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Northfield Bancorp

Shares of Northfield Bancorp (NFBK) of Avenel, N.J., closed at $11.45 Tuesday, returning 6% this year after an 8.5% gain last year.

The shares trade for 0.9 times tangible book value according to Sterne Agee's estimate, and for 45.8 times the consensus 2014 EPS estimate of $0.25. The consensus 2013 EPS estimate is $0.23.

Northfield Bancorp had $2.8 billion in total assets as of Dec. 31. The company in November acquired Flatbush Federal Bancorp of Brooklyn, bringing on $131.5 million in assets and three branches.

The company on Jan. 22 completed a second-step conversion to full stock ownership, raising $356 million through a direct offering to depositors and through the community. The new shares were sold at a price of $10.00. In order for minority shareholders to preserve their ownership percentage, they were granted 1.4029 in new shares for each of their old shares.

Northfield reported fourth-quarter $3.2 million, or $0.06 a share, declining from $3.8 million, or $0.07 a share, a year earlier. The results for the fourth quarter of 2011 reflected a $3.6 million after-tax bargain purchase gain. With credit quality improving, the company's fourth-quarter provision for loan losses was $1.9 million, declining from $7.5 million a year earlier.

Kelley says that after a one-year moratorium on share repurchases following the conversion, "they will be in capital return mode in the next couple of years, growing organically and buying back stock."

Sterne Agee analyst Matthew Breese initiated his firm's coverage of Northfield Bancorp in a report on Jan. 23, with a price target of $18.00, equating to "a 106% price-to-tangible book value ratio, adjusted for the acquisition of Flatbush Federal and the company's second step conversion." Adjusting for a share conversion ratio of 1.4029, the analyst's estimate of Northfield's tangible book value is $12.10 a share, and his price target for the shares is $12.83.

"In-market, former mutual peers currently trade at an average price-to-tangible book value multiple of 105% versus Northfield trading at 91%," Breese wrote. "Given the company's outlook for growth and profitability, we believe shares will trade more in line with peers over the next 12-18 months."

Breese also said that "first-year returns for conversions are the highest due to steep valuation discounts in the offering and investors driving share prices higher in anticipation of share repurchases. Looking ahead, we believe Northfield's performance will track similarly to peers as it is revalued as a fully public entity and begins repurchasing stock post its one-year anniversary."

The analyst said that for 35 second-step conversions completed since 2002, with gross proceeds of over $50 million, the median first-year total return was 17%, while the mean total return was 12%.

-- Written by Philip van Doorn in Jupiter, Fla.

NFBK data by YCharts

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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