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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, 2003



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, including zip code)



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 is approximately $155,218,000 based on the June
30, 2003 closing price of the registrants common stock as quoted on the Nasdaq National Market of $16.38.



The number of shares of the registrants common stock outstanding at February 25, 2004 was 10,162,927.



DOCUMENTS INCORPORATED BY REFERENCE



|                                     |  |                              
|------------------------------------ |  | -----------------------------
|Documents of the Registrant          |  | Form 10-K Reference Locations
|Portions of the 2004 Proxy Statement |  | PART III                     



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AMERICANWEST BANCORPORATION



ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR

ENDED DECEMBER 31, 2003



TABLE OF CONTENTS



|              |  |          |  |                                                                                       |  |     
|------------- |  | -------- |  | ------------------------------------------------------------------------------------- |  | ----
|              |  |          |  |                                                                                       |  | Page
|PART I        |  |          |  |                                                                                       |  |     
|              |  | Item 1.  |  | Business                                                                              |  | 3   
|              |  | Item 2.  |  | Properties                                                                            |  | 17  
|              |  | Item 3.  |  | Legal Proceedings                                                                     |  | 17  
|              |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 18  
|              |  |          | 
|PART II       |  |          |  |                                                                                       |  |     
|              |  | Item 5.  |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 19  
|              |  | Item 6.  |  | Selected Financial Data                                                               |  | 20  
|              |  | Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 21  
|              |  | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 26  
|              |  | Item 8.  |  | Financial Statements and Supplementary Data                                           |  | 27  
|              |  | Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 27  
|              |  | Item 9A. |  | Controls and Procedures.                                                              |  | 27  
|              |  |          | 
|PART III      |  |          |  |                                                                                       |  |     
|              |  | Item 10. |  | Directors and Executive Officers of the Registrant                                    |  | 29  
|              |  | Item 11. |  | Executive Compensation                                                                |  | 29  
|              |  | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 29  
|              |  | Item 13. |  | Certain Relationships and Related Transactions                                        |  | 29  
|              |  | Item 14. |  | Principal Accounting Fees and Services                                                |  | 29  
|              |  |          | 
|PART IV       |  |          |  |                                                                                       |  |     
|              |  | Item 15. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 30  
|              | 
|SIGNATURES    |  | 31      
|              | 
|EXHIBIT INDEX |  | E-1     



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PART I



Forward Looking Statements.



Certain matters discussed or incorporated by reference in this
Annual Report on Form 10-K including, but not limited to, matters described in Item 7-Managements Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (PSLRA), including statements about the business strategy, financial condition, results of operations, future financial targets and earnings outlook of the Company. The forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ materially from those projected. Those factors include, but are not limited to, impact of the current national and regional economy on small business loan demand in the
Companys market, loan delinquency rates, changes in portfolio composition, the banks ability to attract quality commercial business, interest rate movements and the impact on margins such movement may cause, changes in the demographic
make-up of the Companys market, fluctuation in demand for the Companys products and services, the Companys ability to attract and retain qualified people, regulatory changes, competition with other banks and financial institutions,
and other factors. For a discussion of factors that could cause actual results to differ, please see the Companys reports on Forms 10-K and 10-Q as filed with the Securities and Exchange Commission. Words such as targets,
expects, anticipates, believes, other similar expressions or future or conditional verbs such as will, may, should, would, and could are intended to
identify such forward-looking statements. Readers should not place undue reliance on the forward-looking statements, which reflect managements view only as of the date hereto. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect subsequent events or circumstances. This statement is included for the express purpose of protecting the Company under PSLRAs safe harbor provisions.



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. 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 AmericanWest Bank (AWB). On July 31, 2002, AmericanWest Bancorporation acquired Latah Bancorporation, Inc. and its subsidiary, Bank of Latah (BOL), which operated as a subsidiary of AWBC until AWB and BOL merged on
March 19, 2003. The surviving charter is AWB. At December 31, 2003, AWBC had total assets of $1,023.6 million, net loans of $863.7 million, deposits of $871.1 million and stockholders equity of $96.2 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 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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AMERICANWEST BANCORPORATION



Bank



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



AWB offers 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 Bank also provides a broad range of depository
and lending services to commercial, industrial and agricultural enterprises, governmental entities, not for profit entities and individuals. The Banks deposit taking and lending activities are primarily directed to the communities in which
their branches are located. AWBs primary marketing focus is on small to medium-sized businesses, professionals and consumers 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 a growth strategy, the key components of which include:



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



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



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



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 and consumers.



AWBC emphasizes the development of long-term relationships with its customers, which enables the Bank 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 Washington, Idaho and Oregon 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 Washington, Oregon and 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, 2003, AWBC had total gross loans outstanding of $876.4 million, which equals 100.6% of AWBCs deposits and 85.6% of its assets. The majority of the loans held by AWBC were to
borrowers within the Banks 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, and 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.



Construction Loans.Construction loans are made to individuals and contractors to construct primarily single-family principal residences. These loans typically
have maturities of twelve months. Interest rates are typically fixed, although some adjustable-rate loans are made. The Banks policies normally require that a permanent financing commitment be in place before a construction loan is made to an
individual



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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 48% of the loans in the
Banks portfolio have interest rates that float with the lending Banks reference rates, which are in turn based on various indices such as the rates of interest charged by money center banks.



Lending and Credit Management. The Bank follows loan policies. The policies establish
levels of loan commitment by loan type, credit review and grading criteria, and cover other matters such as loan administration, loans to affiliates, costs, problem loans and loan loss reserves, and related items. Loans are analyzed at origination
and on a periodic basis as conditions warrant as outlined in the Banks loan policies.



All loan applications are processed at AWBC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 $3.0 million per loan.



Under applicable federal and state law, permissible loans to one borrower by AWB are limited.
The Bank, as a matter of policy, does not extend credit to any single borrower in excess of $16.0 million. At December 31, 2003, 2002 and 2001, the outstanding balance of loan participations sold outside AWB was $52.9 million, $32.7 million and
$41.3 million, respectively.



Secondary Mortgage Sales.The Bank sells
mortgage loans in the secondary market as a correspondent and as a broker. The Bank offers a variety of products for refinance and purchases; and is approved to originate FHA and VA loans. The majority of loans originated in 2003 were fixed rate
single-family loans. Total loans sold in 2003 were approximately $67.3 million. Approximately 46% of such loans were sold with servicing retained during 2003.



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



|                                                                |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |       |  
|--------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ----- | - |  | - | ----- | -
|                                                                |  | Year ended December 31, |       
|($ in thousands)                                                |  | 2003                    |        |   | 2002 |   |        | 2001 |  |   | 2000   |   |  | 1999 |      
|Nonperforming loans:                                            |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |       |  
|Nonaccrual loans                                                |  | $                       | 12,485 |   |      | $ | 13,315 |      |  | $ | 11,023 |   |  | $    | 5,458 |   |  | $ | 5,875 |  
|Accrual loans 90 days or more past due                          |  |                         | 43     |   |      |   | 244    |      |  |   | 2,193  |   |  |      | 1,339 |   |  |   | 489   |  
|                                                                |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |       |  
|Total nonperforming loans                                       |  |                         | 12,528 |   |      |   | 13,559 |      |  |   | 13,216 |   |  |      | 6,797 |   |  |   | 6,364 |  
|Other real estate owned and other repossessed assets            |  |                         | 7,408  |   |      |   | 7,874  |      |  |   | 1,616  |   |  |      | 1,510 |   |  |   | 1,179 |  
|                                                                |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |       |  
|Total nonperforming assets                                      |  | $                       | 19,936 |   |      | $ | 21,433 |      |  | $ | 14,832 |   |  | $    | 8,307 |   |  | $ | 7,543 |  
|                                                                |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |       |  
|Allowance for loan losses                                       |  | $                       | 12,453 |   |      | $ | 10,272 |      |  | $ | 6,624  |   |  | $    | 4,948 |   |  | $ | 4,349 |  
|Ratio of total nonperforming assets to total assets             |  |                         | 1.95   | % |      |   | 2.34   | %    |  |   | 2.25   | % |  |      | 1.39  | % |  |   | 1.43  | %
|Ratio of total nonperforming loans to total loans               |  |                         | 1.43   | % |      |   | 1.75   | %    |  |   | 2.25   | % |  |      | 1.38  | % |  |   | 1.51  | %
|Ratio of allowance for loan losses to total nonperforming loans |  |                         | 99.4   | % |      |   | 75.8   | %    |  |   | 50.1   | % |  |      | 72.8  | % |  |   | 68.3  | %



The Banks 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. Approximately 59% of the non-performing assets as of December 31, 2003 involve three Other Real Estate Owned (ORE) assets and four non-accruing relationships. In the ORE category, AWBC has two ice
skating complexes totaling $4.3 million; both of which are being marketed (one as an operating ice arena and the other as a commercial building). The other ORE property is an Alzheimer facility at approximately $850 thousand that is being marketed
as an elder care facility or commercial offices. The non-accruing relationships include a $3.7 million retail/office complex near downtown Spokane that management believes AWBC is fully secured. Additionally, a $786,000 loan secured by residential
lots for development located in Yakima is believed to be fully secured and a $1.2 million restaurant loan in Spokane, which is believed to be fully secured. Finally, the last loan is a $1.0 million purchased participation secured by an Ethanol
producing facility in South Dakota. The Bank believes it is fully secured on this loan as well.



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 Bank had a book value of
approximately $7.4 million as of December 31, 2003, 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
Bank. 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 Bank recognizes 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 Bank maintains an allowance
for loan losses by following generally accepted accounting principles outlined in SFAS No. 5, Accounting for Contingencies and Staff Accounting Bulletin 102, Selected Loan Loss Allowance Methodology and Documentation Issues. The Bank
has established systematic methodologies for the



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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 Banks methodologies, as set forth in its policies and reviewed with the Audit Committee of the
Company, include a general allocation based upon measurement of historical losses, anticipated losses and coverage of non performing loans methodology. The anticipated losses methodology includes assigning specific loss ratings to general loan
grading categories, which are reviewed and validated on a periodic basis. The Bank 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.



The Bank
believes it has established its 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 Banks management
believes that the allowance for loan losses is adequate.



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



|                                                            |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                            |  | Years ended December 31, |        
|($ in thousands)                                            |  | 2003                     |         |   | 2002 |   |         | 2001 |  |   | 2000    |   |  | 1999 |        
|Balance of allowance for loan losses at beginning of period |  | $                        | 10,272  |   |      | $ | 6,624   |      |  | $ | 4,948   |   |  | $    | 4,349   |   |  | $ | 3,819   |  
|Charge-offs                                                 |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Commercial                                                  |  |                          | 1,452   |   |      |   | 1,292   |      |  |   | 396     |   |  |      | 833     |   |  |   | 755     |  
|Agricultural                                                |  |                          | 177     |   |      |   | 1,541   |      |  |   | 613     |   |  |      |        |   |  |   |        |  
|Real estate                                                 |  |                          | 2,154   |   |      |   | 26      |      |  |   | 96      |   |  |      | 97      |   |  |   | 210     |  
|Installment                                                 |  |                          | 234     |   |      |   | 265     |      |  |   | 188     |   |  |      | 164     |   |  |   | 199     |  
|Other                                                       |  |                          | 507     |   |      |   | 156     |      |  |   | 36      |   |  |      | 46      |   |  |   | 84      |  
|                                                            |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total charge-offs                                           |  |                          | 4,524   |   |      |   | 3,280   |      |  |   | 1,329   |   |  |      | 1,140   |   |  |   | 1,248   |  
|Recoveries                                                  |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Commercial                                                  |  |                          | 71      |   |      |   | 140     |      |  |   | 112     |   |  |      | 51      |   |  |   | 119     |  
|Agricultural                                                |  |                          | 90      |   |      |   | 173     |      |  |   | 2       |   |  |      |        |   |  |   |        |  
|Real estate                                                 |  |                          | 15      |   |      |   | 3       |      |  |   | 21      |   |  |      | 2       |   |  |   | 40      |  
|Installment                                                 |  |                          | 30      |   |      |   | 67      |      |  |   | 13      |   |  |      | 42      |   |  |   | 30      |  
|Other                                                       |  |                          | 175     |   |      |   | 4       |      |  |   | 2       |   |  |      | 1       |   |  |   | 12      |  
|                                                            |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total recoveries                                            |  |                          | 381     |   |      |   | 387     |      |  |   | 150     |   |  |      | 96      |   |  |   | 201     |  
|Net charge-offs                                             |  |                          | 4,143   |   |      |   | 2,893   |      |  |   | 1,179   |   |  |      | 1,044   |   |  |   | 1,047   |  
|Provision for loan losses                                   |  |                          | 6,324   |   |      |   | 5,663   |      |  |   | 2,855   |   |  |      | 1,643   |   |  |   | 1,577   |  
|Allowance acquired through acquisition                      |  |                          |        |   |      |   | 878     |      |  |   |        |   |  |      |        |   |  |   |        |  
|                                                            |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Balance of allowance for loan losses at end of period       |  | $                        | 12,453  |   |      | $ | 10,272  |      |  | $ | 6,624   |   |  | $    | 4,948   |   |  | $ | 4,349   |  
|                                                            |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Ratio of net charge-offs to average loans                   |  |                          | 0.50    | % |      |   | 0.43    | %    |  |   | 0.22    | % |  |      | 0.23    | % |  |   | 0.27    | %
|Average loans outstanding during the period                 |  | $                        | 821,407 |   |      | $ | 675,344 |      |  | $ | 540,159 |   |  | $    | 450,901 |   |  | $ | 394,132 |  



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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.



|                         |  |                     |        |  |      |   |                    |      |        |  |      |                    |  |      |       |  |                    |   |   |   |       |                    |     |   |  |   |       |  |     |  
|------------------------ |  | ------------------- | ------ |  | ---- | - | ------------------ | ---- | ------ |  | ---- | ------------------ |  | ---- | ----- |  | ------------------ | - | - | - | ----- | ------------------ | --- | - |  | - | ----- |  | --- | -
|                         |  | December 31,        |       
|                         |  | 2003                |        |  | 2002 |   |                    | 2001 |        |  | 2000 |                    |  | 1999 |      
|($ in thousands)         |  | Amount of Allowance |        |  |      |   | Amount ofAllowance |      | %      |  |      | Amount ofAllowance |  | %    |       |  | Amount ofAllowance |   | % |   |       | Amount ofAllowance |     | % | 
|Commercial               |  | $                   | 8,717  |  | 70   | % |                    | $    | 6,677  |  | 65   | %                  |  | $    | 4,632 |  | 70                 | % |   | $ | 3,167 |                    | 64  | % |  | $ | 2,535 |  | 58  | %
|Agricultural             |  |                     | 1,868  |  | 15   | % |                    |      | 2,054  |  | 20   | %                  |  |      | 993   |  | 15                 | % |   |   | 742   |                    | 15  | % |  |   | 688   |  | 16  | %
|Real estate-mortgage     |  |                     | 1,245  |  | 10   | % |                    |      | 719    |  | 7    | %                  |  |      | 452   |  | 7                  | % |   |   | 643   |                    | 13  | % |  |   | 685   |  | 16  | %
|Real estate-construction |  |                     | 249    |  | 2    | % |                    |      | 205    |  | 2    | %                  |  |      | 194   |  | 3                  | % |   |   | 99    |                    | 2   | % |  |   | 152   |  | 3   | %
|Installment              |  |                     | 249    |  | 2    | % |                    |      | 514    |  | 5    | %                  |  |      | 296   |  | 4                  | % |   |   | 247   |                    | 5   | % |  |   | 218   |  | 5   | %
|Other                    |  |                     | 125    |  | 1    | % |                    |      | 103    |  | 1    | %                  |  |      | 57    |  | 1                  | % |   |   | 50    |                    | 1   | % |  |   | 71    |  | 2   | %
|                         |  |                     |        |  |      |   |                    |      |        |  |      |                    |  |      |       |  |                    |   |   |   |       |                    |     |   |  |   |       |  |     |  
|Total                    |  | $                   | 12,453 |  | 100  | % |                    | $    | 10,272 |  | 100  | %                  |  | $    | 6,624 |  | 100                | % |   | $ | 4,948 |                    | 100 | % |  | $ | 4,349 |  | 100 | %
|                         |  |                     |        |  |      |   |                    |      |        |  |      |                    |  |      |       |  |                    |   |   |   |       |                    |     |   |  |   |       |  |     |  



Investments



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



The following table sets forth the carrying value, by type, of the securities in the
Banks portfolios at December 31, 2003, 2002 and 2001.



|                                                 |  |              |        |      |   |        |  |   |       
|------------------------------------------------ |  | ------------ | ------ | ---- | - | ------ |  | - | ------
|                                                 |  | December 31,
|($ in thousands)                                 |  | 2003         |        | 2002 |   | 2001  
|U.S. Treasury and other U.S. Government agencies |  | $            | 4,608  |      | $ | 12,292 |  | $ | 7,896 
|States of the U.S. and political subdivisions    |  |              | 9,085  |      |   | 8,841  |  |   | 1,297 
|Other securities                                 |  |              | 27,033 |      |   | 27,040 |  |   | 6,357 
|                                                 |  |              |        |      |   |        |  |   |       
|Total securities                                 |  | $            | 40,726 |      | $ | 48,173 |  | $ | 15,550
|                                                 |  |              |        |      |   |        |  |   |       



At December 31, 2003, the market value
of the Banks securities exceeded amortized cost by $727,000. At December 31, 2002 market value exceeded amortized cost by approximately $665,000. No portion of AWBC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 Banks investment portfolios by type at December 31, 2003.



