HomeStreet, Inc. Reports Record Full Year Net Income

BY Business Wire | 02/04/13 - 06:00 AM EST

Stock quotes in this article: HMST

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We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. For instance, our ability to expand our banking operations geographically and across market sectors, grow our franchise and capitalize on market opportunities may be limited due to future risks and uncertainties including, but not limited to, changes in general economic conditions that impact our markets and our business, regulatory and legislative actions that may constrain our ability to do business, significant increases in the competition we face in our industry and market and the extent of our success in problem asset resolution efforts. 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 legislative or regulatory actions or reform (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act). A discussion of the factors that we know to pose 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 fiscal year ended December 31, 2011 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2012. These factors are updated from time to time in our filings with the Securities and Exchange Commission, and readers of this release are cautioned to review those disclosures in conjunction with the discussions herein.

Information contained herein, other than information at December 31, 2011, and for the twelve months then ended, is unaudited. 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, 2011, as contained in the Company's Annual Report on Form 10-K for such fiscal year.

HomeStreet, Inc. and Subsidiaries Summary Financial Data
	Quarter ended												Year ended
(in thousands, except share data)	Dec. 31, 2012		Sept. 30, 2012		Jun. 30, 2012		Mar. 31, 2012			Dec. 31, 2011			Dec. 31, 2012		Dec. 31, 2011
Operations Data (for the period ended):
Net interest income ⁽¹⁾	$	16,591	$	16,520	$	14,799	$	12,833		$	12,784		$	60,743	$	48,494
Provision for loan losses	4,000		5,500		2,000		—			—			11,500		3,300
Noninterest income ⁽¹⁾	71,720		68,976		56,743		40,097			27,543			237,534		97,205
Noninterest expense	55,754		45,819		46,847		34,687			33,903			183,105		126,494
Net income before taxes	28,557		34,177		22,695		18,243			6,424			103,672		15,905
Income taxes	7,060		12,186		4,017		(1,716		)	(602		)	21,546		(214		)
Net income	$	21,497	$	21,991	$	18,678	$	19,959		$	7,026		$	82,126	$	16,119
Basic earnings per common share ⁽²⁾	$	1.50	$	1.53	$	1.31	$	1.94		$	1.30		$	6.17	$	2.98
Diluted earnings per common share ⁽²⁾	$	1.46	$	1.50	$	1.26	$	1.86		$	1.21		$	5.98	$	2.80
Weighted average common shares
Basic	14,371,120		14,335,950		14,252,120		10,292,566			5,403,498			13,312,939		5,403,498
Diluted	14,714,166		14,699,032		14,824,064		10,720,330			5,797,170			13,739,398		5,748,342
Shareholders’ equity per share	$	18.34	$	16.82	$	15.05	$	13.41		$	15.99		$	18.34	$	15.99
Common shares outstanding ⁽²⁾	14,382,638		14,354,972		14,325,214		14,325,214			5,403,498			14,382,638		5,403,498

Financial position (at period end):
Cash and cash equivalents	$	25,285	$	22,051	$	75,063	$	92,953		$	263,302		$	25,285	$	263,302
Investment securities available for sale	416,329		414,050		415,610		446,198			329,047			416,329		329,047
Loans held for sale	620,799		535,908		415,189		291,868			150,409			620,799		150,409
Loans held for investment, net	1,308,974		1,268,703		1,235,253		1,295,471			1,300,873			1,308,974		1,300,873
Mortgage servicing rights	95,493		81,512		78,240		86,801			77,281			95,493		77,281
Other real estate owned	23,941		17,003		40,618		31,640			38,572			23,941		38,572
Total assets	2,631,230		2,511,269		2,427,203		2,368,729			2,264,957			2,631,230		2,264,957
Deposits	1,976,835		1,981,814		1,904,749		2,000,633			2,009,755			1,976,835		2,009,755
FHLB advances	259,090		131,597		65,590		57,919			57,919			259,090		57,919
Repurchase agreements	—		—		100,000		—			—			—		—
Shareholders’ equity	263,762		241,499		215,614		192,139			86,407			263,762		86,407

Financial position (averages):
Investment securities available for sale	$	418,261	$	411,916	$	431,875	$	381,129		$	338,933		$	410,819	$	306,813
Loans held for investment	1,297,615		1,270,652		1,304,740		1,338,552			1,385,037			1,303,010		1,477,976
Total interest earning assets	2,244,727		2,187,059		2,143,380		2,090,190			2,078,506			2,166,827		2,069,858
Total interest bearing deposits	1,609,075		1,625,437		1,640,159		1,705,371			1,745,493			1,644,859		1,814,464
FHLB advances	122,516		112,839		79,490		57,919			59,169			93,325		93,755
Repurchase agreements	558		18,478		52,369		—			—			17,806		—
Total interest bearing liabilities	1,794,006		1,818,611		1,833,875		1,825,147			1,866,519			1,817,847		1,970,725
Shareholders’ equity	262,163		231,361		207,344		140,794			84,038			209,629		68,537

