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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM 10-Q







|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2010

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.)

41 West Riverside, Suite 300

Spokane, Washington 99201-0813

(Address of principal executive offices, including zip code)

(509) 467-6993

(Registrants telephone number, including area code)

41 West Riverside, Suite 400

Spokane, Washington 99201-0813

(Former name, former address and former fiscal year, 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(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   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by a check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large Accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.





|             |  |                             
|------------ |  | ----------------------------
|Class        |  | Number of Shares Outstanding
|Common Stock |  | 17,216,488 at May 10, 2010  









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AMERICANWEST BANCORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2010

Table of Contents



|        |  |                       |  |                                                                                          |  |     
|------- |  | --------------------- |  | ---------------------------------------------------------------------------------------- |  | ----
|        |  |                       |  |                                                                                          |  | Page
|Part I  |  | Financial Information |  |                                                                                         
|        |  |                       | 
|        |  | Item 1.               |  | Financial Statements                                                                     |  |     
|        |  |                       | 
|        |  |                       |  | Consolidated Statements of Condition as of March 31, 2010 and December 31, 2009          |  | 3   
|        |  |                       | 
|        |  |                       |  | Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and
2009 |  | 4   
|        |  |                       | 
|        |  |                       |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and
2009 |  | 5   
|        |  |                       | 
|        |  |                       |  | Notes to Consolidated Financial Statements                                               |  | 6   
|        |  |                       | 
|        |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations    |  | 18  
|        |  |                       | 
|        |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                               |  | 33  
|        |  |                       | 
|        |  | Item 4.               |  | Controls and Procedures                                                                  |  | 34  
|        |  |                      
|Part II |  | Other Information     |  |                                                                                         
|        |  |                       | 
|        |  | Item 1.               |  | Legal Proceedings                                                                        |  | 35  
|        |  |                       | 
|        |  | Item 1A.              |  | Risk Factors                                                                             |  | 35  
|        |  |                       | 
|        |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                              |  | 35  
|        |  |                       | 
|        |  | Item 3.               |  | Defaults Upon Senior Securities                                                          |  | 35  
|        |  |                       | 
|        |  | Item 4.               |  | (Removed and Reserved)                                                                   |  | 35  
|        |  |                       | 
|        |  | Item 5.               |  | Other Information                                                                        |  | 35  
|        |  |                       | 
|        |  | Item 6.               |  | Exhibits                                                                                 |  | 35  
|        |  |                      
|        |  | Signatures            |  | 36                                                                                      



2



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AMERICANWEST BANCORPORATION

CONSOLIDATED STATEMENTS OF CONDITION

(unaudited)

(in
thousands)



|                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                      |  | March 31,2010 |           |   | December 31,2009 |  
|ASSETS                                                                                                                                                                |  |               |           |   |                  |   |           |  
|Cash and due from banks                                                                                                                                               |  | $             | 30,030    |   |                  | $ | 38,553    |  
|Overnight interest bearing deposits with other banks                                                                                                                  |  |               | 153,561   |   |                  |   | 163,033   |  
|                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                             |  |               | 183,591   |   |                  |   | 201,586   |  
|                                                                                                                                                                      |  |              
|Securities, available-for-sale at fair value                                                                                                                          |  |               | 46,011    |   |                  |   | 48,986    |  
|                                                                                                                                                                      |  |              
|Loans, net of allowance for loan losses of $38,494 and $38,999, respectively                                                                                          |  |               | 1,153,642 |   |                  |   | 1,231,300 |  
|                                                                                                                                                                      |  |              
|Loans, held for sale                                                                                                                                                  |  |               | 4,797     |   |                  |   | 6,565     |  
|Accrued interest receivable                                                                                                                                           |  |               | 6,312     |   |                  |   | 6,515     |  
|FHLB stock                                                                                                                                                            |  |               | 10,267    |   |                  |   | 10,267    |  
|Premises and equipment, net                                                                                                                                           |  |               | 34,894    |   |                  |   | 35,877    |  
|Foreclosed real estate and other foreclosed assets                                                                                                                    |  |               | 58,301    |   |                  |   | 53,383    |  
|Bank owned life insurance                                                                                                                                             |  |               | 31,454    |   |                  |   | 31,207    |  
|Intangible assets                                                                                                                                                     |  |               | 9,995     |   |                  |   | 10,603    |  
|Other assets                                                                                                                                                          |  |               | 17,838    |   |                  |   | 19,264    |  
|                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|TOTAL ASSETS                                                                                                                                                          |  | $             | 1,557,102 |   |                  | $ | 1,655,553 |  
|                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|                                                                                                                                                                      |  |              
|LIABILITIES                                                                                                                                                           |  |               |           |   |                  |   |           |  
|Non-interest bearing demand deposits                                                                                                                                  |  | $             | 293,664   |   |                  | $ | 305,996   |  
|Interest bearing deposits:                                                                                                                                            |  |               |           |   |                  |   |           |  
|NOW, savings account and money market accounts                                                                                                                        |  |               | 527,162   |   |                  |   | 574,133   |  
|Time, $100,000 and over                                                                                                                                               |  |               | 196,642   |   |                  |   | 177,376   |  
|Other time                                                                                                                                                            |  |               | 394,670   |   |                  |   | 448,035   |  
|                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|TOTAL DEPOSITS                                                                                                                                                        |  |               | 1,412,138 |   |                  |   | 1,505,540 |  
|                                                                                                                                                                      |  |              
|Federal Home Loan Bank advances                                                                                                                                       |  |               | 68,600    |   |                  |   | 63,600    |  
|Other borrowings and capital lease obligations                                                                                                                        |  |               | 61        |   |                  |   | 83        |  
|Junior subordinated debt                                                                                                                                              |  |               | 41,239    |   |                  |   | 41,239    |  
|Accrued interest payable                                                                                                                                              |  |               | 6,649     |   |                  |   | 7,369     |  
|Other liabilities                                                                                                                                                     |  |               | 17,178    |   |                  |   | 18,117    |  
|                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|TOTAL LIABILITIES                                                                                                                                                     |  |               | 1,545,865 |   |                  |   | 1,635,948 |  
|                                                                                                                                                                      |  |              
|STOCKHOLDERS EQUITY                                                                                                                                                  |  |               |           |   |                  |   |           |  
|Preferred stock, no par, shares authorized 5 million                                                                                                                  |  |               |          |   |                  |   |          |  
|Common stock, no par, shares authorized 50 million; 17,236 issued and 17,216 outstanding at March 31, 2010; 17,236 issued
and 17,213 outstanding at December 31, 2009 |  |               | 253,451   |   |                  |   | 253,431   |  
|Accumulated deficit                                                                                                                                                   |  |               | (243,419  | ) |                  |   | (234,888  | )
|Accumulated other comprehensive income, net of tax                                                                                                                    |  |               | 1,205     |   |                  |   | 1,062     |  
|                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                            |  |               | 11,237    |   |                  |   | 19,605    |  
|                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                            |  | $             | 1,557,102 |   |                  | $ | 1,655,553 |  
|                                                                                                                                                                      |  |               |           |   |                  |   |           |  

The accompanying notes are an integral part of these statements.



3



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AMERICANWEST BANCORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in
thousands, except per share amounts)



|                                                           |  |                              |        |   |      |   |         |  
|---------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------- | -
|                                                           |  | Three Months Ended March 31, |       
|                                                           |  | 2010                         |        |   | 2009 |  
|Interest Income                                            |  |                              |        |   |      |   |         |  
|Interest and fees on loans                                 |  | $                            | 17,728 |   |      | $ | 22,464  |  
|Interest on securities                                     |  |                              | 526    |   |      |   | 752     |  
|Other interest income                                      |  |                              | 119    |   |      |   | 35      |  
|                                                           |  |                              |        |   |      |   |         |  
|Total Interest Income                                      |  |                              | 18,373 |   |      |   | 23,251  |  
|                                                           |  |                              |        |   |      |   |         |  
|Interest Expense                                           |  |                              |        |   |      |   |         |  
|Interest on deposits                                       |  |                              | 4,255  |   |      |   | 7,557   |  
|Interest on borrowings                                     |  |                              | 1,206  |   |      |   | 1,757   |  
|                                                           |  |                              |        |   |      |   |         |  
|Total Interest Expense                                     |  |                              | 5,461  |   |      |   | 9,314   |  
|                                                           |  |                              |        |   |      |   |         |  
|Net Interest Income                                        |  |                              | 12,912 |   |      |   | 13,937  |  
|Provision for loan losses                                  |  |                              | 5,000  |   |      |   | 13,680  |  
|                                                           |  |                              |        |   |      |   |         |  
|Net Interest Income After Provision for Loan Losses        |  |                              | 7,912  |   |      |   | 257     |  
|                                                           |  |                              |        |   |      |   |         |  
|Non-interest Income                                        |  |                              |        |   |      |   |         |  
|Fees and service charges on deposits                       |  |                              | 2,103  |   |      |   | 2,208   |  
|Fees on mortgage loan sales, net                           |  |                              | 538    |   |      |   | 1,924   |  
|Other                                                      |  |                              | 197    |   |      |   | 1,668   |  
|                                                           |  |                              |        |   |      |   |         |  
|Total Non-interest Income                                  |  |                              | 2,838  |   |      |   | 5,800   |  
|                                                           |  |                              |        |   |      |   |         |  
|Non-interest Expense                                       |  |                              |        |   |      |   |         |  
|Salaries and employee benefits                             |  |                              | 8,068  |   |      |   | 8,893   |  
|Foreclosed real estate and other foreclosed assets expense |  |                              | 2,732  |   |      |   | 617     |  
|Equipment expense                                          |  |                              | 1,914  |   |      |   | 1,992   |  
|Occupancy expense, net                                     |  |                              | 1,701  |   |      |   | 1,954   |  
|FDIC assessment                                            |  |                              | 1,651  |   |      |   | 3,475   |  
|Amortization of intangible assets                          |  |                              | 608    |   |      |   | 716     |  
|State business and occupation tax                          |  |                              | 121    |   |      |   | 20      |  
|Other                                                      |  |                              | 2,486  |   |      |   | 2,925   |  
|                                                           |  |                              |        |   |      |   |         |  
|Total Non-interest Expense                                 |  |                              | 19,281 |   |      |   | 20,592  |  
|                                                           |  |                              |        |   |      |   |         |  
|Loss Before Income Tax Benefit                             |  |                              | (8,531 | ) |      |   | (14,535 | )
|                                                           |  |                             
|Income Tax Benefit                                         |  |                              |       |   |      |   |        |  
|                                                           |  |                              |        |   |      |   |         |  
|Net Loss                                                   |  | $                            | (8,531 | ) |      | $ | (14,535 | )
|                                                           |  |                              |        |   |      |   |         |  
|Basic loss per common share                                |  | $                            | (0.50  | ) |      | $ | (0.84   | )
|Diluted loss per common share                              |  | $                            | (0.50  | ) |      | $ | (0.84   | )
|Basic weighted average shares outstanding                  |  |                              | 17,216 |   |      |   | 17,213  |  
|Diluted weighted average shares outstanding                |  |                              | 17,216 |   |      |   | 17,213  |  

The accompanying notes
are an integral part of these statements.



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AMERICANWEST BANCORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                                          |  |                              |         |   |      |   |          |  
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | -------- | -
|                                                                                                          |  | Three Months Ended March 31, |        
|                                                                                                          |  | 2010                         |         |   | 2009 |  
|CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES                                                     |  |                              |         |   |      |   |          |  
|Net Loss                                                                                                  |  | $                            | (8,531  | ) |      | $ | (14,535  | )
|Adjustments to reconcile net loss to net cash provided by operating activities:                           |  |                              |         |   |      |   |          |  
|Provisions for loan losses, unfunded commitments and foreclosed real estate and other foreclosed assets   |  |                              | 6,155   |   |      |   | 13,806   |  
|Depreciation and amortization                                                                             |  |                              | 1,655   |   |      |   | 1,840    |  
|Compensatory stock options and restricted stock expense, net of forfeitures                               |  |                              | 20      |   |      |   | (51      | )
|Loss on sale of premises and equipment, securities and foreclosed real estate and other foreclosed assets |  |                              | 237     |   |      |   | 66       |  
|Loss on impairment of premises                                                                            |  |                              |        |   |      |   | 59       |  
|Stock dividends received                                                                                  |  |                              | (26     | ) |      |   | (26      | )
|Originations of loans held for sale                                                                       |  |                              | (22,044 | ) |      |   | (111,700 | )
|Proceeds from loans sold                                                                                  |  |                              | 23,812  |   |      |   | 106,979  |  
|Fair value adjustments on mortgage loan activities                                                        |  |                              | (45     | ) |      |   |         |  
|Changes in assets and liabilities:                                                                        |  |                              |         |   |      |   |          |  
|Accrued interest receivable                                                                               |  |                              | 203     |   |      |   | 573      |  
|Bank owned life insurance                                                                                 |  |                              | (247    | ) |      |   | (250     | )
|Other assets                                                                                              |  |                              | 1,426   |   |      |   | (537     | )
|Accrued interest payable                                                                                  |  |                              | (720    | ) |      |   | 129      |  
|Other liabilities                                                                                         |  |                              | (848    | ) |      |   | 412      |  
|                                                                                                          |  |                              |         |   |      |   |          |  
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                                       |  |                              | 1,047   |   |      |   | (3,235   | )
|                                                                                                          |  |                              |         |   |      |   |          |  
|                                                                                                          |  |                             
|CASH FLOWS PROVIDED BY INVESTING ACTIVITIES                                                               |  |                              |         |   |      |   |          |  
|Securities available-for-sale:                                                                            |  |                              |         |   |      |   |          |  
|Maturities, calls, sales and principal payments                                                           |  |                              | 3,122   |   |      |   | 5,217    |  
|Purchases of Federal Home Loan Bank stock                                                                 |  |                              |        |   |      |   | (1,981   | )
|Net decrease increase in loans                                                                            |  |                              | 62,157  |   |      |   | 32,353   |  
|Purchases of premises and equipment                                                                       |  |                              | (142    | ) |      |   | (196     | )
|Proceeds from sale of premises and equipment                                                              |  |                              | 32      |   |      |   | 477      |  
|Proceeds from sale of foreclosed real estate and other foreclosed assets                                  |  |                              | 4,213   |   |      |   | 4,603    |  
|                                                                                                          |  |                              |         |   |      |   |          |  
|NET CASH PROVIDED BY INVESTING ACTIVITIES                                                                 |  |                              | 69,382  |   |      |   | 40,473   |  
|                                                                                                          |  |                              |         |   |      |   |          |  
|                                                                                                          |  |                             
|CASH FLOWS USED IN FINANCING ACTIVITIES                                                                   |  |                              |         |   |      |   |          |  
|Net decrease in deposits                                                                                  |  |                              | (93,402 | ) |      |   | (35,512  | )
|Proceeds from Federal Home Loan Bank advances                                                             |  |                              | 5,000   |   |      |   |         |  
|Repayments of Federal Home Loan Bank advances and other borrowing activity                                |  |                              | (22     | ) |      |   | 848      |  
|                                                                                                          |  |                              |         |   |      |   |          |  
|NET CASH USED IN FINANCING ACTIVITIES                                                                     |  |                              | (88,424 | ) |      |   | (34,664  | )
|                                                                                                          |  |                              |         |   |      |   |          |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                   |  |                              | (17,995 | ) |      |   | 2,574    |  
|                                                                                                          |  |                             
|Cash and cash equivalents, beginning of year                                                              |  |                              | 201,586 |   |      |   | 66,985   |  
|                                                                                                          |  |                              |         |   |      |   |          |  
|Cash and cash equivalents, end of period                                                                  |  | $                            | 183,591 |   |      | $ | 69,559   |  
|                                                                                                          |  |                              |         |   |      |   |          |  
|                                                                                                          |  |                             
|Supplemental Disclosures:                                                                                 |  |                              |         |   |      |   |          |  
|Cash paid during the period for:                                                                          |  |                              |         |   |      |   |          |  
|Interest                                                                                                  |  | $                            | 6,181   |   |      | $ | 9,185    |  
|Income taxes                                                                                              |  | $                            |        |   |      | $ |         |  
|                                                                                                          |  |                             
|Non-cash Investing and Financing Activities:                                                              |  |                              |         |   |      |   |          |  
|Foreclosed real estate acquired in settlement of loans                                                    |  | $                            | 10,801  |   |      | $ | 11,566   |  

The accompanying notes
are an integral part of these statements.



