##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 001-33592





SILVER STATE BANCORP

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Nevada                                                         |  | 88-0456212                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|170 South Green Valley Parkway, Henderson, Nevada              |  | 89012                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             

(702) 433-8300

(Registrants telephone number, including area code)





Indicate by check mark whether the registrant
(1) has filed all the 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition
of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

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

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

Common Stock Outstanding: 15,135,765 shares as of July 31, 2008









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##### Table of Contents

|         |  |                                                                                                          |  |     
|-------- |  | -------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                          |  | Page
|         |  | PART I  FINANCIAL INFORMATION                                                                           |  |     
|Item 1.  |  | Financial Statements (Unaudited):                                                                        |  |     
|         |  | Consolidated Statements of Financial Condition at June 30, 2008 and December 31, 2007                    |  | 3   
|         |  | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2008 and June 30, 2007 |  | 4   
|         |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and June 30, 2007           |  | 5   
|         |  | Notes to Consolidated Financial Statements                                                               |  | 6   
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                    |  | 16  
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                               |  | 42  
|Item 4.  |  | Controls and Procedures                                                                                  |  | 43  
|         |  |                                                                                                         
|         |  | PART II  OTHER INFORMATION                                                                              |  |     
|         |  |                                                                                                         
|Item 1.  |  | Legal Proceedings                                                                                        |  | 44  
|Item 1A. |  | Risk Factors                                                                                             |  | 44  
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                              |  | 52  
|Item 3.  |  | Defaults Upon Senior Securities                                                                          |  | 52  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                      |  | 52  
|Item 5.  |  | Other Information                                                                                        |  | 52  
|Item 6.  |  | Exhibits                                                                                                 |  | 53  
|         |  | Signatures                                                                                               |  | 53  



2



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##### Table of Contents

PART I  FINANCIAL INFORMATION



|ITEM 1. | Financial Statements
|------- | --------------------

Silver State
Bancorp and Subsidiary

Consolidated Balance Sheets

June 30, 2008 and December 31, 2007

(Dollars in thousands)

(UNAUDITED)



|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                             |  | June 30,2008 |           |   | December 31,2007 |  
|Assets                                                                                                                                                                       |  |              |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                                    |  | $            | 15,918    |   |                  | $ | 13,838    |  
|Federal funds sold                                                                                                                                                           |  |              | 224,183   |   |                  |   |          |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|Total cash and cash equivalents                                                                                                                                              |  |              | 240,101   |   |                  |   | 13,838    |  
|Securities available-for-sale                                                                                                                                                |  |              | 51,821    |   |                  |   | 51,966    |  
|Federal Home Loan Bank stock, at cost                                                                                                                                        |  |              | 5,957     |   |                  |   | 5,469     |  
|Loans held for sale                                                                                                                                                          |  |              | 86,543    |   |                  |   | 68,868    |  
|Loans, net of allowance for losses of $78,869 and $19,304, respectively                                                                                                      |  |              | 1,473,698 |   |                  |   | 1,539,667 |  
|Premises and equipment, net                                                                                                                                                  |  |              | 40,666    |   |                  |   | 43,081    |  
|Land held for sale                                                                                                                                                           |  |              | 5,508     |   |                  |   |          |  
|Accrued interest receivable                                                                                                                                                  |  |              | 7,035     |   |                  |   | 9,874     |  
|Deferred taxes, net                                                                                                                                                          |  |              | 16,586    |   |                  |   | 5,902     |  
|Other real estate owned                                                                                                                                                      |  |              | 16,303    |   |                  |   | 110       |  
|Goodwill                                                                                                                                                                     |  |              |          |   |                  |   | 18,835    |  
|Intangible asset, net of amortization of $378 and $247, respectively                                                                                                         |  |              | 786       |   |                  |   | 917       |  
|Prepaids and other assets                                                                                                                                                    |  |              | 16,413    |   |                  |   | 5,656     |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|Total assets                                                                                                                                                                 |  | $            | 1,961,417 |   |                  | $ | 1,764,183 |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|Liabilities and Stockholders Equity                                                                                                                                         |  |              |           |   |                  |   |           |  
|Deposits:                                                                                                                                                                    |  |              |           |   |                  |   |           |  
|Non-interest-bearing demand                                                                                                                                                  |  | $            | 122,052   |   |                  | $ | 177,084   |  
|Interest-bearing:                                                                                                                                                            |  |              |           |   |                  |   |           |  
|Checking                                                                                                                                                                     |  |              | 414,308   |   |                  |   | 535,902   |  
|Savings                                                                                                                                                                      |  |              | 25,774    |   |                  |   | 22,943    |  
|Time, $100 and over                                                                                                                                                          |  |              | 415,440   |   |                  |   | 256,392   |  
|Other time                                                                                                                                                                   |  |              | 754,906   |   |                  |   | 434,183   |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|Total deposits                                                                                                                                                               |  |              | 1,732,480 |   |                  |   | 1,426,504 |  
|Accrued interest payable and other liabilities                                                                                                                               |  |              | 11,969    |   |                  |   | 9,890     |  
|Federal funds purchased and securities sold under repurchase agreements                                                                                                      |  |              | 1,595     |   |                  |   | 9,983     |  
|Federal Home Loan Bank advances and other borrowings:                                                                                                                        |  |              |           |   |                  |   |           |  
|Short-term borrowings                                                                                                                                                        |  |              | 30,000    |   |                  |   | 34,000    |  
|Long-term borrowings                                                                                                                                                         |  |              | 47,000    |   |                  |   | 56,600    |  
|Junior subordinated debt                                                                                                                                                     |  |              | 69,589    |   |                  |   | 69,589    |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                            |  |              | 1,892,633 |   |                  |   | 1,606,566 |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|Stockholders Equity                                                                                                                                                         |  |              |           |   |                  |   |           |  
|Preferred stock, par value of .001 cents; 10,000,000 shares authorized; none issued or outstanding                                                                           |  |              |          |   |                  |   |          |  
|Common stock, par value of .001 cents; 60,000,000 shares authorized; shares issued 2008: 15,954,098; 2007: 15,944,154; shares outstanding
2008: 15,134,765; 2007: 15,271,421 |  |              | 16        |   |                  |   | 16        |  
|Additional paid-in capital                                                                                                                                                   |  |              | 80,224    |   |                  |   | 79,721    |  
|Retained earnings (accumulated deficit)                                                                                                                                      |  |              | (5,695    | ) |                  |   | 81,974    |  
|Accumulated other comprehensive income (loss)                                                                                                                                |  |              | (95       | ) |                  |   | 64        |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|                                                                                                                                                                             |  |              | 74,450    |   |                  |   | 161,775   |  
|Less cost of treasury stock, 2008: 819,333 shares, 2007: 672,733 shares                                                                                                      |  |              | (5,666    | ) |                  |   | (4,158    | )
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                   |  |              | 68,784    |   |                  |   | 157,617   |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                   |  | $            | 1,961,417 |   |                  | $ | 1,764,183 |  
|                                                                                                                                                                             |  |              |           |   |                  |   |           |  

See Notes to Consolidated Financial Statements.



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##### Table of Contents

Silver State Bancorp and Subsidiary

Consolidated Statements of Operations

For the three months and six
months ended June 30, 2008 and 2007

(Dollars in thousands, except per share information)

(UNAUDITED)



|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|----------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------ | ---- |  | - | -------- | - |  | - | ------ | -
|                                                                        |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                                        |  | 2008                       |         |   | 2007                     |   |        | 2008 |  |   | 2007     |  
|Interest and dividend income on:                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Loans, including fees                                                   |  | $                          | 27,219  |   |                          | $ | 33,411 |      |  | $ | 62,132   |   |  | $ | 61,844 |  
|Securities, taxable                                                     |  |                            | 1,022   |   |                          |   | 634    |      |  |   | 1,667    |   |  |   | 1,327  |  
|Dividends on FHLB stock                                                 |  |                            | 83      |   |                          |   | 40     |      |  |   | 154      |   |  |   | 99     |  
|Federal funds sold and other                                            |  |                            | 729     |   |                          |   | 258    |      |  |   | 853      |   |  |   | 470    |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Total interest income                                                   |  |                            | 29,053  |   |                          |   | 34,343 |      |  |   | 64,806   |   |  |   | 63,740 |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Interest expense on:                                                    |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Deposits                                                                |  |                            | 15,626  |   |                          |   | 12,713 |      |  |   | 29,986   |   |  |   | 23,480 |  
|Federal funds purchased and securities sold under repurchase agreements |  |                            | 31      |   |                          |   | 88     |      |  |   | 123      |   |  |   | 242    |  
|Short-term borrowings                                                   |  |                            | 357     |   |                          |   | 250    |      |  |   | 996      |   |  |   | 415    |  
|Long-term borrowings                                                    |  |                            | 620     |   |                          |   | 643    |      |  |   | 1,283    |   |  |   | 1,214  |  
|Junior subordinated debt                                                |  |                            | 772     |   |                          |   | 689    |      |  |   | 1,840    |   |  |   | 1,355  |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Total interest expense                                                  |  |                            | 17,406  |   |                          |   | 14,383 |      |  |   | 34,228   |   |  |   | 26,706 |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Net interest income                                                     |  |                            | 11,647  |   |                          |   | 19,960 |      |  |   | 30,578   |   |  |   | 37,034 |  
|Provision for loan losses                                               |  |                            | 69,100  |   |                          |   | 1,860  |      |  |   | 100,100  |   |  |   | 3,190  |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Net interest income (loss) after provision for loan losses              |  |                            | (57,453 | ) |                          |   | 18,100 |      |  |   | (69,522  | ) |  |   | 33,844 |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Other income:                                                           |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Gain on sale of loans                                                   |  |                            | 577     |   |                          |   | 1,202  |      |  |   | 1,822    |   |  |   | 3,033  |  
|Net realized gain on sales of available-for-sale securities             |  |                            |        |   |                          |   |       |      |  |   | 52       |   |  |   | 31     |  
|Service charges on deposit accounts                                     |  |                            | 258     |   |                          |   | 221    |      |  |   | 523      |   |  |   | 420    |  
|Loan servicing fees, net of amortization                                |  |                            | 74      |   |                          |   | 61     |      |  |   | 141      |   |  |   | 250    |  
|Other income                                                            |  |                            | 538     |   |                          |   | 406    |      |  |   | 875      |   |  |   | 830    |  
|Gain (loss) on disposal of other assets                                 |  |                            | (2      | ) |                          |   | (16    | )    |  |   | 1        |   |  |   | (16    | )
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|                                                                        |  |                            | 1,445   |   |                          |   | 1,874  |      |  |   | 3,414    |   |  |   | 4,548  |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Non-interest expense:                                                   |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Salaries, wages and employee benefits                                   |  |                            | 5,160   |   |                          |   | 6,414  |      |  |   | 12,527   |   |  |   | 12,244 |  
|Occupancy                                                               |  |                            | 1,208   |   |                          |   | 852    |      |  |   | 2,365    |   |  |   | 1,568  |  
|Depreciation and amortization                                           |  |                            | 800     |   |                          |   | 613    |      |  |   | 1,572    |   |  |   | 1,205  |  
|Insurance                                                               |  |                            | 613     |   |                          |   | 552    |      |  |   | 927      |   |  |   | 621    |  
|Professional fees                                                       |  |                            | 1,544   |   |                          |   | 463    |      |  |   | 2,474    |   |  |   | 1,314  |  
|Advertising, public relations and business development                  |  |                            | 286     |   |                          |   | 226    |      |  |   | 599      |   |  |   | 451    |  
|Customer service expense                                                |  |                            | 57      |   |                          |   | 100    |      |  |   | 149      |   |  |   | 187    |  
|Goodwill impairment                                                     |  |                            | 18,835  |   |                          |   |       |      |  |   | 18,835   |   |  |   |       |  
|Loss on other real estate owned                                         |  |                            | 152     |   |                          |   |       |      |  |   | 168      |   |  |   | 182    |  
|Other                                                                   |  |                            | 1,358   |   |                          |   | 943    |      |  |   | 2,717    |   |  |   | 1,822  |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|                                                                        |  |                            | 30,013  |   |                          |   | 10,163 |      |  |   | 42,333   |   |  |   | 19,594 |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Income (loss) before income taxes                                       |  |                            | (86,021 | ) |                          |   | 9,811  |      |  |   | (108,441 | ) |  |   | 18,798 |  
|Income taxes (benefit)                                                  |  |                            | (12,827 | ) |                          |   | 3,641  |      |  |   | (20,826  | ) |  |   | 7,040  |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Net income (loss)                                                       |  | $                          | (73,194 | ) |                          | $ | 6,170  |      |  | $ | (87,615  | ) |  | $ | 11,758 |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Comprehensive income (loss)                                             |  | $                          | (73,534 | ) |                          | $ | 6,090  |      |  | $ | (87,775  | ) |  | $ | 11,702 |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Basic income (loss) per common share                                    |  | $                          | (4.84   | ) |                          | $ | 0.45   |      |  | $ | (5.78    | ) |  | $ | 0.86   |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  
|Diluted income (loss) per common share                                  |  | $                          | (4.84   | ) |                          | $ | 0.44   |      |  | $ | (5.78    | ) |  | $ | 0.83   |  
|                                                                        |  |                            |         |   |                          |   |        |      |  |   |          |   |  |   |        |  

See Notes to Consolidated Financial Statements.



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##### Table of Contents

Silver State Bancorp and Subsidiary

Consolidated Statements of Cash Flows

Six Months Ended
June 30, 2008 and 2007

(Dollars in thousands)

(UNAUDITED)



|                                                                                                                         |  |      |         |   |      |   |          |  
|------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | -------- | -
|                                                                                                                         |  | 2008 |         |   | 2007 |  
|Cash Flows from Operating Activities                                                                                     |  |      |         |   |      |   |          |  
|Net income (loss)                                                                                                        |  | $    | (87,615 | ) |      | $ | 11,758   |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                       |  |      |         |   |      |   |          |  
|Gain on sales of securities                                                                                              |  |      | (52     | ) |      |   | (31      | )
|(Gain) loss on disposal of other assets                                                                                  |  |      | (1      | ) |      |   | 16       |  
|Loss on other real estate owned transactions                                                                             |  |      | 168     |   |      |   | 182      |  
|Depreciation and amortization                                                                                            |  |      | 1,572   |   |      |   | 1,205    |  
|Net amortization of securities premiums and discounts                                                                    |  |      | 68      |   |      |   |         |  
|Provision for loan losses                                                                                                |  |      | 100,100 |   |      |   | 3,190    |  
|Stock-based compensation expense                                                                                         |  |      | 445     |   |      |   | 223      |  
|Change in deferred taxes                                                                                                 |  |      | (10,567 | ) |      |   |         |  
|Increase in loans held for sale, net                                                                                     |  |      | (17,701 | ) |      |   | (18,964  | )
|Goodwill Impairment                                                                                                      |  |      | 18,835  |   |      |   |         |  
|Increase in accrued interest receivable and other assets                                                                 |  |      | (7,792  | ) |      |   | (3,743   | )
|Increase in accrued interest payable and other liabilities                                                               |  |      | 2,084   |   |      |   | 7,498    |  
|                                                                                                                         |  |      |         |   |      |   |          |  
|Net cash provided by (used in) operating activities                                                                      |  |      | (456    | ) |      |   | 1,334    |  
|                                                                                                                         |  |      |         |   |      |   |          |  
|Cash Flows from Investing Activities                                                                                     |  |      |         |   |      |   |          |  
|Purchases of securities available-for-sale                                                                               |  |      | (31,390 | ) |      |   | (18,394  | )
|Proceeds from maturities of securities available-for-sale                                                                |  |      | 26,060  |   |      |   | 26,910   |  
|Proceeds from sales of securities available-for-sale                                                                     |  |      | 5,254   |   |      |   | 4,306    |  
|Net decrease in money market funds                                                                                       |  |      | (50     | ) |      |   | (24      | )
|Purchase of Federal Home Loan Bank stock                                                                                 |  |      | (488    | ) |      |   | (960     | )
|Net increase in loans                                                                                                    |  |      | (50,878 | ) |      |   | (295,449 | )
|Purchase of premises and equipment                                                                                       |  |      | (4,675  | ) |      |   | (7,979   | )
|Proceeds from sales of premises and equipment                                                                            |  |      |        |   |      |   | 50       |  
|Cash received for other real estate owned                                                                                |  |      | 374     |   |      |   | 455      |  
|                                                                                                                         |  |      |         |   |      |   |          |  
|Net cash used in investing activities                                                                                    |  |      | (55,793 | ) |      |   | (291,085 | )
|                                                                                                                         |  |      |         |   |      |   |          |  
|Cash Flows from Financing Activities                                                                                     |  |      |         |   |      |   |          |  
|Net increase in deposits                                                                                                 |  |      | 305,976 |   |      |   | 259,034  |  
|Net increase (decrease) in other borrowed funds, federal funds purchased and securities sold under repurchase agreements |  |      | (21,988 | ) |      |   | 23,059   |  
|Purchase of treasury stock                                                                                               |  |      | (1,508  | ) |      |   |         |  
|Proceeds from exercise of stock options                                                                                  |  |      | 32      |   |      |   | 214      |  
|                                                                                                                         |  |      |         |   |      |   |          |  
|Net cash provided by financing activities                                                                                |  |      | 282,512 |   |      |   | 282,307  |  
|                                                                                                                         |  |      |         |   |      |   |          |  
|                                                                                                                         |  |     
|Increase in cash and cash equivalents                                                                                    |  |      | 226,263 |   |      |   | (7,444   | )
|Cash and cash equivalents, beginning                                                                                     |  |      | 13,838  |   |      |   | 35,479   |  
|                                                                                                                         |  |      |         |   |      |   |          |  
|Cash and cash equivalents, ending                                                                                        |  | $    | 240,101 |   |      | $ | 28,035   |  
|                                                                                                                         |  |      |         |   |      |   |          |  

See Notes to Consolidated Financial Statements.



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in
thousands, except per share information)





Note 1. Nature of Banking Activities and Summary of Significant Accounting Policies

Nature of banking activities

Silver State Bancorp, or the Company, is a bank holding company headquartered in
Henderson, Nevada. As of March 31, 2008, the Company had two wholly-owned consolidated subsidiaries, Silver State Bank and Choice Bank, or the Banks. Silver State Bank, a Nevada State chartered bank, provides a full range of commercial and
consumer banking products through thirteen branches located in the Las Vegas, Nevada metropolitan area. On September 5, 2006, the Company acquired a second subsidiary, Choice Bank, which, as of March 31, 2008, had three full-service
branches in the greater Phoenix/Scottsdale, Arizona area. Effective April 1, 2008, Choice Bank merged with and into Silver State Bank. The Company also operates loan production offices in Nevada, California, Washington, Oregon, Utah, Colorado
and Florida. The Companys business is concentrated in southern Nevada and central Arizona and is subject to the general economic conditions of these areas. The accounting and reporting policies of the Company conform to accounting principles
generally accepted in the United States of America, or GAAP, and general industry practice.

Going Concern

The continued recessionary forces in the local economy have had a significant adverse impact on the Companys financial condition and results of operations. As
reported in the accompanying consolidated financial statements, the Company has incurred a net loss of $73,194 for the three months ended June 30, 2008 and a net loss of $87,615 for the six months ended June 30, 2008. Stockholders
equity decreased from $157,617 or 8.93% of total assets at December 31, 2007 to $68,784 or 3.51% of total assets at June 30, 2008. The recent losses originate from a provision for loan losses of $100,100, a charge for impairment of
goodwill of $18,835, a valuation allowance of deferred taxes of $10,736 for the six month period ended June 30, 2008, and an increase in nonperforming assets which has reduced the Companys net interest income. The Companys net
interest income will continue to be negatively impacted by the level of nonperforming assets and the Company expects additional losses for the remainder of the year. Further, the Companys liquidity position has declined subsequent to quarter
end. As a result of the losses, the Company is deemed to be adequately capitalized as of June 30, 2008. Non-performing assets totaled $268,335, $79,200 and $13,189 at June 30, 2008, March 31, 2008, and December 31, 2007,
respectively. While the Company has devoted and will continue to devote substantial management resources toward the resolution of all delinquent and non-performing assets, no assurance can be made that managements efforts will be successful.
These conditions create an uncertainty about the Companys ability to continue as a going concern. The unaudited financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

Management of the Company has taken certain steps in an effort to continue with safe and sound banking practices including reorganizing the management
team, exercising the contractual right to defer the interest on trust preferred securities at the Company level, slowing the branch expansion plan for the next several quarters, continuing to work with the Companys financial advisor, Keefe,
Bruyette & Woods, Inc., to seek additional capital, and is considering all strategic alternatives available to the Company and the Bank, halting the stock repurchase program, and is continuing to reduce its lending exposure, due in large
part to the downturn in the local economy, and in particular, values of residential and residential development properties. In addition, the Company has been granted access to borrow funds on an as needed basis from the Federal Reserves
discount window in an amount up to approximately $97,000. See subsequent events in Note 12.

Basis of financial statement presentation and accounting
estimates

In preparing the accompanying consolidated financial statements, management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses for the reporting period. Actual results could differ from
those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and deferred tax asset valuation allowance.

Principles of consolidation

The accompanying consolidated financial
statements include the accounts of Silver State Bancorp and its wholly-owned consolidated subsidiary, Silver State Bank, or the Bank, as of June 30, 2008. Certain trust subsidiaries (see Note 12 of the audited financial statements for the
fiscal year ended December 31, 2007) do not meet the criteria for consolidation pursuant to Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities, as amended. All significant
intercompany accounts and transactions have been eliminated in consolidation.



6



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)





Note 1. Nature of Banking Activities and Summary of Significant Accounting Policies (continued)

Interim
Financial Information

The accompanying unaudited consolidated financial statements as of June 30, 2008 and 2007 have been prepared in condensed
format, and therefore do not include all of the information and footnotes required by GAAP for complete financial statements.

The information furnished in
these interim statements reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for each respective period presented. Such adjustments are of a normal recurring nature. The results of
operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter or for the full year. The interim financial information should be read in conjunction with the Companys audited
financial statements for the fiscal year ended December 31, 2007.

Certain information and note disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC.

Earnings (loss) per share

Basic earnings (loss) per share (EPS) represents income (loss) available to common stockholders divided by the
weighted-average number of common shares outstanding during the period. Diluted EPS reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued as well as any adjustment to income that would
result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding options and nonvested restricted shares, and are determined using the treasury stock method. Diluted loss per share for the
three and six months ended June 30, 2008 were based only on the weighted-average number of shares outstanding during the period, as the inclusion of any common stock equivalents would have been anti-dilutive.

Components used in computing EPS for the three months and six months ended June 30, 2008 and 2007 are summarized as follows:



|                                              |  |                            |            |                          |      |   |            |  |   |            |   |  |   |           
|--------------------------------------------- |  | -------------------------- | ---------- | ------------------------ | ---- | - | ---------- |  | - | ---------- | - |  | - | ----------
|                                              |  | Three Months EndedJune 30, |            | Six Months EndedJune 30,
|                                              |  | 2008                       |            |                          | 2007 |   | 2008       |  |   | 2007      
|Net income (loss)                             |  | $                          | (73,194    | )                        |      | $ | 6,170      |  | $ | (87,615    | ) |  | $ | 11,758    
|                                              |  |                            |            |                          |      |   |            |  |   |            |   |  |   |           
|                                              |  |                            |            |                         
|Average number of common shares outstanding   |  |                            | 15,121,715 |                          |      |   | 13,723,765 |  |   | 15,166,228 |   |  |   | 13,710,441
|Effect of dilutive options                    |  |                            |           |                          |      |   | 417,317    |  |   |           |   |  |   | 445,465   
|                                              |  |                            |            |                          |      |   |            |  |   |            |   |  |   |           
|                                              |  |                            |            |                         
|Average number of dilutive shares outstanding |  |                            | 15,121,715 |                          |      |   | 14,141,082 |  |   | 15,166,228 |   |  |   | 14,155,906
|                                              |  |                            |            |                          |      |   |            |  |   |            |   |  |   |           
|                                              |  |                            |            |                         
|Basic income (loss) per common share          |  | $                          | (4.84      | )                        |      | $ | 0.45       |  | $ | (5.78      | ) |  | $ | 0.86      
|Diluted income (loss) per common share        |  | $                          | (4.84      | )                        |      | $ | 0.44       |  | $ | (5.78      | ) |  | $ | 0.83      

Repurchase Program

For the quarter ended June 30, 2008, the Company repurchased no shares of its common stock on the open market under an approved stock repurchase program authorizing the Company to initially repurchase up to 764,415 shares of its
outstanding common stock. In the first quarter of 2008, the Company repurchased 146,600 shares of its common stock. The Company has no present intention to repurchase the remaining 482,415 shares of its common stock under the stock repurchase
program.



7



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)





Note 1. Nature of Banking Activities and Summary of Significant Accounting Policies (continued)

Current
accounting developments

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial 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. 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. The Company adopted SFAS 159 effective January 1, 2008.
Upon adoption, the Company did not elect the fair value option for eligible items that existed at January 1, 2008 and as such, the impact of adopting such standard is not material.

