10-Q

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 March 31, 2005.

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 001-12487

FIRST STATE BANCORPORATION

(Exact name of registrant as specified in its charter)

NEW MEXICO	85-0366665
(State or other jurisdiction of incorporation or organization)	(IRS Employer 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: 15,351,384 shares of common stock, no par value, outstanding as of May 5, 2005.

FIRST STATE BANCORPORATION AND SUBSIDIARY

	Page
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements	2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3. Quantitative and Qualitative Disclosures About Market Risk	12
Item 4. Controls and Procedures	14
PART II. - OTHER INFORMATION
Item 5. Other Information	15
Item 6. Exhibits	15
SIGNATURES	16

- 1 -

PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements.

First State Bancorporation and Subsidiary

Consolidated Condensed Balance Sheets

(unaudited)

(Dollars in thousands, except share and per share amounts)

	March 31, 2005			December 31, 2004
Assets
Cash and due from banks	$	53,347		$	42,514
Interest-bearing deposits with other banks		229			1,501
Federal funds sold		7,600			1,250
Total cash and cash equivalents		61,176			45,265
Investment securities:
Available for sale (at market, amortized cost of $216,328 at March 31, 2005, and $204,672 at December 31, 2004)		211,832			203,174
Held to maturity (at amortized cost, market value of $76,570 at March 31, 2005, and $75,236 at December 31, 2004)		77,377			75,407
Federal Home Loan Bank stock and Federal Reserve Bank stock, at cost		16,414			12,344
Total investment securities		305,623			290,925
Mortgage loans available for sale		17,798			18,965
Loans held for investment net of unearned interest		1,407,275			1,358,830
Less allowance for loan losses		(16,042	)		(15,331	)
Net loans		1,409,031			1,362,464
Premises and equipment, net		29,030			29,310
Accrued interest receivable		8,129			6,947
Other real estate owned		1,370			1,255
Goodwill		43,223			43,223
Cash surrender value of bank owned life insurance		20,115			19,910
Deferred tax asset, net		4,131			2,866
Other assets, net		11,307			13,345
Total assets	$	1,893,135		$	1,815,510
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing	$	319,986		$	317,729
Interest-bearing		1,093,966			1,083,574
Total deposits		1,413,952			1,401,303
Securities sold under agreements to repurchase		38,511			69,723
Federal Home Loan Bank advances and other		246,344			153,852
Junior subordinated debentures		38,661			38,661
Other liabilities		9,741			7,662
Total liabilities		1,747,209			1,671,201
Stockholders’ equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued or outstanding		—			—
Common stock, no par value, 20,000,000 shares authorized; issued 16,164,862 at March 31, 2005 and 16,141,232 at December 31, 2004; outstanding 15,348,237 at March 31, 2005 and 15,324,728 at December 31, 2004		89,017			88,634
Treasury stock, at cost (816,625 shares at March 31, 2005 and 816,504 shares at December 31, 2004)		(6,342	)		(6,340	)
Retained earnings		66,396			63,166
Unearned compensation		(267	)		(192	)
Accumulated other comprehensive income (loss)- Unrealized loss on investment securities, net of tax		(2,878	)		(959	)
Total stockholders’ equity		145,926			144,309
Total liabilities and stockholders’ equity	$	1,893,135		$	1,815,510
Book value per share	$	9.51		$	9.42
Tangible book value per share	$	6.65		$	6.55

See accompanying notes to unaudited consolidated condensed financial statements.

- 2 -

First State Bancorporation and Subsidiary

Consolidated Condensed Statements of Operations

For the three months ended March 31, 2005 and 2004

(unaudited)

(Dollars in thousands, except per share amounts)

	Three Months ended March 31, 2005			Three Months ended March 31, 2004
Interest:
Interest and fees on loans	$	23,827		$	20,098
Interest on marketable securities:
Taxable		2,520			2,134
Non-taxable		366			100
Federal funds sold		16			—
Interest-bearing deposits with other banks		25			14
Total interest income		26,754			22,346
Interest expense:
Deposits		5,416			4,463
Short-term borrowings		806			306
Long-term debt		629			542
Junior subordinated debentures		562			390
Total interest expense		7,413			5,701
Net interest income		19,341			16,645
Provision for loan losses		(1,075	)		(1,440	)
Net interest income after provision for loan losses		18,266			15,205
Non-interest income:
Service charges on deposit accounts		1,088			1,074
Other banking service fees		181			183
Credit and debit card transaction fees		485			969
Gain on sale or call of investment securities		—			236
Check imprint income		150			136
Gain on sale of mortgage loans		924			566
Other		416			322
Total non-interest income		3,244			3,486
Non-interest expenses:
Salaries and employee benefits		7,604			5,613
Occupancy		1,964			1,815
Data processing		816			677
Credit and debit card interchange		—			406
Equipment		1,048			1,032
Legal, accounting, and consulting		421			330
Marketing		565			552
Telephone		289			287
Supplies		218			194
Delivery		216			250
Other real estate owned		30			110
FDIC insurance premiums		49			44
Amortization of intangibles		27			28
Check imprint expense		164			130
Loss on sale of loans		—			435
Other		1,365			1,169
Total non-interest expenses		14,776		$	13,072
Income before income taxes		6,734			5,619
Income tax expense		2,428			2,045
Net income	$	4,306		$	3,574
Earnings per share:
Basic earnings per share	$	0.28		$	0.23
Diluted earnings per share	$	0.28		$	0.23
Dividends per common share	$	0.07		$	0.05

See accompanying notes to unaudited consolidated condensed financial statements.

- 3 -

First State Bancorporation and Subsidiary

Consolidated Condensed Statements of Comprehensive Income

For the three months ended March 31, 2005 and 2004

(unaudited)

(Dollars in thousands)

	Three months ended March 31, 2005			Three months ended March 31, 2004
Net Income	$	4,306		$	3,574
Other comprehensive income (loss), net of tax - unrealized holding gains (losses) on securities available for sale arising during period		(1,919	)		626
Reclassification adjustment for gains included in net income		—			(151	)
Total comprehensive income	$	2,387		$	4,049

See accompanying notes to unaudited consolidated condensed financial statements.

- 4 -

First State Bancorporation and Subsidiary

Consolidated Condensed Statements of Cash Flows

For the three months ended March 31, 2005 and 2004

(unaudited)

(Dollars in thousands)