Type
and Maturity



|                                                                   |  |       |   |  |        |       
|------------------------------------------------------------------ |  | ----- | - |  | ------ | ------
|($ in thousands)                                                   |  | Yield |   |  | Amount
|U.S. Treasury and other U.S. government agencies and corporations: |  |       |   |  |        |       
|1 year or less                                                     |  | 6.00  | % |  | $      | 508   
|Over 1 through 5 years                                             |  | 3.92  | % |  |        | 1,527 
|Over 5 through 10 years                                            |  | 6.56  | % |  |        | 2,086 
|Over 10 years                                                      |  | 8.23  | % |  |        | 487   
|                                                                   |  |       |   |  |        |       
|Total                                                              |  | 5.80  | % |  | $      | 4,608 
|                                                                   |  |       |   |  |        |       
|States and political subdivisions                                  |  |       |   |  |        |       
|1 year or less                                                     |  | 6.85  | % |  | $      | 620   
|Over 1 through 5 years                                             |  | 7.43  | % |  |        | 4,387 
|Over 5 through 10 years                                            |  | 8.26  | % |  |        | 2,477 
|Over 10 Years                                                      |  | 5.82  | % |  |        | 1,601 
|                                                                   |  |       |   |  |        |       
|Total                                                              |  | 7.34  | % |  | $      | 9,085 
|                                                                   |  |       |   |  |        |       
|Other securities:                                                  |  |       |   |  |        |       
|1 year or less                                                     |  | 4.19  | % |  | $      | 8,444 
|Over 1 through 5 years                                             |  | 7.03  | % |  |        | 8,079 
|Over 5 through 10 years                                            |  | 5.67  | % |  |        | 1,655 
|Over 10 years                                                      |  | 3.92  | % |  |        | 8,855 
|                                                                   |  |       |   |  |        |       
|Total                                                              |  | 5.04  | % |  | $      | 27,033
|                                                                   |  |       |   |  |        |       
|Total investment securities:                                       |  |       |   |  |        |       
|1 year or less                                                     |  | 4.30  | % |  | $      | 9,572 
|Over 1 through 5 years                                             |  | 6.55  | % |  |        | 13,993
|Over 5 through 10 years                                            |  | 4.29  | % |  |        | 6,218 
|Over 10 years                                                      |  | 4.09  | % |  |        | 10,943
|                                                                   |  |       |   |  |        |       
|Total                                                              |  | 5.64  | % |  | $      | 40,726
|                                                                   |  |       |   |  |        |       



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, 2003.



Deposits



The Banks primary source of funds has historically been customer deposits. The Bank strives to maintain a high percentage of noninterest-bearing deposits, which are low cost funds and result in higher interest
margins. At December 31, 2003, 2002, and 2001, the Banks ratios of noninterest-bearing deposits to total deposits were 18.5%, 17.7%, and 18.5%, respectively.



The Bank offers 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 Banks 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 2003, 2002 and 2001.



|                                    |  |                         |         |               |      |   |                |      |              |  |      |                |  |              |         |  |      |  
|----------------------------------- |  | ----------------------- | ------- | ------------- | ---- | - | -------------- | ---- | ------------ |  | ---- | -------------- |  | ------------ | ------- |  | ---- | -
|                                    |  | Year Ended December 31, |        
|                                    |  | 2003                    |         |               | 2002 |   |                | 2001 |             
|($ in thousands)                    |  | AverageBalance          |         | Interest Rate |      |   | AverageBalance |      | InterestRate |  |      | AverageBalance |  | InterestRate |        
|Interest-bearing demand deposits    |  | $                       | 280,401 |               | 1.76 | % |                | $    | 206,570      |  | 2.08 | %              |  | $            | 156,683 |  | 2.85 | %
|Savings deposits                    |  |                         | 60,069  |               | 0.50 | % |                |      | 44,946       |  | 0.94 | %              |  |              | 41,266  |  | 1.74 | %
|Time deposits                       |  |                         | 335,212 |               | 2.35 | % |                |      | 283,043      |  | 3.17 | %              |  |              | 225,289 |  | 5.32 | %
|Noninterest-bearing demand deposits |  |                         | 140,710 |               |      |   |                |      | 111,139      |  |      |                |  |              | 92,008  |  |      |  
|                                    |  |                         |         |               |      |   |                |      |              |  |      |                |  |              |         |  |      |  
|Total                               |  | $                       | 816,392 |               |      |   |                | $    | 645,698      |  |      |                |  | $            | 515,246 |  |      |  
|                                    |  |                         |         |               |      |   |                |      |              |  |      |                |  |              |         |  |      |  



The following table shows the amounts
and maturities of certificates of deposit that had balances of more than $100,000 at December 31, 2003, 2002 and 2001.



|                                                               |  |              |         |      |   |         |  |   |       
|-------------------------------------------------------------- |  | ------------ | ------- | ---- | - | ------- |  | - | ------
|                                                               |  | December 31,
|($ in thousands)                                               |  | 2003         |         | 2002 |   | 2001   
|Certificates of Deposit over $100,000 with remaining maturity: |  |              |         |      |   |         |  |   |       
|Less than three months                                         |  | $            | 59,004  |      | $ | 62,588  |  | $ | 30,050
|Three months to one year                                       |  |              | 54,573  |      |   | 54,194  |  |   | 44,454
|Over one year                                                  |  |              | 13,540  |      |   | 25,559  |  |   | 7,004 
|                                                               |  |              |         |      |   |         |  |   |       
|Total                                                          |  | $            | 127,117 |      | $ | 142,341 |  | $ | 81,508
|                                                               |  |              |         |      |   |         |  |   |       



AWBCs Markets



AWBC is separated into three separate Regions. As of December 31, 2003, these were the
Inland Empire Region headquartered in Spokane, Washington, the Columbia Region headquartered in Kennewick, Washington and the Palouse North Idaho Region headquartered in Latah, Washington.



AWBCs branches are located in and near the three largest metropolitan areas in Eastern
Washington; Spokane, Yakima and the Tri-Cities area comprised of Pasco, 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 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 Banks 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.



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Competition



While the Bank encounters a great deal of competition in its lending activities, management believes there is less competition in the Banks specialty middle market
and neighborhood bank niche than there was a few years ago. The Bank believes that its 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 Banks strategy by contrast, is to remain a middle market lender, which maintains close long-term relationships with its customers.



The Bank competes for deposits and banking business in Central and Eastern Washington from thirty-six locations as well as eight locations
in North Idaho. The Banks 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 Bank competes 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 Banks primary trade areas.



Management believes that the principal competitive factors affecting the Banks 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 Banks products currently compete favorably with respect to these factors, there can be no assurance that the Bank can maintain its competitive position against current and potential
competitors, especially those with significantly greater financial resources.



Employees



As of December 31, 2003, AWBC and its banking
subsidiary had 363 full-time equivalent employees. None of AWBCs employees are covered by a collective bargaining agreement. Management believes relations with AWBC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 the industry of its banking subsidiary. 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



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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.



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 bank.



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 bank.



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 bank 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 bank 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



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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.



Tie-In Arrangements.AWBC and its subsidiary bank 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 bank 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 bank 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 bank.



General. The Bank is subject to regulation by the State of Washington and the Federal
Deposit Insurance Corporation (FDIC). The federal and state laws that apply to AWBCs subsidiary bank 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 bank generally have been promulgated to protect depositors and not to protect stockholders of the subsidiary bank or its 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



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the institution to regulatory sanctions. Management of AWBC believes that its subsidiary bank meets all such
standards, and therefore, does not believe that these regulatory standards materially affect AWBCs business operations.



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 bank are currently insured to a maximum of $100,000 per depositor through its subsidiary Banks 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 bank. 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.



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



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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.



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
bank 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 establishing and maintaining disclosure controls and procedures and disclose their conclusions about the effectiveness of such controls and procedures based on their evaluation as of the end of the period
covered by 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 Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism 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, 2003, AWBC
owned or leased facilities in forty-five locations including thirty-seven in Eastern Washington and eight in North Idaho. 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.



There are a total of forty-four branch or lending office locations, of which thirty-six are in Eastern Washington. They are located in: Chewelah, Colfax, Colton,
Colville, Davenport, Dayton, Ellensburg, Ephrata, Ione, Kennewick, Kettle Falls, Latah, Mabton, Moses Lake, Naches, Oaksdale, Palouse, Prosser, Pullman (2), Spokane (8), Sunnyside, Tekoa, Uniontown, Waitsburg, Walla Walla (2), and Yakima (2). The
remaining eight branches in North Idaho are located in: Hayden, Kellogg, Lewiston, Moscow, Orofino, St. Maries (2), and Wallace.



Item 3. Legal Proceedings.



Periodically and in
the ordinary course of business, various claims and lawsuits are brought against AWBC or AWB, 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 and AWB. 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.



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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 2003.



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AMERICANWEST BANCORPORATION



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 2003 and 2002 as reported by NASDAQ.



|               |  |             |       |      |   |       |  |     |       |  |   |      
|-------------- |  | ----------- | ----- | ---- | - | ----- |  | --- | ----- |  | - | -----
|               |  | Sales Price
|               |  | 2003        |       | 2002
|               |  | High        |       | Low  |   | High  |  | Low
|First Quarter  |  | $           | 17.26 |      | $ | 12.88 |  | $   | 11.49 |  | $ | 9.96 
|Second Quarter |  | $           | 16.91 |      | $ | 13.96 |  | $   | 12.96 |  | $ | 10.77
|Third Quarter  |  | $           | 18.36 |      | $ | 14.84 |  | $   | 13.05 |  | $ | 11.73
|Fourth Quarter |  | $           | 21.32 |      | $ | 16.83 |  | $   | 14.46 |  | $ | 12.05



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



Holders. The
number of holders of common stock of record on February 25, 2004 was approximately 3,000.



Dividends. AWBC has declared and paid the following dividends subsequent to January 1, 2003: On February 14, 2003 and February 20, 2004 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, 2003, with respect to AWBCs compensation plans under which shares of the Companys common stock are authorized for issuance:



|                                                           |  |                                                                                         |  |                                                                          |      |                                                                                                                                     |        
|---------------------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ---- | ----------------------------------------------------------------------------------------------------------------------------------- | -------
|Plan Category                                              |  | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights |  | Weighted average exerciseprice of outstandingoptions, warrantsand rights |      | Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected in
column(a)
|                                                           |  | (a)                                                                                     |  | (b)                                                                      |      | (c)                                                                                                                                
|Equity compensation plans approved by security holders     |  | 624,562                                                                                 |  | $                                                                        | 9.44 |                                                                                                                                     | 598,403
|Equity compensation plans not approved by security holders |  |                                                                                        |  |                                                                          |     |                                                                                                                                     |       
|Total                                                      |  | 624,562                                                                                 |  | $                                                                        | 9.44 |                                                                                                                                     | 598,403



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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)  |  | 2003 |            |   | 2002 |   |           | 2001 |  |   | 2000      |   |  | 1999 |           
|Net interest income                         |  | $    | 56,762     |   |      | $ | 44,092    |      |  | $ | 34,424    |   |  | $    | 30,356     |   |  | $ | 28,474     |  
|Provision for loan losses                   |  |      | 6,324      |   |      |   | 5,663     |      |  |   | 2,855     |   |  |      | 1,643      |   |  |   | 1,577      |  
|Noninterest income                          |  |      | 6,176      |   |      |   | 5,384     |      |  |   | 4,702     |   |  |      | 4,029      |   |  |   | 5,912      |  
|Noninterest expense                         |  |      | 35,120     |   |      |   | 27,560    |      |  |   | 22,276    |   |  |      | 21,328     |   |  |   | 19,209     |  
|Income before income tax expense            |  |      | 21,494     |   |      |   | 16,253    |      |  |   | 13,995    |   |  |      | 11,414     |   |  |   | 13,600     |  
|Income tax expense                          |  |      | 7,508      |   |      |   | 5,354     |      |  |   | 4,788     |   |  |      | 3,379      |   |  |   | 3,888      |  
|Net income                                  |  |      | 13,986     |   |      |   | 10,899    |      |  |   | 9,207     |   |  |      | 8,035      |   |  |   | 9,712      |  
|Basic earnings per common share             |  | $    | 1.39       |   |      | $ | 1.13      |      |  | $ | 0.93      |   |  | $    | 0.68       |   |  | $ | 0.79       |  
|Diluted earnings per common share           |  | $    | 1.34       |   |      | $ | 1.10      |      |  | $ | 0.92      |   |  | $    | 0.68       |   |  | $ | 0.78       |  
|Return on average assets                    |  |      | 1.47       | % |      |   | 1.41      | %    |  |   | 1.46      | % |  |      | 1.44       | % |  |   | 1.90       | %
|Return on average equity                    |  |      | 15.87      | % |      |   | 15.08     | %    |  |   | 13.87     | % |  |      | 12.73      | % |  |   | 16.58      | %
|Assets                                      |  |      | 1,023,597  |   |      |   | 916,831   |      |  |   | 659,341   |   |  |      | 598,513    |   |  |   | 527,726    |  
|Securities                                  |  |      | 40,726     |   |      |   | 48,173    |      |  |   | 15,550    |   |  |      | 47,885     |   |  |   | 53,141     |  
|Loans:                                      |  |      |            |   |      |   |           |      |  |   |           |   |  |      |            |   |  |   |            |  
|Commercial and industrial                   |  |      | 645,156    |   |      |   | 540,467   |      |  |   | 411,197   |   |  |      | 317,108    |   |  |   | 246,796    |  
|Agricultural                                |  |      | 124,395    |   |      |   | 121,279   |      |  |   | 88,121    |   |  |      | 76,093     |   |  |   | 67,025     |  
|Real estate mortgage                        |  |      | 38,075     |   |      |   | 47,613    |      |  |   | 40,084    |   |  |      | 62,173     |   |  |   | 66,690     |  
|Real estate construction                    |  |      | 32,236     |   |      |   | 29,303    |      |  |   | 17,201    |   |  |      | 12,252     |   |  |   | 14,781     |  
|Installment                                 |  |      | 26,850     |   |      |   | 27,405    |      |  |   | 26,311    |   |  |      | 22,489     |   |  |   | 21,190     |  
|Other loans                                 |  |      | 9,678      |   |      |   | 9,512     |      |  |   | 5,062     |   |  |      | 3,972      |   |  |   | 6,939      |  
|Total loans                                 |  |      | 876,390    |   |      |   | 775,579   |      |  |   | 587,976   |   |  |      | 494,087    |   |  |   | 423,421    |  
|Allowance for loan loss to loans percentage |  |      | 1.42       | % |      |   | 1.32      | %    |  |   | 1.13      | % |  |      | 1.00       | % |  |   | 1.03       | %
|Deposits                                    |  |      | 871,125    |   |      |   | 766,335   |      |  |   | 532,237   |   |  |      | 501,426    |   |  |   | 452,899    |  
|Borrowings                                  |  |      | 47,471     |   |      |   | 63,696    |      |  |   | 53,601    |   |  |      | 27,367     |   |  |   | 8,198      |  
|Stockholders equity                        |  |      | 96,198     |   |      |   | 81,130    |      |  |   | 68,206    |   |  |      | 64,530     |   |  |   | 62,922     |  
|Equity to assets ratio                      |  |      | 9.40       | % |      |   | 8.85      | %    |  |   | 10.34     | % |  |      | 10.78      | % |  |   | 11.92      | %
|Basic weighted average shares               |  |      | 10,045,836 |   |      |   | 9,625,038 |      |  |   | 9,910,353 |   |  |      | 11,739,016 |   |  |   | 12,289,671 |  



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



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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 Bank, which is
the difference between interest earned on its loan and investment portfolios and its cost of funds, primarily interest paid on deposits and borrowings. For the years ended December 31, 2003, 2002, and 2001, AWBCs average net interest margins
were 6.49%, 6.20%, and 5.97%, 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, 2003, 2002, and 2001, the provision for loan losses was $6.3
million, $5.7 million, and $2.9 million, respectively. Net charge-offs during the year ended December 31, 2003 were $4.1 million as compared to $2.9 million and $1.2 million during 2002 and 2001, 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, |        
|                                              |  | 2003                    |         |          | 2002 |        |  | 2001 |                
|($ in thousands)                              |  | Average Balance         |         | Interest |      | %      |  |      | Average Balance |  | Interest |         | % |   |        | Average Balance |      | Interest |  | % |        
|Assets                                        |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Loans                                         |  | $                       | 821,407 |          | $    | 69,203 |  | 8.42 | %               |  | $        | 675,344 |   | $ | 57,511 |                 | 8.52 | %        |  | $ | 540,159 |  | $ | 51,300 |  | 9.50 | %
|Taxable securities                            |  |                         | 34,735  |          |      | 1,536  |  | 4.42 | %               |  |          | 22,178  |   |   | 1,281  |                 | 5.78 | %        |  |   | 30,533  |  |   | 1,868  |  | 6.12 | %
|Nontaxable securities                         |  |                         | 9,095   |          |      | 562    |  | 6.17 | %               |  |          | 4,456   |   |   | 321    |                 | 7.21 | %        |  |   | 4,583   |  |   | 318    |  | 6.94 | %
|Overnight deposits with other banks           |  |                         | 12,731  |          |      | 144    |  | 1.13 | %               |  |          | 11,095  |   |   | 185    |                 | 1.67 | %        |  |   | 3,234   |  |   | 126    |  | 3.90 | %
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Total interest earning assets                 |  |                         | 877,968 |          | $    | 71,445 |  | 8.14 | %               |  |          | 713,073 |   | $ | 59,298 |                 | 8.32 | %        |  |   | 578,509 |  | $ | 53,612 |  | 9.27 | %
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Noninterest earning assets                    |  |                         | 72,092  |          |      |        |  |      |                 |  |          | 62,349  |   |   |        |                 |      |          |  |   | 51,622  |  |   |        |  |      |  
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Total assets                                  |  | $                       | 950,060 |          |      |        |  |      |                 |  | $        | 775,422 |   |   |        |                 |      |          |  | $ | 630,131 |  |   |        |  |      |  
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Liabilities                                   |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Interest-bearing demand deposits              |  | $                       | 280,401 |          | $    | 4,940  |  | 1.76 | %               |  | $        | 206,570 |   | $ | 4,305  |                 | 2.08 | %        |  | $ | 156,683 |  | $ | 4,471  |  | 2.85 | %
|Savings deposits                              |  |                         | 60,069  |          |      | 300    |  | 0.50 | %               |  |          | 44,946  |   |   | 422    |                 | 0.94 | %        |  |   | 41,266  |  |   | 717    |  | 1.74 | %
|Time deposits                                 |  |                         | 335,212 |          |      | 7,884  |  | 2.35 | %               |  |          | 283,044 |   |   | 8,965  |                 | 3.17 | %        |  |   | 225,289 |  |   | 11,979 |  | 5.32 | %
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Total interest-bearing deposits               |  |                         | 675,682 |          |      | 13,124 |  | 1.94 | %               |  |          | 534,560 |   |   | 13,692 |                 | 2.56 | %        |  |   | 423,238 |  |   | 17,167 |  | 4.06 | %
|Short-term borrowings                         |  |                         | 11,357  |          |      | 200    |  | 1.76 | %               |  |          | 46,060  |   |   | 1,218  |                 | 2.64 | %        |  |   | 42,461  |  |   | 1,850  |  | 4.36 | %
|Long-term borrowings                          |  |                         | 28,475  |          |      | 1,162  |  | 4.08 | %               |  |          | 3,244   |   |   | 200    |                 | 6.16 | %        |  |   | 647     |  |   | 63     |  | 9.74 | %
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Total interest-bearing liabilities            |  |                         | 715,514 |          | $    | 14,486 |  | 2.02 | %               |  |          | 583,864 |   | $ | 15,110 |                 | 2.59 | %        |  |   | 466,346 |  | $ | 19,080 |  | 4.09 | %
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Noninterest bearing demand deposits           |  |                         | 140,710 |          |      |        |  |      |                 |  |          | 111,139 |   |   |        |                 |      |          |  |   | 92,008  |  |   |        |  |      |  
|Other noninterest bearing liabilities         |  |                         | 5,686   |          |      |        |  |      |                 |  |          | 8,151   |   |   |        |                 |      |          |  |   | 5,389   |  |   |        |  |      |  
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Total liabilities                             |  |                         | 861,910 |          |      |        |  |      |                 |  |          | 703,154 |   |   |        |                 |      |          |  |   | 563,743 |  |   |        |  |      |  
|Stockholders Equity                          |  |                         | 88,150  |          |      |        |  |      |                 |  |          | 72,268  |   |   |        |                 |      |          |  |   | 66,388  |  |   |        |  |      |  
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Total liabilities and stockholders equity    |  | $                       | 950,060 |          |      |        |  |      |                 |  | $        | 775,422 |   |   |        |                 |      |          |  | $ | 630,131 |  |   |        |  |      |  
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Net interest income                           |  |                         |         |          | $    | 56,959 |  | 6.11 | %               |  |          |         |   | $ | 44,188 |                 | 5.73 | %        |  |   |         |  | $ | 34,532 |  | 5.18 | %
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  
|Net interest margin to average earning assets |  |                         |         |          |      |        |  | 6.49 | %               |  |          |         |   |   |        |                 | 6.20 | %        |  |   |         |  |   |        |  | 5.97 | %
|                                              |  |                         |         |          |      |        |  |      |                 |  |          |         |   |   |        |                 |      |          |  |   |         |  |   |        |  |      |  



