As some mutual holding companies tinker with their second-step conversions, Northfield Bancorp Inc. in Avenel, N.J., is shelving its aspiration of becoming an all-stock company.

The $2.2 billion-asset company announced late Thursday that it would put off its full conversion until market conditions improve.

Northfield was one of dozens of mutual holding companies that earlier this year announced plans to become wholly stock companies. Much of the rush was driven by the winding down of the Office of Thrift Supervision, as companies worried about how mutuals would fit into the new financial regulatory world.

The conversion process has been tough, however.

"If the market stays depressed I think we could see a lot of these deals pulled," said Michael Iannaccone, president of MDI Investments in Chicago. "Right now, it would be massive dilution for the existing shareholders, and still, from an investor's point of view, why participate in a second step when there are so many other opportunities out there?"

A downturn in the stock market has made conversions difficult, while investors are interested only in companies with well-defined plans for deploying the capital. Those forces likely will lead more companies to put off their conversions, several observers said.

A handful of companies have moved to get around market conditions by having their deals reappraised at a lower tangible book value, which would mean further dilution to existing shareholders. Northfield, which already had received shareholder approval, instead decided to wait it out.

"Market conditions for financial stocks, including second-step conversions, have weakened substantially, resulting in lower appraisal levels and decreased investor demand," John W. Alexander, Northfield's chairman and chief executive, said in a press release. "Our board of directors … will continue to evaluate market conditions."

Northfield did not return calls.

Given Northfield's existing base of nearly $400 million of equity and a 27.7% total risk-based capital ratio at its thrift, the idea of a conversion left one analyst scratching her head.

"It occurs to me to wonder why they were interested in a second step in the first place," said Suzanne Moot, an analyst with M&M Associates in Milton, Mass.

If completed, Northfield's deal would have been priced at 76.5% of tangible book value and would have raised at least $256 million of capital. To Moot, that may have dissuaded potential investors.

"Their capital ratios would have been extraordinarily high," she said. "It is very difficult to generate the levels of return on equity that most shareholders look for with that much capital."

The majority of Northfield's recent asset growth has been in its securities portfolio, not in loans. As of June 30, its loan portfolio totaled $773 million, making up just 35% of total assets.

Further, the loan portfolio is under considerable stress, particularly for a thrift in the Northeast, which has performed well compared with other regions. As of June 30, nonperforming loans totaled $51.5 million, making up 6.7% of total loans.

Although Northfield has low expenses and an efficiency ratio of 47.56%, Moot said it likely had a hard time selling investors on how it would use the capital. "As a prospective investor, I wouldn't be quite sure what they were going to do with my money to generate a good return," she said. "I mean, I can go out and buy securities on my own."

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