	Three Months ended March 31, 2005			Three Months ended March 31, 2004
Operating activities:
Net Income	$	4,306		$	3,574
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,075			1,440
Provision for decline in value of other real estate owned		—			34
Net gain on sale of other real estate owned		(23	)		(42	)
Depreciation and amortization		1,258			1,103
Stock-based compensation expense		36			58
Gain on sale of investment securities available for sale		—			(236	)
Loss on sale of loans		—			435
Income tax benefit of stock options exercised		24			174
Increase in bank owned life insurance cash surrender value		(205	)		(236	)
Amortization of securities, net		338			143
Mortgage loans originated for sale		(57,038	)		(30,869	)
Proceeds from sale of mortgage loans available for sale		59,177			34,613
Deferred tax asset		(186	)		146
Increase in accrued interest receivable		(1,182	)		(495	)
Decrease in other assets, net		1,740			1,378
Increase in other liabilities, net		2,077			2,315
Total adjustments		7,091			9,961
Net cash provided by operating activities		11,397			13,535
Cash flows from investing activities:
Net increase in loans		(50,193	)		(56,391	)
Purchases of investment securities carried at amortized cost		(5,000	)		(995	)
Maturities of investment securities carried at amortized cost		2,966			4,671
Purchases of investment securities carried at market		(17,591	)		(49,123	)
Maturities of investment securities carried at market		1,591			19,807
Sale of investment securities available for sale		—			17,261
Proceeds from the sale of loans		—			37,649
Purchases of premises and equipment		(680	)		(4,061	)
Proceeds from sale of and payments on other real estate owned		320			391
Net cash used in investing activities		(68,587	)		(30,791	)
Cash flows from financing activities:
Net increase in interest-bearing deposits		10,392			55,566
Net (decrease) increase in non-interest-bearing deposits		2,257			(10,041	)
Net decrease in securities sold under repurchase agreements		(31,212	)		(11,254	)
Proceeds from Federal Home Loan Bank advances		209,500			37,700
Payments on Federal Home Loan Bank advances		(117,008	)		(90,982	)
Proceeds from common stock issued		248			415
Dividends paid		(1,076	)		(839	)
Net cash provided (used) by financing activities		73,101			(19,435	)
Increase (decrease) in cash and cash equivalents		15,911			(36,691	)
Cash and cash equivalent at beginning of period		45,265			86,150
Cash and cash equivalents at end of period	$	61,176		$	49,459
Supplemental disclosure of noncash investing and financing activities:
Additions to other real estate owned in settlement of loans	$	412		$	901
Supplemental disclosure of cash flow information:
Cash paid for interest	$	7,052		$	5,749
Cash paid for income taxes	$	325		$	—

See accompanying notes to unaudited consolidated condensed financial statements.

- 5 -

First State Bancorporation and Subsidiary

Notes to Consolidated Condensed Financial Statements

(unaudited)

1. Consolidated Condensed Financial Statements

The accompanying consolidated condensed financial statements of First State Bancorporation and subsidiary (the “Company”) 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, 2004.

Our 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-month period ended March 31, 2005, are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

2. New Accounting Standards

On March 1, 2005, the Federal Reserve Board released a final rule (FR) incorporating two substantive changes in the capital treatment of trust preferred securities that would impact bank holding companies and a number of clarifications of existing policies and guidelines. The substantive changes included in the FR that affect bank holding companies provide that: (1) As of March 31, 2009, the amount of trust preferred securities that a bank holding company may include as Tier 1 capital will be limited to 25% of the sum of all core capital elements including trust preferred securities, net of goodwill less any associated deferred tax liability, and (2) After March 31, 2009, amounts of trust preferred securities in excess of the 25% limit will be included in Tier 2 capital, limited to 50% of Tier 1 capital. Based on our current amount of trust preferred securities, the FR will not impact our capital calculations.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 establishes standards for how a business enterprise classifies, measures and discloses in its financial statements certain financial instruments with characteristics of both liabilities and equity. SFAS 150 requires that a business enterprise classify financial instruments that are within its scope as liabilities (or as assets in some circumstances). SFAS 150 is effective for contracts entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The FASB has proposed to defer provisions related to mandatorily redeemable financial instruments to periods beginning after December 15, 2004. The adoption of SFAS 150 on July 1, 2003 did not have a material impact on our consolidated financial statements, and the adoption of deferred provisions on January 1, 2005, did not have a material impact on our consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS 123R is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB 25. Among other provisions, SFAS 123R eliminates the use of APB 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS 123R is the first reporting period beginning after June 15, 2005, although early adoption is allowed. However, on April 14, 2005, the Securities and Exchange Commission announced that the compliance date of SFAS 123R will be suspended until January 1, 2006 for calendar year companies.

SFAS 123R permits companies to adopt its requirements using either a “modified prospective” method, or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based payments granted after that date, and based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statements of previous periods based on proforma disclosures made in accordance with SFAS 148.

- 6 -

SFAS 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated, because they depend on, among other things, when employees exercise stock options.

We currently expect to adopt SFAS 123R, effective January 1, 2006 based on the new compliance date announced by the Securities and Exchange Commission; however, we have not yet determined which of the aforementioned adoption methods we will use. Subject to a complete review of the requirements of SFAS 123R, based on stock options granted to date using our current pricing model (i.e., Black-Scholes), the adoption of SFAS 123R on January 1, 2006, is expected to reduce 2006 earnings by approximately $800,000.

In March 2004, the FASB’s Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairments and Its Application to Certain Investments” (EITF 03-1). EITF 03-1 provides accounting guidance regarding the determination of when an impairment (i.e., fair value is less than amortized cost) of debt and marketable equity securities and investments accounted for under the cost method should be considered other-than-temporary and recognized in earnings. EITF 03-1 also requires annual disclosures of certain quantitative and qualitative factors of debt and marketable equity securities classified as available-for-sale or held-to-maturity that are in an unrealized loss position at the balance sheet date, but for which an other-than-temporary impairment has not been recognized. The Financial Accounting Standards Board has decided to delay the effective date for the measurement and recognition guidance until new implementation guidance can be issued. The Proposed Staff Position EITF 03-1-a is expected to be issued in final form in 2005.

In December 2004, the AICPA issued Statement of Position (“SOP”) No. 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer.” SOP 03-3 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or loans accounted for as debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. SOP 03-3 requires that the excess of contractual cash flows over cash flows expected to be collected not be recognized as an adjustment of yield, loss accrual, or valuation allowance. It includes loans with evidence of deterioration of credit quality since origination, acquired by completion of a transfer, including such loans acquired in purchase business combinations. SOP 03-3 does not apply to loans originated by the entity or acquired loans that have not deteriorated in credit quality since origination. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 15, 2004. The adoption of SOP 03-3 on January 1, 2005, did not have a material impact on our consolidated financial statements.

3. Stock-Based Compensation

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.

- 7 -

	Three Months Ended March 31,
	2005			2004
	(Dollars in thousands, except per share amounts)
Net income as reported:	$	4,306		$	3,574
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		24			37
Deduct: Total stock-based employee compensation expense determined under fair value-based method for awards, net of related tax effects		(320	)		(138	)
Pro forma net income	$	4,010		$	3,473
Earnings per share:
Basic – as reported	$	0.28		$	0.23
Basic – pro forma	$	0.26		$	0.23
Diluted – as reported	$	0.28		$	0.23
Diluted – pro forma	$	0.26		$	0.23

See Note 2. New Accounting Standards for further discussion regarding the impact SFAS 123R is expected to have on our operations.

4. 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 months ended March 31:

	Three Months Ended March 31,
	2005					2004
	Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount
	(Dollars in thousands, except share and per share amounts)
Basic EPS:
Net income	$	4,306	15,370,536	$	0.28	$	3,574	15,269,694	$	0.23
Effect of dilutive securities
Options		—	192,998				—	134,172
Diluted EPS:
Net income	$	4,306	15,563,534	$	0.28	$	3,574	15,403,866	$	0.23

On February 9, 2005, we effected a two-for-one split of our common stock. All references to number of shares and per share computations in the consolidated condensed financial statements and notes have been retroactively adjusted to reflect the increased number of shares due to the effect of the common stock split.

5. Treasury Stock

Our Board of Directors has authorized us to purchase up to 1,050,000 shares of our common stock in the open market. As of March 31, 2005, we have purchased 784,100 shares. We did not purchase any additional shares during the three months ended March 31, 2005. We may purchase additional shares, the amount of which will be determined by market conditions. We sponsor a deferred compensation plan, which is included in the consolidated financial statements. At March 31, 2005, the assets of the deferred compensation plan included 32,525 shares of Company common stock.

