As filed with the Securities and Exchange Commission on July 2, 2007

Registration No. 333-142110

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 6

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

SILVER STATE BANCORP

(exact name of registrant as specified in its charter)


Nevada		88-0456212
(state or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

170 South Green Valley Parkway

Henderson, Nevada 89012

(702) 433-8300

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Corey L. Johnson

President and Chief Executive Officer

Silver State Bancorp

170 South Green Valley Parkway

Henderson, Nevada 89012

(702) 433-8300

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Robert C. Azarow, Esq.

Thacher Proffitt & Wood LLP

Two World Financial Center

New York, NY 10281

(212) 912-7400

Steven M. Plevin, Esq.

Nixon Peabody LLP

One Embarcadero Center

San Francisco, CA 94111

(415) 984-8200

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box ¨

CALCULATION OF REGISTRATION FEE



Title of each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Share (1)	Proposed Maximum Aggregate Offering Price (1)	Amount of Registration Fee (2)
Common Stock $0.001 par value	3,824,905	$22.53	$90,000,000	$2,763

(1)

The proposed offering price is estimated solely for the purpose of calculating the registration fee. Pursuant to Rule 457(c), a registration fee of $2,763 is being paid in connection with this filing based upon $22.53, the average of the bid and the asked price of the Common Stock reported on the OTC Bulletin Board on April 10, 2007.

(2)	Previously paid.

The Registrant hereby amends this Registration on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission declares the registration statement effective. This prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any state or jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION — DATED JULY 2, 2007

3,200,000 Shares

PRELIMINARY PROSPECTUS

Common Stock

We are a bank holding company based in Henderson, Nevada. We are offering 3,200,000 shares of our common stock in this firm commitment public underwritten offering. We anticipate that the public offering price will be between $22.00 and $24.00 per share.

Our shares are currently listed on the OTC Bulletin Board under the symbol SSBX.OB. We have applied to have our common stock listed for quotation on the Nasdaq Global Market under the trading symbol “SSBX.” The closing sales price of our common stock, on June 20, 2007, the latest practicable date, was $22.74 per share.

Investing in our common stock involves risks. Please read the “ Risk Factors” section beginning on page 10 for a discussion of factors that you should consider before you make your investment decision.


	Per Share	Total
Price to public	$	$
Underwriting discounts and commissions	$	$
Proceeds to us⁽¹⁾	$	$

⁽¹⁾	This amount is the total before deducting legal, accounting, printing and other offering expenses payable by us, which are estimated to be $1,710,263.

The underwriters also may purchase up to 480,000 additional shares from us at the public offering price, less the underwriting discount, within 30 days of the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

The underwriters expect to deliver the shares against payment in New York, New York on or about , 2007, subject to customary closing conditions.


SANDLER O’NEILL + PARTNERS, L.P.		HOWE BARNES HOEFER & ARNETT

The date of this prospectus is , 2007

LOGO

TABLE OF CONTENTS


		Page
Summary		1
Risk Factors		10
Forward-Looking Statements		21
Use of Proceeds		22
Dividend Policy		22
Trading History		23
Capitalization		24
Dilution		25
Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Business		50
Supervision and Regulation		68
Properties		81
Legal Proceedings		83
Management		84
Corporate Governance		98
Principal Stockholders		100
Security Ownership of Management		101
Shares Eligible for Future Sale		102
Underwriting		104
Description of Capital Stock of Silver State Bancorp		107
Legal Matters		111
Experts		111
Where You Can Find Additional Information		111
Index To Consolidated Financial Statements		F-1

You should rely only on the information contained in this prospectus or to which we have referred you. We and the underwriters have not authorized anyone to provide you with information that is different from that contained in this prospectus. This prospectus does not constitute an offer to sell, or the solicitation of an offer to buy, any of the securities offered hereby to any person in any jurisdiction in which such offer or solicitation would be unlawful. The information contained in this prospectus is accurate only as of the date of the prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock. The affairs of Silver State Bancorp and its subsidiaries including the business, financial condition, results of operations and other information included in this prospectus may have changed since that date.

SUMMARY

The following summary provides an overview of the key aspects of this offering and may not contain all the information that is important to you. To fully understand this offering, you should read this entire document carefully, including the section entitled “Risk Factors” and the consolidated financial statements and the notes to the consolidated financial statements, before making a decision to invest in our common stock. Unless the context suggests otherwise, references in this prospectus to “we,” “us,” “our” or “Silver State” refer to Silver State Bancorp and our subsidiaries.

Our Business

We are a bank holding company headquartered in Henderson, Nevada. We conduct our operations primarily through Silver State Bank, a Nevada-chartered commercial bank, and through Choice Bank, an Arizona-chartered commercial bank that we acquired on September 5, 2006. Through our bank subsidiaries we provide a wide range of banking and related services to locally owned businesses, professional firms, real estate developers and investors, local non-profit organizations, high net worth individuals and other consumers.

Silver State Bank was founded in 1996 by a group of individuals with extensive community banking experience. In 1999, through a bank holding company reorganization, Silver State Bank became the wholly-owned subsidiary of Silver State Bancorp. According to the most recent FDIC Deposit Market Share Report, as of June 30, 2006, Silver State Bank is the 11^th largest bank operating in the Las Vegas-Paradise metropolitan area measured by deposits with a deposit market share of 0.73%, and is the 14^th largest bank among all banks operating in Nevada with a deposit market share of 0.62%. As of March 31, 2007, Silver State Bank had $1.2 billion in assets, $1.0 billion in gross loans (excluding loans held for sale) and $1.0 billion in deposits. Silver State Bank has 10 full-service offices in the greater Las Vegas market area and we expect to open two additional full-service offices in this market area during the next 12 months and four additional full-service offices by the end of 2008.

Choice Bank is an Arizona-chartered commercial bank headquartered in Scottsdale, Arizona. As of March 31, 2007, Choice Bank had $185.4 million in assets, $143.9 million in gross loans (excluding loans held for sale) and $137.4 million in deposits. According to the most recent FDIC Deposit Market Share Report, as of June 30, 2006, Choice Bank is the 39^th largest bank in the Phoenix/Scottsdale market area with a deposit market share of 0.16%. Choice Bank has two full-service offices in the Phoenix/Scottsdale market area and we expect to open two additional full-service offices in this market area during the next 12 months.

In addition to its banking subsidiaries, Silver State Bank operates nine loan production offices, or LPOs, which are located in Utah, Colorado, Washington, Oregon, California and Florida. Our LPOs primarily originate SBA loans, which, for the most part, we sell in the secondary market. To a lesser extent, our LPOs also originate commercial real estate loans primarily for sale into the secondary market. Our LPOs are established and staffed around personnel who are experienced SBA loan producers in their geographic market. According to recent lending statistics, Silver State Bank is the leading SBA lender in the State of Nevada as ranked by dollar volume. During 2006, Silver State Bank originated and closed $127 million in SBA loans, and during the first quarter of 2007 Silver State Bank originated and closed $58 million in SBA loans.

On a consolidated basis, we had approximately $1.4 billion in assets, $1.2 billion in gross loans (excluding loans held for sale), $1.2 billion in deposits and $112.4 million in stockholders’ equity, as of March 31, 2007. As of March 31, 2007, 89.7% of our total loan portfolio was comprised of loans secured by real estate and, historically, the majority of our loans have been to businesses involved in construction or the acquisition and

development of real estate. Our lending activities historically have focused primarily on the following five areas, which as of March 31, 2007, comprised the percentages of our loan portfolio indicated:

•

Construction lending — 30.98%;

•

Land acquisition and development lending — 32.35%;

•

Commercial real estate lending — 15.10%;

•

Commercial and industrial lending — 8.52%; and

•

Business lending through the Small Business Administration, or SBA — 5.88%.

With our acquisition of Choice Bank, we also added a complementary residential real estate loan origination platform to our business. As of March 31, 2007, 6.67% of our total loan portfolio was comprised of residential real estate loans.

As of March 31, 2007, 95.96% of our loan portfolio consisted of variable rate loans and 4.04% consisted of fixed rate loans. As of March 31, 2007, 57.29% of our loan portfolio consisted of short term loans (loans with contractual maturities of less than one year) and 42.71% consisted of long term loans (loans with contractual maturities of one year or more).

Our 20 largest depositors accounted for approximately 37.4% of our deposits and our five largest depositors accounted for approximately 26.7% of our deposits at March 31, 2007. We have provided loans to two of our 20 largest depositors at March 31, 2007. The total aggregate principal balance of these loans was $16.6 million at March 31, 2007. Our largest depositor as of March 31, 2007 accounted for 9.2% of our total deposits. Of our 20 largest depositors at March 31, 2007, two were related to each other (one of which is our largest depositor) representing 12.7% of our total deposits. Also, of our 20 largest depositors at March 31, 2007, four were entities affiliated with directors of Silver State Bank and Choice Bank representing 3.0% of our total deposits. Included among our 20 largest depositors are four depositors who as of March 31, 2007, accounted for $272.3 million, or 23.6%, of our deposits. These customer balances are considered for regulatory purposes to be brokered deposits.

Our executive office is located at 170 South Green Valley Parkway, Henderson, Nevada 89012. Our telephone number at this address is (702) 433-8300. Our website is www.silverstatebancorp.com. Information contained in, or accessible on, our website does not constitute a part of this prospectus.

Choice Bank Acquisition

We completed the acquisition of Choice Bank on September 5, 2006. The purchase price of this transaction, including the fair value of replacement stock options and acquisition costs, was $31.6 million. The cash consideration paid to Choice Bank stockholders was $28.7 million. Stock consideration was paid only to the option holders of Choice Bank in the form of replacement stock options. As part of the transaction, Choice Bank became a wholly owned subsidiary of Silver State Bancorp. At the time we acquired Choice Bank, it had approximately $138.1 million in assets, $103.5 million in deposits and $98.3 million in gross loans. Choice Bank was primarily a residential construction and residential mortgage lender. We believe that Choice Bank’s strength in residential real estate lending, in particular higher balance residential mortgage loans, and Silver State Bank’s strength in commercial lending has provided both of our subsidiary banks with an opportunity to learn from each other to build the product offerings of each bank.

We acquired Choice Bank primarily because of the success of our LPO in the Phoenix/Scottsdale market area, which provided us the opportunity to evaluate this market in a cost efficient manner. While Choice Bank has historically focused on residential construction and residential mortgage lending, we believe that the success of our LPO, when combined with the Choice Bank personnel, should provide us with a strong likelihood of success in generating deposits and deploying our commercial lending skills and experience.

Our Market Areas

We currently operate in what we believe to be several of the most attractive markets in the Western United States:

•

Nevada. In Nevada, we operate in the greater Las Vegas market area.

•

Arizona. In Arizona, we operate in the Phoenix/Scottsdale market area.

•

SBA Lending. We view our SBA lending market to be Nevada and Arizona, in addition to Utah, Colorado, Washington, Oregon, California and Florida, where we currently have LPOs.

According to ESRI, a demographic information system technology firm, the greater Las Vegas market area, in terms of population growth, has been the fifth fastest growing metropolitan area in the United States in the last six years, having grown almost 34% since 2000, almost five times the national population growth rate. This population growth is expected to continue over the next five years, at a rate of 26%, which is almost four times the national rate. Household income growth has tracked population growth, having risen almost 24% in the last six years, and is expected to grow another 18% through 2011. The area’s economic strength is anchored by the gaming industry, as well as by the presence of five Fortune 500 companies headquartered in Las Vegas.

The Phoenix/Scottsdale market area is the largest metropolitan area by population in the state of Arizona. Eight of Arizona’s top ten businesses by revenue are headquartered in the Phoenix/Scottsdale market area, which is one of the reasons for the area’s rapid income growth. The Phoenix/Scottsdale market area currently has the highest household income and per capita income in the state — at $56,481 and $28,057, respectively. The median household income is 10% higher than the national average, and is projected to increase another 22% over the next five years. This rapid income and population growth has driven growth in the banking sector, with total deposits in this market area increasing by over 83%, from $30.7 billion in 2000 to $56.1 billion in 2006.

The rapid population growth in our markets and the resultant growth in the local economies has provided us and should continue to provide us with significant lending and deposit gathering opportunities in the future. The growth in the greater Las Vegas market area, our primary market, has been driven by a variety of factors, including a service economy associated with the hospitality and gaming industries, the historic availability of affordable housing, the lack of a state income tax, and a growing base of senior and retirement communities. Increased economic activity by individuals and accelerated infrastructure investments by businesses should generate additional demand for our products and services. For example, economic growth should produce additional commercial and residential development, providing us with greater lending opportunities. In addition, as per capita income continues to rise, there should be greater opportunities to provide a broader range of financial products and services.

We face intense competition both in making loans and attracting deposits. We compete primarily on the basis of the rates we pay on deposits and the rates and other terms we charge on the loans we originate, as well as the quality of our customer service. Our competition for loans comes principally from commercial banks, savings institutions, credit unions, finance companies and insurance companies operating locally and elsewhere. Our most direct competition for deposits comes from commercial banks, savings banks, savings and loan associations and credit unions. There are large national and regional financial institutions operating throughout our market areas, and we also face strong competition from other community-based financial institutions. According to the FDIC Deposit Market Share Report, as of June 30, 2006, our largest competitor in Nevada, measured by deposits, is Washington Mutual Bank, a federally chartered savings bank with a national presence, that has more than 58% of the deposit market share in Nevada. In addition, Silver State Bank’s five largest competitors (Washington Mutual Bank, Bank of America, Charles Schwab, Wells Fargo Bank, and Citibank Nevada), in the aggregate, have more than 84% of the deposit market share in Nevada. Each of these competitors is, or is affiliated with, a financial institution considered to be among the largest in the country with a national or

international presence. According to the FDIC Deposit Market Share Report, as of June 30, 2006, our largest competitor in Arizona, measured by deposits, is JPMorgan Chase Bank, a large commercial bank with a national and international presence, that has approximately 25% of the deposit market share in Arizona. In addition, Choice Bank’s eight largest competitors (JPMorgan Chase Bank, Bank of America, Wells Fargo Bank, National Bank of Arizona, Compass Bank, World Savings Bank, M&I Marshall & Ilsley Bank and First National Bank of Arizona), in the aggregate, have more than 82% of the deposit market share in Arizona.

During the fourth quarter of 2006, we began to experience some narrowing of our net interest margin reflecting competitive pricing pressure in both loans and deposits, which has resulted in overall lower interest rate spreads than in prior periods. The competitive pricing pressure has continued into the first five months of 2007. If the competition we experienced in the fourth quarter of 2006 and the first quarter of 2007 in the form of higher deposit rates offered by local financial institutions continues for the balance of 2007, it could have the effect of increasing our cost of funds to a level higher than we have experienced historically.

Our Operating Strategy

Our operating strategy has been to focus on the origination of construction loans and land acquisition and development loans for both commercial and residential projects, commercial real estate loans and commercial and industrial loans. Since the inception of Silver State Bank, the Las Vegas economy, and in particular the real estate market, has experienced significant growth that has increased the demand for our construction, land and commercial loan products. We believe that our experienced lending team has been instrumental in our growth in these areas because of their long standing relationships with local developers who have been very active in real estate construction and development. We also believe that our flexibility and personalized service to our commercial banking customers distinguishes us from other financial institutions operating in our market.

A key aspect of our current operating strategy is to leverage our real estate and commercial banking experience in the greater Las Vegas market area and replicate that business model in the Phoenix/Scottsdale market area. Our acquisition of Choice Bank has provided us an entry to this market and expands the banking services of our former LPO in this respect.

Our operating strategy has resulted in significant growth for Silver State Bancorp. Specifically, from December 31, 2002 to March 31, 2007, we increased:

•

total assets from $378.6 million to $1.4 billion;

•

gross loans from $287.1 million to $1.2 billion;

•

total deposits from $290.9 million to $1.2 billion; and

•

total stockholders’ equity from $22.0 million to $112.4 million.

The primary source of funding for our asset growth has been the generation of core deposits which we accomplished by a combination of competitive pricing for local deposits coupled with expansion of our branch system. We have added three new branch offices over the past five years in the greater Las Vegas market area. Our acquisition of Choice Bank provided us with an entry point into the Phoenix/Scottsdale market with its two branch offices and the opportunity to establish new branches in this market. We have also supplemented our deposit gathering through the use of borrowings, primarily from the Federal Home Loan Bank, or FHLB.

To support our asset growth we have pursued a strategy of growing and retaining our earnings, while supplementing capital through private placements of junior subordinated debt and common stock. In 2004, we raised $4.9 million of net proceeds through a private placement of common stock and in 2006 we raised $10.7 million through another private placement of common stock. We have also supplemented our regulatory capital through the issuance of junior subordinated debt to statutory trusts that have in turn privately issued trust

preferred securities. Trust preferred securities issued in connection with the junior subordinated debt generally qualify as Tier 1 capital for regulatory purposes within defined limits. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” At March 31, 2007, we had $38.7 million outstanding of junior subordinated debt. On June 25, 2007, in anticipation of completion of this offering, we received $20 million in financing pursuant to a 90-day non-revolving term loan. We contributed the proceeds of the loan to Silver State Bank and Choice Bank as capital, thus allowing them to be deemed “well capitalized” for regulatory purposes at June 30, 2007 without any reduction in assets. The FDIC determines the applicable insurance premium for each bank each quarter, based in part, on the bank’s regulatory capital classification as of each quarter end. If Silver State Bank and Choice Bank had failed to be deemed “well capitalized” at June 30, 2007, they each would have incurred increased premiums for deposit insurance, Silver State Bank and Choice Bank also would be required to obtain FDIC approval to gather brokered deposits during such times as they are considered to be “adequately capitalized” for regulatory capital purposes. See “Supervision and Regulation — Bank Regulation — Insurance of Deposit Accounts” and “— Capital Standards.” Any amount of the $20 million term loan outstanding at the closing of this offering will be repaid in full with the proceeds of this offering.

Our earnings success has resulted from a strong net interest margin reflecting the attractive yields we earn on our loan products coupled with a strong focus on asset quality and operating efficiency. For the year ended December 31, 2006 and for the three months ended March 31, 2007, we had the following financial highlights:

•

net interest margin of 6.2% and 5.7%, respectively;

•

efficiency ratio of 44.0% and 47.8%, respectively; and

•

non-performing assets to total assets of 0.07% and 0.02%, respectively.

Our Growth Strategy

We intend to continue to expand our business by building on our successful operating strategy in a two-pronged approach: (i) internal organic growth through market penetration and new branches and (ii) external growth through acquisitions and formation of new banks. We currently expect our growth in the greater Las Vegas and Phoenix/Scottsdale markets to be the result of organic growth, while growth in new markets will likely be achieved through acquisition and formation of new banks. Specifically, our growth strategy includes:

•

In-market growth through the continued opening of additional new full service branches. We operate in what we believe to be two highly attractive markets with superior growth prospects. Both of our market areas have high per capita income and are expected to experience some of the fastest population growth in the country. We opened one new full-service branch in Nevada in 2006. During 2007, we expect to open two additional branches in Nevada and two additional branches in Arizona. We plan to open additional branches in 2008 and beyond as conditions permit in order to expand our funding base.

•

Focusing on new markets with attractive growth prospects. We continuously evaluate new markets in the Western United States with similar growth characteristics as our primary markets as possible markets for expansion. We are currently looking to expand in Northern Nevada, Southern California and Utah, as we believe these markets are likely to experience significant growth in construction and land development. This growth and the impact it is likely to have in these markets should create demand for the type of lending that makes up our core competencies. We would expect to implement this aspect of our growth strategy through the formation of additional new banks or the acquisition of existing commercial banks in these markets.

•

SBA Lending Growth. Our primary markets for SBA lending have been in the Western United States and, most recently, Florida through our SBA LPOs. We plan on opening new LPOs to capitalize on our SBA lending experience as opportunities arise. Our growth in new markets will be dependent on our ability to attract seasoned loan officers with experience and knowledge of the markets in which they operate.

Management

We have assembled a senior management team with great depth and breadth of experience in the financial services industry. Each of our executive officers has worked in the financial services industry for at least 17 years. The five most senior members of our management team, which includes our President and Chief Executive Officer, our Chief Operating and Chief Financial Officer, the President of Silver State Bank, our Executive Vice President — Commercial Real Estate Lending and our Executive Vice President — Credit Administrator, founded the institution or joined the institution shortly after inception. The most recent addition to our senior management team is our Chief Risk Officer, who has over 15 years of experience in various capacities at the Federal Deposit Insurance Corporation, or FDIC, including senior bank examiner.

Insider Ownership

Following the offering, our directors and executive officers, as a group, are expected to beneficially own approximately 31.0% of our outstanding common stock, including 72,500 shares expected to be purchased in this offering and options to purchase 341,250 shares exercisable under our stock option plans. Consequently, if they vote their shares in concert, they can significantly influence the outcome of all matters submitted to our stockholders for approval, including the election of directors. In addition, Linda Yanke, the mother-in-law of the Chairman of our Board, is expected to beneficially own approximately 14.5% of our outstanding common stock. The Compensation Committee recently commenced discussions regarding its intention to grant options to purchase not more than 100,000 shares of our common stock to our named executive officers at some point after completion of this offering and prior to the end of this fiscal year. No decisions have been made as to when any such grants would be made, the recipients of such grants or the amount of such grants to any individual or the executive officers as a group. If such options are granted, it would increase the amount and percentage of beneficial ownership of our common stock by our directors and executive officers. See “Principal Stockholder” and “Security Ownership of Management”.

The Offering

Common stock offered

3,200,000 shares⁽¹⁾

Common stock to be outstanding immediately after this offering

16,939,662 shares⁽²⁾

Use of proceeds

We estimate that our net proceeds from this offering will be approximately $66.3 million, or $76.5 million if the over-allotment is exercised in full by the underwriters, assuming an initial public offering price of $22.74 per share (based on the closing price of our common stock on June 20, 2007).

We expect to contribute approximately $30 million of the net proceeds to our bank subsidiaries, and will retain the remainder at our holding company. We will use the net offering proceeds for general corporate purposes, including but not limited to the repayment of any amount outstanding under the $20 million 90-day non-revolving term loan facility, the formation of additional new banks in new market areas with attractive growth prospects, the acquisition of other commercial banks or financial services companies, the addition of new branches in existing and contiguous markets and the development of additional products or services. Funds invested in our subsidiary banks will be used to support additional internal growth. We have no understandings, agreements or definitive plans concerning any specific markets or acquisitions. See “Use of Proceeds.”

Risk factors

See “Risk Factors” beginning on page 8 for a description of material risks related to an investment in our common stock.

Dividend policy

We have never declared or paid cash dividends on our common stock. For the foreseeable future, the board of directors intends to follow a policy of retaining earnings for the purpose of increasing our capital to support additional growth. See “Dividend Policy.”

Nasdaq Global Market symbol

We have applied to have our common stock listed for quotation on the Nasdaq Global Market under the trading symbol “SSBX.”

(1)	The number of shares offered assumes that the underwriters’ over-allotment option is not exercised. If the over-allotment option is exercised in full, we will issue and sell an additional 480,000 shares.

(2)

Based on shares of common stock outstanding as of May 31, 2007. Unless otherwise indicated, information contained in this prospectus regarding the number of shares of our common stock outstanding after this offering does not include an aggregate of up to 1,742,127 shares comprised of: up to 480,000 shares issuable by us upon exercise of the underwriters’ over-allotment option; 1,009,177 shares issuable upon the exercise of outstanding stock options with a weighted average exercise price of $11.57 per share; and an aggregate of 252,950 shares reserved for future issuance under our stock option plan.

Summary Consolidated Financial and Other Data

The summary information presented below at or for each of the years presented is derived in part from our audited consolidated financial statements. The following information is only a summary and you should read it in conjunction with our audited consolidated financial statements and notes beginning on page F-1. On September 5, 2006, we acquired Choice Bank. The results of operations for 2006 include the operations of Choice Bank for the period from September 5, 2006 to December 31, 2006.


	At or For the Three Months Ended March 31,				At or For the Years Ended December 31,
	2007		2006		2006		2005		2004		2003		2002
	(Dollars in thousands, except for share and per share data)
Selected Income Data:
Interest income	$	29,397	$	18,304	$	89,906	$	57,086	$	33,873	$	25,952	$	20,741
Interest expense		12,323		5,893		32,556		15,761		8,344		8,219		8,185

Net interest income		17,074		12,411		57,350		41,325		25,529		17,733		12,556
Provision for loans losses		1,330		600		2,821		2,350		1,750		2,325		1,266

Net interest income after provision for loan losses		15,744		11,811		54,529		38,975		23,779		15,408		11,290
Non-interest income		2,674		1,372		5,917		4,779		4,542		3,723		3,407
Non-interest expense		9,431		6,316		27,827		19,846		15,339		12,875		11,359

Income before income taxes		8,987		6,867		32,619		23,908		12,982		6,256		3,338
Provision for income taxes		3,399		2,424		11,743		8,281		4,464		2,155		1,093

Net income	$	5,588	$	4,443	$	20,876	$	15,627	$	8,518	$	4,101	$	2,245

Share Data:
Earnings per share — basic	$	0.41	$	0.35	$	1.58	$	1.27	$	0.72	$	0.44	$	0.24
Earnings per share — diluted		0.39		0.34		1.52		1.19		0.70		0.38		0.21
Book value per share		8.19		5.57		7.79		5.11		3.59		2.73		2.34
Tangible book value per share		6.74		5.57		6.33		5.11		3.59		2.73		2.34
Shares outstanding at period end⁽¹⁾		13,724,114		12,684,420		13,687,109		12,463,798		12,119,898		9,384,384		9,368,320
Weighted average shares outstanding — basic⁽¹⁾		13,696,855		12,613,539		13,173,918		12,353,391		11,831,392		9,321,920		9,653,936
Weighted average shares outstanding — diluted⁽¹⁾		14,170,469		13,220,640		13,750,641		13,153,299		12,194,508		10,774,384		10,699,984
Selected Balance Sheet Data:
Cash and cash equivalents	$	36,261	$	56,767	$	35,479	$	49,773	$	84,129	$	34,759	$	19,985
Investments and other securities		57,565		73,464		65,324		73,247		60,784		45,902		50,235
Loans held for sale		62,392		24,154		34,053		11,861		9,379		4,182		3,018
Gross loans, including net deferred loan fees		1,168,478		691,194		1,015,643		646,179		523,391		386,721		287,131
Allowance for loan losses		12,530		8,947		11,200		8,314		6,051		4,768		3,546
Assets		1,384,783		872,708		1,209,518		806,297		700,715		489,525		378,611
Deposits		1,151,226		724,667		986,271		645,465		572,330		392,441		290,892
Junior subordinated debt		38,661		18,042		38,661		18,042		18,042		12,887		7,500
Stockholders’ equity		112,399		70,704		106,628		63,694		43,450		25,665		21,957
Selected Other Balance Sheet Data:
Average assets	$	1,284,435	$	839,914	$	980,287	$	747,058	$	571,950	$	437,623	$	330,696
Average interest-earning assets		1,211,543		799,468		928,250		708,909		538,532		402,782		303,724
Average stockholders’ equity		109,905		67,887		88,016		52,710		36,979		23,133		20,834

(Notes on following page.)


	At or for the Three Months Ended March 31,				At or For the Years Ended December 31,
	2007		2006		2006		2005		2004		2003		2002
Selected Capital Ratios:
Leverage ratio	10.3	%	10.6	%	10.5	%	10.4	%	8.8	%	7.1	%	7.5	%
Tier 1 risk-based capital ratio	9.5		10.9		10.5		10.9		9.3		7.8		8.6
Total risk-based capital ratio	10.4		12.0		11.6		12.2		11.4		9.8		9.8
Selected Financial and Performance Data:
Return on average assets⁽²⁾	1.8	%	2.2	%	2.1	%	2.1	%	1.5	%	0.9	%	0.7	%
Return on average stockholders’ equity⁽²⁾	20.6		26.5		23.7		29.6		23.0		17.7		10.8
Net interest rate spread⁽²⁾⁽³⁾	4.9		5.3		5.2		5.0		4.2		4.0		3.6
Net interest margin⁽²⁾⁽⁴⁾	5.7		6.3		6.2		5.8		4.7		4.4		4.1
Efficiency ratio⁽⁵⁾	47.8		45.8		44.0		43.0		51.0		60.0		71.2
Loan to deposit ratio	101.5		95.4		103.0		100.1		91.4		98.5		98.7
Average earning assets to average interest-bearing liabilities	120.7		133.9		129.2		137.0		136.6		120.5		119.5
Average stockholders’ equity to average assets	8.6		8.1		9.0		7.1		6.5		5.3		6.3
Selected Asset Quality Ratios:
Non-performing loans to gross loans⁽⁶⁾	0.01	%	0.07	%	0.01	%	0.19	%	0.09	%	1.23	%	2.31	%
Non-performing assets to total assets⁽⁷⁾	0.02		0.07		0.07		0.15		0.15		0.97		1.76
Allowance for loan losses to gross loans	1.1		1.3		1.1		1.3		1.2		1.2		1.2
Allowance for loan losses to non-performing loans	9,789.1		1,860.1		8,484.8		683.2		1,276.6		100.5		53.4
Net charge-offs to average loans outstanding	—		—		0.07		0.01		0.11		0.33		0.01
Selected Other Data:
Number of full service branch offices	12		9		12		9		9		8		8

(1)	Reflects stock splits.

(2)	Annualized for the three months ended March 31, 2007 and 2006.

(3)	Net interest spread represents average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.

(4)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

(5)	Efficiency ratio represents non-interest expenses as a percentage of the total of net interest income plus non-interest income.

(6)	Non-performing loans are defined as loans that are past due 90 days or more plus loans placed in non-accrual status.

(7)	Non-performing assets include non-performing loans plus other real estate owned.

RISK FACTORS

You should consider carefully the following risk factors before deciding whether to invest in our common stock. Our business could be harmed by any or all of these risks. The trading price of our common stock could decline significantly due to any of these risks, and you may lose all or part of your investment. In assessing these risks you should also refer to the other information contained in this prospectus, including our consolidated financial statements and related notes.

Risks Related To Our Business

Our current primary market area is substantially dependent on gaming and tourism revenue, and a downturn in gaming or tourism could hurt our business and our prospects.

Our business is currently concentrated in the greater Las Vegas market area. The economy of the greater Las Vegas market area is unique in the United States for its level of dependence on services and industries related to gaming and tourism. Any event that negatively affects the gaming or tourism industry will adversely affect the Las Vegas economy.

Gaming and tourism revenue (whether or not such tourism is directly related to gaming) is vulnerable to fluctuations in the national economy. A prolonged downturn in the national economy could have a significant adverse effect on the economy of the Las Vegas area. Virtually any development or event that could dissuade travel or spending related to gaming and tourism, whether inside or outside of Las Vegas, could adversely affect the Las Vegas economy. In this regard, the Las Vegas economy is more susceptible than the economies of other cities to issues such as higher gasoline and other fuel prices, increased airfares, unemployment levels, recession, rising interest rates, and other economic conditions, whether domestic or foreign. Gaming and tourism are also susceptible to certain political conditions or events, such as military hostilities and acts of terrorism, whether domestic or foreign. A terrorist act, or the mere threat of a terrorist act, may adversely affect gaming and tourism and the Las Vegas economy and may cause substantial harm to our business.

In addition, Las Vegas competes with other areas of the country for gaming revenue, and it is possible that the expansion of gaming operations in other states, such as California, as a result of changes in laws or otherwise, or the expansion of gaming operations in other countries could significantly reduce gaming revenue in the Las Vegas area.

Although we have no substantial customer relationships in the gaming and tourism industries, a general downturn in the Las Vegas economy, could have an adverse effect on our customers and result in an increase in loan delinquencies and foreclosures, a reduction in the demand for our products and services and a reduction in the value of the collateral for our loans which could result in the reduction of a customer’s borrowing power, any of which could adversely affect our business, financial condition and results of operations.

The greater Las Vegas and Phoenix/Scottsdale economies each have grown dramatically during the past several years. The failure of these economies to sustain such growth in the future could seriously affect Silver State’s ability to grow.

Las Vegas and Phoenix, the primary markets in which we operate, each have experienced dramatic economic growth for many years, which has fueled a demand for our loans and deposit products. Failure to sustain this growth or deterioration in local, regional, national or global economic conditions could result in, among other things, an increase in loan delinquencies, a decrease in property values, a change in housing turnover rate or a reduction in the level of bank deposits. Particularly, a weakening of the real estate or employment market in the Las Vegas area (which is our single largest market), could result in an increase in the number of borrowers who default on their loans and a reduction in the value of the collateral securing their loans. These events could have an adverse effect on our profitability and asset quality.

Future development in the greater Las Vegas and Phoenix/Scottsdale areas may be subject to the availability of water. We cannot assure that governmental officials will not impose building moratoria, restrictive building requirements, water conservation measures, or other measures to address water shortages. Such restrictions could curtail future development, which has been a source of growth in our loan portfolio, or make living conditions less desirable than current conditions, which could reduce the influx of new residents from current levels and have an adverse effect on our ability to grow and generate loans.

Land values in Nevada are influenced by the amount of land sold by the federal Bureau of Land Management, which controls 87% of Nevada’s land, according to the Nevada State Office of the Bureau of Land Management. Changes to the federal Bureau of Land Management distribution policies on Nevada land could adversely affect the value of Nevada real estate, which in turn could have an adverse effect on our loan portfolio and our ability to generate loans in the future.

Changes in interest rates could adversely affect our results of operations and financial condition.

Our profitability is dependent to a large extent upon net interest income, which is the difference (or “spread”) between the interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities. Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability.

