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Union First Market Bankshares Corporation (UBSH) reported a third-quarter earnings surprise of 12.1% last month, which means that this regional bank has now beaten quarterly estimates in 9 of the last 10 quarters. Shares have been on the rise since the announcement, while rising earnings estimates helped UBSH become a Zacks #1 Rank (Strong Buy) on October 27. Meanwhile, a P/B multiple of just 0.9 makes this stock an attractive pick for value investors.

Q3 Results

On October 22, Union First Market Bankshares reported third-quarter earnings of 37 cents per share. The Zacks Consensus Estimate and last year’s performance were each 33 cents, so the result beat both by 12.1%. Results benefited from an improved fee income, partly offset by higher expenses and a decline in net interest income.

The company's net interest income fell 1.7% year over year to $38.8 million. However, non-interest income totaled $15.6 million, jumping 36.3%, driven by higher other service charges, commissions and fees along with gains on sales of loans. Non-interest expenses soared 11.1% to $38.3 million, mainly due to higher salary and compensation costs.

Credit quality continued to improve at Union First Market Bankshares. Provision for loan losses plummeted 33.3% from the prior-year quarter to $2.4 million. Similarly, as of September 30, 2012, nonperforming assets were 2.29% of total loans, down 79 basis points from the prior-year quarter.

Earnings Estimates Surging

Over the past 30 days, the Zacks Consensus Estimate for 2012 increased 4.8% to $1.32 per share with 6 of 8 total estimates moving higher. This implies year-over-year growth of 23.4%. For 2013, the Zacks Consensus Estimate advanced 5.8% to $1.28 over the same time frame as 5 of 8 estimates moved north.

Valuation Looks Reasonable

Along with a P/B multiple of 0.9, Union First Market Bankshares has an attractive forward P/E ratio of 11.9 (a P/E ratio under 15.0 and a P/B ratio below 3.0 generally indicate value). Moreover, the company has a trailing 12-month ROE of 8.0%, compared with the peer group average of 7.6%. This implies that the company reinvests its earnings more efficiently than its industry peers.

Given the long-term growth projection of 12%, the PEG ratio comes in at 0.99, a 1.0% discount to the benchmark of 1 for a fairly priced stock. Thus, the expected long-term earnings growth is currently priced at a discount.

With headquarters in Richmond, Virginia, Union First Market Bankshares is the holding company for Union First Market Bank. The company, with about 94 branches and more than 150 ATMs throughout Virginia, offers banking and related financial services to retail and commercial customers. With a market capital of about $407.5 million, Union First Market Bankshares competes with Community Trust Bancorp, Inc. (NASDAQ:CTBI) and Farmers Capital Bank Corporation (NASDAQ:FFKT), among others.

Read the full analyst report on UBSH (email registration required)

Source: A Value Pick: Union First Market Bankshares