Amendment No. 2 to Form 10-K

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark 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 $195,589,000 based on the June 30, 2004 closing price of the registrant’s common stock as quoted on the Nasdaq National Market of $19.15.

The number of shares of the registrant’s common stock outstanding at February 25, 2005 was 10,356,704.

This amendment No. 2 to Part I. Item 1 Business to our annual report on Form 10-K for the year ended December 31, 2004 (“Form 10-K”) is being filed to add a Regulatory Matters section reporting the entering into certain supervisory agreements with AmericanWest Bank’s regulators. Other parts of the report, including our financial statements and report issued by our auditors, remain unchanged.

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 Company’s ability to increase market share, the Company’s ability to attract quality commercial business, the Company’s ability to expand its markets through new branches and acquisitions,, interest rate movements and the impact on margins such movement may cause, changes in the demographic make-up of the Company’s market, 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. 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.

AmericanWest Bancorporation (AWBC or the Company) is a Washington corporation registered as a bank holding company, under the Bank Holding Company Act of 1956. AWBC is headquartered in Spokane, Washington. AWBC’s wholly-owned subsidiary is AmericanWest Bank (AWB or Bank), a Washington state chartered bank that operates in Eastern and Central Washington and Northern Idaho. Unless otherwise indicated, reference to AWBC shall include its wholly-owned subsidiary AWB. At December 31, 2004, AWBC had total assets of $1.0 billion, net loans of $0.9 billion, deposits of $0.9 billion and stockholders’ equity of $0.1 billion. The discussion in this Annual Report on AWBC and its financial statements reflects AWBC’s acquisition of Latah Bancorporation, Inc. and its subsidiary, Bank of Latah (BOL), on July 31, 2002, which operated as a subsidiary of AWBC until AmericanWest Bank and BOL merged on March 19, 2003. AWBC was founded in 1983 and trades on NASDAQ under the symbol of AWBC.

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:

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.

AWB, a Washington state-chartered community bank, conducts its banking business through forty-two locations throughout Eastern and Central Washington and Northern Idaho.

AWB offers a full range of financial services to commercial and consumer customers, including industrial and agricultural enterprises, government entities, not-for-profit entities, and individuals. These services include short-term and medium-term loans, revolving credit lines, inventory and accounts receivable financing, mortgages, equipment leases, savings programs, checking accounts, personal loans, and bank credit cards, as well as a variety of account access programs such as debit cards, online banking, and online bill payment. The Bank’s services are primarily directed to the communities in which its financial centers are located and are targeted at the needs of commercial, private banking and consumer customers in these communities.

AWBC pursues a profit-based growth strategy, the key components of which include:

Increasing market share in existing communities through hands-on participation and active engagement in each community. AWBC management believes the Bank is engaged in each community as a hands-on partner focused on improving quality of life. AWBC’s position as a local, community bank sends a powerful message that distinguishes it immediately in the minds of customers, prospects, and community leaders. The Company’s smaller size makes it more adaptable than national or large-scale regional banks. Customers aren’t boxed in by the bureaucracies of the larger, national and regional banks; AWBC extends a certain financial flexibility to its customers that can only come from local leadership and commitment. This commitment is evident not only through the services offered, but also through active participation in causes that contribute to the quality of life, especially in the areas of housing, healthcare, and youth and education.

Expanding the markets served through new products and services to serve an expanded audience. Since its formation, AWBC has focused primarily on commercial banking to small and medium-sized businesses, with limited retail banking services to consumers. Management believes that AWBC can continue to gain market share by expanding its retail product offerings for consumers and businesses. A more complete line of financial products and services will help consumers use money, save money, and manage money, in both their personal and business lives.

Providing service to AWBC’s customers that is based on finding solutions and providing accurate, timely, and intelligent answers. This service model applies to AWBC’s service internally as well as service to customers. The Company’s overall focus is on offering customers greater value than

the larger, regional and national banks. AWBC is more responsive and innovative. The Company’s customers and communities trust it for their banking needs because they know AWBC as a local provider of banking products and services that is helping them achieve their financial goals. To increase market share and profitability, AWBC places a strong emphasis on moving from a transactional (order-taking) environment to a relationship banking culture where service is based on recommending additional products and services that can benefit a customer, thereby providing better service.

Expanding the markets served through de novo branching and acquisitions. AWBC intends to expand its presence in the Pacific Northwest 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.

