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United States
Securities and Exchange Commission
Washington, D.C. 20429

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FORM 10-Q

ý	Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2002.
o	Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from       N/A       to       N/A      .

Commission File Number 000-23925

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MID-STATE BANCSHARES
(Exact name of registrant as specified in its charter)

Issuer's Telephone Number: (805) 473-7700

Securities to be registered under Section 12(b) of the Act: None

Securities to be registered under Section 12(g) of the Act:

Common Stock, no par value
(Title of class)

        Check whether the Company (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 ý    No o

        As of May 2, 2002, the aggregate market value of the common stock held by non-affiliates of the Company was: $464,086,387.

        Number of shares of common stock of the Company outstanding as of May 2, 2002: 24,079,613 shares.

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Mid-State Bancshares

March 31, 2002

Index

			Page
PART I—FINANCIAL INFORMATION
Item 1—Financial Statements
	Consolidated Statements of Financial Position as of March 31, 2002, December 31, 2001, and March 31, 2001		3
	Consolidated Statements of Income for the three month period ended March 31, 2002 and March 31, 2001		4
	Consolidated Statements of Comprehensive Income for the three month period ended March 31, 2002 and March 31, 2001		5
	Consolidated Statements of Cash Flows for the three month period ended March 31, 2002 and March 31, 2001		6
	Notes to Consolidated Financial Statements		7
Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations			8
Item 3—Quantitative and Qualitative Disclosure About Market Risk			15
PART II—OTHER INFORMATION
Item 1—Legal Proceedings			17
Item 2—Changes in Securities and Use of Proceeds			17
Item 3—Defaults Upon Senior Securities			17
Item 4—Submission of Matters to a Vote of Security Holders			17
Item 5—Other Information			17
Item 6—Exhibits and Reports on Form 8-K			17

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PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

Mid-State Bancshares

Consolidated Statements of Financial Position

(Interim Periods Unaudited—figures in 000's)

			Mar. 31, 2002			Dec. 31, 2001			Mar. 31, 2001
ASSETS
Cash and Due From Banks			$	93,403		$	102,970		$	73,534
Fed Funds Sold				90,000			73,000			28,720
Securities Available For Sale				464,754			451,345			360,042
Loans, net of unearned income				1,148,782			1,149,703			946,103
Allowance for Loan Losses				(19,000	)		(19,073	)		(12,071	)
Net Loans				1,129,782			1,130,630			934,032
Premises and Equipment, Net				25,617			25,851			27,566
Accrued Interest Receivable				12,432			11,060			11,162
Investments in Real Estate, Net				234			233			228
Goodwill				33,448			33,448			1,314
Other Intangibles				9,185			9,294			443
Other Assets				14,401			15,833			9,365
	Total Assets		$	1,873,256		$	1,853,664		$	1,446,406
LIABILITIES AND EQUITY
Non Interest Bearing Demand			$	364,923		$	367,370		$	259,636
NOW Accounts, Money Market and Savings Deposits				809,586			769,173			616,795
Time Deposits Under $100				271,874			280,667			234,706
Time Deposits $100 or more				160,300			166,956			137,201
	Total Deposits			1,606,683			1,584,166			1,248,338
Other Borrowings				4,790			17,714			839
Allowance for Losses—Unfunded Commitments				1,687			1,586			1,479
Accrued Interest Payable and Other Liabilities				23,601			15,647			12,750
	Total Liabilities			1,636,761			1,619,113			1,263,406
Shareholders' Equity:
Common Stock and Surplus (Shares Outstanding of 24,094, 24,089 and 22,019, respectively)				84,810			84,872			49,992
Retained Earnings				147,748			143,257			128,837
Accumulated Other Comprehensive Income, Net				3,937			6,422			4,171
	Total Equity			236,495			234,551			183,000
	Total Liabilities and Equity		$	1,873,256		$	1,853,664		$	1,446,406

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Mid-State Bancshares

Consolidated Statements of Income

(Unaudited—figures in 000's except earnings per share data)

