##### Table of Contents




United States


SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





FORM 10-Q





(Mark One)





| | (X) |  | Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of 1934
| | --- |  | ----------------------------------------------------------------------------------




| |  |  | For the quarterly period ended June 30, 2002 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 000 
18561








AMERICANWEST BANCORPORATION


---

(Exact Name of Registrant as Specified in Its Charter)








Washington

91-1259511(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)








9506 North Newport Highway,
Spokane, WA 99218-1200


---

(Address of Principal Executive Offices)








(509) 467-6949


---

(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








The issuer has one class of capital stock, that being common stock. On August 10, 2002, there were 8,126,592 shares of such stock outstanding.




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##### Table of Contents

INDEX TO QUARTERLY REPORT ON FORM 10-Q





June 30, 2002





Table of Contents





PagePart I     Financial InformationItem 1.

Financial StatementsCondensed Consolidated Statements of Condition  June 30, 2002and December 31, 2001

3Condensed Consolidated Statements of Income  Three and SixMonths Ended June 30, 2002 and 2001

4Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2002 and 2001

5Notes to Consolidated Financial Statements

6  8Item 2.

Managements Discussion and Analysis of Financial Conditionand Results of Operations

8  15Item 3.

Quantitative and Qualitative Disclosures About Market Risk

15Part II   Other InformationItem 4.

Submission of Matters to a Vote of Security Holders

15Item 5.

Other Matters

15Item 6.

Exhibits and Reports on Form 8-K

16Signatures

16




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##### Table of Contents




AmericanWest Bancorporation and AmericanWest Bank


Condensed Consolidated Statements of Condition


($ in thousands)





June 30, 2002

December 31, 2001ASSETSCash and due from banks

$
17,842

$
24,421Overnight interest bearing deposits with other banks


11,241


535Cash and cash equivalents


29,083


24,956Securities


16,363


15,550Loans, net of allowance for loan losses of $7,022 in 2002 and $6,624 in 2001


630,961


580,899Accrued interest receivable


5,466


5,368Premises and equipment, net


14,464


13,488Foreclosed real estate and other foreclosed assets


6,052


1,616Life insurance and salary continuation assets


10,823


10,519Goodwill


3,872


3,872Intangible assets


1,040


1,098Other assets


1,786


1,975TOTAL ASSETS

$
719,910

$
659,341LIABILITIESNoninterest bearing  demand deposits

$
102,260

$
98,280Interest bearing:NOW and savings accounts


227,489


207,397Time, $100,000 and over


133,241


81,508Other time


133,875


145,052TOTAL DEPOSITS


596,865


532,237Short-term borrowings


45,342


52,974Capital lease obligations


607


627Accrued interest payable


1,094


1,439Other liabilities


3,926


3,858TOTAL LIABILITIES


647,834


591,135STOCKHOLDERS' EQUITYCommon stock, no par, shares authorized 15,000,000; issued and outstanding 7,849,809 in 2002 and 7,905,366 in
2001


60,985


61,540Retained earnings


10,978


6,584Accumulated other comprehensive income, net of tax


113


82TOTAL STOCKHOLDERS' EQUITY


72,076


68,206TOTAL LIABILITIES and STOCKHOLDERS' EQUITY

$
719,910

$
659,341





The accompanying notes are an integral part of these statements.




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##### Table of Contents

AmericanWest Bancorporation and AmericanWest Bank


Condensed Consolidated Statements of Income


($ in thousands, except per share)