- 8 -

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Certain statements in this Form 10-Q are 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 (the “Exchange Act”). The discussions regarding our growth strategy, expansion of operations in our markets, competition, loan and deposit growth, timing of new branch openings, expansion opportunities including expanding our mortgage division market share, and response to consolidation in the banking industry include forward-looking statements. Other 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 actual results to differ materially from those in the forward-looking statement. Some factors include changes in interest rates, local business conditions, government regulations, loss of key personnel or inability to hire suitable personnel, faster or slower that anticipated growth, economic conditions, potential U.S. Air Force base closures in our geographic regions, our competitors’ responses to our marketing strategy or new competitive conditions, and competition in the geographic and business areas in which we conduct our operations. We are not undertaking any obligation to update these risks to reflect events or circumstances after the date of this report to reflect the occurrence of unanticipated events.

Consolidated Condensed Balance Sheets

Our total assets increased by $77.6 million from $1.816 billion as of December 31, 2004 to $1.893 billion as of March 31, 2005. The increase was primarily made up of a $15.9 million increase in cash and cash equivalents, a $14.7 million increase in investment securities and a $46.5 million increase in loans.

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

	March 31, 2005				December 31, 2004				March 31, 2004
	Amount		%		Amount		%		Amount		%
	(Dollars in thousands)
Commercial	$	170,666	12.0	%	$	174,293	12.6	%	$	160,287	12.9	%
Real estate - commercial		697,663	49.0	%		683,638	49.6	%		608,947	48.9	%
Real estate – one- to four-family		291,786	20.4	%		280,570	20.4	%		306,081	24.6	%
Real estate - construction		218,397	15.3	%		191,728	13.9	%		133,195	10.7	%
Consumer and other		28,763	2.0	%		28,601	2.1	%		30,646	2.5	%
Mortgage loans available for sale		17,798	1.3	%		18,965	1.4	%		4,553	0.4	%
Total	$	1,425,073	100.0	%	$	1,377,795	100.0	%	$	1,243,709	100.0	%

Deposits, which are our main source of funds for loans and investments, increased by $12.6 million from $1.401 billion as of December 31, 2004 to $1.414 billion as of March 31, 2005. Securities sold under agreements to repurchase decreased $31.2 million from $69.7 million at December 31, 2004 to $38.5 million at March 31, 2005, due primarily to one customer that removed excess cash from the Bank during the first quarter. Federal Home Loan Bank advances and other increased $92.5 million from $153.9 million at December 31, 2004 to $246.3 million at March 31, 2005.

The following table represents customer deposits, by category, at the dates indicated.

	March 31, 2005				December 31, 2004				March 31, 2004
	Amount		%		Amount		%		Amount		%
	(Dollars in thousands)
Non-interest-bearing	$	319,986	22.6	%	$	317,729	22.7	%	$	259,528	20.9	%
Interest-bearing demand		259,664	18.4	%		254,140	18.0	%		225,968	18.2	%
Money market savings accounts		229,329	16.2	%		216,769	15.5	%		166,183	13.4	%
Regular savings		72,535	5.1	%		68,671	4.9	%		67,344	5.4	%
Certificates of deposit less than $100,000		218,971	15.5	%		223,893	16.0	%		236,120	19.0	%
Certificates of deposit greater than $100,000		313,467	22.2	%		320,101	22.9	%		286,257	23.1	%
Total	$	1,413,952	100.0	%	$	1,401,303	100.0	%	$	1,241,400	100.0	%

- 9 -

Consolidated Results of Operations For the Three Months Ended March 31, 2005

Our net income for the three months ended March 31, 2005, was $4.3 million, an increase of $732,000 or 20% from $3.6 million for the same period of 2004. The increase in net income resulted from an increase in net interest income of $2.7 million, partially offset by an increase in non-interest expenses of $1.7 million and a decrease in non-interest income of $242,000. Our annualized return on average assets was 0.94% for the three months ended March 31, 2005, compared to 0.88% for the same period of 2004.

Our net interest income increased $2.7 million to $19.3 million for the first quarter of 2005 compared to $16.6 million for the first quarter of 2004. This increase was composed of a $4.4 million increase in total interest income offset by a $1.7 million increase in total interest expense. The increase in interest income was composed of an increase of $2.8 million due to increased average interest earning assets of $202.5 million, aided by a $1.6 million increase due to a 0.38% increase in the yield on average interest earning assets. The increase in average interest-earning assets occurred in loans and investment securities. The increase in loans of $140.5 million was made possible by our successful efforts to attract new customers and the increase in our investment securities of $61.0 million was driven primarily by purchases of securities to satisfy collateral pledging requirements due to an increase in public deposits since prior year. The increase in total interest expense was composed of an increase of $516,000 due to increased average interest-bearing liabilities of $145.0 million and an increase of $1.2 million due to a 0.32% increase 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 $134.2 million and an increase in average borrowings including FHLB advances and junior subordinated debentures of $16.3 million. The increase in interest-bearing deposits is a result of our success in increasing market share in New Mexico.

The increase in yield on interest earning assets of 0.38% reflects the impact of the Federal Reserve Bank’s increase of the discount rate beginning in the third quarter of 2004 and into 2005. The discount rate has increased 1.75% since the first quarter of 2004. The increase in the discount rate contributes to a corresponding increase 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 increase in the prime rate has led to a corresponding increase in the yield on our loan portfolio. We expect that the Federal Reserve Bank rate increases in the first quarter of 2005 will cause the yield on our loan portfolio to continue to increase slightly in the coming months as existing loans reprice.

The increase in our cost of interest bearing liabilities is a result of higher interest payments made to our deposit and repurchase agreement customers as well as higher interest rates paid on our borrowings. 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 increases in the discount rate made by the Federal Reserve Bank since the third quarter of 2004, we have increased the interest rates that we pay on our customers’ deposits and repurchase agreements and increased the corresponding interest payments to these customers. In addition, the increase in the discount rate has corresponded to an increase in interest expense related to our borrowings as the majority of our borrowings mature within one year and are being replaced with borrowings at the higher current rates. We continue to use a laddering approach to our borrowings with maturities of approximately one year.

We believe that the competitive environment for deposits will significantly determine the impact on the net interest margin of changes in interest rates. During the quarter ended March 31, 2005, the net interest margin increased by 0.14% over the quarter ended March 31, 2004 due primarily to Federal Reserve Bank rate increases. We believe that additional increases in rates would cause an increase in our net interest margin due to our asset sensitive position. The extent of future increases in our net interest margin will depend on the amount and timing of any further Federal Reserve Bank increases and our ability to manage the cost of interest-bearing liabilities and stay competitive in the markets we serve.

Our provision for loan losses was $1.1 million for the first quarter of 2005, compared to $1.4 million for the first quarter of 2004. Net charge-offs for the first quarter of 2005 were $364,000 compared to $1.4 million for the first quarter of 2004. The allowance for loan losses to total loans held for investment was 1.14% and the ratio of

- 10 -

allowance for loan losses to non-performing loans was 243% at March 31, 2005, compared to the allowance for loan losses to total loans held for investment of 1.14% and the ratio of allowance for loan losses to non-performing loans of 175% at March 31, 2004. Total non-performing assets to total assets were 0.42% at March 31, 2005, compared to 0.62% at March 31, 2004. 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 decreased by $242,000 to $3.2 million for the three months ended March 31, 2005, compared to $3.5 million for the same period of 2004. The income from credit and debit transaction fees decreased $484,000 from the first quarter of 2004, which is directly related to the sale of the merchant card portfolio in the third quarter of 2004. The sale resulted in lower fee income as well as lower salaries and related expenses of the operation. Absent in the first quarter of 2005 is any gain or loss from the sale of investment securities compared to gains of $236,000 in the first quarter of 2004. These decreases in non-interest income were offset by the gain on sales of mortgage loans, which increased $358,000 from the first quarter of 2004 reflecting a higher level of loan origination activity, which has steadily increased since the second quarter of 2004 as we have continued to expand and focus on our mortgage division.