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AMERICANWEST BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Basis of Presentation

The
foregoing unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by accounting principles generally accepted in the United States of
America for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in the annual report on
Form 10-K for the year ended December 31, 2009. In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a
fair presentation of the results for the interim periods presented. The results of operations for the three months ended March 31, 2010 and 2009 are not necessarily indicative of the operating results for the full year.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and
expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of AmericanWest Bancorporations (Company) consolidated financial statements; accordingly, it is possible
that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts in the Companys consolidated financial position and results of operations.

NOTE 2. Securities

All securities are
classified as available-for-sale and are carried at fair value. Unrealized gains and losses, net of tax, are excluded from earnings and reported as a separate component of stockholders equity. Gains or losses on the sale of available-for-sale
securities are determined using the specific identification method. Premiums and discounts are recognized in interest income using the effective interest method over the period to maturity. The amortized cost of securities, their gross unrealized
gains and losses and their fair values at the respective dates are shown in the following table:



|                                                                 |  |               |        |                      |   |                       |  |           |    |  |   |       
|---------------------------------------------------------------- |  | ------------- | ------ | -------------------- | - | --------------------- |  | --------- | -- |  | - | ------
|March 31, 2010
($ in thousands)                                  |  | AmortizedCost |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue
|Obligations of federal government agencies                       |  | $             | 3,002  |                      | $ | 169                   |  | $         |   |  | $ | 3,171 
|Obligations of states, municipalities and political subdivisions |  |               | 20,116 |                      |   | 377                   |  |           | 46 |  |   | 20,447
|Mortgage-backed securities                                       |  |               | 20,812 |                      |   | 724                   |  |           | 3  |  |   | 21,533
|Other securities                                                 |  |               | 876    |                      |   |                      |  |           | 16 |  |   | 860   
|                                                                 |  |               |        |                      |   |                       |  |           |    |  |   |       
|Total                                                            |  | $             | 44,806 |                      | $ | 1,270                 |  | $         | 65 |  | $ | 46,011
|                                                                 |  |               |        |                      |   |                       |  |           |    |  |   |       



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AMERICANWEST BANCORPORATION



|                                                                 |  |               |        |                      |   |                       |  |           |    |  |   |       
|---------------------------------------------------------------- |  | ------------- | ------ | -------------------- | - | --------------------- |  | --------- | -- |  | - | ------
|December 31, 2009
($ in thousands)                               |  | AmortizedCost |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue
|Obligations of federal government agencies                       |  | $             | 3,230  |                      | $ | 176                   |  | $         | 6  |  | $ | 3,400 
|Obligations of states, municipalities and political subdivisions |  |               | 20,126 |                      |   | 228                   |  |           | 61 |  |   | 20,293
|Mortgage-backed securities                                       |  |               | 23,668 |                      |   | 751                   |  |           | 5  |  |   | 24,414
|Other securities                                                 |  |               | 900    |                      |   |                      |  |           | 21 |  |   | 879   
|                                                                 |  |               |        |                      |   |                       |  |           |    |  |   |       
|Total                                                            |  | $             | 47,924 |                      | $ | 1,155                 |  | $         | 93 |  | $ | 48,986
|                                                                 |  |               |        |                      |   |                       |  |           |    |  |   |       

The following table includes information on investment securities with
unrealized losses at the respective dates:



|                                                                 |           |                     |                  |                     |           |       |                  |   |           |  |                  |    |  |   |       |  |   |   
|---------------------------------------------------------------- | --------- | ------------------- | ---------------- | ------------------- | --------- | ----- | ---------------- | - | --------- |  | ---------------- | -- |  | - | ----- |  | - | --
|March 31, 2010
($ in thousands)                                  |           | Less than 12 months |                  | 12 Months or Longer |           | Total
|                                                                 | FairValue |                     | UnrealizedLosses |                     | FairValue |       | UnrealizedLosses |   | FairValue |  | UnrealizedLosses
|Obligations of states, municipalities and political subdivisions |           | $                   | 1,394            |                     | $         | 15    |                  | $ | 2,966     |  | $                | 30 |  | $ | 4,360 |  | $ | 45
|Mortgage-backed securities                                       |           |                     | 372              |                     |           |      |                  |   | 372       |  |                  | 4  |  |   | 744   |  |   | 4 
|Other securities                                                 |           |                     |                 |                     |           |      |                  |   | 15        |  |                  | 16 |  |   | 15    |  |   | 16
|                                                                 |           |                     |                  |                     |           |       |                  |   |           |  |                  |    |  |   |       |  |   |   
|Total                                                            |           | $                   | 1,766            |                     | $         | 15    |                  | $ | 3,353     |  | $                | 50 |  | $ | 5,119 |  | $ | 65
|                                                                 |           |                     |                  |                     |           |       |                  |   |           |  |                  |    |  |   |       |  |   |   
|                                                                 |           |                     |                 
|December 31, 2009
($ in thousands)                               |           | Less than 12 months |                  | 12 Months or Longer |           | Total
|                                                                 | FairValue |                     | UnrealizedLosses |                     | FairValue |       | UnrealizedLosses |   | FairValue |  | UnrealizedLosses
|Obligations of federal government agencies                       |           | $                   |                 |                     | $         |      |                  | $ | 153       |  | $                | 6  |  | $ | 153   |  | $ | 6 
|Obligations of states, municipalities and political subdivisions |           |                     | 4,021            |                     |           | 33    |                  |   | 2,028     |  |                  | 28 |  |   | 6,049 |  |   | 61
|Mortgage-backed securities                                       |           |                     |                 |                     |           |      |                  |   | 537       |  |                  | 5  |  |   | 537   |  |   | 5 
|Other securities                                                 |           |                     | 5                |                     |           | 8     |                  |   | 7         |  |                  | 13 |  |   | 12    |  |   | 21
|                                                                 |           |                     |                  |                     |           |       |                  |   |           |  |                  |    |  |   |       |  |   |   
|Total                                                            |           | $                   | 4,026            |                     | $         | 41    |                  | $ | 2,725     |  | $                | 52 |  | $ | 6,751 |  | $ | 93
|                                                                 |           |                     |                  |                     |           |       |                  |   |           |  |                  |    |  |   |       |  |   |   

Certain investment securities shown above have fair values less than
amortized cost and therefore contain unrealized losses. At March 31, 2010, the Company evaluated the securities which had an unrealized loss for other than temporary impairment and determined all declines in value were temporary. There were 14
and 19 investment securities with unrealized losses at March 31, 2010 and December 31, 2009, respectively. The Company anticipates full recovery of amortized cost at maturity, or sooner in the event of a more favorable market interest rate
environment, with respect to the securities carried at March 31, 2010.



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Taxable interest income on securities was $417 thousand and $516 thousand for the three months ended
March 31, 2010 and 2009, respectively. Non-taxable interest income on securities was $83 thousand and $192 thousand for the three months ended March 31, 2010 and 2009, respectively. Dividend income on securities was $26 thousand and $44
thousand for the three months ended March 31, 2010 and 2009, respectively. During the three months ended March 31, 2010, total proceeds from sales of securities were $144 thousand and included gains of $3 thousand and losses of $5
thousand. During the three months ended March 31, 2009, there were no sales of securities.

Securities with an amortized cost of $27.7
million and $32.2 million at March 31, 2010 and December 31, 2009, respectively, were pledged for purposes required or permitted by law. The market value of these securities was $28.7 million and $33.2 million at March 31, 2010 and
December 31, 2009, respectively.

The contractual scheduled maturity of securities at March 31, 2010 was as follows:



|                             |  |               |        |           |   |       
|---------------------------- |  | ------------- | ------ | --------- | - | ------
|($ in thousands)             |  | AmortizedCost |        | FairValue
|Due in one year or less      |  | $             | 2,658  |           | $ | 2,684 
|Due from one to five years   |  |               | 5,159  |           |   | 5,395 
|Due from five to ten years   |  |               | 10,747 |           |   | 10,994
|Due after ten years          |  |               | 25,366 |           |   | 26,079
|Other nonmaturity securities |  |               | 876    |           |   | 859   
|                             |  |               |        |           |   |       
|Total                        |  | $             | 44,806 |           | $ | 46,011
|                             |  |               |        |           |   |       

Expected maturities will differ from contractual maturities as the
issuers of certain debt securities have the right to call or prepay their obligations without penalties. Mortgage-backed securities have been classified above based on contractual maturities.

NOTE 3. Loans and Allowance for Loan Losses

Aggregate loan balances by category as of March 31, 2010 and December 31, 2009 were as follows:



|                                              |  |                |           |   |            |     |   |                   |   |           |            |  |     |  
|--------------------------------------------- |  | -------------- | --------- | - | ---------- | --- | - | ----------------- | - | --------- | ---------- |  | --- | -
|($ in thousands)                              |  | March 31, 2010 |           |   | % of Total |     |   | December 31, 2009 |   |           | % of Total | 
|Commercial real estate                        |  | $              | 620,113   |   |            | 52  | % |                   | $ | 627,984   |            |  | 49  | %
|Residential real estate                       |  |                | 172,766   |   |            | 14  | % |                   |   | 183,320   |            |  | 15  | %
|Construction, land development and other land |  |                | 128,871   |   |            | 11  | % |                   |   | 168,454   |            |  | 13  | %
|Agricultural                                  |  |                | 128,732   |   |            | 11  | % |                   |   | 142,404   |            |  | 11  | %
|Commercial and industrial                     |  |                | 125,517   |   |            | 11  | % |                   |   | 130,705   |            |  | 10  | %
|Installment and other                         |  |                | 17,594    |   |            | 1   | % |                   |   | 19,040    |            |  | 2   | %
|                                              |  |                |           |   |            |     |   |                   |   |           |            |  |     |  
|Total loans                                   |  |                | 1,193,593 |   |            | 100 | % |                   |   | 1,271,907 |            |  | 100 | %
|                                              |  |                |           |   |            |     |   |                   |   |           |            |  |     |  
|Allowance for loan losses                     |  |                | (38,494   | ) |            |     |   |                   |   | (38,999   | )          |  |     |  
|Deferred loan fees, net of deferred costs     |  |                | (1,457    | ) |            |     |   |                   |   | (1,608    | )          |  |     |  
|                                              |  |                |           |   |            |     |   |                   |   |           |            |  |     |  
|Net loans                                     |  | $              | 1,153,642 |   |            |     |   |                   | $ | 1,231,300 |            |  |     |  
|                                              |  |                |           |   |            |     |   |                   |   |           |            |  |     |  

The allowance for loan losses and reserve for unfunded commitments are maintained at levels considered adequate by
management to provide for probable loan losses as of the Consolidated Statements of Condition reporting dates. The allowance for loan losses and reserve for unfunded commitments are 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 and the reserve for unfunded commitments during the
three months ended March 31, 2010 and 2009 were as follows:



|                             |  |                             |        |   |      |   |         |  
|---------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                             |  | Three Months EndedMarch 31, |       
|($ in thousands)             |  | 2010                        |        |   | 2009 |  
|Allowance for loan losses:   |  |                             |        |   |      |   |         |  
|Balance, beginning of period |  | $                           | 38,999 |   |      | $ | 44,722  |  
|Loan loss provision          |  |                             | 5,000  |   |      |   | 13,680  |  
|Loans charged-off            |  |                             | (6,171 | ) |      |   | (17,943 | )
|Recoveries                   |  |                             | 666    |   |      |   | 216     |  
|                             |  |                             |        |   |      |   |         |  
|Balance, end of period       |  | $                           | 38,494 |   |      | $ | 40,675  |  
|                             |  |                             |        |   |      |   |         |  



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|                                  |  |                             |     |   |      |   |    
|--------------------------------- |  | --------------------------- | --- | - | ---- | - | ---
|                                  |  | Three Months EndedMarch 31,
|($ in thousands)                  |  | 2010                        |     |   | 2009
|Reserve for Unfunded Commitments: |  |                             |     |   |      |   |    
|Balance, beginning of period      |  | $                           | 456 |   |      | $ | 660
|Unfunded commitments benefit      |  |                             | (46 | ) |      |   |   
|                                  |  |                             |     |   |      |   |    
|Balance, end of period            |  | $                           | 410 |   |      | $ | 660
|                                  |  |                             |     |   |      |   |    

The provision for unfunded commitments is included in other
non-interest expense within the Consolidated Statements of Operations and the reserve for unfunded commitments is included in other liabilities within the Consolidated Statements of Condition.

Impaired loan information as of March 31, 2010 and December 31, 2009 was as follows:



|                                                            |  |               |        |                  |   |        
|----------------------------------------------------------- |  | ------------- | ------ | ---------------- | - | -------
|($ in thousands)                                            |  | March 31,2010 |        | December 31,2009
|Impaired loans without a specific allowance for loan losses |  | $             | 79,344 |                  | $ | 92,665 
|Impaired loans with a specific allowance for loan losses    |  | $             | 17,616 |                  | $ | 22,230 
|Non-accrual loans                                           |  | $             | 91,367 |                  | $ | 107,900

The specific allowance associated
with the loans in the above table was $3.6 million at March 31, 2010 and was related to four borrowers.

The impaired and non-accrual
loans shown for March 31, 2010 and December 31, 2009 included $2.5 million and $2.6 million, respectively, of government guarantees. Had the impaired loans been performing during the three months ended March 31, 2010, the Company
would have recognized an additional $1.8 million in interest income. The Company recognized $152 thousand of interest income on the impaired loans in the above table during the three months ended March 31, 2010, of which $85 thousand was
related to performing restructured loans discussed below.