				Three Month Period Ended March 31,
				2002			2001
Interest Income:
	Interest and fees on loans			$	22,248		$	22,279
	Interest on investment securities—taxable				3,498			3,371
	Interest on investment securities—tax exempt				1,774			1,648
	Interest on fed funds sold, other				336			356
		Total Interest Income			27,856			27,654
Interest Expense:
	Interest on NOW, money market and savings				1,230			2,195
	Interest on time deposits less than $100				2,262			3,089
	Interest on time deposits of $100 or more				1,229			1,858
	Interest on mortgages, other				69			79
		Total Interest Expense			4,790			7,221
Net Interest Income Before Provision					23,066			20,433
Less: Provision for loan losses					300			300
Net Interest Income After Provision					22,766			20,133
Other Operating Income:
	Service charges and fees				2,204			1,893
	Other non interest income				3,779			3,267
		Total Other Operating Income			5,983			5,160
Other Operating Expense:
	Salaries and employee benefits				9,545			8,394
	Occupancy and furniture				2,707			2,242
	Other operating expenses				5,635			4,111
		Total Other Operating Expense			17,887			14,747
Income before taxes					10,862			10,546
Provision for income taxes					3,962			3,900
Net Income				$	6,900		$	6,646
Earnings per share—basic				$	0.29		$	0.30
—diluted				$	0.28		$	0.30

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Mid-State Bancshares

Consolidated Statements of Comprehensive Income

(Unaudited—figures in 000's)

		Three Month Period Ended March 31,
		2002			2001
Net Income		$	6,900		$	6,646
Other Comprehensive Income Before Taxes:
Unrealized gains (losses) on securities available for sale:
Unrealized holding (losses) gains arising during period			(4,144	)		5,001
Reclassification adjustment for Losses (gains) included in net income			2			(61	)
Other comprehensive (loss) income, before tax			(4,142	)		4,940
Income tax (benefit) expense related to items in comprehensive income			(1,657	)		1,976
Other Comprehensive (Loss) Income, Net of Taxes			(2,485	)		2,964
Comprehensive Income		$	4,415		$	9,610

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Mid-State Bancshares

Consolidated Statements of Cash Flows

(Unaudited—figures in 000's)

					Three Month Period Ended March 31,
					2002			2001
OPERATING ACTIVITIES
	Net Income				$	6,900		$	6,646
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for credit losses				300			300
		Depreciation and amortization				985			986
		Net amortization of prem./discounts—investments				847			219
		Change in deferred loan fees				151			(330	)
		Changes in assets and liabilities:
			Accrued interest receivable			(1,372	)		591
			Other intangibles, net			109			14
			Other assets, net			3,089			(355	)
			Other liabilities			8,055			(4,584	)
	Net cash provided by operating activities					19,064			3,487
INVESTING ACTIVITIES
	Proceeds from sales and maturities of investments					22,176			62,738
	Purchases of investments					(40,574	)		(10,597	)
	Decrease (Increase) in loans					397			(25,836	)
	Purchases of premises and equipment, net					(752	)		(549	)
	Net cash (used in) provided by investing activities					(18,753	)		25,756
FINANCING ACTIVITIES
	Increase in deposits					22,517			17,176
	Decrease in short-term borrowings					(12,924	)		(29,401	)
	Exercise of stock options					329			75
	Cash dividends paid					(2,409	)		(1,972	)
	Retirement of company stock					(391	)		(1,855	)
	Net cash provided by (used in) financing activities					7,122			(15,977	)
	Increase in cash and cash equivalents					7,433			13,266
	Cash and cash equivalents, beginning of period					175,970			88,988
	Cash and cash equivalents, end of period				$	183,403		$	102,254
Supplemental disclosure of cash flow information:
	Cash paid during the period for interest				$	4,945		$	7,211
	Cash paid during the period for taxes on income					950			800

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Mid-State Bancshares

Notes to Consolidated Financial Statements

(Information with respect to interim periods is unaudited)

NOTE A—BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATION

        The accompanying consolidated financial statements include the accounts of Mid-State Bancshares and its wholly owned subsidiary Mid-State Bank & Trust and the Bank's subsidiaries, MSB Properties and Mid Coast Land Company (collectively the "Company," "Bank" or "Mid-State"). All significant inter-company transactions have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the Form 10-K Annual Report for the year ended December 31, 2001 of Mid-State Bancshares. A summary of the Company's significant accounting policies is set forth in the Notes to Consolidated Financial Statements contained therein.

