The following discussion and analysis presents a review of the consolidated operating results of the Company and the Bank for the three months ended March 31, 2009 and 2008, respectively, and the financial condition of the Company at March 31, 2009 and December 31, 2008. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto included herein and contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

FORWARD-LOOKING STATEMENTS

Statements included in this Quarterly Report on Form 10-Q, or incorporated herein by reference, that do not relate to present or historical conditions are "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Additional oral or written forward-looking statements may be made by the Sun American Bancorp (the "Company"), from time to time, and such statements may be included in documents that are filed with the Securities and Exchange Commission. Such forward-looking statements involve risks and uncertainties that could cause results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include, without limitation, statements relating to the Company's plans, strategies, objectives, expectations and intentions and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "forecasts," "intends," "possible," "estimates," "anticipates," "expects", and "plans" and similar expressions are intended to identify forward-looking statements. The Company's ability to predict projected results or the effect of events on the Company's operating results is inherently uncertain. Forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those discussed in this document. Factors that could affect the Company's assumptions and predictions include, but are not limited to, the risks that (i) loan losses would have a material adverse effect on the Company's financial condition and operating results; (ii) a decline in the value of the collateral securing the Company's loans could result in an increase in losses on foreclosure; (iii) the Company's growth strategy may not be successful and risk related to acquisitions and integration of target operations; (iv) the geographical concentration of the Company's business in Florida makes the Company highly susceptible to local economic and business conditions; (v) changes in interest rates may adversely affect the Company's financial condition; (vi) competition from other financial institutions could adversely affect the Company's profitability and growth; (vii) the adequacy of our loan loss allowance; (viii) risks related to compliance with environmental laws and regulations and other government regulations; (ix) litigation risks;
(x) lack of active market for our common stock; (xi) the mortgage and real estate crisis, a continuing decline in general economic conditions, and the economic recession could adversely affect our business; (xii) lack of dividends, dilution and anti-takeover provisions in our Amended and Restated Certificate of Incorporation and By-laws; and (xiii) the Company's ability to remain in compliance with specific loan covenants under its Modification to Loan and Stock Pledge Agreement with Silverton Bank N.A. You should not place undue reliance on the Company's forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update or revise any forward-looking statements.

OVERVIEW

The Company's primary market and service area is Broward, Miami-Dade, Palm Beach, and Martin counties where the Company currently operates fourteen full service banking offices. The Company has grown significantly in recent years due to the acquisition of certain assets, and assumption of certain liabilities, of PanAmerican Bank in December 2001, Gulf Bank in February 2004, Beach Bank in December 2006, and the merger with Independent Community Bank completed in March 2007. Coupled with these transactions, the Company had pursued a growth strategy, increasing its level of earning assets, primarily through increases in the loan portfolio by concentrating on the origination of commercial and consumer loan products and by competitively pricing deposit products.

In 2008 and for the first quarter of 2009, growth was intentionally slowed in response to the deteriorating economic environment in the Bank's marketplace. In the near term the Bank has no plans for expansion. Preservation of capital and pursuit of new capital are priorities. In the medium to longer term, once market conditions return to normal, the Bank intends to continue to expand its business through internal growth. If opportunities arise that are deemed beneficial to the company involving mergers and acquisitions, they will be considered. The Bank intends to grow internally by adding to the loan portfolio and bringing in new deposits. The Bank will place a priority on obtaining new core client deposits.

As of March 31, 2009, the Company had total assets of $601.1 million, net loans of $454.5 million, deposits of $459.7 million and shareholders' equity of $36.7 million.

The Company's results of operations are primarily dependent upon the results of operations of the Bank. The Bank conducts a commercial banking business which generally consists of attracting deposits from the general public and applying a majority of these funds (typically 75% to 90%) to the origination of commercial loans to small businesses, consumer loans, and secured real estate loans in its local trade area of South Florida. The balance of the bank's portfolio (approximately 10% to 25%) is generally held in cash and invested in government backed investment grade securities.

The Company is predominantly a commercial lender in the South Florida market place and is therefore exposed to the current weakened real estate conditions in our South Florida geographic region. During 2008 and through the first quarter of 2009, the banking industry in general, and Florida banks in particular, experienced significant declines in the value of real estate collateral held to support funds provided to its borrowers. The Company's financial results for 2009 and 2008 reflect the impact of higher provisions for loan losses and margin compression. The Company reported non-performing assets of $49.9 million at March 31, 2009 compared to $29.8 million at December 31, 2008. The Company is working aggressively to resolve issues related to borrowers who are experiencing, or who may in the future experience, loan performance issues. Initiatives include workouts, loan sales and, when required, foreclosures. The Company's policy is to monitor borrower activity closely and to identify potential issues before they grow. The Company works with its borrowers to provide solutions that are in the best interests of both the borrower and the Company. However, the Company recognizes that during this period of real estate challenges, these types of problems are not resolved quickly, and it is likely that they will continue through 2009.

