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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549
________________________
 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-7949    BANCWEST CORPORATION     Delaware
(State of incorporation)
    
    99-0156159
(I.R.S. Employer Identification No.)999 Bishop Street, Honolulu, Hawaii
(Address of principal executive offices)
    
    96813
(Zip Code)
 Registrants telephone number, including area code: (808) 525-7000    Securities registered pursuant to Section 12(b) of the Act: None    Securities registered pursuant to Section 12(g) of the Act: None    (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or l5(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            No Indicate by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act). Yes            No  ü As of August 1, 2004 the number of outstanding shares of each of the issuers classes of
common stock (all of which were beneficially owned by BNP Paribas) was: Class
    
    OutstandingClass A Common Stock, $0.01 Par Value
    
    85,759,123 Shares




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BANCWEST CORPORATION AND SUBSIDIARIES FORM 10-Q
June 30, 2004 INDEX  
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements(Unaudited)
    
    2Consolidated Statements of Income
    
    2Consolidated Balance Sheets
    
    3Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income
    
    4Consolidated Statements of Cash Flows
    
    5Notes to Consolidated Financial Statements
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    17Forward-Looking Statements
    
    17Overview
    
    18Critical Accounting Estimates
    
    20Consolidated Financial Highlights
    
    21Results of Operations
    
    22Net Interest Income
    
    22Noninterest Income
    
    26Noninterest Expense
    
    27Operating Segments
    
    29Securities Available For Sale
    
    32Loans and Leases
    
    34Nonperforming Assets and Restructured Loans
    
    35Provision and Allowance for Loan and Lease Losses
    
    37Deposits
    
    38Capital
    
    39Income Taxes
    
    39Liquidity Management
    
    40Recent Accounting Standards
    
    41Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    43Item 4. Controls and Procedures
    
    45PART II. OTHER INFORMATIONItem 4. Submission of Matters to a Vote of Security Holders
    
    46Item 6. Exhibits and Reports on Form 8-K
    
    46SIGNATURE
    
    47EXHIBIT INDEX
    
    48Exhibit 12 Statement Regarding Computation of RatiosExhibit 31 Section 302 CertificationsExhibit 32 Section 1350 CertificationsExhibit 12Exhibit 31Exhibit 32
   
 The information furnished in these interim statements reflects all
adjustments that are, in the opinion of management, necessary for a fair
statement of the results for such periods. Such adjustments are of a normal
recurring nature, unless otherwise disclosed in this Form 10-Q. The results
of operations in the interim statements are not necessarily indicative of the
results that may be expected for the full year. The interim financial
information should be read in conjunction with the Companys 2003 Annual
Report on Form 10-K. 1




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PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements 
 BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME(Unaudited) Three Months Ended June 30,
    
    Six Months Ended June 30,2004
    
    2003
    
    2004
    
    2003(in thousands)Interest incomeLoans
    
    $
    337,039
    
    
    $
    338,315
    
    
    $
    669,615
    
    
    $
    675,404Lease financing
    
    
    28,941
    
    
    
    33,395
    
    
    
    60,121
    
    
    
    69,342Investment securities:Taxable
    
    
    50,885
    
    
    
    43,026
    
    
    
    101,307
    
    
    
    83,128Exempt from Federal income taxes
    
    
    95
    
    
    
    183
    
    
    
    189
    
    
    
    337Other
    
    
    2,908
    
    
    
    2,989
    
    
    
    5,787
    
    
    
    5,967Total interest income
    
    
    419,868
    
    
    
    417,908
    
    
    
    837,019
    
    
    
    834,178Interest expenseDeposits
    
    
    43,589
    
    
    
    47,724
    
    
    
    87,025
    
    
    
    100,870Short-term borrowings
    
    
    5,566
    
    
    
    7,042
    
    
    
    10,979
    
    
    
    10,739Long-term debt
    
    
    48,452
    
    
    
    43,281
    
    
    
    95,729
    
    
    
    88,683Total interest expense
    
    
    97,607
    
    
    
    98,047
    
    
    
    193,733
    
    
    
    200,292Net interest income
    
    
    322,261
    
    
    
    319,861
    
    
    
    643,286
    
    
    
    633,886Provision for loan and lease losses
    
    
    11,900
    
    
    
    18,860
    
    
    
    30,765
    
    
    
    41,550Net interest income after provision for
loan and lease losses
    
    
    310,361
    
    
    
    301,001
    
    
    
    612,521
    
    
    
    592,336Noninterest incomeService charges on deposit accounts
    
    
    40,525
    
    
    
    38,561
    
    
    
    81,354
    
    
    
    75,590Trust and investment services income
    
    
    10,054
    
    
    
    9,858
    
    
    
    20,356
    
    
    
    19,365Other service charges and fees
    
    
    36,872
    
    
    
    37,587
    
    
    
    74,045
    
    
    
    70,448Net gains on securities available for sale
    
    
    691
    
    
    
    1,466
    
    
    
    1,058
    
    
    
    3,358Other
    
    
    21,879
    
    
    
    14,655
    
    
    
    34,679
    
    
    
    29,466Total noninterest income
    
    
    110,021
    
    
    
    102,127
    
    
    
    211,492
    
    
    
    198,227Noninterest expenseSalaries and wages
    
    
    83,441
    
    
    
    83,262
    
    
    
    166,896
    
    
    
    168,900Employee benefits
    
    
    34,652
    
    
    
    37,930
    
    
    
    70,889
    
    
    
    74,476Occupancy
    
    
    21,790
    
    
    
    22,381
    
    
    
    43,405
    
    
    
    44,527Outside services
    
    
    20,683
    
    
    
    18,154
    
    
    
    38,944
    
    
    
    35,841Intangible amortization
    
    
    5,764
    
    
    
    5,764
    
    
    
    11,527
    
    
    
    11,527Equipment
    
    
    12,020
    
    
    
    12,437
    
    
    
    23,456
    
    
    
    23,593Other
    
    
    53,874
    
    
    
    49,950
    
    
    
    96,021
    
    
    
    91,726Total noninterest expense
    
    
    232,224
    
    
    
    229,878
    
    
    
    451,138
    
    
    
    450,590Income before income taxes
    
    
    188,158
    
    
    
    173,250
    
    
    
    372,875
    
    
    
    339,973Provision for income taxes
    
    
    73,401
    
    
    
    65,588
    
    
    
    145,066
    
    
    
    130,230Net income
    
    $
    114,757
    
    
    $
    107,662
    
    
    $
    227,809
    
    
    $
    209,743
 The accompanying notes are an integral part of these consolidated financial statements. 2




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BancWest Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS(Unaudited) June 30, 2004
    
    December 31, 2003
    
    June 30, 2003(Dollars in thousands, except share data)AssetsCash and due from banks
    
    $
    1,702,563
    
    
    $
    1,538,004
    
    
    $
    1,498,254Interest-bearing deposits in other banks
    
    
    267,947
    
    
    
    189,687
    
    
    
    57,701Federal funds sold and securities purchased under
agreements to resell
    
    
    245,500
    
    
    
    444,100
    
    
    
    286,600Trading assets
    
    
    4,726
    
    
    
    19,109
    
    
    
    64,173Securities available for sale
    
    
    5,822,419
    
    
    
    5,774,471
    
    
    
    5,014,615Loans held for sale
    
    
    65,031
    
    
    
    51,007
    
    
    
    60,063Loans and leases:Loans and leases
    
    
    27,189,823
    
    
    
    25,722,079
    
    
    
    25,008,420Less allowance for loan and lease losses
    
    
    396,101
    
    
    
    391,699
    
    
    
    391,518Net loans and leases
    
    
    26,793,722
    
    
    
    25,330,380
    
    
    
    24,616,902Vehicle and equipment operating leases, net
    
    
    127,280
    
    
    
    
    
    
    
    Premises and equipment, net
    
    
    520,507
    
    
    
    530,153
    
    
    
    390,218Customers acceptance liability
    
    
    15,279
    
    
    
    30,078
    
    
    
    32,567Core deposit intangible, net
    
    
    175,830
    
    
    
    187,357
    
    
    
    198,884Goodwill
    
    
    3,229,771
    
    
    
    3,226,871
    
    
    
    3,226,851Other real estate owned and repossessed personal property
    
    
    16,993
    
    
    
    17,387
    
    
    
    18,049Other assets
    
    
    1,276,580
    
    
    
    1,013,611
    
    
    
