First Financial Northwest in Renton, Wash., blamed an ongoing battle with an activist investor and lingering real estate woes for its net loss in the third quarter.

The $973 million-asset company lost $791,000 in the third quarter, compared to net income of $1.4 million in the second quarter and profit of $623,000 a year earlier. First Financial, which has been in litigation with Stilwell Group since a contested shareholder vote this spring, said it incurred $260,000 in expenses during the third quarter tied to the legal wrangling. Management blamed a $1.2 million decrease in the value of other real estate owned for the rest of the loss.

“These two events reduced an otherwise profitable quarter with earnings of $630,000 to a loss,” Victor Karpiak, the company’s  chairman, president and chief executive, said in a press release Friday.

Stillwell Group filed a lawsuit in June seeking to invalidate the results of First Financial’s board elections in which Karpiak defeated Stilwell’s nomimee, Spencer Schneider. Stilwell maintains that the results were bogus because a proxy tabulation service did not count 8 million votes that it claims were properly cast for Schneider. First Financial contended that Carl T. Hagberg and Associates made the right call because Schneider failed to sign a master ballot.

First Financial said in Friday’s release that King County (Wash.) Superior Court had ruled on Oct. 9 that the proxy tabulation service was correct to invalidate votes for Schneider. The court, however, also ruled that “certain material facts” remained in dispute and that there would likely be an evidentiary hearing in January.

Karpiak said in Friday’s release that the company has spent $868,000 in 2012 fighting Stilwell. He said most of the company’s underlying fundamentals are sound; nonperforming assets fell 5% from a quarter earlier, to $42.8 million. Still, the loan-loss provision rose 7.7% from the second quarter, to $700,000.

Noninterest income fell 55% from the second quarter, to $107,000. The company did not record any securities gains in the third quarter after booking $94,000 in gains a quarter earlier.

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