8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)          October 21, 2004

MID-STATE BANCSHARES

(Exact Name of registrant as specified in its charter)

California	000-23925	77-0442667
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1026 East Grand Avenue, Arroyo Grande, CA	93420
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code          (805) 473-7700

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications Pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

SECTION 2 – FINANCIAL INFORMATION

Item 2.02 – Results of Operations and Financial Condition.

On October 21, 2004, Mid-State Bancshares reported that diluted earnings per share increased 5.9% to $1.07 per share for the nine months ended September 30, 2004, up from $1.01 per share in the like 2003 period.  For the third quarter, results were $0.36 per share in 2004, down slightly from the $0.37 earned one year before.  Net income for the nine months ended September 30, 2004 was $25.7 million, up from the $24.8 million earned in the same 2003 period.  For the third quarter of 2004, net income was $8.7 million compared to $9.0 million one year earlier.  Results for the three month and nine month periods ended September 30, 2003 were bolstered by gains on the sale of mortgage loans held for sale as a result of the refinance boom which took place during that time frame.

Please refer to the Press Release dated October 21, 2004, attached hereto and made a part hereof.

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

Item 9.01 - - Financial Statements and Exhibits.

Exhibits

Exhibit No.	Description
99	Press Release announcing third quarter earnings – dated October 21, 2004

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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 hereunto duly authorized.

	Registrant:
	MID-STATE BANCSHARES
Date:October 21, 2004	By:	/s/ JAMES W. LOKEY
		James W. Lokey
		President
		Chief Executive Officer
	By:	/s/ JAMES G. STATHOS
		James G. Stathos
		Executive Vice President
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99	Press Release announcing third quarter earnings – dated October 21, 2004

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EX-99

Exhibit 99

News Release

Date:October 21, 2004	Phone Number:805/473-7700
Contact:  James G. Stathos	NASDAQ Symbol:  “MDST”
Title:  Chief Financial Officer	Website: www.midstatebank.com

MID-STATE REPORTS EARNINGS FOR THIRD QUARTER

Arroyo Grande, California - Mid-State Bancshares (the Company), the holding company for Mid-State Bank & Trust (the Bank), reported that diluted earnings per share increased 5.9% to $1.07 per share for the nine months ended September 30, 2004, up from $1.01 per share in the like 2003 period.  For the third quarter, results were $0.36 per share in 2004, down slightly from the $0.37 earned one year before.  Net income for the nine months ended September 30, 2004 was $25.7 million, up from the $24.8 million earned in the same 2003 period.  For the third quarter of 2004, net income was $8.7 million compared to $9.0 million one year earlier.  Results for the three month and nine month periods ended September 30, 2003 were bolstered by gains on the sale of mortgage loans held for sale as a result of the refinance boom which took place during that time frame.

“We are encouraged with the prospects for our earnings going forward,” said James G. Stathos, executive vice president and chief financial officer.  “Our earning asset mix has improved with the increase in our loan portfolio and the recent rate increases have improved our net interest margin in the third quarter to 5.41% from 5.31% in the previous quarter.  The Company’s efficiency ratio for the third quarter 2004 was 60.7%.  While this was slightly higher than the 57.5% ratio during the third quarter of 2003, it is the lowest the ratio has been in any of the calendar quarters over the past year.”

Total assets of the Company increased 10.7% to $2.3 billion at quarter-end, up from $2.1 billion one year earlier.  Approximately $105 million of the $223 million reported increase was the result of the successful integration of Ojai Valley Bank which was acquired by the Company on October 31, 2003.  Deposits increased 11.4% to $2.0 billion at quarter-end, up from just under $1.8 billion one year earlier, with $79 million of the growth attributable to the merger.  The Bank continues to be very successful in attracting core deposits, while remaining competitive in retaining time deposits.  Time deposits increased modestly to $399.2 million from $392.4 million one year earlier.  All other categories of demand, NOW, money market and savings increased to $1.6 billion from $1.4 billion at September 30, 2003.  The loan portfolio reached $1.394 billion at September 30, 2004, compared to $1.091 billion one year earlier.  Only $30 million of this growth resulted from the Ojai Valley Bank merger.  The Company is seeing growth in its loan portfolio, especially in both the residential and non-residential real estate sectors, and with the improving economy expects to see further improvement in its commercial & industrial loan segment.  This trend, coupled with the benefit from rising interest rates, is expected to have a positive effect on the Company’s net interest income.

