HomeStreet (HMST) saw an outstanding first quarter with an easy earnings beat after it closed the Simplicity merger, saw net interest income expanded, posted a big fee income boost, and saw its efficiency ratio improved again.

The company also experienced continued organic loan and deposit growth in addition to those it brought on from Simplicity.

Here’s what FBR Capital Markets had to say:

This quarter's strong mortgage banking revenues overshadowed the commercial and consumer earnings; however, management remains focused on growing its traditional banking platform, and we expect it to contribute more to the bottom line in coming quarters, positioning the company well for earnings growth. This should help shares garner a higher multiple as earnings stability increases.

With shares trading at only 1.1x this quarter's tangible book value of $18.97, compared to peers trading around 1.5x, and our expectation for further earnings growth, we reiterate our Outperform rating and $25 price target on HMST shares. Following 1Q15 results, we are increasing our FY15 EPS estimate to $2.75 from $2.45 and maintaining our FY16 EPS estimate of $3.25.

HMST reported 1Q15 GAAP EPS of $0.59, and we estimate operating EPS of $0.68, meaningfully ahead of our and Street expectations for $0.31. Tangible book value ended the quarter at $18.97, which is below last quarter's level as a result of dilution from the Simplicity merger given a higher share count and increased core deposit intangibles.

Strong mortgage banking; more to come. Management has been steadily investing in its mortgage banking platform, and it is paying off. HomeStreet closed loans of $1.6 billion and IRLCs of $1.9 billion, up from $1.3 billion and $1.2 billion, respectively, and above our estimates. The company's composite gain-on-sale margin also rose to 326 bps from 310 bps last quarter. Management noted that it has locked roughly $600 million loans in April thus far, and we expect the company to lock about $1.9 billion of loans again in 2Q15.

We model $7.7 billion of originations in FY15, which should grow to $8.8 billion in FY16 as HomeStreet continues to gain market share.

Organic loan and deposit growth. HomeStreet experienced 4% of organic loan growth and 10% of organic deposit growth in the quarter in addition to the increases from the Simplicity merger. In particular, new loan commitments in the quarter totaled $221.5 million and originations were $137.2 million. We expect further loan growth as the newly hired SBA and CRE lending teams begin to originate and the company levers its expanded footprint.

Deposit balances increased to $3.3 billion and non-interest-bearing deposits now comprise 7% of total deposits.

NIM expansion continues and net interest income increases. The company's NIM expanded 7 bps QOQ to 3.60%, right in line with our estimate. The company’s net interest income rose given continued earning asset growth of 10.6%, largely driven by the addition of Simplicity's assets and some organic loan growth. We expect net interest income to continue climbing as the company adds more loans to its balance sheet and more than replaces runoff. We model the net interest margin expanding slightly to 3.62% by year-end 2015 as the funding mix improves.

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