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)    July 19, 2005

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:

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

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

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

o  Pre-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 July 19, 2005, Mid-State Bancshares reported diluted earnings of $0.79 per share for the first six months of 2005, an 11.3% increase over the $0.71 earned one year earlier.  Net income for the first half of 2005 was $18.6 million, a 9.2% increase over the $17.0 million earned in the like 2004 period.

Please refer to the Press Release dated July 19, 2005, 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 second quarter earnings – dated July 19, 2005

2

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: July 20, 2005	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

3

EXHIBIT INDEX

Exhibit No.	Description
99	Press Release announcing second quarter earnings – dated July 19, 2005

4

EX-99

Exhibit 99

News Release

Date: July 19, 2005		Phone Number: 805/473-6803
Contact: James G. Stathos		NASDAQ Symbol: MDST
Title:	Executive Vice President/ Chief Financial Officer	Web site: www.midstatebank.com

Mid-State Bancshares Reports 11.3% Earnings per Share Increase
for First Half of 2005

ARROYO GRANDE, CA - Mid-State Bancshares (the Company) [NASDAQ: MDST], the holding company for Mid-State Bank & Trust (the Bank), reported diluted earnings of $0.79 per share for the first six months of 2005, an 11.3% increase over the $0.71 earned one year earlier.  Net income for the first half of 2005 was $18.6 million, a 9.2% increase over the $17.0 million earned in the like 2004 period.

For the quarter, diluted earnings were $0.41 per share on net income of $9.5 million compared to $0.39 per share on net income of $9.4 million in the year earlier period.  Results for the year earlier periods in 2004 were bolstered by a benefit to the provision for loan losses of $2.7 million pre-tax which was posted in June of that year.  After-tax, that non-recurring benefit contributed $1.6 million to earnings in 2004, or approximately seven cents per share.

“Results in the first half of 2005 have exceeded our expectations and are continuing to improve,” said James W. Lokey, president and chief executive officer.  “Higher interest rate levels this year, coupled with a better earning asset mix, have led to improvements in our net interest margin.  As a result, both our return on assets and return on equity have increased, even after allowing for the benefit to the provision for loan losses realized in June 2004.”  The Company’s net interest margin was 5.30% in the first

half of 2005 compared to 4.89% in the year earlier period.  Similarly, the Company’s return on assets and return on equity were 1.61% and 13.60%, respectively, for the six months ended June 30, 2005 compared to 1.54% and 12.40%, in the like 2004 period.  Because of the magnitude of annualizing the impact of the benefit to the provision for loan losses in the second quarter of 2004, the Company’s return on assets was off slightly in the second quarter of 2005 at 1.63% compared to 1.68% in the year earlier quarter.

Non-performing asset levels declined to $5.2 million at June 30, 2005 compared to $10.7 million at December 31, 2004 and $11.8 million one year earlier.  These levels represented 0.2%, 0.5% and 0.5% of total assets, respectively.  These non-performing assets, which in recent quarters have been centered primarily in one loan secured by real estate (originally totaling $8.5 million), were reduced dramatically in the first half of 2005 as a result of the receipt of $6.0 million in principal reductions on that one loan.  Management has specific reserves for potential losses inherent in its impaired loans that it believes are adequate at the present time.  The ratio of the Company’s allowances for losses to non-performing loans was 294% compared to 131% one year earlier.  The Company’s allowances for losses to loans was 1.0% of total gross loans at June 30, 2005, compared to 1.2% at June 30, 2004.

Total assets of the Company increased 4.4% to $2.35 billion at quarter-end, up from $2.25 billion one year earlier, while deposits increased 3.6% to $2.03 billion at quarter-end, up from just over $1.95 billion one year earlier.  Demand deposits increased to $561.4 million, up from $498.8 million one year earlier.  Time deposits increased to $415.2 million from $401.2 million.  Other interest bearing deposit categories including NOW, money market and savings decreased slightly to just under $1.05 billion from just

over $1.05 billion at June 30, 2004.  The loan portfolio reached just under $1.5 billion at June 30, 2005, compared to $1.3 billion one year ago.  The Company is seeing growth in its loan portfolio, especially in both the residential and non-residential real estate sectors.  Real estate secured loans, excluding construction and land development loans and home equity credit lines, total approximately $763 million or 51% of the loan portfolio.