HomeStreet, Inc. and Subsidiaries Summary Financial Data (continued)
	Quarter ended															Year ended
(in thousands, except share data)	Dec. 31, 2012			Sept. 30, 2012			Jun. 30, 2012			Mar. 31, 2012			Dec. 31, 2011			Dec. 31, 2012			Dec. 31, 2011
Financial performance:
Return on average common shareholders’ equity ⁽³⁾	32.80		%	38.02		%	36.03		%	56.70		%	33.44		%	39.18		%	23.52		%
Return on average assets	3.46		%	3.60		%	3.15		%	3.45		%	1.23		%	3.43		%	0.70		%
Net interest margin ⁽¹⁾⁽⁴⁾	3.06		%	3.12		%	2.85		%	2.51		%	2.48		%	2.89		%	2.36		%
Efficiency ratio ⁽⁵⁾	63.13		%	53.59		%	65.48		%	65.53		%	84.07		%	61.39		%	86.82		%
Operating efficiency ratio ⁽⁷⁾	61.81		%	53.18		%	57.03		%	60.77		%	74.78		%	58.01		%	66.04		%
Asset quality:
Allowance for credit losses	$	27,751		$	27,627		$	27,125		$	35,402		$	42,800		$	27,751		$	42,800
Allowance for credit losses/total loans	2.07		%	2.12		%	2.13		%	2.64		%	3.18		%	2.07		%	3.18		%
Allowance for loan losses/nonaccrual loans	92.20		%	71.80		%	81.28		%	46.58		%	55.81		%	92.20		%	55.81		%
Total classified assets	$	86,270		$	102,385		$	137,165		$	208,792		$	188,167		$	86,270		$	188,167
Classified assets/total assets	3.28		%	4.08		%	5.66		%	8.82		%	8.31		%	3.28		%	8.31		%
Total nonaccrual loans ⁽⁶⁾	$	29,892		$	38,247		$	33,107		$	75,575		$	76,484		$	29,892		$	76,484
Nonaccrual loans/total loans	2.23		%	2.94		%	2.62		%	5.66		%	5.69		%	2.23		%	5.69		%
Other real estate owned	$	23,941		$	17,003		$	40,618		$	31,640		$	38,572		$	23,941		$	38,572
Total nonperforming assets	$	53,833		$	55,250		$	73,725		$	107,215		$	115,056		$	53,833		$	115,056
Nonperforming assets/total assets	2.05		%	2.20		%	3.04		%	4.53		%	5.08		%	2.05		%	5.08		%
Net charge-offs	$	3,876		$	4,998		$	10,277		$	7,398		$	10,586		$	26,549		$	25,066
Regulatory capital ratios for the Bank:
Tier 1 capital to total assets (leverage)	11.78		%	10.86		%	10.20		%	9.33		%	6.04		%	11.78		%	6.04		%
Tier 1 risk-based capital	18.05		%	16.76		%	15.83		%	14.23		%	9.88		%	18.05		%	9.88		%
Total risk-based capital	19.31		%	18.01		%	17.09		%	15.50		%	11.15		%	19.31		%	11.15		%
Other data:
Full-time equivalent employees (ending)	1,099			998			913			821			613			1,099			613

(1) Certain prior period amounts have been reclassified between net interest income and noninterest income to conform to the current period presentation in all tables provided.
(2) Per share data shown after giving effect to the 2-for-1 forward stock splits effective November 5, 2012 and March 6, 2012.
(3) Net earnings available to common shareholders divided by average common shareholders’ equity.
(4) Net interest income divided by total interest earning assets on a tax equivalent basis.
(5) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(6) Generally, loans are placed on nonaccrual status when they are 90 or more days past due.
(7) We include an operating efficiency ratio which is not calculated based on generally accepted accounting principles in the United States (“GAAP”), but which we believe provides important information regarding our results of operations. Our calculation of the operating efficiency ratio is computed by dividing noninterest expense less costs related to OREO (gains (losses) on sales, valuation allowance adjustments, and maintenance and taxes) by total revenue (net interest income and noninterest income). Management uses this non-GAAP measurement as part of its assessment of performance in managing noninterest expense. We believe that costs related to OREO are more appropriately considered as credit- related costs rather than as an indication of our operating efficiency. The following table provides a reconciliation of non-GAAP to GAAP measurement.

	Quarter ended										Year ended
	Dec. 31, 2012		Sept. 30, 2012		Jun. 30, 2012		Mar. 31, 2012		Dec. 31, 2011		Dec. 31, 2012		Dec. 31, 2011
Efficiency ratio	63.13	%	53.59	%	65.48	%	65.53	%	84.07	%	61.39	%	86.82	%
Less impact of OREO expenses	1.32	%	0.41	%	8.45	%	4.76	%	9.29	%	3.38	%	20.78	%
Operating efficiency ratio	61.81	%	53.18	%	57.03	%	60.77	%	74.78	%	58.01	%	66.04	%

