On Tuesday, Washington Mutual (NYSE:WM), a provider of retail and commercial banking and mortgage services, reported earnings of $1.01 per share, significantly higher than the expectations of $0.78 to $0.86 that I've seen. The stock reacted by rising sharply before the report at the end of the trading session. It finished up 2.1% to close at $39.02.

WaMu, as it is affectionately known, has been stuck in the mud for the past two years, with its stock price staying at around $40 per share. The big drag on earnings has been mortgage services. Rising interest rates have slowed mortgage refinancings and originations -- quarterly loan volumes were down $5.2 billion, to just under $60 billion, compared with the first quarter in 2004. In addition, WaMu got in trouble by writing some aggressive loans, which cut into earnings by forcing the bank to set aside additional provisions to cover the liability.

In contrast, WaMu's retail banking business has been strong and continues to grow. Deposits were up $1.92 billion, to about $135 billion, from the most recent quarter, and the number of accounts increased by 434,000. WaMu also plans to open 250 new retail centers in 2005, and that's good for two reasons. First, it provides low-cost capital that the company can use for loans. And second, it gives the bank the opportunity to cross-sell financial products. With its cross-sell ratio improving from 5.6 to six products per retail banking household, WaMu is getting good at landing a larger share of its customers' wallets they open checking accounts. More services mean more assets under management and more opportunity to create income.

So we have a rock-steady banking group coupled with a volatile mortgage group. Should Fools consider WaMu as an opportunity? Here's how the company stacks up against competitors Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and Bank of America (NYSE:BAC).

Ticker Price/Book Yield
WM 1.6 4.7%
WFC 2.6 3.3%
C 2.2 3.8%
BAC 1.8 4.0%

Given that the assets are valuable and growing, WaMu looks to be a pretty good value relative to its competitors.

WaMu has been a favorite of value investors like Bill Nygren, David Dreman, and others. They have been a patient lot -- patience is their trademark. But it is a testament to Washington Mutual's franchise that the stock has not fallen despite the difficult interest-rate environment and the earnings drag associated with aggressive loans. Today, I think it would be a Foolish decision to be paid a near-5% yield while waiting for the stock price to catch up with its intrinsic value.

Fool contributor David Meier does not own shares in any of the companies mentioned. The Motley Fool has a disclosure policy.