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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2002





OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



For the transition period
from            to



Commission file number 0-18561



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AMERICANWEST BANCORPORATION

(Exact name of registrant as specified in its charter)



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|Washington                                     |  | 91-1259511                       
|---------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of incorporation) |  | (IRS Employer Identification No.)



9506
North Newport Highway

Spokane, Washington 99218-1200

(Address of principal executive offices)



Registrants telephone number, including area code (509) 467-6993



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Securities
registered pursuant to Section 12(b) of the Act: None



Securities registered pursuant to section 12(g) of the Act:



Common Stock, no par value

Title of each class



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the 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 if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule
12b-2).    YES  x    NO ̈



The aggregate market value of the common stock was held by
non-affiliates of the registrant was $101,992,000 based upon the closing price of the registrants common stock as quoted on the Nasdaq National Market on June 28, 2002 of $13.00.



The number of shares of the registrants common stock outstanding at February 18, 2003 was 9,105,823.



Documents incorporated by reference. Portions of
the AmericanWest Bancorporation definitive Proxy Statement for the annual meeting of shareholders to be held on April 29, 2003, are incorporated by reference into Part III of the Form 10-K.



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AMERICANWEST BANCORPORATION



ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR

ENDED DECEMBER 31, 2002



TABLE OF CONTENTS



|               |  |          |  | Page                                                                                 
|-------------- |  | -------- |  | -------------------------------------------------------------------------------------
|PART I         |  |          |  |                                                                                      
|              
|               |  | Item 1.  |  | Business                                                                             
|              
|               |  | Item 2.  |  | Properties                                                                           
|              
|               |  | Item 3.  |  | Legal Proceedings                                                                    
|              
|               |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                  
|              
|PART II        |  |          |  |                                                                                      
|              
|               |  | Item 5.  |  | Market for Registrants Common Equity and Related Stockholder Matters                
|              
|               |  | Item 6.  |  | Selected Financial Data                                                              
|              
|               |  | Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|              
|               |  | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                           
|              
|               |  | Item 8.  |  | Financial Statements and Supplementary Data                                          
|              
|               |  | Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|              
|PART III       |  |          |  |                                                                                      
|              
|               |  | Item 10. |  | Directors and Executive Officers of the Registrant                                   
|              
|               |  | Item 11. |  | Executive Compensation                                                               
|              
|               |  | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                       
|              
|               |  | Item 13. |  | Certain Relationships and Related Transactions                                       
|              
|               |  | Item 14. |  | Controls and Procedures                                                              
|              
|PART IV        |  |          |  |                                                                                      
|              
|               |  | Item 15. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                     
|              
|SIGNATURES     |  | 30      
|              
|CERTIFICATIONS |  | 31      



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AMERICANWEST BANCORPORATION



PART I



Forward
Looking Statements.    Statements contained in this Annual Report, which are not historical facts, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. A
forward-looking statement may contain words as plan, hopes, believes, estimates, will continue to be, will be, continued to, expect to, anticipate
that, to be, or can impact. These forward-looking statements include statements relating to AmericanWest Bancorporations (AWBC) expectations as to (i) the adequacy of provisions for loan losses, (ii) the
sufficiency of existing cash balances and investments, together with cash flow from operating activities and available lines of credit to meet AWBCs liquidity and capital spending requirements in future years, (iii) the effects of inflation
and changing prices on AWBCs operations, (iv) managements assessment of interest rate risks, and (v) AWBCs ability to continue to compete effectively with larger enterprises and implement the companys growth strategy.
Management cautions that forward-looking statements are subject to risk and uncertainties that could cause AWBCs actual results to differ materially from those projected in such forward-looking statements. AWBCs future business,
financial condition and results of operations could differ materially from those anticipated by such forward-looking statements and are subject to risks and uncertainties including the risks set forth below. Moreover, neither AWBC nor any other
person assumes responsibility for the accuracy and completeness of the forward-looking statements. AWBC is under no duty to update any of the forward-looking statements after the date of this Annual Report to conform such statements to actual
results or to changes in our expectations.



Item 1.    Business.



AmericanWest Bancorporation



AmericanWest Bancorporation (AWBC) is a Washington corporation registered as a bank holding company, under the Bank Holding Company Act of 1956. AWBC is headquartered in Spokane, Washington. On July 31, 2002, AmericanWest
Bancorporation acquired Latah Bancorporation, Inc. and its subsidiary, Bank of Latah (BOL), which continues to operate as a subsidiary of AWBC. AWBC anticipates that it will merge Bank of Latah into AWBCs banking subsidiary, AmericanWest Bank
(AWB) in the first quarter of 2003. During 2001, AWBC merged its five affiliated banks: United Security Bank, Home Security Bank, Bank of Pullman, Grant National Bank, and AmericanWest Bank to form AWB. At December 31, 2002, AWBC had total assets of
$916.8 million, loans of $775.6 million, deposits of $766.3 million and stockholders equity of $81.1 million. AWBC was founded in 1983 and trades on NASDAQ under the symbol of AWBC.



Available Information



AWBCs Internet address is www.awbank.net. You
may access, free of charge, copies of the following documents from AWBCs website by using the Investor Relations hyperlink:



| |  |  | Annual Reports on Form 10-K;
| | - |  | ----------------------------



| |  |  | Quarterly Reports on Form 10-Q; and
| | - |  | -----------------------------------



| |  |  | Current Reports on Form 8-K.
| | - |  | ----------------------------



AWBC makes these reports and certain other information that it files available on the companys website as soon as reasonably
practicable after filing or furnishing them electronically with the Securities and Exchange Commission (SEC). These and other SEC filings of AWBC are also available, free of charge, from the SEC on its website at http://www.sec.gov. The
information contained on the companys website is not incorporated by reference into this document and should not be considered a part of this Annual Report. The companys website address is included in this document as an inactive textual
reference only.



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Banks



AWB, a Washington state chartered commercial bank, conducts
its banking business through thirty-two branches and four lending offices located in communities throughout Eastern Washington, including Spokane, and three branches in Northern Idaho. BOL, an Idaho state chartered commercial Bank, conducts its
banking business through eight branches located in communities throughout Eastern Washington and North Idaho.



AWB and BOL (collectively, the Banks) offer a full range of financial services to commercial and individual customers,
including short-term and medium-term loans, revolving credit facilities, inventory and accounts receivable financing, equipment financing, residential and small commercial construction lending, agricultural lending, mortgage lending, equipment
leasing, various savings programs, checking accounts, installment and personal loans, and bank credit cards. The Banks also provides a broad range of depository and lending services to commercial, industrial and agricultural enterprises,
governmental entities and individuals. The Banks deposit taking and lending activities are primarily directed to the communities in which their branches are located. AWBs and BOLs primary marketing focus is on small to medium-sized
businesses and professionals in these communities.



Business
Strategy



AWBCs business strategy is
to continue to build a growing, profitable community banking and financial services network by emphasizing high quality customer service and by focusing on the financial needs of consumers and small to medium-sized businesses. AWBC intends to pursue
an aggressive growth strategy, the key components of which include:



| |  |  | Increasing market share in existing markets
| | - |  | -------------------------------------------



| |  |  | Expanding the markets served through new branch openings and acquisitions
| | - |  | -------------------------------------------------------------------------



| |  |  | Providing superior customer service
| | - |  | -----------------------------------



Increase Market Share in Existing Markets.    Since its formation AWBC has focused on commercial banking to
small and medium-sized businesses, professionals and other individuals. Management believes that AWBC can continue to gain market share by targeting products and services to these businesses.



AWBC emphasizes the development of long-term relationships
with its customers, which enables the Banks to develop and offer new products that meet its customers needs. AWBC is actively involved in the communities it serves. AWBC believes this community orientation gives a competitive advantage in
attracting and retaining targeted customers.



The
consolidation of the banking industry in recent years has resulted in centralized loan approval in the larger financial institutions with which AWBC competes. This has frequently resulted in inconvenience and reduced service to small business and
individual customers of these institutions, and in managements opinion has created opportunities for smaller, locally-focused institutions, such as community banks, which can approve credit and offer other customized banking services within
each branch. AWBC maintains local loan officers having the authority to approve loans subject to the Banks lending policies. See Lending Activities  Lending and Credit Management.



Expand Markets Served through New Branch Openings and
Acquisitions.    AWBC intends to expand its presence in Eastern and Central Washington and Northern Idaho by opening new branches and possibly acquiring other financial institutions.



Management considers a variety of criteria in evaluating
potential branch expansion, including the demographics and short and long-term growth prospects for the location, the management and other resources needed to integrate the branch into its existing operations, the degree to which the branch would
enhance the geographic diversity of AWBC or would enhance the presence in an existing market, and the estimated cost of opening and operating the branch as compared to the cost of acquiring an existing office and deposit base.



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In
addition to internal growth, there may be attractive opportunities to grow AWBC through carefully selected acquisitions of other financial institutions or their branches in Central and Eastern Washington, Eastern Oregon and Northern Idaho.
AWBCs ability to make future acquisitions depends on several factors such as the availability of suitable acquisition candidates, necessary regulatory and shareholder approval, and compliance with applicable capital requirements and, in the
case of cash acquisitions, on its cash assets or ability to acquire cash. AWBC may need to obtain additional debt and equity capital in pursuing an acquisition strategy. AWBCs access to capital markets or the costs of this capital can be
impacted by economic, financial, competitive and other conditions beyond AWBCs control. Further, acquisition candidates may not be available in the future on favorable terms. Therefore, no assurance can be made that future acquisitions will
occur.



Provide Superior Customer
Service.    AWBC attributes its success to its efforts to offer superior, personal service through professional bankers at all of its branches. AWBC believes that it distinguishes itself in its markets by emphasizing a
culture in which customers are the highest priority. Ongoing employee training is focused on customer needs, responsiveness and courtesy.



Lending Activities



AWBCs loan portfolio consists primarily of commercial loans, agricultural loans, real estate mortgage loans, residential real estate
and other construction loans, consumer installment loans and bankcard loans. At December 31, 2002, AWBC had total loans outstanding of $775.6 million, which equals 101.2% of AWBCs deposits and 84.6% of its assets. The majority of the loans
held by AWBC were to borrowers within the Banks principal market areas. See loan category amounts for five years in Item 6, selected financial data.



Commercial Loans.    Commercial loans primarily consist of loans to businesses for various purposes, including
revolving lines of credit, equipment financing loans and letters of credit. These loans generally mature within five years, have adjustable rates and are secured by inventory, accounts receivable, equipment or real estate. Commercial construction
loans and loans secured by multifamily (five or more) residential properties are also classified as commercial loans. These loans are primarily secured by liens on real estate, capital assets, accounts receivable and inventory, although certain
loans are unsecured. Commercial lending has increased risks as a result of dependence on income production for future repayment, and in certain circumstances, the lack of tangible collateral. Commercial loans are underwritten based on the financial
strength and repayment ability of the borrower, as well as, the value of any collateral securing the loans. Commercial lending operations rely on a strong credit culture that combines prudent credit policies and individual lender accountability.



Agricultural
Loans.    Agricultural loans primarily consist of farm loans to finance operating expenses. These loans generally mature within one year, have adjustable rates and are secured by farm real estate, equipment, crops or
livestock. Since agricultural loans present certain risks not associated with other types of lending, ordinarily the policy of AWBC is to make such loans only to agricultural producers with diverse crops, thereby mitigating the risk of loss
attributable to a crop failure or the deterioration of commodity prices.



Mortgage Loans.    Mortgage loans include various types of loans for which real property is held as collateral. These loans include adjustable and fixed rate first mortgage loans secured by one to
four family residential properties, second mortgage loans secured by one to four family residential properties. Mortgage loans typically mature in one to five years and require payments on amortization schedules ranging from one year to twenty
years.



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Construction Loans.    Construction loans are made to
individuals and contractors to construct primarily single-family principal residences. These loans have maturities of twelve months. Interest rates are typically fixed, although some adjustable-rate loans are made. The Banks policies normally
require that a permanent financing commitment be in place before a construction loan is made to an individual borrower. Construction loans may involve additional risks because loan funds are collateralized by the project under construction, which is
of uncertain value prior to completion. Delays may arise from labor problems, material shortages may be experienced and other unpredictable contingencies may occur. It is important to evaluate accurately the total loan funds required to complete a
project and related loan-to-value ratios. Because of these factors, the analysis of prospective construction loan projects requires an expertise that is different in significant respects from the expertise required for real estate mortgage lending.
Construction lending is generally considered to involve a higher degree of collateral risk than long-term financing of residential properties. AWBCs risk of loss on a construction loan is dependent largely upon the accuracy of the initial
estimate of the propertys value and marketability at completion of construction or development and the estimated cost (including interest) of construction. If the estimate of construction cost proves to be inaccurate, the Bank may be required
to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of value upon completion proves to be inaccurate, the Bank may be confronted at, or prior to, the maturity of the loan with a project whose
value is insufficient to assure full repayment. AWBCs underwriting criteria are designed to evaluate and minimize the risks of each real estate construction loan. Among other things, AWBC considers evidence of the availability of permanent
financing for the borrower, the reputation of the borrower, the amount of the borrowers equity in the project, the independent appraisal and review of cost estimates, the pre-construction sale and leasing information, and the cash flow
projections of the borrower.



Installment and
Other Loans.    Installment loans are primarily automobile, bankcard and personal loans. Consumer loans generally have maturities of five years or less, and fixed interest rates. Consumer lending may involve special risks,
including decreases in the value of collateral and transaction costs associated with foreclosure and repossession.



Interest Rates.    The interest rates earned on loans vary with the degree of risk and amount of the loan, and
are further subject to competitive pressures, money market rates, the availability of funds and government regulations. Approximately 41% of the loans in the Banks portfolio have interest rates that float with the lending Banks reference
rates, which is in turn based on various indices such as the rates of interest charged by money center banks.



Lending and Credit Management.    The Banks follow loan policies. The policies establish levels of loan
commitment by loan type, and credit review and grading criteria, and other matters such as loan administration, loans to affiliates, costs, problem loans and loan loss reserves, and related items. Loans are typically reviewed and graded on a monthly
basis.



All loan applications are processed at
AWBs and BOLs branch lending offices. Designated Bank officers follow approved guidelines and underwriting policies to approve all loan applications. Credit limits generally vary according to the type of loan and the individual loan
officers experience. The maximum current loan approval limits available to any one individual vary from $25,000 to $7,500,000 per loan.



Under applicable federal and state law, permissible loans to one borrower by AWB and BOL are limited. The Banks, as a matter of policy, do
not extend credit to any single borrower in excess of $13,000,000. At December 31, 2002, 2001 and 2000, the outstanding balance of loan participations sold outside AWB was $32.7 million, $41.3 million, and $51.2 million, respectively.



Secondary Mortgage Sales.    The
Banks sell mortgage loans in the secondary market as a correspondent and a broker. The Banks offer a variety of products for refinance and purchases; and is approved to originate FHA and VA loans. The majority of loans originated in 2002 were fixed
rate single-family loans. Such loans were sold on a servicing released basis and also a portion of the loans was sold with servicing retained. Total loans sold in 2002 were $37.2 million with $21.9 million servicing released and $15.3 million
servicing retained.



Nonperforming
Assets.    The following table provides information for the Banks nonperforming assets.



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|                                                                |  | Year ended December 31, |       
|--------------------------------------------------------------- |  | ----------------------- | ------
|($ in thousands)                                                |  | 2002                    |       
|Nonperforming loans:                                            |  |                         |       
|Nonaccrual loans                                                |  | $                       | 13,315
|Accrual loans 90 days or more past due                          |  |                         | 244   
|                                                                |  |                         |       
|Total nonperforming loans                                       |  |                         | 13,559
|Other real estate owned and other repossessed assets            |  |                         | 7,874 
|                                                                |  |                         |       
|Total nonperforming assets                                      |  | $                       | 21,433
|                                                                |  |                         |       
|Allowance for loan losses                                       |  | $                       | 10,272
|Ratio of total nonperforming assets to total assets             |  |                         | 2.34  
|Ratio of total nonperforming loans to total loans               |  |                         | 1.75  
|Ratio of allowance for loan losses to total nonperforming loans |  |                         | 75.8  



The
Banks nonperforming loans consist of nonaccruing loans and accruing loans 90 days or more past due. Accruing loans 90 days or more past due remain on an accrual basis because they are adequately collateralized and in the process of collection.
For nonaccrual loans no interest is taken into income unless received in cash or until such time as the borrower demonstrates an ability to resume payments of principal and interest. Interest previously accrued, but not collected is reversed and
charged against income at the time a loan is placed in nonaccrual status. A large portion of the nonperforming assets as of December 31, 2002 involve four borrrowers. AWB is well secured on a $3.8 million retail/office complex loan near downtown
Spokane and two foreclosed ice skating complexes in Spokane for another $5.2 million. The fourth borrower of $800,000 is on two foreclosed apple orchards in the Yakima Valley. Both ice arenas are currently listed for sale, one as a multi-use
commercial building and the other as an operating ice arena concern.



Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at the lower of cost or fair value at the date of foreclosure establishing a new cost basis. After
foreclosure, management periodically performs valuations and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Real estate properties and other repossessed assets of the Banks had a book value of $7,874,000
as of December 31, 2002, consisting primarily of commercial real estate and equipment.



Analysis of Allowance for Loan Losses



The allowance for loan losses represents managements recognition of the risks of extending credit and its evaluation of the quality of the loan portfolio of the Banks. The allowance is maintained at levels considered
adequate by management to provide for anticipated loan losses, and is based on managements assessment of factors affecting the loan portfolios, including problem loans, business conditions and loss experience, an overall evaluation of the
quality of the underlying collateral, and collateral selling costs. The allowance is increased by provisions charged to operations and is reduced by loans charged off, net of any recoveries.



In originating loans the Banks recognize that losses will be
experienced and that the risk of loss will vary depending on the type of loan, the creditworthiness of the borrower over the term of the loan, general economic conditions, and the quality of the security for the loan. As a result, the Banks maintain
an allowance for loan losses by following generally accepted accounting principles outlined in SFAS No. 5, Accounting for Contingencies. The Banks have established systematic methodologies for determination of the adequacy of the allowance for loan
losses. The methodologies are set forth in a formal policy and take into consideration the need for an overall general valuation allowance and specific allowances for individual nonperforming loans. The Banks adopted SFAS No. 114 and No. 118,
Accounting by Creditors for Impairment of a Loan. These accounting pronouncements require specific identification of an allowance for loan loss for an impaired or nonperforming loan.



