Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q including, but not limited to, matters described in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). Such forward-looking statements may include statements or forecasts about the Company's financial condition and results of operations, expectations for future financial performance and assumptions for those forecasts and expectations. The Company makes forward-looking statements about potential problem loans, cash flows, strategic initiatives, capital initiatives and the adequacy of the allowance for loan losses. Actual results might differ significantly from the Company's forecasts and expectations due to several factors. Some of these factors include, but are not limited to, impact of the current national and regional economy (including real estate values) on loan demand and borrower financial capacity in the Company's market, changes in loan portfolio composition, the ability of the Company to comply with Cease and Desist Order, the Company's ability to raise regulatory capital and the dilutive effect of capital raising, the Company's access to liquidity sources, the Company's ability to increase market share, the Company's ability to attract quality customers, interest rate movements and the impact on net interest 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 employees, regulatory changes and competition with other banks and financial institutions. Other factors are included in Part II, Section 1A of this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2008, filed with the US Securities and Exchange Commission (SEC) available on the SEC's website at www.sec.gov. 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 hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. This statement is included for the express purpose of protecting the Company under PSLRA's safe harbor provisions.

The following discussion contains a review of the results of operations and financial condition for the three months ended March 31, 2009 and 2008. This information should be read in conjunction with the financial statements and related notes appearing in this report. The reader is assumed to have access to the Company's Form 10-K for the year ended December 31, 2008, which contains additional information.

AmericanWest Bancorporation

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

The Company also has four wholly-owned statutory trust subsidiaries which were formed for the sole purpose of issuing trust preferred securities. These include AmericanWest Statutory Trust I, Columbia Trust Statutory Trust I, AmericanWest Capital Trust II and AmericanWest Capital Trust III (collectively Trusts). Due to the adoption of Financial Interpretation Number 46R, Consolidation of Variable Interest Entities, the investments in these Trusts are not consolidated within the consolidated financial statements.

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

As a result of an interim examination, effective August 8, 2008, the Bank is subject to a Supervisory Directive of the Washington State Department of Financial Institutions, Division of Banks (DFI). The directive requires the Bank to provide periodic liquidity and credit quality reports; update the DFI of the status of liquidity planning and the previously announced capital raising initiatives; notify the DFI of significant changes in management and financial condition; retain a permanent Chief Executive Officer, and seek prior written consent of the DFI before paying dividends. As of the date of this quarterly report, management believes it is in compliance with the Supervisory Directive.

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

The Order reaffirms certain restrictions that were included in the Supervisory Directive, including restrictions on the payment of dividends and appointment of directors or senior executive officers without prior approval. Other material provisions of the Order require the Bank to:

• Increase Tier 1 leverage ratio to 10.0% by September 8, 2009 and thereafter maintain such a level until such time as the Order is rescinded;

• Charge-off all assets classified as "loss" and 50% of loans classified as "doubtful" as of the most recent report of examination by June 10, 2009 ($4.8 million of related "loss" assets were previously recognized as losses/charge-offs in 2008 and $5.3 million of "doubtful" assets were reserved at 50% of the outstanding balance as of December 31, 2008; accordingly, no additional expense is expected in connection with this requirement);

• Reduce the level of assets classified as "substandard" or "doubtful" noted in the most recent report of examination to 75% of capital by September 8, 2009;

• Develop a written asset disposition plan for all adversely classified assets of $1 million or more, and take other specified actions to strengthen the credit administration and collection processes by July 10, 2009;

• Develop policies for maintenance of an adequate level of liquidity and certify that pricing of deposits is in compliance with Section 337.6 of the FDIC Rules and Regulations;

• Obtain an independent study of the Bank's credit and lending functions to determine if additional personnel are necessary and develop and implement enhanced policies and procedures for the monitoring and reporting of certain types of loans by July 10, 2009; and

• Formulate and implement written profit improvement and multi-year strategic plans by August 9, 2009.

Although management has undertaken actions to comply with all aspects of the Order, there is no assurance that full compliance will be achieved within the timeframes specified. As a result, the Bank could become subject to further restrictions and/or penalties.

