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                                   EXHIBIT 3.2



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                SECOND RESTATED BYLAWS OF INTERWEST BANCORP, INC.

         The following constitute the Second Restated Bylaws of InterWest
Bancorp, Inc., a Washington Corporation.

1.       OFFICES

         The principal office of the corporation in the State of Washington
         shall be located at 1259 West Pioneer Way, Oak Harbor, Washington
         98277, or at such other location as may be determined by the board of
         directors.

2.       SHAREHOLDERS

         2.1.     ANNUAL MEETING: The annual meeting of shareholders shall be
                  held on the third Tuesday of January in each year, at 1:30
                  p.m., or on such other date and at such other time as may be
                  determined by the board of directors, for the purpose of
                  electing directors and for the transaction of such other
                  business as may properly come before the meeting. If the day
                  fixed for the annual meeting shall be a legal holiday in the
                  State of Washington, the meeting shall be held on the next
                  succeeding business day. If the election of directors is not
                  held on the day designated herein for any annual meeting of
                  the shareholders or at any adjournment thereof, the board of
                  directors shall cause the election to be held at a meeting of
                  the shareholders as soon thereafter as conveniently may be
                  held.

         2.2.     SPECIAL MEETINGS: Special meetings of the shareholders for any
                  purpose or purposes, unless otherwise prescribed by statute,
                  may be called by the president, by the board of directors, or
                  by the written request of holders of not less than a majority
                  of all the shares of the bank entitled to vote at the meeting.

         2.3.     PLACE OF MEETING: All meetings of the shareholders shall be
                  held at the principal place of business of the corporation, or
                  at such other place as shall be determined from time to time
                  by the board of directors. The place at which the meeting of
                  shareholders will be held shall be stated in the notice of
                  this meeting.

         2.4.     NOTICE OF MEETING: Written or printed notice stating the
                  place, day and hour of a meeting of shareholders and, in case
                  of a special meeting of shareholders, the purpose or purposes
                  for which the meeting is called shall be delivered to each
                  shareholder entitled to vote at such meeting, not less than 10
                  days and no more than 50 days before the meeting, either
                  personally or by mail, by the secretary or at the direction of
                  the person or persons calling the meeting. If mailed, such
                  notice shall be deemed to be delivered when deposited in the
                  United States mail, addressed to the shareholder at his
                  address as it appears on the stock transfer records of the
                  bank, with postage thereon prepaid.

         2.5.     CLOSING OF STOCK TRANSFER RECORDS OR FIXING OF RECORD DATE:
                  For the purpose of determining shareholders entitled to notice
                  of or to vote at any meeting of

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                  shareholders or any adjournment thereof, or shareholders
                  entitle to receive payment of any dividend, or in order to
                  make a determination of shareholders for any other proper
                  purpose, the board of directors may provide that the stock
                  transfer records of the corporation shall be closed for a
                  stated period but not to exceed in any case 50 days. If the
                  stock transfer records shall be closed for the purpose of
                  determining shareholders entitled to notice of or to vote at
                  a meeting of shareholders, such books shall be closed for at
                  least 10 days immediately preceding such meeting. In lieu of
                  closing the stock transfer records, the board of directors may
                  fix, in advance, a date as the record date for any such
                  determination of shareholder, which date in any case shall not
                  be more than 50 days and, in case of a meeting of
                  shareholders, not less than 10 days prior to the date on which
                  the particular action requiring such determination of
                  shareholders entitled to notice of, or to vote at, a meeting
                  of shareholders, or shareholders entitled to receive payment
                  of a dividend. When a determination of shareholders entitled
                  to vote at any meeting of shareholders has been made as
                  provided in this section, such determination shall apply to
                  any adjournment thereof.

         2.6.     VOTING LISTS: At least 10 days before each meeting of the
                  shareholders, the officer or agent having charge of the stock
                  transfer records for shares of the corporation shall make a
                  complete record of the shareholders entitled to vote at the
                  meeting or any adjournment thereof, arranged in alphabetical
                  order, with the address of and the number of shares held by
                  each, which record for a period of 10 days prior to the
                  meeting shall be kept on file at the registered office of the
                  corporation. Such record shall be produced and kept open at
                  the time and place of the meeting and shall be subject to the
                  inspection of any shareholder for any proper purpose during
                  the whole time of the meeting. Failure to comply with the
                  requirements of this bylaw shall not affect the validity of
                  any action taken at the meeting.

         2.7.     QUORUM: One-third of the outstanding shares of the corporation
                  entitled to vote, represented in person or by proxy, shall
                  constitute a quorum at a meeting of shareholders. The
                  shareholders present at a duly organized meeting may continue
                  to transact business until adjournment notwithstanding the
                  withdrawal of sufficient shares to leave less than a quorum.
                  If less than one-third of the outstanding shares are
                  represented at a meeting, the meeting may be adjourned to such
                  time and place as may be determined, with the approval of a
                  majority of the shares represented at the meeting, without
                  further notice, except that any meeting at which directors are
                  to be elected shall be adjourned only from day to day until
                  such directors have been elected. At any adjourned meeting at
                  which a quorum shall be present or represented, any business
                  may be transacted which might have been transacted at the
                  meeting as originally called, and in the case of any adjourned
                  meeting called for the election of directors, those who attend
                  the second of the adjourned meetings, although less than a
                  quorum, shall nevertheless constitute a quorum of the purpose
                  of electing directors.