Three Months Ended June
30,

Year to Date June
30,2002

2001

2002

2001INTEREST INCOMEInterest and fees on loans and leases

$
13,109


12,640

$
25,839

$
25,141Interest on securities


206


681


422


1,458Other interest income


25


19


65


60TOTAL INTEREST INCOME


13,340


13,340


26,326


26,659INTEREST EXPENSEInterest on deposits


3,199


4,595


6,384


9,694Interest on borrowings


253


567


565


1,029TOTAL INTEREST EXPENSE


3,452


5,162


6,949


10,723NET INTEREST INCOME


9,888


8,178


19,377


15,936Provision for loan losses


1,272


707


2,082


1,128NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES


8,616


7,471


17,295


14,808NONINTEREST INCOMEFees and service charges


879


661


1,687


1,241Insurance commissions


11


7


22


317Securities gains


0


110


0


114Other


373


548


616


905TOTAL NONINTEREST INCOME


1,263


1,326


2,325


2,577NONINTEREST EXPENSESalaries and employee benefits


3,746


3,049


7,424


6,552Occupancy expense, net


453


443


943


963Equipment expense


461


388


934


792Intangible assets amortization


29


84


57


168Other operating expense


1,552


1,358


2,915


2,708TOTAL NONINTEREST EXPENSE


6,241


5,322


12,273


11,183INCOME BEFORE INCOME TAX EXPENSE


3,638


3,475


7,347


6,202INCOME TAX EXPENSE


1,197


1,161


2,391


2,068NET INCOME

$
2,441

$
2,314

$
4,956

$
4,134Basic earnings per common share

$
0.31

$
0.31

$
0.63

$
0.54Diluted earnings per common share

$
0.30

$
0.31

$
0.62

$
0.54Basic weighted average shares outstanding


7,842,783


7,519,930


7,873,226


7,590,940Diluted weighted average shares outstanding


8,048,255


7,573,012


8,025,686


7,650,643





The accompanying notes are an integral part of these statements.




4




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##### Table of Contents

AmericanWest Bancorporation and AmericanWest Bank


Condensed Consolidated Statements of Cash Flows


Year-To-Date June 30, 2002 and 2001


($ in thousands)


2002


2001Cash flows from operating activities:Net income

$
4,956


$
4,134Provision for loan losses


2,082



1,128Net income

$
4,956


$
4,134Depreciation and amortization


647



521(Increase)/decrease in assets and liabilities:Accrued interest receivable


(98
)


(1,197
)Life insurance and salary continuation assets


(304
)


(48
)Other assets


247



1,110Accrued interest payable


(345
)


142Other liabilities


68



93Net cash provided by operating activities


7,253



5,883Cash flows from investing activities:Securities:Maturities


2,472



10,344Sales


0



21,112Purchases


(3,246
)


(14,664
)Net increase in loans


(57,033
)


(58,927
)Sales of pemises and equipment


9



26Purchases of premises and equipment


(1,638
)


(686
)Foreclosed real estate activity


453



(220
)Net cash change in investing activities


(58,983
)


(43,015
)Cash flows from financing activities:Net change in deposits


64,628



7,632Short-term borrowings activity


(7,632
)


30,012Principal payments on capital lease obligations


(20
)


(18
)Cash payments for stock repurchases


(1,587
)


(3,220
)Cash received from stock sales


468



340Net cash provided by financing activities


55,857



34,746Net change in cash and cash equivalents


4,127



(2,386
)Cash and cash equivalents, beginning of year


24,956



29,827Cash and cash equivalents, end of quarter

$
29,083


$
27,441





The accompanying notes are an integral part of these statements.




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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1.    Management Statement


The consolidated financial statements include AmericanWest Bancorporation (AWBC) and its wholly-owned subsidiary, AmericanWest Bank, after eliminating all significant
intercompany balances and transactions.





The interim unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring
accruals necessary for a fair presentation of the financial condition, the results of operations, and cash flows for the interim periods included herein have been made. The consolidated statement of condition of AWBC as of December 31, 2001 has been
derived from the audited consolidated statement of condition of AWBC as of that date. The results of operations for the six months ended June 30, 2002, are not necessarily indicative of results to be anticipated for the year ending December 31,
2002. For additional information, refer to the consolidated financial statements and footnotes thereto included in AWBCs annual report on Form 10-K for the year ended December 31, 2001.





NOTE 2.    Securities


The securities are classified as available-for-sale and are stated
at fair value, and unrealized holding gains and losses, net of related deferred taxes, are reported as a separate component of stockholders equity. Gains or losses on available-for-sale securities sales are reported as part of noninterest
income based on the net proceeds and the adjusted carrying amount of the securities sold, using the specific identification method. Carrying amount and fair values at June 30, 2002 and December 31, 2001 were as follows:





June 30, 2002

December 31, 2001Amortized Cost

Fair Value

Amortized Cost

Fair Value($ in thousands)U.S. Treasury securities

$
501

$
543

$
1,001

$
1,043Obligations of federal government agencies


3,799


3,836


4,531


4,564Mortgage backed securities


2,760


2,798


2,688


2,730Obligations of states, municipalities and political subdivisions


1,100


1,147


1,255


1,297Other securities


8,032


8,039


5,951


5,916Total

$
16,192

$
16,363

$
15,426

$
15,550




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##### Table of Contents

NOTE 3.    Loans


Loan detail by category as
of June 30, 2002 and December 31, 2001 were as follows:





June 30, 2002


December 31, 2001($ in thousands)Commercial and industrial

$
465,205


$
411,197Agricultural


87,141



88,121Real estate mortgage


38,895



40,084Real estate construction


18,586



17,201Installment


20,513



26,311Bank cards and other


7,934



5,062Total loans


638,274



587,976Allowance for loan losses


(7,022
)


(6,624
)Deferred loan fees, net of deferred costs


(291
)


(453
)Net loans

$
630,961


$
580,899





NOTE 4.    Allowance for loan losses


The allowance for loan loss is maintained at levels considered adequate by management to provide for possible loan losses. The allowance is based on managements assessment of various factors
affecting the loan portfolio, including problem loans, business conditions and loss experience, and an overall evaluation of the quality of the underlying collateral. Changes in the allowance for loan losses during the three and six months ended
June 30, 2002 and 2001 were as follows:





Three Months Ended June 30,


Year to Date June
30,2002


2001


2002


2001($ in thousands)Balance, beginning of period

$
6,380


$
5,276


$
6,624


$
4,948Provision for loan losses


1,272



707



2,082



1,128Loan charge-offs


(863
)


(498
)


(1,967
)


(607
)Loan recoveries


233



26



283



42Balance, end of period

$
7,022


$
5,511


$
7,022


$
5,511





NOTE 5.    Goodwill


In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, in January 2002 AWBC performed an impairment test of goodwill resulting in no impairment.
As a result, goodwill of $3,872,000 ceased to be amortized. AWBC will continue to periodically evaluate goodwill for impairment.





NOTE
6.    Subsequent event


On July 31, 2002, the Company completed its acquisition of and merger with Latah Bancorporation and its wholly-owned subsidiary,
Bank of Latah. This transaction, which was accounted for as a purchase, involved the issuance of 330,093 shares of the Companys common stock and the payment of $13.5 million in cash to the shareholders of Latah Bancorporation. The Company
issued $9.3 million in subordinated debt to fund a portion of this transaction and has assumed $2.6 million in subordinated debt previously held by Latah. The company now holds 100% of the voting equity interest in Bank of Latah.




7




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##### Table of Contents

As a result of this transaction, the Companys assets increased by $131 million. Loans and securities increased by $95 million and $26
million, respectively. Deposits increased by $113 million.





Item 2:    Managements Discussion and Analysis of Financial Condition and Results of Operations





The following discussion contains a review of the results of operations and financial condition for second quarter and the year-to-date results in 2002 and 2001. This information should be read in conjunction with the financial
statements and related notes appearing in this report. The reader is assumed to have access to AWBCs Form 10-K for the year ended December 31, 2001, which contains additional information.





This discussion may contain certain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements
are subject to certain risks and uncertainties that could cause actual results to differ materially from those stated. Readers are cautioned not to place undue reliance on these forward-looking statements.





AmericanWest Bancorporation and AmericanWest Bank


AmericanWest Bancorporation,
Inc (the Company) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The company conducts business through a single wholly-owned subsidiary, AmericanWest Bank, (the Bank) a
state-chartered, FDIC-insured commercial bank organized under the laws of the State of Washington. The Companys and the Banks main offices are located in Spokane, Washington.





The Bank provides a full range of banking services to small and medium-sized business, professionals, and consumers through 32 banking offices located in eastern Washington and northern
Idaho.





The principal sources of the Companys revenue are 1) interest and fees on loans, 2) fees for deposit accounts and related
services, and 3) interest on investments (principally government securities) and 4) interest bearing deposits with other banks. The Banks lending activities consist of term and operating loans to businesses and farmers, real estate
construction and development loans, vehicle and equipment loans for both businesses and consumers, and real estate mortgage loans. The Bank also offers a full line of deposit account products and related services.




