UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

———————

ý QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2009

Commission file number 0-22911

———————

SUN AMERICAN BANCORP

(Exact name of registrant as specified in its charter)

———————

Delaware	65-0325364
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9293 Glades Road

Boca Raton, Florida 33434

(Address of principal executive offices)

(561) 544-1908

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ¨ Yes   ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨   No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of May 10, 2009:

11,672,773 shares of Common Stock

SUN AMERICAN BANCORP

INDEX

PAGE

PART I FINANCIAL INFORMATION

PART II OTHER INFORMATION

i

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

SUN AMERICAN BANCORP

CONSOLIDATED BALANCE SHEETS

	March 31, 2009			December 31, 2008
	(Unaudited)
ASSETS
Cash and due from financial institutions	$	38,468,980		$	5,371,609
Federal funds sold		—			11,189,000
Total cash and cash equivalents		38,468,980			16,560,609
Securities available for sale		29,198,763			30,285,750
Securities held to maturity (fair value 2009 - $55,390,222, 2008 - $54,170,963)		54,263,042			52,752,317
Loans, net of allowance for loan losses of $6,297,988 in 2009 and $6,562,780 in 2008		454,507,544			466,017,871
Federal Reserve Bank stock		1,503,100			3,018,150
Federal Home Loan Bank stock		4,123,700			3,740,600
Accrued interest receivable		2,322,883			2,656,414
Premises and equipment, net		9,676,910			9,991,118
Other assets		7,059,977			4,963,019
	$	601,124,899		$	589,985,848
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Non-interest bearing	$	48,923,546		$	43,116,630
Interest bearing		410,789,960			400,371,612
Total deposits		459,713,506			443,488,242
Securities sold under agreements to repurchase		35,069,356			35,916,707
Federal Home Loan Bank advances		58,000,000			58,000,000
Notes payable		7,528,871			7,528,871
Accrued expenses and other liabilities		4,072,262			3,268,828
Total liabilities		564,383,995			548,202,647
Shareholders’ equity
Preferred Stock, $.01 par value; 5,000,000 shares authorized; Series A – 93,750 issued and outstanding at March 31, 2009 and December 31, 2008		375,000			375,000
Common stock, $.025 par value; 20,000,000 shares authorized; 10,934,944 issued and 10,230,466 shares outstanding at March 31, 2009 and December 31, 2008		273,374			273,374
Additional paid-in capital		107,161,563			106,864,390
Accumulated deficit		(66,858,654	)		(61,517,170	)
Treasury stock at cost, 704,478 shares at March 31, 2009 and December 31, 2008		(3,574,046	)		(3,574,046	)
Accumulated other comprehensive loss		(648,128	)		(652,198	)
Equity attributable to shareholders of Sun American Bancorp		36,729,109			41,769,350
Equity attributable to noncontrolling interests		11,795			13,851
Total shareholders’ equity		36,740,904			41,783,201
	$	601,124,899		$	589,985,848

See accompanying notes to consolidated financial statements

3

SUN AMERICAN BANCORP

CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended March 31, 2009 and 2008

	March 31, 2009			March 31, 2008
	(Unaudited)			(Unaudited)
Interest and dividend income:
Loans, including fees	$	5,864,028		$	8,196,907
Securities		1,090,548			941,181
Federal funds sold and other		12,308			62,806
		6,966,884			9,200,894
Interest expense:
Deposits		3,467,469			3,612,994
FHLB advances		485,659			704,204
Other		337,793			126,923
		4,290,921			4,444,121
Net interest income before provision for loan losses		2,675,963			4,756,773
Provision for loan losses		2,761,400			(48,400	)
Net interest (loss) income after provision for loan losses		(85,437	)		4,805,173
Non-interest income:
Service charges on deposit accounts		380,584			416,111
Other income		9,812			153,015
		390,396			569,126
Non-interest expenses:
Salaries and employee benefits		2,247,502			2,458,759
Occupancy and equipment		1,302,114			1,360,755
Data and item processing		172,851			227,888
Professional fees		331,068			239,684
Insurance		554,516			157,450
Advertising		12,842			34,084
Amortization of intangible assets		—			218,314
Other		1,026,758			575,156
		5,647,651			5,272,090
(Loss) income before income taxes		(5,342,692	)		102,209
Income tax expense		—			(96,747	)
Consolidated net (loss) income		(5,342,692	)		5,462
Less: net (loss) income attributable to noncontrolling interests		(1,208	)		97
Net (loss) income attributable to shareholders of Sun American Bancorp		(5,341,484	)		5,365
Basic net (loss) per share	$	(0.52	)	$	0.00
Diluted net (loss) per share	$	(0.52	)	$	0.00
Weighted average common shares outstanding, basic		10,230,466			10,462,434
Weighted average common shares outstanding, diluted		10,230,466			10,538,272