Changes in the interest rate environment can affect both our net interest income and our non-interest income. Floating rate loans, short-term borrowings and savings and time deposit rates are generally influenced by short-term rates. During 2006, the Board of Governors of the Federal Reserve System, or the Federal Reserve Board, raised the overnight borrowing, or the Federal funds rate, four times, for a total increase of 100 basis points since December 31, 2005, with the Federal funds rate ending the year at 5.25%. The Federal funds rate remained at 5.25% through the first quarter of 2007. Our prime lending rate had a corresponding increase, from 7.25% to 8.25%, resulting in an increase in the rates on floating rate loans as well as the rates on new fixed-rate loans. More significantly, the increase in short-term rates also resulted in increased funding costs, with short-term borrowings immediately repricing to higher rates and deposit rates, although more discretionary, increasing due to competitive pressures. Additionally, as rates increased customers shifted funds from lower rate core demand and savings accounts to fixed-rate certificates of deposit in order to lock in higher rates. This had a negative impact on our net interest income and net interest margin in the fourth quarter of 2006, in the first quarter of 2007 and in April and May of 2007. In addition, if interest rates remain stable over the short term, we would anticipate our deposits to reprice upward resulting in a continued negative impact on our net interest income and net interest margin.

In the future, our earnings may be adversely affected by a decrease in interest rates because 96% of our interest-earning assets are variable rate instruments that will reprice faster than our interest-bearing liabilities, which may result in further compression of our net interest margin. However, if interest rates increase, we anticipate that our profitability measured by net interest income and net interest margin would increase. As a result of our large percentage of variable rate loans, it is possible that during a period of rising interest rates the amount of interest charged to our customers may increase which, if coupled with an overall decline in customers’ cash flows from operations, could result in an increase in loan delinquencies and correspondingly result in an increase of our provision for loan losses.

Because we compete primarily on the basis of the interest rates we offer depositors and the terms of loans we offer borrowers, our margins could decrease if we are required to increase deposit rates or lower interest rates on loans in response to competitive pressures.

We face intense competition both in making loans and attracting deposits. The Las Vegas and Phoenix/Scottsdale market areas have a high concentration of financial institutions, many of which are branches of large

national and regional banks, which have resulted from the consolidation of the banking industry in our market areas and surrounding states. Some of these competitors have significantly greater resources than we do and may offer services that we do not provide such as trust and investment related services. Customers who seek “one stop shopping” may be drawn to these institutions.

We compete primarily on the basis of the rates we pay on deposits and the rates and other terms we charge on the loans we originate, as well as the quality of our customer service. Our competition for loans comes principally from commercial banks, savings institutions, credit unions, finance companies and insurance companies operating locally and elsewhere. Price competition for loans is expected to continue, and may intensify, as a result of additional de novo bank entrants into our marketplace and the pricing strategies of our larger competitors. Price competition for loans is expected to adversely affect the yields we can obtain on our loan portfolio. Price competition for deposits has adversely affected our ability to generate low cost core deposits in our primary market areas sufficient to fund our asset growth. As a result we have sought alternative funding through borrowings and may need to more aggressively price our deposit products resulting in an increase in our costs of funding and a reduction in our net interest margin.

Our most direct competition for deposits comes from commercial banks, savings banks, savings and loan associations and credit unions. There are large national and regional financial institutions operating throughout our market areas, and we also face strong competition from other community-based financial institutions. If interest rates continue to rise, we would expect to face additional significant competition for deposits from short-term money market funds and other corporate and government securities funds and from brokerage firms and insurance companies, in addition to national and regional financial institutions. To the extent the equity markets continue to improve, we would also expect significant competition from brokerage firms and mutual funds. Price competition for deposits might result in us attracting or retaining fewer deposits or paying more on our deposits.

During the fourth quarter of 2006 we began to experience some narrowing of our net interest margin reflecting competitive pricing pressure in both loans and deposits, which has resulted in overall lower interest rate spreads than in prior periods. The competitive pricing pressure has continued into the first quarter of 2007. If the competition we experienced in the fourth quarter of 2006 and the first quarter of 2007 in the form of higher deposit rates offered by local financial institutions continues for the balance of 2007, it could have the effect of increasing our cost of funds to a level higher than we have experienced historically, adversely affecting our net interest margin.

Our growth and expansion strategy may not prove to be successful and our market value and profitability may suffer.

Growth through acquisitions of banks or the organization of new banks in high-growth markets, including in markets outside of our current markets, represents an important component of our business strategy. At this time, we have no agreements or understandings to acquire any financial institutions or financial services providers. Any future acquisitions will be accompanied by the risks commonly encountered in acquisitions. These risks include, among other things:

•

difficulty of integrating operations and personnel;

•

potential disruption of our ongoing business; and

•

inability of our management to maximize our financial and strategic position by the successful implementation of uniform product offerings and the incorporation of uniform technology into our product offerings and control systems.

We expect that competition for suitable acquisition candidates may be significant. We may compete with other banks or financial service companies with similar acquisition strategies, many of which are larger and have greater financial and other resources. We cannot assure you that we will be able to identify successfully and acquire suitable acquisition targets on acceptable terms and conditions.

In addition to the acquisition of existing financial institutions, we may consider the organization of new banks in new market areas. We do not have any current plan to organize a new bank. Any acquisition or organization of a new bank carries with it numerous risks, including the following:

•

the inability to obtain all required regulatory approvals;

•

significant costs and anticipated operating losses during the application and organizational phases, and the first years of operation of the new bank;

•

the inability to secure the services of qualified senior management;

•

the local market may not accept the services of a new bank owned and managed by a bank holding company headquartered outside of the market area of the new bank;

•

the inability to obtain attractive locations within a new market at a reasonable cost; and

•

the additional strain on management resources and internal systems and controls.

We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions and the organization of new banks. Our inability to overcome these risks could have an adverse effect on our ability to achieve our business strategy and maintain our market value and profitability growth.

If we continue to grow rapidly as planned, we may not be able to control costs and maintain our asset quality.

We expect to continue to grow our assets and deposits, the products and services which we offer and the scale of our operations, generally, both internally and through acquisitions. Our ability to manage our growth successfully will depend on our ability to maintain cost controls and asset quality while attracting additional loans and deposits on favorable terms. If we grow too quickly and are not able to control costs and maintain asset quality, this rapid growth could materially adversely affect our financial performance.

We may have difficulty managing our growth, which may divert resources and limit our ability to expand our operations successfully.

Our rapid growth has placed, and it may continue to place, significant demands on our operations and management. Our future success will depend on the ability of our officers and other key employees to continue to implement and improve our operational, credit, financial, management and other internal risk controls and processes and our reporting systems and procedures, and to manage a growing number of client relationships. We may not successfully implement improvements to our management information and control systems and control procedures and processes in an efficient or timely manner and may discover deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate an increase in expected loan volume and the infrastructure that comes with new branches and banks. Thus, our growth strategy may divert management from our existing businesses and may require us to incur additional expenditures to expand our administrative and operational infrastructure. If we are unable to manage future expansion in our operations, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth, any one of which could adversely affect our business.

Our growth could be hindered unless we are able to recruit additional qualified employees.

The markets in which we operate are experiencing a period of rapid growth, placing a premium on highly qualified employees in a number of industries, including the financial services industry. Our business plan includes, and is dependent upon, our hiring and retaining highly qualified and motivated executives and employees at every level, and, in particular, experienced loan officers and branch managers. We expect to experience substantial competition in our endeavor to identify, hire and retain the top-quality employees that we believe are key to our future success. If we are unable to hire and retain qualified employees, we may not be able to grow our franchise and successfully execute our business strategy.

Our business would be harmed if we lost the services of one or more of our senior management team or senior relationship bankers.

We believe that our success to date has been substantially dependent on our senior management team, which includes Corey L. Johnson, our President and Chief Executive Officer, Michael J. Threet, our Chief Operating and Chief Financial Officer, Calvin D. Regan, President of Silver State Bank, Douglas E. French, our Executive Vice President — Commercial Real Estate Lending, and certain of our senior relationship bankers. We also believe that our prospects for success in the future are dependent on retaining our senior management team and senior relationship bankers. In addition to their skills and experience as bankers, these persons provide us with extensive community ties upon which our competitive strategy is based. The loss of the services of any of these persons could have an adverse effect on our business if we are unable to replace them with equally qualified persons who are also familiar with our market areas. In particular, Mr. French has primary responsibility for managing borrowing relationships that generated loan fees totaling $3.4 million during 2006, representing 39% of our total loan fee income. Although the contribution to income attributable to Mr. French is expected to decline in future periods due to his taking on more management oversight responsibilities, we cannot assure you that we would continue to receive all or a substantial portion of the loan income previously attributable to Mr. French should his employment with the Company terminate.

We have a limited operating history and have not been through a variety of business cycles. This makes it difficult to evaluate our future prospects and may increase the risk that we will continue to be successful.

We began operations in 1996 and since that time the Las Vegas market has had 10 years of positive economic growth. As a result, we do not have an operating history during a variety of business cycles for you to evaluate in assessing our future prospects. You must consider our business and prospects in light of the risks and difficulties we will encounter if the Las Vegas and/or the Phoenix/Scottsdale economies experience a downturn. We may not be able to address these risks and difficulties successfully, which could materially harm our business and operating results. In particular, to the extent we were to experience a downturn in the local and regional economy following our rapid growth, our business, financial condition and results of operations may be adversely affected.

Changes in the regulation of financial services companies could adversely affect our business.

Proposals for further regulation of the financial services industry are continually being introduced in Congress and various state legislatures. The agencies regulating the financial services industry also periodically adopt changes to their regulations. It is possible that one or more legislative proposals may be adopted or regulatory changes may be made that would have an adverse effect on our business.

Many of our loans have been made recently, and in certain circumstances there is limited repayment history against which we can fully assess the adequacy of our allowance for loan losses. If our allowance for loan losses is not adequate to cover actual loan losses, our earnings will decrease.

The risk of nonpayment of loans is inherent in all lending activities, and nonpayment, if it occurs, may negatively affect our earnings and overall financial condition, as well as the value of our common stock. Also, some of our loans have been made over the last three years and in certain circumstances there is limited repayment history against which we can fully assess the adequacy of our allowance for loan losses. We make various assumptions and judgments about the collectibility of our loan portfolio and provide an allowance for loan losses based on several factors. If our assumptions are wrong, our allowance for loan losses may not be sufficient to cover our losses, which would have an adverse effect on our operating results. Additions to our allowance for loan losses decrease our net income. While we have not experienced any significant charge-offs or had large numbers of nonperforming loans, due to the significant increase in loans originated during this period we cannot assure you that we will not experience an increase in delinquencies and losses as these loans continue to mature. The actual amount of future provisions for loan losses cannot be determined at this time and may exceed the amounts of past provisions.

Our dependence on loans secured by real estate subjects us to risks relating to fluctuations in the real estate market and related interest rates, environmental risks and legislation that could result in significant additional costs and capital requirements that could adversely affect our assets and results of operations.

A significant portion of our loan portfolio is secured by real estate. Real estate served as the principal source of collateral with respect to approximately 90% of our loan portfolio at March 31, 2007 and approximately 89% of our loan portfolio at both December 31, 2006 and December 31, 2005. Our markets have experienced a sharp increase in real estate values in recent years, in part as the result of historically low interest rates. A decline in economic conditions or rising interest rates could have an adverse effect on the demand for new loans, the ability of borrowers to repay outstanding loans, the value of real estate and other collateral securing loans and the value of real estate owned by us, as well as our financial condition and results of operations in general and the market value of our common stock.

Acts of nature which may cause uninsured damage and other loss of value to real estate that secures these loans may also adversely affect our financial condition. In the course of business, we may acquire, through foreclosure, properties securing loans that are in default. In commercial real estate lending, there is a risk that hazardous substances could be discovered on these properties. In this event, we might be required to remove these substances from the affected properties at our sole cost and expense. The cost of this removal could substantially exceed the value of affected properties. We may not have adequate remedies against the prior owner or other responsible parties or could find it difficult or impossible to sell the affected properties, which could adversely affect our business, financial condition and operating results.

In December 2006, banking regulators issued guidance regarding high concentrations of real estate loans within bank lending portfolios. The guidance requires institutions that exceed certain levels of real estate lending to maintain higher capital ratios than institutions with lower concentrations, if they do not have appropriate risk management policies and practices in place. Although our management believes it has implemented appropriate risk management policies and practices, there are no guarantees that our regulators will reach the same conclusions at each examination. A contrary regulatory conclusion could adversely affect our business and result in a requirement for increased capital levels, and capital may not be available at that time.

Our concentration in real estate construction and land loans subjects us to risks such as inadequate security for repayment of those loans and fluctuations in the demand for those loans based on changes in the real estate market.

We have a high concentration in real estate construction and land loans. At March 31, 2007, approximately 33% of our lending portfolio was classified as real estate construction loans and 33% of our lending portfolio was classified as land loans, in each case including SBA loans. Construction lending involves additional risks when compared to permanent residential or commercial real estate lending because funds are advanced upon the security of the project, which is of uncertain value prior to its completion. Because of the uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to determine accurately the total funds required to complete a project and the related loan-to-value ratio. Construction lending also typically involves higher loan commitment levels than residential lending.

In addition, during the term of a construction loan, no payment from the borrower typically is required since the accumulated interest is added to the principal of the loan through an interest reserve. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction and may incur a loss.

Land loans involve additional risks because the length of time from financing to completion of a development project is significantly longer than for a traditional construction loan, which makes them more

susceptible to declines in real estate values, declines in overall economic conditions which may delay the development of the land and changes in the political landscape that could affect the permitted and intended use of the land being financed. In addition, during this long period of time from financing to completion, the collateral does not generate any cash flow to support the debt service.

Our non-interest income is significantly affected by our continued ability to originate, sell and service SBA loans.

Our non-interest income is significantly affected by our ability to generate new SBA loans. Approximately 70% of our other non-interest income for 2006 was generated from the sale of loans, which primarily represented the sale of SBA loans. Increases in interest rates and changes in other economic conditions could result in decreased SBA loan demand as well as lower gains on sale.

SBA lending is a federal government created and administered program. As such, legislative and regulatory developments can affect the availability and funding of the program. This dependence on legislative funding and regulatory restrictions from time to time causes limitations and uncertainties with regard to the continuation of the program, with a resulting potential adverse financial effect on our business. Currently, the maximum limit on individual SBA 7A loans is $2 million. Any reduction in this level could adversely affect the volume of our business. Since our SBA business constitutes a significant portion of our lending program, our dependence on this government program and its periodic uncertainty relative to availability of the program funding and its general availability creates greater risk for our business than do more stable aspects of our business.

Our business is subject to liquidity risk, and changes in our source of funds may adversely affect our performance and financial condition by increasing our cost of funds.

Our ability to make loans is directly related to our ability to secure funding. Core deposits are our primary source of liquidity. We also use the national certificate of deposit, or CD, markets, which are generally CDs purchased by other financial institutions, and brokered CDs. Both the national CD market and brokered CDs are rate sensitive. We also rely on advances from the FHLB of San Francisco as a funding source. Payments of principal and interest on loans and sales and participations of eligible loans are also a primary source for our liquidity needs. Primary uses of funds include withdrawal of and interest payments on deposits, originations of loans and payment of operating expenses. Core deposits represent a significant source of low-cost funds. Alternative funding sources such as large balance time deposits or borrowings are a comparatively higher-cost source of funds. Liquidity risk arises from the inability to meet obligations when they come due or to manage unplanned decreases or changes in funding sources. Although we believe we can continue to pursue our core deposit funding strategy successfully, significant fluctuations in core deposit balances may adversely affect our financial condition and results of operations.

A large percentage of our deposits is attributable to a relatively small number of customers. Several of our large deposit customers have deposit balances that can fluctuate significantly. The loss of even a few of these customers or a significant decline in their deposit balances may have a material adverse effect on our liquidity and results of operations.

Our 20 largest depositors accounted for approximately 37.4% of our deposits and our five largest depositors accounted for approximately 26.7% of our deposits at March 31, 2007. We have provided loans to two of our 20 largest depositors at March 31, 2007. The total aggregate principal balance of these loans was $16.6 million at March 31, 2007. Our largest depositor as of March 31, 2007 accounted for 9.2% of our total deposits. Of our 20 largest depositors at March 31, 2007, two were related to each other (one of which is our largest depositor) representing 12.7% of our total deposits. Also, of our 20 largest depositors at March 31, 2007, four were entities affiliated with directors of Silver State Bank and Choice Bank representing 3.0% of our total deposits. As of any month ended in 2006 and for the three months ended March 31, 2007, we had up to three depositors who accounted for 5.0% of deposits at such times. The deposit terms offered to our 20 largest depositors are consistent with the terms offered to our other large depositors. Included among our 20 largest depositors are four depositors who as of March 31, 2007, accounted for $272.3 million, or 23.6%, of our deposits. The deposit balances of these four customers, which accounted for 23.6% of our deposits as of March 31, 2007, are considered for regulatory purposes to be brokered deposits, and constitute all our brokered deposits at that date.

Brokered deposits are generally considered to be deposits that have been received by us from a registered broker that is acting on behalf of that broker’s customer. Often, a broker will direct a customer’s deposits to the banking institution offering the highest interest rate available. Federal banking law and regulation places restrictions on depository institutions regarding brokered deposits because of the general concern that these deposits are at a greater risk of being withdrawn and placed on deposit at another institution offering a higher interest rate, thus posing liquidity risk for institutions that gather brokered deposits in significant amounts. The balances of our brokered deposits measured as of each month end from January 1, 2006 to March 31, 2007 have fluctuated, ranging from a high of $272.3 million, or 23.6% of total deposits to a low of $59.2 million, or 8.3%, of total deposits. Our brokered deposits pose a heightened risk of not being retained by us because these customers tend to be very rate sensitive in making their decisions as to the financial institution with which they choose to place their deposits.

Due to the nature of our larger customers’ businesses, the deposit balances they maintain with us may fluctuate significantly from month to month resulting in the list of our largest depositors similarly changing. For example, our two related large depositors are large financial services companies that provide financing services to other financial service companies, securities clearing services to brokerage firms and brokerage services to a large number of commercial and individual customers. Additionally, two of our six largest depositors are title insurance companies. Part of the services these financial services companies and title insurance companies provide to their customers includes holding short term account balances to facilitate the ordinary course of business of these customers. The monies for these account balances are placed on deposit with us. Due to the short term nature of the deposit balances maintained by the customers of our large depositors, the deposit balances maintained with us tend to fluctuate.

The loss of one or more of our 20 largest customers, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’ businesses, would adversely affect our liquidity and require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short term basis to replace such deposits. Depending on the interest rate environment and competitive factors, low cost deposits may need to be replaced with higher cost funding, resulting in a decrease in net interest income and net income.

Our business and results of operations could be harmed due to litigation associated with the collapse of Southwest Exchange, Inc. or Southwest Exchange.

Southwest Exchange, a former customer of Silver State Bank, is currently under investigation for the loss of funds belonging to Southwest Exchange’s customers, which loss has been estimated in newspaper articles to exceed $100.0 million. Southwest Exchange maintained certain deposit accounts with Silver State Bank. Although Southwest Exchange did not maintain custody or escrow accounts at Silver State Bank in the name of or for the benefit of customers of Southwest Exchange, Silver State Bank may become involved in protracted litigation as a result of the activities of Southwest Exchange. We previously were named as a defendant in one such lawsuit and, by agreement of the plaintiff, were dismissed from the lawsuit without prejudice. We were also named in another complaint (along with 29 other defendants) alleging negligence and fraud claims. The amount in question in this lawsuit is approximately $4.9 million. That complaint was not served on Silver State Bank. In addition, we were recently named as a defendant in another action (along with 28 other named defendants), claiming causes of action for conversion, breach of fiduciary duty and negligence, and claiming Civil RICO violations. Silver State Bank has not been served with this complaint. The amount in question in this lawsuit is approximately $900,000. Silver State Bank was also recently named as a defendant in another similar action (along with 40 other named defendants), claiming causes of action for elder abuse, conversion, breach of fiduciary duty, negligence and constructive trust and claiming civil RICO violations and requesting damages. Silver State Bank has been served with this complaint. The amount in question in this lawsuit is approximately $2.5 million.

We believe the allegations against us in these lawsuits are without merit and we intend to vigorously defend these and any other future lawsuits pertaining to this matter. However, if we are not dismissed from these

lawsuits or are included in other litigation regarding Southwest Exchange, our employees, officers and directors may be required to expend substantial amounts of time in connection with such litigations which will prevent them from concentrating on our normal business. In addition, we may be required to spend substantial sums on legal representation in connection with any such litigation.

Risks Related To The Offering

Our Articles of Incorporation and Code of Bylaws and certain laws and regulations may prevent certain transactions, including a sale or merger of Silver State Bancorp, which may adversely affect the price of our common stock.

Provisions of our Articles of Incorporation and Code of Bylaws, federal regulations and various other factors may make it more difficult for companies or persons to acquire control of us without the consent of our Board of Directors. The factors that may discourage takeover attempts or make them more difficult include:

•

Articles of Incorporation, Code of Bylaws and statutory provisions. Provisions of our Articles of Incorporation and Code of Bylaws and of Nevada law may make it more difficult and expensive to pursue a takeover attempt that our Board of Directors opposes. These provisions also make more difficult the removal of our current directors or management, or the election of new directors. These provisions include:

•

limitations on voting rights of the beneficial owners of more than 10% of our common stock;

•

supermajority voting requirements for certain business combinations and changes to some provisions of our Articles of Incorporation and Code of Bylaws;

•

the election of directors to staggered terms of three years;

•

provisions regarding the timing and content of stockholder proposals and nominations;

•

provisions restricting the calling of special meetings of stockholders;

•

the absence of cumulative voting by stockholders in the election of directors; and

•

limitations imposed by Nevada law on business transactions with certain significant stockholders.

•

Bank Regulatory Approvals. The acquisition of specified amounts of our common stock (in some cases, the acquisition of more than 5% of our common stock) may require certain regulatory approvals, including the approval of the Federal Reserve and one or more of our state banking regulatory agencies. The filing of applications with these agencies and the accompanying review process can take several months. Additionally, any corporation, partnership or other company that becomes a bank holding company as a result of acquiring control of us would become subject to regulation as a bank holding company under the Bank Holding Company Act of 1956, as amended, or the BHC Act.

•

Significant ownership by directors and executive officers. Following the offering, our directors and executive officers, directly and through our employee stock benefit plans, are expected to own in the aggregate approximately 31% of our common stock to be outstanding. This significant percentage ownership by our directors and executive officers could make it more difficult to obtain the required vote for a takeover or merger that management opposes.

Our directors and executive officers own a significant portion of our common stock and can exert significant control over our business and corporate affairs.

conflict with the interests of other holders of our common stock, and they may take actions affecting our company with which you disagree. In addition, Linda Yanke, the mother-in-law of the Chairman of our Board, is expected to beneficially own approximately 14.5% of our outstanding common stock. The Compensation Committee recently commenced discussions regarding its intention to grant options to purchase not more than 100,000 shares of our common stock to our named executive officers at some point after completion of this offering and prior to the end of this fiscal year. No decisions have been made as to when any such grants would be made, the recipients of such grants or the amount of such grants to any individual or the executive officers as a group. If such options are granted, it would increase the percentage of beneficial ownership of our common stock by our directors and executive officers. See “Principal Stockholders” and “Security Ownership of Management.”

Our banks’ ability to service our corporate debt and pay dividends is subject to regulatory limitations, which, to the extent we are not able to access those funds, may impair our ability to accomplish our growth strategy and pay our operating expenses.

We expect to use our earnings as capital for operations and expansion of our business. Silver State Bancorp is a legal entity separate and distinct from our subsidiary banks. Since we are a holding company with no significant assets other than the capital stock of our subsidiaries, we depend upon dividends from our subsidiaries for a substantial part of our revenue. Accordingly, our ability to pay dividends depends primarily upon the receipt of dividends or other capital distributions from our subsidiaries. Our subsidiaries’ ability to pay dividends to us is subject to, among other things, their earnings, financial condition and need for funds, as well as federal and state governmental policies and regulations applicable to us and each of those subsidiaries, which limit the amount that may be paid as dividends without prior approval. In addition, if any required payments on outstanding trust preferred securities are not made, we will be prohibited from paying dividends on our common stock.

As of March 31, 2007, Silver State Bank and Choice Bank were “adequately capitalized” for regulatory purposes. Therefore, as of March 31, 2007, Silver State Bank and Choice Bank had the unrestricted ability to pay dividends in an aggregate amount of approximately $20 million and to remain “adequately-capitalized.”

We currently do not pay a dividend on our common stock. For the foreseeable future, our Board of Directors intends to follow a policy of retaining earnings for the purpose of increasing our capital and supporting additional growth.

A substantial number of shares of our common stock will be eligible for sale in the near future, which could adversely affect our stock price and could impair our ability to raise capital through the sale of equity securities.

If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline significantly. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price we deem appropriate. Upon completion of this offering, we will have outstanding approximately 16,939,662 shares of common stock. All of the shares sold in this offering will be freely tradable, except for any shares purchased by our affiliates, as that term is defined by Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. We intend to file registration statements, on Forms S-8, under the Securities Act covering approximately 1.3 million shares of common stock reserved for issuance under our equity compensation plans. These registration statements are expected to be filed soon after the date of this prospectus and will automatically become effective upon filing. Approximately 5,020,173 shares of common stock, as well as 341,250 shares of common stock underlying our outstanding options held by our directors and executive officers, will be available for sale to the public 120 days after the date of this prospectus following the expiration of lock-up agreements with our directors and executive officers. As restrictions on resale imposed under the lock-up agreements end, the market price of our common stock could drop significantly if the holders of restricted shares sell them or are perceived by the market as intending to sell them. Although the lock-up agreements will have stated expiration dates, our directors and officers will be subject to other provisions of the securities laws that may limit their ability to sell shares.

We will retain broad discretion in using the net proceeds from this offering, and may not use the proceeds effectively.

Although we expect to use our earnings as capital for operations and expansion of our business, we have not designated the amount of net proceeds we will use for any particular purpose. Accordingly, our management will retain broad discretion to allocate the net proceeds of this offering. The net proceeds may be applied in ways with which you and other investors in the offering may not agree. Moreover, our management may use the proceeds for corporate purposes that may not increase our market value or make us profitable. In addition, it may take us some time to deploy the proceeds from this offering effectively in accordance with our intended uses. Until the proceeds are effectively deployed, our return on equity and earnings per share may be negatively affected. Management’s failure to utilize the proceeds effectively could have an adverse effect on our business, financial condition and results of operations.

As a result of this offering, we will become a public reporting company subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared.

As a result of this offering, we will become subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX. Section 404 requires annual management assessment of the effectiveness of our internal controls over financial reporting and a report by our independent auditors addressing these assessments. These reporting and other obligations will place significant demands on our management, administrative, operational, internal audit and accounting resources. We anticipate that we will need to upgrade our reporting systems and procedures, implement additional financial and management controls, enhance our internal audit function, and hire additional accounting and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating results and stock price. In addition, expenses related to services rendered by our accountants, legal counsel and consultants will increase in order to ensure compliance with these laws and regulations.

A public trading market for our common stock may not develop or be maintained and our stock may trade below the initial public offering price.

Our common stock is currently quoted on the OTC Bulletin Board. Trading activity on the OTC Bulletin Board may lack the depth, liquidity and orderliness necessary to maintain a liquid market. Although we have applied to list our common stock for quotation on the Nasdaq Global Market under the symbol “SSBX,” an established and liquid trading market may not develop or continue if it does develop, and, after completion of this offering, our common stock may not trade at or above the public offering price. Accordingly, investors should consider the potential lack of liquidity and the long-term nature of an investment in our common stock prior to investing. Investors may not be able to sell their shares at or above the public offering price.

Purchasers of our common stock will experience immediate dilution.

If you purchase shares of our common stock in this offering, you will experience immediate dilution of approximately 59% in the book value of your investment, in that our net tangible book value per share will be approximately $9.39, compared with an assumed offering price of $22.74 (based on the closing price of our common stock on June 20, 2007). Additionally, as of the date of this prospectus, we had outstanding options to purchase 1,009,177 shares at a weighted average exercise price of $11.57 per share. All of these options are held by our directors, executive officers and employees. The issuance of shares following the exercise of options will result in dilution of your ownership of our common stock.

FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements,” which may be identified by the use of such words as “may,” “believe,” “expect,” “intend,” “anticipate,” “should,” “plan,” “estimate,” “predict,” “continue” and “potential” or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations, plans, objectives, future performance or expectations and business that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, those described in the “Risk Factors” section and the following:

•

the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control;

•

there may be increases in competitive pressure among financial institutions or from non-financial institutions;

•

changes in the interest rate environment could adversely affect our results of operations and financial condition;

•

changes in gaming or tourism in our primary market area;

•

changes in accounting principles, policies or guidelines;

•

general economic conditions, either nationally or locally in some or all of the areas in which we do business, or conditions in the securities markets or the banking industry may be less favorable than we currently anticipate;

•

legislative or regulatory changes may adversely affect our business;

•

changes in management’s estimate of the adequacy of the allowance for loan losses;

•

litigation or matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than we anticipate;

•

changes in deposit flows, loan demand or real estate values may adversely affect our business;

•

technological changes may be more difficult or expensive than we anticipate; and

•

success or consumption of new business initiatives may be more difficult or expensive than we anticipate.

Any or all of our forward-looking statements in this prospectus and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. We do not intend to update any of the forward-looking statements after the date of this prospectus or to conform these statements to actual results. All forward-looking statements contained in this prospectus are expressly qualified by these cautionary statements.

USE OF PROCEEDS

The net offering proceeds will depend on the total number of shares of common stock sold in the offering, regulatory and market considerations, and the expenses incurred in connection with the offering. Although we will not be able to determine the actual net proceeds from the sale of the common stock until we complete the offering, we estimate the net proceeds to be $66.3 million, or $76.5 million if the underwriters exercise their over-allotment option, assuming an initial public offering price of $22.74 per share (based on the closing price of our common stock on June 20, 2007).

We expect to contribute approximately $30 million of the net proceeds to our bank subsidiaries, and will retain the remainder at our holding company. We will use the net offering proceeds for general corporate purposes, including but not limited to, the repayment of any amount outstanding under the $20 million 90-day non-revolving term loan facility, the formation of new banks in new market areas with attractive growth prospects, the acquisition of other commercial banks or financial services companies, the addition of new branches in existing and contiguous markets, and the development of additional products or services for new and existing customers. Funds invested in our subsidiary banks will be used to support additional internal growth. We currently have no present understandings or agreements or definitive plans concerning any specific acquisitions. Until the funds are utilized by our holding company or our subsidiary banks, the funds raised will be invested in short-term securities or federal funds sold.

DIVIDEND POLICY

Silver State Bancorp has never paid a cash dividend on its common stock. For the foreseeable future, the board of directors intends to follow a policy of retaining earnings for the purpose of increasing our capital to support additional growth.

The only funds available for the payment of dividends on our capital stock are cash and cash equivalents held by us, earnings from the investment of proceeds from the sale of common stock retained by us, dividends paid by Silver State Bank and Choice Bank to us, and borrowings. Silver State Bank and Choice Bank are prohibited from paying cash dividends to us if any such payment would reduce their capital below required capital levels.

Silver State Bank’s ability to pay dividends is governed by Nevada law and the regulations of the Nevada Financial Institutions Division. Choice Bank’s ability to pay dividends is governed by Arizona law and the regulations of the Arizona Department of Financial Institutions. Under Nevada law, Silver State Bank may not pay dividends unless the bank’s surplus fund, not including any initial surplus fund, equals the bank’s initial stockholders’ equity, including 10% of the previous year’s net profits, and the dividend would not reduce the bank’s stockholders’ equity below the initial stockholders’ equity of the bank or 6% of the total deposit liability of the bank.

Under Arizona law, Choice Bank may pay dividends on the same basis as any other Arizona corporation and a corporation may not make a distribution to stockholders, if to do so would render the corporation insolvent or unable to pay its debts as they become due. However, an Arizona bank may not declare a dividend, payable other than in the bank’s stock, out of capital surplus without required approval.

For more information regarding the capital distribution regulations applicable to Silver State Bank and Choice Bank and restrictions on the ability of Silver State Bank or Choice Bank to lend funds or make other payments to Silver State Bancorp, see “Supervision and Regulation — Capital Standards — Dividends.”

TRADING HISTORY

Our common stock is currently listed on the OTC Bulletin Board under the symbol “SSBX.OB.” In connection with this offering we are applying to have our common stock quoted on the Nasdaq Global Market under the symbol “SSBX.” We currently have 13 market makers.

At the close of business on May 31, 2007, there were 13,739,662 shares outstanding. The following table sets forth for the periods indicated the high and low sales prices per share of our common stock as reported by the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.


	Bid Information
	High		Low
2005
First Quarter	$	19.00	$	15.00
Second Quarter		17.88		15.50
Third Quarter		22.00		16.93
Fourth Quarter		22.50		18.50

2006
First Quarter		23.00		19.50
Second Quarter		22.95		20.75
Third Quarter		26.00		24.94
Fourth Quarter		26.00		23.35

2007
First Quarter		26.20		23.00
Second Quarter (through June 20, 2007)		23.89		22.10

On December 13, 2006, the business day immediately preceding the public announcement of the proposed offering, the closing price of our common stock, as reported on the OTC Bulletin Board, was $23.75 per share. On June 20, 2007, the closing price of our common stock was $22.74 per share and there were approximately 250 holders of record of our common stock.

CAPITALIZATION

The following table presents our consolidated capitalization and regulatory capital ratios at March 31, 2007. Our capitalization is presented on an actual and on an as adjusted basis, assuming the offering had been completed on March 31, 2007 based on the following assumptions:

•

the net proceeds to us in this offering, at an assumed initial offering price of $22.74 per share (based on the closing price of our common stock on June 20, 2007) after deducting underwriting discounts and commissions and estimated offering expenses payable by us in this offering of $6.4 million; and

•

the underwriters’ over-allotment option is not exercised.

The table below should be read in conjunction with our consolidated financial statements and related notes that are included in this prospectus. A change in the number of shares sold in the offering may affect materially the capitalization.