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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 Pacific Northwest economy on the credit risk in the loan
portfolio and overall economic conditions on the entire balance sheet. 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.



|                                                 |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  
|------------------------------------------------ |  | ------------------------------------------------------------ | ------ | - | ------------ | - | ------ | ----- |  | - | ------ | - |  | ---- | ------ | - | ----- | - | ------ | - |  | - | ------ | -
|                                                 |  | 2003 vs 2002                                                 |        |   | 2002 vs 2001 |  
|                                                 |  | Increase (decrease) in net interest income due to changes in |       
|($ in thousands)                                 |  | Volume                                                       |        |   | Rate         |   |        | Total |  |   | Volume |   |  | Rate |        |   | Total |  
|INTEREST EARNING ASSETS                          |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  
|Loans                                            |  | $                                                            | 12,439 |   |              | $ | (747   | )     |  | $ | 11,692 |   |  | $    | 12,839 |   |       | $ | (6,628 | ) |  | $ | 6,211  |  
|Securities                                       |  |                                                              | 972    |   |              |   | (577   | )     |  |   | 395    |   |  |      | (502   | ) |       |   | (70    | ) |  |   | (572   | )
|Federal funds sold and overnight time deposits   |  |                                                              | 27     |   |              |   | (68    | )     |  |   | (41    | ) |  |      | 306    |   |       |   | (247   | ) |  |   | 59     |  
|                                                 |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  
|Total interest earning assets                    |  | $                                                            | 13,438 |   |              | $ | (1,392 | )     |  | $ | 12,046 |   |  | $    | 12,643 |   |       | $ | (6,945 | ) |  | $ | 5,698  |  
|                                                 |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  
|INTEREST BEARING LIABILITIES                     |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  
|Interest-bearing demand deposits                 |  | $                                                            | 1,539  |   |              | $ | (904   | )     |  | $ | 635    |   |  | $    | 1,424  |   |       | $ | (1,590 | ) |  | $ | (166   | )
|Savings deposits                                 |  |                                                              | 142    |   |              |   | (264   | )     |  |   | (122   | ) |  |      | 64     |   |       |   | (359   | ) |  |   | (295   | )
|Time deposits                                    |  |                                                              | 1,652  |   |              |   | (2,733 | )     |  |   | (1,081 | ) |  |      | 3,071  |   |       |   | (6,085 | ) |  |   | (3,014 | )
|                                                 |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  
|Total interest bearing deposits                  |  |                                                              | 3,333  |   |              |   | (3,901 | )     |  |   | (568   | ) |  |      | 4,559  |   |       |   | (8,034 | ) |  |   | (3,475 | )
|Short-term borrowings                            |  |                                                              | (776   | ) |              |   | (79    | )     |  |   | (855   | ) |  |      | 24     |   |       |   | (819   | ) |  |   | (795   | )
|Long-term borrowings                             |  |                                                              | 1,278  |   |              |   | (479   | )     |  |   | 799    |   |  |      | 550    |   |       |   | (250   | ) |  |   | 300    |  
|                                                 |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  
|Total interest bearing liabilities               |  |                                                              | 3,835  |   |              |   | (4,459 | )     |  |   | (624   | ) |  |      | 5,133  |   |       |   | (9,103 | ) |  |   | (3,970 | )
|                                                 |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  
|Total increase (decrease) in net interest income |  | $                                                            | 9,603  |   |              | $ | 3,067  |       |  | $ | 12,670 |   |  | $    | 7,510  |   |       | $ | 2,158  |   |  | $ | 9,668  |  
|                                                 |  |                                                              |        |   |              |   |        |       |  |   |        |   |  |      |        |   |       |   |        |   |  |   |        |  



The following table presents the
aggregate maturities of loans in each major category of AWBCs loan portfolio at December 31, 2003. Actual maturities may differ from the contractual maturities shown below as a result of renewals and prepayments.



2003



|                                        |  |                    |         |                   |   |                 |  |       |         |  |   |        
|--------------------------------------- |  | ------------------ | ------- | ----------------- | - | --------------- |  | ----- | ------- |  | - | -------
|($ in thousands)                        |  | Less than one year |         | One to five years |   | Over five years |  | Total
|Commercial, industrial and agricultural |  | $                  | 231,317 |                   | $ | 248,741         |  | $     | 289,493 |  | $ | 769,551
|Real estate mortgage                    |  |                    | 7,709   |                   |   | 19,315          |  |       | 11,051  |  |   | 38,075 
|Real estate construction                |  |                    | 29,813  |                   |   | 2,245           |  |       | 178     |  |   | 32,236 
|Installment                             |  |                    | 4,824   |                   |   | 17,639          |  |       | 4,387   |  |   | 26,850 
|Bank cards and other                    |  |                    | 5,320   |                   |   | 2,507           |  |       | 1,851   |  |   | 9,678  
|                                        |  |                    |         |                   |   |                 |  |       |         |  |   |        
|Total                                   |  | $                  | 278,983 |                   | $ | 290,447         |  | $     | 306,960 |  | $ | 876,390
|                                        |  |                    |         |                   |   |                 |  |       |         |  |   |        



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Results of Operations



Performance Summary



|                                                    |  |      |        |      |      |        |  |          |        |  |       |   |  |        |  
|--------------------------------------------------- |  | ---- | ------ | ---- | ---- | ------ |  | -------- | ------ |  | ----- | - |  | ------ | -
|                                                    |  | 2003 |        | 2002 |      | 2001   |  | % Change |       
|($ in thousands, except per share)                  |  |      |        |      | 2003 |        |  | 2002     |       
|Interest income                                     |  | $    | 71,248 |      | $    | 59,202 |  | $        | 53,504 |  | 20.35 | % |  | 10.65  | %
|Interest expense                                    |  |      | 14,486 |      |      | 15,110 |  |          | 19,080 |  | -4.13 | % |  | -20.81 | %
|                                                    |  |      |        |      |      |        |  |          |        |  |       |   |  |        |  
|Net interest income                                 |  |      | 56,762 |      |      | 44,092 |  |          | 34,424 |  | 28.74 | % |  | 28.09  | %
|Provision for loan losses                           |  |      | 6,324  |      |      | 5,663  |  |          | 2,855  |  | 11.67 | % |  | 98.35  | %
|                                                    |  |      |        |      |      |        |  |          |        |  |       |   |  |        |  
|Net interest income after provision for loan losses |  |      | 50,438 |      |      | 38,429 |  |          | 31,569 |  | 31.25 | % |  | 21.73  | %
|Noninterest income                                  |  |      | 6,176  |      |      | 5,384  |  |          | 4,702  |  | 14.71 | % |  | 14.50  | %
|Noninterest expense                                 |  |      | 35,120 |      |      | 27,560 |  |          | 22,276 |  | 27.43 | % |  | 23.72  | %
|                                                    |  |      |        |      |      |        |  |          |        |  |       |   |  |        |  
|Income before income taxes                          |  |      | 21,494 |      |      | 16,253 |  |          | 13,995 |  | 32.25 | % |  | 16.13  | %
|Income taxes                                        |  |      | 7,508  |      |      | 5,354  |  |          | 4,788  |  | 40.23 | % |  | 11.82  | %
|                                                    |  |      |        |      |      |        |  |          |        |  |       |   |  |        |  
|Net income                                          |  | $    | 13,986 |      | $    | 10,899 |  | $        | 9,207  |  | 28.32 | % |  | 18.38  | %
|                                                    |  |      |        |      |      |        |  |          |        |  |       |   |  |        |  
|Basic earnings per common share                     |  | $    | 1.39   |      | $    | 1.13   |  | $        | 0.93   |  | 23.01 | % |  | 21.51  | %
|Diluted earnings per common share                   |  | $    | 1.34   |      | $    | 1.10   |  | $        | 0.92   |  | 21.82 | % |  | 19.57  | %



Years Ended December 31, 2003,
2002, and 2001:



AWBCs net income was $14.0 million in 2003, $10.9
million in 2002, and $9.2 million in 2001. Basic earnings per share were $1.39, $1.13, and $0.93 for 2003, 2002, and 2001, respectively. Diluted earnings per share were $1.34, $1.10, and $0.92 in 2003, 2002, and 2001, 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.



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 $133.5 million in total assets, $112.8 million in deposits, and $94.7 million in loans. Approximately 335,000 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. On March 19, 2003, the banks consolidated and currently operate as AmericanWest Bank.



Return on average assets was 1.47%, 1.41%, and 1.46% for 2003, 2002, and 2001, respectively.
Return on average equity was 15.87%, 15.08%, and 13.87% for 2003, 2002, and 2001, respectively. Without the nonrecurring items described above, return on assets would have been 1.42% for 2001. Return on equity would have been 13.48% for 2001.



Net Interest Income.Net interest income increased 29% to $56.8 million
in 2003 compared to 2002. The increase in 2002 was 28% to $44.1 million over 2001 results. The net interest income improvements were primarily the result of loan volume increases and reductions in rates paid on interest bearing deposits in 2003 and
2002. AWBCs net interest margin to average earning assets was 6.49%, 6.20%, and 5.97% in 2003, 2002, and 2001, respectively. As market interest rates decreased significantly during 2002 the yield on earning assets continued to decline to 8.14%
in 2003 from 8.32% in 2002, which was a decrease from 9.27% in 2001. Interest bearing liabilities also continued to decrease to 2.02% in 2003 from 2.59% in 2002 after declining from 4.09% in 2001. The overall result was a slight net interest margin
increase from 6.20% in 2002 to 6.49% in 2003 after increasing from 5.97% in 2001. Average earning assets increased 23% to $878.0 million in 2003 after rising 23% to $713.1 million in 2002.



Provision for Loan Losses.Provision for loan losses increased to $6.3 million in 2003
from $5.7 million in 2002 and $2.9 million in 2001. The increase was due to the changing economic conditions 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



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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 14.7% in 2003 to $6.2 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 included the gain on the sale of the Insurance Agency of $392,000. Fees and service charges for banking
services increased to $4.2 million in 2003 after being at $3.7 million in 2002 and $2.8 million in 2001.



Noninterest Expense. Noninterest expense increased by 27% in 2003 compared to 2002 due to increases in salaries and employee benefits related to growth in branches, increases in incentive compensation, and
health care benefits. Increases in legal expenses and other real estate expenses, which are included in the other line under noninterest expense also contributed to the increase for 2003. Noninterest expense increased 24% in 2002 due to increases in
loan officer incentive expense, nonperforming loan legal expense, and bank merger expense.



Income Tax Expense.Income tax expense increased in proportion to the increase in income before income tax expense.



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 Bank. The payments of dividends by the Bank are subject to limitations imposed by law and governmental
regulations. At the end of 2003 and 2002, AWB had balances of $54.4 million, and $74.5 million in certificates of deposit that were attained 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, 2003, AWBC had approximately $163.3 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 $96.2
million at December 31, 2003, from $81.1 million at December 31, 2002, and $68.2 million at December 31, 2001. At December 31, 2003, stockholders equity was 9.40% of total assets, compared to 8.85% at December 31, 2002. At December 31, 2003,
AWBC held cash and cash-equivalent assets of $48.3 million.



The capital levels
of AWBC and the Bank exceed applicable regulatory well-capitalized guidelines at December 31, 2003 and December 31, 2002.



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



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AMERICANWEST BANCORPORATION



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.



Contractual Obligations



The following summarizes AWBCs long-term contractual obligations at December 31,
2003:



|                            |  |                 |         |           |   |           |  |            |        |       |   |        |  |   |        
|--------------------------- |  | --------------- | ------- | --------- | - | --------- |  | ---------- | ------ | ----- | - | ------ |  | - | -------
|(in thousands)              |  | Less than1 year |         | 1-3 years |   | 3-5 years |  | Thereafter |        | Total
|Time Deposits               |  | $               | 239,616 |           | $ | 36,475    |  | $          | 35,255 |       | $ | 628    |  | $ | 311,974
|Long-term borrowings        |  |                 |        |           |   | 6,400     |  |            | 2,596  |       |   | 883    |  |   | 9,879  
|Capital lease obligations   |  |                 | 75      |           |   | 169       |  |            | 202    |       |   | 96     |  |   | 542    
|Operating lease obligations |  |                 | 637     |           |   | 983       |  |            | 920    |       |   | 4,600  |  |   | 7,140  
|Trust Preferred Securities  |  |                 |        |           |   |          |  |            |       |       |   | 10,000 |  |   | 10,000 
|                            |  |                 |         |           |   |           |  |            |        |       |   |        |  |   |        
|Total                       |  | $               | 240,328 |           | $ | 44,027    |  | $          | 38,973 |       | $ | 16,207 |  | $ | 339,535
|                            |  |                 |         |           |   |           |  |            |        |       |   |        |  |   |        



Off-balance sheet arrangements



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. The following summarizes the amount of commitments per expiration period:



|                                                           |  |                 |         |           |   |           |  |            |   |       |   |    |  |   |        
|---------------------------------------------------------- |  | --------------- | ------- | --------- | - | --------- |  | ---------- | - | ----- | - | -- |  | - | -------
|(in thousands)                                             |  | Less than1 year |         | 1-3 years |   | 3-5 years |  | Thereafter |   | Total
|Commitments to extend credit                               |  | $               | 117,949 |           | $ | 67,783    |  | $          |  |       | $ |   |  | $ | 185,732
|Standby letters of credit and financial guarantees written |  |                 | 2,429   |           |   | 4,231     |  |            | 2 |       |   | 28 |  |   | 6,690  
|Unused commitments on bankcards                            |  |                 | 8,040   |           |   | 5,360     |  |            |  |       |   |   |  |   | 13,400 
|                                                           |  |                 |         |           |   |           |  |            |   |       |   |    |  |   |        
|Total                                                      |  | $               | 128,418 |           | $ | 77,374    |  | $          | 2 |       | $ | 28 |  | $ | 205,822
|                                                           |  |                 |         |           |   |           |  |            |   |       |   |    |  |   |        



New Accounting Pronouncements



During 2003, the Financial Accounting Standards Board (FASB) issued the
following accounting standards:



In January 2003, the FASB issued
Interpretation No. 46, Consolidation of Variable Interest Entities (VIE), as amended and interpreted. It defined a VIE as a corporation, partnership, trust, or any other legal structure used for the business purpose that either does not have
equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. This interpretation will require a VIE to be consolidated or deconsolidated by a company
generally based on the risk of loss or return. Most of the provisions of Interpretation No. 46 have been delayed until March 31, 2004. The Company has a VIE in the form of a Trust set up to issue Trust Preferred Securities and accordingly, the
implementation of the Interpretation is expected to require the deconsolidation of the Trust. The Company expects to adopt the Interpretation in the first quarter of 2004 and the application of Interpretation No. 46 is not anticipated to have a
significant impact on the Companys financial position or results of operations.



In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This
Statement is effective for contracts entered into or modified after June 30, 2003. Adoption of the Statement did not result in an impact on the Companys statement of financial position or results of operations.



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In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic entities. Adoption of the Statement did not result in an impact on the
Companys statement of financial position or results of operations.



In
November 2003, the Emerging Issues Task Force (EITF) researched a consensus that certain quantitative and qualitative disclosures should be required for debt and marketable equity securities classified as available-for-sale or held-to-maturity under
FASB Statements No. 115 and 124, that are impaired at the balance sheet date but for which other-than-temporary impairment has not been recognized. This EITF consensus is effective for fiscal years ending after December 15, 2003. Accordingly, the
Company has adopted this statement as of December 31, 2003 and the result did not have an impact on the Companys statement of financial position or results of operations.



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 48% of AWBCs loan portfolio has interest rates, which float with the Banks 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 Banks 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 managing 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 directs 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.