In September 2006, the Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 06-4 (EITF 06-4), Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar
Life Insurance Arrangements, which requires the application of the provisions of SFAS 106, Employers Accounting for Postretirement Benefits Other Than Pensions, to endorsement split-dollar life insurance arrangements. EITF 06-4 would require
the Company to accrue a liability for the postretirement death benefits associated with split-dollar life insurance agreements. An endorsement-type arrangement generally exists when the Company owns and controls all incidents of ownership of the
underlying policies. EITF 06-4 is effective for fiscal years beginning after December 15, 2007. The adoption of EITF 06-4 did not have a material impact on the financial statements. At January 1, 2008 a cumulative effect adjustment was
recorded to retained earnings in the amount of $55. There was no impact to earnings (loss) per share.

In June 2008, the FASB issued Staff Position, or
FSP, No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities, which addresses whether instruments granted in share-based payment transactions are participating securities prior to
vesting and, therefore, need to be included in the earnings allocation in computing EPS under the two-class method described in SFAS No. 128, Earnings per Share. The FSP concluded that unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend equivalents are participating securities and shall be included in the computation of EPS pursuant to the two-class method. Our restricted stock awards are considered participating securities.
FSP No. EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively to conform with the provisions of the FSP. Early
application is not permitted. FSP No. EITF 03-6-1 is not expected to have a material impact on our computation of EPS.

In May 2008, the FASB issued SFAS
162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities
that are presented in conformity with GAAP. SFAS 162 will be effective 60 days following the approval by the SEC of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles. Any effect of applying the provisions of SFAS 162 shall be reported as a change in accounting principle in accordance with SFAS 154, Accounting Changes and Error Corrections. Additionally, the accounting
principles that were used before and after the application of SFAS 162 and the reason why applying SFAS 162 resulted in a change in accounting principle are to be disclosed. SFAS 162 is not expected to result in any changes in our accounting
principles and, therefore, will not have an impact on our financial condition or results of operations.



8



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)





Note 2. Loans

The composition of the Companys net loans as of June 30, 2008 and December 31,
2007 is as follows:



|                                                     |  |              |           |   |                  |   |           |  
|---------------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                                     |  | June 30,2008 |           |   | December 31,2007 |  
|Commercial and industrial                            |  | $            | 146,259   |   |                  | $ | 139,258   |  
|Real estate:                                         |  |              |           |   |                  |   |           |  
|Commercial                                           |  |              | 245,153   |   |                  |   | 261,846   |  
|Construction, land development, and other land loans |  |              | 1,052,229 |   |                  |   | 1,065,524 |  
|Single family residential                            |  |              | 107,647   |   |                  |   | 94,813    |  
|Consumer installment                                 |  |              | 4,557     |   |                  |   | 4,944     |  
|Leases, net of unearned income                       |  |              | 238       |   |                  |   | 277       |  
|Less net deferred loan fees                          |  |              | (3,516    | ) |                  |   | (7,691    | )
|                                                     |  |              |           |   |                  |   |           |  
|Gross Loans                                          |  |              | 1,552,567 |   |                  |   | 1,558,971 |  
|Less allowance for loan and lease losses             |  |              | (78,869   | ) |                  |   | (19,304   | )
|                                                     |  |              |           |   |                  |   |           |  
|Net Loans                                            |  | $            | 1,473,698 |   |                  | $ | 1,539,667 |  
|                                                     |  |              |           |   |                  |   |           |  

Information about impaired and nonaccrual loans as of June 30, 2008 and December 31, 2007 is as follows:



|                                                                     |  |              |         |                  |   |        
|-------------------------------------------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                                                     |  | June 30,2008 |         | December 31,2007
|Impaired loans with a specific valuation allowance under SFAS 114    |  | $            | 284,226 |                  | $ | 16,850 
|Impaired loans without a specific valuation allowance under SFAS 114 |  |              | 110,458 |                  |   | 118,989
|                                                                     |  |              |         |                  |   |        
|Total impaired loans                                                 |  | $            | 394,684 |                  | $ | 135,839
|                                                                     |  |              |         |                  |   |        
|                                                                     |  |             
|Related allowance for loan losses on impaired loans                  |  | $            | 51,069  |                  | $ | 2,149  
|Nonaccrual loans                                                     |  | $            | 241,828 |                  | $ | 13,079 
|Loans past due 90 days or more and still accruing interest           |  | $            | 10,204  |                  | $ |       
|Average balance of impaired loans during the period                  |  | $            | 429,341 |                  | $ | 129,136
|Interest income recognized during the period on impaired loans       |  | $            | 11,828  |                  | $ | 10,516 

The Company is currently committed to lend approximately $36,605 in additional funds on these impaired loans in
accordance with the original terms of these loans; however, the Company is not legally obligated to, and will not, disburse additional funds on any loans while in nonaccrual status. Of the $36,605 in committed funds on impaired loans, none is
applicable to nonaccrual loans. The Company will continue to monitor its portfolio on a regular basis and will lend additional funds as warranted on these impaired loans.

Approximately 58% of the impaired loans as of June 30, 2008 relate to residential construction and residential land loans. As of June 30, 2008, $110,458 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 are not expected to be collected as scheduled in the loan agreement. The $110,458 of
impaired loans without a specific valuation allowance as of June 30, 2008 are generally impaired due to delays or anticipated delays in receiving payments pursuant to the contractual terms of the loan agreements.

The Company experienced significant declines in the current valuations for real estate collateral supporting portions of its loan portfolio, primarily residential
construction and residential land loans, late in the first quarter of 2008, and continuing into August 2008, as reflected in recently received appraisals. Currently, $299.3 million, or approximately 76%, of impaired loans have recent appraisals. If
real estate values continue to decline and as updated appraisals are received, the Company may have to increase its allowance for loan losses appropriately.



9



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)





Note 2. Loans (continued)

Changes in the allowance for loan losses for the three months and six months ended
June 30, 2008 and 2007, respectively, are as follows:



|                                       |  |                            |         |   |                          |   |        |      |  |   |         |   |  |   |        |  
|-------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                       |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                       |  | 2008                       |         |   | 2007                     |   |        | 2008 |  |   | 2007    |  
|Balance, beginning                     |  | $                          | 40,651  |   |                          | $ | 12,530 |      |  | $ | 19,304  |   |  | $ | 11,200 |  
|Provision charged to operating expense |  |                            | 69,100  |   |                          |   | 1,860  |      |  |   | 100,100 |   |  |   | 3,190  |  
|Less amounts charged off               |  |                            | (30,886 | ) |                          |   | (88    | )    |  |   | (40,542 | ) |  |   | (89    | )
|Recoveries                             |  |                            | 4       |   |                          |   | 32     |      |  |   | 7       |   |  |   | 33     |  
|                                       |  |                            |         |   |                          |   |        |      |  |   |         |   |  |   |        |  
|Balance, ending                        |  | $                          | 78,869  |   |                          | $ | 14,334 |      |  | $ | 78,869  |   |  | $ | 14,334 |  
|                                       |  |                            |         |   |                          |   |        |      |  |   |         |   |  |   |        |  

Note 3. Income Taxes

The Company accounts for income taxes under the liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets are subject to managements judgment based upon available evidence that future
realization is more likely than not. During the second quarter of 2008, the Company established a valuation allowance of $10,736 to the Companys net deferred tax assets. This valuation allowance is related to certain tax aspects involving the
allowance for loan losses. The allowance for loan losses represents future tax benefits which would be realized when actual charge-offs are made against the allowance. To the extent available, sources of taxable income, including those available
from prior years under tax regulations, are deemed per GAAP to be insufficient to absorb tax losses, and a valuation allowance is therefore necessary. If management determines that the Company may be able to realize all or part of the deferred
tax asset in the future, a credit to income tax expense may be required to increase the recorded value of net deferred tax asset to the expected realizable amount.

Note 4. Deposits

At June 30, 2008, four customer balances, which were our four largest depositors, totaling $594,218 comprised
approximately 34% of total deposits. At December 31, 2007, these same four customer balances, which were also our four largest depositors, totaling $500,243 comprised approximately 35% of total deposits. These customer balances constitute all
our brokered deposits at June 30, 2008 and December 31, 2007. Of these deposits at June 30, 2008 and December 31, 2007, $194,885 and $242,821, respectively, are interest-bearing demand deposit accounts, $45,238 and $38,006,
respectively, are time deposits, $100 and over, and $354,095 and $219,416, respectively are other time deposits. See subsequent events in Note 12.

As of
June 30, 2008 and December 31, 2007 approximately $7,233 and $28,431, respectively, of the Companys non-interest-bearing demand deposits consisted of demand accounts maintained by title insurance and qualified intermediary companies.

Note 5. Other Borrowed Funds

The Company has a
line of credit available from the Federal Home Loan Bank of San Francisco (FHLB). Borrowing capacity is determined based on collateral pledged, generally consisting of loans and securities, at the time of the borrowing. The remaining borrowing
capacity at June 30, 2008 with the FHLB was approximately $43,430. Advances at June 30, 2008 have maturity dates as follows:



|              |  |                                   |  |           |        |            |   |       
|------------- |  | --------------------------------- |  | --------- | ------ | ---------- | - | ------
|Maturity Date |  | Interest Rates as ofJune 30, 2008 |  | Long-Term |        | Short-Term
|2008          |  | 2.99%-5.23%                       |  | $         | 10,000 |            | $ | 30,000
|2009          |  | 3.75%-5.22%                       |  |           | 27,000 |            |   |      
|2010          |  | 4.75%                             |  |           | 10,000 |            |   |      
|              |  |                                   |  |           |        |            |   |       
|              |  |                                   |  | $         | 47,000 |            | $ | 30,000
|              |  |                                   |  |           |        |            |   |       

See subsequent events in Note 12.



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)





Note 6. Commitments and Contingencies

Contingencies

Southwest Exchange, a former customer of Silver State Bank, is currently under investigation and reported to be a defendant in a number of lawsuits 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.

The Company previously was named as a defendant in one such lawsuit and, by agreement of the plaintiff, was dismissed from the lawsuit without prejudice.
The Company was also named in two other complaints (along with several other defendants) alleging conversion, breach of fiduciary duty, negligence, fraud and civil RICO claims. More than a year has elapsed since the filing of those complaints, and
they have not been served on Silver State Bank.

Silver State Bank was also recently named, along with 41 other named defendants, as a defendant in a
consolidated litigation pending before the Nevada District Court, Clark County (P&D Kelesis, LLC et al. v. Southwest Exchange, et al., Case No. A535439), claiming causes of action for conversion and negligence per se against the Bank. The
plaintiffs purported to serve Silver State Bank with this complaint on February 7, 2008. The amount claimed in this consolidated lawsuit is approximately $12.7 million. On April 11, 2008, the plaintiffs served the Bank with an amended
complaint, claiming causes of action for breach of fiduciary duty, conversation, negligence per se, unjust enrichment, and Breach of Uniform Fiduciaries Act. On May 2, 2008, some, but not all, additional claimants joined in the Amended Claims
(the Albrittons Claims). The Albrittons Claims total $8.0 million, bringing total claims against Silver State Bank related to this matter to approximately $20.7 million. The Bank filed a motion to dismiss the complaint (or in
the alternative, for summary judgment) which was denied by the court to allow the plaintiffs additional time for discovery. The Company expects that the discovery period will extend into the fourth quarter of 2008. After the period for discovery,
the plaintiffs may amend the complaint, which amendment may include an increase for damages requested, and we may file new motions for dismissal or summary judgment.

The Company believes the allegations against it in these lawsuits are without merit and intends to vigorously defend these and any other future lawsuits pertaining to this matter. However, if the Company is not
dismissed from these lawsuits or is included in other litigation regarding Southwest Exchange, its 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, the Company may be required to spend substantial sums on legal representation in connection with any such litigation until the claims are dismissed.

In the normal course of business, the Company is involved in various other legal proceedings occurring in the ordinary course of business. In the opinion of management,
any liability resulting from such other proceedings would not have a material adverse effect on the consolidated financial statements.

Financial
instruments with off-balance-sheet risk

A summary of the contract amount of the Companys exposure to off-balance-sheet risk as of June 30 is
as follows:



|                             |  |              |         |                  |   |        
|---------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                             |  | June 30,2008 |         | December 31,2007
|Commitments to extend credit |  | $            | 288,072 |                  | $ | 530,857
|Standby letters of credit    |  |              | 2,677   |                  |   | 2,480  
|                             |  |              |         |                  |   |        
|                             |  | $            | 290,749 |                  | $ | 533,337
|                             |  |              |         |                  |   |        

Concentrations

The Companys loan portfolio has a high concentration in real estate loans, specifically construction and land loans. At June 30, 2008, approximately 10% of real estate loans were classified as residential construction loans,
approximately 25% of real estate loans were classified as commercial construction loans, approximately 21% were classified as residential land loans, and approximately 19% were classified as commercial land loans. In addition, commercial real estate
loans represent approximately 17% and single family residential loans represent approximately 8% of total real estate loans as of June 30, 2008. Approximately 64% of the commercial real estate loans are owner-occupied.



11



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)





Note 7. Stock Options and Restricted Stock

The Companys 2006 Omnibus Equity Plan is discussed in Note 14
of the audited financial statements for the fiscal year ended December 31, 2007.

In January 2008, the Company adopted a new Omnibus Equity Plan,
which was approved at the Annual Meeting of Shareholders in April 2008. The 2008 Omnibus Plan allows for the granting of 750,000 stock-based awards.

During the three and six months ended June 30, 2008, the Company granted 156,000 incentive stock options and 6,000 shares of restricted stock to various employees and granted 47,000 incentive stock options to key officers. The options
had a weighted average exercise price of $12.28. All of the incentive stock options vest at 25% per year. The restricted stock vests 100% after 4 years. The total expense to be recognized on these stock based awards granted during the six
months ended June 30, 2008 is approximately $752, and will be recorded over the vesting period. During the six months ended June 30, 2008, 5,194 stock options were exercised, and 50,450 options and 1,250 shares of restricted stock were
forfeited. These exercised and forfeited options had a weighted average exercise price of $6.07 and $18.23, respectively.

As of June 30, 2008, there
was $2,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements. This compensation will be recognized over a weighted average period of approximately 2 years.

Note 8. Regulatory Capital Requirements

To be categorized as
well-capitalized or adequately capitalized, the Company and the Bank must maintain Total Risk Based, Tier I Risk Based and Tier I Leverage ratios as set forth in the table below. As of June 30, 2008, the Company and the Bank meet the regulatory
guidelines to be categorized as adequately capitalized for all regulatory purposes.

The actual capital amounts and ratios for the Bank and the Company as
of June 30, 2008 are presented in the following table:



|                                         |  |        |         |       |                             |   |        |                       |         |  |     |        |  |       |         |  |      |  
|---------------------------------------- |  | ------ | ------- | ----- | --------------------------- | - | ------ | --------------------- | ------- |  | --- | ------ |  | ----- | ------- |  | ---- | -
|                                         |  | Actual |         |       | To beAdequately Capitalized |   |        | To beWell-Capitalized |        
|                                         |  | Amount |         | Ratio |                             |   | Amount |                       | Ratio   |  |     | Amount |  | Ratio |        
|As of June 30, 2008:                     |  |        |         |       |                             |   |        |                       |         |  |     |        |  |       |         |  |      |  
|Total Capital (to Risk Weighted Assets)  |  |        |         |       |                             |   |        |                       |         |  |     |        |  |       |         |  |      |  
|Company                                  |  | $      | 158,380 |       | 9.0                         | % |        | $                     | 141,541 |  | 8.0 | %      |  | $     | 176,926 |  | 10.0 | %
|Silver State Bank                        |  | $      | 156,584 |       | 8.9                         | % |        | $                     | 141,362 |  | 8.0 | %      |  | $     | 176,702 |  | 10.0 | %
|Tier I Capital (to Risk Weighted Assets) |  |        |         |       |                             |   |        |                       |         |  |     |        |  |       |         |  |      |  
|Company                                  |  | $      | 91,010  |       | 5.1                         | % |        | $                     | 70,770  |  | 4.0 | %      |  | $     | 106,156 |  | 6.0  | %
|Silver State Bank                        |  | $      | 133,793 |       | 7.6                         | % |        | $                     | 70,681  |  | 4.0 | %      |  | $     | 106,021 |  | 6.0  | %
|Tier I Capital (to Average Assets)       |  |        |         |       |                             |   |        |                       |         |  |     |        |  |       |         |  |      |  
|Company                                  |  | $      | 91,010  |       | 4.5                         | % |        | $                     | 81,756  |  | 4.0 | %      |  | $     | 102,195 |  | 5.0  | %
|Silver State Bank                        |  | $      | 133,793 |       | 6.6                         | % |        | $                     | 81,616  |  | 4.0 | %      |  | $     | 102,020 |  | 5.0  | %



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)





Note 9. Fair Value Accounting

Effective January 1, 2008, the Company partially adopted SFAS 157, Fair
Value Measurements, or SFAS 157, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies only to fair value measurements already required or permitted by
other accounting standards and does not impose requirements for additional fair value measures. SFAS 157 was issued to increase consistency and comparability in reporting fair values. In February 2008, the Financial Accounting Standards Board issued
Staff Position No. FAS 157-2, or FSP 157-2, which delays the effective date of SFAS 157 for certain nonfinancial assets and nonfinancial liabilities, to fiscal years beginning after November 15, 2008, and interim periods within those fiscal
years. The delay is intended to allow additional time to consider the effect of various implementation issues that have arisen, or that may arise, from the application of SFAS 157. The Company has elected to apply the deferral provisions in FSP
157-2 and therefore has only partially applied the provisions of SFAS 157. The Companys adoption of SFAS 157 did not have a material impact on the Companys financial condition or results of operations.

As defined in SFAS 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. In determining the fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants
would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company
uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on observability of the inputs used in the valuation techniques, the Company is required to provide the following information
according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the
following three categories:



| |  | Level 1: Valuations for assets and liabilities traded in active exchange markets. Valuations are obtained from readily available pricing sources for market
transactions involving identical assets or liabilities.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for
identical or similar assets or liabilities.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Level 3: Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and
similar techniques, and not based on market exchange, dealer or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company has not adopted the provisions of SFAS 157 with respect to certain nonfinancial assets, such as other real estate owned. The Company will fully adopt SFAS
157 with respect to such items effective January 1, 2009. The Company does not believe that such adoption will have a material impact on the consolidated financial statements, but will result in additional disclosures related to the fair value
of nonfinancial assets.

The Company has identified available-for-sale securities and impaired loans with allocated reserves under SFAS 114 as those items
requiring disclosure under SFAS 157. Management has concluded that servicing rights are not material for further consideration in relation to SFAS 157 disclosures.

Fair Value on a Recurring Basis

The table below presents the balance of securities available-for-sale at June 30, 2008, which are
measured at fair value on a recurring basis:



|                              |  |                               |        |                                                            |   |                                            |  |                                        |        |  |   |  
|----------------------------- |  | ----------------------------- | ------ | ---------------------------------------------------------- | - | ------------------------------------------ |  | -------------------------------------- | ------ |  | - | -
|                              |  | Fair Value Measurements Using
|                              |  | Total                         |        | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   | Significant OtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                              |  |                               |        |                                                           
|Securities available-for-sale |  | $                             | 51,821 |                                                            | $ | 2,030                                      |  | $                                      | 49,791 |  | $ | 
|                              |  |                               |        |                                                            |   |                                            |  |                                        |        |  |   |  

Securities available-for-sale consist mainly of AAA rated US Government agency securities, with the majority
having maturity dates of five years or less. The Company measures securities available-for-sale at fair value on a recurring basis; thus, there was no transition adjustment upon adoption of SFAS 157. The fair value of the Companys securities
available-for-sale are determined using Level 1 and Level 2 inputs, which are derived from readily available pricing sources and third-party pricing services for identical or comparable instruments, respectively.



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)







|Note | 9. Fair Value Accounting (continued)
|---- | ------------------------------------

Fair Value on a
Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an
ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents such assets carried on the balance sheet by caption and by level within the SFAS 157
hierarchy as of June 30, 2008.



|                                                                |  |                               |         |                                                            |   |                                            |  |                                        |   |  |   |        
|--------------------------------------------------------------- |  | ----------------------------- | ------- | ---------------------------------------------------------- | - | ------------------------------------------ |  | -------------------------------------- | - |  | - | -------
|                                                                |  | Fair Value Measurements Using
|                                                                |  | Total                         |         | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   | Significant OtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                                                |  |                               |         |                                                           
|Impaired loans with specific valuation allowance under SFAS 114 |  | $                             | 233,157 |                                                            | $ |                                           |  | $                                      |  |  | $ | 233,157
|                                                                |  |                               |         |                                                            |   |                                            |  |                                        |   |  |   |        

The specific reserves for collateral dependent impaired loans are based on the fair value of the collateral less
estimated costs to sell. The fair value of collateral was determined based on appraisals. In some cases, adjustments were made to the appraised values due to various factors including age of the appraisal, age of comparables included in the
appraisal, and known changes in the market and in the collateral. When significant adjustments were based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement. Specific reserves were calculated
for impaired loans with an aggregate carrying amount of $284,226 during the quarter ended June 30, 2008. The collateral underlying these loans had a fair value of $253,431, less estimated costs to sell of $20,274, resulting in a specific
reserve in the allowance for loan losses of $51,069.



|Note | 10. Segment Reporting
|---- | ---------------------

Effective April 1, 2008, the Company
completed the merger of Choice Bank into Silver State Bank. As a result, the Company no longer prepares discrete financial information for Choice Bank. As such, the Company only has one reportable segment.



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##### Table of Contents

Silver State Bancorp and Subsidiary

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share information)





Note 11. Goodwill

Goodwill represents the excess of the consideration over the fair value of the net assets of
Choice Bank acquired in September 2006. Goodwill is not amortized, but instead tested for impairment at least annually. The Company reviewed goodwill for the Choice Bank reporting unit for impairment as of October 1, 2007 in accordance with
SFAS 142, Goodwill and Other Intangible Assets. No impairment to goodwill was recognized at that time. As a result of Choice Bank being merged into Silver State Bank effective April 2008, the Companys reporting unit for goodwill impairment
purposes is Silver State Bank. The Company considered other events and circumstances through June 2008, in accordance with SFAS 142, for the Silver State Bank reporting unit, due to the continued deterioration of market conditions as well as
continued deterioration in our credit quality, and as a result of this impairment test, the Company recorded a full impairment charge to the goodwill asset of $18,835. The goodwill impairment charge had no impact on the Companys tangible
capital levels, tangible book value per share, regulatory capital ratios or liquidity.

Note 12. Subsequent Events

In July 2008, the Company received an additional $30,000 in short-term advances from the FHLB.

In July 2008, a director resigned his duties as a member of the Companys board of directors and as a member of the board of directors of the Bank.

In July 2008, in an effort to preserve our capital and improve our capital ratios, the Company elected to defer further interest payments on each of our series of junior subordinated debt securities relating to the
trust preferred securities of Silver State Capital Trust II, Silver State Capital Trust III, Silver State Capital Trust IV, Silver State Capital Trust V and Silver State Capital Trust VI (each an unconsolidated subsidiary of the Company). The
Company has the ability under each indenture for the junior subordinated debt securities to defer interest payments for up to 20 consecutive calendar quarters without experiencing a default under the indentures.

In August 2008, the Company announced the resignation of its President and Chief Executive Officer who was also the Chief Executive Officer of the Bank. The Company also
announced the resignation of the Companys and the Banks Chairman of the Board. Both individuals will continue serving as directors on the boards of directors of the Company and of the Bank. The boards of directors of each of the Company
and of the Bank have appointed a replacement as Chairman of the Board, subject to regulatory approval. The Company also named an acting Chief Executive Officer and President of the Company who is also acting Chief Executive Officer of the Bank,
subject to regulatory approval.

As of August 12, 2008, the most recent practicable date, the Companys cash and cash equivalents were $85,696.
Also, as of that date, the Company did not have access to purchase federal funds under agreements with other correspondent banks and it had outstanding borrowings from the FHLB of $107,000, which is our maximum borrowing capacity from the FHLB at
this time. As of August 8, 2008, the Company had been granted access to the Federal Reserve Bank of San Franciscos discount window for up to $97,000 in borrowed funds, none of which had been borrowed as of August 12, 2008. Also, as
of August 12, 2008, the most recent practicable date, the Companys total brokered deposits were $620,738.

In August 2008, the Companys
insurance carrier notified the Company of its intent to cancel our director and officers liability policy, employment practices liability policy, internet banking liability policy, financial institution bond and combination safe deposit policy,
effective October 7, 2008, purportedly, as a result of what it contends is a material change in the risk which has caused the risk of loss to be substantially and materially increased beyond that contemplated when the policies were issued.



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##### Table of Contents

|ITEM 2. | 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 Annual Report on Form 10-K (Commission File No. 001-33592), filed with the Securities and Exchange Commission on March 14, 2008
which includes the audited financial statements for the year ended December 31, 2007 and the other statistical data provided elsewhere in this Form 10-Q. Unless otherwise indicated, the financial information presented in this section reflects
the consolidated financial condition and operations of Silver State Bancorp.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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:



| |  |  | 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 may reduce interest margins and could adversely affect our results of operations and financial condition;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | changes in accounting principles, policies or guidelines;
| | - |  | ---------------------------------------------------------



| |  |  | general economic conditions, either nationally or locally in some or all 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;
| | - |  | --------------------------------------------------------------------



| |  |  | technological changes may be more difficult or expensive than we anticipate;
| | - |  | ----------------------------------------------------------------------------



| |  |  | success or consummation of new business initiatives may be more difficult or expensive than we anticipate;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | litigation or other 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 gaming or tourism in our primary market area; and
| | - |  | ------------------------------------------------------------



| |  |  | changes in managements estimate of the adequacy of the allowance for loan losses.
| | - |  | ----------------------------------------------------------------------------------

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

Available Information

Under the Securities Exchange Act of 1934
Sections 13 and 15(d), 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.



