The U.S.'s largest savings and loan, Washington Mutual (NYSE:WM), had $3.57 (8%) deducted from its stock price yesterday. Is it time for investors to withdraw their money?

Back in August, the Fool's Tom Jacobs asked why Washington Mutual was wastefully spending shareholder money to tout its stock instead of touting its real strengths, which include a 2.08% return on assets and a 19.8% return on equity. This company, rated "A" by Fitch, is managing its money in a world-class manner.

Yesterday the company announced that it was lowering its guidance for 2003 earnings from $4.42 per share to a range of $4.15 to $4.25 per share. At the current price of $38.13, the stock is trading at 9 times earnings -- and, with a payout ratio of 38%, yielding a safe 4.2%. The company is forecasting increased earnings for 2004 (although it lowered the low end of guidance) of $4.30 to $4.80 a share.

Investors interested in mortgage providers should pay attention to the Mortgage Bankers Association (MBA) press releases. The MBA reports that new loan applications have fallen 60% from their May high and adjustable-rate mortgages are at a four-year high. On the other hand, residential loan delinquencies are at a three-year low. Also of interest is news coming from the National Association of Realtors (NAR). After three consecutive years of record sales, the NAR expects home sales to be off slightly in 2004. This is clearly a mixed picture.

Larger drops in home sales, or an increase in interest rates or delinquencies, are the biggest risks for Washington Mutual and its peers as they try to squeeze every last drop from housing's twin booms (housing and refinancing) caused by record-low interest rates.

Expect staff cuts to continue. Just like Countrywide Financial (NYSE:CFC) and E*Trade (NYSE:ET) are reducing payrolls to match mortgage demand, so will their peers. The winners will be the companies that manage money well. Washington Mutual has proven it can. At today's prices, a lot of bad news has already been discounted. Instead of withdrawing money, shareholders should be looking for opportunities to make deposits.

W.D. owns stock in Washington Mutual. Discuss stocks with him and other investors on the Washington Mutual discussion board. Email W.D. at