Our total non-interest expenses increased by $1.7 million to $14.8 million for the first quarter of 2005, compared to $13.1 million for the same period of 2004. This increase was due primarily to a $2.0 million increase in salaries and employee benefits, a $149,000 increase in occupancy expense, a $139,000 increase in data processing, and a $91,000 increase in legal, accounting, and consulting. The increase in salaries and benefits is a result of several senior level lenders added in the Colorado and Utah markets in addition to overall growth in employees and an increase in commissions related to the higher level of single-family mortgage loan originations. These increases were offset by a decrease of $406,000 in credit and debit card interchange due to the sale of our merchant card services in the third quarter of 2004. Absent in the first quarter of 2005 is any loss on sale of loans compared to the loss on sale of loans of $435,000 in the first quarter of 2004 due to the sale of approximately $38 million in loans obtained in the acquisition of First Community.

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.

	March 31, 2005			December 31, 2004			March 31, 2004
	(Dollars in thousands)
ALLOWANCE FOR LOAN LOSSES:
Balance beginning of period	$	15,331		$	14,121		$	14,121
Provision for loan losses		1,075			4,500			1,440
Net charge-offs		(364	)		(3,290	)		(1,438	)
Balance end of period	$	16,042		$	15,331		$	14,123
Allowance for loan losses to total loans held for investment		1.14	%		1.13	%		1.14	%
Allowance for loan losses to non performing loans		243	%		192	%		175	%
	March 31, 2005			December 31, 2004			March 31, 2004
	(Dollars in thousands)
NON-PERFORMING ASSETS:
Accruing loans – 90 days past due	$	5		$	4		$	—
Non-accrual loans		6,609			7,969			8,070
Total non-performing loans		6,614			7,973			8,070
Other real estate owned		1,370			1,255			2,075
Total non-performing assets	$	7,984		$	9,228		$	10,145
Potential problem loans	$	22,197		$	22,174		$	17,099
Total non-performing assets to total assets		0.42	%		0.51	%		0.62	%

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.

- 11 -

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.

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.

- 12 -

	Three Months Ended March 31,
	2005							2004
	Average Balance			Interest Income or Expense		Average Yield or Cost		Average Balance			Interest Income or Expense		Average Yield or Cost
	(Dollars in thousands)
Assets
Loans:
Commercial	$	166,065		$	2,661	6.50	%	$	157,490		$	2,173	5.55	%
Real estate—mortgage		975,347			16,333	6.79	%		933,608			15,051	6.48	%
Real estate—construction		204,277			3,883	7.71	%		124,449			2,102	6.79	%
Consumer		28,697			708	10.01	%		30,619			707	9.29	%
Mortgage		16,525			242	5.94	%		4,594			65	5.69	%
Other		876			—	—			553			—	—
Total loans		1,391,787			23,827	6.94	%		1,251,313			20,098	6.46	%
Allowance for loan losses		(15,673	)						(14,332	)
Securities:
U.S. government and mortgage-backed		258,664			2,391	3.75	%		213,508			2,049	3.86	%
State and political subdivisions:
Non-taxable		27,978			366	5.31	%		10,859			100	3.70	%
Other		14,893			129	3.51	%		16,189			85	2.11	%
Total securities		301,535			2,886	3.88	%		240,556			2,234	3.74	%
Interest-bearing deposits with other banks		4,834			25	2.10	%		6,627			14	0.85	%
Federal funds sold		2,861			16	2.27	%		—			—	—
Total interest-earning assets		1,701,017			26,754	6.38	%		1,498,496			22,346	6.00	%
Non-interest-earning assets:
Cash and due from banks		57,620							45,639
Other.		116,097							108,722
Total non-interest-earning assets		173,717							154,361
Total assets	$	1,859,061						$	1,638,525
Liabilities and Stockholders’ Equity
Deposits:
Interest-bearing demand accounts	$	261,092		$	445	0.69	%	$	220,974		$	247	0.45	%
Certificates of deposit > $100,000		316,742			2,445	3.13	%		272,703			1,849	2.73	%
Certificates of deposit < $100,000		223,310			1,542	2.80	%		237,854			1,700	2.87	%
Money market savings accounts		219,729			830	1.53	%		160,932			532	1.33	%
Regular savings accounts		70,554			154	0.89	%		64,738			135	0.84	%
Total interest-bearing deposits		1,091,427			5,416	2.01	%		957,201			4,463	1.88	%
Federal funds purchased and securities sold under agreements to repurchase		54,068			66	0.50	%		59,564			46	0.31	%
Short-term borrowings		110,677			740	2.71	%		91,784			260	1.14	%
Long-term debt		98,579			629	2.59	%		106,373			542	2.05	%
Junior subordinated debentures		38,661			562	5.90	%		33,506			390	4.68	%
Total interest-bearing liabilities		1,393,412			7,413	2.16	%		1,248,428			5,701	1.84	%
Non-interest-bearing demand accounts		311,466							249,700
Other non-interest-bearing liabilities		7,401							5,006
Total liabilities		1,712,279							1,503,134
Stockholders’ equity		146,782							135,391
Total liabilities and stockholders’ equity	$	1,859,061						$	1,638,525
Net interest income				$	19,341						$	16,645
Net interest spread						4.22	%						4.16	%
Net interest margin						4.61	%						4.47	%
Ratio of average interest-earning assets to average interest-bearing liabilities						122.08	%						120.03	%

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 First State Bank N.M. on an ongoing basis.

- 13 -

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 March 31, 2005, our cumulative interest rate gap for the period up to three months was a positive $452.9 million and for the period up to one year was a positive $146.3 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 March 31, 2005. 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.

	Less than three months		Three months to less than one year			One to five years		Over five years		Total
	(Dollars in thousands)
Interest-earning assets:
Investment securities	$	5,773	$	23,378		$	210,180	$	66,292	$	305,623
Interest-bearing deposits with other banks		229		—			—		—		229
Federal funds sold		7,600		—			—		—		7,600
Loans:
Commercial		117,237		19,041			31,654		2,734		170,666
Real estate		716,945		157,931			329,600		21,168		1,225,644
Consumer		8,270		7,855			12,076		562		28,763
Total interest-earning assets	$	856,054	$	208,205		$	583,510	$	90,756	$	1,738,525
Interest-bearing liabilities:
Savings and NOW accounts	$	112,306	$	135,239		$	247,544	$	66,439	$	561,528
Certificates of deposit greater than $100,000		76,681		135,749			98,875		2,162		313,467
Certificates of deposit less than $100,000		51,467		90,656			74,378		2,470		218,971
Securities sold under agreements to repurchase		38,511		—			—		—		38,511
FHLB advances and other		85,544		153,136			7,078		586		246,344
Junior subordinated debentures		38,661		—			—		—		38,661
Total interest-bearing liabilities	$	403,170	$	514,780		$	427,875	$	71,657	$	1,417,482
Interest rate gap	$	452,884	$	(306,575	)	$	155,635	$	19,099	$	321,043
Cumulative interest rate gap at March 31, 2005	$	452,884	$	146,309		$	301,944	$	321,043
Cumulative gap ratio at March 31, 2005		2.12		1.16			1.22		1.23

Item 4. Controls and Procedures.

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2005 pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures and internal control over financial reporting are, to the best of their knowledge, effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Our Chief Executive Officer and Chief Financial Officer have also concluded that there were no changes in our internal control over financial reporting or in other factors that occurred during the registrant’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting or any corrective actions with regard to significant deficiencies and material weaknesses in internal control over financial reporting.