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Non-performing asset levels were reduced to $11.0 million compared to $15.8 million one year earlier.  The level of non-performing assets as a percent of total assets was 0.5% compared to 0.8% one year ago.  Non-performing assets are centered primarily in one loan secured by real estate (totaling $8.5 million).  Management has specific reserves on its impaired loans that it believes would offset potential losses, if any, arising from less than full recovery of the loans from the supporting collateral.  The ratio of the Company’s allowances for losses to non-performing loans was 142% compared to 149% one year earlier.  The Company’s allowances for losses to loans was 1.1% of total gross loans at September 30, 2004, compared to 1.7% at September 30, 2003.

The slowdown in the mortgage loan industry has affected both the new and refinance activity which caused the net gain on sale of loans held for sale to decline to $0.1 million in the third quarter of 2004 compared to $1.0 million in the like 2003 period.  Similarly, the net gain on sale of loans held for sale for the nine months year-to-date was $0.4 million compared to $3.0 million one year earlier.  Management continues to anticipate that the net gain on sale in 2004 will be significantly lower than the level achieved in 2003.

The Company experienced an increase in pre-tax non-interest expense of just under $1.7 million in the three months ended September 30, 2004 compared to the same period one year earlier.  For the nine months year-to-date, the increase from one year earlier was $5.8 million.  Salaries and benefits accounted for $1.0 million of the increase in the third quarter and $4.0 million of the increase for the nine months year-to-date comparisons.  The amount of increase was influenced by several factors, including: 1) the addition of employees from the acquisition of Ojai Valley Bank, 2) increases in accrual rates for incentive compensation, 3) increases in the Company cost of health care coverage for employees, 4) increases in workers compensation premiums, 5) increases in payroll tax rates for California’s Family Leave Act, 6) one-time severance costs for terminated employees, and 7) regular salary increases.  Increases in occupancy expense and advertising & promotional expense accounted for the balance of the increase in non interest expense.

At its regular Board meeting of January 21, 2004, the Board authorized the repurchase of up to 1,178,352 additional shares of the Company’s common stock.  The new authorization does not have an expiration date.  There were 215,607 shares repurchased in the third quarter of 2004 at an average price of $24.38 per share compared to 207,541 shares repurchased in the third quarter of 2003 at an average price of $20.95 per share.  Year-to-date, the Company has repurchased 373,819 shares at an average price of $23.59 per share compared to 625,830 repurchased in the like 2003 period at an average price of $18.93 per share.  As of September 30, 2004, the Company is continuing the program and can repurchase up to 805,405 additional shares under the January authorization.

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In other matters concerning capital, the Board of Directors again approved a quarterly dividend in the third quarter of $0.14 per share, which brings the total for the nine months year-to-date to $0.42, representing a 13.5% increase over the $0.37 declared in the first nine months of 2003.  The Company paid a dividend of $0.13 in the third quarter of 2003.

Mid-State Bancshares is a $2.3 billion holding company for Mid-State Bank & Trust, an independent, community bank serving California’s San Luis Obispo, Santa Barbara, and Ventura Counties.  Since opening its doors in 1961, the Bank has grown to 41 offices serving more than 100,000 households.