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The Banks believe they have established their existing allowances for loan losses in
accordance with generally accepted accounting principles. In addition banking regulators may request an additional allowance for loan losses based on their review of the loan portfolio. Also future events affecting borrowers and collateral cannot be
predicted with certainty, which may result in an increase to the future allowance for loan losses as additional information becomes available. The Banks management believes that the allowance for loan losses is adequate.



The following table sets forth information regarding changes
in the Banks allowances for loan losses as follows:



|                                                            |  | Years ended December 31, |        
|----------------------------------------------------------- |  | ------------------------ | -------
|($ in thousands)                                            |  | 2002                     |        
|Balance of allowance for loan losses at beginning of period |  | $                        | 6,624  
|Charge-offs                                                 |  |                          |        
|Commercial                                                  |  |                          | 1,292  
|Agricultural                                                |  |                          | 1,541  
|Real estate                                                 |  |                          | 26     
|Installment                                                 |  |                          | 265    
|Other                                                       |  |                          | 156    
|                                                            |  |                          |        
|Total charge-offs                                           |  |                          | 3,280  
|                                                           
|Recoveries                                                  |  |                          |        
|Commercial                                                  |  |                          | 140    
|Agricultural                                                |  |                          | 173    
|Real estate                                                 |  |                          | 3      
|Installment                                                 |  |                          | 67     
|Other                                                       |  |                          | 4      
|                                                            |  |                          |        
|Total recoveries                                            |  |                          | 387    
|                                                           
|Net charge-offs                                             |  |                          | 2,893  
|Provision for loan losses                                   |  |                          | 5,663  
|Allowance acquired through acquisition                      |  |                          | 878    
|                                                            |  |                          |        
|Balance of allowance for loan losses at end of period       |  | $                        | 10,272 
|                                                            |  |                          |        
|Ratio of net charge-offs to average loans                   |  |                          | 0.43   
|Average loans outstanding during the period                 |  | $                        | 675,344



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The following table sets forth the allowance for loan losses by loan category, based
on managements assessment of the risk associated with such categories as of the dates indicated, and summarizes the percentage of gross loans in each category to total gross loans.



|                         |  | December 31,             |       
|------------------------ |  | ------------------------ | ------
|($ in thousands)         |  | 2002 Amount of Allowance |       
|                         |  |                          |       
|Commercial               |  | $                        | 6,677 
|Agricultural             |  |                          | 2,054 
|Real estate-mortgage     |  |                          | 719   
|Real estate-construction |  |                          | 205   
|Installment              |  |                          | 514   
|Other                    |  |                          | 103   
|                         |  |                          |       
|Total                    |  | $                        | 10,272
|                         |  |                          |       



Investments



Management of the investment portfolio is
by the Vice President and Chief Financial Officer of AWB and by the President and CEO of BOL, and reviewed by the respective Asset/Liability Committee. Investment activities are in accordance with the Investment, Liquidity and Asset/Liability
Management polices approved by the boards of AWB and BOL.



The following table sets forth the carrying value, by type, of the securities in the Banks portfolios at December 31, 2002, 2001 and 2000.



|                                                 |  | December 31,
|------------------------------------------------ |  | ------------
|($ in thousands)                                 |  | 2002        
|U.S. Treasury and other U.S. Government agencies |  | $           
|States of the U.S. and political subdivisions    |  |             
|Other securities                                 |  |             
|                                                 |  |             
|Total securities                                 |  | $           
|                                                 |  |             



At
December 31, 2002, the market value of the Banks securities exceeded amortized cost by $665,000. At December 31, 2001 amortized cost exceeded market value by $124,000. No portion of AWBs or BOLs investment portfolio is invested in
derivative securities (being securities whose value derives from the value of an underlying security or securities, or market index of underlying securities values).



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The following table sets forth the carrying values, maturities and approximate average
aggregate yields of securities in the Banks investment portfolios by type at December 31, 2002.



|Type and Maturity ($ in thousands)                                 |  | Yield |   |  | Amount
|------------------------------------------------------------------ |  | ----- | - |  | ------
|U.S. Treasury and other U.S. government agencies and corporations: |  |       |   |  |       
|1 year or less                                                     |  | 2.23  | % |  | $     
|Over 1 through 5 years                                             |  | 3.70  | % |  |       
|Over 5 through 10 years                                            |  | 6.01  | % |  |       
|Over 10 years                                                      |  | 8.23  | % |  |       
|                                                                   |  |       |   |  |       
|Total                                                              |  | 4.22  | % |  | $     
|                                                                   |  |       |   |  |       
|States and political subdivisions                                  |  |       |   |  |       
|1 year or less                                                     |  | 7.05  | % |  |       
|Over 1 through 5 years                                             |  | 7.16  | % |  |       
|Over 5 through 10 years                                            |  | 7.99  | % |  |       
|Over 10 Years                                                      |  | 9.25  | % |  |       
|                                                                   |  |       |   |  |       
|Total                                                              |  | 7.74  | % |  | $     
|                                                                   |  |       |   |  |       
|Other securities:                                                  |  |       |   |  |       
|1 year or less                                                     |  | 5.35  | % |  |       
|Over 1 through 5 years                                             |  | 6.97  | % |  |       
|Over 5 through 10 years                                            |  | 6.72  | % |  |       
|Over 10 years                                                      |  | 5.50  | % |  |       
|                                                                   |  |       |   |  |       
|Total                                                              |  | 6.27  | % |  | $     
|                                                                   |  |       |   |  |       
|Total investment securities:                                       |  |       |   |  |       
|1 year or less                                                     |  | 4.53  | % |  | $     
|Over 1 through 5 years                                             |  | 6.34  | % |  |       
|Over 5 through 10 years                                            |  | 6.94  | % |  |       
|Over 10 years                                                      |  | 6.71  | % |  |       
|                                                                   |  |       |   |  |       
|Total                                                              |  | 6.02  | % |  | $     
|                                                                   |  |       |   |  |       



The
yields for tax-exempt securities have been computed on a tax equivalent basis using an assumed tax rate of 34%. Maturities are estimated using payment experience as of December 31, 2002.



Deposits



The Banks primary source of funds has historically been customer deposits. The Banks strive to maintain a high percentage of
noninterest-bearing deposits, which are low cost funds and result in higher interest margins. At December 31, 2002, 2001, and 2000, the Banks ratios of noninterest-bearing deposits to total deposits were 17.7%, 18.5%, and 19.2%, respectively.



The Banks offer a variety of accounts designed
to attract both short-term and long-term deposits from its customers. These accounts include negotiable order of withdrawal (NOW) accounts, money market investment accounts, savings accounts, and certificates of deposit and other time
deposits. Interest-bearing accounts earn interest at rates established by management of AWB, based on competitive market factors and managements desire to increase or decrease certain types or maturities of deposits consistent with the
Banks policies.



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The following table sets forth the average balances for each major category of deposit
and the weighted-average interest rate paid for deposits in 2002, 2001 and 2000.



|                                    |  | Year Ended December 31, |        
|----------------------------------- |  | ----------------------- | -------
|                                    |  | 2002                    |        
|($ in thousands)                    |  | AverageBalance          |        
|Interest-bearing demand deposits    |  | $                       | 206,570
|Savings deposits                    |  |                         | 44,946 
|Time deposits                       |  |                         | 283,043
|Noninterest-bearing demand deposits |  |                         | 111,139
|                                    |  |                         |        
|Total                               |  | $                       | 645,698
|                                    |  |                         |        



The
following table shows the amounts and maturities of certificates of deposit that had balances of more than $100,000 at December 31, 2002, 2001 and 2000.



|                                                               |  | December 31,
|-------------------------------------------------------------- |  | ------------
|($ in thousands)                                               |  | 2002        
|Certificates of Deposit over $100,000 with remaining maturity: |  |             
|Less than three months                                         |  | $           
|Three months to one year                                       |  |             
|Over one year                                                  |  |             
|                                                               |  |             
|Total                                                          |  | $           
|                                                               |  |             



AWBCs Markets



AWBCs branches are located in and
near the three largest metropolitan areas in Eastern Washington; Spokane, Yakima and the so-called Tri-Cities area comprised of Hanford, Kennewick and Richland and in rural communities in Eastern Washington and Northern Idaho. Spokane, with its
diversified economy of military, manufacturing, government, health care, construction, financial services, natural resources and retail has been generally been stable and impervious to many of the national economic highs and lows.



The Yakima Valleys major industries center around
agriculture and food processing as well as manufacturing and government. The economy here has suffered due to recent market and production problems with the fruit orchards and related industries.



The Tri-Cities is currently the fastest growing area in
Washington State. A new nuclear-waste vitrification plant and the jobs it has brought to the area are a major factor in its recent growth.



The Banks branches located in rural towns in Eastern Washington and Northern Idaho are in areas with economies that historically
have been based on the agricultural, timber, and mining industries or on tourism. These locations do not provide significant economic growth, but tend to be underserved by the financial industry.



Competition



While the Banks encounter a great deal of competition in
their lending activities, management believes there is less competition in the Banks specialty middle market and neighborhood bank niche than there was a few years ago. The Banks believe that their competitive position has been strengthened by
the consolidation in the banking industry, which has resulted in a focus on the larger accounts with less contact between the bank officers and their customers. The Banks strategy by contrast, is to remain a middle market lender, which
maintains close long-term relationships with its customers.



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The Banks compete for deposits and banking business in Central and Eastern Washington
from forty-one locations as well as, seven locations in North Idaho. The Banks market area encompasses Spokane, Stevens, Ferry, Lincoln, Pend Oreille, Franklin, Yakima, Benton, Whitman, Grant, Walla Walla, and Columbia Counties in Washington
and Kootenai, Shoshone, Clearwater, Benewah, Latah and Nez Perce counties in Idaho. The Banks compete against commercial banks, mutual savings banks, credit unions, savings and loans, mortgage companies, and other financial institutions. The major
commercial bank competitors are the regional and national banks that have a branch or branches within the Banks primary trade areas.



Management believes that the principal competitive factors affecting the Banks markets include interest rates paid on deposits and
charged on loans, the range of banking products available, and customer service and support. Although management believes that the Banks products currently compete favorably with respect to these factors, there can be no assurance that the
Banks can maintain their competitive position against current and potential competitors, especially those with significantly greater financial resources.



Employees



As of December 31, 2002, AWBC and its banking subsidiaries had 334 FTEs. None of AWBCs employees are covered by a collective
bargaining agreement. Management believes relations with AWBs employees are good. AWBC is located at 9506 N. Newport Hwy. Spokane, WA 99218 and the telephone number is 509-467-6993.



Supervision and Regulation



The following generally refers to certain significant statutes and regulations affecting its subsidiary banking industry. These references
are only intended to provide brief summaries and, therefore, are not complete and are qualified by the statutes and regulations referenced. Changes in applicable laws or regulations may have a material effect on the business and prospects of AWBC.
The operations of AWBC may also be affected by changes in the policies of banking and other government regulators. AWBC cannot accurately predict the nature or extent of the effects on its business and earnings that fiscal or monetary policies, or
new federal or state laws, may have in the future.



Changes in
Banking Laws and Regulations



On November
12, 1999, the president signed into law the Financial Services Modernization Act of 1999. Generally, the act (i) repeals the historical restrictions on preventing banks from affiliating with securities firms, (ii) provides a uniform framework for
the activities of banks, savings institutions and their holding companies, (iii) broadens the activities that may be conducted by national banks and banking subsidiaries of bank holding companies, (iv) provides an enhanced framework for protecting
the privacy of consumers information and (v) addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.



Bank holding companies are permitted to engage in a wider
variety of financial activities than permitted under previous law, particularly with respect to insurance and securities activities. In addition, in a change from previous law, bank holding companies will be in a position to be owned, controlled or
acquired by any company engaged in financially related activities, so long as such company meets certain regulatory requirements. The act also permits national banks (and, in states with wildcard statutes, certain state banks), either directly or
through operating subsidiaries, to engage in certain non-banking financial activities.



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AWBC does not believe that the act will negatively affect the operations of it or its
subsidiaries. However, to the extent the legislation permits banks, securities firms and insurance companies to affiliate, the financial services industry may experience further consolidation. This consolidation could result in a growing number of
larger financial institutions that offer a wider variety of financial services than AWBC currently offers and that can aggressively compete in the markets currently served by AWBC and its subsidiary banks.



General.    As a bank holding
company, AWBC is subject to the Bank Holding Company Act of 1956 (BHCA), as amended, which places AWBC under the supervision of the Board of Governors of the Federal Reserve (FRB). AWBC must file annual reports with the Federal Reserve
and must provide it with such additional information as it may require. In addition, the Federal Reserve periodically examines AWBC and its subsidiary banks.



In general, the BHCA limits bank holding company business to owning or controlling banks and engaging in other banking-related activities.
Bank holding companies must obtain the FRBs approval before they: (1) acquire direct or indirect ownership or control of any voting shares of any bank that results in total ownership or control, directly or indirectly, of more than 5% of the
voting shares of such bank; (2) merge or consolidate with another bank holding company; or (3) acquire substantially all of the assets of any additional banks. Subject to certain state laws, such as age and contingency laws, a bank holding company
that is adequately capitalized and adequately managed may acquire the assets of both in-state and out-of-state banks. Under the Financial Modernization Act of 1999, a bank holding company may apply to the FRB to become a financial holding company,
and thereby engage (directly or through a subsidiary) in certain activities deemed financial in nature, such as securities brokerage and insurance underwriting.



Control of Nonbanks.    With certain exceptions, the BHCA prohibits bank holding
companies from acquiring direct or indirect ownership or control of voting shares in any company that is not a bank or a bank holding company unless the FRB determines that the activities of such company are incidental or closely related to the
business of banking. If a bank holding company is well capitalized and meets certain criteria specified by the FRB, it may engage de novo in certain permissible nonbanking activities without prior FRB approval.



Control Transactions.    The Change
in Bank Control Act of 1978, as amended, requires a person (or group of persons acting in concert) acquiring control of a bank holding company to provide the FRB with 60 days prior written notice of the proposed acquisition.
Following receipt of this notice, the FRB has 60 days within which to issue a notice disapproving the proposed acquisition, but the FRB may extend this time period for up to another 30 days. An acquisition may be completed before expiration of the
disapproval period if the FRB issues written notice of its intent not to disapprove the transaction. In addition, any company must obtain the FRBs approval before acquiring 25% (5% if the company is a bank holding
company) or more of the outstanding shares or otherwise obtaining control over AWBC.



Transactions with Affiliates.    AWBC and its subsidiary banks are deemed affiliates within the meaning of the Federal Reserve Act, and transactions between affiliates are
subject to certain restrictions. Accordingly, AWBC and its subsidiary banks must comply with Sections 23A and 23B of the Federal Reserve Act. Generally, Sections 23A and 23B (1) limit the extent to which a financial institution or its subsidiaries
may engage in covered transactions with an affiliate, as defined, to an amount equal to 10% of such institutions capital and surplus and an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of
such capital and surplus, and (2) require all transactions with an affiliate, whether or not covered transactions, to be on terms substantially the same, or at least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term covered transaction includes the making of loans, purchase of assets, issuance of a guarantee and other similar types of transactions.



Regulation of Management.    Federal law (1) sets forth the circumstances under
which officers or directors of a financial institution may be removed by the institutions federal supervisory agency; (2) places restraints on lending by an institution to its executive officers, directors, principal stockholders, and their
related interests; and (3) prohibits management personnel from serving as a director or in other management positions with another financial institution which has assets exceeding a specified amount or which has an office within a specified
geographic area.



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Tie-In Arrangements.    AWBC and its subsidiary banks
cannot engage in certain tie-in arrangements in connection with any extension of credit, sale or lease of property or furnishing of services. For example, with certain exceptions, neither AWBC nor its subsidiary banks may condition an extension of
credit on either (1) a requirement that the customer obtain additional services provided by it or (2) an agreement by the customer to refrain from obtaining other services from a competitor.



The FRB has adopted significant amendments to its anti-tying
rules that: (1) removed FRB-imposed anti-tying restrictions on bank holding companies and their non-bank subsidiaries; (2) allow banks greater flexibility to package products with their affiliates; and (3) establish a safe harbor from the tying
restrictions for certain foreign transactions. These amendments were designed to enhance competition in banking and nonbanking products and to allow banks and their affiliates to provide more efficient, lower cost service to their customers.
However, the impact of the amendments on AWBC and its subsidiary banks is unclear at this time.



State Law Restrictions.    As a Washington business corporation, AWBC may be subject to certain limitations and restrictions as provided under applicable Washington corporate
law. In addition, Washington banking law may restrict certain activities of its subsidiary banks.



General.    The Banks are subject to regulation by the State of Washington and the Federal Deposit Insurance
Corporation (FDIC). As an Idaho state  chartered bank, BOL is also subject to regulation by the State of Idaho. The federal and state laws that apply to AWBCs subsidiary banks regulate, among other things, the scope of its business, its
investments, its reserves against deposits, the timing of the availability of deposited funds and the nature and amount of and collateral for loans. The laws and regulations governing its subsidiary banks generally have been promulgated to protect
depositors and not to protect stockholders of the subsidiary banks or their holding company.



CRA.    The Community Reinvestment Act (the CRA) requires that, in connection with examinations of financial institutions within their jurisdiction, regulators
must evaluate the record of the financial institutions in meeting the credit needs of their local communities, including low and moderate-income neighborhoods, consistent with the safe and sound operation of those banks. These factors are also
considered in evaluating mergers, acquisitions, and applications to open a branch or facility.



Insider Credit Transactions.    Banks are also subject to certain restrictions imposed by the Federal Reserve Act on extensions of credit to executive officers, directors,
principal shareholders, or any related interests of such persons. Extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, and follow credit underwriting procedures that are not less stringent
than those prevailing at the time for comparable transactions with persons not covered above and who are not employees; and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to
certain lending limits and restrictions on overdrafts to such persons. A violation of these restrictions may result in the assessment of substantial civil monetary penalties on the affected bank or any officer, director, employee, agent, or other
person participating in the conduct of the affairs of that bank, the imposition of a cease and desist order, and other regulatory sanctions.