- 14 -

PART II. – OTHER INFORMATION

Item 5. Other Information.

On February 1, 2005, the Executive Employment Agreements were amended to permit payment of all sums in a lump sum in one year, such that the amount paid shall not be considered “deferred compensation” within the meaning or Section 409A of the Internal Revenue Code. The amendments are included in the exhibits filed herein.

Item 6. Exhibits.

Exhibit No.	Description
3.1	Restated Articles of Incorporation of First State Bancorporation. (1)
3.2	Articles of Amendment to the Restated Articles of Incorporation of First State Bancorporation. (6)
3.3	Amended Bylaws of First State Bancorporation. (2)
4	Shareholder Protection Rights Agreement dated October 25, 1996. (3)
10.1	Executive Employment Agreement. (5)
10.2	First State Bancorporation 2003 Equity Incentive Plan. (4)
10.3	Deferred Compensation Agreement. (2) (Participation and contributions to this Plan have been frozen as of December 31, 2004)
10.4	First Amendment to Executive Employment Agreement.*
10.5	Officer Employment Agreement.*
10.6	First Amendment to Officer Employment Agreement.*
14	Code of Ethics for Executives. (2)
31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

(1) Incorporated by reference from First State Bancorporation’s Registration Statement on Form S-2, Commission File No. 333-24417, declared effective April 25, 1997.

(2) Incorporated by reference from First State Bancorporation’s Form 10-Q for the quarter ended March 31, 2003.

(3) Incorporated by reference from First State Bancorporation’s Form 10-QSB for the quarter ended September 30, 1996.

(4) Incorporated by reference from First State Bancorporation’s Current Report on Form 8-K filed June 9, 2003.

(5) Incorporated by reference from First State Bancorporation’s 10-K for the year ended December 31, 2001.

(6) Incorporated by reference from First State Bancorporation’s 10-KSB for the year ended December 31, 1997.

 * Filed herewith.

- 15 -

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: May 9, 2005	By:	/s/ Michael R. Stanford
		Michael R. Stanford, President & Chief Executive Officer
Date: May 9, 2005	By:	/s/ Christopher C. Spencer
		Christopher C. Spencer, Senior Vice President and Chief Financial Officer

- 16 -

EXHIBIT INDEX

Exhibit No.	Description
3.1	Restated Articles of Incorporation of First State Bancorporation. (1)
3.2	Articles of Amendment to the Restated Articles of Incorporation of First State Bancorporation. (6)
3.3	Amended Bylaws of First State Bancorporation. (2)
4	Shareholder Protection Rights Agreement dated October 25, 1996. (3)
10.1	Executive Employment Agreement. (5)
10.2	First State Bancorporation 2003 Equity Incentive Plan. (4)
10.3	Deferred Compensation Agreement. (2) (Participation and contributions to this Plan have been frozen as of December 31, 2004)
10.4	First Amendment to Executive Employment Agreement.*
10.5	Officer Employment Agreement.*
10.6	First Amendment to Officer Employment Agreement.*
14	Code of Ethics for Executives. (2)
31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

(1) Incorporated by reference from First State Bancorporation’s Registration Statement on Form S-2, Commission File No. 333-24417, declared effective April 25, 1997.

(2) Incorporated by reference from First State Bancorporation’s Form 10-Q for the quarter ended March 31, 2003.

(3) Incorporated by reference from First State Bancorporation’s Form 10-QSB for the quarter ended September 30, 1996.

(4) Incorporated by reference from First State Bancorporation’s Current Report on Form 8-K filed June 9, 2003.

(5) Incorporated by reference from First State Bancorporation’s 10-K for the year ended December 31, 2001.

(6) Incorporated by reference from First State Bancorporation’s 10-KSB for the year ended December 31, 1997.

 * Filed herewith.

- 17 -

EX-10.4

Exhibit 10.4

FIRST AMENDMENT

TO

EXECUTIVE EMPLOYMENT AGREEMENT

Pursuant to Section 14 of the Executive Employment Agreement effective as of August 31, 2001 (the “Agreement”) entitled “Waiver; Modification,” the parties to the Agreement hereby modify the Agreement as provided below.

Section 6(b)(ii) shall be amended by deleting the second sentence thereto and by replacing it with the following sentence:

Such payment shall be made, in the Company’s sole discretion, either (1) in accordance with normal payroll procedures applicable to senior officers at the time of such termination; (2) in a single lump sum payment; or (3) in a combination of normal payroll procedures followed by a lump sum payment for the balance of the payment; provided, that, in all cases, all payments shall be completed within the taxable year in which the Officer terminates employment, or such later time as permitted under Section 409A of the Internal Revenue Code or its successor and the guidance provided by the Internal Revenue Service or Department of Treasury, such that the amount paid shall not be considered “deferred compensation” within the meaning of Section 409A.

Section 6(b)(iii) and 6(c)(iii) shall be amended by deleting the provisions in their entirety and by replacing them with the following sentence:

Continued participation in the Company’s fringe benefits; provided, however, that such continuation of benefits after termination shall not apply to those fringe benefits which require a minimum number of hours of employment for participation, such as 401k, life insurance and other employee insurance. The Company shall reimburse Officer for COBRA payments for continued medical benefits and insurance for the severance period to the extent incurred.

The Officer, to the extent determined to be nondiscriminatory under the Company’s qualified employee benefit plans, shall become fully vested in his benefits under such plans. Additionally, the Officer shall become fully vested with respect to any of the Company’s non-qualified benefit plans in which he is a participant.

All other provisions of the Agreement shall remain in full force and unamended.

Dated this 1st day February of 2005.

FIRST STATE BANCORPORATION

BY:

TITLE:

EXECUTIVE

EX-10.5

Exhibit 10.5

OFFICER EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into by and between                      (“Officer”) and First State Bancorporation, a New Mexico corporation (the “Company”), effective as of                     , (the “Commencement Date”).

WHEREAS, the Company desires to provide for the service and employment of the Officer with the Company and the Officer wishes to perform services for the Company, all in accordance with the terms and conditions provided herein; and

WHEREAS, the Officer is designated an Executive Officer of the Company and as such has special responsibilities and duties to the Company and its subsidiaries.

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, the Officer and the Company hereby agree as follows:

Section 1. EMPLOYMENT. The Company does hereby employ the Officer and the Officer does hereby accept employment as                      of the Company. The Officer shall have all the duties, responsibilities and authority normally performed by the                      and shall render services consistent with such position on the terms set forth herein and shall report to the Chairman and CEO (“CEO”) and the Board of Directors of the Company (the “Board”). In addition, the Officer shall have such other Officer and managerial powers and duties with respect to the Company and its subsidiaries as may reasonably be assigned to him by the CEO or the Board, to the extent consistent with his position and status as                      set forth above. The Officer agrees to devote all of his working time and efforts to the business and affairs of the Company and its subsidiaries, subject to periods of vacation and sick leave to which he is entitled, and shall not engage in activities that substantially interfere with such performance; provided, however, that this Agreement shall not be interpreted to prohibit the Officer from serving on the board of directors of any not for profit corporation or engaging in civic and community service consistent with the public image of the Company.

Section 2. TERM OF AGREEMENT. The term (the “Term”) of this Agreement shall be for three (3) years from the Commencement Date (unless earlier terminated pursuant to Section 5), and shall automatically renew for a further three (3) year Term on the first anniversary of the Commencement Date and for a further three (3) year Term each year thereafter; provided that the Agreement shall not renew for a further three (3) year Term if the Company gives Notice of Non-Renewal (“Notice of Non-Renewal”) to the Officer in accordance with Section 10 at least sixty (60) days prior to the next anniversary of the Commencement Date.

