Stilwell Nominee Claims Victory in Fight With First Financial Northwest

Silence may not be golden for First Financial Northwest when it comes to announcing the results of Thursday's annual meeting.

Stilwell Group, a New York investment firm, is claiming victory in a contentious proxy battle against the Renton, Wash., company. The only problem is that First Financial Northwest has yet to publicly announce the results and has no plan to do so until after the extended Memorial Day weekend.

Stilwell Group won "the vote decisively," says Spencer Schneider, the firm's lawyer and director nominee. Schneider claims that First Financial's board is challenging the outcome over a "technicality" involving the count. "The company is trying to steal the election and is trying to void all of our votes; every single one," says Schneider, who says the company told them the results by phone on Friday. "In fact, if they don't count the votes we will go to court."

First Financial (FFNW) has four business days after the annual meeting to report the results to the Securities and Exchange Commission. Calls to Victor Karpiak, First Financial's chairman and chief executive, were not returned.

"They are still sorting this out. We may not know [the results] until Tuesday," says M. Scott Gaspard, the president of the Washington Financial League and one of First Financial's nominees. "It is too uncertain, so we'll see how it all shakes out."

Gaspard said shareholders were told during the meeting that it would be "a day or two" before the votes were certified. Observers say it can take longer to certify votes when there is a proxy battle. Still, a majority of the votes are cast before the meeting, so both parties should have a sense of direction. A recount is also possible.

"In a proxy fight, the real action is before the meeting," says Kip Weissman, a partner at Luse, Gorman, Pomerenk & Schick who works with community bank involved in proxy battles. "The real action is in the campaign so 99% of the time, the meeting is just sounds of fury signifying nothing."

During the other two proxy battles this week — at Cardinal Bankshares in Floyd, Va., and Harvard Illinois Bancorp — the boards voluntarily released preliminary results within 24 hours of their meetings. Stillwell was also fighting Harvard Illinois, but the board announced during the meeting that it had prevailed.

An unnamed source with knowledge of the matter believed Stilwell had the upper hand against First Financial's board but lost "momentum" when the company said earlier this month that it had received backing from two proxy advisory firms. Afterward, the margin thinned between the two sides, making it too close to call immediately.

At least one other big investor, O-Cap Partners in New York, had said in a January filing with the Securities and Exchange Commission that it wanted to hold talks with First Financial's management about maximizing shareholder value, including the company's possible sale. Calls to O-Cap were not returned.

"When you have [a vote] as close as this, along with all the electronic voting involved … you have a lot of checking," Gaspard says.

If Stillwell prevails, Schneider will once again, become a director at First Financial. He resigned from the board in February, citing concerns about the board's spending habits and suggesting that they replace refreshments with hard candy at the annual meeting. After the resignation, Stilwell made Schneider its board nominee in an attempt to force a sale of the $1 billion-asset company.