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##### Table of Contents

Bank of Latah


On July 31, 2002, the Company completed its
acquisition of and merger with Latah Bancorporation and its wholly-owned subsidiary, Bank of Latah. This transaction, which was accounted for as a purchase, involved the issuance of 330,093 shares of the Companys common stock and the payment
of $13.5 million in cash to the shareholders of Latah Bancorporation. The Company issued $9.3 million in subordinated debt to fund this transaction and has assumed $2.6 million in subordinated debt previously held by Latah. The Company now holds
100% of the voting equity interest in Bank of Latah. The Company intends to operate Latah as a separate subsidiary bank until the first quarter of 2003.





As a result of this transaction, the Companys assets increased by $131 million. Loans and securities increased by $95 million and $26 million, respectively. Deposits increased by $113 million. These amounts are not reflected in
the Condensed Consolidated Financial Statements accompanying this report.





The addition of Bank of Latah to the companys operations
adds value to the Company in several ways. First, Bank of Latah is a well-managed and profitable bank with good asset quality and projected net income after tax of $1.6 million in 2002. Second, Bank of Latahs business locations mesh very well
with those of AmericanWest, increasing our presence in the important Palouse agricultural market of eastern Washington and adding four locations in northern Idaho. With the additional of our new offices in Lewiston and Hayden, this will bring our
number of Idaho locations to seven by year end. Third, Bank of Latahs operating philosophy and information systems are substantially similar to those of the Company, making for an easy integration these operations. Finally, this acquisition
adds new profitable leverage to the Companys capital, providing for greater future returns on equity.





Performance Overview


The table below summarizes the Companys financial performance for the three and six month periods ending June 30, 2002 and 2001:





AMERICANWEST BANCORPORATION AND SUBSIDIARIES


PERFORMANCE SUMMARY





Three Months Ended June 30,


Year-To-Date June 30,2002

2001

% Change


2002

2001

% Change($ in thousands, except per share)Interest income

$
13,340

$
13,340

0.0
%

$
26,326

$
26,659

-1.2
%Interest expense


3,452


5,162

-33.1
%


6,949


10,723

-35.2
%Net interest income


9,888


8,178

20.9
%


19,377


15,936

21.6
%Provision for loan losses


1,272


707

79.9
%


2,082


1,128

84.6
%Net interest income after provision for loan losses


8,616


7,471

15.3
%


17,295


14,808

16.8
%Noninterest income


1,263


1,326

-4.8
%


2,325


2,577

-9.8
%Noninterest expense


6,241


5,322

17.3
%


12,273


11,183

9.7
%Income before income taxes


3,638


3,475

4.7
%


7,347


6,202

18.5
%Income taxes


1,197


1,161

3.1
%


2,391


2,068

15.6
%Net income

$
2,441

$
2,314

5.5
%

$
4,956

$
4,134

19.9
%Basic earnings per common share

$
0.31

$
0.31

0.0
%

$
0.63

$
0.54

16.7
%Diluted earnings per common share

$
0.30

$
0.31

-3.2
%

$
0.62

$
0.54

14.8
%




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##### Table of Contents

Net Income


The Company reported net income of $2,441,000 or
$0.30 per fully diluted share for the second quarter of 2002 compared to $2,314,000 and $0.31 for the same period in 2001. For the first six months of 2002, net income was $4,956,000 or $0.62 per fully diluted share versus $4,134,000 and $0.54 in
2001. The Companys return on average assets was 1.44% for the six months ended June 30, 2002 and 1.35% for the same period in 2001. All of the Companys net income for these periods was derived from the operating results of the Bank.





Net Interest Income


Net interest income for the six
months ended June 30, 2002 was $19,377,000, an increase of $3,441,000 or 22% over the same period in 2001. This was the principal factor in the increase of the Companys net income for the same period.





Growth in net interest income was due to two factors. First, loans increased by 15.6% to $637,691,000 in 2002 over $551,769,000 in 2001. Second, the
Companys net interest margin increased to 6.15% in 2002 versus 5.66% in 2001.





This favorable change in net interest margin has
been due to a faster decline in the Companys interest expense than the related decline in the yield on loans and other earning assets. The maturities of the Companys time deposits are generally shorter than that of its loans, causing
these liabilities to re-price more quickly in a period of falling rates. In addition, the Company has continually adjusted the rates on other interest-bearing deposits downward as market rates have declined. Finally, the Company has carefully
managed the rates and terms on new loans to slow the decline in earning asset yields.