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##### Table of Contents

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 Bank Holding Company 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, an Arizona state-chartered bank that was formed on January 28, 2002. With the acquisition of Choice
Bank, we became a multi-bank holding company operating both Choice Bank and Silver State Bank as separate bank subsidiaries. Choice Bank was merged into Silver State Bank effective on April 1, 2008 with the combined bank operating as Silver
State Bank.

Since commencing business, Silver State Bank has grown from one location in Henderson, Nevada to thirteen branches in the greater Las Vegas
market area and four branches in the greater Phoenix/Scottsdale market area, including one new branch in the Phoenix/Scottsdale area that opened in April 2008.

Our assets and liabilities are comprised primarily of loans and deposits, respectively. We provide a variety of loans to our customers, including construction and land loans, commercial real estate loans, commercial and industrial loans,
Small Business Administration (SBA) loans and to a lesser extent, residential real estate and consumer loans. We fund our loans primarily with deposits and borrowings to the extent needed.

We experienced a net loss for the three months ended June 30, 2008 of $73.2 million, or ($4.84) per diluted share, compared to net income of $6.2 million, or $0.44
per diluted share, for the corresponding period in 2007. For the six months ended June 30, 2008, we reported a net loss of $87.6 million, or ($5.78) per diluted share, compared to net income of $11.8 million, or $0.83 per diluted share, for the
corresponding period of 2007. The net loss for the three months ended June 30, 2008 was due primarily to an increase of $67.2 million to the provision for loan losses for the three months ended June 30, 2008 compared to the corresponding
period of 2007. The increase in the provision for loan losses is primarily attributable to our residential construction and residential land loan portfolio which continues to experience deterioration in estimated collateral values and repayment
abilities of some of our customers. Other reasons for the increase are attributable to an overall increase in nonperforming assets, an overall increase in net loan charge-offs, and the continuing general weakening economic conditions in the markets
served by the Company. Our non-interest expenses increased $19.9 million for the three months ended June 30, 2008 and increased $22.7 million for the six months ended June 30, 2008, compared to the corresponding periods of 2007, reflecting
an impairment charge of $18.8 million, representing a full-write down of the Companys goodwill asset, which was recorded with the acquisition of Choice Bank. The impairment charge was the result of the Company completing an impairment
valuation test of its goodwill asset during the quarter due to the continued deterioration of market conditions as well as continued deterioration in our credit quality. The goodwill impairment charge had no impact on the Companys tangible
capital levels, tangible book value per share, regulatory capital ratios or liquidity. Our net interest income decreased $8.3 million due to the increase in nonaccrual loans and lower interest rate environment for the three months ended
June 30, 2008 compared to the corresponding period of 2007, and we had a difference of $16.5 million between our income tax benefit for the three months ended June 30, 2008 and our income tax expense for the corresponding period of 2007.
The income tax benefit for the three months ended June 30, 2008 also includes the effects of the establishment of a valuation allowance of $10.7 million to the Companys net deferred tax assets. This valuation allowance is related to
certain tax aspects involving the allowance for loan losses.

The second half of 2007 and the first six months of 2008 have been highlighted by significant
disruption and volatility in the financial and capital marketplaces. This instability has been attributable to a variety of factors, the most significant of which has been the fallout from the failures and defaults associated with the sub-prime
mortgage market. Although we do not engage in sub-prime lending, our markets have been affected by these factors. During the second quarter of 2008, there has continued to be a decline in the national housing and real estate markets as well as the
overall economy.



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##### Table of Contents

During the second quarter of 2008, we continued to experience significant competitive pressures and challenging market
conditions in the markets in which we operate as the economies in the Las Vegas and Phoenix/Scottsdale areas, as well as the national economy, continue to show signs of significant weakness. The Las Vegas economy has continued to weaken from the
housing and credit crisis which has had a significant impact on the residential housing markets as well as the commercial real estate markets. The local unemployment rate in Las Vegas has risen to 6.5% as of June 2008 compared to 4.8% a year earlier
and 5.6% as of December 31, 2007. Single family building permits and commercial building permits for June 2008 have decreased 38.1% and 37.8%, respectively, compared to a year earlier. New home sales in June 2008 were down 44.7% compared to a
year earlier. Gaming revenue as of May 2008 decreased 16.4% compared to a year earlier. As of June 2008, the office market had a vacancy rate of 16.1% up from 11.0% a year earlier. As of June 2008, the retail vacancy rate reached 6.0% compared to
3.3% a year earlier. According to one Las Vegas economist, these factors help corroborate the presence of a current recession in the Southern Nevada market. The Phoenix/Scottsdale economy is experiencing similar weakening as the local unemployment
rate in the Phoenix area has risen to 4.3% as of June 2008 compared to 3.1% a year earlier and 3.8% as of December 31, 2007. Total housing sales in April 2008 were down 27.7% compared to a year earlier. Total new housing units authorized in
April 2008 were down 32.4% from a year earlier. 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. The weakness in the residential market has continued to expand into the commercial real estate market as builders and related industries downsize. The extent of the impact of the deterioration of the Nevada and Arizona
economies and real estate markets on certain segments of our loan portfolio, namely our residential construction and residential land loans, began to be realized toward the end of the first quarter of 2008 as project delays mounted and updated
appraisals showing significant lower valuations were received. With many real estate projects requiring an extended time to market, some of our borrowers have exhausted their liquidity which requires us to place the loan into nonaccrual status.
These economic trends have continued to adversely affect our asset quality with nonaccrual loans increasing to $241.8 million as of June 30, 2008 compared to $78.0 million as of March 31, 2008 and $13.1 million as of December 31,
2007. Nonperforming loans as a percentage of gross loans were 16.23% as of June 30, 2008 compared to 4.79% as of March 31, 2008 and 0.84% as of December 31, 2007. Nonperforming assets as a percentage of total assets were 13.68% as of
June 30, 2008, compared to 4.14% as of March 31, 2008 and 0.75% as of December 31, 2007. For the three months ended June 30, 2008, net charge-offs as a percentage of average loans were 1.82% compared to less than 0.01% for the
corresponding period in 2007. For the six months ended June 30, 2008, net charge-offs as a percentage of average loans were 2.40% compared to less than 0.01% for the corresponding period in 2007. Other real estate owned, or OREO, was $16.3
million as of June 30, 2008, compared to $1.2 million as of March 31, 2008 and $110,000 at December 31, 2007. Continuation of these economic and real estate factors are likely to continue to affect our asset quality and overall
performance.

Our asset growth during the first six months of 2008 has been driven primarily by our increase in cash and cash equivalents, with deposits
and Federal Home Loan Bank (FHLB) advances serving as our primary funding sources. The increase in cash and cash equivalents has enabled us to meet the needs of our depositors in the deteriorating economic conditions in the markets we serve. Total
cash equivalents increased 1635.1% to $240.1 million as of June 30, 2008 from $13.8 million as of December 31, 2007. Net loans decreased 4.3% to $1.47 billion as of June 30, 2008 from $1.54 billion as of December 31, 2007. Total
deposits increased 21.5% to $1.73 billion as of June 30, 2008 from $1.43 billion as of December 31, 2007. Although, we have decided to slow our branch expansion plan for the next several quarters we continue to seek additional core
deposits through the growth of our existing branch network which includes thirteen branches in the greater Las Vegas market area (three of which were opened in the last twelve months) and four branches in the greater Phoenix/Scottsdale (two of which
were opened in the last twelve months). FHLB advances decreased 15.0% to $77.0 million as of June 30, 2008 from $90.6 million as of December 31, 2007.

We have a high concentration in real estate loans in our loan portfolio, specifically construction and land loans. At June 30, 2008, approximately 91% of total gross loans were classified as real estate loans. At June 30, 2008,
approximately 10% of real estate loans were classified as residential construction loans, approximately 25% of real estate loans were classified as commercial construction loans, approximately 21% were classified as residential land loans, and
approximately 19% were classified as commercial land loans. In addition, commercial real estate loans represent approximately 17% and single family residential loans represent approximately 8% of total real estate loans as of June 30, 2008.
Approximately 64% of commercial real estate loans are owner occupied.

Our 20 largest depositors accounted for approximately 44.1% of our total deposits
and our five largest depositors accounted for approximately 35.9% of our total deposits at June 30, 2008. Our largest depositor as of June 30, 2008 accounted for 20.4% of our total deposits. The deposit terms offered to our 20 largest
depositors are consistent with the terms offered to our other large depositors. Our four largest depositors accounted for $594.2 million, or 34.3% of total deposits at June 30, 2008. The deposit balances of these four largest customers are
considered for regulatory purposes to be brokered deposits, and constitute all our brokered deposits at that date. 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. We
expect to reduce the level of brokered deposits throughout the remainder of 2008, replacing them with other deposits or borrowings, as appropriate.

As a
result of the net loss for the three months ended June 30, 2008, the Company is considered adequately capitalized pursuant to regulatory capital definitions at June 30, 2008 with Tier 1 Risk Based, Total Risked-Based, and Tier
1 capital to average assets or leverage ratio of 5.1%, 9.0% and 4.5%, respectively. The Company will incur increased premiums for deposit insurance and also be required to obtain FDIC approval to accept, renew, or roll-over brokered deposits during
such times as we are considered to be adequately capitalized for regulatory capital purposes. In addition, falling below the well-capitalized level has triggered acceleration of certain of our brokered deposits held as money
market accounts and has resulted in the non-renewal of brokered deposits held as CDs which has had a material impact on our liquidity.

The Company did not
repurchase any shares of its common stock under an authorized stock repurchase program during the quarter ended June 30, 2008. At June 30, 2008 the maximum number of shares remaining that may yet be purchased under this stock repurchase
program was 482,415. The repurchased shares are held in treasury. The Company has no plans to repurchase any additional shares of common stock under this repurchase program during the third quarter of 2008.



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##### Table of Contents

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 and land loans, 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. The decrease in net interest income for the three months and six months ended June 30, 2008 compared to the corresponding periods in 2007 is due
primarily to a decrease in our net interest margin from 5.9% for the three months ended June 30, 2007 to 2.4% for the three months ended June 30, 2008 and a decrease in our net interest margin from 5.8% for the six months ended
June 30, 2008 to 3.3% for the six months ended June 30, 2008. The decrease in net interest margin is primarily attributable to an overall decline in market interest rates and a continued increase in competitive pricing pressure in both
loans and deposits. In addition, the net interest margin was negatively impacted due to a shift in our deposit mix as the Company has become increasingly reliant on higher cost funding sources such as time deposits. Furthermore, our net interest
margin decreased by approximately 0.49% during the three months ended June 30, 2008 and decreased by approximately 0.36% during the six months ended June 30, 2008 due to the reversal of interest income on loans being placed on nonaccrual
status during the first six months of 2008.

The instability in the mortgage and housing markets has continued to impact the global markets and domestic
markets and has contributed to the significant credit and liquidity crisis which began during the third quarter of 2007. In response to the liquidity and credit crisis and potential impact on the overall economy, the Federal Open Market Committee
(FOMC) reduced the Discount Rate by 250 basis points and the Federal Funds Rate by 225 basis points since the beginning of 2008. Furthermore, since the beginning of the 2007 third quarter the FOMC has reduced the Discount Rate by 400 basis points
and the Federal Funds Rate by 325 basis points. These decreases in short-tem interest rates have resulted in a more positively sloped yield curve. However, this interest rate environment may continue to have an adverse affect on our net interest
margin in the near future as the majority of our interest-earning assets, including approximately 97% of our loan portfolio, are variable rate instruments that will reprice faster than our interest-bearing liabilities.

If the competition we experienced in the first six months of 2008 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 2008, 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. This strong competition coupled with decreasing interest rates on our variable rate loans has caused the
average yield on our loan portfolio to decrease significantly compared to prior periods. 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 continue to have an adverse impact on the yields we can obtain on our loan portfolio. The competitive pressures we face in both lending and deposit gathering are
expected to result in a continued narrowing of our net interest margin in future periods.

Non-interest income for the three months ended June 30,
2008 decreased 22.9% from the corresponding period in 2007, due primarily to a decrease in gain on sale of loans held for sale. Non-interest expense for the three months ended June 30, 2008 increased 195.3% from the corresponding period in
2007, due primarily to the $18.8 million goodwill impairment charge and increases in occupancy costs, professional fees, depreciation and amortization expense, and insurance expense due to an increase in FDIC deposit insurance assessments.

Operating efficiency is measured in terms of how efficiently income before income taxes is generated as a percentage of revenue. Our efficiency ratio
(non-interest expenses divided by the sum of net interest income and non-interest income) was 229.3% for the three months ended June 30, 2008, compared to 46.6% for the corresponding period in 2007. Our efficiency ratio was 124.5% for the six
months ended June 30, 2008, compared to 47.1% for the corresponding period in 2007. These increases are due primarily to the $18.8 million goodwill impairment charge incurred during the second quarter of 2008.

The net loss for the three months ended June 30, 2008 combined with the decrease in equity resulted in a return on average equity, or ROE, of (210.6%) for the three
months ended June 30, 2008 compared to 21.2% for the corresponding period in 2007. Our ROE for the six months ended June 30, 2008 was (117.4%) compared to 20.9% for the corresponding period in 2007. Our return on average assets, or
ROA, for the three months ended June 30, 2008 decreased to (14.4%) compared to 1.7% for the corresponding period in 2007. Our ROA for the six months ended June 30, 2008 was (9.1%) compared to 1.7% for the corresponding period in
2007.

Outlook

We have taken and continue to
take proactive actions to work through this economic environment of which the most obvious was a significant increase in our loan loss provision. In addition, we continue to follow our stricter lending guidelines to reflect the current economic
conditions. Our internal loan review department continues to work in conjunction with our external loan review protocols, and we recently completed three separate external loan reviews  on construction and land loans, commercial real estate
loans, and residential mortgages. We have increased the number of professionals in our Special Assets Department to enhance our ability to further mitigate issues with problem loans and to develop an OREO management component to assist in preserving
asset quality and maximize the level of recovery when OREO assets are subsequently sold. Our Special Assets Department will continue to work directly on all problem loan situations and will work with borrowers in a timely manner to either liquidate
collateral, pledge additional collateral to assist in shoring up projects, or in necessary cases, proceeding with the foreclosure process. In addition, senior management is reviewing the asset disposition opportunities for our problem loans to the
extent that they make economic sense. We believe that our Special Assets Department and the recently completed external loan reviews have identified and isolated most, if not all, of our problem loans. As a result, we believe the provision for loan
losses should decline in the second half of 2008. We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. Due to the current economic conditions in the markets we
operate and our current strategic focus, we expect to experience little or no loan growth for the remainder of 2008, as compared to previous years.



19



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##### Table of Contents

We have implemented, and will continue to implement, a range of expense reduction measures to help with profitability,
including slowing our branch expansion plan for the next several quarters, discontinuing purchases of our common stock under our stock repurchase program for the next several quarters and effecting staff reductions when necessary. In August 2008, we
effected staff reductions of 34 employees, or approximately 10% of our total work force. We anticipate that the staff reductions effected in August 2008 will save us approximately $350,000 per quarter, bolstering our liquidity position in that
amount per quarter.

We continue working with our financial advisor, Keefe, Bruyette & Woods, Inc., who we engaged in April, 2008, to assist us in
evaluating a variety of strategic alternatives to enhance our capital position and strengthen our balance sheet. In addition, we continue to aggressively seek good core deposits throughout our branch network, especially since we operate one of the
leading SBA lending departments in the region which allows us excellent access to business account relationships. Due to the current economic conditions in the markets we operate and our current strategic focus, however, we expect to experience
little or no deposit growth for the remainder of 2008, as compared to previous years.

We will also continue to work towards achieving adequate excess
liquidity reserves to ensure we can meets the needs of our depositors. On August 8, 2008, we were granted access to the Federal Reserve Bank of San Franciscos discount window, with a borrowing capacity of up to $97.0 million. The discount
window is the way the Federal Reserve System provides direct loans to banks. The borrowing capacity granted to the Bank by the Federal Reserve is in addition to any borrowing capacity available to the Company from the FHLB of San Francisco. As of
August 12, 2008, the most recent practicable date, the Companys cash and cash equivalents were $85.7 million, and the Company had not borrowed any funds from the Federal Reserve. In addition, as of that date the Company did not have
access to purchase federal funds under agreements with other correspondent banks and it had outstanding borrowings from the FHLB of $107.0 million, which is our maximum borrowing capacity from the FHLB at this time. Also, as of August 12, 2008,
the Companys total brokered deposits were $620.7 million. The Company will continue to evaluate all available alternatives to maintain adequate excess liquidity reserves in order to meet the needs of our depositors.

Despite the net loss for the second quarter 2008, our core operations, including net interest income, remained positive, even with anticipated net interest margin
compression. Excluding unusual and non-operating items, pre-tax pre-provision operating earnings were $1.9 million in the second quarter of 2008. Management has presented pre-tax pre-provision operating earnings for purposes of additional analysis
of operating results. Pre-tax pre-provision operating earnings, as defined by management, represents net income (loss) excluding income tax (benefit) expense, the provision for loan losses, as well as other unusual, nonrecurring or nonoperating
items. Pre-tax pre-provision operating earnings is a non-GAAP measure. Consolidated net income (loss), measured in accordance with GAAP, is the principal and most useful measure of earnings and provides comparability of earnings with other
companies. However, management believes presenting pre-tax pre-provision operating earnings provides investors with the ability to understand the Companys underlying operating trends. The tables on page 24 provide a reconciliation of the
pre-tax pre-provision operating earnings described here with GAAP. Our capital position has remained adequate to support our balance sheet and our allowance for loan losses is adequate to protect against probable losses in our loan portfolio.

In addition to our core branch banking operations, we operate ten loan production offices located in Nevada, Utah, Colorado, Washington, Oregon,
California and Florida, which are established and staffed around personnel who are experienced SBA loan producers in their geographic market. According to recent lending statistics, Silver State Bank continues to be a leading SBA lender in the state
of Nevada as ranked by dollar volume. We will continue to focus on our core operations with the objective of increasing our net interest income quarter over quarter, while at the same time, also focusing on continuing our expense reduction measures
which were implemented in the second quarter of 2008.

We remain optimistic about the long-term growth prospects of both Las Vegas, anchored by its
international gaming industry, as well as the presence of five Fortune 500 companies headquartered in Las Vegas, and the Phoenix/Scottsdale area, which is the largest metropolitan area in the state of Arizona, with eight of Arizonas top ten
businesses by revenue being headquartered there. The fundamental strength of Arizona and Nevada as desirable places to live and work continue to point to our markets as long term growth areas. While we will continue to approach the balance of 2008
with caution, we feel that our direct dynamic strategies moving forward will provide us with the ability to move the Company toward profitability once again.

Other Recent Developments

On July 26, 2008, Andrew K. McCain resigned his duties as a member of our board of directors and as a
member of the board of directors of the Bank, effective as of that date. On August 1, 2008, we announced the resignation of Corey L. Johnson as President and Chief Executive Officer of the Company, and as Chief Executive Officer of the Bank,
effective July 31, 2008. On August 1, 2008, we also announced the resignation of the Companys and the Banks Chairman of the Board, Bryan S. Norby, effective July 30, 2008. Both Mr. Johnson and Mr. Norby will
continue serving as directors on the boards of directors of the Company and of the Bank. The boards of directors of each of the Company and of the Bank have appointed Phillip C. Peckman as Chairman of the Board, subject to regulatory approval. We
have also named Michael J. Thorell as acting Chief Executive Officer and President of the Company and as acting Chief Executive Officer of the Bank, subject to regulatory approval.

In an effort to preserve our capital and improve our capital ratios, on July 30, 2008, our board of directors elected to defer further interest payments on each of our series of junior subordinated debt
securities relating to the trust preferred securities of Silver State Capital Trust II, Silver State Capital Trust III, Silver State Capital Trust IV, Silver State Capital Trust V and Silver State Capital Trust VI (each an unconsolidated subsidiary
of the Company). We have the ability under each indenture for the junior subordinated debt securities to defer interest payments for up to 20 consecutive calendar quarters without experiencing a default under the indentures.



20



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##### Table of Contents

Selected financial highlights are presented in the table below.

Silver State Bancorp and Subsidiary

Summary Consolidated Financial
and Other Data

(Dollars in thousands, except per share data and ratios)

(UNAUDITED)



|                                                           |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|---------------------------------------------------------- |  | ---------------------------------------- | ---------- | - | -------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ----------
|                                                           |  | At or for the Three Months EndedJune 30, |            |   | For the Six Months EndedJune 30,
|                                                           |  | 2008                                     |            |   | 2007                             |   |            | 2008 |  |   | 2007      
|Selected Financial Data:                                   |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Interest income                                            |  | $                                        | 29,053     |   |                                  | $ | 34,343     |      |  | $ | 64,806     |   |  | $ | 63,740    
|Interest expense                                           |  |                                          | 17,406     |   |                                  |   | 14,383     |      |  |   | 34,228     |   |  |   | 26,706    
|                                                           |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Net interest income                                        |  |                                          | 11,647     |   |                                  |   | 19,960     |      |  |   | 30,578     |   |  |   | 37,034    
|Provision for loans losses                                 |  |                                          | 69,100     |   |                                  |   | 1,860      |      |  |   | 100,100    |   |  |   | 3,190     
|                                                           |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Net interest income (loss) after provision for loan losses |  |                                          | (57,453    | ) |                                  |   | 18,100     |      |  |   | (69,522    | ) |  |   | 33,844    
|Non-interest income                                        |  |                                          | 1,445      |   |                                  |   | 1,874      |      |  |   | 3,414      |   |  |   | 4,548     
|Non-interest expense                                       |  |                                          | 30,013     |   |                                  |   | 10,163     |      |  |   | 42,333     |   |  |   | 19,594    
|                                                           |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Income (loss) before income taxes                          |  |                                          | (86,021    | ) |                                  |   | 9,811      |      |  |   | (108,441   | ) |  |   | 18,798    
|Provision for income taxes (benefits)                      |  |                                          | (12,827    | ) |                                  |   | 3,641      |      |  |   | (20,826    | ) |  |   | 7,040     
|                                                           |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Net Income (loss)                                          |  | $                                        | (73,194    | ) |                                  | $ | 6,170      |      |  | $ | (87,615    | ) |  | $ | 11,758    
|                                                           |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|                                                           |  |                                          |            |  
|Share data:                                                |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Earnings (loss) per sharebasic                            |  | $                                        | (4.84      | ) |                                  | $ | 0.45       |      |  | $ | (5.78      | ) |  | $ | 0.86      
|Earnings (loss) per sharediluted                          |  |                                          | (4.84      | ) |                                  |   | 0.44       |      |  |   | (5.78      | ) |  |   | 0.83      
|Book value per share                                       |  |                                          | 4.54       |   |                                  |   | 8.64       |      |  |   |            |   |  |   |           
|Tangible book value per share                              |  |                                          | 4.49       |   |                                  |   | 7.20       |      |  |   |            |   |  |   |           
|Shares outstanding at period end                           |  |                                          | 15,134,765 |   |                                  |   | 13,746,162 |      |  |   |            |   |  |   |           
|Weighted average shares outstandingbasic                  |  |                                          | 15,121,715 |   |                                  |   | 13,723,765 |      |  |   | 15,166,228 |   |  |   | 13,710,441
|Weighted average shares outstandingdiluted                |  |                                          | 15,121,715 |   |                                  |   | 14,141,082 |      |  |   | 15,166,228 |   |  |   | 14,155,906
|                                                           |  |                                          |            |  
|Selected Balance Sheet Data:                               |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Cash and cash equivalents                                  |  | $                                        | 240,101    |   |                                  | $ | 28,035     |      |  |   |            |   |  |   |           
|Investments and other securities                           |  |                                          | 51,821     |   |                                  |   | 52,466     |      |  |   |            |   |  |   |           
|Loans held for sale                                        |  |                                          | 86,543     |   |                                  |   | 52,121     |      |  |   |            |   |  |   |           
|Gross loans, including net deferred loan fees              |  |                                          | 1,552,567  |   |                                  |   | 1,311,525  |      |  |   |            |   |  |   |           
|Allowance for loan losses                                  |  |                                          | 78,869     |   |                                  |   | 14,334     |      |  |   |            |   |  |   |           
|Assets                                                     |  |                                          | 1,961,417  |   |                                  |   | 1,510,619  |      |  |   |            |   |  |   |           
|Deposits                                                   |  |                                          | 1,732,480  |   |                                  |   | 1,245,305  |      |  |   |            |   |  |   |           
|Junior subordinated debt                                   |  |                                          | 69,589     |   |                                  |   | 38,661     |      |  |   |            |   |  |   |           
|Stockholders equity                                       |  |                                          | 68,784     |   |                                  |   | 118,767    |      |  |   |            |   |  |   |           
|                                                           |  |                                          |            |  
|Selected Other Balance Sheet Data:                         |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Average assets                                             |  | $                                        | 2,044,681  |   |                                  | $ | 1,443,194  |      |  | $ | 1,939,020  |   |  | $ | 1,362,938 
|Average earning assets                                     |  |                                          | 1,972,159  |   |                                  |   | 1,367,547  |      |  |   | 1,864,017  |   |  |   | 1,288,871 
|Average stockholders equity                               |  |                                          | 139,817    |   |                                  |   | 116,569    |      |  |   | 150,109    |   |  |   | 113,255   
|                                                           |  |                                          |            |  
|Selected Capital Ratios:                                   |  |                                          |            |   |                                  |   |            |      |  |   |            |   |  |   |           
|Leverage Ratio                                             |  |                                          | 4.5        | % |                                  |   | 9.6        | %    |  |   |            |   |  |   |           
|Tier 1 Risk-Based Capital ratio                            |  |                                          | 5.1        |   |                                  |   | 9.0        |      |  |   |            |   |  |   |           
|Total Risk-Based Capital ratio                             |  |                                          | 9.0        |   |                                  |   | 9.9        |      |  |   |            |   |  |   |           



