include statements about the competitiveness of the banking industry. When used in this press release, the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” and similar expressions (including the negative of these terms) may help identify forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond 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 our ability to expand our banking operations geographically and across market sectors, integrate acquisitions, grow our franchise and capitalize on market opportunities, meet our growth targets, maintain our position in the industry and generate positive net income and cash flow. These limitations and risks include without limitation changes in general political and economic conditions that impact our markets and our business, actions by the Federal Reserve Board and financial market conditions that affect monetary and fiscal policy, regulatory and legislative actions that may increase capital requirements or otherwise constrain our ability to do business, 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, increases in the competition in our industry and across our markets and the extent of our success in problem asset resolution efforts. The results of our acquisitions may fall short of our financial and operational expectations. We may not realize the benefits expected from completed bank and branch acquisitions in the anticipated time frame (or at all), and completing our acquisitions and integrating acquired operations may take longer or prove more expensive than anticipated. We may not be able to achieve the full benefit of cost efficiency programs we have previously implemented or those management 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, 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 March 31, 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 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.

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 acquisition-related expenses, of which we recorded in connection with our merger with OCBB on February 1, 2016, with our acquisition of two retail deposit branches in Lake Oswego, Oregon on August 12, 2016 and two retail deposit branches in Southern California on November 11, 2016. We also have presented adjusted expenses, which eliminate costs incurred in connection with these acquisitions. Similarly, we have provided information about our balance sheet items, including total loans, total deposits and total assets, adjusted in each case to eliminate acquisition-related impacts. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

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

HomeStreet, Inc. and Subsidiaries

Summary Financial Data



	Quarter Ended										Six Months Ended
(dollars in thousands, except share data)	June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		June 30, 2017		June 30, 2016

Income statement data (for the period ended):
Net interest income	$	46,868	$	45,651	$	48,074	$	46,802	$	44,482	$	92,519	$	85,173
Provision for credit losses	500		—		350		1,250		1,100		500		2,500
Noninterest income	81,008		74,461		73,221		111,745		102,476		155,469		174,184
Noninterest expense	111,244		106,874		117,539		114,399		111,031		218,118		212,384
Acquisition-related expenses (included in noninterest expense)	177		—		401		512		1,025		177		6,223
Income before income taxes	16,132		13,238		3,406		42,898		34,827		29,370		44,473
Income tax expense	4,923		4,255		1,112		15,197		13,078		9,178		16,317
Net income	$	11,209	$	8,983	$	2,294	$	27,701	$	21,749	$	20,192	$	28,156
Basic income per common share	$	0.42	$	0.33	$	0.09	$	1.12	$	0.88	$	0.75	$	1.16
Diluted income per common share	$	0.41	$	0.33	$	0.09	$	1.11	$	0.87	$	0.75	$	1.15
Common shares outstanding	26,874,871		26,862,744		26,800,183		24,833,008		24,821,349		26,874,871		24,821,349
Weighted average number of shares outstanding:
Basic	26,866,230		26,821,396		25,267,909		24,811,169		24,708,375		26,843,813		24,192,441
Diluted	27,084,608		27,057,449		25,588,691		24,996,747		24,911,919		27,071,028		24,394,648
Shareholders' equity per share	$	24.40	$	23.86	$	23.48	$	23.60	$	22.55	$	24.40	$	22.55
Tangible book value per share ⁽¹⁾	$	23.30	$	22.73	$	22.33	$	22.45	$	21.38	$	23.30	$	21.38

Financial position (at period end):
Cash and cash equivalents	$	54,447	$	61,492	$	53,932	$	55,998	$	45,229	$	54,447	$	45,229
Investment securities	936,522		1,185,654		1,043,851		991,325		928,364		936,522		928,364
Loans held for sale	784,556		537,959		714,559		893,513		772,780		784,556		772,780
Loans held for investment, net	4,156,424		3,957,959		3,819,027		3,764,178		3,698,959		4,156,424		3,698,959
Loan servicing rights	258,222		257,421		245,860		167,501		147,266		258,222		147,266
Other real estate owned	4,597		5,646		5,243		6,440		10,698		4,597		10,698
Total assets	6,586,557		6,401,143		6,243,700		6,226,601		5,941,178		6,586,557		5,941,178
Deposits	4,747,771		4,595,809		4,429,701		4,504,560		4,239,155		4,747,771		4,239,155
Federal Home Loan Bank advances	867,290		862,335		868,379		858,923		878,987		867,290		878,987
Shareholders’ equity	$	655,841	$	640,919	$	629,284	$	586,028	$	559,603	$	655,841	$	559,603

Financial position (averages):
Investment securities	$	1,089,552	$	1,153,248	$	962,504	$	981,223	$	766,248	$	1,121,224	$	695,971
Loans held for investment	4,119,825		3,914,537		3,823,253		3,770,133		3,677,361		4,017,748		3,538,420
Total interest-earning assets	5,837,917		5,782,061		5,711,154		5,692,999		5,186,131		5,810,143		4,907,819
Total interest-bearing deposits	3,652,036		3,496,190		3,413,311		3,343,339		3,072,314		3,574,543		2,903,645
Federal Home Loan Bank advances	872,019		975,914		938,342		988,358		946,488		923,679		921,607
Federal funds purchased and securities sold under agreements to repurchase	4,804		978		951		2,242		—		2,901		—
Total interest-bearing liabilities	4,654,064		4,598,243		4,477,732		4,459,213		4,110,208		4,626,306		3,901,883
Shareholders’ equity	$	668,377	$	649,439	$	616,497	$	588,335	$	548,080	$	658,961	$	529,482
Other data:
Full-time equivalent employees (ending)	2,542		2,581		2,552		2,431		2,335		2,542		2,335

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)



	Quarter Ended															Six Months Ended
(dollars in thousands, except share data)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016