	At March 31, 2007
	Historical			As adjusted
	(Dollars in thousands)
Long term borrowings:
Junior subordinated debt	$	38,661		$	38,661
Other borrowings		50,000			50,000

Total long term borrowings	$	88,661		$	88,661

Stockholders’ equity:⁽¹⁾
Preferred stock, $.001 par value: 10,000,000 shares authorized, no shares issued or outstanding		$ —			$ —
Common stock, $.001 par value; 60,000,000 shares authorized; 14,261,447 shares issued; 13,724,114 shares outstanding, 16,924,114 outstanding on an adjusted basis		14			17
Additional paid-in capital		51,830			118,155
Retained earnings		62,733			62,733
Less cost of treasury stock, 537,333		(2,101	)		(2,101	)
Accumulated other comprehensive (loss)		(77	)		(77	)

Total stockholders’ equity		112,399			178,727

Total capitalization	$	201,060		$	267,388

Regulatory Capital Ratios:⁽²⁾
Leverage capital		10.3	%		15.5	%
Tier 1 capital		9.5	%		14.2	%
Total capital		10.4	%		15.1	%

(1)

On January 24, 2007, our stockholders approved an amendment to our Articles of Incorporation increasing the authorized number of shares of common stock to 60.0 million, reducing the par value of such stock to $.001, and creating a class of preferred stock in the amount of 10.0 million shares with a par value of $.001.

(2)

The net proceeds from our sale of common stock in this offering are presumed to be invested in securities which carry a 20% risk weighting for purposes of our risk-based capital ratios. If the over-allotment option is exercised in full, net proceeds would be $76.5 million, and our leverage capital ratio, Tier 1 capital ratio and our total capital ratio would have been 16.3%, 14.9% and 15.8%, respectively.

DILUTION

Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of our common stock in this offering and the net tangible book value per share of common stock immediately after this offering. Net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the number of outstanding shares of common stock. Our net tangible book value as of March 31, 2007 was $92.5 million, or $6.74 per share, based on the number of shares of common stock outstanding as of March 31, 2007.

After giving effect to the sale of the 3,200,000 shares of our common stock to be sold by us in this offering at an initial public offering price of $22.74 per share (based on the closing price of our common stock on June 20, 2007), and after deducting underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value at March 31, 2007 would have been approximately $158.8 million, or $9.39 per share. This amount represents an immediate increase in pro forma net tangible book value of $2.65 per share to existing stockholders and an immediate dilution of $13.35 per share to new investors. The dilution to investors in this offering is illustrated in the following table:


Initial public offering price per share			$	22.74
Net tangible book value per share prior to the offering	$	6.74
Increase in net tangible book value per share attributed to new investors		2.65

Pro forma net tangible book value per share after the offering				9.39

Dilution per share to new investors			$	13.35

The following table sets forth, as of March 31, 2007, on an adjusted basis as described above, the difference between the number of shares of common stock purchased from us by our existing stockholders and to be purchased from us by new investors in this offering, the aggregate cash consideration paid by our existing stockholders and to be paid by new investors in this offering and the average price per share paid by existing stockholders and to be paid by new investors in this offering. The table below is based upon an initial public offering price of $22.74 per share (based on the closing price of our common stock on June 20, 2007) before deducting estimated underwriting discounts and commissions and our estimated offering expenses.


	Shares Purchased			Total Consideration				Average Price per Share
	Number	Percent		Amount		Percent		Average Price per Share
	(Dollars in thousands)
Existing stockholders	13,724,114	81	%	$	41,603	36	%	$	3.03
New investors	3,200,000	19			72,768	64			22.74

Total	16,924,114	100	%	$	114,371	100	%	$	6.76

If the underwriters exercise their over-allotment option in full, our existing stockholders would own approximately 79% and our new investors would own approximately 21% of the total number of shares of our common stock outstanding after this offering.

The foregoing discussion and tables assume no exercise of stock options outstanding immediately following this offering. As of March 31, 2007, there were 1,022,950 shares of common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $11.38 per share. To the extent that any of these options are exercised there may be further dilution to new investors. In addition, you will incur additional dilution if we grant options, restricted stock or other rights to purchase our common stock in the future with exercise prices below the initial public offering price. The Compensation Committee recently commenced discussions regarding its intention to grant options to purchase not more than 100,000 shares of our common stock to our named executive officers at some point after completion of this offering and prior to the end of this fiscal year. No decisions have been made as to when any such grants would be made, the recipients of such grants or the amount of such grants to any individual or the executive officers as a group.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis reflects Silver State Bancorp’s financial statements and other relevant statistical data and is intended to enhance your understanding of our financial condition and results of operations. You should read the information in this section in conjunction with Silver State Bancorp’s Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements beginning on page F-1 of this prospectus, and the other statistical data provided elsewhere in this prospectus. Unless otherwise indicated, the financial information presented in this section reflects the consolidated financial condition and operations of Silver State Bancorp.

Executive Summary

We are a Nevada corporation formed on January 21, 1999 to acquire all of the issued and outstanding stock of Silver State Bank and to engage in the business of a bank holding company under the BHC Act of 1956, as amended. Silver State Bank was formed in July, 1996, as a commercial bank headquartered in Henderson, Nevada. On September 5, 2006 we acquired Choice Bank. Choice Bank is an Arizona state-chartered bank that was formed on January 28, 2002.

We provide a variety of loans to our customers, including construction and land loans, commercial real estate loans, commercial and industrial loans, SBA loans and to a lesser extent, residential real estate and consumer loans. We fund our loans primarily with locally generated deposits and borrowings to the extent needed.

Since commencing business, Silver State Bank has grown from one location in Henderson, Nevada to 10 branches in the greater Las Vegas market area. In 2006 we opened one new branch office and, on September 5, 2006, we acquired Choice Bank, with two branches in the greater Phoenix/Scottsdale market area. With the acquisition of Choice Bank, we became a multi-bank holding company and plan to continue operating both Choice Bank and Silver State Bank as separate bank subsidiaries for the foreseeable future. On November 16, 2006, we completed a systems and data conversion of Choice Bank. In addition, with our oversight, Choice Bank has modified its operating policies and procedures to conform to those of Silver State Bank. However, Choice Bank continues to review and establish its own lending limits as an entity and with respect to its individual loan officers.

While maintaining strong asset quality and improving profitability, we have sustained substantial asset growth since we opened. As of December 31, 2006 our ratio of non-performing assets to total assets of 0.07% and as of March 31, 2007 our ratio of non-performing assets to total assets was 0.02%. For the year ended 2006 our ratio of net charge-offs to average loans outstanding was 0.07% and for the three month period ended March 31, 2007 we had net charge-offs to average loans outstanding was 0.00%. The expansion of our construction, land acquisition and development and commercial and industrial lending has been the primary element of our growth. The primary source of funding for our asset growth has been the generation of core deposits which we accomplished by a combination of competitive pricing for local deposits coupled with expansion of our branch system. We have added three new branch offices over the past five years in the greater Las Vegas market area. Our acquisition of Choice Bank provided us with two new branch offices, an entry point into the Phoenix/Scottsdale market and the opportunity to expand our banking presence. We have also supplemented our deposit gathering through the use of borrowings, primarily from the FHLB.

We expect to fund our internal growth in the Nevada and Arizona markets by opening new branches and exploring additional acquisitions in new markets as they become available. During 2007, we expect to open two additional branches in Nevada and two additional branches in Arizona. We also expect to open four additional branches in Nevada during 2008, and plan to open additional branches in both markets in 2008 and beyond as conditions permit. We estimate that the cost of opening the four branches in 2007 will be approximately $4.5 million.

Our ability to continue to generate rapid internal growth and to take advantage of acquisition opportunities will be affected by our continued profitability, our ability to raise capital in this public offering, and our access to the capital markets in general. In 2004, we raised $4.9 million of net proceeds through a private placement of common stock and in 2006 we raised $10.7 million through another private placement of common stock. We have also added to regulatory capital through the issuance of junior subordinated debt to statutory trusts that have in turn privately issued trust preferred securities. The junior subordinated debt securities are generally included in Tier 1 capital for regulatory purposes. At March 31, 2007, we had $38.7 million outstanding of junior subordinated debt.

Our results of operations are largely dependent on net interest income. Net interest income is the difference between interest income we earn on interest-earning assets, which are comprised primarily of construction, land development and commercial real estate loans, and to a lesser extent commercial business, residential and consumer loans, and the interest we pay on our interest-bearing liabilities, which are primarily deposits and, to a lesser extent, other borrowings. Management strives to match the re-pricing characteristics of the interest-earning assets and interest-bearing liabilities to protect net interest income from changes in market interest rates and changes in the shape of the yield curve.

Net income during the first three months of 2007 increased by $1.1 million, or 25.8% primarily due to an increase in the average balance of our loan portfolio compared to the first three months of 2006. This increase was offset in part by a decrease in our net interest margin compared to the first three months of 2006. The decrease in the net interest margin for 2007 was the result of an increase in funding costs, specifically increases in deposit rates.

Net income during 2006 was affected by an increase in our net interest margin compared to 2005. The increase in the net interest margin for 2006 was the result of the increase in yields in all categories of our loan portfolio, reflective of an overall higher interest rate environment, while our cost of funds repriced more slowly. However, during the fourth quarter of 2006 we began to experience some narrowing of our net interest margin reflecting competitive pricing pressure in both loans and deposits, which has resulted in overall lower interest rate spreads than in prior periods. The competitive pricing pressure has continued into the first five months of 2007.

If the competition we experienced in the fourth quarter of 2006 and the first five months of 2007 in the form of higher deposit rates offered by local financial institutions, several of which are affiliated with significantly larger national and international financial institutions, continues for the balance of 2007, it could have the effect of increasing our cost of funds to a level higher than we have experienced historically. We continue to utilize FHLB advances and other wholesale funding sources to supplement our local sources of funds and as a means to lower our overall cost of funds.

We also have experienced strong competition in making loans in the form of intense pricing pressure on the interest rates we offer. To date, we have been successful in responding to this competition as evidenced by our loan portfolio growth and the increase in the average yield on our loan portfolio. However, price competition for loans is expected to continue, and may intensify, as a result of additional de novo bank entrants into our marketplace and the pricing strategies of our larger competitors. Price competition for loans is expected to have an adverse impact on the yields we can obtain on our loan portfolio.

Non-interest income for 2006 as compared to 2005, and for the three months ended March 31, 2007, compared to the three months ended March 31, 2006, continued to increase due to the gain on sale of loans, primarily consisting of SBA loans. Non-interest expense also continued to increase primarily due to the overall growth of our institution, which has required us to hire additional employees and add properties for new branches. In addition, non-interest expense for 2006 also increased due to the construction of our new administrative center. The increase is also attributable to accounting and legal fees associated with the increased size and complexity of the company.

Our future performance will depend on many factors including economic conditions, changes in interest rates, increasing competition for deposits and quality loans, and regulatory compliance burdens. We believe that

the impact from the national decline in sales of existing homes and in the median price of homes will be minimal on our future financial condition. Residential real estate loans represent 6.7% of our loan portfolio as of March 31, 2007, and we do not anticipate significantly increasing the percentage of residential home lending in the future. We believe the housing market should stabilize in our primary market areas within the next 12 to 18 months given continued solid in-migration and sharply decreased new home supply. Our primary lending businesses have not been adversely affected by the general decline in the residential housing market. Approximately 58% of our residential real estate loans as of March 31, 2007 are attributed to originations by Choice Bank. Choice Bank has developed a core competency in residential mortgage loans with principal balances in excess of the Federal National Mortgage Association single-family limit of $417,000 (commonly referred to as “non-conforming” or “jumbo” loans). We do not engage in sub-prime mortgage lending, which has been the riskiest sector of the residential housing market.

In the future, our earnings may be adversely affected by a decrease in interest rates because approximately 96% of our interest-earning assets are variable rate instruments that will reprice faster than our interest-bearing liabilities, which may result in further compression of our net interest margin. However, if interest rates increase, we anticipate that our profitability measured by net interest income and net interest margin would increase. As a result of our large percentage of variable rate loans, it is possible that during a period of rising interest rates the amount of interest charged to our customers may increase which, if coupled with an overall decline in those customers’ cash flows from operations, could result in an increase in loan delinquencies and correspondingly result in an increase in our provision for loan losses. Additionally, approximately 57% of our loan portfolio have maturities of less than one year, of which $293.1 million, or 25%, are construction loans that would need to be replaced with new construction loans in order to maintain and grow that portfolio. We have been successful in doing so due primarily to the strength of the real estate and construction market in the greater Las Vegas market area. Historically, we have been successful in renewing loans with our commercial borrowers on a regular basis, as evidenced by our history of significant loan growth. However, in the event of an economic downturn or a significant increase in interest rates we may not achieve the same success at renewing our short term loans, which would have an adverse impact on our results of operations.

Our 20 largest depositors accounted for approximately 37.4% of our deposits and our five largest depositors accounted for approximately 26.7% of our deposits at March 31, 2007. Our largest depositor as of March 31, 2007 accounted for 9.2% of our total deposits. Of our 20 largest depositors at March 31, 2007, two were related to each other (one of which is our largest depositor) representing 12.7% of our total deposits. Also, of our 20 largest depositors at March 31, 2007, four were entities affiliated with directors of Silver State Bank and Choice Bank representing 3.0% of our total deposits. Included among our 20 largest depositors are four depositors who as of March 31, 2007, accounted for $272.3 million, or 23.6%, of our deposits. The deposit balances of these four customers, which accounted for 23.6% of our deposits as of March 31, 2007, are considered for regulatory purposes to be brokered deposits, and constitute all our brokered deposits at that date. Brokered deposits are generally considered to be deposits that have been received by us from a registered broker that is acting on behalf of that broker’s customer. Often, a broker will direct a customer’s deposits to the banking institution offering the highest interest rate available. Federal banking law and regulation places restrictions on depository institutions regarding brokered deposits because of the general concern that these deposits are at a greater risk of being withdrawn and placed on deposit at another institution offering a higher interest rate, thus posing liquidity risk for institutions that gather brokered deposits in significant amounts. The balances of our brokered deposits measured as of each month end from January 1, 2006 to March 31, 2007 have fluctuated, ranging from a high of $272.3 million, or 23.6% of total deposits to a low of $59.2 million, or 8.3% of total deposits.

Our brokered deposits pose a heightened risk of not being retained by us because these customers tend to be very rate sensitive in making their decisions as to the financial institution with which they choose to place their deposits. Although the deposits of our four brokered deposit customers may meet the regulatory definition of a brokered deposit, we consider them to be corporate customers with which we either have or are in the process of building longer term customer relationships. Two of these customers have been our depositors for approximately four years.

We believe that our net income has not been, and do not expect it to be, adversely affected by the use of brokered short term deposits. As a general matter, we price brokered deposits separately from our pricing of deposits gathered through our local branch networks. Both historically and currently, our brokered deposits have had a lower average cost than time deposits gathered through our local branch network because we can offer rates to brokered deposit customers outside of our market area that are lower than the rates we offer through our local branch network. In addition, our brokered deposits have had a comparable cost to wholesale borrowings available through the use of Federal Home Loan Bank borrowings. As with all funding decisions, we continually analyze our various funding choices and price our deposit products, including brokered deposits, with a view towards obtaining the lowest cost funding while meeting our liquidity needs and achieving the best net interest margin possible. We carefully monitor the balances in our brokered accounts, the impact of movements in interest rates generally, the interest rates offered by local competitors, the rates offered by other institutions that access the brokered deposit market, the availability of wholesale borrowings and related costs of such funding sources. We also developed contingency funding plans in the event that we fail to retain one or more of our brokered deposit customers.

Due to the nature of our larger customers’ businesses, the deposit balances they maintain with us may fluctuate significantly from month to month resulting in the list of our largest depositors similarly changing. For example, our two related large depositors are large financial services companies that provide financing services to other financial service companies, securities clearing services to brokerage firms and brokerage services to a large number of commercial and individual customers. Additionally, two of our six largest depositors are title insurance companies. Part of the services these financial services companies and title insurance companies provide to their customers includes holding short term account balances to facilitate the ordinary course of business of these customers. Although the many individual account balances of the customers of our large financial services depositors tend to be smaller, when placed on deposit with us into our depositor’s account they result, in the aggregate, in a very large balance relative to our other accounts. Due to the short term nature of the deposit balances maintained by the customers of our large depositors, the deposit balances maintained with us tend to fluctuate.

The loss of one or more of our largest 20 customers, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’ businesses, would adversely affect our liquidity and require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short term basis to replace such deposits. Depending on the interest rate environment and competitive factors, low cost deposits may need to be replaced with higher cost funding, resulting in a decrease in net interest income and net income.

We believe that other non-interest expense items, including professional expenses and other costs related to compliance with the reporting requirements of the United States securities laws and compliance with the SOX, will increase significantly after we become a publicly traded company.

We believe that we are positioned for expansion within our market areas and that by expanding our presence, continuing to diversify our geographic sources of income, growing our deposit relationships, and maintaining our operating efficiency, we will be able to increase our profitability and enhance our franchise value.

Recent Developments

On June 25, 2007, in anticipation of completion of this offering, we received $20 million in financing pursuant to a 90-day non-revolving term loan. We contributed the proceeds of the loan to Silver State Bank and Choice Bank as capital, thus allowing them to be deemed “well capitalized” for regulatory purposes at June 30, 2007 without any reduction in assets. The FDIC determines the applicable insurance premium for each bank each quarter, based in part, on the bank’s regulatory capital classification as of each quarter end. If Silver State Bank and Choice Bank had failed to be deemed “well capitalized” at June 30, 2007, they each would have incurred increased premiums for deposit insurance. Silver State Bank and Choice Bank also would be required to obtain FDIC approval to gather brokered deposits during such times as they are considered to be “adequately capitalized” for regulatory capital purposes. Assuming we maintain our level of deposits at March 31, 2007 for the remainder of the year and if the two banks were to be classified as “adequately capitalized” for the remainder

of the year, we estimate that the resulting increase to our deposit insurance assessment would be approximately $581,000 for 2007. However, because we completed the $20 million financing, we believe that the impact of the increased deposit assessment due to the two banks being “adequately capitalized” at March 31, 2007 will be limited to only one fiscal quarter and will not be material to our 2007 results of operations. Although the $20 million financing will allow the two banks to be “well capitalized” as of June 30, 2007, it will not increase our consolidated capital or affect our capital status as a bank holding company. As a result of our continued growth, it is possible that at June 30, 2007, we as a bank holding company may be deemed to be “adequately capitalized.” We do not anticipate that failure to be “well capitalized” will have as an adverse impact on our business or results of operations. Further, upon completion of the offering we will be considered to be “well capitalized.” See “Supervision and Regulation—Bank Regulation—Insurance of Deposit Accounts” and “—Capital Standards.” Any amount of the $20 million term loan outstanding at the closing of this offering will be repaid in full with the proceeds of this offering.

Comparison of Financial Condition at December 31, 2006 and December 31, 2005 and at March 31, 2007 and December 31, 2006

Assets. Our total assets increased $403.2 million, or 50%, to $1.2 billion at December 31, 2006 as compared to $806.3 million at December 31, 2005. This increase was due primarily to internally generated loan growth at Silver State Bank. Total assets also increased $138.1 million during 2006 as a result of our acquisition of Choice Bank, which closed on September 5, 2006. Choice Bank’s total assets as of December 31, 2006 were $165.3 million. Our overall growth was supported by a private placement of common stock in the second quarter of 2006 resulting in net proceeds of $10.7 million and the issuance of $20.6 million of junior subordinated debt in the second half of 2006.

Our total assets increased $175.3 million, or 14%, to $1.4 billion at March 31, 2007 as compared to $1.2 billion at December 31, 2006. The increase is due primarily to internally generated loan growth.

Loans. Total loans were $1.0 billion at December 31, 2006, an increase of $369.5 million, or 57.2%, from $646.2 million on December 31, 2005. Construction and land loans made up a majority of the increase in our loans in 2006. Commercial real estate and commercial and industrial loans also increased. This growth was due in part to the addition of key loan officers in 2005 and 2006. Total loans acquired as a result of the Choice Bank acquisition were $98.3 million, primarily consisting of one- to four-family family residential loans and residential construction loans. Total loans at Choice Bank as of December 31, 2006 were $123.6 million.

Total loans were $1.2 billion at March 31, 2007, an increase of $152.8 million, or 15.0% from December 31, 2006. The majority of the loan growth was in construction and land loans, attributable to the reasons stated above pertaining to 2006.

The allowance for loan losses was 1.10% of gross loans at December 31, 2006 compared to 1.29% at December 31, 2005. The decrease in the percentage of allowance for loan losses to gross loans is primarily due to a change in the nature and composition of the allowance as a result of the company’s Arizona operation and a decrease in nonperforming loans. Net loan charge-offs were $598,000 for 2006. We had $132,000 in total non-performing loans at December 31, 2006 compared to $1.2 million at December 31, 2005.

The allowance for loan losses was 1.07% of gross loans at March 31, 2007 compared to 1.10% at December 31, 2006. Net loan charge-offs were zero for the quarter. We had $128,000 in total non-performing loans at March 31, 2007 compared to $132,000 at December 31, 2006.

Securities. Our investment portfolio consists mainly of AAA rated US government agency securities. Our securities are all classified as “available-for-sale” and are reported at fair value, with unrealized gains and losses excluded from earnings and instead reported as a separate component of stockholders’ equity.

At December 31, 2006 securities totaled $65.3 million, a decrease of $7.9 million, or 10.8%, from $73.2 million on December 31, 2005. The decrease in our securities portfolio was primarily due to strong demand for our loan products, which have a higher yield than investment securities. At December 31, 2006, most of our

securities had a contractual maturity date of five years or less. These medium to short-term maturities are consistent with our current primary focus and strategy to grow the loan portfolio while using our investment portfolio primarily for liquidity purposes.

At March 31, 2007 securities totaled $57.6 million, a decrease of $7.7 million or 11.8%, from $65.3 million on December 31, 2006. The decrease in our securities portfolio was primarily again due to strong loan demand. At March 31, 2007, most of our securities had a contractual maturity of five years or less.

Premises and Equipment. Our premises and equipment totaled $32.0 million at December 31, 2006, an increase of $12.0 million, or 60.3%, from $20.0 million at December 31, 2005. This increase was primarily due to the completion of our new administrative facility during 2006, the opening of one new branch and the property and equipment obtained in the acquisition of Choice Bank.

Our premises and equipment totaled $32.1 million at March 31, 2007 compared to $32.0 million at December 31, 2006.

Goodwill. Our goodwill totaled $18.9 million at December 31, 2006 compared to no goodwill or other intangible assets at December 31, 2005. The goodwill at year-end 2006 represents the primary intangible asset arising from the acquisition of Choice Bank. Our goodwill decreased to $18.8 million at March 31, 2007 due to an adjustment made in finalization of the purchase price allocation related to the acquisition of Choice Bank. In addition, the acquisition of Choice Bank resulted in a core deposit intangible which, as of March 31, 2007 and December 31, 2006, amounted to $1.1 million.

Cash and Cash Equivalents. Cash and cash equivalents totaled $35.5 million at December 31, 2006, a decrease of $14.3 million, or 28.7%, from $49.8 million at December 31, 2005. The decrease in cash and cash equivalents was primarily due to the acquisition of Choice Bank. We completed the acquisition of Choice Bank on September 5, 2006. The purchase price for this transaction, including fair value of replacement stock options and acquisition costs, was $31.6 million. The cash consideration paid to Choice Bank stockholders was $28.7 million. No stock consideration was paid other than the replacement stock options. Our focus for the past several years has been to maintain sufficient liquidity not only to satisfy daily operational cash flow needs as they arise from our deposit and administrative activities, but also to allow for adequate loan funding needs as they arise. We generally attempt to limit our cash and cash equivalents by investing our excess liquidity in higher yielding assets such as loans, securities or federal funds sold. See “—Liquidity and Capital Resources.”

Cash and cash equivalents (consisting of cash and due from banks and federal funds sold), totaled $36.3 million at March 31, 2007, an increase of $800,000, or 2.3% from $35.5 million at December 31, 2006.

Deposits. Total deposits were $986.3 million at December 31, 2006, an increase of $340.8 million or 52.8% from December 31, 2005. An increase in interest-bearing deposits was the primary reason for the increase in our deposits during 2006. Interest-bearing checking accounts increased $141.2 million, or 48.08%, to $434.9 million at December 31, 2006 from $293.7 million at December 31, 2005. Time deposits also increased $203.9 million, or 128.9%, to $362.1 million at December 31, 2006 from $158.2 million at December 31, 2005. These increases were driven by higher rates offered on our deposits and an increased focus on generating deposits from our existing customers. We also believe our deposit gathering efforts benefited from the establishment and maturation of our branch network. Total deposits also increased $103.5 million as a result of the Choice Bank acquisition. Total deposits at Choice Bank on December 31, 2006 were $129.4 million.

Total deposits were $1.2 billion at March 31, 2007, an increase of $165.0 million, or 16.7% from December 31, 2006. An increase in interest-bearing deposits was the primary reason for the increase in our deposits during the first quarter of 2007. Interest bearing checking accounts increased $87.7 million, or 20.2%, to $522.6 million from $434.9 million at December 31, 2006. Time deposits also increased $70.1 million, or 19.4% to $432.2 million at March 31, 2007 from $362.1 million at December 31, 2006. These increases were primarily due to the reasons stated above pertaining to 2006.

Borrowings. At December 31, 2006, we had $58.0 million in advances from the FHLB, $50.0 million of which were classified as long term borrowings and $8.0 million of which were classified as short term borrowings. Total borrowings from the FHLB have increased $4.0 million, or 7.41%, to $58.0 million at December 31, 2006 from $54.0 million at December 31, 2005.

At March 31, 2007, we had $70.0 million in advances from the FHLB, $50.0 million of which were classified as long term borrowings and $20.0 million of which were classified as short term borrowings. Total borrowings from the FHLB increased $12.0 million, or 20.7%, to $70.0 million at March 31, 2007. As competition for deposits continues to increase, we anticipate further reliance on FHLB borrowings to supplement the funding of our asset growth. As of March 31, 2007, our remaining borrowing capacity at the FHLB was $16.5 million.

Junior Subordinated Debt. We had $38.7 million of junior subordinated debentures outstanding at March 31, 2007 and December 31, 2006 compared to $18.0 million at December 31, 2005. Our junior subordinated debt, which is issued to our statutory trust subsidiaries that in turn issue trust preferred securities, is considered long term borrowing for financial reporting purposes but is included as a component of regulatory capital, subject to limitations. See “Supervision and Regulation—Capital Standards—Regulatory Capital Guidelines.” During 2006, we completed two issuances of junior subordinated debentures.

On August 25, 2006, we issued $20.6 million of junior subordinated debt securities to Silver State Capital Trust IV, a statutory trust created under the laws of the State of Delaware. The securities have quarterly interest payments and an interest rate equal to 3-month LIBOR plus 1.60%, for an effective rate of 6.96%, as of December 31, 2006, with principal due at maturity in 2036. The proceeds of this issuance were used to fund a portion of the cash consideration paid to acquire Choice Bank, which closed on September 5, 2006.

On December 5, 2006, we issued $7.7 million of junior subordinated debt securities to Silver State Capital Trust V, a statutory trust created under the laws of the State of Delaware. The securities have quarterly interest payments and an interest rate equal to 3-month LIBOR plus 1.62%, for an effective rate of 6.98%, as of December 31, 2006, with principal due at maturity in 2037. We used the proceeds raised in this issuance to redeem all $7.7 million of our junior subordinated debt securities issued to Silver State Capital Trust I on November 28, 2001, which had semi-annual interest payments equal to 6-month LIBOR plus 3.75%.

Stockholders’ Equity. Stockholders’ equity increased $42.9 million, or 67.35%, to $106.6 million at December 31, 2006 from $63.7 million at December 31, 2005. The increase in stockholders’ equity is primarily the result of $20.9 million of net income from operations, the issuance of $10.7 million of common stock to investors in a private placement, the exercise of stock options for approximately $8.1 million and $2.8 million of replacement stock options granted as a result of the Choice Bank acquisition.

Stockholders’ equity increased $5.8 million, or 5.4%, to $112.4 million at March 31, 2007 from $106.6 million at December 31, 2006. The increase is primarily the result of $5.6 million of net income from operations.

Analysis of Net Interest Income

Net interest income represents the difference between the interest income we earn on our interest-earning assets, such as loans and investment securities, and the expense we pay on interest-bearing liabilities, such as deposits and borrowed funds. Net interest income depends on our volume of interest-earning assets and interest-bearing liabilities and the interest rates we earned or paid on them.

Average Balance Sheet. The following tables presents certain information regarding our financial condition and net interest income for the three month periods ended March 31, 2007 and 2006, and the years ended 2006, 2005 and 2004. The tables presents the average yield on interest-earning assets and the average cost of interest-bearing liabilities for the periods indicated. We derived the yields and costs by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the periods indicated. Interest income includes fees that we considered adjustments to yields.


	For the Three Months Ended March 31,
	2007							2006
	Average Balance			Interest		Average Yield/ Cost⁽⁵⁾		Average Balance			Interest		Average Yield/ Cost⁽⁵⁾
	(Dollars in thousands)
Interest-earning assets
Investment securities-taxable	$	61,027		$	693	4.61	%	$	74,090		$	608	3.33	%
Federal funds sold and other		16,480			212	5.22			24,619			269	4.43
Loans⁽¹⁾⁽²⁾		1,129,930			28,433	10.21			698,023			17,395	10.11
FHLB stock		4,106			59	5.83			2,736			32	4.74

Total earning assets		1,211,543			29,397	9.84	%		799,468			18,304	9.29	%
Non-interest earning assets
Cash and due from banks		18,564							17,337
Allowance for loan losses		(11,539	)						(8,523	)
Other assets		65,867							31,632

Total assets	$	1,284,435						$	839,914

Interest-bearing liabilities
Interest checking	$	20,896		$	57	1.11	%	$	19,364		$	38	0.80	%
Savings and money market		466,931			5,376	4.67			322,889			3,034	3.81
Time deposits		402,386			5,334	5.38			176,860			1,866	4.28

Total interest-bearing deposits		890,213			10,767	4.91			519,113			4,938	3.86

Short-term borrowings		24,710			319	5.24			18,665			194	4.22
Long-term debt		50,111			571	4.62			41,100			418	4.12
Junior subordinated debt		38,661			666	6.99			18,042			343	7.71

Total interest-bearing liabilities		1,003,695			12,323	4.98	%		596,920			5,893	4.00	%
Non-interest bearing liabilities
Non-interest bearing demand deposits		163,634							171,879
Other liabilities		7,201							3,228
Stockholders’ equity		109,905							67,887

Total liabilities and stockholders' equity	$	1,284,435						$	839,914

Net interest rate spread⁽³⁾						4.86	%						5.29	%
Net interest income/net interest margin⁽⁴⁾				$	17,074	5.72	%				$	12,411	6.30	%

Total interest-earning assets to interest-bearing liabilities		120.71	%						133.93	%

(1)	Net loan fees of $2.3 million and $2.1 million are included in the yield computation for the three months ended 2007 and 2006, respectively.

(2)	Non-accrual loans have been included in average loan balances.

(3)	Net interest spread represents average yield earned on interest-earning assets less the average rate paid on interest bearing liabilities

(4)	Net interest margin is computed by dividing net interest income by total average earning assets.

(5)	Annualized.


	For the Years Ended December 31,
	2006							2005							2004
	Average Balance			Interest		Average Yield/ Cost		Average Balance			Interest		Average Yield/ Cost		Average Balance			Interest		Average Yield/ Cost
	(Dollars in thousands)
Interest-earnings assets
Investment securities-taxable	$	76,505		$	3,034	3.97	%	$	86,342		$	2,614	3.03	%	$	74,088		$	1,676	2.26	%
Federal funds sold and other		26,993			1,349	5.00			29,123			926	3.18			25,002			296	1.18
Loans⁽¹⁾⁽²⁾		821,733			85,378	10.39			590,799			53,434	9.04			436,961			31,804	7.28
FHLB stock		3,019			145	4.80			2,645			112	4.23			2,481			97	3.91

Total earning assets		928,250			89,906	9.69	%		708,909			57,086	8.05	%		538,532			33,873	6.29	%
Non-interest earning assets
Cash and due from banks		17,056							19,023							17,073
Allowance for loan losses		(9,569	)						(7,039	)						(5,296	)
Other assets		44,550							26,165							21,641

Total assets	$	980,287						$	747,058						$	571,950

Interest-Bearing liabilities
Interest checking	$	18,658		$	173	0.93	%	$	17,998		$	132	0.73	%	$	14,790		$	39	0.26	%
Savings and money market		350,549			15,197	4.34			317,416			9,609	3.03			190,451			3,233	1.70
Time deposits		257,414			12,599	4.89			104,668			2,993	2.86			120,708			2,901	2.40

Total interest-bearing deposits		626,621			27,969	4.46			440,082			12,734	2.89			325,949			6,173	1.89

Short-term borrowings		19,392			898	4.63			18,886			600	3.18			16,104			324	2.01
Long-term debt		47,175			1,813	3.84			40,375			1,304	3.23			35,470			953	2.69
Junior subordinated debt		25,393			1,876	7.39			18,042			1,123	6.22			16,792			894	5.32

Total interest-bearing liabilities		718,581			32,556	4.53			517,385			15,761	3.05			394,315			8,344	2.12
Non interest-bearing liabilities
Non interest-bearing demand deposits		168,860							173,622							138,012
Other liabilities		4,830							3,341							2,644
Stockholders’ equity		88,016							52,710							36,979

Total liabilities and stockholders’ equity	$	980,287						$	747,058						$	571,950

Net interest rate spread⁽³⁾						5.16	%						5.00	%						4.17	%
Net interest income/net interest margin⁽⁴⁾				$	57,350	6.18	%				$	41,325	5.83	%				$	25,529	4.74	%

Total interest-earning assets to interest-bearing liabilities		129.18	%						137.02	%						136.57	%

(1)	Net loan fees of $8.7 million, $7.3 million and $4.7 million are included in the yield computation for 2006, 2005, and 2004, respectively.

(2)	Non-accrual loans have been included in average loan balances.

(3)	Net interest spread represents average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.

(4)	Net interest margin in computed by dividing net interest income by total average earning assets.

Rate/Volume Analysis. The following table presents the extent to which the changes in interest rates and the changes in volume of our interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to:

•

changes attributable to changes in volume (changes in volume multiplied by prior rate);

•

changes attributable to changes in rate (changes in rate multiplied by prior volume); and

•

the net change.