        These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States on a basis consistent with the accounting policies reflected in the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2001. They do not, however, include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments including normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for any other interim period or for the year as a whole.

NOTE B—EARNINGS PER SHARE

        The following is a reconciliation of net income and shares outstanding to the income and number of shares used to compute Earnings Per Share ("EPS"). Figures are in thousands, except earnings per share data.

			Three Month Period Ended March 31, 2002								Three Month Period Ended March 31, 2001
			Earnings			Shares		EPS			Earnings			Shares		EPS
Net Income as reported			$	6,900							$	6,646
Basic Earnings Per Share:
	Income available to Common Shareholders		$	6,900		24,089		$	0.29		$	6,646		21,960		$	0.30
Effect of dilutive securities:
	Stock Options					839								492
Diluted Earnings Per Share:
	Income available to Common Shareholders		$	6,900		24,928		$	0.28		$	6,646		22,452		$	0.30

NOTE C—RECENT ACCOUNTING PRONOUNCEMENTS

        In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 addresses financial accounting and reporting for business combinations and is effective for all business combinations accounted for by the purchase method completed after June 30, 2001. SFAS No. 141 requires all business combinations be accounted for using the purchase method. The acquisition of Americorp, parent of the American Commercial Bank, during the third quarter of 2001 was accounted for in accordance with SFAS No. 141. Management adopted

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SFAS No. 141 on January 1, 2002. The adoption of SFAS No. 141 did not have a material impact on the Company's results of operations or financial condition

        SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. With the adoption of SFAS No. 142, goodwill is no longer subject to amortization over its estimated useful life, rather goodwill will be subject to at least an annual assessment for impairment. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, with a provision that states goodwill acquired in a business combination for which the acquisition date is after June 30, 2001 should not be amortized. Management adopted SFAS No. 142 on January 1, 2002. The adoption of SFAS No. 142 resulted in $570 thousand not being recognized as amortization expense for the period ended March 31, 2002.

        In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121 and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30. It addresses financial accounting and reporting for the impairment of long-lived assets to be disposed of. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. Management adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not have a material impact on the Company's results of operation or financial condition.

Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations

        Selected Financial Data—Summary.    The following table provides certain selected consolidated financial data as of and for the three months ended March 31, 2002 and 2001 (unaudited).

		Year-to-Date
		Mar. 31, 2002			Mar. 31, 2001
		(Unaudited—In thousands)
Interest Income (not taxable equivalent)		$	27,856		$	27,654
Interest Expense			4,790			7,221
Net Interest Income			23,066			20,433
Provision for Loan Losses			300			300
Net Interest Income after provision for loan losses			22,766			20,133
Non-interest income			5,983			5,160
Non-interest expense			17,887			14,747
Income before income taxes			10,862			10,546
Provision for income taxes			3,962			3,900
Net Income		$	6,900		$	6,646

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		Year-to-Date
		Mar. 31, 2002			Mar. 31, 2001
		(In thousands, except per share data)
Per share:
Net Income—basic		$	0.29		$	0.30
Net Income—diluted		$	0.28		$	0.30
Weighted average shares used in Basic E.P.S. calculation			24,089			21,960
Weighted average shares used in Diluted E.P.S. calculation			24,928			22,452
Cash dividends		$	0.10		$	0.09
Book value at period-end		$	9.82		$	8.35
Tangible book value at period end		$	8.05		$	8.27
Ending Shares			24,094			21,915
Financial Ratios
Return on assets			1.51	%		1.89	%
Return on tangible assets			1.55	%		1.89	%
Return on equity			11.88	%		14.97	%
Return on tangible equity			14.51	%		15.12	%
Net interest margin (not taxable equivalent)			5.57	%		6.28	%
Net interest margin (taxable equivalent yield)			5.85	%		6.63	%
Net loan losses to avg. loans			0.10	%		0.01	%
Efficiency ratio			61.6	%		57.6	%
Period Averages
Total Assets		$	1,849,338		$	1,427,361
Total Tangible Assets			1,806,736			1,425,603
Total Loans			1,130,367			920,436
Total Earning Assets			1,680,663			1,318,574
Total Deposits			1,584,075			1,236,340
Common Equity			235,523			180,071
Common Tangible Equity			192,921			178,313

