Second-step conversions by mutual holding companies have been in a freeze since last summer, but at least one analyst believes that the market is set to thaw.

On Monday, Frank Schiraldi, an associate director at Sandler O'Neill & Partners said in a research note that he believes the industry is set to "enter another wave of second-step thrift conversions." The note was intended to encourage investors to consider investing in mutual holding companies because they tend to be undervalued, pay healthy dividends and experience big price jumps when they convert to 100% stock-owned companies.

Sandler O'Neill has handled several of the conversions in the last few years and Schiraldi mentioned four mutual holding companies in his report that are currently represented by the firm.

Second-step activity had been brisk until last summer, when bank stocks collectively took a dive as the economy appeared to weaken and portions of the Dodd-Frank Act began to take effect. That law merged the Office of Thrift Supervision, which oversaw mutual thrift companies, into the Office of the Comptroller of the Currency and shifted the oversight of the companies to the Federal Reserve.

Schiraldi said in his note that 20 conversions had been completed in 2010 and the first half of 2011, but that only one such deal has taken place since last summer. He expects more to come, but said that the likely players are waiting for others to succeed first.

"MHC institutions worry about being first one out of the gate to test the markets, in part because it takes [upwards of six months] to bring a deal to market," Schiraldi wrote. "We believe MHCs may be on the sidelines, but will pounce once a deal is successfully brought to market."

Schiraldi also noted that it is a limited universe; there are only about two-dozen mutual holding companies.

He is also not expecting existing mutuals to do partial conversions because of the regulatory shift. "We have not seen a thrift convert into a stock MHC structure since Dodd-Frank and we do not expect to, given the less accommodating stance of regulators," he wrote.

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