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  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 3/14/08  Silver State Bancorp              10-K       12/31/07    6:231                                    RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        For Fiscal Year Ended December 31, 2007             HTML  1,491K 
 2: EX-23.1     Consent of McGladrey & Pullen, Llp                  HTML      5K 
 3: EX-31.1     Certification of Principal Executive Officer        HTML     11K 
                          Pursuant to Section 302                                
 4: EX-31.2     Certification of Principal Financial Officer        HTML     11K 
                          Pursuant to Section 302                                
 5: EX-32.1     Written Statement of Chief Executive Officer        HTML      7K 
                          Furnished Pursuant to Section 906                      
 6: EX-32.2     Written Statement of Chief Financial Officer        HTML      7K 
                          Furnished Pursuant to Section 906                      

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2007

OR

For the transition period from              to             .

Commission file number: 001-33592

SILVER STATE BANCORP

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (702) 433-8300

Securities registered pursuant to Section 12(b) of the Act

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:    YES  ¨    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    YES  ¨    NO   x

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

As of June 29, 2007, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates was $145,772,624, based upon the $22.99 closing price of the registrant’s common stock as quoted on the OTC Bulletin Board on that date. Prior to the completion of Silver State Bancorp’s initial registered public offering on July 23, 2007, Silver State Bancorp’s common stock was listed on the OTC Bulletin Board under the symbol “SSBX.OB.”

The number of shares outstanding of the registrant’s common stock as of March 7, 2008 was 15,170,765.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 30, 2008 and any adjournments thereof and which is expected to be filed with the Securities and Exchange Commission within 120 days from December 31, 2007 are incorporated by reference into Part III.

INDEX

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements may be identified by the use of the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions.

Forward-looking statements are based on various assumptions and analyses made by us in light of our management’s experience and its perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following:

We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.

PART I

Where You Can Find More Information

Under Sections 13 and 15(d) of the Exchange Act, periodic and current reports must be filed with the Securities and Exchange Commission, or the SEC. We electronically file the following reports with the SEC: Form 10-K (Annual Report), Form 10-Q (Quarterly Report), Form 8-K (Current Report), and Form DEF 14A (Proxy Statement). We may file additional forms. The SEC maintains an Internet site, www.sec.gov, in which all forms filed electronically may be accessed. Additionally, all forms filed with the SEC and additional shareholder information is available free of charge on our website: www.silverstatebancorp.com. We post these reports to our website as soon as reasonably practicable after filing them with the SEC. None of the information on or hyperlinked from our website is incorporated into this Report.

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:

On a consolidated basis as of December 31, 2007, we had approximately $1.8 billion in assets, $1.6 billion in total gross loans (excluding loans held for sale), $1.4 billion in deposits and $157.6 million in stockholders’ equity.

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 Federal Deposit Insurance Corporation (FDIC) Deposit Market Share Report, as of June 30, 2007, Silver State Bank is the 8^th largest bank operating in the Las Vegas-Paradise metropolitan area measured by deposits and is the 11^th largest bank among all banks operating in Nevada. As of December 31, 2007, Silver State Bank had $1.5 billion in assets, $1.4 billion in gross loans (excluding loans held for sale) and $1.2 billion in deposits. As of December 31, 2007, Silver State Bank has twelve 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 2008 and four additional full-service offices before the end of 2009.

Choice Bank is an Arizona-chartered commercial bank headquartered in Scottsdale, Arizona. As of December 31, 2007, Choice Bank had $264.6 million in assets, $203.4 million in gross loans (excluding loans held for sale) and $215.2 million in deposits. As of December 31, 2007, Choice Bank has three full-service offices in the Phoenix/Scottsdale market area and we expect to open three additional full-service offices in this market area during 2008 and four additional full-service offices before the end of 2009.

In November 2007, the Company announced its plans to merge Silver State Bank and Choice Bank by the end of the first quarter 2008 and operate the combined bank as Silver State Bank. In February 2008, the

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Company received approval of the proposed merger from the FDIC and expects to complete the merger by April 1, 2008. This merger will create economies of scale associated with both banks being part of a single platform, marketing advantages in the markets we operate, and enable both banks to have consistent policies and procedures in all areas of operation.