Financial performance:
Return on average shareholders’ equity⁽²⁾	6.71		%	5.53		%	1.49		%	18.83		%	15.87		%	6.13		%	10.64		%
Return on average shareholders’ equity, excluding acquisition-related expenses (net of tax)⁽¹⁾⁽²⁾	6.78		%	5.53		%	1.67		%	19.07		%	16.36		%	6.16		%	12.16		%
Return on average tangible shareholders' equity, excluding acquisition-related expenses (net of tax) ⁽¹⁾	7.10		%	5.81		%	1.74		%	20.04		%	17.27		%	6.46		%	12.84		%
Return on average assets	0.70		%	0.57		%	0.15		%	1.79		%	1.54		%	0.63		%	1.06		%
Return on average assets, excluding acquisition-related expenses (net of tax)⁽¹⁾	0.70		%	0.57		%	0.16		%	1.81		%	1.59		%	0.64		%	1.21		%
Net interest margin ⁽³⁾	3.29		%	3.23		%	3.42		%	3.34		%	3.48		%	3.26		%	3.52		%
Efficiency ratio ⁽⁴⁾	86.99		%	88.98		%	96.90		%	72.15		%	75.55		%	87.96		%	81.89		%
Core efficiency ratio ⁽¹⁾⁽⁵⁾	86.86		%	88.98		%	96.57		%	71.83		%	74.86		%	87.88		%	79.49		%
Asset quality:
Allowance for credit losses	$	37,470		$	36,042		$	35,264		$	35,233		$	34,001		$	37,470		$	34,001
Allowance for loan losses/total loans⁽⁶⁾	0.86		%	0.87		%	0.88		%	0.89		%	0.88		%	0.86		%	0.88		%
Allowance for loan losses/nonaccrual loans	233.50		%	185.99		%	165.52		%	131.07		%	207.41		%	233.50		%	207.41		%
Total nonaccrual loans⁽⁷⁾⁽⁸⁾	$	15,476		$	18,676		$	20,542		$	25,921		$	15,745		$	15,476		$	15,745
Nonaccrual loans/total loans	0.37		%	0.47		%	0.53		%	0.68		%	0.42		%	0.37		%	0.42		%
Other real estate owned	$	4,597		$	5,646		$	5,243		$	6,440		$	10,698		$	4,597		$	10,698
Total nonperforming assets⁽⁸⁾	$	20,073		$	24,322		$	25,785		$	32,361		$	26,443		$	20,073		$	26,443
Nonperforming assets/total assets	0.30		%	0.38		%	0.41		%	0.52		%	0.45		%	0.30		%	0.45		%
Net (recoveries) charge offs	$	(928	)	$	(778	)	$	319		$	18		$	(478	)	$	(1,706	)	$	(842	)

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)



	Quarter Ended																Six Months Ended
(dollars in thousands, except share data)	June 30, 2017				Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017				June 30, 2016

Regulatory capital ratios for the Bank:
Tier 1 leverage capital (to average assets)	10.12		%	⁽⁹⁾	9.98		%	10.26		%	9.91		%	10.28		%	10.12		%	⁽⁹⁾	10.28		%
Tier 1 common equity risk-based capital (to risk-weighted assets)	13.10		%	⁽⁹⁾	13.25		%	13.92		%	13.61		%	13.52		%	13.10		%	⁽⁹⁾	13.52		%
Tier 1 risk-based capital (to risk-weighted assets)	13.10		%	⁽⁹⁾	13.25		%	13.92		%	13.61		%	13.52		%	13.10		%	⁽⁹⁾	13.52		%
Total risk-based capital (to risk-weighted assets)	13.87		%	⁽⁹⁾	14.02		%	14.69		%	14.41		%	14.33		%	13.87		%	⁽⁹⁾	14.33		%
Risk-weighted assets	$	4,858,563			$	4,680,840		$	4,569,227		$	4,442,518		$	4,218,707		$	4,858,563			$	4,218,707
Regulatory capital ratios for the Company:
Tier 1 leverage capital (to average assets)	9.55		%	⁽⁹⁾	9.45		%	9.78		%	9.52		%	9.88		%	9.55		%	⁽⁹⁾	9.88		%
Tier 1 common equity risk-based capital (to risk-weighted assets)	9.85		%	⁽⁹⁾	9.96		%	10.54		%	10.37		%	10.31		%	9.85		%	⁽⁹⁾	10.31		%
Tier 1 risk-based capital (to risk-weighted assets)	10.92		%	⁽⁹⁾	11.07		%	11.66		%	11.55		%	11.51		%	10.92		%	⁽⁹⁾	11.51		%
Total risk-based capital (to risk-weighted assets)	11.60		%	⁽⁹⁾	11.74		%	12.34		%	12.25		%	12.22		%	11.60		%	⁽⁹⁾	12.22		%
Risk-weighted assets	$	5,517,073			$	5,331,674		$	5,221,455		$	5,042,699		$	4,778,947		$	5,517,073			$	4,778,947


(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 0.95%, 0.97%, 1.00%, 1.05% and 1.03% at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 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 $732 thousand, $750 thousand, $1.9 million, $2.1 million and $2.6 million of nonperforming loans guaranteed by the SBA at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016, respectively.


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

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Operations



	Three Months Ended June 30,					%		Six Months Ended June 30,					%
(in thousands, except share data)	2017			2016		Change		2017			2016		Change

Interest income:
Loans	$	51,198		$	47,262	8	%	$	100,704		$	89,996	12	%
Investment securities	5,419			4,002		35		11,051			7,055		57
Other	125			27		363		261			294		(11	)
	56,742			51,291		11		112,016			97,345		15
Interest expense:
Deposits	5,867			4,449		32		11,490			8,018		43
Federal Home Loan Bank advances	2,368			1,462		62		4,769			2,881		66
Federal funds purchased and securities sold under agreements to repurchase	5			—		NM		5			—		NM
Long-term debt	1,514			823		84		2,993			1,134		164
Other	120			75		60		240			139		73
	9,874			6,809		45		19,497			12,172		60
Net interest income	46,868			44,482		5		92,519			85,173		9
Provision for credit losses	500			1,100		(55	)	500			2,500		(80	)
Net interest income after provision for credit losses	46,368			43,382		7		92,019			82,673		11
Noninterest income:
Net gain on loan origination and sale activities	65,908			85,630		(23	)	126,189			146,893		(14	)
Loan servicing income	8,764			12,703		(31	)	18,003			20,735		(13	)
Income from WMS Series LLC	406			1,164		(65	)	591			1,300		(55	)
Depositor and other retail banking fees	1,811			1,652		10		3,467			3,247		7
Insurance agency commissions	501			370		35		897			764		17
Gain on sale of investment securities available for sale	551			62		789		557			97		474
Other	3,067			895		243		5,765			1,148		402
	81,008			102,476		(21	)	155,469			174,184		(11	)
Noninterest expense:
Salaries and related costs	76,390			75,167		2		147,698			142,451		4
General and administrative	15,872			16,739		(5	)	33,000			32,261		2
Amortization of core deposit intangibles	493			525		(6	)	1,007			1,057		(5	)
Legal	150			605		(75	)	310			1,048		(70	)
Consulting	771			1,177		(34	)	1,829			2,849		(36	)
Federal Deposit Insurance Corporation assessments	697			784		(11	)	1,521			1,500		1
Occupancy	8,880			7,513		18		17,089			14,668		17
Information services	8,172			8,447		(3	)	15,820			15,981		(1	)
Net (benefit) cost from operation and sale of other real estate owned	(181		)	74		(345	)	(156		)	569		(127	)
	111,244			111,031		—		218,118			212,384		3
Income before income taxes	16,132			34,827		(54	)	29,370			44,473		(34	)
Income tax expense	4,923			13,078		(62	)	9,178			16,317		(44	)
NET INCOME	$	11,209		$	21,749	(48	)	$	20,192		$	28,156	(28	)