HomeStreet, Inc. and Subsidiaries Consolidated Statements of Operations
	Quarter ended Dec. 31,					%		Year Ended Dec. 31,						%
(in thousands, except share data)	2012		2011			Change		2012			2011			Change
Interest income:
Loans	$	18,713	$	17,351		8		$	71,057		$	71,795		(1	)
Investment securities available for sale	2,186		1,792			22		9,391			6,920			36
Other	27		203			(87	)	243			477			(49	)
	20,926		19,346			8		80,691			79,192			2
Interest expense:
Deposits	3,756		5,388			(30	)	16,741			24,815			(33	)
Federal Home Loan Bank advances	282		699			(60	)	1,788			3,821			(53	)
Securities sold under agreements to repurchase	1		—			NM		70			—			NM
Long-term debt	292		459			(36	)	1,333			2,046			(35	)
Other	4		16			(75	)	16			16			NM
	4,335		6,562			(34	)	19,948			30,698			(35	)
Net interest income	16,591		12,784			30		60,743			48,494			25
Provision for credit losses	4,000		—			NM		11,500			3,300			248
Net interest income after provision for credit losses	12,591		12,784			(2	)	49,243			45,194			9
Noninterest income:
Net gain on mortgage loan origination and sale activities	68,753		19,001			262		210,209			48,467			334
Mortgage servicing income	651		5,963			(89	)	16,121			38,056			(58	)
Income from Windermere Mortgage Services, Inc.	516		739			(30	)	4,264			2,119			101
Gain (loss) on debt extinguishment	—		—			—		(939		)	2,000			NM
Depositor and other retail banking fees	800		748			7		3,062			3,061			—
Insurance commissions	193		186			4		743			910			(18	)
Gain on securities available for sale	141		459			(69	)	1,490			1,102			35
Other	666		447			49		2,584			1,490			73
	71,720		27,543			160		237,534			97,205			144
Noninterest expense:
Salaries and related costs	38,680		16,462			135		119,829			53,519			124
General and administrative	8,322		6,182			35		27,352			18,490			48
Legal	325		1,075			(70	)	1,796			3,360			(47	)
Consulting	1,291		2,011			(36	)	3,037			2,644			15
Federal Deposit Insurance Corporation assessments	803		1,256			(36	)	3,554			5,534			(36	)
Occupancy	2,425		1,733			40		8,585			6,764			27
Information services	2,739		1,436			91		8,867			5,902			50
Other real estate owned expense	1,169		3,748			(69	)	10,085			30,281			(67	)
	55,754		33,903			64		183,105			126,494			45
Income before income tax expense	28,557		6,424			345		103,672			15,905			552
Income tax expense (benefit)	7,060		(602		)	NM		21,546			(214		)	NM
NET INCOME	$	21,497	$	7,026		206		$	82,126		$	16,119		409

Basic income per share	$	1.50	$	1.30		15		$	6.17		$	2.98		107
Diluted income per share	1.46		1.21			21		5.98			2.80			114
Basic weighted average number of shares outstanding	14,371,120		5,403,498			166		13,312,939			5,403,498			146
Diluted weighted average number of shares outstanding	14,714,166		5,797,170			154		13,739,398			5,748,342			139

HomeStreet, Inc. and Subsidiaries Five Quarter Consolidated Statements of Operation
	Quarter ended
(in thousands, except share data)	Dec. 31, 2012		Sept. 30, 2012		Jun. 30, 2012			Mar. 31, 2012			Dec. 31, 2011
Interest income:
Loans	$	18,713	$	18,512	$	17,351		$	16,481		$	17,351
Investment securities available for sale	2,186		2,517		2,449			2,238			1,792
Other	27		24		56			137			203
	20,926		21,053		19,856			18,856			19,346
Interest expense:
Deposits	3,756		3,908		4,198			4,879			5,388
Federal Home Loan Bank advances	282		297		535			675			699
Securities sold under agreements to repurchase	1		19		50			—			—
Long-term debt	292		305		271			465			459
Other	4		4		3			4			16
	4,335		4,533		5,057			6,023			6,562
Net interest income	16,591		16,520		14,799			12,833			12,784
Provision for credit losses	4,000		5,500		2,000			—			—
Net interest income after provision for credit losses	12,591		11,020		12,799			12,833			12,784

Noninterest income:
Net gain on mortgage loan origination and sale activities	68,753		65,233		46,727			29,496			19,001
Mortgage servicing income	651		506		7,091			7,873			5,963
Income from Windermere Mortgage Services, Inc.	516		1,188		1,394			1,166			739
Loss on debt extinguishment	—		—		(939		)	—			—
Depositor and other retail banking fees	800		756		771			735			748
Insurance commissions	193		192		177			182			186
Gain on securities available for sale	141		397		911			41			459
Other	666		704		611			604			447
	71,720		68,976		56,743			40,097			27,543
Noninterest expense:
Salaries and related costs	38,680		31,573		28,224			21,351			16,462
General and administrative	8,322		7,033		6,725			5,273			6,182
Legal	325		312		724			435			1,075
Consulting	1,291		1,069		322			355			2,011
Federal Deposit Insurance Corporation assessments	803		794		717			1,240			1,256
Occupancy	2,425		2,279		2,092			1,790			1,733
Information services	2,739		2,411		1,994			1,723			1,436
Other real estate owned expense	1,169		348		6,049			2,520			3,748
	55,754		45,819		46,847			34,687			33,903
Income before income tax expense	28,557		34,177		22,695			18,243			6,424
Income tax expense (benefit)	7,060		12,186		4,017			(1,716		)	(602		)
NET INCOME	$	21,497	$	21,991	$	18,678		$	19,959		$	7,026

Basic income per share	$	1.50	$	1.53	$	1.31		$	1.94		$	1.30
Diluted income per share	1.46		1.50		1.26			1.86			1.21
Basic weighted average number of shares outstanding	14,371,120		14,335,950		14,252,120			10,292,566			5,403,498
Diluted weighted average number of shares outstanding	14,714,166		14,699,032		14,824,064			10,720,330			5,797,170

