<PAGE>


                                 UNITED STATES

                       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 September 30, 1997
     
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
           OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from..........................

                        Commission file number 333-16951

                                   BSM BANCORP
            (Exact name of registrant as specified in its charter)


                  CALIFORNIA                            NO. 77-0442667
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)


              2739 Santa Maria Way, Santa Maria, California 93455
             (Address of principal executive offices)    (Zip Code)

        Registrant's telephone number, including area code:  (805) 937-8551


                                  Not applicable
          (Former name or former address, if changed since last report)

     
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(c) of the Securities Exchange Act of 1934 during
the preceding 12 months (of shorter period that the registrant was required to
file such reports) Yes [X], and (2) has been subject to such filing requirements
for the past 90 days.  Yes[ ] No[X]

                        APPLICABLE ONLY TO CORPORATE ISSUERS

On October 27, 1997, there were 2,981,339 shares of BSM Bancorp Common Stock
outstanding.

                                       1
<PAGE>

                                  BSM BANCORP
                               September 30, 1997
                                      INDEX



                         PART I - FINANCIAL INFORMATION                    PAGE
                                                                           ----
Item 1 - Financial Statements
     Consolidated Balance Sheet at September 30, 1997 and
           December 31, 1996............................................     3
     Consolidated Statement of Income for the nine months ended
           September 30, 1997 and 1996..................................     4
     Consolidated Statement of Cash Flows for the nine months ended
           September 30, 1997 and 1996..................................     5
     Consolidated Statement of Changes in Capital from January 1, 1996
           through September 30, 1997 ..................................     6
     Notes to Consolidated Financial Statements.........................     7
Item 2 - Management's Discussion and Analysis of Financial Condition
           and Results of Operations....................................     8

                           PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K...............................    11

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

                          BSM BANCORP AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEET
                                  (UNAUDITED)

                                    ASSETS

<TABLE>
<CAPTION>
                                                  SEPTEMBER 30, 1997    DECEMBER 31, 1996
                                                  ------------------    -----------------
<S>                                               <C>                   <C>
Cash and due from banks                             $  18,483,726         $  17,643,554
Federal funds sold                                     17,074,000            13,920,000
                                                    -------------         -------------
Cash and cash equivalents                              35,557,726            31,563,554
Investments:
    Securities available-for-sale                      43,887,311            23,865,611
    Securities held-to-maturity (market value of
     $56,728,847 and $68,331,524, respectively)        56,620,480            68,339,127
Loans, net of unearned income                         181,757,346           179,391,366
    Allowance for loan losses                          (2,239,520)           (2,701,876)
                                                    -------------         -------------
Net loans                                             179,517,826           176,689,490
Premises and equipment                                 12,941,255            12,648,207
Accrued interest receivable and other assets            7,304,788             8,291,296
                                                    -------------         -------------
         Total Assets                               $ 335,829,386         $ 321,397,285
                                                    -------------         -------------
                                                    -------------         -------------

                                  LIABILITIES

Deposits:
    Noninterest-bearing demand                      $  68,101,862         $  67,181,717
    Interest-bearing demand                           117,750,093           111,528,482
    Time deposits under $100,000                       78,272,183            70,229,443
    Time deposits $100,000 or more                     35,144,449            37,338,194
                                                    -------------         -------------
         Total deposits                               299,268,587           286,277,386
Accrued interest payable and other liabilities          1,838,220             2,487,932
                                                    -------------         -------------
         Total liabilities                            301,106,807           288,765,768
                                                    -------------         -------------

Shareholders' equity:
Common stock,  50,000,000 authorized;
    Issued and outstanding
         2,980,939 as of September 30, 1997
         2,973,631 as of December 31, 1996             11,536,339            11,460,488
Undivided profits                                      23,127,097            21,176,801
Valuation of securities available-for-sale, 
 net of tax                                                59,143                (5,772)
                                                    -------------         -------------
         Total capital                                 34,722,579            32,631,517
                                                    -------------         -------------
         Total Liabilities & Capital                $ 335,829,386         $ 321,397,285
                                                    -------------         -------------
                                                    -------------         -------------
</TABLE>