This Press Release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act.  All of the statements contained in the Press Release, other than statements of historical fact, should be considered forward-looking statements, including, but not limited to, those concerning (i) the Company’s strategies, objectives and plans for expansion of its operations, products and services, and growth of its portfolio of loans, investments and deposits, (ii) the Company’s beliefs and expectations regarding actions that may be taken by regulatory authorities having oversight of its operation and interest rates, (iii) the Company’s beliefs as to the adequacy of its existing and anticipated allowances for loan and real estate losses and (iv) the Company’s beliefs and expectations concerning future operating results and the economy in its service area.  Although the Company believes the expectations reflected in those forward-looking statements are reasonable, it can give no assurance that those expectations will prove to have been correct.  All subsequent written and oral forward-looking statements by or attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this qualification.  Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are not intended to give any assurance as to future results.  The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Please See Pertinent Financial Data Attached.

#     #     #

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Consolidated Financial Data  -  Mid-State Bancshares

(Unaudited)

	Quarter Ended				Year-to-Date
(In thousands)	Sept. 30, 2004		Sept. 30, 2003		Sept. 30, 2004			Sept. 30, 2003
Interest Income (not taxable equivalent)	$	28,236	$	26,643	$	81,093		$	78,715
Interest Expense	2,083		2,157		6,149			7,559
Net Interest Income	26,153		24,486		74,944			71,156
(Benefit)/Provision for Loan Losses	—		—		(2,700		)	260
Net Interest Income after provision for loan losses	26,153		24,486		77,644			70,896
Non-interest income	7,250		7,838		22,160			22,236
Non-interest expense	20,265		18,589		60,836			54,990
Income before income taxes	13,138		13,735		38,968			38,142
Provision for income taxes	4,465		4,760		13,257			13,364
Net Income	$	8,673	$	8,975	$	25,711		$	24,778

	Quarter Ended						Year-to-Date
(In thousands, except per share data)	Sept. 30, 2004			Sept. 30, 2003			Sept. 30, 2004			Sept. 30, 2003
Per share:
Net Income - basic	$	0.37		$	0.39		$	1.09		$	1.06
Net Income - diluted	$	0.36		$	0.37		$	1.07		$	1.01
Weighted average shares used in Basic E.P.S. calculation	23,369			23,287			23,496			23,441
Weighted average shares used in Diluted E.P.S. calculation	23,842			24,350			23,949			24,487
Cash dividends	$	0.14		$	0.13		$	0.42		$	0.37
Book value at period-end							$	11.94		$	11.25
Tangible book value at period end							$	9.54		$	9.43
Ending Shares							23,323			23,191
Financial Ratios
Return on assets	1.50		%	1.72		%	1.53		%	1.65		%
Return on tangible assets	1.53		%	1.76		%	1.57		%	1.69		%
Return on equity	12.47		%	13.61		%	12.42		%	12.77		%
Return on tangible equity	15.64		%	16.22		%	15.61		%	15.25		%
Net interest margin (not taxable equivalent)	5.01		%	5.14		%	4.93		%	5.23		%
Net interest margin (taxable equivalent yield)	5.41		%	5.53		%	5.34		%	5.63		%
Net loan (recoveries) losses to avg. loans	(0.01		)%	0.38		%	(0.06		)%	0.09		%
Efficiency ratio	60.7		%	57.5		%	62.7		%	58.9		%
Period Averages
Total Assets	$	2,306,318		$	2,069,078		$	2,249,562		$	2,002,806
Total Tangible Assets	2,250,254			2,026,932			2,193,155			1,960,666
Total Loans (includes loans held for sale)	1,358,768			1,140,493			1,279,738			1,129,684
Total Earning Assets	2,077,356			1,889,499			2,031,150			1,818,879
Total Deposits	2,005,694			1,787,933			1,951,211			1,724,251
Common Equity	276,652			261,692			276,426			259,408
Common Tangible Equity	220,587			219,546			220,019			217,268
Balance Sheet - At Period-End
Cash and due from banks							$	119,104		$	109,469
Investments and Fed Funds Sold							688,923			767,741
Loans held for sale							10,001			42,075
Loans, net of deferred fees, before allowance for loan losses							1,394,478			1,091,113
Allowance for Loan Losses							(13,912		)	(16,871		)
Goodwill and core deposit intangibles							55,916			42,217
Other assets							55,033			50,405
Total Assets							$	2,309,543		$	2,086,149
Non-interest bearing deposits							$	524,785		$	436,565
Interest bearing deposits							1,474,782			1,358,227
Other borrowings							5,843			7,907
Allowance for losses - unfunded commitments							1,682			1,862
Other liabilities							23,989			20,767
Shareholders’ equity							278,462			260,821
Total Liabilities and Shareholders’ equity							$	2,309,543		$	2,086,149
Asset Quality & Capital - At Period-End
Non-accrual loans							$	10,954		$	12,562
Loans past due 90 days or more							—			—
Other real estate owned							—			3,279
Total non performing assets							$	10,954		$	15,841
Allowance for losses to loans, gross (1)							1.1		%	1.7		%
Non-accrual loans to total loans, gross							0.8		%	1.2		%
Non performing assets to total assets							0.5		%	0.8		%
Allowance for losses to non performing loans (1)							142.4		%	149.1		%
Equity to average assets (leverage ratio)							9.5		%	10.2		%
Tier One capital to risk-adjusted assets							12.4		%	14.7		%
Total capital to risk-adjusted assets							13.3		%	16.0		%