See accompanying notes to consolidated financial statements

4

SUN AMERICAN BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three months ended March 31, 2009 and 2008

	Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Equity attributable to shareholders of Sun American Bank
Balance at January 1, 2008	$	—	$	273,374	$	105,728,957		$	(6,025,754	)	$	(1,990,641	)	$	(194,747	)	$	97,791,189
Buyback of  warrants costs		—		—		(5,813	)					—			—			(5,813	)
Purchase of 263,398 shares of treasury stock		—		—		—						(1,081,813	)		—			(1,081,813	)
Recognition of stock-based compensation expense		—		—		291,909						—			—			291,909
Net income, other comprehensive loss and total comprehensive loss		—		—		—			5,365			—			(78,412	)		(73,047	)
Balance at March 31, 2008	$	—	$	273,374	$	106,015,053		$	(6,020,389	)	$	(3,072,454	)	$	(273,159	)	$	96,922,425
Balance at January 1, 2009	$	375,000	$	273,374	$	106,864,390		$	(61,517,170	)	$	(3,574,046	)	$	(652,198	)	$	41,769,350
Recognition of stock-based compensation expense		—		—		297,173									—			297,173
Net (loss) income, other comprehensive income and total comprehensive loss		—		—		—			(5,341,484	)					4,070			(5,337,414	)
Balance at March 31, 2009	$	375,000	$	273,374	$	107,161,563		$	(66,858,654	)	$	(3,574,046	)	$	(648,128	)	$	36,729,109

See accompanying notes to consolidated financial statements

5

SUN AMERICAN BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31, 2009 and 2008

	March 31, 2009			March 31, 2008
	(Unaudited)			(Unaudited)
Net cash provided by (used in) operating activities	$	(93,691	)	$	1,647,519
Cash flows from investing activities:
Maturities and pay-downs of available for sale securities		908,641			482
Maturities and pay-downs of held to maturity securities		4,078,608			16,798,986
Purchases of held to maturity securities		(5,566,989	)		(34,696,515	)
Net purchases of Federal Reserve Bank and Federal Home Loan Bank stock		1,131,950			(162,100	)
Decrease (increase) in net loans		3,998,722			(17,323,137	)
Proceeds from sales of OREO		2,091,184			—
Purchase of premises and equipment		(17,116	)		(57,334	)
Net cash provided by (used in) investing activities		6,625,000			(35,439,618	)
Cash flows from financing activities:
Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements		(847,351	)		19,184,491
Net change in Federal Home Loan Bank Advances		—			6,000,000
Net increase (decrease) in deposits		16,225,263			18,008,363
Increase in Notes Payable		—			1,425,716
Redemption of minority interest		(850	)		—
Purchases of treasury shares		—			(1,081,813	)
Repurchase of warrants costs		—			(5,813	)
Net cash provided by (used in) financing activities		15,377,062			43,530,944
Net change in cash and cash equivalents		21,908,371			9,738,845
Cash and cash equivalents at beginning of period		16,560,609			8,109,917
Cash and cash equivalents at end of period	$	38,468,980		$	17,848,762
Supplemental information:
Interest paid	$	4,475,615		$	4,340,779
Transfer of loans to real estate owned	$	4,750,205		$	1,050,780

See accompanying notes to consolidated financial statements

6

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - CRITICAL ACCOUNTING POLICIES

Sun American Bancorp (the “Company”) has identified four policies as being critical because they require management to make judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

Allowance for Loan Losses: The Company’s accounting for the allowance for loan losses is a critical policy that is discussed in detail in the Management’s Discussion and Analysis (see Asset Quality and Nonperforming Assets).

Goodwill and Intangible Assets: The Company tests goodwill and other intangible assets for impairment annually. The test requires the Company to determine the fair value of its reporting unit and compare the reporting unit’s fair value to its carrying value. The fair value of the reporting unit is estimated using management valuation models. While management believes the sources utilized to arrive at the fair value estimates are reliable, different sources or methods could have yielded different fair value estimates. These fair value estimates require a significant amount of judgment. Changes in management’s valuation of its reporting unit may affect future earnings through the recognition of a goodwill impairment charge. At November 30, 2008 (the goodwill impairment testing date) goodwill and intangible assets were determined to be fully impaired. Accordingly the Company wrote off all of its goodwill and intangible assets in the fourth quarter of 2008.