Section 3. LOCATION. In connection with the Officer’s employment by the Company, the Officer shall be based at the headquarters of the Company in Albuquerque, New Mexico except for required travel for the Company’s business.

Section 4. COMPENSATION.

(a) BASE SALARY. Effective as of the Commencement Date, the Company shall pay the Officer a base salary (“Base Salary”) at an initial rate of $             per year, payable in accordance with the Company’s policies relating to salaried employees. The Officer’s Base Salary may be increased, but may not be decreased below this amount, by the CEO with concurrence of the Compensation Committee of the Company Board of Directors (the “Compensation Committee”) in their sole discretion.

(b) ANNUAL BONUS. Commencing with the fiscal year of the Company (“Fiscal Year”) in which the Commencement Date occurs, the Officer shall have the opportunity to earn a bonus (“Bonus”) for each Fiscal Year as recommended by the Compensation Committee in accordance with the bonus policies of the Compensation Committee (“Bonus Plan”). The Officer shall be entitled to receive such other bonuses as are determined in the discretion of the Compensation Committee.

(c) FRINGE BENEFITS.

(i) GENERAL. The Officer shall be entitled to participate in each fringe, welfare, 401(k) savings plan, deferred compensation plan, pension benefit and incentive programs adopted from time to time by the Company for its employees.

(ii) VACATION. The Officer will receive four (4) weeks of paid vacation annually, subject to the terms of the Company’s vacation policies as they relate to senior officers.

(iii) INSURANCE. Officer shall be covered under any life insurance, salary continuation and long-term disability insurance programs, in accordance with their terms, as in effect for senior officers from time to time.

(iv) AUTOMOBILE. The Company shall furnish Officer with a current model vehicle suitable to his status as                     .

Section 5. TERMINATION.

(a) NOTICE OF TERMINATION. “Notice of Termination” shall mean a notice in accordance with Section 10 of an intention to terminate Officer’s employment that shall state the specific termination provision in this Agreement upon which the terminating party relies.

(b) DATE OF TERMINATION. “Date of Termination” shall mean:

(i) if the Officer’s employment is terminated because of death, the date of the Officer’s death; or

(ii) if the Officer’s employment is terminated for any other reason, the date specified in the Notice of Termination, which shall not be a date prior to the date such Notice of Termination is given or the expiration of any required notice period.

(iii) if the agreement is terminated by Notice of Non-Renewal, the date of which the agreement terminates by expiration of the three (3) year Term.

(c) TERMINATION FOR CAUSE. The Company may terminate the Officer’s employment under this Agreement for Cause (as defined below) at any time, in which event any rights of the Officer to continued employment under the Agreement shall thereupon cease.

(i) “Cause” shall exist if the Officer:

(A) fails, on a willful and continuing basis, to devote his full business time to Corporation’s business affairs (other than due to illness or incapacity, vacations, incidental civic activities and incidental personal time); or

(B) is convicted of a felony or a crime involving dishonesty, or breach of trust; or

(C) participates in an act of fraud, embezzlement or theft (regardless of whether a criminal conviction is obtained); or

(D) makes an unauthorized disclosure of confidential information that results in significant injury to the Company; or

(E) is the subject of state or federal regulatory action or is the substantial causative factor in regulatory action against the Company or its subsidiaries.

(ii) The Company may not terminate Officer’s employment for Cause unless and until a determination that Cause exists is made and approved by a majority of the Board (excluding the Officer), Officer is given at least fifteen (15) days’ written notice of the Board meeting called to make such determination and an opportunity to cure during such notice period, and Officer is given the opportunity to address such meeting.

(d) TERMINATION OTHER THAN FOR CAUSE. The Company may terminate the Officer’s employment under this Agreement without Cause at any time. The Officer’s right to continued employment under the Agreement shall cease, subject to the Section 6 and other provisions of this Agreement.

(e) TERMINATION BY REASON OF OFFICER’S DISABILITY. “Disability” shall be deemed the reason for the termination by the Company of the Officer’s employment if, as a result of the Officer’s incapacity due to physical or mental illness, the Officer shall have been absent from the full-time performance of the Officer’s duties with the Company for a period of six (6) consecutive months, the Company shall have given the Officer a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Officer shall not have returned to the full-time performance of the Officer’s duties.

(f) TERMINATION BY THE OFFICER.

(i) Prior to a Change of Control. The Officer may terminate his employment hereunder voluntarily at any time upon at least thirty (30) days’ prior notice to the Company.

(ii) Upon Change of Control. The Officer may terminate his employment hereunder at his sole discretion during the twenty-four (24) month period following a Change of Control (as defined below) upon thirty (30) days prior notice to the Company.

(g) NON-RENEWAL OF AGREEMENT.

(i) Prior to a Change of Control. Upon Notice of Non-Renewal of the agreement, the Officer shall be entitled to all severance benefits provided by Section 6(b).

(ii) Upon a Change of Control. Upon Notice of Non-Renewal of the agreement, the Officer shall be entitled to all severance benefits provided by Section 6(c).

(iii) Survival of Entitlements. The severance payments and benefits provided by Sections 6(b) and (c) shall survive the non-renewal of the agreement.

Section 6. SEVERANCE PAYMENTS.

(a) ACCRUED AND UNPAID BENEFITS. Following the termination of the Officer’s employment with the Company at any time for any reason, the Officer shall receive:

(i) any earned, but unpaid, Base Salary,

(ii) any earned, but unpaid, bonus for any Fiscal Year that ended prior to the Fiscal Year in which the Date of Termination occurs,

(iii) the cash equivalent of any accrued, but unused, vacation; and

(iv) any vested and accrued employee benefits, subject to the terms of the applicable employee benefit plans.

The amounts payable under subparagraphs 6(a)(i), (ii) and (iii) shall be paid within thirty (30) days following the Date of Termination.

(b) SEVERANCE BENEFITS PRIOR TO A CHANGE OF CONTROL. If the Company terminates the Officer’s employment with the Company for any reason other than (i) the Officer’s death, (ii) the Officer’s Disability or (iii) Cause, the Officer shall be entitled to the following:

(i) All amounts payable pursuant to Section 6(a);

(ii) An amount equal to the sum of (A) the Officer’s Base Salary in effect at the time of the termination and (B) without proration, the most recent annual bonus paid pursuant to Section 4(b) hereof. Such payment shall be made in accordance with the Company’s normal payroll procedures applicable to senior officers at the time of such termination as if the Officer had continued to be employed.

(iii) Continued participation in the Company’s fringe benefits; provided, however, that such continuation of benefits after termination shall not apply to those fringe benefits which require a minimum number of hours of employment for participation, such as 401k, bank owned life insurance and other employee insurance. The Company shall reimburse Officer for COBRA payments for continued medical benefits and insurance for the severance period to the extent incurred.

(c) SEVERANCE BENEFITS FOLLOWING A CHANGE OF CONTROL. If during the twelve (12) month period following a Change of Control the Company terminates the Officer’s employment with the Company for any reason other than Cause, or if the Officer terminates his employment with the Company, by resignation, death or disability, the Officer shall be entitled to the following:

(i) All amounts payable pursuant to Section 6(a);

(ii) An amount equal to three (3) times the sum of (A) the Officer’s Base Salary in effect at the time of the termination and without proration, (B) the most recent Bonus paid pursuant to Section 4(b) hereof (without deduction for any contributions by the Company for the Officer’s benefit to any retirement or other investment plans). Such payment shall be made in a lump sum in cash within thirty (30) days after the Date of Termination;

(iii) All of the Officer’s outstanding options, restricted stock or other equity related grants under the Company’s 2003 Equity Incentive Plan (including amended plans or substitute plans) to purchase Company common stock shall become fully vested and nonforfeitable as of the Date of Termination;

(iv) Continued participation in the Company’s fringe benefits; provided, however, that such continuation of benefits after termination shall not apply to those fringe benefits which require a minimum number of hours of employment for participation, such as 401k, bank owned life insurance and other employee insurance. The Company shall reimburse Officer for COBRA payments for continued medical benefits and insurance for the severance period to the extent incurred.