Other assets increased to $85.0 million at June 30, 2005, compared to $55.2 million in the prior year.  The increase was primarily the result of an interest-bearing investment in the amount of $30.0 million that the Company made in the Senior Housing Crime Prevention Foundation Investment Corporation.  “This investment will provide the needed funding for the Senior Housing Crime Prevention Foundation in its efforts to prevent elder abuse in nursing homes throughout the Company’s service area,” said James G. Stathos, executive vice president and chief financial officer.  “The Bank will be marketing its services to various constituencies in the nursing home communities as a result of this program.  Moreover, it effectively addresses one of the most unfortunate issues facing many of our customers’ families – financial and other forms of elder abuse.”  The Company expects to make additional announcements about this program later in the third quarter of this year, once the program is fully operational.

Both non-interest income and expense have declined in 2005 compared to the like 2004 periods because of Management’s decision to outsource its credit card merchant processing activity.  The decline in non-interest income also reflected a non recurring gain on the sale of Other Real Estate Owned of $1.1 million realized in June of 2004.  The net effect of outsourcing the merchant processing activity was relatively neutral to the Company’s bottom line with the Company now receiving a payment for a percentage

of the net profit associated with the activity.  Outsourcing this function provides more competitive pricing and products for our customers, while at the same time allowing the Company to reduce costs.  Those adjustments, along with the increased net interest margin, positively affected the Company’s efficiency ratio which was 57.3% in the first half of 2005 compared to 63.7% in the first half of 2004.

On January 21, 2004, the Company’s Board of Directors authorized the repurchase of up to 1,178,352 additional shares of the Company’s common stock.  This authorization does not have an expiration date.  The Company repurchased 315,787 shares in the second quarter of 2005 at an average price of $26.06 per share compared to 157,350 shares repurchased in the 2004 period at an average price of $22.48 per share.  Year-to-date, the Company has repurchased 509,557 shares of stock at an average price of $26.52 compared to 158,212 shares repurchased in the 2004 period at an average price of $22.51.  All of these shares were purchased in open market transactions.  As of June 30, 2005, the Company is continuing the program and can repurchase up to 10,800 additional shares under the January 2004 authorization.

On June 15, 2005 the Board authorized the repurchase of up to an additional five percent of its outstanding shares, or up to 1,141,373 additional shares of the Company’s common stock.  This authorization does not have an expiration date.  This 2005 authorization allows the Company to continue its buyback program uninterrupted when the remaining shares under the 2004 authorization have been purchased.

In other matters concerning capital, the Board of Directors approved quarterly cash dividends of $0.16 per share in each of the first two quarters of 2005, up from $0.14 declared in each of the first two quarters of 2004.

Mid-State Bancshares is a $2.35 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 40 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, (iv) the Company’s beliefs and expectations concerning future operating results, (v) the growth of its loan portfolio and its net interest margin and (vi) the strength of 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.