FDICIA.    Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (the FDICIA),
each federal banking agency has prescribed, by regulation, noncapital safety and soundness standards for institutions under its authority. These standards cover internal controls, information systems, and internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings and stock valuation. An
institution, which fails to meet these standards, must develop a plan acceptable to the agency, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to
regulatory sanctions. Management of AWBC believes that its subsidiary banks meet all such standards, and therefore, does not believe that these regulatory standards materially affect AWBCs business operations.



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Interstate Banking and Branching.    The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the Interstate Act) permits nationwide interstate banking and branching under certain circumstances. This legislation generally authorizes interstate branching and relaxes federal
law restrictions on interstate banking. Currently, bank holding companies may purchase banks in any state, and states may not prohibit such purchases. Additionally, banks are permitted to merge with banks in other states as long as the home state of
neither merging bank has opted out. The Interstate Act requires regulators to consult with community organizations before permitting an interstate institution to close a branch in a low-income area.



Under recent FDIC regulations, banks are prohibited from using
their interstate branches primarily for deposit production. The FDIC has accordingly implemented a loan-to-deposit ratio screen to ensure compliance with this prohibition.



With regard to interstate bank mergers, Washington has opted in to the Interstate Act and allows
in-state banks to merge with out-of-state banks subject to certain aging requirements. Washington law generally authorizes the acquisition of an in-state bank by an out-of-state bank through merger with a Washington financial institution that has
been in existence for at least 5 years prior to the acquisition. With regard to interstate bank branching, out-of-state banks that do not already operate a branch in Washington may not establish de novo branches in Washington or establish and
operate a branch by acquiring a branch in Washington.



Deposit Insurance.    The deposits of its subsidiary banks are currently insured to a maximum of $100,000 per depositor through its subsidiary banks Insurance Fund (BIF) administered by
the FDIC. All insured banks are required to pay semi-annual deposit insurance premium assessments to the FDIC.



The FDICIA included provisions to reform the Federal Deposit Insurance System, including the implementation of risk-based deposit
insurance premiums. The FDICIA also permits the FDIC to make special assessments on insured depository institutions in amounts determined by the FDIC to be necessary to give it adequate assessment income to repay amounts borrowed from the U.S.
Treasury and other sources, or for any other purpose the FDIC deems necessary. The FDIC has implemented a risk-based insurance premium system under which banks are assessed insurance premiums based on how much risk they present to the BIF. Banks
with higher levels of capital and a low degree of supervisory concern are assessed lower premiums than banks with lower levels of capital or a higher degree of supervisory concern.



Dividends.The principal source of AWBCs cash revenues is dividends
received from its subsidiary banks. The payment of dividends is subject to government regulation, in that regulatory authorities may prohibit banks and bank holding companies from paying dividends, which would constitute an unsafe or unsound banking
practice. In addition, a bank may not pay cash dividends if that payment could reduce the amount of its capital below that necessary to meet minimum applicable regulatory capital requirements. Other than the laws and regulations noted above, which
apply to all banks and bank holding companies, neither AWBC nor its subsidiary banks are currently subject to any regulatory restrictions on its dividends.



Capital Adequacy.Federal bank regulatory agencies use capital adequacy guidelines in the examination and
regulation of bank holding companies and banks. If capital falls below minimum guideline levels, the holding company or bank may be denied approval to acquire or establish additional banks or nonbank businesses or to open new facilities.



The FDIC and Federal Reserve use risk-based
capital guidelines for banks and bank holding companies. These are designed to make such capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to
minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance sheet items. The guidelines are minimums, and the Federal Reserve has noted that bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain
ratios well in excess of the minimum. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier I capital. Tier I
capital for bank holding companies includes common shareholders equity, certain qualifying perpetual preferred stock and minority interests in equity accounts of consolidated subsidiaries, less intangibles except as described above.



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The Federal Reserve also employs a leverage ratio, which is Tier I capital as a
percentage of total assets less intangibles, to be used as a supplement to risk-based guidelines. The principal objective of the leverage ratio is to constrain the maximum degree to which a bank holding company may leverage its equity capital base.
The Federal Reserve requires a minimum leverage ratio of 3%. However, for all but the most highly rated bank holding companies and for bank holding companies seeking to expand, the Federal Reserve expects an additional cushion of at least 1% to 2%.



FDICIA created a statutory framework of
supervisory actions indexed to the capital level of the individual institution. Under regulations adopted by the FDIC, an institution is assigned to one of five capital categories depending on its total risk-based capital ratio, Tier I risk-based
capital ratio, and leverage ratio, together with certain subjective factors. Institutions which are deemed to be undercapitalized depending on the category to which they are assigned are subject to certain mandatory supervisory
corrective actions. AWBC does not believe that these regulations have any material effect on its operations.



Effects of Government Monetary Policy.The earnings and growth of AWBC are affected not only by general
economic conditions, but also by the fiscal and monetary policies of the federal government, particularly the Federal Reserve. The Federal Reserve can and does implement national monetary policy for such purposes as curbing inflation and combating
recession, but its open market operations in U.S. government securities, control of the discount rate applicable to borrowings from the Federal Reserve, and establishment of reserve requirements against certain deposits, influence the growth of bank
loans, investments and deposits, and also affect interest rates charged on loans or paid on deposits. The nature and impact of future changes in monetary policies and their impact on AWBC and its subsidiary banks cannot be predicted with certainty.



Disclosure Controls and Procedures



The Sarbanes-Oxley Act of 2002 and related rulemaking by the
Securities and Exchange Commission (SEC), which effect sweeping corporate disclosure and financial reporting reform, generally require public companies to focus on their disclosure controls and procedures. As a result, public companies
such as AmericanWest Bancorporation, now must have disclosure controls and procedures in place and make certain disclosures about them in their periodic SEC reports (i.e., Forms 10-K and 10-Q) and their chief executive and chief financial
officers must certify in these filings that they are responsible for developing and evaluating disclosure controls and procedures and disclose the results of an evaluation conducted by them within the 90-day period preceding the filing of the
relevant report, among other things. AWBC is monitoring the status of other related ongoing rulemaking by the SEC and other regulatory entities. Currently, management believes that AWBC is in compliance with the rulemaking promulgated to date.



Customer Information Security



The FDIC and other bank regulatory agencies have adopted
final guidelines for establishing standards for safeguarding nonpublic personal information about customers that implement provisions of the Financial Modernization Act of 1999 (the Guidelines). Among other things, the Guidelines require
each financial institution, under the supervision and ongoing oversight of its Board of Directors or an appropriate committee thereof, to develop, implement and maintain a comprehensive written information security program designed to ensure the
security and confidentiality of customer information; to protect against any anticipated threats or hazards to the security or integrity of such information; and to protect against unauthorized access to or use of such information that could result
in substantial harm or inconvenience to any customer.



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Privacy



The FDIC and other regulatory agencies have published final privacy rules pursuant to provisions of the
Financial Modernization Act of 1999 (Privacy Rules). The Privacy Rules, which govern the treatment of nonpublic personal information about consumers by financial institutions, require a financial institution to provide notice to
customers (and other consumers in some circumstances) about its privacy policies and practices, describe the conditions under which a financial institution may disclose nonpublic personal information to nonaffiliated third parties and provide a
method for consumers to prevent a financial institution from disclosing that information to most nonaffiliated third parties by opting out of that disclosure, subject to certain exceptions.



USA Patriot Act



The USA Patriot Act of 2001 (the USA Patriot
Act), designed to deny terrorists and others the ability to obtain anonymous access to the U.S. financial system, has significant implications for depository institutions, broker-dealers and other businesses involved in the transfer of money.
The USA Patriot Act, together with the implementing regulations of various federal regulatory agencies, require financial institutions, including AmericanWest Bank, to implement additional or amend existing policies and procedures with respect to,
among other things, anti-money laundering compliance, suspicious activity and currency transaction reporting and due diligence on customers. They also permit information sharing for counter-terrorist purposes between federal law enforcement agencies
and financial institutions, as well as among financial institutions, subject to certain conditions, and require the FRB (and other federal banking agencies) to evaluate the effectiveness of an applicant in combating money laundering activities when
considering applications filed under Section 3 of the BHCA or the Bank Merger Act. Management believes that AWBC and its subsidiaries are currently in compliance with all currently effective requirements prescribed by the USA Patriot Act and all
applicable final implementing regulations.



Item 2. Properties.



At December 31, 2002, AWBC owned or leased facilities in forty-eight locations including forty-one in Eastern Washington and seven in North Idaho and the Computer/Processing Center. AWBCs main office is located in North
Spokane, which is owned by AWB. About 1,400 square feet is used for the Administrative Offices. In addition AWBC leases approximately 9,000 square feet for its Computer/Processing Center located near the Spokane Airport. AWBC is separated into four
separate Regions. As of January 1, 2002, these were the Inland Empire Region headquartered in Spokane, Washington, the Columbia River Region headquartered in Ephrata, Washington, the Blue Mountain Region headquartered in Walla Walla, Washington, and
the Palouse Region headquartered in Pullman, Washington.



There are a total of forty-seven branch or lending office locations, of which forty are in Eastern Washington. They are located in: Chewelah, Colfax, Colton, Colville, Davenport, Dayton, Ellensburg, Ephrata, Ione, Kettle Falls,
Latah, Mabton, Moses Lake (2), Naches, Oaksdale, Palouse, Prosser, Pullman (3), Richland, Spokane (9), Sunnyside, Tekoa, Uniontown, Waitsburg, Walla Walla (2), Yakima (2) and Zillah. The remaining seven branches in North Idaho are located in:
Hayden, Kellogg, Lewiston, Moscow, Orofino, and St. Maries (2).



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Item 3. Legal Proceedings.



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



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



No matters were submitted to a vote of AWBCs shareholders during the fourth quarter of 2002.



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PART II



Item 5.    Market for Registrants Common Equity and Related Stockholder Matters.



Market Information.    The Common Stock is quoted on the Nasdaq National Market System (NASDAQ) under the
symbol AWBC. The following table sets out the high and low prices per share for the Common Stock for 2002 and 2001 as reported by NASDAQ.



|               |  | Sales Price
|-------------- |  | -----------
|               |  | 2002       
|               |  | High       
|First Quarter  |  | $          
|Second Quarter |  | $          
|Third Quarter  |  | $          
|Fourth Quarter |  | $          



Per
share amounts have been adjusted giving retroactive effect to stock dividends.



Holders.    The number of holders of common stock of record on February 15, 2003 was approximately 3,000.



Dividends.    AWBC has declared and paid the following dividends subsequent to
January 1, 2001: On February 15, 2001, and February 1, 2002 AWBC paid 10% stock dividends. No cash dividends were paid.



Securities Authorized for Issuance Under Equity Compensation Plans.The following table provides information
as of December 31, 2002, with respect to AWBCs compensation plans under which shares of the companys common stock are authorized for issuance:



Equity Compensation Plan Information.



|Plan Category                                              |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights |  | Weighted average exercise price of outstanding options, warrants and rights |      | Number of securities remaining available for future
issuance under equity compensation plans (excluding securities reflected in column (a)
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------------------
|                                                           |  | (a)                                                                                         |  | (b)                                                                         |      | (c)                                                                                                                                       
|Equity compensation plans approved by security holders     |  | 794,314                                                                                     |  | $                                                                           | 7.45 |                                                                                                                                           
|Equity compensation plans not approved by security holders |  | 0                                                                                           |  | $                                                                           | 0.00 |                                                                                                                                           
|Total                                                      |  | 794,314                                                                                     |  | $                                                                           | 7.45 |                                                                                                                                           



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Item 6.    Selected Financial Data



The following table sets forth certain selected consolidated financial data of AWBC at and for the years ended December 31:



|($ in thousands, except per share amounts)  |  | 2002 |           |   | 2001 |   |           | 2000 |  |   | 1999      |   |  | 1998 |          
|------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | ---------
|                                            |  |      |          
|Net interest income                         |  | $    | 44,092    |   |      | $ | 34,424    |      |  | $ | 30,356    |   |  | $    | 28,474   
|Provision for loan losses                   |  |      | 5,663     |   |      |   | 2,855     |      |  |   | 1,643     |   |  |      | 1,577    
|Noninterest income                          |  |      | 5,384     |   |      |   | 4,702     |      |  |   | 4,029     |   |  |      | 5,912    
|Noninterest expense                         |  |      | 27,560    |   |      |   | 22,276    |      |  |   | 21,328    |   |  |      | 19,209   
|Income before income tax expense            |  |      | 16,253    |   |      |   | 13,995    |      |  |   | 11,414    |   |  |      | 13,600   
|Income tax expense                          |  |      | 5,354     |   |      |   | 4,788     |      |  |   | 3,379     |   |  |      | 3,888    
|Net income                                  |  |      | 10,899    |   |      |   | 9,207     |      |  |   | 8,035     |   |  |      | 9,712    
|Basic earnings per common share             |  | $    | 1.37      |   |      | $ | 1.12      |      |  | $ | 0.91      |   |  | $    | 1.05     
|Diluted earnings per common share           |  | $    | 1.33      |   |      | $ | 1.12      |      |  | $ | 0.90      |   |  | $    | 1.04     
|Return on average assets                    |  |      | 1.41      | % |      |   | 1.46      | %    |  |   | 1.44      | % |  |      | 1.90     
|Return on average equity                    |  |      | 15.08     | % |      |   | 13.87     | %    |  |   | 12.73     | % |  |      | 16.58    
|Assets                                      |  |      | 916,831   |   |      |   | 659,341   |      |  |   | 598,513   |   |  |      | 527,726  
|Securities                                  |  |      | 48,173    |   |      |   | 15,550    |      |  |   | 47,885    |   |  |      | 53,141   
|Loans:                                      |  |      |           |   |      |   |           |      |  |   |           |   |  |      |          
|Commercial and industrial                   |  |      | 540,467   |   |      |   | 411,197   |      |  |   | 317,108   |   |  |      | 246,796  
|Agricultural                                |  |      | 121,279   |   |      |   | 88,121    |      |  |   | 76,093    |   |  |      | 67,025   
|Real estate mortgage                        |  |      | 47,613    |   |      |   | 40,084    |      |  |   | 62,173    |   |  |      | 66,690   
|Real estate construction                    |  |      | 29,303    |   |      |   | 17,201    |      |  |   | 12,252    |   |  |      | 14,781   
|Installment                                 |  |      | 27,405    |   |      |   | 26,311    |      |  |   | 22,489    |   |  |      | 21,190   
|Other loans                                 |  |      | 9,512     |   |      |   | 5,062     |      |  |   | 3,972     |   |  |      | 6,939    
|Total loans                                 |  |      | 775,579   |   |      |   | 587,976   |      |  |   | 494,087   |   |  |      | 423,421  
|Allowance for loan loss to loans percentage |  |      | 1.32      | % |      |   | 1.13      | %    |  |   | 1.00      | % |  |      | 1.03     
|Deposits                                    |  |      | 766,335   |   |      |   | 532,237   |      |  |   | 501,426   |   |  |      | 452,899  
|Borrowings                                  |  |      | 63,696    |   |      |   | 53,601    |      |  |   | 27,367    |   |  |      | 8,198    
|Stockholders equity                        |  |      | 81,130    |   |      |   | 68,206    |      |  |   | 64,530    |   |  |      | 62,922   
|Equity to assets ratio                      |  |      | 8.85      | % |      |   | 10.34     | %    |  |   | 10.78     | % |  |      | 11.92    
|Basic weighted average shares               |  |      | 7,954,577 |   |      |   | 8,190,374 |      |  |   | 8,819,697 |   |  |      | 9,233,412



See Item
7, Results of Operations below for a description of the nonrecurring items of 2001 and 2000



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Item 7.    Managements Discussion and Analysis of Financial Condition and Results of Operations.



Overview



You should read the following discussion together with AWBCs consolidated financial statements, related notes and supplementary data of AWBC and its subsidiaries, which are included elsewhere
in this Annual Report. The following discussion contains forward-looking statements that reflect plans, estimates and beliefs. The actual results of AWBC could differ materially from those discussed in the forward-looking statements.



AWBCs net income is derived primarily
from net interest income of the Banks, which is the difference between interest earned on their loan and investment portfolios and their cost of funds, primarily interest paid on deposits and borrowings. For the years ended December 31, 2002, 2001,
and 2000, AWBCs average net interest margins were 6.2%, 6.0%, and 6.0%, respectively.



Net income is also affected by levels of provisions for loan losses, noninterest income (primarily service charges on deposits, insurance commissions, sale of securities gains or losses and other
operating income) and noninterest expense (primarily salaries and benefits, occupancy expense, data processing cost, legal and professional services expense, business and occupation tax, and other operating expenses). For the three years ended
December 31, 2002, 2001, and 2000, the provision for loan losses was $5,663,000, $2,855,000, and $1,643,000, respectively. Net charge-offs during the year ended December 31, 2002 were $2,893,000 as compared to $1,179,000 and $1,044,000 during 2001
and 2000, respectively.



Net Interest Income



The following table sets forth information with regard to
average balances of assets and liabilities, and interest income from interest-earning assets and interest expense on interest-bearing liabilities, resultant yields or costs, net interest income, net interest spread (the difference between the
average yield on interest-earning assets and the average cost of interest-bearing liabilities), and the net interest margin.



|                                              |  | Year Ended December 31, |        
|--------------------------------------------- |  | ----------------------- | -------
|                                              |  | 2002                    |        
|($ in thousands)                              |  | Average Balance         |        
|                                              |  |                         |        
|Assets                                        |  |                         |        
|Loans                                         |  | $                       | 675,344
|Taxable securities                            |  |                         | 22,178 
|Nontaxable securities                         |  |                         | 4,456  
|Overnight deposits with other banks           |  |                         | 11,095 
|                                              |  |                         |        
|Total interest earning assets                 |  |                         | 713,073
|                                              |  |                         |        
|Noninterest earning assets                    |  |                         | 62,349 
|                                              |  |                         |        
|Total assets                                  |  | $                       | 775,422
|                                              |  |                         |        
|Liabilities                                   |  |                         |        
|Interest-bearing demand deposits              |  | $                       | 206,570
|Savings deposits                              |  |                         | 44,946 
|Time deposits                                 |  |                         | 283,044
|                                              |  |                         |        
|Total interest-bearing deposits               |  |                         | 534,560
|Short-term borrowings                         |  |                         | 46,060 
|Long-term borrowings                          |  |                         | 3,244  
|                                              |  |                         |        
|Total interest-bearing liabilities            |  |                         | 583,864
|                                              |  |                         |        
|Noninterest bearing demand deposits           |  |                         | 111,139
|Other noninterest bearing liabilities         |  |                         | 8,151  
|                                              |  |                         |        
|Total liabilities                             |  |                         | 703,154
|Stockholders Equity                          |  |                         | 72,268 
|                                              |  |                         |        
|Total liabilities and stockholders equity    |  | $                       | 775,422
|                                              |  |                         |        
|Net interest income                           |  |                         |        
|                                              |  |                         |        
|Net interest margin to average earning assets |  |                         |        
|                                              |  |                         |        



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Nonaccrual loans are included with loan balances. In the above table tax-exempt
securities income has been presented using a tax equivalent basis and an assumed tax rate of 34%.