    982,809Total assets
    
    $
    40,264,148
    
    
    $
    38,352,215
    
    
    $
    36,447,686Liabilities and Stockholders EquityDeposits:Interest-bearing
    
    $
    19,649,419
    
    
    $
    18,347,730
    
    
    $
    17,533,152Noninterest-bearing
    
    
    8,326,906
    
    
    
    8,055,387
    
    
    
    7,502,551Total deposits
    
    
    27,976,325
    
    
    
    26,403,117
    
    
    
    25,035,703Federal funds purchased and securities sold under
agreements to repurchase
    
    
    1,799,249
    
    
    
    1,174,877
    
    
    
    1,386,713Short-term borrowings
    
    
    574,089
    
    
    
    1,197,809
    
    
    
    1,062,819Acceptances outstanding
    
    
    15,279
    
    
    
    30,078
    
    
    
    32,567Long-term debt
    
    
    4,646,075
    
    
    
    4,221,025
    
    
    
    3,519,174Guaranteed preferred beneficial interests in Companys
junior subordinated debentures
    
    
    
    
    
    
    
    
    
    
    262,951Other liabilities
    
    
    822,123
    
    
    
    1,062,437
    
    
    
    1,060,109Total liabilities
    
    $
    35,833,140
    
    
    $
    34,089,343
    
    
    $
    32,360,036Commitments and contingent liabilitiesStockholders equity:Class A common stock, par value $0.01 per share
Authorized - 150,000,000 shares
Issued - 85,759,123 shares
    
    $
    858
    
    
    $
    858
    
    
    $
    858Additional paid-in capital
    
    
    3,419,927
    
    
    
    3,419,927
    
    
    
    3,419,927Retained earnings
    
    
    1,034,007
    
    
    
    806,198
    
    
    
    579,377Accumulated other comprehensive income, net
    
    
    (23,784
    )
    
    
    35,889
    
    
    
    87,488Total stockholders equity
    
    
    4,431,008
    
    
    
    4,262,872
    
    
    
    4,087,650Total liabilities and stockholders equity
    
    $
    40,264,148
    
    
    $
    38,352,215
    
    
    $
    36,447,686
 The accompanying notes are an integral part of these consolidated financial statements. 3




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BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME(Unaudited) Class ACommon Stock
    
    AdditionalPaid-in
    
    Retained
    
    AccumulatedOtherComprehensiveShares
    
    Amount
    
    Capital
    
    Earnings
    
    Income, net
    
    Total(in thousands, except share data)Balance, December 31, 2003
    
    
    85,759,123
    
    
    $
    858
    
    
    $
    3,419,927
    
    
    $
    806,198
    
    
    $
    35,889
    
    
    $
    4,262,872Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227,809
    
    
    
    
    
    
    
    227,809Unrealized net loss on securities
available for sale arising during the
period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,293
    )
    
    
    (49,293
    )Reclassification of net realized gains on
securities available for sale included in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (624
    )
    
    
    (624
    )Unrealized net loss on cash flow derivative
hedges arising during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,474
    )
    
    
    (3,474
    )Reclassification of net realized gains on
cash flow derivative hedges included in net
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,282
    )
    
    
    (6,282
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227,809
    
    
    
    (59,673
    )
    
    
    168,136Balance, June 30, 2004
    
    
    85,759,123
    
    
    $
    858
    
    
    $
    3,419,927
    
    
    $
    1,034,007
    
    
    $
    (23,784
    )
    
    $
    4,431,008Balance, December 31, 2002
    
    
    85,759,123
    
    
    $
    858
    
    
    $
    3,419,927
    
    
    $
    369,634
    
    
    $
    77,063
    
    
    $
    3,867,482Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209,743
    
    
    
    
    
    
    
    209,743Unrealized net gains on securities
available for sale arising during the
period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,863
    
    
    
    7,863Reclassification of net realized gains on
securities available for sale included in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,998
    )
    
    
    (1,998
    )Unrealized net gain on cash flow derivative
hedges, arising during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,500
    
    
    
    11,500Reclassification of net realized gains on
cash flow derivative hedges included in net
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,940
    )
    
    
    (6,940
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209,743
    
    
    
    10,425
    
    
    
    220,168Balance, June 30, 2003
    
    
    85,759,123
    
    
    $
    858
    
    
    $
    3,419,927
    
    
    $
    579,377
    
    
    $
    87,488
    
    
    $
    4,087,650
 The accompanying notes are an integral part of these consolidated financial statements. 4




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BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) Six Months Ended June 30,2004
    
    2003(in thousands)Cash flows from operating activities:Net income
    
    $
    227,809
    
    
    $
    209,743Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    33,187
    
    
    
    36,387Net decrease in deferred income taxes
    
    
    (211,538
    )
    
    
    (1,114
    )Provision for loan and lease losses
    
    
    30,765
    
    
    
    41,550Net decrease (increase) in trading assets
    
    
    14,383
    
    
    
    (20,743
    )Net decrease (increase) in loans held for sale
    
    
    (14,024
    )
    
    
    25,211Net gains on securities available for sale
    
    
    (1,058
    )
    
    
    (3,358
    )Net increase in interest receivable
    
    
    (212
    )
    
    
    (11,026
    )Net increase in interest payable
    
    
    10,160
    
    
    
    1,730Net decrease (increase) in prepaid expense
    
    
    (1,541
    )
    
    
    8,184Other
    
    
    (80,910
    )
    
    
    (77,262
    )Net cash provided by operating activities
    
    
    7,021
    
    
    
    209,302Cash flows from investing activities:Proceeds from maturity of securities available for sale
    
    
    973,691
    
    
    
    1,019,795Proceeds from the sale of securities available for sale
    
    
    282,394
    
    
    
    339,376Purchase of securities available for sale
    
    
    (1,387,691
    )
    
    
    (2,549,001
    )Proceeds from sales of loans
    
    
    165,941
    
    
    
    455,284Purchases of loans
    
    
    (744,256
    )
    
    
    (786,458
    )Net increase in loans and leases resulting from originations and collections
    
    
    (909,443
    )
    
    
    (562,937
    )Net increase in origination of vehicle operating leases
    
    
    (127,280
    )
    
    
    -Purchase of premises and equipment
    
    
    (14,551
    )
    
    
    (22,513
    )Other
    
    
    (198,556
    )
    
    
    2,510Net cash used in investing activities
    
    
    (1,959,751
    )
    
    
    (2,103,944
    )Cash flows from financing activities:Net increase in deposits
    
    
    1,573,208
    
    
    
    478,224Net increase in Federal funds purchased and securities sold
under agreements to repurchase
    
    
    624,372
    
    
    
    595,237Net increase (decrease) in short-term borrowings
    
    
    (623,720
    )
    
    
    329,545Proceeds from long-term debt
    
    
    756,000
    
    
    
    315,000Repayments of long-term debt
    
    
    (332,911
    )
    
    
    (174,224
    )Net cash provided by financing activities
    
    
    1,996,949
    
    
    
    1,543,782Net increase (decrease) in cash and cash equivalents
    
    
    44,219
    
    
    
    (350,860
    )Cash and cash equivalents at beginning of period
    
    
    2,171,791
    
    
    
    2,193,415Cash and cash equivalents at end of period
    
    $
    2,216,010
    
    
    $
    1,842,555Supplemental disclosures:Interest paid
    
    $
    183,573
    
    
    $
    198,546Income taxes paid
    
    $
    311,404
    
    
    $
    129,311Supplemental schedule of noncash investing and financing activities:Loans converted into other real estate owned and repossessed personal property
    
    $
    4,548
    
    
    $
    4,249Loans made to facilitate the sale of other real estate owned
    
    $
    620
    
    
    $
    1,218
 The accompanying notes are an integral part of these consolidated financial statements. 5