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The following table presents estimated maturity or pricing information indicating AWBCs exposure to interest
rate changes as of December 31, 2003. 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, 2003. 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%. Fair values are based on the calculations used in accordance with generally accepted accounting principles as disclosed in the financial statements.



|                                                     |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   |         |   |  |   |        
|---------------------------------------------------- |  | ----------------- | ------- | - | ---------- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------- | - | ---------- | - | ------- | ----- |  | - | ------- | - |  | - | ------- | - |  | - | -------
|Year ended December 31, 2003                         |  | Expected maturity |         |   | Fair Value
|($ in thousands)                                     |  | 2004              |         |   | 2005       |   |         | 2006 |  |   | 2007   |   |  | 2008 |         |   | Thereafter |   |         | Total |  |  
|Financial Assets                                     |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   |         |   |  |   |        
|Cash and due from banks                              |  | $                 | 29,352  |   |            | $ |        |      |  | $ |       |   |  | $    |        |   |            | $ |        |       |  | $ |        |   |  | $ | 29,352  |   |  | $ | 29,352 
|Overnight interest bearing deposits with other banks |  |                   | 18,943  |   |            |   |        |      |  |   |       |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   | 18,943  |   |  |   | 18,943 
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 0.95    | % |  |   |        
|Securities                                           |  |                   | 7,042   |   |            |   | 5,371   |      |  |   | 5,865  |   |  |      | 4,312   |   |            |   | 3,028   |       |  |   | 15,108  |   |  |   | 40,726  |   |  |   | 40,726 
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 5.64    | % |  |   |        
|Fixed rate loans                                     |  |                   | 119,953 |   |            |   | 46,315  |      |  |   | 53,746 |   |  |      | 46,950  |   |            |   | 46,025  |       |  |   | 139,335 |   |  |   | 452,324 |   |  |   | 469,654
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 7.62    | % |  |   |        
|Variable rate loans                                  |  |                   | 159,336 |   |            |   | 42,037  |      |  |   | 28,527 |   |  |      | 11,519  |   |            |   | 15,654  |       |  |   | 166,993 |   |  |   | 424,066 |   |  |   | 424,066
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 6.68    | % |  |   |        
|Financial Liabilities                                |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   |         |   |  |   |        
|Noninterest bearing deposits                         |  |                   | 23,902  |   |            |   | 23,902  |      |  |   | 23,902 |   |  |      | 23,902  |   |            |   | 23,902  |       |  |   | 39,915  |   |  |   | 159,425 |   |  |   | 159,425
|Interest-bearing demand deposits                     |  |                   | 9,053   |   |            |   | 9,053   |      |  |   | 9,053  |   |  |      | 9,053   |   |            |   | 9,053   |       |  |   | 15,119  |   |  |   | 60,384  |   |  |   | 60,384 
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 0.33    | % |  |   |        
|Savings deposits                                     |  |                   | 50,876  |   |            |   | 50,876  |      |  |   | 50,876 |   |  |      | 50,876  |   |            |   | 50,876  |       |  |   | 84,962  |   |  |   | 339,342 |   |  |   | 339,342
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 1.50    | % |  |   |        
|Time deposits                                        |  |                   | 239,616 |   |            |   | 28,281  |      |  |   | 8,194  |   |  |      | 19,361  |   |            |   | 15,894  |       |  |   | 628     |   |  |   | 311,974 |   |  |   | 320,380
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 2.17    | % |  |   |        
|Short-term borrowings                                |  |                   | 27,050  |   |            |   |        |      |  |   |       |   |  |      |        |   |            |   |        |       |  |   |        |   |  |   | 27,050  |   |  |   | 27,050 
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 1.14    | % |  |   |        
|Long-Term Borrowings                                 |  |                   |        |   |            |   | 4,000   |      |  |   | 2,400  |   |  |      | 1,596   |   |            |   | 1,000   |       |  |   | 883     |   |  |   | 9,879   |   |  |   | 9,625  
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 2.65    | % |  |   |        
|Trust Preferred                                      |  |                   |        |   |            |   |        |      |  |   |       |   |  |      |        |   |            |   |        |       |  |   | 10,000  |   |  |   | 10,000  |   |  |   | 10,000 
|Weighted average interest rate                       |  |                   |         |   |            |   |         |      |  |   |        |   |  |      |         |   |            |   |         |       |  |   |         |   |  |   | 4.86    | % |  |   |        
|Net of financial assets and liabilities              |  |                   | (15,871 | ) |            |   | (22,389 | )    |  |   | 40,075 |   |  |      | (42,007 | ) |            |   | (36,018 | )     |  |   | 169,929 |   |  |   |         |   |  |   |        
|Cumulative net amount                                |  |                   | (15,871 | ) |            |   | (38,260 | )    |  |   | 1,815  |   |  |      | (40,192 | ) |            |   | (76,210 | )     |  |   | 93,718  |   |  |   |         |   |  |   |        
|Percentage of total assets                           |  |                   | -1.55   | % |            |   | -3.74   | %    |  |   | 0.18   | % |  |      | -3.93   | % |            |   | -7.45   | %     |  |   | 9.16    | % |  |   |         |   |  |   |        



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, 2003, 2002, and 2001, 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.



There were no changes in or disagreements with accountants on accounting and financial disclosure.



Item 9A. Controls and Procedures.



Evaluation
of disclosure controls and procedures.As of the end of the period covered by this report and pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the Exchange Act), the Companys management, including the Chief Executive
Office and the Chief Financial Officer, conducted an evaluation of the effectiveness and design of the Companys disclosure controls and procedures (as that



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AMERICANWEST BANCORPORATION



term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, the Companys
Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this report, that the Companys disclosure controls and procedures were effective in recording, processing, summarizing and reporting
information required to be disclosed by the Company, within the time periods specified in the Securities and Exchange Commissions rules and forms.



Changes in internal controls.In addition and as of the end of the period covered by this report, there have been no changes in internal control over financial
reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the Companys fourth fiscal quarter that have materially affected or are reasonably likely to materially affect, the internal control over financial reporting.



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AMERICANWEST BANCORPORATION



PART III



Item 10. Directors and Executive Officers of the Registrant.



Information included under the following captions in the Companys proxy statement relating to its 2004 annual meeting of stockholders (the 2004 Proxy Statement) is incorporated herein by reference:



| |  | Election of Directors;
| | - | ------------------------



| |  | Board Committees and Meetings;
| | - | --------------------------------



| |  | Corporate Governance;
| | - | -----------------------



| |  | Compliance with Section 16(a) of the Exchange Act; and
| | - | --------------------------------------------------------



| |  | Executive Officers Who are Not Directors.
| | - | -------------------------------------------



Item 11. Executive Compensation.



Information
included under the following captions in the 2004 Proxy Statement is incorporated herein by reference:



| |  | Directors Compensation;
| | - | --------------------------



| |  | Compensation Committee Interlocks and Insider Participation;
| | - | --------------------------------------------------------------



| |  | Executive Compensation; and
| | - | -----------------------------



| |  | Related Party Transactions and Business Relationships.
| | - | --------------------------------------------------------



Item 12. Security Ownership of Certain Beneficial Owners and Management.



Information included under the following caption in the 2004 Proxy Statement is incorporated herein by reference:



| |  | Security Ownership of Certain Beneficial Owners and Management.
| | - | -----------------------------------------------------------------



See also Note 16 of the Notes to the Consolidated Financial Statements, including the table presenting equity compensation plan information, included in this report.



Item 13. Certain Relationships and Related Transactions.



Information included under the following captions in the 2004 Proxy Statement is incorporated herein by reference:



| |  | Compensation Committee Interlocks and Insider Participation; and
| | - | ------------------------------------------------------------------



| |  | Related Party Transactions and Business Relationships.
| | - | --------------------------------------------------------



Item 14. Principal Accounting Fees and Services.



The information included under the following captions in the 2004 Proxy Statement is incorporated herein by reference:



| |  | Independent Auditors.
| | - | -----------------------



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AMERICANWEST BANCORPORATION



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 |  | 32
|Consolidated Statements of Condition                              |  | 33
|Consolidated Statements of Income                                 |  | 34
|Consolidated Statements of Changes in Stockholders Equity        |  | 35
|Consolidated Statements of Cash Flows                             |  | 36
|Notes to Consolidated Financial Statements                        |  | 37



(a) (2)    There are no financial statement schedules filed herewith.



(a) (3)    Exhibits



The exhibits filed as part of this report and exhibits incorporated herein by reference to other documents are listed in the Index to Exhibits to this
Annual Report on Form 10-K (pages E-1 and E-2), including executive compensation plans and arrangements which are identified separately by asterisk.



(b) Reports on Form 8-K.



Current Report on Form 8-K dated October 24, 2003 and filed October 27, 2003, Items 5 and 12



| | (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.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



With the exception of the information expressly
incorporated herein by reference, the 2004 Proxy Statement is not to be deemed filed as part of this Annual Report on Form 10-K.



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AMERICANWEST BANCORPORATION



SIGNATURES



Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 8thof March, 2004.



AMERICANWEST BANCORPORATIONBy:

/s/ Wesley E. ColleyWesley E. ColleyPresident, Chief Executive Officer and Director




Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 8th day of March, 2004.



Principal Executive Officer



|    |  |                      |  |                                                
|--- |  | -------------------- |  | -----------------------------------------------
|By: |  | /s/ Wesley E. Colley |  | President, Chief Executive Officer and Director
|    |  | Wesley E. Colley     |  |                                                



Principal Financial and Accounting
Officer



|    |  |                    |  |                                                     
|--- |  | ------------------ |  | ----------------------------------------------------
|By: |  | /s/ C. Tim Cassels |  | Executive Vice President and Chief Financial Officer
|    |  | C. Tim Cassels     |  |                                                     



Remaining Directors



|    |  |                             |  |     |  |                         
|--- |  | --------------------------- |  | --- |  | ------------------------
|By: |  | /s/ Rand Elliott            |  | By: |  | /s/ Don Swartz          
|    |  | Rand Elliott, Director      |  |     |  | Don Swartz, Director    
|    |  |                             | 
|By: |  | /s/ Allen Ketelson          |  | By: |  | /s/ Gary Bolyard        
|    |  | Allen Ketelson, Director    |  |     |  | Gary Bolyard, Director  
|    |  |                             | 
|By: |  | /s/ Robert J. Gardner       |  | By: |  | /s/ P. Mike Taylor      
|    |  | Robert J. Gardner, Director |  |     |  | P. Mike Taylor, Director
|    |  |                             | 
|By: |  | /s/ Craig Eerkes            |  |     |  |                         
|    |  | Craig Eerkes, Director      |  |     |  |                         



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AMERICANWEST BANCORPORATION



Independent Auditors Report



Board of Directors and Shareholders

AmericanWest Bancorporation

Spokane, Washington



We have audited the accompanying consolidated statement of financial condition of AmericanWest Bancorporation and subsidiaries as of December 31, 2003 and 2002, and the
related consolidated statements of income, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2003. 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, 2003 and 2002, and the results of their operations and their cash flows for each of the three years ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States of America.



/s/ Moss Adams LLP



Everett, Washington

January 23, 2004



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AMERICANWEST BANCORPORATION



CONSOLIDATED STATEMENTS OF CONDITION

DECEMBER 31, 2003 and 2002

($ In thousands)



|                                                                                                                 |  |      |           |      |   |        
|---------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | -------
|                                                                                                                 |  | 2003 |           | 2002
|ASSETS                                                                                                           |  |      |           |      |   |        
|Cash and due from banks                                                                                          |  | $    | 29,352    |      | $ | 24,250 
|Overnight interest bearing deposits with other banks                                                             |  |      | 18,943    |      |   | 14,675 
|                                                                                                                 |  |      |           |      |   |        
|Cash and cash equivalents                                                                                        |  |      | 48,295    |      |   | 38,925 
|                                                                                                                 |  |     
|Securities                                                                                                       |  |      | 40,726    |      |   | 48,173 
|                                                                                                                 |  |     
|Loans, net of allowance for loan losses of $12,453 and $10,272, respectively                                     |  |      | 863,718   |      |   | 764,938
|                                                                                                                 |  |     
|Accrued interest receivable                                                                                      |  |      | 6,750     |      |   | 6,405  
|Premises and equipment, net                                                                                      |  |      | 22,455    |      |   | 20,943 
|Foreclosed real estate and other foreclosed assets                                                               |  |      | 7,408     |      |   | 7,874  
|Life insurance and salary continuation assets                                                                    |  |      | 15,643    |      |   | 11,915 
|Goodwill                                                                                                         |  |      | 12,050    |      |   | 12,050 
|Intangible assets                                                                                                |  |      | 2,893     |      |   | 3,180  
|Other assets                                                                                                     |  |      | 3,659     |      |   | 2,428  
|                                                                                                                 |  |      |           |      |   |        
|TOTAL ASSETS                                                                                                     |  | $    | 1,023,597 |      | $ | 916,831
|                                                                                                                 |  |      |           |      |   |        
|LIABILITIES                                                                                                      |  |      |           |      |   |        
|Noninterest bearing - demand deposits                                                                            |  | $    | 159,425   |      | $ | 135,537
|Interest bearing deposits:                                                                                       |  |      |           |      |   |        
|NOW and savings accounts                                                                                         |  |      | 399,726   |      |   | 306,969
|Time, $100,000 and over                                                                                          |  |      | 127,117   |      |   | 142,341
|Other time                                                                                                       |  |      | 184,857   |      |   | 181,488
|                                                                                                                 |  |      |           |      |   |        
|TOTAL DEPOSITS                                                                                                   |  |      | 871,125   |      |   | 766,335
|                                                                                                                 |  |     
|Short-term borrowings                                                                                            |  |      | 27,050    |      |   | 46,284 
|Long-term borrowings                                                                                             |  |      | 9,879     |      |   | 6,825  
|Capital lease obligations                                                                                        |  |      | 542       |      |   | 587    
|Trust Preferred Securities                                                                                       |  |      | 10,000    |      |   | 10,000 
|Accrued interest payable                                                                                         |  |      | 914       |      |   | 1,199  
|Other liabilities                                                                                                |  |      | 7,889     |      |   | 4,471  
|                                                                                                                 |  |      |           |      |   |        
|TOTAL LIABILITIES                                                                                                |  |      | 927,399   |      |   | 835,701
|                                                                                                                 |  |     
|STOCKHOLDERS EQUITY                                                                                             |  |      |           |      |   |        
|Common stock, no par, shares authorized 15 million; issued and outstanding 9,207,250 and 8,085,774, respectively |  |      | 78,908    |      |   | 64,301 
|Retained earnings                                                                                                |  |      | 16,817    |      |   | 16,394 
|Accumulated other comprehensive income, net of tax                                                               |  |      | 473       |      |   | 435    
|                                                                                                                 |  |      |           |      |   |        
|TOTAL STOCKHOLDERS EQUITY                                                                                       |  |      | 96,198    |      |   | 81,130 
|                                                                                                                 |  |      |           |      |   |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                       |  | $    | 1,023,597 |      | $ | 916,831
|                                                                                                                 |  |      |           |      |   |        



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



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AMERICANWEST BANCORPORATION



CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2003, 2002 and 2001

($ In thousands, except per share amounts)



|                                                    |  |      |            |      |   |           |  |   |          
|--------------------------------------------------- |  | ---- | ---------- | ---- | - | --------- |  | - | ---------
|                                                    |  | 2003 |            | 2002 |   | 2001     
|INTEREST INCOME                                     |  |      |            |      |   |           |  |   |          
|Interest and fees on loans                          |  | $    | 69,203     |      | $ | 57,511    |  | $ | 51,300   
|Interest on securities                              |  |      | 1,901      |      |   | 1,506     |  |   | 2,078    
|Other interest income                               |  |      | 144        |      |   | 185       |  |   | 126      
|                                                    |  |      |            |      |   |           |  |   |          
|TOTAL INTEREST INCOME                               |  |      | 71,248     |      |   | 59,202    |  |   | 53,504   
|                                                    |  |      |            |      |   |           |  |   |          
|INTEREST EXPENSE                                    |  |      |            |      |   |           |  |   |          
|Interest on deposits                                |  |      | 13,124     |      |   | 13,692    |  |   | 17,167   
|Interest on borrowings                              |  |      | 1,362      |      |   | 1,418     |  |   | 1,913    
|                                                    |  |      |            |      |   |           |  |   |          
|TOTAL INTEREST EXPENSE                              |  |      | 14,486     |      |   | 15,110    |  |   | 19,080   
|                                                    |  |      |            |      |   |           |  |   |          
|NET INTEREST INCOME                                 |  |      | 56,762     |      |   | 44,092    |  |   | 34,424   
|Provision for loan losses                           |  |      | 6,324      |      |   | 5,663     |  |   | 2,855    
|                                                    |  |      |            |      |   |           |  |   |          
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |      | 50,438     |      |   | 38,429    |  |   | 31,569   
|                                                    |  |      |            |      |   |           |  |   |          
|NONINTEREST INCOME                                  |  |      |            |      |   |           |  |   |          
|Fees and service charges                            |  |      | 4,242      |      |   | 3,675     |  |   | 2,802    
|Insurance commissions                               |  |      | 38         |      |   | 47        |  |   | 349      
|Securities gains                                    |  |      | 61         |      |   | 44        |  |   | 188      
|Other                                               |  |      | 1,835      |      |   | 1,618     |  |   | 1,363    
|                                                    |  |      |            |      |   |           |  |   |          
|TOTAL NONINTEREST INCOME                            |  |      | 6,176      |      |   | 5,384     |  |   | 4,702    
|                                                    |  |      |            |      |   |           |  |   |          
|NONINTEREST EXPENSE                                 |  |      |            |      |   |           |  |   |          
|Salaries and employee benefits                      |  |      | 20,291     |      |   | 16,114    |  |   | 13,115   
|Occupancy expense, net                              |  |      | 2,429      |      |   | 2,033     |  |   | 1,849    
|Equipment expense                                   |  |      | 2,379      |      |   | 1,988     |  |   | 1,649    
|State business and occupation tax                   |  |      | 808        |      |   | 756       |  |   | 571      
|Director fees                                       |  |      | 118        |      |   | 108       |  |   | 114      
|Intangible assets amortization                      |  |      | 251        |      |   | 164       |  |   | 336      
|Other                                               |  |      | 8,844      |      |   | 6,397     |  |   | 4,642    
|                                                    |  |      |            |      |   |           |  |   |          
|TOTAL NONINTEREST EXPENSE                           |  |      | 35,120     |      |   | 27,560    |  |   | 22,276   
|                                                    |  |      |            |      |   |           |  |   |          
|INCOME BEFORE INCOME TAX EXPENSE                    |  |      | 21,494     |      |   | 16,253    |  |   | 13,995   
|                                                    |  |      |           
|INCOME TAX EXPENSE                                  |  |      | 7,508      |      |   | 5,354     |  |   | 4,788    
|                                                    |  |      |            |      |   |           |  |   |          
|NET INCOME                                          |  | $    | 13,986     |      | $ | 10,899    |  | $ | 9,207    
|                                                    |  |      |            |      |   |           |  |   |          
|Basic earnings per common share                     |  | $    | 1.39       |      | $ | 1.13      |  | $ | 0.93     
|Diluted earnings per common share                   |  | $    | 1.34       |      | $ | 1.10      |  | $ | 0.92     
|Basic weighted average shares outstanding           |  |      | 10,045,836 |      |   | 9,625,038 |  |   | 9,910,353
|Diluted weighted average shares outstanding         |  |      | 10,473,852 |      |   | 9,915,354 |  |   | 9,989,954