In addition to its banking subsidiaries, the Company operates twelve loan production offices (LPOs), which are located in Nevada, 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 and Choice Bank originated and closed a combined $167.6 million in SBA loans during 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 with whom we have long-standing relationships 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. In recent years, the Las Vegas market has also experienced significant growth in the residential and commercial construction and light manufacturing sectors.

Arizona. In Arizona, we operate in the cities of Scottsdale, Chandler, and Sun City West, all 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 some of the fastest population growth in the country in recent years. These markets are expected to continue to experience population growth in the near future, although at more modest rates than in recent years. During 2007, the economies in the markets we operate began to show signs of weakening compared to recent years caused by higher unemployment rates, decreased job growth, the effects of the national housing crisis and credit crunch, and the effects of the national economic slowdown and cutbacks in consumer spending.

The Las Vegas economy has weakened recently as the loss of real estate and construction jobs from the declining residential market, as well as lost casino/hotel jobs due to the scheduled closing of old casino resorts to make way for new casino projects, has caused the local unemployment rate to rise to 5.6% as of December 2007.

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Population growth has also tapered off, rising 2.7% from 2006 to 2007. New home sales in 2007 were down 45% from 2006. In the Phoenix area, closings of new homes and resale homes in 2007 have decreased 24% and 35%, respectively, compared to 2006. As a result, the residential housing markets in the Las Vegas and Phoenix areas have experienced a significant decline with growing inventories of newly constructed one-to-four family residential homes and declining property values. Further weakening of the real estate or employment market in the Las Vegas area (which is our single largest market) or the Phoenix area 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, adversely affecting our profitability and asset quality. The weakness in the residential market has begun to expand into the commercial real estate market in the markets in which we operate, as builders and related industries downsize. In addition, commercial and industrial vacancy rates have also been on the rise in recent months.

Despite the economic challenges we are currently experiencing in the markets in which we operate, we believe that we operate in areas of the country that have sound economic fundamentals driven by a variety of factors which will provide us with continued lending and growth opportunities in the future. Some of these factors that exist in the greater Las Vegas market area, our primary market, include 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.

The Company’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. 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

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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, 2007, Silver State Bank is the 11^th largest bank among all banks operating in Nevada with a deposit market share of 0.60% and is the 8^th largest bank in the Las Vegas-Paradise Metropolitan area with a deposit market share of 0.66%. According to the most recent FDIC Deposit Market Share Report, as of June 30, 2007, Choice Bank is the 30^th largest bank in the Phoenix-Mesa-Scottsdale area with a deposit market share of 0.26%. According to the FDIC Deposit Market Share Report, as of June 30, 2007, our largest competitor in Nevada, measured by deposits, is Citibank, a federally chartered savings bank with a national presence, which has more than 41% of the deposit market share in Nevada. In addition, Silver State Bank’s five largest competitors (Citibank, Washington Mutual Bank, Charles Schwab, Bank of America, and Wells Fargo Bank), in the aggregate, have more than 90% 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, 2007, 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 24% of the deposit market share in Arizona. In addition, Choice Bank’s eight largest competitors (JPMorgan Chase Bank, Bank of America, Wells Fargo Bank, Compass Bank, World Savings Bank, M&I Marshall & Ilsley Bank, First National Bank of Arizona, and Meridian Bank), in the aggregate, have more than 80% of the deposit market share in Arizona.

There are approximately 47 banking institutions in our market area in Nevada and approximately 71 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 generally require construction loans 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 $93.2 million, representing 38 loans, at December 31, 2007.

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As of December 31, 2007 our loan portfolio totaled $1.6 billion, or approximately 88% of our total assets. The following table presents the composition of our loan portfolio in dollar amounts at the dates indicated.

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

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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 approximately 33% of our total loan portfolio at December 31, 2007, including SBA loans. At December 31, 2007, the largest construction loan in our portfolio was $20.6 million. On December 31, 2007 and 2006, our construction loans were as follows:

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 approximately 36% of our total loan portfolio at December 31, 2007, including SBA loans. At December 31, 2007, the largest land loan in our portfolio was a $19.1 million land development loan to a local developer. On December 31, 2007 and 2006, our land loans were as follows:

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.