At March 31, 2010 and December 31, 2009, impaired loans of $7.0 million
were classified as performing restructured loans. The restructurings were granted in response to borrower financial difficulty, and generally provide for a temporary modification of loan repayment terms. In order for a restructured loan to be
considered performing and on accrual status, the loans collateral coverage generally will be greater than or equal to 100% of the loan balance, the loan is current on payments, and the borrower must either prefund an interest reserve or
demonstrate the ability to make payments from a verified source of cash flow. The performing impaired loans were performing in accordance with the original loan terms at the time of modification and were performing in accordance with the modified
terms as of the reporting date. The above table included $12.6 million and $9.2 million of impaired loans classified as non-performing restructured loans at March 31, 2010 and December 31, 2009, respectively.



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NOTE 4. Goodwill

At March 31, 2010, the Company had $10.0 million of core deposit intangible assets which were recorded in connection with various business
combinations. Generally accepted accounting principles require core deposit intangible assets to be amortized to expense over their useful lives.

NOTE 5. Junior Subordinated Debt

As of
March 31, 2010, the Company had four wholly-owned trusts (Trusts) that were formed to issue trust preferred securities and related common securities of the Trusts. The Trusts are summarized as follows:



|                                 |  |                |  |                   |        |      |          |     |               |      |   |                |            |               |               
|-------------------------------- |  | -------------- |  | ----------------- | ------ | ---- | -------- | --- | ------------- | ---- | - | -------------- | ---------- | ------------- | --------------
|($ in thousands)                 |  | Issue Date     |  | OutstandingAmount |        | Rate |          |     | EffectiveRate |      |   | Next Call Date |            | Maturity Date
|Trust Name                       |  |                |  |                   |        |      |          |     |               |      |   |                |            |               |               
|AmericanWest Statutory Trust I   |  | September 2002 |  | $                 | 10,310 |      | Floating | (1) |               | 3.68 | % |                | June 2010  |               | September 2032
|Columbia Trust Statutory Trust I |  | June 2003      |  |                   | 3,093  |      | Floating | (2) |               | 3.38 | % |                | June 2010  |               | June 2033     
|AmericanWest Capital Trust II    |  | March 2006     |  |                   | 7,217  |      | 6.76%    | (3) |               | 6.76 | % |                | March 2011 |               | March 2036    
|AmericanWest Capital Trust III   |  | March 2007     |  |                   | 20,619 |      | 6.53%    | (4) |               | 6.53 | % |                | March 2012 |               | June 2037     
|                                 |  |                |  |                   |        |      |          |     |               |      |   |                |            |               |               
|                                 |  |                |  | $                 | 41,239 |      |          |     |               |      |   |                |            |               |               
|                                 |  |                |  |                   |        |      |          |     |               |      |   |                |            |               |               



|(1) | Rate based on LIBOR plus 3.40%, adjusted quarterly.
|--- | ---------------------------------------------------

|(2) | Rate based on LIBOR plus 3.10%, adjusted quarterly.
|--- | ---------------------------------------------------

|(3) | Rate fixed for 5 years from issuance, then adjusted quarterly thereafter based on LIBOR plus 1.50%.
|--- | ---------------------------------------------------------------------------------------------------

|(4) | Rate fixed for 5 years from issuance, then adjusted quarterly thereafter based on LIBOR plus 1.63%.
|--- | ---------------------------------------------------------------------------------------------------

All of the common securities of the Trusts are owned by the Company. The Trusts issued their preferred securities to investors, and used the proceeds to
purchase junior subordinated debt of the Company. The Company has fully and unconditionally guaranteed the trust preferred securities along with all obligations of the Trusts under the trust agreements. Interest income from the junior subordinated
debt is the source of revenues for these Trusts. In accordance with generally accepted accounting standards, the Trusts are not consolidated in the Companys financial statements.

In accordance with the provisions of the related indentures, the Company has notified the trustees of the Trusts each quarter since the third quarter of
2008 that the payment of interest on the junior subordinated debt will be deferred. The Company has the right to defer payment of interest for up to 20 consecutive quarters, although it will continue to accrue the cost and recognize the expense of
the interest at the normal rate on a compounded basis until such time as the deferred arrearage has been paid current. As of March 31, 2010, interest totaling $4.6 million, which is included in accrued interest payable within the Consolidated
Statements of Condition, was deferred and in arrears.

As of March 31, 2010, $3.3 million of the $40.0 million junior subordinated debt
(excluding the common stock of the Trusts) qualified as Tier I capital. Under the guidance issued by the Board of Governors of the Federal Reserve Bank of San Francisco (FRB), a portion of the balance may qualify as Tier 2 capital, although Tier 2
capital cannot exceed Tier 1 capital. The FRB adopted a rule, effective March 31, 2011, that permits the inclusion of junior subordinated debt in Tier I capital, but with stricter quantitative limits. This new rule is not expected to impact the
Company. There can be no assurance that the FRB will not further limit the amount of junior subordinated debt permitted to be included in Tier I capital for regulatory capital purposes.

NOTE 6. Comprehensive Loss

Total
comprehensive loss, which includes the net loss and unrealized gains and losses on the Companys available-for-sale securities, net of tax, was $8.4 million and $14.4 million for the three months ended March 31, 2010 and 2009,
respectively.



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NOTE 7. Cash Dividends

Pursuant to the provisions of a Supervisory Prompt Corrective Action Directive issued to the Bank by the Federal Deposit Insurance Corporation (FDIC) on
February 24, 2010 and a Cease and Desist Order issued to the Bank by the FDIC and Washington Department of Financial Institutions (DFI) effective May 11, 2009, the Bank is prohibited from paying any cash dividends without prior regulatory
approval. In addition, the Company was notified by the Federal Reserve System (FRB) in August 2008 that it could not make any dividend payments without prior approval from the FRB. As a result, no cash dividend payments were declared or paid by the
Company during the three months ended March 31, 2010 or 2009.

NOTE 8. Loss Per Share

The following is a reconciliation of the numerators and denominators for basic and diluted loss per share computations for the three months ended
March 31, 2010 and 2009:



|                                                                                                      |  |                             |        |   |      |   |         |  
|----------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                                      |  | Three Months EndedMarch 31, |       
|(in thousands, except per share)                                                                      |  | 2010                        |        |   | 2009 |  
|Numerator:                                                                                            |  |                             |        |   |      |   |         |  
|Net loss                                                                                              |  | $                           | (8,531 | ) |      | $ | (14,535 | )
|                                                                                                      |  |                            
|Denominator:                                                                                          |  |                             |        |   |      |   |         |  
|Weighted average number of common shares outstanding                                                  |  |                             | 17,216 |   |      |   | 17,213  |  
|                                                                                                      |  |                            
|Basic loss per common share                                                                           |  | $                           | (0.50  | ) |      | $ | (0.84   | )
|Diluted loss per common share                                                                         |  | $                           | (0.50  | ) |      | $ | (0.84   | )
|                                                                                                      |  |                            
|Anti-dilutive warrants, stock options, and compensatory awards not included in diluted loss per share |  |                             | 2,213  |   |      |   | 315     |  

NOTE 9. Stock-Based Compensation

The AmericanWest Bancorporation 2006 Equity Incentive Plan (Plan) provides for the issuance of incentive stock options, nonqualified stock
options, restricted stock awards and unrestricted stock awards to key employees, officers and directors. The Plan was amended during 2008 to increase the number of authorized shares for issuance under all awards by 250,000 shares (plus any shares
under the Companys 2001 Stock Option Plan as to which options or other benefits granted and outstanding as of March 17, 2006 may lapse, expire, terminate or be canceled). The number of shares subject to stock options and restricted stock
awards issued under the Plan as of March 31, 2010 was 683,354. The Board of Directors Compensation Committee administers the Plan. The maximum term of an incentive stock option granted under the Plan is ten years and the Plan will
terminate on March 17, 2016.

Stock Options

Compensation expense related to stock options is summarized in the table below including the impact on net loss and diluted loss per share for the three
months ended March 31, 2010 and 2009:



|                                 |  |                             |   |      |   |  
|-------------------------------- |  | --------------------------- | - | ---- | - | -
|                                 |  | Three monthsended March 31,
|($ in thousands)                 |  | 2010                        |   | 2009
|Stock option compensation cost   |  | $                           | 8 |      | $ | 5
|Impact on net loss               |  | $                           | 8 |      | $ | 5
|Impact on diluted loss per share |  | $                           |  |      | $ | 



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The following table summarizes the stock option activity for the three months ended March 31, 2010:



|                                 |  |         |   |  |                              |      
|-------------------------------- |  | ------- | - |  | ---------------------------- | -----
|                                 |  | Options |   |  | Weightedaverageexerciseprice
|Outstanding at December 31, 2009 |  | 256,681 |   |  | $                            | 14.57
|Granted                          |  |        |   |  |                              |     
|Exercised                        |  |        |   |  |                              |     
|Forfeited                        |  | (11,784 | ) |  |                              | 12.03
|                                 |  |         |   |  |                              |      
|Outstanding at March 31, 2010    |  | 244,897 |   |  | $                            | 14.70
|                                 |  |         |   |  |                              |      
|Exercisable at March 31, 2010    |  | 182,645 |   |  | $                            | 17.09

There were no options issued or
exercised during the three months ended March 31, 2010 or 2009.

Total unrecognized compensation cost at March 31, 2010 was $44
thousand, which will be recognized through 2013. The amortization of stock-based compensation reflects estimated forfeitures adjusted for actual forfeiture experience. Estimated forfeitures will be continually evaluated in subsequent periods and may
change based on new facts and circumstances.

The weighted average remaining term for outstanding and exercisable stock options at
March 31, 2010 was 5.5 years and 4.7 years, respectively. The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of the Companys common stock as of the reporting date.
Since none of the stock options outstanding and exercisable at March 31, 2010 had an exercise price lower than the market value of the Companys common stock, these options had no aggregate intrinsic value as of that date.

Restricted Common Stock Awards

The
Company has granted performance-based restricted common stock awards to certain executives and employees. Outstanding performance-based awards vest between November 2010 and August 2012 and are expensed as compensation over the period earned.
Certain agreements require that the Company or the individual meet performance criteria and, for every year that the goal is not achieved, the award recipients forfeit 20% of their performance-based restricted common stock award. Awards are also
forfeited if an employees employment with the Company or the Bank is terminated prior to vesting other than pursuant to a change in control.

The purpose of these awards is to promote the long term interests of the Company and its shareholders by providing a financial incentive as a means for
retaining certain key executives and employees. For the three months ended March 31, 2010 and 2009, compensation expense, pre-tax, related to these grants was approximately $12 thousand and $9 thousand, respectively. In addition, the
compensation expense for the three months ended March 31, 2009, was offset by the reversal of $65 thousand related to the termination of an executives employment and the forfeiture of 5,000 shares of restricted common stock.



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The following table summarizes both unvested performance restricted and unvested restricted common stock
activity for the three months ended March 31, 2010:



|                                 |  |                       |   |  |                                     |      
|-------------------------------- |  | --------------------- | - |  | ----------------------------------- | -----
|                                 |  | RestrictedCommonStock |   |  | Weightedaveragegrant datefair value
|Unvested as of December 31, 2009 |  | 22,500                |   |  | $                                   | 21.15
|Granted                          |  |                      |   |  |                                     |     
|Vested                           |  | (3,200                | ) |  |                                     | 20.68
|Forfeited                        |  |                      |   |  |                                     |     
|                                 |  |                       |   |  |                                     |      
|Unvested as of March 31, 2010    |  | 19,300                |   |  | $                                   | 21.23
|                                 |  |                       |   |  |                                     |      

NOTE 10. Warrants

In connection with an agreement engaging a strategic advisor, the Company granted a warrant to purchase up to ten percent of the Companys
outstanding common stock on a fully-diluted basis taking into account all outstanding options, rights and warrants, with an exercise price equal to the closing price per share as of the date of the execution of the agreement, or $0.49 per share. The
warrant for 1,942,772 shares vests upon the closing of a capital transaction, subject to certain limitations. Additionally, upon the closing of a capital transaction the Company has agreed to issue to the strategic advisor for $100 an additional
warrant to acquire a number of shares equal to ten percent of the new shares issued, with an exercise price equal to the price paid by the investors purchasing shares in such capital transaction, subject to certain limitations.

NOTE 11. Fair Value Measurement

The
Company has adopted generally accepted accounting principles which provide enhanced guidance for measuring assets and liabilities using fair value, and which apply to situations where other standards require or permit assets or liabilities to be
measured at fair value. The standards also require expanded disclosure of items that are measured at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings.

Valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Companys market assumptions. These two types of inputs create a fair value hierarchy. Level 1 includes quoted prices for identical instruments in active markets. Level 2 includes quoted prices for similar
instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable. Level 3 includes instruments whose significant value input assumptions are
unobservable.

The following table summarizes the Companys financial instruments that were measured at fair value on a recurring basis
at March 31, 2010:



|                                                                  |  |            |         |                               |         |        |         |   |        |  |   |   
|----------------------------------------------------------------- |  | ---------- | ------- | ----------------------------- | ------- | ------ | ------- | - | ------ |  | - | --
|                                                                  |  | Fair Value |         | Fair Value Measurements Using
|($ in thousands)                                                  |  |            | Level 1 |                               | Level 2 |        | Level 3
|Recurring assets                                                  |  |            |         |                               |         |        |         |   |        |  |   |   
|Obligations of federal government agencies                        |  | $          | 3,171   |                               | $       | 3,171  |         | $ |       |  | $ |  
|Obligations of states, municipalities, and political subdivisions |  | $          | 20,402  |                               | $       | 20,402 |         | $ |       |  | $ |  
|Mortgage backed securities                                        |  | $          | 18,689  |                               | $       |       |         | $ | 18,689 |  | $ |  
|Other securities                                                  |  | $          | 18      |                               | $       | 18     |         | $ |       |  | $ |  
|Rate lock commitments                                             |  | $          | 45      |                               | $       |       |         | $ |       |  | $ | 45



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The following table summarizes the changes during the three months ended March 31, 2010 for
recurring assets measured using level 3:



|                  |  |                      |    |                         |   |  
|----------------- |  | -------------------- | -- | ----------------------- | - | -
|($ in thousands)  |  | Rate lockcommitments |    | Forwardsalescommitments
|December 31, 2009 |  | $                    |   |                         | $ | 
|Gains             |  |                      | 45 |                         |   | 
|                  |  |                      |    |                         |   |  
|March 31, 2010    |  | $                    | 45 |                         | $ | 
|                  |  |                      |    |                         |   |  

Gains shown in the table above are included in fees on mortgage loan
sales, net within the Consolidated Statements of Operations and included in the fair value adjustments on mortgage loan activities in the Consolidated Statements of Cash Flows.