                                       3
<PAGE>

                             BSM BANCORP AND SUBSIDIARY
                          CONSOLIDATED STATEMENT OF INCOME
                                     (UNAUDITED)


<TABLE>
<CAPTION>
                                                  THREE MONTH PERIOD            NINE MONTH PERIOD
                                                  ENDED SEPTEMBER 30,          ENDED SEPTEMBER 30,
                                               -------------------------   ---------------------------
                                                  1997           1996          1997           1996
                                               -----------   -----------   ------------   ------------
<S>                                            <C>           <C>           <C>            <C>
INTEREST INCOME:                                                            
Interest and fees on loans                     $ 4,744,167   $ 4,594,386   $ 13,901,268   $ 13,149,758
Interest on investment securities-taxable        1,238,066     1,133,991      3,518,716      3,078,012
Interest on investment securities-nontaxable       174,727        87,763        544,985        394,524
Other interest income                              187,890       252,361        459,404        581,044
                                               -----------   -----------   ------------   ------------
TOTAL INTEREST INCOME                            6,344,850     6,068,501     18,424,373     17,203,338
                                               -----------   -----------   ------------   ------------
INTEREST EXPENSE:                                                                                     
Interest on demand and savings deposits            605,261       648,589      1,784,617      1,887,364
Interest on time deposits                        1,533,157     1,431,924      4,443,428      4,012,463
                                               -----------   -----------   ------------   ------------
TOTAL INTEREST EXPENSE                           2,138,418     2,080,513      6,228,045      5,899,827
NET INTEREST INCOME BEFORE PROVISION             4,206,432     3,987,988     12,196,328     11,303,511
                                               -----------   -----------   ------------   ------------
Less: Provision for loan losses                          0         5,000         30,000         20,500
                                               -----------   -----------   ------------   ------------
NET INTEREST INCOME AFTER PROVISION              4,206,432     3,982,988     12,166,328     11,283,011
OTHER OPERATING INCOME:
Service charges and fees                           507,844       471,592      1,500,643      1,346,194
Other fee income                                   227,837       157,774        547,271        432,449
Merchant discount fees                             147,978       137,658        438,250        374,189
Other income                                       (20,072)       42,401         89,786        168,669
                                               -----------   -----------   ------------   ------------
TOTAL OTHER OPERATING INCOME                       863,587       809,425      2,575,950      2,321,501
                                               -----------   -----------   ------------   ------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits                   1,673,511     1,695,636      5,312,625      4,873,487
Occupancy expenses                                 238,131       248,654        723,588        711,638
Furniture and equipment                            350,332       354,540      1,073,073      1,041,830
Advertising and promotion                          181,103       162,584        535,010        423,308
Professional expenses                               90,276       139,221        259,225        368,833
Office expenses                                    220,976       207,466        722,684        586,710
Merchant processing costs                          148,328       196,564        404,820        421,868
Other expenses                                     285,143       286,090        834,168        687,903
                                               -----------   -----------   ------------   ------------
TOTAL OTHER OPERATING EXPENSES                   3,187,800     3,290,755      9,865,193      9,115,577
                                               -----------   -----------   ------------   ------------
Income before taxes                              1,882,219     1,501,658      4,877,085      4,488,935
Provision for income taxes                         740,000       607,000      1,884,800      1,748,000
                                               -----------   -----------   ------------   ------------
NET INCOME                                     $ 1,142,219   $   894,658   $  2,992,285   $  2,740,935
                                               -----------   -----------   ------------   ------------
                                               -----------   -----------   ------------   ------------
EARNING PER SHARE                              $      0.38   $      0.30   $       0.99   $       0.91
Number of shares used in computation             3,032,000     3,004,000      3,029,000      2,998,000
                                               -----------   -----------   ------------   ------------
                                               -----------   -----------   ------------   ------------
</TABLE>