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         2.8.     PROXIES: A shareholder of record may vote either in person or
                  by proxy executed in writing by the shareholder or by his duly
                  authorized attorney-in-fact. All proxies shall be filed with
                  the secretary of the corporation before or at the commencement
                  of meetings. No unrevoked proxy shall be valid after 11 months
                  from the date of its execution unless otherwise expressly
                  provided in the proxy.

         2.9.     VOTING OF SHARES: Each outstanding share, shall be entitled to
                  one vote on each matter submitted to a vote of the
                  shareholders at a meeting of shareholders. In the election of
                  directors, every shareholder of record entitled to vote at the
                  meeting of shareholders shall have the right to vote the
                  number of shares owned by him for as many persons as there are
                  directors to be elected by the holders of such shares.
                  Cumulative voting shall not be permitted in the election of
                  directors.

         2.10.    VOTING OF SHARES BY CERTAIN HOLDERS:

                  2.10.1.  Shares standing in the name of another corporation,
                           domestic or foreign, may be voted by such officer,
                           agent or proxy as the bylaws of such corporation may
                           prescribe, or in the absence of such provision, as
                           the board of directors of such corporation may
                           determine. A certified copy of action taken by the
                           corporations shall be conclusively as to proper
                           authorization by the corporation.

                  2.10.2.  Shares held by an administrator, executor, guardian
                           or conservator may be voted by such person, either in
                           person or by proxy, upon delivery of appropriate
                           evidence of such person's authority to act as
                           administrator, executor, guardian or conservator.
                           Shares standing in the name of a trustee may be voted
                           by such person, either in person or by proxy.

                  2.10.3.  Shares held by a receiver may be voted by such
                           receiver, and shares held by or under the control of
                           a receiver may be voted by the receiver without the
                           transfer thereof into the name of the receiver if
                           authority so to do be contained in an appropriate
                           order of the court by which such receiver was
                           appointed.

                  2.10.4.  If shares are held jointly by three or more
                           fiduciaries, the will of the majority of the
                           fiduciaries shall control the manner of voting or the
                           giving of a proxy, unless the instrument or order
                           appointing such fiduciaries directs otherwise.

                  2.10.5.  Treasury shares shall not be voted at any meeting or
                           counted in determining the total number of
                           outstanding shares entitled to vote at any meeting of
                           shareholders.

                  2.10.6.  Shares of another corporation held by this
                           corporation may be voted by the chairman of the
                           board, the president or any executive vice president,
                           or by proxy executed by any such officer, unless the
                           board of directors by

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                  resolution shall designate some other person to vote shares
                  held by the corporation.

         2.11.    INFORMAL ACTION BY SHAREHOLDERS: Any action required to be
                  taken at a meeting of the shareholders or any other action
                  which may be taken at a meeting of the shareholders may be
                  taken without a meeting if a consent in writing setting forth
                  such action shall be signed by all the shareholders entitled
                  to vote with respect to the subject matter thereof.

         2.12.    NOTICE FOR NOMINATIONS AND PROPOSALS:

                  2.12.1.  Nominations for the election of directors and
                           proposals for any new business to be taken up at any
                           annual or special meeting of shareholders may be made
                           by the board of directors of the corporation or by
                           any shareholders of the corporation entitled to vote
                           generally in the election of directors. In order for
                           a shareholder of the corporation to make any such
                           nominations and/or proposals, he or she shall give
                           notice thereof in writing, delivered or mailed by
                           first class United States mail, postage prepaid, to
                           the Secretary of the corporation not less than thirty
                           days nor more than sixty days prior to any such
                           meeting; provided, however, that if less than
                           thirty-one days' notice of the meeting is given to
                           shareholders, such written notice shall be delivered
                           or mailed, as prescribed, to the Secretary of the
                           corporation not later than the close of the tenth day
                           following the day on which notice of the meeting was
                           mailed to shareholders. Each such notice given by a
                           shareholder with respect to nominations for election
                           of directors shall set forth (i) the name, age,
                           business address and, if known, residence address of
                           each nominee proposed in such notice (ii) the
                           principal occupation or employment of each such
                           nominees, (iii) the number of shares of stock of the
                           corporation which are beneficially owned by each such
                           nominee, (iv) such other information as would be
                           required to be included in a proxy statement
                           soliciting proxies for the election of the proposed
                           nominee pursuant to Regulations 14A of the Securities
                           Exchange Act of 1934, as amended, including without
                           limitation, such person's written consent to be named
                           in the proxy statement as a nominee and to serving as
                           a director, if elected, and (v) as to the shareholder
                           giving such notice (a) his name and address as they
                           appear of the corporation's books, and (b) the class
                           and number of shares of the corporation which are
                           beneficially owned by such shareholder. In addition,
                           the shareholder making such nomination shall promptly
                           provide any other information reasonably requested by
                           the corporation.