Basic income per share	$	0.42		$	0.88	(52	)	$	0.75		$	1.16	(35	)
Diluted income per share	$	0.41		$	0.87	(53	)	$	0.75		$	1.15	(35	)
Basic weighted average number of shares outstanding	26,866,230			24,708,375		9		26,843,813			24,192,441		11
Diluted weighted average number of shares outstanding	27,084,608			24,911,919		9		27,071,028			24,394,648		11

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Operations



	Quarter Ended
(in thousands, except share data)	June 30, 2017			Mar. 31, 2017		Dec. 31, 2016			Sept. 30, 2016		June 30, 2016

Interest income:
Loans	$	51,198		$	49,506	$	50,919		$	49,752	$	47,262
Investment securities	5,419			5,632		5,863			5,476		4,002
Other	125			136		80			102		27
	56,742			55,274		56,862			55,330		51,291
Interest expense:
Deposits	5,867			5,623		5,629			5,362		4,449
Federal Home Loan Bank advances	2,368			2,401		1,544			1,605		1,462
Federal funds purchased and securities sold under agreements to repurchase	5			—		2			2		—
Long-term debt	1,514			1,479		1,469			1,440		823
Other	120			120		144			119		75
	9,874			9,623		8,788			8,528		6,809
Net interest income	46,868			45,651		48,074			46,802		44,482
Provision for credit losses	500			—		350			1,250		1,100
Net interest income after provision for credit losses	46,368			45,651		47,724			45,552		43,382
Noninterest income:
Net gain on loan origination and sale activities	65,908			60,281		67,820			92,600		85,630
Loan servicing income (loss)	8,764			9,239		(271		)	12,595		12,703
Income (loss) from WMS Series LLC	406			185		(141		)	1,174		1,164
Depositor and other retail banking fees	1,811			1,656		1,799			1,744		1,652
Insurance agency commissions	501			396		414			441		370
Gain on sale of investment securities available for sale	551			6		2,394			48		62
Other	3,067			2,698		1,206			3,143		895
	81,008			74,461		73,221			111,745		102,476
Noninterest expense:
Salaries and related costs	76,390			71,308		81,739			79,164		75,167
General and administrative	15,872			17,128		15,996			14,949		16,739
Amortization of core deposit intangibles	493			514		530			579		525
Legal	150			160		180			639		605
Consulting	771			1,058		719			1,390		1,177
Federal Deposit Insurance Corporation assessments	697			824		995			919		784
Occupancy	8,880			8,209		8,122			7,740		7,513
Information services	8,172			7,648		9,206			7,876		8,447
Net (benefit) cost from operation and sale of other real estate owned	(181		)	25		52			1,143		74
	111,244			106,874		117,539			114,399		111,031
Income before income tax expense	16,132			13,238		3,406			42,898		34,827
Income tax expense	4,923			4,255		1,112			15,197		13,078
NET INCOME	$	11,209		$	8,983	$	2,294		$	27,701	$	21,749

Basic income per share	$	0.42		$	0.33	$	0.09		$	1.12	$	0.88
Diluted income per share	$	0.41		$	0.33	$	0.09		$	1.11	$	0.87
Basic weighted average number of shares outstanding	26,866,230			26,821,396		25,267,909			24,811,169		24,708,375
Diluted weighted average number of shares outstanding	27,084,608			27,057,449		25,588,691			24,996,747		24,911,919

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Financial Condition



(in thousands, except share data)	June 30, 2017			Dec. 31, 2016			% Change

Assets:
Cash and cash equivalents (including interest-earning instruments of $23,107 and $34,615)	$	54,447		$	53,932		1	%
Investment securities (includes $884,266 and $993,990 carried at fair value)	936,522			1,043,851			(10	)
Loans held for sale (includes $680,959 and $656,334 carried at fair value)	784,556			714,559			10
Loans held for investment (net of allowance for loan losses of $36,136 and $34,001; includes $5,134 and $17,988 carried at fair value)	4,156,424			3,819,027			9
Loan servicing rights (includes $236,621 and $226,113 carried at fair value)	258,222			245,860			5
Other real estate owned	4,597			5,243			(12	)
Federal Home Loan Bank stock, at cost	41,769			40,347			4
Premises and equipment, net	101,797			77,636			31
Goodwill	22,175			22,175			—
Other assets	226,048			221,070			2
Total assets	$	6,586,557		$	6,243,700		5
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	4,747,771		$	4,429,701		7
Federal Home Loan Bank advances	867,290			868,379			—
Accounts payable and other liabilities	190,421			191,189			—
Long-term debt	125,234			125,147			—
Total liabilities	5,930,716			5,614,416			6
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, 26,874,871 shares and 26,800,183 shares	511			511			—
Additional paid-in capital	337,515			336,149			—
Retained earnings	323,228			303,036			7
Accumulated other comprehensive loss	(5,413		)	(10,412		)	(48	)
Total shareholders’ equity	655,841			629,284			4
Total liabilities and shareholders’ equity	$	6,586,557		$	6,243,700		5

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Financial Condition



(in thousands, except share data)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016		June 30, 2016