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			Mar. 31, 2002			Mar. 31, 2001
			(Unaudited In thousands)
Balance Sheet—At Period-End
Cash and due from banks			$	93,403		$	73,534
Investments and Fed Funds Sold				554,754			388,762
Loans, net of deferred fees, before allowance for loan losses				1,148,782			946,103
Allowance for Loan Losses				(19,000	)		(12,071	)
Goodwill and other intangibles				42,633			1,757
Other assets				52,684			48,321
	Total Assets		$	1,873,256		$	1,446,406
Non-interest bearing deposits			$	364,923		$	259,636
Interest bearing deposits				1,241,760			988,702
Other borrowings				4,790			839
Allowance for losses—unfunded commitments				1,687			1,479
Other liabilities				23,601			12,750
Shareholders' equity				236,495			183,000
	Total Liabilities and Shareholders' equity		$	1,873,256		$	1,446,406
Asset Quality & Capital—At Period-End
Non-accrual loans			$	3,586		$	6,038
Loans past due 90 days or more				110			950
Other real estate owned				—			—
Total non performing assets			$	3,696		$	6,988
Allowance for losses to loans, gross(1)				1.8	%		1.4	%
Non-accrual loans to total loans, gross				0.3	%		0.6	%
Non performing assets to total assets				0.2	%		0.5	%
Allowance for losses to non performing loans(1)				559.7	%		193.9	%
Equity to average assets (leverage ratio)				10.6	%		12.4	%
Tier One capital to risk-adjusted assets				14.0	%		15.7	%
Total capital to risk-adjusted assets				15.2	%		16.8	%

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(1)

Includes allowance for loan losses and allowance for losses — unfunded commitments

        Performance Summary.    The Company posted net income of $6.9 million for the three months ended March 31, 2002 compared to $6.6 million in the like 2001 period. These earnings represent an annualized return on assets of 1.51% and 1.89%, respectively. The annualized return on equity was 11.88% for the first quarter of 2002 compared to 14.97% in the first quarter of 2001. On a per share basis, diluted earnings per share were $0.29 in the 2002 period compared to $0.30 in the like quarter of 2001.

        On September 28, 2001, the Company acquired Americorp, the parent company of American Commercial Bank in Ventura. As a result of that merger, goodwill and other intangibles in the amount of $40.4 million were created. Average goodwill and other intangible assets in the first quarter of 2002 amounted to $42.6 million compared to $1.8 million in the like period one year earlier. Adjusting for the impact of these intangible assets, the return on tangible assets in the first quarter of 2002 was 1.55% compared to 1.89% in the 2001 period. Return on tangible equity was 14.51% compared to 15.12% in the first quarter of 2001.

        Net Interest Income.    Mid-State's year-to-date annualized yield on interest earning assets was 6.72% for the first three months of 2002 (7.01% on a taxable equivalent basis) compared to 8.51% in the like 2001 period (8.84% on a taxable equivalent basis). The decrease in yield is related to the general

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decline in interest rates. The Prime Rate, to which many of the Bank's loans are tied, remained at 4.75% in the 2002 period compared to an average of 8.62% in the 2001 period. Conversely, annualized interest expense as a percent of earning assets decreased from 2.23% in the first three months of 2001 to 1.15% in this year's first three months. Overall, Mid-State's annualized Net Interest Income, expressed as a percent of earning assets, decreased from 6.28% for the three month period of 2001 (6.63% on a taxable equivalent basis) to 5.57% in the comparable 2002 period (5.85% on a taxable equivalent basis). Annualized Net Interest Income as a percent of average total assets declined from 5.81% in the first three months of 2001 (6.12% taxable equivalent) to 5.06% in the comparable 2002 period (5.32% taxable equivalent).

        Average earnings assets for the three months ended March 31, 2002 increased from the like 2001 period ($1,680.7 million compared to $1,318.6 million). Average deposits in this same time-frame were up $347.8 million, ($1,584.1 million compared to $1,236.3 million). The unusual increase is in large part due to the acquisition of American Commercial Bank noted above.