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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 approximately 17% of our total loan portfolio at December 31, 2007. At December 31, 2007, the largest commercial real estate loan in our portfolio was $13.4 million, secured by industrial real estate. On December 31, 2007 and 2006, our commercial real estate loans were as follows:

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 December 31, 2007, our largest commercial and industrial loan to one borrower was $23.6 million, secured primarily by helicopters. Commercial loans comprised approximately 9% of our total loan portfolio at December 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 Banks’ 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, or 504 loans. For 2007, SBA 7A Loans represented approximately 17% 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

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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 repaid 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 December 31, 2007, residential real estate loans represented approximately 6% of our total loan portfolio. 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 loan-to-value ratio greater 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%. As of December 31, 2007, we had 36 speculative residential real estate construction loans with an aggregate balance of $41.8 million.

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

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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.

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 December 31, 2007, we had 46 interest-only mortgage loans with an aggregate balance of $24.5 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 December 31, 2007 and 2006.

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.

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Choice Bank. Choice Bank’s lending policies 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. Upon completion of the planned merger of Choice Bank and Silver State Bank, all loan approval procedures and authority will be governed by the prescribed procedures and authority currently in place at Silver State Bank.

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 to 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 $45.5 million at December 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 20% of the bank’s capital and allowance for loan losses (approximately $4.4 million at December 31, 2007 with respect to Choice Bank). The largest aggregate extensions of credit by our subsidiary banks to one borrower at December 31, 2007, were as follows:

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 December 31, 2007, the aggregate lending limit of our subsidiary banks to a single borrower was approximately $49.9 million. Assuming the merger had been completed prior to that date, as of December 31, 2007, our aggregate lending limit to a single borrower on a pro-forma basis would have been approximately $51.0 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:

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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 continued to use 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 officers also update the credit risk grades on the loans in their respective portfolios on a regular basis, taking into consideration information such as our position with respect to the underlying collateral, updated financial information from the customer, updated appraisals and the current status of the loan. The loan officers certify as to the appropriate credit risk grade as part of this update, and will recommend appropriate changes in grades as necessary. The results of this certification process are reviewed by our Credit Administration staff. Our loan portfolio and credit risk grades are also reviewed periodically by an internal loan review staff that reports to the Audit Committee, as well as by external, independent loan review firms (one for Silver State Bank and one for Choice Bank). As part of this review, randomly selected new, renewed, and seasoned 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 contacting the borrower to notify 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” at the loan officer’s discretion or by senior management. “Watch List” reports are completed monthly and reviewed by senior management and the various loan committees. If the problem appears to be long-term in nature and cannot be remedied in a satisfactory manner, assignment to the Special Assets department is considered. If the loan is assigned, the Special Assets 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.

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.

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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:

Nonperforming assets, which include other real estate owned, or OREO, nonaccrual loans and accruing loans delinquent 90 days or more, were $13.2 million at December 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 nonaccrual 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 nonaccrual 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 nonaccrual, it is also entered on the Watch List if the loan is above $5,000.

If the nonaccrual balance has not been paid in full by the time the credit reaches 180 days past due, the balance may be 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.

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The following table presents information regarding nonaccrual loans, accruing loans delinquent 90 days or more, and OREO as of the dates indicated. During the periods 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.

Our nonaccrual loans consisted of twenty loans and totaled $13.1 million at December 31, 2007 and consisted of two loans and totaled $132,000 at December 31, 2006. This increase is due primarily to construction and land loans where the borrower has experienced financial difficulty in the current challenging economic environment.

Our potential problem loans, consisting of loans in grades six or higher but still performing, were approximately $84.5 million at December 31, 2007 and $12.0 million at December 31, 2006. This increase is due primarily to construction and land loans where delays caused by the permitting process and the general economic slowdown in the markets in which we operate have affected the timing or completion and ultimate disposition of the finished project.

The total amount of additional interest income on nonaccrual loans that would have been recognized in 2007 if interest on all such loans had been recorded based upon original contract terms was immaterial. We are currently committed to lend approximately $387,000 to borrowers with loans on nonaccrual status.