HomeStreet, Inc. and Subsidiaries Consolidated Statements of Financial Condition
(in thousands, except share data)	Dec. 31, 2012		Dec. 31, 2011		% Change
Assets:
Cash and cash equivalents (including interest-bearing instruments of $12,414 and $246,113)	$	25,285	$	263,302	(90	)
Investment securities available for sale	416,329		329,047		27
Loans held for sale (includes $607,578 and $130,546 carried at fair value)	620,799		150,409		313
Loans held for investment (net of allowance for loan losses of $27,561 and $42,689)	1,308,974		1,300,873		1
Mortgage servicing rights (includes $87,396 and $70,169 carried at fair value)	95,493		77,281		24
Other real estate owned	23,941		38,572		(38	)
Federal Home Loan Bank stock, at cost	36,367		37,027		(2	)
Premises and equipment, net	15,232		6,569		132
Accounts receivable and other assets	88,810		61,877		44
Total assets	$	2,631,230	$	2,264,957	16
Liabilities and shareholders’ equity
Liabilities:
Deposits	$	1,976,835	$	2,009,755	(2	)
Federal Home Loan Bank advances	259,090		57,919		347
Accounts payable and accrued expenses	69,686		49,019		42
Long-term debt	61,857		61,857		—
Total liabilities	2,367,468		2,178,550		9
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 80,000,000
Issued and outstanding, 14,382,638 shares and 5,403,498 shares	511		511		—
Additional paid-in capital	90,189		31		NM
Retained earnings	163,872		81,746		100
Accumulated other comprehensive income	9,190		4,119		123
Total shareholders’ equity	263,762		86,407		205
Total liabilities and shareholders’ equity	$	2,631,230	$	2,264,957	16

HomeStreet, Inc. and Subsidiaries Five Quarter Consolidated Statements of Financial Condition

(in thousands, except share data)	Dec. 31, 2012		Sept. 30, 2012		June 30, 2012		Mar. 31, 2012		Dec. 31, 2011
Assets:
Cash and cash equivalents	$	25,285	$	22,051	$	75,063	$	92,953	$	263,302
Investment securities available for sale	416,329		414,050		415,610		446,198		329,047
Loans held for sale	620,799		535,908		415,189		291,868		150,409
Loans held for investment	1,308,974		1,268,703		1,235,253		1,295,471		1,300,873
Mortgage servicing rights	95,493		81,512		78,240		86,801		77,281
Other real estate owned	23,941		17,003		40,618		31,640		38,572
Federal Home Loan Bank stock, at cost	36,367		36,697		37,027		37,027		37,027
Premises and equipment, net	15,232		13,060		10,226		7,034		6,569
Accounts receivable and other assets	88,810		122,285		119,977		79,737		61,877
Total assets	$	2,631,230	$	2,511,269	$	2,427,203	$	2,368,729	$	2,264,957
Liabilities and shareholders’ equity
Liabilities:
Deposits	$	1,976,835	$	1,981,814	$	1,904,749	$	2,000,633	$	2,009,755
Federal Home Loan Bank advances	259,090		131,597		65,590		57,919		57,919
Securities sold under agreements to repurchase	—		—		100,000		—		—
Accounts payable and accrued expenses	69,686		94,502		79,393		56,181		49,019
Long-term debt	61,857		61,857		61,857		61,857		61,857
Total liabilities	2,367,468		2,269,770		2,211,589		2,176,590		2,178,550
Shareholders’ equity:
Preferred stock, no par value
Authorized 10,000 shares	—		—		—		—		—
Common stock, no par value
Authorized 80,000,000	511		511		511		511		511
Additional paid-in capital	90,189		89,264		88,637		86,755		31
Retained earnings	163,872		142,375		120,384		101,705		81,746
Accumulated other comprehensive income	9,190		9,349		6,082		3,168		4,119
Total shareholders’ equity	263,762		241,499		215,614		192,139		86,407
Total liabilities and shareholders’ equity	$	2,631,230	$	2,511,269	$	2,427,203	$	2,368,729	$	2,264,957

HomeStreet, Inc. and Subsidiaries Average Balances, Yields and Rates Paid (Taxable-equivalent basis)

	Quarter ended Dec. 31,
	2012						2011
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets ⁽¹⁾:
Cash & cash equivalents	$	28,029	$	26	0.39	%	$	180,596	$	200	0.46	%
Investment securities	418,261		2,682		2.56	%	338,933		1,867		2.20	%
Loans held for sale	500,822		4,175		3.36	%	173,940		1,801		4.14	%
Loans held for investment	1,297,615		14,571		4.48	%	1,385,037		15,589		4.49	%
Total interest-earning assets	2,244,727		21,454		3.82	%	2,078,506		19,457		3.73	%
Noninterest-earning assets ⁽²⁾	238,433						206,827
Total assets	$	2,483,160					$	2,285,333
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	159,192	130		0.32	%	$	136,627	117		0.34	%
Savings accounts	104,748		105		0.40	%	63,883		78		0.48	%
Money market accounts	677,135		855		0.50	%	484,310		721		0.59	%
Certificate accounts	668,000		2,666		1.59	%	1,060,673		4,471		1.67	%
Total interest-bearing deposits	1,609,075		3,756		0.93	%	1,745,493		5,387		1.22	%
FHLB advances	122,516		282		0.95	%	59,169		699		4.68	%
Securities sold under agreements to repurchase	558		1		0.26	%	—		—		—
Long-term debt	61,857		292		1.89	%	61,857		459		2.97	%
Other borrowings	—		4		—		—		16		—
Total interest-bearing liabilities	1,794,006		4,335		0.96	%	1,866,519		6,561		1.40	%
Other noninterest-bearing liabilities	426,991						334,776
Total liabilities	2,220,997						2,201,295
Shareholders’ equity	262,163						84,038
Total liabilities and shareholders’ equity	$	2,483,160					$	2,285,333
Net interest income ⁽³⁾			$	17,119					$	12,896
Net interest spread					2.86	%					2.33	%
Impact of noninterest-bearing sources					0.20	%					0.15	%
Net interest margin					3.06	%					2.48	%

(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, which is a non-GAAP measure, primarily related to tax-exempt income on certain loans and securities of $528 thousand for the quarter ended December 31, 2012 and $112 thousand for the quarter ended December 31, 2011, respectively. The Company's estimated marginal tax rate was 36% for the periods presented.