Mergers and Acquisitions: The Company accounts for its business combinations based on the purchase method of accounting. The purchase method of accounting requires the Company to determine the fair value of the tangible net assets and identifiable intangible assets acquired. The fair values are based on available information and current economic conditions at the date of acquisition. The fair values may be obtained from independent appraisers, discounted cash flow present value techniques, management valuation models, quoted prices on national markets or quoted market prices from brokers. These fair value estimates will affect future earnings through the disposition or amortization of the underlying assets and liabilities. While management believes the sources utilized to arrive at the fair value estimates are reliable, different sources or methods could have yielded different fair value estimates. Such different fair value estimates could affect future earnings through different values being utilized for the disposition or amortization of the underlying assets and liabilities acquired.

Investment Securities: The Company records its securities available for sale in its balance sheet at fair value. The Company uses market price quotes for valuation. The fair value of these securities in the Company’s balance sheet was based on the closing price quotations at period end. The closing quotation represents inter-dealer quotations without retail markups, markdowns or commissions and do not necessarily represent actual transactions. As a consequence, the Company may not be able to realize the quoted market price upon sale. The Company adjusts its securities available for sale to fair value monthly with a corresponding increase or decrease to other comprehensive income. Investments for which management has the intent and the Company has the ability to hold to maturity, are carried at cost, adjusted for amortization of premium and accretion of discount. Amortization and accretion are calculated using the constant yield method over the term of the securities. Declines in the fair value of individual securities classified as either held to maturity or available for sale below their cost that are other than temporary result in write-downs of the individual securities to their fair value through the statement of operations.

Income Taxes: The Company files a consolidated federal income tax return. The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. A valuation allowance, if needed, reduces deferred tax amounts to the amount expected to be realized. At year end in 2008 the Company analyzed its deferred tax assets and determined that it no longer met the requirements under SFAS No. 109, Accounting for Income Taxes to continue to recognize the benefits of its deferred tax assets. Accordingly the Company recorded a valuation allowance in an amount equal to its net deferred tax assets.

7

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - CRITICAL ACCOUNTING POLICIES (Continued)

Nature of Operations and Principles of Consolidation

The consolidated financial statements include the Company and its subsidiary, Sun American Bank (the “Bank”). The Company is a bank holding company regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) that owns 99.9% of the outstanding capital stock of the Bank. Inter-company balances and transactions have been eliminated in consolidation.

The Company is organized under the laws of the State of Delaware, while the Bank is a Florida State Chartered Commercial Bank that is a member of the Federal Reserve System whose deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank provides a full range of commercial banking and consumer banking services to businesses and individuals. The Bank is regulated by the Florida Department of Banking and Finance and the Federal Reserve Board.

Stock Compensation

The Company has granted stock options for the purchase of shares of common stock of the Company to directors, former directors and employees of the Company under the Amended and Restated Directors Stock Option Plan, the Amended and Restated Incentive Stock Option Plan, and the Amended and Restated 2005 Stock Option and Stock Incentive Plan, (the “Plans”) and various compensation agreements and actions of the Board of Directors. All options for the purchase of common stock of the Company expire 10 years from the date of grant. All options, with the exception of 118,000 options issued to key consultants at below fair market value, have an exercise price that is equal to the fair market value of the Company’s common stock on the date the options were granted. Options vest over five years.

At March 31, 2009, the Amended and Restated Directors Stock Option Plan permits the grant of stock options to purchase up to 400,000 shares of common stock, of which 8,600 shares remained available for issuance. The Amended and Restated Incentive Stock Option Plan permits the grant of stock options to purchase up to 400,000 shares of common stock, of which 6,304 shares remained available for issuance. The Amended and Restated 2005 Stock Option and Stock Incentive Plan permits the grant of stock options and restricted shares for up to 2 million shares with 1.5 million shares allocated to incentive stock options. At March 31, 2009, 106,040 shares of common stock remained available for issuance under the Amended and Restated 2005 Stock Option and Stock Incentive Plan.

The following table presents information on stock options outstanding for the periods shown.

	Year to date March 31, 2009			Full Year December 31, 2008
	Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at beginning of year	2,673,620	$	5.95	1,482,869		$	10.48
Granted	—		—	1,415,500		$	1.78
Exercised	—		—	—			—
Forfeited or expired	33,100	$	6.82	(224,749	)	$	9.51
Outstanding at end of period	2,640,520	$	5.94	2,673,620		$	5.95
Options exercisable at end of period	1,227,728	$	7.50	798,492		$	9.14

The aggregate intrinsic value for stock options outstanding and options exercisable at March 31, 2009 was $211,172 and $42,234, respectively. The weighted average remaining contractual term of stock options outstanding and options exercisable at March 31, 2009, was 7.9 years and 7.2 years, respectively.