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BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) 1. Summary of Significant Accounting Policies Descriptions of Operations BancWest Corporation is a financial holding company headquartered in
Honolulu, Hawaii and incorporated under the laws of the State of Delaware.
Through our principal subsidiaries, Bank of the West and First Hawaiian Bank,
we provide commercial and consumer banking services, engage in commercial,
equipment and vehicle leasing and offer trust, investment and insurance
products. BancWest Corporations subsidiaries operate 357 branches in the
states of California, Hawaii, Oregon, Washington, Idaho, New Mexico and Nevada
and in Guam and Saipan. In this report BancWest Corporation and Subsidiaries is
referred to as the Company, we or our. BancWest Corporation alone is
referred to as the Parent. Basis of Presentation We have prepared the accompanying financial data for the three and six
months ended June 30, 2004 and 2003 in accordance with accounting principles
generally accepted in the United States. In the opinion of management, the accompanying consolidated financial
statements contain all normal and recurring adjustments necessary to present
fairly our consolidated financial position as of June 30, 2004, December 31,
2003 and June 30, 2003, consolidated results of operations for the three and
six months ended June 30, 2004 and 2003, and cash flows for the six months
ended June 30, 2004 and 2003. The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in our consolidated
financial statements and accompanying notes. Management bases its estimates on
historical experience and various other assumptions believed to be reasonable.
Although these estimates are based on managements best knowledge of current
events and actions that may impact the Company in the future, actual results
may be different from the estimates. Our critical accounting policies are those
that affect our financial statements materially and involve difficult,
subjective or complex judgments by management. Descriptions of the significant accounting policies of the Company are
included in Note 1 (Summary of Significant Accounting Policies) to the audited
consolidated financial statements included in the Companys 2003 Annual Report
on Form 10-K. There have been no significant changes to these policies. Reclassifications Certain amounts in the financial statements for prior periods have been
reclassified to conform with the current financial statement presentation.
Such reclassifications did not have a material effect on the Consolidated
Financial Statements. 2. Derivative Financial Instruments Any portion of the changes in the fair value of a derivative designated as
a hedge that is deemed ineffective is recorded in current period earnings; this
amount was not material in the three and six months ended June 30, 2004 and
2003. Fair Value Hedges The Company has various derivative instruments that hedge the fair values
of recognized assets or liabilities or of unrecognized firm commitments (fair
value hedges). At June 30, 2004, the Company carried an interest rate swap of
$2.7 million with a fair market value loss of $0.5 million that was a hedge for
a commercial loan. The Company receives 1-month LIBOR and pays a fixed rate of
8.32%. At June 30, 2003, the Company carried $2.8 million of such swaps with a
fair market value loss of $0.9 million. In addition, at June 30, 2004, the
Company carried interest rate swaps totaling $78.6 million with a market value
loss of $2.4 million that were categorized as fair value hedges for commercial
and commercial real estate loans. The Company receives 6-month LIBOR and pays
fixed rates from 3.56% to 7.99%. At June 30, 2003, the Company carried $126.1
million of such swaps with a market value loss of $12.6 million. At November 20, 2002, BancWest Corporation executed a $150 million
interest rate swap agreement with BNP Paribas to hedge the fair value of the
9.5% BancWest Capital I Quarterly Income Preferred Securities (the BWE Capital
Securities) issued by 6




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BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) BancWest Capital I. Following the adoption of FIN 46, BancWest Capital I
was deconsolidated, resulting in recognition of $150 million of subordinated
debt instead of the BWE Capital Securities. The terms of the subordinated debt
mirror those of the BWE Capital Securities. Concurrent with the
deconsolidation of BancWest Capital I, the Bank redesignated the interest rate
swap to hedge the subordinated debt. The derivative instrument is highly
effective and all changes in the fair value of the hedge were recorded in
current-period earnings together with the offsetting change in fair value of
the hedged item attributable to the risk being hedged. We pay 3-month LIBOR
plus 3.69% and receive fixed payments at 9.5%. The fair market value loss of
the swap was $0.5 million at June 30, 2004 while the fair market value gain was
$5.3 million at June 30, 2003. At June 30, 2004, the Company carried interest rate swaps and swaptions
totaling $8.6 million with a market value gain of $0.5 million that were
categorized as fair value hedges for repurchase agreements. The Company pays
3-month LIBOR and receives fixed rates ranging from 8.29% to 8.37%. At June
30, 2003, the Company carried $8.6 million of such swaps and swaptions with a
market value gain of $0.9 million. Cash Flow Hedges At June 30, 2004, the Company carried interest rate swaps of $600 million
with a fair market value gain of $28.2 million which are categorized as cash
flow hedges, to hedge LIBOR-based commercial loans. The hedges had a fair
market value gain of $64.6 million at June 30, 2003. The interest rate swaps
were entered into during 2001 and mature in 2006. We pay 3-month LIBOR and
receive fixed rates ranging from 5.64% to 5.87%. The net settlement on the $600
million swaps has increased commercial loan interest income by $12.2 million
for the six months ended June 30, 2004 and by $11.7 million for the six months
ended June 30, 2003. The Company estimates net settlement gains, recorded as
commercial loan interest income, of $19.1 million over the next twelve months
resulting from these hedges. At June 30, 2004, the Company carried interest rate swaps totaling $100
million with a fair market value gain of $8.4 million in order to reduce
exposure to interest rate increases associated with short-term fixed rate
liabilities. The swaps hedge forecasted transactions associated with
short-term fixed rate liabilities. The swaps mature as follows: $70 million in
2013, $20 million in 2018 and $10 million in 2023. We pay fixed rates ranging
from 3.65% to 4.58% and receive 3-month LIBOR. The effect on pretax income
from these swaps for the six months ended June 30, 2004 was a loss of $1.6
million. At June 30, 2003, the Company carried $50 million of such swaps with
a market value gain of $0.8 million. The Company estimates a net increase to
interest expense of $2.3 million over the next twelve months resulting from
these hedges. 7




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##### Table of Contents



BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) Free-standing Derivative Instruments Free-standing derivative instruments include derivative transactions
entered into for risk management purposes that do not otherwise qualify for
hedge accounting. Interest rate lock commitments issued on residential mortgage
loans intended to be held for resale are considered free-standing derivative
instruments. Such commitments are stratified by rates and terms and are valued
based on market quotes for similar loans. Adjustments, including discounting
the historical fallout rate, are then applied to estimate fair market value.
Trading activities primarily involve providing various free-standing interest
rate and foreign exchange derivative products to customers. Interest-rate
derivative instruments utilized by the Company in its trading operations
include interest-rate swaps, caps, floors and collars. The following table summarizes derivatives held by the Company as of June
30, 2004, December 31, 2003 and June 30, 2003: June 30, 2004
    
    December 31, 2003
    
    June 30, 2003Contractual Amounts Which
    
    
    
    
    
    Credit
    
    
    
    
    
    
    
    
    
    Credit
    
    
    
    
    
    
    
    
    
    CreditRepresent
    
    Notional
    
    Risk
    
    Net Fair
    
    Notional
    
    Risk
    
    Net Fair
    
    Notional
    
    Risk
    
    Net FairCredit Risk:
    
    Amount
    
    Amount
    
    Value
    
    Amount
    
    Amount
    
    Value
    
    Amount
    
    Amount
    
    Value(in thousands)Held for hedge purposes:Interest rate swaps
    
    $
    935,522
    
    
    $
    37,624
    
    
    $
    33,396
    
    
    $
    944,110
    
    
    $
    54,821
    
    
    $
    44,885
    
    
    $
    931,830
    
    
    $
    71,116
    
    
    $
    57,657Swaptions
    
    
    4,329
    
    
    
    156
    
    
    
    156
    
    
    
    4,329
    
    
    
    178
    
    
    
    178
    
    
    
    5,639
    
    
    
    439
    
    
    
    439Held for trading or free-standing:Interest rate swaps
    
    
    1,322,376
    
    
    
    19,390
    
    
    
    7,054
    
    
    
    1,375,018
    
    
    
    22,113
    
    
    
    5,224
    
    
    
    1,294,235
    
    
    
    33,263
    
    
    
    3,733Purchased interest rate options
    
    
    95,390
    
    
    
    101
    
    
    
    101
    
    
    
    22,318
    
    
    
    187
    
    
    
    187
    
    
    
    59,690
    
    
    
    388
    
    
    
    388Written interest rate options
    
    
    94,406
    
    
    
    
    
    
    
    (101
    )
    
    
    62,946
    
    
    
    
    
    
    
    (187
    )
    
    
    158,732
    
    
    
    250
    
    
    
    (138
    )Forward interest rate options
    
    
    22,000
    
    
    
    
    
    
    
    (262
    )
    
    
    217,930
    
    
    
    782
    
    
    
    732
    
    
    
    54,000
    
    
    
    
    
    
    
    (11
    )Commitments to purchase and sell foreign currencies
    
    
    534,392
    
    
    
    3,909
    
    
    
    73
    
    
    
    421,130
    
    
    