        Provision and Allowance for Loan Losses.    Mid-State made provisions for loan losses in the first quarter of 2002 in the amount of $300 thousand, which is identical to the first quarter of 2001.

        During the first quarter, Management reclassified the portion of its allowance for loan losses related to unfunded commitments and letters of credit to allowance for losses—unfunded commitments. This change was undertaken to be in conformity with accounting principles generally accepted in the United States. Both the allowance for loan losses and the allowance for losses—unfunded commitments, are available to absorb inherent credit losses.

        Management continues to believe that the allowances for loan losses and unfunded commitments, which collectively stand at 1.8% of total loans at March 31, 2002, up from 1.4% one year earlier, are adequate to cover inherent losses. The $20.7 million total allowance for credit losses is approximately 560% of the level of non performing assets which stand at $3.7 million compared to $7.0 million one year earlier. Non performing assets consist of loans on non-accrual and accruing loans 90 days or more past due. While continuing efforts are made to improve overall asset quality, Management is unable to estimate with certainty, how and under what terms, problem assets will be resolved.

        Changes in the allowance for loan losses (in thousands) for the periods ended March 31, 2002 and 2001 are as follows:

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        At March 31, 2002, the recorded investments in loans, which have been identified as impaired totaled $6,223,000. Of this amount, $2,541,000 related to loans with no valuation allowance and $3,682,000 related to loans with a corresponding valuation allowance of $1,370,000. Impaired loans totaled $8,804,000 at March 31, 2001, all of which were tied to corresponding valuation allowances totaling $2,120,000. The valuation allowance for impaired loans is included within the general allowance shown above and netted against loans on the consolidated statements of financial position. For the quarter ended March 31, 2002, the average recorded investment in impaired loans was $7,706,000 compared to $5,981,000 in the 2001 period. A loan is identified as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. Because this definition is very similar to that used by bank regulators to determine on which loans interest should not be accrued, the Bank expects that most impaired loans will be on non-accrual status.

        Non-interest Income.    Non-interest income for the first three months of 2002 was $6.0 million, up from $5.2 million earned in the 2001 period, an increase of 15.9%. The increase was related to higher service charge income of approximately $311 thousand over the comparable period, an increase in the Company's merchant mastercard income of about $154 thousand, a $100 thousand increase in ATM and debit card fee income, and an increase in other fee income of $235 thousand. Much of these increases in non-interest income are related to the activity generated by the customers of the former American Commercial Bank in Ventura.

        Non-interest Expense.    Non-interest expense for the first three months of 2002 was $17.9 million. This compares to $14.7 million in the comparable 2001 period. This increase was primarily the result of increases in salaries and benefits of approximately $1.2 million, an increase in occupancy expense of $465 thousand, a $235 thousand increase in intangible amortization, outsourcing charges for the Company's internal audit function of $88 thousand and operating losses of $116 thousand. Most of the increases in salaries and benefits, occupancy expenses and intangible amortization are related to the merger with American Commercial Bank.

        Provision for Income Taxes.    The year-to-date provision for income taxes was $4.0 million, compared to $3.9 million for the same period in 2001. The effective tax rate in 2002 was 36.5% compared to 37.0% in 2001. While the normal combined federal and state statutory tax rate is 42% for Mid-State Bancshares, the tax exempt income generated by its municipal bond portfolio is the primary reason that the effective rate is lower.

        Balance Sheet.    Total assets at March 31, 2002 totaled $1,873.3 million, compared to $1,446.4 million the same period one year earlier. Approximately $307.3 million of the $426.9 million increase is a result of the merger with Americorp on September 28, 2001. A comparison of selected balance sheet

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components from one year earlier and the contribution toward that change from the merger are presented in the table below:

Mid-State Bancshares

Condensed Balance Sheet—At Period-End

			Mar. 30, 2002			Mar. 30, 2001			$ Change			Approximate Portion of $ Change due to Merger
			(Unaudited—In thousands)
Cash and due from banks			$	93,403		$	73,534		$	19,869			4,665
Investments and Fed Funds Sold				554,754			388,762			165,992			66,606
Loans, before allowance for loan losses				1,148,782			946,103			202,679			190,043
Allowance for Loan Losses				(19,000	)		(12,071	)		(6,929	)		(5,464	)
Goodwill and Other Intangibles				42,633			1,757			40,876			40,400
Other assets				52,684			48,321			4,363			11,045
	Total Assets		$	1,873,256		$	1,446,406		$	426,850		$	307,295
Non-interest bearing deposits			$	364,923		$	259,636		$	105,287			83,048
Interest bearing deposits				1,241,760			988,702			253,058			170,951
Other borrowings				4,790			839			3,951			—
Other liabilities				25,288			14,229			11,059			10,040
Shareholders' equity				236,495			183,000			53,495			43,256
	Total Liabilities and Shareholders' equity		$	1,873,256		$	1,446,406		$	426,850		$	307,295

        Mid-State's loan to deposit ratio of 71.5% at March 31, 2002 is down from the 75.8% ratio one year earlier. There is ample internal liquidity to fund improvements in this ratio through Mid-State's investment portfolio which is categorized as available for sale.

        Investment Securities.    Fed funds sold represent $90.0 million of the $554.8 million portfolio noted above. Of the remaining $464.8 million, 9% is invested in U.S. Treasury securities, 33% is invested in U.S. Government agency obligations, 54% is invested in securities issued by states and political subdivisions in the U.S. and 4% is invested in mortgage-backed securities and other securities. Sixty-seven percent of all investment securities mature prior to March 31, 2007. Approximately 29% of the total portfolio matures in less than one year. The Bank's investment in mortgage-backed securities consist of investments in FNMA and FHLMC pools which have contractual maturities of up to 17 years. The actual time of repayment may be shorter due to prepayments made on the underlying collateral.

        Capital Resources.    The Company announced on May 1, 2002 that it has authorized a stock repurchase program for up to five percent (5%) of its outstanding shares. Based on current outstanding shares, the buyback may result in the purchase of up to approximately 1,203,580 shares. These repurchases will be made from time to time by the Company in the open market or in block purchases or in privately negotiated transactions in compliance with the Securities and Exchange Commission rules. The program began in early May 2002 and is expected by Management to be effective for one year. The company's previous stock repurchase program began in April 2000 and saw the repurchase of 1,130,000 shares of stock. The new authorization allowed the Company to continue its buy-back program uninterrupted.

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        Total stockholders' equity increased from $183.0 million at March 31, 2001 to $236.5 million at March 31, 2002. Changes in stockholders' equity over this 12 month period includes activity outlined in the following table:

			Common Stock & Surplus		Undivided Profits		Accumulated Comp. Income		Total
Ending Equity at March 31, 2001			49,992		128,837		4,171		183,000
	Net Income 9 Mos 2001 (Apr. - Dec.)				20,756				20,756
	Common Stock Repurchased 9 Mos. 2001 (Apr. - Dec.)		(5,660	)					(5,660	)
	Stock Options Exercised— 9 Mos. 2001 (Apr. - Dec.)		639						639
	Regular Dividends 9 Mos. 2001 (Apr. - Dec.)				(6,336	)			(6,336	)
	Chg. Accumulated Other Comprehensive Income (FAS 115)						2,251		2,251
	Merger with American Commercial Bank		39,178						39,178
	Value of Stock Options Impacting Goodwill		723						723
Ending Equity at December 31, 2001			84,872		143,257		6,422		234,551
	Net Income 3 Mos. Y-T-D 2002				6,900				6,900
	Common Stock Repurchased 3 Mos. Y-T-D 2002		(391	)					(391	)
	Stock Options Exercised 3 Mos Y-T-D		329						329
	Regular Dividend Q1-2002				(2,409	)			(2,409	)
	Chg. Accumulated Other Comprehensive Income (FAS 115)						(2,485	)	(2,485	)
Ending Equity at March 31, 2002			84,810		147,748		3,937		236,495

        Liquidity.    The focus of the Company's liquidity management is to ensure its ability to meet cash requirements. Sources of liquidity include cash, due from bank balances (net of Federal Reserve requirements to maintain reserves against deposit liabilities), fed funds sold, investment securities (net of pledging requirements), loan repayments, deposits and fed funds borrowing lines. Typical demands on liquidity are deposit run-off from demand deposits and savings accounts, maturing time deposits, which are not renewed, and anticipated funding under credit commitments to customers.

