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4. Washington Federal
Shares of Washington Federal (WAFD) of Seattle closed at $16.70 Wednesday, returning 21% year-to-date, following a 16% decline during 2011.

The shares trade for 1.1 times their reported June 30 tangible book value of $15.69, and for 13 times the consensus 2013 EPS estimate of $1.31. The consensus 2012 EPS estimate is $1.28.

Based on a quarterly payout of eight cents, the shares have a dividend yield of 1.92%.

The company's efficiency ratio for the 12-months ended June 30 was 38.40%.

Washington Federal had $13.5 billion in total assets as of June 30. The company on Aug. 20 announced a major balance sheet restructuring "intended to reduce the Company's interest rate risk and improve its future earnings potential." The company sold $2.4 billion in fixed-rate mortgage backed securities with an average yield of 3.22% for a pre-tax gain of $95 million, and also prepaid $876 million in long-term borrowings with a rate of 3.94%, for a pre-tax loss of $95 million.

The company also "purchased a mix of short and longer term assets totaling $1.7 billion with an anticipated weighted average yield of 1.85%, and restructured an additional $100 million of long term debt to lengthen maturity and reduce the weighted average rate from 4.04% to 3.33%," and said that "an ongoing review of the investment portfolio and long-term debt likely will result in additional transactions of a similar nature."

Washington Federal CEO Roy Whitehead said that "given current interest rate conditions, we decided it prudent to harvest most of the steadily diminishing gain in the securities portfolio and prepay high-cost debt," and added that the moves "are not expected to have a material effect on net earnings this quarter, and will limit potential margin compression from prepayments on securities and provide more financial flexibility in the future."

Washington Federal's net interest margin had narrowed to 3.05% during the fiscal third quarter ended June 30, from 3.29% the previous quarter, and 3.44% a year earlier. The company's overall performance performance improved, with fiscal third-quarter earnings of $35.2 million, or 33 cents a share, increasing from $34.1 million, or 32 cents a share, the previous quarter and $30.1 million, or 27 cents a share year earlier, with Whitehead saying in July that the higher net income was "attributed primarily to the material decline in expenses related to problem assets, which more than offset a decline in net interest income."

The company's ROA for the 12-month period ended June 30 was 0.98%, and its ROE was 6.97%.

Sterne Agee analyst Brett Rabatin has a neutral rating on Washington Federal, and said in August after the balance sheet restricting was announced that "We still believe the shares will trade in fairly close proximity to tangible book value given a difficult revenue growth environment, but our view is more positive on WAFD post the announced partial de-leveraging of the balance sheet despite a similar EPS outlook.

Rabatin estimates that Washington Federal will earn $1.31 a share for all of 2012, followed by EPS of $1.34 in 2013.

"Besides a higher level of confidence on the forward NIM due to less concern over MBS pre-pays, the balance sheet is overall better positioned for low or rising interest rates," he said."

WAFD Chart WAFD data by YCharts

Interested in more on Washington Federal? See TheStreet Ratings' report card for this stock.

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