Washington Federal (WAFD) in Seattle has sold $2.4 billion of fixed-rate mortgage-backed securities and prepaid $876 million in long-term debt.

The changes were part of a plan to "reduce the company's interest rate risk and improve its future earnings potential," the $13.6 billion-asset Washington Federal said Monday.

Washington Federal recorded a pre-tax gain of $95 million from the sale of the securities, which yielded an annualized 3.22% in July. The company also recorded a pretax loss of $95 million from the debt repayment. The weighted average rate on the retired debt was 3.94%.

In related transactions, Washington Federal also purchased a mix of short- and longer- term assets totaling $1.7 billion with an anticipated weighted average yield of 1.85%. It also restructured an additional $100 million of long-term debt to lengthen maturity and reduce the weighted average rate from 4.04% to 3.33%.

An ongoing review of the investment portfolio and long-term debt will likely result in similar transactions, Washington Federal said.

"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," Roy M. Whitehead, its chairman and chief executive, said in a news release. "Other balance sheet restructuring is intended to shorten asset duration and lengthen the maturity of liabilities to position the company for continued long-term success,"

The transactions are not expected to have a material effect on net earnings this quarter and will limit potential margin compression from prepayments on securities, Whitehead said.

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