###

Consolidated Financial Data - Mid-State Bancshares

(Unaudited)	Quarter Ended						Year-to-Date
(In thousands)	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Interest Income (not taxable equivalent)	$	31,654		$	26,620		$	61,136		$	52,857
Interest Expense	3,694			1,990			6,407			4,066
Net Interest Income	27,960			24,630			54,729			48,791
(Benefit)/Provision for Loan Losses	—			(2,700		)	—			(2,700		)
Net Interest Income after provision for loan losses	27,960			27,330			54,729			51,491
Non-interest income	5,378			7,910			10,773			14,910
Non-interest expense	19,211			20,877			37,546			40,571
Income before income taxes	14,127			14,363			27,956			25,830
Provision for income taxes	4,615			4,990			9,354			8,792
Net Income	$	9,512		$	9,373		$	18,602		$	17,038
	Quarter Ended						Year-to-Date
(In thousands, except per share data)	June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Per share:
Net Income - basic	$	0.42		$	0.40		$	0.81		$	0.72
Net Income - diluted	$	0.41		$	0.39		$	0.79		$	0.71
Weighted average shares used in Basic E.P.S. calculation	22,884			23,550			22,951			23,560
Weighted average shares used in Diluted E.P.S. calculation	23,381			23,962			23,468			24,003
Cash dividends	$	0.16		$	0.14		$	0.32		$	0.28
Book value at period-end							$	12.04		$	11.60
Tangible book value at period end							$	9.63		$	9.20
Ending Shares							22,810			23,454
Financial Ratios
Return on assets	1.63		%	1.68		%	1.61		%	1.54		%
Return on tangible assets	1.67		%	1.72		%	1.65		%	1.58		%
Return on equity	13.87		%	13.73		%	13.60		%	12.40		%
Return on tangible equity	17.34		%	17.28		%	17.00		%	15.59		%
Net interest margin (not taxable equivalent)	5.37		%	4.90		%	5.30		%	4.89		%
Net interest margin (taxable equivalent yield)	5.79		%	5.31		%	5.72		%	5.30		%
Net loan (recoveries) losses to avg. loans	0.06		%	0.00		%	0.06		%	(0.09		)%
Efficiency ratio	57.6		%	64.2		%	57.3		%	63.7		%
Period Averages
Total Assets	$	2,339,887		$	2,242,379		$	2,323,193		$	2,220,872
Total Tangible Assets	2,284,853			2,185,971			2,267,989			2,164,292
Total Loans (includes loans held for sale)	1,460,506			1,289,633			1,447,401			1,239,789
Total Earning Assets	2,088,566			2,022,516			2,084,110			2,007,793
Total Deposits	2,022,691			1,947,865			2,007,110			1,923,670
Common Equity	275,100			274,577			275,842			276,312
Common Tangible Equity	220,067			218,169			220,638			219,732
Balance Sheet - At Period-End
Cash and due from banks							$	116,891		$	128,141
Investments and Fed Funds Sold							606,462			697,431
Loans held for sale							10,871			12,789
Loans, net of deferred fees, before allowance for loan losses							1,490,366			1,316,135
Allowance for Loan Losses							(13,403		)	(13,895		)
Goodwill and core deposit intangibles							54,885			56,259
Other assets							85,024			55,155
Total Assets							$	2,351,096		$	2,252,015
Non-interest bearing deposits							$	561,435		$	498,754
Interest bearing deposits							1,464,293			1,455,691
Other borrowings							25,331			4,964
Allowance for losses - unfunded commitments							1,759			1,570
Other liabilities							23,623			19,074
Shareholders’ equity							274,655			271,962
Total Liabilities and Shareholders’ Equity							$	2,351,096		$	2,252,015
Asset Quality & Capital - At Period-End
Non-accrual loans							$	5,152		$	11,758
Loans past due 90 days or more							—			2
Other real estate owned							—			—
Total non performing assets							$	5,152		$	11,760
Allowance for losses to loans, gross (1)							1.0		%	1.2		%
Non-accrual loans to total loans, gross							0.3		%	0.9		%
Non performing assets to total assets							0.2		%	0.5		%
Allowance for losses to non performing loans (1)							294.3		%	131.5		%
Equity to average assets (leverage ratio)							9.4		%	9.7		%
Tier One capital to risk-adjusted assets							11.6		%	13.0		%
Total capital to risk-adjusted assets							12.5		%	13.9		%