                                       4
<PAGE>

                           BSM BANCORP AND SUBSIDIARY
                    CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                  THREE MONTH PERIOD                NINE MONTH PERIOD
                                                  ENDED SEPTEMBER 30,              ENDED SEPTEMBER 30,
                                              ----------------------------   -----------------------------
                                                  1997            1996           1997             1996
                                              -------------   ------------   -------------   -------------
<S>                                           <C>             <C>            <C>             <C>
OPERATING ACTIVITIES
Net income                                    $   1,142,219   $    894,658   $   2,992,285   $   2,740,935
Adjustments to reconcile net income to 
 net cash provided by operating activities:
  Depreciation and amortization                     316,458        285,504         929,261         853,144
  Provision for credit losses                             0          5,000          30,000          20,500
  Net amortization of premium/
   discounts-investments                             44,282         59,743         255,923         263,548
  Loans originated for sale                        (469,800)    (2,221,750)     (2,024,941)     (4,708,950)
  Proceeds from loan sales                          387,000      1,366,750       2,726,479       5,163,484
  Net loss (gain) from sale of fixed assets          31,625         (3,927)        (14,312)        (52,319)
  Net loss (gain) from sale of oth. real 
   estate loans                                    (207,747)       (13,341)       (172,361)        (39,095)
  Net change in accrued interest, other 
   assets and other liabilities                     830,518      1,145,592        (178,099)        250,052
                                              -------------   ------------   -------------   -------------
Net cash provided by operating activities         2,074,555      1,518,229       4,544,235       4,491,299

INVESTING ACTIVITIES
Proceeds from maturities of securities held 
 to maturity                                     12,003,700      9,590,000      21,863,777      28,916,923
Proceeds from maturities of securities 
 available for sale                               5,000,000      3,000,000      12,173,000       3,000,000
Purchases of held-to-maturity securities         (4,802,534)    (9,434,859)    (12,984,128)    (25,720,465)
Purchases of available-for-sale securities      (20,342,967)    (9,010,962)    (29,501,553)    (21,589,931)
Net decrease in loans                            (5,654,643)       682,308      (3,979,543)      4,436,178
Purchases of premises and equipment                (103,889)    (1,086,224)     (1,263,387)     (2,301,018)
Proceeds from the sale of other real 
 estate owned                                       359,171        788,341       1,061,767       1,114,643
Proceeds for the sale of equipment                    5,650          3,927          55,390          64,073
Net cash received for purchase of 
 Citizens Bank                                            0              0               0       8,067,071
                                              -------------   ------------   -------------   -------------
Net cash provided (used) by investing 
 activities                                     (13,535,512)    (5,467,469)    (12,574,677)     (4,012,526)

FINANCING ACTIVITIES
Net decrease in demand and savings deposits      11,789,554        265,696       7,141,756     (13,482,865)
Net increase in time deposits                     2,729,627      2,626,823       5,848,995      12,690,490
Payments for dividends/distributions               (595,986)      (414,339)     (1,041,989)       (964,191)
Proceeds from the exercise of stock options          30,201         19,000          75,851         137,500
                                              -------------   ------------   -------------   -------------
Net cash provided (used) by financing 
 activities                                      13,953,396      2,497,180      12,024,613      (1,619,066)
                                              -------------   ------------   -------------   -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS         2,492,439     (1,452,060)      3,994,171      (1,140,293)
                                              -------------   ------------   -------------   -------------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR     33,065,286     30,436,661      31,563,554      30,124,894
                                              -------------   ------------   -------------   -------------
CASH AND CASH EQUIVALENTS, SEPTEMBER 30,      $  35,557,725   $ 28,984,601   $  35,557,725   $  28,984,601
                                              -------------   ------------   -------------   -------------
                                              -------------   ------------   -------------   -------------
Cash paid during the year for interest            2,130,919      1,893,578       6,699,391       5,336,803
Cash paid during the year for income taxes          395,085        569,535       1,511,162       1,759,807
</TABLE>

