FIRST STATE BANCORPORATION - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2003.

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 1-12487

FIRST STATE BANCORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NEW MEXICO 85-0366665
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

7900 JEFFERSON NE
ALBUQUERQUE, NEW MEXICO 87109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(505) 241-7500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 7,515,488 shares of common
stock, no par value, outstanding as of August 11, 2003.

FIRST STATE BANCORPORATION AND SUBSIDIARY

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

FIRST STATE BANCORPORATION AND SUBSIDIARY
Consolidated Condensed Balance Sheets
(unaudited)
(Dollars in thousands, except per share amounts)

See accompanying notes to unaudited consolidated condensed financial statements.

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FIRST STATE BANCORPORATION AND SUBSIDIARY
Consolidated Condensed Statements of Operations
For the three and six months ended June 30, 2003 and 2002
(unaudited)
(Dollars in thousands, except per share amounts)

See accompanying notes to unaudited consolidated condensed financial statements.

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FIRST STATE BANCORPORATION AND SUBSIDIARY
Consolidated Condensed Statements of Comprehensive Income
For the three and six months ended June 30, 2003 and 2002
(unaudited)
(Dollars in thousands, except per share amounts)

See accompanying notes to unaudited consolidated condensed financial statements.

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FIRST STATE BANCORPORATION AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
For the three and six months ended June 30, 2003 and 2002
(unaudited)
(Dollars in thousands, except per share amounts)

See accompanying notes to unaudited consolidated condensed financial statements.

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FIRST STATE BANCORPORATION AND SUBSIDIARY
Notes to Consolidated Condensed Financial Statements
(unaudited)

1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The accompanying consolidated condensed financial statements are unaudited and
include our accounts and those of our wholly owned subsidiary, First State Bank
N.M. (the "Bank"). All significant intercompany accounts and transactions have
been eliminated. Information contained in our consolidated condensed financial
statements and notes thereto should be read in conjunction with our consolidated
financial statements and notes thereto contained in our Annual Report on Form
10-K for the year ended December 31, 2002.

The consolidated condensed financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and instructions to Form 10-Q. Accordingly,
they do not include all of the information and notes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In our opinion, all adjustments (consisting only of
normally recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 2003, are not necessarily indicative of the results that may be expected for
the year ending December 31, 2003.

2. STOCK BASED COMPENSATION

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value-based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The adoption of this statement as of December 31, 2002 had no effect on
our consolidated financial position or results of operations.

We apply the intrinsic value-based method of accounting prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees and related interpretations in accounting for its fixed plan stock
options." As such, compensation expense is recorded on the date of grant only if
the current market price of the underlying stock exceeds the exercise price.
SFAS No. 123, "Accounting for Stock-Based Compensation," established accounting
and disclosure requirements using a fair value-based method of accounting for
stock-based employee compensation plans. As allowed by SFAS No. 123, we have
elected to continue to apply the intrinsic value-based method and have included
the disclosure required by SFAS No. 148.

Had compensation costs been determined consistent with the fair value method of
SFAS No. 123 at the grant dates for awards, net income and earnings per common
share would have changed to the pro forma amounts indicated below.

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3. EARNINGS PER COMMON SHARE

Basic earnings per share are computed by dividing net income (the numerator) by
the weighted-average number of common shares outstanding during the period (the
denominator). Diluted earnings per share are calculated by increasing the basic
earnings per share denominator by the number of additional common shares that
would have been outstanding if dilutive potential common shares for options had
been issued.

The following is a reconciliation of the numerators and denominators of basic
and diluted earnings per share for the three and six months ended June 30:

4. TREASURY STOCK

Our Board of Directors has authorized us to purchase up to 525,000 shares of our
common stock. As of June 30, 2003, we have purchased 392,050 shares including
15,000 shares totaling $330,644 during the first six months of 2003. We may
purchase additional shares, the amount of which will be determined by market
conditions.