                  2.12.2.  Each such notice given by a shareholder to the
                           Secretary with respect to business proposals to bring
                           before a meeting shall set forth in writing as to
                           each matter: (i) a brief description of the business
                           desired to be brought before the meeting and the
                           reasons for conducting such business at the

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                           meeting, (ii) the name and address, as they appear on
                           the corporation's books, of the shareholder proposing
                           such business; (iii) the class and number of shares
                           of the corporation which are beneficially owned by
                           the shareholder, and (iv) any material interest of
                           the shareholder in such business. Notwithstanding
                           anything in these Bylaws to the contrary, no business
                           shall be conducted at the meeting except in
                           accordance with the procedures set forth in this
                           Article.

                  2.12.3.  The Chairman of the annual or special meeting of
                           shareholders may, if the facts warrant, determine and
                           declare to the meeting that a nomination or proposal
                           was not made in accordance with the foregoing
                           procedure, and, if he should so determine, he shall
                           so declare to the meeting and the defective
                           nomination or proposal shall be disregarded and laid
                           over for action at the next succeeding adjourned
                           special or annual meeting of the shareholders taking
                           place thirty days or more thereafter. This provision
                           shall not require the holding of any adjourned or
                           special meeting of shareholders for the purpose of
                           considering such defective nomination or proposal.

3.       BOARD OF DIRECTORS

         3.1.     GENERAL POWERS: The business and affairs of the corporation
                  shall be managed by the board of directors.

         3.2      NUMBER, TENURE AND QUALIFICATIONS:

                  3.2.1.   The board of directors shall consist of nine members,
                           a majority of which shall not be officers or
                           employees of the corporation or any of its
                           subsidiaries. The number of directors may at any time
                           be increased or decreased by the board of directors
                           at any regular or special meeting of the board of
                           directors, provided that no decrease shall have the
                           effect of shortening the term of any incumbent
                           director except as provided in Section 3.9 of this
                           Article 3.

                  3.2.2.   Directors shall be elected to staggered terms so that
                           one-third of the directors, or as near as may be, are
                           elected each year. If additional directors are added
                           to the board, the terms of those directors shall be
                           staggered so that approximately one-third of the
                           directors are elected each year. Unless removal in
                           accordance with the corporation's Articles of
                           Incorporation each director shall hold office until
                           his successor shall have been elected and qualified.

                  3.2.3.   A person shall not be a director of the corporation
                           if the person has been adjudicated bankrupt, or has
                           taken the benefit of any assignment for the benefit
                           of creditors, or has suffered a judgment recovered
                           against him for a sum of money to remain unsatisfied
                           of record or unsuperseded on appeal

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                           for a period of more than three months. A person
                           shall not be a director of the corporation if the
                           person (1) is not a resident of a state of the
                           United States; (2) has been adjudicated a bankrupt
                           or has taken the benefit of any insolvency law, or
                           has made a general assignment for the benefit of
                           creditors; (3) has suffered a judgment recovered
                           against him for a sum of money to remain unsatisfied
                           of record or unsecured on appeal for a period of
                           more than three months; (4) is a trustee, officer,
                           clerk or other employee of a savings bank that is
                           not controlled by the corporation.

                  3.2.4.   Oath. Each director upon election shall take an oath
                           that he will, so far as it devolves on him,
                           diligently and honestly administer the affairs of the
                           corporation, and will not knowingly violate, or
                           wiling permit to be violated, any of the provision of
                           law applicable to such corporation. Further, upon
                           such election, each director shall sign a statement
                           certifying compliance with the foregoing
                           qualifications as a director.

                  3.2.5.   Age. No person shall be eligible for initial election
                           as a director who is 72 years of age or more and no
                           person shall continue to serve as a director who is
                           75 years of age or more and the office of such
                           director shall become vacant on the last day of the
                           month in which such director reaches his 75th
                           birthday.

         3.3.     MEETINGS: An annual meeting of the board of directors and of
                  any committee designated by the board of directors shall be
                  held, without other notice than this bylaw, immediately after
                  and at the same place as the annual meeting of shareholders.
                  The board of directors may provide, by resolution, the notice,
                  if any, required, and the time and place, either within or
                  without the State of Washington, for holding any other regular
                  meeting of the board of directors, the chairman, the
                  president, the board of directors or any director may call a
                  special meeting of directors.