In addition, certain assets are measured at fair value on a non-recurring basis. Adjustments to fair value based on such non-recurring transactions
generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment. The following table summarizes assets of the Company that were measured at fair value on a non-recurring basis at
March 31, 2010, and the total amount charged to operations resulting from fair value adjustments for the three months ended March 31, 2010:



|                                                   |  |            |         |                               |         |                                  |         |   |            |  |   |        |  |   |      
|-------------------------------------------------- |  | ---------- | ------- | ----------------------------- | ------- | -------------------------------- | ------- | - | ---------- |  | - | ------ |  | - | -----
|                                                   |  | Fair Value |         | Fair Value Measurements Using |         | Three months endedMarch 31, 2010
|($ in thousands)                                   |  |            | Level 1 |                               | Level 2 |                                  | Level 3 |   | Total Loss
|Non-Recurring                                      |  |            |         |                               |         |                                  |         |   |            |  |   |        |  |   |      
|Impaired loans                                     |  | $          | 34,855  |                               | $       |                                 |         | $ |           |  | $ | 34,855 |  | $ | 6,171
|Foreclosed real estate and other foreclosed assets |  | $          | 57,438  |                               | $       |                                 |         | $ |           |  | $ | 57,438 |  | $ | 1,201

Impaired loans included in the table
above are collateral dependent and have been adjusted to fair value based on the estimated fair value of the underlying collateral, less estimated selling costs. If the Bank determines that the value of an impaired loan is less than the recorded
investment in the loan, the carrying value is adjusted through a charge-off recorded through the allowance for loan losses. The Total Loss column for impaired loans shown above represents charge-offs related to impaired loans recognized during the
three months ended March 31, 2010.

The foreclosed real estate and other foreclosed assets referenced in the table above have been
adjusted to estimated fair value, less estimated selling costs. At the time of foreclosure, foreclosed assets are recorded at the lower of the carrying amount of the loan or the estimated fair value less estimated selling costs. Any write-downs
based on the assets fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, management periodically obtains updated valuations of the foreclosed assets and, if additional impairments are deemed
necessary, the impairment is recorded in foreclosed real estate and other foreclosed assets expense within the Consolidated Statements of Operations. The Total Loss column for foreclosed real estate and other foreclosed assets shown above represents
impairments charged to the Consolidated Statements of Operations during the three months ended March 31, 2010.



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The following fair value table includes those financial instruments for which it is practical to
estimate fair value. It does not include the value of premises and equipment and intangible assets such as customer relationships and core deposit intangibles. The table summarizes carrying amounts, estimated fair values, and assumptions used by the
Company to estimate fair value as of March 31, 2010 and December 31, 2009:



|                                                     |  |                                                                                                                                                                     |  |                |           |                    |   |          
|---------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | ------------------ | - | ---------
|As of March 31, 2010:
($ in thousands)               |  | Assumptions Used in
Estimating Fair Value                                                                                                                           |  | CarryingAmount |           | EstimatedFairValue
|Financial Assets:                                    |  |                                                                                                                                                                     |  |                |           |                    |   |          
|Cash and due from banks                              |  | Equal to carrying value                                                                                                                                             |  | $              | 30,030    |                    | $ | 30,030   
|Overnight interest bearing deposits with other banks |  | Equal to carrying value                                                                                                                                             |  |                | 153,561   |                    |   | 153,561  
|Securities                                           |  | Quoted market prices                                                                                                                                                |  |                | 46,011    |                    |   | 46,011   
|Federal Home Loan Bank Stock                         |  | Par value                                                                                                                                                           |  |                | 10,267    |                    |   | 10,267   
|Loans, held for sale                                 |  | Equal to carrying value                                                                                                                                             |  |                | 4,797     |                    |   | 4,797    
|Loans                                                |  | Based on publicly available information on assisted transactions for similar loan portfolios                                                                        |  |                | 1,153,642 |                    |   | 822,547  
|Bank owned life insurance                            |  | Equal to carrying value                                                                                                                                             |  |                | 31,454    |                    |   | 31,454   
|Mortgage loan derivative instruments, net            |  | Equal to carrying value                                                                                                                                             |  |                | 45        |                    |   | 45       
|                                                     |  |                                                                                                                                                                     | 
|Financial Liabilities:                               |  |                                                                                                                                                                     |  |                |           |                    |   |          
|Deposits                                             |  | Fixed-rate certificate of deposits at discounted expected future cash flows and all other deposits equal to carrying value                                          |  |                | 1,412,138 |                    |   | 1,418,805
|Federal Home Loan Bank advances and other borrowings |  | Discounted expected future cash flows                                                                                                                               |  |                | 68,661    |                    |   | 69,414   
|Junior subordinated debentures                       |  | Discounted expected future cash flows                                                                                                                               |  |                | 41,239    |                    |   | 28,629   
|                                                     |  |                                                                                                                                                                     | 
|As of December 31, 2009:
($ in thousands)            |  | Assumptions Used in
Estimating Fair Value                                                                                                                           |  | CarryingAmount |           | EstimatedFairValue
|Financial Assets:                                    |  |                                                                                                                                                                     |  |                |           |                    |   |          
|Cash and due from banks                              |  | Equal to carrying value                                                                                                                                             |  | $              | 38,553    |                    | $ | 38,553   
|Overnight interest bearing deposits with other banks |  | Equal to carrying value                                                                                                                                             |  |                | 163,033   |                    |   | 163,033  
|Securities                                           |  | Quoted market prices                                                                                                                                                |  |                | 48,986    |                    |   | 48,986   
|Federal Home Loan Bank Stock                         |  | Par value                                                                                                                                                           |  |                | 10,267    |                    |   | 10,267   
|Loans, held for sale                                 |  | Equal to carrying value                                                                                                                                             |  |                | 6,565     |                    |   | 6,565    
|Loans                                                |  | Fixed-rate loans at discounted expected future cash flows, and variable-rate loans equal to carrying value, net of allowance
for loan losses and liquidity discount |  |                | 1,231,300 |                    |   | 1,196,386
|Bank owned life insurance                            |  | Equal to carrying value                                                                                                                                             |  |                | 31,207    |                    |   | 31,207   
|                                                     |  |                                                                                                                                                                     | 
|Financial Liabilities:                               |  |                                                                                                                                                                     |  |                |           |                    |   |          
|Deposits                                             |  | Fixed-rate certificate of deposits at discounted expected future cash flows and all other deposits equal to carrying value                                          |  |                | 1,505,540 |                    |   | 1,511,013
|Federal Home Loan Bank advances and other borrowings |  | Discounted expected future cash flows                                                                                                                               |  |                | 63,683    |                    |   | 64,831   
|Junior subordinated debentures                       |  | Discounted expected future cash flows                                                                                                                               |  |                | 41,239    |                    |   | 27,454   
|Mortgage loan derivative instruments, net            |  | Equal to carrying value                                                                                                                                             |  |                |          |                    |   |         

NOTE 12. Derivatives

The Company may use derivatives to hedge the risk of changes in the fair values of interest rate lock commitments and residential mortgage
loans held for sale. These derivatives are accounted for as free-standing derivatives, or economic hedges, with changes in the fair value of the derivatives reported in income. The Company primarily utilizes forward interest rate contracts in its
derivative risk management strategy.



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The Bank periodically enters into forward delivery contracts to sell residential mortgage loans to
investors at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage loan commitments. Credit risk associated with forward contracts is limited to the
replacement cost of those forward contracts in a gain position. There were no counterparty default losses on forward contracts in the three months ended March 31, 2010. Market risk with respect to forward contracts arises principally from
changes in the value of contractual positions due to changes in market interest rates. The Bank limits its exposure to market risk by monitoring differences between commitments to customers and forward contracts with investors. In the event the
Company has forward delivery contract commitments in excess of available mortgage loans, the Company completes the transaction by either paying or receiving a fee to or from the investors equal to the increase or decrease in the market value of the
forward contract. At March 31, 2010, the Bank had commitments to originate mortgage loans held for sale at pre-determined interest rates totaling $9.3 million. At March 31, 2010, the Bank did not have any forward sales commitments.

The following table summarizes the types of derivatives, separately by assets and liabilities, their location on the Consolidated Statements
of Condition, and the fair values of such derivatives as of March 31, 2010 and December 31, 2009:



|                                           |  |                           |  |                      |  |               |    |                  |   |  
|------------------------------------------ |  | ------------------------- |  | -------------------- |  | ------------- | -- | ---------------- | - | -
|($ in thousands) 
Underlying Risk Exposure |  | Description               |  | BalanceSheetLocation |  | March 31,2010 |    | December 31,2009
|Asset Derivatives                          |  |                           |  |                      |  |               |    |                  |   |  
|Interest rate contracts                    |  | Rate lock commitments     |  | Other assets         |  | $             | 45 |                  | $ | 
|Interest rate contracts                    |  | Forward sales commitments |  | Other assets         |  |               |   |                  |   | 
|                                           |  |                           |  |                      |  |               |    |                  |   |  
|Total asset derivatives                    |  |                           |  |                      |  | $             | 45 |                  | $ | 
|                                           |  |                           |  |                      |  |               |    |                  |   |  
|Liability Derivatives                      |  |                           |  |                      |  |               |    |                  |   |  
|Interest rate contracts                    |  | Rate lock commitments     |  | Other liabilities    |  | $             |   |                  | $ | 
|Interest rate contracts                    |  | Forward sales commitments |  | Other liabilities    |  |               |   |                  |   | 
|                                           |  |                           |  |                      |  |               |    |                  |   |  
|Total liability derivatives                |  |                           |  |                      |  | $             |   |                  | $ | 
|                                           |  |                           |  |                      |  |               |    |                  |   |  

NOTE 13. Recent Accounting Pronouncements

In March 2010, FASB issued Accounting Standards Update (ASU) No. 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded
Credit Derivatives. The update clarifies scope exceptions related to certain credit derivatives and the accounting for such credit derivatives. The update is effective on July 1, 2010 and is not expected to have a material impact on the
Company.

In February 2010, FASB issued ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and
Disclosure Requirements. This update removed the requirement that the date through which subsequent events are evaluated be disclosed. This update was effective immediately upon the issuance and did not have a material impact on the Company.

In January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair
Value Measurements. The update requires expanded disclosures and clarifies existing disclosure requirements. This update was effective on January 1, 2010 and did not have a material impact on the Company.

In December 2009, the FASB issued ASU No. 2009-16 Transfers and Servicing (Topic 860), Accounting for Transfers of Financial Assets. This
guidance establishes standards for transfers and servicing of financial assets and the accounting for transfers of servicing assets. The guidance was effective beginning on January 1, 2010 and did not have a material impact on the Company.



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In September 2009, the FASB issued ASU No. 2009-12 Fair Value Measurements and Disclosures
(Topic 820), Investments in Certain Entities that Calculate Net Asset Values per Share (or Its Equivalent). This applies to investments that are measured at a net asset value per share because the investments fair value is not readily
available, reducing the required steps in measuring fair value, and increasing associated disclosures and is effective for periods ending after December 15, 2009. The adoption of this guidance did not have a material impact on the Company.

In June 2009, FASB issued SFAS No. 166, Accounting for Transfers of Financial Assetsan Amendment of FASB Statement
No. 140. This statement has not yet been codified into the FASB ASC. SFAS No. 166 eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial
asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferors interest in transferred financial assets. This statement is effective for annual reporting periods beginning after
November 15, 2009, and for interim periods therein. The adoption of this guidance did not have a material impact on the Company.

In June
2009, FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). This statement has not yet been codified into the FASB ASC. SFAS No. 167 eliminates FASB Interpretations 46(R) (FIN 46(R)) exceptions to consolidating
qualifying special-purpose entities, contains new criteria for determining the primary beneficiary, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. SFAS
No. 167 also contains a new requirement that any term, transaction, or arrangement that does not have a substantive effect on an entitys status as a variable interest entity, a companys power over a variable interest entity, or a
companys obligation to absorb losses or its right to receive benefits of an entity must be disregarded in applying FIN 46(R) provisions. The elimination of the qualifying special-purpose entity concept and its consolidation exceptions means
more entities will be subject to consolidation assessments and reassessments. This statement requires additional disclosures regarding an entitys involvement in a variable interest entity. This statement is effective for annual reporting
periods beginning after November 15, 2009, and for interim periods therein. The adoption of this guidance did not have a material impact on the Company.



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

Forward-Looking Statements

Certain
matters discussed in this Quarterly Report on Form 10-Q including, but not limited to, matters described in Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations, include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). Such forward-looking statements may include statements or forecasts about the Companys financial condition and results of operations, expectations
for future financial performance, and assumptions for those forecasts and expectations. The Company makes forward-looking statements about potential problem loans, cash flows, strategic initiatives, capital initiatives, and the adequacy of the
allowance for loan losses. Actual results might differ significantly from the Companys forecasts and expectations due to several factors. Some of these factors include, but are not limited to, impact of the current national and regional
economy (including real estate values), borrower financial capacity in the Companys market, changes in loan portfolio composition, the ability of the Company to comply with the FDICs Order to Cease and Desist and Supervisory Prompt
Corrective Action Directive and Federal Reserve Written Agreement, the Companys ability to raise additional regulatory capital and the dilutive effect of capital raising, the Companys access to liquidity sources, the Companys
ability to attract and retain quality customers, interest rate movements and the impact on net interest margins such movements may cause, the Companys products and services, the Companys ability to attract and retain qualified employees,
regulatory changes, and competition with other banks and financial institutions. Words such as targets, expects, anticipates, believes, and other similar expressions, and future or conditional verbs
such as will, may, should, would, and could, are intended to identify such forward-looking statements. Readers should not place undue reliance on the forward-looking statements, which
reflect managements view only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. This statement is included for the express purpose of
protecting the Company under PSLRAs safe harbor provisions. Other factors are included in the Annual Report on Form 10-K for the year ended December 31, 2009, filed with the US Securities and Exchange Commission (SEC) available on the
SECs website at www.sec.gov, as supplemented from time to time in Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

The following discussion contains a review of the results of operations and financial condition for the three months ended March 31, 2010 and
2009. 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 the Companys Form 10-K for the year ended December 31, 2009, which
contains additional information.

AmericanWest Bancorporation

AmericanWest Bancorporation, which was formed in 1983, is a Washington corporation registered as a bank holding company under the Bank Holding Company Act
of 1956, and is headquartered in Spokane, Washington. The Companys wholly-owned subsidiary is AmericanWest Bank (Bank), a Washington state chartered bank that operates in Eastern and Central Washington, Northern Idaho and in Utah doing
business as Far West Bank. Unless otherwise indicated, reference to the Company shall include the Bank and its Far West Bank division. The Companys unconsolidated information will be referred to as that of the Parent Company. The
Bank provides a full range of banking services to small and medium-sized businesses, agricultural businesses, professionals and consumers through 58 financial centers located in Washington, Northern Idaho and Utah.