5. ACQUISITION OF FIRST COMMUNITY INDUSTRIAL BANK

We completed our acquisition of First Community Industrial Bank ("First
Community") on October 1, 2002 for approximately $67 million. We financed this
acquisition through a public offering of our common stock in August 2002, which
netted approximately $51.0 million and through the issuance of approximately
$25.0 million in trust preferred securities in June of 2002. The acquisition was
accounted for using the purchase method of accounting, and accordingly, the
assets and liabilities of First Community were recorded at their respective fair
values on October 1, 2002. We acquired approximately $343 million in loans and
approximately $242 million in deposits and recognized goodwill of approximately
$43 million related to the transaction. The First Community account balances
acquired on October 1, 2002 and the results of operations since October 1, 2002
are included in the results of First State.

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During the first quarter of 2003, we completed the sale of certain mortgage
loans available for sale obtained in the acquisition of First Community in 2002.
The sale to unrelated third parties included 227 loans with a carrying value of
approximately $8.5 million. The subsequent sale of the mortgage loans, which had
been recorded at their estimated fair value on the date of acquisition, resulted
in an additional discount of approximately $277,000 that was recorded as a
reduction of goodwill. This reduction of goodwill has subsequently been offset
by $88,000 of additional items related to the acquisition.

The pro forma financial information below presents the condensed consolidated
financial results assuming that First Community, acquired October 1, 2002, had
been acquired at the beginning of 2002 and includes the effect of amortization
of other acquired identifiable intangible assets from that date. This pro forma
information is presented for informational purposes only and is not necessarily
indicative of the results of future operations that would have been achieved had
the acquisition taken place at the beginning of 2002. Pro forma information
follows:

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

CONSOLIDATED CONDENSED BALANCE SHEETS

Our total assets increased by $65.1 million from $1.387 billion as of December
31, 2002, to $1.452 billion as of June 30, 2003. The increase was primarily made
up of a $14.0 million increase in investment securities and a $91.6 million
increase in net loans offset by a $40.2 million decrease in cash and cash
equivalents.

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The following table presents the amounts of our loans, by category, at the dates
indicated.

Deposits, which are our main source of funds for loans and investments,
increased by $50.8 million from $1.080 billion as of December 31, 2002, to
$1.130 billion as of June 30, 2003. Securities sold under agreements to
repurchase and federal funds purchased decreased $22.4 million from $70.8
million at December 31, 2002 to $48.3 million at June 30, 2003. The following
table represents customer deposits, by category, at the dates indicated.

CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003

Our net income for the three months ended June 30, 2003, was $3.7 million, an
increase of $1.5 million or 66% from $2.2 million for the same period of 2002.
The increase in net income resulted from an increase in net interest income
before provision for loan losses of $6.1 million and an increase in non-interest
income of $988,000, partially offset by an increase in non-interest expenses of
$3.9 million and income taxes of $927,000. Our annualized return on average
assets was 1.05% for the three months ended June 30, 2003 and 2002.

Our net interest income before the provision for loan losses increased $6.1
million to $15.9 million for the second quarter of 2003 compared to $9.9 million
for the second quarter of 2002. This increase was composed of an $8.0 million
increase in total interest income and a $1.9 million increase in total interest
expense. The increase in interest income was composed of an increase of $10.0
million due to increased average interest earning assets of $506.4 million,
offset by a $2.0 million decrease due to a 0.26% decrease in the yield on
average interest earning assets. The increase in average interest-earning assets
occurred in loans and investment securities, and was made possible by the
acquisition of First Community in the fourth quarter of 2002 and our successful
efforts to increase market share in New Mexico. The increase in total interest
expense was composed of an increase of $4.8 million due to increased average
interest-bearing liabilities of $449.5 million, offset by a decrease of $2.9
million due to a 0.28% decrease in the cost of interest-bearing liabilities. The
increase in average interest-bearing liabilities was due to an increase in
average interest-bearing deposits of $349.8 million, an increase in average
borrowings of $79.0 million, and an increase in average trust preferred
securities of $23.6 million. The increase in interest-bearing deposits is a
result of the acquisition of First Community and our success in increasing
market share in New Mexico. The increase in borrowings is due primarily to
outstanding FHLB advances of First Community. The additional trust preferred
securities were issued in June 2002 to help fund the First Community
acquisition.