Assets:
Cash and cash equivalents	$	54,447		$	61,492		$	53,932		$	55,998	$	45,229
Investment securities	936,522			1,185,654			1,043,851			991,325		928,364
Loans held for sale	784,556			537,959			714,559			893,513		772,780
Loans held for investment, net	4,156,424			3,957,959			3,819,027			3,764,178		3,698,959
Loan servicing rights	258,222			257,421			245,860			167,501		147,266
Other real estate owned	4,597			5,646			5,243			6,440		10,698
Federal Home Loan Bank stock, at cost	41,769			41,656			40,347			39,783		40,414
Premises and equipment, net	101,797			97,349			77,636			72,951		67,884
Goodwill	22,175			22,175			22,175			19,900		19,846
Other assets	226,048			233,832			221,070			215,012		209,738
Total assets	$	6,586,557		$	6,401,143		$	6,243,700		$	6,226,601	$	5,941,178
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	4,747,771		$	4,595,809		$	4,429,701		$	4,504,560	$	4,239,155
Federal Home Loan Bank advances	867,290			862,335			868,379			858,923		878,987
Accounts payable and other liabilities	190,421			176,891			191,189			151,968		138,307
Long-term debt	125,234			125,189			125,147			125,122		125,126
Total liabilities	5,930,716			5,760,224			5,614,416			5,640,573		5,381,575
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	337,515			336,875			336,149			276,844		276,303
Retained earnings	323,228			312,019			303,036			300,742		273,041
Accumulated other comprehensive (loss) income	(5,413		)	(8,486		)	(10,412		)	7,931		9,748
Total shareholders’ equity	655,841			640,919			629,284			586,028		559,603
Total liabilities and shareholders’ equity	$	6,586,557		$	6,401,143		$	6,243,700		$	6,226,601	$	5,941,178

HomeStreet, Inc. and Subsidiaries

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



	Quarter Ended June 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	$	87,249	$	125	0.57	%	$	37,572	$	27	0.28	%
Investment securities	1,089,552		6,466		2.38	%	766,248		4,677		2.44	%
Loans held for sale	541,291		5,586		4.13	%	704,950		6,565		3.73	%
Loans held for investment	4,119,825		45,701		4.43	%	3,677,361		40,727		4.42	%
Total interest-earning assets	5,837,917		57,878		3.96	%	5,186,131		51,996		4.00	%
Noninterest-earning assets ⁽²⁾	587,211						451,116
Total assets	$	6,425,128					$	5,637,247
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	494,997	$	502	0.41	%	$	456,461	$	489	0.43	%
Savings accounts	309,844		256		0.33	%	299,103		255		0.34	%
Money market accounts	1,551,328		1,917		0.50	%	1,286,570		1,589		0.50	%
Certificate accounts	1,295,867		3,303		1.03	%	1,030,180		2,191		0.86	%
Total interest-bearing deposits	3,652,036		5,978		0.66	%	3,072,314		4,524		0.59	%
Federal Home Loan Bank advances	872,019		2,368		1.09	%	946,488		1,462		0.62	%
Federal funds purchased and securities sold under agreements to repurchase	4,804		14		1.20	%	—		—		—	%
Long-term debt	125,205		1,514		4.86	%	91,406		823		3.62	%
Total interest-bearing liabilities	4,654,064		9,874		0.85	%	4,110,208		6,809		0.67	%
Noninterest-bearing liabilities	1,102,687						978,959
Total liabilities	5,756,751						5,089,167
Shareholders’ equity	668,377						548,080
Total liabilities and shareholders’ equity	$	6,425,128					$	5,637,247
Net interest income ⁽³⁾			$	48,004					$	45,187
Net interest spread					3.11	%					3.33	%
Impact of noninterest-bearing sources					0.18	%					0.15	%
Net interest margin					3.29	%					3.48	%


(1)	The average balances of nonaccrual assets and related income, if any, are included in their respective categories.


(2)	Includes loan balances that have been foreclosed and are now reclassified to other real estate owned.


(3)	Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.1 million and $705 thousand for the quarters ended June 30, 2017 and June 30, 2016, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

HomeStreet, Inc. and Subsidiaries

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



	Six Months Ended June 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	$	89,224	$	261	0.59	%	$	38,805	$	71	0.36	%
Investment securities	1,121,224		13,065		2.33	%	695,971		8,442		2.43	%
Loans held for sale	581,947		11,673		4.02	%	634,623		12,051		3.81	%
Loans held for investment	4,017,748		89,187		4.44	%	3,538,420		78,006		4.40	%
Total interest-earning assets	5,810,143		114,186		3.93	%	4,907,819		98,570		4.01	%
Noninterest-earning assets ⁽²⁾	574,654						426,906
Total assets	$	6,384,797					$	5,334,725
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	472,920	$	980	0.42	%	$	436,093	$	981	0.45	%
Savings accounts	307,095		508		0.33	%	297,821		509		0.34	%
Money market accounts	1,570,406		4,128		0.53	%	1,237,023		2,953		0.48	%
Certificate accounts	1,224,122		6,104		1.00	%	932,708		3,716		0.79	%
Total interest-bearing deposits	3,574,543		11,720		0.66	%	2,903,645		8,159		0.56	%
Federal Home Loan Bank advances	923,679		4,770		1.04	%	921,607		2,881		0.62	%
Federal funds purchased and securities sold under agreements to repurchase	2,901		16		1.03	%	—		—		—	%
Long-term debt	125,183		2,992		4.81	%	76,631		1,133		2.80	%
Total interest-bearing liabilities	4,626,306		19,498		0.85	%	3,901,883		12,173		0.63	%
Noninterest-bearing liabilities	1,099,530						903,360
Total liabilities	5,725,836						4,805,243
Shareholders’ equity	658,961						529,482
Total liabilities and shareholders’ equity	$	6,384,797					$	5,334,725
Net interest income ⁽³⁾			$	94,688					$	86,397
Net interest spread					3.08	%					3.38	%
Impact of noninterest-bearing sources					0.18	%					0.14	%
Net interest margin					3.26	%					3.52	%


(1)	The average balances of nonaccrual assets and related income, if any, are included in their respective categories.


(2)	Includes loan balances that have been foreclosed and are now reclassified to other real estate owned.