(v) The Officer, to the extent determined to be nondiscriminatory under the Company’s qualified employee benefit plans, shall become fully vested in his benefits under such plans. Additionally, the Officer shall become fully vested with respect to any of the Company’s non-qualified benefit plans in which he is a participant.

(d) CHANGE OF CONTROL. A “Change of Control” is deemed to have occurred if:

(i) A person [as that term is used in Section 13d of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)] becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of shares of the Company having twenty five percent (25%) or more of the total number of votes that may be cast for the election of directors of the Company without the prior approval of at least two-thirds of the members of the Company’s Board unaffiliated with that person;

(ii) Persons who constitute the directors of the Company at the beginning of a 24-month period cease to constitute at least two-thirds of all directors at any time during the period, unless the election of any new or replacement directors was approved by a vote of at least a majority of the members of the Company Board in office immediately before the period and of the new and replacement directors so approved;

(iii) The adoption of any plan or proposal to liquidate or dissolve the Company; or

(iv) Any merger or consolidation of the Company unless thereafter (1) directors of the Company immediately prior thereto continue to constitute at least two-thirds of the directors of the surviving entity or transferee, or (2) the Company’s securities continue to represent or are converted into securities that represent more than 80 percent of the combined voting power of the surviving entity or transferee.

Notwithstanding anything to the contrary in this Section 6(d), no rights under this Agreement shall accrue to the Officer because of a Change in Control if the Officer, or any group of which the Officer is a member, is the person whose acquisition constituted the Change in Control.

“Person” shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by substantially all of the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

(e) MITIGATION. The Officer shall not be required to mitigate damages with respect to any payments made pursuant to this Agreement, and no compensation received by Officer from other employment with respect to services rendered after the Date of Termination shall reduce the obligations of the Company under this Agreement.

(g) RELEASE OF EMPLOYMENT CLAIMS. The Officer agrees, as a condition to receipt of the payments and benefits provided for in Sections 6(b) and (c), that he will execute a comprehensive release, releasing any and all claims arising out of the Officer’s employment (other than enforcement of this Agreement and the Officer’s rights under any of the Company’s incentive compensation and employee benefit plans and programs to which he is entitled under this Agreement).

Section 7. CONFIDENTIALITY AND NON-COMPETITION

(a) CONFIDENTIALITY. “Confidential Information” shall mean nonpublic information about the Company and its subsidiaries or their affiliates, and their respective clients and customers that is not disclosed by the Company or its subsidiaries for financial reporting purposes and that was learned by the Officer in the course of his employment with the Company including, without limitation, any proprietary knowledge, trade secrets, data, formulae, information and client and customer lists and all papers, resumes and records (including computer records) of the documents containing such Confidential Information. Confidential Information does not include information regarding the Officer’s own compensation and benefits.

(i) The Officer acknowledges that in his employment with the Company, he will occupy a position of trust and confidence. The Officer shall not, except as may be required to perform his duties hereunder or as required by applicable law, without limitation in time or until such information shall have become public other than by the Officer’s unauthorized disclosure, disclose to others or use, whether directly or indirectly, any Confidential Information.

(ii) The Officer acknowledges that all Confidential Information is specialized, unique in nature and of great value to the Company and its subsidiaries, and that such Confidential Information gives the Company and its subsidiaries a competitive advantage. The Officer agrees to deliver or return to the Company, at the Company’s request at any time or upon termination or expiration of his employment or as soon thereafter as possible, all documents, computer tapes and disks, records, lists, data, drawings, prints, notes and written information (and all copies thereof) furnished by or on behalf of or for the benefit of the Company and its subsidiaries or their affiliates or prepared by the Officer during the term of his employment by the Company, but excluding documents relating to the Officer’s own compensation and benefits.

(b) NON-COMPETITION. Officer agrees that for a period of twelve (12) months following the Date of Termination, Officer shall not directly or indirectly induce or attempt to influence any employee of the Company or its subsidiaries to terminate his or her employment with the Company and shall not engage in (as a principal, partner, director, officer, agent, employee, consultant or otherwise) or be financially interested in any financial institution operating within any county in New Mexico in which the Company or any subsidiary has an office or branch (excluding publicly traded financial institutions in which Officer’s interest is less than 1%). If the period of time or the area specified in this paragraph should be adjudged unreasonable in any proceeding, then the period of time shall be reduced by such number of months or the area shall be reduced by the elimination of such portion thereof or both so that such restriction may be enforced in such area and for such time as is adjudged by the court considering the matter to be reasonable.

(c) SOLICITATION OF CUSTOMERS. Officer agrees that for a period of twelve (12) months from the Date of Termination, Officer will not solicit, on his own behalf, or that of his employer, the trade or patronage of any persons or entities known to him to be customers or clients of the Company during the period of Officer’s employment, regardless of the location of such customers or clients.

(d) STANDSTILL. During the period commencing on the Commencement Date and ending on the third (3^rd) anniversary of the Date of Termination, Officer will not, directly or indirectly:

(i) make, or in any way participate in any Solicitation of Proxies to vote, solicit any consent or communicate with or seek to advise or influence any person or entity with respect to the voting of any Company common stock or engage, encourage, participate in or support a Solicitation in Opposition with respect to the Company;

(ii) solicit, seek to effect, negotiate with or provide any information to any other party with respect to, or make any statement or proposal, whether written or oral, to the Board or any director or officer of the Company or otherwise make any public announcement or proposal whatsoever with respect to, any form of business combination transaction involving the Company including, without limitation, a merger, exchange offer or liquidation of the Company’s assets, or any restructuring, recapitalization or similar transaction with respect to the Company; or

(iii) otherwise act to seek to control, disrupt or influence the management, policies or affairs of the Company, or instigate or encourage any third party to take any action described in this Section 7(e).

Defined terms used in this Section 7(e) shall have the following meanings: “Solicitation in Opposition” shall have the meaning specified in Note 3 to Rule 14(a)-6(a) under the Exchange Act; “Proxy” shall have the meaning ascribed to it in Rule 14a-1 under the Exchange Act; “Solicitation” shall have the meaning ascribed to it in Rule 14a-1 under the Exchange Act.

(e) REMEDIES. In the event of a breach or threatened breach of this Section 7, the Officer agrees that the Company shall be entitled to apply for injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Officer acknowledging that damages would be inadequate and insufficient.

(f) SURVIVAL OF PROVISIONS. The obligations contained in this Section 7 shall, to the extent provided in this Section 7, survive the termination or expiration of the Officer’s employment with the Company and, as applicable, shall be fully enforceable thereafter in accordance with the terms of this Agreement.

Section 8. INDEMNIFICATION. Company will indemnify the Officer against any legal expenses he may incur in litigation against the Company, any shareholder of the Company, or any other person, to enforce or defend his rights under this Agreement; further, the Company shall indemnify, defend and hold harmless the Officer against all losses, claims, damages, costs, expenses (including attorney fees), liabilities, judgments or amounts paid in settlement (which settlement shall require the prior written consent of the Company, which consent shall not be unreasonably withheld) of or in connection with any claim, action, suit, proceeding or investigation which arises out of such person serving in his capacity as an employee or Officer of the Company and pertaining to any matter or fact arising, existing or occurring before the Change of Control (including, without limitation, the events giving rise to the Change of Control) to the full extent permitted under applicable New Mexico or federal law (including, but not limited to, Title XII of the United States Code) and the Articles of Incorporation and bylaws of the Company as in effect at the time of the Change of Control. The Company will advance expenses incurred by such persons in connection with such claims to the full extent permitted by such laws, Articles of Incorporation and bylaws.