	Three Months Ended March 31, 2007 v. 2006 Increase (Decrease) Due to Changes in⁽¹⁾									For the Years Ended December 31, 2006 v. 2005 Increase (Decrease) Due to Changes in⁽¹⁾							For the Years Ended December 31, 2005 v. 2004 Increase (Decrease) Due to Changes in⁽¹⁾
	Volume			Rate			Total			Volume			Rate		Total		Volume			Rate		Total
	(in thousands)
Interest on securities, taxable	$	(148	)	$	233		$	85		$	(390	)	$	810	$	420	$	371		$	567	$	938
Federal funds sold and other		(105	)		48			(57	)		(106	)		529		423		131			499		630
Loans		10,868			170			11,038			23,994			7,950		31,944		13,914			7,716		21,630
FHLB stock		20			7			27			18			15		33		7			8		15

Total interest income		10,635			458			11,093			23,516			9,304		32,820		14,423			8,790		23,213

Interest expense:
Interest checking		4			15			19			6			35		41		24			69		93
Savings and money market		1,658			684			2,342			1,436			4,152		5,588		3,844			2,532		6,376
Time deposits		2,990			478			3,468			7,476			2,130		9,606		(459	)		551		92
Short-term borrowings		78			47			125			23			275		298		88			188		276
Long-term debt		103			50			153			261			248		509		158			193		351
Junior subordinated debt		355			(32	)		323			543			210		753		78			151		229

Total interest expense		5,188			1,242			6,430			9,745			7,050		16,795		3,733			3,684		7,417

Net increase.	$	5,447		$	(784	)	$	4,663		$	13,771		$	2,254	$	16,025	$	10,690		$	5,106	$	15,796

(1)	Changes due to both volume and rate have been allocated to volume changes.

Comparison of Operating Results for the Three Months ended March 31, 2007 and 2006

General. Net income was $5.6 million for the three months ended March 31, 2007; an increase of $1.2 million, or 27.3%, compared with net income of $4.4 million for the three months ended March 31, 2006. Basic and diluted earnings per common share were $.41 and $.39, respectively, for the first quarter of 2007 compared with basic and diluted earnings per share of $.35 and $.34, respectively, for the first quarter 2006. For the period ended March 31, 2007 our return on average stockholders’ equity was 20.6% compared with 26.5% as of March 31, 2006. Our return on average assets was 1.8% as of March 31, 2007 and 2.2% as of March 31, 2006.

Interest and Dividend Income. Total interest and dividend income increased $11.1 million, or 60.7%, to $29.4 million at March 31, 2007 from $18.3 million at March 31, 2006. This increase is primarily attributable to an increase in the average volume of earning assets, primarily loans, and an increase in average yields on those assets. The increase in the average balance of loans reflects a significant increase in our portfolio of construction and land loans. We also experienced increases in the average volume of our commercial real estate and commercial and industrial loan portfolios. Interest income on investment securities and federal funds sold also increased reflecting higher average yields on these portfolios due to the higher interest rate environment.

Interest Expense. Total interest expense increased $6.4 million, or 108.5%, to $12.3 million at March 31, 2007 from $5.9 million at March 31, 2006. The increase primarily reflects an increase in the average balance of interest-bearing deposits, coupled with an increase in the average cost of such funds. In particular, the average balance of our time deposits, one of our highest cost sources of funds, more than doubled reflecting our

competitive pricing. Due to the increase in market interest rates and significant competition for deposits in our markets the average cost of our time deposits increased substantially for the first three months of 2007 compared to the corresponding period in 2006. Interest expense on our savings and money market accounts also increased primarily due to an increase in the average cost of these funds, as well as a significant increase in the average balance. The increase in interest expense also reflects the increase in the average balance of our borrowed funds as we continued to use FHLB borrowings and junior subordinated debt to supplement deposits to fund our operations.

Net Interest Income. Net interest income increased $4.7 million, or 37.9%, to $17.1 million at March 31, 2007 from $12.4 million at March 31, 2006. The increase in net interest income was due to the overall growth in our balance sheet. The net interest margin for the three months ended March 31, 2007 was 5.7% compared to 6.3% at March 31, 2006. A further compression of our net interest margin is expected to continue for the balance of 2007 from increased funding costs due to significant increased competition for deposits and loans.

Provision for Loan Losses. Our provision for loan losses was $1.3 million for the three months ended March 31, 2007 compared with $600,000 for the three months ended March 31, 2006. Net charge-offs (recoveries) for the three months ended March 31, 2007 were $0 compared with ($33) thousand for the three months ended March 31, 2006. The increase in the provision for loan losses and the allowance for loan losses primarily reflected our continued loan growth in the first quarter of 2007.

The ratio of non-performing loans to total loans was 0.01% at March 31, 2007 and at December 31, 2006. The ratio of the allowance for loan losses to non-performing loans was 9,789.1% at March 31, 2007 compared with 8,484.8% at December 31, 2006. The ratio of the allowance for loan losses to total loans was 1.07% at March 31, 2007 compared with 1.10% at December 31, 2006. Non-performing loans decreased slightly to $128,000 at March 31, 2007 from $132,000 at December 31, 2006.

Although we believe that we have established and maintained the allowance for loan losses at adequate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment. Although we use the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short-term change. See “ — Critical Accounting Policies” and “Business — Allowance for Loan Losses.”

Other Income. Total non-interest income increased $1.3 million, or 92.9%, to $2.7 million for the three months ended March 31, 2007 from $1.4 million for the three months ended March 31, 2006. This increase is primarily attributable to an increase in gain on sales of loans, primarily due to our SBA production loan activity. The table below represents a break-down of our other income.


	For the Three Months Ended March 31,
	2007		2006			Increase
	(In thousands)
Gain on sale of loans	$	1,831	$	1,177		$	654
Service charges		199		150			49
Investment securities gains, net		31		—			31
Loan servicing fees, net of amortization		189		39			150
Gain (loss) on disposal of other assets		—		(38	)		38
Other		424		44			380

Total non-interest income	$	2,674	$	1,372		$	1,302

Non-Interest Expense. Non-interest expense increased $3.1 million, or 49.2%, to $9.4 million for the three months ended March 31, 2007 from $6.3 million for the three months ended March 31, 2006. The increase reflects our overall growth. Salaries and employee benefit costs increased $1.9 million as a result of additional

employees and increased benefit costs. Our number of full time equivalent employees increased from 180 at March 31, 2006 to 284 at March 31, 2007. For the three months ended March 31, 2007, we recognized $102,000 of stock based compensation expense compared to $36,000 for the three months ended March 31, 2006, pursuant to Statement of Financial Accounting Standards, or SFAS, No. 123R, Share Based Payment. Occupancy and depreciation expense increased $528,000 as the result of additional property and fixed assets relating to our new branch offices and administrative center. Professional fees increased by $490,000 due to the increase in the size and complexity of our company and increased compliance and regulatory costs. The table below sets forth the components of our non-interest expense.


	For the Three Months Ended March 31,
	2007		2006		Increase (Decrease)
	(In thousands)
Salaries and employee benefits	$	5,830	$	3,956	$	1,874
Occupancy		716		530		186
Depreciation & amortization		592		250		342
Professional fees		851		361		490
Advertising, public relations and business development		225		182		43
Loss on other real estate owned		182		—		182
Customer service expense		87		115		(28	)
Data processing		42		104		(62	)
Insurance		69		58		11
Directors expense		26		26		—
Dues and memberships		38		61		(23	)
Other		773		673		100

Total non-interest expense	$	9,431	$	6,316	$	3,115

Income Taxes. Income tax expense increased $975,000, or 40.2%, to $3.4 million for the three months ended March 31, 2007 from $2.4 million for the three months ended March 31, 2006. Our effective rate for first quarter 2007 is 37.8% as compared to 35.3% for the first quarter of 2006. The increase in our effective tax rate is due primarily to increasing state income tax apportionment as a result of the Arizona operation and an increase in certain nondeductible expenses, such as stock based compensation expense associated with incentive stock options as a result of our adoption of SFAS 123R on January 1, 2006.

Comparison of Operating Results for the Years Ended December 31, 2006 and 2005

General. Net income was $20.9 million for the year ended December 31, 2006; an increase of $5.3 million, or 34.0%, compared with net income of $15.6 million for the year ended December 31, 2005. Basic and diluted earnings per common share were $1.58 and $1.52, respectively, for 2006 compared with basic and diluted earnings per share of $1.27 and $1.19, respectively, for 2005. For the year ended December 31, 2006 our return on average stockholders’ equity was 23.7% compared with 29.6% for 2005. Our return on average assets was 2.1% for 2006 and 2005.

Interest and Dividend Income. Total interest and dividend income increased $32.8 million, or 57.44%, to $89.9 million at December 31, 2006 from $57.1 million at December 31, 2005. This increase is attributable to an increase in the average volume of earning assets, primarily loans, and an increase in average yields on those assets. The increase in the average balance of loans reflects a significant increase in our portfolio of construction and land loans. We also experienced increases in the average volume of our commercial real estate and commercial and industrial loan portfolios. These portfolios all experienced significant increases in the average yield reflecting the overall higher interest rate environment that prevailed during 2006 compared to 2005. In

addition, we also added residential mortgage loans as a result of our acquisition of Choice Bank, which had a positive impact on interest income for the year. Interest income on investment securities and federal funds sold also increased reflecting higher average yields on these portfolios due to the higher interest rate environment.

Interest Expense. Total interest expense increased $16.8 million, or 106.33%, to $32.6 million at December 31, 2006 from $15.8 million at December 31, 2005. The increase primarily reflects an increase in the average balance of interest-bearing deposits, coupled with an increase in the average cost of such funds. In particular, the average balance of our time deposits, one of our highest cost sources of funds, more than doubled reflecting our competitive pricing. Due to the increase in market interest rates and significant competition for deposits in our markets the average cost of our time deposits increased substantially during 2006. Interest expense on our savings and money market accounts also increased primarily due to an increase in the average cost of these funds, as well as a more modest increase in the average balance. The increase in interest expense also reflects the increase in the average balance of our borrowed funds as we continued to use FHLB borrowings and junior subordinated debt to supplement deposits to fund our operations. Consistent with our deposits, the average cost of funds for these borrowings also increased in the higher interest rate environment.

Net Interest Income. Net interest income increased $16.1 million, or 38.98%, to $57.4 million at December 31, 2006 from $41.3 million at December 31, 2005. The increase in net interest income was due to the overall growth in our balance sheet and improved net interest margin. The net interest margin for the year ended December 31, 2006 was 6.2% compared to 5.8% at December 31, 2005. Our net interest margin is expected to be adversely affected in the future by increased funding costs due to significant increased competition for deposits and loans.

Provision for Loan Losses. Our provision for loan losses increased by $471,000, or 20.48%, to $2.8 million for the year ended December 31, 2006 compared with $2.3 million for the year ended December 31, 2005. Net charge-offs for the year ended December 31, 2006 were $598,000 compared with $87,000 for the year ended December 31, 2005. Our allowance for loan losses increased $2.9 million, or 34.94%, to $11.2 million at December 31, 2006 from $8.3 million at December 31, 2005. The increase in the allowance for loan losses primarily reflected the addition of the Choice Bank allowance for loan losses of $663,000 and the $2.8 million provision for loan losses as a result of our significant loan growth.

Non-performing loans decreased $1.1 million to $132,000 at December 31, 2006 from $1.2 million at December 31, 2005. The decline is a result of two non-accrual loans being paid off and one loan which was partially charged off. During the year one new loan was placed on non-accrual status, bringing the total number of loans on non-accrual status to three.

The ratio of non-performing loans to total loans was 0.01% at December 31, 2006 compared with 0.19% at December 31, 2005. The ratio of the allowance for loan losses to non-performing loans was 8,484.8% at December 31, 2006 compared with 683.2% at December 31, 2005. The ratio of the allowance for loan losses to total loans was 1.10% at December 31, 2006 compared with 1.29% at December 31, 2005.

Other Income. Total non-interest income increased $1.1 million, or 22.9%, to $5.9 million for the year ended December 31, 2006 from $4.8 million for the year ended December 31, 2005. This increase is primarily attributable to an increase in gain on sales of loans. Proceeds from our loan sales totaled $84.1 million in 2006,

compared to $55.3 million in 2005. Proceeds from our loan sales are primarily due to our SBA loan production activity. To a lesser extent, proceeds from our loan sales reflect sales of commercial real estate loans. The table below represents a break-down of our other income.


	For the Years Ended December 31,									For the Years Ended December 31,
	2006			2005			Increase (Decrease)			2005			2004		Increase (Decrease)
	(In thousands)
Gain on sale of loans	$	4,168		$	3,344		$	824		$	3,344		$	2,667	$	677
Service charges		759			941			(182	)		941			1,078		(137	)
Investment securities gains (losses), net		(6	)		(6	)		—			(6	)		—		(6	)
Loan servicing fees, net of amortization		176			58			118			58			308		(250	)
Gain (loss) on disposal of other assets		(44	)		(40	)		(4	)		(40	)		22		(62	)
Other		864			482			382			482			467		15

Total non-interest income	$	5,917		$	4,779		$	1,138		$	4,779		$	4,542	$	237

Non-Interest Expense. Non-interest expense increased $8.0 million, or 40.40%, to $27.8 million for the year ended December 31, 2006 from $19.8 million for the year ended December 31, 2005. The increase reflects our overall growth. Salaries and employee benefit costs increased $4.2 million as a result of additional employees and increased benefit costs. Our number of full time equivalent employees increased from 164 at December 31, 2005 to 268 at December 31, 2006. For the year ended December 31, 2006, we recognized $341,000 of stock based compensation expense pursuant to Statement of Financial Accounting Standards, or SFAS, No. 123R, Share Based Payment. For the year ended December 31, 2005, we recorded $1.6 million of stock option expense as a result of our accelerating the vesting of 975,000 stock options. The stock option expense recorded in 2005 was pursuant to Accounting Principal Bulletin, or APB, Opinion 25, Accounting for Stock Issued to Employees, and related interpretations. Occupancy expense increased $639,000 as the result of additional property and fixed assets relating to our new branch offices and administrative center. Professional fees increased by $860,000 due to the increase in the size and complexity of our company and increased compliance and regulatory costs. Other non-interest expense increased $1.2 million from December 31, 2005 to $2.9 million for December 31, 2006. This increase, in general, is the result of the growth of the assets and operations of our two subsidiary banks. The table below sets forth the components of our non-interest expense.


	For the Years Ended December 31,						For the Years Ended December 31,
	2006		2005		Increase (Decrease)		2005		2004		Increase (Decrease)
	(In thousands)
Salaries and employee benefits	$	17,176	$	12,938	$	4,238	$	12,938	$	8,821	$	4,117
Occupancy		2,583		1,944		639		1,944		1,694		250
Depreciation & amortization		1,531		1,041		490		1,041		1,054		(13	)
Professional fees		1,560		700		860		700		730		(30	)
Advertising, public relations and business development		751		559		192		559		374		185
Customer service expense		378		201		177		201		164		37
Data processing		351		328		23		328		303		25
Insurance		296		246		50		246		276		(30	)
Directors expense		131		126		5		126		117		9
Dues and memberships		146		83		63		83		94		(11	)
Other		2,924		1,680		1,244		1,680		1,712		(32	)

Total non-interest expense	$	27,827	$	19,846	$	7,981	$	19,846	$	15,339	$	4,507

Income Taxes. Income tax expense increased $3.4 million, or 40.96%, to $11.7 million for the year ended December 31, 2006 from $8.3 million for the year ended December 31, 2005. Our effective rate for 2006 was 36.0% as compared to 34.6% for the year ended December 31, 2005. The increase in our effective tax rate is due primarily to increasing state income tax apportionment as a result of the Arizona operation and an increase in certain nondeductible expenses, such as stock based compensation expense associated with incentive stock options as a result of our adoption of SFAS 123R on January 1, 2006.

Comparison of Operating Results for the Years Ended December 31, 2005 and 2004

General. Net income was $15.6 million for the year ended December 31, 2005, an increase of $7.1 million, or 83.5%, compared with net income of $8.5 million for the year ended December 31, 2004. Basic and diluted earnings per common share were $1.27 and $1.19, respectively, for 2005 compared with basic and diluted earnings per share of $0.72 and $0.70, respectively, for 2004. For the year ended December 31, 2005 our return on average stockholders’ equity was 29.6% compared with 23.0% for 2004. Our return on average assets for 2005 was 2.1% compared with 1.5% for 2004.

Interest and Dividend Income. Total interest and dividend income increased $23.2 million, or 68.4%, to $57.1 million at December 31, 2005 from $33.9 million at December 31, 2004. This increase is attributable to an increase in the average volume of earning assets, primarily loans, and an increase in the average yields on those assets. The increase in the average balance of loans reflects a significant increase in our portfolio of construction and land loans due primarily to additional loan officers and higher legal lending limits. We also experienced increases in the average volume of our commercial real estate and commercial and industrial loan portfolios. These portfolios all experienced significant increases in average yield as interest rates increased during 2005.

Interest Expense. Total interest expense increased $7.5 million, or 90.4%, to $15.8 million at December 31, 2005 from $8.3 million at December 31, 2004. The increase is a direct result of an overall increase in the average balance of interest-bearing deposits, coupled with an increase in the average cost of such funds. Due to the increase in market interest rates and significant competition for deposits in our markets the average cost of our time deposits increased significantly during 2005. Interest expense on our savings and money market accounts also increased primarily due to an increase in the average cost of these funds, as well as more modest increases in the average balance. The increase in interest expense also reflects the increase in the average balance of our borrowed funds as we continued to use FHLB borrowings and junior subordinated debt to supplement deposits to fund our operations. Consistent with our deposits, the average cost of funds for these borrowings also increased in the higher interest rate environment.

Net Interest Income. Net interest income increased $15.8 million, or 62.0%, to $41.3 million at December 31, 2005 from $25.5 million at December 31, 2004. The increase in net interest income was due to the overall increase in our balance sheet and in our net interest margin. The net interest margin for the year ended December 31, 2005 was 5.8% compared to 4.7% at December 31, 2004. This increase reflects the impact of the rising interest rate environment, which increased our average yields more significantly than our average cost of funds as our interest-earning assets generally repriced more quickly than our interest-bearing liabilities.

Provision for Loan Losses. Our provision for loan losses increased by $600,000, or 35.3%, to $2.3 million for the year ended December 31, 2005 compared with $1.7 million for the year ended December 31, 2004. Net charge-offs for the year ended December 31, 2005 were $87,000 compared with $467,000 for the year ended December 31, 2004. Our allowance for loan losses increased $2.2 million, or 36.1%, to $8.3 million at December 31, 2005 from $6.1 million at December 31, 2004. This increase is primarily attributed to our loan growth and, to a lesser extent, the increase in our non-performing loans.

Non-performing loans increased $743,000 to $1.2 million at December 31, 2005 from $474,000 at December 31, 2004.

The ratio of non-performing loans to total loans was .19% at December 31, 2005 compared with .09% at December 31, 2004. The ratio of the allowance for loan losses to non-performing loans was 683.2% at December 31, 2005 compared with 1,276.6% at December 31, 2004. The ratio of the allowance for loan losses to total loans was 1.29% at December 31, 2005 compared with 1.16% at December 31, 2004. The increase in this ratio is primarily attributed to an increase in non-performing loans at December 31, 2005.

Other Income. Total non-interest income increased $237,000, or 5.2%, to $4.8 million for the year ended December 31, 2005. This increase is primarily attributable to an increase in gain on sale of loans. Proceeds from our loan sales totaled $55.3 million in 2005, compared to $37.8 million in 2004. Proceeds from our loan sales are primarily due to our SBA loan production activities. To a lesser extent, proceeds from our loan sales reflect sales of commercial real estate loans.

Non-Interest Expense. Non-interest expense increased $4.5 million, or 29.4%, to $19.8 million for the year ended December 31, 2005 from $15.3 million for the year ended December 31, 2004, generally reflecting the overall growth of our company. Salaries and employee benefit costs increased $4.1 million as a result of additional employees and increased benefit costs. Our number of full time equivalent employees increased from 131 at December 31, 2004 to 164 at December 31, 2005. In December of 2005, we accelerated the vesting of 975,000 stock options. As a result of this action, we recognized stock option expense of $1.6 million in 2005.

Income Taxes. Income tax expense increased $3.8 million, or 84.4%, to $8.3 million for the year ended December 31, 2005 from $4.5 million for the year ended December 31, 2004. Our effective tax rate for 2005 was 34.6% as compared to 34.4% for the year ended December 31, 2004.

Liquidity and Capital Resources

The term “liquidity” refers to our ability to generate adequate amounts of cash to fund loan originations, deposit withdrawals and operating expenses. Our primary sources of funds are cash received from scheduled amortization and prepayments of loans, new deposits, borrowed funds, maturities and calls of investment securities and funds provided by our operations. Our membership in the FHLB provides us access to additional sources of borrowed funds, which is generally limited to twenty times the amount of FHLB stock owned.

Deposit flows, calls of investment securities and borrowed funds, and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds.

We experienced an increase in deposits of $237.3 million (excluding $103.5 million in deposits obtained through the Choice Bank acquisition) during the year ended December 31, 2006 compared with a net increase of $73.1 million during the year ended December 31, 2005. Deposit flows are affected by the level of market interest rates, the interest rates and products offered by competitors, the volatility of equity markets and other factors. At December 31, 2006, there were $337.7 million in time deposits scheduled to mature within one year. Based on our historical experience and competitive pricing practices, we expect to be able to retain or replace a substantial portion of these maturing deposits.

We experienced a total increase in deposits of $165.0 million during the three months ended March 31, 2007 compared with a net increase of $79.2 million during the three months ended March 31, 2006. Deposit flows are affected by the level of market interest rates, the interest rates and products offered by competitors, the volatility of equity markets and other factors. At March 31, 2007, there were $409.2 million in time deposits scheduled to mature within one year. Based on our historical experience and competitive pricing practices, we expect to be able to retain or replace a substantial portion of these maturing deposits. Our 20 largest depositors accounted for approximately 37.4% of our deposits and our five largest depositors accounted for approximately 26.7% of our deposits at March 31, 2007. The loss of one or more of one of our largest 20 customers, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’ businesses, would adversely

affect our liquidity and require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short term basis to replace such deposits. Included among our 20 largest depositors are four depositors who as of March 31, 2007, accounted for $272.3 million, or 23.6%, of our deposits. The deposit balances of these four customers, which accounted for 23.6% of our deposits as of March 31, 2007, are considered for regulatory purposes to be brokered deposits, and constitute all our brokered deposits at that date. Brokered deposits are generally considered to be deposits that have been received by us from a registered broker that is acting on behalf of that broker’s customer. Often, a broker will direct a customer’s deposits to the banking institution offering the highest interest rate available. Federal banking law and regulation places restrictions on depository institutions regarding brokered deposits because of the general concern that these deposits are at a greater risk of being withdrawn and placed on deposit at another institution offering a higher interest rate, thus posing liquidity risk for institutions that gather brokered deposits in significant amounts. The balances of our brokered deposits measured as of each month end from January 1, 2006 to March 31, 2007 have fluctuated, ranging from a high of $272.3 million, or 23.6% of total deposits to a low of $59.2 million, or 8.3% of total deposits. The loss of one or more of one of our largest 20 customers, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’ businesses, would adversely affect our liquidity and require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short term basis to replace such deposits. We have not experienced any liquidity issues to date with respect to brokered deposits or our other large balance deposits and we believe we have ample alternative sources of funding, albeit currently at slightly higher rates, to more than compensate for the loss of one or more of these customers.

For the year ended December 31, 2006, we experienced a net decrease in other borrowed funds, federal funds purchased and securities sold under repurchase agreements of $4.5 million dollars, compared to a net increase of $12.1 million dollars during 2005. The net decrease in 2006 reflects our ability to fund our asset growth primarily through deposits. Borrowed funds increased to $96.7 million from $72.0 million for 2005. The increase in borrowed funds during 2005 was primarily due to our funding a portion of the cash consideration for the acquisition of Choice Bank.

For the three months ended March 31, 2007, we experienced a net increase in other borrowed funds, federal funds purchased and securities sold under repurchase agreements of approximately $300,000, compared to a net decrease of $21.4 million dollars during the three months ended March 31, 2006. The net decrease in the first three months of 2006 reflects our ability to fund our asset growth primarily through deposits. Borrowed funds increased to $108.7 million at March 31, 2007 from $96.7 million at December 31, 2006. The increase in borrowed funds helped to continue to fund our asset growth.

At March 31, 2007, there were $30.0 million in borrowed funds scheduled to mature within one year. We anticipate we will have sufficient resources to meet this funding commitment by borrowing new funds at prevailing market interest rates or paying off the borrowed funds as they mature or are called.

Our primary use of funds is for the origination of construction and land loans, commercial loans and commercial real estate loans. Our net increase in total loans was $272.1 million (excluding $98.3 million in gross loans obtained as a result of the Choice Bank acquisition) during the year ended December 31, 2006 compared with $124.7 during the year ended December 31, 2005. Our net increase in total loans was $152.9 million during the three months ended March 31, 2007 compared with $45.1 million during the three months ended March 31, 2006. The increase in net loans for 2006 and the first three months of 2007 reflected the overall increase in demand for commercial loans in the markets in which we operate.

Cash flow from our investment activities included purchases of securities for our investment portfolio during the year ended December 31, 2006 which were $91.3 million compared with $97.7 million during the year ended December 31, 2005. The decrease in purchases of securities reflected the strong demand for our loan products, which are higher yielding interest-earning assets. The proceeds from maturing of securities available for sale were $60.2 million during the year ended December 31, 2006 compared with $35.7 million during the year ended December 31, 2005. The proceeds from sale of securities available for sale were $44.0 million during the year ended December 31, 2006 compared with $40.2 million during the year ended December 31, 2005.

Cash flow from our investment activities included purchases of securities for our investment portfolio during the three months ended March 31, 2007 which were $3.1 million, compared with $21.6 million during the three months ended March 31, 2006. The decrease in purchases of securities reflected the strong demand for our loan products, which are higher yielding interest-earning assets. The proceeds from the maturity of securities available for sale were $6.7 million during the three months ended March 31, 2007 compared with $20.9 million during the three months ended March 31, 2006. The proceeds from sale of securities available for sale were $4.3 million during the three months ended March 31, 2007 compared with $0 during the three months ended March 31, 2006.

In 2006, our primary source of liquidity at the holding company level was the issuance of $10.7 million of common stock to investors in a private placement and the issuance of junior subordinated debt. On August 25, 2006 we issued $20.6 million of junior subordinated debt securities to Silver State Capital Trust IV, a statutory trust created under the laws of the State of Delaware. The securities have quarterly interest payments and an interest rate equal to 3-month LIBOR plus 1.60%, for an effective rate of 6.96%, as of December 31, 2006, with principal due at maturity in 2036. The proceeds of this offering were used to fund a portion of the cash consideration of the purchase price for the acquisition of Choice Bank, which closed on September 5, 2006.

On December 5, 2006 we issued $7.7 million of junior subordinated debt securities to Silver State Capital Trust V, a statutory trust created under the laws of the State of Delaware. The securities have quarterly interest payments and an interest rate equal to 3-month LIBOR plus 1.62%, for an effective rate of 6.98%, as of December 31, 2006, with principal due at maturity in 2037. We used the proceeds raised in this offering to redeem all $7.7 million of our junior subordinated debt securities issued to Silver State Capital Trust I on November 28, 2001, which had semi-annual interest payments equal to 6-month LIBOR plus 3.75%.

Other sources of liquidity for Silver State Bancorp may include dividend payments from our subsidiary banks. During 2005 and 2006, and the first three months of 2007, Silver State Bancorp did not receive any capital distributions from its subsidiary banks. Applicable federal and state law may limit the amount of capital distributions our bank subsidiaries may make.

At December 31, 2006, we exceeded all regulatory capital requirements and are considered to be “well-capitalized” with a total capital to risk weighted assets of 11.6%, Tier 1 capital to risk weighted assets of 10.5% and a Tier 1 capital to average assets, or leverage, ratio of 10.5%. At March 31, 2007, Silver State Bancorp exceeded all regulatory capital requirements and is considered to be “well-capitalized” with a total capital to risk weighted assets of 10.4%, Tier 1 capital to risk weighted assets of 9.5% and a Tier 1 capital to average assets, or leverage, ratio of 10.3%. At March 31, 2007, both Silver State Bank and Choice Bank are considered to be “adequately capitalized.” See “Supervision and Regulation.”

As a result of this offering, our ability to raise capital through the issuance of junior subordinated debt will also increase because, for regulatory purposes, certain issuances of junior subordinated debt (up to 25% of Tier 1 capital) qualify as Tier 1 capital. Since our Tier 1 capital will increase as a result of this offering, we expect to be able to issue additional junior subordinated debt that qualifies as Tier 1 capital. See “Supervision and Regulation — Capital Standards — Regulatory Capital Guidelines.”

Critical Accounting Policies

Note 1 to our consolidated financial statements contains a summary of our significant accounting policies. We believe our policies with respect to the methodology for our determination of the allowance for loan losses and asset impairment judgments, including other than temporary declines in the value of our securities, involve a high degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could cause reported results to differ materially. These critical policies and their application are continually reviewed by management, and are periodically reviewed with the Audit Committee and our Board of Directors.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable losses incurred in the loan portfolio. Our allowance for loan loss methodology incorporates a variety of risk considerations in establishing an allowance for loan loss that we believe is adequate to absorb losses in the existing portfolio. Such analysis addresses our historical loss experience, delinquency and charge-off trends, trends in volume and terms of loans, collateral value, changes in loan policies, national and local market economic trends, size and complexity of credits, credit concentrations, peer group comparisons and other considerations. This information is then analyzed to determine “estimated loss factors” which, in turn, is assigned to each loan category. We also closely evaluate each credit graded “watch list/special mention” and below to individually assess the appropriate specific loan loss reserve on such credits. In addition to ongoing internal loan review monitoring and risk assessment, management utilizes independent loan review firms to review our loan underwriting and credit administration practices, which also assists management with determining the appropriateness of our allowance for loan losses.

Our primary lending emphasis is commercial real estate loans, construction loans and land acquisition and development loans for both residential and commercial projects. As a result of our lending practices, we also have a concentration of loans secured by real property located in Nevada. Based on the composition of our loan portfolio and the growth in our loan portfolio, we believe the primary risks inherent in our portfolio are increases in interest rates, a decline in the economy, generally, and a decline in real estate market values. Any one or a combination of these events may adversely affect our loan portfolio resulting in increased delinquencies, loan losses and future levels of provisions. We consider it important to maintain the ratio of our allowance for loan losses to total loans at an acceptable level given current economic conditions, interest rates and the composition of our portfolio.

The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. Provisions for loan losses are made on both a specific and general basis. Specific allowances are provided on impaired credits pursuant to SFAS No. 114 “Accounting by Creditors for Impairment of a Loan.” The general component of the allowance for loan losses is based on historical loss experience and adjusted for qualitative and environmental factors pursuant to SFAS No. 5 “Accounting for Contingencies” and other related regulatory guidance. At least annually, we review the assumptions and formulas related to our general valuation allowances in an effort to update and to refine our allowance for loan losses in light of the various factors described above.

We consider the ratio of the allowance for loan losses to total loans at December 31, 2006 and March 31, 2007, given the primary emphasis and current market conditions, to be at an acceptable level. Furthermore, the increase in the allowance for loan losses during 2006 and the first three months of 2007 reflected the growth in the loan portfolio, the low levels of loan charge-offs, the stability in the real estate market and the resulting stability in our overall loan quality.

Asset Impairment Judgments. Certain of our assets are carried in our consolidated statements of financial condition at fair value or at the lower of cost or fair value. Valuation allowances are established when necessary to recognize impairment of such assets. We periodically perform analyses to test for impairment of various assets. In addition to our impairment analyses related to loans discussed above, another significant impairment analysis relates to the value of other than temporary declines in the value of our securities.

Our available for sale portfolio is carried at estimated fair value, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income in stockholders’ equity. We conduct a periodic review and evaluation of the securities portfolio to determine if the value of any security has declined below its

carrying value and whether such decline is other than temporary. If such decline is deemed other than temporary, we would adjust the carrying amount of the security by writing down the security to fair market value through a charge to current period operations. The market values of our securities are significantly affected by changes in interest rates. In general, as interest rates rise, the market value of fixed-rate securities will decrease; as interest rates fall, the market value of fixed-rate securities will increase. With significant changes in interest rates, we evaluate our intent and ability to hold the security for a sufficient time to recover the recorded principal balance. Estimated fair values for securities are based on published or securities dealers’ market values.

Valuation of Servicing Rights. We generally retain the right to service the guaranteed and unguaranteed portion of SBA loans sold to others. We generally receive a standard fee for providing this servicing function. The cost allocated to the servicing rights retained has been recognized as a separate asset and is being amortized in proportion to and over the period of estimated net servicing income. This asset is included in other assets in the accompanying balance sheets.

Servicing rights are periodically evaluated for impairment. Servicing rights are stratified based on origination dates. Fair values are estimated using a discounted cash flow model which utilizes various assumptions including prepayment speeds and current market rates of interest or other available information. As of December 31, 2006, we had total servicing rights of $705,000. As of March 31, 2007, we had total servicing rights of $945,000. No impairments were recognized during the years ended December 31, 2006, 2005 and 2004.

Goodwill Impairment. Goodwill is presumed to have an indefinite useful life and is tested, at least annually, for impairment at the reporting unit level. Impairment exists when the carrying amount of goodwill exceeds its implied fair value. We use the quoted market price of our common stock on our impairment testing date and allocate the fair value to our reporting units. If the fair value of our reporting unit with goodwill exceeds its carrying amount, further evaluation is not necessary. However, if the fair value of our reporting unit with goodwill is less than its carrying amount, further evaluation is required to compare the implied fair value of the reporting unit’s goodwill to its carrying amount to determine if a write-down of goodwill is required.

We would test our goodwill for impairment between annual tests if an event occurred or circumstances changed that would more likely than not reduce the fair value of our reporting unit below its carrying amount. The identification of additional reporting units or the use of other valuation techniques could result in materially different evaluations of impairment.