In addition to internal growth, there may be attractive opportunities to grow AWBC through carefully selected acquisitions of other financial institutions or their branches within or adjacent to the Company’s market area. The Company’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.

AWBC’s loan portfolio consists primarily of commercial loans, commercial real estate loans, agricultural loans, real estate mortgage loans, residential real estate and other construction loans, consumer installment loans and bankcard loans. At December 31, 2004, AWBC had total gross loans outstanding of $0.9 billion, which equals 104% of AWBC’s deposits and 88% of its assets. The majority of the loans held by AWBC were to borrowers within the Company’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 term loans, revolving lines of credit, equipment financing loans and letters of credit. These loans generally mature within one to five years, have adjustable rates and are secured by inventory, accounts receivable, or equipment, although certain loans are unsecured. Commercial lending has increased risk in comparison to certain other types of lending 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.

Commercial Real Estate Loans. Commercial real estate loans primarily consist of loans to purchase or construct commercial and multifamily properties. These loans are secured by real estate, generally mature in five to ten years and can be fixed or adjustable rate. Commercial real estate loans include commercial construction loans. 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 commercial real estate lending. AWBC’s underwriting criteria are designed to evaluate and

minimize the risks of each commercial 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.

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 production ability, 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 Company’s policies normally require that a permanent financing commitment be in place before a construction loan is made to an individual borrower. Construction loans may involve additional risks because loan funds are collateralized by the project under construction, which is of uncertain value prior to completion. Delays may arise from labor problems, material shortages may be experienced and other unpredictable contingencies may occur. It is important to evaluate accurately the total loan funds required to complete a project and related loan-to-value ratios. Because of these factors, the analysis of prospective construction loan projects requires an expertise that is different in significant respects from the expertise required for real estate mortgage lending. Construction lending is generally considered to involve a higher degree of collateral risk than long-term financing of residential properties. AWBC’s risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value and marketability at completion of construction or development and the estimated cost (including interest) of construction. If the estimate of construction cost proves to be inaccurate, the Company 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 Company 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 and other loans are primarily automobile, bankcard and personal loans, otherwise known as consumer loans. These 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 55% of the loans in the Company’s portfolio have interest rates that adjust with the lending Company’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 Company 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 Company’s loan policies.

All loan applications are received at AWB’s branch lending offices and processed centrally through loan processing and administration. Designated lending 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’s experience. The maximum current loan approval limits available to any one individual vary from $25,000 to $5.0 million per relationship. Lending relationships in excess of $5.0 million require the approval of the board and management credit committee.

Under applicable federal and state laws, loans by AWB to a single borrower or related entity are limited. The Company, as a matter of policy, does not extend credit to any single borrower in excess of $16.0 million. AWB may sell portions of loans without recourse under an industry practice known as loan participations. At December 31, 2004, 2003 and 2002, the outstanding balance of loan participations sold outside AWB was approximately $48.9 million, $52.9 million and $32.7 million, respectively.

Secondary Mortgage Sales. The Company sells mortgage loans in the secondary market as a correspondent and as a broker. The Company offers a variety of products for refinance and purchases; and is approved to originate FHA and VA loans. The majority of loans originated in 2004 were fixed rate single-family loans. Total loans sold in 2004 were approximately $51.8 million, with the vast majority sold on a servicing released basis.

Nonperforming Assets. The following table provides information for the Company’s nonperforming assets:

Nonperforming assets include loans that are 90 or more days past due or in nonaccrual status and real estate and other loan collateral acquired through foreclosure. 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 and 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.

Total nonperforming assets were approximately $28.5 million or 2.71% of total assets at December 31, 2004. This compares to approximately $19.9 million or 1.95% of assets at December 31, 2003. The majority of nonperforming assets are comprised of several loans and properties as discussed below.

The Company has acquired title to an ice skating complex in Spokane that it is currently carrying in foreclosed real estate and other foreclosed assets. It is carried at $1.3 million and is being operated as an ice skating rink. The asset is being carried at estimated market value and is being marketed as both an operating facility and as an alternative use facility.

The Company has acquired title to a retail/office complex in Spokane that totals $1.5 million that it is carrying in foreclosed real estate and other foreclosed assets. The Company has received an earnest money agreement from a buyer for an amount in excess of the asset amount, pending certain contingencies, including environmental due diligence, which is ongoing. If the offer is not accepted or sale does not occur, the property will be listed with a real estate professional and marketed as a retail/office facility. The sale is expected to close in the first half of 2005.

