First State Reports First Quarter Results

First State Bancorporation (NASDAQ:FSNM):

OVERVIEW:

• Total deposits increased $140.3 million, improving liquidity.
• Loans decreased $119.7 million.
• Net interest margin decreased to 2.56% for the quarter.
• Total non-performing loans increased $28.5 million.
• Potential problem loans decline for third consecutive quarter.
• First Community Bank remains “adequately capitalized.”
• $95.6 million of allowance excluded from regulatory capital.
• Exposure to construction, development and land loans down approximately 40% since 12/31/07.

First State Bancorporation (“First State”) (NASDAQ:FSNM) today announced a first quarter 2010 loss of $15.7 million, or $(0.75) per diluted share, compared to a loss of $24.4 million or $(1.19) per diluted share for the same period in 2009. The net loss for the three months ended March 31, 2010 resulted primarily from the level of provision for loan losses due to the level of non-performing assets and charge-offs and write-downs of other real estate owned.

“Although non-performing loans are up slightly in the first quarter, we are pleased to report that total classified loans remained stable for a third straight quarter and potential problem loans continue to decline,” stated H. Patrick Dee, President and Chief Executive Officer. “We continue to aggressively reduce our exposure to the construction, development, and land loans that have been the source of the majority of our problem loans. We are also encouraged by the increase in deposits in what has historically been a difficult quarter for deposit generation,” continued Dee.

In June 2009, we completed the sale of the Colorado branches, transferring approximately $387 million in loans, $512 million in deposits and securities sold under agreements to repurchase, and $20 million of premises and equipment and other assets. At March 31, 2009, these items were reclassified as available for sale.

INCOME STATEMENT HIGHLIGHTS:
(Unaudited-$ in thousands, except share and per share amounts)		First Quarter EndedMarch 31,
		2010			2009
Interest income		$	27,016		$	41,230
Interest expense			9,633			14,878
Net interest income			17,383			26,352
Provision for loan losses			(16,200)			(33,300)
Net interest income (expense) after provision for loan losses			1,183			(6,948)
Non-interest income			6,783			9,634
Non-interest expense			23,629			27,059
(Loss) before income taxes			(15,663)			(24,373)
Income tax expense (benefit)			-			-
Net (loss)		$	(15,663)		$	(24,373)
Basic (loss) per share		$	(0.75)		$	(1.19)
Diluted (loss) per share		$	(0.75)		$	(1.19)
Weighted average basic shares outstanding			20,767,850			20,468,411
Weighted average diluted shares outstanding			20,767,850			20,468,411

FINANCIAL RATIOS:
		First Quarter Ended
		March 31,
(unaudited)		2010		2009
Return on average assets		(2.25)%		(2.88)%
Return on average equity		(141.35)%		(63.69)%
Efficiency ratio		97.78%		75.19%
Operating expenses to average assets		3.39%		3.20%
Net interest margin		2.56%		3.27%
Average equity to average assets		1.59%		4.51%
Leverage ratio:
Consolidated		1.28%		4.88%
Bank Subsidiary		4.47%		6.48%
Total risk-based capital ratio
Consolidated		3.86%		8.90%
Bank Subsidiary		8.03%		9.02%

BALANCE SHEET HIGHLIGHTS:
(Unaudited – $ in thousands except per share amounts)		March 31,2010		December 31,2009		March 31,2009		$ Change fromDecember 31, 2009		$ Change fromMarch 31, 2009
Total assets		$2,862,080		$2,744,395		$3,549,825		$117,685		$(687,745)
Total loans		1,897,944		2,017,690		2,704,048		(119,746)		(806,104)
Interest bearing deposits with other banks and federal funds sold		263,167		105,082		181,448		158,085		81,719
Investment securities		644,546		562,124		506,326		82,422		138,220
Deposits		2,174,605		2,034,328		2,727,169		140,277		(552,564)
Non-interest bearing deposits		364,540		350,704		497,226		13,836		(132,686)
Interest bearing deposits		1,810,065		1,683,624		2,229,943		126,441		(419,878)
Borrowings		594,669		595,365		597,400		(696)		(2,731)
Shareholders’ equity		32,612		47,031		135,301		(14,419)		(102,689)
Book value per share		$1.57		$2.27		$6.59		$(0.70)		$(5.02)
Tangible book value per share		$1.32		$2.01		$5.86		$(0.69)		$(4.54)

Net interest income was $17.4 million for the first quarter of 2010 compared to $26.4 million for the same quarter of 2009. Our net interest margin was 2.56% and 3.27% for the first quarter of 2010 and 2009, respectively.