A Message from HomeStreet Bank Chairman & CEO Bruce Williams

The national and local economic news has been unsettling in recent weeks. Most news stories tend to focus on the worst problems, not the overall health of the banking industry. In keeping with HomeStreet Bank's commitment to our customers, I'd like to offer our perspective on the current situation.

Most banks in this country, HomeStreet among them, are in relatively good shape. The recent news stories are predominantly centered around Wall Street investment banks or national banks that were heavily involved in subprime lending. Very few banks of the 8,000 or so in this country are in that situation.

Of great importance to depositors, and a significant difference from the Great Depression, is that bank deposits are insured by the federal government through the Federal Deposit Insurance Corporation (FDIC). The FDIC covers up to $250,000 for individual bank deposits and IRAs and is higher for joint accounts. As events of the last several weeks demonstrate, the FDIC is committed to the protection of depositors.

Additionally, some banks, including HomeStreet Bank, participate in the CDARS^® program (Certificate of Deposit Account Registry Service). With this program, Certificates of Deposit can be insured by the FDIC all the way up to $50 million. HomeStreet’s bank branch employees are well trained to help customers maximize their FDIC insurance coverage. I encourage you to sit down with one of our branch employees and review your accounts to make sure you are maximizing your coverage.

HomeStreet did not participate in subprime lending. In fact, our home loan portfolio is doing relatively well, with delinquencies and foreclosures well below the levels we experienced in 2002, when the Pacific Northwest went through its most recent recession. Our home lending business is also doing well this year despite the poor housing market – both because so many of our competitors are no longer in business or have decreased their lending activities, and because we have experienced staff who can help homebuyers with FHA, VA and conforming loans.

Our deposit business is also doing well. In recent months, we have seen significant growth in deposits.

HomeStreet is not immune from the economic challenges facing the country, particularly when they affect our consumer or business customers. While most of our customers have not been significantly affected, some of our builder customers are facing significant challenges in the housing slowdown. In response, we have increased the amount of loan loss reserves we set aside year-to-date and we are working closely with our builder customers to help them work through their problems. HomeStreet has long been guided by a long-term approach. We are being prudent and setting the funds aside in order to be prepared for possible future loan losses.

Some other important factors that influence our financial health and stability:

Most of our lending is in the Puget Sound area, which remains a better housing market than many other parts of the country.

HomeStreet Bank had no exposure to investments in either Fannie Mae or Freddie Mac.

For 87 years, we have prepared for and navigated through changing, and often challenging, economic times. Today, HomeStreet Bank is a well-capitalized financial institution, with all three of our FDIC-required capital ratios above the benchmark ratios established by the FDIC. We remain financially sound and committed to our customers.

We always appreciate hearing your thoughts. Please stop by a branch or send me an e-mail any time.

Bruce W. Williams, Chairman & CEO
HomeStreet Bank