Earnings momentum for Banner Corporation ( BANR - Snapshot Report ) has been advancing since its strong second quarter results, which included an earnings surprise of 114.8%. This commercial bank has now surpassed the Zacks Consensus Estimate for seven straight quarters with an average surprise of 130.2%.

The strong second quarter led to positive earnings estimate revisions, helping BANR to achieve Zacks #1 Rank (Strong Buy) status on August 7. The stock also reached its 52-week high on the same day. In addition, a P/B multiple of just 0.9 makes this stock an attractive pick for value investors.

Impressive Second Quarter Results

On July 25, Banner Corporation reported second quarter 2012 earnings per share of 58 cents, topping the Zacks Consensus Estimate of 27 cents by 114.8%. After considering one-time items, earnings stood at $1.27 per share, significantly up from a penny in the year-ago quarter. The upsurge was mainly aided by growth in net interest income, reduced other operating expenses and a lower provision for loan losses.

Net interest income climbed 15.4% year over year to $38.3 million. Net interest margin expanded 17 basis points (bps) to 4.26%. Additionally, the company's other operating expenses declined 11.4% to $35.7 million. However, the other operating loss recorded was $9.1 million, compared with income of $9.3 million in the prior-year quarter.

Credit metrics continued to improve at Banner Corporation. Provision for loan losses decreased on a year-over-year basis, with net charge-offs declining. Net charge-offs were 0.16% of average loans outstanding, down 25 bps from the year-ago quarter. Provision for loan losses decreased 50.0% from the year-ago quarter to $4 million.

Earnings Momentum on an Upswing

Over the last 30 days, the Zacks Consensus Estimate for 2012 jumped 73.2% to $2.46 per share on the back of upward revisions from four of six estimates. This implies year-over-year growth of 949.4%. For 2013, four positive revisions out of six total estimates helped the Zacks Consensus Estimate increase 21.7% to $1.29 over the same time frame.

Reasonable Valuation

Along with a P/B multiple of 0.9, Banner Corporation has a forward P/E ratio as low as 9.8. (A P/E ratio under 15.0 and a P/B ratio below 3.0 generally indicate value.) Furthermore, the company’s share price has gained nearly 40% year-to-date.

Additionally, Banner Corporation currently enjoys a dividend yield of 0.2%. Therefore, in addition to being a value stock, the company also offers an income opportunity.

The chart below clearly shows that after a plunge in October 2011, the stock is back on the recovery path.

Headquartered in Walla Walla, Washington, Banner Corporation, the holding company for Banner Bank and Islanders Bank, provides various banking products and services. The company was founded in 1890 and conducts operations for individuals, businesses and public sector entities in the United States. Banner Bank operates through 86 branch offices and 7 loan production offices in Washington, Oregon and Idaho, while Islanders Bank conducts business from 3 locations in San Juan County, Washington. With a market capital of about $436.1 million, Banner Corporation competes with Flagstar Bancorp Inc. (FBC) among others.