The following table illustrates the changes in AWBCs net interest income due to changes in volumes and interest rates. Management
has assessed, and will continue to assess on an on-going basis the impact of the recent tragedies and the slowing Washington state economy on the credit risk in the loan portfolio. Currently, management is not aware of any unusually large loan
concentrations in industries negatively impacted by the recent events and the slowdown in the economy. Management continues to closely monitor AWBC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 on-going assessments.



The change in interest income and interest expense due to changes in both volume and rate, which cannot be segregated, has been allocated
proportionately to the change due to volume and the change due to rate.



|                                                 |  | 2002 vs 2001                                                 |        |   | 2001 vs 2000 |  
|------------------------------------------------ |  | ------------------------------------------------------------ | ------ | - | ------------ | -
|                                                 |  | Increase (decrease) in net interest income due to changes in |       
|($ in thousands)                                 |  | Volume                                                       |        |   | Rate         |  
|INTEREST EARNING ASSETS                          |  |                                                              |        |   |              |  
|Loans                                            |  | $                                                            | 12,839 |   |              | $
|Securities                                       |  |                                                              | (502   | ) |              |  
|Federal funds sold and overnight time deposits   |  |                                                              | 306    |   |              |  
|                                                 |  |                                                              |        |   |              |  
|Total interest earning assets                    |  | $                                                            | 12,643 |   |              | $
|                                                 |  |                                                              |        |   |              |  
|INTEREST BEARING LIABILITIES                     |  |                                                              |        |   |              |  
|Interest-bearing demand deposits                 |  | $                                                            | 1,423  |   |              | $
|Savings deposits                                 |  |                                                              | 64     |   |              |  
|Time deposits                                    |  |                                                              | 3,071  |   |              |  
|                                                 |  |                                                              |        |   |              |  
|Total interest bearing deposits                  |  |                                                              | 4,558  |   |              |  
|Short-term borrowings                            |  |                                                              | 24     |   |              |  
|Long-term borrowings                             |  |                                                              | 550    |   |              |  
|                                                 |  |                                                              |        |   |              |  
|Total interest bearing liabilities               |  |                                                              | 5,132  |   |              |  
|                                                 |  |                                                              |        |   |              |  
|Total increase (decrease) in net interest income |  | $                                                            | 7,511  |   |              | $
|                                                 |  |                                                              |        |   |              |  



The
following table presents the aggregate maturities of loans in each major category of the AWBCs loan portfolio at December 31, 2002. Actual maturities may differ from the contractual maturities shown below as a result of renewals and
prepayments.



|2002 ($ in thousands)                  |  | Less than one year |         | One to five years |   | Over five years |  | Total
|-------------------------------------- |  | ------------------ | ------- | ----------------- | - | --------------- |  | -----
|Commercial, financial and agricultural |  | $                  | 221,115 |                   | $ | 211,739         |  | $    
|Real estate-mortgage                   |  |                    | 9,835   |                   |   | 20,948          |  |      
|Real estate-construction               |  |                    | 27,167  |                   |   | 2,116           |  |      
|Installment                            |  |                    | 5,004   |                   |   | 20,206          |  |      
|Other                                  |  |                    | 8,464   |                   |   | 140             |  |      
|                                       |  |                    |         |                   |   |                 |  |      
|Total                                  |  | $                  | 271,585 |                   | $ | 255,149         |  | $    
|                                       |  |                    |         |                   |   |                 |  |      



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Results of Operations



Years Ended December 31, 2002, 2001, and 2000



Performance Summary



|                                                    |  |      |        |      |   |        |  | % Change |       
|--------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | -------- | ------
|($ in thousands, except per share)                  |  | 2002 |        | 2001 |   | 2000   |  | 2002     |       
|Interest income                                     |  | $    | 59,202 |      | $ | 53,504 |  | $        | 50,042
|Interest expense                                    |  |      | 15,110 |      |   | 19,080 |  |          | 19,686
|                                                    |  |      |        |      |   |        |  |          |       
|Net interest income                                 |  |      | 44,092 |      |   | 34,424 |  |          | 30,356
|Provision for loan losses                           |  |      | 5,663  |      |   | 2,855  |  |          | 1,643 
|                                                    |  |      |        |      |   |        |  |          |       
|Net interest income after provision for loan losses |  |      | 38,429 |      |   | 31,569 |  |          | 28,713
|Noninterest income                                  |  |      | 5,384  |      |   | 4,702  |  |          | 4,029 
|Noninterest expense                                 |  |      | 27,560 |      |   | 22,276 |  |          | 21,328
|                                                    |  |      |        |      |   |        |  |          |       
|Income before income taxes                          |  |      | 16,253 |      |   | 13,995 |  |          | 11,414
|Income taxes                                        |  |      | 5,354  |      |   | 4,788  |  |          | 3,379 
|                                                    |  |      |        |      |   |        |  |          |       
|Net income                                          |  | $    | 10,899 |      | $ | 9,207  |  | $        | 8,035 
|                                                    |  |      |        |      |   |        |  |          |       
|Basic earnings per common share                     |  | $    | 1.37   |      | $ | 1.12   |  | $        | 0.91  
|Diluted earnings per common share                   |  | $    | 1.33   |      | $ | 1.12   |  | $        | 0.90  



AWBCs net income was $10,899,000 in 2002, $9,207,000 in 2001, and $8,035,000 in 2000. Basic earnings per share were $1.37, $1.12, and $.91 for 2002, 2001, and 2000, respectively. Diluted earnings per share were $1.33, $1.12,
and $.90 in 2002, 2001, and 2000, respectively.



2001 results include a gain of $392,000 on the sale of the Insurance Agency. This gain increased 2001 net income by $258,000 and $.03 per share. 2000 results included a rehabilitation tax credit of $283,000, loss on the sale of
securities of $358,000, and a loss on the completion of the amortization of the Moses Lake Branch intangible asset of $505,000. 2000 net income was reduced by $290,000 and $.03 per share for these items.



AWBC completed its merger with Latah Bancorporation, Inc. and
Bank of Latah (BOL) effective July 31, 2002. As of July 31, 2002, BOL had approximately $135 million in total assets, $112 million in deposits, and $95 million in loans. Approximately 330,000 AWBC shares and $13.5 million in cash were issued to BOL
shareholders for the merger. The purchase accounting method was used for the transaction.



Return on average assets was 1.41%, 1.46%, and 1.44% for 2002, 2001, and 2000, respectively. Return on average equity was 15.08%, 13.87%, and 12.73% for 2002, 2001, and 2000, respectively. Without the
nonrecurring items described above, return on assets would have been 1.42% and 1.49% for 2001 and 2000, respectively. Return on equity would have been 13.48% and 13.20% for 2001 and 2000, respectively.



Net Interest Income.Net interest income increased 28%
to $44,092,000 in 2002 compared to 2001. The increase in 2001 was 13% to $34,424,000 over 2000 results. The net interest income improvements were primarily the result of loan volume increases in 2002 and 2001. AWBCs net interest margin to
average earning assets was 6.18%, 5.97%, and 6.01% in 2002, 2001, and 2000, respectively. As market interest rates decreased significantly during 2002 the yield on earning assets declined to 8.30% in 2002 after falling to 9.27% in 2001. Interest
bearing liabilities also moved with market interest rates by declining to 2.59% in 2002 after declining to 4.09% in 2001. The overall result was a slight net interest margin increase from 5.97% to 6.18% in 2002 after declining from 6.01% in 2000.
Average earning assets increased 23% to $713 million in 2002 after rising 13% to $579 million in 2001.



Provision for Loan Losses.Provision for loan losses increased to $5,663,000 in 2002 from $2,885,000 in 2001 and $1,643,999 in
2000. The increase was due to the changing economic conditions in 2002 and



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2001 in Eastern Washington, Northern Idaho and the Pacific Northwest in general as well as the
continued internal growth of the Loan Portfolio. Provisions are made to reserve for known and inherent risk characteristics within the loan portfolio. AWBC and its subsidiaries regularly evaluate the level of provision and the Allowance for Loan
Losses for adequacy by considering such factors as current loan grades, historical loss rates, change in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and estimate
impact of current economic conditions that may effect a borrowers ability to pay. The use of different estimates or assumptions could produce different provision for loan loss. In addition, the allowance for losses and loans and the provision
for loan losses is also subject to regulatory supervision and examination.



Noninterest Income.Noninterest income, which consists of fees and service charges, insurance commissions, securities gains and losses, and other income, increased 14.5%
in 2002 to $5.3 million. The increase was due to the increases in services and other fees and mortgage banking and Bank Owned Life Insurance income in the Other Income line item. In 2001 noninterest income increased 17% due to the gain on the sale
of the Insurance Agency of $392,000 and gains on the sale of credit card servicing, securities and loans. Fees and service charges for banking services increased to $3.7 million in 2002 after being at $2.8 million in 2001 and $2.5 million in 2000.



Noninterest
Expense.    Noninterest expense increased by 15% in 2002 due to increases in loan officer incentive expense, nonperforming loan legal expense, and bank merger expense. Noninterest expense increased in 2001 due to loan officer
incentive expense, nonperforming loan legal expense, and merger of the banks expense offset by lower expenses with the sale of the Insurance Agency and a Business and Occupation tax expense refund from an audit.



Income Tax Expense.Income Tax
Expense increased in proportion to the increase in Net Income before Taxes.



Liquidity and Capital Resources



Management believes that AWBCs cash flow will be sufficient to support its existing operations for the foreseeable future. Cash flows from operations contribute significantly to liquidity, as do proceeds from maturities of
securities and increasing customer deposits. If AWBC needs additional liquidity, it would be required to borrow or issue additional capital stock. AWBCs ability to incur indebtedness is limited by government regulations and its ability to
service borrowings is dependent upon the availability of dividends from the Banks. The payments of dividends by the Banks are subject to limitations imposed by law and governmental regulations. During 2002 AWB received $54,341,000 in certificates of
deposit through the use of QwickRate Express Data and their Internet services.



The Bank may borrow on a short-term basis to compensate for reductions in other sources of funds. Bank borrowings may also be used on a longer-term basis to support expanded lending activities and to
match the maturity of repricing intervals of assets. At December 31, 2002, AWBC had approximately $138 million of lines of credit available for liquidity purposes. Cash flows from operations also contribute significantly to liquidity as indicated in
AWBCs Consolidated Statement of Cash Flows, as well as proceeds from maturities of securities and increasing customer deposits.



AWBCs total stockholders equity increased to $81,130,000 at December 31, 2002, from $68,206,000 at December 31, 2001 and
$64,530,000 at December 31, 2000. At December 31, 2002, stockholders equity was 8.85% of total assets, compared to 10.34% at December 31, 2000. At December 31, 2002, AWBC held cash and cash-equivalent assets of $38.9 million.



The capital levels of AWBC and the Banks exceed applicable
regulatory well-capitalized guidelines at December 31, 2002.



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Effects of Inflation and Changing Prices.    The primary
impact of inflation on AWBCs operations is increased asset yields, deposit costs and operating overhead. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a
result, interest rates generally have a more significant impact on a financial institutions performance than the effects of general levels of inflation. Although interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services, increases in inflation generally have resulted in increased interest rates. The effects of inflation can magnify the growth of assets, and if significant, would require that equity capital increase at a
faster rate than would otherwise be necessary.



New Accounting
Pronouncements.



During the year 2002 the
Financial Accounting Standards Board issued the following accounting standards:



Statement of Financial Standard (SFAS) No. 145, Rescission of FASB Statement No. 13, and Technical Corrections.    This Statement rescinds FASB Statement No. 4, Reporting
Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44, Accounting for Intangible
Assets of Motor Carriers. This Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications
that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed
conditions. AWBC implemented this statement effective April 1, 2002. Implementation of this statement did not result in a material impact on its financial position or results of operations.



Statement of Financial Accounting Standard (SFAS) No. 146,
Accounting for Costs Associated with Exit or Disposal Activities,addresses financial accounting and reporting for the treatment of costs associated with exit or disposal activities. This Statement improves financial reporting by requiring
that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. This Statement replaces EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity. The provisions of this Statement are to be applied prospectively to exit or disposal activities initiated after December 31, 2002. AWBC does not expect the Statement will result in a material
impact on its financial position or results of operations.



Statement of Financial Accounting Standard (SFAS) No. 147, Acquisitions of Certain Financial Institutions  an Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9. The provisions of this Statement
that relate to the application of the purchase method of accounting apply to all acquisitions of financial institutions, except transactions between two or more mutual enterprises. This Statement removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with FASB Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. In
addition, this Statement amends FASB Statement N0. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor and
borrower relationship intangible assets and credit-card-holder intangible assets. This Statement is effective for acquisitions on or after October 1, 2002. AWBC does not expect the Statement will result in a material impact on its financial position
or results or operation.



Statement of Financial
Accounting Standard (SFAS) No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure an Amendment of FASB Statement No. 123.This Statement amends FASB No. 123, to provide alternative methods of transition for a
voluntary change to the fair-value based method of accounting for stock-based employee compensation. In addition, it amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As of December 31, 2002, AWBC has adopted the disclosure requirements of the Statement and continues to follow the intrinsic
value method to account for stock-based employee compensation.



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In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.The Interpretation elaborates on the disclosures to be made by sellers or guarantors of products and services, as well as those
entities guaranteeing the financial performance of others. The Interpretation further clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee.
The initial recognition and initial measurement provisions of the Interpretation are effective on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements are effective for financial statements of
periods ending after December 15, 2002. AWBC believes that its disclosures with regards to these matters are adequate as of December 31, 2002.



Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.



Market Risk



Management considers interest rate risk to be a market risk that could have a significant effect on the financial condition and results of
operations of AWBC. AWBC does not use derivatives including forward and futures contracts, options, and swaps to manage its market and interest rate risks. All of AWBCs transactions are denominated in U.S. dollars. Approximately 41% of
AWBCs loan portfolio has interest rates, which float with the Banks reference interest rates. Fixed rate loans are generally made with a term of five years or less. General economic conditions, regulatory policy and competition in the
marketplace affect interest income and cost of funds. The Banks operating strategies focus on asset/liability management. The purpose of asset/liability management (ALM) is to provide stable net interest income growth by protecting
the AWBCs earnings from undue interest rate risk. AWBC follows an ALM policy for controlling exposure to interest rate risk. The ALM policy is designed to maintain an appropriate balance between rate-sensitive assets and liabilities in order
to maximize interest rate spreads. AWBC monitors the sensitivity of its assets and liabilities with respect to changes in interest rates and maturities, and direct the allocation of their funds accordingly. The strategy of AWBC has been to maintain,
to the extent possible, a balanced position between assets and liabilities, and to place emphasis on the sensitivity of its assets.



The following table presents estimated maturity or pricing information indicating AWBCs exposure to interest rate changes as of
December 31, 2002. The expected maturities take into consideration historical and estimated principal prepayments for loans and securities. Principal prepayments are the amounts of principal reduction in addition to contractual amortization.
Fixed-rate and variable-rate loans are expected to have payment rates of 35%, 25%, 15%, 15%, and 10% for the following five years, respectively. Securities principal payments are based on payment experience as of December 31, 2002. The expected
maturities for financial liabilities with no stated maturity reflect historical and estimated future roll-off rates. The anticipated annual roll-off rates for noninterest bearing deposits, interest-bearing demand deposits and savings deposits are
15%. The interest rates disclosed are based on rates from 2002 results. Fair values are based on the calculations used in accordance with generally accepted accounting principles as disclosed in the financial statements.



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|Year ended December 31, 2002 ($ in thousands)        |      | Expected maturity |         |      | 
|---------------------------------------------------- | ---- | ----------------- | ------- | ---- | 
|                                                     | 2003 |                   |         | 2004 | 
|Financial Assets                                     |      |                   |         |      | 
|Cash and due from banks                              |      | $                 | 24,250  |      | 
|Overnight interest bearing deposits with other banks |      |                   | 14,675  |      | 
|Weighted average interest rate                       |      |                   | 1.10    | %    | 
|Securities                                           |      |                   | 8,210   |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Fixed rate loans                                     |      |                   | 159,911 |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Variable rate loans                                  |      |                   | 111,542 |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Financial Liabilities                                |      |                   |         |      | 
|Noninterest bearing deposits                         |      |                   | 20,320  |      | 
|Interest-bearing demand deposits                     |      |                   | 8,670   |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Savings deposits                                     |      |                   | 37,352  |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Time deposits                                        |      |                   | 254,911 |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Short-term borrowings                                |      |                   | 46,284  |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Long-Term Borrowings                                 |      |                   | 46      |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Trust Preferred                                      |      |                   |         |      | 
|Weighted average interest rate                       |      |                   |         |      | 
|Net of financial assets and liabilities              |      |                   | (48,995 | )    | 
|Cumulative net amount                                |      |                   | (48,995 | )    | 
|Percentage of total assets                           |      |                   | -5.34   | %    | 



The
above table presents information about AWBCs interest sensitivity; it does not predict future earnings. AWBC uses budgeting and earnings projections to forecast earnings. It requires assumptions about the projection of loan and securities
prepayments, loan originations and liability funding sources, which may be inaccurate. Weighted average interest rates by expected maturity are not available.



Item 8.    Financial Statements and Supplementary Data.



The consolidated financial statements and supplementary data of AWBC and its subsidiaries for the years ended December 31, 2002, 2001, and
2000, which have been audited except as indicated by Moss Adams LLP, are included as part of Item 15 of this report.



Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial



Disclosure.



Not applicable.



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PART III



Item 10.    Directors and Executive Officers of the Registrant.