21



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##### Table of Contents

Silver State Bancorp and Subsidiary

Summary Consolidated Financial and Other Data (continued)

(Dollars in thousands, except per share data and ratios)

(UNAUDITED)



|                                                                 |  |                                          |    |  |                                  |   |  |         |    |  |        |  
|---------------------------------------------------------------- |  | ---------------------------------------- | -- |  | -------------------------------- | - |  | ------- | -- |  | ------ | -
|                                                                 |  | At or for the Three Months EndedJune 30, |    |  | For the Six Months EndedJune 30, |  
|                                                                 |  | 2008                                     |    |  | 2007                             |   |  | 2008    |    |  | 2007   |  
|Selected Financial & Performance Ratios:                         |  |                                          |    |  |                                  |   |  |         |    |  |        |  
|Return on average assets(1)                                      |  | (14.40                                   | )% |  | 1.71                             | % |  | (9.09   | )% |  | 1.74   | %
|Return on average stockholders equity(1)                        |  | (210.55                                  | )  |  | 21.23                            |   |  | (117.38 | )  |  | 20.94  |  
|Net interest rate spread(1)(2)                                   |  | 1.94                                     |    |  | 5.04                             |   |  | 2.78    |    |  | 4.96   |  
|Net interest margin(1)(3)                                        |  | 2.38                                     |    |  | 5.85                             |   |  | 3.30    |    |  | 5.79   |  
|Efficiency ratio(4)                                              |  | 229.25                                   |    |  | 46.55                            |   |  | 124.54  |    |  | 47.12  |  
|Loan to deposit ratio                                            |  | 89.62                                    |    |  | 105.32                           |   |  |         |    |  |        |  
|Average earning assets to average interest-bearing liabilities   |  | 112.37                                   |    |  | 119.34                           |   |  | 114.09  |    |  | 119.99 |  
|Average stockholders equity to average assets                   |  | 6.84                                     |    |  | 8.08                             |   |  | 7.74    |    |  | 8.31   |  
|                                                                 |  |                                          |    | 
|Selected Asset Quality Ratios:                                   |  |                                          |    |  |                                  |   |  |         |    |  |        |  
|Nonperforming loans to gross loans(5)                            |  | 16.23                                    | %  |  | 0.01                             | % |  |         |    |  |        |  
|Nonperforming assets to total assets(6)                          |  | 13.68                                    |    |  | 0.02                             |   |  |         |    |  |        |  
|Loans past due 90 days or more and still accruing to total loans |  | 0.66                                     |    |  |                                 |   |  |         |    |  |        |  
|Allowance for loan losses to gross loans                         |  | 5.08                                     |    |  | 1.09                             |   |  |         |    |  |        |  
|Allowance for loan losses to nonperforming loans                 |  | 31.29                                    |    |  | 12,045.38                        |   |  |         |    |  |        |  
|Net charge-offs to average loans outstanding                     |  | 1.82                                     |    |  | 0.00                             |   |  | 2.40    | %  |  | 0.00   | %
|                                                                 |  |                                          |    | 
|Selected Other Data:                                             |  |                                          |    |  |                                  |   |  |         |    |  |        |  
|Number of full service branch offices                            |  | 17                                       |    |  | 12                               |   |  |         |    |  |        |  



|(1) | Annualized for the three and six month periods ended June 30, 2008 and 2007.
|--- | ----------------------------------------------------------------------------

|(2) | Net interest spread represents average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net interest margin represents net interest income as a percentage of average interest-earning assets.
|--- | ------------------------------------------------------------------------------------------------------

|(4) | Efficiency ratio represents non-interest expenses as a percentage of the total of net interest income plus non-interest income.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(5) | Nonperforming loans are defined as loans that are past due 90 days or more plus loans placed in nonaccrual status.
|--- | ------------------------------------------------------------------------------------------------------------------

|(6) | Nonperforming assets include nonperforming loans plus other real estate owned.
|--- | ------------------------------------------------------------------------------



22



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##### Table of Contents

Silver State Bancorp and Subsidiary

Summary Consolidated Financial and Other Data

(Dollars in thousands, except per share data and ratios)

(UNAUDITED)



|                                          |  |                                          |         |   |                                  |   |        |      |  |   |         |   |  |   |       
|----------------------------------------- |  | ---------------------------------------- | ------- | - | -------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------
|                                          |  | At or for the Three Months EndedJune 30, |         |   | For the Six Months EndedJune 30,
|                                          |  | 2008                                     |         |   | 2007                             |   |        | 2008 |  |   | 2007   
|Pre-tax pre-provision operating earnings* |  | $                                        | 1,914   |   |                                  | $ | 11,671 |      |  | $ | 10,494  |   |  | $ | 21,988
|Consolidated net income (loss)            |  |                                          | (73,194 | ) |                                  |   | 6,170  |      |  |   | (87,615 | ) |  |   | 11,758
|Diluted earnings per share                |  |                                          | (4.84   | ) |                                  |   | 0.44   |      |  |   | (5.78   | ) |  |   | 0.83  
|Tier 1 risk-based capital ratio           |  |                                          | 5.1     | % |                                  |   | 9.0    | %    |  |   |         |   |  |   |       
|Total risk-based capital ratio            |  |                                          | 9.0     | % |                                  |   | 9.9    | %    |  |   |         |   |  |   |       



|* | See reconciliation to net income (loss) reported in accordance with GAAP in the following table.
|- | ------------------------------------------------------------------------------------------------

The following table reconciles pre-tax pre-provision operating earnings to consolidated net income (loss) presented in accordance with U.S. generally accepted accounting principles (GAAP).



|                                         |  |                                          |         |                                  |      |   |        |  |   |         |   |  |   |       
|---------------------------------------- |  | ---------------------------------------- | ------- | -------------------------------- | ---- | - | ------ |  | - | ------- | - |  | - | ------
|                                         |  | At or for the Three Months EndedJune 30, |         | For the Six Months EndedJune 30,
|                                         |  | 2008                                     |         |                                  | 2007 |   | 2008   |  |   | 2007   
|Consolidated net income (loss)           |  | $                                        | (73,194 | )                                |      | $ | 6,170  |  | $ | (87,615 | ) |  | $ | 11,758
|Provision for income taxes (benefit)     |  |                                          | (12,827 | )                                |      |   | 3,641  |  |   | (20,826 | ) |  |   | 7,040 
|Provision for loan losses                |  |                                          | 69,100  |                                  |      |   | 1,860  |  |   | 100,100 |   |  |   | 3,190 
|Goodwill impairment                      |  |                                          | 18,835  |                                  |      |   |       |  |   | 18,835  |   |  |   |      
|                                         |  |                                          |         |                                  |      |   |        |  |   |         |   |  |   |       
|Pre-tax pre provision operating earnings |  | $                                        | 1,914   |                                  |      | $ | 11,671 |  | $ | 10,494  |   |  | $ | 21,988
|                                         |  |                                          |         |                                  |      |   |        |  |   |         |   |  |   |       



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##### Table of Contents

Comparison of Financial Condition

Assets. Total assets increased $197.2 million, or 11.2%, to $1.96 billion at June 30, 2008 as compared to $1.76 billion at December 31, 2007. This increase was due primarily to a significant
increase in cash and cash equivalents.

Loans. Total gross loans, net of deferred fees, were $1.55 billion at June 30, 2008, a decrease
of $6.4 million, or 0.4%, from $1.56 billion at December 31, 2007. Construction and land loans and commercial real estate loans made up the majority of the decrease in gross loans in the first six months of 2008, primarily reflecting the
stricter lending guidelines due to the current economic conditions in the markets we operate. Consumer loans also decreased slightly over the same period. Single family residential real estate loans and commercial and industrial loans have increased
over the same period. We anticipate minimal or no loan growth for the remainder of 2008 as we continue to focus on working through the deteriorating economic environments in the markets in which we operate.

As of June 30, 2008 our loan portfolio totaled $1.55 billion, or approximately 79% of our total assets compared to $1.56 billion, or approximately 88% of our total
assets as of December 31, 2007. The following table presents the composition of our loan portfolio in dollar amounts as of the dates indicated.



|                                      |  |                 |           |   |                     |   |           |  
|------------------------------------- |  | --------------- | --------- | - | ------------------- | - | --------- | -
|                                      |  | At June 30,2008 |           |   | At December 31,2007 |  
|                                      |  | (In thousands)  |          
|Construction and land                 |  | $               | 1,052,229 |   |                     | $ | 1,065,524 |  
|Commercial real estate                |  |                 | 245,153   |   |                     |   | 261,846   |  
|Commercial and industrial             |  |                 | 146,259   |   |                     |   | 139,258   |  
|Single family residential real estate |  |                 | 107,647   |   |                     |   | 94,813    |  
|Consumer                              |  |                 | 4,557     |   |                     |   | 4,944     |  
|Leases, net of unearned income        |  |                 | 238       |   |                     |   | 277       |  
|Net deferred loan fees                |  |                 | (3,516    | ) |                     |   | (7,691    | )
|                                      |  |                 |           |   |                     |   |           |  
|Gross loans, net of deferred fees     |  |                 | 1,552,567 |   |                     |   | 1,558,971 |  
|Less: Allowance for loan losses       |  |                 | (78,869   | ) |                     |   | (19,304   | )
|                                      |  |                 |           |   |                     |   |           |  
|                                      |  | $               | 1,473,698 |   |                     | $ | 1,539,667 |  
|                                      |  |                 |           |   |                     |   |           |  

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 comprised approximately 32% of our total loan portfolio at June 30, 2008 compared to approximately 33% at
December 31, 2007. On June 30, 2008 and December 31, 2007, our construction loans were as follows:



|                   |  |                 |         |                     |   |        
|------------------ |  | --------------- | ------- | ------------------- | - | -------
|Type               |  | At June 30,2008 |         | At December 31,2007
|                   |  | (In thousands) 
|One-to Four-family |  | $               | 133,628 |                     | $ | 149,891
|Multi-Family       |  |                 | 49,670  |                     |   | 45,697 
|Hotel              |  |                 | 10,403  |                     |   | 29,499 
|Multi-Use          |  |                 | 16,955  |                     |   | 15,156 
|Industrial         |  |                 | 50,706  |                     |   | 35,521 
|Office             |  |                 | 73,120  |                     |   | 67,806 
|Retail             |  |                 | 153,530 |                     |   | 162,538
|Other              |  |                 | 1,587   |                     |   | 2,160  
|                   |  |                 |         |                     |   |        
|Total Construction |  | $               | 489,599 |                     | $ | 508,268
|                   |  |                 |         |                     |   |        



24



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##### Table of Contents

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. Land loans, including SBA loans, comprised approximately 36% of our total loan portfolio at
June 30, 2008 and December 31, 2007. On June 30, 2008 and December 31, 2007, our land loans were as follows:



|                             |  |                 |         |                     |   |        
|---------------------------- |  | --------------- | ------- | ------------------- | - | -------
|Type                         |  | At June 30,2008 |         | At December 31,2007
|                             |  | (In thousands) 
|Residential Raw              |  | $               | 55,404  |                     | $ | 56,174 
|Commercial Raw               |  |                 | 60,761  |                     | $ | 51,583 
|Residential Infill           |  |                 | 26,852  |                     |   | 28,916 
|Commercial Infill            |  |                 | 83,724  |                     |   | 106,877
|Residential Land Development |  |                 | 154,912 |                     |   | 176,949
|Commercial Land Development  |  |                 | 126,938 |                     |   | 84,719 
|Residential Developed Land   |  |                 | 54,039  |                     |   | 49,607 
|Commercial Developed Land    |  |                 |        |                     |   | 2,431  
|                             |  |                 |         |                     |   |        
|Total Land                   |  | $               | 562,630 |                     | $ | 557,256
|                             |  |                 |         |                     |   |        

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. Commercial real estate loans comprised approximately 16% of our total loan portfolio at June 30, 2008 compared to approximately 17% at December 31, 2007. On
June 30, 2008 and December 31, 2007, our commercial real estate loans were as follows:



|               |  |                 |         |                     |   |        
|-------------- |  | --------------- | ------- | ------------------- | - | -------
|Type           |  | At June 30,2008 |         | At December 31,2007
|               |  | (In thousands) 
|Multi-Family   |  | $               | 9,396   |                     | $ | 10,490 
|Hotel          |  |                 | 1,954   |                     |   | 5,523  
|Multi-Use      |  |                 | 11,110  |                     |   | 9,938  
|Industrial     |  |                 | 50,438  |                     |   | 48,593 
|Office         |  |                 | 58,654  |                     |   | 68,573 
|Mini-Storage   |  |                 | 4,034   |                     |   | 4,051  
|Retail         |  |                 | 78,078  |                     |   | 81,172 
|Other          |  |                 | 31,489  |                     |   | 33,506 
|               |  |                 |         |                     |   |        
|Total Term CRE |  | $               | 245,153 |                     | $ | 261,846
|               |  |                 |         |                     |   |        

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 loans to small and medium-sized businesses in a variety of
industries. Commercial and industrial loans comprised approximately 9% of our total loan portfolio at June 30, 2008 and December 31, 2007.

Residential Real Estate Loans.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. We also originate residential real
estate construction loans for primary and secondary residences, loans for improved custom home lots, home equity loans and home improvement loans. Residential real estate loans comprised approximately 7% of our total loan portfolio at June 30,
2008 compared to approximately 6% at December 31, 2007.

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 comprised less than 1% of our total loan portfolio at June 30, 2008 and December 31, 2007.



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Loans Held For Sale.Loans held for sale are those loans that the Company has the intent to sell in the
foreseeable future. Loans held for sale were $86.5 million at June 30, 2008, an increase of $17.7 million, or 25.7% from December 31, 2007. The Companys loans held for sale consist primarily of Small Business Administration (SBA)
loans, which are fully funded. Our overall growth in loans held for sale is consistent with our focus and strategy to grow our SBA loan volume by focusing on markets which we believe have attractive growth prospects. In addition, the increase in
loans held for sale is also due to the timing of the sales of these loans which are subject to market demand.

Non-Performing Assets.
Non-performing assets include nonaccrual loans, loans past due 90 days or more and still accruing interest, restructured loans, and OREO. In general, loans are placed on nonaccrual status when we determine timely recognition of interest to be in
doubt due to the borrowers financial condition and collection efforts. Loans past due 90 days or more and still accruing interest consist primarily of loans past due 90 days or more as to their maturity date but not their interest due.
Restructured loans have modified terms to reduce either principal or interest due to deterioration in the borrowers financial condition. OREO results from loans where we have received physical possession of the borrowers assets that
collateralized the loan.

The following table presents information regarding nonaccrual loans, accruing loans delinquent 90 days or more, and OREO as of
the dates indicated. As of the dates shown below, we had no loans classified as troubled debt restructurings.



|                                                           |  |                        |         |   |                     |   |        |  
|---------------------------------------------------------- |  | ---------------------- | ------- | - | ------------------- | - | ------ | -
|                                                           |  | At June 30,2008        |         |   | At December 31,2007 |  
|                                                           |  | (Dollars in thousands) |        
|Total nonaccrual loans                                     |  | $                      | 241,828 |   |                     | $ | 13,079 |  
|Loans past due 90 days or more and still accruing interest |  |                        | 10,204  |   |                     |   |       |  
|Restructured loans                                         |  |                        |        |   |                     |   |       |  
|Other real estate owned (OREO)                             |  |                        | 16,303  |   |                     |   | 110    |  
|                                                           |  |                        |         |   |                     |   |        |  
|Total nonperforming assets                                 |  | $                      | 268,335 |   |                     | $ | 13,189 |  
|                                                           |  |                        |         |   |                     |   |        |  
|                                                           |  |                       
|Nonperforming loans to gross loans                         |  |                        | 16.23   | % |                     |   | 0.84   | %
|Nonperforming assets to total assets                       |  |                        | 13.68   |   |                     |   | 0.75   |  
|Interest income recognized on nonaccrual loans(1)          |  | $                      | 6,466   |   |                     | $ | 1,002  |  



|(1) | For the six months ended June 30, 2008 and year ended December 31, 2007.
|--- | ------------------------------------------------------------------------

The composite of nonaccrual loans were as follows as of the dates indicated:



|                          |  |                        |  |                   |                      |   |       |   |                       |        |   |                     |    |                   |   |        |  |       |                       |  |      |  
|------------------------- |  | ---------------------- |  | ----------------- | -------------------- | - | ----- | - | --------------------- | ------ | - | ------------------- | -- | ----------------- | - | ------ |  | ----- | --------------------- |  | ---- | -
|                          |  | At June 30, 2008       |  |                   | At December 31, 2007 |  
|                          |  | # ofNonaccrualLoans    |  | NonaccrualBalance |                      | % |       |   | Percent ofTotal Loans |        |   | # ofNonaccrualLoans |    | NonaccrualBalance |   | %      |  |       | Percent ofTotal Loans | 
|                          |  | (Dollars in thousands) | 
|Residential construction  |  | 42                     |  | $                 | 50,415               |   | 20.8  | % |                       | 3.25   | % |                     | 3  |                   | $ | 4,991  |  | 38.2  | %                     |  | 0.32 | %
|Commercial construction   |  | 12                     |  |                   | 37,184               |   | 15.4  |   |                       | 2.40   |   |                     |   |                   |   |       |  |      |                       |  |     |  
|Residential land          |  | 36                     |  |                   | 103,526              |   | 42.8  |   |                       | 6.67   |   |                     | 7  |                   |   | 5,357  |  | 41.0  |                       |  | 0.35 |  
|Commercial land           |  | 4                      |  |                   | 34,849               |   | 14.4  |   |                       | 2.24   |   |                     |   |                   |   |       |  |      |                       |  |     |  
|Commercial real estate    |  | 4                      |  |                   | 5,421                |   | 2.2   |   |                       | 0.35   |   |                     | 4  |                   |   | 1,785  |  | 13.6  |                       |  | 0.11 |  
|Residential real estate   |  | 9                      |  |                   | 6,999                |   | 2.9   |   |                       | 0.45   |   |                     | 1  |                   |   | 750    |  | 5.7   |                       |  | 0.05 |  
|Commercial and industrial |  | 16                     |  |                   | 3,401                |   | 1.4   |   |                       | 0.22   |   |                     | 5  |                   |   | 196    |  | 1.5   |                       |  | 0.01 |  
|Consumer                  |  | 2                      |  |                   | 33                   |   | < 0.1 |   |                       | < 0.01 |   |                     |   |                   |   |       |  |      |                       |  |     | %
|                          |  |                        |  |                   |                      |   |       |   |                       |        |   |                     |    |                   |   |        |  |       |                       |  |      |  
|Total Loans               |  | 125                    |  | $                 | 241,828              |   | 100.0 | % |                       | 15.58  | % |                     | 20 |                   | $ | 13,079 |  | 100.0 | %                     |  | 0.84 |  
|                          |  |                        |  |                   |                      |   |       |   |                       |        |   |                     |    |                   |   |        |  |       |                       |  |      |  

Our nonaccrual loans consisted of 125 loans and totaled $241.8 million at June 30, 2008 and consisted of 20
loans and totaled $13.1 million at December 31, 2007. Residential construction and residential land loans comprise approximately 64% of the total aggregate balance of nonaccrual loans at June 30, 2008 compared to approximately 79% at
December 31, 2007. Commercial construction and commercial land loans comprise approximately 30% of the total aggregate balance of nonaccrual loans at June 30, 2008 compared to approximately 0% at December 31, 2007. The increase in
total nonaccrual loans is due primarily to residential construction and residential land loans and commercial construction and commercial land loans where the borrowers have required an extended time to market their projects due to the current
challenging economic environment and have exhausted their available liquidity. Loans related to the southern Nevada market area comprise approximately 71% of the total aggregate balance of nonaccrual loans at June 30, 2008 compared to
approximately 88% at December 31, 2007.



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##### Table of Contents

The average nonaccrual loan size was approximately $1.9 million at June 30, 2008. Of the nonaccrual loans at
June 30, 2008, the five largest had an aggregate balance of approximately $57.4 million or approximately 24% of the total aggregate balance of nonaccrual loans. The largest two nonaccrual loans at June 30, 2008 were a $14.4 million
commercial land loan with a specific allowance reserve of $1.2 million secured by an 11.5 acre site for a mixed use development and a $14.4 million residential land loan with a specific allowance reserve of $1.7 million secured by a 157.6 acre site
and all improvements for 120 proposed single family residential lots. The next three largest nonaccrual loans have aggregate balances ranging from $9.2 million to $9.8 million with total aggregate specific allowance reserves of $2.4 million and are
secured by raw residential land and raw commercial land.

The total amount of additional interest income on nonaccrual loans that would have been
recognized for the three and six months ended June 30, 2008 if interest on all such loans had been recorded based upon original contract terms was approximately $2.4 million and $3.4 million, respectively. We are currently committed to lend no
additional funds on these nonaccrual loans, in accordance with the original terms of these loans.

Our loans which are past due 90 days or more and still
accruing interest consisted of four loans and totaled $10.2 million at June 30, 2008. We had no loans of this type at December 31, 2007. The average size of loans past due 90 days or more and still accruing interest was approximately $2.6
million at June 30, 2008. Residential construction and land loans comprise 100% of the total aggregate balance of these loans at June 30, 2008. The largest loan which is past due 90 days or more and still accruing interest at June 30,
2008 is a $5.5 million residential land loan secured by a 19.2 acre site of 19 lots.

OREO consists of seven properties and totaled approximately $16.3
million at June 30, 2008 and consisted of one property and totaled approximately $110,000 at December 31, 2007. The two largest properties in OREO at June 30, 2008 had an aggregate balance of approximately $13.9 million or
approximately 85% of the total aggregate balance of OREO and consisted of finished condo lots with common area improvements and a multi-family residential property. Concurrent with the transfer of new properties to OREO during the second quarter of
2008, the Company recognized $1.3 million in net charge-offs representing the difference between the estimated fair value less the estimated cost to sell of the properties and outstanding loan balances.

We also classify our loans consistent with federal banking regulations using a nine category grading system. The following table presents information regarding potential
problem loans, consisting of loans in grades six through nine but still performing as of the dates indicated. These grades are referred to in applicable banking regulations as Other Loans Especially Mentioned, Substandard,
Doubtful, and Loss and are described in further detail in our Form 10-K.



|                          |  |                        |  |             |                      |   |       |   |                       |       |   |           |    |             |   |        |  |       |                       |  |        |  
|------------------------- |  | ---------------------- |  | ----------- | -------------------- | - | ----- | - | --------------------- | ----- | - | --------- | -- | ----------- | - | ------ |  | ----- | --------------------- |  | ------ | -
|                          |  | At June 30, 2008       |  |             | At December 31, 2007 |  
|                          |  | # ofLoans              |  | LoanBalance |                      | % |       |   | Percent ofTotal Loans |       |   | # ofLoans |    | LoanBalance |   | %      |  |       | Percent ofTotal Loans | 
|                          |  | (Dollars in thousands) | 
|Residential construction  |  | 7                      |  | $           | 11,850               |   | 7.6   | % |                       | 0.76  | % |           | 14 |             | $ | 22,748 |  | 26.9  | %                     |  | 1.46   | %
|Commercial construction   |  | 7                      |  |             | 26,068               |   | 16.7  |   |                       | 1.68  |   |           | 4  |             |   | 14,273 |  | 16.9  |                       |  | 0.92   |  
|Residential land          |  | 15                     |  |             | 62,112               |   | 39.8  |   |                       | 4.00  |   |           | 15 |             |   | 32,369 |  | 38.3  |                       |  | 2.08   |  
|Commercial land           |  | 4                      |  |             | 39,333               |   | 25.2  |   |                       | 2.53  |   |           | 2  |             |   | 3,376  |  | 4.0   |                       |  | 0.22   |  
|Commercial real estate    |  | 12                     |  |             | 9,371                |   | 6.0   |   |                       | 0.60  |   |           | 8  |             |   | 3,915  |  | 4.6   |                       |  | 0.25   |  
|Residential real estate   |  | 3                      |  |             | 2,499                |   | 1.6   |   |                       | 0.16  |   |           | 7  |             |   | 6,735  |  | 8.0   |                       |  | 0.43   |  
|Commercial and industrial |  | 9                      |  |             | 4,737                |   | 3.1   |   |                       | 0.31  |   |           | 12 |             |   | 1,013  |  | 1.2   |                       |  | 0.06   |  
|Consumer                  |  |                       |  |             |                     |   |      |   |                       |      |   |           | 4  |             |   | 77     |  | 0.1   |                       |  | < 0.01 |  
|                          |  |                        |  |             |                      |   |       |   |                       |       |   |           |    |             |   |        |  |       |                       |  |        |  
|Total Loans               |  | 57                     |  | $           | 155,970              |   | 100.0 | % |                       | 10.04 | % |           | 66 |             | $ | 84,506 |  | 100.0 | %                     |  | 5.42   | %
|                          |  |                        |  |             |                      |   |       |   |                       |       |   |           |    |             |   |        |  |       |                       |  |        |  

Our potential problem loans, consisted of 57 loans and totaled approximately $156.0 million at June 30, 2008
and consisted of 66 loans and totaled $84.5 million at December 31, 2007. Construction and land loans comprise approximately 89% of the total aggregate balance of potential problem loans at June 30, 2008 compared to approximately 86% at
December 31, 2007. This increase is due primarily to construction and land loans where borrowers have experienced substantial construction delays and required an extended time to market their projects due to the current challenging economic
environment in the markets we operate which has caused the timing of completion or ultimate disposition of the finished project to be delayed. Our potential problem loans are primarily secured by real estate with loan to value ratios within bank
policy limits at the time of origination.