The Company also has four wholly-owned statutory trust subsidiaries which were formed for the sole purpose of issuing trust preferred securities. These
include AmericanWest Statutory Trust I, Columbia Trust Statutory Trust I, AmericanWest Capital Trust II and AmericanWest Capital Trust III (collectively Trusts). The investments in these Trusts are not consolidated within the consolidated financial
statements.

The discussion in this Quarterly Report of the Company and its financial statements reflects the Companys acquisitions of
Far West Bancorporation (FWBC) and its subsidiary on April 1, 2007 and Columbia Trust Bancorp and its subsidiaries on March 15, 2006. Both acquisitions were accounted for by the purchase method of accounting and the results of the
Companys operations prior to the respective acquisitions do not reflect the activities of Far West Bancorporation or Columbia Trust Bancorp.



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The Companys stock was traded on the NASDAQ Global Select market under the symbol AWBC until
March 23, 2010, and since that time the Companys bid and ask prices are quoted in the Pink Sheets and on the OTC Bulletin Board under the symbol AWBC.PK.

On February 26, 2010, the Bank received from the Federal Deposit Insurance Corporation (FDIC) a Supervisory Prompt Corrective Action Directive (PCA
Directive), directing the Bank to recapitalize within 30 days of receipt, and reiterating various requirements already imposed on the Bank by an Order to Cease and Desist discussed below. The PCA Directive informed the Bank that its Capital
Restoration Plan dated July 2, 2009 was unacceptable.

On May 8, 2009, the Bank entered into a Stipulation and Consent to the
Issuance of an Order to Cease and Desist (Stipulation) with the FDIC and the Washington State Department of Financial Institutions, Division of Banks (DFI) that was issued in connection with a routine regulatory examination of the Bank completed
during December 2008 (Examination). Pursuant to the Stipulation, the FDIC and the DFI issued an Order to Cease and Desist (Order) on May 11, 2009. Neither the Bank nor the Company admitted any wrongdoing and no monetary penalties were imposed
in connection with the Order. Copies of the Stipulation and the Order were included as Exhibits 10.1 and 10.2 of the Form 10-Q filed on May 15, 2009.

The Order and the PCA Directive require the Bank to:



| |  |  | Recapitalize the Bank. The Order required the Bank to increase its Tier 1 leverage ratio to 10.0% by September 9, 2009. The PCA Directive directed
the Bank to sell its securities or obligations so that the Bank will be adequately capitalized or accept an offer to be acquired by or combine with another financial institution, by March 28, 2010. The Bank did not meet the Tier 1 leverage
ratio requirement by the prescribed deadline and the Bank did not become adequately capitalized by the prescribed deadline. Management and its financial advisors are continuing aggressive efforts with respect to enhancing the Banks regulatory
capital ratios through sale of new equity securities to private investors and divestiture of selected assets. Prior to the receipt of the PCA Directive, the Company engaged an additional investment banker to enhance its continuing efforts.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Retain qualified senior executive officers, including a Chief Financial Officer and a Chief Credit Officer, with written authority from the Board of
Directors to implement the provisions of the Order, and obtain an independent study of the Banks lending and credit functions to determine if additional personnel were necessary. The independent study was completed on June 15, 2009 and a
related plan to implement its recommendations was approved by the Board of Directors on July 30, 2009. A copy of the study and the plan were furnished to the FDIC and DFI. The Bank believes that it has the appropriate management and lending and
credit personnel, as required by the Order, but with the resignation of its Chief Credit Officer in February 2010, has initiated an executive search and implemented an interim succession plan which management believes is effective.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide 30 days prior notice to the FDIC and the DFI of the addition of any new member on the Board of Directors or the employment of any new
senior executive officer. The Bank has not added anyone to the Board of Directors or employed any new senior executive officer since the effective date of the Order.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Not pay any bonuses to or increase the compensation of any director or senior officer of the Bank. The Bank has no plans to increase compensation of
directors or senior officers.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Refrain from paying cash dividends without the prior written consent of the FDIC and the DFI. The Bank has not paid any cash dividends since the first
quarter of 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Maintain and implement a policy for determining the adequacy of the allowance for loan and lease losses (ALLL), to include a review of the ALLL at
least quarterly and correction of any deficiency in the ALLL indicated by the review. The Board of Directors has reviewed the Banks policies and practices with respect to determining the adequacy of the ALLL and believes that such policies and
practices are adequate and appropriate. The Board of Directors has reviewed the ALLL quarterly and believes that it has been adequate.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Charge-off, by June 30, 2009, all assets classified as loss and 50% of loans classified as doubtful as of the Report of
Examination issued in February 2009 (ROE). These actions were completed prior to June 30, 2009, with no additional material loss recognized.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reduce the level of assets classified as substandard or doubtful noted in the ROE to 75% of capital by September 8, 2009.
As of March 31, 2010, the assets classified as substandard or doubtful were reduced by $131.0 million since the ROE, and the related ratio was 114%. This target was not achieved by the deadline, primarily due to
continued reductions in the Banks capital.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Develop a written plan for reduction and collection of delinquent loans, develop written asset disposition plans for all adversely classified assets of
$1 million or more, develop and implement enhanced policies and procedures for the monitoring and reporting of certain types of loans, and take other specified actions to strengthen the credit administration and collection processes by July 10,
2009. An initial plan covering collection of delinquent loans was approved by the Board of Directors on June 30, 2009, and a copy of that plan was furnished to the FDIC and DFI. In addition, the Bank has developed a written asset disposition
plan for each classified asset of $1 million or greater, and intends to develop such plans for assets of $1 million or more that become classified in the future. A plan and related amendments to the Banks lending policy, designed to improve
loan monitoring and other matters, was approved by the Board of Directors on July 20, 2009, and a copy of that plan was furnished to the FDIC and DFI.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Refrain from extending credit to or for the benefit of (i) any borrower who has an extension of credit from the Bank that has been charged off or
classified, in whole or in part, Loss, (ii) any borrower who has an extension of credit from the Bank that has been classified, in whole or in part, Doubtful, without prior approval of the Board of Directors or loan
committee and collection of all interest due, or (iii) any borrower who has an extension of credit from the Bank in excess of $500 thousand that has been classified Substandard, without prior approval of the Board of Directors or
loan committee and collection of all interest due. Since the date of the Order, the Bank has not made any extensions of credit in violation of these limitations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Develop a written plan for reducing extensions of credit to borrowers in the Land Development and Construction (LDC) Loan concentrations by
June 10, 2009, and refrain from making any additional LDC loans, except in accordance with such plan. A written plan to reduce such extensions of credit was adopted by the Board of Directors on June 6, 2009, and a copy was provided to the
FDIC and DFI. Since that date, the Bank has not made any additional LDC loans except in accordance with such plan and with the prior approval of the Board of Directors. As of March 31, 2010, the aggregate amount of LDC loans has been reduced by
$259.5 million since December 31, 2008, representing 67% of the December 31, 2008 total of LDC loans.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Develop policies for maintenance of an adequate level of liquidity, restrict the interest rates the Bank pays on deposits to maintain compliance with
Section 337.6 of the FDIC Rules and Regulations, and refrain from accepting or renewing any brokered certificates of deposit. The Board of Directors determined that
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | the Bank had in place adequate policies and procedures for maintenance of liquidity. The Bank provided written certification to the FDIC and DFI on June 4, 2009 that the Banks deposit
pricing complied with the requirements of Section 337.6 and continues to monitor interest rates to maintain compliance with such requirements. The Bank has not accepted or renewed any brokered certificates of deposit since August 2008, and has
reduced the level of such deposits from $240.7 million at June 30, 2008 to $2.5 million at March 31, 2010.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Formulate and implement a written profit plan and multi-year strategic plan by August 9, 2009. These plans were approved by the Board of Directors
on August 7, 2009 and copies were furnished to the FDIC and DFI.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Not permit its average total assets to increase from quarter to quarter. The Banks average assets have not increased since the issuance of the
Order.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the Order requires that the Board of Directors continue its participation in the affairs of the Bank,
and increase such participation as appropriate, including approval of sound policies and objectives and supervision of the Banks activities. The Board of Directors believes that it maintained significant and appropriate participation prior to
the Order being issued, has continued to do so during the life of the Order to date, and is appropriately fulfilling its participation, oversight and supervision responsibilities, having met nine times during the first quarter of 2010.

Although management has undertaken actions to comply with all aspects of the Order and the PCA Directive, there can be no assurance that full compliance
will be achieved. As a result, the Bank could become subject to further restrictions or to penalties. Full satisfaction of the Orders and PCA Directives requirements will depend almost exclusively on raising a significant amount of
additional capital.

On September 15, 2009, the Company entered into a Written Agreement with the FRB. Under the terms of the Written
Agreement, the Company cannot do any of the following without prior written approval of the FRB:



| |  |  | Declare or pay any dividends.
| | - |  | -----------------------------



| |  |  | Make any distributions of principal or interest on junior subordinated debentures.
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Incur, increase or guarantee any debt.
| | - |  | --------------------------------------



| |  |  | Redeem any outstanding stock.
| | - |  | -----------------------------

The Written Agreement also requires the Company to:



| |  |  | Submit a written capital plan that provides for sufficient capitalization of both the Parent and the Bank. The written capital plan was originally
submitted on November 13, 2009. The FRB informed the Company in writing that the plan was not acceptable on December 8, 2009, and an amended plan was resubmitted on January 29, 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Comply with FRB regulations governing affiliate transactions.
| | - |  | -------------------------------------------------------------



| |  |  | Comply with notice and approval requirements of the FDI Act related to the appointment of directors and senior executive officers or change in the
responsibility of any current senior executive officer.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Comply with restrictions on paying or agreeing to pay certain indemnification and severance payments without prior written approval.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Submit a quarterly progress report to the FRB.
| | - |  | ----------------------------------------------

Substantially all of the requirements of the Written Agreement are similar to requirements imposed on the Company and the Bank pursuant to other
regulatory orders and agreements, and the Company and the Bank have been operating in a manner consistent with those requirements. In addition, the Company took various actions on its own initiative, such as ceasing payment of dividends on its
common stock and deferring distributions on subordinated debentures (trust preferred securities), before those actions were required by the regulators.

As of December 31, 2009, due to the Companys significant net loss from operations in 2009, deterioration in the credit quality of the loan
portfolio, and the decline in the level of its regulatory capital to support operations, there was substantial doubt about the Companys ability to continue as a going concern. The financial statements contained in this report have been
prepared assuming the Company will continue as a going concern.



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Results of Operations

Overview

The Company reported a net loss
of $8.5 million or $0.50 per share for the three months ended March 31, 2010, compared to a net loss of $14.5 million or $0.84 per share for the same period in 2009. The negative annualized return on average assets, for the three months ended
March 31, 2010, was 2.16% as compared to 3.18% for the three months ended March 31, 2009.

The Company recognized a provision for
loan losses of $5.0 million, or 1.65% of average loans on an annualized basis, for the three months ended March 31, 2010, as compared to $13.7 million, or 3.44% of average loans annualized, for the three months ended March 31, 2009. For
the quarter ended March 31, 2010, net charge-offs were $5.5 million, or 1.81% of average gross loans annualized, as compared to $17.7 million, or 4.45%, for the first quarter of 2009.

The table below summarizes the Companys financial performance for the three months ended March 31, 2010 and 2009:



|                                              |  |                              |        |   |      |   |         |          |  |      |  
|--------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------- | -------- |  | ---- | -
|                                              |  | Three Months Ended March 31, |       
|($ in thousands except per share data)        |  | 2010                         |        |   | 2009 |   |         | % Change | 
|Interest Income                               |  | $                            | 18,373 |   |      | $ | 23,251  |          |  | -21  | %
|Interest Expense                              |  |                              | 5,461  |   |      |   | 9,314   |          |  | -41  | %
|                                              |  |                              |        |   |      |   |         |          |  |      |  
|Net Interest Income                           |  |                              | 12,912 |   |      |   | 13,937  |          |  | -7   | %
|Loan Loss Provision                           |  |                              | 5,000  |   |      |   | 13,680  |          |  | -63  | %
|                                              |  |                              |        |   |      |   |         |          |  |      |  
|Net interest income after loan loss provision |  |                              | 7,912  |   |      |   | 257     |          |  | 2979 | %
|                                              |  |                              |        |   |      |   |         |          |  |      |  
|Non-interest Income                           |  |                              | 2,838  |   |      |   | 5,800   |          |  | -51  | %
|Non-interest Expense                          |  |                              | 19,281 |   |      |   | 20,592  |          |  | -6   | %
|                                              |  |                              |        |   |      |   |         |          |  |      |  
|Loss before income tax benefit                |  |                              | (8,531 | ) |      |   | (14,535 | )        |  | 41   | %
|Income tax benefit                            |  |                              |       |   |      |   |        |          |  | 0    | %
|                                              |  |                              |        |   |      |   |         |          |  |      |  
|Net Loss                                      |  | $                            | (8,531 | ) |      | $ | (14,535 | )        |  | 41   | %
|                                              |  |                              |        |   |      |   |         |          |  |      |  
|                                              |  |                              |       
|Basic loss per common share                   |  | $                            | (0.50  | ) |      | $ | (0.84   | )        |  | 40   | %
|Diluted loss per common share                 |  | $                            | (0.50  | ) |      | $ | (0.84   | )        |  | 40   | %



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|                                                                                              |      |                             |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------- | ---- | --------------------------- | ------- | ---- |  | - | ------- | -
|Selected Financial Information:
($ in thousands except per share data, ratios are annualized) |      | Three Months EndedMarch 31, |        
|                                                                                              | 2010 |                             |         | 2009 | 
|Net loss                                                                                      |      | $                           | (8,531  | )    |  | $ | (14,535 | )
|Diluted loss per common share                                                                 |      | $                           | (0.50   | )    |  | $ | (0.84   | )
|Return on average assets                                                                      |      |                             | -2.16   | %    |  |   | -3.18   | %
|Return on average equity                                                                      |      |                             | -206.00 | %    |  |   | -66.70  | %
|Efficiency ratio                                                                              |      |                             | 101.21  | %    |  |   | 97.58   | %
|Non-interest income to average assets                                                         |      |                             | 0.72    | %    |  |   | 1.27    | %
|Non-interest expenses to average assets                                                       |      |                             | 4.88    | %    |  |   | 4.50    | %
|Net interest margin (1)                                                                       |      |                             | 3.62    | %    |  |   | 3.31    | %



|(1) | Presented on a tax equivalent basis for tax exempt securities. Average loans include loans held for sale and non-accrual loans.
|--- | -------------------------------------------------------------------------------------------------------------------------------

Net Interest Income

Three Months
Ended March 31, 2010 and 2009

Net interest income for the first quarter of 2010 was $12.9 million, a decrease of $1.0 million from
the first quarter of 2009. Interest income for the first quarter of 2010 was $18.4 million, a decrease of $4.9 million from the same period of the prior year. The decrease in interest income is related mainly to the decline in the yield on earning
assets of 36 basis points as well as a decline in average earning assets of $270.2 million. The Companys cost of funds inclusive of non-interest bearing demand deposits was 1.42% in the first quarter of 2010, as compared to 2.17% in the same
period of 2009. Interest expense for the first quarter of 2010 was $5.5 million, a decrease of $3.9 million from the similar period of the prior year. The decrease in interest expense from the first quarter of 2009 is a result of a decrease in the
cost of funds of 86 basis points and a decrease in average interest bearing liabilities of $180.7 million.