The information requested by this item is contained in the registrants 2003 proxy statement under the headings Election of
Directors and Executive Officers who are not Directors, and is incorporated by reference.



Item 11.    Executive Compensation.



The information requested by this item is contained in the registrants 2003 proxy statement under the headings Executive Compensation and Report of the Compensation
Committee, and is incorporated by reference.



Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.



The information requested by this item is contained in the registrants 2003 proxy statement under the heading Security
Ownership of Certain Beneficial Owners and Management, and is incorporated by reference.



Item 13.    Certain Relationships and Related Transactions.



The information requested by this item is contained in the registrants 2003 proxy statement under the heading Related Party
Transactions and Business Relations, and is incorporated by reference.



Item 14.    Controls and Procedures.



Within 90 days prior to the date of this report we evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Our principal executive and financial officers
supervised and participated in this evaluation. Based on this evaluation, our principal executive and financial officers each concluded that our disclosure controls and procedures are effective in timely alerting them to material information
required to be included in our periodic reports to the SEC. The design of any system of controls is based in part upon various assumptions about the likelihood of future events, and there can be no assurance that any of our plans, products, services
or procedures will succeed in achieving their intended goals under future conditions. In addition, there have been no significant changes in our internal controls or in other factors known to management that could significantly affect our internal
controls subsequent to our most recent evaluation. We have found no facts that would require us to take any corrective actions with regard to significant deficiencies or material weaknesses.



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PART IV



Item 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.



|(a) (1) |  | Financial Statements                                                                                                                                                                                                                                                                                                          
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  | Independent Auditors Report on Consolidated Financial Statements                                                                                                                                                                                                                                                             
|        |  | Consolidated Statements of Condition                                                                                                                                                                                                                                                                                          
|        |  | Consolidated Statements of Income                                                                                                                                                                                                                                                                                             
|        |  | Consolidated Statements of Changes in Stockholders Equity                                                                                                                                                                                                                                                                    
|        |  | Consolidated Statements of Cash Flows                                                                                                                                                                                                                                                                                         
|        |  | Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                                    
|       
|(a) (2) |  | There are no financial statement schedules filed herewith.                                                                                                                                                                                                                                                                    
|       
|(a) (3) |  | Exhibits                                                                                                                                                                                                                                                                                                                      
|       
|3.1     |  | Articles of Incorporation of registrant are incorporated herein by reference to Exhibit 3(a) to the registrants
registration statement on Form S-14 (File No. 2-86318).                                                                                                                                                      
|       
|3.2     |  | Bylaws of registrant are incorporated herein by reference to Exhibit 3(b) to the registrants registration
statement on Form S-14 (File No. 2-86318).                                                                                                                                                                         
|       
|10.1    |  | Agreement and Plan of Mergers dated March 28, 2002, by and among AmericanWest Bancorporation, AmericanWest Bank, Latah
Bancorporation, Inc. and Bank of Latah is incorporated by reference to Exhibit 2 of the registrants registration statement on Form S-4 (File No. 333-87838).                                          
|       
|10.2    |  | Latah Bancorporation, Inc. 1999 Employee Incentive Stock Option Plan is incorporated by reference to Exhibit 99.1 to
the registrants registration statement on Form S-8 (File No. 333-101040) filed November 6, 2002.                                                                                                        
|       
|10.3    |  | Latah Bancorporation, Inc. 1999 Non-Qualified Stock Option Plan is incorporated by reference to Exhibit 99.2 to the
registrants registration statement on Form S-8 (File No. 333-101040) filed November 6, 2002.                                                                                                             
|       
|10.4    |  | Placement Agreement dated as of September 18, 2002, between AmericanWest Bancorporation and AmericanWest Statutory
Trust I, as Offerors, and FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc., as Placement Agents, for the issuance of Floating Rate Capital Securities to Preferred Term Securities VII, Ltd.
|       
|10.5    |  | Indenture dated as of September 26, 2002, between AmericanWest Bancorporation, as Issuer, and State Street Bank and
Trust Company of Connecticut, National Association, as Trustee, for the issuance of Floating Rate Junior Subordinated Deferrable Interest Debentures due 2032.                                            
|       
|10.6    |  | Form of AmericanWest Bancorporation Floating Rate Junior Subordinated Deferrable Interest
Debentures.                                                                                                                                                                                                                         
|       
|10.7    |  | Form of AmericanWest Statutory Trust I Floating Rate Capital Securities.                                                                                                                                                                                                                                                      
|       
|10.8    |  | Form of AmericanWest Statutory Trust I Floating Rate Common Securities.                                                                                                                                                                                                                                                       
|       
|10.9    |  | Amended and Restated Declaration of Trust dated as of September 26, 2002, between AmericanWest Bancorporation, as
Sponsor; Wesley E. Colley, Wade Griffith and John L. Gilbert, as Administrators; and State Street Bank and Trust Company of Connecticut, National Association, as Institutional Trustee.                    



29



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AMERICANWEST BANCORPORATION



|     
|-----
|10.10
|     
|10.11
|     
|10.12
|     
|10.13
|     
|21   
|     
|23.1 
|     
|99.1 



(b)
Reports on Form 8-K.



There were
no Form 8-K Reports in the last quarter of 2002.



(c) All schedules are omitted as the required information is not applicable or the information is presented in the Consolidated Financial Statements or related notes.



SIGNATURES



In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 26thof March, 2003.



|Principal Executive Officer: |  |                             |  | 
|---------------------------- |  | --------------------------- |  | 
|                            
|By:                          |  | /s/    Wes
Colley           |  | 
|                             |  | Wes Colley                  |  | 
|                            
|Principal Accounting Officer |  |                             |  | 
|                            
|By:                          |  | /s/    C. Tim
Cassels       |  | 
|                             |  | C. Tim Cassels              |  | 
|                            
|Remaining Directors          |  |                             |  | 
|                            
|By:                          |  | /s/    Rand
Elliott         |  | 
|                             |  | Rand Elliott, Directors     |  | 
|                             |  |                             |  | 
|                            
|By:                          |  | /s/    Allen
Ketelson       |  | 
|                             |  | Allen Ketelson, Director    |  | 
|                             |  |                             |  | 
|                            
|By:                          |  | /s/    Robert J.
Gardner    |  | 
|                             |  | Robert J. Gardner, Director |  | 



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AMERICANWEST BANCORPORATION



CERTIFICATIONS



I, Wesley E. Colley,
President and Chief Executive Officer, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of AmericanWest Bancorporation.
| | -- |  | -------------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
know to us by others within those entities. Particularly during the period in which this annual report is being prepared;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the Evaluation Date); and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes to internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Dated: March 26, 2003.

/s/    Wesley E.
ColleyWesley E. Colley President and Chief Executive Officer






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AMERICANWEST BANCORPORATION



I, C. Tim Cassels, Vice President and Chief Financial Officer, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of AmericanWest Bancorporation.
| | -- |  | -------------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
know to us by others within those entities. Particularly during the period in which this annual report is being prepared;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the Evaluation Date); and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes to internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Dated: March 26, 2003.



/s/    C. Tim
CasselsC. Tim Cassels Vice President and Chief Financial Officer






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AMERICANWEST BANCORPORATION



Independent Auditors Report



To the Board of Directors and Shareholders

AmericanWest Bancorporation



We have audited the accompanying consolidated statement of financial condition of AmericanWest Bancorporation
and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of income, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2002. These consolidated financial
statements are the responsibility of the Corporations management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provided a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AmericanWest Bancorporation and subsidiaries as of December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the three years ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.



/s/ Moss Adams LLP



Everett, Washington

January 24, 2003



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AMERICANWEST BANCORPORATION



CONSOLIDATED STATEMENTS OF CONDITION

DECEMBER 31, 2002 AND 2001

($ In thousands)



|                                                                                                                  |  | 2002 |         | 2001
|----------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ----
|ASSETS                                                                                                            |  |      |         |     
|Cash and due from banks                                                                                           |  | $    | 24,250  |     
|Overnight interest bearing deposits with other banks                                                              |  |      | 14,675  |     
|Cash and cash equivalents                                                                                         |  |      | 38,925  |     
|                                                                                                                 
|Securities                                                                                                        |  |      | 48,173  |     
|                                                                                                                 
|Loans, net of allowance for loan losses of $10,272 in 2002 and $6,624 in
2001                                     |  |      | 764,938 |     
|                                                                                                                 
|Accrued interest receivable                                                                                       |  |      | 6,405   |     
|Premises and equipment, net                                                                                       |  |      | 20,943  |     
|Foreclosed real estate and other foreclosed assets                                                                |  |      | 7,874   |     
|Life insurance and salary continuation assets                                                                     |  |      | 11,915  |     
|Goodwill                                                                                                          |  |      | 12,050  |     
|Intangible assets                                                                                                 |  |      | 3,180   |     
|Other assets                                                                                                      |  |      | 2,428   |     
|                                                                                                                  |  |      |         |     
|TOTAL ASSETS                                                                                                      |  | $    | 916,831 |     
|                                                                                                                  |  |      |         |     
|LIABILITIES                                                                                                       |  |      |         |     
|Noninterest bearingdemand deposits                                                                               |  | $    | 135,537 |     
|Interest bearing deposits:                                                                                        |  |      |         |     
|NOW and savings accounts                                                                                          |  |      | 306,969 |     
|Time, $100,000 and over                                                                                           |  |      | 142,341 |     
|Other time                                                                                                        |  |      | 181,488 |     
|                                                                                                                  |  |      |         |     
|TOTAL DEPOSITS                                                                                                    |  |      | 766,335 |     
|                                                                                                                 
|Short-term borrowings                                                                                             |  |      | 46,284  |     
|Long-term borrowings                                                                                              |  |      | 6,825   |     
|Capital lease obligations                                                                                         |  |      | 587     |     
|Trust Preferred Securities                                                                                        |  |      | 10,000  |     
|Accrued interest payable                                                                                          |  |      | 1,199   |     
|Other liabilities                                                                                                 |  |      | 4,471   |     
|                                                                                                                  |  |      |         |     
|TOTAL LIABILITIES                                                                                                 |  |      | 835,701 |     
|STOCKHOLDERS EQUITY                                                                                              |  |      |         |     
|Common stock, no par, shares authorized 15 million; issued and outstanding8,085,774
in 2002 and 7,905,366 in 2001 |  |      | 64,301  |     
|Retained earnings                                                                                                 |  |      | 16,394  |     
|Accumulated other comprehensive income, net of tax                                                                |  |      | 435     |     
|TOTAL STOCKHOLDERS EQUITY                                                                                        |  |      | 81,130  |     
|                                                                                                                  |  |      |         |     
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                        |  | $    | 916,831 |     
|                                                                                                                  |  |      |         |     



The
accompanying notes are an integral part of these financial statements.



34



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AMERICANWEST BANCORPORATION



CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2002, 2001 and 2000

($ In thousands, except per share amounts)



|                                                    |  | 2002 |           | 2001 |   | 2000      | 
|--------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | 
|INTEREST INCOME                                     |  |      |           |      |   |           | 
|Interest and fees on loans                          |  | $    | 57,511    |      | $ | 51,300    | 
|Interest on securities                              |  |      | 1,506     |      |   | 2,078     | 
|Other interest income                               |  |      | 185       |      |   | 126       | 
|                                                    |  |      |           |      |   |           | 
|TOTAL INTEREST INCOME                               |  |      | 59,202    |      |   | 53,504    | 
|                                                    |  |      |           |      |   |           | 
|INTEREST EXPENSE                                    |  |      |           |      |   |           | 
|Interest on deposits                                |  |      | 13,692    |      |   | 17,167    | 
|Interest on borrowings                              |  |      | 1,418     |      |   | 1,913     | 
|                                                    |  |      |           |      |   |           | 
|TOTAL INTEREST EXPENSE                              |  |      | 15,110    |      |   | 19,080    | 
|                                                    |  |      |           |      |   |           | 
|NET INTEREST INCOME                                 |  |      | 44,092    |      |   | 34,424    | 
|Provision for loan losses                           |  |      | 5,663     |      |   | 2,855     | 
|                                                    |  |      |           |      |   |           | 
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |      | 38,429    |      |   | 31,569    | 
|                                                    |  |      |           |      |   |           | 
|NONINTEREST INCOME                                  |  |      |           |      |   |           | 
|Fees and service charges                            |  |      | 3,675     |      |   | 2,802     | 
|Insurance commissions                               |  |      | 47        |      |   | 349       | 
|Securities gains/(losses)                           |  |      | 44        |      |   | 188       | 
|Other                                               |  |      | 1,618     |      |   | 1,363     | 
|                                                    |  |      |           |      |   |           | 
|TOTAL NONINTEREST INCOME                            |  |      | 5,384     |      |   | 4,702     | 
|                                                    |  |      |           |      |   |           | 
|NONINTEREST EXPENSE                                 |  |      |           |      |   |           | 
|Salaries and employee benefits                      |  |      | 16,114    |      |   | 13,115    | 
|Occupancy expense, net                              |  |      | 2,033     |      |   | 1,849     | 
|Equipment expense                                   |  |      | 1,988     |      |   | 1,649     | 
|State business and occupation tax                   |  |      | 756       |      |   | 571       | 
|Director fees                                       |  |      | 108       |      |   | 114       | 
|Intangible assets amortization                      |  |      | 164       |      |   | 336       | 
|Other                                               |  |      | 6,397     |      |   | 4,642     | 
|                                                    |  |      |           |      |   |           | 
|TOTAL NONINTEREST EXPENSE                           |  |      | 27,560    |      |   | 22,276    | 
|                                                    |  |      |           |      |   |           | 
|INCOME BEFORE INCOME TAX EXPENSE                    |  |      | 16,253    |      |   | 13,995    | 
|                                                   
|INCOME TAX EXPENSE                                  |  |      | 5,354     |      |   | 4,788     | 
|                                                    |  |      |           |      |   |           | 
|NET INCOME                                          |  | $    | 10,899    |      | $ | 9,207     | 
|                                                    |  |      |           |      |   |           | 
|                                                   
|Basic earnings per common share                     |  | $    | 1.37      |      | $ | 1.12      | 
|Diluted earnings per common share                   |  | $    | 1.33      |      | $ | 1.12      | 
|Basic weighted average shares outstanding           |  |      | 7,954,577 |      |   | 8,190,374 | 
|Diluted weighted average shares outstanding         |  |      | 8,194,508 |      |   | 8,256,160 | 



The
accompanying notes are an integral part of these financial statements.





35



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AMERICANWEST BANCORPORATION



CONSOLIDATED STATEMENTS OF STOCKHOLDERSS EQUITY

YEARS ENDED DECEMBER 31, 2002, 2001, and 2000

($ in thousands)



|                                                                             |  | Common Stock |   |  | Retained Earnings |        |   | AccumulatedOtherComprehensive Income(Loss) |   |        | Total |  |   | ComprehensiveIncome (Loss)
|---------------------------------------------------------------------------- |  | ------------ | - |  | ----------------- | ------ | - | ------------------------------------------ | - | ------ | ----- |  | - | --------------------------
|                                                                             |  | Shares       |   |  | Amount            |        |   |                                            |   |       
|Balances, January 1, 2000                                                    |  | 6,942,439    |   |  | $                 | 44,471 |   |                                            | $ | 19,460 |       |  | $ | (1,009                    
|Common Stock issued for options exercised                                    |  | 86,789       |   |  |                   | 585    |   |                                            |   |        |       |  |   |                           
|10% Stock dividend                                                           |  | 693,891      |   |  |                   | 8,934  |   |                                            |   | (8,934 | )     |  |   |                           
|Net income                                                                   |  |              |   |  |                   |        |   |                                            |   | 8,035  |       |  |   |                           
|Stock repurchase program                                                     |  | (749,107     | ) |  |                   | (5,086 | ) |                                            |   | (2,851 | )     |  |   |                           
|Net change in unrealized gain on available-for-sale securities, net of
taxes |  |              |   |  |                   |        |   |                                            |   |        |       |  |   | 925                       
|                                                                             |  |              |   |  |                   |        |   |                                            |   |        |       |  |   |                           
|Balance, December 31, 2000                                                   |  | 6,974,012    |   |  | $                 | 48,904 |   |                                            | $ | 15,710 |       |  | $ | (84                       
|                                                                             |  |              |   |  |                   |        |   |                                            |   |        |       |  |   |                           
|Common stock issued for options exercised                                    |  | 75,005       |   |  |                   | 504    |   |                                            |   |        |       |  |   |                           
|10% stock dividend declared in January 2001                                  |  | 698,298      |   |  |                   | 7,853  |   |                                            |   | (7,853 | )     |  |   |                           
|10% stock dividend declared in December 2001                                 |  | 718,670      |   |  |                   | 8,408  |   |                                            |   | (8,408 | )     |  |   |                           
|Net income                                                                   |  |              |   |  |                   |        |   |                                            |   | 9,207  |       |  |   |                           
|Stock repurchase program                                                     |  | (560,619     | ) |  |                   | (4,129 | ) |                                            |   | (2,072 | )     |  |   |                           
|Net change in unrealized gain on available-for-sale securities, net of
taxes |  |              |   |  |                   |        |   |                                            |   |        |       |  |   | 166                       
|                                                                             |  |              |   |  |                   |        |   |                                            |   |        |       |  |   |                           
|Balance, December 31, 2001                                                   |  | 7,905,366    |   |  | $                 | 61,540 |   |                                            | $ | 6,584  |       |  | $ | 82                        
|                                                                             |  |              |   |  |                   |        |   |                                            |   |        |       |  |   |                           
|Common stock issued for options exercised                                    |  | 94,724       |   |  |                   | 737    |   |                                            |   |        |       |  |   |                           
|Common stock issued for the acquisition of Latah Bancorporation              |  | 334,947      |   |  |                   | 4,101  |   |                                            |   |        |       |  |   |                           
|Net income                                                                   |  |              |   |  |                   |        |   |                                            |   | 10,899 |       |  |   |                           
|Stock repurchase program                                                     |  | (249,263     | ) |  |                   | (2,077 | ) |                                            |   | (1,089 | )     |  |   |                           
|Net change in unrealized gain on available-for-sale securities, net of
taxes |  |              |   |  |                   |        |   |                                            |   |        |       |  |   | 353                       
|                                                                             |  |              |   |  |                   |        |   |                                            |   |        |       |  |   |                           
|Balance, December 31, 2002                                                   |  | 8,085,774    |   |  | $                 | 64,301 |   |                                            | $ | 16,394 |       |  | $ | 435                       
|                                                                             |  |              |   |  |                   |        |   |                                            |   |        |       |  |   |                           



