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2017 Year in Review: Finance

5 Big Stories

Who says bankers are dull? They aren’t in Orange County, not this year.

Banc of California Inc. ousted Chief Executive Steve Sugarman—then came a proxy battle.

Sugarman, who was 38 when he became chief executive in 2012, quickly built the Irvine-based bank’s assets sixfold to become OC’s biggest bank by assets at $11 billion. He drew criticism for some deals, including paying $100 million for naming rights for a $350 million soccer stadium in downtown Los Angeles.

In January, Sugarman departed on the same day Banc of California announced the Securities and Exchange Commission was probing how the bank handled unproven allegations by an anonymous blogger. The results of the investigation have yet to be made public. Sugarman received an $8 million separation package.

A proxy battle ensued, and by June, six of the nine-member board were new and wasted no time in reshaping the bank by jettisoning its lower-margin mortgage business and laying off more than 900, or half of the workforce.

The board hired longtime banker Doug Bowers as chief executive in May, and in September named John Bogler chief financial officer to fill a position that was vacant for almost a year.

Another high-flying Irvine-based firm that confronted a problematic year was Opus Bank, which was built into the second largest in the county by assets by Stephen Gordon, who had the backing of prominent Wall Street firms.

The year began with an opinion from auditor KPMG Inc. that the bank didn’t maintain effective internal controls. Opus raised $53 million in a private placement in February.

The bank said in November that it reached a deal to pay $17 million to settle a shareholder lawsuit alleging it misled investors from 2014 to 2016 about the quality of its loans. At the same time, Chief Financial Officer Nicole Carrillo left and was replaced by Kevin Thompson.

The bank’s efforts to turn itself around are being rewarded by investors, who have pushed the stock up about 46% since a 52-week low in March.

At the same time, Opus in a pending lawsuit is accusing smaller rival First Foundation Inc. of “stealing” nine employees. Gordon and First Foundation Chief Executive Scott Kavanaugh were previously involved in the founding of Commercial Capital Bancorp Inc.

Ed Carpenter, the 72-year-old surf-loving founder of Carpenter & Co., did well this year. His company held a 17% interest in Heritage Oaks Bancorp of Paso Robles and an 86% stake in Plaza Bancorp of Irvine. Both banks were purchased for a premium this year by Irvine-based Pacific Premier Bancorp Inc.

Those bank buys doubled Pacific Premier’s assets to $7.8 billion. The bank that almost failed in 2000 was skating at full strength this year.

Hockey-playing MBA dropout Steve Gardner, chief executive of Pacific Premier, has led the stock on a mythical 10-bagger run since 2009. Pacific Premier has quietly become the most highly valued bank in OC with a $1.6 billion market cap that’s almost double its rivals. And in November the bank signed a multiyear partnership with the Los Angeles Chargers, which is headquartered in Costa Mesa.

The biggest story among wealth managers was Bill Gross, the one-time bond king, reaching a reported $81 million settlement over the way he departed the firm he co-founded—Newport Beach-based Pacific Investment Management Co.

Honorable Mentions

• Pacific Alternative Asset Management Co., an Irvine-based fund of hedge funds, proved its worth to Wall Street by merging with KKR Prisma, a unit of KKR Inc., which was founded by the legendary Henry Kravis and George Roberts. PAAMCO co-founder Jane Buchan is now co-chief executive with Girish Reddy of a firm that manages or advises on $34 billion in assets.

• Newport Beach-based Engaged Capital, founded by Wall Street veteran Glenn Welling, won a Texas-size brawl against the founder of publicly traded Rent-A-Center Inc., gaining three seats on the seven-member board.

• Global Benefits Group, a little-known insurance firm with its principal operations in Foothill Ranch, in February went public on the London Stock Exchange, where its shares rose 15% and a $234 million market cap as of Dec. 8. A few days after the IPO, Chief Executive Robert Dubrish had “an unplanned cardiac surgery,” but has since recuperated.

Next Week

Can Banc of California and Opus Bank get their mojo back in 2018? Will longtime bond king Gross get his mojo back and outperform the PIMCO portfolio managers who replaced him? Will California’s newly legalized cannabis industry find anyone to handle its cash since federal law prohibits banks from touching such funds?

— Peter J. Brennan

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