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The decrease in yield on interest earning assets reflects the impact of the
Federal Reserve Bank's reductions of the discount rate in November 2002 and June
2003. The reductions in the discount rate contributed to corresponding
reductions in the prime rate. A substantial portion of our loan portfolio
consists of adjustable rate loans whose rates are adjusted based upon the then
prevailing prime rate. The decrease in the prime rate has led to a corresponding
reduction in the yield on our loan portfolio. We aim to keep the maturity of our
investment securities relatively short. As a result of the current low rate
environment, our policy of investing in securities with short maturities has
caused us to experience reduced yields on our securities as they mature and are
reinvested.

The decrease in our cost of interest bearing liabilities is a result of lower
interest payments made to our deposit and repurchase agreement customers. The
interest rate that we pay to our deposit and repurchase agreement customers is
influenced by the level of the discount rate. As a result of the reductions in
the discount rate made by the Federal Reserve Bank in 2002 and 2003, we reduced
the interest rates that we pay on our customers' deposits and repurchase
agreements that reduced the corresponding interest payments to these customers.
This decrease was partially offset by the issuance of trust-preferred securities
that bear a higher interest rate than customer deposits or repurchase
agreements.

We believe that the competitive environment for deposits will significantly
determine the impact on the net interest margin of changes in interest rates.
Management believes that the recent Federal Reserve Bank rate cut will cause
continued margin compression during the second half of 2003. We also believe
that additional decreases in rates would cause further compression of our net
interest margin, while increases would cause an increase in our net interest
margin.

Our provision for loan losses was $1.3 million for the second quarter of 2003,
compared to $519,000 for the second quarter of 2002. Net charge-offs for the
second quarter of 2003 were $490,000 compared to $147,000 for the second quarter
of 2002. The allowance for loan losses to total loans was 1.17% and the
allowance for loan losses to non-performing loans was 130% at June 30, 2003,
compared to the allowance for loan losses to total loans of 1.28% and the
allowance for loan losses to non-performing loans of 277% at June 30, 2002.
Total non-performing assets to total assets were 0.72% at June 30, 2003,
compared to 0.41% at June 30, 2002. The increase in charge-offs and the decrease
in the percentage of the allowance for loan losses to total loans and
non-performing loans as of and for the quarter ended June 30, 2003 were directly
related to the higher level of non-performing loans at First Community. We
provide for loan losses based upon our judgments concerning the adequacy of the
allowance for loan losses considering such factors as loan growth, delinquency
trends, previous charge-off experience, and local and national economic
conditions.

Our total non-interest income increased by $988,000 to $4.0 million for the
three months ended June 30, 2003, compared to $3.0 million for the same period
of 2002. The increase was primarily composed of a $630,000 increase in gains on
sales of mortgage loans, caused by greater new home construction and refinancing
resulting from the lower interest rate environment, and a $304,000 increase in
service charges on deposits resulting from increased customer accounts and
deposit activity.

We believe that if interest rates remain at current levels or begin to increase,
the demand for mortgage loans to refinance existing mortgage loans or for new
home construction will decrease and we will see a decrease in gains on sales of
mortgage loans and other loan fees associated with our mortgage lending
operations.

Our total non-interest expenses increased by $3.9 million to $12.6 million for
the second quarter of 2003, compared to $8.7 million for the same period of
2002. This increase was due partially to a $2.4 million increase in salaries and
employee benefits, a $424,000 increase in occupancy expense, and a $208,000
increase in equipment expense. The increases in salary, occupancy, and equipment
expense are due primarily to the acquisition and merger of First Community and
increased commissions for the production of mortgage loans sold. The increase in
occupancy expense was also impacted by an additional branch office opened during
the first quarter in Santa Fe, N.M. We anticipate that occupancy and equipment
expenses will continue to increase modestly during the remainder of fiscal 2003
as management continues to reposition branch locations in Colorado and Utah and
opens one additional branch and a new support services facility in New Mexico.