The
accompanying notes are an integral part of these financial statements



36



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AMERICANWEST BANCORPORATION



CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2002, 2001 and 2000

($ in thousands)



|                                                                                                                     |  | 2002 |          |   | 2001 |   |         | 2000 | 
|-------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                 |  |      |          |   |      |   |         |      | 
|Net Income                                                                                                           |  | $    | 10,899   |   |      | $ | 9,207   |      | 
|Adjustments to reconcile net income to net cash provided by operating
activities:                                    |  |      |          |   |      |   |         |      | 
|Provision for loan losses                                                                                            |  |      | 5,663    |   |      |   | 2,855   |      | 
|Depreciation and amortization                                                                                        |  |      | 1,569    |   |      |   | 1,234   |      | 
|Stock issued for employee incentive program                                                                          |  |      | 224      |   |      |   |         |      | 
|Deferred income taxes                                                                                                |  |      | (647     | ) |      |   | (814    | )    | 
|(Gain)/loss on sale of premises and equipment                                                                        |  |      | (10      | ) |      |   | (16     | )    | 
|(Increase) decrease in assets:                                                                                       |  |      |          |   |      |   |         |      | 
|Accrued interest receivable                                                                                          |  |      | 601      |   |      |   | 11      |      | 
|Life insurance and salary continuation assets                                                                        |  |      | (670     | ) |      |   | (115    | )    | 
|Other assets                                                                                                         |  |      | 24       |   |      |   | 1,803   |      | 
|Increase/(decrease) in liabilities:                                                                                  |  |      |          |   |      |   |         |      | 
|Accrued interest payable                                                                                             |  |      | (475     | ) |      |   | (541    | )    | 
|Other liabilities                                                                                                    |  |      | (2       | ) |      |   | 648     |      | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 
|NET CASH FROM OPERATING ACTIVITIES                                                                                   |  |      | 17,176   |   |      |   | 14,272  |      | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                 |  |      |          |   |      |   |         |      | 
|Securities available-for-sale:                                                                                       |  |      |          |   |      |   |         |      | 
|Maturities                                                                                                           |  |      | 11,215   |   |      |   | 19,103  |      | 
|Sales                                                                                                                |  |      | 1,537    |   |      |   | 27,566  |      | 
|Purchases                                                                                                            |  |      | (18,497  | ) |      |   | (14,168 | )    | 
|Net increase in loans and leases                                                                                     |  |      | (102,858 | ) |      |   | (95,295 | )    | 
|Purchase of life insurance contracts                                                                                 |  |      |         |   |      |   | (6,100  | )    | 
|Purchases of premises and equipment                                                                                  |  |      | (6,259   | ) |      |   | (1,514  | )    | 
|Proceeds from sale of premises and equipment                                                                         |  |      | 40       |   |      |   | 23      |      | 
|Net cash to acquire Latah Bancorporation                                                                             |  |      | (8,544   | ) |      |   |         |      | 
|Foreclosed assets activity                                                                                           |  |      | 1,792    |   |      |   | (106    | )    | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 
|NET CASH FROM INVESTING ACTIVITIES                                                                                   |  |      | (121,574 | ) |      |   | (70,491 | )    | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                 |  |      |          |   |      |   |         |      | 
|Net increase/(decrease) in deposits                                                                                  |  |      | 121,347  |   |      |   | 30,811  |      | 
|Short-term borrowings activity                                                                                       |  |      | (10,287  | ) |      |   | 26,273  |      | 
|Principal payments on capital lease obligations                                                                      |  |      | (40      | ) |      |   | (39     | )    | 
|Proceeds from issuance of capital stock                                                                              |  |      | 513      |   |      |   | 504     |      | 
|Proceeds from issuance of Trust Preferred Securities                                                                 |  |      | 10,000   |   |      |   |         |      | 
|Stock repurchase program                                                                                             |  |      | (3,166   | ) |      |   | (6,201  | )    | 
|Cash dividends and fractional shares                                                                                 |  |      |          |   |      |   |         |      | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 
|NET CASH FROM FINANCING ACTIVITIES                                                                                   |  |      | 118,367  |   |      |   | 51,348  |      | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                              |  |      | 13,969   |   |      |   | (4,871  | )    | 
|Cash and cash equivalents at January 1                                                                               |  | $    | 24,956   |   |      | $ | 29,827  |      | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 
|Cash and cash equivalents at December 31                                                                             |  | $    | 38,925   |   |      | $ | 24,956  |      | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 
|Interest paid                                                                                                        |  | $    | 15,585   |   |      | $ | 19,621  |      | 
|Income taxes paid                                                                                                    |  | $    | 5,995    |   |      | $ | 4,852   |      | 
|Supplemental Schedule of Noncash Investing and Financing Activities                                                  |  |      |          |   |      |   |         |      | 
|Foreclosed real estate acquired in settlement of loans Transfers from securities at cost to securities at fair value |  | $    | 7,821    |   |      | $ | 1,252   |      | 
|                                                                                                                     |  |      |          |   |      |   |         |      | 



The
accompanying notes are an integral part of these financial statements.



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##### Table of Contents

AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1.    Business and Summary of Significant
Accounting Policies



Basis of consolidation:



The consolidated financial statements
include the accounts of AmericanWest Bancorporation (AWBC or Corporation) and its wholly owned subsidiaries AmericanWest Bank (AWB or Banks) and Bank of Latah (BOL or Banks) after eliminating all significant intercompany balances and
transactions. During 2001 AWBC merged its five Banks into AWB and sold its insurance subsidiary.



Nature of business:



AWB is a state-chartered commercial bank under the laws of the State of Washington, and provides banking services primarily throughout Eastern and Central Washington and Northern Idaho. BOL is a
state-chartered commercial bank under the laws of the State of Idaho, and provides banking services primarily throughout Eastern Washington and Northern Idaho. AWBC is subject to competition from other financial institutions, as well as nonfinancial
intermediaries and to the regulations of certain federal and state agencies and it undergoes periodic examinations by those regulatory agencies.



AmericanWest Capital Trust I (the Trust), a subsidiary of AWBC, was formed in September 2002 for the exclusive purpose of
issuing Trust Preferred Securities and common securities and using the $10.0 million in proceeds from the issuance to acquire junior subordinated debentures issued by AWBC.



Basis of financial statement presentation:



The financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of certain assets and liabilities as of the date of the statement of financial condition
and certain revenues and expenses for the period and the accompanying notes. Actual results could differ, either positively or negatively, from those estimates.



Material estimates that are particularly susceptible to significant change in the near-term relate to the
determination of the allowance for loan losses, deferred income taxes and the valuation of real estate acquired in connection with foreclosures or in the satisfaction of loans. In connection with the determination of the allowance for loan losses
and other real estate owned, management obtains independent appraisals for significant properties.



Management believes that the allowances for loan losses and other real estate owned are adequate. While management uses currently
available information to recognize losses on loans and other real estate owned, future additions to the allowances may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the AWBC allowance for loan losses and other real estate owned. Such agencies may require AWBC to recognize additions to the allowances based on their judgments of information available to them at the time of
their examination.



Securities:



All of the securities are classified available-for-sale.
Securities consist primarily of obligations of the U.S. government and U.S. government agencies and state governments. Unrealized holding gains and losses, net of tax, on available-for-sale securities are excluded from earnings and reported as
a net amount in a separate component of stockholders equity until realized. Gains and 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.



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##### Table of Contents

AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 1.    Business and Summary of Significant
Accounting Policies (continued)



Loans and allowances for
loan losses:



Loans receivable that
management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances reduced by any charge-offs or specific valuation accounts and net of any deferred fees
or costs on originated loans, or unamortized premiums or discounts on purchased loans. Net deferred fees or costs are amortized using the interest method over the life of the loan. Effective July 1, 2001, net loan origination fees and costs are no
longer deferred and amortized because the net difference is not significant.



The accrual of interest on impaired loans is discontinued when, in managements opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all
unpaid interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received.



An allowance for probable losses on loans is maintained at a level deemed by management to be adequate to provide for potential loan
losses through charges to operating expense. The allowance is based upon a continuing review of loans, which includes consideration of actual net loan loss experience, changes in the size and character of the loan portfolio, identification of
individual problem situations which may affect the borrowers ability to repay, the estimated value of any underlying collateral, and evaluation of current economic conditions. Loan losses are recognized through charges to the allowance.



Foreclosed real estate:



Real estate properties acquired through, or in lieu of, loan
foreclosure are to be sold and are initially recorded at lower of the recorded investment or its fair value at the date of foreclosure establishing a new cost basis. After foreclosure, management periodically performs valuations and the real estate
is carried at the lower of carrying amount or fair value less cost to sell. Any subsequent write-downs are recorded as a valuation allowance and charged against operating expenses. Operating expenses of such properties, net of related income, are
included in other expenses and gains and losses on their disposition are included in noninterest income and expenses.



Premises and equipment:



Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation over estimated useful lives, which range
from 3 to 30 years. Depreciation expense is computed using primarily the straight-line method for financial statement purposes. Accelerated depreciation methods are used for federal income tax purposes. Normal costs of maintenance and repairs are
charged to expense as incurred.



Intangibles:



Intangible assets acquired in the form of
goodwill are not being amortized. Customer lists and covenants to not compete, and core deposits purchased are being amortized using the straight-line method over five to twenty-five years. AWBC periodically evaluates these intangible assets for
impairment.



Income taxes:



AWBC files a consolidated federal income tax return. The
income tax related to the individual entities is generally computed as if each one had filed a separate tax return and is based on amounts reported in the statements of income (after exclusion of non-taxable permanent differences such as interest on
state and municipal securities) and include deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred taxes are computed using the asset and liability approach.



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##### Table of Contents

AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 1.    Business and Summary of Significant
Accounting Policies (continued)



Per share amounts:



All per share amounts have been calculated
on the basis of weighted average number of shares outstanding during each year. All share and per share amounts have been adjusted giving retroactive effect to stock dividends. The number of dilutive shares is calculated using the Treasury Stock
Method.



Cash and cash equivalents:



For the purposes of presentation in the consolidated
financial statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and overnight deposits with other banks.



The Bank places its cash with high credit quality institutions. The amount on deposit fluctuates and at times exceeds the insured limit by
the Federal Deposit Insurance Corporation, which potentially subjects the Bank to credit risk.



Stock options:



Employee stock options are accounted for under the intrinsic value method as allowed under Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees. Stock options are granted at
exercise prices not less than the fair market value of common stock on the date of grant. Under APB No. 25, no compensation expense is recognized pursuant to AWBCs stock option plans. The following table sets out the proforma amounts of net
income and earnings per share that would have been reported had it elected to follow the fair value recognition provisions of SFAS No. 123: Fair values were arrived at through the use of the Black-Scholes model.



|( $ in thousands, except per share)                  |  | 2002 |           |   | 2001 |   |           | 2000 | 
|---------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- | 
|Results using fair value based method of accounting: |  |      |           |   |      |   |           |      | 
|Proforma Net income                                  |  | $    | 10,549    |   |      | $ | 8,919     |      | 
|Proforma Basic earnings per common share             |  | $    | 1.33      |   |      | $ | 1.09      |      | 
|Proforma Diluted earnings per common share           |  | $    | 1.29      |   |      | $ | 1.08      |      | 
|                                                    
|Assumptions used to make the fair value calculation: |  |      |           |   |      |   |           |      | 
|Risk free interest rate                              |  |      | 5.00      | % |      |   | 4.25      | %    | 
|Expected volatility                                  |  |      | 34.54     | % |      |   | 28.25     | %    | 
|Expected cash dividends                              |  |      | 0         | % |      |   | 0         | %    | 
|Expected stock option life                           |  |      | 5.0 years |   |      |   | 5.0 years |      | 



Other off-statement
of condition instruments:



In the ordinary
course of business AWBC has entered into off-statement of condition financial instruments consisting of commitments to extend credit, commitments under credit-card arrangements, commercial letters of credit, and standby letters of credit. Such
financial instruments are held for purposes other than trading and are recorded in the financial statements when they are funded or related fees are incurred or received.



Note 2.    Acquisition



On July 31, 2002, the Corporation completed its acquisition of 100% of the voting equity interest in
Latah Bancorporation and its wholly-owned subsidiary, Bank of Latah. The results of Latah Bancorporations operations have been included in the consolidated financial statements since that date. Bank of Latah is a commercial bank providing
a wide array of banking products and services to its customers in the Palouse region of Eastern Washington.



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##### Table of Contents

AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 2.    Acquisition (continued)



The aggregate purchase price was approximately $17.5 million,
including approximately $13.5 million in cash and approximately 335,000 shares of the Corporations common stock valued at $4 million. The value of the shares of common stock issued was determined based on the closing market price of the
Corporations shares on March 28, 2002, the date of the definitive agreement and notification to the public of the transaction. The Corporation issued $9.3 million in subordinated debt to fund a portion of the transaction and has assumed
approximately $2.7 million in long-term debt previously held by Latah. The $9.3 million in subordinated debt was subsequently repaid with the proceeds from the issuance of trust preferred securities.



The following table summarizes the estimated fair values of
the assets acquired and liabilities assumed at the date of acquisition.



At July 31, 2002 ($000s)



|Cash and cash equivalents   |  | $ | 4,907  
|--------------------------- |  | - | -------
|Securities                  |  |   | 26,362 
|Loans, net                  |  |   | 94,665 
|Premises and equipment, net |  |   | 2,591  
|Other Assets                |  |   | 2,714  
|Core Deposit Intangible     |  |   | 2,256  
|Goodwill                    |  |   | 8,177  
|                            |  |   |        
|Total assets acquired       |  | $ | 141,672
|                            |  |   |        
|Deposits                    |  | $ | 112,751
|Short-term borrowings       |  |   | 7,759  
|Other liabilities           |  |   | 949    
|Long Term Debt              |  |   | 2,663  
|                            |  |   |        
|Total liabilities assumed   |  | $ | 124,122
|                            |  |   |        
|Net assets acquired         |  | $ | 17,550 
|                            |  |   |        



Core
deposits are a dependable, long-term source of funds for the Corporation. The core deposit intangible asset will be amortized over the estimated life of the depositor relationships of 15 years under the straight-line method. Goodwill resulting from
the acquisition totaled $8,177,000 and will be periodically evaluated for impairment. None of the goodwill is expected to be deductible for tax purposes.



Note 3.    Accounting Pronouncements



In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations,
and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill will no longer be amortized but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their useful lives. AWBC applied the new rules on accounting for goodwill and other intangible assets beginning in the first quarter 2002. During 2002, AWBC performed the first
of the required impairment tests of goodwill as of January 1, 2002. All intangibles were found to be not impaired.



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 3.    Accounting Pronouncements (continued)



During the year 2002 the Financial Accounting Standards Board
issued the following accounting standards:



Statement of Financial Standard (SFAS) No. 145, Rescission of FASB Statement No. 13, and Technical Corrections. This Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an
amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This Statement amends FASB
Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. AWBC implemented this statement
effective April 1, 2002. Implementation of this statement did not result in a material impact on its financial position or results of operations.



Statement of Financial Accounting Standard (SFAS) No. 146, Accounting for Costs Associated with Exit or Disposal Activities,addresses financial accounting and reporting for the treatment of costs associated with exit or disposal activities. This Statement improves financial reporting by requiring that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the liability is incurred. This Statement replaces EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. The
provisions of this Statement are to be applied prospectively to exit or disposal activities initiated after December 31, 2002. AWBC does not expect the Statement will result in a material impact on its financial position or results of operations.



Statement of Financial Accounting Standard
(SFAS) No. 147, Acquisitions of Certain Financial Institutions  an Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9. The provisions of this Statement that relate to the application of the purchase method of
accounting apply to all acquisitions of financial institutions, except transactions between two or more mutual enterprises. This Statement removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and
requires that those transactions be accounted for in accordance with FASB Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition, this Statement amends FASB Statement N0. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and
credit-card-holder intangible assets. This Statement is effective for acquisitions on or after October 1, 2002. AWBC does not expect the Statement will result in a material impact on its financial position or results or operation.



Statement of Financial Accounting Standard (SFAS) No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure an Amendment of FASB Statement No. 123.This Statement amends FASB No. 123, to provide alternative methods of transition for a voluntary change to the fair-value
based method of accounting for stock-based employee compensation. In addition, it amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported results. As of December 31, 2002, AWBC has adopted the disclosure requirements of the Statement and continues to follow the intrinsic value method to account for
stock-based employee compensation.



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 3.    Accounting Pronouncements (continued)



In November 2002, the FASB issued Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.The Interpretation elaborates on the disclosures to be made by sellers or guarantors of products and services, as
well as those entities guaranteeing the financial performance of others. The Interpretation further clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing
the guarantee. The initial recognition and initial measurement provisions of the Interpretation are effective on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements are effective for
financial statements of periods ending after December 15, 2002. AWBC believes that its disclosures with regards to these matters are adequate as of December 31, 2002.



Note 4.    Cash and Cash Equivalents



The Banks are required to maintain cash reserves with the Federal Reserve Bank. Cash reserve requirements are
computed by applying prescribed percentages to various types of deposits. When the Banks cash reserves are in excess of that required they might lend the excess to other banks.



Conversely, when cash reserves are less than required, the Banks borrow funds on a daily basis. Such reserve
requirements at December 31, 2002 and 2001 were approximately $25,000 and $2,762,000, respectively. The average amounts of federal funds sold and overnight interest bearing deposits with other banks for the years ended December 31, 2002 and 2001,
were $11,095,000 and $4,196,000, respectively. Similarly, averages of short-term borrowings were $43,006,000 and $42,461,000 for 2002 and 2001, respectively. Short Term borrowings consist mainly of Advances with the Federal Home Loan Bank of
Seattle. Advances with the Federal Home Loan Bank of Seattle are collateralized by loans of the Banks. The balance of short-term borrowings at December 31, 2002 and 2001 was $46,284,000 and $52,974,000, respectively.