As a result of the real estate value declines, in the first quarter of 2008, we ordered updated appraisals on
the real estate collateral underlying our construction and land loan portfolios, and in April 2008, we engaged an independent third party to review our construction and land loan portfolios to assist us in identifying weaknesses. The results of the
appraisal updates and the independent loan review were taken into account in establishing our provision for loan losses in the first six months of 2008. The independent loan review was completed with respect to our residential construction,
residential land, and commercial construction loan portfolios in the second quarter of 2008. In addition, we continue to receive updated appraisals with respect to our residential construction and residential land loan portfolios, as well as, our
commercial construction portfolio.



27



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##### Table of Contents

The following table sets forth information regarding impaired loans as of the dates indicated:



|                                                                           |  |                  |  |                      |         |           |    |             |   |        
|-------------------------------------------------------------------------- |  | ---------------- |  | -------------------- | ------- | --------- | -- | ----------- | - | -------
|                                                                           |  | At June 30, 2008 |  | At December 31, 2007
|                                                                           |  | # ofLoans        |  | LoanBalance          |         | # ofLoans |    | LoanBalance
|                                                                           |  | (In thousands)  
|Impaired loans with a specific valuation allowance under SFAS 114:         |  |                  |  |                      |         |           |    |             |   |        
|Residential construction                                                   |  | 35               |  | $                    | 42,308  |           | 5  |             | $ | 10,149 
|Commercial construction                                                    |  | 11               |  |                      | 48,049  |           |   |             |   |       
|Residential land                                                           |  | 32               |  |                      | 124,342 |           | 3  |             |   | 5,266  
|Commercial land                                                            |  | 5                |  |                      | 57,583  |           | 1  |             |   | 327    
|Commercial real estate                                                     |  | 1                |  |                      | 3,000   |           | 2  |             |   | 528    
|Residential real estate                                                    |  | 8                |  |                      | 5,499   |           | 1  |             |   | 143    
|Commercial and industrial                                                  |  | 15               |  |                      | 3,412   |           | 9  |             |   | 437    
|Consumer                                                                   |  | 2                |  |                      | 33      |           |    |             |   |        
|                                                                           |  |                  |  |                      |         |           |    |             |   |        
|Total impaired loans with a specific valuation allowance under SFAS 114    |  | 109              |  | $                    | 284,226 |           | 21 |             | $ | 16,850 
|                                                                           |  |                  |  |                      |         |           |    |             |   |        
|                                                                           |  |                  |  |                     
|Impaired loans without a specific valuation allowance under SFAS 114:      |  |                  |  |                      |         |           |    |             |   |        
|Residential construction                                                   |  | 15               |  | $                    | 19,321  |           | 16 |             | $ | 27,956 
|Commercial construction                                                    |  | 11               |  |                      | 21,917  |           | 7  |             |   | 23,015 
|Residential land                                                           |  | 17               |  |                      | 41,881  |           | 22 |             |   | 57,655 
|Commercial land                                                            |  | 1                |  |                      | 7,043   |           | 1  |             |   | 3,048  
|Commercial real estate                                                     |  | 11               |  |                      | 15,559  |           | 3  |             |   | 1,351  
|Residential real estate                                                    |  | 9                |  |                      | 4,387   |           | 7  |             |   | 5,964  
|Commercial and industrial                                                  |  | 2                |  |                      | 350     |           |   |             |   |       
|                                                                           |  |                  |  |                      |         |           |    |             |   |        
|Total impaired loans without a specific valuation allowance under SFAS 114 |  | 66               |  | $                    | 110,458 |           | 56 |             | $ | 118,989
|                                                                           |  |                  |  |                      |         |           |    |             |   |        
|                                                                           |  |                  |  |                     
|Total impaired loans                                                       |  | 175              |  | $                    | 394,684 |           | 77 |             | $ | 135,839
|                                                                           |  |                  |  |                      |         |           |    |             |   |        
|                                                                           |  |                  |  |                     
|Related allowance for loan losses on impaired loans                        |  |                  |  | $                    | 51,069  |           |    |             | $ | 2,149  
|Average balance of impaired loans during the period(1)                     |  |                  |  | $                    | 429,341 |           |    |             | $ | 129,136
|Interest income recognized during the period on impaired loans(1)          |  |                  |  | $                    | 11,828  |           |    |             | $ | 10,516 



|(1) | For the six months ended June 30, 2008 and year ended December 31, 2007.
|--- | ------------------------------------------------------------------------

Impaired loans pursuant to SFAS 114, consisted of 175 loans and totaled $394.7 million at June 30, 2008 and consisted of 77 loans and totaled $135.8 million at December 31, 2007. We are currently committed
to lend approximately $36.6 million in additional funds on these impaired loans, in accordance with the original terms of these loans. Of the $36.6 million in committed funds on impaired loans, none is representative of nonaccrual loans. The Company
will continue to monitor its portfolio on a regular basis and will lend additional funds only as warranted on these impaired 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. Approximately 58% of the impaired loans as of June 30, 2008 relates to residential construction and residential land loans. As of June 30, 2008, $110.5 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 are not expected to be collected as scheduled in the loan agreement. The $110.5
million of impaired loans without a specific valuation allowance as of June 30, 2008 are generally impaired due to delays or anticipated delays in receiving payments pursuant to the contractual terms of the loan agreements. In addition, at
June 30, 2008 and December 31, 2007, we had no loans classified as troubled debt restructurings, as defined in SFAS 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings. However, due to the current economic environments
in the markets in which we operate and deterioration of certain loans in our portfolio, we may have loans classified as troubled debt restructurings during the remainder of 2008.

The Company experienced significant declines in the current valuations for real estate collateral supporting portions of its loan portfolio, primarily residential construction and residential land loans, late in the
first quarter of 2008, and continuing through the second quarter of 2008, as reflected in recently received appraisals. Currently, $299.3 million, or approximately 76%, of impaired loans have recent appraisals. If real estate values continue to
decline and as updated appraisals are received, the Company may have to increase its allowance for loan losses accordingly.



28



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##### Table of Contents

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



|                                             |  |                                   |         |   |      |   |        |  
|-------------------------------------------- |  | --------------------------------- | ------- | - | ---- | - | ------ | -
|                                             |  | For the Six Months Ended June 30, |        
|                                             |  | 2008                              |         |   | 2007 |  
|                                             |  | (Dollars in thousands)            |        
|Allowance for loan losses:                   |  |                                   |         |  
|Balance at beginning of period               |  | $                                 | 19,304  |   |      | $ | 11,200 |  
|Provisions charged to operating expenses     |  |                                   | 100,100 |   |      |   | 3,190  |  
|Recoveries of loans previously charged-off:  |  |                                   |         |   |      |   |        |  
|Residential construction                     |  |                                   |        |   |      |   |       |  
|Commercial construction                      |  |                                   |        |   |      |   |       |  
|Residential land                             |  |                                   |        |   |      |   |       |  
|Commercial land                              |  |                                   |        |   |      |   |       |  
|Commercial real estate                       |  |                                   |        |   |      |   |       |  
|Residential real estate                      |  |                                   |        |   |      |   |       |  
|Commercial and industrial                    |  |                                   |        |   |      |   | 3      |  
|Consumer and other                           |  |                                   | 7       |   |      |   | 30     |  
|                                             |  |                                   |         |   |      |   |        |  
|Total recoveries                             |  |                                   | 7       |   |      |   | 33     |  
|                                             |  |                                   |         |   |      |   |        |  
|Loans charged-off:                           |  |                                   |         |   |      |   |        |  
|Residential construction                     |  |                                   | 7,353   |   |      |   |       |  
|Commercial construction                      |  |                                   | 3,750   |   |      |   |       |  
|Residential land                             |  |                                   | 27,314  |   |      |   |       |  
|Commercial land                              |  |                                   | 744     |   |      |   |       |  
|Commercial real estate                       |  |                                   | 184     |   |      |   |       |  
|Residential real estate                      |  |                                   | 299     |   |      |   |       |  
|Commercial and industrial                    |  |                                   | 880     |   |      |   |       |  
|Consumer and other                           |  |                                   | 18      |   |      |   | 89     |  
|                                             |  |                                   |         |   |      |   |        |  
|Total charged-off                            |  |                                   | 40,542  |   |      |   | 89     |  
|                                             |  |                                   |         |   |      |   |        |  
|Net charge-offs                              |  |                                   | 40,535  |   |      |   | 56     |  
|                                             |  |                                   |         |   |      |   |        |  
|Balance at end of period                     |  | $                                 | 78,869  |   |      | $ | 14,334 |  
|                                             |  |                                   |         |   |      |   |        |  
|                                             |  |                                  
|Net charge-offs to average loans outstanding |  |                                   | 2.40    | % |      |   | 0.00   | %
|                                             |  |                                  
|Allowance for loan losses to gross loans     |  |                                   | 5.08    |   |      |   | 1.09   |  

The allowance for loan losses has been determined in accordance with accounting principles generally accepted in
the United States of America, or GAAP. 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. During the second quarter of 2008, we further increased the allowance for loan
losses due to the weaknesses in the residential real estate markets in which we operate specifically related to our residential construction and residential land portfolio which continues to experience deterioration in estimated collateral values
and repayment abilities of some of our customers, an increase in nonperforming assets, and the general weakening economic condition in the markets in which we serve. The specific increase in the allowance for loan losses reflects specific reserves
on impaired loans as required by SFAS 114, general reserves based on various qualitative and quantitative factors reflecting among other things a significant increase in nonaccrual loans and the migration of loans categorized as potential problem
loans in the first quarter of 2008 into higher regulatory grades in the second quarter of 2008.

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.



29



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##### Table of Contents

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 as of the dates indicated:



|                                      |  |                 |        |                                           |                     |   |        |   |                                           |  |       |  
|------------------------------------- |  | --------------- | ------ | ----------------------------------------- | ------------------- | - | ------ | - | ----------------------------------------- |  | ----- | -
|                                      |  | At June 30,2008 |        |                                           | At December 31,2007 |  
|                                      |  | Amount          |        | % ofLoans inEachCategoryto GrossLoans (1) |                     |   | Amount |   | % ofLoans inEachCategoryto GrossLoans (1) | 
|Construction and land                 |  | $               | 66,651 |                                           | 67.6                | % |        | $ | 13,664                                    |  | 68.0  | %
|Commercial real estate                |  |                 | 5,322  |                                           | 15.8                |   |        |   | 3,568                                     |  | 16.7  |  
|Commercial and industrial             |  |                 | 3,805  |                                           | 9.4                 |   |        |   | 1,199                                     |  | 8.9   |  
|Single family residential real estate |  |                 | 2,966  |                                           | 6.9                 |   |        |   | 777                                       |  | 6.1   |  
|Consumer and other                    |  |                 | 125    |                                           | 0.3                 |   |        |   | 96                                        |  | 0.3   |  
|                                      |  |                 |        |                                           |                     |   |        |   |                                           |  |       |  
|Total                                 |  | $               | 78,869 |                                           | 100.0               | % |        | $ | 19,304                                    |  | 100.0 | %
|                                      |  |                 |        |                                           |                     |   |        |   |                                           |  |       |  



|(1) | Gross loans before netting deferred loan fees.
|--- | ----------------------------------------------

Securities.
Our investment portfolio consists mainly of AAA rated U.S. 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 June 30, 2008, securities totaled $51.8 million, a decrease of $145,000, or
0.3%, from $52.0 million at December 31, 2007. At June 30, 2008, the majority 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 support the loan portfolio while using our investment portfolio primarily for liquidity purposes.

The carrying value of our securities
available for sale at June 30, 2008 and at December 31, 2007 is set forth below.



|                                   |  |                 |        |                     |   |       
|---------------------------------- |  | --------------- | ------ | ------------------- | - | ------
|                                   |  | At June 30,2008 |        | At December 31,2007
|                                   |  | (In thousands) 
|U.S. Treasury securities           |  | $               | 9,446  |                     | $ | 9,578 
|U.S. Government-sponsored agencies |  |                 | 35,692 |                     |   | 35,621
|Mortgage-backed obligations        |  |                 | 4,212  |                     |   | 4,327 
|Money market                       |  |                 | 2,086  |                     |   | 2,067 
|Other debt securities              |  |                 | 385    |                     |   | 373   
|                                   |  |                 |        |                     |   |       
|Total investment securities        |  | $               | 51,821 |                     | $ | 51,966
|                                   |  |                 |        |                     |   |       

Premises and Equipment. Our premises and equipment totaled $40.7 million at June 30, 2008, a
decrease of $2.4 million, or 5.6%, from $43.1 million at December 31, 2007. This decrease was primarily due to the completion of construction of new branch offices during the first six months of 2008 offset by a decrease of $5.5 million of land
which was reclassified during the second quarter of 2008 to land held for sale due to a change in the Companys intent for the use of the property.

Land Held For Sale.Our land held for sale totaled $5.5 million at June 30, 2008 compared to $0 at December 31, 2007. Land held for sale consists of raw land in the Las Vegas area in which the Company is
currently marketing for sale and no longer being considered as a future branch location. Management changed its intent for the use of this property during the second quarter of 2008.

Goodwill and Other Intangible Assets.Our goodwill is related to the acquisition of Choice Bank in 2006 and totaled $0 at June 30, 2008 compared to $18.8 million at December 31, 2007. Due to
the continued deterioration of market conditions as well as continued deterioration in our credit quality, the Company completed an impairment valuation test of its $18.8 million goodwill asset during the second quarter of 2008. As a result of this
impairment test, the Company recorded a full impairment charge to the goodwill asset of $18.8 million. The goodwill impairment charge had no impact on the Companys tangible capital levels, tangible book value per share, regulatory capital
ratios or liquidity. In addition, the acquisition of Choice Bank resulted in a core deposit intangible, which due to amortization, amounted to $786,000 at June 30, 2008 compared to $917,000 at December 31, 2007. As of June 30, 2008,
the Company completed an impairment evaluation of its core deposit intangible and determined no impairment loss was necessary.



30



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##### Table of Contents

Deferred Taxes.At June 30, 2008 we had net deferred tax assets of $16.6 million, an increase of $10.7
million, or 181.0% from $5.9 million at December 31, 2007. This increase is primarily the result of the large increase in our allowance for loan losses during the first six months of 2008 which is our largest deferred tax item. During the
second quarter of 2008, the Company established a valuation allowance of $10.7 million to the Companys net deferred tax assets. This valuation allowance is related to certain tax aspects involving the allowance for loan losses. The allowance
for loan losses represents future tax benefits which would be realized when actual charge-offs are made against the allowance. To the extent available, sources of taxable income, including those available from prior years under tax
regulations, are deemed per GAAP to be insufficient to absorb tax losses, and a valuation allowance is therefore necessary.

Cash and Cash
Equivalents. Cash and cash equivalents (consisting of cash and due from banks and federal funds sold), totaled $240.1 million at June 30, 2008, an increase of $226.3 million, or 1635.1%, from $13.8 million at December 31, 2007.
This increase is due to our concerted efforts to increase our liquidity.

Deposits. Total deposits were $1.73 billion at June 30, 2008,
an increase of $306.0 million, or 21.5% from December 31, 2007. An increase in time deposits is the primary reason for the increase in our deposits during the first six months of 2008. Time deposits increased $479.8 million, or 69.5% to $1.17
billion at June 30, 2008 from $690.6 million at December 31, 2007. A significant portion of our deposit increase is due to the increase of our brokered deposits from $500.2 million at December 31, 2007 to $594.2 million at
June 30, 2008. This increase was due to increased deposits from the same four existing broker deposit customers that existed at December 31, 2007. For a discussion of recent changes in deposit concentration, see Liquidity and
Capital Resources.

Borrowings. At June 30, 2008, we had $77.0 million in advances from the FHLB, $47.0 million of which were
classified as long-term borrowings and $30.0 million of which were classified as short-term borrowings. Total borrowings from the FHLB have decreased $13.6 million, or 15.0%, to $77.0 million at June 30, 2008 from $90.6 million at
December 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 June 30, 2008, we had the ability to borrow an additional $43.4
million from the FHLB.

Junior Subordinated Debt. We had $69.6 million of junior subordinated debentures outstanding at June 30, 2008
and December 31, 2007. Our junior subordinated debt, which is issued to our statutory trust subsidiaries that in turn have issued trust preferred securities, is considered long-term borrowing for financial reporting purposes but is included as
a component of regulatory capital, subject to limitations.

In an effort to preserve the Companys capital and improve its capital ratios, on
July 30, 2008, the Companys board of directors elected to defer further interest payments on each of the Companys series of junior subordinated debt securities relating to the trust preferred securities of Silver State Capital Trust
II, Silver State Capital Trust III, Silver State Capital Trust IV, Silver State Capital Trust V and Silver State Capital Trust VI (each an unconsolidated subsidiary of the Company). The Company has the ability under each indenture for the junior
subordinated debt securities to defer interest payments for up to 20 consecutive calendar quarters without experiencing a default under the indentures. The deferral provisions for these securities were intended to be exercised during extraordinary
times such as the Company is now experiencing.

Stockholders Equity. Stockholders equity decreased $88.8 million, or 56.4%, to
$68.8 million at June 30, 2008 from $157.6 million at December 31, 2007. The decrease in stockholders equity is primarily the result of the $87.6 million net loss for six months ended June 30, 2008 with the remainder from
treasury stock transactions and stock option exercises. The Company repurchased 146,600 shares of its common stock under an authorized stock repurchase program at a weighted average price per share of $10.29 during the first quarter of 2008 and did
not repurchase any shares of its common stock during the second quarter of 2008.



31



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##### Table of Contents

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 June 30, 2008 and 2007, and the
six month periods ended June 30, 2008 and 2007. The tables present 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 June 30, |          
|                                                              |  | 2008                                |           |   | 2007     |  
|                                                              |  | AverageBalance                      |           |   | Interest |   | AverageYield/Cost (5) |  |      | AverageBalance |  |   | Interest  |   | AverageYield/Cost (5) |  
|                                                              |  | (Dollars in thousands)              |          
|Interest-earning assets                                       |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Investment Securities-taxable                                 |  | $                                   | 127,796   |   |          | $ | 1,022                 |  | 3.22 | %              |  | $ | 53,214    |   |                       | $ | 634    |  | 4.78  | %
|Federal funds sold and other                                  |  |                                     | 141,050   |   |          |   | 729                   |  | 2.08 |                |  |   | 22,968    |   |                       |   | 258    |  | 4.51  |  
|Loans(1)(2)                                                   |  |                                     | 1,697,417 |   |          |   | 27,219                |  | 6.45 |                |  |   | 1,287,071 |   |                       |   | 33,411 |  | 10.41 |  
|FHLB stock                                                    |  |                                     | 5,896     |   |          |   | 83                    |  | 5.66 |                |  |   | 4,294     |   |                       |   | 40     |  | 3.74  |  
|                                                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total earning assets                                          |  |                                     | 1,972,159 |   |          |   | 29,053                |  | 5.93 | %              |  |   | 1,367,547 |   |                       |   | 34,343 |  | 10.07 | %
|Non-interest earning assets                                   |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Cash and due from banks                                       |  |                                     | 20,011    |   |          |   |                       |  |      |                |  |   | 17,377    |   |                       |   |        |  |       |  
|Allowance for loan losses                                     |  |                                     | (42,009   | ) |          |   |                       |  |      |                |  |   | (13,230   | ) |                       |   |        |  |       |  
|Other assets                                                  |  |                                     | 94,520    |   |          |   |                       |  |      |                |  |   | 71,500    |   |                       |   |        |  |       |  
|                                                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total assets                                                  |  | $                                   | 2,044,681 |   |          |   |                       |  |      |                |  | $ | 1,443,194 |   |                       |   |        |  |       |  
|                                                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|                                                              |  |                                     |           |   |          |  
|Interest-bearing liabilities                                  |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Interest checking                                             |  | $                                   | 17,448    |   |          | $ | 85                    |  | 1.96 | %              |  | $ | 16,481    |   |                       | $ | 44     |  | 1.07  | %
|Savings and money market                                      |  |                                     | 499,456   |   |          |   | 3,852                 |  | 3.10 |                |  |   | 522,192   |   |                       |   | 6,161  |  | 4.73  |  
|Time deposits                                                 |  |                                     | 1,071,521 |   |          |   | 11,689                |  | 4.39 |                |  |   | 487,380   |   |                       |   | 6,508  |  | 5.36  |  
|                                                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total interest-bearing deposits                               |  |                                     | 1,588,425 |   |          |   | 15,626                |  | 3.96 |                |  |   | 1,026,053 |   |                       |   | 12,713 |  | 4.97  |  
|Short-term borrowings                                         |  |                                     | 45,410    |   |          |   | 388                   |  | 3.44 |                |  |   | 27,024    |   |                       |   | 338    |  | 5.02  |  
|Long-term debt                                                |  |                                     | 51,642    |   |          |   | 620                   |  | 4.83 |                |  |   | 54,207    |   |                       |   | 643    |  | 4.76  |  
|Junior subordinated debt                                      |  |                                     | 69,589    |   |          |   | 772                   |  | 4.46 |                |  |   | 38,661    |   |                       |   | 689    |  | 7.15  |  
|                                                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total interest-bearing liabilities                            |  |                                     | 1,755,066 |   |          |   | 17,406                |  | 3.99 | %              |  |   | 1,145,945 |   |                       |   | 14,383 |  | 5.03  | %
|Non-interest bearing liabilities                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Non-interest bearing demand deposits                          |  |                                     | 137,570   |   |          |   |                       |  |      |                |  |   | 169,333   |   |                       |   |        |  |       |  
|Other liabilities                                             |  |                                     | 12,228    |   |          |   |                       |  |      |                |  |   | 11,347    |   |                       |   |        |  |       |  
|Stockholders equity                                          |  |                                     | 139,817   |   |          |   |                       |  |      |                |  |   | 116,569   |   |                       |   |        |  |       |  
|                                                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total liabilities and stockholders equity                    |  | $                                   | 2,044,681 |   |          |   |                       |  |      |                |  | $ | 1,443,194 |   |                       |   |        |  |       |  
|                                                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Net interest rate spread(3)                                   |  |                                     |           |   |          |   |                       |  | 1.94 | %              |  |   |           |   |                       |   |        |  | 5.04  | %
|Net interest income/net interest margin(4)                    |  |                                     |           |   |          | $ | 11,647                |  | 2.38 | %              |  |   |           |   |                       | $ | 19,960 |  | 5.85  | %
|                                                              |  |                                     |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total interest-earning assets to interest-bearing liabilities |  |                                     | 112.37    | % |          |   |                       |  |      |                |  |   | 119.34    | % |                       |   |        |  |       |  



|(1) | Net loan fees of $2.8 million and $3.5 million are included in the yield computation for the three months ended June 30, 2008 and 2007, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Nonaccrual 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.
|--- | -----------