         3.4.     NOTICE: Notice of special meetings of the board of directors
                  giving the time and place thereof shall be provided to each
                  director at least one day prior to the date set for such
                  meeting by the person or persons authorized to call such
                  meeting or by the secretary at the direction of the person or
                  persons authorized to call the meeting, either by personal
                  delivery, mail or telegram addressed to the last known address
                  of such director, or by personal telephone call or any other
                  means sufficient to permit attendance at the meeting. If
                  mailed, notice shall be deemed to be delivered when deposited
                  in the United States mail, postage prepaid, so addressed to
                  the director. If notice is by telegram, notice shall be deemed
                  delivered when the telegram is delivered to the telegraph
                  office for transmission. If notice is by personal telephone
                  call or other means, the information concerning the meeting
                  shall be given to the director personally and an affidavit of
                  the person giving such notice shall be included in the minute
                  book with the minutes of the meeting. If no place for a
                  special meeting is designated in the notice thereof, the
                  meeting shall be held at the principal place of business of
                  the corporation. A

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                  waiver of notice signed by the director or directors, whether
                  before or after the time state for meeting, shall be
                  equivalent to the giving of notice. The attendance of
                  a director or a committee member at a meeting shall constitute
                  a waiver of notice of the meeting except where a director or
                  committee member attends a meeting for the express purpose of
                  objecting to the transaction of any business because the
                  meeting is not lawfully convened. Unless otherwise required by
                  law, neither the business to be transacted at, nor the purpose
                  of, any regular or special meeting of the board of directors
                  or any committee designated by the board of directors need to
                  be specified in the notice or waiver or such notice of such
                  meeting.

         3.5.     QUORUM: A majority of the number of directors fixed by or in
                  the manner provided in these bylaws shall constitute a quorum
                  for the transaction of any business at any meeting of the
                  directors. If less than such majority shall attend a meeting,
                  a majority of the directors present may adjourn the meeting
                  from time to time without further notice, and a quorum present
                  at such adjourned meeting may transact business.

         3.6.     MANNER OF ACTING: The act of the majority of the directors
                  present at a meeting or adjourned meeting at which a quorum is
                  present shall be the act of the board of directors. Members of
                  the board of directors or any committee designated by the
                  board of directors may participate in a meeting of such board
                  or committee by means of a conference telephone or similar
                  communication equipment by which all persons participating in
                  the meeting can hear each other at the same time;
                  participating by such means shall constitute presence in
                  person at a meeting. Notwithstanding the foregoing, the
                  following decisions shall require the act of 2/3 of the
                  directors present:

                  3.6.1.   approval of any plan of merger, consolidation or
                           exchange involving the corporation; and

                  3.6.2.   the sale of substantially all of the assets of the
                           corporation.

         3.7.     INFORMAL ACTION: Any action permitted or required to be taken
                  at a meeting of the directors or permitted to be taken at a
                  meeting of a committee of directors may be taken without a
                  meeting if a consent in writing setting forth the action so
                  taken shall be signed by all the directors or all the members
                  of the committee, as the case may be.

         3.8.     BOARD COMMITTEES: The board of directors may designate, by
                  resolution adopted by a majority of the full board of
                  directors of the corporation, from among its members an
                  executive committee and one or more other committees, each of
                  which, to the extent provided in such resolution, shall have
                  an may exercise the authority of the board of directors,
                  except as limited by law. The designation of any such
                  committee and the delegation thereto of authority shall not
                  relieve the board of directors, or any member thereof, of any
                  responsibility imposed by law.

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                  The executive committee shall be three members of the board
                  if the board consists of seven or fewer members; and the
                  executive committee shall consist of four members of the board
                  if the board consists of eight or more members.

         3.9.     REMOVAL: A director may be removed from office only in the
                  manner prescribed by the corporation's Articles of
                  Incorporation.

         3.10.    VACANCIES: Any vacancy occurring in the board of directors may
                  be filled by the affirmative vote of a majority of the
                  remaining directors through less than a quorum of the board of
                  directors. A director elected to fill a vacancy shall be
                  elected for the unexpired term of his predecessor in office.
                  Any vacancy to be filled by reason of an increase in the
                  number of directors shall be filled by the board of directors
                  for a term of office continuing only until the next election
                  of directors by shareholders.

         3.11.    COMPENSATION: The directors may be paid their expenses, if
                  any, for attendance at each meeting of the Board of Directors
                  and may be paid a fixed sum for attendance at each meeting of
                  the Board of Directors, as stated retainer as Directors and/or
                  such other compensation as may be fixed by the Board of
                  Directors by Resolution. Members of special or standing
                  committees may be allowed like compensation for serving on
                  committees of the Board of Directors. No such payments shall
                  preclude any Director from serving the Corporation or any of
                  its subsidiaries in any other capacity and receiving
                  compensation therefore.

4.       OFFICERS

         4.1.     NUMBER: The officers of the corporation may include a chief
                  executive officer, chief operations officer, chairman of the
                  board of directors, president, one or more executive vice
                  presidents, one or more senior vice presidents, one or more
                  vice presidents, a secretary and a treasurer, each of whom
                  shall be elected by the board of directors. Such other
                  officers as may be deemed necessary or appropriate may be
                  elected or appointed by the board of directors with the power
                  and authority of such officer being established at the time
                  such officer is established. Except for the offices of
                  president and secretary, any two or more offices may be held
                  by the same person. Assistant vice presidents shall not be
                  considered as officers of the corporation.