(1)  Includes allowance for loan losses and allowance for losses - unfunded commitments

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Consolidated Financial Data - Mid-State Bancshares

(Unaudited)

	Quarter Ended
(In thousands)	Sept. 30, 2004		June 30, 2004			Mar. 31, 2004		Dec. 31, 2003			Sept. 30, 2003
Interest Income (not taxable equivalent)	$	28,236	$	26,620		$	26,237	$	26,525		$	26,643
Interest Expense	2,083		1,990			2,076		2,140			2,157
Net Interest Income	26,153		24,630			24,161		24,385			24,486
(Benefit)/Provision for Loan Losses	—		(2,700		)	—		(1,229		)	—
Net Interest Income after provision for loan losses	26,153		27,330			24,161		25,614			24,486
Non-interest income	7,250		7,910			6,999		6,823			7,838
Non-interest expense	20,265		20,877			19,693		19,701			18,589
Income before income taxes	13,138		14,363			11,467		12,736			13,735
Provision for income taxes	4,465		4,990			3,802		4,350			4,760
Net Income	$	8,673	$	9,373		$	7,665	$	8,386		$	8,975

	Quarter Ended
(In thousands, except per share data)	Sept. 30, 2004			June 30, 2004			Mar. 31, 2004			Dec. 31, 2003			Sept. 30, 2003
Per share:
Net Income - basic	$	0.37		$	0.40		$	0.33		$	0.36		$	0.39
Net Income - diluted	$	0.36		$	0.39		$	0.32		$	0.35		$	0.37
Weighted average shares used in Basic E.P.S. calculation	23,369			23,550			23,570			23,447			23,287
Weighted average shares used in Diluted E.P.S. calculation	23,842			23,962			24,045			23,921			24,350
Cash dividends	$	0.14		$	0.14		$	0.14		$	0.13		$	0.13
Book value at period-end	$	11.94		$	11.60		$	11.80		$	11.56		$	11.25
Tangible book value at period end	$	9.54		$	9.20		$	9.40		$	9.15		$	9.43
Ending Shares	23,323			23,454			23,586			23,567			23,191
Financial Ratios
Return on assets	1.50		%	1.68		%	1.40		%	1.53		%	1.72		%
Return on tangible assets	1.53		%	1.72		%	1.44		%	1.57		%	1.76		%
Return on equity	12.47		%	13.73		%	11.09		%	12.50		%	13.61		%
Return on tangible equity	15.64		%	17.28		%	13.93		%	15.45		%	16.08		%
Net interest margin (not taxable equivalent)	5.01		%	4.90		%	4.88		%	4.91		%	5.14		%
Net interest margin (taxable equivalent yield)	5.41		%	5.31		%	5.30		%	5.31		%	5.53		%
Net loan (recoveries) losses to avg. loans	(0.01		)%	0.00		%	-0.04		%	-0.01		%	0.38		%
Efficiency ratio	60.7		%	64.2		%	63.2		%	63.1		%	57.5		%
Period Averages
Total Assets	$	2,306,318		$	2,242,379		$	2,199,365		$	2,171,206		$	2,069,078
Total Tangible Assets	2,250,254			2,185,971			2,142,613			2,118,330			2,024,032
Total Loans (includes loans held for sale)	1,358,768			1,289,633			1,189,945			1,138,603			1,140,493
