.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

Dear W.M.:

Sun American Bancorp (SAMB-$6.61) is home ported in unbearably gridlocked Boca Raton, where deep-pocket real estate developers and builders have an extra-cozy relationship with most city and county officials. Founded in the early 1990s, SAMB has 14 full-service branches along the chimerical, pulsating and Fescennine corridor running from Miami through Fort Lauderdale and Palm Beach. This is one of the few banks that don’t pay a dividend, certainly because its earnings are so niggardly.

But SAMB’s interest income has increased very nicely in each of the past 10 years; deposits have zoomed 30-fold to $449 million, and loans have grown 34-fold to $425 million in that same time frame. Unfortunately, SAMB’s net income has been rocky and impressively underwhelming. However, stockholders’ equity has gone nuclear from $500,000 in 1997 to an expected $109 million this year. SAMB seems to have enjoyed significant growth, but obviously inutile management seems to have enormous trouble squeezing profits from this growth.

This regional bank operates in a highly competitive market with a panoply of profitable competitors. Regional banks have done moderately well over the past decade, but the last few years have been a bit bumpy. SAMB, however, does not have a long record, and its share performance has been horrid, gross and grim compared to the local competition.

SAMB’s earnings yield (the annual return generated if profits remained fixed and all earnings are paid out as dividends) is a keenly disappointing 2.1 percent and embarrassingly lower than that of similar regionals. SAMB’s five-year net margins of 3.2 percent pale in comparison to the 29.8 percent industry average.

Finally, SAMB trades at 833 times cash flow versus an industry average of 9.9 times cash flow. Ouch and oh my gosh, Messrs. Golden, Nichols, Garrett, Ross and Barreiro (chief executive officer, chief financial officer, chief loan officer, executive vice president and chief operating officer, respectively) badly need a few refresher courses in Banking 101. Even a 1-for-2.5 reverse split last May hasn’t helped SAMB’s stock price, which is down more than 50 percent from its 12-month high of $14.62. Sun American Bank seems to be conducting business under a dark cloud, and I don’t think the bank’s shareholders are happy campers.

But there may be a silver lining in this cloud, which could be SAMB’s $9.75 per share book value. If the balance sheet numbers are correct, SAMB is trading at a too-cheap 68 percent of book. Most regional banks trade between 1.5 and 2 times book, so it’s not unreasonable to think that some larger regionals with sentient management might find SAMB an attractive takeover target.

Certainly well-run regional banks with good operational skills should easily divine some decent earnings from SAMB’s deposits, automated teller machines, cash management services, checking accounts, Individual Retirement Accounts, investment management accounts, insurance services and industrial, commercial and personal loan portfolios.

At SAMB’s current price, I think the stock may have reached its low point, and a 1,000-share purchase could be smart bottom fishing and possibly a keen speculation. So do it!

I doubt the stock will rise in value based on its earnings, dividends, clever management and an active board of directors. Management has proved that it lacks the ability to post earnings comparable with its peers and ought to be banished to Bangladesh. And SAMB’s feeble, impuissant board members ought to be precluded from sitting on the board of any public corporation in the United States until they can pass a competency exam. Remember, the board of directors is elected by stockholders to make sure that management is doing its job. And certainly the stumblebums at SAMB have failed ignominiously.

However, there’s a modest probability that SAMB would be worth $12 to $15 a share if one of the larger regionals proposes marriage and tosses the pinheads, ninny hammers and klutzes from their executive offices.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service