                                       5
<PAGE>


                                   BSM BANCORP

                        STATEMENT OF CHANGES IN CAPITAL
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         NET      
                                              COMMON SHARES                           UNREALIZED  
                                         -----------------------                    ADJUSTMENT IN 
                                         NUMBER OF                   UNDIVIDED      AVAILABLE FOR
                                           SHARES      AMOUNT         PROFITS      SALE SECURITIES      TOTAL
-----------------------------------------------------------------------------------------------------------------
<S>                                      <C>        <C>             <C>              <C>             <C>
BALANCE AT JANUARY 1, 1996               2,950,081  $ 11,250,288    $ 18,673,257     $  51,221       $ 29,974,766
Proceeds from exercise of                           
   stock options                            16,000       137,500                                          137,500
Dividends paid                                                          (964,191)                        (964,191)
Net income for the period                                              2,740,935                        2,740,935
Adjustment in available for sale                  
  Securities, net of taxes of $ 71,817                                                (107,726)          (107,726)
                                         ---------  ------------    ------------     ---------       ------------
BALANCE AT SEPTEMBER 30, 1996            2,966,081    11,387,788      20,450,001       (56,505)        31,781,284
Issuance of organizational stock               150         1,500                                            1,500
Proceeds from exercise of     
   stock options                             7,400        71,200                                           71,200
Adjustment in available for sale   
  Securities, net of taxes of $(33,822)                                                 50,733             50,733
Net income for the period                                               726,800                           726,800
                                         ---------  ------------    ------------     ---------       ------------
BALANCE AT DECEMBER 31, 1996             2,973,631    11,460,488      21,176,801        (5,772)        32,631,517
Retirement of organizational stock            (150)       (1,500)                                          (1,500)
Proceeds from exercise of     
   stock options                             7,600        79,550                                           79,550
Partial distribution-El Camino Merger         (142)       (2,199)                                          (2,199)
Dividends paid                                                        (1,041,989)                      (1,041,989)
Net income for the period                                              2,992,285                        2,992,285
Adjustment in available for sale   
  Securities, net of taxes of $(43,277)                                                 64,915             64,915
                                         ---------  ------------    ------------     ---------       ------------
BALANCE AT SEPTEMBER 30, 1997            2,980,939  $ 11,536,339    $ 23,127,097     $  59,143       $ 34,722,579
                                         ---------  ------------    ------------     ---------       ------------
                                         ---------  ------------    ------------     ---------       ------------
</TABLE>
                  See notes to consolidated financial statements

                                       6
<PAGE>

                             BSM BANCORP AND SUBSIDIARY

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATION

BSM Bancorp (the "Company") was incorporated on November 12, 1996, for the 
sole purpose of becoming a bank holding company for Bank of Santa Maria (the 
"Bank"). Following regulatory consent and with the approval of the Bank's 
shareholders, the Bank merged with BSM Merger Company (a wholly-owned 
subsidiary of the Company) (the "Merger"), as of the close of business on 
March 11, 1997 and thereby became a wholly-owned subsidiary of the Company.

As of December 31, 1996, the Company had only one shareholder and it  had no 
SEC nor Federal Reserve Bank reporting requirements.  Following completion of 
the Merger, the Company is required to file periodic reports under section 
15(d) of the Exchange Act.  A quarterly report on Form 10Q was filed on March 
31, 1997, for the first time.  As the Merger was recorded using the pooling 
of interest method, restatement of prior balances was necessary to meet 
accounting standards.  Accordingly, the financial statements herein contain 
balances prior to the actual existence of the Company which reflect what the 
"consolidated" entity would have reported as restated for all acquisitions, 
either recorded by pooling or purchase accounting.

The unaudited consolidated financial statements have been prepared in 
accordance with generally accepted accounting principles and with the 
instructions to Form 10-Q.  On January 10, 1997, the Bank acquired El Camino 
National Bank through an exchange of Bank stock.  This acquisition was 
accounted for by using the pooling of interest method.  The annual report for 
Bank of Santa Maria, although disclosing the merger, did not restate the 1996 
financial numbers as the effect on the reported numbers was not deemed 
material. Concurrently, the Bank was in the process of obtaining regulatory 
approval to form the Company.  While the management of BSM Bancorp believes 
that the disclosures presented are sufficient to make the information not 
misleading, reference should be made to the Bank's Annual Report for the year 
ended December 31, 1996.  Management had elected to include a CONSOLIDATED 
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY to assist the reader in the 
analysis of the  Merger and the acquisition, both of which occurred during 
the first quarter.