         4.2.     ELECTION AND TERM OF OFFICE: The officers of the corporation
                  to be elected by the board of directors may be elected for
                  such term as the board may deem advisable or may be elected to
                  serve for an indefinite term at the pleasure of the board.
                  Officers of the corporation shall be elected at the first
                  meeting of directors following the expiration of the term of
                  office. Each officer shall hold office until his successor
                  shall have been duly elected and qualified regardless of his
                  term of office, except in the event of his prior death or
                  resignation or his removal in the manner hereinafter provided.

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         4.3.     REMOVAL: Any officer or agent elected, or appointed by the
                  board of directors may be removed by the board of directors
                  whenever in its judgment the best interest of the bank would
                  be served thereby, but such removal shall be without prejudice
                  to the contract rights, if any, of the person so removed.
                  Election or appointment of any officer or agent shall not of
                  itself create contract rights.

         4.4.     VACANCIES: A vacancy in any office because of death,
                  resignation, removal, disqualification or otherwise, may be
                  filled by the board of directors for the unexpired portion of
                  the term.

         4.5.     CHAIRMAN OF THE BOARD: The chairman of the board, if there be
                  such an officer, shall, if present, preside at all meetings of
                  the board of directors, and exercise and perform such other
                  powers and duties as may be determined from time to time by
                  the board of directors.

         4.6.     CHIEF EXECUTIVE OFFICER: The chief executive officers shall
                  exercise and perform all duties incident to such office and
                  such duties as may be determined from time to time by the
                  board of directors.

         4.7.     CHIEF OPERATING OFFICER: The chief operating officer shall
                  exercise and perform all duties incident to such office and
                  such duties as may be determined from time to time by the
                  board of directors.

         4.8.     PRESIDENT: The president shall exercise and perform such
                  powers and duties as may be determined from time to time by
                  the board of directors. He may sign, with the secretary or any
                  other proper offices of the corporation, certificates for
                  shares of the corporation. In general, he shall perform all
                  duties incident to the office and such duties as may be
                  prescribed by resolution of the board of directors from time
                  to time.

         4.9.     THE EXECUTIVE VICE PRESIDENTS AND/OR SENIOR VICE PRESIDENTS:
                  The executive vice presidents and/or senior vice presidents,
                  if any, shall exercise and perform such powers and duties as
                  may be determined from time to time by the board of directors.

         4.10.    THE VICE PRESIDENTS: The vice presidents shall exercise and
                  perform such powers and duties as may be determined from time
                  to time by the board of directors.

         4.11.    THE SECRETARY: The secretary shall keep the minutes of the
                  proceedings of the shareholder and board of directors, shall
                  give notices in accordance with the provisions of these bylaws
                  and as required by law, shall be custodian of the corporate
                  records and of the seal of the corporation, shall keep a
                  record of the names and addresses of all shareholders and the
                  number and class of shares held by each, have general charge
                  of the stock transfer records of the corporation, may sign
                  with the corporation, deeds and mortgages, bonds, contracts or
                  other instruments which shall have been authorized by
                  resolution of the board of

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                  directors, and in general shall perform all duties incident to
                  the office of secretary and such other duties as from time to
                  time may be assigned by the board of directors.

         4.12.    THE TREASURER: If required by the board of directors, the
                  treasurer shall give a bond for the faithful discharge of this
                  duties in such sum and with such surety or sureties as the
                  board of directors shall determine. He shall have charge and
                  custody of and be responsible for keeping correct and complete
                  books and records of account, for all funds and securities of
                  the corporation, receive and give receipts for moneys due and
                  payable to the corporation from any source whatsoever, deposit
                  all such moneys in the name of the corporation in the banks,
                  trust companies or other such moneys in the name of the
                  corporation in banks, trust companies or other depositories as
                  shall be selected in accordance with the provisions of these
                  bylaws, and in general perform all of duties incident to the
                  office of treasurer and such other duties as from time to time
                  may be assigned to him by the board of directors.

         4.13.    ASSISTANT VICE PRESIDENTS, ASSISTANT SECRETARIES AND ASSISTANT
                  TREASURERS: The assistant vice presidents, assistant
                  secretaries and assistant treasurers, in general, shall
                  perform such duties as shall be assigned to them by the board
                  of directors. If required by the board of directors, the
                  assistant treasurers shall respectively give bonds for the
                  faithful discharge of their duties in such sums and with such
                  sureties as the board of directors shall determine. Neither
                  the assistant vice presidents, the assistant secretaries nor
                  the assistant treasurers shall be considered officers of the
                  corporation.

         4.14.    COMPENSATION OF OFFICERS AND EMPLOYEES: Compensation of
                  officers and other employees may be fixed from time to time by
                  the board of directors. No officer shall be prevented from
                  receiving a salary because of service as a director of the
                  corporation.

5.       CONTRACTS

         5.1.     CONTRACTS: The board of directors may authorize any officer or
                  officers, agent or agents, to enter into any contract or
                  execute deliver any instrument in the name of and on behalf of
                  the corporation, and that authority may be general or confined
                  to specific instances.