Current conditions appear to indicate that market
rates will not fall significantly through the remainder of 2002. Sluggish economic activity and negligible inflationary pressure also indicate that rates will not increase materially until well into 2003. When rates rise, the Company may see its net
interest income decline as deposits re-price upward more quickly than loans. This may be offset somewhat by the Companys efforts to emphasize variable rate lending and less rate-sensitive deposit types.





The following table sets forth the Companys net interest margin for the six months ending June 30, 2002 and 2001:




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##### Table of Contents

AmericanWest Bancorporation and Subsidiaries


Net Interest Margin


Year-To-Date June 30, 2002 and 2001


($ in thousands)





2002 Average

Interest

%


2001 Average

Interest

%Loans

$
612,998

$
22,286

7.33
%

$
516,952

$
23,507

9.17
%Loan fees





3,553

1.17
%





1,634

0.64
%Investments


22,835


487

4.30
%


50,679


1,518

6.04
%Total earning assets


635,833


26,326

8.35
%


567,631


26,659

9.47
%Other assets


50,812








50,934Total assets

$
686,645

$
26,326




$
618,565

$
26,659Interest-bearing deposits

$
470,669

$
6,384

2.74
%

$
420,158

$
9,694

4.65
%Borrowings


42,424


565

2.69
%


40,758


1,029

5.09
%Total interest-bearing liabilities


513,093


6,949

2.73
%


460,916


10,723

4.69
%Noninterest bearing deposits


97,738








86,933Other liabilities


5,127








5,133Total liabilities


615,958


6,949





552,982


10,723Equity


70,687








65,583Total liabilities and capital

$
686,645

$
6,949




$
618,565

$
10,723Net interest income/spread




$
19,377

5.62
%




$
15,936

4.78
%Net interest margin to average earning assets







6.15
%







5.66
%





Provision for Loan Losses


Provision for loan losses reduces net interest income. The Company provided $2,082,000 in the first six months of 2002, compared to $1,128,000 in 2001. This increased provision is the result of growth in the Companys loans and
the recognition of increased risk in the Companys loan portfolio in light of increases in non-performing assets and declining economic activity.





Management believes the allowance for possible loan losses is adequate to absorb any losses in the current portfolio. This statement is based on managements continuing evaluation of the inherent risks in outstanding loans,
current levels of nonperforming assets and economic factors.





Noninterest Income and Expense


Noninterest income for the six months ended June 30, 2002 was $2,325,000, a decrease of 10% from 2001. 2001 amounts include revenue from a former insurance agency subsidiary and one-time gains from the
sale of that subsidiary and the sale of an investment in an ATM transaction processor. Fees and service charges increased in 2002 to $1,687,000 over $1,241,000 in 2001. This is primarily due to improved assessment and collection of overdraft and NSF
fees and general growth in business volume.





Noninterest expense increased slightly to $12,273,000 at June 30, 2002 compared to 2001.
Most of this increase was attributable to higher employee incentive expense.




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##### Table of Contents

Nonperforming Assets


Nonperforming assets include loans that are
90 or more days past due or in non-accrual status and real estate and other loan collateral acquired through foreclosure. Total nonperforming assets were $18,199,000 or 2.53% of total assets at June 30, 2002. This compares to $15,791,000 or 2.48% of
assets in 2001. The majority of nonperforming assets involve seven borrowers totaling $14.3 million. The Company has reached a settlement agreement with the owners of one ice skating complex in Spokane that management believes will allow the Company
to recover the entire principal amount of the loan ($2.2 million). (This agreement was consummated on July 31, 2002.) The Company continues to operate another ice skating complex in Spokane pending its sale as an operating business. Management
believes such a sale will recover substantially all of the $3.1 million balance of this loan.





Management believes it remains well
secured on a $4 million retail/office complex in Spokane. This loan is subject to litigation and is scheduled for trial in October. Management believes the Company will prevail in this matter.