32



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##### Table of Contents

|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|------------------------------------------------------------- |  | --------------------------------- | --------- | - | -------- | - | --------------------- |  | ---- | -------------- |  | - | --------- | - | --------------------- | - | ------ |  | ----- | -
|                                                              |  | For the Six Months Ended June 30, |          
|                                                              |  | 2008                              |           |   | 2007     |  
|                                                              |  | AverageBalance                    |           |   | Interest |   | AverageYield/Cost (5) |  |      | AverageBalance |  |   | Interest  |   | AverageYield/Cost (5) |  
|                                                              |  | (Dollars in thousands)            |          
|Interest-earning assets                                       |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Investment Securities-taxable                                 |  | $                                 | 90,145    |   |          | $ | 1,667                 |  | 3.72 | %              |  | $ | 57,099    |   |                       | $ | 1,327  |  | 4.69  | %
|Federal funds sold and other                                  |  |                                   | 79,103    |   |          |   | 853                   |  | 2.17 |                |  |   | 18,637    |   |                       |   | 470    |  | 5.09  |  
|Loans(1)(2)                                                   |  |                                   | 1,688,929 |   |          |   | 62,132                |  | 7.40 |                |  |   | 1,208,934 |   |                       |   | 61,844 |  | 10.32 |  
|FHLB stock                                                    |  |                                   | 5,840     |   |          |   | 154                   |  | 5.30 |                |  |   | 4,201     |   |                       |   | 99     |  | 4.75  |  
|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total earning assets                                          |  |                                   | 1,864,017 |   |          |   | 64,806                |  | 6.99 | %              |  |   | 1,288,871 |   |                       |   | 63,740 |  | 9.97  | %
|Non-interest earning assets                                   |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Cash and due from banks                                       |  |                                   | 17,547    |   |          |   |                       |  |      |                |  |   | 17,968    |   |                       |   |        |  |       |  
|Allowance for loan losses                                     |  |                                   | (31,091   | ) |          |   |                       |  |      |                |  |   | (12,389   | ) |                       |   |        |  |       |  
|Other assets                                                  |  |                                   | 88,547    |   |          |   |                       |  |      |                |  |   | 68,488    |   |                       |   |        |  |       |  
|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total assets                                                  |  | $                                 | 1,939,020 |   |          |   |                       |  |      |                |  | $ | 1,362,938 |   |                       |   |        |  |       |  
|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|                                                              |  |                                   |           |   |          |  
|Interest-bearing liabilities                                  |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Interest checking                                             |  | $                                 | 13,970    |   |          | $ | 112                   |  | 1.61 | %              |  | $ | 18,676    |   |                       | $ | 101    |  | 1.09  | %
|Savings and money market                                      |  |                                   | 521,681   |   |          |   | 8,671                 |  | 3.34 |                |  |   | 494,714   |   |                       |   | 11,537 |  | 4.70  |  
|Time deposits                                                 |  |                                   | 917,245   |   |          |   | 21,203                |  | 4.65 |                |  |   | 445,118   |   |                       |   | 11,842 |  | 5.36  |  
|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total interest-bearing deposits                               |  |                                   | 1,452,896 |   |          |   | 29,986                |  | 4.15 |                |  |   | 958,508   |   |                       |   | 23,480 |  | 4.94  |  
|Short-term borrowings                                         |  |                                   | 57,743    |   |          |   | 1,119                 |  | 3.90 |                |  |   | 23,968    |   |                       |   | 657    |  | 5.53  |  
|Long-term debt                                                |  |                                   | 53,544    |   |          |   | 1,283                 |  | 4.82 |                |  |   | 52,971    |   |                       |   | 1,214  |  | 4.62  |  
|Junior subordinated debt                                      |  |                                   | 69,589    |   |          |   | 1,840                 |  | 5.32 |                |  |   | 38,661    |   |                       |   | 1,355  |  | 7.07  |  
|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total interest-bearing liabilities                            |  |                                   | 1,633,772 |   |          |   | 34,228                |  | 4.21 | %              |  |   | 1,074,108 |   |                       |   | 26,706 |  | 5.01  | %
|Non-interest bearing liabilities                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Non-interest bearing demand deposits                          |  |                                   | 143,521   |   |          |   |                       |  |      |                |  |   | 166,499   |   |                       |   |        |  |       |  
|Other liabilities                                             |  |                                   | 11,618    |   |          |   |                       |  |      |                |  |   | 9,076     |   |                       |   |        |  |       |  
|Stockholders equity                                          |  |                                   | 150,109   |   |          |   |                       |  |      |                |  |   | 113,255   |   |                       |   |        |  |       |  
|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total liabilities and stockholders equity                    |  | $                                 | 1,939,020 |   |          |   |                       |  |      |                |  | $ | 1,362,938 |   |                       |   |        |  |       |  
|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Net interest rate spread(3)                                   |  |                                   |           |   |          |   |                       |  | 2.78 | %              |  |   |           |   |                       |   |        |  | 4.96  | %
|Net interest income/net interest margin(4)                    |  |                                   |           |   |          | $ | 30,578                |  | 3.30 | %              |  |   |           |   |                       | $ | 37,034 |  | 5.79  | %
|                                                              |  |                                   |           |   |          |   |                       |  |      |                |  |   |           |   |                       |   |        |  |       |  
|Total interest-earning assets to interest-bearing liabilities |  |                                   | 114.09    | % |          |   |                       |  |      |                |  |   | 119.99    | % |                       |   |        |  |       |  



|(1) | Net loan fees of $6.5 million and $5.8 million are included in the yield computation for the six months ended June 30, 2008 and 2007, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Nonaccrual 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.
|--- | -----------



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##### Table of Contents

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.
| | - |  | ---------------



|                                |  |                                                                                         |       |   |                                                                                       |   |         |       |  |   |        |   |  |      |        |   |       |   |         |   |  |   |        |  
|------------------------------- |  | --------------------------------------------------------------------------------------- | ----- | - | ------------------------------------------------------------------------------------- | - | ------- | ----- |  | - | ------ | - |  | ---- | ------ | - | ----- | - | ------- | - |  | - | ------ | -
|                                |  | For the Three Months EndedJune 30, 2008 v.
2007Increase (Decrease)Due to Changes in (1) |       |   | For the Six Months EndedJune 30, 2008 v.
2007Increase (Decrease)Due to Changes in (1) |  
|                                |  | Volume                                                                                  |       |   | Rate                                                                                  |   |         | Total |  |   | Volume |   |  | Rate |        |   | Total |  
|                                |  | (In thousands)                                                                          |       |   | (In thousands)                                                                        |  
|Interest on securities, taxable |  | $                                                                                       | 596   |   |                                                                                       | $ | (208    | )     |  | $ | 388    |   |  | $    | 611    |   |       | $ | (271    | ) |  | $ | 340    |  
|Federal funds sold and other    |  |                                                                                         | 610   |   |                                                                                       |   | (139    | )     |  |   | 471    |   |  |      | 652    |   |       |   | (269    | ) |  |   | 383    |  
|Loans                           |  |                                                                                         | 6,580 |   |                                                                                       |   | (12,772 | )     |  |   | (6,192 | ) |  |      | 17,658 |   |       |   | (17,370 | ) |  |   | 288    |  
|FHLB stock                      |  |                                                                                         | 23    |   |                                                                                       |   | 20      |       |  |   | 43     |   |  |      | 43     |   |       |   | 12      |   |  |   | 55     |  
|                                |  |                                                                                         |       |   |                                                                                       |   |         |       |  |   |        |   |  |      |        |   |       |   |         |   |  |   |        |  
|Total interest income           |  |                                                                                         | 7,809 |   |                                                                                       |   | (13,099 | )     |  |   | (5,290 | ) |  |      | 18,964 |   |       |   | (17,898 | ) |  |   | 1,066  |  
|                                |  |                                                                                         |       |   |                                                                                       |   |         |       |  |   |        |   |  |      |        |   |       |   |         |   |  |   |        |  
|Interest expense:               |  |                                                                                         |       |   |                                                                                       |   |         |       |  |   |        |   |  |      |        |   |       |   |         |   |  |   |        |  
|Interest checking               |  |                                                                                         | 5     |   |                                                                                       |   | 36      |       |  |   | 41     |   |  |      | (38    | ) |       |   | 49      |   |  |   | 11     |  
|Savings and money market        |  |                                                                                         | (175  | ) |                                                                                       |   | (2,134  | )     |  |   | (2,309 | ) |  |      | 448    |   |       |   | (3,314  | ) |  |   | (2,866 | )
|Time deposits                   |  |                                                                                         | 6,372 |   |                                                                                       |   | (1,191  | )     |  |   | 5,181  |   |  |      | 10,914 |   |       |   | (1,553  | ) |  |   | 9,361  |  
|Short-term borrowings           |  |                                                                                         | 157   |   |                                                                                       |   | (107    | )     |  |   | 50     |   |  |      | 655    |   |       |   | (193    | ) |  |   | 462    |  
|Long-term debt                  |  |                                                                                         | (31   | ) |                                                                                       |   | 8       |       |  |   | (23    | ) |  |      | 14     |   |       |   | 55      |   |  |   | 69     |  
|Junior subordinated debt        |  |                                                                                         | 343   |   |                                                                                       |   | (260    | )     |  |   | 83     |   |  |      | 818    |   |       |   | (333    | ) |  |   | 485    |  
|                                |  |                                                                                         |       |   |                                                                                       |   |         |       |  |   |        |   |  |      |        |   |       |   |         |   |  |   |        |  
|Total interest expense          |  |                                                                                         | 6,671 |   |                                                                                       |   | (3,648  | )     |  |   | 3,023  |   |  |      | 12,811 |   |       |   | (5,289  | ) |  |   | 7,522  |  
|                                |  |                                                                                         |       |   |                                                                                       |   |         |       |  |   |        |   |  |      |        |   |       |   |         |   |  |   |        |  
|Net increase                    |  | $                                                                                       | 1,138 |   |                                                                                       | $ | (9,451  | )     |  | $ | (8,313 | ) |  | $    | 6,153  |   |       | $ | (12,609 | ) |  | $ | (6,456 | )
|                                |  |                                                                                         |       |   |                                                                                       |   |         |       |  |   |        |   |  |      |        |   |       |   |         |   |  |   |        |  



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

Comparison of Results of Operations

Our results of operations depend substantially on net interest income, which is the difference between
interest income on interest-earning assets, consisting primarily of loans receivable, securities and other short-term investments, and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of
operations are also dependent upon our generation of non-interest income, consisting primarily of income from the gain on sale of loans, loan servicing fees, and banking service fees. Other factors contributing to our results of operations include
our provisions for loan losses, income taxes, and the level of our non-interest expenses, such as compensation and benefits, occupancy and equipment costs, and other miscellaneous operating expenses.

General.Net loss was $73.2 million for the three months ended June 30, 2008, a difference of $79.4 million or 1286.3%, compared with net income of
$6.2 million for the three months ended June 30, 2007. The net loss for the three months ended June 30, 2008, was due primarily to a $69.1 million provision for loan losses, an impairment charge of $18.8 million representing a full
write-down of the Companys goodwill asset, and the establishment of a valuation allowance of $10.7 million to the Companys net deferred tax assets. The net loss was also impacted by a decrease in net interest income, an increase in
non-interest expenses and a decrease in non-interest income when compared to the corresponding period in 2007. Basic and diluted loss per share were ($4.84) for the three months ended June 30, 2008, compared with basic and diluted income per
share of $0.45 and $0.44, respectively, for the three months ended June 30, 2007. For the three months ended June 30, 2008, our annualized return on average stockholders equity was (210.6%) compared with 21.2% for the
corresponding period in 2007. Our annualized return on average assets was (14.4%) for the three months ended June 30, 2008, compared with 1.7% for the corresponding period in 2007. Net loss was $87.6 million for the six months ended
June 30, 2008, a difference of $99.4 million or 845.2%, compared with net income of $11.8 million for the six months ended June 30, 2007. The net loss for the six months ended June 30, 2008, was due primarily to a $100.1 million
provision for loan losses, an impairment charge of $18.8 million representing a full write-down of the Companys goodwill asset, and the establishment of a valuation allowance of $10.7 million to the Companys net deferred tax assets. The
net loss was also impacted by a decrease in net interest income, an increase in non-interest expenses and a decrease in non-interest income when compared to the corresponding period in 2007. Basic and diluted loss per share were ($5.78) for the six
months ended June 30, 2008, compared with basic and diluted income per share of $0.86 and $0.83, respectively, for the six months ended June 30, 2007. For the six months ended June 30, 2008, our annualized return on average
stockholders equity was (117.4%) compared with 20.9% for the corresponding period in 2007. Our annualized return on average assets was (9.1%) for the six months ended June 30, 2008, compared with 1.7% for the corresponding
period in 2007.



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Interest and Dividend Income. Total interest and dividend income decreased $5.3 million, or 15.4%, to $29.1
million for the three months ended June 30, 2008 from $34.3 million for the corresponding period in 2007. This decrease is primarily attributable to the lower interest rate environment and an increase in nonperforming loans. These factors were
offset by an increase in the average balances of earning assets, primarily loans. Total interest and dividend income increased $1.1 million, or 1.7%, to $64.8 million for the six months ended June 30, 2008 from $63.7 million for the
corresponding period in 2007. This increase is primarily attributable to an increase in the average balance of earning assets, primarily loans. We experienced a decrease in our average yield on loans for the three months and six months ended
June 30, 2008 due to the recent decreases in our prime lending rates, reflecting the general decline in market interest rates that began in the second half of 2007 and continued in the first quarter of 2008. The decreases in our prime lending
rates resulted in immediate declines in the rates on our variable rate loans which make up the significant majority of our loan portfolio. Our interest income was also negatively impacted by the significant increase in nonaccrual loans during the
first six months of 2008. The average yield on earning assets decreased to 5.93% for the three months ended June 30, 2008 compared with 10.07% for the corresponding period of 2007. The average yield on earning assets decreased to 6.99% for the
six months ended June 30, 2008 compared with 9.97% for the corresponding period of 2007.

Interest Expense. Total interest expense
increased $3.0 million, or 21.0%, to $17.4 million for the three months ended June 30, 2008 from $14.4 million for the corresponding period in 2007. Total interest expense increased $7.5 million, or 28.2%, to $34.2 million for the six months
ended June 30, 2008 from $26.7 million for the corresponding period in 2007. These increases primarily reflect an increase in the average balance of interest-bearing liabilities, especially our interest-bearing deposits, short-term borrowings
and junior subordinated debt, offset by a decrease in the average cost of our interest-bearing liabilities. In particular, the average balance of our time deposits, one of our highest cost sources of funds, increased by 119.9% and 106.7% for the
three months and six months ended June 30, 2008, respectively, compared to the corresponding periods of 2007 primarily reflecting our competitive pricing during these periods. The increase in interest expense also reflects an increase of 39.0%
and 56.5% in the average balance of our borrowed funds for the three months and six months ended June 30, 2008, respectively, compared to the corresponding periods of 2007 as we continued to use FHLB borrowings and junior subordinated debt to
supplement deposits to fund our operations. The average cost of interest-bearing liabilities decreased to 3.99% for the three months ended June 30, 2008 compared with 5.03% for the corresponding period of 2007. The average cost of
interest-bearing liabilities decreased to 4.21% for the six months ended June 30, 2008 compared with 5.01% for the corresponding period of 2007. The decline in average cost reflects the overall decline in market interest rates offset in part by
the increased competition for deposits and the significant increase in higher costing certificates of deposit.

Net Interest Income. Net
interest income decreased $8.3 million, or 41.7%, to $11.6 million for the three months ended June 30, 2008 from $20.0 million for the corresponding period in 2007. Net interest income decreased $6.5 million, or 17.4%, to $30.6 million for the
six months ended June 30, 2008 from $37.0 million for the corresponding period in 2007. The net interest margin for the three months ended June 30, 2008 was 2.38% compared to 5.85% for the corresponding period in 2007. The net interest
margin for the six months ended June 30, 2008 was 3.30% compared to 5.79% for the corresponding period in 2007. These decreases are primarily attributable to a decrease in the average yield of our loan portfolio reflecting the lower interest
rate environment, as well as continued competitive pressure on the pricing of our deposit products. These competitive pressures partially mitigated the impact of the significant decline in market interest rates. Additionally, the net interest margin
was negatively impacted due to a shift in our deposit mix as the Company has become increasingly reliant on higher cost funding sources such as time deposits. Furthermore, our net interest margin decreased by approximately 0.49% during the three
months ended June 30, 2008 and decreased by approximately 0.36% during the six months ended June 30, 2008 due to the reversal of interest income on loans being placed on nonaccrual status during the first six months of 2008. Further
interest rate cuts and increased funding costs due to significant increased competition for deposits and loans is expected to result in further compression of our net interest margin for the remainder of 2008 assuming market rates remain at their
current levels.

Provision for Loan Losses. The provision for loan losses in each period is reflected as a charge against earnings in that
period. The provision is equal to the amount required to maintain the allowance for loan losses at a level that, in our judgment, is adequate to absorb probable loan losses inherent in the loan portfolio.

Our provision for loan losses was $69.1 million and $100.1 million for the three and six months ended June 30, 2008, respectively, compared to $1.9 million and $3.2
million for the corresponding periods of 2007. Factors that impact the provision for loan losses are net charge-offs or recoveries, changes in the size of the loan portfolio, and the recognition of changes in current risk factors. The significant
increase in the provision for loan losses for the three and six months ended June 30, 2008 is primarily attributable to the Companys residential construction and land loan portfolio which continues to experience deterioration in estimated
collateral values and repayment abilities of some of the Companys customers. Other reasons for the increase are attributable to an overall increase in nonperforming assets, an increase in our potential problem loans and the continuing general
weakening economic conditions in the markets served by the Company. To assist us in identifying weaknesses in our construction and land loan portfolios, we engaged an independent third-party to review these portions of our loan portfolio. The
results of the third-party loan review were taken into account in establishing the provision for loan losses in the first six months of 2008.



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During the second quarter of 2008, we continued to experience significant competitive pressures and challenging market
conditions in the markets in which we operate as the economies in the Las Vegas and Phoenix/Scottsdale areas, as well as the national economy, have continued to show signs of significant weakness. The Las Vegas economy has continued to weaken from
the housing and credit crisis which have had a significant impact on the residential housing markets as well as the commercial real estate markets. The local unemployment rate in Las Vegas has risen to 6.5% as of June 2008 compared to 4.8% a year
earlier and 5.6% as of December 31, 2007. Single family building permits and commercial building permits for June 2008 have decreased 38.1% and 37.8%, respectively, compared to a year earlier. New home sales in June 2008 were down 44.7%
compared to a year earlier. Gaming revenue as of May 2008 decreased 16.4% compared to a year earlier. As of June 2008, the office market had a vacancy rate of 16.1% up from 11.0% a year earlier. As of June 2008, the retail vacancy rate reached 6.0%
compared to 3.3% a year earlier. According to one Las Vegas economist, these factors help corroborate the presence of a current recession in the Southern Nevada market. The Phoenix/Scottsdale economy is experiencing similar weakening as the local
unemployment rate in the Phoenix area has risen to 4.3% as of June 2008 compared to 3.1% a year earlier and 3.8% as of December 31, 2007. Total housing sales in April 2008 were down 27.7% compared to a year earlier. Total new housing units
authorized in April 2008 were down 32.4% from a year earlier. As a result, the residential housing markets in the Las Vegas and Phoenix areas have continued to experience a significant decline with growing inventories of newly constructed
one-to-four family residential homes and declining property values. The weakness in the residential market has begun to expand into the commercial real estate market as builders and related industries downsize. The extent of the impact of the
deterioration of the Nevada and Arizona economies and real estate markets on certain segments of our loan portfolio, namely our residential construction and land loans, began to be realized toward the end of the first quarter of 2008 as project
delays mounted and updated appraisals showing significant lower valuations were received. With many real estate projects requiring an extended time to market, some of our borrowers have exhausted their liquidity which requires us to place the loan
into nonaccrual status. These economic trends have begun to adversely affect our asset quality with nonaccrual loans increasing to $241.8 million as of June 30, 2008 compared to $13.1 million at December 31, 2007. Nonperforming loans as a
percentage of gross loans were 16.23% as of June 30, 2008 compared to 0.84% at December 31, 2007. Nonperforming assets as a percentage of total assets were 13.68% as of June 30, 2008 compared to 0.75% as of December 31, 2007. In
addition, our potential problem loans totaled approximately $156.0 million at June 30, 2008 compared to $84.5 million at December 31, 2007. For the three and six months ended June 30, 2008, net charge-offs as a percentage of average
loans were 1.82% and 2.40%, respectively compared to less than 0.01% for the corresponding periods in 2007. OREO was $16.3 million at June 31, 2008 compared to $110,000 at December 31, 2007. Continuation of these economic and real estate
factors are likely to continue to affect our asset quality and overall performance.

The specific increase in the allowance for loan losses reflects
specific reserves on impaired loans as required by SFAS 114, general reserves based on various qualitative and quantitative factors reflecting among other things a significant increase in nonaccrual loans and the migration of loans categorized as
potential problem loans in the first quarter of 2008 into higher regulatory grades in the second quarter of 2008.

The ratio of nonperforming loans to
total gross loans was 16.23% at June 30, 2008 compared to 0.84% at December 31, 2007. The ratio of the allowance for loan losses to gross loans was 5.08% at June 30, 2008 compared with 1.24% at December 31, 2007. The ratio of the
allowance for loan losses to nonperforming loans was 31.29% at June 30, 2008 compared with 147.60% at December 31, 2007. Nonperforming loans increased to $252.0 million at June 30, 2008 from $13.1 million at December 31, 2007.
See  Critical Accounting Policies  Allowance for Loan Losses.

Other Income. We earn non-interest income primarily
through gains on sales of loans, fees related to services provided to deposit customers, and fees related to services provided to current and potential loan customers.

Total non-interest income decreased $429,000, or 22.9%, to $1.4 million for the three months ended June 30, 2008 from $1.9 million for the corresponding period of 2007. Total non-interest income decreased $1.1
million, or 24.9%, to $3.4 million for the six months ended June 30, 2008 from $4.5 million for the corresponding period of 2007. These decreases are primarily attributable to a decrease in gain on sales of loans, due to the overall decrease in
market demand for these products which affected the timing of origination and sale of these loans, as well as a general decline in the premiums obtained from the sale of these loans. The table below represents a breakdown of our other income for the
periods indicated.



|                                          |  |                                    |       |   |                                  |   |       |                    |  |   |      |   |      |   |       |                    |   |       |   |  |   |        |  
|----------------------------------------- |  | ---------------------------------- | ----- | - | -------------------------------- | - | ----- | ------------------ |  | - | ---- | - | ---- | - | ----- | ------------------ | - | ----- | - |  | - | ------ | -
|                                          |  | For the Three Months EndedJune 30, |       |   | For the Six Months EndedJune 30, |  
|                                          |  | 2008                               |       |   | 2007                             |   |       | Increase(Decrease) |  |   | 2008 |   | 2007 |   |       | Increase(Decrease) |  
|                                          |  | (In thousands)                     |       |   | (In thousands)                   |  
|Gain on sale of loans                     |  | $                                  | 577   |   |                                  | $ | 1,202 |                    |  | $ | (625 | ) |      | $ | 1,822 |                    | $ | 3,033 |   |  | $ | (1,211 | )
|Service charges                           |  |                                    | 258   |   |                                  |   | 221   |                    |  |   | 37   |   |      |   | 523   |                    |   | 420   |   |  |   | 103    |  
|Investment securities gains (losses), net |  |                                    |      |   |                                  |   |      |                    |  |   |     |   |      |   | 52    |                    |   | 31    |   |  |   | 21     |  
|Loan servicing fees, net of amortization  |  |                                    | 74    |   |                                  |   | 61    |                    |  |   | 13   |   |      |   | 141   |                    |   | 250   |   |  |   | (109   | )
|Gain (loss) on disposal of other assets   |  |                                    | (2    | ) |                                  |   | (16   | )                  |  |   | 14   |   |      |   | 1     |                    |   | (16   | ) |  |   | 17     |  
|Other income                              |  |                                    | 538   |   |                                  |   | 406   |                    |  |   | 132  |   |      |   | 875   |                    |   | 830   |   |  |   | 45     |  
|                                          |  |                                    |       |   |                                  |   |       |                    |  |   |      |   |      |   |       |                    |   |       |   |  |   |        |  
|Total non-interest income                 |  | $                                  | 1,445 |   |                                  | $ | 1,874 |                    |  | $ | (429 | ) |      | $ | 3,414 |                    | $ | 4,548 |   |  | $ | (1,134 | )
|                                          |  |                                    |       |   |                                  |   |       |                    |  |   |      |   |      |   |       |                    |   |       |   |  |   |        |  



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Non-Interest Expense. Non-interest expense increased $19.9 million, or 195.3%, to $30.0 million for the
three months ended June 30, 2008 from $10.2 million for the corresponding period of 2007. Non-interest expense increased $22.7 million, or 116.1%, to $42.3 million for the six months ended June 30, 2008 from $19.6 million for the
corresponding period of 2007. These increases were significantly affected by an impairment charge of $18.8 million, representing a full-write down of the Companys goodwill asset, which was originally recorded with the acquisition of Choice
Bank. The impairment charge was the result of the Company completing an impairment valuation test of its goodwill asset during the quarter due to the continued deterioration of market conditions as well as continued deterioration in our credit
quality. The increases are also attributable to our overall growth, specifically to the opening of new branches and hiring of new loan officers and other employees, as well as increased expenses related to operating as a public company. Salaries and
employee benefit costs decreased $1.3 million from the three months ended June 30, 2007 to the corresponding period of 2008 as a result of decreased loan commissions and bonus accruals, offset by additional employees, related increased benefit
costs, and normal salary increases. Salaries and employee benefit costs increased $283,000 from the six months ended June 30, 2007 to the corresponding period of 2008 reflecting overall franchise growth. Occupancy expenses increased $356,000
and $797,000, respectively, from the three and six months ended June 30, 2007 to the corresponding periods of 2008 as a result of additional property and fixed assets relating to our new branch office openings over the past year as well as
recent lease termination costs associated with our decision to slow our branch expansion in future quarters. Depreciation and amortization expense increased $187,000 and $367,000, respectively, from the three and six months ended June 30, 2007
to the corresponding periods of 2008 as a result of the increase in property and equipment associated with our new branch office openings over the past year. Insurance expense increased $61,000 and $306,000, respectively, from the three and six
months ended June 30, 2007 compared to the corresponding periods of 2008, due to increased insurance costs and an increase in FDIC deposit insurance assessments given to all banks since the second quarter of 2007. Professional fees expense
increased $1.1 million and $1.2 million, respectively, from the three and six months ended June 30, 2007 to the corresponding periods of 2008 due to the increase in size and complexity of the Company and increased legal, audit, accounting,
compliance, and loan review fees associated with being a public company and the challenging economic environment. Losses on other real estate owned increased $152,000 and decreased $14,000, respectively, from the three and six months ended
June 30, 2007 compared to the corresponding periods of 2008 due to the significant increase in OREO and related transactions to dispose of properties acquired in foreclosures. Other non-interest expense increased $415,000 and $895,000,
respectively, from the three and six months ended June 30, 2007 compared to the corresponding periods of 2008, due to our overall franchise growth. The table below sets forth the components of our non-interest expense for the periods indicated.



