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Localized basis sets in the projector augmented wave formalism allow for computationally efficient calculations within density functional theory (DFT). However, achieving high numerical accuracy requires an extensive basis set, which also poses a fundamental problem for the interpretation of the results. We present a way to obtain a reduced basis set of atomic orbitals through the subdiagonalization of each atomic block of the Hamiltonian. The resulting local orbitals (LOs) inherit the information of the local crystal field. In the LO basis, it becomes apparent that the Hamiltonian is nearly block-diagonal, and we demonstrate that it is possible to keep only a subset of relevant LOs which provide an accurate description of the physics around the Fermi level. This reduces to some extent the redundancy of the original basis set, and at the same time it allows one to perform post-processing of DFT calculations, ranging from the interpretation of electron transport to extracting effective tight-binding Hamiltonians, very efficiently and without sacrificing the accuracy of the results.