THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

First State Bancorporation (FSNM)

4/28/2006 Proxy Information

Credit Transactions

The executive officers and directors of the Company and First Community Bank, and members of their immediate families and certain businesses, in which these individuals hold controlling interests, are customers of First Community Bank and it is anticipated that such parties will continue to be customers of First Community Bank in the future. Credit transactions with these parties are subject to review by First Community Bank’s Board of Directors and by the Company’s Audit Committee. All outstanding loans and extensions of credit by First Community Bank to these parties were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and in the opinion of management did not involve more than the normal risk of collectability or present other unfavorable features. At December 31, 2005, the aggregate balance of First Community Bank’s loans and advances under existing lines of credit to these parties was approximately $10.2 million or 0.67% of First Community Bank’s total loans. All payments of principal and interest on these loans are current. These loans represented 6.40% of the Company’s equity as of December 31, 2005. Prohibitions of loans to directors or executive officers under Section 402(a) of the Sarbanes-Oxley Act of 2002 do not apply to loans made or maintained by First Community Bank to Company officers and directors since First Community Bank is a financial institution insured by the F.D.I.C. and its loan activity is subject to the insider lending restrictions of the Federal Reserve Act.

Legal Services

Mr. DeLayo was a director of First Community Bank from 1988 through January 1992 and was a director of the Santa Fe Bank from March 1993 to June 1994. He was appointed as a director of the Company in November 1993, and elected chairman of the Board in July 2000. Mr. DeLayo acts as general counsel to the Company. Mr. DeLayo and his firm, Leonard J. DeLayo, Jr., P.C., are involved in representing the Company in loan, collection, and various other matters. The Company paid Mr. DeLayo’s firm approximately $136,000, $216,000, and $360,000 for its legal services in 2005, 2004, and 2003, respectively. The Audit Committee reviewed and approved the terms of Mr. DeLayo’s retention as comparable to other third-party, arms-length legal services transactions in the ordinary course of business and as fair to the Company.

Santa Fe Branch Location

The Downtown Santa Fe location was constructed on land owned by Horn Distributing Company. Mr. Herman Wisenteiner, a director of the Company, is the principal shareholder of Horn Distributing Company. The Company entered into a lease with Horn Distributing Company in 1995 for an initial term of 15 years that expires on December 31, 2010. Lease payments were approximately $79,000 for 2005, $76,000 for 2004, and $74,000 for 2003. In the opinion of management, the lease is on terms similar to other third-party commercial transactions in the ordinary course of business.

Denver, Colorado Loft Residence Lease

The Company has entered into a lease for the rental of a 1,787 square foot residential loft in downtown Denver, Colorado with Stanford Family Trust, LLC, whose managing members are Michael R. Stanford, C.E.O. of the Company, and his wife. The lease also provides for parking for two Company vehicles in the loft’s parking garage. The lease term commenced November 15, 2003, and renews on a year-to-year basis with an automatic renewal unless the Company gives 90 days notice of termination prior to the renewal. The Stanford Family Trust may terminate the lease on 30 days notice. Monthly lease payments for the loft are approximately $3,500 in monthly installments, with annual escalations of 2.5%. The Company pays an additional $130 per month for the two parking spaces in the loft garage. The Stanford Family Trust pays all utilities, taxes, insurance, and loft association fees. The Company installed a communications line at its expense. Mr. Stanford spends a portion of each month in Colorado in addition to other management employees which use the loft on a comparable basis for company business. During 2005, the loft was occupied more than 90% of its total occupancy by management employees, including Mr. Stanford, on the Company’s business. It is also used for Company related entertainment. The Company pays approximately 80% of the Stanford Family Trust’s debt service and other costs. The Company paid the Stanford Family Trust, LLC approximately $41,000 for 2005, $40,000 for 2004, and $3,000 for 2003. The Audit Committee reviewed and approved the lease of the loft and the renewal of the lease for 2005-2006 as comparable to other third-party, arms-length transactions in the ordinary course of business and as fair to the Company.

Proposed Branch Location Acquired In Acquisition

On January 3, 2006, the Company succeeded to the rights of Access Anytime BanCorp, Inc. (“Access”) to an Albuquerque branch location in the Journal Center development under a Real Estate Purchase Agreement dated May 28, 2004 with Journal Center Corporation (“Journal Center”). Journal Center is a wholly owned subsidiary of Journal Enterprises, Inc. Mr. Lowell A. Hare is Vice President and Chief Financial Officer of both Journal Center and Journal Enterprises, Inc. Access agreed with Journal Center that if Access did not commence construction by March 7, 2007 (18 months from closing) Journal Center had a six month option to repurchase the property from Access at its cost plus certain expenses. Prior to the closing of the Access merger, Journal Center and the Company, through First Community Bank, the Company’s subsidiary, agreed to extend the date for commencement of construction by six months to September 7, 2007. In return therefore, First Community Bank agreed that if Journal Center did not exercise its option, and First Community sold the branch property, the proceeds of the sale would be allocated equally between Journal Center and First Community, after deduction of expenses including certain infrastructure improvements. The Company’s Audit Committee approved the transaction, with abstention by Mr. Hare, as comparable to other third-party, arms-length transactions and as fair to the Company.