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Business Observer Thursday, Sep. 18, 2003 15 years ago

1st Runner-Up: David Dunbar Chairman

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President and CEO Peoples Bank/Peoples Floriday Banking Corp.In his 28 years of banking, David Dunbar has worked for the largest bank in the state and the smallest bank in the state.
by: Article Author Staff Writer

1st Runner Up: David Dunbar Chairman

President and CEO Peoples Bank/Peoples Floriday Banking Corp.

In his 28 years of banking, David Dunbar has worked for the largest bank in the state and the smallest bank in the state. The former was Southeast First National Bank in Miami, where his banking career started in 1975. The latter is Peoples Bank, which he started from nothing in 1996.

During those years, Dunbar, 51, has learned a lot about economic cycles and the banking industry. He has learned what makes a bank successful, and, perhaps as important, marketable for sale.

Dunbar was the banker who ultimately prepared Republic Bank for sale from Charles Rutenberg, owner of U.S. Homes, to William R. Hough in May 1993. While at Southeast Bank, Dunbar helped structure a loan to Rutenberg to start up Republic Bank. But Southeast worried about Rutenberg's management skills.

"Rutenberg did not adhere to the highly regulated environment of banking as well as he did in home building," says Dunbar. Rutenberg challenged Dunbar to run Republic instead. So, in 1981, at age 28, Dunbar became president and chief operating officer of Republic.

From 1981 to 1988, Dunbar grew Republic's total assets from $18 million to $244 million. He left in 1988 because he disagreed with Rutenberg's refusal to disclose purchase offers to the rest of the board; Rutenberg was holding out for a higher purchase price.

In 1991, Republic asked Dunbar to return and get the bank sold. By then, Republic faced regulatory citations and asset quality concerns. In a couple of years, Dunbar improved asset quality and returned the bank to profitability, enabling its sale, which netted Rutenberg less, by the way, than the offers he refused in 1988.

Peoples State Bank, formerly based in New Port Richey, then snatched up Dunbar to clean up its bank and prepare it for sale to SunTrust Bank (then SunBank). SunTrust bought Peoples State in May 1995 for $18 million, 2.47 times book value, the highest price SunTrust had ever paid for a Florida bank at that time. SunTrust asked Dunbar to stay, but without a non-compete agreement on either himself or the Peoples name, Dunbar had other plans.

He and a group of board members from the former People's State Bank decided to form Peoples Bank, based in Pinellas County. Charter approvals were obtained in only 86 days, the fastest approval time on record. There was so much interest in buying shares in Peoples Bank, Dunbar says the board had to turn capital away.

On opening day, the bank attracted 225 accounts and $2 million in deposits. The bank was profitable in less than one year, making it one of the most successful bank startups in Florida history.

By its third year, despite opening two more bank offices, Peoples' return on average assets was nearly 1.0% and its return on average equity was in the low teens. By 1999, Peoples ranked No. 4 out of all 54 new banks started in Florida during the 1990s and No. 1 out of the 16 that opened in West Central Florida during that time. Peoples has experienced consistent high growth on nearly every measure, every year.

The secret to the success, says Dunbar, is two-fold. First, the demographics of Pinellas County help. "There are 998,000 people in Pinellas County, with $20 billion in bank deposits," says Dunbar. "There are only two banks in my primary service area - that helps the success ratio. To start a new bank, you have to fill a void. Of all the banks in this area, all but one are branches of larger banks. If you want to walk into a bank and talk to the decision makers, you will come here instead. We can make a good living off the crumbs that fall from the big banks' table."

Peoples opened its first branch in Pasco County less than two years after the bank opened. It took longer to open in Clearwater. "In Clearwater, they had an independent banking choice with Citizens Bank of Clearwater," says Dunbar. "But when Citizens sold to FNB, I went into Clearwater. Now of the other banks in Clearwater, we've cleaned their clock. We ARE Clearwater's independent bank now. We will go wherever there is a void of an independent bank. With more than $250 million in assets, we can now do 95% of the business in the greater Tampa Bay market."