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CONSOLIDATED RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003

Our net income for the six months ended June 30, 2003, was $7.2 million, an
increase of $2.9 million or 66% from $4.3 million for the same period of 2002.
The increase in net income resulted from an increase in net interest income
before provision for loan losses of $11.5 million and an increase in
non-interest income of $1.7 million, partially offset by an increase in
non-interest expenses of $7.5 million and income taxes of $1.7 million. Our
annualized return on average assets was 1.03% for the six months ended June 30,
2003, compared to 1.04% for the same period of 2002.

Our net interest income before the provision for loan losses increased $11.5
million to $30.8 million for the six months ended June 30, 2003 compared to
$19.3 million for the same period of 2002. This increase was composed of a $15.4
million increase in total interest income and a $3.9 million increase in total
interest expense. The increase in interest income was composed of an increase of
$19.3 million due to increased average interest earning assets of $500.1 million
offset by a $3.9 million decrease due to a 0.32% decrease in the yield on
average interest earning assets. The increase in average interest-earning assets
occurred in loans and investment securities, and was made possible by the
acquisition of First Community in the fourth quarter of 2002 and our successful
efforts to increase market share in New Mexico. The increase in total interest
expense was composed of an increase of $9.8 million due to increased average
interest-bearing liabilities of $449.9 million, offset by a decrease of $5.9
million due to a 0.31% decrease in the cost of interest-bearing liabilities. The
increase in average interest-bearing liabilities was due to an increase in
average interest-bearing deposits of $351.7 million, an increase in average
borrowings of $79.0 million, and an increase in average trust preferred
securities of $24.2 million. The increase in interest-bearing deposits is a
result of the acquisition of First Community and our success in increasing
market share in New Mexico. The increase in borrowings is due primarily to
outstanding FHLB advances of First Community. The additional trust preferred
securities were issued in June 2002 to help fund the First Community
acquisition.

Our provision for loan losses was $2.3 million for the first six months of 2003,
compared to $1.2 million for the first six months of 2002. Net charge-offs for
the six months ended June 30, 2003 were $1.2 million compared to $645,000 for
the six months ended June 30, 2002. The allowance for loan losses to total loans
was 1.17% and the allowance for loan losses to non-performing loans was 130% at
June 30, 2003, compared to the allowance for loan losses to total loans of 1.28%
and the allowance for loan losses to non-performing loans of 277% at June 30,
2002. Total non-performing assets to total assets were 0.72% at June 30, 2003,
compared to 0.41% at June 30, 2002. The increase in charge-offs and the decrease
in the percentage of the allowance for loan losses to total loans and
non-performing loans as of and for the six months ended June 30, 2003 were
directly related to the higher level of non-performing loans at First Community.
We provide for loan losses based upon our judgments concerning the adequacy of
the allowance for loan losses considering such factors as loan growth,
delinquency trends, previous charge-off experience, and local and national
economic conditions.

Our total non-interest income increased by $1.7 million to $7.6 million for the
six months ended June 30, 2003, compared to $5.9 million for the same period of
2002. For the first six months of 2003 compared to the first six months of 2002,
the gains on sales of mortgage loans increased $951,000 as a result of greater
new home construction and refinancing resulting from the lower interest rate
environment, and service charges on deposit accounts increased $432,000 as a
result of increased customer accounts and deposit activity.