         5.2.     CONTRACTS WITH LOANS TO CORPORATE DIRECTORS AND OFFICERS: The
                  corporation may enter into contracts and otherwise transact
                  business as vendor, purchaser, or otherwise, with its
                  directors, officers, and shareholders and with corporations,
                  associations, firms and entities in which they are, or may
                  become interested in, as directors, officers, shareholders, or
                  otherwise, as freely as though such interest did not exist,
                  except that no loan shall be made by the corporation secured
                  by its shares. In the absence of fraud, the fact that any
                  director, officer, shareholder, or any association, firm or
                  other entity of which any director, officer, or shareholder

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                  is interested, is in any way interest in any transaction or
                  contract shall not make the transaction or contract void or
                  voidable, or require the director, officer, or shareholder to
                  account to this corporation for any profits therefrom if the
                  transaction or contract is or shall be authorized, ratified,
                  or approved by either (1) vote of a majority of quorum of the
                  board of directors, excluding any interested director or
                  directors, (2) the written consent of the holders of a
                  majority of the shares entitled to vote, or (3) a general
                  resolution approving the acts of the directors and officers
                  adopted by vote of the holders of a majority of the shares
                  entitled to vote at a meeting of shareholders. All
                  transactions or contracts, including loans to officers and
                  directors, made pursuant to this section of these bylaws,
                  shall be subject to any applicable federal and state laws and
                  regulations. Nothing herein contained shall create or imply
                  any liability in the circumstances above described or prevent
                  the authorization, ratification or approval of such
                  transactions or contracts in any other manner.

6.       SHARES

         6.1.     The shares of stock issued by the corporation may be either
                  with or without par value, as authorized by the Articles of
                  Incorporation. The shareholders at any regular or special
                  meeting called for that purpose may authorize the issuance of
                  additional capital stock upon such terms and conditions as may
                  be included in such authorization. The board of directors may
                  change the number of authorized shares of stock to effectuate
                  a split of, or stock dividend in, the corporation's own
                  shares, and to change the number of authorized shares in
                  proportion thereto.

         6.2.     WITHDRAWAL:

                  6.2.1.   Stock shall be paid for in cash or other
                           consideration at a price not less than the par value
                           thereof as may be approved by the board of directors.
                           Stock shall not be subject to withdrawal except upon
                           liquidation or dissolution and until all claims of
                           creditors first shall have been fully paid.

                  6.2.2.   Shareholders shall participate in any distribution of
                           assets upon liquidation or dissolution after payment
                           has been made in full to all creditors and to all
                           holders of withdrawable savings.

         6.3.     CERTIFICATE FOR SHARES: The shares of the corporation shall be
                  represented by certificates in such form as may be required by
                  law and signed by the president or executive vice president
                  and by the secretary or an assistant secretary and may be
                  sealed with the seal of the corporation or a facsimile
                  thereof. The signatures of the corporate offices on the
                  certificate may be facsimiles if the certificate is manually
                  signed on behalf of an independent transfer agent or
                  registrar.

         6.4.     TRANSFER OF SHARES: Transfer of shares of the corporation
                  shall be made only on the stock transfer records of the
                  corporation by the holder of record thereof or by his legal
                  representative who shall furnish proper evidence of authority
                  to transfer

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                  shares, or by his attorney thereunto authorized by
                  power of attorney duly executed and filed with the secretary
                  of the corporation, on surrender for cancellation of the
                  certificate for the shares. Except as otherwise permitted by
                  these bylaws, the person in whose name shares stand on the
                  stock transfer records of the corporation shall be deemed by
                  the corporation to be the owner thereof for all purposes. All
                  certificates surrendered to the corporation for transfer shall
                  be canceled and no new certificate shall be issued until the
                  former certificate for a like number of shares shall have been
                  surrendered and canceled, except that in case of a lost,
                  destroyed or mutilated certificates, a new certificate may be
                  issued therefore upon the terms, including indemnification as
                  the corporation may request.

         6.5.     DIVIDENDS: No dividends shall be declared on stock until the
                  corporation has satisfied any applicable net worth or other
                  requirements imposed by law. Subject to such requirements,
                  shares of stock shall be entitled to such dividends, as may be
                  declared and issued from time to time by the board of
                  directors.

7.       SEAL

         The seal of the corporation shall be circular in form and consist of
         the name of the corporation, the state and year of incorporation, and
         the words "corporate seal."

8.       WAIVER

         Whenever any notice is required to be given to any shareholder or
         director of the corporation, a waiver thereof in writing, signed by the
         person or persons entitled thereto, whether before or after the time
         stated for such notice, shall be deemed equivalent to the giving of
         notice.

9.       INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS

         9.1.     As used in this article

                  9.1.1.   "Director" means any person who is or was a director
                           of the corporation and any person who, while a
                           director of the corporation, is or was serving at the
                           request of the corporation as a director, officer,
                           partner, trustee, employee, or agent of another
                           foreign or domestic corporation, partnership, joint
                           venture, trust, other enterprise, or employee benefit
                           plan.

                  9.1.2.   "Corporation" includes any domestic or foreign
                           predecessor entity of the corporation in a merger,
                           consolidation, or other transaction in which the
                           predecessor's existence ceased upon consummation of
                           such transaction.