Quantitative and Qualitative Disclosure About Market Risk

As a financial institution, our primary component of market risk is interest rate volatility. Net interest income is the primary component of our net income, and fluctuations in interest rates will ultimately affect the level of both income and expense recorded on a large portion of our assets and liabilities. Fluctuations in interest rates will also affect the market value of all interest-earning assets, other than those that possess a short term to maturity. During 2006, the market yield curve inverted, primarily due to increases in short-term market interest rates. This inverted yield curve continued during the first three months of 2007. This interest rate environment had an adverse impact on our net interest income as our interest-bearing liabilities generally reflect movements in short-term rates, while our interest-earning assets, a majority of which have initial terms to maturity or repricing greater than one year, generally reflect movements in long-term interest rates.

The impact of interest rate changes on our interest income is generally felt in later periods than the impact on our interest expense due to the timing of the recording on the balance sheet of our interest-earning assets and interest-bearing liabilities. The recording of interest-earning assets on the balance sheet generally lags the current market due to normal delays of up to three months between the time we commit to originate or purchase a loan and the time we fund the loan, while the recording of interest-bearing liabilities on the balance sheet generally reflects the current market rates.

Our primary source of funds has been deposits, consisting primarily of interest-bearing checking accounts and time deposits, which have substantially shorter terms to maturity than our loan portfolio. We use securities sold under agreements to repurchase and FHLB advances as additional sources of funds. These borrowings generally have a long-term to maturity, in an effort to offset our short-term deposit liabilities and assist in managing our interest rate risk. Certain of these borrowings have call options that could shorten their maturities in a changing interest rate environment.

Net Interest Income. The computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, asset prepayments and deposit decay, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions we may undertake in response to changes in interest rates. Actual amounts may differ from the projections set forth below should market conditions vary from underlying assumptions.


Sensitivity of Net Interest Income

Interest Rate Scenario	Adjusted Net Interest Income		Percentage Change from Base
	(Dollars in thousands)
Up 300 basis points	$	76,442	7.6	%
Up 200 basis points		74,633	5.1
Up 100 basis points		72,829	2.6
BASE		71,014	—
Down 100 basis points		69,175	(2.6	)
Down 200 basis points		67,329	(5.2	)
Down 300 basis points		65,452	(7.8	)

Our percentage change for increases or decreases in interest income by 100 basis points were 2.6% and (2.6%) for the three months ended 2007 as compared to 2.6% and (2.6%) for the year ended 2006 and 5.7% and (5.7%) for the year ended 2005.

Off-Balance Sheet Arrangements and Contractual Obligations

We are a party to certain off-balance sheet arrangements, which occur in the normal course of our business, to meet the credit needs of our customers and the growth initiatives of our subsidiary banks. These arrangements are primarily commitments to originate and purchase loans, and to purchase securities. We did not engage in any hedging transactions that use derivative instruments (such as interest rate swaps and caps) during 2006 and the first three months of 2007 and did not have any such hedging transactions in place at December 31, 2006 or March 31, 2007, which would create other off-balance sheet arrangements.

The following table reports the amounts of our contractual obligations and financial instruments with off-balance sheet risk as of March 31, 2007.


	At March 31, 2007
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		After 5 Years
	(Dollars in thousands)
Long term borrowed funds	$	50,000	$	10,000	$	30,000	$	10,000	$	—
Junior subordinated deferrable interest debentures		38,661		—		—		—		38,661
Operating lease obligations		7,799		984		1,609		1,490		3,716
Purchase obligation for land		5,400		5,400		—		—		—

Total	$	101,860	$	16,384	$	31,609	$	11,490	$	42,377


	At March 31, 2007
Other Commitments	Total Amounts Committed		Amount of Commitment Expiration Per Period
	Total Amounts Committed		Less Than 1 Year		1-3 Years		3-5 Years		After 5 Years
	(In thousands)
Commitments to extend credit	$	479,368	$	297,848	$	138,941	$	25,251	$	17,328
Standby letters of credit		5,741		2,131		792		2,818		—

Total	$	485,109	$	299,979	$	139,733	$	28,069	$	17,328

The following table reports the amounts of our contractual obligations and financial instruments with off-balance sheet risk as of December 31, 2006.


	At December 31, 2006
			Payments Due By Period
Contractual Obligation	Total		Less Than 1 Year		1-3 Years		3-5 Years		After 5 Years
	(In thousands)
Long term borrowed funds	$	50,000	$	10,000	$	30,000	$	10,000	$	—
Junior subordinated deferrable interest debentures		38,661		—		—		—		38,661
Operating lease obligations		6,526		926		1,398		1,190		3,012

Total	$	95,187	$	10,926	$	31,398	$	11,190	$	41,673


	At December 31, 2006
	Total Amounts Committed		Amount of Commitment Expiration Per Period
Other Commitments	Total Amounts Committed		Less Than 1 Year		1-3 Years		3-5 Years		After 5 Years
	(In thousands)
Commitments to extend credit	$	381,758	$	247,621	$	88,262	$	9,024	$	36,851
Standby letters of credits		5,391		1,781		792		2,818		—

Total	$	387,149	$	249,402	$	89,054	$	11,842	$	36,851

Commitments to extend credit are agreements to lend money to a customer as long as there is no violation of any condition established in the contract. Since some commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Our bank subsidiaries evaluate each customer’s credit-worthiness on a case-by-case basis. The amount of collateral we obtain, if deemed necessary, is based on management’s credit evaluation of the borrower.

Additionally, we offer standby letters of credit to our customers. Standby letters of credit are conditional commitments used by our subsidiary banks to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing these letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held in support of these standby letters of credit varies based on the customer’s credit-worthiness. We are not obligated to advance further amounts on credit lines if the customer is delinquent, or otherwise in violation of the agreement. Commitments under standby letters of credit were $5.4 million as of December 31, 2006 and $5.7 million as of March 31, 2007.

We have also committed to irrevocably and unconditionally guarantee the following payments or distributions with respect to the holders of trust preferred securities to the extent that Silver State Capital Trust II, Silver State Capital Trust III, Silver State Capital Trust IV and Silver State Capital Trust V have not made such payments or distributions: (1) accrued and unpaid distributions, (2) the redemption price, and (3) upon a dissolution or termination of the trust, the lesser of the liquidation amount and all accrued and unpaid distributions and the amount of assets of the trust remaining available for distribution. We do not believe that these off-balance sheet

arrangements have or are reasonably likely to have a material effect on our financial condition cash flows, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources. However, there can be no assurance that such arrangements will not have any such future effects.

Recent Accounting Pronouncements

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140,” which amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and permits an entity to choose either the amortization method, which is consistent with current accounting principles generally accepted in the United States of America, commonly referred to as GAAP, or fair value measurement method for subsequent measurements. Additionally, at the initial adoption, SFAS No. 156 permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities, provided that the securities are identified in some manner as offsetting the entity’s exposure to changes in the fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value. SFAS No. 156 is effective as of the beginning of the first fiscal year that begins after September 15, 2006. Upon our adoption of SFAS No. 156 on January 1, 2007, we elected to apply the amortization method for measurements of our mortgage servicing rights and we did not reclassify any of our available-for-sale securities to trading securities. We do not expect SFAS No. 156 to have a material impact on our financial condition or results of operations.

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FASB Interpretation No. 48 is effective for fiscal years beginning after December 15, 2006. The application of FASB Interpretation No. 48 is not expected to have a significant impact on our financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This statement provides guidance for using fair value to measure assets and liabilities. The FASB believes the standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. Statement 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The application of SFAS No. 157 is not expected to have a material impact on our financial condition or results of operations.

In September 2006, the FASB ratified the consensus of the Emerging Issues Task Force, or EITF, Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangement. EITF 06-4 applies to endorsement split dollar life insurance policies that provide a benefit to an employee that extends to postretirement periods and requires an employer to recognize a liability for future benefits over the service period based on the substantive agreement with the employee. EITF 06-4 is effective for fiscal years beginning after December 15, 2007, with early adoption permitted. We do not expect EITF 06-4 to have a material impact on our consolidated financial statements.

In September 2006, the FASB ratified a consensus reached by the EITF on Issue No. 06-5, “Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB

Technical Bulletin No. 85-4.” Technical Bulletin No. 85-4, “Accounting for Purchases of Life Insurance,” requires that the amount that could be realized under a life insurance contract as of the date of the statement of financial condition should be reported as an asset. The EITF concluded that a policyholder should consider any additional amounts (i.e., amounts other than cash surrender value) included in the contractual terms of the policy in determining the amount that could be realized under the insurance contract. When it is probable that contractual restrictions would limit the amount that could be realized, these contractual limitations should be considered when determining the realizable amounts. Amounts that are recoverable by the policyholder at the discretion of the insurance company should be excluded from the amount that could be realized. Amounts that are recoverable beyond one year from the surrender of the policy should be discounted to present value. A policyholder should determine the amount that could be realized under the insurance contract assuming the surrender of an individual-life by individual-life policy (or certificate by certificate in a group policy). Any amount that would ultimately be realized by the policyholder upon the assumed surrender of the final policy (or final certificate in a group policy) should be included in the amount that could be realized under the insurance contract. A policyholder should not discount the cash surrender value component of the amount that could be realized when contractual restrictions on the ability to surrender a policy exist. However, if the contractual limitations prescribe that the cash surrender value component of the amount that could be realized is a fixed amount, then the amount that could be realized should be discounted. EITF Issue No. 06-5 is effective for fiscal years beginning after December 15, 2006. Our adoption of EITF Issue No. 06-5 on January 1, 2007 did not have a material impact on our financial condition or results of operations.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115.” SFAS 159 permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS 159 are elective; however, the amendment to SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” applies to all entities with available for sale or trading securities. For financial instruments elected to be accounted for at fair value, an entity will report the unrealized gains and losses in earnings. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. SFAS 159 was recently issued and we are currently assessing the financial impact this statement will have on our consolidated financial statements.

Impact of Inflation and Changing Prices

Our consolidated financial statements and accompanying notes have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater affect on performance than do the effects of inflation.

BUSINESS

Overview and History

We are a bank holding company headquartered in Henderson, Nevada. We conduct our operations primarily through Silver State Bank, a Nevada-chartered commercial bank, and through Choice Bank, an Arizona-chartered commercial bank that we acquired on September 5, 2006. Through our bank subsidiaries, we provide a wide range of banking and related services to locally owned businesses, professional firms, real estate developers and investors, local non-profit organizations, high net worth individuals and other consumers. Our lending activities have historically focused on:

•

Construction lending;

•

Land acquisition and development lending;

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Commercial real estate lending;

•

Commercial and industrial lending; and

•

Business lending through the SBA.

With our acquisition of Choice Bank, we also added a residential real estate loan origination platform to our business.

On a consolidated basis, we had approximately $1.4 billion in assets, $1.2 billion in total loans (excluding loans held for sale), $1.2 billion in deposits and $112.4 million in stockholders’ equity, as of March 31, 2007.

Silver State Bank was founded in 1996 by a group of individuals with extensive community banking experience. In 1999, through a bank holding company reorganization, Silver State Bank became the wholly-owned subsidiary of Silver State Bancorp. According to the most recent FDIC Deposit Market Share Report, as of June 30, 2006, Silver State Bank is the 11^th largest bank operating in the Las Vegas-Paradise metropolitan area measured by deposits and is the 14^th largest bank among all banks operating in Nevada. As of March 31, 2007, Silver State Bank had $1.2 billion in assets, $1.0 billion in gross loans (excluding loans held for sale) and $1.0 billion in deposits. Silver State Bank has 10 full-service offices in the greater Las Vegas market area and we expect to open two additional full-service offices in this market area during the next 12 months and four additional full-service offices before the end of 2008.

Choice Bank is an Arizona-chartered commercial bank headquartered in Scottsdale, Arizona. As of March 31, 2007, Choice Bank had $185.4 million in assets, $143.9 million in gross loans (excluding loans held for sale) and $137.4 million in deposits. Currently, Choice Bank has two full-service offices in the Phoenix/Scottsdale market area and we expect to open two additional full-service offices in this market area during next 12 months.

In addition to its banking subsidiaries, Silver State Bank operates nine LPOs, which are located in Utah, Colorado, Washington, Oregon, California and Florida. Our LPOs primarily originate SBA loans, which for the most part, we sell in the secondary market. To a lesser extent, our LPOs also originate commercial real estate loans primarily for sale into the secondary market. Our LPOs are established and staffed around personnel who are experienced SBA loan producers in their geographic market. According to recent lending statistics, Silver State Bank is the leading SBA lender in the state of Nevada as ranked by dollar volume. Silver State Bank originated and closed $127.0 million in SBA loans during 2006 and $58.0 million in SBA loans during the first quarter 2007.

Market Area and Customer Base

Our customers are primarily small to mid-sized businesses (generally representing businesses with up to $50.0 million in revenues) that require highly personalized commercial banking products and services that we deliver with an emphasis on relationship banking. We believe that our customers prefer locally managed banking

institutions that provide responsive, personalized service and customized products. A substantial portion of our business is with customers who have long-standing relationships with our officers or directors or who have been referred to us by existing customers.

Through our banking subsidiaries, Silver State Bank and Choice Bank, we serve customers in Nevada and Arizona.

Nevada. In Nevada, we have branches in the cities of Henderson, Las Vegas, North Las Vegas, and Boulder City, all of which are in the greater Las Vegas market area. The economy of the greater Las Vegas market area is primarily driven by services and industries related to gaming, entertainment and tourism, and is experiencing growth in the residential and commercial construction and light manufacturing sectors.

Arizona. In Arizona, we operate in Scottsdale and West Valley, both of which are located in the Phoenix/Scottsdale market area. These metropolitan areas contain companies in the following industries: aerospace, high-tech manufacturing, construction, energy, transportation, minerals and mining and financial services. Our primary service area in Arizona is within the geographical boundaries of Maricopa County. We consider other counties in Arizona as secondary lending areas.

SBA Lending. We view our SBA lending market to be Nevada and Arizona, in addition to Utah, Colorado, Washington, Oregon, California and Florida where we currently have LPOs.

We currently operate in what we believe to be several of the most attractive markets in the Western United States. These markets have high per capita income and have experienced, and are expected to continue to experience, some of the fastest population growth in the country.

Las Vegas, Nevada. In terms of population growth, the greater Las Vegas market area has been the fifth fastest growing metropolitan area in the United States in the last six years, having grown almost 34% since 2000, almost five times the national population growth rate. This population expansion is set to continue in the next five years, with the population expected to grow through 2011 at a rate of 26%, which is almost four times the national rate. In May of 2007, Clark County, Nevada had an estimated monthly net in-migration of almost 6,000 people. Household income growth has tracked population growth, having risen almost 24% in the last six years, and is expected to grow another 18% through 2011. According to the Bureau of Labor Statistics, the greater Las Vegas market area experienced a 2.9% growth in employment from April 2006 to April 2007. The area’s economic strength is anchored by the gaming industry, as well as the presence of five Fortune 500 companies headquartered in Las Vegas.

Phoenix/Scottsdale, Arizona. With 4 million people, over 67% of Arizona’s population, the Phoenix/Scottsdale market area is the largest metropolitan area in the state of Arizona. In May of 2007, Arizona had an estimated monthly net in-migration of 36,000 people. Eight of Arizona’s top ten businesses by revenue are headquartered in the Phoenix/Scottsdale market area, helping to propel the area’s rapid income growth. The Phoenix/Scottsdale market area currently has the highest household income and per capita income in the state — at $56,481 and $28,057, respectively. The median household income is 10% higher than the national average, and is projected to increase another 22% in the next five years, the fastest projected growth in household income in Arizona. According to the Bureau of Labor Statistics, the Phoenix/Scottsdale market area experienced a 4.2% growth in employment from April 2006 to April 2007. This rapid income and population growth has driven growth in the banking sector, with total deposits in this market area increasing by over 83%, from $30.7 billion in 2000 to $56.1 billion in 2006.

We believe the rapid population growth in our markets and the resultant growth in the local economies will provide us with significant lending and growth opportunities in the future. The growth in the greater Las Vegas market area, our primary market, has been driven by a variety of factors, including a service economy associated with the hospitality and gaming industries, the historic availability of affordable housing, the lack of a state

income tax, and a growing base of senior and retirement communities. Increased economic activity by individuals and accelerated infrastructure investments by businesses should generate additional demand for our products and services. For example, economic growth should produce additional commercial and residential development, providing us with greater lending opportunities. In addition, as per capita income continues to rise, there should be greater opportunities to provide a broader range of financial products and services.

Our future growth opportunities will be influenced by the growth and stability of the statewide and regional economies, other demographic population trends and the competitive environment within and around the states of Nevada and Arizona. We believe that we have developed lending products and marketing strategies to address the diverse credit-related needs of the residents in our market areas. We intend the primary funding for our growth to be customer deposits, using borrowed funds to supplement our deposit initiatives as a funding source. We intend to grow customer deposits by continuing to offer desirable products at competitive rates and by opening new branch offices.

Silver State Bank’s real estate lending activity focuses on construction loans and land acquisition and development loans for both commercial and residential projects, commercial real estate loans and commercial and industrial loans. SBA loans also constitute a large percentage of our portfolio. We are currently one of the largest SBA lenders in Nevada and, in addition, both Silver State Bank and Choice Bank are nationwide SBA approved Preferred Lenders Program lenders. Choice Bank primarily specializes in providing construction and long term financing for homes and also provides commercial real estate loans.

Competition

The banking and financial services business in our market areas is highly competitive. This increasingly competitive environment is a result primarily of growth in community banks, changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial services providers. We compete for loans, deposits and customers with other commercial banks, local community banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions and other non-bank financial services providers. Many of these competitors are much larger in total assets and capitalization, have greater access to capital markets and offer a broader range of financial services than we can offer.

Competition for deposit and loan products remains strong from both banking and non-banking firms, and this competition directly affects the rates of those products and the terms on which they are offered to customers. Price competition for deposits has adversely affected our ability to generate low cost core deposits in our primary market areas sufficient to fund our asset growth. As a result we have sought alternative funding through borrowings and may need to price our deposit products more aggressively, resulting in an increase in our costs of funding and a reduction in our net interest margin. Technological innovation continues to contribute to greater competition in domestic and international financial services markets. Many customers now expect a choice of several delivery systems and channels, including telephone, mail, internet banking and ATMs.

According to the most recent FDIC Deposit Market Share Report, as of June 30, 2006, Silver State Bank is the 14^th largest bank among all banks operating in Nevada with a deposit market share of 0.62% and is the 11^th largest bank in the Las Vegas-Paradise Metropolitan area with a deposit market share of 0.73%. According to the most recent FDIC Deposit Market Share Report, as of June 30, 2006, Choice Bank is the 39^th largest bank in the Phoenix-Mesa-Scottsdale area with a deposit market share of 0.16%. According to the FDIC Deposit Market Share Report, as of June 30, 2006, our largest competitor in Nevada, measured by deposits, is Washington Mutual Bank, a federally chartered savings bank with a national presence, that has more than 58% of the deposit market share in Nevada. In addition, Silver State Bank’s five largest competitors (Washington Mutual Bank, Bank of America, Charles Schwab, Wells Fargo Bank, and Citibank Nevada), in the aggregate, have more than 84% of the deposit market share in Nevada. Each of these competitors is, or is affiliated with, a financial institution considered to be among the largest in the country with a national or international presence. According

to the FDIC Deposit Market Share Report, as of June 30, 2006, our largest competitor in Arizona, measured by deposits, is JPMorgan Chase Bank, a large commercial bank with a national and international presence, that has approximately 25% of the deposit market share in Arizona. In addition, Choice Bank’s eight largest competitors (JPMorgan Chase Bank, Bank of America, Wells Fargo Bank, National Bank of Arizona, Compass Bank, World Savings Bank, M&I Marshall & Ilsley Bank and First National Bank of Arizona), in the aggregate, have more than 82% of the deposit market share in Arizona.

There are approximately 28 banking institutions in our market area in Nevada and approximately 37 banking institutions in our market area in Arizona. However, we believe that our most direct competition in lending comes from 12 institutions in Nevada and from 15 institutions in Arizona. Due to our size, which allows us to provide personalized service to our customers and the quality of the service we provide, we have been able to develop a loyal borrower and depositor base.

Mergers between financial institutions have placed additional pressure on banks to consolidate their operations, reduce expenses and increase revenues to remain competitive. In addition, competition has intensified due to federal and state interstate banking laws, which permit banking organizations to expand geographically with fewer restrictions than in the past. These laws allow banks to merge with other banks across state lines, thereby enabling banks to establish or expand banking operations in our market. The competitive environment is also significantly affected by federal and state legislation that makes it easier for non-bank financial institutions to compete with us.

Lending Activities

We provide a variety of loans to our customers, including construction and land loans, commercial real estate loans, commercial and industrial loans, SBA loans and, to a lesser extent, residential real estate and consumer loans. Our lending efforts have focused on meeting the needs of our business customers, who have typically required funding for commercial and commercial real estate enterprises.

Our lending guidelines call for commercial properties to be 50% or more leased prior to funding. Exceptions are made for developers with successful borrowing histories with the banks, with support from financially capable guarantors, excellent project feasibility and strong market conditions. The aggregate principal balance of loans outstanding with respect to commercial properties that are less than 50% leased was $93.4 million, representing 29 loans, at March 31, 2007. At March 31, 2007, the largest commercial real estate loan in our portfolio was $12.3 million, secured by industrial real estate.

As of March 31, 2007 our loan portfolio totaled $1.2 billion, or approximately 84% of our total assets. The following table presents the composition of our loan portfolio in dollar amounts at the dates indicated.


	At March 31, 2007			At December 31,
	At March 31, 2007			2006			2005			2004			2003			2002
	(In thousands)
Construction and land	$	765,821		$	620,167		$	369,197		$	228,293		$	94,348		$	54,228
Commercial real estate		211,629			206,744			195,754			214,860			212,182			165,868
Commercial and industrial		115,881			109,134			68,904			62,176			55,082			49,095
Single family residential real estate		78,507			80,280			13,720			18,508			22,527			13,387
Consumer		5,336			5,789			3,504			2,928			3,296			3,488
Leases, net of unearned income		56			411			264			729			1,684			2,860
Net deferred loan fees		(8,752	)		(6,882	)		(5,164	)		(4,103	)		(2,398	)		(1,795	)

Gross loans, net of deferred fees		1,168,478			1,015,643			646,179			523,391			386,721			287,131
Less: Allowance for loan losses		(12,530	)		(11,200	)		(8,314	)		(6,051	)		(4,768	)		(3,546	)

	$	1,155,948		$	1,004,443		$	637,865		$	517,340		$	381,953		$	283,585

The following table presents the contractual maturity of our loans at the dates indicated.


	At March 31, 2007									At December 31, 2006
	Due Within One Year		Due 1-5 Years		Due Over Five Years		Total			Due Within One Year		Due From 1-5 Years		Due in More than Five Years		Total
	(In thousands)
Construction and land	$	519,079	$	202,390	$	44,352	$	765,821		$	445,996	$	138,826	$	35,345	$	620,167
Commercial real estate		65,441		88,737		57,451		211,629			57,139		93,445		56,160		206,744
Commercial and industrial		67,533		21,306		27,042		115,881			60,193		22,684		26,257		109,134
Single family residential real estate		19,095		14,132		45,280		78,507			19,481		11,210		49,589		80,280
Consumer		3,214		1,767		355		5,336			3,547		1,751		491		5,789
Leases, net of unearned income		36		20		—		56			58		353		—		411
Net deferred loan fees		—		—		—		(8,752	)		—		—		—		(6,882	)

Gross loans, net of deferred fees		674,398		328,352		174,480		1,168,478			586,414		268,269		167,842		1,015,643
Less: Allowance for loan losses		—		—		—		(12,530	)		—		—		—		(11,200	)

	$	674,398	$	328,352	$	174,480	$	1,155,948		$	586,414	$	268,269	$	167,842	$	1,004,443

Interest rates:
Fixed	$	5,745	$	20,020	$	21,789	$	47,554		$	7,991	$	15,697	$	20,703	$	44,391
Variable		668,653		308,332		152,691		1,129,676			578,423		252,572		147,139		978,134
Net deferred loan fees		—		—		—		(8,752	)		—		—		—		(6,882	)

Gross loans, net of deferred fees	$	674,398	$	328,352	$	174,480	$	1,168,478		$	586,414	$	268,269	$	167,842	$	1,015,643

Construction and Land Loans. The principal types of our construction loans include industrial/warehouse properties, office buildings, retail centers, medical facilities, restaurants and entry level residential tract homes. Construction loans are primarily made to experienced local developers with whom we have significant lending history. An analysis of each construction project is performed as part of the underwriting process to determine whether the type of property, location, construction costs and contingency funds are appropriate and adequate. Our underwriting guidelines generally require our construction loans to have loan-to-value ratios of no more than 75% and we seek to obtain personal guarantees from our borrowers when possible. Construction loans comprised 33% of our total loan portfolio at March 31, 2007, including SBA loans. At March 31, 2007, the largest construction loan in our portfolio was $12.7 million. On March 31, 2007 and December 31, 2006, our construction loans were as follows:


Type	At March 31, 2007		At December 31, 2006
	(In thousands)
One- to Four-Family	$	93,684	$	80,276
Multi-Family		28,402		12,820
Hotel		35,132		28,969
Multi-Use		6,664		3,565
Industrial		24,841		31,623
Office		66,100		60,137
Mini-Storage		4,764		4,562
Retail		110,207		86,926
Other		13,794		4,985

Total Construction	$	383,588	$	313,863

We classify our land loans as loans on raw land, infill, land development and developed land loans. We consider raw land to be land that has no improvements on it and is located outside of a developed area. Infill is land that has no improvements but is located within a metropolitan area and is surrounded by developed land. Land development loans are loans containing budgeted dollars to finance the onsite improvements upon raw or infill land, and developed land loans consist of loans on land with improvements completed. We extend land loans primarily to borrowers who plan to initiate active development of the property within two years and have a prior good business relationship with our bank subsidiaries and bank officers. Our underwriting guidelines generally require our land loans to have a loan-to-value ratio of no more than 65%. Land loans comprised 33% of our total loan portfolio at March 31, 2007, including SBA loans. At March 31, 2007, the largest land loan in our portfolio was a $17.8 million land development loan to a local developer. On March 31, 2007 and December 31, 2006, our land loans were as follows:


Type	At March 31, 2007		At December 31, 2006
	(In thousands)
Raw	$	69,211	$	53,347
Infill		96,961		105,057
Land Development		177,796		117,047
Developed Land		38,265		30,853

Total Land	$	382,233	$	306,304

Construction and development loans typically provide for a reserve budget to service payments for the term of the loan. We believe that reasonable assumptions are made by the loan officer during loan underwriting and confirmed by the Senior Loan Committee during the loan approval process concerning average outstanding loan balance, interest rate, and sales or lease absorption, to determine the appropriate interest reserve budget amount to carry the interest for the term of the loan.

Commercial Real Estate Loans. A significant component of our lending activity consists of loans to finance the purchase of commercial real estate and loans to finance inventory and working capital that are secured by commercial real estate. We have a commercial real estate portfolio comprised of loans on apartment buildings, professional offices, industrial facilities, retail centers and other commercial properties. Our underwriting guidelines generally require our commercial real estate loans to have loan-to-value ratios of no more than 75% and minimum debt service coverage ratios, defined as net operating income divided by debt service, of no less than 1.25. In addition, we seek to obtain personal guarantees from our borrowers whenever possible. The maturity of these loans is typically 2-5 years. The specific loan-to-value ratio and debt service coverage ratio varies depending on the type of collateral for each commercial loan. Commercial real estate loans comprised 18% of our total loan portfolio at March 31, 2007. At March 31, 2007, the largest commercial real estate loan in our portfolio was $12.3 million, secured by industrial real estate. On March 31, 2007 and December 31, 2006, our commercial real estate loans were as follows:


Type	At March 31, 2007		At December 31, 2006
	(In thousands)
Multi-Family	$	7,447	$	7,159
Hotel		6,684		3,348
Multi-Use		153		932
Industrial		38,803		36,832
Office		48,790		45,292
Mini-Storage		9,941		9,951
Retail		75,912		77,924
Other		23,899		25,306

Total Term CRE	$	211,629	$	206,744

Commercial and Industrial Loans. In addition to real estate secured loan products, we also originate commercial and industrial loans, including working capital lines of credit, inventory and accounts receivable lines, equipment loans and other commercial loans. We focus on making commercial loans to small and medium- sized businesses in a wide variety of industries. Our underwriting guidelines generally require that our commercial and industrial loans have a loan-to-value ratio of no more than 75% and we seek to obtain a personal guarantee from our borrowers whenever possible. At March 31, 2007, our largest commercial and industrial loan to one borrower was $16.6 million, secured primarily by helicopters. Commercial loans comprised 10% of our total loan portfolio at March 31, 2007.

SBA Loans. Our bank subsidiaries are nationwide SBA Preferred Lenders. As Preferred Lenders they can approve a loan within the authority delegated to them by the SBA. Preferred Lenders approve, package, fund and service SBA loans within a range of authority that is not available to SBA lenders that do not have the Preferred Lender designation. The Bank’s SBA loans fall into two categories, loans originated under the SBA’s 7A Program, or SBA 7A Loans, and loans originated under the SBA’s 504 Program. For 2006, SBA 7A Loans represented approximately 29% of the SBA Loans originated by our banks while 504 Loans represented the balance.

Under the SBA 7A Loan program, loans from $150,000 up to $2.0 million are guaranteed 75% by the SBA. Generally, this guarantee would become invalid only if the loan was not closed and serviced in accordance with the SBA loan authorization. SBA 7A Loans under $150,000 are guaranteed 85% by the SBA. SBA 7A Loans collateralized by real estate have terms of up to 25 years, while loans collateralized by equipment and working capital have terms of up to 10 years. We generally sell the guaranteed portion of SBA 7A loans, which is up to 85% of the loan. The unguaranteed portion of these loans may also be sold. At least 10%, or 5% with prior SBA approval, of the SBA 7A Loans are required to be retained in our portfolio. Funding for these loans has come principally from deposit sources. We retain the servicing on the guaranteed and unguaranteed portion of SBA 7A Loans that we sell. The strategy of selling both the guaranteed and unguaranteed portion of the SBA 7A Loans allows us to supplement our earnings and maintain funding to meet our local loan demand. Upon sale in the secondary market, the purchaser of the guaranteed portion of an SBA 7A Loan pays a premium to us, which historically has ranged up to 10% of the guaranteed amount, and in the case of a sale of the unguaranteed portion, the premium has historically ranged up to 4%. Generally, we also receive a servicing fee equal to 1% of the guaranteed amount sold in the secondary market. Under certain circumstances, we may be required to refund the premium we receive on the sale of a loan. In the event of a default on an SBA 7A Loan, within 90 days of its sale, or if the loan is prepaid within 90 days of its sale, we are required to refund the premium to the purchaser. Since inception of the program, refunds of the premiums on SBA 7A Loans have been nominal.

Under the SBA’s 504 Program, we require a minimum down payment of 10% (more on special purpose or single use properties). We then enter into a first trust deed loan in an amount not less than 50% of the total project cost and an interim second trust deed loan in an amount not less than 40% of the total cost of the project. For SBA 504 non-construction loans, the first trust deed loan has a term of up to 25 years. The second trust deed loan is generally for a term of up to 180 days. Within the 180 day period of entering into the loan, the second trust deed loans are refinanced by SBA certified development companies and used as collateral for SBA guaranteed debentures. For SBA 504 construction loans, the term on the second trust deed loan is generally up to 18 months and the certified development company cannot pay off the loan until a certificate of occupancy is issued. The first trust deed loan on a construction project is generally for a term of up to 18 months with an automatic conversion to a permanent fixed-rate loan upon completion of the project. Our SBA lending program, and portions of our real estate lending, are dependent on the continual funding and programs of certain federal agencies or quasi-government corporations, including the SBA. The guaranteed portion of SBA loans is not included in calculation of our subsidiary banks’ loan-to-one-borrower limitations described below.

Residential Real Estate Loans. As of March 31, 2007, residential real estate loans represented 6.7% of our total loan portfolio. With the acquisition of Choice Bank, we added a residential real estate loan origination

platform to our business. We originate residential mortgage loans secured by one-to-four family properties, most of which serve as the primary or secondary residences of the owner. Choice Bank has developed a core competency in residential mortgage loans with principal balances in excess of the Federal National Mortgage Association single-family limit of $417,000 (commonly referred to as “non-conforming” or “jumbo” loans). Our primary focus is to maintain and expand relationships with developers, realtors, and other key contacts in the residential real estate industry in order to originate new mortgages. Most of our loan originations result from relationships with existing or past customers, members of our local community, and referrals from realtors, attorneys, and builders. All of the portfolio residential real estate loans are typically made at a loan-to-value ratio of 80%. If these loans are made with a greater loan-to-value ratio than 80%, the borrower is required to obtain private mortgage insurance, which results in a lower exposure to the Bank in the event the borrower defaults in making payments on the loan.

We also originate residential real estate construction loans for primary and secondary residences, as well as loans for improved custom home lots. These loans are also typically made at a loan-to-value ratio of 80%. If these loans are made with a loan-to-value ratio greater than 80%, then private mortgage insurance, paid by the borrower, is required. Improved custom home lots are typically financed at a maximum loan-to-value ratio of 80%. In addition we serve the custom home builders within our markets with residential speculative custom home financing for specific custom home communities. These loans are typically made at a maximum loan-to-cost ratio of 80% and at a maximum loan-to-value ratio of 65%.

Lastly, we originate home equity loans and home improvement loans to serve primarily our current mortgage customer base. All of these types of loans are made with a maximum combined loan-to-value ratios of 80%.

We offer a variety of adjustable rate mortgage, or ARM, loans secured by one- to four-family residential properties with a fixed-rate for initial terms of one year, three years or five years. After the initial adjustment period, ARM loans adjust on an annual basis. These loans are originated in amounts generally up to $3.0 million. The ARM loans that we currently originate have a maximum 30-year amortization period and are generally subject to the loan-to-value ratios described above. The interest rates on ARM loans fluctuate based upon a fixed spread above the monthly average yield on United States Treasury securities, adjusted to a constant maturity of one year, and generally are subject to a maximum increase of 2% per adjustment period and a limitation on the aggregate adjustment of 5% over the life of the loan. In the current rate environment, where the yield curve is relatively flat, the ARM loans we offer have initial interest rates below the fully indexed rate.