The tax equivalent net interest
margin for the first quarter of 2010 was 3.62%, an increase of 31 basis points from the same period in 2009. The increase was driven by a reduction in the cost of funds of 86 basis points partially offset by a decrease in the yield on earning assets
of 36 basis points. The decrease in the cost of funds was driven by the cost of interest bearing deposits declining 102 basis points. The average yield on loans for the first quarter of 2010 was 5.84%, an increase of 20 basis points from the same
period of 2009. The impact of non-accrual loans on the net interest margin for the first quarter of 2010 was approximately 54 basis points. Contributing the decline in the yield on earning assets was an increase in the impact of on-balance sheet
liquidity of 48 basis points.



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The following table sets forth the Companys net interest margin for the three months ended
March 31, 2010 and 2009:



|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|--------------------------------------------- |  | ---------------------------- | --------- | -------- | ---- | ------ |  | ---- | -------------- |  | -------- | --------- | - | - | ------ |  | ---- | -
|                                              |  | Three months ended March 31, |          
|                                              |  | 2010                         |           |          | 2009 |       
|($ in thousands)                              |  | AverageBalance               |           | Interest |      | %      |  |      | AverageBalance |  | Interest |           | % |  
|Assets                                        |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Loans (1)                                     |  | $                            | 1,230,294 |          | $    | 17,728 |  | 5.84 | %              |  | $        | 1,614,190 |   | $ | 22,464 |  | 5.64 | %
|Taxable securities                            |  |                              | 40,000    |          |      | 443    |  | 4.49 | %              |  |          | 45,589    |   |   | 560    |  | 4.98 | %
|Non-taxable securities (2)                    |  |                              | 7,713     |          |      | 125    |  | 6.57 | %              |  |          | 19,106    |   |   | 292    |  | 6.20 | %
|FHLB Stock                                    |  |                              | 10,267    |          |      |       |  | 0.00 | %              |  |          | 9,586     |   |   |       |  | 0.00 | %
|Overnight deposits with other banks and other |  |                              | 161,102   |          |      | 119    |  | 0.30 | %              |  |          | 31,097    |   |   | 35     |  | 0.46 | %
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Total interest earning assets                 |  |                              | 1,449,376 |          |      | 18,415 |  | 5.15 | %              |  |          | 1,719,568 |   |   | 23,351 |  | 5.51 | %
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Non-interest earning assets                   |  |                              | 151,407   |          |      |        |  |      |                |  |          | 134,719   |   |   |        |  |      |  
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Total assets                                  |  | $                            | 1,600,783 |          |      |        |  |      |                |  | $        | 1,854,287 |   |   |        |  |      |  
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|                                              |  |                              |           |          |      |       
|Liabilities                                   |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Interest bearing demand deposits              |  | $                            | 189,058   |          | $    | 167    |  | 0.36 | %              |  | $        | 131,007   |   | $ | 132    |  | 0.41 | %
|Savings and MMDA deposits                     |  |                              | 357,046   |          |      | 718    |  | 0.82 | %              |  |          | 426,313   |   |   | 1,768  |  | 1.68 | %
|Time deposits                                 |  |                              | 610,264   |          |      | 3,370  |  | 2.24 | %              |  |          | 664,369   |   |   | 5,657  |  | 3.45 | %
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Total interest bearing deposits               |  |                              | 1,156,368 |          |      | 4,255  |  | 1.49 | %              |  |          | 1,221,689 |   |   | 7,557  |  | 2.51 | %
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Overnight borrowings                          |  |                              | 5,889     |          |      | 11     |  | 0.76 | %              |  |          | 94,242    |   |   | 214    |  | 0.92 | %
|Junior subordinated debt                      |  |                              | 41,239    |          |      | 637    |  | 6.26 | %              |  |          | 41,239    |   |   | 641    |  | 6.30 | %
|Other borrowings                              |  |                              | 60,675    |          |      | 558    |  | 3.73 | %              |  |          | 87,721    |   |   | 902    |  | 4.17 | %
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Total interest bearing liabilities            |  |                              | 1,264,171 |          |      | 5,461  |  | 1.75 | %              |  |          | 1,444,891 |   |   | 9,314  |  | 2.61 | %
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Non-interest bearing demand deposits          |  |                              | 295,073   |          |      |        |  |      |                |  |          | 295,854   |   |   |        |  |      |  
|Other non-interest bearing liabilities        |  |                              | 24,744    |          |      |        |  |      |                |  |          | 25,168    |   |   |        |  |      |  
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Total liabilities                             |  |                              | 1,583,988 |          |      |        |  |      |                |  |          | 1,765,913 |   |   |        |  |      |  
|Stockholders Equity                          |  |                              | 16,795    |          |      |        |  |      |                |  |          | 88,374    |   |   |        |  |      |  
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Total liabilities and stockholders equity    |  | $                            | 1,600,783 |          |      |        |  |      |                |  | $        | 1,854,287 |   |   |        |  |      |  
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Net interest income and spread                |  |                              |           |          | $    | 12,954 |  | 3.40 | %              |  |          |           |   | $ | 14,037 |  | 2.90 | %
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  
|Net interest margin to average earning assets |  |                              |           |          |      |        |  | 3.62 | %              |  |          |           |   |   |        |  | 3.31 | %
|                                              |  |                              |           |          |      |        |  |      |                |  |          |           |   |   |        |  |      |  



|(1) | Includes loans held for sale and non-accrual loans in average loans. Interest income includes loan fee income.
|--- | --------------------------------------------------------------------------------------------------------------

|(2) | Tax-exempt securities income has been presented using a tax equivalent basis and an assumed tax rate of 34%.
|--- | ------------------------------------------------------------------------------------------------------------



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The following table sets forth a summary of changes in the components of net interest income during the
first quarter of 2010, as compared to the first quarter of 2009, due to the changes in average interest earning assets and interest bearing liabilities and the resultant changes in interest income and interest expense:



|                                                              |  |                                                              |        |   |      |   |        |       |  |   |        |  
|------------------------------------------------------------- |  | ------------------------------------------------------------ | ------ | - | ---- | - | ------ | ----- |  | - | ------ | -
|                                                              |  | Three months ended March 31, 2010compared to 2009            |       
|($ in thousands)                                              |  | Increase (decrease) in net interestincome due to changes in: |       
|                                                              |  | Volume                                                       |        |   | Rate |   |        | Total | 
|Interest earning assets                                       |  |                                                              |        |   |      |   |        |       |  |   |        |  
|Loans (1)                                                     |  | $                                                            | (5,339 | ) |      | $ | 603    |       |  | $ | (4,736 | )
|Securities (2)                                                |  |                                                              | (224   | ) |      |   | (60    | )     |  |   | (284   | )
|Overnight deposits with other banks, and other and FHLB stock |  |                                                              | 112    |   |      |   | (28    | )     |  |   | 84     |  
|                                                              |  |                                                              |        |   |      |   |        |       |  |   |        |  
|Total interest earning assets                                 |  | $                                                            | (5,451 | ) |      | $ | 515    |       |  | $ | (4,936 | )
|                                                              |  |                                                              |        |   |      |   |        |       |  |   |        |  
|                                                              |  |                                                              |       
|Interest bearing liabilities                                  |  |                                                              |        |   |      |   |        |       |  |   |        |  
|Interest bearing demand deposits                              |  | $                                                            | 59     |   |      | $ | (24    | )     |  | $ | 35     |  
|Savings and MMDA deposits                                     |  |                                                              | (287   | ) |      |   | (763   | )     |  |   | (1,050 | )
|Time deposits                                                 |  |                                                              | (460   | ) |      |   | (1,827 | )     |  |   | (2,287 | )
|Total interest bearing deposits                               |  |                                                              | (688   | ) |      |   | (2,614 | )     |  |   | (3,302 | )
|                                                              |  |                                                              |        |   |      |   |        |       |  |   |        |  
|Overnight borrowings                                          |  |                                                              | (200   | ) |      |   | (3     | )     |  |   | (203   | )
|Junior subordinated debt                                      |  |                                                              |       |   |      |   | (4     | )     |  |   | (4     | )
|Other borrowings                                              |  |                                                              | (278   | ) |      |   | (66    | )     |  |   | (344   | )
|                                                              |  |                                                              |        |   |      |   |        |       |  |   |        |  
|Total interest bearing liabilities                            |  |                                                              | (1,166 | ) |      |   | (2,687 | )     |  |   | (3,853 | )
|                                                              |  |                                                              |        |   |      |   |        |       |  |   |        |  
|Total decrease in net interest income                         |  | $                                                            | (4,285 | ) |      | $ | 3,202  |       |  | $ | (1,083 | )
|                                                              |  |                                                              |        |   |      |   |        |       |  |   |        |  



|(1) | Includes loans held for sale and non-accrual loans in average loans. Interest income includes loan fee income.
|--- | --------------------------------------------------------------------------------------------------------------

|(2) | Tax-exempt securities income has been presented using a tax equivalent basis and an assumed tax rate of 34%.
|--- | ------------------------------------------------------------------------------------------------------------

Loan Loss Provision

During the three
months ended March 31, 2010, the Company recognized a provision for loan losses of $5.0 million, or 1.65%, of average gross loans on an annualized basis. For the three months ended March 31, 2009, the Company recognized a provision for
loan losses of $13.7 million, or 3.44%, of average gross loans on an annualized basis.

The provision is determined based on a model which
considers, among other things, specific loan risk characteristics in the portfolio and internal loan risk rating classifications. Management regularly evaluates the adequacy of the level of the allowance for credit losses by considering changes in
the nature of the loan portfolio, portfolio composition, overall portfolio quality, industry concentrations, delinquency trends, current economic factors, and the estimated impact of current economic conditions that may affect a borrowers
ability to pay. Management continually monitors the economic conditions of the markets in which it currently operates, which include mainly Eastern and Central Washington, Northern Idaho and Utah. Management also considers general economic
conditions in the analysis. In its evaluation of impaired loans, management considers collateral values if the loan is collateral dependent and the discounted cash flows if the loan is not collateral dependent. Substantially all of the
Companys impaired loans are collateral dependent and it is the Companys practice to charge-off the difference between the carrying value and the market value of the underlying collateral, less costs to sell, of all impaired loans. The
loan loss provision is a significant estimate and the use of different assumptions could produce different results.



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Non-interest Income

Three Months Ended March 31, 2010 and 2009

Non-interest income for the three months ended March 31, 2010 was $2.8 million, as compared to $5.8 million for the same period of 2009, a decrease
of $3.0 million, or 51%. The change consists of the following components:



| |  |  | Fees and service charges on deposits decreased $105 thousand, or 5%, largely due to lower transaction volumes, and a reduction in overdraft fee income
which decreased $104 thousand. These were partially offset by an increase in debit card fee income of $70 thousand.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fees on mortgage loan sales decreased $1.4 million, or 72%, due to a decrease in the volumes of loans originated and sold.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Other non-interest income decreased $1.5 million, or 88%, due mainly to a one-time excise tax refund from the state of Washington of $977 thousand net
of the certain professional fees paid in the process of amending prior years excise tax returns received in the first quarter of 2009. The first quarter of 2009 also included $535 thousand of income related to the sale of a merchant bankcard
portfolio, which was partially offset by losses on disposals of leasehold improvements of $419 thousand. In addition, net gains on foreclosed assets declined by $103 thousand as compared to the first quarter of 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Non-interest Expense

Three Months
Ended March 31, 2010 and 2009

Non-interest expense for the three months ended March 31, 2010 totaled $19.3 million, as compared
to $20.6 million for the same quarter of the prior year. The change consists of the following components:



| |  |  | Salaries and benefits were down $825 thousand, or 9%, in the first quarter of 2010 as compared to the first quarter of 2009, as a result of cost saving
initiatives that included a reduction in total staff of approximately 52 full-time equivalents and the discontinuance of certain employee incentive programs. These declines were partially offset by an increase in benefit costs as compared to the
same period of the prior year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The foreclosed asset expense was $2.7 million in the first quarter of 2010, an increase of $2.1 million, or 343% as compared to $617 thousand in the
first quarter of 2009. The first quarter of 2010 includes increases in valuation adjustments of $1.1 million and other carrying and legal costs of $1.0 million.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | FDIC assessments were $1.7 million in the first quarter of 2010 as compared to $3.5 million in the first quarter of 2009. The first quarter of 2009
included $1.5 million for a special assessment.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equipment and occupancy expenses decreased $331 thousand, or 8%, related to cost savings associated with the consolidation and closure of financial
centers in the prior year.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other non-interest expense decreased $439 thousand or 15% largely due to decreased loan expenses, and other operating expenses, partially offset by an
increase in professional fees associated with capital raising efforts and insurance costs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Income Tax (Benefit)
Provision

As a result of the Companys current going concern status as of December 31, 2009 and 2008, all tax benefits since
December 31, 2008 have been deferred and all deferred taxes have been fully reserved. The Company did not recognize any tax benefit for operating losses in the first quarter of 2010 or 2009. To the extent the Company can generate taxable income
in the future sufficient to offset the tax deductions represented by the net deferred tax asset, the non-cash valuation allowance that has been established may be partially or entirely reduced. If the valuation allowance is reduced or eliminated,
future tax benefits will be recognized that will have a positive non-cash impact on the Companys net income, stockholders equity and regulatory capital ratios.