These indemnification obligations of the Company will continue in force for a period of five (5) years after the date on which the Change of Control is effective, and will apply to any claims asserted or made within such period. Such indemnification shall not be due if an arbitrator and/or court of law, as appropriate under Section 11, determines that the Officer’s position in the litigation was frivolous and/or that the Officer did not pursue such litigation in good faith.

The Company shall use its best efforts to maintain in effect for three (3) years after a Change of Control officers and directors liability insurance with respect to claims arising from facts or events which occurred before the Change of Control with at least the same coverage and amounts, and containing terms and conditions no less advantageous, as the coverage provided by the Company prior to the Change of Control.

Section 9. WITHHOLDING. The Company shall make such deductions and withhold such amounts from each payment made to the Officer hereunder as may be required from time to time by law, governmental regulation or order.

Section 10. NOTICES. All notices and other communications under this Agreement shall be in writing and shall be given by hand, facsimile or first-class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon delivery or three (3) days after mailing or twenty-four (24) hours after transmission of a facsimile to the respective persons named below:

(a) If to the Company:

7900 Jefferson NE

Albuquerque NM 87109

(b) If to the Officer:

7900 Jefferson NE

Albuquerque NM 87109

Either party may change such party’s address for notices by notice duly given pursuant hereto.

Section 11. DISPUTE RESOLUTION; ATTORNEYS’ FEES. Any and all disputes arising out of, under, in connection with, or relating to this Agreement, the breach or alleged breach of this Agreement, or its enforceability, shall be settled either by litigation in the courts of the United States or the State of New Mexico or by arbitration in Albuquerque, New Mexico, such forum to be selected by the Officer in his discretion. In the event the Officer elects to resolve disputes through arbitration, such arbitration shall be conducted before a single arbitrator under the terms set forth in this Agreement and otherwise in accordance with the Federal Arbitration Act and the Rules of the American Arbitration Association. Judgment upon an arbitration award may be entered in any court having jurisdiction of the matter. The duty to arbitrate shall survive the cancellation or termination of this Agreement.

(a) The arbitrator shall be selected in the following manner:

(i) The parties shall select an arbitrator; or

(ii) If the parties are unable to agree on an arbitrator within thirty (30) days of the demand for arbitration, then the American Arbitration Association shall submit a list of seven individuals to the parties and the arbitrator shall be selected by the parties alternately striking names from the list of seven with the Officer making the first strike.

(b) The arbitrator designated and acting under this Agreement shall determine the controversy in accordance with the laws of the State of New Mexico and applicable federal law as applied to the facts as he finds them.

(c) The decision of the arbitrator shall be rendered within thirty (30) days after the hearing by the arbitrator, unless otherwise agreed to in writing by all parties, and such decision shall be in writing and in duplicate, one counterpart to be delivered to each party.

(d) The parties desire that, in the event the Officer elects to resolve disputes by arbitration, the enforceability of this arbitration provision and the proceedings thereunder be subject to the fullest extent possible to the provisions of the Federal Arbitration Act.

Section 12. GOVERNING LAW. This Agreement and the legal relations thus created between the parties hereto shall be governed by and construed under and in accordance with the laws of the State of New Mexico, without regard to its conflicts of law principles.

Section 13. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and supersedes any and all prior agreements and understandings between the parties with respect to the Officer’s employment and compensation by the Company, including the Officer Income Protection Plan.

Section 14. WAIVER; MODIFICATION. Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of, or failure to insist upon strict compliance with, any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. This Agreement shall not be modified in any respect except by a writing executed by each party hereto.

Section 15. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided that, in the event of the merger, consolidation, transfer or sale of all or substantially all of the assets of the Company with or to any other individual or entity or any similar event, this Agreement shall, subject to the provisions hereof, be binding upon and inure to the benefit of such successor and such successor shall discharge and perform all the promises, covenants, duties and obligations of the Company hereunder.

Section 16. SEVERABILITY. In the event that a court of competent jurisdiction determines that any portion of this Agreement is in violation of any statute or public policy, only the portions of this Agreement that violate such statute or public policy shall be stricken. All portions of this Agreement that do not violate any statute or public policy shall continue in full force and effect. Furthermore, any court order striking any portion of this Agreement shall modify the stricken terms as little as possible to give as much effect as possible to the intentions of the parties under this Agreement.

Section 17. HEADINGS; INCONSISTENCY. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. In the event of any inconsistency between the terms of this Agreement and any form, award, plan or policy of the Company, the terms of this Agreement shall control.

Section 18. COUNTERPARTS. This Agreement may be executed in counterparts (including counterparts delivered by facsimile), each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

Section 19. REPRESENTATION BY COUNSEL; INTERPRETATION. Each party acknowledges that it has had the opportunity to be represented by counsel in connection with this Agreement. Any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Officer has hereunto signed this Agreement on the date first above written.

FIRST STATE BANCORPORATION
By:	Michael R. Stanford
Title:	President and CEO
OFFICER

EX-10.6

Exhibit 10.6

FIRST AMENDMENT

TO

OFFICER EMPLOYMENT AGREEMENT

Pursuant to Section 14 of the Officer Employment Agreement effective as of                      (the “Agreement”) entitled “Waiver; Modification,” the parties to the Agreement hereby modify the Agreement as provided below.

Section 6(b)(ii) shall be amended by deleting the second sentence thereto and by replacing it with the following sentence:

Such payment shall be made, in the Company’s sole discretion, either (1) in accordance with normal payroll procedures applicable to senior executive officers at the time of such termination; (2) in a single lump sum payment; or (3) in a combination of normal payroll procedures followed by a lump sum payment for the balance of the payment; provided, that, in all cases, all payments shall be completed within the taxable year in which the Officer terminates employment, or such later time as permitted under Section 409A of the Internal Revenue Code or its successor and the guidance provided by the Internal Revenue Service or Department of Treasury, such that the amount paid shall not be considered “deferred compensation” within the meaning of Section 409A.

All other provisions of the Agreement shall remain in full force and unamended.

Dated this 1^st day of February of 2005.

FIRST STATE BANCORPORATION

By:

Title:

OFFICER

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Michael R. Stanford, certify that:

1. I have reviewed this report on Form 10-Q of First State Bancorporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2005

/s/ Michael R. Stanford

Michael R. Stanford

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Christopher C. Spencer, certify that:

1. I have reviewed this report on Form 10-Q of First State Bancorporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2005

/s/ Christopher C. Spencer

Christopher C. Spencer

Senior Vice President and Chief Financial Officer, and Principal Accounting Officer

EX-32.1

Exhibit 32.1

Certification of CEO Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of First State Bancorporation, a New Mexico corporation (the “Company”), for the period ended March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael R. Stanford, as President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to First State Bancorporation and will be retained by First State Bancorporation and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Michael R. Stanford

Michael R. Stanford

President and Chief Executive Officer

May 9, 2005

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

Certification of CFO Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of First State Bancorporation, a New Mexico corporation (the “Company”), for the period ended March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher C. Spencer, as Senior Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to First State Bancorporation and will be retained by First State Bancorporation and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Christopher C. Spencer

Christopher C. Spencer

Senior Vice President and Chief Financial Officer,

and Principal Accounting Officer

May 9, 2005

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as amended.