The origination and retention of ARM loans helps reduce exposure to increases in interest rates. However, ARM loans can pose credit risks different from the risks inherent in fixed-rate loans, primarily because as interest rates rise, the underlying payments of the borrower may rise, which increases the potential for default. The marketability of the underlying property also may be adversely affected by higher interest rates. In order to minimize risks, we evaluate borrowers of ARM loans based on their ability to repay the loans at the higher of the initial interest rate or the fully indexed rate. In an effort to reduce risk further, we have not in the past, nor do we currently, originate ARM loans that provide for negative amortization of principal.

We also offer interest-only mortgage loans. These loans are designed for loan customers who desire flexible amortization schedules. These loans are originated as 1/1, 3/1, or 5/1 ARM loans, with the interest-only portion of the payment based upon the initial loan term, or offered on a 30-year fixed-rate loan, with interest-only payments for the first 10 years of the obligation. The 30-year fixed-rate loans are originated for sale into the secondary market. With respect to ARM loans, at the end of the initial 1-, 3- or 5-year interest-only period of these loans, the payment will adjust to include both principal and interest and will amortize over the remaining term so the loan will be repaid at the end of its original life. These loans may involve higher risks compared to standard loan products since there is the potential for higher payments once the interest rate resets and the principal begins to amortize and they rely on a stable or rising housing market to maintain acceptable loan-to-value ratios. As of March 31, 2007, we had 65 interest-only loans with an aggregate balance of $34.1 million.

Consumer Loans. We offer a variety of consumer loans to meet the needs of our commercial customers. Examples of our consumer loans include new and used automobile loans and personal lines of credit. Consumer loans represented less than 1% of our total loan portfolio at March 31, 2007.

Loan Approval Procedures and Authority. Our lending policies for Silver State Bank and Choice Bank are as follows:

Silver State Bank. The Senior Loan Committee, comprised of the executive officers of Silver State Bank, sets the authorization levels for each individual loan officer on a case-by-case basis in a written memorandum to that officer that details the officer’s lending authority according to the types and grades of loans. Generally, the more experienced a loan officer, the higher the authorization level. The maximum approval amount granted to an individual officer is $500,000 for unsecured credit relationships, $1.0 million for collateralized credit relationships (secured primarily by a perfected security interest in equipment) and $2.0 million for secured credit relationships (secured by pledged collateral that is equivalent to cash or near cash, such as marketable stocks or bonds; in addition, Silver State Bank considers properly margined real estate loans meeting the bank’s loan to value or loan to cost guidelines as secured transactions). The Senior Loan Committee has approval authority of up to $27.0 million. Any extension of credit that would result in the aggregate extensions of credit to a customer to exceed that amount must be approved by the Directors Loan Committee.

Further, all non-criticized loans above $100,000, all other loans especially mentioned above $30,000, all substandard loans above $20,000 and all doubtful or loss loans are reported to the Senior Loan Committee. In addition, any loan granted to a member of the board of directors of Silver State Bancorp, Silver State Bank or Choice Bank, any of Silver State Bancorp’s principal stockholders or any of our executive officers requires the approval of the board of directors.

Choice Bank. Choice Bank’s lending policies generally mirror those of Silver State Bank. Loan officers with lending limits may approve loans within their respective lending authority. All loans in excess of $100,000 will be reported to the Management Loan Committee. This committee consists of both Choice Bank and Silver State Bank’s Executive Officers. All loans in excess of the applicable loan officer’s lending limit must be approved by the Management Loan Committee. All Management Committee approvals are reported monthly at the regularly scheduled Choice Bank board meeting.

Loans to One Borrower. In addition to the limits set forth above, state banking law generally limits the aggregate extensions of credit that a bank may make a single borrower. Under Nevada law, the aggregate extensions of credit that a bank may make to a single borrower generally may not exceed 25% of the sum of the bank’s Tier 1 capital and allowance for loan losses (approximately $29.8 million at March 31, 2007 with respect to Silver State Bank). Under Arizona law, the aggregate extensions of credit of a bank to one borrower may not exceed 15% of the bank’s capital and allowance for loan losses (approximately $1.9 million at March 31, 2007 with respect to Choice Bank). The largest aggregate extensions of credit by our subsidiary banks to one borrower at March 31, 2007, were as follows:

•

Silver State Bank’s largest aggregate extension of credit to a single borrower was $17.8 million, consisting of a land development loan to a local developer;

•

Choice Bank’s largest aggregate extension of credit to a single borrower was $1.9 million consisting of a commercial development loan to a local developer.

Notwithstanding the above limits, our subsidiary banks are able to leverage their relationships with one another to participate in loans collectively which they otherwise would not be able to make on an individual basis. As of March 31, 2007, the aggregate lending limit of our subsidiary banks to a single borrower was approximately $31.7 million.

Concentrations of Credit Risk. Our lending policies also establish customer and product concentration limits to control single customer and product exposures. As these policies are intended as guidance and not as absolute

limitations, at any particular point in time the ratios may be higher or lower because of funding on outstanding commitments. Set forth below are our policy limit guidelines and the segmentation of our loan portfolio by loan type as of the dates indicated:


	At March 31, 2007						At December 31, 2006
	Percent of Total Risk Based Capital				Percent of Total Loans*		Percent of Total Risk Based Capital				Percent of Total Loans*
	Policy Limit		Actual*		Percent of Total Loans*		Policy Limit		Actual*		Percent of Total Loans*
Construction Loans	350	%	279	%	32	%	350	%	236	%	30	%
Land Loans	350		269		31		350		227		29
Commercial Real Estate Loans	300		175		20		300		167		21
Commercial Loans	150		85		10		150		86		11
Single Family Residential Real Estate Loans	100		55		6		100		59		8
Consumer Loans	25		4		1		25		4		1

*	Calculations include loans held for sale pursuant to our portfolio limit guidelines.

We continually monitor a variety of risk exposures in our loan portfolio. As part of the portfolio monitoring process, we periodically perform “stress tests” using various factors, typically those issues outside the control of our management. The goal of stress testing the portfolio is to determine the overall effect of various events on our loan portfolio that could create unanticipated loss exposure and/or impairment of our banks’ capital. Stress testing provides our management with insight into how these issues may affect our banks’ capital.

Asset Quality

One of our key strategies is to maintain high asset quality. We have instituted a loan grading system consisting of nine different categories. Loans graded in the first five categories are considered “satisfactory.” The other four grades range from a “watch” category to a “loss” category and are consistent with the grading systems used by the FDIC. All loans are assigned a credit risk grade at the time they are made. In addition, our “Watch List” loans are internally reviewed by Silver State Bank’s Senior Loan Committee and Choice Bank’s Management Loan Committee on a monthly basis to determine whether a change in the credit risk is warranted. The Senior Loan Committee and the Management Loan Committee each reports its analysis to its respective board of directors at the monthly board meeting. Our loan portfolio and credit risk grades are also reviewed periodically by external, independent loan review firms (one for Silver State Bank and one for Choice Bank). As part of this review, randomly selected new and renewed loans are reviewed for compliance with our credit policies. In addition, our independent loan review firms generally review our “Watch List” loans.

Delinquent Loans and Foreclosed Assets. Our policies for Silver State Bank and Choice Bank are as follows:

In General. When a borrower fails to make required payments on a loan, we take a number of steps to induce the borrower to cure the delinquency and restore the loan to a current status. Our goal in any problem loan negotiation is repayment of the obligation. The appropriate method to use to attain this goal varies depending on the circumstances involved.

Generally, if a loan is approaching 30 days past due, we attempt to remedy the deficiency by notifying the borrower of the default and to determine the cause of the default. If the nature of the problem is short-term, the bank works with the defaulting borrower to develop a strategy to remedy the situation. Further, the loan is continued to be closely monitored and may be placed on the bank’s “Watch List” in the loan officer’s discretion. “Watch List” reports are completed monthly and reviewed by senior management. If the problem appears to be long term in nature and cannot be remedied in a satisfactory manner, assignment to the Special Attention Loans

department is considered. If the loan is assigned, the Special Attention Loans department administers the credit from this point, seeking legal advice if necessary. Possible remedies include legal action, foreclosure or other means to protect the bank’s collateral position.

If the strategy described above is unsuccessful and the loan is approaching 60 or more days past due, the loan officer contacts the bank’s Chief Credit Officer with a recommendation that the loan be assigned to the Special Attention Loans department. Depending on the specific factors involved, the Manager of the Special Attention Loans department or the Chief Credit Officer may decide to initiate possible legal action and/or recourse to the collateral in question.

Our policies require that management continuously monitor the status of the loan portfolio and report to the Board of Directors on a monthly basis. These reports include information on delinquent loans and foreclosed real estate.

Repossession/Foreclosure. Our policy is to proceed with the repossession of collateral only as a last alternative after the borrower has demonstrated an unwillingness or inability to adhere to a reasonable program of repayment.

Criticized Assets. Federal regulations require that each insured bank classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, examiners have authority to identify problem assets, and, if appropriate, classify them. We use grades six through nine of our loan grading system to identify potential problem assets.

The following describes grades six through nine of our loan grading system, which are consistent with the definitions set forth in applicable banking regulations and guidelines:

(6)

“Other Loans Especially Mentioned.” These loans have potential weaknesses which, if not checked and corrected, may result in deterioration of the repayment prospects, weaken the loan, or inadequately protect the banks’ credit position at some future date. Other Loans Especially Mentioned are believed to be potential problems that warrant more than the usual management attention, but do not quite justify a classification of Substandard. Loans which might fall into this category include those with an inadequate loan agreement, poorly collateralized loans, loans without proper documentation and for which any other deviation for prudent lending practices occurred. Economic or market conditions that may, in the future, affect the borrower may warrant mention of the loan.

(7)

“Substandard.” These loans may involve more than a normal degree of risk and are inadequately protected by the solid worth and paying capacity of the borrower. Weaknesses may include lack, insufficiency or poor marketability of collateral, poor handling, programming or supervision by bank personnel, or external adverse factors. Loans of this type are characterized by the distinct possibility that the bank may sustain some loss if the deficiencies are not corrected quickly. A strong possibility of correcting the deficiencies usually exists.

(8)

“Doubtful.” A loan classified as “Doubtful” has all the weaknesses of a Substandard loan. In addition, collection in full — on the basis of currently existing facts, conditions and values — is highly questionable and improbable. The possibility of loss is extremely high, but because of important and reasonably specific pending factors, which may work toward strengthening the asset, classification as Loss is deferred until its more exact status may be determined.

(9)

“Loss.” These assets are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practicable or desirable to defer writing off the asset, even though partial recovery may be affected in the future.

Non-performing assets, which include other real estate owned, or OREO, non-accrual loans and accruing loans delinquent 90 days or more, were $332,000 at March 31, 2007, $870,000 at December 31, 2006, and $1.2 million at December 31, 2005.

We generally stop accruing income on (i) any loan when interest or principal payments are in arrears for 90 days or on (ii) any asset for which payment in full of interest or principal is not expected. We designate loans on which we stop accruing income as non-accrual loans and we reverse any outstanding interest that we previously accrued. We subsequently recognize income in the period in which we collect it, when the ultimate collection of principal is no longer in doubt. We return non-accrual loans to accrual status only when factors indicating doubtful collection no longer exist and the loan has been brought current. In addition, when a loan is placed on non-accrual, it is also entered on the Watch List if the loan is above $5,000.

If the non-accrual balance has not been paid in full by the time the credit reaches 180 days past due, the balance is charged off, unless certain legal proceedings have been initiated or other circumstances make it reasonably likely that we will collect the loan.

OREO consists of real property we acquire through foreclosure or deed in lieu of foreclosure. After foreclosure, OREO is carried at the lower of fair value minus estimated cost to sell or at cost. A valuation allowance account is established through provisions charged to income, which results from the ongoing periodic valuations of OREO. Fair market value is generally based on recent appraisals.

The following table presents information regarding non-accrual loans, accruing loans delinquent 90 days or more, and OREO as of the dates indicated. During the period shown below, we did not have any loans past due 90 days or more and still accruing or interest income that would have been recorded under the original terms of the loans.


	At March 31, 2007			At December 31,
	At March 31, 2007			2006			2005			2004			2003			2002
	(Dollars in thousands)
Total non-accrual loans⁽¹⁾	$	128		$	132		$	1,217		$	474		$	4,745		$	6,645
Restructured loans		—			—			—			—			—			—
Other real estate owned (OREO)		204			738			—			600			—			—

Total non-performing assets		332		$	870		$	1,217		$	1,074		$	4,745		$	6,645

Non-accrual loans to gross loans		0.01	%		0.01	%		0.19	%		0.09	%		1.23	%		2.31	%
Non-performing assets to total assets		0.02	%		0.07	%		0.15	%		0.15	%		0.97	%		1.76	%
Interest income recognized on nonaccrual loans	$	—		$	111		$	89		$	5		$	160		$	138

(1)	We had no loans past due 90 days of more and still accruing as of the end of each period indicated.

Our potential problem loans, consisting of loans in grades six or higher but still performing, were approximately $12.0 million at March 31, 2007 and $12.0 million at December 31, 2006.

The total amount of interest income received during 2006 on non-accrual loans outstanding and additional interest income on non-accrual loans that would have been recognized if interest on all such loans had been recorded based upon original contract terms was immaterial. We are not committed to lend additional funds to borrowers with loans on non-accrual status.

We define impaired loans as all non-accrual construction and land development, commercial and industrial and commercial real estate loans. Impaired loans are individually assessed to determine whether a loan’s carrying value is not in excess of the fair value of the collateral or the present value of the loan’s cash flows. Smaller

balance homogeneous loans that are collectively evaluated for impairment, such as residential mortgage loans and consumer loans, are specifically excluded from the impaired loan portfolio. We had four, six and five loans classified as impaired at March 31, 2007, December 31, 2006 and 2005, respectively. In addition, at December 31, 2006 and 2005, we had no loans classified as troubled debt restructurings, as defined in SFAS No. 15.

Allowance for Loan Losses. The following table presents the activity in our allowance for loan losses at or for the periods indicated.


	For the Three Months Ended March 31,						For the Years Ended December 31,
	2007			2006			2006			2005			2004			2003			2002
	(Dollars in thousands)
Allowance for loan losses:
Balance at beginning of period	$	11,200		$	8,314		$	8,314		$	6,051		$	4,768		$	3,546		$	2,308
Provisions charged to operating expenses		1,330			600			2,821			2,350			1,750			2,325			1,266
Acquisition⁽¹⁾		—			—			663			—			—			—			—
Recoveries of loans previously charged-off:
Construction and land		—			—			—			—			—			—			—
Commercial real estate		—			—			—			37			1			—			—
Commercial and industrial		1			33			52			40			118			50			346
Residential real estate		—			—			—			—			—			—			—
Consumer and other		—			—			14			14			9			4			39

Total recoveries		1			33		$	66		$	91		$	128		$	54		$	385

Loans charged-off:
Construction and land		—			—			—			—			—			—			—
Commercial real estate		—			—			19			—			178			500			126
Commercial and industrial		—			—			447			95			399			466			156
Residential real estate		—			—			44			—			—			139			—
Consumer and other		1			—			154			83			18			52			131

Total charged-off		1			—			664			178			595			1,157			413

Net charge-offs		—			(33	)		598			87			467			1,103			28

Balance at end of period	$	12,530		$	8,947		$	11,200		$	8,314		$	6,051		$	4,768		$	3,546

Net charge-offs to average loans outstanding		—	%		—	%		0.07	%		0.01	%		0.11	%		0.33	%		0.01	%
Allowance for loan losses to gross loans		1.07			1.29			1.10			1.29			1.16			1.23			1.23

(1)	In connection with our acquisition of Choice Bank on September 5, 2006, we added $663,000 in the allowance for loan losses held by Choice Bank at the time of the acquisition.

The allowance for loan losses has been determined in accordance with accounting principles generally accepted in the United States of America. We are responsible for the timely and periodic determination of the adequacy of the allowance. We believe that our allowance for loan losses is adequate to cover specifically identifiable loan losses, as well as estimated losses inherent in our portfolio for which certain losses are probable but not specifically identifiable.

We maintain the allowance for loan losses through provisions for loan losses that we charge to income. We charge losses on loans against the allowance for loan losses when we believe the collection of loan principal is unlikely. We establish the provision for loan losses after considering the results of our review of delinquency and charge-off trends, the amount of the allowance for loan losses in relation to the total loan balance, loan portfolio

growth, GAAP and regulatory guidance. We periodically review the assumptions and formula used in determining our allowance for loan losses and make adjustments if required to reflect the current risk profile of our loan portfolio.

Although we believe that we have established and maintained the allowance for loan losses at adequate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment. Although management uses the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short-term change. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Comparison of Operating Results for the Years Ended December 31, 2006 and 2005 — Critical Accounting Policies — Allowance for Loan Losses.”

The following table represents the allocation of our allowance for loan losses by loan category and the percentage of loans in each category to total loans at March 31, 2007.


	At March 31, 2007
	Amount		% of Loans in Each Category to Gross Loans*
	(Dollars in thousands)
Construction and land	$	8,868	65.0	%
Commercial real estate		2,469	18.0
Commercial and industrial		779	9.8
Single family residential real estate		335	6.7
Consumer and other		79	0.5

Total	$	12,530	100.0	%

*	Gross Loans before netting deferred loan fees

The following table presents the allocation of our allowance for loan losses by loan category and the percentage of loans in each category to total loans at December 31, 2006, 2005, 2004, 2003 and 2002.


	At December 31,
	2006				2005				2004				2003				2002
	Amount		% of Loans in Each Category to Gross Loans*		Amount		% of Loans in Each Category to Gross Loans*		Amount		% of Loans in Each Category to Gross Loans*		Amount		% of Loans in Each Category to Gross Loans*		Amount		% of Loans in Each Category to Gross Loans^*
	(Dollars in thousands)
Construction and land	$	7,356	60.7	%	$	3,662	56.7	%	$	3,354	43.3	%	$	1,961	24.2	%	$	520	18.8	%
Commercial real estate		2,667	20.2			2,359	30.1			1,167	40.7			1,139	54.6			1,463	57.4
Commercial and industrial		801	10.7			1,716	10.6			1,256	11.9			1,390	14.2			1,272	17.0
Single family residential real estate		287	7.8			516	2.1			200	3.5			225	5.8			197	4.6
Consumer and other		89	0.6			61	0.5			74	0.6			53	1.2			94	2.2

Total	$	11,200	100.0	%	$	8,314	100.0	%	$	6,051	100.0	%	$	4,768	100.0	%	$	3,546	100.0	%

*	Gross Loans before netting deferred loan fees.

Investment Activities

Investment Securities. The Board of Directors established an Investment Committee, comprised of six executive officers, who meet on a regular basis to review our investment portfolio and evaluate the current status of our investments. Our Chief Executive Officer and Chief Operating Officer/Chief Financial Officer are responsible for overseeing the investment portfolio and have the authority to make investment decisions for our bank subsidiaries.

We have authority to invest in various types of assets, including U.S. Treasury obligations, securities of various federal agencies, mortgage-backed securities, certain time deposits of insured banks and savings institutions, certain bankers’ acceptances, repurchase agreements, purchases of federal funds, money market funds, municipal securities, corporate debt and equity securities, commercial paper and mutual funds.

We classify investment securities as available for sale at the date of purchase. We currently have no investment securities classified as trading or held to maturity.

At March 31, 2007 we had $57.6 million of investment securities compared with $65.3 million and $73.2 million at December 31, 2006 and 2005, respectively. All of these investment securities are classified as securities available for sale.

The contractual maturity distribution and weighted average yield of our available for sale portfolio at March 31, 2007 and at December 31, 2006 are summarized in the tables below. Weighted average yield is calculated by dividing income within each maturity range by the outstanding amount. Securities available for sale are carried at amortized cost in the table below for purposes of calculating the weighted average yield received on such securities.


	At March 31, 2007
	Due Under 1 Year Amount/Yield				Due 1-5 Years Amount/Yield				Due 5-10 Years Amount/Yield				Due Over 10 Years Amount/Yield				Total Amount/Yield
	(Dollars in thousands)
Available for Sale
US Treasury securities	$	2,991	4.95	%	$	6,521	4.97	%	$	—	—		$	—	—		$	9,512	4.96	%
U.S. Government-sponsored agencies		25,667	3.94			17,790	5.51			—	—			—	—			43,457	4.58
Mortgage-backed obligations		—	—			—	—			—	—			2,330	5.86	%		2,330	5.86
Other		2,040	4.38			—	—			164	4.28	%		178	4.84			2,382	4.41

Total available for sale	$	30,698	4.07	%	$	24,311	5.36	%	$	164	4.28	%	$	2,508	5.79	%	$	57,681	4.69	%


	At December 31, 2006
	Due Under 1 Year				Due 1-5 Years				Due 5-10 Years				Due Over 10 Years				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in thousands)
Available for Sale
US Treasury securities	$	—	—		$	9,484	4.96	%	$	—	—		$	—	—		$	9,484	4.96	%
U.S. Government-sponsored Agencies		27,038	3.62	%		23,120	5.45			—	—			—	—			50,158	4.46
Mortgage-backed obligations		—	—			963	5.94			526	5.74	%		2,351	5.85	%		3,840	5.86
Other		1,994	4.36			—				—				—	—			1,994	4.36

Total available for sale	$	29,032	3.67	%	$	33,567	5.33	%	$	526	5.74	%	$	2,351	5.85	%	$	65,476	4.63	%

The carrying value of our securities available for sale at March 31, 2007, and at December 31, 2006, 2005 and 2004 is set forth below.


	At March 31, 2007		At December 31,
	At March 31, 2007		2006		2005		2004
	(In thousands)
U.S. Treasury securities	$	9,524	$	9,496	$	7,426	$	7,425
U.S. Government-sponsored agencies		43,386		50,038		61,690		36,645
Mortgage-backed obligations		2,311		3,839		2,030		5,246
Money market		1,985		1,951		2,101		11,468
Other debt securities		359		—		—		—

Total investment securities	$	57,565	$	65,324	$	73,247	$	60,784

Sources of Funds

General. Customer deposits, borrowings, scheduled amortization and prepayments of loan principal and funds provided by operations are our primary sources of funds for use in lending, investing and for other general purposes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Deposits. We offer a variety of deposit accounts having a range of interest rates and terms. We currently offer savings accounts, NOW accounts, checking accounts, money market accounts and time deposits. We also offer IRA accounts.

Deposits generated through our branch network are our primary means of funding growth. Since December 31, 2002, our deposits have grown from $290.9 million to $1.2 billion as of March 31, 2007. Our deposit growth was primarily due to the growth in our branch network and our competitive pricing. As of March 31, 2007 we had 10 Silver State Bank branch offices and two Choice Bank branch offices. We expect to open two new Silver State Bank branches and two new Choice Bank branches in 2007.

Deposit flows are influenced significantly by general and local economic conditions, changes in prevailing interest rates, pricing of deposits and competition. Our deposits are primarily obtained from the market areas surrounding our offices. We rely primarily on paying competitive rates, providing strong customer service and maintaining long-standing relationships with customers to attract and retain these deposits. We also use brokers to obtain deposits when we require additional funding to meet loan demand. As of March 31, 2007, four of our depositors accounted for $272.3 million, or 23.6%, of our brokered deposits. The deposit balances of these four customers, which accounted for 23.6% of our deposits of March 31, 2007, are considered for regulatory purposes to be brokered deposits, and constitute all our brokered deposits at that date. Brokered deposits are generally considered to be deposits that have been received by us from a registered broker that is acting on behalf of that broker’s customer. Often, a broker will direct a customer’s deposits to the banking institution offering the highest interest rate available. The balances of our brokered deposits measured as of each month end from January 1, 2006 to March 31, 2007 have fluctuated, ranging from a high of $272.3 million, or 23.6% of total deposits to a low of $59.2 million, or 8.3% of total deposits. In addition, we obtain deposits via the internet. The primary reason for our increase in time deposits in 2006 was that we offered competitive rates on our certificates of deposits to fund our loan demand.

In determining our deposit rates, we consider local competition, U.S. Treasury securities offerings, the rates charged on other sources of funds and our funding requirements. Core deposits (defined as non-time deposit accounts) represented 62.5% of total deposits at March 31, 2007. At March 31, 2007, time deposits with remaining terms to maturity of less than one year amounted to $409.2 million.

The following table presents our average balances and rates by deposit category for the periods indicated:


	For the Three Months Ended March 31,								For the Years Ended December 31,
	2007				2006				2006				2005				2004
	Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate
	(Dollars in thousands)
Interest checking (NOW)	$	20,896	1.11	%	$	19,364	0.80	%	$	18,658	0.93	%	$	17,998	0.73	%	$	14,790	0.26	%
Savings and money market		466,931	4.67			322,889	3.81			350,549	4.34			317,416	3.03			190,451	1.70
Time		402,386	5.38			176,860	4.28			257,414	4.89			104,668	2.86			120,708	2.40

Total interest-bearing deposits		890,213	4.91			519,113	3.86			626,621	4.46			440,082	2.89			325,949	1.89
Non-interest bearing demand deposits		163,634	—			171,879	—			168,860	—			173,622				138,012

Total deposits	$	1,053,847	4.14	%	$	690,992	2.90	%	$	795,481	3.52	%	$	613,704	2.07	%	$	463,961	1.33	%

The following table presents in time deposits with balances of $100,000 and over maturing, for the periods indicated:


Maturity Period	At March 31, 2007		At December 31, 2006
	(In thousands)
Three months or less	$	71,257	$	49,226
Over three months through six months		61,127		70,100
Over six months through 12 months		140,399		95,563
Over 12 months		11,317		12,604

Total	$	284,100	$	227,493

Borrowings. From time to time we obtain advances from the FHLB, which are generally secured by a blanket lien against certain portions of our real estate loan portfolio. Borrowings from the FHLB are generally limited to twenty times the amount of FHLB stock owned. Short-term borrowed funds at the dates and for the periods presented are summarized as follows:


	At or for the Three Months Ended March 31, 2007			At or For the Years Ended December 31,
	At or for the Three Months Ended March 31, 2007			2006			2005			2004
	(Dollars in thousands)
FHLB Advances:
Maximum month-end balance	$	20,000		$	8,000		$	10,000		$	25,000
Balance at end of period		20,000			8,000			5,000			20,000
Average balance		12,955			4,795			2,288			2,678
Customer Repurchase Accounts and other
Maximum month-end balance		6,633			21,640			22,072			21,977
Balance at end of period		1,915			13,602			22,072			21,977
Average balance		11,755			14,597			16,598			13,426

Total Short-Term Borrowed Funds at end of period	$	21,915		$	21,602		$	27,072		$	41,977

Weighted average interest rate at end of period		5.33	%		5.09	%		3.92	%		2.50	%
Weighted average interest rate during period		5.24	%		4.63	%		3.18	%		2.01	%

In addition, we had $50.0 million in long term advances from the FHLB at March 31, 2007 and December 31, 2006, compared to $49.0 million at December 31, 2005.

From time to time we have formed special purpose trusts for the sole purpose of issuing guaranteed preferred beneficial interests in its junior subordinated debentures, or trust preferred securities, and investing the

proceeds thereof in the junior subordinated debentures issued by us. The funds raised through the issuance of junior subordinated debt have been used to supplement our capital and help us grow our assets. At March 31, 2007 we had $38.7 million of junior subordinated debentures issued to the following special purpose trusts:


Name of Trust	Interest Rate	Maturity	First Optional Redemption Date	At March 31, 2007 Amount Outstanding
Silver State Capital Trust II	3-month LIBOR plus 3.25%	April 24, 2033	April 24, 2008		5,155,000
Silver State Capital Trust III	3-month LIBOR plus 2.75%	April 7, 2034	April 7, 2009		5,155,000
Silver State Capital Trust IV	3-month LIBOR plus 1.60%	September 30, 2036	September 30, 2011		20,619,000
Silver State Capital Trust V	3-month LIBOR plus 1.62%	March 1, 2037	March 1, 2012		7,732,000

Total Junior Subordinated Debt Outstanding				$	38,661,000

The trust preferred securities qualify as Tier 1 Capital for Silver State Bancorp, subject to certain limitations, with the excess being included in total capital for regulatory purposes. Payment of distributions out of the monies held by the trusts and payments on liquidation of the trusts or the redemption of the trust preferred securities are guaranteed by us to the extent the trusts have funds available. Our obligations under the guarantees and the junior subordinated debentures are subordinate and junior in right of payment to all of our indebtedness and will be structurally subordinated to all liabilities and obligations of our subsidiaries. In the event of certain changes or amendments to regulatory requirements or Federal tax rules, the debt is redeemable in whole.

On June 25, 2007, in anticipation of completion of this offering, we received $20 million in financing pursuant to a 90-day non-revolving term loan. We contributed the proceeds of the loan to Silver State Bank and Choice Bank as capital, thus allowing them to be deemed “well capitalized” for regulatory purposes at June 30, 2007 without any reduction in assets. The FDIC determines the applicable insurance premium for each bank each quarter, based in part, on the bank’s regulatory capital classification as of each quarter end. If Silver State Bank and Choice Bank had failed to be deemed “well capitalized” at June 30, 2007, they each would have incurred increased premiums for deposit insurance, Silver State Bank and Choice Bank also would be required to obtain FDIC approval to gather brokered deposits during such times as they are considered to be “adequately capitalized” for regulatory capital purposes. See “Supervision and Regulation — Bank Regulation — Insurance of Deposit Accounts” and “— Capital Standards.”

Subsidiaries

We have two wholly-owned bank subsidiaries, Silver State Bank and Choice Bank. Silver State Bank is a Nevada-chartered commercial bank headquartered in Henderson, Nevada. Silver State Bank is one of the largest banks headquartered in Nevada, with $1.2 billion in assets, $1.0 billion in loans and $1.0 billion in deposits as of March 31, 2007. Silver State Bank has 10 full-service offices in the greater Las Vegas market area. In addition, Silver State Bank expects to open two full-service offices in the greater Las Vegas market area in the next 12 months and four additional full-service offices before the end of 2008.

Choice Bank is an Arizona-chartered commercial bank headquartered in Scottsdale, Arizona. As of March 31, 2007, Choice Bank had $185.4 million in assets, $143.9 million in loans and $137.4 million in deposits. Choice Bank has one full-service office in Scottsdale and one in Sun City West. In addition, Choice Bank expects to open two full-service offices in the Phoenix/Scottsdale market area in the next 12 months.

Financial Information Regarding Segment Reporting

We currently operate our business in two reportable operating segments, Silver State Bank and Choice Bank. Please refer to Note 19 of notes to our consolidated financial statements “Segment Information” for financial information regarding segment reporting.

Personnel

As of March 31, 2007, we had 284 full-time employees and 11 part-time employees. Employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good.

SUPERVISION AND REGULATION

General

The following discussion is only intended to summarize significant statutes and regulations that affect the banking industry and therefore is not a comprehensive survey of the field. These summaries are qualified in their entirety by reference to the particular statute or regulation that is referenced or described. Changes in applicable laws or regulations or in the policies of banking supervisory agencies, or the adoption of new laws or regulations, may have a material effect on our business and prospects. Changes in fiscal or monetary policies also may affect us. The probability, timing, nature or extent of such changes or their effect on us cannot be predicted.

Bank Holding Company Regulation

General. Silver State Bancorp is a bank holding company and is registered with the Board of Governors of the Federal Reserve System, under the BHC Act. As such, the Federal Reserve is our primary federal regulator, and we are subject to extensive regulation, supervision and examination by the Federal Reserve. Silver State Bancorp must file reports with the Federal Reserve and provide it with such additional information as it may require.

Under Federal Reserve regulations, a bank holding company is required to serve as a source of financial and managerial strength for its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the Federal Reserve’s policy that, in serving as a source of strength to its subsidiary banks, a bank holding company should stand ready to use its available resources to provide adequate capital to its subsidiary banks during period of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company’s failure to meet these obligations will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of Federal Reserve regulations, or both.

Among its powers, the Federal Reserve may require a bank holding company to terminate an activity or terminate control of, divest or liquidate subsidiaries or affiliates that the Federal Reserve determines constitute a significant risk to the financial safety or soundness of the bank holding company or any of its bank subsidiaries. Subject to certain exceptions, bank holding companies are also required to give written notice to and receive approval from the Federal Reserve before purchasing or redeeming their common stock or other equity securities. The Federal Reserve also may regulate provisions of a bank holding company’s debt, including by imposing interest rate ceilings and reserve requirements. In addition, the Federal Reserve requires all bank holding companies to maintain capital at or above certain prescribed levels.

Holding Company Bank Ownership. The BHC Act requires every bank holding company to obtain the approval of the Federal Reserve before it may acquire, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of any class of the outstanding voting shares of such other bank or bank holding company, acquire all or substantially all the assets of another bank or bank holding company or merge or consolidate with another bank holding company.

Holding Company Nonbank Ownership. With certain exceptions, the BHC Act prohibits a bank holding company from acquiring or retaining, directly or indirectly, ownership or control of more than 5% of the outstanding voting shares of any company that is not a bank or bank holding company, or from engaging, directly or indirectly, in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain nonbank activities that have been identified, by statute or by Federal Reserve regulation or order as activities so closely related to the business of banking or of managing or controlling banks as to be a proper incident thereto. Business activities that have been determined to be so related to banking include securities brokerage services, investment advisory services, fiduciary services and certain management advisory and data processing services, among others.

Change in Control. In the event that the BHC Act is not applicable to a person or entity, the Change in Bank Control Act of 1978, or the CIBC Act, requires that such person or entity give notice to the Federal Reserve and the Federal Reserve not disapprove such notice before such person or entity may acquire “control” of a bank or bank holding company. A limited number of exemptions apply to such transactions. Control is conclusively presumed to exist if a person or entity acquires 25% or more of the outstanding shares of any class of voting stock of the bank holding company or insured depository institution. Control is rebuttably presumed to exist if a person or entity acquires 10% or more but less than 25% of such voting stock and either the issuer has a class of registered securities under Section 12 of the Exchange Act, or no other person or entity will own, control or hold the power to vote a greater percentage of such voting stock immediately after the transaction.

