SEATTLE ( TheStreet) -- Saying Washington Federal ( WFSL) was "on track to drive improved profitability going forward as credit costs continue to decline," McAdams Wright Ragen analyst Sara Hasan reiterated Monday her buy rating for the shares, and $23 price target.

The target price would represent a 51% return for investors, based on Friday's closing stock price of $15.26.

After meeting with Washington Federal's CFO Brent Beardall, Hasan said that with the company having repaid the Troubled Assets Relief Program, or TARP, and with "credit costs falling, we think the future looks bright for WFSL and its robust capital balance." Adding that organic growth "remains challenging today," Hasan explained that acquisitions "are a likely option" for deploying excess capital, although Washington Federal's discipline on pricing "may limit its standing as an acquirer-of-choice."

Hasan estimate that the company had enough excess capital to support "an additional $2-3 billion in assets."

The company had $13.5 billion in total assets of September 30, and a tangible common equity ratio of 11.98%, which was the second-highest among the largest 50 U.S. bank and thrift holding companies, according to data from Securities and Exchange Commission filings supplied by SNL Financial.

For the third quarter, Washington Federal reported net income of $16 million, or 14 cents a share, improving from $9.6 million, or 11 cents a share a year earlier. For the company's fiscal 2010 ended September 30, net income was $118.7 million, or $1.05 a share, compared to $40.7 million, or 46 cents a share, for fiscal 2009. Earnings for the full fiscal year were boosted by a $54.8 million after-tax gain on the bargain purchase of the failed Horizon Bank of Bellingham, Wash. from the Federal Deposit Insurance Corp. in January.

The company's annualized ratio of net charge-offs - loan losses less recoveries - to average loans for the third quarter was 1.69%, which was low compared to the national aggregate third-quarter net charge-off ratio of 2.32% reported by the FDIC. Washington Federal's third-quarter provision for loan loss reserves was $26 million, increasing from $20.7 million in the second quarter but declining from $42.6 million in the third quarter of 2009.

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