(3)	Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $2.2 million and $1.2 million for the six months ended June 30, 2017 and June 30, 2016, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment



	Quarter Ended															Six Months Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016

Net interest income	$	42,448		$	40,903		$	40,637		$	39,339		$	38,393		$	83,352		$	74,039
Provision for credit losses	500			—			350			1,250			1,100			500			2,500
Noninterest income	8,276			9,425			13,087			9,771			8,181			17,701			12,824
Noninterest expense	36,631			36,469			35,482			32,170			34,103			73,101			70,733
Income before income taxes	13,593			13,859			17,892			15,690			11,371			27,452			13,630
Income tax expense	4,147			4,567			5,846			5,557			4,292			8,714			5,009
Net income	$	9,446		$	9,292		$	12,046		$	10,133		$	7,079		$	18,738		$	8,621

Net income, excluding acquisition-related expenses (net of tax)⁽¹⁾	$	9,561		$	9,292		$	12,307		$	10,466		$	7,745		$	18,853		$	12,665
Efficiency ratio ⁽²⁾	72.22		%	72.46		%	66.04		%	65.51		%	73.22		%	72.34		%	81.43		%
Core efficiency ratio ⁽¹⁾⁽³⁾	71.87		%	72.46		%	65.30		%	64.46		%	71.02		%	72.16		%	74.27		%
Full-time equivalent employees (ending)	1,055			1,022			998			948			926			1055			926

Net gain on loan origination and sale activities:
Multifamily DUS ^®⁽⁴⁾	$	1,273		$	3,360		$	3,518		$	2,695		$	3,655		$	4,633		$	5,184
Other ⁽⁵⁾	459			602			3,231			1,028			935			1,061			1,214
	$	1,732		$	3,962		$	6,749		$	3,723		$	4,590		$	5,694		$	6,398

Production volumes for sale to the secondary market:
Loan originations
Multifamily DUS ^{® (4)}	$	58,343		$	57,552		$	94,725		$	45,497		$	146,535		$	115,895		$	185,629
Other ⁽⁵⁾	6,126			6,798			3,008			2,913			5,528			12,924			5,528
Loans sold
Multifamily DUS ^{® (4)}	35,312			76,849			85,594			58,484			109,394			112,161			157,364
Other ⁽⁵⁾	$	24,695		$	13,186		$	75,000		$	50,255		$	31,813		$	37,881		$	31,813

(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.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Commercial Loan Servicing Income



	Quarter Ended															Six Months Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016

Servicing income, net:
Servicing fees and other	$	1,652		$	1,840		$	1,402		$	1,476		$	1,392		$	3,492		$	2,736
Amortization of multifamily MSRs	(761		)	(931		)	(689		)	(661		)	(648		)	(1,692		)	(1,285		)
Commercial loan servicing income	$	891		$	909		$	713		$	815		$	744		$	1,800		$	1,451

Commercial Loans Serviced for Others



(in thousands)	June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016

Commercial
Multifamily DUS ^®	$	1,135,722	$	1,140,414	$	1,108,040	$	1,055,181	$	1,023,505
Other	75,336		73,832		69,323		67,348		62,466
Total commercial loans serviced for others	$	1,211,058	$	1,214,246	$	1,177,363	$	1,122,529	$	1,085,971

Commercial Multifamily Capitalized Mortgage Servicing Rights



	Quarter Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016

Beginning balance	$	21,424		$	19,747		$	17,591		$	16,366		$	15,402
Originations	937			2,608			2,845			1,886			1,612
Amortization	(761		)	(931		)	(689		)	(661		)	(648		)
Ending balance	$	21,600		$	21,424		$	19,747		$	17,591		$	16,366
Ratio of MSR carrying value to related loans serviced for others	1.89		%	1.86		%	1.77		%	1.65		%	1.58		%
MSR servicing fee multiple ⁽¹⁾	3.95			3.94			3.84			3.70			3.62
Weighted-average note rate (loans serviced for others)	4.42		%	4.45		%	4.52		%	4.60		%	4.68		%
Weighted-average servicing fee (loans serviced for others)	0.48		%	0.47		%	0.46		%	0.45		%	0.44		%


(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.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Investment Securities



(in thousands, except for duration data)	June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016

Available for sale:
Mortgage-backed securities:
Residential	$	150,935	$	174,060	$	177,074	$	152,236	$	139,074
Commercial	23,381		29,476		25,536		27,208		24,707
Municipal bonds	372,729		619,934		467,673		355,344		335,801
Collateralized mortgage obligations:
Residential	184,695		182,037		191,201		182,833		163,406
Commercial	76,230		69,144		70,764		120,259		116,099
Corporate debt securities	30,218		51,075		51,122		85,191		85,249
U.S. Treasury Securities	10,740		10,663		10,620		26,004		26,020
Agency	35,338		—		—		—		—
Total available for sale	$	884,266	$	1,136,389	$	993,990	$	949,075	$	890,356
Held to maturity	52,256		49,265		49,861		42,250		38,008
	$	936,522	$	1,185,654	$	1,043,851	$	991,325	$	928,364
Weighted average duration in years
Available for sale	4.6		3.6		4.2		4.0		4.1

Five Quarter Loans Held for Investment



(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016

Consumer loans
Single family⁽¹⁾	$	1,148,229		$	1,100,215		$	1,083,822		$	1,186,476		$	1,218,216
Home equity and other	414,506			380,869			359,874			338,155			309,204
	1,562,735			1,481,084			1,443,696			1,524,631			1,527,420
Commercial loans
Commercial real estate	942,122			922,852			871,563			810,346			762,170
Multifamily	780,602			748,333			674,219			562,272			562,728
Construction/land development	648,672			611,150			636,320			661,813			639,441
Commercial business	248,908			222,761			223,653			237,117			239,077
	2,620,304			2,505,096			2,405,755			2,271,548			2,203,416
	4,183,039			3,986,180			3,849,451			3,796,179			3,730,836
Net deferred loan fees and costs	9,521			6,514			3,577			1,974			779
	4,192,560			3,992,694			3,853,028			3,798,153			3,731,615
Allowance for loan losses	(36,136		)	(34,735		)	(34,001		)	(33,975		)	(32,656		)
	$	4,156,424		$	3,957,959		$	3,819,027		$	3,764,178		$	3,698,959


(1)	Includes $5.1 million, $19.0 million, $18.0 million, $20.5 million and $22.4 million of single family loans that are carried at fair value at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016, respectively.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Loan Roll-forward