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

Consolidated Financial Data  -  Mid-State Bancshares

(Unaudited)	Quarter Ended
(In thousands, except per share data)	June 30, 2005			Mar. 31, 2005			Dec. 31, 2004			Sept. 30, 2004			June 30, 2004
Interest Income (not taxable equivalent)	$	31,654		$	29,482		$	28,843		$	28,236		$	26,620
Interest Expense	3,694			2,713			2,301			2,083			1,990
Net Interest Income	27,960			26,769			26,542			26,153			24,630
(Benefit)/Provision for Loan Losses	—			—			—			—			(2,700		)
Net Interest Income after provision for loan losses	27,960			26,769			26,542			26,153			27,330
Non-interest income	5,378			5,395			5,604			7,250			7,910
Non-interest expense	19,211			18,335			18,458			20,265			20,877
Income before income taxes	14,127			13,829			13,688			13,138			14,363
Provision for income taxes	4,615			4,739			4,290			4,465			4,990
Net Income	$	9,512		$	9,090		$	9,398		$	8,673		$	9,373
Per share:
Net Income - basic	$	0.42		$	0.39		$	0.41		$	0.37		$	0.40
Net Income - diluted	$	0.41		$	0.39		$	0.40		$	0.36		$	0.39
Weighted average shares used in Basic E.P.S. calculation	22,884			23,019			23,201			23,369			23,550
Weighted average shares used in Diluted E.P.S. calculation	23,381			23,557			23,741			23,842			23,962
Cash dividends	$	0.16		$	0.16		$	0.16		$	0.14		$	0.14
Book value at period-end	$	12.04		$	11.78		$	11.89		$	11.94		$	11.60
Tangible book value at period end	$	9.63		$	9.38		$	9.48		$	9.54		$	9.20
Ending Shares	22,810			22,949			23,099			23,323			23,454
Financial Ratios
Return on assets	1.63		%	1.60		%	1.60		%	1.50		%	1.68		%
Return on tangible assets	1.67		%	1.64		%	1.64		%	1.53		%	1.72		%
Return on equity	13.87		%	13.33		%	13.40		%	12.47		%	13.73		%
Return on tangible equity	17.34		%	16.66		%	16.75		%	15.64		%	17.28		%
Net interest margin (not taxable equivalent)	5.37		%	5.22		%	5.01		%	5.01		%	4.90		%
Net interest margin (taxable equivalent yield)	5.79		%	5.65		%	5.42		%	5.41		%	5.31		%
Net loan losses (recoveries) to average loans	0.06		%	0.05		%	0.03		%	(0.01		)%	0.00		%
Efficiency ratio	57.6		%	57.0		%	57.4		%	60.7		%	64.2		%
Period Averages
Total Assets	$	2,339,887		$	2,306,314		$	2,330,364		$	2,306,318		$	2,242,379
Total Tangible Assets	2,284,853			2,250,937			2,274,646			2,250,254			2,185,971
Total Loans (includes loans held for sale)	1,460,506			1,434,150			1,403,478			1,358,768			1,289,633
Total Earning Assets	2,088,566			2,079,604			2,107,007			2,077,356			2,022,516
Total Deposits	2,022,691			1,991,356			2,026,945			2,005,694			1,947,865
Common Equity	275,100			276,592			278,924			276,652			274,577
Common Tangible Equity	220,067			221,215			223,206			220,587			218,169
Balance Sheet - At Period-End
Cash and due from banks	$	116,891		$	127,861		$	112,669		$	119,104		$	128,141
Investments and Fed Funds Sold	606,462			628,634			650,817			688,923			697,431
Loans held for sale	10,871			9,927			12,988			10,001			12,789
Loans, net of deferred fees, before allowance for loan losses	1,490,366			1,456,091			1,421,894			1,394,478			1,316,135
Allowance for Loan Losses	(13,403		)	(13,630		)	(13,799		)	(13,912		)	(13,895		)
Goodwill and other intangibles (excl OMSR’s)	54,885			55,228			55,572			55,916			56,259
Other assets (incl OMSR’s)	85,024			58,070			55,946			55,033			55,155
Total Assets	$	2,351,096		$	2,322,181		$	2,296,087		$	2,309,543		$	2,252,015
Non-interest bearing deposits	$	561,435		$	526,597		$	517,139		$	524,785		$	498,754
Interest bearing deposits	1,464,293			1,478,735			1,477,406			1,474,782			1,455,691
Other borrowings	25,331			23,621			6,582			5,843			4,964
Allowance for losses - unfunded commitments	1,759			1,624			1,783			1,682			1,570
Other liabilities	23,623			21,228			18,550			23,989			19,074
Shareholders’ equity	274,655			270,376			274,627			278,462			271,962
Total Liabilities and Shareholders’ equity	$	2,351,096		$	2,322,181		$	2,296,087		$	2,309,543		$	2,252,015
Asset Quality & Capital - At Period-End
Non-accrual loans	$	5,152		$	5,828		$	10,700		$	10,954		$	11,758
Loans past due 90 days or more	—			—			—			—			2
Other real estate owned	—			—			—			—			—
Total non performing assets	$	5,152		$	5,828		$	10,700		$	10,954		$	11,760
Allowance for losses to loans, gross (1)	1.0		%	1.0		%	1.1		%	1.1		%	1.2		%
Non-accrual loans to total loans, gross	0.3		%	0.4		%	0.8		%	0.8		%	0.9		%
Non performing assets to total assets	0.2		%	0.3		%	0.5		%	0.5		%	0.5		%
Allowance for losses to non performing loans (1)	294.3		%	261.7		%	145.6		%	142.4		%	131.5		%
Equity to average assets (leverage ratio)	9.4		%	9.5		%	9.3		%	9.5		%	9.7		%
Tier One capital to risk-adjusted assets	11.6		%	11.9		%	12.1		%	12.4		%	13.0		%
Total capital to risk-adjusted assets	12.5		%	12.8		%	13.0		%	13.3		%	13.9		%

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