The Company has acquired title to an office complex in Post Falls, Idaho that totals $0.5 million that it is carrying in foreclosed real estate and other foreclosed assets. The Company has received an earnest money agreement from a buyer for an amount in excess of the asset amount. The sale is expected to close in the first half of 2005.

The Company has classified $6.2 million in loans to a real estate developer as nonaccrual due to delinquency and the apparent inability to repay the debt without liquidation of the collateral. The Company has evaluated collateral coverage and has recognized a $40,000 impairment. The Company has initiated foreclosure action.

The Company has classified $5.3 million in loans to a wine grape vineyard and winery as nonaccrual due to continuing operating losses and inadequate cash flow to service debt. The entity continues to operate. The Company has evaluated collateral coverage and has provided for an impairment of $1.3 million at this time. The borrower is marketing the real estate and seeking alternative financing.

The Company has classified $2.5 million in loans to a row crop farmer as nonaccrual due to continued operating losses and inadequate cash flow to service debt. The entity continues to operate. The Company has evaluated collateral coverage and has provided for an impairment of $200,000 at this time. The borrower is currently marketing its real estate.

The Company has $1.1 million in loans to an auto dealer as nonaccrual due to a maturity of the loans and cessation of operations by the owner. The Company has evaluated collateral, and believes the loans are adequately collateralized. The Company intends to obtain title to the property through foreclosure and then market the property to achieve repayment.

A $0.9 million loan to an Ethanol production plant is classified nonaccrual due to a bankruptcy filing and uncertainty regarding the collection of principal and interest. The loan is a purchased participation and represents 12% of the total obligation of the borrower. Sale of the property by the trustee has occurred with payoff of the loan expected in the first half of 2005.

The allowance for credit losses is established to absorb known and inherent losses primarily resulting from loans outstanding. Accordingly, all credit losses are charged to the allowance and all recoveries are credited to it. The provision for credit losses charged to operating expense is based on past credit loss experience and other factors, which in management’s judgment deserve current recognition in estimating probable credit losses. Such other factors include growth and composition of the loan portfolio, credit concentrations, trends in portfolio volume, maturities, delinquencies and non-accruals, the relationship of the allowance for credit losses to outstanding loans, historical loss trends and general economic conditions. While management uses the best information available to base its estimates, future adjustments to the allowance may be necessary if economic conditions, particularly in the Company’s market, differ substantially from the assumptions used. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

AWBC utilizes a loan loss reserve methodology and documentation process which it believes is consistent with SEC Accounting Bulletin No. 102, Selected Loan Loss Allowance Methodology and Documentation Issues. Additionally, AWBC 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. To this end, AWBC developed a systematic methodology using a nine-grade scale system to determine its allowance for loan losses. On at least a quarterly basis the allowance is recalculated to determine if the amount allocated is adequate. This process is disciplined and consistently applied.

This methodology includes a detailed analysis of the loan portfolio that is performed on a quarterly basis by competent and well-trained personnel who have the skills and experience to perform analyses, estimates, reviews and other loan loss methodology function. All loans are considered in the analysis whether on an individual or group basis, using current and reliable data. Loans are evaluated for impairment on an individual basis, if applicable, and the remainder of the portfolio is segmented into groups of loans with similar risk characteristics. Management considers all relevant internal and external factors that may affect loan collectability, including interest, if applicable. Additionally, the methodology includes consideration of particular risks inherent in different kinds of lending. Current collateral values (less costs to sell) are considered in cases where this type of analysis is applicable. The analysis ensures the loan loss allowance balance and methodology is in accordance with accounting principles generally accepted in the United States of America. Management believes that the allowance for loan losses is adequate.

At December 31, 2004, the Company had approximately $37 million of loans that were not classified as nonperforming but for which known information about the borrower’s financial condition caused management to have concern about the ability of the borrowers to comply with the repayment terms of the loans. These loans were identified through the loan review process described above that provides for assignment of a risk rating based on a nine-grade scale. Based on the evaluation of current market conditions, loan collateral, other secondary sources of repayment and cash flow generation, management does not anticipate any significant losses related to these loans. These loans are subject to continuing management attention and are considered in the determination of the allowance for loan losses. A decline in the economic conditions in the Company’s market areas or other factors could adversely impact individual borrowers or the loan portfolio in general. Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual or transferred to foreclosed real estate and other foreclosed assets in the future.

The following table sets forth information regarding changes in the Company’s allowance for loan losses as follows:

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:

Investment activities are in accordance with the Investment, Liquidity and Asset/Liability Management polices approved by the Board of AWBC. Activities are reviewed by the asset/liability committee (ALCO) and the Board of AWBC.

