First Financial in Washington State to Change CEO at Bank Unit

First Financial Northwest (FFNW), a company under fire from activist shareholders and regulators, will replace the chief executive of its banking unit next month and has made another important management change.

Joe Kiley will become the president and chief executive of First Savings Bank Northwest on Sept. 17, the Renton, Wash., company said Friday. Kiley, 56, is from California and has more than 20 years of experience in banking, the company said. He will also join the bank's board.

Victor Karpiak, the current chairman, president and CEO of First Financial and First Savings Bank, will retire as president and CEO of the bank the same day as Kiley takes over, the company says. As part of a transition agreement, Karpiak will continue as executive chairman of First Savings Bank to "facilitate the executive succession," the company said.

"We are looking forward to the experience Joe will bring to the bank and will look to his leadership skills as he helps us continue to move forward with improving the bank's performance," Mr. Karpiak said in a news release.

First Financial on Friday also split in two the job of chief lending and credit administration officer at its bank. Simon Soh will be promoted to chief lending officer of First Savings Bank, provided state and federal regulators approve the move; he had been loan production manager. Herman L. Robinson will remain at the bank as chief credit officer, the company said.

First Financial has been embroiled in an investor fight for months.

Activist investor Joseph Stilwell, who as of June owned 8.5% of First Financial's shares, has sought to place a representative on its board of directors to pursue his agenda of ousting Karpiak and pressuring fellow directors to put the company up for sale.

His nominee, Spencer Schneider, lost a bid in May for Karpiak's board seat, but Stilwell later filed a lawsuit against First Financial to invalidate the results of its board elections. The results were bogus because the company did not count 8 million votes that he claims were properly cast for Schneider, Stilwell argues. Had they been counted, Schneider would have defeated Karpiak, Stilwell said in the lawsuit filed in King County (Wash.) Superior Court.

First Financial argues that the 8 million proxy votes cast for Schneider were invalid because Schneider himself failed to sign a master ballot, and that a proxy tabulation service confirmed the results.

The company made no mention of the investor pressure in the news release, saying the changes announced Friday are part of its effort to comply with the bank's memorandum of understanding with the Federal Deposit Insurance Corp. and the Washington Department of Financial Institutions.

"The bank believes that these changes in management are in the best interests of the bank in complying with the conditions of the MOU and will further enhance the knowledge and expertise of management and the board of directors," the release said.

First Financial reported net income of $1.4 million in the second quarter, up 9% from a year earlier. It has reported seven consecutive profitable quarters, it said. Its stock closed Friday at $7.98 per share, up 35% this year but off its 52-week high of $8.35. Earnings per share growth has been weak, and second-quarter revenue fell 24%, to $10.8 million, from a year earlier.

Stilwell has complained that First Financial lost about $90 million from 2007 to 2011, while Karpiak's pay nearly doubled, to $1 million.

Regulatory actions had been tied to problem loans at the bank.