HomeStreet, Inc. and Subsidiaries Average Balances, Yields and Rates Paid (Taxable-equivalent basis) (continued)

	Year Ended Dec. 31,
	2012						2011
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets ⁽¹⁾:
Cash & cash equivalents	$	94,478	$	231	0.24	%	$	159,031	$	465	0.29	%
Investment securities	410,819		11,064		2.69	%	306,813		7,083		2.31	%
Loans held for sale	358,520		12,713		3.54	%	126,038		5,602		4.44	%
Loans held for investment	1,303,010		58,490		4.49	%	1,477,976		66,342		4.49	%
Total interest-earning assets	2,166,827		82,498		3.81	%	2,069,858		79,492		3.84	%
Noninterest-earning assets ⁽²⁾	225,704						229,943
Total assets	$	2,392,531					$	2,299,801
Liabilities and Shareholders’ Equity:
Deposits:
Interest-bearing demand accounts	$	151,029	498		0.33	%	$	129,254	575		0.44	%
Savings accounts	90,246		395		0.44	%	57,513		335		0.58	%
Money market accounts	613,546		3,243		0.53	%	450,362		3,018		0.67	%
Certificate accounts	790,038		12,605		1.60	%	1,177,335		20,887		1.77	%
Total interest-bearing deposits	1,644,859		16,741		1.02	%	1,814,464		24,815		1.37	%
FHLB advances	93,325		1,788		1.91	%	93,755		3,821		4.08	%
Securities sold under agreements to repurchase	17,806		70		0.39	%	—		—		—
Long-term debt	61,857		1,333		2.16	%	62,506		2,046		3.27	%
Other borrowings	—		16		—		—		16		—
Total interest-bearing liabilities	1,817,847		19,948		1.10	%	1,970,725		30,698		1.56	%
Other noninterest-bearing liabilities	365,055						260,539
Total liabilities	2,182,902						2,231,264
Shareholders’ equity	209,629						68,537
Total liabilities and shareholders’ equity	$	2,392,531					$	2,299,801
Net interest income ⁽³⁾			$	62,550					$	48,794
Net interest spread					2.71	%					2.28	%
Impact of noninterest-bearing sources					0.18	%					0.08	%
Net interest margin					2.89	%					2.36	%

(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, which is a non-GAAP measure, primarily related to tax-exempt income on certain loans and securities of $1.8 million for the twelve months ended December 31, 2012 and $300 thousand for the twelve months ended December 31, 2011, respectively. The Company's estimated marginal tax rate was 36% for the periods presented.

HomeStreet, Inc. and Subsidiaries Five Quarter Investment Securities Available for Sale
(in thousands, except for duration data)	Dec. 31, 2012		Sept. 30, 2012		June 30, 2012		Mar. 31, 2012		Dec. 31, 2011
Mortgage backed:
Residential	$	62,853	$	63,365	$	48,136	$	40,575	$	—
Commercial	14,380		14,532		14,602		14,410		14,483
Municipal bonds	129,174		128,595		126,681		79,051		49,584
Collateralized mortgage obligations:
Residential	170,199		167,513		185,970		245,889		223,390
Commercial	9,043		9,110		9,165		10,019		10,070
Agency	—		—		—		25,007		—
US Treasury	30,679		30,935		31,056		31,247		31,520
	$	416,328	$	414,050	$	415,610	$	446,198	$	329,047
Weighted average duration in years	4.9		5.0		5.1		5.1		4.4

Five Quarter Loans Held for Investment
(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011
Consumer loans
Single family residential	$	673,865		$	602,164		$	537,174		$	506,103		$	496,934
Home equity	136,746			141,343			147,587			152,924			158,936
	810,611			743,507			684,761			659,027			655,870
Commercial loans
Commercial real estate	361,879			360,919			370,064			391,727			402,139
Multifamily residential	17,012			36,912			47,069			56,328			56,379
Construction/land development	71,033			77,912			83,797			158,552			173,405
Commercial business	79,576			80,056			79,980			68,932			59,831
	529,500			555,799			580,910			675,539			691,754
	1,340,111			1,299,306			1,265,671			1,334,566			1,347,624
Net deferred loan fees and discounts	(3,576		)	(3,142		)	(3,508		)	(3,891		)	(4,062		)
	1,336,535			1,296,164			1,262,163			1,330,675			1,343,562
Allowance for loan losses	(27,561		)	(27,461		)	(26,910		)	(35,204		)	(42,689		)
	$	1,308,974		$	1,268,703		$	1,235,253		$	1,295,471		$	1,300,873

Allowance as a % of loans held for investment	2.07		%	2.12		%	2.13		%	2.64		%	3.18		%
Allowance as a % of nonaccrual loans	92.20		%	71.80		%	81.28		%	46.58		%	55.81		%

HomeStreet, Inc. and Subsidiaries Five Quarter Credit Quality Activity

Allowance for Credit Losses (roll-forward)
	Quarter ended
(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011

Allowance for Credit Losses (roll-forward):
Beginning balance	$	27,627		$	27,125		$	35,402		$	42,800		$	53,386
Provision for credit losses	4,000			5,500			2,000			—			—
(Charge-offs), net of recoveries	(3,876		)	(4,998		)	(10,277		)	(7,398		)	(10,586		)
Ending balance	$	27,751		$	27,627		$	27,125		$	35,402		$	42,800

Nonperforming assets (NPAs) roll-forward
	Quarter ended
(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011