Because of the high number of independent banks south of the Manatee River, Dunbar doesn't see Peoples expanding southward anytime soon. However, he does foresee at least two more branches in the next two years, one in the Trinity area, between the Palm Harbor and Pasco County locations, and he says he's working to find the right Tampa site.

Another key to success, says Dunbar, is the experience of the team. Officers have an average of 22.5 years of banking experience each. Most came to work at Peoples with an existing book of business and loyal clientele. For coming to Peoples, they are richly rewarded.

"Per capita, our employees are the most well paid in Florida," says Dunbar. "But also, if you look, per capita, they make more net revenue than almost any other bank in Florida. They say every business needs a good lawyer, a good accountant and a good banker. Peoples' bankers know the good lawyers and the good accountants. We've got the who's who customers. You don't have to like me; this is just a great place to work."

That banking experience has helped Peoples keep bad loan ratios extremely low. "We have made $650 million in loans in seven years," says Dunbar. "But our loan portfolio is now $150 million. That means $500 million in loans was put on the books and has been paid off. We are not so big that we have to make numbers and volume. We have enough experience to know the good loans from the bad, and we don't have to do every one. Of eight to 10 deals, we may do two."

Peoples has not put much money into traditional marketing efforts, only using print advertising for special events. Instead, moneyfor marketing goes to nonprofit entities. Peoples has made a $100,000 commitment to a performing arts center and another $100,000 commitment to Morton Plant Hospital; Dunbar is the chairman of the board of trustees of Morton Plant Mease Health Care Inc.

"Those are huge numbers for a small bank," says Dunbar of the large nonprofit commitments. "And they do affect the bottom line, but it's really for selfish reasons. I am passionate about health care, the arts and education. And the people who feel the same way and who are active in those organizations are the people I want to be my customers. People see us as the only independent bank who steps up and donates to those things and they think, 'That's a bank I want to be involved in.' It's probably enhanced our bottom line long-term."

The columned and neat appearance of each Peoples Bank is also important to Dunbar: "I tell the groundskeeper that I want it to look like Disney outside. I want it to look perfect. Inside, it looks like Northern Trust. There is no reason why you can't have great service and an opulent workplace. We don't pinch pennies."

So, for the banker who has mastered the art of selling banks, will he sell Peoples? After years of saying no, Dunbar has softened to the idea.

"I get offers all the time, everyday, and good ones," says Dunbar. "I'm not going to kid anyone here. I have three constituency groups to consider - the 235 shareholders, 76 team members and 10,000 customers. When an offer comes before us that is too good to pass up, that is mindful of all three groups, that will give all three groups better than what they have today, then I have an obligation to take it the board and consider it. Are there people out there who can meet that test? You betcha. But it will have to be quite a deal. I turned down an offer last February that any other banker would take. For now, our shareholders are pretty happy with a 20% return."

Until that ideal offer comes in, Dunbar is content to spend his time with his wife of 23 years, Cindy, whom he met in banking, and their daughters, 11 and 9. "Those three girls are my whole world," says Dunbar. He also enjoys fishing on his boat, "Bankers Hours."

"My toughest challenge is that I do like the entrepreneurial side," says Dunbar. "In this highly regulated industry, it's hard to be entrepreneurial. As chairman, I get to think strategy. But as president, I'm in charge of operations. The buck stops here. He doesn't know it, but the greatest compliment I ever got was a comment Frederick Fisher, now a director emeritus of the bank, made to a client of the bank's, not to me. Fred told him that I'm not a banker, I'm an entrepreneur."

- Kendall Jones

PEOPLES BANK ($ = Thousands)

FY 2000FY 2001FY 200201/03-06/03

Total Assets$142,217$173,400$223,466$247,841

Total deposits$121,096$143,680$182,298$195,941

Noncurrent loans and leases0436062

Net income$1,301$1,865$2,568$1,552

Return on assets1.00%1.15%1.28%1.33%

Return on equity15.01%15.84%17.69%19.09%

Efficiency ratio62.15%60.32%59.88%56.02%

Assets per employee (millions)2.793.043.153.49

Noncurrent loans to loans00.33%00.04%

Total risk-based capital ratio10.35%10.42%10.15%10.13%

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