        The Bank has adequate liquidity at the present time. Its loan to deposit ratio at March 31, 2002 was 71.5% versus 75.8% one year earlier. The Bank normally strives for a loan to deposit ratio in the 65% to 75% range. The Bank's internally calculated liquidity ratio stands at 36.2% at March 31, 2002, which is above its minimum policy of 15% and above the 33.5% level of March 31, 2001. Management is not aware of any future capital expenditures or other significant demands or commitments which would severely impair liquidity.

        Off Balance Sheet Transactions.    The Company is contingently liable for letter of credit accommodations made to its customers in the ordinary course of business totaling $29.7 million at March 31, 2002, down from $30.2 million one year earlier. Additionally, the Company has undisbursed loan commitments, also made in the ordinary course of business, totaling $318.7 million, which was down from the $393.1 million outstanding one year earlier.

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        There are no Special Purpose Entity ("SPE") trusts, corporations, or other legal entities established by Mid-State which reside off-balance sheet. There are no other off-balance sheet items other than the aforementioned items related to letter of credit accommodations and un-disbursed loan commitments.

        Critical Accounting Policies and Estimates This "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as, disclosures included elsewhere in this Form 10-Q, are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements require Management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingencies. A summary of the more significant accounting policies of the Company can be found in Footnote One to the financial statements which is included in Item 8 of the Company's Annual Report on Form 10-K. Additionally, because it involves some of the more significant judgments and estimates used in preparation of the consolidated financial statements, the reader's attention is directed to the earlier section on page 11 addressing the allowance for loan losses.

        Important Factors Relating to Forward-Looking Statements.    The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in such statements. All of the statements contained in this Quarterly Report on Form 10-Q, including those in Items 2 and 3, which are not identified as historical should be considered forward-looking. In connection with certain forward-looking statements contained in this Quarterly Report on Form 10-Q and those that may be made in the future by or on behalf of the Company which are identified as forward-looking, the Company notes that there are various factors that could cause actual results to differ materially from those set forth in any such forward-looking statements. Such factors include, but are not limited to, the real estate market, the availability of loans at acceptable prices, the general level of economic activity both locally and nationally, interest rates, the actions by the Company's regulatory agencies, actions by competitors of the Company and other factors referenced in the Company's filings with the Securities and Exchange Commission. Accordingly, there can be no assurance that the forward-looking statements contained in this Quarterly Report on Form 10-Q will be realized or that actual results will not be significantly higher or lower. The forward-looking statements have not been audited by, examined by or subjected to agreed-upon procedures by independent accountants, and no third-party has independently verified or reviewed such statements. Readers of this Quarterly Report on Form 10-Q should consider these facts in evaluating the information contained herein. The inclusion of the forward-looking statements contained in this Quarterly Report on Form 10-Q should not be regarded as a representation by the Company or any other person that the forward-looking statements contained in this Quarterly Report on Form 10-Q will be achieved. In light of the foregoing, readers of this Quarterly Report on Form 10-Q are cautioned not to place undue reliance on the forward-looking statements contained herein. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Item 3—Quantitative and Qualitative Disclosure About Market Risk

        The Bank expects its risk exposure to changes in interest rates to remain manageable and well within acceptable policy ranges. A recent review as of the end of 2001 of the potential changes in the Bank's net interest income over a 12 month time horizon showed that it could fluctuate under very extreme alternative rate scenarios from between +3.6% and -6.1% of the base case (rates unchanged) of $97.4 million. The Bank's policy is to maintain a structure of assets and liabilities which are such that net interest income will not vary more than plus or minus 15% of the base forecast over the next

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12 months. Management expects that its exposure to interest rate risk is manageable and it will continue to strive for an optimal trade-off between risk and earnings.

        The following table presents a summary of the Bank's net interest income forecasted for the coming 12 months under alternative interest rate scenarios.