Results of Operations

Overview

The Company reported a net loss of $14.5 million or $0.84 per share for the three months ended March 31, 2009, compared to a net loss (excluding a $27.0 million goodwill impairment charge) of $4.6 million or $0.26 per share for the same period in 2008 and a net loss of $31.6 million, or $1.83, per share inclusive of the goodwill impairment charge.

The negative return on average assets annualized, for the three months ended March 31, 2009, was 3.18% as compared to 5.98% for the three months ended March 31, 2008. The negative return on average assets annualized, excluding the goodwill impairment charge, for the three months ended March 31, 2008 was 0.86%.

The Company recognized a provision for loan losses of $13.7 million, or 3.44% of average loans on an annualized basis, for the three months ended March 31, 2009, as compared to $12.8 million, or 2.89% of average loans annualized, for the three months ended March 31, 2008. For the quarter ended March 31, 2009, net charge-offs were $17.7 million, or 4.45% of average gross loans annualized, as compared to $11.0 million, or 2.48%, for the first quarter of 2008.

The table below summarizes the Company's financial performance for the three months ended March 31, 2009 and 2008:

                                                      Three Months Ended March 31,
  ($ in thousands except per share data)            2009          2008        % Change
  Interest Income                                 $  23,251     $  33,670          -31 %
  Interest Expense                                    9,314        12,383          -25 %

  Net Interest Income                                13,937        21,287          -35 %
  Loan Loss Provision                                13,680        12,800            7 %

  Net interest income after loan loss provision         257         8,487          -97 %

  Non-interest Income                                 5,800         4,220           37 %
  Non-interest Expense                               20,592        45,783          -55 %

  Loss before income tax benefit                    (14,535 )     (33,076 )         56 %
  Income tax benefit                                      0        (1,519 )        100 %

  Net Loss                                        $ (14,535 )   $ (31,557 )         54 %

  Basic loss per common share                     $   (0.84 )   $   (1.83 )         54 %
  Diluted loss per common share                   $   (0.84 )   $   (1.83 )         54 %

The selected financial ratios presented below in the non-GAAP column exclude the goodwill impairment charge of $27.0 million taken during the three months ended March 31, 2008. These calculations do not conform to generally accepted accounting principles (GAAP) measures; however, management believes these ratios are preferable as they represent a more meaningful comparison to the three months ended March 31, 2009.

                                                  Three Months Ended March 31,
                                                               2008          2008
                                                2009       Non-GAAP (1)      GAAP
     Selected Financial Ratios, annualized:
     Return on average assets                    -3.18 %          -0.86 %    -5.98 %
     Return on average equity                   -66.70 %          -6.44 %   -44.58 %
     Return on tangible average equity         -104.51 %         -13.03 %   -90.25 %
     Efficiency ratio                           100.70 %          70.17 %    70.17 %
     Non-interest income to average assets        1.27 %           0.80 %     0.80 %
     Non-interest expenses to average assets      4.50 %           3.56 %     8.68 %
     Net interest margin (2)                      3.34 %           4.62 %     4.62 %

(1) Excludes goodwill impariment charge, when applicable.

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

Net Interest Income

Three Months Ended March 31, 2009 and 2008

Net interest income for the first quarter of 2009 was $13.9 million, a decrease of $7.4 million from the first quarter of 2008. Interest income for the first quarter of 2009 was $23.3 million, a decrease of $10.4 million from the same period of the prior year. The decrease in interest income is related mainly to the decline in the yield on earning assets of 175 basis points as well as a decline in average earning assets of $154 million. The Company's cost of funds inclusive of non-interest bearing demand deposits was 2.17% in the first quarter of 2009, as compared to 2.74% in the same period of 2008. Interest expense for the first quarter of 2009 was $9.3 million, a decrease of $3.1 million from the similar period of the prior year. The decrease in interest expense from the first quarter of 2008 is a result of a decrease in the cost of funds of 74 basis points and a decrease in average interest bearing liabilities of $42 million.