Beginning balance	$	55,250		$	73,725		$	107,215		$	115,056		$	159,462
Additions	9,973			20,703			13,208			18,776			7,251
Reductions:
Charge-offs	(3,876		)	(4,441		)	(10,277		)	(7,398		)	(10,586		)
OREO sales	(2,028		)	(25,946		)	(9,804		)	(8,878		)	(26,037		)
OREO writedowns	(1,216		)	(2,623		)	(5,578		)	(2,754		)	(3,564		)
Principal paydown, payoff advances	(1,807		)	(4,794		)	(12,037		)	(1,321		)	(3,871		)
Transferred back to accrual status	(2,463		)	(1,374		)	(9,002		)	(6,266		)	(7,599		)
Total reductions	(11,390		)	(39,178		)	(46,698		)	(26,617		)	(51,657		)
Net additions/(reductions)	(1,417		)	(18,475		)	(33,490		)	(7,841		)	(44,406		)
Ending balance	$	53,833		$	55,250		$	73,725		$	107,215		$	115,056

HomeStreet, Inc. and Subsidiaries Five Quarter Nonperforming Assets by Loan Class

(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011

Nonaccrual loans:
Consumer loans
Single family residential	$	13,304		$	12,900		$	7,530		$	14,290		$	12,104
Home equity	2,970			1,024			1,910			1,853			2,464
	16,274			13,924			9,440			16,143			14,568
Commercial loans:
Commercial real estate	6,403			16,186			14,265			9,222			10,184
Multifamily residential	—			—			—			—			2,394
Construction/land development	5,042			5,848			9,373			49,708			48,387
Commercial business	2,173			2,289			29			502			951
	13,618			24,323			23,667			59,432			61,916
Total nonaccrual loans	$	29,892		$	38,247		$	33,107		$	75,575		$	76,484
Nonaccrual loans to total loans	2.23		%	2.94		%	2.62		%	5.66		%	5.69		%

Other real estate owned:
Consumer
Single family residential	$	4,071		$	2,787		$	3,142		$	3,243		$	6,600
	4,071			2,787			3,142			3,243			6,600
Commercial
Commercial real estate	10,283			3,489			3,184			284			2,055
Construction/land development	9,587			10,727			34,292			28,113			29,917
	19,870			14,216			37,476			28,397			31,972
Total other real estate owned	$	23,941		$	17,003		$	40,618		$	31,640		$	38,572

Nonperforming assets:
Consumer
Single family residential	$	17,375		$	15,687		$	10,672		$	17,533		$	18,704
Home equity loans	2,970			1,024			1,910			1,853			2,464
	20,345			16,711			12,582			19,386			21,168
Commercial
Commercial real estate	16,686			19,675			17,449			9,506			12,239
Multifamily residential	—			—			—			—			2,394
Construction/land development	14,629			16,575			43,665			77,821			78,304
Commercial business	2,173			2,289			29			502			951
	33,488			38,539			61,143			87,829			93,888
Total nonperforming assets	$	53,833		$	55,250		$	73,725		$	107,215		$	115,056
Nonperforming assets to total assets	2.05		%	2.20		%	3.04		%	4.53		%	5.08		%

HomeStreet, Inc. and Subsidiaries Delinquencies by Loan Class
(in thousands)	30-59 days past due			60-89 days past due			90 days or more past due ⁽¹⁾			Total past due			Current			Total loans

December 31, 2012
Consumer loans
Single family residential	$	11,916		$	4,732		$	53,962		$	70,610		$	603,255		$	673,865
Home equity	787			242			2,970			3,999			132,747			136,746
	12,703			4,974			56,932			74,609			736,002			810,611
Commercial loans
Commercial real estate	—			—			6,403			6,403			355,476			361,879
Multifamily residential	—			—			—			—			17,012			17,012
Construction/land development	—			—			5,042			5,042			65,991			71,033
Commercial business	—			—			2,173			2,173			77,403			79,576
	—			—			13,618			13,618			515,882			529,500
	$	12,703		$	4,974		$	70,550		$	88,227		$	1,251,884		$	1,340,111
As a % of total loans	0.95		%	0.37		%	5.26		%	6.58		%	93.42		%	100.00		%

December 31, 2011
Consumer loans
Single family residential	$	7,694		$	8,552		$	47,861		$	64,107		$	432,827		$	496,934
Home equity	957			500			2,464			3,921			155,015			158,936
	8,651			9,052			50,325			68,028			587,842			655,870
Commercial loans
Commercial real estate	—			—			10,184			10,184			391,955			402,139
Multifamily residential	—			—			2,394			2,394			53,985			56,379
Construction/land development	9,916			—			48,387			58,303			115,102			173,405
Commercial business	—			—			951			951			58,880			59,831
	9,916			—			61,916			71,832			619,922			691,754
	$	18,567		$	9,052		$	112,241		$	139,860		$	1,207,764		$	1,347,624
As a % of total loans	1.38		%	0.67		%	8.33		%	10.38		%	89.62		%	100.00		%

(1) Includes $40.7 million and $35.8 million of single family residential loans past due and still accruing at December 31, 2012 and December 31, 2011 respectively, whose repayments are insured by the FHA or guaranteed by the VA.