    8,592
    
    
    
    (48
    )
    
    
    444,942
    
    
    
    7,396
    
    
    
    123Purchased foreign exchange options
    
    
    26,550
    
    
    
    268
    
    
    
    268
    
    
    
    55,791
    
    
    
    597
    
    
    
    597
    
    
    
    45,194
    
    
    
    667
    
    
    
    667Written foreign exchange options
    
    
    26,550
    
    
    
    
    
    
    
    (268
    )
    
    
    55,791
    
    
    
    
    
    
    
    (597
    )
    
    
    45,194
    
    
    
    
    
    
    
    (667
    )
 8




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##### Table of Contents



BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued) 3. Operating Segments Our reportable segments are the operating segments that we use in our
internal reporting at Bank of the West and First Hawaiian Bank. Bank of the
Wests segments operate primarily in California, Oregon, Washington, Idaho, New
Mexico and Nevada. As discussed below, certain Bank of the West segments
conduct business nationwide. Although First Hawaiian Banks segments operate
primarily in Hawaii, it also has operations outside the state, such as
leveraged leases, international banking and branches in Guam and Saipan. The results of each segment are determined by our management accounting
process, which assigns balance sheet and income statement items to each
reporting segment. The net interest income of each segment includes the results
of the respective banks transfer pricing process, which assesses an internal
funds charge on all segment assets and a funds credit on all segment
liabilities. The internal charges and credits assigned to each asset and
liability are intended to match the maturity, repayment and interest rate
characteristics of that asset or liability. With the exception of goodwill,
assets are allocated to each business segment on the basis of assumed benefit
to their business operations. Goodwill is assigned on the basis of projected
future earnings of the segments. The process of management accounting is
dynamic and subjective. There is no comprehensive or authoritative guidance
which can be followed. Changes in management structure and/or the allocation
process may result in changes in allocations and transfers. In that case,
results for prior periods would be (and have been) reclassified for
comparability. Results for 2003 have been reclassified to reflect changes in
the transfer pricing methodology and noninterest income and expense allocation
methodology applied in 2004. Bank of the West Bank of the West manages its operations through three operating segments:
Regional Banking, Commercial Banking and Consumer Finance. Regional Banking Regional Banking seeks to serve a broad customer base by offering a wide
range of retail and commercial banking products. Deposit products offered by
this segment include checking accounts, savings deposits, market rate accounts,
individual retirement accounts and time deposits. Regional Banking utilizes
these deposits as its principal funding source. Bank of the Wests telephone
banking service, a network of automated teller machines and the online
eTimeBanker service provide retail customers with other means of accessing and
managing their accounts. Through its branch network, this business segment originates a variety of
consumer loans, including direct vehicle loans, lines of credit and second
mortgages. In addition, Regional Banking originates and holds a portfolio of
first mortgage loans on 1-4 family residences. Through its commercial banking
operations conducted from its branch network, Regional Banking offers a wide
range of commercial banking products intended to serve the needs of smaller
community-based businesses. These include originations of standardized loan
and deposit products for businesses with relatively simple banking and
financing needs. Regional Banking also provides a number of fee-based products
and private banking services including trust, insurance and investment
services. More complex and customized commercial banking services are offered
through the segments Business Banking Centers which serve clusters of branches
and provide lending, deposit and cash management services to companies
operating in the relevant market areas. Business Banking Centers support
commercial lending activities for middle market business customers in locations
throughout California, as well as Portland, Oregon, Reno and Las Vegas, Nevada
and Albuquerque, New Mexico. The Regional Banking Segment also includes a Pacific Rim Division which
offers multilingual services through a branch network in predominately Asian
American communities in California, with specialized domestic and international
products and services for both individuals and companies. Commercial Banking The Commercial Banking Segment is comprised of several divisions:
Commercial Banking Division, Agribusiness Banking Division, Real Estate
Industries Division and Specialty areas. The Commercial Banking Division
supports business clients with revenues between $25 million and $500 million.
The Commercial Banking Division focuses on relationship banking including
deposit generation as well as lending activities. The Agribusiness Banking
Division serves all agribusiness and rural commercial clients. The Real Estate
Industries Division provides construction financing to large regional and
national real estate developers for residential and commercial projects.
Interim and permanent financing is available on these commercial real estate
projects. 9




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##### Table of Contents



BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued) The Commercial Banking Segment also includes specialty areas: Church
Lending, Small Business Administration (SBA), Health Care, Leasing, Credit
Union, Government, Correspondent Banking, Cash Management Services and Capital
Markets. Equipment leasing is available through the Companys commercial
offices, branches, brokers across the nation and its subsidiary, Trinity
Capital. Trinity specializes in nationwide vendor leasing and servicing
programs for manufacturers in specific markets. The Commercial Banking Segment also provides trade finance and functions
as an agent in commercial, agribusiness and real estate syndication
transactions. Consumer Finance The Consumer Finance Segment targets the origination of auto loans and
leases in the western United States, and recreational vehicle and marine loans
nationwide. These loans and leases are originated through a network of auto
dealers and recreational vehicle and marine dealers serviced by sales
representatives located throughout the country. This segment also includes
Bank of the Wests wholly-owned subsidiary, Essex Credit Corporation, which
focuses on the origination of marine and recreational vehicle loans directly
with customers through office locations throughout the United States. In
February 2004, Essex began retaining certain types of loans in its own
portfolio. In previous years, Essex sold substantially all of its loans to
investors on a servicing released basis. First Hawaiian Bank First Hawaiian manages its operations through the following operating
segments: Retail Banking, Consumer Finance, Commercial Banking and Financial
Management. Retail Banking First Hawaiian Banks Retail Banking Segment operates through 56 banking
offices located throughout Hawaii. First Hawaiian Bank also operates three
branches in Guam and two branches in Saipan. The focus of First Hawaiian Banks retail/community banking strategy is
primarily in Hawaii, where it had a 40% market share of the domestic bank
deposits of individuals, corporations and partnerships in the state as of
December 31, 2003. Thanks to its significant market share in Hawaii, First
Hawaiian Bank already has product or service relationships with a majority of
the households in the state. Therefore, a key goal of its retail community
banking strategy is to build those relationships by cross-selling additional
products and services to existing individual and business customers. In pursuing the community banking markets in Hawaii, Guam and Saipan,
First Hawaiian Bank seeks to serve a broad customer base by furnishing a range
of retail and commercial banking products. Through its branch network, First
Hawaiian Bank generates first-mortgage loans on residences and a variety of
consumer loans, consumer lines of credit and second mortgages. To complement
its branch network and serve these customers, First Hawaiian Bank operates a
system of automated teller machines, a 24-hour phone center in Honolulu and a
full-service internet banking system. Through commercial banking operations
conducted from its branch network, First Hawaiian Bank offers a wide range of
banking products intended to serve the needs of smaller, community-based
businesses. First Hawaiian Bank also provides a number of fee-based products
and services such as annuities and mutual funds, insurance and securities
brokerage. The First Investment Center department of First Hawaiian Bank makes
available annuities, mutual funds and other securities through BancWest
Investment Services, Inc., a registered broker-dealer, member NASD/SIPC, that
is a subsidiary of BancWest Corporation. Consumer Finance Consumer Lending offers many types of loans to consumers, including lines
of credit (uncollateralized or collateralized) and various types of personal
and automobile loans. First Hawaiian Bank also provides indirect consumer
automobile financing on new and used autos by purchasing finance contracts from
dealers. First Hawaiian Banks Dealer Center is the largest commercial bank
automobile lender in the State of Hawaii. First Hawaiian Bank is the largest
issuer of MasterCard® and VISA® credit cards in Hawaii. Consumer Finance also makes residential real estate loans, including
home-equity loans, to enable borrowers to purchase, refinance, improve or
construct residential real property. The loans are collateralized by mortgage
liens on the related property, substantially all located in Hawaii. First
Hawaiian Bank also originates residential real estate loans for sale on the
secondary market. 10