8

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - CRITICAL ACCOUNTING POLICIES (Continued)

Stock Compensation (continued)

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option valuation model. This model uses the assumptions listed in the table below. Expected volatilities are based on the historical volatility of the Company’s stock.  The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Black-Scholes assumptions	Three Months Ended March 31, 2009	Year Ended December 31, 2008
Risk-free interest rate	2.71%	2.96%
Expected option life	6.5 years	6.5 years
Expected stock price volatility	20%	20%
Dividend yield	0%	0%
Weighted Average fair value of options granted during the year	—	$1.21

Stock option compensation expense was $297,000 for the three months ended March 31, 2009 compared to $292,000 for the same period in 2008. The deferred tax benefit on the portion of expense related to nonqualified stock options was zero and $57,000, for the three months ended in 2009 and 2008, respectively.

As of March 31, 2009, there was $3.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the various plans. That cost is expected to be recognized over a weighted average period of 2.8 years.

The following table presents information on restricted stock outstanding for March 31, 2009:

	Year to date March 31, 2009					Year to date March 31, 2008
	Shares			Average Market Price at Grant		Shares		Average Market Price at Grant
Outstanding at beginning of year	$	40,000		$	13.10	52,000		$	13.10
Vested		(12,000	)		13.10	(12,000	)		13.10
Outstanding at end of period	$	28,000		$	13.10	40,000		$	13.10

As of March 31, 2009, there was $350,000 of total unrecognized compensation cost related to non-vested shares of restricted stock. That cost is expected to be recognized over a weighted average period of 2.4 years.

NOTE 2 - BASIS OF PRESENTATION AND DISCLOSURE

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for the financial statements not to be misleading have been included. Operating results for the three month periods ended March 31, 2009 and 2008, respectively, are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and the notes to consolidated financial statements included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2008, as filed with the Securities and Exchange Commission.

9

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, SFAS No. 157, “Fair Value Measurements (“SFAS 157”),” was issued. SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material.

In December 2007, Business Combinations (“SFAS 141(R)”) was issued. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008 and early implementation is not permitted. SFAS 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. Acquisition related costs including finder’s fees, advisory, legal, accounting valuation and other professional and consulting fees are required to be expensed as incurred. The impact of adoption was not material.

In December 2007, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”) was issued. SFAS 160 requires the Company to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement shall be effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption was prohibited. The impact of adoption was not material.

In March 2008, Disclosures about Derivative Instruments and Hedging Activity (“SFAS 161”) was issued. SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The impact of adoption was not material.

In April 2009, the Financial Accounting Standards Board (“FASB”) issued three final Staff Positions (“FSP”s) intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities. FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, provides guidelines for making fair value measurements more consistent with the principles presented in FASB Statement No. 157, Fair Value Measurements. FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, enhances consistency in financial reporting by increasing the frequency of fair value disclosures. FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities.

FSP FAS 157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms what Statement 157 states is the objective of fair value measurement—to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive.

10

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS (Continued)

FSP FAS 107-1 and APB 28-1 relate to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. Prior to issuing this FSP, fair values for these assets and liabilities were only disclosed once a year. The FSP requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value.

FSP FAS 115-2 and FAS 124-2 on other-than-temporary impairments is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in comprehensive income remains fair value. The FSP also requires increased and more timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses.

The FSPs are effective for interim and annual periods ending after June 15, 2009 and are not expected to have a material effect on the financial statements of the Company.

NOTE 4 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amount and estimated fair values of financial instruments were as follows at year-end:

	March 31, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and due from financial institutions	$	38,468,980	$	38,468,980	$	5,371,609	$	5,371,609
Federal Funds Sold		—		—		11,189,000		11,189,000
Securities available for sale		29,198,763		29,198,763		30,285,750		30,285,750
Securities held to maturity		54,263,042		55,390,222		52,752,317		54,170,963
Loans, net		454,507,544		455,800,325		466,017,871		468,816,235
Federal Reserve Bank stock		1,503,100		1,503,100		3,180,150		3,180,150
Federal Home Loan Bank stock		4,123,700		4,123,700		3,740,600		3,740,600
Accrued interest receivable		2,322,883		2,322,883		2,656,414		2,656,414
Financial liabilities
Deposits	$	459,713,506	$	462,112,015	$	443,488,242	$	447,101,501
Repurchase agreements		35,069,356		37,307,614		35,916,707		39,534,620
Federal Home Loan Bank advances		58,000,000		59,772,847		58,000,000		60,192,247
Other Borrowed Money		7,528,871		7,528,871		7,528,871		7,528,871
Accrued interest payable		1,367,783		1,367,783		1,552,478		1,552,478

The methods and assumptions used to estimate fair value are described as follows.