The Company has acquired two former apple orchards in the Yakima area and is working to recast these properties for development as residential or commercial sites. It is managements
belief that these efforts will allow the Company to fully recover the $2 million book value of these assets





The Company is in
negotiations with the borrower on a $2.0 million loan secured by commercial real estate and nursery stock in the Yakima area to allow the borrower to refinance properties and repay the obligation. Management believes this process will lead to full
recovery on this loan.





The company is working with a Yakima area borrower on a $1.0 million loan secured by residential building lots to
facilitate the sale of the lots. Management believes the loan is well secured and anticipates no loss.





Financial Condition


The Companys consolidated assets at June 30, 2002 were $719,910,000, an increase of 9.2% over December 31, 2001. Asset growth took the form of increased loans
outstanding, funded by increased deposits and short-term borrowings. Total stockholders equity was $72,076,000 at the same date, up from $68,206,000 at year-end 2001. Increases in shareholders equity came from net income, which was partially
offset by buy-backs of common stock.





Investment Portfolio


The Companys investment portfolio grew slightly from $15,550,000 at December 31 2001 to 16,363,000 in 2002. This growth came through purchases on investment securities, partially offset by maturities, pay downs and calls on
securities. There were no sales of securities during this period. The major classifications of investments as of June 30, 2002 and December 31, 2001 can be found in the Notes to Condensed Consolidated Financial Statements. All securities are
classified at available-forsale. Management believes that this classification provides greater flexibility to respond to interest rate changes and liquidity needs.




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##### Table of Contents

Loan Portfolio


The major classifications of loans at June 30,
2002 and December 31, 2001 can be found in the Notes to Condensed Consolidated Financial Statements.





Totals loans were 637,983,000 at
June 30, 2002 compared to 587,523,000 at December 31, 2001. This growth was centered in commercial and industrial loans, which increased by $54 million to $465 million. Smaller increases were also realized in real estate construction and credit card
loans, which had combined growth of $4 million. These increases were partially offset by small decreases in installment, agricultural and mortgage loans, which declined by $8 million in the aggregate. Management continues to pursue loan growth, both
in total and as a percentage of assets, as a source of increased net interest income.





Allowance for Loan Losses


At June 30, 2002, the Companys Allowance for Loan Losses was $7,022,000 or 1.10% of total loans. This compares to $6,624,000 or 1.12% at December 31, 2001. Activity in the Allowance is
summarized in Note 4 in the Notes to Condensed Consolidated Financial Statements.





The Allowance for Loan Losses is increased by charges
to income (provision for loan losses) and decreased by charge offs (net of recoveries). Loans are charged to the allowance when management believes the collection of principal is unlikely. The allowance is an amount management believes is adequate
to absorb losses inherent in existing loans and commitments to extend credit. This judgment is based on growth and composition of the portfolio, periodic risk evaluation of existing loans and loan commitments, past loan loss experience, economic
factors, and the status of specific problem loans.





The majority of the Companys loans are to small and medium-sized business and
farmers in eastern Washington and northern Idaho and are secured by residential and commercial real estate, crops and business inventory and receivables. Real estate values in this area remain stable. Prices for agricultural commodities, with the
exception of apples, also remain at normal levels. However, significant long-term changes in either of these underlying factors could affect the collectibility of a material portion of the Companys loans outstanding.





While management uses available information to evaluate and recognize loan losses, further reductions in the carrying amounts of loans may be necessary based on
changes in local, national and/or global economic conditions. In addition, state and federal regulatory agencies, as part of their normal examination process periodically review the estimated losses loans. Such agencies may require the company to
recognize additional estimated losses based on their judgment about information available to them at the time of their examination, even if such estimated losses do not ultimately occur.




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Deposits


The Companys primary source of funds is customer
deposits. To attract and retain deposits, the Company offers a wide variety of account types and maturities, both interest-bearing and non interest-bearing. Many accounts types have additional services bundled with them, such as insurance, travel
discounts, free checks and free or discounted access to other bank services. Interest rates on accounts are determined by management based on the Companys funding needs and market conditions and can change as frequently as daily.





At June 30, 2002, total deposits were $596,865,000, an increase of $64 million over December 31, 2001.





In recent years, competition from non-bank investment alternatives has increased competition for retail deposits. The current low interest rate environment also
makes it more difficult to attract consumer deposits, particularly the longer maturities the Company desires to protect its net interest margin. In light of these factors and to further diversify its funding sources, the company has expanded its use
of time deposits from public entities and from small depository institutions. These funds have also proven to be less costly than retail time deposits. At June 30, 2002, these accounts totaled $112,465,000 or 18.8% of total deposits.