The accompanying consolidated balance sheets, statements of income, 
statements of changes in shareholders' equity and statement of cash flows (as 
restated for the acquisition of  El Camino National Bank and the subsequent 
Merger of the Bank of Santa Maria by the Company), reflect all material 
adjustments necessary for fair presentation of the Company's financial 
position as of September 30, 1997 and December 31, 1996 and the results of 
operations for the nine  months ended September 30, 1997 and 1996.  All such 
adjustments were of a normal recurring nature.

NOTE 2 - CAPITAL SECTION OF THE CONSOLIDATED BALANCE SHEET.

As explained in Note 1, BSM Bancorp acquired Bank of Santa Maria on March 11, 
1997.  Prior to that date, there were only 150 shares of BSM Bancorp Common 
Stock outstanding.  The Bank, as of December 31, 1996, as restated for the 
acquisition of El Camino, was authorized to issue 25,000,000 shares of Common 
Stock and had 2,973,481 outstanding.

NOTE 3 - EARNINGS PER SHARE

Earnings per common share are based upon weighted average number of shares 
outstanding during the period plus shares issuable upon the assumed exercise 
of outstanding common stock options rounded to the nearest 1,000 shares.

                                       7
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

OVERVIEW

For the nine months ended September 30, 1997, the Company reported net income 
of $2,992,000, or $.99 per share compared to a net income of $2,741,000, or 
$.91 per share for the same nine month period in 1996.  Earnings per share 
for the third quarter of this year was up 22.6% to $.38 compared to $.30 for 
the same period in 1996.  The annualized return on average assets was 1.26% 
for  1997 compared to 1.24% for  1996, as restated for the El Camino merger.  
Annualized return on average shareholders' equity for  1997 and 1996 was 
11.72% and 11.83% respectively.

FINANCIAL CONDITION

Total assets as of September 30, 1997, increased 4.5% to $335.8 million in 
comparison to restated total assets of $321.4 million as of December 31, 
1996. Comparable asset totals for the first nine months of 1996, recorded a 
 .4% increase after factoring out the purchase of approximately $29 million in 
assets in conjunction with the May, 1996 Citizens acquisition.  Cash and cash 
equivalents increased by $4.0 million with funds provided by the operating 
activities.  Loans increased by $2.8 million during the first nine months of 
1997, compared to a $6.0 million decline during the same period in 1996, 
after factoring the purchase of approximately $18 million dollars in loans in 
conjunction with the May, 1996 Citizens acquisition.  The percentage of 
increase was 1.6% for 1997, versus a decline of 3.7% for 1996.

Total investment dollars increased by 9.0% to $100.5 million  as of September 
30, 1997.  The mix between securities held to maturity and available for sale 
reflects the Company's  policy to have a larger percentage of security 
dollars available to meet liquidity needs.  This was accomplished by 
purchasing "available for sale" securities from the proceeds of maturing 
"held to maturity" securities as well as investing the funds made available 
from increasing deposit dollars.  The increase in premises and equipment by a 
net  of $293,000 included the purchase of land adjacent to the Bank's main 
office previously leased for employee parking, cost associated with the 
purchase and refurbishing of the building used for the newly opened 
Atascadero Branch, a $300,000 expenditure to upgrade the Bank's mainframe 
computer offset by the sale of the Templeton Main Street Branch facilities.  
The Bank's cash flow continued to benefit from several sales of other real 
estate owned properties during the third quarter.

