James Dunne III should be getting ready to step down as head of New York investment bank Sandler O'Neill & Partners. In 2002, while frantically trying to hold together a firm that had been decimated by the 9/11 terrorist attack on the World Trade Center, a beleaguered Dunne announced that he would only stay on as senior managing principal for five more years. Since then, however, the intense Long Island native has led a remarkable revival at the firm. Business - and morale - have never been better. Now Dunne, 50, says he's having too much fun to quit.

"At the time, five years seemed like an eternity," he recalls. "In hindsight, it wasn't very thoughtful."

Sandler's comeback under Dunne is one of the most unlikely and inspiring stories Wall Street has seen in recent years. The terror attack not only killed 68 of the firm's 171 employees - among them,...