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 5.    Securities



Debt and equity securities have been classified according to
managements intent. The amortized cost of securities and their fair values at December 31 were as follows:



|December 31, 2002 ($ in thousands)                               |  | Amortized Cost |        | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Fair Value
|---------------------------------------------------------------- |  | -------------- | ------ | ---------------------- | - | ----------------------- |  | ----------
|Securities available-for-sale:                                   |  |                |        |                        |   |                         |  |           
|U.S. Treasury securities                                         |  | $              | 3,101  |                        | $ | 54                      |  | $         
|Obligations of federal government agencies                       |  |                | 9,096  |                        |   | 54                      |  |           
|Obligations of states, municipalities and political subdivisions |  |                | 8,745  |                        |   | 119                     |  |           
|Mortgage backed securities                                       |  |                | 4,888  |                        |   | 17                      |  |           
|Other securities                                                 |  |                | 21,678 |                        |   | 543                     |  |           
|                                                                 |  |                |        |                        |   |                         |  |           
|Total                                                            |  | $              | 47,508 |                        | $ | 787                     |  | $         
|                                                                 |  |                |        |                        |   |                         |  |           



|December 31, 2001 ($ in thousands)                               |  | Amortized Cost |        | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Fair Value
|---------------------------------------------------------------- |  | -------------- | ------ | ---------------------- | - | ----------------------- |  | ----------
|Securities available-for-sale:                                   |  |                |        |                        |   |                         |  |           
|U.S. Treasury securities                                         |  | $              | 1,001  |                        | $ | 42                      |  |           
|Obligations of federal government agencies                       |  |                | 4,531  |                        |   | 53                      |  |           
|Obligations of states, municipalities and political subdivisions |  |                | 1,255  |                        |   | 42                      |  |           
|Mortgage backed securities                                       |  |                | 2,688  |                        |   | 42                      |  |           
|Other securities                                                 |  |                | 5,951  |                        |   | 34                      |  |           
|                                                                 |  |                |        |                        |   |                         |  |           
|Total                                                            |  | $              | 15,426 |                        | $ | 213                     |  | $         
|                                                                 |  |                |        |                        |   |                         |  |           



Securities taxable interest income was $1,010,000, $1,596,000, and $2,573,000 for 2002, 2001 and 2000, respectively. Securities nontaxable interest income was $225,000, $210,000 and $469,000 for 2002, 2001 and 2000, respectively.
Dividend income was $271,000, $272,000, and $229,000 for 2002, 2001 and 2000, respectively. Securities with an amortized cost of $8,120,000 and $5,674,000 at December 31, 2002 and 2001, respectively, were pledged for purposes required or permitted
by law. Market value of these securities was $8,226,000 and $5,790,000 at December 31, 2002 and 2001, respectively. Other securities includes Federal Home Loan Bank (FHLB) Stock of $4,564,000 in 2002 and $4,173,000 in 2001, which is carried at cost
and can be sold back to the Federal Home Loan Bank at cost, but is restricted as to purchase and sale based on the level of AWBC business activity with the FHLB.



Gross realized gains on sales of securities available for sale were $44,000, $267,000, and $44,000 for 2002,
2001, and 2000, respectively. Gross realized losses were $0, $79,000, and $370,000 for 2002, 2001, and 2000, respectively.



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 5.    Securities (continued)



The contractual scheduled maturity of securities at December
31, 2002 were as follows:



|($ in thousands)                             |  | Amortized Cost |        | Fair Value
|-------------------------------------------- |  | -------------- | ------ | ----------
|Due in one year or less                      |  | $              | 6,636  |           
|Due from one year to five years              |  |                | 17,193 |           
|Due from five to ten years                   |  |                | 9,264  |           
|Due after ten years                          |  |                | 4,845  |           
|Mortgage backed securities                   |  |                | 4,888  |           
|FHLB Stock and other Non Maturity Securities |  |                | 4,682  |           
|                                             |  |                |        |           
|                                             |  | $              | 47,508 |           
|                                             |  |                |        |           



Expected
maturities will differ from contractual maturities because the issues of certain debt securities have the right to call or prepay their obligations without any penalties.



Note 6.    Loans and Allowance for Loan Losses



Loan categories as of December 31, 2002 and 2001 were as
follows:



|($ in thousands)                          |  | 2002 |         |   | 2001 |  
|----------------------------------------- |  | ---- | ------- | - | ---- | -
|Commercial and industrial                 |  | $    | 540,467 |   |      | $
|Agricultural                              |  |      | 121,279 |   |      |  
|Real estate mortgage                      |  |      | 47,613  |   |      |  
|Real estate construction                  |  |      | 29,303  |   |      |  
|Installment                               |  |      | 27,405  |   |      |  
|Bank cards and other                      |  |      | 9,512   |   |      |  
|                                          |  |      |         |   |      |  
|Total loans                               |  |      | 775,579 |   |      |  
|Allowance for loan losses                 |  |      | (10,272 | ) |      |  
|Deferred loan fees, net of deferred costs |  |      | (369    | ) |      |  
|                                          |  |      |         |   |      |  
|Net loans                                 |  | $    | 764,938 |   |      | $
|                                          |  |      |         |   |      |  



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 6.    Loans and Allowance for Loan Losses (continued)



Variable rate loans were $318,691,000 and $229,296,000 as of
December 31, 2002 and 2001, respectively. Remaining loans were fixed rate loans. A summary of loans by contractual maturity as of December 31, 2002 and 2001 is as follows:



|($ in thousands)         |  | 2002 |         | 2001
|------------------------ |  | ---- | ------- | ----
|Maturity within one year |  | $    | 271,585 |     
|One to five years        |  |      | 255,149 |     
|Over five years          |  |      | 248,845 |     
|                         |  |      |         |     
|                         |  | $    | 775,579 |     
|                         |  |      |         |     



Changes
in the allowance for loan losses are as follows:



|($ in thousands)                      |  | 2002 |        |   | 2001 |   |        | 2000 | 
|------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- | 
|Balance, beginning of year            |  | $    | 6,624  |   |      | $ | 4,948  |      | 
|Provision charged to operations       |  |      | 5,663  |   |      |   | 2,855  |      | 
|Allowance acquired through acquisiton |  |      | 878    |   |      |   |        |      | 
|Loans charged-off                     |  |      | (3,280 | ) |      |   | (1,329 | )    | 
|Recoveries                            |  |      | 387    |   |      |   | 150    |      | 
|                                      |  |      |        |   |      |   |        |      | 
|Balance, end of year                  |  | $    | 10,272 |   |      | $ | 6,624  |      | 
|                                      |  |      |        |   |      |   |        |      | 



Impaired
loan information as of December 31, 2002, 2001 and 2000 is as follows:



|($ in thousands)                                            |  | 2002 |        | 2001 |   | 2000  
|----------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|Impaired loans with specific allowance for loan losses      |  | $    | 2,323  |      | $ | 1,679 
|Impaired loans without a specific allowance for loan losses |  |      | 7,438  |      |   | 11,442
|                                                            |  |      |        |      |   |       
|Total impaired loans                                        |  | $    | 9,761  |      | $ | 13,121
|                                                            |  |      |        |      |   |       
|Impaired loans allowance for loan losses                    |  | $    | 512    |      | $ | 444   
|Average impaired loans                                      |  |      | 10,887 |      |   | 11,767
|Interest income recognized for impaired loans               |  |      | 8      |      |   | 269   



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 7.    Premises and Equipment



Major classifications of premises and equipment are
summarized as of December 31, 2002 and 2001 as follows:



|($ in thousands)                   |  | 2002 |        |   | 2001 |  
|---------------------------------- |  | ---- | ------ | - | ---- | -
|Premises                           |  | $    | 17,815 |   |      | $
|                                  
|Furniture, fixtures, and equipment |  |      | 8,154  |   |      |  
|                                  
|Leasehold improvements             |  |      | 1,009  |   |      |  
|                                   |  |      |        |   |      |  
|                                   |  |      | 26,978 |   |      |  
|                                  
|Less accumulated depreciation      |  |      | (9,941 | ) |      |  
|                                   |  |      |        |   |      |  
|                                   |  |      | 17,037 |   |      |  
|                                  
|Land                               |  |      | 3,906  |   |      |  
|                                   |  |      |        |   |      |  
|Premises and equipment, net        |  | $    | 20,943 |   |      | $
|                                   |  |      |        |   |      |  



Note
8.    Life Insurance and Salary Continuation Plan



AWBC maintains a salary continuation plan for the benefit of certain of their directors, executive officers and other key employees. The plan provides for monthly payments to such persons, or their
designated beneficiaries, for a period of ten years following retirement at age 65, or death prior to retirement. Amounts payable to eligible participants are determined by reference to such persons salary or directors fee as of the date
of each such persons agreement under the plan.



The plan is generally available to most directors, executive officers and other key employees, and vests according to years of service. Persons employed for at least six continuous years following the effective date of the plan are
deemed vested with respect to 20% of the salary continuation benefits available to them, and become vested in an additional 20% of such benefits for each succeeding year of employment thereafter until the employee becomes fully vested. Eligible
persons employed for at least ten continuous years prior to the effective date of the plans are deemed fully vested. The Bank has invested funds in life insurance policies to protect the Bank from early payout of the obligations under the salary
continuation plan due to the untimely death of plan participants. The Bank is the beneficiary of the life insurance policies. The Bank earns interest on these invested funds, which is classified with noninterest income.



Cash surrender values; salary continuance benefit obligations
at age 65, and the recorded liability were as follows as of December 31, 2002 and 2001:



|($ in thousands)                                                           |  | 2002 |       | 2001
|-------------------------------------------------------------------------- |  | ---- | ----- | ----
|Cash surrender value                                                       |  | $    | 6,784 |     
|Present value at age 65 of all participants after full vesting is
obtained |  |      | 5,025 |     
|Present value at age 65 of the current fully vested participants           |  |      | 3,944 |     
|Recorded liability for future benefit obligation                           |  |      | 1,789 |     
|Vested participants are eligible to receive benefits at age 65.            |  |      |       |     





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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 9.    Income Taxes



The components of income tax expense for the years presented
are as follows:



|($ in thousands)               |  | 2002 |       |   | 2001 |   |       | 200 | 
|------------------------------ |  | ---- | ----- | - | ---- | - | ----- | --- | 
|Current expense                |  | $    | 6,001 |   |      | $ | 5,602 |     | 
|Deferred tax expense/(benefit) |  |      | (647  | ) |      |   | (814  | )   | 
|                               |  |      |       |   |      |   |       |     | 
|Income tax expense             |  | $    | 5,354 |   |      | $ | 4,788 |     | 
|                               |  |      |       |   |      |   |       |     | 



The
effective tax rate differs from the statutory tax rate as follows:



|($ in thousands)                           |  | 2002 |       |   | 2001 |   |       | 2000 | 
|------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|Income tax at statutory rates              |  | $    | 5,664 |   |      | $ | 4,772 |      | 
|Effect of tax-exempt interest income       |  |      | (119  | ) |      |   | (104  | )    | 
|Effect of tax credit                       |  |      |       |   |      |   |       |      | 
|Effect of nondeductible expenses and other |  |      | (191  | ) |      |   | 120   |      | 
|                                           |  |      |       |   |      |   |       |      | 
|Income tax expense                         |  | $    | 5,354 |   |      | $ | 4,788 |      | 
|                                           |  |      |       |   |      |   |       |      | 



The
following are the significant components of deferred tax assets and liabilities. The net amount is classified with other assets in the consolidated financial statements:



|($ in thousands)                                   |  | 2002 |       | 2001
|-------------------------------------------------- |  | ---- | ----- | ----
|Deferred tax assets:                               |  |      |       |     
|Allowance for loan losses                          |  | $    | 3,580 |     
|Deferred compensation expense                      |  |      | 825   |     
|Other                                              |  |      | 274   |     
|                                                   |  |      |       |     
|Total deferred tax assets                          |  |      | 4,679 |     
|                                                   |  |      |       |     
|Deferred tax liabilities:                          |  |      |       |     
|Deferred loan costs                                |  |      | 576   |     
|Lease financing                                    |  |      | 104   |     
|FHLB stock dividend income                         |  |      | 755   |     
|Unrealized losses on available-for-sale securities |  |      | 230   |     
|Other                                              |  |      | 983   |     
|                                                   |  |      |       |     
|Total deferred tax liabilities                     |  |      | 2,648 |     
|                                                   |  |      |       |     
|Net deferred tax assets                            |  | $    | 2,031 |     
|                                                   |  |      |       |     



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 10.    Time Deposit Maturities



At December 31, 2002, the scheduled maturities of time
deposits were as follows:



|($ in thousands) |  | Total
|---------------- |  | -----
|2003             |  | $    
|2004             |  |      
|2005             |  |      
|2006             |  |      
|2007             |  |      
|                 |  |      
|Total            |  | $    
|                 |  |      



Note
11.    Trust Preferred Securities



The Trust, a wholly-owned subsidiary of AWBC, is a statutory business trust created for the exclusive purposes of issuing and selling capital securities and utilizing sale proceeds to acquire junior subordinated debt issued by AWBC.
On September 26, 2002, the Trust issued $10,000,000 of trust preferred securities with a 30-year maturity, callable after the fifth year by AWBC. The rate adjusts quarterly based on LIBOR (London Inter Bank Offered Rate) plus 3.40%. These securities
are considered Tier I capital for the purposes of regulatory capital requirements. Accordingly, the junior subordinated debentures are the sole assets of the Trust, and payments under the junior subordinated debentures will be the sole revenues of
the Trust. All of the common securities of the Trust are owned by AWBC. AWBC has fully and unconditionally guaranteed the capital securities along with all obligations of the Trust under the trust agreements. The trust preferred securities are
included as a separate line item in AWBCs statement of financial condition and distributions payable are treated as interest expense in the consolidated statement of operations.



Note 12.    Commitments and Contingent Liabilities



In the ordinary course of business, AWBC has various
outstanding commitments and contingent liabilities that are not reflected in the accompanying consolidated financial statements. In addition, AWBC is a defendant in certain claims and legal actions arising in the ordinary course of business. In the
opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of AWBC.



The minimum annual rental commitments on capital and operating
leases at December 31, 2002, exclusive of taxes and other charges, are summarized as follows:



|($ in thousands)                            |  |   |      
|------------------------------------------- |  | - | -----
|2003                                        |  | $ | 782  
|2004                                        |  |   | 739  
|2005                                        |  |   | 612  
|2006                                        |  |   | 584  
|2007                                        |  |   | 583  
|Later years                                 |  |   | 5,414
|                                            |  |   |      
|Total minimum payments due                  |  | $ | 8,714
|Less: Amount representing interest          |  |   | (314 
|                                            |  |   |      
|Present value of net minimum lease payments |  | $ | 8,400
|                                            |  |   |      



AWBC
rental expense for 2002, 2001, and 2000 was $686,000, $669,000, and $663,000, respectively.



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 12.    Commitments and Contingent Liabilities (continued)



Other commitments and contingent liabilities:



AWBC is a party to financial instruments
with off-statement of condition risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. Those
instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of condition. The contract or notional amounts of those instruments reflect the extent of involvement AWBC has in
particular classes of financial instruments.



AWBCs exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the
contractual notional amount of those instruments. AWBC uses the same credit policies in making commitments and conditional obligations as it does for statement of condition instruments.



|                                                                    |  | Contract orNotional Amount
|------------------------------------------------------------------- |  | --------------------------
|($ in thousands)                                                    |  | 2002                      
|                                                                    |  |                           
|Financial instruments whose contract amounts represent credit risk: |  |                           
|Commitments to extend credit                                        |  | $                         
|Standby letters of credit and financial guarantees written          |  |                           
|Unused commitments on bankcards                                     |  |                           
|                                                                    |  |                           
|TOTAL                                                               |  | $                         
|                                                                    |  |                           



AWBC
does not anticipate any material losses as a result of the commitments or guarantees.



Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. AWBC evaluates each
customers creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by AWBC upon extension of credit is based on managements credit evaluation of the counterparty. Collateral held varies but may
include accounts receivable, inventory, property, plant and equipment and income producing commercial properties.



Standby letters of credit and financial guarantees written are conditional commitments issued by AWBC to guarantee the performance of a
customer of a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.



The Banks loans, commitments, and commercial and standby letters of credit have been granted to customers in the Banks market area. As such, significant changes in economic conditions in
the States of Washington and Idaho or within its primary industries could adversely affect the Banks ability to collect loans. Substantially all such customers are depositors of the Banks. The concentrations of credit by type of loan are set
forth in Note 6. AWBCs related party loans and deposits are disclosed in Note 18. The Banks, as a matter of policy, do not extend credit to any single borrower in excess of $13,000,000.



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 12.    Commitments and Contingent Liabilities (continued)



As of December 31, 2002 and 2001, AWBC had
lines of credit available of $138,000,000 and $97,439,000, respectively, that could be used for long or short term borrowings at current market rates.



Long Term borrowings consisted entirely of long term advances that are collateralized by loans in the Banks loan portfolios.
Interest rates on these advances range from 4.27% to 7.38%



Note 13.    Common Stock



The Board of Directors approved stock repurchases in 2002 and 2001. In 2002 249,263 shares were repurchased for $3.2 million. In 2001 560,619 shares were repurchased for $6.2 million. In January and December 2001 the Board
of Directors declared 10% common stock dividends. AWBC recorded a transfer from retained earnings to common stock for the market value of the additional shares issued. Per share amounts and weighted average shares outstanding have been retroactively
adjusted to reflect the stock dividends.



Note
14.    Restrictions on Dividends and Loans



The Banks are subject to banking regulations relating to the payment of dividends and the amount of loans that it may extend. The Banks are allowed to pay dividends out of retained earnings. As of December 31, 2002, the
amount of retained earnings of AWB was $33,088,000 and Bank of Latah had $4,456,000. As of December 31, 2002 AWBC had $16,394,000 of retained earnings available for dividends.



Certain loans to any person, including liabilities of a firm or association, cannot exceed twenty percent of
the capital and surplus of the Banks. Loans that are secured or covered by guarantees, or by commitments or agreements to take over or to purchase the same, made by any federal reserve bank or by the United States, including any corporation wholly
owned directly or indirectly by the United States, are not subject to these restrictions. No loans can be made unless the Banks have more than the minimum available funds required by law.