                  9.1.3.   "Expenses" includes attorneys' fees.

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<PAGE>

                  9.1.4.   "Official capacity" means: (1) when used with respect
                           to a director, the office of director in the
                           corporation and (2) when used with respect to a
                           person other than a director as contemplated in
                           subsection 10 of this article, the elective or
                           appointive office in the corporation held by the
                           officer or the employment or agency relationship
                           undertaken by the employee or agent in behalf of the
                           corporation but in each case does not include service
                           for any other foreign or domestic corporation or any
                           partnership, joint venture, trust, other enterprise,
                           or employee benefit plan.

                  9.1.5.   "Party" includes a person who was, is, or is
                           threatened to be made, a named defendant or
                           respondent in a proceeding.

                  9.1.6.   "Proceeding" means any threatened, pending or
                           completed action, suite or proceeding, whether civil,
                           criminal, administrative or investigative.

         9.2.     The corporation shall indemnify any person made a party to any
                  proceeding (other than a proceeding referred to in subsection
                  9.3 of this article), by reason of the fact that he is or was
                  a director, against judgments, penalties, fines, settlements
                  and reasonable expenses actually incurred by him in connection
                  with such proceeding if:

                  9.2.1.   He conducted himself in good faith and (1) in the
                           case of conduct in his own official capacity with the
                           corporation, he reasonably believed his conduct to be
                           in the corporation's best interest, or (2) in all
                           other cases, he reasonably believed his conduct to be
                           at least not opposed to the corporation's best
                           interests; and

                  9.2.2.   In the case of any criminal proceeding, he had no
                           reasonable cause to believe his conduct was unlawful.

                  The termination of any proceeding by judgment, order,
                  settlement, conviction, or upon a plea of NOLO CONTENDERE or
                  its equivalent, shall not, of itself, be determinative that
                  the person did not meet the requisite standard of conduct set
                  forth in this subsection.

         9.3.     The corporation shall indemnify any person made a party to any
                  proceeding by or in the right of the corporation by reason of
                  the fact that he is or was a director against reasonable
                  expenses actually incurred by him in connection with such
                  proceeding if he conducted himself in good faith, and

                  9.3.1.   in the case of conduct in his official capacity with
                           the corporation, he reasonably believed his conduct
                           to be in its best interests; or

                  9.3.2.   in all cases, he reasonably believed his conduct to
                           be at least not opposed to its best interest;
                           PROVIDED THAT no indemnification shall be made

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<PAGE>

                           pursuant to this section in respect to any proceeding
                           in which such person shall have been adjudged to be
                           liable to the corporation.

         9.4.     A director shall not be indemnified under subsection 9.2 or
                  9.3 of this article in respect of any proceeding charging
                  improper personal benefit to him, whether or not involving
                  action in his official capacity, in which he shall have been
                  adjudged to be liable on the basis that personal benefit was
                  improperly received by him.

         9.5.     Unless otherwise limited by the articles of incorporation, a
                  director who has been wholly successful, on the merits or
                  otherwise, in the defense of any proceeding referred to in
                  subsection 9.2 or 9.3 of this article shall be indemnified
                  against reasonable expenses incurred by him in connection with
                  the proceeding.

         9.6.     No indemnification under subsection 9.2 or 9.3 of this article
                  shall be made by the corporation unless authorized in the
                  specific case after a determination that indemnification of
                  the director is permissible in the circumstances because he
                  has met the standard of conduct set forth in the applicable
                  section. Such determination shall be made:

                  9.6.1.   by the board of directors by a majority vote of a
                           quorum consisting of directors not at the time
                           parties to such proceeding; or

                  9.6.2.   if such a quorum cannot be obtained, then by a
                           majority vote of a committee of the board of
                           directors, duly designated to act in the matter, by a
                           majority vote of the full board of directors (in
                           which designation directors who are parties may
                           participate), consisting solely of two or more
                           directors not at the time parties to such proceeding;
                           or

                  9.6.3.   in a written opinion by legal counsel other than an
                           attorney, or a firm having associated with it an
                           attorney, who has been retained by or who has
                           performed services within the past three years for
                           the corporation or any party to be indemnified,
                           selected by the board of directors or a committee
                           thereof by vote as set forth in 9.6.1 or 9.6.2 of
                           this subsection, or if the requisite quorum of the
                           full board of directors cannot be obtained therefore
                           and such committee cannot be established, by a
                           majority vote of the full board of directors (in
                           which selection directors who are parties may
                           participate); or

                  9.6.4.   by the shareholders.

                  Authorization of indemnification and determination as to
                  reasonableness of expenses shall be made in the same manner
                  as the determination that indemnification is permissible,
                  except that if the determination that indemnification is
                  permissible is made by such legal counsel, authorization of
                  indemnification and determination as to reasonableness of
                  expenses shall be made

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<PAGE>
                  in a manner specified in paragraph 9.6.3 of this subsection
                  for the selection of such counsel.