Deposits increased by $13.0 million during the first nine months of 1997, 
versus virtually no increase during the same period in 1996, after factoring 
in the purchase of approximately $29 million in deposits in conjunction with 
the May 1996 Citizens acquisition.  The percentage of increase was 4.5% for 
1997, occurring primarily during the third quarter.  The earlier decline 
appears to attributable to be the runoff of deposit dollars associated with 
the acquisition of El Camino National Bank in January of 1997 and the 
acquisition of Citizens in May of 1996.  A certain level of runoff was 
anticipated by Company management.

The Bank, prior to its acquisition by the Company, paid semi-annual 
dividends, a policy which was first implemented in mid 1996.  During the 
first quarter of 1996, the Directors of the Bank paid a $.20 per share annual 
cash dividend which was augmented in August of 1996, with the first 
semi-annual dividend of $.15 per share.  In January of 1997, the Bank again 
paid a $.15 per share cash dividend. The Company was the beneficiary of two 
organizational dividends from the Bank during the first nine months of 1997.  
A dividend in the amount of $150,000 payable on March 12, 1997 and a 
dividend in the amount of $700,000 payable on August 17, 1997.  With the 
Company now fully organized, a $.20 per share cash dividend was declared in 
July, 1997, payable on August 15, 1997.  Both the Bank and the Company 
maintain strong liquidity positions.

                                       8
<PAGE>

RESULTS OF OPERATIONS

Interest income on loans was up by $752,000 in the first nine months of 1997, 
compared with the same period during 1996.  The increase in interest income 
was primarily attributable to the increase in average outstanding loans, 
which were up by $7.1 million.  The effective yield increased only by 
approximately 18 basis points.  Approximately 70% of this positive variance 
is due to the volume increase, primarily from the purchase of loans in 
conjunction with the Citizens acquisition.  There was also a difference 
caused by the number of days during the respective first quarters which 
accounts for approximately $45,000.

Interest income on investments, including Federal funds transactions, 
increased by $470,000 during the first nine  months of 1997 over the 
comparable period in 1996.  This increase, as with loans, was primarily 
attributable to the increase in funds available for investment, which was up 
by $11.0 million.  The effective yield increased 2.5 basis points.  
Approximately 96% of this positive variance is due  to the volume increase 
(primarily from the investible cash, $8.1 million), made available in 
conjunction with the Citizens acquisition.  There was also a difference 
caused by the number of days during the respective first quarters which 
accounts for approximately $14,000.

Interest expense on interest-bearing deposits were up by $328,000 in the 
first nine months of 1997, compared with the first nine months of 1996.  The 
increase in interest expense was attributable to the increase in average 
interest-bearing deposits which were up by $11.6 million.  The effective rate 
increased less than 2 basis points.  The increase in the rate raised the 
overall interest expense cost by about $22,000.  There was also a difference 
caused by the number of days during the respective first quarters which 
accounts for approximately $21,000.

Net interest margin improved from 5.75% for the first nine months of 1996, to 
5.82% for the same period in 1997.  The provision for loan losses of $30,000 
is sufficient to bring the allowance for loan losses to a balance considered 
to be adequate to absorb potential losses in the portfolio.  Management's 
determination of the adequacy of the allowance is based upon a detailed 
evaluation of the portfolio, current economic conditions and trends, 
historical loan loss experience and other risk factors.

Noninterest income increased $254,000 or 10.96% to $2,576,000 as of September 
30, 1997.  While the effect of the mergers contributed to the increased 
service fee base, fees from the sale of loans into the secondary market also 
are reflected in the overall increase in 1997.  Non interest expenses 
increased $750,000 or 8.22% to $9,865,000 as of September 30, 1997.  
Approximately 55% of this overall increase is related to increased salary 
expense, due directly to the three additional operating branches reflected in 
the first nine months of 1997.  Two of these branches (Citizens Bank) were 
acquired in May of 1996 and accounted for using purchase accounting.  Salary 
dollars are, therefore, not included in the 1996 reported numbers for the 
first four months.  The number of full-time equivalents, as restated for the 
El Camino merger, was reported at 195 as of September 30, 1996, as well as 
September 30, 1997.  Also during the first nine months of 1997, the Bank 
absorbed certain costs associated with the El Camino merger totaling 
approximately $56,000, goodwill amortization from the Citizens acquisition 
totaling $99,000, increased occupancy costs for the three additional 
locations of approximately $67,000, as well as increased promotional expenses 
associated with the El Camino merger and the opening of the Atascadero Branch 
of approximately $33,000.  There was also a writedown of $54,000 to one of 
the Bank's OREO properties which occurred during the first nine months as 
well as costs associated with the closure of the Main Street Branch in 
Templeton.  While some of these aforementioned expenses will be ongoing, 
approximately $200,000 appear to be of a non-reoccurring nature.  Excluding 
these dollars would bring the percentage of increase in noninterest expenses 
for the first nine months of 1997 (when compared to first half 1996), down to 
6.0%, which is more in line with the increase in noninterest income.