The tax equivalent net interest margin for the first quarter of 2009 was 3.34%, a decrease of 128 basis points from the same period in 2008. This decrease was driven by the decline in yield on earning assets, offset in part by a reduction in the cost of funds. The average yield on loans for the first quarter of 2009 was 5.64%, a decrease of 177 basis points from the same period in 2008, which drove the reduction in yield on interest earning assets down to 5.55%. The decrease in the average yield on loans is in part related to a decline in index rates for certain variable rate loans tied to Prime. The average prime rate (the base index for approximately 35% of the Company's loan portfolio) for the first quarter of 2009 was 3.25% as compared to 6.24% for the same period of the prior year. In addition, the impact of non-accrual loans on the net interest margin for the three months ended March 31, 2009 was approximately 61 basis points.

The reduction in the Company's cost of funds, inclusive of non-interest bearing demand deposits, to 2.17% in the first quarter of 2009 as compared to the same period in the prior year was a result of a reduction in the cost of interest bearing liabilities of 74 basis points offset in part by a reduction in average non-interest bearing demand deposits of $32 million or 9.8%.

                          AMERICANWEST BANCORPORATION



The following table sets forth the Company's net interest margin for the three
months ended March 31, 2009 and 2008:



                                                           Three months ended March 31,
                                                      2009                               2008
                                           Average                            Average
($ in thousands)                           Balance     Interest     %         Balance     Interest     %
                Assets
Loans (1)                                $ 1,614,190   $  22,464   5.64 %   $ 1,778,977   $  32,784   7.41 %
Taxable securities                            45,589         560   4.98 %        51,844         647   5.02 %
Non-taxable securities (2)                    19,106         292   6.20 %        17,918         273   6.13 %
FHLB Stock                                     9,586          -    0.00 %         9,689          20   0.83 %
Overnight deposits with other banks
and other                                     18,200          35   0.78 %         2,688          39   5.84 %

Total interest earning assets              1,706,671      23,351   5.55 %     1,861,116      33,763   7.30 %

Non-interest earning assets                  147,616                            260,208

Total assets                             $ 1,854,287                        $ 2,121,324

             Liabilities
Interest bearing demand deposits         $   131,007   $     132   0.41 %   $   138,319   $     189   0.55 %
Savings and MMDA deposits                    426,313       1,768   1.68 %       546,262       2,953   2.17 %
Time deposits                                664,369       5,657   3.45 %       523,962       5,910   4.54 %

Total interest bearing deposits            1,221,689       7,557   2.51 %     1,208,543       9,052   3.01 %

Overnight borrowings                          94,242         214   0.92 %        85,425         822   3.87 %
Junior subordinated debt                      41,239         641   6.30 %        41,239         736   7.18 %
Other borrowings                              87,721         902   4.17 %       151,672       1,773   4.70 %

Total interest bearing liabilities         1,444,891       9,314   2.61 %     1,486,879      12,383   3.35 %

Non-interest bearing demand deposits         295,854                            327,931
Other non-interest bearing liabilities        25,168                             21,821

Total liabilities                          1,765,913                          1,836,631
         Stockholders' Equity               88,374                             284,693

Total liabilities and stockholders'
equity                                   $ 1,854,287                        $ 2,121,324

Net interest income and spread                         $  14,037   2.94 %                 $  21,380   3.95 %

Net interest margin to average earning
assets                                                             3.34 %                             4.62 %

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

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

The following table sets forth a summary of changes in the components of net interest income during the first quarter of 2009, as compared to the first quarter of 2008, due to the changes in average interest earning assets and interest bearing liabilities and the resultant changes in interest income and interest expense:

                                                           Three months ended March 31, 2009
                                                                    compared to 2008
                                                          Decrease in net interest income due
                                                                     to changes in:
($ in thousands)                                         Volume             Rate           Total
Interest earning assets
Loans (1)                                             $     (3,003 )     $    (7,317 )   $ (10,320 )
Securities (2)                                                 (66 )              (2 )         (68 )
Overnight deposits with other banks, and other and
FHLB stock                                                      72               (96 )         (24 )