HomeStreet, Inc. and Subsidiaries Troubled Debt Restructurings (TDRs)

Troubled Debt Restructurings by Accrual and Nonaccrual Status

(in thousands)	Dec. 31, 2012		Sept. 30, 2012		June 30, 2012		Mar. 31, 2012		Dec. 31, 2011
Accrual
Consumer loans
Single family residential	$	67,483	$	67,647	$	73,743	$	70,977	$	62,792
Home equity	2,288		2,705		2,538		2,145		2,056
	69,771		70,352		76,281		73,122		64,848
Commercial loans
Commercial real estate	21,071		16,540		16,539		25,778		25,040
Multifamily residential	3,221		6,030		6,038		6,045		6,053
Construction/land development	6,365		13,802		7,875		7,978		8,799
Commercial business	147		154		162		287		191
	30,804		36,526		30,614		40,088		40,083
	$	100,575	$	106,878	$	106,895	$	113,210	$	104,931
Nonaccrual
Consumer loans
Single family residential	$	3,931	$	6,210	$	1,395	$	4,090	$	3,801
Home equity	465		64		231		347		419
	4,396		6,274		1,626		4,437		4,220
Commercial loans
Commercial real estate	770		7,716		9,037		—		—
Multifamily residential	—		—		—		—		—
Construction/land development	5,042		5,845		9,370		17,929		18,633
Commercial business	—		22		29		360		687
	5,812		13,583		18,436		18,289		19,320
	$	10,208	$	19,857	$	20,062	$	22,726	$	23,540
Total
Consumer loans
Single family residential	$	71,414	$	73,857	$	75,138	$	75,067	$	66,593
Home equity	2,753		2,769		2,769		2,492		2,475
	74,167		76,626		77,907		77,559		69,068
Commercial loans
Commercial real estate	21,841		24,256		25,576		25,778		25,040
Multifamily residential	3,221		6,030		6,038		6,045		6,053
Construction/land development	11,407		19,647		17,245		25,907		27,432
Commercial business	147		176		191		647		878
	36,616		50,109		49,050		58,377		59,403
	$	110,783	$	126,735	$	126,957	$	135,936	$	128,471

HomeStreet, Inc. and Subsidiaries Troubled Debt Restructurings (TDRs)

Troubled Debt Restructurings - Re-Defaults
	Quarter ended
(in thousands)	Dec. 31, 2012		Sept. 30, 2012		June 30, 2012		Mar. 31, 2012		Dec. 31, 2011

Recorded investment of re-defaults ⁽¹⁾
Consumer loans
Single family residential	$	1,386	$	5,123	$	1,364	$	760	$	1,286
Home equity	—		—		—		34		—
	1,386		5,123		1,364		794		1,286
Commercial loans
Commercial real estate	—		7,716		—		—		—
Multifamily residential	—		—		—		—		—
Construction/land development	—		—		—		—		8,264
Commercial business	—		—		29		—		145
	—		7,716		29		—		8,409
	$	1,386	$	12,839	$	1,393	$	794	$	9,695

(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 Five Quarter Mortgage Banking Operations

Mortgage Servicing Income
	Quarter ended
(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011

Servicing income, net:
Servicing fees and other	$	7,523		$	7,168		$	6,705		$	6,436		$	6,518
Changes in fair value of single family MSRs due to modeled amortization ⁽¹⁾	(6,280		)	(5,360		)	(4,052		)	(4,969		)	(4,176		)
Amortization of multifamily MSRs	(463		)	(598		)	(462		)	(491		)	(366		)
	780			1,210			2,191			976			1,976
Risk management, single family MSRs:
Changes in fair value of MSRs due to changes in model inputs and/or assumptions ⁽²⁾	2,489			(5,565		)	(15,354		)	7,411			(3,910		)
Net gain (loss) from derivatives economically hedging MSRs	(2,618		)	4,861			20,254			(514		)	7,897
	(129		)	(704		)	4,900			6,897			3,987
Mortgage servicing income	$	651		$	506		$	7,091		$	7,873		$	5,963

(1) Represents changes due to collection/realization of expected cash flows and curtailments over time.
(2) Principally reflects changes in model assumptions and prepayment speed assumptions, which are primarily affected by changes in interest rates.

Loans Serviced for Others
(in thousands)	Dec. 31, 2012		Sept. 30, 2012		June 30, 2012		Mar. 31, 2012		Dec. 31, 2011

Single family residential
U.S. government agency MBS	$	8,508,458	$	7,724,562	$	7,061,232	$	6,530,578	$	6,464,815
Other	362,230		385,107		407,750		416,700		420,470
	8,870,688		8,109,669		7,468,982		6,947,278		6,885,285
Commercial
Multifamily	727,118		760,820		772,473		766,433		758,535
Other	53,235		53,617		56,840		59,370		56,785
	780,353		814,437		829,313		825,803		815,320
Total loans serviced for others	$	9,651,041	$	8,924,106	$	8,298,295	$	7,773,081	$	7,700,605

HomeStreet, Inc. and Subsidiaries Five Quarter Mortgage Banking Operations (continued)

Single Family Capitalized Mortgage Servicing Rights
	Quarter ended
(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011
Beginning balance	$	73,787		$	70,585		$	79,381		$	70,169		$	67,471
Originations	17,397			14,121			10,598			6,723			10,759
Purchases	3			6			12			47			25
Changes due to modeled amortization ⁽¹⁾	(6,280		)	(5,360		)	(4,052		)	(4,969		)	(4,176		)
Net additions and amortization	11,120			8,767			6,558			1,801			6,608
Changes in fair value due to changes in model inputs and/or assumptions ⁽²⁾	2,489			(5,565		)	(15,354		)	7,411			(3,910		)
Ending balance	$	87,396		$	73,787		$	70,585		$	79,381		$	70,169
Ratio of MSR carrying value to related loans serviced for others	0.99		%	0.91		%	0.95		%	1.14		%	1.02		%
MSR servicing fee multiple ⁽³⁾	3.13			2.81			2.82			3.30			2.91
Weighted-average note rate (loans serviced for others)	4.34		%	4.52		%	4.69		%	4.83		%	4.93		%
Weighted-average servicing fee (loans serviced for others)	0.31		%	0.33		%	0.34		%	0.35		%	0.35		%

(1) Represents changes due to collection/realization of expected future cash flows over time.
(2) Principally reflects changes in model assumptions and prepayment speed assumptions, which are primarily affected by changes in 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.