Impaired loans pursuant to Statement of Financial Accounting Standards, or SFAS, 114, Accounting by Creditors for Impairment of a Loan, totaled $135.8 million and $938,000 as of December 31, 2007 and 2006, respectively. We are currently committed to lend approximately $23.8 million in additional funds on these impaired loans; however, management will continue to monitor the credit quality of these loans and will only lend additional funds as warranted. 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 seventy-seven and six loans classified as impaired at December 31, 2007 and 2006, respectively. A significant majority of the impaired loans as of December 31, 2007 relates to construction and land loans. As of December 31, 2007 $119.0 million of impaired loans do not have any specific valuation allowance under SFAS 114. Pursuant to SFAS 114, a loan is impaired when both the contractual interest payments and the contractual principal payments of a loan will not be collected as scheduled in the loan agreement. The $119.0 million of impaired loans as of December 31, 2007 are generally impaired due to delays or anticipated delays in receiving payments pursuant to the contractual terms of the loan agreements. These loans are adequately collateralized as of December 31, 2007. However, this assessment could change in the near future depending on various factors, including a decrease in the value of real estate values in southern Nevada and central Arizona. In addition, at December 31, 2007 and 2006, we had no loans classified as troubled debt restructurings, as defined in SFAS 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings.

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

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, U.S. generally accepted accounting principles (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. During the third and fourth quarters of 2007, we increased the allowance for loan losses due to weaknesses in the residential real estate markets in which we operate, an increase in nonperforming assets, an increase in potential problem loans, and the general weakening economic condition in the markets served by the Company.

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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 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, 2007 and 2006—Critical Accounting Policies—Allowance for Loan Losses.”

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, 2007, 2006, 2005, 2004, and 2003.

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 December 31, 2007 we had $52.0 million of investment securities compared with $65.3 million at December 31, 2006. All of these investment securities are classified as securities available-for-sale.

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The contractual maturity distribution and weighted average yield of our available-for-sale portfolio at December 31, 2007 are summarized in the table 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.

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

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, 2003, our deposits have grown from $392.4 million to $1.4 billion as of December 31, 2007. Our deposit growth was primarily due to the growth in our branch network and our competitive pricing. As of December 31, 2007 we have twelve Silver State Bank branch offices and three Choice Bank branch offices. We expect to open two new Silver State Bank branches and three new Choice Bank branches in 2008.

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 December 31, 2007, four of

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our depositors accounted for $500.2 million, or 35.1%, of total deposits. The deposit balances of these four customers 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, 2007 to December 31, 2007 have fluctuated, ranging from a high of $517.5 million, or 35.5% of total deposits to a low of $228.3 million, or 22.2% of total deposits. In addition, we obtain deposits via the internet.

Our 20 largest depositors accounted for approximately 44.8% of our deposits and our five largest depositors accounted for approximately 36.6% of our deposits at December 31, 2007. Our largest depositor as of December 31, 2007 accounted for 15.4% of our total deposits. Of our 20 largest depositors at December 31, 2007, two were related to each other representing 14.1% of our total deposits. Also, of our 20 largest depositors at December 31, 2007, two were entities affiliated with directors of Silver State Bank and Choice Bank representing 1.9% of our total deposits.

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 51.6% of total deposits at December 31, 2007. At December 31, 2007, time deposits with remaining terms to maturity of less than one year amounted to $680.6 million.

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

At December 31, 2007, we had $256.4 million in time deposits with balances of $100,000 and over maturing as follows:

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Borrowings. From time to time we obtain advances from the Federal Home Loan Bank (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:

In addition, we had $56.6 million in long-term advances from the FHLB at December 31, 2007 compared to $50.0 million at December 31, 2006.

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 December 31, 2007, we had $69.6 million of junior subordinated debentures issued to the following special purpose trusts:

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

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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.

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 $1.5 billion in assets, $1.4 billion in gross loans (excluding loans held for sale), and $1.2 billion in deposits as of December 31, 2007. Silver State Bank has twelve 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 2008 and four additional full-service offices before the end of 2009.

