First State Benefits from New Legislation

First State Bancorporation (“First State”) (NASDAQ: FSNM) today announced that with President Obama’s signature on House Bill 3548 on November 6, 2009, which includes an extension of the tax net operating loss (NOL) carryback period from two to five years, First State estimates that it should recover approximately $9.8 million of taxes paid in prior years based on the 2009 tax loss generated through September 30, 2009. The amount is subject to change based on our final tax calculations for the full year of 2009; however, we do not anticipate a significant change. Because First State currently has a valuation allowance offsetting its NOLs due to the uncertainty of the ability to realize them in future years, the amount recovered through the extended carryback will be recorded in earnings and capital in the fourth quarter ending December 31, 2009. The provisions of the carryback do not apply to any bank which has accepted Troubled Asset Relief Program (TARP) funds; however, First State has not accepted any TARP funds.

“This change in the tax laws will result in a very welcome boost to our capital,” stated Michael R. Stanford, President and Chief Executive Officer of First State. “Based on our balance sheet totals as of September 30, 2009, this tax benefit is the equivalent of about 45 basis points in total risk based capital for the subsidiary, First Community Bank,” continued Stanford.

ABOUT FIRST STATE

First State Bancorporation is a New Mexico based commercial bank holding company (NASDAQ: FSNM). First State provides services, through its subsidiary First Community Bank, to customers from a total of 40 branches located in New Mexico and Arizona. On Monday, November 9, 2009, First State’s stock closed at $0.62 per share.

ADDITIONAL INFORMATION AND WHERE TO FIND IT

Certain statements in this news release 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”). These statements are based on management’s current expectations or predictions of future results or events. We make these forward-looking statements in reliance on the safe harbor provisions provided under the Private Securities Litigation Reform Act of 1995.

First State’s news releases and filings with the Securities and Exchange Commission are available through the Investor Relations section of First State’s website at www.fcbnm.com.