The allowance for loan losses at March 31, 2009 was $6.3 million after taking charge-offs of $3.0 million in the quarter. The allowance for loan losses represented 1.37% of total loans. Management continues to monitor the adequacy of our loan loss provisions in conjunction with the current economic condition in South Florida. Real estate values in Florida have, in general, declined throughout 2008 and into the first quarter of 2009. It is recognized that this negatively impacts collateral values that support outstanding loans in the Bank's portfolio. It is recognized that a risk exists that real estate value in our markets may continue to decline and thus additional reserves may be required as 2009 progresses.

The Bank maintained a well capitalized position during the quarter. At March 31, 2009, the Bank's Total, Tier 1 and Tier 1 Leverage ratios were 10.39%, 9.14% and 7.42%, with all ratios in excess of the Federal regulatory definition of a "Well Capitalized Bank".

LIQUIDITY

Regulatory agencies require that the Bank maintain sufficient liquidity to operate in a sound and safe manner. The principal sources of liquidity and funding are generated by the operations of the Bank through its diverse deposit base, loan participations and other asset/liability measures. For banks, liquidity represents the ability to meet loan commitments, withdrawals of deposit funds, and operating expenses. The level and maturity of deposits necessary to support the lending and investment activities is determined through monitoring loan demand and through its asset/liability management process. Considerations in managing the liquidity position include scheduled cash flows from existing assets, contingencies and liabilities, as well as projected liquidity conducive to efficient operations and are continuously evaluated as part of the asset/liability management process. Historically, the Bank has increased its level of deposits to allow for its planned asset growth. The level of deposits is influenced by general interest rates, economic conditions and competition, among other things. South Florida continues to develop and faces intense competition from other financial service providers. Management has found that adjusting pricing, or introducing new products, produces increased deposit growth. Adjusting the rate paid on money market and NOW accounts can quickly adjust the level of deposits.

The Bank is a member of the Federal Home Loan Bank of Atlanta ("FHLB"). At March 31, 2009, the Bank had $58,000,000 of FHLB fixed rate advances to assist in funding its loan portfolio growth. The Bank has pledged a security interest in its real estate loan portfolio to the FHLB as collateral for borrowings obtained from the FHLB. See note 6 to the Company's Consolidated Financial Statements for additional information regarding these advances. Liquidity at March 31, 2009, consisted of $38.5 million in cash and cash equivalents and $29.2 million in available-for-sale investments, for a total of $67.7 million, compared to a total of $46.9 million at year-end 2008.

DISCUSSION OF FINANCIAL CONDITION CHANGES FROM JANUARY 1, 2009 TO MARCH 31, 2009

FINANCIAL CONDITION

Total assets increased by $11.1 million, or 2%, to $601.1 million at March 31, 2009 from $590.0 million at December 31, 2008. The increase was primarily due to increases in customer deposits that generated $21.9 of higher cash balances.

Cash on deposit at March 31, 2009 was $38.5 million compared to $16.6 million at December 31, 2008. Cash on deposit represents available liquidity waiting to be deployed into higher yielding assets or to pay down maturing liabilities.

Net loans receivable decreased by $11.5 million, or 3%, to $454.5 million at March 31, 2009, from $466.0 million at December 31, 2008. The decrease was primarily due to a general, planned reduction of the Bank's loan portfolio during the first quarter of 2009.

ASSET QUALITY AND NONPERFORMING ASSETS

In the normal course of business, the Bank has recognized, and will continue to recognize, losses resulting from the inability of certain borrowers to repay loans and the insufficient realizable value of collateral securing such loans. Accordingly, management has established an allowance for loan losses, which totaled $6.3 million at March 31, 2009 after taking charge-offs of $3.0 million in the first quarter, and when analyzed by management was deemed to be adequate to absorb estimated credit losses. Management's periodic evaluation of the adequacy of the allowance is based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires estimates of material factors including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change.

The Bank has a detailed system of procedures to ensure complete analysis of all factors pertinent to the evaluation of the adequacy of its loan loss allowance. The evaluation process includes analyzing general conditions in the local economy and historical loan losses as well as components within the portfolio itself to include: portfolio composition, concentrations, off-balance sheet risks, delinquencies and non-accrual loans, impaired assets, nonperforming assets and gross and net loan balances. In computing the adequacy of the loan loss allowance, management employs the following methodology:

Non-Specific Allowance: The methodology used in establishing non-specific allowances is based on a broad risk analysis of the portfolio. All significant portfolio segments, including concentrations, are analyzed. The amount of the non-specific allowance is based upon a statistical analysis that derives appropriate formulas, which are adjusted by management's subjective assessment of current and future conditions. The determination includes an analysis of loss and recovery experience in the various portfolio segments over at least the last three fiscal years. Results of the historical loss analysis are adjusted to reflect current and anticipated conditions.

