Good day and welcome to the HomeStreet Incorporated Fourth Quarter and Year-end 2013 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Mr. Mark Mason, President and CEO. Please go ahead.

Hello and thank you for joining us for our fourth quarter earnings call. Before we begin, I’d like to remind you that our earnings release was furnished this morning with the SEC on Form 8-K and is available on our website at ir.homestreet.com. In addition, a recording of this call will be available today at the same address. On today’s call, we will make some forward-looking statements. Any statement that isn’t a description of historical fact is probably forward-looking and these statements are subject to many risks and uncertainties. Our actual performance may fall short of our expectations or we may take different actions from those we currently anticipate. Factors that may cause actual results to differ from expectations or that may cause us to deviate from our current plans are detailed in our SEC filings, including our quarterly report on Form 10-Q for the third quarter and our annual report on 10-K for 2012 as well as our various other SEC reports. Additional information on any non-GAAP financial measures referenced in today’s call, including a reconciliation of those measures to GAAP measures may be found in our SEC filings and in the earnings release available on our website. Today, I’d like to share a few thoughts about current market conditions, update you on our progress and executing our strategy and highlight key financial results. Please refer to our earnings release for a more detailed discussion of our financial condition and results of operations. The mortgage market continues to be [theoretically] different from where it was a year ago, with the magnitude of the decrease in mortgage volume exceeding in our expectations. While home demand continues to rise, home sale activities still subdued driven impart by low levels of new and existing homes for sale. New home sales dropped by…

We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from Tim Coffey of FIG Partners. Please go ahead.

Good morning, Mark. How are you doing?

Good Tim, how are you?

I am good, thanks. So the mortgage market; I mean given the headwind that you are facing in your own Puget Sound region, do you anticipate ‘14 to kind of be a reflection of what we saw in the second half of 2013?

Well for us, the question of mortgage loan volume is in part what’s going on in the industry and you think about that in terms of loans producer or loan officer. And then that number has declined from a peak of 7 loans to 8 loans per loan officer per month to just below 3 loans per loan officer per month in the fourth quarter. Now given this, the more significant seasonality in our Pacific Northwest market that number can vary pretty substantially during the year and in middle of the year, the second and third quarters, that number will rise above 4 to perhaps 4.5 loans per loan officer per month and then back down to maybe its current level, absent any macroeconomic changes; greater pace of home sales, a greater pace of new home construction things like that that could impact the purchase market. But we also have to consider the impact of hiring. So, as our number of producers rises and gets through the ramp up period to full productivity, which is about four months, our originations are anticipated to rise notwithstanding those macroeconomic issues. So, our forecast indicates, notwithstanding any changes in the market that our originations will grow pretty substantially, seasonally during the second and third quarters, but also as the consequence of continued hiring. And we've hired a substantial number of people even in the fourth quarter of last year who are finishing their ramp up periods in the first quarter and will contribute pretty substantially in the middle part to the end of this year. And so, our origination expectations next year exceed last year, notwithstanding the change in the market.

Okay. And how many producers do you have at year-end?

Total producers were approximately 365.

Do you anticipate additional sales of the securities to (inaudible) liquidity?

We may, I think it’s more likely that we allow the securities portfolio to pay down amortization and not to grow commensurable balance sheet growth.

Okay. The estimates or the expectations you gave for your balance sheet growth, specifically the average earning assets, do you anticipate loan growth to be faster than that?

We hope that it will be; we do. I mean we have very substantial loan origination capability today across all of our commercial and consumer product lines, including single family loans that we retain on our balance sheet. We have far more capacity than that 6% to 8% quarterly would suggest. Our challenge going forward we believe is going to be balance sheet capacity and may be selling more of our even commercial originations into the secondary market.

Any interest in purchasing loans?

Well, given our capacity challenges, no, not at this juncture.

Okay. And then within the good organic loan growth this quarter, within multi-family, there is more of commercial loans, what are you seeing from competitors in terms of pricing and underwriting?