Liquidity and Capital Resources


In addition to the strategy noted for
deposits above, the Company uses short-term borrowings, principally in the form of advances from the Federal Home Loan Bank of Seattle, as a source of funding. With maturities ranging from overnight to one year, these advances are used to provide a
ready source of short-term liquidity for the banks operations and are a tool the Company uses to manage its interest rate risk.





At
June 30, 2002, these borrowings stood at $45,000,000 with a weighted average rate of 2.14% and a weighted average maturity of 161 days. The Companys total line of credit at the FHLB is approximately $84,000,000. The Company also has unused
credit lines totaling $25,000,000 with two correspondent banks.





As a federally-regulated bank holding company, the Company is required
to maintain minimum levels of capital at all times. Bank regulatory agencies have promulgated regulations that measure the Companys capital in three ways. Shareholders equity is measured against assets both on a book basis and on a
risk-weighted basis according to standardized risk categories for specific types of assets. In addition, shareholders equity is adjusted for certain other items, most prominently the Allowance for Loan Losses and certain intangibles, to arrive at
defined regulatory capital. This amount is then measured against risk-weighted assets.





The table below lists the Companys capital
ratios relative to regulatory requirements at June 30, 2002:




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##### Table of Contents

AmericanWest Bancorporation and Subsidiaries


Regualtory Capital Ratios as of June 30, 2002





Capital Ratio

Reglatory Standard for "Well Capitalized" Rating

Actual  RatioShareholders Equity to Average Total Assets

5.00%

9.69%Shareholders Equity to Risk Weighted Assets

6.00%

9.77%Total Capital to Risk Weighted Assets

10.00%

10.79%





Item 3.    Quantitative and Qualitative Disclosures About Market Risk.





Management
considers interest rate risk to be a market risk that could have a significant effect on the financial condition of AWBC. There have been no material changes in reported market risks faced by AWBC since the end of the most recent fiscal year.





Part II


Other
Information





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





| | (a) |  | Annual meeting of shareholders was held on April 23, 2002.
| | --- |  | ----------------------------------------------------------




| | (b) |  | Proxies for the annual meeting were solicited pursuant to Regulation 14 under the Act
| | --- |  | -------------------------------------------------------------------------------------




| | (c) |  | Matters voted upon at the meeting
| | --- |  | ---------------------------------




Proposal 1  Election of Directors





For

WithholdWesley E. Colley

5,596,022

69,731James Rand Elliot

5,662,746

3,007David E. Frame

5,662,767

2,886Robert J. Gardner

5,663,075

2,678Keith P. Sattler

5,662,470

4,283Donald H. Swartz II

5,648,522

17,231P. Mike Taylor

5,573,991

91,842





Item 5.    Other Matters





Following the annual meeting of shareholders April 23, 2002 David
E. Frame resigned from the Companys Board of Directors for personal reasons. The Board appointed former director Norman McKibben to fill the vacancy created by Mr. Frames resignation until the next meeting of shareholders.




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##### Table of Contents




Item 6.    Exhibits and Reports on Form 8-K





| | (a) |  | Exhibits
| | --- |  | --------

None in second
quarter 2002.





| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------

On April 1, 2002, the
Company filed a Form 8-K covering its planned acquisition of Latah Bancorporation. This transaction was consummated on July 31, 2002.





Signatures


Pursuant to 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 on August 13, 2002.








AMERICANWEST BANCORPORATION\s\    Wes ColleyWes Colley, President and Chief Executive Officer\s\    Dan MurrayDan Murray, Senior Vice President and Credit Administrator\s\    Wade A. GriffithWade A. Griffith, Vice President and Acting Chief Financial Officer





CERTIFICATION





To my knowledge, this Report on Form 10-Q for the quarter ended June 30, 2002, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the
information contained in this Report fairly presents, in all material respects, the financial condition and the results of operation of AmericanWest Bancorporation.








By:

\s\    Wes ColleyWes Colley, Chief Executive OfficerBy:

\s\    Wade A. GriffithWade A. Griffith, Acting Chief Financial Officer







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