|                                                       |  |                                    |        |      |                                  |                    |  |   |        |   |      |   |                    |  |   |        |  |   |        |  
|------------------------------------------------------ |  | ---------------------------------- | ------ | ---- | -------------------------------- | ------------------ |  | - | ------ | - | ---- | - | ------------------ |  | - | ------ |  | - | ------ | -
|                                                       |  | For the Three Months EndedJune 30, |        |      | For the Six Months EndedJune 30, |                   
|                                                       |  | 2008                               |        | 2007 |                                  | Increase(Decrease) |  |   | 2008   |   | 2007 |   | Increase(Decrease) | 
|                                                       |  | (In thousands)                     |        |      | (In thousands)                   |                   
|Salaries, wages and employee benefits                  |  | $                                  | 5,160  |      | $                                | 6,414              |  | $ | (1,254 | ) |      | $ | 12,527             |  | $ | 12,244 |  | $ | 283    |  
|Occupancy                                              |  |                                    | 1,208  |      |                                  | 852                |  |   | 356    |   |      |   | 2,365              |  |   | 1,568  |  |   | 797    |  
|Depreciation and amortization                          |  |                                    | 800    |      |                                  | 613                |  |   | 187    |   |      |   | 1,572              |  |   | 1,205  |  |   | 367    |  
|Insurance                                              |  |                                    | 613    |      |                                  | 552                |  |   | 61     |   |      |   | 927                |  |   | 621    |  |   | 306    |  
|Professional fees                                      |  |                                    | 1,544  |      |                                  | 463                |  |   | 1,081  |   |      |   | 2,474              |  |   | 1,314  |  |   | 1,160  |  
|Advertising, public relations and business development |  |                                    | 286    |      |                                  | 226                |  |   | 60     |   |      |   | 599                |  |   | 451    |  |   | 148    |  
|Customer service expense                               |  |                                    | 57     |      |                                  | 100                |  |   | (43    | ) |      |   | 149                |  |   | 187    |  |   | (38    | )
|Goodwill impairment                                    |  |                                    | 18,835 |      |                                  |                   |  |   | 18,835 |   |      |   | 18,835             |  |   |       |  |   | 18,835 |  
|Loss on other real estate owned                        |  |                                    | 152    |      |                                  |                   |  |   | 152    |   |      |   | 168                |  |   | 182    |  |   | (14    | )
|Other                                                  |  |                                    | 1,358  |      |                                  | 943                |  |   | 415    |   |      |   | 2,717              |  |   | 1,822  |  |   | 895    |  
|                                                       |  |                                    |        |      |                                  |                    |  |   |        |   |      |   |                    |  |   |        |  |   |        |  
|Total non-interest expense                             |  | $                                  | 30,013 |      | $                                | 10,163             |  | $ | 19,850 |   |      | $ | 42,333             |  | $ | 19,594 |  | $ | 22,739 |  
|                                                       |  |                                    |        |      |                                  |                    |  |   |        |   |      |   |                    |  |   |        |  |   |        |  

Income Taxes.Total income tax benefit was $12.8 million for the three months ended June 30,
2008, a difference of $16.5 million or 452.3% compared with total income tax expense of $3.6 million for the corresponding period of 2007. Total income tax benefit was $20.8 million for the six months ended June 30, 2008, a difference of $27.9
million or 395.8% compared with total income tax expense of $7.0 million for the corresponding period of 2007. Our effective federal income tax rate was 17.0% and 21.3%, respectively, for the three and six months ended June 30, 2008, compared
to 37.1% and 37.5% for the corresponding periods of 2007. The income tax benefit is due to the losses incurred for the three and six months ended June 30, 2008 before income taxes, partially offset by a valuation charge of $10.7 million to the
Companys net deferred tax assets incurred during the three months ended June 30, 2008. Our largest deferred tax asset component relates to our allowance for loan losses. The allowance for loan losses represents future tax benefits which
would be realized when actual charge-offs are made against the allowance. To the extent available, sources of taxable income, including those available from prior years under tax regulations, are deemed per GAAP to be insufficient to absorb
tax losses, and a valuation allowance is therefore necessary. The valuation loss increased by $10.7 million during the three months ended June 30, 2008.

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. The value at cost of our FHLB stock at June 30, 2008
is approximately $6.0 million. In August 2008, we were granted access to the Federal Reserve Bank of San Franciscos discount window for up to $97.0 million. The borrowing capacity granted to the Bank by the Federal Reserve is in addition to
any borrowing capacity available to the Company from the FHLB.



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Cash and cash equivalents (consisting of cash and due from banks and federal funds sold), totaled $240.1 million at
June 30, 2008, an increase of $226.3 million, or 1635.1%, from $13.8 million at December 31, 2007. This increase is due to our concerted efforts to increase our liquidity.

As of August 12, 2008, the most recent practicable date, the Companys cash and cash equivalents were $85.7 million. Also, as of that date, the Company did not have access to purchase federal funds under
agreements with other correspondent banks and it had outstanding borrowings from the FHLB of $107.0 million, which is our maximum borrowing capacity from the FHLB at this time. However, the Company did have access to the Federal Reserve Bank of San
Franciscos discount window for up to $97.0 million, none of which had been borrowed as of August 12, 2008.

Deposit flows, calls of investment
securities and borrowed funds, and prepayments of loans 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 $306.0 million during the six months ended June 30, 2008 compared with a net increase of $259.0
million during the corresponding period of 2007. The majority of this increase is attributable to an increase in brokered deposits and time deposits. 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 June 30, 2008, there were $1.16 billion 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 44.1% of our total deposits and our five largest depositors accounted for approximately 35.9% of our total deposits at June 30, 2008. Our four largest
depositors accounted for $594.2 million, or 34.3% of total deposits at June 30, 2008. The deposit balances of these four largest 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. 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, 2007 to June 30, 2008 have fluctuated, ranging from a high of $753.1 million, or 41.7% of total deposits to a low of $228.3 million, or 22.2% 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. In addition, our adequately capitalized classification will require FDIC approval to accept, renew, or roll-over brokered deposits.

We believe that our net income has not been, and we 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 have 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, two of our five largest 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, one of our largest twenty depositors is a title insurance
company. 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. We have approximately $103.1 million in brokered time deposits scheduled to mature in the
third quarter of 2008. As of August 12, 2008, the most recent practicable date, we had no money market deposit accounts which are considered brokered deposits. Also, as of that date, the Companys total brokered deposits were $620.7
million. Depending on the interest rate environment and competitive factors, these deposits may need to be replaced with higher cost funding.

For the six
months ended June 30, 2008, we experienced a net decrease in other borrowed funds, federal funds purchased and securities sold under repurchase agreements of approximately $22.0 million, compared to a net increase of $23.1million during the
corresponding period of 2007. The net decrease in the first six months of 2008 reflects our ability to use deposits as our primary source of funds. In July and August 2008, the Companys capacity to purchase federal funds under agreements with
other lending institutions was reduced to zero as compared to approximately $39.0 million at June 30, 2008, approximately $104.0 million at March 31, 2008 and approximately $90.5 million as of December 31, 2007. At June 30, 2008,
there were $67.0 million in borrowed funds scheduled to mature within one year.



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Our primary use of funds is for the origination of loans and providing the needs of our deposit customers. Our net
increase in total loans was $50.9 million during the six months ended June 30, 2008 compared with $295.4 million for the corresponding period in 2007. The decrease in net loan originations for the first six months of 2008 reflected the overall
decrease in demand for loans in the markets in which we operate reflecting the worsened economic conditions as well as our overall strategy to slow our overall loan growth.

Cash flow from our investment activities included purchases of securities for our investment portfolio during the six months ended June 30, 2008, which were $31.4 million compared with $18.4 million during the
corresponding period of 2007. The increase in purchases of securities reflected the decreased demand for our loan products as well as increasing the liquidity value of our assets. The proceeds from maturing of securities available-for-sale were
$26.1 million during the six months ended June 30, 2008 compared with $26.9 million during the corresponding period of 2007. The proceeds from sale of securities available-for-sale were $5.3 million during the six months ended June 30,
2008 compared with $4.3 million during the corresponding period of 2007.

Other sources of liquidity for Silver State Bancorp may include dividend payments
from our subsidiary bank. During 2007 and the first six months of 2008, Silver State Bancorp did not receive any capital distributions from its subsidiary banks. On April 1, 2008, our subsidiary Choice Bank merged with and into Silver State
Bank. Applicable federal and state law may limit the amount of capital distributions Silver State Bank may make.

At June 30, 2008, the Company was
considered to be adequately capitalized with a total capital to risk weighted assets ratio of 9.0%, Tier 1 capital to risk weighted assets ratio of 5.1% and a Tier 1 capital to average assets, or leverage, ratio of 4.5%. At June 30,
2008, Silver State Bank was also considered to be adequately capitalized with a total capital to risk weighted assets ratio of 8.9%, Tier 1 capital to risk weighted assets ratio of 7.6%, and a Tier 1 capital to average assets, or
leverage, ratio of 6.6% The Company will incur increased premiums for deposit insurance and also be required to obtain FDIC approval to accept, renew, or roll-over brokered deposits during such times as we are considered to be adequately
capitalized for regulatory capital purposes. In addition, falling below the well-capitalized level has triggered acceleration of certain of our brokered deposits held as money market accounts and has resulted in the non-renewal of
brokered deposits held as CDs which has had a material impact on our liquidity.

We continue to consider a variety of strategic alternatives to enhance our
capital position and strengthen our balance sheet. In April 2008, to assist us in evaluating these alternatives, our Board of Directors enlisted the services of Keefe, Bruyette & Woods, Inc., a nationally recognized investment banking firm.
In addition, during the second quarter of 2008, we filed a registration statement with the SEC with respect to a rights offering of up to $40.0 million, which continues to be an alternative that the Company is considering.

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 the first six months of 2008 and did not have any such hedging
transactions in place at June 30, 2008, which would create other off-balance sheet arrangements.

We have also committed to irrevocable and
unconditional limited guarantees with respect to the holders of trust preferred securities of our unconsolidated trust subsidiaries to the extent that Silver State Capital Trust II, Silver State Capital Trust III, Silver State Capital Trust IV,
Silver State Capital Trust V, and Silver State Capital Trust VI have received interest payments from us on our issued junior subordinated debt, but have not made payments or distributions to the holders of their trust preferred securities for the
following: (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. On July 30, 2008, the Companys board of directors elected to defer further
interest payments on each of the Companys series of junior subordinated debt securities relating to the trust preferred securities of Silver State Capital Trust II, Silver State Capital Trust III, Silver State Capital Trust IV, Silver State
Capital Trust V and Silver State Capital Trust VI. As a result of the Companys election to defer interest payments of junior subordinated debt securities relating to the trust preferred securities, we do not expect to have access to the debt
markets until we become current on these obligations.

We also have entered into long-term contractual obligations consisting of advances from FHLB. These
advances are secured with collateral generally consisting of securities. As of June 30, 2008, these long-term FHLB advances totaled $47.0 million and will mature by October 25, 2010.

Our commitments associated with commitments to extend credit were $288.1 million at June 30, 2008 compared to $530.9 million at December 31, 2007. Our
commitments associated with standby letters of credit were $2.7 million at June 30, 2008 compared to $2.5 million at December 31, 2007.



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Critical Accounting Policies

Note 1 to our Audited Consolidated Financial Statements for the year ended December 31, 2007, included in our Annual Report on Form 10-K, contains a summary of our significant accounting policies, including discussions on recently
issued accounting pronouncements, our adoption of them and the related impact of their adoption. 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 our Audit Committee and our
Board of Directors. The following is a discussion of these critical accounting policies and significant estimates. Additional information about these policies can be found in Note 1 of the Audited Consolidated Financial Statements filed with the SEC
on Form 10-K.

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 these 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. 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 quarterly, 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. Continuing into the first six months of 2008, we decided to make further increases to the environmental loss factors due to the weaknesses in the real estate
markets in which we operate, significant declines in appraisal valuations received late in the first quarter of 2008, increases in nonperforming loans, increases in potential problem loans, and the general weakening of the local economies in the
markets in which we operate. In the event that our residential construction and land portfolio continues to experience deterioration in estimated collateral values, we may have to further adjust and discount the appraised values for the collateral
underlying the loans in that portfolio, which could result in significant increases to our provision for loan losses.

We consider the ratio of the
allowance for loan losses to total loans at June 30, 2008 to be at an acceptable level. 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.

Valuation Allowance of Deferred Income Taxes. The Company accounts for federal income taxes in accordance with the
provisions of SFAS No. 109, Accounting for Income Taxes. Pursuant to the provisions of SFAS No. 109, a deferred tax liability or deferred tax asset is computed by applying the current statutory tax rates to net taxable or
deductible differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements that will result in taxable or deductible amounts in future periods. Deferred tax assets are recorded only to the
extent that the amount of net deductible temporary differences or carryforward attributes may be utilized against current period earnings, carried back against prior years earnings, offset against taxable temporary differences reversing in
future periods, or utilized to the extent of managements estimate of future taxable income. A valuation allowance is provided for deferred tax assets to the extent that the value of net deductible temporary differences and carryforward
attributes exceeds managements estimates of taxes payable on future taxable income. Deferred tax liabilities are provided on the total amount of net temporary differences taxable in the future.

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 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 income. 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.



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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. The Company annually reviews the goodwill for impairment in accordance with SFAS No. 142, Goodwill and
Other Intangible Assets. 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. The Company determined that such an event occurred during the three months ended June 30,
2008.

During this period, the general market conditions in the markets we operate continued to deteriorate as well as the continued deterioration in our
credit quality. These market conditions and related credit concerns caused valuations for financial institutions to decrease significantly during the three months ended June 30, 2008. The market price of the Companys stock declined from
$8.71 on April 1, 2008 to $2.07 at June 30, 2008.

As a result of the above conditions, the Company completed an interim impairment valuation
test of its $18.8 million goodwill asset during the three months ended June 30, 2008. As a result of this impairment test, the Company recorded a full impairment charge to the goodwill asset of $18.8 million. The goodwill impairment charge had
no impact on the Companys tangible capital levels, tangible book value per share, regulatory capital ratios or liquidity.



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|ITEM 3. | Quantitative and Qualitative Disclosures 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 2007, the market yield curve
was primarily flat. During the final four months of 2007 and the first four months of 2008, there were significant decreases in short-term interest rates which resulted in a more positively sloped yield curve. There have been no further declines in
interest rates in May and June of 2008 and the yield curve has remained positively sloped. Our earnings are adversely affected by a decrease in interest rates because a significant majority of our interest-earning assets are variable rate
instruments that will reprice faster than our interest-bearing liabilities, which will result in further compression of our net interest margin. Any further decreases in these short-term interest rates will likely have a similar effect. In addition,
although more discretionary, rates for our interest-bearing deposits are slower to adjust to the decreases in rates due to competitive pressures.

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. We were also recently granted access to the FRB discount window for up to $97.0 million. 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.

June 30,
2008

Sensitivity of Net Interest Income



|                       |  |                             |        |                           |       |  
|---------------------- |  | --------------------------- | ------ | ------------------------- | ----- | -
|Interest Rate Scenario |  | Adjusted NetInterest Income |        | PercentageChangefrom Base |      
|                       |  | (Dollars in thousands)      |       
|Up 300 basis points    |  | $                           | 57,624 |                           | 11.8  | %
|Up 200 basis points    |  |                             | 55,608 |                           | 7.9   |  
|Up 100 basis points    |  |                             | 53,578 |                           | 3.9   |  
|BASE                   |  |                             | 51,557 |                           |      |  
|Down 100 basis points  |  |                             | 45,628 |                           | (11.5 | )
|Down 200 basis points  |  |                             | 39,694 |                           | (23.0 | )
|Down 300 basis points  |  |                             | 35,177 |                           | (31.8 | )

Our percentage change for increases or decreases in net interest income by 200 basis points were 7.9% and
(23.0%) for the six months ended June 30, 2008 compared to 10.4% and (9.6%) for the year ended December 31, 2007.



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|ITEM 4. | Controls and Procedures
|------- | -----------------------

In connection with the preparation of this
Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of our acting Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the acting Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosures. Solely as a result of the material weakness relating to impaired loans described below, our acting Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30,
2008, our disclosure controls and procedures were ineffective.

A material weakness is a control deficiency, or combination of control deficiencies, that
results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. Our independent auditors identified the following material weakness in connection with
managements preparation of the consolidated financial statements for the quarter ended June 30, 2008:

The Company experienced significant
declines in the as-of valuations for certain residential (construction and land loans) collateral related to the Companys loan portfolio late in the first quarter of 2008, and continuing through May 2008. The Companys initial internal
allowance for loan loss calculation as of March 31, 2008 did not reflect a qualitative adjustment for impaired loans for which updated appraisals had not yet been received. The Companys independent auditors communicated to management that
such an adjustment would be appropriate. As a result, a qualitative adjustment was recorded to the allowance for loan losses as of March 31, 2008, in the amount of approximately $6.0 million. As of June 30, 2008, the Company implemented
new discount guidelines for evaluating appraisals relating to impaired loans. In connection with the Companys independent auditors review procedures, they identified an impaired loan that was not properly evaluated by management. As a result
and in connection with other subsequent event considerations, management recorded approximately $4.5 million of additional provision for loan losses as of June 30, 2008 which is reflected in this Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2008.

Management feels the new discount guidelines for appraisals on impaired loans, combined with the additional controls
implemented recently, will fully remediate this material weakness on a prospective basis.

Notwithstanding managements assessment that our disclosure
controls and procedures were ineffective as of June 30, 2008 due to the material weakness described above, we believe that the consolidated financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our
consolidated financial condition as of June 30, 2008 and December 31, 2007 and consolidated results of operations and cash flows for the three and six month periods ended June 30, 2008 and 2007, in conformity with GAAP.

In addition, there were no other changes in our internal control over financial reporting that occurred during the three months ended June 30, 2008 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION



|ITEM 1. | Legal Proceedings
|------- | -----------------

Southwest Exchange, a former customer of Silver
State Bank, is currently under investigation and reported to be a defendant in a number of lawsuits 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 two other complaints (along with several other defendants) alleging conversion, breach of fiduciary duty, negligence, fraud
and civil RICO claims. More than a year has elapsed since the filing of those complaints, and they have not been served on Silver State Bank.

Silver State
Bank was also recently named, along with 41 other named defendants, as a defendant in a consolidated litigation pending before the Nevada District Court, Clark County (P&D Kelesis, LLC et al. v. Southwest Exchange, et al., Case No. A535439),
claiming causes of action for conversion and negligence per se against the Bank. The plaintiffs purported to serve Silver State Bank with this complaint on February 7, 2008. The amount claimed in this consolidated lawsuit is approximately $12.7
million. On April 11, 2008, the plaintiffs served the Bank with an amended complaint, claiming causes of action for breach of fiduciary duty, conversation, negligence per se, unjust enrichment, and Breach of Uniform Fiduciaries Act. On
May 2, 2008, some, but not all, additional claimants joined in the Amended Claims (the Albrittons Claims). The Albrittons Claims total $8.0 million, bringing total claims against Silver State Bank related to this matter
to approximately $20.7 million. The Bank filed a motion to dismiss the complaint (or in the alternative, for summary judgment) which was denied by the court to allow the plaintiffs additional time for discovery. The Company expects that the
discovery period will extend into the fourth quarter of 2008. After the period for discovery, the plaintiffs may amend the complaint, which amendment may include an increase for damages requested, and we may file new motions for dismissal or summary
judgment.

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 until the claims are
dismissed.

We are not involved in any other 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.



|ITEM 1A. | Risk Factors
|-------- | ------------

We experienced a net loss in the second quarter
of 2008 directly attributable to a substantial deterioration in our residential construction and residential land loan portfolio and the resulting increase in our provision for loan losses, an impairment charge representing a full write-down of our
goodwill asset and the establishment of a valuation allowance to our net deferred assets, and we are likely to experience additional losses in the third quarter of 2008, which will likely mean a net loss for the 2008 fiscal year.

We realized a net loss of $73.2 million in the second quarter of 2008. The net loss in the second quarter is the direct result of a $69.1 million provision to our
loan loss reserve, an impairment charge of $18.8 million representing a full write-down of our goodwill asset and the establishment of a valuation allowance of $10.7 million to our net deferred tax assets. The loan loss reserve is the amount
required to maintain the allowance for loan losses at an adequate level to absorb probable loan losses. The increase in the provision for loan losses is primarily attributable to our residential construction and residential land loan portfolios,
which continue to experience deterioration in estimated collateral values and repayment abilities of some of our customers. Other reasons for the increase in the provision for loan losses are attributable to an overall increase in nonperforming
assets and the continuing general weakening economic conditions and decline in real estate values in the markets served by the Company. The $18.8 impairment charge was the result of the Company completing an impairment valuation test of its goodwill
asset during the quarter due to the continued deterioration of market conditions as well as continued deterioration in our credit quality. This is a one time charge. The $10.7 million valuation allowance to our net deferred tax assets is related to
certain tax aspects involving the allowance for loan losses.

At June 30, 2008, our nonaccrual loans were $241.8 million compared to $13.1 million at
December 31, 2007 and our potential problem loans were $156.0 million compared to $84.5 million at December 31, 2007. For the six months ended June 30, 2008, net charge-offs as a percentage of average loans were 2.40% compared to less
than 0.01% for the corresponding period in 2007. These increases are primarily due to our residential construction and residential land loan portfolio.

At
June 30, 2008, approximately 91% of total gross loans were classified as real estate loans, with approximately 10% of real estate loans being classified as residential construction loans and approximately 21% being classified as residential
land loans.



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The deterioration in our construction and land loan portfolios has been caused primarily by the weakening Las Vegas
economy, 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 6.5% as of June 2008 compared to 4.8% a year earlier and 5.6% at December 31, 2007. New home sales in June 2008 were down 44.7% compared to a year earlier. In the Phoenix area, total housing sales in April 2008 were
down 27.7% compared to a year earlier and total new housing units authorized in April 2008 were down 32.4% compared to a year earlier. 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. With many real estate projects requiring an extended time to market, some of our borrowers have exhausted their liquidity which
may require us to place their loans into nonaccrual status.

To assist us in identifying weaknesses in our construction and land loan portfolios, we
ordered updated appraisals on the real estate collateral underlying these loans and, in April 2008, we engaged an independent third party to review our construction and land loan portfolios. The results of appraisal updates and the results of the
independent loan review were taken into account in establishing our provision for loan losses in the second quarter of 2008.

Although the independent loan
review has been completed, we continue to receive updated appraisals, and, as a result, it is likely that additional deterioration will be identified in the third quarter of 2008.

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 loans in our loan portfolio, specifically construction and land loans.
Construction lending involves additional risks as 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 the appraisal value, which includes various assumptions, 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 often does not generate any cash flow to support the debt service.

Our financial condition may be adversely affected by a decline in the value of the real estate securing our loans. Real estate values have recently been declining in
most of our markets, which may adversely affect our financial condition. If we continue to receive updated appraisals revealing significant additional weaknesses in our collateral, it will likely result in further losses.

Silver State Bancorp and the Bank are no longer considered well capitalized for regulatory purposes, which will cause us to incur increased premiums
for deposit insurance, require FDIC approval to gather brokered deposits, and has triggered acceleration of certain of our brokered deposits.

As
of June 30, 2008, neither Silver State Bancorp nor Silver State Bank are considered well capitalized for regulatory capital purposes. As a result, the FDIC will assess higher deposit insurance premiums on the Bank, which will impact
our earnings. In addition, we will be required to obtain FDIC approval to gather brokered deposits during such times as we remain adequately capitalized for regulatory capital purposes. Requiring us to obtain regulatory approval prior to
accepting brokered deposits will affect our ability to increase our liquidity position, in some cases, in a timely manner. Further, being adequately capitalized has triggered acceleration of certain of our brokered deposits held as money
market accounts and has resulted in the non-renewal of brokered deposits held as CDs, which has had a material impact on our liquidity.

Our capital
ratios will likely restrict our ability to grow our balance sheet as we have in the past, which could adversely affect our results of operations, financial condition and liquidity.

The net loss in the second quarter of 2008 has reduced our stockholders equity at June 30, 2008, and we expect additional losses for the third quarter of
2008, further reducing stockholders equity. If we experience additional losses in the future, it will likely restrict our ability to grow our balance sheet as we have in the past. Accordingly, our primary short-term strategy is to manage our credit
quality and strengthen, rather than grow, our balance sheet. If our credit quality continues to deteriorate, additional decreases to stockholders equity beyond the third quarter may occur. Any future growth of the Bank may subject the Bank to
the risk that such growth, absent an increase in the Banks regulatory capital, would cause the Bank to fall below the minimum requirements to be considered adequately capitalized. If we are not able to grow our assets, our results of
operations, financial condition and liquidity may be adversely affected.



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If the Banks current capital ratios decline below the regulatory threshold for an adequately
capitalized institution, we will be considered undercapitalized, which will have a material and adverse effect on us.

Although
both Silver State Bancorp and the Bank meet the requisite capital ratios to be considered adequately capitalized, if the Banks current capital ratios decline below the minimum requirements to be considered adequately
capitalized, the Bank will be considered undercapitalized, which will have a material and adverse effect on us.