Carrying amount is the estimated fair value for cash and cash equivalents, short-term borrowings, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. Security fair values are based on market prices or dealer quotes, and, if no such information is available, on the rate and term of the security and information about the issuer. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values. Fair value of debt is based on current rates for similar financing. The fair value of off-balance-sheet items is not significant.

11

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 - FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Directly or indirectly observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates); or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities would include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Assets and liabilities measured at fair value on a recurring and non-recurring basis are summarized below:

			Fair Value Measurements at March 31, 2009 using
	March 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities (recurring)	$	29,198,763	$	—	$	29,198,763	$	—
Impaired loans (non-recurring)	$	88,431,361	$	—	$	65,391,628	$	23,039,733

The valuation techniques used to measure fair value for the items in the table above are as follows:

Available for sale securities: The fair value of securities available for sale equals quoted market prices, if available. If quoted market prices are not available, fair value is typically determined using quoted market prices for similar securities which are considered to be a level 2 input.

Impaired loans are not measured at fair value on a recurring basis but are subject to fair value adjustments when there is evidence of impairment. These adjustments to fair value usually result from application of lower of cost or fair value accounting or write-downs of individual assets due to impairment. Fair value adjustments to loans reflect full or partial write-downs that are based on the loan’s current appraised value of the collateral in accordance with SFAS 114, Accounting by Creditors for Impairment of a Loan which is considered to be a level 2 input. For impaired loans where management has adjusted the results of the appraisals, based upon management’s assessment that the appraisal results are not representative of the actual value of the underlying property, the valuation is considered to be a level 3 input.

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $88.4 million, with a valuation allowance of $1.9 million.

12

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES

The following is an analysis of the allowance for loan losses:

	Three Months Ended March 31,
	2009			2008
Balance, beginning of year	$	6,562,780		$	6,503,508
Total charge-offs		(3,033,487	)		(1,309,130	)
Recoveries		7,295			4,581
Provision for loan losses		2,761,400			(48,400	)
Allowance balance at end of period	$	6,297,988		$	5,150,559
Gross loans	$	460,805,533		$	461,433,270

Impaired loans were as follows:

	March 31, 2009		December 31, 2008
Loans with no allocated allowance for loan losses	$	65,391,628	$	81,978,662
Loans with allocated allowance for loan losses		23,039,733		7,968,106
Impaired loans at end of period	$	88,431,361	$	89,946,768
Amount of the allowance for loan losses allocated	$	1,889,882	$	1,990,148

Nonperforming loans and impaired loans are defined differently. Some loans may be included in both categories, whereas other loans may only be included in one category.

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

	March 31, 2009		December 31, 2008
Over 90 days past due and still accruing	$	3,117,523	$	—
Nonaccrual loans		40,696,766		25,927,936
Other real estate owned and repossessions		6,068,181		3,864,005
Total nonperforming assets	$	49,882,470	$	29,791,941

Nonperforming assets at March 31, 2009 were 8.30% of total assets, an increase from the corresponding December 31, 2008 ratio of 5.05%. Nonperforming assets at March 31, 2009 were in various stages of resolution for which management believes such loans are adequately collateralized and were appropriately considered in its determination of the adequacy of the allowance for loan losses.

13

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

The details of Federal Home Loan Bank (“FHLB”) borrowings at March 31, 2009 and December 31, 2008 were as follows:

2009		2008		Maturity Date	Interest Rate
	10,000,000		10,000,000	September,2009	3.27
	16,000,000		16,000,000	January, 2010	3.20
	5,000,000		5,000,000	January, 2010	3.18
	10,000,000		10,000,000	March, 2010	3.69
	5,000,000		5,000,000	March, 2010	2.46
	5,000,000		5,000,000	April, 2010	3.27
	7,000,000		7,000,000	June, 2011	3.91
$	58,000,000	$	58,000,000

The Bank has pledged a security interest in its real estate loan portfolio to the FHLB as collateral for borrowings obtained from the FHLB.

NOTE 7 – NOTES PAYABLE

The following is a summary of notes payable as of March 31, 2009 and December 31, 2008.

	March 31, 2009			December 31, 2008
Note Payable to Silverton Bank, borrowed under a line of credit
due January 2010, plus interest payable quarterly at Prime Rate minus 1%,
Secured by 99.97% of the outstanding Sun American Bank stock		7,528,871			7,528,871
Total notes payable	$	7,528,871		$	7,528,871
Interest rate		2.25	%		2.25	%

The credit line matures January 2010; interest is set at Prime Rate minus 1.00% and the line is secured by 99.97% of the outstanding Sun AMERICAN BANK STOCK.