(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016

Loans - beginning balance	$	3,986,180		$	3,849,451		$	3,796,179		$	3,730,836		$	3,555,835
Originations	508,263			355,684			425,499			349,900			439,947
Purchases and advances	228,753			186,178			159,226			190,964			173,082
Payoffs, paydowns, sales and other	(540,019		)	(404,385		)	(530,223		)	(474,884		)	(437,080		)
Charge-offs and transfers to OREO	(138		)	(748		)	(1,230		)	(637		)	(948		)
Loans - ending balance	$	4,183,039		$	3,986,180		$	3,849,451		$	3,796,179		$	3,730,836

Net change - loans outstanding	$	196,859		$	136,729		$	53,272		$	65,343		$	175,001

Five Quarter Credit Quality Activity

Allowance for Credit Losses (roll-forward)



	Quarter Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016

Beginning balance	$	36,042		$	35,264		$	35,233		$	34,001		$	32,423
Provision for credit losses	500			—			350			1,250			1,100
Recoveries, net of (charge-offs)	928			778			(319		)	(18		)	478
Ending balance	$	37,470		$	36,042		$	35,264		$	35,233		$	34,001
Components:
Allowance for loan losses	$	36,136		$	34,735		$	34,001		$	33,975		$	32,656
Allowance for unfunded commitments	1,334			1,307			1,263			1,258			1,345
Allowance for credit losses	$	37,470		$	36,042		$	35,264		$	35,233		$	34,001

Allowance as a % of loans held for investment^{(1) (2)}	0.86		%	0.87		%	0.88		%	0.89		%	0.88		%
Allowance as a % of nonaccrual loans	233.50		%	185.99		%	165.52		%	131.07		%	207.41		%


(1)	Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses/total loans was 0.95%, 0.97%, 1.00%, 1.05% and 1.03% at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016, respectively.


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

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Nonperforming Assets (NPAs) roll-forward



	Quarter Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016

Beginning balance	$	24,322		$	25,785		$	32,361		$	26,443		$	23,285
Additions	1,009			5,481			3,137			13,751			5,314
Reductions:
Gross charge-offs	(103		)	(45		)	(826		)	(251		)	(125		)
OREO sales	(1,162		)	(622		)	(2,001		)	(3,992		)	—
OREO writedowns and other adjustments	—			—			—			(1,160		)	—
Principal paydowns, payoff advances, equity adjustments	(1,541		)	(3,759		)	(5,700		)	(602		)	(1,985		)
Transferred back to accrual status	(2,452		)	(2,518		)	(1,186		)	(1,828		)	(46		)
Total reductions	(5,258		)	(6,944		)	(9,713		)	(7,833		)	(2,156		)
Net (reductions) additions	(4,249		)	(1,463		)	(6,576		)	5,918			3,158
Ending balance⁽¹⁾	$	20,073		$	24,322		$	25,785		$	32,361		$	26,443


(1)	Includes $732 thousand, $750 thousand, $1.9 million, $2.1 million and $2.6 million of nonperforming loans guaranteed by the SBA at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016, respectively.

Five Quarter Nonperforming Assets



(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016

Nonaccrual loans	$	15,476		$	18,676		$	20,542		$	25,921		$	15,745
Other real estate owned	4,597			5,646			5,243			6,440			10,698
Total nonperforming assets⁽¹⁾	$	20,073		$	24,322		$	25,785		$	32,361		$	26,443
Nonaccrual loans as a % of total loans	0.37		%	0.47		%	0.53		%	0.68		%	0.42		%
Nonperforming assets as a % of total assets	0.30		%	0.38		%	0.41		%	0.52		%	0.45		%


(1)	Includes $732 thousand, $750 thousand, $1.9 million, $2.1 million and $2.6 million of nonperforming loans guaranteed by the SBA at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016 respectively.

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

June 30, 2017
Total loans held for investment	$	11,578		$	4,319		$	49,300		$	65,197		$	4,117,842		$	4,183,039
Less: FHA/VA loans⁽¹⁾	8,739			3,550			33,824			46,113			60,191			106,304
Less: guaranteed portion of SBA loans⁽²⁾	—			—			732			732			5,493			6,225
Total loans, excluding FHA/VA and guaranteed portion of SBA loans	$	2,839		$	769		$	14,744		$	18,352		$	4,052,158		$	4,070,510
As a % of total loans, excluding FHA/VA and guaranteed portion of SBA loans	0.07		%	0.02		%	0.36		%	0.45		%	99.55		%	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.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status



(in thousands)	June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016

Accrual⁽¹⁾	$	81,886	$	81,555	$	76,581	$	81,270	$	83,818
Nonaccrual	3,511		3,162		4,874		5,680		4,112
Total TDRs	$	85,397	$	84,717	$	81,455	$	86,950	$	87,930


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

Troubled Debt Restructurings (TDRs) - Re-Defaults



	Quarter Ended
(in thousands)	June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016

Recorded investment of re-defaults⁽¹⁾	$	1,382	$	270	$	653	$	1,173	$	2,460


(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.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Deposits



(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016

Deposits by Product:
Noninterest-bearing accounts - checking and savings	$	572,734		$	581,101		$	537,651		$	499,106		$	504,988
Interest-bearing transaction and savings deposits:
NOW accounts	541,592			514,271			468,812			501,370			518,132
Statement savings accounts due on demand	311,202			310,813			301,361			303,872			300,070
Money market accounts due on demand	1,587,741			1,579,957			1,603,141			1,513,547			1,366,581
Total interest-bearing transaction and savings deposits	2,440,535			2,405,041			2,373,314			2,318,789			2,184,783
Total transaction and savings deposits	3,013,269			2,986,142			2,910,965			2,817,895			2,689,771
Certificates of deposit	1,291,935			1,211,507			1,091,558			1,097,263			1,139,249
Noninterest-bearing accounts - other	442,567			398,160			427,178			589,402			410,135
Total deposits	$	4,747,771		$	4,595,809		$	4,429,701		$	4,504,560		$	4,239,155


Percent of total deposits:
Noninterest-bearing accounts - checking and savings	12.1		%	12.6		%	12.1		%	11.1		%	11.9		%
Interest-bearing transaction and savings deposits:
NOW accounts	11.4			11.2			10.6			11.1			12.2
Statement savings accounts, due on demand	6.6			6.8			6.8			6.7			7.1
Money market accounts, due on demand	33.4			34.4			36.2			33.6			32.2
Total interest-bearing transaction and savings deposits	51.4			52.4			53.6			51.4			51.5
Total transaction and savings deposits	63.5			65.0			65.7			62.5			63.4
Certificates of deposit	27.2			26.4			24.6			24.4			26.9
Noninterest-bearing accounts - other	9.3			8.6			9.7			13.1			9.7
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment



	Quarter Ended															Six Months Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016

Net interest income	$	4,420		$	4,747		$	7,437		$	7,463		$	6,089		$	9,167		$	11,134
Noninterest income	72,732			65,036			60,134			101,974			94,295			137,768			161,360
Noninterest expense	74,613			70,404			82,057			82,229			76,928			145,017			141,651
Income (loss) before income taxes	2,539			(621		)	(14,486		)	27,208			23,456			1,918			30,843
Income tax (benefit) expense	776			(312		)	(4,734		)	9,640			8,786			464			11,308
Net income (loss)	$	1,763		$	(309	)	$	(9,752	)	$	17,568		$	14,670		$	1,454		$	19,535

Efficiency ratio ⁽¹⁾	96.71		%	100.89		%	121.44		%	75.14		%	76.63		%	98.69		%	82.12		%
Full-time equivalent employees (ending)	1,487			1,558			1,554			1,483			1,409			1,487			1,409

Production volumes for sale to the secondary market:
Single family mortgage closed loan volume⁽²⁾⁽³⁾	$	2,011,127		$	1,621,053		$	2,514,657		$	2,647,943		$	2,261,599		$	3,632,180		$	3,834,747
Single family mortgage interest rate lock commitments⁽²⁾	$	1,950,427		$	1,622,622		$	1,765,942		$	2,689,640		$	2,361,691		$	3,573,049		$	4,165,394
Single family mortgage loans sold⁽²⁾	$	1,808,500		$	1,739,737		$	2,651,022		$	2,489,415		$	2,173,392		$	3,548,237		$	3,644,975


(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.

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Gain on Sale to the Secondary Market



	Quarter Ended										Six Months Ended
(in thousands)	June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016		June 30, 2017		June 30, 2016

Gain on loan origination and sale activities:⁽¹⁾
Single family:
Servicing value and secondary market gains⁽²⁾	$	57,353	$	50,538	$	52,719	$	79,946	$	73,685	$	107,891	$	127,812
Loan origination fees	6,823		5,781		8,352		8,931		7,355		12,604		12,683
Total mortgage banking gain on loan origination and sale activities⁽¹⁾	$	64,176	$	56,319	$	61,071	$	88,877	$	81,040	$	120,495	$	140,495

Composite Margin (in basis points):
Servicing value and secondary market gains / interest rate lock commitments⁽³⁾	294		312		299		297		312		302		307
Loan origination fees / retail mortgage originations⁽⁴⁾	37		37		35		37		35		37		35
Composite Margin	331		349		334		334		347		339		342


(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.

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Servicing Income



	Quarter Ended															Year Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016

Servicing income, net:
Servicing fees and other	$	14,325		$	14,339		$	12,792		$	12,628		$	11,531		$	28,664		$	22,620
Changes in fair value of single family MSRs due to amortization ⁽¹⁾	(8,909		)	(8,520		)	(9,365		)	(8,925		)	(7,758		)	(17,429		)	(15,015		)
	5,416			5,819			3,427			3,703			3,773			11,235			7,605
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions ⁽²⁾	(6,417		)	2,132			57,379			4,915			(14,055		)	(4,285		)	(42,269		)
Net gain (loss) from derivatives economically hedging MSR	8,874			379			(61,790		)	3,162			22,241			9,253			53,948
	2,457			2,511			(4,411		)	8,077			8,186			4,968			11,679
Mortgage Banking servicing income (loss)	$	7,873		$	8,330		$	(984	)	$	11,780		$	11,959		$	16,203		$	19,284


(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)	June 30, 2017		Mar. 31, 2017		Dec. 31, 2016		Sept. 30, 2016		June 30, 2016

Single family
U.S. government and agency	$	20,574,300	$	19,760,612	$	18,931,835	$	17,593,901	$	16,433,411
Other	530,308		542,557		556,621		605,139		640,109
Total single family loans serviced for others	$	21,104,608	$	20,303,169	$	19,488,456	$	18,199,040	$	17,073,520

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Single Family Capitalized Mortgage Servicing Rights



	Quarter Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016

Beginning balance	$	235,997		$	226,113		$	149,910		$	130,900		$	133,449
Additions and amortization:
Originations	15,748			15,918			27,796			22,734			19,264
Purchases	211			354			393			286			—
Changes due to amortization ⁽¹⁾	(8,909		)	(8,520		)	(9,365		)	(8,925		)	(7,758		)
Net additions and amortization	7,050			7,752			18,824			14,095			11,506
Changes in fair value due to changes in model inputs and/or assumptions ⁽²⁾	(6,425		)	2,132			57,379			4,915			(14,055		)
Ending balance	$	236,622		$	235,997		$	226,113		$	149,910		$	130,900
Ratio of MSR carrying value to related loans serviced for others	1.12		%	1.16		%	1.16		%	0.82		%	0.77		%
MSR servicing fee multiple ⁽³⁾	3.97			4.11			4.08			2.87			2.67
Weighted-average note rate (loans serviced for others)	3.98		%	3.96		%	3.95		%	4.00		%	4.05		%
Weighted-average servicing fee (loans serviced for others)	0.28		%	0.28		%	0.28		%	0.29		%	0.29		%


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


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


(3)	Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others.

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															Six Months Ended
(dollars in thousands, except share data)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016

Shareholders' equity	$	655,841		$	640,919		$	629,284		$	586,028		$	559,603		$	655,841		$	559,603
Less: Goodwill and other intangibles	(29,783		)	(30,275		)	(30,789		)	(28,573		)	(28,861		)	(29,783		)	(28,861		)
Tangible shareholders' equity	$	626,058		$	610,644		$	598,495		$	557,455		$	530,742		$	626,058		$	530,742

Common shares outstanding	26,874,871			26,862,744			26,800,183			24,833,008			24,821,349			26,874,871			24,821,349

Book value per share	$	24.40		$	23.86		$	23.48		$	23.60		$	22.55		$	24.40		$	22.55
Impact of goodwill and other intangibles	(1.10		)	(1.13		)	(1.15		)	(1.15		)	(1.17		)	(1.10		)	(1.17		)
Tangible book value per share	$	23.30		$	22.73		$	22.33		$	22.45		$	21.38		$	23.30		$	21.38