Choice Bank is an Arizona-chartered commercial bank headquartered in Scottsdale, Arizona. As of December 31, 2007, Choice Bank had $264.6 million in assets, $203.4 million in gross loans (excluding loans held for sale), and $215.2 million in deposits. Choice Bank has three full-service offices in the Phoenix/Scottsdale market area. In addition, Choice Bank expects to open three full-service offices in the Phoenix/Scottsdale market area in 2008 and four additional full-service offices before the end of 2009.

As described in “—Overview and History,” Choice Bank will be merging into Silver State Bank effective as of April 1, 2008.

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 December 31, 2007, we had 389 full-time equivalent employees. Employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good.

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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 registered with the Board of Governors of the Federal Reserve System, or the Federal Reserve, under the Bank Holding Company Act of 1956, as amended, or 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 periods 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 may also 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.

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Change in Control. The Change in Bank Control Act of 1978, or the CIBC Act, prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction. Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company, such as Silver State Bancorp, with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, would constitute acquisition of control of the bank holding company. In addition, approval of the Federal Reserve under the BHC Act is required before any person may acquire 25% or more of a bank holding company’s outstanding common stock (5% where the acquirer is a bank holding company), or otherwise obtains control or a “controlling influence” over a bank holding company.

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 is also a bank holding company within the meaning of state law in the states where its subsidiary banks are located and is therefore subject to the rules and regulations applicable to bank holding companies in those states. As such, Silver State Bancorp is subject to examination by and may be required to file reports with the Nevada Financial Institutions Division, or the Nevada DFI, under the Nevada Revised Statutes as the parent company of Silver State Bank. In addition, Silver State Bancorp must obtain the approval of the Nevada Commissioner of Financial Institutions, or the Nevada Commissioner, before it may acquire another bank in Nevada. Further, any transfer of control of a Nevada bank holding company must be approved in advance by the Nevada Commissioner. Under the Arizona Revised Statutes, no person may acquire control of a company that controls an Arizona bank, such as Silver State Bancorp, 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 company is presumed to control that 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 is also subject to regulation by the FDIC, which is the primary federal banking supervisory authority of each of our banks. As to certain matters, each bank is also subject to regulation by the Federal Reserve, although neither bank is a member of the Federal Reserve System.

Federal and state banking laws and the implementing regulations of the federal and state banking regulatory agencies cover most aspects of the banks’ operations, including capital requirements, reserve requirements against deposits, reserve requirements 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 or regulation, the FDIC could take a number of different remedial actions as it would deem 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.

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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. Each bank’s deposit accounts are insured up to applicable limits by the FDIC under the Deposit Insurance Funds, or DIF. Both of our subsidiary banks are required to pay deposit insurance premiums.

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. Under this new assessment system, the FDIC assigns an institution to one of four risk categories, with the first category having two sub-categories, based on the institution’s most recent supervisory ratings and capital ratios. Base assessment rates range from two to four basis points of deposits for Risk Category I institutions and seven basis points of deposits for Risk Category II institutions, twenty-five basis points of deposits for Risk Category III institutions and forty basis points of deposits for Risk Category IV institutions. For institutions within Risk Category I, assessment rates generally depend upon a combination of their CAMELS component ratings (Capital adequacy, Asset quality, Management, Earnings, Liquidity, Sensitivity to Market Risk) and financial ratios, or for large institutions with long-term debt issuer ratings, assessment rates 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 assessment rates for our deposits from 1997 through 2006 were each 0 basis points, the lowest assessment rate under the prior risk assessment system. The FDIC has 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%.

In addition, all FDIC insured institutions are required to pay assessments to the FDIC to fund interest payments on bonds issued by the Financing Corporation, or FICO, an agency of the federal government established to recapitalize the predecessor to the SAIF. The assessment rate is adjusted quarterly and is 0.0114% of insured deposits for the fourth quarter of 2007 and the first quarter of 2008. These assessments will continue until the FICO bonds mature in 2017 through 2019.

As briefly discussed above, the FDIC under the Federal Deposit Insurance Act, or the FDI Act, may terminate the insurance of an institution’s deposits upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that might lead to termination of our deposit insurance.

Change in Control. 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. In addition, the prior approval of the Nevada Commissioner is required before any person may acquire “control” of a Nevada bank. 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 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.

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Capital Standards