NOTE 8 - Capital Adequacy

The Company’s 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		Adequately Capitalized	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 was considered to be well capitalized at March 31, 2009.

14

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 - BASIC AND DILUTED NET (LOSS) PER SHARE

The following tables summarize the computation of basic and diluted net (loss) per share attributable to shareholders of the Company.

Basic and Diluted	Three Months Ended March 31,
	2009			2008
Basic net (loss) per share:
Net (loss)  income attributable to the shareholders of the Company	$	(5,341,484	)	$	5,365
Weighted average shares outstanding, basic		10,230,466			10,462,434
Weighted average shares outstanding, diluted		10,230,466			10,538,272
Basic net (loss) per share	$	(0.52	)	$	0.00
Diluted net (loss) per share	$	(0.52	)	$	0.00

The difference between basic and diluted weighted-average shares outstanding is the dilutive impact of unexercised in-the-money stock options and warrants.

Stock options and stock warrants to purchase 2.7 million and 4.5 million shares of common stock, respectively, were not considered in computing diluted net (loss) per share for the three months ended March 31, 2009, and stock options and stock warrants to purchase 1.6 million and 4.3 million shares of common stock, respectively, were not considered in computing diluted net (loss) per share for the three months ended March 31, 2008, because they were antidilutive.

NOTE 10 - WARRANTS

As of March 31, 2009, the Company had outstanding warrants to purchase 4,513,225 shares of common stock, including Class A, D, E, F, G and H warrants and other warrants.

A summary of the warrants to purchase shares of common stock of the Company as of March 31, 2009 and December 31, 2008, is presented below.

	Shares of Common Stock to be issued upon the exercise of a Warrant	March 31, 2009	December 31, 2008
Class A Warrants	0.4	920,125	920,125
Class D Warrants	0.4	4,649,074	4,649,074
Class E Warrants	0.4	722,000	722,000
Class F Warrants	0.2	6,334,714	6,334,714
Class G Warrants	0.4	50,000	50,000
Class H Warrants	1.6	93,750	93,750
Other Warrants	0.4	1,399,506	1,399,506
Warrants Outstanding		14,169,169	14,169,169

Class A Warrants

Each warrant entitles the holder to purchase 0.4 of a share of common stock at an exercise price of $4.00 per warrant or $10.00 per share, subject to adjustment for stock splits, reverse stock splits and other events of recapitalization. The Company may redeem the Class A warrants at any time if the following conditions have been satisfied: (i) the Company has registered for resale the common stock issuable upon exercise of the Class A warrants; (ii) the common stock, as publicly traded on a national securities exchange, has closed at a price of at least $21.25 for 20 continuous trading days; and (iii) the Company pays $4.00 per outstanding warrant, subject to adjustment. If not earlier redeemed, the Class A warrants will expire on December 31, 2010.

15

SUN AMERICAN BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10 – WARRANTS (Continued)

Class D Warrants

The Company’s Class D Warrants trade on the Nasdaq Global Market under the symbol “SAMBW”. Each Class D warrant entitles the holder to purchase 0.4 of a share of the Company’s common stock at an exercise price of $4.00 per warrant, or $10.00 per share. The exercise price is subject to adjustment upon the occurrence of certain events as provided in the Class D warrant certificate. The Company’s Class D warrants expired on May 13, 2009.

Class E Warrants

Each warrant entitles the holder to purchase 0.4 of a share of common stock at an exercise price of $4.25 per warrant or $10.63 per share, subject to adjustment for stock splits, reverse stock splits and other events of recapitalization. The Company may redeem the Class E warrants at any time if the following conditions have been satisfied: (i) the Company has registered for resale the common stock issuable upon exercise of the Class E warrants; (ii) the common stock, as publicly traded on a national securities exchange, has closed at a price of at least $21.25 for 20 continuous trading days; and (iii) the Company pays $10.00 per outstanding share, subject to adjustment. The Class E warrants will expire no later than March 2010.

Class F Warrants

Each warrant entitles the holder to purchase 0.2 of a share of common stock at an exercise price of $2.00 per warrant or $10.00 per share, subject to adjustment for stock splits, reverse stock splits and other events of recapitalization. The Class F warrants will expire no later than December 2010.

The Company has the right to redeem the Class F warrants at a redemption price of $1.25 per share (subject to adjustment in the event of a stock split, reverse stock split, stock dividend on the common stock or the like) after providing written notice to the Class F warrant holders at any time after the closing price of the Company’s common stock equals or exceeds $14.00, for any period of twenty consecutive trading days. If the Company calls the Class F warrants for redemption, they will be exercisable until the close of business of the specified redemption date. The holders of Class F warrants may satisfy their obligation to pay the aggregate exercise price through a “cashless exercise”, in which event the Company will issue to the holders the number of shares determined by the “cashless exercise” formula.