Note 15.    Employee Stock Ownership Plan (ESOP) and Profit Sharing 401(k) Plan



AWBC sponsors an ESOP. An ESOP is a form of retirement plan
whereby AWBC receives a deduction for contributions to the Plan and the Plan invests all or a portion of the employer Trust contributions and Trust earnings in stock of AWBC. The Plan is qualified under Section 401(a) of the Internal Revenue Code as
a stock bonus plan. Employees 21 years or older become eligible for participation after 1,000 hours or more of service in a plan year, and benefits fully vest after five years of service. Contributions to the ESOP plan totaled $212,500, $183,000 and
$400,000 for 2002, 2001 and 2000, respectively and are based on a percentage of AWBC earnings. Contributions are allocated pro rata based on eligible annual compensation on December 31. AWBC has a Profit Sharing 401(k) Plan. Contributions to the
401(k) plan in 2002 were $238,802 and in 2001 were $167,000. There were no employer contributions to the plan in 2000.



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 16.    Stock Option Plans



The AWBC Shareholders and Board of Directors approved an
Incentive Stock Plan (Plan) in 2001. The plan provides for the issuance of incentive stock options to directors, officers and key employees. The maximum aggregate number of authorized shares issued under this plan is 800,000. In any given year, no
eligible participant may receive more than 10,000 shares. The exercise price of each option granted under the Plan may not be less than the fair market value of a share of AWBCs common stock on the date of grant. 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 December 31, 2010. On February 1, 2002 and June 1, 2001 there were 115,000 and 128,370,
respectively, common stock incentive stock options issued under the new Plan. As of December 31, 2002 there were 567,004 stock options outstanding from prior approved Incentive Stock Option Plans. Future incentive stock options will be issued from
the Plan approved in 2001.



The status of
the Plans as of December 31, 2002, 2001 and 2000 is as follows:



|                                                               |  | 2002    |   | 2001 |                                 | 2000 
|-------------------------------------------------------------- |  | ------- | - | ---- | ------------------------------- | -----
|                                                               |  | Number  |   |      | Weighted Average Exercise Price |      
|Outstanding at beginning of year                               |  | 486,112 |   |      | $                               | 9.17 
|Granted                                                        |  | 115,000 |   |      |                                 | 12.00
|Acquired                                                       |  | 284,854 |   |      |                                 | 2.58 
|Exercised                                                      |  | (74,444 | ) |      |                                 | 6.90 
|Forfeited                                                      |  | (17,208 | ) |      |                                 | 8.21 
|                                                               |  |         |   |      |                                 |      
|Outstanding at year-end                                        |  | 794,314 |   |      | $                               | 7.45 
|                                                               |  |         |   |      |                                 |      
|Exercisable at year-end                                        |  | 588,643 |   |      | $                               | 6.64 
|Weighted average fair value of options granted during the year |  |         |   |      | $                               | 4.68 



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 16.    Stock Option Plans (continued)



The following table summarizes information about stock
options outstanding at December 31, 2002:



|Range ofExercisePrices |  | NumberOutstanding                       |  | Options Outstanding          |  | Options Exercisable
|---------------------- |  | --------------------------------------- |  | ---------------------------- |  | -------------------
|                       |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |  | NumberExercisable  
|$1.06$1.23            |  | 107,768                                 |  | 0.5 years                    |  | $1.16              
|$2.22                  |  | 30,041                                  |  | 4.4 years                    |  | $2.22              
|$2.54                  |  | 54,797                                  |  | 4.3 years                    |  | $2.54              
|$3.70                  |  | 30,616                                  |  | 5.6 years                    |  | $3.70              
|$5.21$5.59            |  | 23,067                                  |  | 7.3 years                    |  | $5.52              
|$6.35                  |  | 33,983                                  |  | 0.1 years                    |  | $6.35              
|$6.64$6.84            |  | 18,797                                  |  | 8.5 years                    |  | $6.66              
|$7.20                  |  | 6,710                                   |  | 0.6 years                    |  | $7.20              
|$7.86                  |  | 129,250                                 |  | 1.1 years                    |  | $7.86              
|$9.39                  |  | 26,292                                  |  | 2.0 years                    |  | $9.39              
|$9.73                  |  | 117,810                                 |  | 2.8 years                    |  | $9.73              
|$10.50$10.89          |  | 43,715                                  |  | 1.1 years                    |  | $10.55             
|$11.19$11.37          |  | 17,841                                  |  | 1.1 years                    |  | $11.31             
|$12.00                 |  | 109,500                                 |  | 4.1 years                    |  | $12.00             
|$12.88                 |  | 44,127                                  |  | 0.1 years                    |  | $12.88             



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 17.    Parent Company Only Statements



The following are the condensed statements of condition,
income, and cash flows for the parent company only, AmericanWest Bancorporation. These statements are presented using the equity method of accounting; therefore, accounts of the subsidiaries have not been included. Intercompany transactions and
balances have not been eliminated. The following information should be read in conjunction with the other notes to the consolidated financial statements.



Condensed Statements of Condition

($ in thousands)



|                                           |  | December 31,
|------------------------------------------ |  | ------------
|                                           |  | 2002        
|Cash                                       |  | $           
|Investment in:                             |  |             
|Bank subsidiaries                          |  |             
|Other assets                               |  |             
|                                           |  |             
|TOTAL ASSETS                               |  | $           
|                                           |  |             
|Other Borrowings                           |  | $           
|Stockholders equity                       |  |             
|                                           |  |             
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |  | $           
|                                           |  |             



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 17.    Parent Company Only Statements (Continued)



Condensed Statements of Income

($ in thousands)



|                                                                                        |  | Years Ended December 31,
|--------------------------------------------------------------------------------------- |  | ------------------------
|                                                                                        |  | 2002                    
|Income:                                                                                 |  |                         
|Bank subsidiaries dividends                                                             |  | $                       
|Rent income                                                                             |  |                         
|Other income                                                                            |  |                         
|                                                                                        |  |                         
|                                                                                        |  |                         
|                                                                                        |  |                         
|Expenses:                                                                               |  |                         
|Salaries and benefits                                                                   |  |                         
|Interest expense                                                                        |  |                         
|Depreciation and amortization                                                           |  |                         
|Other operating expenses                                                                |  |                         
|                                                                                        |  |                         
|                                                                                        |  |                         
|                                                                                        |  |                         
|Income/(loss) before tax benefit and equity in undistributed net income of
subsidiaries |  |                         
|Income tax benefit/(expense)                                                            |  |                         
|                                                                                        |  |                         
|Income/(loss) before equity in undistributed net income of subsidiaries                 |  |                         
|Equity in undistributed net income of:                                                  |  |                         
|Bank subsidiaries                                                                       |  |                         
|Nonbank subsidiaries                                                                    |  |                         
|                                                                                        |  |                         
|Net income                                                                              |  | $                       
|                                                                                        |  |                         



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 17.    Parent Company Only Statements (Continued)



Condensed Statements of Cash Flows

($ in thousands)



|                                                                              |  | Years Ended December 31, |        
|----------------------------------------------------------------------------- |  | ------------------------ | -------
|                                                                              |  | 2002                     |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                         |  |                          |        
|Net Income                                                                    |  | $                        | 10,899 
|Adjustments to reconcile net income to cash provided by operating
activities: |  |                          |        
|Equity in undistributed net income of subsidiaries                            |  |                          | (4,713 
|Depreciation and amortization                                                 |  |                          | 0      
|Gain on sale                                                                  |  |                          | 0      
|(Increase) decrease in other assets                                           |  |                          | (62    
|Increase (decrease) in other liabilities                                      |  |                          | (21    
|                                                                              |  |                          |        
|NET CASH FROM OPERATING ACTIVITIES                                            |  |                          | 6,103  
|                                                                              |  |                          |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                          |  |                          |        
|Investment in subsidiaries                                                    |  |                          | (4,963 
|Return of investment in subsidiaries                                          |  |                          | 0      
|Net Cash to acquire Latah Bancorporation                                      |  |                          | (8,544 
|Purchase of premises and equipment                                            |  |                          |        
|Proceeds from sale of Insurance Agency                                        |  |                          | 0      
|Sale of premises and equipment                                                |  |                          |        
|                                                                              |  |                          |        
|NET CASH FROM INVESTING ACTIVITIES                                            |  |                          | (13,507
|                                                                              |  |                          |        
|CASH FLOWS FROM FINANCING ACTIVITIES                                          |  |                          |        
|Issuance of capital stock                                                     |  |                          | 736    
|Stock repurchase program                                                      |  |                          | (3,166 
|Proceeds from issuance of Long Term Debt                                      |  |                          | 19,309 
|Repayment of Long Term Debt                                                   |  |                          | (9,300 
|                                                                              |  |                          |        
|NET CASH FROM FINANCING ACTIVITIES                                            |  |                          | 7,579  
|                                                                              |  |                          |        
|NET CHANGE IN CASH                                                            |  |                          | 175    
|CASH, beginning of year                                                       |  |                          | 1      
|                                                                              |  |                          |        
|CASH, end of year                                                             |  | $                        | 176    
|                                                                              |  |                          |        



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 18.    Related Party Transactions



Loans to related parties:



Loans to AWBCs officers and directors are on
substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than normal risk of collectibility. Such loans had the following
balances and activity during 2002 and 2001:



|($ in thousands)             |  | 2002 |        |   | 2001 |  
|---------------------------- |  | ---- | ------ | - | ---- | -
|Balance at beginning of year |  | $    | 4,022  |   |      | $
|New loans or advances        |  |      | 8,650  |   |      |  
|Repayments and adjustments   |  |      | (3,278 | ) |      |  
|                             |  |      |        |   |      |  
|Balance at end of year       |  | $    | 9,394  |   |      | $
|                             |  |      |        |   |      |  



Deposits from related
parties:



Deposits from related parties
totaled $2,062,000 and $1,365,000 at December 31, 2002 and 2001, respectively.



Payments to related parties:



AWB paid zero dollars in 2002 but paid $84,000 in both 2001 and 2000, to an Association including one of the Directors of AWBC and AWB for the rent of its Ephrata branch. This person is no longer a director of AWBC or AWB.



Note 19.    Fair Value of Financial
Instruments



SFAS No. 107, Disclosures about
Fair Value of Financial Instruments requires disclosure of fair value information about financial instruments for which it is practicable to estimate fair value. As defined by SFAS No. 107, financial instruments include the categories listed
below. It does not include the value of property, plant and equipment and intangible assets such as customer relationships and core deposit intangibles. Fair values of off-statement of condition lending commitments are based on fees currently
charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counter parties credit standing. The fair value of the fees at December 31, 2002 and 2001, were insignificant. See Note 10 for the
notional amount of the commitments to extend credit. The following table summarizes carrying amounts, estimated fair values, and assumptions used by AWBC to estimate fair value as of December 31, 2002 and 2001:



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|As of December 31, 2002: ($ in thousands)            |  | Assumptions Used inEstimating Fair Value                                                                                                |  | Carrying Amount |         | Estimated FairValue
|---------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | -------------------
|Financial Assets:                                    |  |                                                                                                                                         |  |                 |         |                    
|Cash and due from banks                              |  | Equal to carrying value                                                                                                                 |  | $               | 24,250  |                    
|Overnight interest bearing deposits with other banks |  | Equal to carrying value                                                                                                                 |  |                 | 14,675  |                    
|Securities                                           |  | Quoted market prices                                                                                                                    |  |                 | 48,173  |                    
|Loans                                                |  | Fixed-rate loans: Discounted expected future cash flows, variable-rate loans: equal
to carrying value, net of allowance for loan losses |  |                 | 764,938 |                    
|Financial Liabilities:                               |  |                                                                                                                                         |  |                 |         |                    
|Deposits                                             |  | Fixed-rate certificates of deposit: Discounted expected future cash flows All other deposits: Equal to carrying
value                   |  |                 | 766,335 |                    
|Short-term borrowings                                |  | Equal to carrying value                                                                                                                 |  |                 | 46,284  |                    
|Long-Term Borrowings                                 |  | Discounted expected future cash flows                                                                                                   |  |                 | 6,825   |                    
|Trust Preferred Borrowings                           |  | Equal to carrying value                                                                                                                 |  |                 | 10,000  |                    



|As of December 31, 2001: ($ in thousands)            |  | Assumptions Used inEstimating Fair Value                                                                                                |  | Carrying Amount |         | Estimated FairValue
|---------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | -------------------
|Financial Assets:                                    |  |                                                                                                                                         |  |                 |         |                    
|Cash and due from banks                              |  | Equal to carrying value                                                                                                                 |  | $               | 24,421  |                    
|Overnight interest bearing deposits with other banks |  | Equal to carrying value                                                                                                                 |  |                 | 535     |                    
|Securities                                           |  | Quoted market prices                                                                                                                    |  |                 | 15,550  |                    
|Loans                                                |  | Fixed-rate loans: Discounted expected future cash flows, variable-rate loans: equal to
carrying value, net of allowance for loan losses |  |                 | 580,899 |                    
|Financial Liabilities:                               |  |                                                                                                                                         |  |                 |         |                    
|Deposits                                             |  | Fixed-rate certificates of deposit: Discounted expected future cash flows All other deposits: Equal to carrying
value                   |  |                 | 532,237 |                    
|Short-term borrowings                                |  | Equal to carrying value                                                                                                                 |  |                 | 52,974  |                    



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##### Table of Contents

AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 20.    Regulatory Matters



The Banks are subject to various regulatory capital
requirements administered by the banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on the Banks financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Banks must meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities, and certain off-statement of
condition items.



The Banks capital amounts
and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Banks to maintain minimum
amounts and ratios set forth in the following table of total and Tier I capital to risk-weighted and average assets. As of December 31, 2001 AWBC, AWB and BOL were considered well capitalized based on regulatory capital standards.



As of December 31, 2002 and 2001 the regulatory ratios for
AWBC, AWB and BOL were as follows:



|                                                    |  | Actual |        | Adequately Capitalized |        |        | Well Capitalized
|--------------------------------------------------- |  | ------ | ------ | ---------------------- | ------ | ------ | ----------------
|($ in thousands)                                    |  | Amount |        | Ratio                  |        | Amount |                 
|As of December 31, 2002:                            |  |        |        |                        |        |        |                 
|Total capital to risk weighted assets:              |  |        |        |                        |        |        |                 
|AWBC                                                |  | $      | 85,735 |                        | 10.24% |        | > $66,972       
|AWB                                                 |  |        | 75,452 |                        | 10.36% |        | > 58,237        
|BOL                                                 |  |        | 12,132 |                        | 11.08% |        | > 8,762         
|Tier I capital to risk weighted assets:             |  |        |        |                        |        |        |                 
|AWBC                                                |  |        | 75,463 |                        | 9.01%  |        | > 33,486        
|AWB                                                 |  |        | 66,405 |                        | 9.12%  |        | > 29,119        
|BOL                                                 |  |        | 10,907 |                        | 9.96%  |        | > 4,381         
|Leverage capital, Tier I capital to average assets: |  |        |        |                        |        |        |                 
|AWBC                                                |  |        | 75,463 |                        | 8.54%  |        | > 35,328        
|AWB                                                 |  |        | 66,405 |                        | 8.94%  |        | > 29,699        
|BOL                                                 |  |        | 10,907 |                        | 7.75%  |        | > 5,629         
|As of December 31, 2001:                            |  |        |        |                        |        |        |                 
|Total capital to risk weighted assets:              |  |        |        |                        |        |        |                 
|AWBC                                                |  | $      | 69,778 |                        | 11.25% |        | > $49,633       
|AWB                                                 |  |        | 69,362 |                        | 11.18% |        | > 49,620        
|Tier I capital to risk weighted assets:             |  |        |        |                        |        |        |                 
|AWBC                                                |  |        | 63,154 |                        | 10.18% |        | > 24,816        
|AWB                                                 |  |        | 62,738 |                        | 10.12% |        | > 24,810        
|Leverage capital, Tier I capital to average assets: |  |        |        |                        |        |        |                 
|AWBC                                                |  |        | 63,154 |                        | 9.84%  |        | > 25,660        
|AWB                                                 |  |        | 62,738 |                        | 9.92%  |        | > 25,297        



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##### Table of Contents

AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 21.    Earnings Per Share



The following is a reconciliation of the numerators and
denominators for basic and diluted per-share computations for net income for 2002, 2001 and 2000:



|($ in thousands, except per share)                   |  | 2002 |           | 2001 |   | 2000     
|---------------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|Numerator:                                           |  |      |           |      |   |          
|Net income                                           |  | $    | 10,899    |      | $ | 9,207    
|                                                    
|Denominator:                                         |  |      |           |      |   |          
|Weighted-average number of common shares outstanding |  |      | 7,954,577 |      |   | 8,190,374
|Incremental shares assumed for stock options         |  |      | 239,931   |      |   | 65,786   
|                                                     |  |      |           |      |   |          
|Total                                                |  |      | 8,194,508 |      |   | 8,256,160
|                                                     |  |      |           |      |   |          
|Basic earnings per common share                      |  | $    | 1.37      |      | $ | 1.12     
|Diluted earnings per common share                    |  | $    | 1.33      |      | $ | 1.12     
|Potentially dilutive stock option shares             |  |      |          |      |   | 122,028  



QUARTERLY FINANCIAL
DATA

CONDENSED CONSOLIDATED STATEMENT OF INCOME-QUARTERLY



UNAUDITED



|                                                    |  | 2002, Quarter Ended |           | 2001, Quarter Ended
|--------------------------------------------------- |  | ------------------- | --------- | -------------------
|($ in thousands, except per share)                  |  | Dec. 31             |           | Sept. 30           
|Interest income                                     |  | $                   | 16,912    |                    
|Interest expense                                    |  |                     | 4,162     |                    
|                                                    |  |                     |           |                    
|Net Interest Income                                 |  |                     | 12,750    |                    
|Provision for loan losses                           |  |                     | 1,843     |                    
|                                                    |  |                     |           |                    
|Net interest income after provision for loan losses |  |                     | 10,907    |                    
|Noninterest income                                  |  |                     | 1,585     |                    
|Noninterest expense                                 |  |                     | 8,021     |                    
|                                                    |  |                     |           |                    
|Income before income taxes                          |  |                     | 4,471     |                    
|Income tax                                          |  |                     | 1,559     |                    
|                                                    |  |                     |           |                    
|Net income                                          |  | $                   | 2,912     |                    
|                                                    |  |                     |           |                    
|Basic earnings per common share                     |  | $                   | 0.361     |                    
|Diluted earnings per common share                   |  | $                   | 0.342     |                    
|Basic average shares                                |  |                     | 8,065,933 |                    
|Diluted average shares                              |  |                     | 8,506,632 |                    



60