Our total non-interest expenses increased by $7.5 million to $24.5 million for
the six months ended June 30, 2003, compared to $17.0 million for the same
period of 2002. This increase was due partially to a $4.4 million increase in
salaries and employee benefits, a $745,000 increase in occupancy expense, and a
$431,000 increase in equipment expense. The increases in salary, occupancy, and
equipment expense are due primarily to the acquisition and merger of First
Community and increased commissions for the production of mortgage loans sold.
The increase in occupancy expense was also impacted by an additional branch
office opened during the first quarter in Santa Fe, N.M. We anticipate that
occupancy and equipment expenses will continue to increase modestly during the
remainder of fiscal 2003 as management continues to reposition branch locations
in Colorado and Utah and opens one additional branch and a new support services
facility in New Mexico.

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ALLOWANCE FOR LOAN LOSSES

We use a systematic methodology, which is applied monthly, to determine the
amount of allowance for loan losses and the resultant provisions for loan losses
we consider adequate to provide for anticipated loan losses. The allowance is
increased by provisions charged to operations and reduced by loan charge-offs,
net of recoveries. The following table sets forth information regarding changes
in our allowance for loan losses for the periods indicated. The principal factor
affecting the amount of the provision in each of the periods presented was
growth in the loan portfolio.

Potential problem loans are loans not included in non-performing loans that we
have doubts as to the ability of the borrowers to comply with present loan
repayment terms.

During the first quarter of 2003, we completed the sale of certain mortgage
loans available for sale obtained in the acquisition of First Community in 2002.
The sale to unrelated third parties included 227 loans with a carrying value of
approximately $8.5 million. Included in the sale were approximately $3 million
in face value of loans that were non-performing as of December 31, 2002. The
subsequent sale of the mortgage loans, which had been recorded at their
estimated fair value on the date of acquisition, resulted in an additional
discount of approximately $277,000, which was recorded as a reduction of
goodwill. This reduction of goodwill has subsequently been offset by $88,000 of
additional items related to the acquisition.

LIQUIDITY AND CAPITAL EXPENDITURES

Our primary sources of funds are customer deposits, loan repayments, and
maturities of investment securities. We have additional sources of liquidity in
the form of borrowings. Borrowings include federal funds purchased, securities
sold under repurchase agreements, and borrowings from the Federal Home Loan
Bank.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The following tables set forth, for the periods indicated, information with
respect to average balances of assets and liabilities, as well as the total
dollar amounts of interest income from interest-earning assets and interest
expense from interest-bearing liabilities, resultant yields or costs, net
interest income, net interest spread, net interest margin, and our ratio of
average interest-earning assets to average interest-bearing liabilities. No tax
equivalent adjustments were made and all average balances are daily average
balance. Non-accruing loans have been included in the table as loans carrying a
zero yield.

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To effectively measure and manage interest rate risk, we use gap analysis and
simulation analysis to determine the impact on net interest income under various
interest rate scenarios, balance sheet trends, and strategies. From these
analyses, we quantify interest rate risk and we develop and implement
appropriate strategies. Additionally, we utilize duration and market value
sensitivity measures when these measures provide added value to the overall
interest rate risk management process. The overall interest rate risk position
and strategies are reviewed by management and the Board of Directors of the Bank
on an ongoing basis.

Rising and falling interest rate environments can have various impacts on a
bank's net interest income, depending on the short-term interest rate gap that
the bank maintains, the relative changes in interest rates that occur when the
bank's various assets and liabilities reprice, unscheduled repayments of loans,
early withdrawals of deposits and other factors. As of June 30, 2003, our
cumulative interest rate gap for the period up to three months was a positive
$133.4 million and for the period up to one year was a positive $263.7 million.
Based solely on our interest rate gap of twelve months or less, our net income
could be unfavorably impacted by decreases in interest rates or favorably
impacted by increases in interest rates.

The following table sets forth our estimate of maturity or repricing, and the
resulting interest rate gap of our interest-earning assets and interest-bearing
liabilities at June 30, 2003. The amounts are based upon regulatory reporting
formats and, therefore, may not be consistent with financial information
appearing elsewhere in this report that has been prepared in accordance with
accounting principles generally accepted in the United States of America. The
amounts could be significantly affected by external factors such as changes in
prepayment assumptions, early withdrawals of deposits, and competition.