The following table sets forth the carrying value, by type, of the securities in the Company’s portfolios at December 31, 2004, 2003 and 2002:

At December 31, 2004, and 2003 the market value of the Company’s securities exceeded amortized cost by $316,000 and $727, 000, respectively. 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).

The following table sets forth the carrying values, maturities and approximate average aggregate yields of securities in the Company’s investment portfolio by type at December 31, 2004:

The weighted average yield related to states and political subdivisions reflect the actual yield and are not presented on a tax equivalent basis.

The Company’s primary source of funds has historically been customer deposits. The Company strives to maintain a high percentage of noninterest bearing deposits, which are low cost funds and result in higher interest margins. At December 31, 2004, 2003 and 2002, the Company’s ratios of noninterest bearing deposits to total deposits were 19.0%, 18.5% and 17.7%, respectively.

The Company 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 Company’s policies.

The following table sets forth the average balances for each major category of deposit and the weighted-average interest rate paid for deposits in the year ended 2004, 2003 and 2002:

The following table shows the amounts and maturities of certificates of deposit that had balances of $100,000 or more at December 31, 2004, 2003 and 2002:

AWBC’s financial centers are located in the three largest metropolitan areas in Eastern and Central Washington; Spokane, Yakima, and the Tri-Cities area comprised of Pasco, Kennewick and Richland, and in suburban and rural communities in Eastern and Central Washington and Northern Idaho.

Spokane, with its diversified economy of military, manufacturing, government, health care, construction, financial services, natural resources and retail services, has generally been stable and resistant to many of the national economic highs and lows. Spokane County’s population grew by an estimated 3,200 people in 2003, which is less than 1%. Estimated per-capita income in Spokane County as of the 2000 census was $25,550, about 6% higher than the year earlier, but only 87% of the national average. Spokane County’s annual average employment fell by about 1.8% last year. The County had about 3,500 fewer nonagricultural wage and salary workers in 2002 than in 2001. Home sales in the Spokane metropolitan area increased in 2003 year by about 6% to 6,243. The average home-sale price in the Spokane market climbed 2.5% to $124,973.

The Tri-Cities is currently the fastest growing area in Washington State. The combined Tri-Cities population grew 35% from 1990 to 2000 and grew 2.2% each of the next two years to 139,860 in 2002. Kennewick, individually, grew 30% in the past decade, 2% from 2000 to 2001, and less than 1% in 2002. Per capita personal income as of the 2000 Census was $21,301 in Benton County and $15,459 in Franklin County. A nuclear-waste vitrification plant and the jobs it has brought to the area are a major factor in its recent growth. In Tri-Cities, median home prices as of the 2000 Census were $119,900 in Benton County and $102,000 in Franklin County.

Yakima population grew 11.2% from 1990 to 2000 and to 71,845. Per capita personal income as of the 2000 Census was $29,475. Yakima’s unemployment rate was 7.2% as of the last Census. In Yakima, median home prices as of the 2000 Census were $106,725. Significant categories of employment in Yakima include education, health and social services, retail and manufacturing.

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

The Company competes primarily with large national and regional banks, as well as credit unions, savings and loans, mortgage companies, and other financial institutions. Management believes there are three key differentiators that distinguish it from its bank competition: (1) It is committed to a local, community banking model; (2) its smaller size makes it more adaptable; and (3) it puts customer service first. Management believes that its competitive position has been strengthened by the consolidation of past years in the banking industry, which resulted in many community banks that were previously owned locally becoming part of large national or regional banks. The Company’s strategy, by contrast, is to remain closely tied to a community banking model with strong local connections.

As of December 31, 2004, the Company had 365 full-time equivalent employees, none of whom is covered by a collective bargaining agreement. Following the mergers and consolidations in the early part of this decade, Management has focused on acculturating employees while acknowledging and respecting the heritage of each bank and how it has shaped who the Company is today. All employees now operate under a unified organization, which management believes has been a positive transition. Renewed focus on employee training programs, on internal marketing and communication systems, and on consistent and equitable salary structures will further improve employee relations, which Management believes are currently good.