         9.7.     Reasonable expenses incurred by a director who is party to a
                  proceeding may be paid or reimbursed by the corporation in
                  advance of the final disposition of such proceeding:

                  9.7.1.   After a determination, made in the manner specified
                           by subsection 9.6 of this article, that the
                           information then known to those making the
                           determination (without undertaking further
                           investigation for purposes thereof) does not
                           establish that indemnification would not be
                           permissible under subsection 9.2 or 9.3 of this
                           article; or

                  9.7.2.   upon receipt by the corporation of (1) a written
                           affirmation by the director of his good faith belief
                           that he has met the standard of conduct necessary for
                           indemnification by the corporation as authorized in
                           this article; and (2) a written undertaking by or on
                           behalf of the director to repay such amount if it
                           shall ultimately be determined that he has not met
                           such standard of conduct.

                  The undertaking required by paragraph 9.7.2 of this subsection
                  shall be an unlimited general obligation of the director but
                  need not be secured and may be accepted without reference to
                  financial ability to make the repayment. Payments pursuant to
                  this subsection may be authorized in the manner specified in
                  subsection 9.6 of this article.

         9.8.     No provision for the corporation to indemnify a director who
                  is made a party to a proceeding, whether contained in the
                  articles of incorporation, these bylaws, or resolution of
                  shareholders or directors, an agreement, or otherwise (except
                  as contemplated by subsection 9.11 of this article), shall be
                  valid unless consistent with this article, or to the extent
                  that indemnity hereunder is limited by the articles of
                  incorporation, consistent therewith. Nothing contained in this
                  article shall limit the corporation's ability to reimburse
                  expenses incurred by a director in connection with his
                  appearance as a witness in a proceeding at a time when he has
                  not been made a named defendant or respondent in the
                  proceeding.

         9.9.     For purposes of this article the corporation shall be deemed
                  to have requested a director to serve an employee benefit plan
                  where the performance by him of his duties to the corporation
                  also imposes duties on, or otherwise involves services by, him
                  to the plan or participants or beneficiaries of the plan,;
                  excise taxes assessed on a director with respect to an
                  employee benefit plan pursuant to applicable law shall be
                  deemed "fines"; and action taken or omitted by him with
                  respect to an employee benefit plan in the performance of his
                  duties for a purpose reasonably believed by him to be in the
                  interest of the participants and beneficiaries of the plan
                  shall be deemed to be for a purpose which is not opposed to
                  the best interests of the corporation.

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<PAGE>

         9.10.    Unless otherwise limited by the articles of incorporation:

                  9.10.1.  the corporation shall provide indemnification,
                           including advances of expenses, to an officer,
                           employee or agent of the corporation to the same
                           extent that it may indemnify directors pursuant to
                           this article except that subsection 9.12 of this
                           article shall not apply to any person other than a
                           director; and

                  9.10.2.  the corporation, in addition, shall have the power to
                           indemnify an officer who is not a director, as well
                           as employees and agents of the corporation who are
                           not directors, to such further extent, consistent
                           with law, as may be provided by the articles of
                           incorporation, these bylaws, general or specific
                           action of the board of directors, or contract.

         9.11.    The corporation shall have the power to purchase and maintain
                  insurance on behalf of any person who is or was a director,
                  officer, employee or agent of the corporation or is or was
                  serving at the request of the corporation as an officers,
                  employee or agent of another bank, corporation, partnership,
                  joint venture, trust, other enterprise, or employee benefit
                  plan against any liability asserted against him and incurred
                  by him in any such capacity or arising out of his status as
                  such, whether or not the corporation would have the power to
                  indemnify him against such liability under the provisions of
                  this article.

         9.12.    Any indemnification of a director in accordance with this
                  article, including any payment or reimbursement of expenses,
                  shall be reported to the shareholders with the notice of the
                  next shareholders meeting, or prior thereto, in a written
                  report containing a brief description of the proceedings
                  involving the director being indemnified and the nature and
                  extent of such indemnification.

10.      LOANS AND INVESTMENTS

         The funds of the corporation may also be loaned or invested as the
         board of directors may from time to time direct, subject to applicable
         law.

11.      FISCAL YEAR

         The fiscal year of the corporation shall be the calendar year.

12.      AMENDMENTS TO BYLAWS

         These bylaws may be amended or repealed and new bylaws adopted by a
         two-thirds majority vote of the directors at any regular or special
         meeting of the board of directors or by a majority of votes eligible to
         be cast by the shareholders of the corporation at any legal meeting.

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<PAGE>

13.      MISCELLANEOUS

         Unless some other meaning and intent is apparent from the context, the
         plurals shall include the singular and vice versa, and masculine,
         feminine and neuter words shall be used interchangeably.

         These Second Restated Bylaws of InterWest Bancorp, Inc. supercede the
         original Bylaws of InterWest Bancorp, Inc. and all Amendments thereto.

         DATED this _____ day of _____________, 2000.


                                  INTERWEST BANCORP, INC.



                                  /s/
                                  -------------------------------------
                                  Patrick M. Fahey
                                  President and Chief Executive Officer


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