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



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AMERICANWEST BANCORPORATION



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

YEARS ENDED DECEMBER 31, 2003, 2002 and 2001

($ in thousands)



|                                                                             |        |              |   |        |                   |        |   |                                               |   |         |       |  |   |                             |   |  |   |        |   |  |   |       
|---------------------------------------------------------------------------- | ------ | ------------ | - | ------ | ----------------- | ------ | - | --------------------------------------------- | - | ------- | ----- |  | - | --------------------------- | - |  | - | ------ | - |  | - | ------
|                                                                             |        | Common Stock |   |        | Retained Earnings |        |   | Accumulated Other Comprehensive Income (Loss) |   |         | Total |  |   | Comprehensive Income (Loss)
|                                                                             | Shares |              |   | Amount |                   |        |   |                                               |  
|Balances, January 1, 2001                                                    |        | 6,974,012    |   |        | $                 | 48,904 |   |                                               | $ | 15,710  |       |  | $ | (84                         | ) |  | $ | 64,530 |   |  |   |       
|                                                                             |        |              |   |        |                   |       
|Common stock issued for options exercised                                    |        | 75,005       |   |        |                   | 504    |   |                                               |   |         |       |  |   |                             |   |  |   | 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   |       |  |   |                             |   |  |   | 9,207  |   |  | $ | 9,207 
|Stock repurchase program                                                     |        | (560,619     | ) |        |                   | (4,129 | ) |                                               |   | (2,072  | )     |  |   |                             |   |  |   | (6,201 | ) |  |   |       
|Net change in unrealized gain on available-for-sale securities, net of taxes |        |              |   |        |                   |        |   |                                               |   |         |       |  |   | 166                         |   |  |   | 166    |   |  |   | 166   
|                                                                             |        |              |   |        |                   |        |   |                                               |   |         |       |  |   |                             |   |  |   |        |   |  |   |       
|Balances, December 31, 2001                                                  |        | 7,905,366    |   |        | $                 | 61,540 |   |                                               | $ | 6,584   |       |  | $ | 82                          |   |  | $ | 68,206 |   |  | $ | 9,373 
|                                                                             |        |              |   |        |                   |        |   |                                               |   |         |       |  |   |                             |   |  |   |        |   |  |   |       
|Common stock issued for options exercised                                    |        | 94,724       |   |        | $                 | 737    |   |                                               |   |         |       |  |   |                             |   |  | $ | 737    |   |  |   |       
|Common stock issued for the acquisition of Latah Bancorporation              |        | 334,947      |   |        |                   | 4,101  |   |                                               |   |         |       |  |   |                             |   |  |   | 4,101  |   |  |   |       
|Net income                                                                   |        |              |   |        |                   |        |   |                                               | $ | 10,899  |       |  |   |                             |   |  |   | 10,899 |   |  | $ | 10,899
|Stock repurchase program                                                     |        | (249,263     | ) |        |                   | (2,077 | ) |                                               |   | (1,089  | )     |  |   |                             |   |  |   | (3,166 | ) |  |   |       
|Net change in unrealized gain on available-for-sale securities, net of taxes |        |              |   |        |                   |        |   |                                               |   |         |       |  | $ | 353                         |   |  |   | 353    |   |  |   | 353   
|                                                                             |        |              |   |        |                   |        |   |                                               |   |         |       |  |   |                             |   |  |   |        |   |  |   |       
|Balances, December 31, 2002                                                  |        | 8,085,774    |   |        | $                 | 64,301 |   |                                               | $ | 16,394  |       |  | $ | 435                         |   |  | $ | 81,130 |   |  | $ | 11,252
|                                                                             |        |              |   |        |                   |        |   |                                               |   |         |       |  |   |                             |   |  |   |        |   |  |   |       
|Common stock issued for options exercised and employee incentive program     |        | 366,269      |   |        | $                 | 2,144  |   |                                               |   |         |       |  |   |                             |   |  | $ | 2,144  |   |  |   |       
|Net income                                                                   |        |              |   |        |                   |        |   |                                               | $ | 13,986  |       |  |   |                             |   |  |   | 13,986 |   |  | $ | 13,986
|10% stock dividend declared in January 2003                                  |        | 817,167      |   |        |                   | 12,911 |   |                                               |   | (12,911 | )     |  |   |                             |   |  |   |        |   |  |   |       
|Stock repurchase program                                                     |        | (61,960      | ) |        |                   | (448   | ) |                                               |   | (652    | )     |  |   |                             |   |  |   | (1,100 | ) |  |   |       
|Net change in unrealized gain on available-for-sale securities, net of taxes |        |              |   |        |                   |        |   |                                               |   |         |       |  | $ | 38                          |   |  |   | 38     |   |  |   | 38    
|                                                                             |        |              |   |        |                   |        |   |                                               |   |         |       |  |   |                             |   |  |   |        |   |  |   |       
|Balances, December 31, 2003                                                  |        | 9,207,250    |   |        | $                 | 78,908 |   |                                               | $ | 16,817  |       |  | $ | 473                         |   |  | $ | 96,198 |   |  | $ | 14,024
|                                                                             |        |              |   |        |                   |        |   |                                               |   |         |       |  |   |                             |   |  |   |        |   |  |   |       



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



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AMERICANWEST BANCORPORATION



CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2003, 2002 and 2001

($ in thousands)



|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                                                  |  | 2003 |          |   | 2002 |   |          | 2001 | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                              |  |      |          |   |      |   |          |      |  |   |         |  
|Net Income                                                                                        |  | $    | 13,986   |   |      | $ | 10,899   |      |  | $ | 9,207   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                 |  |      |          |   |      |   |          |      |  |   |         |  
|Provision for loan losses                                                                         |  |      | 6,324    |   |      |   | 5,663    |      |  |   | 2,855   |  
|Depreciation and amortization                                                                     |  |      | 2,234    |   |      |   | 1,569    |      |  |   | 1,234   |  
|Deferred income taxes                                                                             |  |      | (732     | ) |      |   | (647     | )    |  |   | (814    | )
|(Gain)/loss on sale of premises and equipment                                                     |  |      | 141      |   |      |   | (10      | )    |  |   | (16     | )
|Gain on sale of available-for-sale securities                                                     |  |      | (61      | ) |      |   | (44      | )    |  |   | (188    | )
|Changes in assets and liabilities:                                                                |  |      |          |   |      |   |          |      |  |   |         |  
|Accrued interest receivable                                                                       |  |      | (345     | ) |      |   | 601      |      |  |   | 11      |  
|Life insurance and salary continuation assets                                                     |  |      | (728     | ) |      |   | (670     | )    |  |   | (115    | )
|Other assets                                                                                      |  |      | (499     | ) |      |   | 24       |      |  |   | 1,803   |  
|Accrued interest payable                                                                          |  |      | (285     | ) |      |   | (475     | )    |  |   | (541    | )
|Other liabilities                                                                                 |  |      | 3,418    |   |      |   | (2       | )    |  |   | 648     |  
|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|NET CASH FROM OPERATING ACTIVITIES                                                                |  |      | 23,453   |   |      |   | 16,908   |      |  |   | 14,084  |  
|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                              |  |      |          |   |      |   |          |      |  |   |         |  
|Securities available-for-sale:                                                                    |  |      |          |   |      |   |          |      |  |   |         |  
|Maturities and principal payments                                                                 |  |      | 15,924   |   |      |   | 11,215   |      |  |   | 19,103  |  
|Sales                                                                                             |  |      | 3,128    |   |      |   | 1,581    |      |  |   | 27,754  |  
|Purchases                                                                                         |  |      | (11,858  | ) |      |   | (18,497  | )    |  |   | (14,168 | )
|Net increase in loans and leases                                                                  |  |      | (101,433 | ) |      |   | (102,858 | )    |  |   | (95,295 | )
|Purchase of life insurance contracts                                                              |  |      | (3,000   | ) |      |   |         |      |  |   | (6,100  | )
|Purchases of premises and equipment                                                               |  |      | (3,447   | ) |      |   | (6,259   | )    |  |   | (1,514  | )
|Proceeds from sale of premises and equipment                                                      |  |      | 199      |   |      |   | 40       |      |  |   | 23      |  
|Net cash to acquire Latah Bancorporation                                                          |  |      |         |   |      |   | (8,544   | )    |  |   |        |  
|Foreclosed assets activity                                                                        |  |      | (3,205   | ) |      |   | 1,792    |      |  |   | (106    | )
|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|NET CASH FROM INVESTING ACTIVITIES                                                                |  |      | (103,692 | ) |      |   | (121,530 | )    |  |   | (70,303 | )
|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                              |  |      |          |   |      |   |          |      |  |   |         |  
|Net increase in deposits                                                                          |  |      | 104,790  |   |      |   | 121,347  |      |  |   | 30,811  |  
|Borrowings activity                                                                               |  |      | (16,180  | ) |      |   | (10,287  | )    |  |   | 26,273  |  
|Principal payments on capital lease obligations                                                   |  |      | (45      | ) |      |   | (40      | )    |  |   | (39     | )
|Proceeds from issuance of capital stock, exercise of stock options and employee incentive program |  |      | 2,144    |   |      |   | 737      |      |  |   | 504     |  
|Proceeds from issuance of Trust Preferred Securities                                              |  |      |         |   |      |   | 10,000   |      |  |   |        |  
|Stock repurchase program                                                                          |  |      | (1,100   | ) |      |   | (3,166   | )    |  |   | (6,201  | )
|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|NET CASH FROM FINANCING ACTIVITIES                                                                |  |      | 89,609   |   |      |   | 118,591  |      |  |   | 51,348  |  
|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                                           |  |      | 9,370    |   |      |   | 13,969   |      |  |   | (4,871  | )
|                                                                                                  |  |      |         
|Cash and cash equivalents, beginning of period                                                    |  | $    | 38,925   |   |      | $ | 24,956   |      |  | $ | 29,827  |  
|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|Cash and cash equivalents, end of period                                                          |  | $    | 48,295   |   |      | $ | 38,925   |      |  | $ | 24,956  |  
|                                                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|Supplemental Disclosures:                                                                         |  |      |          |   |      |   |          |      |  |   |         |  
|Cash paid during the period for:                                                                  |  |      |          |   |      |   |          |      |  |   |         |  
|Interest                                                                                          |  | $    | 14,771   |   |      | $ | 15,585   |      |  | $ | 19,621  |  
|Income taxes                                                                                      |  | $    | 6,195    |   |      | $ | 5,995    |      |  | $ | 4,852   |  
|                                                                                                  |  |      |         
|Noncash Investing and Financing Activities:                                                       |  |      |          |   |      |   |          |      |  |   |         |  
|Foreclosed real estate acquired in settlement of loans                                            |  | $    | 3,671    |   |      | $ | 7,821    |      |  | $ | 1,252   |  



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



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AMERICANWEST BANCORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. Business and Summary of Significant Accounting Policies



Nature of business:



AmericanWest Bank (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. Bank of Latah (BOL) was a state-chartered commercial bank under the laws
of the State of Idaho, and provided banking services primarily throughout Eastern Washington and Northern Idaho. On March 19, 2003, AmericanWest Bancorporation (AWBC or the Company) consolidated its two commercial banking subsidiaries, AWB and BOL
into a single commercial bank. The AmericanWest Bank charter is the surviving charter. 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 (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 million in proceeds from the
issuance to acquire junior subordinated debentures issued by AWBC.



Basis of
consolidation:



The consolidated financial statements include the accounts
of AmericanWest Bancorporation (AWBC or Company) and its wholly owned subsidiaries after eliminating all intercompany transactions.



Estimates:



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
materially from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan and lease losses, valuation of real estate owned and deferred tax
assets.



Cash and Cash Equivalents:



Cash equivalents are any highly liquid investments with a remaining maturity of three months
or less at the date of purchase. Cash and cash equivalents on deposit with other banks and financial institutions in amounts that periodically exceed the federal insurance limit. AWBC evaluates the credit quality of these banks and financial
institutions to mitigate its credit risk.



Securities:



All of the securities are classified available-for-sale and are carried at market value.
Market value is determined using published quotes or other indicators of value as of the close of business on December 31, 2003 and 2002, respectively. Securities consist primarily of obligations of the U.S. government and U.S. government agencies,
state governments and corporate securities. 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.



The Banks investment in Federal Home Loan Bank (FHLB) stock is
carried at par value of $100 per share, which reasonably approximates its fair value. As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on specified percentages of its outstanding FHLB
advances. The Bank may request redemption at par value of any stock in excess of the amount the Bank is required to hold. Stock redemptions are at the discretion of the FHLB.



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AMERICANWEST BANCORPORATION



NOTE 1. Business and Summary of Significant Accounting Policies (Continued)



Loans and allowances for loan losses:



Loans that management has the intent and ability to hold for the foreseeable future or until
maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.



Interest income is accrued on the unpaid principal balance. The Banks policy is to
defer loan origination and commitment fees as well as certain loan origination costs, and to amortize the net amount as an adjustment of the yield of the related loan over its contractual life using the interest method. Effective, July 1, 2001, net
loan origination fees and costs are no longer deferred and amortized because the net difference is not significant.



The Bank considers loans impaired when it is probable the Bank will be unable to collect all amounts as scheduled under the loan agreement. Impaired loans are measured
based on the present value of expected future cash flows discounted at the loans effective interest rate, or, as a practical expedient, at the loans observable market price or the fair value of the collateral, if the loan is collateral
dependent. Changes in these values will be reflected in income and as adjustments to the allowance for possible credit losses.



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. Factors
considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed. When interest accrual is discontinued, all unpaid accrued interest
is reversed. Interest income is subsequently recognized only to the extent cash payments are received, or payment is considered certain. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.



The allowance for loan
losses is maintained at a level management believes is adequate to provide for potential loan, loan commitment, standby letter of credit and financial guarantee losses. The allowance is based on a continuing review of these items which includes
consideration of actual loss experience, changes in the size and character of the portfolio, identification of individual problem situations which may affect the borrowers ability to repay, and evaluations of the prevailing and anticipated
economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision, as more information becomes available.



The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries). Management believes the
allowance for loan losses is adequate. While management uses available information to recognize losses on loans, changes in economic conditions may necessitate revision of the estimate in future years. In addition, various regulatory agencies, as an
integral part of their examination processes, periodically review the Banks allowance for loan losses. Such agencies may require the Bank to recognize additional losses based on their judgment using information available to them at the time of
their examination.



Foreclosed real estate:



Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and
are initially recorded at the 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.



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AMERICANWEST BANCORPORATION



NOTE 1. Business and Summary of Significant Accounting Policies (Continued)



Premises and equipment:



Premises and equipment are stated at cost less accumulated depreciation over estimated
useful lives, which range from 3 to 30 years. Land is carried at cost. Depreciation expense is computed using the straight-line method for financial statement purposes. Expenditures for new premises and equipment and major betterments are
capitalized. Normal costs of maintenance and repairs are charged to expense as incurred.



Goodwill and intangible assets:



Intangible assets acquired in the form of goodwill are not being amortized. 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 accounts for income taxes using the liability method, which requires that deferred tax
assets and liabilities be determined based on the temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities and tax attributes using enacted tax rates in effect in the years in which the temporary
differences are expected to reverse.



Earnings per share:



Basic earnings per share (EPS) is computed by dividing net income by the weighted average
number of shares outstanding during the year giving retroactive effect to stock dividends. Diluted EPS reflects the potential dilutive effect of stock options and is computed by dividing net income by the weighted average number of shares
outstanding during the year, plus the dilutive common shares that would have been outstanding had the stock options been exercised using the treasury stock method.



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AMERICANWEST BANCORPORATION



NOTE 1. Business and Summary of Significant Accounting Policies (Continued)



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 Statement of Financial Accounting Standards
Board No. 123, Accounting for Stock-Based Compensation. Fair values were arrived at through the use of the Black-Scholes model.



|                                                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|( $ in thousands, except per share)                                                                                        |  | 2003 |          |   | 2002 |   |         | 2001 | 
|Reported Net Income                                                                                                        |  | $    | 13,986   |   |      | $ | 10,899  |      |  | $ | 9,207   |  
|Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of tax effects |  |      | (671     | ) |      |   | (350    | )    |  |   | (288    | )
|                                                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Proforma Net Income                                                                                                        |  | $    | 13,315   |   |      | $ | 10,549  |      |  | $ | 8,919   |  
|                                                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Basic Earnings Per Share                                                                                                   |  |      |          |   |      |   |         |      |  |   |         |  
|Reported Earnings Per Share                                                                                                |  | $    | 1.39     |   |      | $ | 1.13    |      |  | $ | 0.93    |  
|Stock-based employee compensation, fair value                                                                              |  |      | (0.06    | ) |      |   | (0.03   | )    |  |   | (0.03   | )
|                                                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Proforma Earnings Per Share                                                                                                |  | $    | 1.33     |   |      | $ | 1.10    |      |  | $ | 0.90    |  
|                                                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Diluted Earnings Per Share                                                                                                 |  |      |          |   |      |   |         |      |  |   |         |  
|Reported Diluted Earnings Per Share                                                                                        |  | $    | 1.34     |   |      | $ | 1.10    |      |  | $ | 0.92    |  
|Stock-based employee compensation, fair value                                                                              |  |      | (0.07    | ) |      |   | (0.04   | )    |  |   | (0.03   | )
|                                                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Proforma Diluted Earnings Per Share                                                                                        |  | $    | 1.27     |   |      | $ | 1.06    |      |  | $ | 0.89    |  
|                                                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Fair Value Calculation Assumptions:                                                                                        |  |      |          |   |      |   |         |      |  |   |         |  
|Risk free interest rate                                                                                                    |  |      | 3.92     | % |      |   | 5.00    | %    |  |   | 4.25    | %
|Expected volatility                                                                                                        |  |      | 27.70    | % |      |   | 34.54   | %    |  |   | 28.25   | %
|Expected cash dividends                                                                                                    |  |      | 0        | % |      |   | 0       | %    |  |   | 0       | %
|Expected stock option life                                                                                                 |  |      | 10 years |   |      |   | 5 years |      |  |   | 5 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.