Class G Warrants

Each warrant entitles the holder to purchase 0.4 of a share of common stock at an exercise price of $4.00 per warrant or $10.00 per share, subject to adjustment for stock splits, reverse stock splits and other events of recapitalization. The Class G warrants will expire no later than May 2010. The holders of Class G warrants may satisfy their obligation to pay the aggregate Exercise Price through a “cashless exercise”, in which event the Company will issue to the holders the number of shares determined by the “cashless exercise” formula.

Class H Warrants

Each warrant entitles the holder to purchase 1.6 shares of common stock at an exercise price of $2.5 per warrant or $1.56 per share, subject to adjustment for stock splits, reverse stock splits and other events of recapitalization. The Class H warrants will expire no later than September 2010.

Other Warrants

An aggregate of 1,399,506 warrants have been issued to various underwriters for compensation for certain private and public offerings of the Company’s common stock. The exercise prices per share range from $3.38 to $14.85 and have expiration dates between 2009 and 2010.

16

Throughout this Quarterly Report, when we use the terms “we,” “our” or “us,” we are referring to Sun American Bancorp or to Sun American Bancorp and its subsidiary, Sun American Bank. Reference to “the Company” refers to Sun American Bancorp and its subsidiary, Sun American Bank. References to “the Bank” refer to Sun American Bank.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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.

17

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”.

18

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.

19

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.

20

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, 2009		December 31, 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.

21

The following is a summary of the distribution of deposits:

Deposits	March 31, 2009		December 31, 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.

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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.

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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 Balance		Interest (4)		Average Yield/Rate (3)			Average Balance		Interest (4)		Average 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 deposit		287,869		2,752		3.88			185,729		2,260		4.88
Total interest-bearing deposits		409,413		3,467		3.43			343,521		3,613		4.22
Federal funds purchased and securities sold under repurchase agreement		35,721		294		3.34			7,351		75		4.10
Federal Home Loan Bank advances		63,111		486		3.12			76,824		704		3.68
Notes payable		7,529		44		2.35			3,463		52		5.99
Total interest bearing liabilities		515,774		4,291		3.37			431,159		4,444		4.13
Non-interest bearing liabilities		47,447							56,027
Shareholders' equity		41,218							97,399
Total	$	604,439						$	584,585
Net Interest income and yield on net interest-earning assets			$	2,676		2.03	%			$	4,757		3.74	%

———————

(1)

Includes investment securities, Federal Reserve Bank stock and Federal Home Loan Bank stock.

(2)

Excludes loans for which the accrual of interest has been suspended.

(3)

Yields and rates are annualized.

(4)

Includes fee income on loans.

Income from interest earning cash on deposit, investment securities and Federal Reserve Bank stock increased by $99,000, or 10%, to $1.1 million for the three months ended March 31, 2009 from $1.0 million for the three months ended March 31, 2008, due primarily to an increase of $42.9 million, or 62%, in average volume of investments and cash on deposit but offset by a 183 basis point decrease in investment yield.

Interest and fees on loans decreased by $2.3 million or 28%, in the three months ended March 31, 2009, compared to the three months ended March 31, 2008. The decrease in loan income resulted from a decrease in total average loan balances outstanding of $17.8 million from $441.1 million for the three months ended March 31, 2008 to $423.3 million at March 31, 2009. In addition lower interest yields of about 183 basis points when comparing the three months ended March 31, 2009 versus the three months ended March 31, 2008 which accounted for

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$1.9 million of the reduction of interest and fees on loans. The yield on all interest-earning assets was 5.28% for the three months ended March 31, 2009, a 195 basis point decrease from 7.23% for the three months ended March 31, 2008.

Total interest expense decreased $153,000, or 3% to $4.2 million for the three months ended March 31, 2009 as compared to $4.4 million for the three months ended March 31, 2008. The decrease in interest expense was primarily the result of a decrease in average interest rates on interest bearing deposit account balances of 76 basis points from 4.13% in the first quarter of 2008 compared to 3.37% in the first quarter of 2009. This resulted in $980,000 of reduced interest expense. However this decrease was offset by an increase in average volume of interest bearing liabilities of $84.6 million, or 20%, to $515.8 million for the three months ended March 31, 2009 from $431.2 million for the same period in 2008 which resulted in increased interest expense of $791,000.

NON-INTEREST INCOME

Total non-interest income decreased by $179,000, or 31%, to $390,000 for the three months ended March 31, 2009 from $569,000 for the three months ended March 31, 2008. The decrease in fee income was the primarily result of a one-time fee earned in 2008 for $140,000 that did not recur in 2009.