On August 24, 2004, AWB entered into a memorandum of understanding with the Federal Deposit Insurance Corporation (FDIC) relating to the Bank’s compliance controls, processes and training. On December 15, 2004, the Bank received a supervisory directive from the Washington Department of Financial Institutions (DFI) requiring it to take various actions to improve the Bank’s asset quality and loan administration, to maintain a minimum level of capital exceeding that required of well-capitalized banks under the applicable regulations (which the Bank met as of the date of the directive and continues to meet) and to revise its policies and procedures with respect to liquidity and funds management. Both supervisory actions were founded upon the Bank’s operations under prior management. Each of the FDIC and the DFI also have required the Bank to furnish the agency with at least 30 days’ notice prior to adding or replacing any director or senior executive officer or changing the responsibilities of any senior executive officer. The Bank may not make the change if either regulatory agency disapproves. Neither the memorandum of understanding nor the directive imposed any fines or penalties, although they did not preclude the possibility of fines and penalties in the future.

The supervisory actions will remain in effect until modified or terminated by the FDIC and the DFI, respectively. The Company and the Bank are committed to resolving the issues raised by the regulators and are continuing to take action to accomplish that goal.

These supervisory actions may adversely affect the Company’s and the Bank’s ability to obtain regulatory approvals for future initiatives requiring regulatory action, such as acquisitions. However, neither this effect nor the memorandum of understanding nor the directive, including the financial impact of enhanced processes, procedures and policies, is expected to have a material adverse impact on the financial condition or results of operations of the Company or the Bank.

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 (1) repeals the historical restrictions on preventing banks from affiliating with securities firms, (2) provides a uniform framework for the activities of banks, savings institutions and their holding companies, (3) broadens the activities that may be conducted by national banks and banking subsidiaries of bank holding companies, (4) provides an enhanced framework for protecting the privacy of consumers’ information and (5) addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.

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

AWBC does not believe that the act negatively affects 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.

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 non-banking 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 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 that has assets exceeding a specified amount or that 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.

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 the Company.

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.

Community Reinvestment Act. The Community Reinvestment Act (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.

Federal Deposit Insurance Corporation Improvement Act. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), each federal banking agency has prescribed, by regulation, non-capital safety and soundness standards for institutions under its authority. These standards cover internal controls, information systems, and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings and stock valuation. An institution which fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions. Management of AWBC believes that its subsidiary 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 (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 AWBC’s subsidiary bank are currently insured to a maximum of $100,000 per depositor through the Bank Insurance Fund (BIF) administered by the FDIC. All insured banks are required to pay semi-annual deposit insurance premium assessments to the FDIC.

FDICIA included provisions to reform the Federal Deposit Insurance System, including the implementation of risk-based deposit insurance premiums. 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 non-bank businesses or to open new facilities.

The FDIC and Federal Reserve use risk-based capital guidelines for banks and bank holding companies. These are designed to make such capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the Federal Reserve has noted that bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain ratios well in excess of the minimum. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier I capital. Tier I capital for bank holding companies includes common shareholders’ equity, certain qualifying perpetual preferred stock and minority interests in equity accounts of consolidated subsidiaries, less intangibles. The Company’s regulatory capital ratios are reported in Note 21. Regulatory Matters.

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 amount of capital 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.

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.

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 (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. Management believes the Company is currently in compliance with the final guidelines.

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. Management believes the Company is currently in compliance with the final guidelines.

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (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 effective requirements prescribed by the USA PATRIOT Act and all applicable final implementing regulations.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amendment number 2 to report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on the 8^th day of August, 2005.


AMERICANWEST BANCORPORATION

By:		/s/ Robert M. Daugherty
		Robert M. Daugherty
		President and Chief Executive Officer


	Year ended December 31,
($ in thousands)	2004			2003			2002			2001			2000
Nonperforming loans:
Nonaccrual loans	$	24,222		$	12,485		$	13,315		$	11,023		$	5,458
Accruing loans 90 days or more past due		53			43			244			2,193			1,339

Total nonperforming loans		24,275			12,528			13,559			13,216			6,797
Other real estate owned and other repossessed assets		4,201			7,408			7,874			1,616			1,510

Total nonperforming assets	$	28,476		$	19,936		$	21,433		$	14,832		$	8,307

Allowance for loan losses	$	18,475		$	12,453		$	10,272		$	6,624		$	4,948
Ratio of total nonperforming assets to total assets		2.71	%		1.95	%		2.34	%		2.25	%		1.39	%
Ratio of total nonperforming loans to total loans		2.62	%		1.43	%		1.75	%		2.25	%		1.38	%
Ratio of allowance for loan losses to total nonperforming loans		76.1	%		99.4	%		75.8	%		50.1	%		72.8	%