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Non-performing Assets

Non-performing assets include loans that are 90 or more days past due or on non-accrual status, and real estate and other loan collateral acquired through
foreclosure and repossession. For non-accrual loans, interest previously accrued but not collected is reversed and charged against income at the time a loan is placed on non-accrual status. Any payments received for a loan that is on non-accrual
status are applied to principal. Interest income is not recognized until the loan is returned to accrual status, when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following table summarizes the non-performing assets at March 31, 2010, December 31, 2009 and March 31, 2009:



|                                                        |  |               |         |   |                  |   |         |               |  |   |         |  
|------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | ------------- |  | - | ------- | -
|($ in thousands)                                        |  | March 31,2010 |         |   | December 31,2009 |   |         | March 31,2009 | 
|Non-accrual loans (1)                                   |  | $             | 88,847  |   |                  | $ | 105,271 |               |  | $ | 122,442 |  
|Accruing loans over 90 days past due (1)                |  |               |        |   |                  |   |        |               |  |   | 285     |  
|                                                        |  |               |         |   |                  |   |         |               |  |   |         |  
|Total non-performing loans                              |  |               | 88,847  |   |                  |   | 105,271 |               |  |   | 122,727 |  
|Foreclosed real estate and other foreclosed assets      |  |               | 58,301  |   |                  |   | 53,383  |               |  |   | 22,552  |  
|                                                        |  |               |         |   |                  |   |         |               |  |   |         |  
|Total non-performing assets                             |  | $             | 147,148 |   |                  | $ | 158,654 |               |  | $ | 145,279 |  
|                                                        |  |               |         |   |                  |   |         |               |  |   |         |  
|Restructured loans (2)                                  |  | $             | 6,991   |   |                  | $ | 6,995   |               |  | $ |        |  
|                                                        |  |               |        
|Non-performing loans to total gross loans (1)           |  |               | 7.44    | % |                  |   | 8.28    | %             |  |   | 7.86    | %
|Non-performing assets to total assets (1)               |  |               | 9.45    | % |                  |   | 9.58    | %             |  |   | 7.96    | %
|Allowance for loan loss to total gross loans            |  |               | 3.23    | % |                  |   | 3.07    | %             |  |   | 2.60    | %
|Allowance for credit losses to total gross loans        |  |               | 3.26    | % |                  |   | 3.10    | %             |  |   | 2.65    | %
|Allowance for credit losses to non-performing loans (1) |  |               | 43.79   | % |                  |   | 37.48   | %             |  |   | 33.68   | %



|(1) | Amounts and ratios are shown net of government guarantees on non-performing loans of $2.5 million, $2.6 million, and $1.4 million, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents accruing restructured loans performing according to their restructured terms.
|--- | ----------------------------------------------------------------------------------------

Total non-performing assets were $147.1 million, or 9.45%, of total assets at March 31, 2010 as compared to $158.7 million, or 9.58%, of total
assets at December 31, 2009. Total non-performing loans as of March 31, 2010 were $88.8 million, or 7.44%, of total gross loans and consisted of the following categories:



|                                              |  |               |        |                     |     |   |                  |   |                     |  |     |  
|--------------------------------------------- |  | ------------- | ------ | ------------------- | --- | - | ---------------- | - | ------------------- |  | --- | -
|($ in thousands)                              |  | March 31,2010 |        | % of Non-performing |     |   | December 31,2009 |   | % of Non-performing | 
|Construction, land development and other land |  | $             | 44,418 |                     | 50  | % |                  | $ | 60,849              |  | 58  | %
|Commercial real estate                        |  |               | 24,445 |                     | 28  | % |                  |   | 25,999              |  | 25  | %
|Residential real estate                       |  |               | 8,600  |                     | 9   | % |                  |   | 7,659               |  | 7   | %
|Commercial and industrial                     |  |               | 5,786  |                     | 7   | % |                  |   | 6,099               |  | 6   | %
|Agricultural                                  |  |               | 5,576  |                     | 6   | % |                  |   | 4,588               |  | 4   | %
|Installment and other                         |  |               | 22     |                     | 0   | % |                  |   | 77                  |  | 0   | %
|                                              |  |               |        |                     |     |   |                  |   |                     |  |     |  
|Total non-performing loans                    |  | $             | 88,847 |                     | 100 | % |                  | $ | 105,271             |  | 100 | %
|                                              |  |               |        |                     |     |   |                  |   |                     |  |     |  



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The following is a summary of the activity of the non-performing loans during the three months ended
March 31, 2009 and 2010:



|                                                                   |  |                              |         |   |      |   |         |  
|------------------------------------------------------------------ |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                   |  | Three Months Ended March 31, |        
|($ in thousands)                                                   |  | 2010                         |         |   | 2009 |  
|Beginning Balance                                                  |  | $                            | 105,271 |   |      | $ | 91,744  |  
|Additions and other                                                |  |                              | 11,298  |   |      |   | 66,710  |  
|Charge-offs                                                        |  |                              | (6,171  | ) |      |   | (17,943 | )
|Paydowns and sales                                                 |  |                              | (10,750 | ) |      |   | (6,218  | )
|Reclassified to foreclosed real estate and other foreclosed assets |  |                              | (10,801 | ) |      |   | (11,566 | )
|                                                                   |  |                              |         |   |      |   |         |  
|Ending Balance                                                     |  | $                            | 88,847  |   |      | $ | 122,727 |  
|                                                                   |  |                              |         |   |      |   |         |  

The total non-performing loans, net of government guarantees, by state (determined by location of the principal underlying
collateral) at March 31, 2010 and December 31, 2009 are summarized below:



|                           |  |               |        |                     |     |   |                  |   |                     |  |     |  
|-------------------------- |  | ------------- | ------ | ------------------- | --- | - | ---------------- | - | ------------------- |  | --- | -
|($ in thousands)           |  | March 31,2010 |        | % of Non-performing |     |   | December 31,2009 |   | % of Non-performing | 
|Utah                       |  | $             | 55,758 |                     | 63  | % |                  | $ | 68,684              |  | 65  | %
|Washington                 |  |               | 18,854 |                     | 21  | % |                  |   | 20,836              |  | 20  | %
|New Hampshire              |  |               | 10,548 |                     | 12  | % |                  |   | 10,632              |  | 10  | %
|Idaho                      |  |               | 3,553  |                     | 4   | % |                  |   | 4,980               |  | 5   | %
|California                 |  |               | 134    |                     | 0   | % |                  |   | 139                 |  | 0   | %
|                           |  |               |        |                     |     |   |                  |   |                     |  |     |  
|Total non-performing loans |  | $             | 88,847 |                     | 100 | % |                  | $ | 105,271             |  | 100 | %
|                           |  |               |        |                     |     |   |                  |   |                     |  |     |  

At March 31, 2010 and December 31, 2009, the Company had approximately $93.1 million, or 7.80% of total
loans, and $80.6 million, or 6.34% of total loans, respectively, that were not classified as non-performing that management considered to be potential problem loans. A loan is considered a potential problem loan if it has a well-defined weakness,
based on known information about the borrowers financial condition that causes management to have concerns about the borrowers ability to comply with the repayment terms of the loan if the weakness is not corrected. Potential problem
loans are classified as substandard, or risk grade 7 on the Companys internal 9 grade risk rating scale, but are not included in non-performing loans. A substandard loan is placed on non-accrual status and included in
non-performing loans when management determines, based on current information and events, that it is probable the borrower will be unable to repay both principal and interest in accordance with the original terms of the loan agreement. These
classifications are subject to managements judgment and management believes the classifications are appropriate at March 31, 2010. The increase in potential problem loans from December 31, 2009 is primarily the result of additional
loans downgraded during the quarter primarily in the construction, land development and land and commercial real estate categories.

As of
March 31, 2010, foreclosed real estate (OREO) and other foreclosed assets totaled $58.3 million as compared to $53.4 million at December 31, 2009. OREO at March 31, 2010 was comprised of 47 individual properties. The weighted average
holding period for properties held as of March 31, 2010 was approximately 7 months.

The Company pursues an active liquidation strategy
designed to condense holding periods and carrying costs associated with OREO. Marketing strategies commence during the foreclosure process, prior to ownership of the foreclosed asset. During the first quarter of 2010, the Company liquidated 12
properties as compared to 10 properties in the first quarter of 2009 and 44 properties for the full year 2009.



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The following table sets forth the major components of the changes in OREO and foreclosed assets during
the first three months of 2010 and 2009:



|                      |  |                                      |        |   |            |     |   |        |   |        |            |  |     |  
|--------------------- |  | ------------------------------------ | ------ | - | ---------- | --- | - | ------ | - | ------ | ---------- |  | --- | -
|                      |  | For the three months ended March 31, |       
|                      |  | 2010                                 |        |   | 2009       |    
|($ in thousands)      |  | Amount                               |        |   | Properties |     |   | Amount |   |        | Properties | 
|Beginning balance     |  | $                                    | 53,383 |   |            | 45  |   |        | $ | 15,781 |            |  | 22  |  
|Additions to OREO     |  |                                      | 10,801 |   |            | 14  |   |        |   | 11,566 |            |  | 16  |  
|Valuation adjustments |  |                                      | (1,201 | ) |            |    |   |        |   | (126   | )          |  |    |  
|Disposition of OREO   |  |                                      | (4,682 | ) |            | (12 | ) |        |   | (4,669 | )          |  | (10 | )
|                      |  |                                      |        |   |            |     |   |        |   |        |            |  |     |  
|Ending balance        |  | $                                    | 58,301 |   |            | 47  |   |        | $ | 22,552 |            |  | 28  |  
|                      |  |                                      |        |   |            |     |   |        |   |        |            |  |     |  

The following table sets forth the OREO and foreclosed asset balances by type as of March 31, 2010 and
December 31, 2009:



|                          |  |                      |        |                         |    |        |   |            |  |   
|------------------------- |  | -------------------- | ------ | ----------------------- | -- | ------ | - | ---------- |  | --
|                          |  | As of March 31, 2010 |        | As of December 31, 2009
|($ in thousands)          |  | Amount               |        | Properties              |    | Amount |   | Properties
|Land development          |  | $                    | 43,091 |                         | 26 |        | $ | 35,283     |  | 21
|Commercial                |  |                      | 5,428  |                         | 7  |        |   | 7,814      |  | 9 
|Multi-family              |  |                      | 7,175  |                         | 7  |        |   | 7,862      |  | 8 
|Single family residential |  |                      | 2,557  |                         | 7  |        |   | 2,424      |  | 7 
|Other foreclosed assets   |  |                      | 50     |                         |   |        |   |           |  |  
|                          |  |                      |        |                         |    |        |   |            |  |   
|Total                     |  | $                    | 58,301 |                         | 47 |        | $ | 53,383     |  | 45
|                          |  |                      |        |                         |    |        |   |            |  |   

The following table sets forth the OREO and foreclosed asset balances
by state as of March 31, 2010 and December 31, 2009:



|                 |  |                      |        |                         |    |        |   |            |  |   
|---------------- |  | -------------------- | ------ | ----------------------- | -- | ------ | - | ---------- |  | --
|                 |  | As of March 31, 2010 |        | As of December 31, 2009
|($ in thousands) |  | Amount               |        | Properties              |    | Amount |   | Properties
|Utah             |  | $                    | 40,132 |                         | 35 |        | $ | 34,272     |  | 28
|Washington       |  |                      | 10,471 |                         | 6  |        |   | 13,024     |  | 11
|Arizona          |  |                      | 3,885  |                         | 1  |        |   | 3,885      |  | 1 
|Idaho            |  |                      | 3,813  |                         | 5  |        |   | 2,202      |  | 5 
|                 |  |                      |        |                         |    |        |   |            |  |   
|Total            |  | $                    | 58,301 |                         | 47 |        | $ | 53,383     |  | 45
|                 |  |                      |        |                         |    |        |   |            |  |   

Investment Portfolio

The Companys investment portfolio decreased from $49.0 million at December 31, 2009 to $46.0 million at March 31, 2010 as a result of
sales, maturities and pay-downs. No securities were purchased during the first quarter of 2010. All securities are classified as available-forsale and recorded at fair value. Management believes that this classification provides greater
flexibility to respond to unexpected interest rate changes and liquidity needs.

Loan Portfolio

Total loans decreased $78.3 million during the three months ended March 31, 2010. The decrease includes a $39.6 million decrease in construction,
land development and other land loans and a $13.7 million decrease in agricultural loans. At March 31, 2010, the Banks largest 20 credit relationships consisted of loans and loan commitments ranging from $5.8 million to $12.3 million,
with an aggregate total credit exposure of $152.1 million and outstanding balances of $149.4 million. Of this total $47.9 million is related to commercial construction or land acquisition and development related loans and $28.9 million of these
loans were classified as non-performing.



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The Banks portfolio consists of loans extended to real estate developers and building contractors,
small and medium-sized businesses, agricultural businesses, professionals and consumers mainly in the Banks principal market areas, and such loans are principally secured by residential and commercial real estate, crops, business inventory and
receivables. Management has assessed, and will continue to assess on an on-going basis, the effect of the economy within the Banks principal market areas on the credit risk in the loan portfolio, and the effect of overall economic conditions
on the entire balance sheet. Management is aware of recent downturns in the residential real estate economy which have adversely affected the credit quality of the loan portfolio. Additionally, management recognizes certain geographical
concentrations in the market areas serviced and continues to closely monitor the Banks credit quality and focus on identifying potential problem credits and any loss exposure in a timely manner. Industry concentration and related limits will
continue to be subject to ongoing assessment.

The major classifications of loans at March 31, 2010 and December 31, 2009 can be
found in Note 3 to the Consolidated Financial Statements. The following table summarizes additional information related to the construction, land development and other land category at March 31, 2010 and December 31, 2009:



|                                                    |  |               |         |            |     |   |                  |   |            |  |     |  
|--------------------------------------------------- |  | ------------- | ------- | ---------- | --- | - | ---------------- | - | ---------- |  | --- | -
|($ in thousands)                                    |  | March 31,2010 |         | % of Total |     |   | December 31,2009 |   | % of Total | 
|Residential land development                        |  | $             | 47,295  |            | 37  | % |                  | $ | 68,389     |  | 41  | %
|Investor commercial construction                    |  |               | 31,278  |            | 24  | % |                  |   | 40,583     |  | 24  | %
|Raw land                                            |  |               | 21,584  |            | 17  | % |                  |   | 21,717     |  | 13  | %
|Owner occupied commercial construction              |  |               | 9,528   |            | 7   | % |                  |   | 10,657     |  | 6   | %
|Residential consumer                                |  |               | 3,681   |            | 3   | % |                  |   | 5,917      |  | 4   | %
|Builder spec                                        |  |               | 1,952   |            | 2   | % |                  |   | 8,397      |  | 5   | %
|Other                                               |  |               | 13,553  |            | 10  | % |                  |   | 12,794     |  | 7   | %
|                                                    |  |               |         |            |     |   |                  |   |            |  |     |  
|Total construction, land development and other land |  | $             | 128,871 |            | 100 | % |                  | $ | 168,454    |  | 100 | %
|                                                    |  |               |         |            |     |   |                  |   |            |  |     |  

The following table summarizes the outstanding unfunded commitments as of March 31, 2010 and
December 31, 2009:



|                                              |  |               |         |                   |   |        
|--------------------------------------------- |  | ------------- | ------- | ----------------- | - | -------
|($ in thousands)                              |  | March 31,2010 |         | December 
31,2009
|Agricultural                                  |  | $             | 51,600  |                   | $ | 55,398 
|Commercial and industrial                     |  |               | 44,560  |                   |   | 54,159 
|Residential real estate                       |  |               | 38,677  |                   |   | 39,404 
|Commercial real estate                        |  |               | 14,630  |                   |   | 15,291 
|Construction, land development and other land |  |               | 5,348   |                   |   | 9,385  
|Installment and other                         |  |               | 9,191   |                   |   | 9,155  
|                                              |  |               |         |                   |   |        
|Total                                         |  | $             | 164,006 |                   | $ | 182,792
|                                              |  |               |         |                   |   |        

The following table summarizes the loan portfolio repricing as of
March 31, 2010. The adjustable and variable rate loans are tied to Prime or another market index. Adjustable rate loans do not re-price immediately with market changes while variable rate loans adjust within three months or immediately with
market index rate changes. Loans on non-accrual status are included in the fixed rate category.



|                 |  |               |  
|---------------- |  | ------------- | -
|                 |  | March 31,2010 |  
|Adjustable Rates |  | 43            | %
|Variable Rates   |  | 26            | %
|Fixed Rates      |  | 31            | %



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Allowance for Loan Losses and Reserve for Unfunded Commitments

At March 31, 2010, the Banks allowance for loan losses was $38.5 million, or 3.23%, of total loans. This compares to $39.0 million, or 3.07%,
at December 31, 2009. At March 31, 2010 and December 31, 2009 the Banks reserve for unfunded commitments was $410 thousand and $456 thousand, respectively. The allowance for loan losses is established to absorb known losses
primarily resulting from loans outstanding as of the statement of financial condition date. Accordingly, all loan losses are charged to the allowance and all recoveries are credited to it. The provision for loan losses charged to operating expense
is based on past credit loss experience and other factors which in managements judgment deserve current recognition in estimating probable credit losses. Such other factors include growth and composition of the loan portfolio, credit
concentrations, trends in portfolio volume, maturities, delinquencies and non-accruals, historical loss trends and general economic conditions. While management uses the best information available to base its estimates, future adjustments to the
allowance may be necessary if economic conditions, particularly in the Companys market areas, differ substantially from the assumptions initially used. In addition, various regulatory agencies, as an integral part of their examination process,
periodically review the Companys allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

The Company utilizes a loan loss reserve methodology and documentation process which it believes is consistent with Security and Exchange
Commission, Generally Accepted Accounting Principles, and bank regulatory requirements. These accounting rules require specific identification of an allowance for loan loss for an impaired loan. To this end, the Company developed a systematic
methodology using a nine-grade risk rating system to determine its allowance for loan losses. Current collateral values, less costs to sell, are considered in cases where this type of analysis is applicable. On a quarterly basis, the allowance is
recalculated using the methodology to determine if the allowance is adequate.