        Net interest income under the above scenarios is influenced by the characteristics of the Bank's assets and liabilities. In the case of N.O.W., savings and money market deposits (total $809.6 million) interest is based on rates set at the discretion of management ranging from 0.25% to 1.21%. In a downward rate environment, there is a limit to how far these deposit instruments can be re-priced and this behavior is similar to that of fixed rate instruments. In an upward rate environment, the magnitude and timing of changes in rates on these deposits is assumed to be more reflective of variable rate instruments.

        It is important to note that the above table is a summary of several forecasts and actual results may vary. The forecasts are based on estimates and assumptions of management that may turn out to be different and may change over time. Factors affecting these estimates and assumptions include, but are not limited to—competitors' behavior, economic conditions both locally and nationally, actions taken by the Federal Reserve Board, customer behavior, and management's responses. Changes that vary significantly from the assumptions and estimates may have significant effects on the Bank's net interest income. Therefore the results of this analysis should not be relied upon as indicative of actual future results. Historically, the Bank has been able to manage its Net Interest Income in a fairly narrow range reflecting the Bank's relative insensitivity to interest rate changes. The impact of prepayment behavior on mortgages, real estate loans, mortgage backed securities, securities with call features, etc. is not considered material to the sensitivity analysis. Over the last 5 years, the Bank's net interest margin (which is net interest income divided by average earning assets of the Bank) has ranged from a low of 5.77% to a high of 6.44% (not taxable equivalent). The Bank's net interest margin in 2001 of 6.06% is in the middle of this range by historical standards, coming off the higher levels experienced in recent years. For the first quarter of 2002, the net interest margin was somewhat below this historical range at 5.57% (not taxable equivalent), while the first quarter of 2001 was 6.28%. The net interest margin under the alternative scenarios reported above ranges from 5.25% to 5.79%. Management feels this range of scenarios, while low by historical standards, is consistent with current experience and interest rate levels, but no assurances can be given that actual future experience will fall within this range.

        The Bank's exposure with respect to interest rate derivatives, exchange rate fluctuations, and/or commodity price movements is nil. The Bank does not own any instruments within these markets.

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PART II—OTHER INFORMATION

Item 1—Legal Proceedings

        Mid-State is not a party to any material legal proceeding.

Item 2—Changes in Securities and Use of Proceeds

        There were no material changes in securities and uses of proceeds during the period covered by this report.

Item 3—Defaults Upon Senior Securities

        Not applicable.

Item 4—Submission of Matters to a Vote of Security Holders

        No matters were submitted to the Shareholders for a vote during the first quarter of 2002.

Item 5—Other Information

        Not applicable.

Item 6—Exhibits and Reports on Form 8-K

A)

Exhibits

Exhibit No.		Exhibit
None

B)

Reports on Form 8-K

        None

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SIGNATURES

        Pursuant to the requirement of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Mid-State Bancshares (registrant)
Date: May 8, 2002		By:		/s/  JAMES W. LOKEY       JAMES W. LOKEY President Chief Executive Officer
Date: May 8, 2002		By		/s/  JAMES G. STATHOS       JAMES G. STATHOS Executive Vice President Chief Financial Officer

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QuickLinks

Mid-State Bancshares March 31, 2002 Index
PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

Mid-State Bancshares Consolidated Statements of Financial Position (Interim Periods Unaudited—figures in 000's)
Mid-State Bancshares Consolidated Statements of Income (Unaudited—figures in 000's except earnings per share data)
Mid-State Bancshares Consolidated Statements of Comprehensive Income (Unaudited—figures in 000's)
Mid-State Bancshares Consolidated Statements of Cash Flows (Unaudited—figures in 000's)
Mid-State Bancshares Notes to Consolidated Financial Statements (Information with respect to interim periods is unaudited)

Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations

Mid-State Bancshares Condensed Balance Sheet—At Period-End

Item 3—Quantitative and Qualitative Disclosure About Market Risk

PART II—OTHER INFORMATION

Item 1—Legal Proceedings
Item 2—Changes in Securities and Use of Proceeds
Item 3—Defaults Upon Senior Securities
Item 4—Submission of Matters to a Vote of Security Holders
Item 5—Other Information
Item 6—Exhibits and Reports on Form 8-K

SIGNATURES