First Financial announced Wednesday it had appointed Indiana banker Claude E. Davis, 43, president and CEO, nearly a year after the job was vacated.

Davis was senior vice president at the $5.1 billion Irwin Financial Corp. and chairman of Irwin Union Bank and Trust in Columbus, Ind. He takes over a company that operates the fifth-largest bank in Greater Cincinnati and Northern Kentucky, with regional deposits of $1.32 billion and 35 branches here. The parent company has assets of $3.9 billion.

Former president and CEO Stanley Pontius agreed to step aside Oct. 15 after running First Financial for 12 years.

That move caught some banking observers by surprise.

The departure of Pontius, who left with a $3 million severance package, and the long vacancy, prompted speculation whether the banking company would remain independent or was looking for a buyer. The bank has maintained it wants to remain independent.

Nevertheless, shares of First Financial fell 4.78 percent on the news Wednesday to close at $17.51, down 88 cents.

Ross Demmerle, a banking analyst at Hilliard Lyons in Louisville, said the stock drop is not surprising because some investors had been expecting a sale, and the stock price had been driven higher on that expectation.

Analysts said Davis has the experience to turn the bank around.

Davis joined Irwin Financial Corp. and its lead bank, Irwin Union Bank, in 1987 as vice president and controller. He was president of Irwin Union Bank from January 1996 until last year, when he was named to his current job.

Under his leadership, Irwin expanded to 20 markets in nine states. That expansion produced more than 20 percent growth in loans and deposits.

Davis, who will become a member of First Financial Bancorp's board, will join the bank Oct. 1. The bank has struggled to increase profits.

Demmerle said Davis will have to decide what type of bank he wants First Financial to be. Davis could continue to run First Financial as a regional bank with banking affiliates and charters in several states - or he could convert it into a bank with a single charter.

First Financial operates six banking affiliates in Ohio, Michigan, Kentucky and Indiana with a total of 106 branches.

Conversion "could help cut the bank's costs and give it a more streamlined banking operation," Demmerle said.

Bradley Ness, a banking analyst at Friedman, Billings, Ramsey in Arlington, Va., said First Financial's struggles in recent years have been caused by minimal loan and deposit growth, profit margin compression and less-than-expected cost savings from a recent bank charter consolidation.

Those factors, coupled with the lack of leadership the past year, have hurt the bank's overall performance.

But while there is an advantage to consolidating operations, Ness said a well-run multi-bank network can be profitable and experience exceptional growth.

"I'm optimistic on Davis' ability to jump-start earnings growth at First Financial," he said.

E-mail jmckinney@enquirer.com