	Years ended December 31,
($ in thousands)	2004			2003			2002			2001			2000
Balance of allowance for loan losses at beginning of period	$	12,453		$	10,272		$	6,624		$	4,948		$	4,349
Charge-offs
Commercial		7,359			1,452			1,292			396			833
Agricultural		279			177			1,541			613			—
Real estate		90			2,154			26			96			97
Installment		221			234			265			188			164
Other		173			507			156			36			46

Total charge-offs		8,122			4,524			3,280			1,329			1,140

Recoveries
Commercial		1,013			71			140			112			51
Agricultural		26			90			173			2			—
Real estate		10			15			3			21			2
Installment		25			30			67			13			42
Other		24			175			4			2			1

Total recoveries		1,098			381			387			150			96

Net charge-offs		7,024			4,143			2,893			1,179			1,044
Provision for loan losses		13,046			6,324			5,663			2,855			1,643
Allowance acquired through acquisition		—			—			878			—			—

Balance of allowance for loan losses at end of period	$	18,475		$	12,453		$	10,272		$	6,624		$	4,948

Ratio of net charge-offs to average loans		0.77	%		0.50	%		0.43	%		0.22	%		0.23	%
Average loans outstanding during the period	$	913,844		$	821,407		$	675,344		$	540,159		$	450,901


	December 31,
($ in thousands)	2004 Amount of Allowance				2003 Amount of Allowance				2002 Amount of Allowance		%		2001 Amount of Allowance		%		2000 Amount of Allowance		%
Commercial and commercial real estate		11,824	64	%		8,717	70	%		6,677	65	%		4,632	70	%		3,167	64	%
Real estate construction		2,667	14	%		249	2	%		205	2	%		194	3	%		99	2	%
Agricultural		2,532	14	%		1,868	15	%		2,054	20	%		993	15	%		742	15	%
Real estate-mortgage		1,014	6	%		1,245	10	%		719	7	%		452	7	%		643	13	%
Installment		199	1	%		249	2	%		514	5	%		296	4	%		247	5	%
Bankcard and other		239	1	%		125	1	%		103	1	%		57	1	%		50	1	%

Total	$	18,475	100	%	$	12,453	100	%	$	10,272	100	%	$	6,624	100	%	$	4,948	100	%


($ in thousands)	2004		2003		2002
U.S. Treasury and other U.S. Government agencies	$	2,494	$	4,608	$	12,292
States of the U.S. and political subdivisions		8,886		9,085		8,841
Other securities		22,506		27,033		27,040

Total securities	$	33,886	$	40,726	$	48,173


Type and Maturity ($ in thousands)	Yield		Amount
U.S. Treasury and other U.S. government agencies and corporations:
1 year or less	6.50	%	$	508
Over 1 through 5 years	3.24	%		1,100
Over 5 through 10 years	8.73	%		432
Over 10 years	8.23	%		454

Total	5.76	%	$	2,494

States and political subdivisions:
1 year or less	4.44	%	$	880
Over 1 through 5 years	4.87	%		4,833
Over 5 through 10 years	5.56	%		1,393
Over 10 Years	3.93	%		1,780

Total	4.75	%	$	8,886

Other securities:
1 year or less	7.70	%	$	2,543
Over 1 through 5 years	4.37	%		9,609
Over 5 through 10 years	—			—
Over 10 years	2.02	%		10,354

Total	3.66	%	$	22,506

Total investment securities:
1 year or less	6.82	%	$	3,931
Over 1 through 5 years	4.44	%		15,542
Over 5 through 10 years	6.31	%		1,825
Over 10 years	2.51	%		12,588

Total	4.10	%	$	33,886


By		/s/ Diane L. Kelleher
		Diane L. Kelleher
		Executive Vice President and Chief Financial Officer


Name:		/s/ Robert M. Daugherty
Title		President and Chief Executive Officer
Date: August 8, 2005


	2004				2003				2002
($ in thousands)	Average Balance		Interest Rate		Average Balance		Interest Rate		Average Balance		Interest Rate
Interest bearing demand deposits	$	62,046	0.26	%	$	60,069	0.50	%	$	44,946	0.94	%
Savings deposits		384,064	1.44	%		280,401	1.76	%		206,570	2.08	%
Time deposits		282,182	2.17	%		335,212	2.35	%		283,043	3.17	%
Noninterest bearing demand deposits		159,704				140,710				111,139

Total	$	887,996			$	816,392			$	645,698