Comprehensive income:



Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such
as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.



Advertising:



The Company expenses all costs associated with advertising and promotional efforts as incurred. Advertising costs for the years ended
December 31, 2003, 2002 and 2001 were approximately $801,000, $546,000 and $272,000, respectively.



Reclassifications:



Certain prior year
balances have been reclassified to conform to the current year presentation. These reclassifications had no effect on retained earnings or net income as previously presented.



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AMERICANWEST BANCORPORATION



Note 2. Recently issued accounting pronouncements



During 2003, the Financial Accounting Standards Board (FASB) issued the following accounting
standards:



In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities (VIE), as amended and interpreted. It defined a VIE as a corporation, partnership, trust, or any other legal structure used for the business purpose that either does not have equity investors with
voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. This interpretation will require a VIE to be consolidated or deconsolidated by a company generally based on the risk
of loss or return. Most of the provisions of Interpretation No. 46 have been delayed until March 31, 2004. The Company has a VIE in the form of a Trust set up to issue Trust Preferred Securities and accordingly, the implementation of the
Interpretation is expected to require the deconsolidation of the Trust. The Company expects to adopt the Interpretation in the first quarter of 2004 and the application of Interpretation No. 46 is not anticipated to have a significant impact on the
Companys financial position or results of operations.



In April 2003, the
FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is effective for contracts
entered into or modified after June 30, 2003. Adoption of the Statement did not result in an impact on the Companys statement of financial position or results of operations.



In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within
its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic entities. Adoption of the Statement did not result in an impact on the Companys statement
of financial position or results of operations.



In November 2003, the Emerging
Issues Task Force (EITF) researched a consensus that certain quantitative and qualitative disclosures should be required for debt and marketable equity securities classified as available-for-sale or held-to-maturity under FASB Statements No. 115 and
124, that are impaired at the balance sheet date but for which other-than-temporary impairment has not been recognized. This EITF consensus is effective for fiscal years ending after December 15, 2003. Accordingly, the Company has adopted this
statement as of December 31, 2003 and the result did not have an impact on the Companys statement of financial position or results of operations.



Note 3. Cash and Cash Equivalents



The Bank is 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 Banks cash reserves are in excess of that required, it may lend the excess to other banks.



Conversely, when cash reserves are less than required, the Bank borrows funds on a daily basis. Such reserve requirements at December 31, 2003 and 2002 were approximately
$25,000. The average amounts of federal funds sold and overnight interest bearing deposits with other banks for the years ended December 31, 2003 and 2002 were approximately $6,434,000 and $11,095,000, respectively. Similarly, averages of short-term
borrowings were approximately $11,357,000 and $43,006,000 for 2003 and 2002, respectively. The balance of short-term borrowings at December 31, 2003 and 2002 was approximately $27,050,000 and $46,284,000, respectively.



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AMERICANWEST BANCORPORATION



Note 4. 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, 2003



|                                                                 |  |               |        |                        |   |                        |  |           |     |  |   |   |  |   |       
|---------------------------------------------------------------- |  | ------------- | ------ | ---------------------- | - | ---------------------- |  | --------- | --- |  | - | - |  | - | ------
|                                                                 |  | AmortizedCost |        | Gross Unrealized Gains |   | Gross UnrealizedLosses |  | FairValue
|($ in thousands)                                                 |  |               |        | Lessthan12months       |   | 12monthsorlonger       | 
|Securities available-for-sale:                                   |  |               |        |                        |   |                        |  |           |     |  |   |   |  |   |       
|U.S. Treasury securities                                         |  | $             | 501    |                        | $ | 34                     |  | $         |    |  | $ |  |  | $ | 535   
|Obligations of federal government agencies                       |  |               | 4,056  |                        |   | 28                     |  |           | 11  |  |   |  |  |   | 4,073 
|Obligations of states, municipalities and political subdivisions |  |               | 8,879  |                        |   | 241                    |  |           | 34  |  |   | 1 |  |   | 9,085 
|Mortgage backed securities                                       |  |               | 5,331  |                        |   | 13                     |  |           | 85  |  |   | 7 |  |   | 5,252 
|Corporate securities                                             |  |               | 16,148 |                        |   | 690                    |  |           | 21  |  |   |  |  |   | 16,817
|Other securities                                                 |  |               | 5,084  |                        |   |                       |  |           | 120 |  |   |  |  |   | 4,964 
|                                                                 |  |               |        |                        |   |                        |  |           |     |  |   |   |  |   |       
|Total                                                            |  | $             | 39,999 |                        | $ | 1,006                  |  | $         | 271 |  | $ | 8 |  | $ | 40,726
|                                                                 |  |               |        |                        |   |                        |  |           |     |  |   |   |  |   |       



December 31, 2002



|                                                                 |  |               |        |                        |   |                         |  |           |     |  |   |       
|---------------------------------------------------------------- |  | ------------- | ------ | ---------------------- | - | ----------------------- |  | --------- | --- |  | - | ------
|($ in thousands)                                                 |  | AmortizedCost |        | Gross Unrealized Gains |   | Gross Unrealized Losses |  | FairValue
|Securities available-for-sale:                                   |  |               |        |                        |   |                         |  |           |     |  |   |       
|U.S. Treasury securities                                         |  | $             | 3,101  |                        | $ | 54                      |  | $         |    |  | $ | 3,155 
|Obligations of federal government agencies                       |  |               | 9,096  |                        |   | 54                      |  |           | 13  |  |   | 9,137 
|Obligations of states, municipalities and political subdivisions |  |               | 8,745  |                        |   | 119                     |  |           | 23  |  |   | 8,841 
|Mortgage backed securities                                       |  |               | 4,888  |                        |   | 17                      |  |           | 24  |  |   | 4,881 
|Corporate securities                                             |  |               | 13,344 |                        |   | 480                     |  |           | 41  |  |   | 13,783
|Other securities                                                 |  |               | 8,334  |                        |   | 63                      |  |           | 21  |  |   | 8,376 
|                                                                 |  |               |        |                        |   |                         |  |           |     |  |   |       
|Total                                                            |  | $             | 47,508 |                        | $ | 787                     |  | $         | 122 |  | $ | 48,173
|                                                                 |  |               |        |                        |   |                         |  |           |     |  |   |       



Certain investment securities shown
above have fair values less than amortized cost and therefore contain unrealized losses. The Company has evaluated these securities and has determined that the decline in value is temporary and is related to the change in market interest rates since
purchase. The decline in value is not related to any company or industry specific event. There were twenty-two investment securities with unrealized losses at December 31, 2003. The Company anticipates full recovery of amortized cost with respect to
these securities at maturity or sooner in the event of a more favorable market interest rate environment.



Securities taxable interest income was approximately $1,178,000, $1,010,000 and $1,596,000 for 2003, 2002 and 2001, respectively. Securities nontaxable interest income was approximately $365,000, $225,000 and $210,000
for 2003, 2002 and 2001, respectively. Dividend income was approximately $358,000, $271,000 and $272,000 for 2003, 2002 and 2001, respectively. Securities with an amortized cost of $12,855,000 and $8,120,000 at December 31, 2003 and 2002,
respectively, were pledged for purposes required or permitted by law. Market value of these securities was $12,771,000 and $8,226,000 at December 31, 2003 and 2002, respectively.



Other securities includes Federal Home Loan Bank (FHLB) Stock of $2,563,000 and $4,564,000 in 2003 and 2002, respectively, 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.



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Note 4. Securities (Continued)



Gross realized gains on sales of securities available for sale were approximately $61,000, $44,000 and $267,000 for 2003, 2002 and 2001,
respectively. Gross realized losses were $0 for 2003 and 2002 and $79,000 for 2001.



The contractual scheduled maturity of securities at December 31, 2003 were as follows:



|                                             |  |                |        |            |   |       
|-------------------------------------------- |  | -------------- | ------ | ---------- | - | ------
|($ in thousands)                             |  | Amortized Cost |        | Fair Value
|Due in one year or less                      |  | $              | 6,831  |            | $ | 6,836 
|Due from one year to five years              |  |                | 13,210 |            |   | 13,935
|Due from five to ten years                   |  |                | 5,449  |            |   | 5,545 
|Due after ten years                          |  |                | 6,497  |            |   | 6,479 
|Mortgage backed securities                   |  |                | 5,331  |            |   | 5,252 
|FHLB Stock and other Non Maturity Securities |  |                | 2,681  |            |   | 2,679 
|                                             |  |                |        |            |   |       
|                                             |  | $              | 39,999 |            | $ | 40,726
|                                             |  |                |        |            |   |       



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



Note 5. Loans and Allowance for Loan Losses



Loan categories as of December 31, 2003 and 2002 were as follows:



|                                          |  |      |         |   |      |   |         |  
|----------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|($ in thousands)                          |  | 2003 |         |   | 2002 |  
|Commercial and industrial                 |  | $    | 645,156 |   |      | $ | 540,467 |  
|Agricultural                              |  |      | 124,395 |   |      |   | 121,279 |  
|Real estate mortgage                      |  |      | 38,075  |   |      |   | 47,613  |  
|Real estate construction                  |  |      | 32,236  |   |      |   | 29,303  |  
|Installment                               |  |      | 26,850  |   |      |   | 27,405  |  
|Bank cards and other                      |  |      | 9,678   |   |      |   | 9,512   |  
|                                          |  |      |         |   |      |   |         |  
|Total loans                               |  |      | 876,390 |   |      |   | 775,579 |  
|Allowance for loan losses                 |  |      | (12,453 | ) |      |   | (10,272 | )
|Deferred loan fees, net of deferred costs |  |      | (219    | ) |      |   | (369    | )
|                                          |  |      |         |   |      |   |         |  
|Net loans                                 |  | $    | 863,718 |   |      | $ | 764,938 |  
|                                          |  |      |         |   |      |   |         |  



Variable rate loans were approximately
$424,066,000 and $318,691,000 as of December 31, 2003 and 2002, respectively. Remaining loans were fixed rate loans. A summary of loans by contractual maturity as of December 31, 2003 and 2002 are as follows:



|                         |  |      |         |      |   |        
|------------------------ |  | ---- | ------- | ---- | - | -------
|($ in thousands)         |  | 2003 |         | 2002
|Maturity within one year |  | $    | 278,983 |      | $ | 271,585
|One to five years        |  |      | 290,447 |      |   | 255,149
|Over five years          |  |      | 306,960 |      |   | 248,845
|                         |  |      |         |      |   |        
|                         |  | $    | 876,390 |      | $ | 775,579
|                         |  |      |         |      |   |        



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Note 5. Loans and Allowance for Loan Losses (Continued)



Changes in the allowance for loan losses are as follows:



|                                      |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|($ in thousands)                      |  | 2003 |        |   | 2002 |   |        | 2001 | 
|Balance, beginning of year            |  | $    | 10,272 |   |      | $ | 6,624  |      |  | $ | 4,948  |  
|Provision charged to operations       |  |      | 6,324  |   |      |   | 5,663  |      |  |   | 2,855  |  
|Allowance acquired through acquisiton |  |      |       |   |      |   | 878    |      |  |   |       |  
|Loans charged-off                     |  |      | (4,524 | ) |      |   | (3,280 | )    |  |   | (1,329 | )
|Recoveries                            |  |      | 381    |   |      |   | 387    |      |  |   | 150    |  
|                                      |  |      |        |   |      |   |        |      |  |   |        |  
|Balance, end of year                  |  | $    | 12,453 |   |      | $ | 10,272 |      |  | $ | 6,624  |  
|                                      |  |      |        |   |      |   |        |      |  |   |        |  



Impaired loan information as of
December 31, 2003, 2002 and 2001 are as follows:



|                                                            |  |      |        |      |   |        |  |   |       
|----------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|($ in thousands)                                            |  | 2003 |        | 2002 |   | 2001  
|Impaired loans with specific allowance for loan losses      |  | $    | 1,727  |      | $ | 2,323  |  | $ | 1,679 
|Impaired loans without a specific allowance for loan losses |  |      | 11,563 |      |   | 7,438  |  |   | 11,442
|                                                            |  |      |        |      |   |        |  |   |       
|Total impaired loans                                        |  | $    | 13,290 |      | $ | 9,761  |  | $ | 13,121
|                                                            |  |      |        |      |   |        |  |   |       
|Impaired loans allowance for loan losses                    |  | $    | 800    |      | $ | 512    |  | $ | 444   
|Average impaired loans                                      |  |      | 11,525 |      |   | 10,887 |  |   | 11,767
|Interest income recognized for impaired loans               |  |      |       |      |   | 8      |  |   | 269   



Note 6. Premises and Equipment



Major classifications of premises and equipment are summarized as of
December 31, 2003 and 2002 as follows:



|                                   |  |      |         |   |      |   |        |  
|---------------------------------- |  | ---- | ------- | - | ---- | - | ------ | -
|($ in thousands)                   |  | 2003 |         |   | 2002 |  
|Premises                           |  | $    | 19,680  |   |      | $ | 17,815 |  
|Furniture, fixtures, and equipment |  |      | 9,150   |   |      |   | 8,154  |  
|Leasehold improvements             |  |      | 935     |   |      |   | 1,009  |  
|                                   |  |      |         |   |      |   |        |  
|                                   |  |      | 29,765  |   |      |   | 26,978 |  
|Less accumulated depreciation      |  |      | (11,228 | ) |      |   | (9,941 | )
|                                   |  |      |         |   |      |   |        |  
|                                   |  |      | 18,537  |   |      |   | 17,037 |  
|Land                               |  |      | 3,918   |   |      |   | 3,906  |  
|                                   |  |      |         |   |      |   |        |  
|Premises and equipment, net        |  | $    | 22,455  |   |      | $ | 20,943 |  
|                                   |  |      |         |   |      |   |        |  



Depreciation expense for the years
ended December 31, 2003, 2002 and 2001 was approximately $1,595,000, $1,274,000 and $1,274,000, respectively.



Note 7. Life Insurance and Salary Continuation Plan



AWBC maintains a salary continuation plan for the benefit of certain directors, executive officers and other key employees. The plan provides for monthly payments to such persons, or their designated beneficiaries,
for a period of time following retirement, or in some cases 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.



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Note 7. Life Insurance and Salary Continuation Plan (Continued)



The plan is generally available to most directors, executive officers and other key
employees, and vests according to the specific plan. 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 retirement, and the recorded liability were as follows as of December 31, 2003 and 2002:



|                                                                               |  |      |        |      |   |      
|------------------------------------------------------------------------------ |  | ---- | ------ | ---- | - | -----
|($ in thousands)                                                               |  | 2003 |        | 2002
|Cash surrender value                                                           |  | $    | 11,829 |      | $ | 6,784
|Present value at retirement of all participants after full vesting is obtained |  |      | 9,015  |      |   | 5,025
|Present value at retirement of the current fully vested participants           |  |      | 4,328  |      |   | 3,944
|Recorded liability for future benefit obligation                               |  |      | 2,726  |      |   | 1,789



NOTE 8: Goodwill and Intangible
Assets



The Company has goodwill and core deposit intangible assets which
were recorded in connection with the acquisition of certain business combinations. The value of the core deposit intangibles are amortized over the estimated useful life of the deposit relationship. Amortization expense for the years ended December
31, 2003, 2002 and 2001, was $251,000, $164,000 and $336,000, respectively. The Company estimates amortization expense for the next five years to be consistent with the year ended December 31, 2003.



Prior to January 1, 2002, the Company amortized goodwill over 20 years. Upon the
implementation of Statement of Financial Accounting Standards No. 142 (SFAS No. 142), Goodwill and Other Intangible Assets, on January 1, 2002, The Company ceased amortization of goodwill, which resulted in the reduction of expenses, net of
taxes of approximately $137 thousand. SFAS No. 142 requires the Company to test the goodwill for impairment at least annually. The Company tested its goodwill and found no impairment during 2003.