Specific Allowance: All significant commercial and industrial loans classified as either "substandard" or "doubtful" are reviewed at the end of each period to determine if a specific reserve is needed for that credit. The determination of a specific reserve for an impaired asset is evaluated in accordance with Statement of Financial Accounting Standards No. 114, and a specific reserve is very common for significant credits classified as either "substandard" or "doubtful." The establishment of a specific reserve does not necessarily mean that the credit with the specific reserve will definitely incur loss at the reserve level. It is only an estimate of potential loss based upon anticipated events.

At December 31, 2008, the allowance for loan losses was $6.6 million. During the three months ended March 31, 2009, the Company recorded a provision for loan loss of $2.8 million. Net charge-offs amounted to $3.0 million. Collectively, these items resulted in a $6.3 million allowance for loan losses at March 31, 2009. The charge-offs were split evenly with approximately $1 million each to residential, vacant land and commercial loans.

The Bank's impaired assets were $88.4 million at March 31, 2009, or 19.2% of total gross loans, compared to $89.9 million at December 31, 2008. Assets which are impaired are those deemed by management as inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets which are impaired have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

The Company's nonperforming assets are as follows:

Nonperforming assets consist of loans that are past due 90 days or more which are still accruing interest, loans on nonaccrual status, OREO and other repossessed assets. The following table sets forth information with respect to nonperforming assets identified by the Bank at March 31, 2009 and December 31, 2008.

                                                  March 31,     December 31,
                                                    2009            2008
                                                    (Dollars in thousands)

       Delinquencies over 90 days and accruing
        Commercial real estate                   $     3,118   $           --
       Non-accrual loans:
       Commercial                                      1,515            1,055
       Commercial real estate                         38,428           23,879
       Residential real estate                           702              565
       Consumer                                           51              429
       OREO                                            5,715            3,511
       Repossessions                                     353              353
       Total nonperforming assets                $    49,882   $       29,792

Total nonperforming assets have increased during the three months ended March 31, 2009 from December 31, 2008 by $20.1 million. The total of $49.9 million at March 31, 2009, consists of thirty-three loans in various stages of resolution and nine foreclosed properties for which management believes such loans are adequately collateralized or otherwise appropriately reserved in its determination of the adequacy of the allowance for loan losses. The total of $29.8 million at December 31, 2008, consisted of thirty-five loans and seven foreclosed properties.

LIABILITIES

Liabilities increased $16.2 million, or 3%, to $564.4 million at March 31, 2009 from $548.2 million at December 31, 2008 primarily due to increase in customer deposits.

DEPOSITS

Deposit accounts include interest and non-interest checking, money market, savings, and certificates of deposit. Deposits increased to $459.7 million at March 31, 2009 from $443.5 million at December 31, 2008. The increase of 4% during the first three months of 2009 is due to focused business development.

The Bank continues to further develop its niche in the small and medium size businesses, condominium associations, and individuals within its trade area in the South Florida markets. These markets include Miami-Dade County, Broward County, Palm Beach County, and Martin County. Given the diverse population of these markets and geographic expanse, the Bank employs different strategies in meeting the deposit and credit needs of its communities. In addition, management continues to implement a strategy to change the mix of the deposit portfolio by focusing more heavily on core deposits, particularly savings and DDA accounts which are important components of the deposit mix which the Bank has historically maintained satisfactory levels of these types of deposit because of its policy of relationship banking.

The following is a summary of the distribution of deposits:

                                                  March 31,      December 31,
      Deposits                                       2009            2008
                                                         (In thousands)

      NOW accounts                                $   33,644    $       32,855
      Money market accounts                           25,206            29,372
      Savings accounts                                79,042            37,836
      Certificates of deposit under $100,000         123,277           145,903
      Certificates of deposit $100,000 and more      149,621           154,406
      Total interest-bearing deposits                410,790           400,372
      Non-interest bearing deposits                   48,924            43,116
      Total deposits                              $  459,714    $      443,488

Brokered deposits were $34.9 million and $30.6 million at March 31, 2009 and December 31, 2008, respectively.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase at March 31, 2009 were $35.1 million compared to $35.9 million at December 31, 2008, a decrease of $800,000 or 2%. These repurchase agreements are secured by securities held by the Bank.

FEDERAL HOME LOAN BANK BORROWINGS

FHLB borrowings totaled $58.0 million at March 31, 2009, compared to $58.0 million at December 31, 2008. See Financial Statement Footnote No. 6.

CAPITAL

The Company's total shareholders' equity was $36.7 million at March 31, 2009, a decrease of $5.1 million, or 12%, from $41.8 million at December 31, 2008. This decrease was substantially due to the net loss in the first quarter of 2009.