Total interest earning assets                         $     (2,997 )     $    (7,415 )   $ (10,412 )

Interest bearing liabilities
Interest bearing demand deposits                      $       (989 )     $       932     $     (57 )
Savings and MMDA deposits                                     (640 )            (545 )      (1,185 )
Time deposits                                                1,567            (1,820 )        (253 )

Total interest bearing deposits                                (62 )          (1,433 )      (1,495 )
Overnight borrowings                                            84              (692 )        (608 )
Junior subordinated debt                                        -                (95 )         (95 )
Other borrowings                                              (739 )            (132 )        (871 )

Total interest bearing liabilities                            (717 )          (2,352 )      (3,069 )

Total decrease in net interest income                 $     (2,280 )     $    (5,063 )   $  (7,343 )

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

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

Loan Loss Provision

During the three months ended March 31, 2009, the Company recognized a provision for loan losses of $13.7 million, or 3.44%, of average gross loans on an annualized basis. For the three months ended March 31, 2008, the Company recognized a provision for loan losses of $12.8 million, or 2.89%, of average gross loans on an annualized basis. For the three months ended March 31, 2009 and 2008, the annualized net charge-offs were 4.45% and 2.48% of average gross loans, respectively.

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

Non-interest Income

Three Months Ended March 31, 2009 and 2008

Non-interest income for the three months ended March 31, 2009 was $5.8 million, as compared to $4.2 million for the same period of 2008, an increase of $1.6 million, or 37%. This increase consists of the following components:

• Fees and service charges on deposits decreased $345 thousand, or 14%, largely due to lower transaction volumes, a reduction in overdraft fee income which decreased $327 thousand and debit card fee income which decreased $65 thousand.

• Fees on mortgage loan sales increased $1.1 million, or 123%, largely due to the Federal Reserve Bank's aggressive monetary policy in an effort to drive down mortgage rates. This, combined with additional internal efforts to market these services to the Bank's customers, resulted in strong growth in mortgage related fee revenue.

• Other non-interest income increased $863 thousand, or 107%, due mainly to a one-time excise tax refund from the state of Washington of $977 thousand net of the certain professional fees paid in the process of amending prior years' excise tax returns.

Non-interest Expense

Three Months Ended March 31, 2009 and 2008

Non-interest expense for the three months ended March 31, 2009 totaled $20.6 million, as compared to $18.8 million (excluding a goodwill impairment charge of $27 million) for the same quarter of the prior year. The change consists of the following components:

• Salaries and benefits were down $1.9 million, or 17.6%, in the first quarter of 2009 as compared to the first quarter of 2008, as a result of cost saving initiatives that included a reduction in total staff of approximately 129 full-time equivalents.

• FDIC assessments were $3.48 million in the first quarter of 2009 as compared to $52 thousand in the first quarter of 2008. The increase was a result of increased assessments rates and an accrual for a special assessment equal to 10 basis points of total deposits

• Equipment and occupancy increased $246 thousand, or 6.6%, related to costs associated with improvements made to existing facilities and higher rent expense.

• Other non-interest expense increased $187 thousand or 6.2% largely due to an increase in professional fees associated with capital raising efforts and loan collection activities.

Income Tax (Benefit) Provision

As a result of the Company's current going concern status as of December 31, 2008, all tax benefits from operating losses in 2009 have been deferred and all deferred taxes have been fully reserved. The Company did not recognize any tax benefit for operating losses in the first quarter of 2009. If the Company is successful in raising additional capital and future operating profitability is probable, it is likely the going concern status will be rescinded and the valuation reserve for the deferred tax asset reversed, significantly enhancing the regulatory capital ratios of both the Bank and the Company.

Non-performing Assets

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

                          AMERICANWEST BANCORPORATION



The following table summarizes the non-performing assets at March 31,
2009, December 31, 2008 and March 31, 2008:



                                                     March 31        December 31,       March 31
                                                       2009              2008             2008
($ in thousands)
Non-accrual loans (1)                                $ 122,442      $       91,744      $  43,269
Accruing loans over 90 days past due (1)                   285                  -           3,578
. . .