The Federal Deposit
Insurance Act (FDIA) requires each federal banking agency to take prompt corrective action with respect to banks that do not meet minimum capital requirements. Once a bank becomes undercapitalized, it is subject to various requirements and
restrictions, including a prohibition on the payment of capital distributions and management fees, restrictions on the growth of the banks assets, and a requirement for prior regulatory approval of certain expansion proposals. In addition, an
undercapitalized institution must file a capital restoration plan with its principal federal regulator demonstrating how it plans to return to capital compliance. In order for the plan to be accepted by the regulator, any holding company of the bank
must guarantee the plan up to certain specified limitations.

If an undercapitalized bank either does not submit a capitalization plan or fails in any
material respect to implement a plan approved by its regulator, the agency may impose additional restrictions on the bank. These include, among others, requiring the recapitalization or sale of the bank, restricting transactions with affiliates,
limiting interest rates the bank may pay on deposits, and prohibiting any holding company of the bank from making capital distributions without the prior approval of the Federal Reserve Board (FRB) or requiring a holding company to divest its
subsidiary depository institution or non-depository affiliates. Further, even after the bank has attained adequately capitalized status, the appropriate federal banking agency may, if it determines, after notice and hearing, that the bank is in an
unsafe or unsound condition or has not corrected a deficiency from its most recent examination, treat the bank as if it were undercapitalized and subject the bank to the regulatory restrictions of such lower classification.

In addition to measures taken under the prompt corrective action provisions with respect to undercapitalized institutions, insured banks and their holding companies may
be subject to potential enforcement actions by their regulators for unsafe and unsound practices in conducting their business or for violations of law or regulation, including the filing of a false or misleading regulatory report. Enforcement
actions under this authority may include the issuance of cease and desist orders, the imposition of civil money penalties, the issuance of directives to increase capital, formal and informal agreements, or removal and prohibition orders against
institution-affiliates parties (generally bank insiders). Further, the FRB may bring an enforcement action against a bank holding company either to address undercapitalization in the holding company or to require the holding company to
take measures to remediate undercapitalization in a subsidiary. Although each of the Company and the Bank are well within the adequately capitalized regulatory thresholds, it is possible that if they continue to realize losses over the
next few quarters, they may fall into the undercapitalized regulatory classification, which would have a material and adverse effect on us.

The greater Las Vegas and Phoenix/Scottsdale economies continue to weaken. The continuation of this weakening could seriously affect Silver States profitability and asset quality.

Las Vegas and Phoenix, the primary markets in which we operate, each experienced dramatic economic growth for many years, which fueled a demand for our loans and deposit
products. The Las Vegas economy began weakening in the second half of 2007 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, caused the local unemployment rate to rise. The Las Vegas economy continued experiencing weakness in the first half of 2008 as the downturn in the national economy adversely affected tourism and the sluggish
credit markets put some projected resort properties on hold. The local unemployment rate in Las Vegas has risen to 6.5% as of June 2008 compared to 4.8% a year earlier and 5.6% as of December 31, 2007. Single family building permits and
commercial building permits for June 2008 have decreased 38.1% and 37.8%, respectively, compared to a year earlier. New home sales in June 2008 were down 44.7% compared to a year earlier. Gaming revenue as of May 2008 decreased 16.4% compared to a
year earlier. As of June 2008, the office market had a vacancy rate of 16.1% up from 11.0% a year earlier. As of June 2008, the retail vacancy rate reached 6.0% compared to 3.3% a year earlier. In the Phoenix metropolitan area, the housing market
continued to struggle during the first half of 2008, with total housing sales in April 2008 down 27.7% compared to a year earlier and total new housing units authorized in April 2008 down 32.4% from a year earlier. The local unemployment rate in the
Phoenix area has risen to 4.3% as of June 2008 compared to 3.1% a year earlier and 3.8% as of December 31, 2007. It is expected that job growth in Phoenix will continue to idle through 2008 due to the fallout of the financial sector and a slow
down in construction.

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. The weakness in the residential market has begun to expand into the commercial real estate market as builders and related industries downsize. The
extent of the impact of the deterioration of the Nevada and Arizona economies and real estate markets on certain segments of our loan portfolio, namely our residential construction and residential land loans, began to be realized toward the end of
the first quarter of 2008 as project delays mounted and updated appraisals showing significant lower valuations were received. With many real estate projects requiring an extended time to market, some of our borrowers have exhausted their liquidity
which may require us to place their loans into nonaccrual status.

These economic trends have begun to adversely affect our asset quality with nonaccrual
loans increasing to $241.8 million as of June 30, 2008, compared to $13.1 million at December 31, 2007. Nonperforming loans as a percentage of gross loans were 16.23% as of June 30, 2008, compared to 0.84% at December 31, 2007.
Nonperforming assets as a percentage of total assets were 13.68% as of June 30, 2008, compared to 0.75% as of December 31, 2007. In addition, our potential problem loans totaled approximately $156.0 million at June 30, 2008 compared
to $84.5 million at December 31, 2007. For the six months ended June 30, 2008, net charge-offs as a percentage of average loans were 2.40% compared to less than 0.01% for the corresponding period in 2007. OREO was $16.3 million at
June 30, 2008 compared to $110,000 at December 31, 2007. Continuation of these economic and real estate factors are likely to continue to affect our asset quality and overall performance.



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The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in the
local economy.

Originating loans secured by real estate is our primary business. As of June 30, 2008, approximately 59% of our loan portfolio
was secured by real estate located in Nevada and approximately 28% of our loan portfolio was secured by real estate located in Arizona. Due to this geographic concentration, we are susceptible to risks related to downturns in the local economy and
local real estate markets to a greater extent than a more geographically diverse lender.

During the last part of 2007 and the first half of 2008, there
has been a decline in the housing and real estate markets and in the general economy, both nationally and locally, with some reports indicating that the national economy is bordering on a recession. Housing market conditions in the Western quadrant
of the United States, where most of our lending activity occurs, have deteriorated during the last part of 2007 and through the present day as evidenced by reduced levels of sales, increasing inventories of houses on the market, declining house
prices and an increase in the length of time houses remain on the market. It is possible that these conditions will not improve or will worsen or that such conditions will result in a decrease in our interest income, an increase in our
non-performing loans and an increase in our provision for loan losses.

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. The Federal Open Market Committee (FOMC) further reduced the
Discount Rate by 225 basis points and the Federal Funds Rate by 200 basis points during the 2008 first quarter, and by an additional 25 basis points to both rates at its recent meeting in April 2008. These decreases in short-tem interest rates have
resulted in a more positively sloped yield curve. Our prime lending rate had a corresponding decrease, from 7.25% at December 31, 2007 to 5.00% currently, resulting in a decrease in the rates on floating rate loans as well as the rates on new
fixed-rate loans. Our earnings will be adversely affected by a decrease in interest rates because a significant majority of our interest-earning assets are variable rate instruments that will reprice faster than our interest-bearing liabilities,
which will result in further compression of our net interest margin (computed by dividing net interest income by total average earning assets) in 2008. Any further decreases in the Discount Rate and the Federal Funds Rate by the FOMC will likely
have a similar effect. In addition, although more discretionary, rates for our interest-bearing deposits are slower to adjust to the decrease in rates due to competitive pressures. The computation of a prospective effect of a 100 point hypothetical
interest rate decrease results in a decrease of net interest income of (11.5%) for the six months ended June 30, 2008.

In the future, our
earnings may be adversely affected by an increase in interest rates due to 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 increase, customers typically shift funds from lower rate core demand and savings accounts to fixed-rate certificates of deposit in order to lock in higher rates. Further, as a result of the large percentage of
variable rate loans in our loan portfolio, 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 our 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.

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 Michael Thorell, our acting Chief Executive Officer and President and acting Chief Executive Officer of Silver State Bank (previously having been the
Banks Chief Lending Officer and Chief Credit Administration Officer), Michael J. Threet, our Chief Operating and Chief Financial Officer, Calvin D. Regan, President of Silver State Bank, 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.

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. Due to the significant increase in loans originated during this period it is possible that we will 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.



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We have recently had a significant increase in nonperforming assets, potential problem loans, impaired loans and
charge-offs due primarily to residential construction and residential land loans where the borrower has experienced financial difficulty or experienced delays caused by the permitting process, and the general economic slowdown in the markets in
which we operate, which has affected the timing or completion and ultimate disposition of the finished project. As a result of an increase in nonperforming assets, an increase in potential problem loans, and the general weakening economic condition
in the markets we serve, during the second quarter of 2008, we increased our allowance for loan losses to $78.9 million, or 5.08% of gross loans, at June 30, 2008 compared to $19.3 million, or 1.24% of gross loans, at December 31, 2007.
However, even though we increased our allowance for loan losses in the second quarter of 2008, due to a significant increase in our nonperforming loans, our ratio of the allowance for loan losses to nonperforming loans decreased to 31.3% at
June 30, 2008 compared to 147.6% at December 31, 2007. The reduction in this ratio indicates that in the event we incurred a loss on our portfolio of nonperforming loans in excess of our total allowance for loan losses, we would incur a
decrease in our earnings both for the excess of the loss over the amount of the allowance for loan losses and to replenish the allowance to cover potential future losses inherent in the remainder of the 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.

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 91% of our loan portfolio at June 30, 2008, as compared to 91% at December 31, 2007 and approximately 89% of our loan portfolio at
December 31, 2006. Our markets have experienced a sharp increase in real estate values in recent years, in part as the result of historically low interest rates. More recently, real estate values have been declining in the markets in which we
operate.

During the first half of 2008, we continued to experience significant competitive pressures and challenging market conditions in the markets in
which we operate as the economies in the Las Vegas and Phoenix/Scottsdale areas, as well as the national economy, have shown signs of significant weakness. 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. The weakness in the residential market has begun to expand into the commercial real estate market as
builders and related industries downsize. The extent of the impact of the deterioration of the Nevada and Arizona economies and real estate markets on certain segments of our loan portfolio, namely our residential construction and residential land
loans, began to be realized toward the end of the first quarter of 2008 as project delays mounted and updated appraisals showing significant lower valuations were received. With many real estate projects requiring an extended time to market, some of
our borrowers have exhausted their liquidity which requires us to place the loan into nonaccrual status. The Company experienced a decline in the valuations of the real estate collateral for certain portions of its loan portfolio late in the first
half of 2008, and continuing through the present day, as reflected in recently received updated appraisals.

These economic trends have begun to adversely
affect our asset quality with nonaccrual loans increasing to $241.8 million compared to $13.1 million at December 31, 2007. Nonperforming loans as a percentage of gross loans were 16.23% as of June 30, 2008, compared to 0.84% at
December 31, 2007. Nonperforming assets as a percentage of total assets were 13.68% as of June 30, 2008, compared to 0.75% as of December 31, 2007. In addition, our potential problem loans totaled approximately $156.0 million at
June 30, 2008 compared to $84.5 million at December 31, 2007. For the three months ended June 30, 2008, net charge-offs as a percentage of average loans were 2.40% compared to less than 0.01% for the corresponding period in 2007. OREO
was $16.3 million at June 30, 2008 compared to $110,000 at December 31, 2007. Continuation of these economic and real estate factors are likely to affect our asset quality and overall performance.

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. A regulatory conclusion to this effect would likely adversely affect our business
and result in a requirement for increased capital which may not be available at that time.

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, and, as of August 8, 2008, we have been granted access to the Federal Reserve Bank of San
Franciscos discount window for up to $97.0 million in borrowed funds, none of which had been borrowed as of August 12, 2008. As of August 12, 2008, the Company did not have access to purchase federal funds under agreements with other
correspondent banks and it is possible that we will continue to no longer have access to purchase federal funds through correspondent banks in the future. In addition as of this date, the Company had outstanding borrowings from the FHLB of $107.0
million, which is our maximum borrowing capacity from the FHLB at this time.





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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 44.1% of our deposits and our five largest
depositors accounted for approximately 35.9% of our deposits at June 30, 2008. We provided loans to two of our 20 largest depositors as of June 30, 2008. The total aggregate principal balance of these loans was $3.4 million at
June 30, 2008. Our largest depositor as of June 30, 2008 accounted for 20.4% of our total deposits. Of our 20 largest depositors at June 30, 2008, two were related to each other representing 8.4% of our total deposits. Also, of our 20
largest depositors at June 30, 2008, three were entities affiliated with directors of Silver State Bank representing 1.9% of our total deposits. As of any month ended during the first six months of 2008 and all of 2007, we had up to four
depositors who each accounted for more than 5.0% of total 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 June 30, 2008, accounted for $594.2 million, or 34.3%, of our total deposits. At June 30, 2008, 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. 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, 2007 to June 30, 2008 have fluctuated, ranging from a high of $753.1 million, or 41.7% of total deposits to a low of $228.3 million, or 22.2%, 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. We have
approximately $103.1 million in brokered time deposits scheduled to mature in the third quarter of 2008. In July and August 2008, two of our four largest depositors as of June 30, 2008 withdrew approximately $194.8 million in money market
deposits from the Bank. These deposits were considered to be brokered deposits for regulatory purposes. During this same time period, the Bank was able to replace these deposits with brokered time deposits from another customer who was also one of
our four largest depositors as of June 30, 2008. As of August 12, 2008, the most recent practicable date, we had no money market deposit accounts which are considered brokered deposits. Also, as of that date, the Companys total
brokered deposits were $620.7 million.

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, two of our five largest 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, one of our twenty largest depositors are title insurance companies. Part of the
services these financial service 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 and reported to be a defendant in a number of lawsuits 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.

Silver State Bank was also recently named, along with 41 other named defendants, as a defendant in a consolidated litigation pending before the Nevada
District Court, Clark County (P&D Kelesis, LLC et al. v. Southwest Exchange, et al., Case No. A535439), claiming causes of action for conversion and negligence per se against the Bank. The plaintiffs purported to serve Silver State Bank
with this complaint on February 7, 2008. The amount claimed in this consolidated lawsuit is approximately $12.7 million. On April 11, 2008, the plaintiffs served the Bank with an amended complaint, claiming causes of action for breach of
fiduciary duty, conversation, negligence per se, unjust enrichment, and Breach of Uniform Fiduciaries Act. On May 2, 2008, some, but not all, additional claimants joined in the Amended Claims (the Albrittons Claims). The
Albrittons Claims total $8.0 million, bringing total claims against Silver State Bank related to this matter to approximately $20.7 million. The Bank filed a motion to dismiss the complaint (or in the alternative, for summary judgment) which
was denied by the court to allow the plaintiffs additional time for discovery. The Company expects that the discovery period will extend into the fourth quarter of 2008. After the period for discovery, the plaintiffs may amend the complaint, which
amendment may include an increase for damages requested, and we may file new motions for dismissal or summary judgment.



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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 until the
claims are dismissed.

The continued recessionary forces in the local economies that we serve have had a significant adverse impact on our financial
condition and results of operations, which creates an uncertainty about our ability to continue as a going concern.

The continued recessionary
forces in the local economies that we serve have had a significant adverse impact on our financial condition and results of operations. The Company has incurred a net loss of $73.2 million for the three months ended June 30, 2008 and a net loss
of $87.6 million for the six months ended June 30, 2008. Stockholders equity decreased from $157.6 million at December 31, 2007 to $68.8 million at June 30, 2008. The recent losses originate from a provision for loan losses of
$100.1 million, a charge for impairment of goodwill of $18.8 million, a valuation allowance of deferred taxes of $10.7 million for the six month period ended June 30, 2008, and an increase in nonperforming assets which has reduced the
Companys net interest income. The Companys net interest income will continue to be negatively impacted by the level of nonperforming assets, and the Company expects additional losses for the remainder of the year. Further, the
Companys liquidity position has declined subsequent to quarter end. As a result of the losses, the Company is deemed to be adequately capitalized as of June 30, 2008. Nonperforming assets totaled $268.3 million, $79.2 million
and $13.1 million at June 30, 2008, March 31, 2008, and December 31, 2007, respectively. While the Bank has devoted and will continue to devote substantial management resources toward the resolution of all delinquent and
non-performing assets, no assurance can be made that managements efforts will be successful. These conditions create an uncertainty about the Companys ability to continue as a going concern. The unaudited consolidated financial
statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

If the bid price for our
common stock continues to close below $1.00, our common stock may be delisted from The NASDAQ Global Select Market, which could negatively impact the price of our common stock and our ability to access the capital markets.

Our common stock is listed on The NASDAQ Global Select Market (NASDAQ). On August 1, 2008, the bid price of our common stock closed below $1.00, and has continued
to close below $1.00 since such date. If the bid price of our common stock continues to close below the minimum $1.00 per share requirement for 30 consecutive business days, the Company is likely to receive a letter from the NASDAQ Listing
Qualifications Staff (Staff) notifying the Company that it fails to comply with NASDAQs minimum bid price requirement for continued listing set forth in NASDAQ Marketplace Rule 4450(a)(5).

In such a case, the Company would be provided 180 calendar days from the day of the letter to regain compliance. If, at anytime before the end of the 180 calendar
days period, the bid price of the Companys common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Staff would provide written notification to the Company that it has achieved compliance. If the
Company does not regain compliance by the end of the 180 calendar days period, the Companys common stock would be subject to delisting. At that time, the Company would be permitted to appeal the Staffs determination to delist its
securities to a Listing Qualifications Panel.

Pursuant to the NASDAQ Marketplace Rules, the Panel would have the authority to grant the Company up to an
additional 180 days from the date of the hearing to implement the Companys plan of compliance, which could include a reverse stock split if the price has not exceeded $1.00 per share for 10 consecutive business days by that time. In the event
the Panel were to deny the request for continued listing, our common stock may become eligible for quotation and trading on the OTC Bulletin Board.

The
delisting of our common stock from NASDAQ would significantly affect the ability of investors to trade our securities and would significantly negatively affect the value and liquidity of our common stock. In addition, the delisting of our common
stock could materially adversely affect our ability to raise capital on terms acceptable to us or at all. Delisting from NASDAQ could also have other negative results, including the potential loss of confidence by our employees, the loss of
institutional investor interest and fewer business development opportunities.

Our decision to defer interest on our trust preferred securities will
likely restrict our access to the debt markets, significantly limiting our sources of liquidity.

In an effort to preserve the Companys
capital and improve its capital ratios, on July 30, 2008, our board of directors elected to defer further interest payments on each series of our junior subordinated debt securities relating to the trust preferred securities of Silver State
Capital Trust II, Silver State Capital Trust III, Silver State Capital Trust IV, Silver State Capital Trust V and Silver State Capital Trust VI (each an unconsolidated subsidiary of the Company). We have the ability under each indenture for the
junior subordinated debt securities to defer interest payments for up to 20 consecutive calendar quarters without experiencing a default under the indentures. The deferral provisions for these securities were intended to be exercised during
extraordinary times such as the Company is now experiencing.

As a result of our election to exercise our contractual right to defer interest payments on
our junior subordinated debt securities, it is likely that we will not have access to the debt markets until we become current on these obligations. Therefore, we are likely to have greater difficulty in obtaining financing and, thus, will have
fewer sources to enhance our capital and liquidity position.



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Our insurance carrier has notified us of its intent to cancel our director and officers liability policy,
employment practices liability policy, internet banking liability policy, financial institution bond and combination safe deposit policy, effective October 7, 2008. If we are unable to maintain adequate insurance coverage either through our
existing insurance carrier or through another insurance carrier, we will be at a risk of loss for any significant claims brought against us after the cancellation is effected which we are unable to successfully defend.

On August 5, 2008, our insurance carrier notified us of its intent to cancel our director and officers liability policy, employment practices liability policy,
internet banking liability policy, financial institution bond and combination safe deposit policy, effective October 7, 2008, purportedly, as a result of what it contends is a material change in the risk which has caused the risk of loss to be
substantially and materially increased beyond that contemplated when the policies were issued. Directors and officers insurance provides financial protection for our directors and officers in the event they are sued in conjunction with the
performance of their duties as they relate to the Company. Employment practices liability insurance provides us protection against claims made by employees, former employees, or potential employees. It covers discrimination, wrongful termination of
employment, sexual harassment and other employment-related allegations. Internet banking liability insurance provides us protection against losses arising from wrongful internet or electronic banking acts. The financial institution bond protects us
against acts of dishonesty and fraud by our employees, customers and others. The combination safe deposit coverage protects against losses (including damage or destruction) of a customers property held in safe deposit boxes.

The FDIC requires adequate risk management measures in connection with providing deposit insurance, which includes having adequate insurance coverage. Although we do not
believe that our insurance carrier has stated a supportable basis to cancel our insurance coverage for the reasons it has given us, if we are unable to enforce our contractual rights against this insurance carrier, or obtain substantially similar
insurance coverage from another insurance carrier, by October 7, 2008, we will be at a risk of loss for any significant claims brought against us after the cancellation is effected which we are unable to successfully defend. In addition, we are
likely to be subject to enhanced regulatory scrutiny, which may include a directive to seek alternative arrangements, including personal guarantees by directors and shareholders.

For a summary of risk factors relevant to our operations, see our Annual Report on Form 10-K filed on March 14, 2008. There have been no material changes in risk factors relevant to our operations since
March 14, 2008, other than as set forth above.



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|ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Use of Proceeds from Registered Securities. On July 17, 2007, the Companys Registration Statement on Form S-1 covering the offering of 1,500,000 shares of the Companys common stock, Commission file number
333-142110 was declared effective. The net proceeds of the offering to the Company (after deducting the foregoing expenses) were $25.5 million. From July 17, 2007 through June 30, 2008 a total of $20.4 million and $1.5 million of the net
proceeds have been contributed as additional paid-in capital to Silver State Bank and Choice Bank, respectively. In addition, during this same period, the Company has used approximately $3.6 million of the net proceeds to repurchase 282,000 shares
of the Companys outstanding common stock under the stock repurchase program.



|ITEM 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not applicable.



|ITEM 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

An annual
meeting of our stockholders was held on April 30, 2008.

The following proposals were adopted by the margins indicated:



| | 1. | Election of four directors for terms of three years each and the election of one director for the term of one year.
| | -- | -------------------------------------------------------------------------------------------------------------------



|                   |  |                  |  |         |  |         |  |         |  |                
|------------------ |  | ---------------- |  | ------- |  | ------- |  | ------- |  | ---------------
|                   |  | Number of Shares
|                   |  | For              |  | Against |  | Witheld |  | Abstain |  | BrokerNon-Votes
|Brian M. Collins   |  | 11,643,089       |  |        |  | 162,960 |  |        |  | 3,364,716      
|Craig A. McCall    |  | 11,648,589       |  |        |  | 157,460 |  |        |  | 3,364,716      
|Phillip C. Peckman |  | 11,649,429       |  |        |  | 156,620 |  |        |  | 3,364,716      
|Andrew K. McCain   |  | 11,644,889       |  |        |  | 161,160 |  |        |  | 3,364,716      
|Mark S. Bosco      |  | 11,198,677       |  |        |  | 607,372 |  |        |  | 3,364,716      



| | 2. | Ratification of the appointment of McGladrey & Pullen, LLP as the Companys independent registered public accounting firm for the fiscal year ending December 31,
2008.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                 |  |           
|---------------- |  | ----------
|For              |  | 11,782,989
|Against          |  | 9,778     
|Witheld          |  |          
|Abstain          |  | 13,280    
|Broker Non-Votes |  | 3,364,718 



| | 3. | Approval and adoption of Silver State Bancorps 2008 Omnibus Equity Plan.
| | -- | -------------------------------------------------------------------------



|                 |  |          
|---------------- |  | ---------
|For              |  | 9,079,156
|Against          |  | 135,021  
|Witheld          |  |         
|Abstain          |  | 26,708   
|Broker Non-Votes |  | 5,929,880



|ITEM 5. | Other Information
|------- | -----------------

Not applicable.



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|ITEM 6. | Exhibits
|------- | --------



|            |  |                                                                                                                                                                                                                                                                                                                    
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Identification of Exhibit                                                                                                                                                                                                                                                                                          
|31.1        |  | Certifications of acting Chief Executive Officer.                                                                                                                                                                                                                                                                  
|            | 
|31.2        |  | Certifications of Chief Financial Officer.                                                                                                                                                                                                                                                                         
|            | 
|32.1        |  | Written Statement of acting Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to SEC rules, this exhibit will not
be deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.
|            | 
|32.2        |  | Written Statement of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to SEC rules, this exhibit will not be
deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.       

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



|                       |  |                      |  |                                                    
|---------------------- |  | -------------------- |  | ---------------------------------------------------
|                       |  | Silver State Bancorp
|                       |  |                     
|Dated: August 14, 2008 |  | By:                  |  | /s/    Michael J. Threet                           
|                       |  |                      |  | Michael J. Threet                                  
|                       |  |                      |  | Chief Financial Officer and Chief Operating Officer
|                       |  |                      |  | (Principal Accounting Officer)                     



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Exhibit Index



|            |  |                                                                                                                                                                                                                                                                                                                    
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Identification of Exhibit                                                                                                                                                                                                                                                                                          
|31.1        |  | Certifications of acting Chief Executive Officer.                                                                                                                                                                                                                                                                  
|            | 
|31.2        |  | Certifications of Chief Financial Officer.                                                                                                                                                                                                                                                                         
|            | 
|32.1        |  | Written Statement of acting Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to SEC rules, this exhibit will not
be deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.
|            | 
|32.2        |  | Written Statement of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to SEC rules, this exhibit will not be
deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.       



54