Well, the pricing is very competitive, let me start with that. Having said that, our originations in the fourth quarter for multi-family and other commercial real estate types averaged interest rates of 4.55%, which feel stronger than my last comments. That’s what permanent loans; construction though somewhat lower than that, averaging 3.2%. Now, those are much shorter duration loans. They are floaters, so there is no interest rate risk, but the competition in construction and the multi-family end of that is still pretty significant.

Okay. Well, those were my questions. I appreciate your time.

(Operator Instructions). As there are no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Mark Mason for any closing remarks.

I think we’ll wait and pull in more time for questions. And I’m going to take this opportunity to correct the couple of numbers in my prior comments. It came to my attention that we had a couple of typos. When we were talking about our employee headcount this year and the number of additions, the numbers we cited for reductions were misstated. We actually reduced mortgage production personnel by 42 employees, mortgage operations personnel by 32 and commercial lending and administration by 37 positions; my apologies for the typos in my prepared comments. Could we pull a little more time for question operator?

(Operator Instructions). The next question comes from Tim Coffey of FIG Partners. Please go ahead.

Hello again, Mark.

Hi Tim.

Well, as we look towards the earn-back on the goodwill from these acquisitions, have your estimates changed at all?

Well, our internal estimates have obviously changed with additional income from the acquisitions. I think that our expectations for our acquisitions have increased since the [daily] announcement, their lending activity, I feel fairly comfortable it’s going to exceed our expectations right away as an example. In their first two months of activity, we closed those at the beginning of the second month of the quarter; they originated correctly $24 million of commercial loans. That would be substantially greater than the pace of originations and greater than our expectations. So I think our expectations are increasing.

And then these discussions, kind of M&A discussions, no need to go in the detail, but the tone maybe the depth of the discussions, have they changed at all in the last, say six months?

I think that those bills -- there continue to be changes in the M&A market. Last year was a good year from a source perspective for valuations, right. Valuations came up on average 20% to 30%, I would say, in terms of book value multiples. We don’t expect that to continue this year because we don’t see the same opportunity for target earnings increases or better cost savings. From our standpoint given where our stock is currently trading, it’s a little bit harder for us to do high premium to book value transactions because of the additional dilution that that would create. Doesn’t mean we are out of the market though and transactions that might take less stock and a little more cash is still possible, smaller transactions. And we believe that our stock value will hopefully recover this year as our earnings recover from a consequence that everything that we put in place over the last year and so we will be better positioned to have those conversations. We hope to do more transactions this year. We have been concentrating on completing our acquisitions in a quality way, improving our efficiency as a consequence and we will see what the market brings. And I think the valuation comments are consistent with what others are saying. I think there will be transactions this year. I am not sure we will have the magnitude or the number of transactions as we had last year. As we said in the Pacific Northwest, we will have to see.

Good. And I see you are pretty committed to paying a cash dividend right now. What would it take for you to consider stock repurchase program?

That would be tough to consider. If you look at the pace of our balance sheet growth, we feel we have a need for all of that capital. If you extrapolate those growth -- the growth potential from those earning assets number, growth numbers, you're going to need that capital. So, we don't anticipate stock buybacks in any near-term.

Okay.

Beyond that, let me make one more comment regarding regulator expectations; and I think you will hear this from most folks in the industry though, particularly from people like us with more aggressive growth plans and exposure to businesses like mortgage banking. Our regulators expect us to carry higher levels of capital than we might previously have expected. We believe that based upon our conversations with our regulators that maintaining a Tier 1 leverage ratio in the approximately 9% range is a number that they are going to be comfortable with. Could we get below that? Sure. But we're targeting maintenance of those kind of numbers for the near-term.

All right. Well, that’s a good story. Thank you very much.

Great. Thanks Tim.

(Operator Instructions). Mr. Mason, I'm showing no further questions. Would you like to have any closing remarks?

Sure. I want to just thank you again to everyone who participated today for your patience and questions. I can't leave the call without wishing well our Seattle Seahawks. This weekend HomeStreet Bank is the bank of the Seahawks and we're pretty excited up here in the Pacific Northwest. Thank you all for being on the call today.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.