FORWARD-LOOKING STATEMENTS

This document includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements can be identified by the use of
forward-looking words such as "believe," "expect," "may," "will," "should,"
"seek," "approximately," "intend," "plan," "estimate," or "anticipate" or the
negative of those words or other comparable terminology. Forward-looking
statements involve inherent risks and uncertainties. A number of important
factors could cause

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actual results to differ materially from those in the forward-looking statement.
Some factors include fluctuations in interest rates, inflation, government
regulations, loss of key personnel, faster or slower than anticipated growth,
economic conditions, competition's responses to our marketing strategy, and
competition in the geographic and business areas in which we conduct our
operations.

ITEM 4. CONTROLS AND PROCEDURES.

An evaluation was performed under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of June 30, 2003 pursuant to
Exchange Act rule 13a-14. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective, in all material respects, to ensure that
information required to be disclosed in the reports the Company files and
submits under the Exchange Act is recorded, processed, summarized and reported
as and when required. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of management's evaluation.

PART II - OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On June 6, 2003 we held our annual meeting of shareholders. At that meeting the
following items were submitted to a vote of security holders:

1. The following four directors were elected:

As a result of the election of the above listed directors, our Board of
Directors will consist of those directors and the following directors: H.
Patrick Dee, Leonard J. DeLayo, Jr., Herman N. Wisenteiner, Bradford M.
Johnson, Douglas M. Smith, M.D., and Kevin L. Reid.

2. Proposal to ratify the selection of KPMG LLP as our independent public
accountants. Votes: For 6,815,565; Against 164,097; Abstain 5,903.

3. Proposal to approve the First State Bancorporation 2003 Equity Incentive
Plan. Votes: For 4,231,186; Against 1,072,863; Abstain 21,885.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

- ----------

(1) Incorporated by reference from the Company's Registration Statement on
Form S-2, Commission File No. 333-24417, declared effective April 25,
1997.

(2) Incorporated by reference from the Company's Form 10-Q for the quarter
ended March 31, 2003.

(3) Incorporated by reference from the Company's Form 10-QSB for the
quarter ended September 30, 1996.

(4) Incorporated by reference from the Company's Current Report on Form 8-K
filed June 9, 2003.

(b) Reports on Form 8-K.

We filed a current report on Form 8-K, dated May 19, 2003, announcing our
first quarter 2003 financial results.

We filed a current report on Form 8-K, dated May 30, 2003, announcing that
Mr. Michael R. Stanford, our President and Chief Executive Officer, and a member
of our Board of Directors, had entered into a "trading plan" pursuant to the
requirements of Rule 10b5-1(c) promulgated by the Securities and Exchange
Commission under Section 10(b) of the Securities Exchange Act of 1934, as
amended.

We filed a current report on Form 8-K, dated June 9, 2003, announcing that
we held our annual meeting of shareholders. During the annual meeting, the
shareholders of the Company elected the four director nominees; Michael R.
Stanford, Marshall G. Martin, Lowell A. Hare, and A. J. (Jim) Wells, for terms
ending at the 2006 annual meeting or until their successors are duly elected and
qualified. The shareholders ratified the appointment of KPMG LLP as independent
auditors for the year ending December 31, 2003. The shareholders also approved
the First State Bancorporation 2003 Equity Incentive Plan to replace the First
State Bancorporation 1993 Stock Option Plan.

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SIGNATURES

In accordance with 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.

FIRST STATE BANCORPORATION

Date: August 13, 2003 By: /s/ Michael R. Stanford
--------------------------------------------------
Michael R. Stanford, President & Chief Executive
Officer

Date: August 13, 2003 By: /s/ Christopher C. Spencer
--------------------------------------------------
Christopher C. Spencer, Senior Vice President and
Chief Financial Officer

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EXHIBIT INDEX