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##### Table of Contents



BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued) Commercial Banking Commercial Lending is a major lender to small and medium-sized businesses
in Hawaii and Guam. Lending services include receivable and inventory
financing, term loans for equipment acquisition and facilities expansion and
trade financing letters of credit. To support the cash management needs of both
commercial banking customers and large private and public deposit relationships
maintained with the Company, First Hawaiian Bank operates a Cash Management
Department which provides a full range of innovative and relationship-focused
cash management services. Real Estate Lending-Commercial provides interim construction, residential
development and permanent financing for commercial real estate projects,
including retail facilities, warehouses and office buildings. The Bank also
does lease-to-fee conversion financing for condominium associations and
cooperatives. International Banking Services provides international banking products and
services through First Hawaiian Banks branch system, its Japan Business
Development Department in Honolulu, a Grand Cayman branch, three Guam branches,
two branches in Saipan and a representative office in Tokyo, Japan. First
Hawaiian Bank maintains a network of correspondent banking relationships
throughout the world. First Hawaiian Banks trade-related international
banking activities are concentrated in the Asia-Pacific area. Leasing provides leasing services for businesses from heavy equipment to
office computer and communication systems. Financial Management The Financial Management Segment offers a full range of trust and
investment management services, and also seeks to reinforce customer
relationships developed by or in conjunction with the Retail Banking Segment.
The Financial Management Segment provides asset management, advisory and
administrative services for estates, trusts and individuals. It also acts as
trustee and custodian of retirement and other employee benefit plans. At June
30, 2004, the Trust and Investments Division had approximately 3,971 accounts
with a market value of $8.8 billion. Of this total, $6.0 billion represented
assets in nonmanaged accounts and $2.8 billion were managed assets. Securities and Insurance Services, through a wholly-owned subsidiary of
First Hawaiian Bank, First Hawaiian Insurance, Inc., provides insurance
brokerage services for personal, business and estate insurance needs. First
Hawaiian Insurance offers insurance needs analysis for individuals, families
and businesses, as well as life, disability and long-term care insurance
products. The Private Banking Department within First Hawaiian Banks Financial
Management Segment provides a wide range of private banking service products to
high-net-worth individuals. 11




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##### Table of Contents



BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued) The tables below present information about the Companys operating segments as
of or for the periods indicated: Bank of the West
    
    First Hawaiian BankRegional
    
    Commercial
    
    Consumer
    
    
    
    
    
    Retail
    
    
    
    
    
    Commercial
    
    Financial
    
    
    
    
    
    Other
    
    Reconciling
    
    Consolidated(in millions)
    
    Banking
    
    Banking
    
    Finance
    
    Other(1)
    
    Banking
    
    Consumer
    
    Banking
    
    Management
    
    Other(2)
    
    BancWest(3)
    
    Items(4)
    
    TotalsThree Months Ended June 30, 2004:Net interest income
    
    $
    121.9
    
    
    $
    79.4
    
    
    $
    51.1
    
    
    $
    22.0
    
    
    $
    58.6
    
    
    $
    22.2
    
    
    $
    7.7
    
    
    $
    
    
    
    $
    (5.4
    )
    
    $
    (35.2
    )
    
    $
    
    
    
    $
    322.3Noninterest income
    
    
    44.7
    
    
    
    12.6
    
    
    
    6.5
    
    
    
    6.1
    
    
    
    14.5
    
    
    
    6.5
    
    
    
    8.5
    
    
    
    7.3
    
    
    
    3.5
    
    
    
    (0.2
    )
    
    
    
    
    
    
    110.0Noninterest expense
    
    
    108.2
    
    
    
    29.7
    
    
    
    20.6
    
    
    
    10.1
    
    
    
    44.7
    
    
    
    11.7
    
    
    
    5.4
    
    
    
    6.4
    
    
    
    (6.1
    )
    
    
    1.5
    
    
    
    
    
    
    
    232.2Provision for loan and lease losses
    
    
    1.7
    
    
    
    
    
    
    
    6.8
    
    
    
    
    
    
    
    1.1
    
    
    
    2.2
    
    
    
    0.1
    
    
    
    
    
    
    
    (0.1
    )
    
    
    0.1
    
    
    
    
    
    
    
    11.9Tax provision (benefit)
    
    
    22.3
    
    
    
    24.5
    
    
    
    11.9
    
    
    
    7.1
    
    
    
    10.9
    
    
    
    5.9
    
    
    
    4.0
    
    
    
    0.3
    
    
    
    1.7
    
    
    
    (15.2
    )
    
    
    
    
    
    
    73.4Net income (loss)
    
    $
    34.4
    
    
    $
    37.8
    
    
    $
    18.3
    
    
    $
    10.9
    
    
    $
    16.4
    
    
    $
    8.9
    
    
    $
    6.7
    
    
    $
    0.6
    
    
    $
    2.6
    
    
    $
    (21.8
    )
    
    $
    
    
    
    $
    114.8Segment assets at June 30
    
    $
    8,014
    
    
    $
    9,115
    
    
    $
    8,536
    
    
    $
    5,148
    
    
    $
    3,770
    
    
    $
    1,573
    
    
    $
    1,145
    
    
    $
    27
    
    
    $
    3,500
    
    
    $
    7,155
    
    
    $
    (7,719
    )
    
    $
    40,264Segment goodwill at June 30
    
    
    1,214
    
    
    
    708
    
    
    
    308
    
    
    
    
    
    
    
    650
    
    
    
    216
    
    
    
    118
    
    
    
    11
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    3,230Average assets
    
    
    7,964
    
    
    
    8,940
    
    
    
    8,429
    
    
    
    4,805
    
    
    
    3,693
    
    
    
    1,555
    
    
    
    1,130
    
    
    
    25
    
    
    
    3,382
    
    
    
    7,168
    
    
    
    (7,748
    )
    
    
    39,343Average loans and leases
    
    
    5,946
    
    
    
    7,606
    
    
    
    8,022
    
    
    
    
    
    
    
    2,693
    
    
    
    1,371
    
    
    
    957
    
    
    
    9
    
    
    
    137
    
    
    
    41
    
    
    
    (35
    )
    
    
    26,747Average deposits
    
    
    14,646
    
    
    
    3,468
    
    
    
    11
    
    
    
    1,827
    
    
    
    7,009
    
    
    
    8
    
    
    
    21
    
    
    
    26
    
    
    
    192
    
    
    
    
    
    
    
    (91
    )
    
    
    27,117Three Months Ended June 30, 2003:Net interest income
    
    $
    120.8
    
    
    $
    75.8
    
    
    $
    50.7
    
    
    $
    22.1
    
    
    $
    56.6
    
    
    $
    19.9
    
    
    $
    8.5
    
    
    $
    
    
    
    $
    (0.1
    )
    
    $
    (34.4
    )
    
    $
    
    
    
    $
    319.9Noninterest income
    
    
    41.7
    
    
    
    13.2
    
    
    
    3.5
    
    
    
    5.9
    
    
    
    13.6
    
    
    
    9.9
    
    
    
    5.0
    
    
    
    7.3
    
    
    
    2.0
    
    
    
    
    
    
    
    
    
    
    
    102.1Noninterest expense
    
    
    108.1
    
    
    
    30.3
    
    
    
    15.3
    
    
    
    7.5
    
    
    
    42.4
    
    
    
    11.5
    
    
    
    2.3
    
    
    
    6.9
    
    
    
    (0.5
    )
    
    
    6.0
    
    
    
    
    
    
    
    229.8Provision for loan and lease losses
    
    
    4.4
    
    
    
    (4.1
    )
    
    
    16.7
    
    
    
    
    
    
    
    1.9
    
    
    
    2.4
    
    
    
    0.1
    
    
    
    
    
    
    
    (0.5
    )
    
    
    (2.0
    )
    
    
    
    
    
    
    18.9Tax provision (benefit)
    
    
    19.2
    
    
    
    24.2
    
    
    
    8.5
    
    
    
    8.0
    
    
    
    9.8
    
    
    
    6.0
    
    
    
    3.6
    
    
    
    0.2
    
    
    
    1.6
    
    
    
    (15.5
    )
    
    
    
    
    
    
    65.6Net income (loss)
    
    $
    30.8
    
    
    $
    38.6
    
    
    $
    13.7
    
    
    $
    12.5
    
    
    $
    16.1
    
    
    $
    9.9
    
    
    $
    7.5
    
    
    $
    0.2
    
    
    $
    1.3
    
    
    $
    (22.9
    )
    
    $
    
    
    
    $
    107.7Segment assets at June 30
    
    $
    7,608
    
    
    $
    8,434
    
    
    $
    7,550
    
    
    $
    4,221
    
    
    $
    3,311
    
    
    $
    1,458
    
    
    $
    1,164
    
    
    $
    15
    
    
    $
    3,420
    
    
    $
    6,724
    
    
    $
    (7,457
    )
    