In accordance with SFAS No. 142, the effect of this accounting change is reflected
prospectively. Comparative disclosure as if the changes had been retroactively applied to the prior years is as follows:



|                                            |  |      |        |      |   |        |  |   |      
|------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | -----
|                                            |  | 2003 |        | 2002 |   | 2001  
|Reported net income                         |  | $    | 13,986 |      | $ | 10,899 |  | $ | 9,207
|Add back: goodwill amortization, net of tax |  |      |       |      |   |       |  |   | 207  
|                                            |  |      |        |      |   |        |  |   |      
|Total                                       |  | $    | 13,986 |      | $ | 10,899 |  | $ | 9,414
|                                            |  |      |        |      |   |        |  |   |      
|Basic earnings per share:                   |  |      |        |      |   |        |  |   |      
|Reported net income                         |  | $    | 1.39   |      | $ | 1.13   |  | $ | 0.93 
|Goodwill amortization                       |  |      |       |      |   |       |  |   | 0.02 
|                                            |  |      |        |      |   |        |  |   |      
|Adjusted earnings per share                 |  | $    | 1.39   |      | $ | 1.13   |  | $ | 0.95 
|                                            |  |      |        |      |   |        |  |   |      
|Diluted earnings per share:                 |  |      |        |      |   |        |  |   |      
|Reported net income                         |  | $    | 1.34   |      | $ | 1.10   |  | $ | 0.92 
|Goodwill amortization                       |  |      |       |      |   |       |  |   | 0.03 
|                                            |  |      |        |      |   |        |  |   |      
|Adjusted earnings per share                 |  | $    | 1.34   |      | $ | 1.10   |  | $ | 0.95 
|                                            |  |      |        |      |   |        |  |   |      



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Note 9. Income Taxes



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



|                               |  |      |       |   |      |   |       |      |  |   |       |  
|------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|($ in thousands)               |  | 2003 |       |   | 2002 |   |       | 2001 | 
|Current expense                |  | $    | 8,240 |   |      | $ | 6,001 |      |  | $ | 5,602 |  
|Deferred tax expense/(benefit) |  |      | (732  | ) |      |   | (647  | )    |  |   | (814  | )
|                               |  |      |       |   |      |   |       |      |  |   |       |  
|Income tax expense             |  | $    | 7,508 |   |      | $ | 5,354 |      |  | $ | 4,788 |  
|                               |  |      |       |   |      |   |       |      |  |   |       |  



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



|                                           |  |      |       |   |      |   |       |      |  |   |       |  
|------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|($ in thousands)                           |  | 2003 |       |   | 2002 |   |       | 2001 | 
|Income tax at statutory rates              |  | $    | 7,492 |   |      | $ | 5,664 |      |  | $ | 4,772 |  
|Effect of tax-exempt interest income       |  |      | (205  | ) |      |   | (119  | )    |  |   | (104  | )
|Effect of nondeductible expenses and other |  |      | 221   |   |      |   | (191  | )    |  |   | 120   |  
|                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Income tax expense                         |  | $    | 7,508 |   |      | $ | 5,354 |      |  | $ | 4,788 |  
|                                           |  |      |       |   |      |   |       |      |  |   |       |  



The following are the significant
components of deferred tax assets and liabilities.



|                                                   |  |      |       |      |   |      
|-------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|($ in thousands)                                   |  | 2003 |       | 2002
|Deferred tax assets:                               |  |      |       |      |   |      
|Allowance for loan losses                          |  | $    | 4,359 |      | $ | 3,580
|Deferred compensation expense                      |  |      | 949   |      |   | 825  
|Other                                              |  |      | 250   |      |   | 274  
|                                                   |  |      |       |      |   |      
|Total deferred tax assets                          |  |      | 5,558 |      |   | 4,679
|                                                   |  |      |       |      |   |      
|Deferred tax liabilities:                          |  |      |       |      |   |      
|Deferred loan costs                                |  |      | 578   |      |   | 576  
|Lease financing                                    |  |      | 106   |      |   | 104  
|FHLB stock dividend income                         |  |      | 522   |      |   | 755  
|Unrealized losses on available-for-sale securities |  |      | 255   |      |   | 230  
|Other                                              |  |      | 1,359 |      |   | 983  
|                                                   |  |      |       |      |   |      
|Total deferred tax liabilities                     |  |      | 2,820 |      |   | 2,648
|                                                   |  |      |       |      |   |      
|Net deferred tax assets                            |  | $    | 2,738 |      | $ | 2,031
|                                                   |  |      |       |      |   |      



Note 10. Time Deposit Maturities



At December 31, 2003, the scheduled maturities of time deposits were as
follows:



|                 |  |   |        
|---------------- |  | - | -------
|($ in thousands) |  |  
|2004             |  | $ | 239,616
|2005             |  |   | 28,281 
|2006             |  |   | 8,194  
|2007             |  |   | 19,361 
|2008             |  |   | 15,894 
|Thereafter       |  |   | 628    
|                 |  |   |        
|Total            |  | $ | 311,974
|                 |  |   |        



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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. In 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, 2003,
exclusive of taxes and other charges, are summarized as follows:



|                                            |  |   |       |  
|------------------------------------------- |  | - | ----- | -
|($ in thousands)                            |  |   |      
|2004                                        |  | $ | 739   |  
|2005                                        |  |   | 612   |  
|2006                                        |  |   | 584   |  
|2007                                        |  |   | 583   |  
|2008                                        |  |   | 561   |  
|Thereafter                                  |  |   | 4,853 |  
|                                            |  |   |       |  
|Total minimum payments due                  |  | $ | 7,932 |  
|Less: Amount representing interest          |  |   | (250  | )
|                                            |  |   |       |  
|Present value of net minimum lease payments |  | $ | 7,682 |  
|                                            |  |   |       |  



AWBC rental expense for 2003, 2002 and
2001 was $752,000, $686,000 and $669,000.



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.



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Note 12. Commitments and Contingent Liabilities (Continued)



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 or 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 or Notional Amount December 31,
|($ in thousands)                                                    |  | 2003                                     |         | 2002
|Financial instruments whose contract amounts represent credit risk: |  |                                          |         |      |   |        
|Commitments to extend credit                                        |  | $                                        | 185,732 |      | $ | 140,126
|Standby letters of credit and financial guarantees written          |  |                                          | 6,690   |      |   | 2,343  
|Unused commitments on bankcards                                     |  |                                          | 13,400  |      |   | 15,022 
|                                                                    |  |                                          |         |      |   |        
|TOTAL                                                               |  | $                                        | 205,822 |      | $ | 157,491
|                                                                    |  |                                          |         |      |   |        



AWBC does not anticipate any material
losses as a result of the commitments, standby letters of credit 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.



A majority of the AWBs loans, commitments, and commercial and standby letters of credit
have been granted to customers in the Banks 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 Banks ability to collect
loans. Substantially all such customers are depositors of the Bank. The concentrations of credit by type of loan are set forth in Note 5. AWBCs related party loans and deposits are disclosed in Note 19. The Bank, as a matter of policy, does
not extend credit to any single borrower in excess of $16.0 million.



As of
December 31, 2003 and 2002, AWBC had lines of credit available of approximately $163.3 million and $138.0 million, respectively. The lines were available for short-term and long-term borrowings with maturities up to 30 years at market interest
rates.



Note 13. Common Stock



The Board of Directors approved stock repurchases in 2003, 2002 and 2001. In 2003, 2002 and
2001 61,960 shares, 249,263 shares and 560,619 shares, respectively, were repurchased for $1.1 million, $3.2 million and $6.2 million, respectively.



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Note 13. Common Stock (Continued)



In January of 2003, December of 2001, and January of 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 on the date issued. Per share amounts and weighted average shares outstanding have been retroactively adjusted to reflect the stock dividends.



In January of 2004 the Board of Directors declared a 10% stock dividend. The per share
amounts and weighted average shares outstanding have been retroactively adjusted to reflect this stock dividend.



Note 14. Restrictions on Dividends and Loans



The Bank is subject to banking regulations relating to the payment of dividends and the amount of loans that it may extend. The Bank is allowed to pay dividends out of
retained earnings. As of December 31, 2003 and 2002, the amount of retained earnings of AWB was $48,610,000 and $33,088,000, respectively. At December 31, 2002, Bank of Latah had retained earnings of approximately $4,456,000.



Certain loans to any person, including liabilities of a firm or association, cannot exceed
twenty percent of the capital and surplus of the Bank. 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 Bank has 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 $288,000, $213,000 and
$183,000 for 2003, 2002 and 2001, respectively and are based on a percentage of AWBC earnings. Contributions are allocated pro rata based on eligible annual compensation on December 31. Stock dividends are allocated on a pro-rata basis on allocated
shares per participant at the record date of the stock dividend. AWBC has a Profit Sharing 401(k) Plan. Contributions to the Profit Sharing 401(k) plan in 2003 were approximately $279,000, $239,000 in 2002 and $167,000 in 2001.



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 968,000. 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. During 2003, there were 194,554 options issued under the Plan. 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, 2003 there were 254,965 stock options outstanding from prior approved Incentive Stock Option Plans. Future incentive stock
options will be issued from the Plan approved in 2001.



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Note 16. Stock Option Plans (Continued)



The status of the Plans as of December 31, 2003, 2002 and 2001 is as follows:



|                                                               |  |          |   |      |                                 |       |        |         |   |                               |   |        |  |         |                               |  |   |     
|-------------------------------------------------------------- |  | -------- | - | ---- | ------------------------------- | ----- | ------ | ------- | - | ----------------------------- | - | ------ |  | ------- | ----------------------------- |  | - | ----
|                                                               |  | 2003     |   | 2002 |                                 | 2001 
|                                                               |  | Number   |   |      | Weighted Average Exercise Price |       | Number |         |   | WeightedAverageExercise Price |   | Number |  |         | WeightedAverageExercise Price
|Outstanding at beginning of year                               |  | 794,314  |   |      | $                               | 7.45  |        | 486,112 |   |                               | $ | 9.17   |  | 445,201 |                               |  | $ | 8.39
|Granted                                                        |  | 194,554  |   |      |                                 | 13.17 |        | 115,000 |   |                               |   | 12.00  |  | 128,370 |                               |  |   | 9.73
|Acquired                                                       |  |         |   |      |                                 |      |        | 284,854 |   |                               |   | 2.58   |  |        |                               |  |   | 0.00
|Exercised                                                      |  | (342,367 | ) |      |                                 | 5.46  |        | (74,444 | ) |                               |   | 6.90   |  | (82,506 | )                             |  |   | 5.95
|Forfeited                                                      |  | (21,939  | ) |      |                                 | 12.69 |        | (17,208 | ) |                               |   | 8.21   |  | (4,953  | )                             |  |   | 8.80
|                                                               |  |          |   |      |                                 |       |        |         |   |                               |   |        |  |         |                               |  |   |     
|Outstanding at year-end                                        |  | 624,562  |   |      | $                               | 9.44  |        | 794,314 |   |                               | $ | 7.45   |  | 486,112 |                               |  | $ | 9.17
|                                                               |  |          |   |      |                                 |       |        |         |   |                               |   |        |  |         |                               |  |   |     
|Exercisable at year-end                                        |  | 462,936  |   |      |                                 |       |        | 588,643 |   |                               | $ | 6.64   |  | 227,985 |                               |  | $ | 8.87
|Weighted average fair value of options granted during the year |  |          |   |      | $                               | 7.98  |        |         |   |                               | $ | 4.68   |  |         |                               |  | $ | 3.40



The following table summarizes
information about stock options outstanding at December 31, 2003:



|                         |  |                   |                                            |                     |                               |                     |                    |  |                                 |  |   |      
|------------------------ |  | ----------------- | ------------------------------------------ | ------------------- | ----------------------------- | ------------------- | ------------------ |  | ------------------------------- |  | - | -----
|                         |  | NumberOutstanding |                                            | Options Outstanding |                               | Options Exercisable
|Range of Exercise Prices |  |                   | Weighted Average RemainingContractual Life |                     | WeightedAverage ExercisePrice |                     | Number Exercisable |  | Weighted Average Exercise Price
|$2.02 - $4.74            |  | 82,398            |                                            | 3.7 years           |                               | $                   | 2.71               |  | 82,398                          |  | $ | 2.71 
|$5.08 - $6.17            |  | 26,044            |                                            | 7.0 years           |                               | $                   | 5.57               |  | 26,044                          |  | $ | 5.57 
|$7.15                    |  | 137,942           |                                            | 0.1 years           |                               | $                   | 7.15               |  | 137,942                         |  | $ | 7.15 
|$8.54                    |  | 25,986            |                                            | 1.1 years           |                               | $                   | 8.54               |  | 22,546                          |  | $ | 8.54 
|$8.85                    |  | 96,824            |                                            | 1.9 years           |                               | $                   | 8.85               |  | 74,454                          |  | $ | 8.85 
|$9.55 - $10.34           |  | 33,742            |                                            | 1.5 years           |                               | $                   | 9.91               |  | 29,342                          |  | $ | 9.89 
|$10.91 - $12.93          |  | 110,626           |                                            | 3.5 years           |                               | $                   | 11.06              |  | 55,210                          |  | $ | 10.97
|$16.96 - $19.57          |  | 111,000           |                                            | 8.8 years           |                               | $                   | 17.16              |  | 35,000                          |  | $ | 17.09



NOTE 17. Acquisition



On July 31, 2002, the Company 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.



The aggregate purchase price was approximately $17.5 million, including approximately $13.5
million in cash and 330,093 shares of the Companys common stock valued at approximately $4 million. The value of the shares of common stock issued was determined based on the closing market price of the Companys shares on March 28, 2002,
the date of the definitive agreement and notification to the public of the transaction. The Company 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 repaid with the proceeds from the issuance of trust preferred securities.



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NOTE 17. Acquisition (Continued)



The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at July 31, 2002 ($ in thousands):



|                            |  |   |        
|--------------------------- |  | - | -------
|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 Company. The core deposit intangible asset is being amortized over the estimated life of the depositor relationships of 15 years under the straight-line method. Goodwill resulting from the acquisition totaled
$8,178,000.



Note 18. 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.



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Note 18. Parent Company Only Statements (Continued)



Condensed Statements of Condition

($ in thousands)



|                                           |  |              |         |      |   |       
|------------------------------------------ |  | ------------ | ------- | ---- | - | ------
|                                           |  | December 31,
|                                           |  | 2003         |         | 2002
|Cash                                       |  | $            | 1,439   |      | $ | 176   
|Investment in Bank subsidiary              |  |              | 100,047 |      |   | 93,289
|Other assets                               |  |              | 5,022   |      |   | 550   
|                                           |  |              |         |      |   |       
|TOTAL ASSETS                               |  | $            | 106,508 |      | $ | 94,015
|                                           |  |              |         |      |   |       
|Other Borrowings                           |  | $            | 10,310  |      | $ | 12,885
|Stockholders equity                       |  |              | 96,198  |      |   | 81,130
|                                           |  |              |         |      |   |       
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |  | $            | 106,508 |      | $ | 94,015
|                                           |  |              |         |      |   |       



Condensed Statements
of Income

($ in thousands)



|                                                                                           |  |                          |        |      |   |        |  |   |       |  
|------------------------------------------------------------------------------------------ |  | ------------------------ | ------ | ---- | - | ------ |  | - | ----- | -
|                                                                                           |  | Years Ended December 31, |       
|                                                                                           |  | 2003                     |        | 2002 |   | 2001   | 
|Income:                                                                                    |  |                          |        |      |   |        |  |   |       |  
|Bank subsidiaries dividends                                                                |  | $                        | 3,300  |      | $ | 6,333  |  | $ | 4,471 |  
|Other income                                                                               |  |                          | 2      |      |   | 14     |  |   | 395   |  
|                                                                                           |  |                          |        |      |   |        |  |   |       |  
|                                                                                           |  |                          | 3,302  |      |   | 6,347  |  |   | 4,866 |  
|                                                                                           |  |                          |        |      |   |        |  |   |       |  
|Expenses:                                                                                  |  |                          |        |      |   |        |  |   |       |  
|Interest expense                                                                           |  |                          | 552    |      |   | 238    |  |   | 1     |  
|Depreciation and amortization                                                              |  |                          |       |      |   |       |  |   | 226   |  
|Other operating expenses                                                                   |  |                          | 34     |      |   |       |  |   |      |  
|                                                                                           |  |                          |        |      |   |        |  |   |       |  
|                                                                                           |  |                          | 586    |      |   | 238    |  |   | 227   |  
|                                                                                           |  |                          |        |      |   |        |  |   |       |  
|Income before tax benefit (expense) and equity in undistributed net income of subsidiaries |  |                          | 2,716  |      |   | 6,109  |  |   | 4,639 |  
|Income tax benefit (expense)                                                               |  |                          | 204    |      |   | 76     |  |   | (134  | )
|Income before equity in undistributed net income of subsidiaries                           |  |                          | 2,920  |      |   | 6,185  |  |   | 4,505 |  
|                                                                                           |  |                          |        |      |   |        |  |   |       |  
|Equity in undistributed net income of:                                                     |  |                          |        |      |   |        |  |   |       |  
|Bank subsidiaries                                                                          |  |                          | 11,066 |      |   | 4,714  |  |   | 4,634 |  
|Nonbank subsidiaries                                                                       |  |                          |       |      |   |       |  |   | 68    |  
|                                                                                           |  |                          |        |      |   |        |  |   |       |  
|Net income                                                                                 |  | $                        | 13,986 |      | $ | 10,899 |  | $ | 9,207 |  
|                                                                                           |  |                          |        |      |   |        |  |   |       |  



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Note 18. Parent Company Only Statements (Continued)



Condensed Statements of Cash Flows

($ in thousands)



|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  
|----------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                              |  | Years Ended December 31, |        
|                                                                              |  | 2003                     |         |   | 2002 |   |         | 2001 | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                          |  |                          |         |   |      |   |         |      |  |   |        |  
|Net Income                                                                    |  | $                        | 13,986  |   |      | $ | 10,899  |      |  | $ | 9,207  |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                          |         |   |      |   |         |      |  |   |        |  
|Equity in undistributed net income of subsidiaries                            |  |                          | (11,066 | ) |      |   | (4,714  | )    |  |   | (4,702 | )
|Depreciation and amortization                                                 |  |                          |        |   |      |   |        |      |  |   | 226    |  
|(Gain) Loss on sale                                                           |  |                          | 1       |   |      |   |        |      |  |   | (391   | )
|Increase in other assets                                                      |  |                          | (127    | ) |      |   | (62     | )    |  |   | (2,966 | )
|Decrease in other liabilities                                                 |  |                          |        |   |      |   | (21     | )    |  |   | (608   | )
|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  
|NET CASH FROM OPERATING ACTIVITIES                                            |  |                          | 2,794   |   |      |   | 6,102   |      |  |   | 766    |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                          |  |                          |         |   |      |   |         |      |  |   |        |  
|Investment in subsidiaries                                                    |  |                          |        |   |      |   | (13,507 | )    |  |   | (294   | )
|Return of investment in subsidiaries                                          |  |                          |        |   |      |   |        |      |  |   | 4,097  |  
|Proceeds from sale of Insurance Agency                                        |  |                          |        |   |      |   |        |      |  |   | 781    |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  
|NET CASH FROM (USED BY) INVESTING ACTIVITIES                                  |  |                          |        |   |      |   | (13,507 | )    |  |   | 4,584  |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                          |  |                          |         |   |      |   |         |      |  |   |        |  
|Issuance of capital stock                                                     |  |                          | 2,144   |   |      |   | 737     |      |  |   | 504    |  
|Stock repurchase program                                                      |  |                          | (1,100  | ) |      |   | (3,166  | )    |  |   | (6,201 | )
|Proceeds from issuance of Long Term Debt                                      |  |                          |        |   |      |   | 19,309  |      |  |   |       |  
|Repayment of Long Term Debt                                                   |  |                          | (2,575  | ) |      |   | (9,300  | )    |  |   |       |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  
|NET CASH FROM (USED BY) FINANCING ACTIVITIES                                  |  |                          | (1,531  | ) |      |   | 7,580   |      |  |   | (5,697 | )
|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  
|NET CHANGE IN CASH                                                            |  |                          | 1,263   |   |      |   | 175     |      |  |   | (347   | )
|CASH, beginning of year                                                       |  |                          | 176     |   |      |   | 1       |      |  |   | 348    |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  
|CASH, end of year                                                             |  | $                        | 1,439   |   |      | $ | 176     |      |  | $ | 1      |  
|                                                                              |  |                          |         |   |      |   |         |      |  |   |        |  



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Note 19. 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 collectability. Such loans had the following balances and activity during 2003 and 2002:



|                             |  |      |        |   |      |   |        |  
|---------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|($ in thousands)             |  | 2003 |        |   | 2002 |  
|Balance at beginning of year |  | $    | 9,394  |   |      | $ | 4,022  |  
|New loans or advances        |  |      | 3,485  |   |      |   | 8,650  |  
|Repayments and adjustments   |  |      | (9,693 | ) |      |   | (3,278 | )
|                             |  |      |        |   |      |   |        |  
|Balance at end of year       |  | $    | 3,186  |   |      | $ | 9,394  |  
|                             |  |      |        |   |      |   |        |  



Deposits from related parties:



Deposits from related parties totaled approximately $1,722,000 and
$2,062,000 at December 31, 2003 and 2002, respectively.