                                       9
<PAGE>

CAPITAL RESOURCES

The Company and its bank subsidiary are subject to risk-based capital 
regulations adopted by the federal banking regulators.  These guidelines are 
used to evaluate capital adequacy and are based upon an institution's assets 
risk profile and off-balance sheet exposures, such as unused loan commitments 
and letters of credit.  The following table sets forth the Company's and the 
Bank's leverage and risk-based capital ratios at September 30, 1997:

  (In thousands)                 COMPANY                  BANK
---------------------------------------------------------------------
                           Amount        %         Amount         %
                         --------------------------------------------

LEVERAGE RATIO           $  32,952    10.18%     $  32,639     10.15%
Regulatory minimum       $  12,945     4.00%     $  12,868      4.00%
Excess                   $  20,007     6.18%     $  19,771      6.15%

RISKED-BASED RATIOS
Tier 1 capital           $  32,952    15.05%     $  32,639     14.90%
Tier 1 minimum           $   8,758     4.00%     $   8,762      4.00%
Excess                   $  24,194    11.05%     $  23,877     10.90%

Total capital            $  35,191    16.07%     $  34,878     15.92%
Total capital minimum    $  17,517     8.00%     $  17,523      8.00%
Excess                   $  17,674     8.07%     $  17,355      7.92%

The management of the Company is not aware of any trends, events, 
uncertainties or recommendations by regulatory authorities that will have or 
that are reasonably likely to have material effect on the liquidity, capital 
resources or operations of the Company.

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<PAGE>

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

    A)   Exhibits

    Exhibit No.                   Exhibit
    ---------------------------------------------------------------------------
         2.1       Plan of Reorganization and Merger Agreement - Annex 1 of 
                     Written Consent Statement/Prospectus*
         3.1       Articles of Incorporation of Registrant*
         3.2       Amendment to Articles of Incorporation of Registrant*
         3.3       Amendment to Articles of Incorporation of Registrant*
         3.4       Bylaws of the Registrant*
        10.1       Form of Indemnification Agreement*
        10.2       BSM Bancorp 1996 Stock Option agreement as approved by 
                     California Department of Corporations**
        10.3       Form of Written Consent*
        10.4       Nipomo Branch Land Lease*
        10.5       Lompoc Branch Lease*
        10.6       Form of "Change in Control" Employment Contract**
        27         Financial Data Schedule (for SEC use only)

         *All documents listed are incorporated by reference and can be found 
          in the Registration Statement of the Company filed on Form S-4.

        **This exhibit is contained in BSM Bancorp's Quarterly Report on Form 
          10-Q for the period ended March 31, 1997, filed with the Commission 
          on May 15, 1997 (Commission File No. 333-16951), and incorporated 
          by reference.

    B)   Reports on Form 8-K

         There were no reports on Form 8-K during the nine months ended 
September 30, 1997.

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<PAGE>

                                   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.

                                       BSM Bancorp
                                       (Registrant)




                                       /s/ William A. Hares
Date:    October 27, 1997              William A. Hares
                                       President and
                                       Chief Executive Officer





                                       /s/ F. Dean Fletcher
Date:    October 27, 1997              F. Dean Fletcher
                                       Executive Vice President
                                       and Chief Financial Officer



                                       12