State Law Restrictions. As a Nevada corporation, Silver State Bancorp is subject to certain limitations and restrictions under applicable Nevada corporate law. For example, Nevada law imposes restrictions relating to indemnification of directors, maintenance of books, records and minutes and observance of certain corporate formalities. Silver State Bancorp also is a bank holding company within the meaning of state law in the states where its subsidiary banks are located. As such, it is subject to examination by and may be required to file reports with the Nevada Financial Institutions Division, or the Nevada DFI, under sections 666.095 and 666.105 of the Nevada Revised Statutes. Silver State Bancorp must obtain the approval of the Nevada Commissioner of Financial Institutions, or the Nevada Commissioner, before it may acquire a bank. Any transfer of control of a Nevada bank holding company must be approved in advance by the Nevada Commissioner.

Under section 6-142 of the Arizona Revised Statutes, no person may acquire control of a company that controls an Arizona bank without the prior approval of the Arizona Superintendent of Financial Institutions, or the Arizona Superintendent. A person who has the power to vote 15% or more of the voting stock of a controlling company is presumed to control the company.

Bank Regulation

General. We control two subsidiary banks. Silver State Bank, located in Henderson, Nevada, is chartered by the State of Nevada and is subject to primary regulation, supervision and examination by the Nevada DFI. Choice Bank, located in Scottsdale, Arizona, is chartered by the State of Arizona and is subject to primary regulation, supervision and examination by the Arizona Department of Financial Institutions, or the Arizona DFI. Each bank also is subject to regulation by the FDIC, which is its primary federal banking supervisory authority, and, as to certain matters, the Federal Reserve, although neither bank is a member of the Federal Reserve System.

Federal and state banking laws and the implementing regulations promulgated by the federal and state banking regulatory agencies cover most aspects of the banks’ operations, including capital requirements, reserve requirements against deposits and for possible loan losses and other contingencies, dividends and other distributions to stockholders, customers’ interests in deposit accounts, payment of interest on certain deposits, permissible activities and investments, securities that a bank may issue and borrowings that a bank may incur, rate of growth, number and location of branch offices and acquisition and merger activity with other financial institutions.

In addition, if, as a result of an examination, the FDIC were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of either of the banks’ operations had become unsatisfactory, or that either of the banks or their management was in violation of any law of regulation, the FDIC may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in the bank’s capital, to restrict the bank’s growth, to assess civil monetary penalties against the bank’s officers or directors, to remove officers and directors and, if the FDIC concludes that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate the bank’s deposit insurance.

Under Nevada and Arizona law, each of the respective state banking supervisory authorities has many of the same remedial powers with respect to its state-chartered banks.

Insurance of Deposit Accounts. Deposits in the banks are insured by the FDIC to applicable limits through the Deposit Insurance Fund, or DIF. Both of our subsidiary banks are required to pay deposit insurance premiums, which are assessed and paid quarterly. Pursuant to The Federal Deposit Insurance Corporation Improvement Act, the FDIC had established a risk-based assessment system for insured depository institutions that took into account the risks attributable to different categories and concentrations of assets and liabilities. Under the risk-based assessment system, the FDIC assigned an institution to one of the three capital categories based on the institution’s financial information as of its most recent quarterly financial report filed with the applicable bank regulatory agency prior to the commencement of the assessment period, consisting of (1) well capitalized, (2) adequately capitalized or (3) undercapitalized. The FDIC also assigned an institution to one of three supervisory subcategories within each capital group. The supervisory subgroup to which an institution was assigned was based on a supervisory evaluation provided to the FDIC by the institution’s primary federal regulator and information that the FDIC determined to be relevant to the institution’s financial condition and the risk posed to the Deposit Insurance Fund, or DIF (formerly the Savings Association Insurance Fund, or SAIF, and the Bank Insurance Fund, or BIF). An institution’s deposit insurance assessment rate depended on the capital category and supervisory subcategory to which it was assigned. Under the risk-based assessment system, there were nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates were applied, ranging from 0 to 27 basis points. The assessment rates for our BIF-assessable and SAIF-assessable deposits from 1997 through 2006 were each 0 basis points.

On February 8, 2006, President Bush signed the “Federal Deposit Insurance Reform Act of 2005,” or the 2005 Deposit Act, into law. The 2005 Deposit Act contains provisions designed to reform and modernize the federal deposit insurance system. Effective January 1, 2007, the FDIC established a new risk-based assessment system for determining the deposit insurance assessments to be paid by insured depository institutions. The FDIC consolidated the previous nine assessment rate categories into four new categories. Base assessment rates range from two to four basis points for Risk Category I institutions and seven basis points for Risk Category II institutions, twenty-five basis points for Risk Category III institutions and forty basis points for Risk Category IV institutions. For institutions within Risk Category I, assessment rates will depend upon a combination of Capital adequacy, Asset quality, Management, Earnings, Liquidity, Sensitivity to Market Risk, or CAMELS, component ratings and financial ratios, or for large institutions with long-term debt issuer ratings, assessment rates will depend on a combination of long-term debt issuer ratings and CAMELS component ratings. The FDIC has the flexibility to adjust rates, without further notice-and-comment rulemaking, provided that no such adjustment can be greater than three basis points from one quarter to the next, that adjustments cannot result in rates more than three basis points above or below the base rates and that rates cannot be negative. Effective January 1, 2007, the FDIC has set the assessment rates at three basis points above the base rates. Assessment rates will, therefore, range from five to forty-three basis points of deposits. The FDIC also established 1.25% of estimated insured deposits as the designated reserve ratio of the DIF. The FDIC is authorized to change the assessment rates as necessary, subject to the previously discussed limitations, to maintain the required reserve ratio of 1.25%.

Silver State Bancorp is considered “well capitalized” for regulatory purposes as of March 31, 2007. As of December 31, 2006 both Silver State Bank and Choice Bank were “well capitalized.” As of March 31, 2007 both Silver State Bank and Choice Bank are “adequately capitalized.” Pursuant to the FDIC’s risk-based deposit insurance assessment system, the deposit insurance assessment rate for both Silver State Bank and Choice Bank has increased as a result of the adequately capitalized status of each bank at March 31, 2007. Any increase in insurance assessments would have an adverse effect on our and our subsidiaries’ earnings. In addition, both of Silver State Bank and Choice Bank would be required to obtain FDIC approval to gather brokered deposits during such times as they are considered to be “adequately capitalized.”

Change in Control. The application of the CIBC Act is described in the discussion above regarding bank holding companies. Under Nevada banking law, a Nevada bank must report a change in ownership of 10% or

more of the bank’s outstanding voting stock to the Nevada DFI within three business days after obtaining knowledge of the change. Any person who acquires control of a Nevada bank must obtain the prior approval of the Nevada Commissioner. Arizona banking law provides that no person may acquire control of an Arizona bank without the prior approval of the Arizona Superintendent. A person who has the power to vote 15% or more of the voting stock of an Arizona bank is presumed to control the bank.

Bank Merger. Section 18(c) of the Federal Deposit Insurance Act, or the FDI Act, requires a bank or any other insured depository institution to obtain the approval of its primary federal banking supervisory authority before it may merge or consolidate with or acquire the assets or assume the liabilities of any other insured depository institution. State law requirements are similar. Nevada banking law requires that a bank must obtain the prior approval of the Nevada Commissioner before it may merge or consolidate with or transfer its assets and liabilities to another bank. Arizona banking law requires the approval of the Arizona Superintendent before a bank may merge or consolidate with another bank.

Capital Standards

Regulatory Capital Guidelines. The Federal Reserve and the FDIC have risk-based capital adequacy guidelines intended to measure capital adequacy with regard to the degree of risk associated with a banking organization’s operations for transactions reported on the balance sheet as assets and transactions, such as letters of credit and recourse arrangements, that are reported as off-balance-sheet items. Under these guidelines, the nominal dollar amounts of assets on the balance sheet and credit-equivalent amounts of off-balance-sheet items are multiplied by one of several risk adjustment percentages. These range from 0.0% for assets with low credit risk, such as cash and certain U.S. government securities, to 100.0% for assets with relatively higher credit risk, such as business loans. A banking organization’s risk-based capital ratios are obtained by dividing its Tier 1 capital and total qualifying capital (Tier 1 capital and a limited amount of Tier 2 capital) by its total risk-adjusted assets and off-balance-sheet items. Tier 1 capital consists of common stock, retained earnings, noncumulative perpetual preferred stock and minority interests in certain subsidiaries, less most other intangible assets. Tier 1 capital also includes trust-preferred securities in an amount not to exceed 25% of total capital, net of goodwill. Tier 2 capital may include a limited amount of the allowance for loan and lease losses and certain other instruments that have some characteristics of equity. The inclusion of elements of Tier 2 capital as qualifying capital is subject to certain other requirements and limitations of the federal banking supervisory agencies. Since December 31, 1992, the Federal Reserve and the FDIC have required a minimum ratio of Tier 1 capital to risk-adjusted assets and off-balance-sheet items of 4.0% and a minimum ratio of qualifying total capital to risk-adjusted assets and off-balance-sheet items of 8.0%.

The Federal Reserve and the FDIC also require banking organizations to maintain a minimum amount of Tier 1 capital relative to average total assets, referred to as the leverage ratio. The principal objective of the leverage ratio is to place a limit on the extent to which a bank holding company may leverage its equity capital base. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets is 3.0%. However, an institution with a 3.0% leverage ratio would be unlikely to receive the highest rating since a strong capital position is a significant part of the regulators’ rating criteria. All banking organizations not rated in the highest category must maintain an additional capital cushion of 100 to 200 basis points. The Federal Reserve and the FDIC have the discretion to set higher minimum capital requirements for specific institutions whose specific circumstances warrant it, such as a bank or bank holding company experiencing or anticipating significant growth. A bank that does not achieve and maintain the required capital levels may be issued a capital directive by the Federal Reserve or the FDIC, as appropriate, to ensure the maintenance of required capital levels. Neither the Federal Reserve nor the FDIC has advised Silver State Bancorp or any of its subsidiary banks that it is subject to any special capital requirements.

The regulatory capital guidelines and actual capitalization of Silver State Bancorp on a consolidated basis and for each of its subsidiary banks is as follows:


	At March 31, 2007				Adequately- Capitalized Requirements				Minimum For Well-Capitalized Requirements
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)


Total Capital (to Risk Weighted Assets)
Silver State Bancorp	$	142,735	10.4	%	$	109,870	8.0	%	$	137,337	10.0	%
Silver State Bank		119,269	9.6			99,048	8.0			123,810	10.0
Choice Bank		12,971	9.7			10,718	8.0			13,397	10.0

Tier I Capital (to Risk Weighted Assets)
Silver State Bancorp	$	130,064	9.5	%	$	54,935	4.0	%	$	82,402	6.0	%
Silver State Bank		107,628	8.7			49,524	4.0			74,286	6.0
Choice Bank		11,941	8.9			5,359	4.0			8,038	6.0

Leverage Ratio (to Average Assets)
Silver State Bancorp	$	130,064	10.3	%	$	50,582	4.0	%	$	63,227	5.0	%
Silver State Bank		107,628	9.7			44,401	4.0			55,501	5.0
Choice Bank		11,941	7.9			6,083	4.0			7,604	5.0

As of March 31, 2007, Silver State Bank and Choice Bank are “adequately capitalized” for regulatory purposes. Over the last three years, Silver State Bancorp and Silver State Bank have been “well capitalized” for regulatory purposes at all times except that as of March 31, 2007 Silver State Bank was “adequately capitalized”. Choice Bank has been “well capitalized” at all times since its acquisition by Silver State Bancorp in September of 2006, except that as of March 31, 2007 it was “adequately capitalized.” The change in capital status at March 31, 2007 reflects the continued growth of the two banks during the time when our capital management efforts were focused on preparing for this offering. On June 25, 2007, in anticipation of completion of this offering, we received $20 million in financing pursuant to a 90-day non-revolving term loan. We contributed the proceeds of the loan to Silver State Bank and Choice Bank as capital, thus allowing them to be deemed “well capitalized” for regulatory purposes at June 30, 2007 without any reduction in assets. Any amount of the $20 million term loan outstanding at the closing of this offering will be repaid in full with the proceeds of this offering. The FDIC determines the applicable insurance premium for each bank each quarter, based in part, on the bank’s regulatory capital classification as of each quarter end. If Silver State Bank and Choice Bank had failed to be deemed “well capitalized” at June 30, 2007, they each would have incurred increased premiums for deposit insurance for that quarter. Silver State and Choice Bank also would be required to obtain FDIC approval to gather brokered deposits during such times as they are considered to be “adequately capitalized” for regulatory capital purposes.

Institutions may continue to gather brokered deposits during such times as they are considered to be “adequately capitalized” by obtaining a waiver from the FDIC. Institutions may request a waiver by submitting a letter application to the appropriate FDIC regional director. Such application must contain (i) the time period for which the waiver is requested, (ii) the policy governing the use of brokered deposits in the institution’s overall funding and liquidity management program, (iii) volume, rates and maturities of the brokered deposits held at the time of application and anticipated during the waiver period sought, (iv) a comparison with respect to how brokered deposits differ from other funding alternatives, (v) procedures and practices used to solicit brokered deposits, including an identification of the principal sources of such deposits, (vi) management systems used to monitor the solicitation, acceptance and use of brokered deposits, (vii) a recent consolidated financial statement with balance sheet and income statements and (viii) the reasons the institution believes its acceptance, renewal or rollover of brokered deposits would pose no undue risk. The FDIC reviews applications on a case-by-case basis and grants waivers where it determines that acceptance of brokered deposits will not result in an unsafe or

unsound banking practice. We believe that we are in compliance with all rules and regulations of the FDIC concerning brokered deposits and that all of our activities, including the use of brokered deposits, are conducted in a safe and sound manner.

Although the $20 million financing will allow the two banks to be “well capitalized” as of June 30, 2007, it will not increase our consolidated capital or affect our capital status as a bank holding company. As a result of our continued growth, it is possible that at June 30, 2007, we as a bank holding company may be deemed to be “adequately capitalized.” We do not anticipate that failure to be “well capitalized” will have as an adverse impact on our business or results of operations. Further, upon completion of the offering we will be considered to be “well capitalized.”

Prompt Corrective Action. Federal banking agencies possess broad powers to take corrective and other supervisory action to resolve the problems of insured depository institutions, including institutions that fall below one or more of the prescribed minimum capital ratios described above. An institution that is classified based upon its capital levels as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it was in the next lower capital category if its primary federal banking supervisory authority, after notice and opportunity for hearing, determines that an unsafe or unsound condition or practice warrants such treatment. At each successively lower capital category, an insured depository institution is subject to additional restrictions. A bank holding company must guarantee that a subsidiary bank that adopts a capital restoration plan will meet its plan obligations, in an amount not to exceed 5% of the subsidiary bank’s assets or the amount required to meet regulatory capital requirements, whichever is less. Any capital loans made by a bank holding company to a subsidiary bank are subordinated to the claims of depositors of the bank and to certain other indebtedness of the subsidiary bank. In the event of the bankruptcy of a bank holding company, any commitment by the bank holding company to a federal banking regulatory agency to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee and would be entitled to priority of payment.

In addition to measures that may be taken under the prompt corrective action provisions, federal banking regulatory authorities may bring enforcement actions against banks and bank holding companies for unsafe or unsound practices in the conduct of their businesses or for violations of any law, rule or regulation, any condition imposed in writing by the appropriate federal banking regulatory authority or any written agreement with the authority. Possible enforcement actions include the appointment of a conservator or receiver, the issuance of a cease-and-desist order that could be judicially enforced, the termination of deposit insurance (in the case of a depository institution), the imposition of civil money penalties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the issuance of removal and prohibition orders against institution-affiliated parties and the enforcement of such actions through injunctions or restraining orders. In addition, a bank holding company’s inability to serve as a source of strength for its subsidiary banks could serve as an additional basis for a regulatory action against the bank holding company.

Under Nevada law, if the stockholders’ equity of a Nevada state-chartered bank becomes impaired, the Nevada Commissioner must require the bank to correct the impairment within three months after receiving notice from the Nevada Commissioner. If the impairment is not corrected, the Nevada Commissioner may take possession of the bank and liquidate it.

Dividends. Silver State Bancorp has never declared or paid cash dividends on its capital stock. Silver State Bancorp currently intends to retain any future earnings for future growth and does not anticipate paying any cash dividends in the foreseeable future. Any determination in the future to pay dividends will be at the discretion of Silver State Bancorp’s board of directors and will depend on the company’s earnings, financial condition, results of operations, business prospects, capital requirements, regulatory restrictions, contractual restrictions and other factors that the board of directors may deem relevant.

Silver State Bancorp’s ability to pay dividends is subject to the regulatory authority of the Federal Reserve. Although there are no specific federal laws or regulations restricting dividend payments by bank holding companies, the supervisory concern of the Federal Reserve focuses on a holding company’s capital position, its ability to meet its financial obligations as they come due, and its capacity to act as a source of financial strength to its subsidiaries. In addition, Federal Reserve policy discourages the payment of dividends by a bank holding company that is not supported by current operating earnings.

Section 78-288 of the Nevada Revised Statutes provides that no cash dividend or other distribution to stockholders, other than a stock dividend, may be made by a Nevada corporation if, after giving effect to the

dividend, the corporation would not be able to pay its debts as they become due or, unless specifically allowed by the articles of incorporation, the corporation’s total assets would be less than the sum of its total liabilities and the claims of preferred stockholders upon dissolution of the corporation.

From time to time, Silver State Bancorp may become a party to financing agreements and other contractual obligations that have the effect of limiting or prohibiting the declaration or payment of dividends. Holding company expenses and obligations with respect to its outstanding trust preferred securities and corresponding subordinated debt also may limit or impair Silver State’s ability to declare and pay dividends.

Since Silver State Bancorp has no significant assets other than the voting stock of its subsidiaries, it currently depends on dividends from its bank subsidiaries for a substantial portion of its revenue. The ability of a state nonmember bank to pay cash dividends is not restricted by federal law or regulations. State law imposes restrictions on the ability of each of Silver State Bancorp’s subsidiary banks to pay dividends:

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Under sections 661.235 and 661.240 of the Nevada Revised Statutes, Silver State Bank may not pay dividends unless the bank’s surplus fund, not including any initial surplus fund, equals the bank’s initial stockholders’ equity, including 10% of the previous year’s net profits, and the dividend would not reduce the bank’s stockholders’ equity below the initial stockholders’ equity of the bank or 6% of the total deposit liability of the bank.

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Under section 6-187 of the Arizona Revised Statutes, Choice Bank may pay dividends on the same basis as any other Arizona corporation. Under section 10-640 of the Arizona Revised Statutes, a corporation may not make a distribution to stockholders if to do so would render the corporation insolvent or unable to pay its debts as they become due. However, an Arizona bank may not declare a dividend, payable other than in the bank’s stock, out of capital surplus without the approval of the Superintendent.

As of March 31, 2007, Silver State Bank and Choice Bank are “adequately capitalized” for regulatory purposes. Therefore, as of March 31, 2007, Silver State Bank and Choice Bank had the unrestricted ability to pay dividends in an aggregate amount of approximately $20 million and to remain “adequately-capitalized.”

Redemption. A bank holding company may not purchase or redeem its equity securities without the prior written approval of the Federal Reserve if the purchase or redemption combined with all other purchases and redemptions by the bank holding company during the preceding 12 months equals or exceeds 10% of the bank holding company’s consolidated net worth. However, prior approval is not required, under Federal Reserve regulations, if the bank holding company is well-managed, not the subject of any unresolved supervisory issues and both before and immediately after the purchase or redemption is well-capitalized.

Increasing Competition in Financial Services

Interstate Banking and Branching. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, or the Riegle-Neal Act, generally authorizes interstate branching. Currently, bank holding companies may purchase banks in any state, and banks may merge with banks in other states, unless the home state of the bank holding company or either merging bank has opted out under the Riegle-Neal Act. After properly entering a state, an out-of-state bank may establish new branches or acquire branches or acquire other banks on the same terms as a bank that is chartered by the state.

Nevada has enacted legislation authorizing interstate mergers pursuant to the Riegle-Neal Act. The Nevada statute permits out-of-state banks and bank holding companies meeting certain requirements to maintain and operate the Nevada branches of a Nevada bank that are acquired in an interstate combination. An out-of-state bank may not enter the state by establishing a new branch or acquiring a branch of a depository institution in Nevada without acquiring the institution itself, and an out-of-state bank holding company without a subsidiary bank in Nevada may not establish a new bank. However, with the written approval of the Nevada Commissioner, such an out-of-state bank or bank holding company may engage in such a transaction in a county with a population of less than 100,000.

An out-of-state bank may enter Arizona by establishing a new branch or by acquiring a single branch of a financial institution that is headquartered in the state, provided that the branch is more than five years old and the state in which the out-of-state bank is headquartered extends reciprocal rights. An out-of-state bank holding company without a subsidiary bank in Arizona may establish a new bank in the state, and thereafter may acquire additional banks.

Financial Holding Company Status. The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act, or GLB Act, was enacted in order to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities and investment banking firms and other financial service providers. The GLB Act revised the BHC Act to permit a qualifying bank holding company to engage in a broader range of financial activities, primarily through wholly owned subsidiaries, and thereby to foster greater competition among financial service companies. The GLB Act also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily with regard to insurance activities. The GLB Act:

•

Broadens the activities that may be conducted by bank holding companies and their subsidiaries and by national banks and their financial subsidiaries. Under parity provisions of the FDI Act and FDIC regulations, as well as state banking laws and regulations, insured state banks may engage in activities that are permissible for national banks, thereby extending the effect of the GLB Act to state banks as well;

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Provides a framework for protecting the privacy of consumer information;

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Modifies the laws governing the implementation of the Community Reinvestment Act, or the CRA; and

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Addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.

In order to become or remain a financial holding company, a bank holding company must be well-capitalized, well-managed, and, except in limited circumstances, in compliance with the CRA. Failure by a financial holding company to maintain compliance with these requirements or correct non-compliance within a fixed time period could lead to the divesture of all subsidiary banks or a requirement to conform all nonbanking activities to those permissible for a bank holding company. A bank holding company that is not also a financial holding company can only engage in banking and such other activities that were determined by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be a proper incident thereto at the time that the GLB Act was adopted by Congress.

A bank holding company that qualifies and elects to become a financial holding company may affiliate with securities firms and insurance companies and engage in investment banking and other activities that are financial in nature or are incidental or complementary to activities that are financial in nature. Under the regulations of the Federal Reserve implementing the GLB Act, activities that are financial in nature and may be engaged in by financial holding companies include securities underwriting, dealing and market making, sponsoring mutual funds and investment companies, engaging in insurance underwriting and brokerage activities, investing (without providing routine management) in companies engaged in nonfinancial activities and conducting activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines from time to time to be financial in nature or incidental to a financial activity.

Silver State Bancorp does not believe that the GLB Act will have a material effect on its operations, at least in the near-term. Silver State Bancorp is not a financial holding company and has no current plans to engage in any activities not permitted to bank holding companies. However, to the extent that the GLB Act enables banks, securities firms and insurance companies to affiliate, the financial service industry may experience further consolidation. The GLB Act also may contribute to an increase in the level of competition that Silver State Bancorp faces from larger institutions and other types of companies offering diversified financial products, many of which may have substantially greater financial resources than Silver State Bancorp has.

Selected Regulation of Banking Activities

Interagency Guidance on Concentrations in Commercial Real Estate Lending. On December 6, 2006, the Federal Reserve, the Office of the Comptroller of the Currency, or the OCC and the FDIC adopted guidance entitled “Concentrations in Commercial Real Estate (CRE) Lending, Sound Risk Management Practices,” or the CRE Guidance, to address concentrations of commercial real estate loans in financial institutions. Although the CRE Guidance does not establish specific commercial real estate lending limits, the Federal Reserve, OCC and FDIC use the following criteria to evaluate whether an institution has a commercial real estate concentration risk. An institution may be identified for further supervisory analysis if it has experienced rapid growth in commercial real estate lending or has notable exposure to a specific type of commercial real estate. An institution may also be subject to further supervisory analysis if its total reported loans for construction, land development and other land represent 100 percent or more of that institution’s total capital, or if the institution’s total commercial real estate loans represent 300 percent or more of its total capital and the outstanding balance of its commercial real estate portfolio has increased by 50 percent or more during the prior 36 months. The CRE Guidance applies to financial institutions with an accumulation of credit concentration exposures and asks that the institutions quantify the additional risk such exposures may pose. Such quantification should include the stratification of the commercial real estate portfolio by, among other things, property type, geographic market, tenant concentrations, tenant industries, developer concentrations and risk rating. In addition, an institution should perform periodic market analyses for the various property types and geographic markets represented in its portfolio. Further, an institution with commercial real estate concentration risk should also perform portfolio level stress tests or sensitivity analysis to quantify the effect of changing economic conditions on asset quality, earnings and capital. We believe that the CRE Guidance will not have a material impact on the conduct of our business and we have implemented requirements and suggestions set forth in the CRE Guidance during 2007. See “Business — Lending Activities — Loan Approval Procedures and Authority — Concentrations of Credit Risk.”

Interagency Guidance on Nontraditional Mortgage Product Risks. On October 4, 2006, the FDIC and other federal bank regulatory authorities published the Interagency Guidance on Nontraditional Mortgage Product Risks, or the Guidance. The Guidance describes sound practices for managing risk, as well as marketing, originating and servicing nontraditional mortgage products, which include, among other things, interest-only loans. The Guidance sets forth supervisory expectations with respect to loan terms and underwriting standards, portfolio and risk management practices and consumer protection. For example, the Guidance indicates that originating interest-only loans with reduced documentation is considered a layering of risk and that institutions are expected to demonstrate mitigating factors to support their underwriting decision and the borrower’s repayment capacity. Specifically, the Guidance indicates that a lender may accept a borrower’s statement as to the borrower’s income without obtaining verification only if there are mitigating factors that clearly minimize the need for direct verification of repayment capacity and that, for many borrowers, institutions should be able to readily document income.

We have evaluated the Guidance to determine our compliance and, as necessary, modified our risk management practices and underwriting guidelines. The Guidance does not apply to all mortgage lenders with whom we compete for loans. Therefore, we cannot predict the impact the Guidance may have, if any, on our loan origination volumes in future periods.

Transactions with Affiliates. Banks are subject to restrictions imposed by the Federal Reserve Act and regulations adopted by the Federal Reserve to implement it with regard to purchase of assets from affiliates, extensions of credit to affiliates, investments in securities issued by affiliates and the use of affiliates’ securities as collateral for loans to any borrower. These laws and regulations may limit the ability of Silver State Bancorp to obtain funds from its subsidiary banks for its cash needs, including funds for payment of dividends, interest and operational expenses.

Insider Credit Transactions. Banks also are subject to certain restrictions under the Federal Reserve Act and Federal Reserve regulations regarding extensions of credit to executive officers, directors or principal stockholders of a bank and its affiliates or to any related interests of such persons (i.e., insiders). All extensions

of credit to insiders must be made on substantially the same terms and pursuant to the same credit underwriting procedures as are applicable to comparable transactions with persons who are neither insiders nor employees, and must not involve more than the normal risk of repayment or present other unfavorable features. Insider loans also are subject to certain lending limits, and the regulations impose restrictions on overdrafts to insiders and requirements for prior approval by the bank’s board of directors.

Lending Limits. State banking law generally limits the amount of funds that a bank may lend to a single borrower. Under Nevada law, the total amount of outstanding extensions of credit that a bank may make to a single borrower generally may not exceed 25% of Tier 1 capital plus allowance for loan losses. Under Arizona law, the aggregate extensions of credit of a bank to one borrower may not exceed 15% of the bank’s capital. “See Business — Loan Approval Procedures and Authority — Loans to One Borrower.”

Tying Arrangements. Silver State Bancorp and its subsidiary banks are prohibited from engaging in certain tying arrangements in connection with any extension of credit, sale or lease of property or furnishing of services. With certain exceptions for traditional banking services, Silver State Bancorp’s subsidiary banks may not condition an extension of credit to a customer on a requirement that the customer obtain additional credit, property or services from the bank, Silver State Bancorp or any of Silver State Bancorp’s other subsidiaries, that the customer provide some additional credit, property or services to the bank, Silver State Bancorp or any of Silver State Bancorp’s other subsidiaries or that the customer refrain from obtaining credit, property or other services from a competitor.

Regulation of Management. Federal law sets forth circumstances under which officers or directors of a bank or bank holding company may be removed by the institution’s primary federal banking supervisory authority. Federal law also prohibits a management official of a bank or bank holding company from serving as a management official with an unaffiliated bank or bank holding company that has offices within a specified geographic area that is related to the location of the bank’s offices and the asset size of the institutions.

Safety and Soundness Standards. Federal law imposes upon banks certain non-capital safety and soundness standards. These standards cover internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation and benefits. Additional standards apply to asset quality, earnings and stock valuation. An institution that fails to meet these standards must develop a plan, acceptable to its regulators, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions.

Consumer Protection Laws and Regulations

The banking regulatory authorities have increased their attention in recent years to compliance with consumer protection laws and their implementing regulations. Examination and enforcement have become more intense in nature, and insured institutions have been advised to monitor carefully compliance with such laws and regulations. Silver State Bank and Choice Bank are subject to many federal consumer protection statutes and regulations, some of which are discussed below.

Community Reinvestment Act. The CRA is intended to encourage insured depository institutions, while operating safely and soundly, to help meet the credit needs of their communities. The CRA specifically directs the federal regulatory agencies, when examining insured depository institutions, to assess a bank’s record of helping meet the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound banking practices. The CRA further requires the agencies to take a financial institution’s record of meeting its community credit needs into account when evaluating applications for, among other things, domestic branches, mergers or acquisitions, or holding company formations. The agencies use the CRA assessment factors in order to provide a rating to the financial institution. The ratings range from a high of “outstanding” to a low of “substantial noncompliance.” Silver State Bank was rated “outstanding” in its last examination for CRA compliance, as of June 1, 2005. Choice Bank was rated “satisfactory” in its last examination for CRA compliance, as of March 1, 2005.

Equal Credit Opportunity Act. The Equal Credit Opportunity Act generally prohibits discrimination in any credit transaction, whether for consumer or business purposes, on the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), receipt of income from public assistance programs, or good faith exercise of any rights under the Consumer Credit Protection Act.

Truth in Lending Act. The Truth in Lending Act, or TILA, is designed to ensure that credit terms are disclosed in a meaningful way so that consumers may compare credit terms more readily and knowledgeably. As a result of the TILA, all creditors must use the same credit terminology to express rates and payments, including the annual percentage rate, the finance charge, the amount financed, the total of payments and the payment schedule, among other things.

Fair Housing Act. The Fair Housing Act, or FHA, regulates many practices, and makes it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status. A number of lending practices have been found by the courts to be illegal under the FHA, including some practices that are not specifically mentioned in the FHA.

Home Mortgage Disclosure Act. The Home Mortgage Disclosure Act, or HMDA, grew out of public concern over credit shortages in certain urban neighborhoods and provides public information that is intended to help show whether financial institutions are serving the housing credit needs of the neighborhoods and communities in which they are located. The HMDA also includes a “fair lending” aspect that requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. Beginning with data reported for 2004, the amount of information that financial institutions collect and disclose concerning applicants and borrowers has expanded, which is expected to increase the attention that HMDA data receives from state and federal banking supervisory authorities, community-oriented organizations and the general public.

Real Estate Settlement Practices Act. The Real Estate Settlement Procedures Act, or RESPA, requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements. RESPA also prohibits certain abusive practices, such as kickbacks and fee-splitting without providing settlement services.

Penalties under the above laws may include fines, reimbursements and other penalties. Due to heightened regulatory concern related to compliance with these laws generally, Silver State Bancorp and its subsidiary banks may incur additional compliance costs or be required to expend additional funds for investments in its local communities.

Predatory Lending

“Predatory lending” is a far-reaching concept and potentially covers a broad range of behavior. As such, it does not lend itself to a concise or comprehensive definition. However, predatory lending typically involves one or more of the following elements:

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making unaffordable loans based on the borrower’s assets rather than the borrower’s ability to repay an obligation;

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inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced, or loan flipping; and

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engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower.

The Home Ownership Equity and Protection Act of 1994, or HOEPA, and regulations adopted by the Federal Reserve to implement it require extra disclosures and extend additional protection to borrowers in

consumer credit transactions, such as home repairs or renovation, where an extension of credit is secured by a mortgage on the borrower’s primary residence. The HOEPA disclosures and protections are applicable to consumer loans with any of the following features:

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interest rates for first lien mortgage loans more than 8 percentage points above the yield on U.S. Treasury securities having a comparable maturity;

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interest rates for subordinate lien mortgage loans more than 10 percentage points above the yield on U.S. Treasury securities having a comparable maturity; or

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fees, such as optional insurance and similar debt protection costs paid in connection with the credit transaction that, when combined with points and fees, are deemed to be excessive.

HOEPA also prohibits loan flipping by the same lender or loan servicer within a year of the loan being refinanced. Lenders are presumed to have violated the law unless they document that the borrower has the ability to repay. Lenders that violate the rules face cancellation of loans and penalties equal to the finance charges paid.

Privacy

Under the GLB Act, all financial institutions, including Silver State Bancorp and its bank subsidiaries, are required to establish policies and procedures to restrict the sharing of nonpublic customer data with nonaffiliated parties at the customer’s request and to protect customer data from unauthorized access. In addition, the Fair and Accurate Credit Transactions Act of 2003, or the FACT Act, includes many provisions concerning national credit reporting standards and permits consumers, including customers of Silver State Bancorp’s subsidiary banks, to opt out of information-sharing for marketing purposes among affiliated companies. The FACT Act also requires banks and other financial institutions to notify their customers if they report negative information about them to a credit bureau or if they are granted credit on terms less favorable than those generally available. The Federal Reserve and the Federal Trade Commission have extensive rulemaking authority under the FACT Act, and Silver State Bancorp and its subsidiary banks are subject to these provisions. Silver State Bancorp has developed policies and procedures for itself and its subsidiaries to maintain compliance and believes it is in compliance with all privacy, information sharing and notification provisions of the GLB Act and the FACT Act.