Average shareholders' equity	$	668,377		$	649,439		$	616,497		$	588,335		$	548,080		$	658,961		$	529,482
Less: Average goodwill and other intangibles	(30,104		)	(30,611		)	(29,943		)	(28,769		)	(28,946		)	(30,356		)	(27,796		)
Average tangible shareholders' equity	$	638,273		$	618,828		$	586,554		$	559,566		$	519,134		$	628,605		$	501,686

Return on average shareholders’ equity	6.71		%	5.53		%	1.49		%	18.83		%	15.87		%	6.13		%	10.64		%
Impact of goodwill and other intangibles	0.31		%	0.28		%	0.07		%	0.97		%	0.89		%	0.29		%	0.58		%
Return on average tangible shareholders' equity	7.02		%	5.81		%	1.56		%	19.80		%	16.76		%	6.42		%	11.22		%

Return on average shareholders' equity	6.71		%	5.53		%	1.49		%	18.83		%	15.87		%	6.13		%	10.64		%
Impact of acquisition-related expenses (net of tax)	0.07		%	—		%	0.18		%	0.24		%	0.49		%	0.03		%	1.52		%
Return on average shareholders' equity, excluding acquisition-related expenses (net of tax)	6.78		%	5.53		%	1.67		%	19.07		%	16.36		%	6.16		%	12.16		%

Return on average assets	0.70		%	0.57		%	0.15		%	1.79		%	1.54		%	0.63		%	1.06		%
Impact of acquisition-related expenses (net of tax)	—		%	—		%	0.01		%	0.02		%	0.05		%	0.01		%	0.15		%
Return on average assets, excluding acquisition-related expenses (net of tax)	0.70		%	0.57		%	0.16		%	1.81		%	1.59		%	0.64		%	1.21		%

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding acquisition-related items, net of tax, noninterest income and noninterest expense, excluding acquisition-related items, diluted earnings per share, excluding acquisition-related items, net of tax, and Commercial and Consumer Banking segment net income, excluding acquisition-related items, net of tax. We refer to these measurements as “Core” measurements. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance.



	Quarter Ended															Six Months Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016

Consolidated results:
Net income	$	11,209		$	8,983		$	2,294		$	27,701		$	21,749		$	20,192		$	28,156
Impact of acquisition-related expenses (net of tax)	115						261			333			666			115			4,044
Net income, excluding acquisition-related expenses (net of tax)	$	11,324		$	8,983		$	2,555		$	28,034		$	22,415		$	20,307		$	32,200

Net interest income	$	46,868		$	45,651		$	48,074		$	46,802		$	44,482		$	92,519		$	85,173

Noninterest income	81,008			74,461			73,221			111,745			102,476			155,469			174,184

Noninterest expense	$	111,244		$	106,874		$	117,539		$	114,399		$	111,031		$	218,118		$	212,384
Impact of acquisition-related expenses	(177		)	—			(401		)	(512		)	(1,025		)	(177		)	(6,223		)
Noninterest expense, excluding acquisition-related expenses	$	111,067		$	106,874		$	117,138		$	113,887		$	110,006		$	217,941		$	206,161

Efficiency ratio	86.99		%	88.98		%	96.90		%	72.15		%	75.55		%	87.96		%	81.89		%
Impact of acquisition-related expenses	(0.13		)%	—		%	(0.33		)%	(0.32		)%	(0.69		)%	(0.08		)%	(2.40		)%
Core efficiency ratio, excluding acquisition-related expenses	86.86		%	88.98		%	96.57		%	71.83		%	74.86		%	87.88		%	79.49		%

Diluted earnings per common share	$	0.41		$	0.33		$	0.09		$	1.11		$	0.87		$	0.75		$	1.15
Impact of acquisition-related expenses (net of tax)	0.01			—			0.01			0.01			0.03			—			1.49
Diluted earnings per common share, excluding acquisition-related expenses (net of tax)	$	0.42		$	0.33		$	0.10		$	1.12		$	0.90		$	0.75		$	2.64

Return on average tangible shareholders' equity	7.02		%	5.81		%	1.56		%	19.80		%	16.76		%	6.42		%	11.22		%
Impact of acquisition-related expenses (net of tax)	0.08		%	—		%	0.18		%	0.24		%	0.51		%	0.04		%	1.62		%
Return on average tangible shareholders' equity, excluding acquisition-related expenses (net of tax)	7.10		%	5.81		%	1.74		%	20.04		%	17.27		%	6.46		%	12.84		%

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

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



	Quarter Ended															Six Months Ended
(in thousands)	June 30, 2017			Mar. 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			June 30, 2017			June 30, 2016

Commercial and Consumer Banking Segment results:
Net income	$	9,446		$	9,292		$	12,046		$	10,133		$	7,079		$	18,738		$	8,621
Impact of acquisition-related expenses (net of tax)	115						261			333			666			115			4,044
Net income, excluding acquisition-related expenses (net of tax)	$	9,561		$	9,292		$	12,307		$	10,466		$	7,745		$	18,853		$	12,665

Net interest income	$	42,448		$	40,903		$	40,637		$	39,339		$	38,393		$	83,352		$	74,039

Noninterest income	$	8,276		$	9,425		$	13,087		$	9,771		$	8,181		$	17,701		$	12,824

Noninterest expense	$	36,631		$	36,469		$	35,482		$	32,170		$	34,103		$	73,101		$	70,733
Impact of acquisition-related expenses	(177		)	—			(401		)	(512		)	(1,025		)	(177		)	(6,223		)
Noninterest expense, excluding acquisition-related expenses	$	36,454		$	36,469		$	35,081		$	31,658		$	33,078		$	72,924		$	64,510

Efficiency ratio	72.22		%	72.46		%	66.04		%	65.51		%	73.22		%	72.34		%	81.43		%
Impact of acquisition-related expenses	(0.35		)%	—		%	(0.74		)%	(1.05		)%	(2.20		)%	(0.18		)%	(7.16		)%
Core efficiency ratio, excluding acquisition-related expenses	71.87		%	72.46		%	65.30		%	64.46		%	71.02		%	72.16		%	74.27		%

HomeStreet, Inc. - FORM 8-K - EX-99.1 - EARNINGS RELEASE ISSUED BY HOMESTREET, INC DATED JULY 24, 2017 - July 24, 2017

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