Commercial Multifamily Capitalized Mortgage Servicing Rights
	Quarter ended
(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011
Beginning balance	$	7,725		$	7,655		$	7,420		$	7,112		$	6,612
Originations	835			668			697			799			866
Amortization	(463		)	(598		)	(462		)	(491		)	(366		)
Ending balance	$	8,097		$	7,725		$	7,655		$	7,420		$	7,112
Ratio of MSR carrying value to related loans serviced for others	1.04		%	0.95		%	0.92		%	0.90		%	0.87		%
MSR servicing fee multiple ⁽¹⁾	2.70			2.47			2.45			2.41			2.42
Weighted-average note rate (loans serviced for others)	5.38		%	5.48		%	5.54		%	5.60		%	5.67		%
Weighted-average servicing fee (loans serviced for others)	0.38		%	0.38		%	0.38		%	0.37		%	0.36		%

(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 Five Quarter Mortgage Banking Operations (continued)

Mortgage Banking Activity
	Quarter ended
(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011

Production volumes:
Single family mortgage closed loan volume ⁽¹⁾	$	1,518,971		$	1,368,238		$	1,068,656		$	712,302		$	624,111
Single family mortgage interest rate lock commitments	1,254,954			1,313,182			1,303,390			915,141			543,164
Single family mortgage loans sold	1,434,947			1,238,879			962,704			534,310			710,706

Multifamily mortgage originations	$	40,244		$	20,209		$	35,908		$	15,713		$	49,071
Multifamily mortgage loans sold	33,689			26,515			27,178			31,423			33,461

Net gain on mortgage loan origination and sale activities:
Single family:
Secondary marketing gains	$	40,757		$	42,021		$	29,950		$	17,057		$	2,669
Provision for repurchase losses	(123		)	(526		)	(1,930		)	(390		)	(12		)
Net gain from secondary marketing activities	40,634			41,495			28,020			16,667			2,657
Mortgage servicing rights originated	17,397			14,121			10,598			6,723			10,758
Loan origination and funding fees	9,091			8,577			7,070			4,944			4,401
Total single family	67,122			64,193			45,688			28,334			17,816
Multifamily	1,631			1,040			1,039			1,162			1,185
Total net gain on mortgage loan origination and sale activities	$	68,753		$	65,233		$	46,727		$	29,496		$	19,001

Single family margins (in basis points):
Mortgage servicing rights originated / mortgage loans sold	121			114			110			126			151
Secondary marketing gains, net of repurchase provision / interest rate lock commitments	313		⁽²⁾	316			215			182			49
Loan origination and funding fees / mortgage originations ⁽¹⁾	60			63			66			69			71
Composite Margin	494		⁽²⁾	493			391			377			271

(1) Represents single family mortgage production volume designated for sale during each respective period.
(2) Excludes the impact of a $1.3 million correction that was recorded in secondary marketing gains in the fourth quarter of 2012 for the cumulative effect of an error in prior years related to the fair value measurement of loans held for sale. Including the impact of this correction, the secondary marketing gain margin and Composite Margin were 324 and 505 basis points, respectively, in the fourth quarter of 2012.

HomeStreet, Inc. and Subsidiaries Five Quarter Deposits
(in thousands)	Dec. 31, 2012			Sept. 30, 2012			June 30, 2012			Mar. 31, 2012			Dec. 31, 2011

Deposits by Product:
Noninterest bearing accounts - checking and savings	$	83,563		$	77,149		$	64,404		$	68,245		$	69,276
Interest bearing transaction and savings deposits:
NOW accounts	174,699			172,086			170,098			154,670			138,936
Statement savings accounts due on demand	103,932			104,239			88,104			79,438			66,898
Money market accounts due on demand	683,906			675,363			630,798			559,563			499,457
Total interest bearing transaction and savings deposits	962,537			951,688			889,000			793,671			705,291
Total transaction and savings deposits	1,046,100			1,028,837			953,404			861,916			774,567
Certificates of deposit	655,467			684,604			755,646			890,694			1,033,798
Noninterest bearing accounts - other	275,268			268,373			195,699			248,023			201,390
Total deposits	$	1,976,835		$	1,981,814		$	1,904,749		$	2,000,633		$	2,009,755


Percent of total deposits:
Noninterest bearing accounts - checking and savings	4.2		%	3.9		%	3.4		%	3.4		%	3.4		%
Interest bearing transaction and savings deposits:
NOW accounts	8.8		%	8.7		%	8.9		%	7.7		%	6.9		%
Statement savings accounts due on demand	5.3		%	5.3		%	4.6		%	4.0		%	3.3		%
Money market accounts due on demand	34.6		%	34.1		%	33.1		%	28.0		%	24.9		%
Total interest bearing transaction and savings deposits	48.7		%	48.1		%	46.6		%	39.7		%	35.1		%
Total transaction and savings deposits	52.9		%	52.0		%	50.0		%	43.1		%	38.5		%
Certificates of deposit	33.2		%	34.5		%	39.7		%	44.5		%	51.4		%
Noninterest bearing accounts - other	13.9		%	13.5		%	10.3		%	12.4		%	10.1		%
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

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