    $
    36,448Segment goodwill at June 30
    
    
    1,214
    
    
    
    707
    
    
    
    307
    
    
    
    
    
    
    
    650
    
    
    
    216
    
    
    
    118
    
    
    
    10
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    3,227Average assets
    
    
    7,334
    
    
    
    8,273
    
    
    
    7,415
    
    
    
    3,560
    
    
    
    3,289
    
    
    
    1,440
    
    
    
    1,156
    
    
    
    14
    
    
    
    3,296
    
    
    
    6,693
    
    
    
    (7,360
    )
    
    
    35,110Average loans and leases
    
    
    5,336
    
    
    
    6,944
    
    
    
    7,091
    
    
    
    
    
    
    
    2,452
    
    
    
    1,248
    
    
    
    1,013
    
    
    
    1
    
    
    
    297
    
    
    
    59
    
    
    
    (42
    )
    
    
    24,399Average deposits
    
    
    13,786
    
    
    
    3,073
    
    
    
    14
    
    
    
    858
    
    
    
    6,464
    
    
    
    8
    
    
    
    17
    
    
    
    49
    
    
    
    151
    
    
    
    
    
    
    
    (81
    )
    
    
    24,339
 Bank of the West
    
    First Hawaiian BankRegional
    
    Commercial
    
    Consumer
    
    
    
    
    
    Retail
    
    
    
    
    
    Commercial
    
    Financial
    
    
    
    
    
    Other
    
    Reconciling
    
    Consolidated(in millions)
    
    Banking
    
    Banking
    
    Finance
    
    Other(1)
    
    Banking
    
    Consumer
    
    Banking
    
    Management
    
    Other(2)
    
    BancWest(3)
    
    Items(4)
    
    TotalsSix Months Ended June 30, 2004:Net interest income
    
    $
    245.2
    
    
    $
    156.9
    
    
    $
    104.2
    
    
    $
    42.8
    
    
    $
    115.2
    
    
    $
    43.2
    
    
    $
    16.3
    
    
    $
    (0.2
    )
    
    $
    (10.1
    )
    
    $
    (70.2
    )
    
    $
    
    
    
    $
    643.3Noninterest income
    
    
    87.7
    
    
    
    26.6
    
    
    
    9.2
    
    
    
    11.4
    
    
    
    29.2
    
    
    
    14.4
    
    
    
    10.3
    
    
    
    15.0
    
    
    
    7.5
    
    
    
    0.2
    
    
    
    
    
    
    
    211.5Noninterest expense
    
    
    215.5
    
    
    
    58.9
    
    
    
    37.5
    
    
    
    16.9
    
    
    
    86.6
    
    
    
    23.1
    
    
    
    7.4
    
    
    
    12.8
    
    
    
    (11.1
    )
    
    
    3.5
    
    
    
    
    
    
    
    451.1Provision for loan and lease losses
    
    
    2.2
    
    
    
    0.4
    
    
    
    21.8
    
    
    
    
    
    
    
    2.4
    
    
    
    4.2
    
    
    
    0.2
    
    
    
    
    
    
    
    (0.5
    )
    
    
    0.1
    
    
    
    
    
    
    
    30.8Tax provision (benefit)
    
    
    45.4
    
    
    
    48.9
    
    
    
    21.3
    
    
    
    14.7
    
    
    
    22.1
    
    
    
    12.1
    
    
    
    6.3
    
    
    
    0.8
    
    
    
    3.6
    
    
    
    (30.1
    )
    
    
    
    
    
    
    145.1Net income (loss)
    
    $
    69.8
    
    
    $
    75.3
    
    
    $
    32.8
    
    
    $
    22.6
    
    
    $
    33.3
    
    
    $
    18.2
    
    
    $
    12.7
    
    
    $
    1.2
    
    
    $
    5.4
    
    
    $
    (43.5
    )
    
    $
    
    
    
    $
    227.8Average assets
    
    
    7,893
    
    
    
    8,794
    
    
    
    8,270
    
    
    
    4,709
    
    
    
    3,637
    
    
    
    1,513
    
    
    
    1,122
    
    
    
    24
    
    
    
    3,400
    
    
    
    7,093
    
    
    
    (7,615
    )
    
    
    38,840Average loans and leases
    
    
    5,870
    
    
    
    7,467
    
    
    
    7,891
    
    
    
    
    
    
    
    2,638
    
    
    
    1,325
    
    
    
    965
    
    
    
    9
    
    
    
    170
    
    
    
    45
    
    
    
    (36
    )
    
    
    26,344Average deposits
    
    
    14,518
    
    
    
    3,424
    
    
    
    8
    
    
    
    1,725
    
    
    
    6,924
    
    
    
    8
    
    
    
    20
    
    
    
    28
    
    
    
    195
    
    
    
    
    
    
    
    (75
    )
    
    
    26,775Six Months Ended June 30, 2003:Net interest income
    
    $
    242.7
    
    
    $
    156.5
    
    
    $
    100.4
    
    
    $
    34.7
    
    
    $
    114.1
    
    
    $
    38.7
    
    
    $
    16.8
    
    
    $
    
    
    
    $
    (1.3
    )
    
    $
    (68.7
    )
    
    $
    
    
    
    $
    633.9Noninterest income
    
    
    80.3
    
    
    
    24.5
    
    
    
    6.2
    
    
    
    11.5
    
    
    
    28.1
    
    
    
    20.0
    
    
    
    6.6
    
    
    
    14.8
    
    
    
    6.2
    
    
    
    
    
    
    
    
    
    
    
    198.2Noninterest expense
    
    
    213.3
    
    
    
    60.3
    
    
    
    30.5
    
    
    
    15.5
    
    
    
    83.2
    
    
    
    22.8
    
    
    
    4.6
    
    
    
    13.2
    
    
    
    (0.2
    )
    
    
    7.4
    
    
    
    
    
    
    
    450.6Provision for loan and lease losses
    
    
    7.9
    
    
    
    (3.8
    )
    
    
    29.6
    
    
    
    
    
    
    
    3.5
    
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    41.6Tax provision (benefit)
    
    
    39.8
    
    
    
    48.7
    
    
    
    18.2
    
    
    
    12.0
    
    
    
    21.0
    
    
    
    11.8
    
    
    
    5.9
    
    
    
    0.6
    
    
    
    3.1
    
    
    
    (30.9
    )
    
    
    
    
    
    
    130.2Net income (loss)
    
    $
    62.0
    
    
    $
    75.8
    
    
    $
    28.3
    
    
    $
    18.7
    
    
    $
    34.5
    
    
    $
    19.5
    
    
    $
    12.9
    
    
    $
    1.0
    
    
    $
    2.2
    
    
    $
    (45.2
    )
    
    $
    
    
    
    $
    209.7Average assets
    
    
    7,329
    
    
    
    8,262
    
    
    
    7,257
    
    
    
    3,342
    
    
    
    3,277
    
    
    
    1,434
    
    
    
    1,169
    
    
    
    14
    
    
    
    3,282
    
    
    
    6,623
    
    
    
    (7,237
    )
    
    
    34,752Average loans and leases
    
    
    5,315
    
    
    
    6,934
    
    
    
    6,923
    
    
    
    
    
    
    
    2,436
    
    
    
    1,238
    
    
    
    1,028
    
    
    
    1
    
    
    
    325
    
    
    
    60
    
    
    
    (43
    )
    
    
    24,217Average deposits
    
    
    13,660
    
    
    
    2,996
    
    
    
    14
    
    
    
    964
    
    
    
    6,428
    
    
    
    9
    
    
    
    19
    
    
    
    50
    
    
    
    153
    
    
    
    
    
    
    
    (63
    )
    
    
    24,230
   (1)
    
    The material net interest income and noninterest income items in the
Other column are related to Treasury activities of $26.1 million and $50.7
million and unallocated other income of $2.0 million and $3.5 million for
the three and six months ended June 30, 2004, respectively. The material
net interest income and noninterest income items in the Other column
resulted substantially from Treasury activities of $22.9 million and $36.2
million and unallocated other income of $5.1 million and $10.0 million for
the three and six months ended June 30, 2003, respectively. 12