Compliance

In order to assure that Silver State Bancorp and its subsidiary banks are in compliance with the laws and regulations that apply to their operations, including those summarized above and below, Silver State Bancorp and each of its subsidiary banks employs a compliance officer and Silver State Bancorp engages an independent compliance auditing firm. Silver State Bancorp is regularly reviewed by the Federal Reserve and the subsidiary banks are regularly reviewed by the FDIC and their respective state banking agencies, as part of which their compliance with applicable laws and regulations is assessed. Based on the assessments of its outside compliance auditors and state and federal banking supervisory authorities of Silver State Bancorp and its subsidiary banks, Silver State Bancorp believes that it materially complies with all the laws and regulations that apply to its operations.

Anti-Money Laundering and Customer Identification

Silver State Bank and Choice Bank are subject to FDIC regulations implementing the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act. The USA PATRIOT Act gives the federal government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.

Title III of the USA PATRIOT Act and the related FDIC regulations impose the following requirements with respect to financial institutions:

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Establishment of anti-money laundering programs.

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Establishment of a program specifying procedures for obtaining identifying information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time.

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Establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering.

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Prohibitions on correspondent accounts for foreign shell banks and compliance with record keeping obligations with respect to correspondent accounts of foreign banks.

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Bank regulators are directed to consider a bank holding company’s effectiveness in combating money laundering when ruling on Federal Reserve Act and Bank Merger Act applications.

Corporate Governance and Accounting Legislation

Sarbanes-Oxley Act of 2002. SOX was adopted for the stated purpose of increasing corporate responsibility, enhancing penalties for accounting and auditing improprieties at publicly traded companies, and protecting investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. SOX is the most far-reaching U.S. securities legislation enacted in many years. It applies generally to all companies that file or are required to file periodic reports with the Securities and Exchange Commission, or SEC, under the Exchange Act, which will include Silver State Bancorp. SOX includes very specific additional disclosure requirements and new corporate governance rules, requires the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues by the SEC and the Comptroller General. Among its provisions, SOX subjects bonuses issued to top executives to disgorgement if a subsequent restatement of a company’s financial statements was due to corporate misconduct, prohibits an officer or director from misleading or coercing an auditor, prohibits insider trades during pension fund “blackout periods,” imposes new criminal penalties for fraud and other wrongful acts and extends the period during which certain securities fraud lawsuits can be brought against a company or its officers.

SOX represents significant federal involvement in matters that traditionally were previously left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees. The SEC has been delegated the task of enacting rules to implement various provisions with respect to, among other matters, disclosure in periodic filings pursuant to the Exchange Act. In addition, the federal banking regulatory authorities have adopted requirements concerning the certification of financial statements by bank officials that are generally similar to requirements under SOX.

Federal Securities Law

Silver State Bancorp’s securities are registered with the SEC under the Exchange Act. As such, Silver State Bancorp is subject to the information, proxy solicitation, insider trading, and other requirements and restrictions of the Exchange Act.

PROPERTIES

We conduct our business through our executive office, located in Henderson, Nevada, 10 full-service branch offices in the greater Las Vegas market area operated by our wholly-owned subsidiary Silver State Bank, two full-service branch offices in the Phoenix, Arizona area operated by our wholly-owned subsidiary Choice Bank and SBA LPOs in Nevada, Utah, Colorado, Washington, Oregon, Florida and California. Silver State Bank operates nine LPOs, six of which are based out of the homes of individuals. We own nine of our existing locations, lease ten locations, and own the building on the leased land on the remaining location. Our lease arrangements are typically long-term arrangements with third parties that generally contain several options to renew at the expiration date of the lease.


Location		Owned or Leased
Silver State Bank Branches:

Pebble Market 400 N. Green Valley Pkwy. Henderson, NV 89074		Owned

Sunset 4200 E. Sunset Rd. Henderson, NV 89014		Land Lease Building Owned

Craig Road 1225 W. Craig Rd. North Las Vegas, NV 89032		Owned

Rainbow/Westcliff 170 S. Rainbow Blvd. Las Vegas, NV 89145		Owned

Rainbow/Dewey 5547 S. Rainbow Blvd. Las Vegas, NV 89118		Owned

The Lakes 8901 W. Sahara Ave. Las Vegas, NV 89117		Owned

Fort Apache 9415 W. Flamingo Rd. Las Vegas, NV 89147		Owned

Water Street 65 W. Lake Mead Pkwy. Henderson, NV 89015		Leased

Boulder City 1000 Nevada Hwy. Boulder City, NV 89005		Owned

Aliante 6895 Aliante Pkwy. North Las Vegas, NV 89084		Owned


Location		Owned or Leased

Choice Bank Branches:

Scottsdale 15190 North Hayden Rd. Scottsdale, AZ 85260		Leased

West Valley 13739 Camino Del Sol Sun City West, AZ 85375		Leased

Silver State Bank SBA Loan Production Offices:

Nevada 1325 Airmotive Way, Suite 175 Reno, NV 89502		Leased

Oregon 1800 NW 167th Place, Suite 110 Beaverton, OR 97006		Leased

California 6630 Sierra College Boulevard, Suite 400 Rocklin, CA 95677		Leased

Executive Offices:

170 S. Green Valley Pkwy Henderson, NV 89012		Leased

Silver State Bank Administrative Offices:

1081 Whitney Ranch Drive Henderson, NV 89014		Owned

2250 Corporate Circle Drive Henderson, NV 89074		Leased

Choice Bank Administrative Office:

14500 Northside Drive, Suite 312 Scottsdale, AZ 85260		Leased

Future Branches:

Centennial 7105 Durango Drive Las Vegas, NV 89149		Land Owned

Durango/Patrick 602 S. Durango Las Vegas, NV 89113		Land Owned

Las Vegas Blvd & Silverado Ranch Southwest corner of Las Vegas and Silverado Ranch Las Vegas, NV 89183		Land Owned

Novat/Cliff Shadows 3355 Novat Street Las Vegas, NV 89129		Land Owned


Location		Owned or Leased

Baseline Northwest corner of W. Baseline Rd and S. Vineyard Maricopa County, AZ		Land Owned

Seven Hills 855 Seven Hills Drive, Suite 160 Henderson, NV 89052		Leased

Mountains Edge Blue Diamond and Buffalo Las Vegas, NV 89178		Leased

Pecos/McQueen 980 E. Pecos Rd, Suites 1 & 2 Chandler, AZ 85225		Leased

For additional information regarding our lease obligations, see Note 12 of Notes to Consolidated Financial Statements.

LEGAL PROCEEDINGS

We are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. We believe that these routine legal proceedings, in the aggregate, are immaterial to our financial condition and results of operation.

MANAGEMENT

Directors

Composition of Our Board. There are nine seats on our Board of Directors. There are currently eight members and one vacancy. Each of our directors belongs to one of three classes with staggered three-year terms of office. At each of Silver State Bancorp’s annual stockholder meetings, the stockholders elect directors to fill the seats of the directors whose terms are expiring in that year and any vacant seats. Silver State Bancorp, as sole stockholder of Silver State Bank and Choice Bank, elects the directors for each of our bank subsidiaries.

Who Our Directors Are. The following table states our directors’ names, their ages as of March 31, 2007, their positions, the years when they began serving as directors (including time spent on the board of directors of Silver State Bank prior to the incorporation of Silver State Bancorp) and the year in which their respective terms expire:


	Age	Director Since	Term Expires	Position with Silver State Bancorp
Bryan S. Norby	50	1996	2007	Director, Chairman of the Board
Corey L. Johnson	49	1996	2007	Director, President and Chief Executive Officer
Brian M. Collins	44	1998	2008	Director
Brian Cruden	46	1996	2009	Director
Alan Knudson	56	1998	2009	Director
Craig McCall	50	1998	2008	Director
Thomas Nicholson	70	1996	2007	Director
Phillip C. Peckman	58	1997	2008	Director

Bryan S. Norby has served as a founding director of Silver State Bank since its inception in July 1996 and as a founding director of Silver State Bancorp since its inception in January 1999. Mr. Norby has served as the Chairman of the Boards of Silver State Bancorp and Silver State Bank since January 2006. Mr. Norby has been a financial analyst with Yanke Machine Shop, Inc., a metal fabrication company, since 1998. Mr. Norby is currently on the Board of Directors of Northwest Bancorporation, Inc., the bank holding company of Inland Northwest Bank. Mr. Norby is an inactive certified public accountant.

Corey L. Johnson has served as a founding director of Silver State Bank since its inception in July 1996 and as a founding director of Silver State Bancorp since its inception in January 1999. Mr. Johnson has served as President of Silver State Bancorp since inception, and Chief Executive Officer of Silver State Bancorp since December 2006. Mr. Johnson also served as President of Silver State Bank from inception until December 2006, and has served as Chief Executive Officer of Silver State Bank since January 2006.

Brian M. Collins has served as a director of Silver State Bank since October 1998 and as a founding director of Silver State Bancorp since its inception in January 1999. In addition, over the past five years, Mr. Collins has been involved in a variety of real estate and contracting-related businesses. He has been the owner of Collins and Collins Development, a commercial and residential real estate general contracting firm since 1993. Mr. Collins has served as the Secretary and Treasurer of Collins Development, a commercial real estate general contracting firm, since 2002. He has been a managing member of BJC Investments, LLC, a real estate investment firm. Mr. Collins was also a vice president of Collins Brothers Corp, which specializes in land development and the owner of Collins Motorsports, LLC, a race team shop, since 2002.

Brian Cruden has served as a founding director of Silver State Bank since its inception in July 1996 and as a founding director of Silver State Bancorp since its inception in January 1999. Mr. Cruden has served as the President of Insurcorp, Nevada’s largest employee benefit insurance and consulting firm, since 1992. In addition, Mr. Cruden is a co-owner of Insurcorp. Prior to 1992, Mr. Cruden held several key positions with various insurance companies and firms. Mr. Cruden previously served on the Board of Directors of Nevada Community Foundation. Currently, Mr. Cruden serves on the Board of Trustees of Southern Hills Hospital HCA/Columbia.

Alan Knudson has served as a director of Silver State Bank since January 1998 and as a founding director of Silver State Bancorp since its inception in January 1999. Mr. Knudson has been an investor and trustee of Knudson Family Trust since 1983. In addition, Mr. Knudson was the general partner of Knudson Family Partnership.

Craig McCall has served as a director of Silver State Bank since October 1998 and as a founding director of Silver State Bancorp since its inception in January 1999. Mr. McCall has been the president and a majority owner of CKJ, LLC, a company which specializes in owning and managing commercial and industrial real estate properties, since 1996. In his capacity as president of CKJ, LLC, Mr. McCall is responsible for acquisitions and management. Mr. McCall is also the president and sole shareholder of ASAP Auto Pawn, Inc. ASAP Auto Pawn, Inc. owns businesses in the collateral lending business, jewelry store and used car sales. In his capacity as president of ASAP Auto Pawn, Inc., Mr. McCall is responsible for strategic planning and overseeing operations.

Thomas Nicholson has served as a founding director of Silver State Bank since its inception in July 1996 and as a founding director of Silver State Bancorp since its inception in January 1999. Mr. Nicholson comes from a third generation ranching family and has lived in the Boise, Idaho area for over 50 years. His family started raising sheep and is now raising cattle and crops in Ada and Canyon counties and operating a large Holstein calf operation in Indiana. In addition to managing the significant family farming and cattle operations, Mr. Nicholson owns and manages several businesses, including an agricultural equipment dealership with locations in Idaho, and a Honda/Toyota automobile dealership located in Seattle, Washington. In the past, Mr. Nicholson served as a director of Micron Technology, a Boise based computer chip manufacturer, as a director of the Advisory Board of Key Bank (Idaho State) and as a director of the Peregrine Fund, a non-profit organization.

Phillip C. Peckman has served as a director of Silver State Bank since May 1997 and as a founding director of Silver State Bancorp since its inception in January 1999. Mr. Peckman joined Greenspun Corporation in 1990 as Chief Operating Officer. The Greenspun Corporation is a privately owned corporation which maintains significant investment interests in a variety of industries including publishing, cable and broadcast media, commercial real estate, and gaming. He left Greenspun Corporation as Chief Executive Officer in October 2006. He is currently the Chief Executive Officer of Peckman Outdoor Media, a Las Vegas based billboard company. In addition, Mr. Peckman is a former attorney and certified public accountant and was the managing partner of the Las Vegas, Nevada offices of McGladrey & Pullen, LLP, an independent certified accounting firm, leaving in 1990. On June 5, 2007, Mr. Peckman was elected to serve as a director of Shuffle Master, Inc., a Nevada based publicly-traded company, which provides entertainment-based products for the gaming industry.

Executive Officers

Silver State Bancorp’s executive officers include certain of the executive officers of Silver State Bank, the principal banking subsidiary of Silver State Bancorp. Silver State Bancorp’s and Bank’s executive officers are appointed annually by the respective Boards of Directors and serve at the Board’s discretion. However, some of our officers have employment agreements, as further described in “ — Employment Agreements.” Silver State Bancorp has the following executive officers:

Michael J. Threet, age 37, has served as Chief Financial Officer of Silver State Bancorp since its inception in January 1999 and Chief Operating Officer since August 2006. In addition, Mr. Threet has been Chief Operating Officer of Silver State Bank since August 2006. From June 1997 until he was named Chief Operating Officer, Mr. Threet was Chief Financial Officer and Executive Vice President of Silver State Bank. Prior to joining Silver State Bank, Mr. Threet served as the corporate controller for American Bank of Commerce, where he was responsible for SEC reporting and accounting operations.

Douglas E. French, age 49, has served as Executive Vice President — Commercial Real Estate Lending of Silver State Bank since January 1998. Mr. French joined Silver State Bank as Senior Vice President — Real Estate Loan Officer in 1997 and was promoted to Executive Vice President — Commercial Real Estate Lending in 1998. Mr. French served as a vice president — real estate loan officer for Community Bank from 1995 to 1997. Prior to that, Mr. French served as a Vice President real estate loan officer for U.S. Bank in Reno and Las Vegas.

Calvin D. Regan, age 41, has served as President of Silver State Bank since December 2006. Since joining Silver State Bank in 1996, Mr. Regan has also served as Executive Vice President and Senior Vice President. Mr. Regan has served on the board of the National Association of Government Guaranteed Lenders since 2000.

Thomas J. Russell, age 57, has served as Executive Vice President — Credit Administrator of Silver State Bank since May 2000. Prior to joining Silver State Bancorp, Mr. Russell served as a Vice President and Area Manager of First Security Bank of Nevada from 1997 to 2000. Mr. Russell has over 27 years of commercial banking experience, serving in a variety of positions in both branch and corporate banking assignments.

Kirk Viau, age 41, has served as Senior Vice President and Chief Risk Officer of Silver State Bank/Silver State Bancorp since May 2006. From 1990 until he joined Silver State Bancorp, Mr. Viau worked at the Federal Deposit Insurance Corporation in a variety of roles, including as a senior bank examiner.

Board Composition

In accordance with the terms of our Articles of Incorporation, the terms of office of our directors are divided into three classes:

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Class I, whose term will expire at the annual meeting of stockholders to be held in 2007.

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Class II, whose term will expire at the annual meeting of stockholders to be held in 2008.

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Class III, whose term will expire at the annual meeting of stockholders to be held in 2009.

The Class I directors are Messrs. Norby, Nicholson, and Johnson, the Class II directors are Messrs. McCall, Peckman and Collins, and the Class III directors are Messrs. Knudson and Cruden. At each of Silver State Bancorp’s annual stockholder meetings, the stockholders elect directors to fill the seats of the directors whose terms are expiring in that year and any vacant seats. Silver State Bancorp, as sole stockholder of Silver State Bank and Choice Bank, elects the directors for each of its bank subsidiaries.

Meetings of the Board of Directors and Its Committees

During 2006, Silver State Bancorp’s Board of Directors held 13 meetings. No current director attended fewer than 75% of the total number of Board meetings held during the period for which such director has been a director and committee meetings of which such director was a member.

Committees of the Board of Directors

Silver State Bancorp’s Board of Directors has established four standing committees:

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the Compensation Committee;

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the Nominating and Governance Committee;

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the Audit Committee; and

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the Executive Committee.

Information with respect to these committees is listed below. Silver State Bancorp may appoint additional committees of its Board of Directors in the future, including for purposes of complying with all applicable corporate governance rules of the Nasdaq Global Market.

Compensation Committee. The Compensation Committee consists of Messrs. Norby, Nicholson and McCall, with Mr. McCall serving as Chairman. All members of the Compensation Committee have been

determined by the Board to be independent of Silver State Bancorp and meet the definition of independence in Rule 4200(a)(15) of the Nasdaq Global Market’s listing standards. The Compensation Committee acts under a written charter adopted by Silver State Bancorp’s board of directors, which is available on Silver State Bancorp’s website at www.silverstatebancorp.com. This committee oversees Silver State Bancorp’s compensation and employee benefit plans and practices, including its executive compensation plans and its incentive compensation and equity-based plans. The Compensation Committee also annually reviews and approves corporate goals and objectives relevant to the Chief Executive Officer’s compensation and evaluates the Chief Executive Officer’s performance in light of those goals and objectives.

Nominating and Governance Committee. The Nominating and Governance Committee consists of Messrs. Knudson, Cruden and Peckman. Mr. Peckman serves as Chairman. All members of the Nominating and Governance Committee have been determined by the Board to be independent of Silver State Bancorp and meet the definition of independence in Rule 4200(a)(15) of the Nasdaq Global Market’s listing standards. The Nominating and Governance Committee acts under a written charter adopted by Silver State Bancorp’s board of directors, a copy of which is available on Silver State Bancorp’s website at www.silverstatebancorp.com. This committee is responsible for developing and implementing policies and practices relating to corporate governance, including developing and monitoring implementation of Silver State Bancorp’s Corporate Governance Guidelines. In addition, the Nominating and Governance Committee is responsible for developing criteria for the selection and evaluation of directors and recommends to the Board of Directors candidates for election as directors and senior management.

Audit Committee. The Audit Committee consists of Mr. McCall and Mr. Norby, each of whom have been determined by the Board to be independent of Silver State Bancorp and meet the definition of independence in Rule 4200(a)(15) of the Nasdaq Global Market’s listing standards and Rule 10A-3 of the Exchange Act. Mr. Norby serves as Chairman of the Audit Committee. Silver State Bancorp’s Board of Directors has determined that Mr. Norby is an “audit committee financial expert,” as defined by the rules and regulations of the SEC.

The Audit Committee acts under a written charter adopted by Silver State Bancorp’s board of directors, a copy of which is available on Silver State Bancorp’s website at www.silverstatebancorp.com. The Audit Committee is primarily responsible for: monitoring the integrity of Silver State Bancorp’s financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance and public disclosure of financial information; monitoring the independence and performance of Silver State Bancorp’s independent auditors and internal auditing department; and maintaining free and open communication between the Audit Committee, the independent auditors, management, the internal auditing department, and the Board of Directors.

Rule 4350(d) of the Nasdaq Global Market’s listing standards, requires that audit committees be comprised of at least three independent members. We currently have one vacancy on this committee and pursuant to the Nasdaq Global Market’s listing standards, we have 12 months from our listing to comply with this requirement. The Nominating and Governance Committee intends to commence a search for a third member by the second half of this year.

Executive Committee. The Executive Committee consists of Messrs. Johnson, Norby, McCall, Nicholson and Peckman. The Executive Committee exercises certain powers of the Board of Directors in the management of the business and affairs of Silver State Bancorp, if necessary, between meetings of the Board of Directors.

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2006, Messrs. Norby, McCall and Nicholson served on the Compensation Committee. There were no interlocks, as defined under the rules and regulations of the SEC, between members of the Compensation Committee or executive officers of Silver State Bancorp and corporations with which such persons are affiliated.

Compensation Committee Report

The Compensation Committee has reviewed the Compensation Discussion and Analysis included below and has discussed it with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this prospectus.

Silver State Bancorp

Compensation Committee

Craig McCall, Chairman, Chair

Bryan Norby, Member

Thomas Nicholson, Member

Compensation Discussion and Analysis

Introduction

In this Compensation Discussion and Analysis we give an overview and analysis of our compensation program and policies, the material compensation decisions we have made under those programs and policies, and the material factors that we considered in making those decisions. Later in this prospectus, under the heading “Executive Officer Compensation” you will find a series of tables containing specific information about the compensation earned or paid in 2006 to Corey L. Johnson, our President and Chief Executive Officer, Michael J. Threet, our Chief Operating Officer and Chief Financial Officer, Calvin D. Regan, the President of Silver State Bank, Douglas E. French, our Executive Vice President, Thomas J. Russell, our Chief Credit Officer and Tod W. Little, our former Chief Executive Officer, referred to as our “named executive officers,” or NEOs.

Compensation Committee

The Compensation Committee assesses the structure of the management team and the overall performance of Silver State Bancorp. It is responsible for making recommendations to the Board of Directors regarding executive compensation, incentive compensation awards and grants of equity awards. All members of the Compensation Committee have been determined by the Board to be independent of Silver State Bancorp and meet the definition of independence in Rule 4200(a)(15) of the Nasdaq Global Market’s listing standards.

The Compensation Committee endeavors to maintain executive compensation that is fair, reasonable and consistent with Silver State Bancorp’s size and the compensation practices of its competitors within the financial services industry. The goal of the Compensation Committee is to attract, develop and retain high caliber executives who are capable of optimizing Silver State Bancorp’s performance for the benefit of its stockholders.

The Chief Executive Officer provides information to the Compensation Committee about individual performance assessments for each of the other NEOs, after reviewing the analysis and supporting data received from Clark Consulting, an outside consulting group, and expresses to the Compensation Committee his view on the appropriate levels of compensation for the other NEOs for the ensuing year. For 2006, the Chief Executive Officer’s recommendations were followed by the Compensation Committee.

The Chief Executive Officer participates in Compensation Committee discussions solely in an informational and advisory capacity and does not have a vote in the Compensation Committee’s decision-making process. The Chief Executive Officer does not attend those portions of the Compensation Committee meetings during which his performance is evaluated or his compensation is determined.

The compensation of named executive officers is made up of many components, consisting of base salary, short-term bonus incentives, equity plans which provide for the grant of stock options and restricted stock awards

as well as a 401(k) plan. In addition, the NEOs are provided with general fringe benefits consisting of enhanced medical and dental insurance, group term life insurance, disability insurance and employee assistance programs, tax gross-ups for insurance coverage under bank-owned life insurance, automobile-related benefits, country club dues and gym memberships.

The Compensation Committee recently commenced discussions regarding its intention to grant options to purchase not more than 100,000 shares of our common stock to our named executive officers at some point after completion of this offering and prior to the end of this fiscal year. No decisions have been made as to when any such grants would be made, the recipients of such grants or the amount of such grants to any individual or the executive officers as a group.

Base Salary

We pay base salaries in order to provide executive officers with sufficient, regularly-paid income and to attract, recruit and retain executives with the knowledge, skills and abilities necessary to successfully execute their job duties and responsibilities. When establishing the 2006 base salaries, the Compensation Committee hired a consultant, Clark Consulting, to provide recommendations based on compensation data compiled by Clark Consulting derived from public filings with the SEC. The outside consultant blended several data categories from these sources to reflect Silver State Bank’s asset size, geographical region and performance in order to produce a custom peer group consisting of the nineteen following publicly traded banks and bank holding companies: West Coast Bancorp, CoBiz Inc., Capital Corp. of the West, Vineyard National Bancorp, Farmers & Merchants Bancorp, Western Sierra Bancorp, Cascade Bancorp, Northern Empire Bancshares, Cascade Financial Corp., Heritage Commerce Corp., Sierra Bancorp, Pacific Mercantile Bancorp, PremierWest Bancorp, Community Bancorp, Temecula Valley Bancorp Inc., Bank of Marin, Washington Banking Co., Alliance Bancshares California and San Joaquin Bank. The consultant then presented the Compensation Committee with recommendations and salary ranges to use for establishing executive pay. The Compensation Committee takes into account the data provided by the consultant, the achievement of the Silver State Bancorp’s strategic plan and goals for the prior year (consisting primarily of growth in the areas of asset size, return on equity and return on assets), and the contribution of the NEOs towards meeting those goals consistent with each NEO’s role within the organization with no particular factor weighed more heavily than any other in determining base salary. The Compensation Committee also reviews Silver State Bancorp’s financial performance, focusing on our asset size, return on equity and return on assets, and takes into account its own personal knowledge of the standards of living within the community to establish a base salary for its NEOs. In light of the foregoing and our exceptional performance as compared to the custom peer group, the Compensation Committee has historically benchmarked NEO compensation at approximately the seventy-fifth (75^th) percentile of the peer group NEO compensation.

Bonus Plan

Our annual bonus program is designed to link awards to our strategic and operating objectives, which have historically focused on the areas of asset growth, return on equity and return on assets. The goal of the plan is to have long-term viability and to be attractive to new hires and help retain current employees. For purposes of the annual bonus, each named executive officer is evaluated on their contribution to these corporate performance measures at year-end. The Compensation Committee reviews these goals and recommends bonuses based on their achievement to the Board of Directors for final approval on an annual basis.

For purposes of determining the level of funding, actual performance for the relevant year is compared to a sliding scale of performance measures to determine the level of bonuses awarded, if any, to each NEO. For 2006, bonuses were awarded based on general performance in the areas of asset growth, return on equity and return on assets with no specific weighting based on numerical thresholds or specific benchmarks. Bonuses were determined using the same methodology and background data as was used for determining base salary, specifically determining bonuses on the basis of the information provided by Clark Consulting regarding bonuses paid by the peer group comprised of similar publicly traded banks and bank holding companies as discussed

above under “Compensation Discussion and Analysis–Base Salary.” The determination of the amount of bonus payable to each NEO was then made based upon the bonus amount needed to bring total cash compensation paid to each NEO into approximately the 75th percentile of total cash compensation paid to persons with similar job functions as the particular NEO within the peer group of similar publicly traded banks and bank holding companies. This percentage target for total cash compensation was selected because our performance was in the top 25th percentile within the peer group on the performance measures of asset growth, return on equity and return on assets for 2006. It is the general policy of the Compensation Committee not to adjust the bonuses awarded, but the Compensation Committee does have the discretion to make adjustments and will do so if unusual or unanticipated circumstances occur. To date, the Compensation Committee has not utilized its discretion to make adjustments to any bonus payments.

Mr. French is also compensated on the basis of commissions derived from fee income on loans that he originates (with the approval for such loan originations and fees controlled by persons other than Mr. French). The use of commissions as part of Mr. French’s compensation reflects his role as one of our leading loan originators and the general market custom of compensating loan origination officers on the basis of commissions. Mr. French receives commissions based on 10% of the loan fees generated, which rate we believe to be customary. This commission rate is paid to all loan officers of Silver State Bank.

Equity Plans

The 1997 Executive Stock Option Plan and 1997 Stock Option Plan were approved by our stockholders on October 23, 1998. The 1998 Stock Option Plan was approved by our stockholders on April 29, 1998. The 2004 Stock Option Plan was approved by our stockholders on April 28, 2004 and an amendment to the 2004 Plan was approved by our stockholders on December 21, 2005. The 2006 Omnibus Equity Plan, which provides for the award of stock options and restricted stock, was approved by our stockholders on September 20, 2006. The purpose of each plan is to promote the growth and profitability of Silver State Bancorp, to provide an incentive to achieve corporate objectives, to attract and retain individuals of outstanding competence and to provide participants with an equity interest in Silver State Bancorp, so that their interests are aligned with stockholder interests. This approach is designed to provide incentives to increase stockholder value over the long term since the full benefit of this component of the compensation package cannot be realized unless stock price appreciation occurs over a number of years. Further information on awards granted to named executive officers is available in the section titled “Equity Compensation Plans” within this prospectus.

No awards were granted to any NEO in calendar 2006 due to the sufficiency of the stock grants made in 2004 to the NEOs (the NEOs were granted a large number of options in 2004 with an initial vesting schedule of 25% per year such that the options would fully vest in 2008; however, the vesting schedules of these options were accelerated in calendar 2005 to be 100% vested in anticipation of adverse accounting treatment under FAS 123R). When awards are made, these awards are timed to occur during those periods when there is no impending release of any material, non-public information relating to Silver State Bancorp. The exercise price of the stock option award is established to be fair market value of our common stock on the date of grant.

In December 2005, we accelerated the vesting of 975,000 stock options with an average exercise price of $7.65 per share. The accelerated options were held by our directors and executive officers. Our Board of Directors voted to approve the option acceleration at a meeting held on December 14, 2005. The option acceleration was effective as of December 21, 2005. Our chief executive officer at the time, Tod W. Little, participated in the discussions and voting on the option acceleration at this board meeting. Shortly after the acceleration of the options, Mr. Little exercised all of his 112,500 options with an aggregate value (measured as the market price of our common stock on the date of exercise less the exercise price multiplied by the number of options exercised) equal to approximately $1.4 million. On January 9, 2006, Mr. Little submitted to our Board of Directors his resignation from all positions with us. January 9, 2006, was the first date that any member of our board of directors became aware of Mr. Little’s intention to resign. If the option acceleration had not occurred the previous month, Mr. Little would have forfeited all of his 112,500 unvested options in accordance with the terms of the options.

As a result of the modification of the stock options, we recognized stock option expense of $1.6 million in 2005 in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, as interpreted by Financial Accounting Standards Board Interpretation No. 44: Accounting for Certain Transactions Involving Stock Compensation (FIN 44). Also as a result of the modification of these stock options, we will not need to record any stock option expense under Statement of Financial Accounting Standards No. 123R. Had we not accelerated the vesting of stock options in December 2005, and considering subsequent forfeitures by the former chief executive officer, we would have recorded total compensation expense pursuant to SFAS No. 123R of approximately $1.3 million during the periods 2006 through 2008.

Employment Agreements

Silver State Bancorp or Silver State Bank, as applicable, has entered into employment agreements with Messrs. Johnson, Threet, Regan and Russell in order to secure their services in their respective positions with Silver State Bancorp and Silver State Bank. These agreements each have a term of three years and renew automatically each year.

We entered into these agreements with the intent to assure stockholders of management continuity. We also established these agreements to maintain quality leadership for the organization. The Compensation Committee wanted to protect the interest of our named executive officers so that, in the event that a change in control or a merger/acquisition opportunity arose, the named executive officers who have entered into the contracts would be motivated to act solely in the best interests of the institution rather than potentially being distracted by personal concerns and interests. The details of these agreements are discussed in further detail under the heading “Employment Agreements” elsewhere in this prospectus.

All Other Compensation

All other compensation for NEOs includes employer provided 401(k) contributions, insurance premiums, tax gross-ups for insurance coverage under bank-owned life insurance, automobile-related benefits, country club dues and gym memberships which we believe are important to the provision of a competitive compensation package to retain the NEOs.

Interrelationship of Compensation Elements

The various elements of the compensation package are not inter-related. For example, if it does not appear as though the expected level of bonus will be achieved, the size of the base salary is not affected.

Other Matters

While we believe that it is important that our executive officers and directors own shares of Silver State Bancorp’s common stock, and all of the executive officers and directors own common stock, we do not have equity or security ownership requirements or guidelines for executive officers. This is primarily because we believe the current NEOs’ interests are sufficiently aligned with the stock performance of Silver State Bancorp through current holdings of vested stock options. For our director security ownership requirements see “Corporate Governance — Director Qualifications.”

The Compensation Committee does take into account the impact of accounting and tax treatments when setting compensation; however, it is not a primary consideration in the decision-making process.

Compensation Decision-Making Policies and Procedures

Decision-Making and Policy-Making. Our Code of By-laws requires that executive officer compensation be set by the Board of Directors upon the recommendation of the Compensation Committee to which decision-making authority has been delegated. In addition, upon our listing on the Nasdaq Global Market, we will have to observe

governance standards that require executive officer compensation decisions to be made by the independent director members of our board or by a committee of independent directors. Consistent with these requirements, our Board of Directors has established a Compensation Committee all of whose members are independent directors.

The Compensation Committee has been delegated authority by our board to oversee executive compensation by evaluating and recommending to the Board approval of Silver State Bancorp’s and its subsidiaries’ compensation, employment arrangements and benefit programs and plans. We have established a Compensation Committee Charter which annually reviews compensation of its executive officers based on annual base salary level, any annual incentive or performance-based compensation, any employment agreements, severance arrangements and change in control agreements, any perquisites or other in-kind benefits, and any other special or supplemental benefits.

The Compensation Committee meets at least two times a year. It considers the expectations of the Chief Executive Officer with respect to his own compensation based on the corporate goals and objectives and the Chief Executive Officer’s performance in light of these goals and objectives. The Compensation Committee does not delegate its duties to others.

Use of Outside Advisors and Survey Data. The Compensation Committee uses its own criteria coupled with custom peer group comparative data prepared by Clark Consulting in order establish the compensation plans and programs and associated compensation levels of the Chief Executive Officer as well as the other named executive officers. The custom peer group utilized consists of nineteen publicly traded banks and bank holding companies.

Executive Officer Compensation

The table below sets forth for 2006 the compensation of each of our named executive officers.

2006 SUMMARY COMPENSATION TABLE


Name and Principal Positions	Year	Salary⁽¹⁾		Bonus⁽¹⁾	Option Awards⁽²⁾		Non-Equity Incentive Plan Compensation			All Other Compensation⁽⁴⁾		Total
Corey L. Johnson,	2006	$	222,576	350,126	$	—	$	—		$	27,582	$	600,284
Director, President & Chief Executive Officer

Tod W. Little,	2006		5,797	—		—		—			270,643		276,440
Former Chief Executive Officer⁽⁵⁾

Michael J. Threet,	2006		163,419	250,126		—		—			20,671		434,216
Chief Operating and Chief Financial Officer

Calvin D. Regan,	2006		201,837	300,126		—		—			24,341		526,304
President of Silver State Bank

Douglas E. French,	2006		151,626	100,126		—		338,584	⁽³⁾		13,951		604,287
Executive Vice President

Thomas J. Russell	2006

Silver State Bancorp S-1/A