The Company and the Bank are subject to various regulatory capital requirements administered by the regulatory banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. The regulations require the Company and the Bank to meet specific capital adequacy guidelines that includes quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's and the Bank's capital classification is also subject to qualitative judgment by the regulators about interest rate risk, concentration of credit risk and other factors.

In accordance with risk-based capital guidelines issued by the Federal Reserve Board, the Bank is required to maintain a minimum ratio of total capital to weighted risk assets as well as maintain minimum leverage ratios (set forth in the table below). Member banks operating at or near the minimum ratio levels are expected to have well diversified risks, including no undue interest rate risk exposure, excellent control systems, good earnings, high asset quality, high liquidity, and well managed on- and off-balance sheet activities, and in general be considered strong organizations with a composite 1 rating under the CAMEL rating system for banks. For all but the most highly rated banks meeting the above conditions, the minimum leverage ratio may require an additional 100 to 200 basis points.

The Company and the Bank's capital ratios at March 31, 2009 and December 31, 2008 are listed below:

       Capital Ratios            March 31, 2009      December 31, 2008      Adequate      Well Capitalized

Sun American Bancorp
Total risk-weighted capital                8.87 %                9.54%        >8%               >10%
Tier 1 risk-weighted capital               7.62 %                8.29%        >4%               >6%
Tier 1 leverage capital                    6.19 %                6.97%        >4%               >5%

Sun American Bank
Total risk-weighted capital               10.39 %               10.98%        >8%               >10%
Tier 1 risk-weighted capital               9.14 %                9.73%        >4%               >6%
Tier 1 leverage capital                    7.42 %                8.18%        >4%               >5%

Based upon these ratios, the Bank is considered to be well capitalized.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2008

The Company reported a net loss of $5.3 million for the three months ended March 31, 2009 compared to net income of $5,000 for the three months ended March 31, 2008. The net loss for the three months ended March 31, 2009 is attributed substantially to managing asset quality issues which are more prevalent in 2009. Borrower repayment issues required the Company to take higher loan loss provisions, incur losses on foreclosed asset sales, increased loan resolution legal costs and higher levels of non-performing loans which resulted in margin compression, reversal of interest income and lower overall loan yields.

Basic and diluted net loss per share were $0.52 and $0.52, respectively, for the three months ended March 31, 2009. Basic and diluted loss per share were $0.00 and $0.00, respectively, for the three months ended March 31, 2008.

NET INTEREST INCOME

Net interest income before provision for loan losses for the three months ended March 31, 2009 was $2.7 million compared to $4.8 million for the three months ended March 31, 2008, a decrease of $2.1 million, or 44%. Interest earning assets declined modestly in the first quarter of 2009 compared to 2008 but the primary cause of the decline in net interest income was due to reduced yields on interest earning assets. Loan yields declined from 7.45% in the first quarter of 2008 to 5.62% in 2009 which represents a 183 basis point decline and accounted for $1.9 million of the reduced net interest income.

For the periods indicated, the following table contains information regarding the total dollar amounts of interest income from interest-earning assets and the resulting average yields, the total dollar amount of interest expense on interest-bearing liabilities and the resulting average costs, net interest income, and the net yield on interest-earning assets.

                                                         For the three months ended March 31,
                                                2009                                             2008
                             Average                        Average         Average                           Average
                             Balance    Interest (4)     Yield/Rate (3)     Balance    Interest (4)        Yield/Rate (3)
(Dollars in thousands)
Assets:
Interest-earning
assets:
Investments (1)             $  89,477   $       1,091               4.94 % $  61,577   $         941                 6.13 %
Cash on deposit                22,759              12               0.22       7,775              63                 3.24
Loans:
Commercial loans (2)           24,250             262               4.39      31,900             602                 7.57
Commercial mortgage
loans (2)                     288,141           4,094               5.76     301,276           5,632                 7.50
Consumer loans (2)              2,213              32               5.92       4,879              90                 7.36
Residential mortgage
loans (2)                      77,804           1,093               5.70      71,811           1,341                 7.49
Home equity and other
loans (2)                      30,865             383               5.02      31,217             532                 6.84
Total loans                   423,273           5,864               5.62     441,083           8,197                 7.45
Total interest earning
assets                        535,509           6,967               5.28     510,435           9,201                 7.23
Non-interest earning
assets                         68,930                                         74,150
Total                       $ 604,439                                      $ 584,585
Liabilities and
Shareholders' Equity:
Interest-bearing
liabilities:
Deposits:
NOW accounts                $  33,610             153               1.84   $  74,520             570                 3.07
Money Market accounts          26,411             104               1.60      58,079             555                 3.83
Savings accounts               61,523             458               3.02      25,193             228                 3.63
Certificates of
. . .