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##### Table of Contents



BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)   The material noninterest expense items in the Other column are substantially
derived from Treasury activities of $4.3 million and $8.5 million and
unallocated administrative items of $5.8 million and $8.4 million for the
three and six months ended June 30, 2004, respectively. The material
noninterest expense items in the Other column primarily resulted from Treasury
activities and unallocated administrative items of $7.5 million and $15.5
million for the three and six months ended June 30, 2003, respectively.The material average asset items in the Other column are related to
unallocated Treasury securities for the periods presented.The material average deposit items in the Other column are related to
unallocated Treasury balances for the periods presented.(2)
    
    Other is composed of Administrative and Syndicated and Media Lending.
Administrative represents administrative support areas including
Information Management and Operations and Finance and Investment.The material items in the Other column related to
net interest income, noninterest income and
noninterest expense for the three and six months ended June 30, 2004 and 2003 include unallocated other and
Treasury activities.The material items in the Other column related to average assets are
unallocated Treasury securities for the periods presented. The material items
in the Other column related to average deposits are unallocated balances for
the periods presented.(3)
    
    The Other BancWest category consists primarily of BancWest Corporation
(Parent Company), FHL Lease Holding Company, Inc. and BancWest Investment
Services (BWIS).(4)
    
    The reconciling items in the above table are principally intercompany
eliminations. 13




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BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued) 4. Operating Lease Assets Prior to February 2004, leases of vehicles to customers were treated as
finance leases, as they qualified for such treatment under Statement of
Financial Accounting Standards (SFAS) No. 13, Accounting for Leases. Beginning
in February 2004, our automobile leases are treated as operating leases, as we
no longer obtain residual insurance on an individual lease basis. Operating lease rental income for leased assets, primarily vehicles, is
recognized on a straight-line basis. Related depreciation expense is recorded
on a straight-line basis over the life of the lease taking into account the
estimated residual value of the leased asset. On a periodic basis, leased
assets are reviewed for impairment. Impairment loss is recognized if the
carrying amount of leased assets exceeds fair value and is not recoverable.
The carrying amount of leased assets is not recoverable if it exceeds the sum
of the undiscounted cash flows expected to result from the lease payments and
the estimated residual value upon the eventual disposition of the equipment.
Vehicle lease receivables are written off when 120 days past due. The following table shows future minimum lease receivables under leases
with terms in excess of one year as of June 30, 2004: Rental Income(in thousands)2004
    
    $
    13,1432005
    
    
    26,9762006
    
    
    26,9752007
    
    
    22,7782008
    
    
    23,9882009 and thereafter
    
    
    46,534Total minimum payments
    
    $
    160,394
 5. Goodwill and Intangible Assets We performed the impairment testing of goodwill required under SFAS No.
142 in the fourth quarter of 2003. No impairment of goodwill was found. The
impairment analysis was performed using a discounted cash flows model. The
table below provides the breakdown of goodwill by reportable segment and the
change during the year. Bank of the West
    
    First Hawaiian BankRegional
    
    Commercial
    
    Consumer
    
    Retail
    
    Consumer
    
    Commercial
    
    Financial
    
    
    
    
    
    Consolidated(in millions)
    
    Banking
    
    Banking
    
    Finance
    
    Banking
    
    Finance
    
    Banking
    
    Management
    
    BancWest
    
    TotalsBalance as of January 1, 2004:
    
    $
    1,214
    
    
    $
    706
    
    
    $
    308
    
    
    $
    650
    
    
    $
    216
    
    
    $
    118
    
    
    $
    10
    
    
    $
    5
    
    
    $
    3,227Purchase accounting adjustment:Trinity Capital
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2CIC/HCM
Asset Management, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Balance as of June 30, 2004:
    
    $
    1,214
    
    
    $
    708
    
    
    $
    308
    
    
    $
    650
    
    
    $
    216
    
    
    $
    118
    
    
    $
    11
    
    
    $
    5
    
    
    $
    3,230
 Amortization of finite-lived intangible assets was $5.8 million for each
of the three-month periods ended June 30, 2004 and 2003 and $11.5 million for
each of the six-month periods ending June 30, 2004 and 2003. The estimated
annual amortization expense for finite-lived intangible assets, primarily core
deposit intangibles arising from previous mergers, is approximately $23 million
(pretax) for each of the years from 2004 to 2008. Our finite-lived intangible assets substantially consist of core deposit
intangible assets. The gross carrying amount, accumulated amortization and net
book value of these intangible assets are detailed below. June 30, 2004
    
    December 31, 2003
    
    June 30, 2003(in thousands)Gross carrying amount
    
    $
    230,538
    
    
    $
    230,538
    
    
    $
    230,538Accumulated amortization
    
    
    54,708
    
    
    
    43,181
    
    
    
    31,654Net book value
    
    $
    175,830
    
    
    $
    187,357
    
    
    $
    198,884
 14




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BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued) 6. Financial
Interpretation No. 46 (FIN 46): Consolidation of Variable
Interest Entities (VIE) On June 23, 1997 and October 20, 2000, the Company formed two trusts,
First Hawaiian Capital I (FH Trust) and BancWest Capital I (BWE Trust) (the
Trusts), respectively. The Trusts issued preferred and common capital
securities. The purpose of these entities is to allow for the issuance of
preferred capital securities that qualify for inclusion in Tier 1 regulatory
capital. Historically, these trusts have been consolidated and the related
trust preferred securities have been treated as Tier 1 capital under Federal
Reserve rules and regulations. The Company began deconsolidating the Trusts as
a result of the adoption of FIN 46 in the preparation of its financial
statements on October 1, 2003. BWE Trust is a Delaware business trust, which was formed in 2000 and
exchanged $150 million of its BWE Capital Securities as well as all outstanding
common securities of BWE Trust, for 9.5% junior subordinated deferrable
interest debentures of the Corporation. The Corporation sold the $150 million
of BWE Capital Securities to the public. At June 30, 2004, the BWE Trusts
total assets were $155.9 million, comprised primarily of the Corporations
junior subordinated debentures. The BWE Capital Securities and the debentures
will mature on December 1, 2030, but on or after December 1, 2005 are subject
to redemption in whole or in part at par plus accrued interest. They are
solely, fully and unconditionally guaranteed by the Parent, representing the
Companys maximum liability for the securities. All of the common securities
of the Trust are owned by the Parent. FH Trust is a Delaware business trust which was formed in 1997, issued
$100 million of its Capital Securities (the FH Capital Securities) and used
the proceeds to purchase junior subordinated deferrable interest debentures of
the Corporation. The FH Capital Securities accrue and pay interest semiannually
at an annual interest rate of 8.343%. The FH Capital Securities are mandatorily
redeemable upon maturity date of July 1, 2027. However, they are subject to
redemption on or after July 1, 2007, in whole or in part (subject to a
prepayment penalty) as provided for in the governing indenture. At June 30,
2004, the FH Trusts total assets were $107.4 million, comprised primarily of
the Corporations junior subordinated debentures. The debentures and the
associated interest expense make up the Companys maximum exposure to losses
for this trust. They are solely, fully and unconditionally guaranteed by the
Parent, representing the Companys maximum liability for the securities. All
of the common securities of the Trust are owned by the Parent. As
of October 2003, effective with the adoption of FIN 46 as
it relates to the Trusts, BancWest no longer consolidates the Trusts. This
deconsolidation had no material impact on the total assets or liabilities of
the Corporation. The Federal Reserve Board issued temporary guidance which
indicated that the preferred capital securities can still be included as part
of Tier 1 Capital. The Federal Reserve Board is reviewing the regulatory
implications of any accounting treatment changes and will provide further
guidance if necessary or warranted. The Company has identified investments that meet the definition of a VIE
under FIN 46 but do not meet the requirements for consolidation. The Company
owns several limited partnership interests in low-income housing developments
in conjunction with the Community Reinvestment Act. Limited partners do not
participate in the control of the partnerships businesses. The general
partner exercises the day-to-day control and management of the projects. The
general partners have exclusive control over the partnerships businesses and
have all of the rights, powers, and authority generally conferred by law or
necessary, advisable or consistent with accomplishing the partnerships
businesses. FIN 46 indicates that if an entity (e.g., limited partner) cannot
sell, transfer, or encumber its interests in the VIE without the prior approval
of an enterprise (e.g., general partner), the limited partner is deemed to be a
de facto agent for the general partner. BancWest is considered to be a de
facto agent for the general partner where BancWest has a limited partnership
interest over 50%. BancWest is not the primary beneficiary for these
partnerships or for those where its interest is less than 50%. The business
purpose of these entities is to provide affordable housing within the Companys
service area in return for tax credits and tax loss deductions. Our
subscription amount for these investments as of June 30, 2004 is approximately
$94.8 million with approximately $31.8 million as the residual contribution
outstanding. We are not obligated to fund deficiencies of the limited
partnerships and our maximum exposure to losses is limited to our subscription
amount. Bargain purchase options are available for the general partners to
purchase the Companys portion of interests in the limited partnerships. These
commitments were entered into from 1991 through 2004. 7. Pension and Other Postretirement Benefit Plans The Company sponsors two noncontributory defined benefit pension plans, a
cash balance plan and an unfunded excess benefit pension plan. The postretirement benefit plans were amended for eligible employees who
retire after June 30, 2004. The amendment places a cap on the funding of the
plan, however, it does not change the benefit options available to the
retirees. 15