Payments to related
parties:



AWB paid $84,000 in 2003, 2002, and 2001 to an association that
includes one of the Directors of AWBC and AWB for the rent of its Ephrata branch.



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Note 20. 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 premises and equipment and intangible assets such as customer
relationships and core deposit intangibles. Fair values of off-statement of condition lending commitments standby letters of credit and guarantees 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, 2003 and 2002, were insignificant. See Note 12 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, 2003 and 2002:



|                                                     |  |                                                                                                                                         |  |                 |         |                      |   |        
|---------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | -------------------- | - | -------
|As of December 31, 2003: ($ in
thousands)            |  | Assumptions Used in Estimating Fair Value                                                                                               |  | Carrying Amount |         | Estimated Fair Value
|Financial Assets:                                    |  |                                                                                                                                         |  |                 |         |                      |   |        
|Cash and due from banks                              |  | Equal to carrying value                                                                                                                 |  | $               | 29,352  |                      | $ | 29,352 
|Overnight interest bearing deposits with other banks |  | Equal to carrying value                                                                                                                 |  |                 | 18,943  |                      |   | 18,943 
|Securities                                           |  | Quoted market prices                                                                                                                    |  |                 | 40,726  |                      |   | 40,726 
|Loans                                                |  | Fixed-rate loans: Discounted expected future cash flows, variable-rate loans: equal to carrying value, net of allowance for loan
losses |  |                 | 863,718 |                      |   | 881,267
|Financial Liabilities:                               |  |                                                                                                                                         |  |                 |         |                      |   |        
|Deposits                                             |  | Fixed-rate certificates of deposit:                                                                                                     |  |                 |         |                      |   |        
|                                                     |  | Discounted expected future cash flows                                                                                                   |  |                 |         |                      |   |        
|                                                     |  | All other deposits: Equal to carrying value                                                                                             |  |                 | 871,125 |                      |   | 879,531
|Short-term borrowings                                |  | Equal to carrying value                                                                                                                 |  |                 | 27,050  |                      |   | 27,050 
|Long-Term Borrowings                                 |  | Discounted expected future cash flows                                                                                                   |  |                 | 9,879   |                      |   | 9,625  
|Trust Preferred Borrowings                           |  | Equal to carrying value                                                                                                                 |  |                 | 10,000  |                      |   | 10,000 
|                                                     |  |                                                                                                                                         | 
|As of December 31, 2002: ($ in
thousands)            |  | Assumptions Used in Estimating Fair Value                                                                                               |  | Carrying Amount |         | Estimated Fair Value
|Financial Assets:                                    |  |                                                                                                                                         |  |                 |         |                      |   |        
|Cash and due from banks                              |  | Equal to carrying value                                                                                                                 |  | $               | 24,250  |                      | $ | 24,250 
|Overnight interest bearing deposits with other banks |  | Equal to carrying value                                                                                                                 |  |                 | 14,675  |                      |   | 14,675 
|Securities                                           |  | Quoted market prices                                                                                                                    |  |                 | 48,173  |                      |   | 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 |                      |   | 785,709
|Financial Liabilities:                               |  |                                                                                                                                         |  |                 |         |                      |   |        
|Deposits                                             |  | Fixed-rate certificates of deposit:                                                                                                     |  |                 |         |                      |   |        
|                                                     |  | Discounted expected future cash flows                                                                                                   |  |                 |         |                      |   |        
|                                                     |  | All other deposits: Equal to carrying value                                                                                             |  |                 | 766,335 |                      |   | 773,002
|Short-term borrowings                                |  | Equal to carrying value                                                                                                                 |  |                 | 46,284  |                      |   | 46,284 
|Long-Term Borrowings                                 |  | Discounted expected future cash flows                                                                                                   |  |                 | 6,825   |                      |   | 7,429  
|Trust Preferred Borrowings                           |  | Equal to carrying value                                                                                                                 |  |                 | 10,000  |                      |   | 10,000 



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Note 21. Regulatory Matters



The Bank is 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 Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities, and certain off-statement of condition items.



The Companys 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 Bank 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, 2003 AWBC and AWB were considered well capitalized based on regulatory capital standards. As of December 31, 2002 AWBC, AWB and BOL were considered well capitalized based on regulatory capital standards.



As of December 31, 2003 the regulatory ratios for AWBC and AWB and for 2002
the regulatory ratios for AWBC, AWB and BOL were as follows:



|                                                    |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|--------------------------------------------------- |  | ------ | ------- | ----- | ----- | - | --------------------- | - | ------ | - | ------ | ---------------- | ---- | - |  | ------ |  | ----- | ------ |  | ----- | -
|                                                    |  | Actual |         |       |       |   | AdequatelyCapitalized |   |        |   |        | Well Capitalized |     
|($ in thousands)                                    |  | Amount |         | Ratio |       |   |                       |   | Amount |   | Ratio  |                  |      |   |  | Amount |  | Ratio |       
|As of December 31, 2003:                            |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|Total capital to risk weighted assets:              |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|AWBC                                                |  | $      | 102,348 |       | 10.77 | % |                       | > |        | $ | 76,039 |                  | 8.00 | % |  | >      |  | $     | 95,049 |  | 10.00 | %
|AWB                                                 |  |        | 100,226 |       | 10.55 | % |                       | > |        |   | 76,007 |                  | 8.00 | % |  | >      |  |       | 95,009 |  | 10.00 | %
|                                                    |  |        |         |       |       |   |                       |  
|Tier I capital to risk weighted assets:             |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|AWBC                                                |  |        | 90,460  |       | 9.52  | % |                       | > |        |   | 39,403 |                  | 4.00 | % |  | >      |  |       | 59,104 |  | 6.00  | %
|AWB                                                 |  |        | 88,343  |       | 9.30  | % |                       | > |        |   | 38,004 |                  | 4.00 | % |  | >      |  |       | 57,006 |  | 6.00  | %
|                                                    |  |        |         |       |       |   |                       |  
|Leverage capital, Tier I capital to average assets: |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|AWBC                                                |  |        | 90,460  |       | 9.18  | % |                       | > |        |   | 38,020 |                  | 4.00 | % |  | >      |  |       | 47,525 |  | 5.00  | %
|AWB                                                 |  |        | 88,343  |       | 8.97  | % |                       | > |        |   | 39,403 |                  | 4.00 | % |  | >      |  |       | 49,254 |  | 5.00  | %
|                                                    |  |        |         |       |       |   |                       |  
|As of December 31, 2002:                            |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|Total capital to risk weighted assets:              |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|AWBC                                                |  | $      | 85,735  |       | 10.24 | % |                       | > |        | $ | 66,972 |                  | 8.00 | % |  | >      |  | $     | 83,715 |  | 10.00 | %
|AWB                                                 |  |        | 75,452  |       | 10.36 | % |                       | > |        |   | 58,237 |                  | 8.00 | % |  | >      |  |       | 72,797 |  | 10.00 | %
|BOL                                                 |  |        | 12,132  |       | 11.08 | % |                       | > |        |   | 8,762  |                  | 8.00 | % |  | >      |  |       | 10,952 |  | 10.00 | %
|                                                    |  |        |         |       |       |   |                       |  
|Tier I capital to risk weighted assets:             |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|AWBC                                                |  |        | 75,463  |       | 9.01  | % |                       | > |        |   | 33,486 |                  | 4.00 | % |  | >      |  |       | 50,229 |  | 6.00  | %
|AWB                                                 |  |        | 66,405  |       | 9.12  | % |                       | > |        |   | 29,119 |                  | 4.00 | % |  | >      |  |       | 43,678 |  | 6.00  | %
|BOL                                                 |  |        | 10,907  |       | 9.96  | % |                       | > |        |   | 4,381  |                  | 4.00 | % |  | >      |  |       | 6,571  |  | 6.00  | %
|                                                    |  |        |         |       |       |   |                       |  
|Leverage capital, Tier I capital to average assets: |  |        |         |       |       |   |                       |   |        |   |        |                  |      |   |  |        |  |       |        |  |       |  
|AWBC                                                |  |        | 75,463  |       | 8.54  | % |                       | > |        |   | 35,328 |                  | 4.00 | % |  | >      |  |       | 44,160 |  | 5.00  | %
|AWB                                                 |  |        | 66,405  |       | 8.94  | % |                       | > |        |   | 29,699 |                  | 4.00 | % |  | >      |  |       | 37,124 |  | 5.00  | %
|BOL                                                 |  |        | 10,907  |       | 7.75  | % |                       | > |        |   | 5,629  |                  | 4.00 | % |  | >      |  |       | 7,036  |  | 5.00  | %



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AMERICANWEST BANCORPORATION



Note 22. Earnings Per Share



The following is a reconciliation of the numerators and denominators for basic and diluted per-share computations for net income for 2003,
2002 and 2001:



|                                                     |  |      |            |      |   |           |  |   |          
|---------------------------------------------------- |  | ---- | ---------- | ---- | - | --------- |  | - | ---------
|($ in thousands, except per share)                   |  | 2003 |            | 2002 |   | 2001     
|Numerator:                                           |  |      |            |      |   |           |  |   |          
|Net income                                           |  | $    | 13,986     |      | $ | 10,899    |  | $ | 9,207    
|                                                     |  |      |           
|Denominator:                                         |  |      |            |      |   |           |  |   |          
|Weighted-average number of common shares outstanding |  |      | 10,045,836 |      |   | 9,625,038 |  |   | 9,910,353
|Incremental shares assumed for stock options         |  |      | 428,016    |      |   | 290,316   |  |   | 79,601   
|                                                     |  |      |            |      |   |           |  |   |          
|Total                                                |  |      | 10,473,852 |      |   | 9,915,354 |  |   | 9,989,954
|                                                     |  |      |            |      |   |           |  |   |          
|Basic earnings per common share                      |  | $    | 1.39       |      | $ | 1.13      |  | $ | 0.93     
|Diluted earnings per common share                    |  | $    | 1.34       |      | $ | 1.10      |  | $ | 0.92     
|Potentially dilutive stock option shares             |  |      |           |      |   |          |  |   | 122,028  



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AMERICANWEST BANCORPORATION



QUARTERLY FINANCIAL DATA

CONDENSED CONSOLIDATED STATEMENT OF INCOME-QUARTERLY

($ in thousands, except per share)



UNAUDITED



|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|--------------------------------------------------- |  | ------------------- | ---------- | ------------- | - | ---------- |  | --------- | ---------- |  | - | ----------
|                                                    |  | 2003, Quarter Ended
|                                                    |  | December 31,        |            | September 30, |   | June 30,   |  | March 31,
|Interest income                                     |  | $                   | 18,714     |               | $ | 18,166     |  | $         | 17,583     |  | $ | 16,785    
|Interest expense                                    |  |                     | 3,469      |               |   | 3,561      |  |           | 3,713      |  |   | 3,743     
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Net Interest Income                                 |  |                     | 15,245     |               |   | 14,605     |  |           | 13,870     |  |   | 13,042    
|Provision for loan losses                           |  |                     | 2,741      |               |   | 1,597      |  |           | 1,120      |  |   | 866       
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Net interest income after provision for loan losses |  |                     | 12,504     |               |   | 13,008     |  |           | 12,750     |  |   | 12,176    
|Noninterest income                                  |  |                     | 1,486      |               |   | 1,623      |  |           | 1,622      |  |   | 1,445     
|Noninterest expense                                 |  |                     | 8,654      |               |   | 8,995      |  |           | 8,814      |  |   | 8,657     
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Income before income taxes                          |  |                     | 5,336      |               |   | 5,636      |  |           | 5,558      |  |   | 4,964     
|Income tax                                          |  |                     | 1,875      |               |   | 1,926      |  |           | 1,955      |  |   | 1,752     
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Net income                                          |  | $                   | 3,461      |               | $ | 3,710      |  | $         | 3,603      |  | $ | 3,212     
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Basic earnings per common share                     |  | $                   | 0.34       |               | $ | 0.37       |  | $         | 0.36       |  | $ | 0.32      
|Diluted earnings per common share                   |  | $                   | 0.33       |               | $ | 0.35       |  | $         | 0.34       |  | $ | 0.31      
|Basic average shares                                |  |                     | 10,086,066 |               |   | 10,057,546 |  |           | 10,084,905 |  |   | 10,010,326
|Diluted average shares                              |  |                     | 10,473,852 |               |   | 10,534,171 |  |           | 10,477,660 |  |   | 10,409,434
|                                                    | 
|                                                    |  | 2002, Quarter Ended
|                                                    |  | December 31,        |            | September 30, |   | June 30,   |  | March 31,
|Interest income                                     |  | $                   | 16,912     |               | $ | 15,964     |  | $         | 13,340     |  | $ | 12,986    
|Interest expense                                    |  |                     | 4,162      |               |   | 3,999      |  |           | 3,452      |  |   | 3,497     
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Net Interest Income                                 |  |                     | 12,750     |               |   | 11,965     |  |           | 9,888      |  |   | 9,489     
|Provision for loan losses                           |  |                     | 1,843      |               |   | 1,738      |  |           | 1,272      |  |   | 810       
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Net interest income after provision for loan losses |  |                     | 10,907     |               |   | 10,227     |  |           | 8,616      |  |   | 8,679     
|Noninterest income                                  |  |                     | 1,585      |               |   | 1,474      |  |           | 1,263      |  |   | 1,062     
|Noninterest expense                                 |  |                     | 8,021      |               |   | 7,266      |  |           | 6,241      |  |   | 6,032     
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Income before income taxes                          |  |                     | 4,471      |               |   | 4,435      |  |           | 3,638      |  |   | 3,709     
|Income tax                                          |  |                     | 1,559      |               |   | 1,404      |  |           | 1,197      |  |   | 1,194     
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Net income                                          |  | $                   | 2,912      |               | $ | 3,031      |  | $         | 2,441      |  | $ | 2,515     
|                                                    |  |                     |            |               |   |            |  |           |            |  |   |           
|Basic earnings per common share                     |  | $                   | 0.30       |               | $ | 0.31       |  | $         | 0.26       |  | $ | 0.26      
|Diluted earnings per common share                   |  | $                   | 0.28       |               | $ | 0.30       |  | $         | 0.25       |  | $ | 0.26      
|Basic average shares                                |  |                     | 9,759,779  |               |   | 9,684,226  |  |           | 9,489,767  |  |   | 9,563,851 
|Diluted average shares                              |  |                     | 10,293,025 |               |   | 9,938,991  |  |           | 9,738,389  |  |   | 9,683,772 



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INDEX TO EXHIBITS



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                          
|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         |  | 2003 Restated Bylaws of registrant.                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|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 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 Officers, 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. is incorporated by reference to the registrants annual report on Form 10-K (File No. 000-18561) filed March 26,
2003.
|            | 
|10.5        |  | Indenture dated as of September 26, 2002, between AmericanWest Bancorporation, as Issurer, 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 is incorporated by reference to the registrants annual report on Form 10-K (File No. 000-18561) filed March 26, 2003.                                            
|            | 
|10.6        |  | Form of AmericanWest Bancorporation Floating Rate Junior Subordinated Deferrable Interest Debentures is incorporated by reference to the registrants annual report on Form 10-K (File No.
000-18561) filed March 26, 2003.                                                                                                                                                                                                                          
|            | 
|10.7        |  | Form of AmericanWest Statutory Trust I Floating Rate Capital Securities is incorporated by reference to the registrants annual report on Form 10-K (File No. 000-18561) filed March 26,
2003.                                                                                                                                                                                                                                                       
|            | 
|10.8        |  | Form of AmericanWest Statutory Trust I Floating Rate Common Securities is incorporated by reference to the registrants annual report on Form 10-K (File No. 000-18561) filed March 26,
2003.                                                                                                                                                                                                                                                        



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##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 is incorporated by reference to the registrants annual report on Form 10-K (File No. 000-18561) filed March 26,
2003.
|      | 
|10.10 |  | Guarantee Agreement dated as of September 26, 2002, between AmericanWest Bancorporation, as Guarantor, and State Street Bank and Trust Company of Connecticut National Association, as
Guarantee Trustee is incorporated by reference to the registrants annual report on Form 10-K (File No. 000-18561) filed March 26, 2003.                                                                                                
|      | 
|10.11 |  | Subscription Agreement dated as of September 26, 2002, between AmericanWest Bancorporation and AmericanWest Statutory Trust I, as Officers, and Preferred Term Securities VII, Ltd., as
Purchaser is incorporated by reference to the registrants annual report on Form 10-K (File No. 000-18561) filed March 26, 2003.                                                                                                       
|      | 
|10.12 |  | AmericanWest Bancorporation 2001 Incentive Stock Plan is incorporated by reference to Exhibit 99.1 to the registrants registration statement on Form S-8 (File No.
333-65628)*                                                                                                                                                                                                                                                
|      | 
|10.13 |  | AmericanWest Bancorporation 2001 Employee Stock Purchase Plan is incorporated by reference to Exhibit 99.1 to the registrants registration statement on Form S-8 (File No.
333-65630).*                                                                                                                                                                                                                                       
|      | 
|14.1  |  | Code of Ethics                                                                                                                                                                                                                                                                                                                                                                                                                 
|      | 
|21    |  | Subsidiaries of Registrant. Reference is made to Item 1. Business. AmericanWest Bancorporation and The Bank for the required information.                                                                                                                                                                                                                                                                                     
|      | 
|23.1  |  | Consent of Independent Auditors                                                                                                                                                                                                                                                                                                                                                                                                
|      | 
|31(a) |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                         
|      | 
|(b)   |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                         
|      | 
|32(a) |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                          
|      | 
|(b)   |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                          



---

|* | Denotes executive compensation plan or arrangement.
|- | ---------------------------------------------------



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