An update from CEO Bruce Williams

As the economic downturn continues, it seems inevitable that 2009 will be a challenging year for our country. Still, there are reasons to keep the challenges in perspective. First, the new administration has made economic recovery its top priority and may be more successful in turning the economy around. Second, there is a lot in the works to help solve our economic problems.

Some of the actions taken have already had a positive impact. Earlier in the year, Fannie Mae, Freddie Mac and FHA were authorized to make larger loans, particularly important in relatively high cost housing markets like ours. On November 25, the federal government announced it would provide up to $800 billion to stimulate mortgage lending and consumer spending, resulting in an immediate and significant drop in mortgage rates, the lowest in five years. This could have a positive and material impact on housing markets.

This fall, Congress raised the FDIC deposit insurance limit to $250,000 through 2009. Changes benefiting consumers were made to other account types as well, such as broadening the definition of beneficiaries on revocable trusts.  Additionally, the FDIC announced its Temporary Liquidity Guarantee Program to provide unlimited FDIC coverage on noninterest-bearing transaction accounts.

Though HomeStreet Bank is not unaffected by the downturn, we are doing relatively well under the circumstances. Our bank has been profitable all three quarters of 2008. Our capital ratios have increased. Our deposits have grown considerably over the past several months. (In fact, the third quarter was our best quarter ever for deposit growth.)

Other factors that have contributed to our profitability this year include:

• Increased home lending, despite the soft housing market. Our expertise in FHA, VA and Fannie Mae loans has been particularly important in helping our customers buy or refinance homes.
• Record apartment lending, again because of our ability to provide Fannie Mae apartment loans.

As a family- and employee-owned company that's been in business for nearly 90 years, we are proud of the strong connection we have to our customers and our communities. My HomeStreet partners and I always appreciate hearing your thoughts. Please stop by a branch or send me an e-mail any time.

I wish you the best in these challenging times.

Bruce Williams
Chairman & CEO, HomeStreet Bank

December 3, 2008