Total Earning Assets	2,077,356			2,022,516			1,993,070			1,971,706			1,889,499
Total Deposits	2,005,694			1,947,865			1,899,475			1,878,835			1,787,933
Common Equity	276,652			274,577			278,047			266,132			261,692
Common Tangible Equity	220,587			218,169			221,295			215,316			221,430
Balance Sheet - At Period-End
Cash and due from banks	$	119,104		$	128,141		$	123,672		$	123,763		$	109,469
Investments and Fed Funds Sold	688,923			697,431			749,708			822,179			767,741
Loans held for sale	10,001			12,789			10,712			13,410			42,075
Loans, net of deferred fees, before allowance for loan losses	1,394,478			1,316,135			1,240,325			1,154,932			1,091,113
Allowance for Loan Losses	(13,912		)	(13,895		)	(16,584		)	(16,063		)	(16,871		)
Goodwill and other intangibles (excl OMSR's)	55,916			56,259			56,603			56,947			40,146
Other assets (incl OMSR's)	55,033			55,155			54,231			53,664			52,476
Total Assets	$	2,309,543		$	2,252,015		$	2,218,667		$	2,208,832		$	2,086,149
Non-interest bearing deposits	$	524,785		$	498,754		$	480,652		$	487,624		$	436,565
Interest bearing deposits	1,474,782			1,455,691			1,435,908			1,424,807			1,358,227
Other borrowings	5,843			4,964			4,886			7,627			7,907
Allowance for losses - unfunded commitments	1,682			1,570			1,867			1,941			1,862
Other liabilities	23,989			19,074			17,072			14,279			20,767
Shareholders' equity	278,462			271,962			278,282			272,554			260,821
Total Liabilities and Shareholders' equity	$	2,309,543		$	2,252,015		$	2,218,667		$	2,208,832		$	2,086,149
Asset Quality & Capital - At Period-End
Non-accrual loans	$	10,954		$	11,758		$	12,220		$	12,312		$	12,562
Loans past due 90 days or more	—			2			—			—			—
Other real estate owned	—			—			3,428			3,428			3,279
Total non performing assets	$	10,954		$	11,760		$	15,648		$	15,740		$	15,841
Allowance for losses to loans, gross (1)	1.1		%	1.2		%	1.5		%	1.6		%	1.7		%
Non-accrual loans to total loans, gross	0.8		%	0.9		%	1.0		%	1.1		%	1.2		%
Non performing assets to total assets	0.5		%	0.5		%	0.7		%	0.7		%	0.8		%
Allowance for losses to non performing loans (1)	142.4		%	131.5		%	151.0		%	146.2		%	149.1		%
Equity to average assets (leverage ratio)	9.5		%	9.7		%	9.7		%	9.6		%	10.2		%
Tier One capital to risk-adjusted assets	12.4		%	13.0		%	13.6		%	13.8		%	14.7		%
Total capital to risk-adjusted assets	13.3		%	13.9		%	14.8		%	15.0		%	16.0		%

(1)  Includes allowance for loan losses and allowance for losses - unfunded commitments

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