This methodology includes a detailed analysis of the loan
portfolio that is performed by personnel that the Company believes are competent and well-trained, and who have the skills and experience to perform analyses, estimates, reviews and other loan loss methodology functions. All loans are considered in
the analysis, either on an individual or group basis, using current data. Loans are evaluated for impairment on an individual basis, if applicable, and the remainder of the portfolio is segmented into groups of loans with similar risk
characteristics. The methodology considers the probability of default and severity of the loss by loan category based on empirical portfolio information. These probabilities and severities were determined based on a historical analysis of the loan
portfolio. Additionally, the methodology includes consideration of particular risks inherent in different kinds of lending. Management believes that the allowance for loan losses is adequate as of March 31, 2010.



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The following table summarizes the loan charge-offs by loan type for the three months ended
March 31, 2010 and 2009:



|                                              |  |                             |       |      |   |       
|--------------------------------------------- |  | --------------------------- | ----- | ---- | - | ------
|                                              |  | Three Months EndedMarch 31,
|($ in thousands)                              |  | 2010                        |       | 2009
|Construction, land development and other land |  | $                           | 2,033 |      | $ | 14,874
|Commercial and industrial                     |  |                             | 1,540 |      |   | 1,916 
|Residential real estate                       |  |                             | 1,594 |      |   | 532   
|Commercial real estate                        |  |                             | 822   |      |   | 426   
|Agricultural                                  |  |                             | 61    |      |   |      
|Installment and other                         |  |                             | 121   |      |   | 195   
|                                              |  |                             |       |      |   |       
|Total                                         |  | $                           | 6,171 |      | $ | 17,943
|                                              |  |                             |       |      |   |       

The net charge-offs annualized for the three months ended
March 31, 2010 and 2009 represent 1.81% and 4.45% of average gross loans, respectively.

Deposits and Borrowings

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

Total deposits declined $93.4 million during the three months ended March 31, 2010, ending the
period at $1.41 billion. Non-interest bearing demand deposits declined $12.3 million, or 4.0%, during the first quarter of 2010 and the average balance outstanding declined just 2.6% as compared to the fourth quarter of 2009. Non-interest bearing
deposits were 20.8% of total deposits as of March 31, 2010 as compared to 20.3% at December 31, 2009.

On April 13, 2010, the
FDIC adopted an interim final rule that extended the Transaction Account Guarantee Program (TAG) component of the Temporary Liquidity Guarantee Program for six months, through December 31, 2010, with the possibility of extending the TAG an
additional 12 months without further rulemaking. The TAG provides unlimited deposit insurance for certain transaction accounts, and the Bank will continue to incur fees to participate in the program.

Federal Home Loan Bank of Seattle (FHLB) advances and other borrowings increased by $5.0 million during the three months ended March 31, 2010 to
$68.7 million.

The Company had four wholly-owned trusts (Trusts) at March 31, 2010 that were formed to issue trust preferred securities
in the form of junior subordinated debt, and related common securities of the Trusts. Junior subordinated debt totaled $41.2 million at March 31, 2010. In accordance with the provisions of the related indentures, the Company has notified the
trustees of the Trusts each quarter since the third quarter of 2008 that the payment of interest on the junior subordinated debt will be deferred. The Company has the right to defer payment of interest for up to 20 consecutive quarters, although it
will continue to accrue the cost and recognize the expense of the interest at the normal rate on a compounded basis until such time as the deferred arrearage has been paid current. As of March 31, 2010, interest totaling $4.6 million, which is
included in accrued interest payable on the Consolidated Statements of Condition, was deferred and in arrears.

Liquidity and Capital
Resources

For the three months ended March 31, 2010, the net cash flows provided by operations were $1.0 million as compared to net
cash flows used for the three months ended March 31, 2009 of $3.2 million. Additionally, for the three months ended March 31, 2010, the Company generated $69.4 million in net cash from investing activities primarily as loan balances
decreased and used $88.4 million in net cash from financing activities, primarily as deposit balances declined. The Company generated $40.5 million in investing activities and used $34.7 million in net cash from financing activities during the same
period of the previous year.



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The Banks primary source of funds is deposits. In addition, the Bank has the ability to borrow
from the FHLB and the Federal Reserve Bank of San Francisco (FRB) Discount Window. At March 31, 2010, the Bank had $167.7 million of available credit from these sources as compared to $184.3 million at December 31, 2009. As of
March 31, 2010 and December 31, 2009, the Bank did not have any Fed Funds lines agreements with correspondent banks.

The Parent
Companys ability to service its debt is generally dependent upon the availability of dividends from the Bank. The payment of dividends by the Bank is subject to limitations imposed by law and governmental regulations. The Bank is currently
prohibited by regulatory order from paying any dividends to the Parent Company without prior regulatory approval. In addition, the Parent Company is prohibited by regulatory order from paying any dividends to stockholders.

The Companys total stockholders equity decreased to $11.2 million at March 31, 2010 as compared to $19.6 million at December 31,
2009. This decrease is mainly related to the net loss recorded for the first three months of 2010 of $8.5 million. The Companys total stockholders equity to total assets ratio decreased to 0.7% as of March 31, 2010 from 1.2% as of
December 31, 2009. At March 31, 2010 and December 31, 2009, the Company held cash and cash equivalent assets of $183.6 million and $201.6 million, respectively.

As a result of capital deficiencies, the Bank and the Company have entered into regulatory agreements (for further details see Item 2,
Managements Discussion and Analysis of Financial Condition and Results of Operations). These agreements and related actions by regulators could have a direct material effect on the Companys financial statements. Under the Order, the Bank
must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and other factors.

The Companys and the Banks actual
capital amounts and ratios as of March 31, 2010, and the required regulatory ratios and corresponding amounts, are presented in the table below:



|                                                    |  |        |        |       |                        |   |        |                  |         |  |      |        |  |       |         |  |       |  
|--------------------------------------------------- |  | ------ | ------ | ----- | ---------------------- | - | ------ | ---------------- | ------- |  | ---- | ------ |  | ----- | ------- |  | ----- | -
|                                                    |  | Actual |        |       | Adequately Capitalized |   |        | Well Capitalized |        
|($ in thousands)                                    |  | Amount |        | Ratio |                        |   | Amount |                  | Ratio   |  |      | Amount |  | Ratio |        
|As of March 31, 2010:                               |  |        |        |       |                        |   |        |                  |         |  |      |        |  |       |         |  |       |  
|Total capital to risk weighted assets:              |  |        |        |       |                        |   |        |                  |         |  |      |        |  |       |         |  |       |  
|Company                                             |  | $      | 6,736  |       | 0.52                   | % |        | $                | 104,171 |  | 8.00 | %      |  |       | N/A     |  | N/A   |  
|Bank                                                |  |        | 60,709 |       | 4.67                   | % |        |                  | 104,038 |  | 8.00 | %      |  | $     | 130,048 |  | 10.00 | %
|                                                    |  |        |        |       |                        |  
|Tier I capital to risk weighted assets:             |  |        |        |       |                        |   |        |                  |         |  |      |        |  |       |         |  |       |  
|Company                                             |  |        | 3,368  |       | 0.26                   | % |        |                  | 52,085  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|Bank                                                |  |        | 44,173 |       | 3.40                   | % |        |                  | 52,019  |  | 4.00 | %      |  |       | 78,029  |  | 6.00  | %
|                                                    |  |        |        |       |                        |  
|Leverage capital, Tier I capital to average assets: |  |        |        |       |                        |   |        |                  |         |  |      |        |  |       |         |  |       |  
|Company                                             |  |        | 3,368  |       | 0.21                   | % |        |                  | 63,632  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|Bank                                                |  |        | 44,173 |       | 2.78                   | % |        |                  | 63,566  |  | 4.00 | %      |  |       | 79,458  |  | 5.00  | %

The Company and its financial
advisors, Cappello Capital Corp and Sandler ONeill + Partners, LP, have continued efforts with respect to identification of and discussions with a variety of potential private equity investors. Although the Parent Company has the existing
authority under its Articles of Incorporation to issue preferred shares, it is likely that shareholder approval will be required for any private equity investment in the common stock of the Parent Company.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

In managements opinion, there have been no material changes in reported market risks faced by the Company since the end of the most recent fiscal
year. Based upon modeling using parallel interest rate changes of an increase in rates of 100 basis points and 200 basis points over the next twelve months, the Companys net



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interest income is expected to increase slightly under rising interest rates. These scenarios also include the assumptions that balances and current pricing spreads remain constant. The
modeling as of March 31, 2010 considered parallel interest rate changes of an increase in rates of 100 basis points and 200 basis points.

The changes to net interest income over the next twelve months given the assumptions in the model are presented in the table below as of March 31,
2010 and December 31, 2009 based on the rate changes evaluated at the time of the analysis.



|                                |  |                                                        |     |  |                  |    
|------------------------------- |  | ------------------------------------------------------ | --- |  | ---------------- | ---
|                                |  | Percentage Change in Net InterestIncome over 12 Months |    
|Rate Scenario                   |  | March 31,2010                                          |     |  | December 31,2009 |    
|Rates increase 200 basis points |  | 3.83                                                   | %   |  | 3.32             | %  
|Rates increase 100 basis points |  | 1.94                                                   | %   |  | 1.59             | %  
|Rates decrease 100 basis points |  | N/A                                                    | (1) |  | N/A              | (1)
|Rates decrease 200 basis points |  | N/A                                                    | (1) |  | N/A              | (1)



|(1) | Market rates in effect were less than 1.0% thus these downward rate simulation scenarios are not applicable.
|--- | ------------------------------------------------------------------------------------------------------------

As a further means of quantifying interest rate risk, the Companys management looks at the economic perspective by capturing the impact of interest
rate changes on the net value of future cash flows, or Economic Value of Equity (EVE). To determine the EVE, cash flows projected from the Companys current assets and liabilities are discounted based on current market rates. Investment
securities are valued using current market prices. Loans are discounted at current Bank pricing spreads to market reference rates. Deposits and borrowings are discounted based on the FHLB yield curve as of the simulation date. Deposit cash flows
include Federal Reserve Bank estimates of operating costs for each deposit type. The Companys policy sets limits on allowable changes in EVE if rates rise or fall by 200 basis points. Percentage changes calculated at March 31, 2010 are
outside the limits, due to the low level of equity. Had the Bank had enough equity to have been classified as well-capitalized at March 31, 2010, changes to the EVE would have been within the policy guidelines.



|Item 4. | Controls and Procedures
|------- | -----------------------

During the three
months ended March 31, 2010, there were no changes in the Companys internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control over financial reporting.

The Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the principal
executive officer and the principal financial officer, of the effectiveness of the design and operation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended
(Exchange Act). Based upon that evaluation, the Companys principal executive officer and principal financial officer concluded that the Companys disclosure controls and procedures were effective, as of the end of the period covered by
this report, in ensuring that material information relating to the Company, including its consolidated subsidiaries, required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms.



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Part II. Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

Periodically and in
the ordinary course of business, various claims and lawsuits are brought against the Company or the Bank, such as claims to enforce liens, condemnation proceedings on properties in which the Bank held a security interest, claims involving the making
and servicing of real property loans, actions relating to employee claims and other issues incident to the business of the Company and the Bank. In the opinion of management, the ultimate liability, if any, resulting from such claims or lawsuits
currently pending or threatened will not have a material adverse effect on the financial position or results of operations of the Company.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material
changes from the risk factors disclosed in the Companys annual report on Form 10-K for the year ended December 31, 2009.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

The Company has a stock repurchase authorization for 250,000 common shares which was approved by the Board of Directors during 2006. This authorization
does not have an expiration date. No shares were repurchased under this authorization during the three months ended March 31, 2010 or the year ended December 31, 2009.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not
applicable.



|Item 4. | Removed and Reserved
|------- | --------------------



|Item 5. | Other Information
|------- | -----------------

There is no other
information to report.



|Item 6. | Exhibits
|------- | --------

a. Exhibits.
The exhibits filed as part of this report are as follows:



|     |  |                                                                                                                                                                                    
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Amended and Restated Articles of Incorporation of AmericanWest (filed as Exhibit 3.1 to the Form 10-Q filed on August 11, 2008, and incorporated herein by this
reference).        
|     | 
|3.2  |  | Amended and Restated Bylaws of AmericanWest Bancorporation (filed as Exhibit 3.2 to the Form 8-K filed on April 21, 2009, and incorporated herein by this
reference).              
|     | 
|31.1 |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+                                               
|     | 
|32.1 |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+



|+ | Denotes items filed herewith.
|- | -----------------------------



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##### Table of Contents

AMERICANWEST BANCORPORATION



Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized on May 12, 2010.



AMERICANWEST BANCORPORATION/s/ Patrick J. RusnakPatrick J. RusnakChief Executive Officer/s/ Shelly L. KrasseltPrincipal Accounting OfficerSenior Vice President and Controller




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