 NON-INTEREST EXPENSE

Total non-interest expenses increased by $376,000, or 7%, to $5.6 million for the three months ended March 31, 2009 period from $5.2 million for the three months ended March 31, 2008.

The largest component of non-interest expense was salaries and employee benefits which declined from $2.5 million in the first quarter of 2008 to $2.2 million in the first quarter of 2009. As of March 31, 2009, the number of full-time equivalent employees was 116 compared to 117 as of March 31, 2008.

The second largest component of non-interest expenses was occupancy and equipment expense. Occupancy and equipment expense amounted to $1.3 million for the three months ended March 31, 2009 compared to $1.4 million for the three months ended March 31, 2008. This modest decrease reflects reduced depreciation and maintenance costs in the current quarter.

Other non-interest expenses were $2.1 million for the first quarter of 2009 compared to $1.5 million for the first quarter of 2008. The increase of $700,000 was primarily due to increased Federal Deposit Insurance premiums of $400,000 in the current quarter as well as due to losses incurred on sales of other real estate owned of $455,000 which were not incurred in 2008. Aside from these items, other expenses were $310,000 less in the first quarter of 2009 when compared to the first quarter of 2008. Amortization of intangible assets declined by $212,000 to zero as the intangible assets were fully impaired, data processing costs declined by $68,000 and property taxes decreased by $78,000 in the current quarter when compared to the first quarter of 2008.

PROVISION FOR LOAN LOSSES

Although management uses its best judgment in underwriting each loan, industry experience indicates that a portion of the Bank’s loans will become delinquent. Regardless of the underwriting criteria utilized, the Bank may experience losses as a result of many factors beyond its control, including, among other things, changes in market conditions affecting the value of security and unrelated problems affecting the credit of the borrower. Due to the concentration of loans in South Florida, adverse economic conditions in this area could result in a decrease in the value of a significant portion of the collateral that supports the Bank’s loan portfolio.

Provision for loan loss was $2.8 million in the first quarter of 2009. The comparative provision for loan loss for the three months ended March 31, 2008 was a recovery of $48,000. The increased provision required in 2009 was due to higher levels of non-performing loans and declining value of real estate collateral on select loans in the portfolio.

For a more detailed description of the calculation of the allowance for loan loss, see the section above entitled “Asset Quality and Nonperforming Assets.”

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PROVISION FOR INCOME TAXES

No income tax expense or recovery was booked in the first quarter of 2009 as no taxes were payable and the Company maintained a valuation allowance in an amount equal to its net deferred tax assets as of March 31, 2009. Income tax expense was $97,000 for the three months ended March 31, 2008.

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Item 4T.

Controls and Procedures

The Company, under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in reaching a reasonable level of assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated, recorded, processed, summarized, and communicated to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding the required disclosure, and reported within the time period specified in the Securities and Exchange Commission’s rules and forms.

There were no changes in the internal control over financial reporting (“Internal Control”) during the quarter covered by this report that have materially affected or which are reasonably likely to materially affect Internal Control.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

There have been no material developments during the period covered by this report.

Item 1A.

Risk Factors

There have been no material changes from the risk factors as previously disclosed in the Company's 2008 Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The Company had no sales of unregistered securities during the first quarter of 2009 which have not previously been reported on a Current Report on Form 8-K.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Securities Holders

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

The following exhibits are filed as part of or incorporated by reference in this report;

31.1	Rule 13a-14(a)/15d-14(a) Chief Executive Officer’s Certification required under Section 302 of Sarbanes-Oxley Act of 2002
31.2	Rule 13a-14(a)/15d-14(a) Chief Financial Officer’s Certification required under Section 302 of Sarbanes-Oxley Act of 2002
32.1	Section 1350 Chief Executive Officer’s and Chief Financial Officer’s Certification required under Section 906 of Sarbanes-Oxley Act of 2002

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUN AMERICAN BANCORP
May 14, 2009	By:	/s/MICHAEL E. GOLDEN
		Michael E. Golden Chief Executive Officer (Principal Executive Officer)
May 14, 2009	By:	/s/ROBERT NICHOLS
		Robert Nichols
		Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX

Exhibit No.	Description
31.1	Rule 13a-14(a)/15d-14(a) Chief Executive Officer’s Certification required under Section 302 of Sarbanes-Oxley Act of 2002
31.2	Rule 13a-14(a)/15d-14(a) Chief Financial Officer’s Certification required under Section 302 of Sarbanes-Oxley Act of 2002
32.1	Section 1350 Chief Executive Officer’s and Chief Financial Officer’s Certification required under Section 906 of Sarbanes-Oxley Act of 2002

30