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##### Table of Contents



BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued) The following table sets forth the components of the net periodic benefit
cost (credit) for the three months ending June 30, 2004 and 2003: Pension Benefits
    
    Other Benefits2004
    
    2003
    
    2004
    
    2003(in thousands)Service cost
    
    $
    2,260
    
    
    $
    3,484
    
    
    $
    381
    
    
    $
    596Interest cost
    
    
    6,569
    
    
    
    9,141
    
    
    
    655
    
    
    
    722Expected return on plan assets
    
    
    (8,159
    )
    
    
    (10,972
    )
    
    
    
    
    
    
    Amortization of transition (asset)/obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    (218
    )
    
    
    Recognized net actuarial (gain) loss
    
    
    1,515
    
    
    
    4,016
    
    
    
    124
    
    
    
    (3
    )Total benefit cost (credit)
    
    $
    2,185
    
    
    $
    5,669
    
    
    $
    942
    
    
    $
    1,315
 The following table sets forth the components of the net periodic benefit
cost (credit) for the six months ending June 30, 2004 and 2003: Pension Benefits
    
    Other Benefits2004
    
    2003
    
    2004
    
    2003(in thousands)Service cost
    
    $
    4,520
    
    
    $
    6,982
    
    
    $
    933
    
    
    $
    1,191Interest cost
    
    
    13,137
    
    
    
    18,307
    
    
    
    1,309
    
    
    
    1,442Expected return on plan assets
    
    
    (16,318
    )
    
    
    (21,895
    )
    
    
    
    
    
    
    Amortization of transition (asset)/obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    (218
    )
    
    
    Recognized net actuarial (gain) loss
    
    
    3,030
    
    
    
    8,023
    
    
    
    241
    
    
    
    (6
    )Total benefit cost (credit)
    
    $
    4,369
    
    
    $
    11,417
    
    
    $
    2,265
    
    
    $
    2,627
 The following table sets forth the components of the net periodic benefit
cost (credit) for our funded plans for: Funded Pension BenefitsThree Months
endedJune 30,
    
    Six Months
endedJune 30,2004
    
    2003
    
    2004
    
    2003(in thousands)Service cost
    
    $
    1,761
    
    
    $
    3,098
    
    
    $
    3,521
    
    
    $
    6,183Interest cost
    
    
    5,530
    
    
    
    8,259
    
    
    
    11,061
    
    
    
    16,481Expected return on plan assets
    
    
    (8,159
    )
    
    
    (10,972
    )
    
    
    (16,318
    )
    
    
    (21,895
    )Amortization of transition (asset)/obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognized net actuarial (gain) loss
    
    
    1,274
    
    
    
    3,887
    
    
    
    2,549
    
    
    
    7,755Net periodic benefit cost (credit)
    
    $
    406
    
    
    $
    4,272
    
    
    $
    813
    
    
    $
    8,524
 Contributions The Company expects to contribute $2.5 million to its defined benefit
pension plans and $3.0 million to its other postretirement benefit plans in
2004. 16




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##### Table of Contents



BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations 
 FORWARD-LOOKING STATEMENTS Certain matters contained in this report are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Our
forward-looking statements (such as those concerning our plans, expectations,
estimates, strategies, projections and goals) involve risks and uncertainties
that could cause actual results to differ materially from those discussed in
this report. Readers should carefully consider those risks and uncertainties in
reading this report. Factors that could cause or contribute to such differences
include, but are not limited to:  (1)
    
    global, national and local economic and market conditions, specifically
with respect to changes in the United States economy and geopolitical
uncertainty;(2)
    
    the level and volatility of interest rates and currency values;(3)
    
    government fiscal and monetary policies;(4)
    
    credit risks inherent in the lending process;(5)
    
    loan and deposit demand in the geographic regions where we conduct
business;(6)
    
    the impact of intense competition in the rapidly evolving banking and
financial services business;(7)
    
    extensive federal and state regulation of our business, including the
effects of current and pending legislation and regulations;(8)
    
    whether expected revenue enhancements and cost savings are realized
within expected time frames;(9)
    
    matters relating to the integration of our business with that of past and
future merger partners, including the impact of combining these businesses
on revenues, expenses, deposit attrition, customer retention and financial
performance;(10)
    
    our reliance on third parties to provide certain critical services,
including data processing;(11)
    
    the proposal or adoption of changes in accounting standards by the
Financial Accounting Standards Board (FASB), the Securities and Exchange
Commission (SEC) or other standard setting bodies;(12)
    
    technological changes;(13)
    
    other risks and uncertainties discussed in this document or detailed from
time to time in other SEC filings that we make; and(14)
    
    managements ability to manage risks that result from these and other
factors. Our forward-looking statements are based on managements current views
about future events. Those statements speak only as of the date on which they
are made. We do not intend to update forward-looking statements, and, except as
required by law, we disclaim any obligation or undertaking to update or revise
any such statements to reflect any change in our expectations or any change in
events, conditions, circumstances or assumptions on which forward-looking
statements are based. The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
Form 10-Q. 17




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) OVERVIEW BancWest Corporation (www.bancwestcorp.com) is a financial holding company
with assets of $40.3 billion. It is a wholly-owned subsidiary of Paris-based
BNP Paribas. The Company is headquartered in Honolulu, Hawaii, with an
administrative headquarters in San Francisco, California. Its principal
subsidiaries are Bank of the West (296 branches in California, Oregon, New
Mexico, Nevada, Washington and Idaho) and First Hawaiian Bank (61 branches in
Hawaii, Guam and Saipan). In this report, BancWest Corporation and
Subsidiaries is referred to as the Company, we or our. BancWest
Corporation alone is referred to as the Parent. Acquisitions Community First Bankshares Acquisition On March 16, 2004, BancWest announced that it signed an agreement to
acquire Community First Bankshares, Inc. (Community First), a holding company
that operates Community First National Bank (CFB). The transaction received
approval from Community Firsts shareholders on June 30, 2004. It is
anticipated that the purchase transaction will close in the third quarter of
2004, subject to regulatory approval. Subsequently, CFB will be merged with
and into Bank of the West and its branches will be integrated into Bank of the
Wests branch network system. The acquisition of Community First will add 10
new states to Bank of the Wests footprint, as well as to our market share in
California and New Mexico. CFB operates 155 branches in 12 states in the
Southwest, Rocky Mountains, Great Plains and east to Minnesota, Iowa and
Wisconsin. CFBs retail operations will complement the Banks
existing network in California, Nevada, New Mexico and the Pacific Northwest.
At June 30, 2004, CFB had total assets of $5.6 billion,
total deposits of $4.4 billion and loans of $3.4 billion. Following the acquisition, results of
operations of Community First will be included in our Consolidated Financial
Statements. The purchase price of approximately $1.2 billion will be paid in
cash and accounted for as a purchase. In connection with the acquisition, management is in the process of
assessing and formulating restructuring plans. These restructuring plans will
target areas where there is a significant amount of overlap between the two
companies. This includes consolidating administrative and support services
including sales and marketing and to focus the Companys resources on
activities that will promote growth in the business in the near future. We
will be consolidating excess facilities and evaluating areas where
we will be able to take advantage of existing facilities. Conversion and
restructuring expenses incurred to date totaling $2.7 million have been
included in noninterest expense for the six months ended June 30, 2004. As
management is still in the process of developing the plans, estimates of
associated exit costs and other restructuring costs yet to be
incurred have not
been determined at this time. USDB Bancorp Acquisition On April 27, 2004 the Company announced that it signed an agreement to
acquire USDB Bancorp, parent company of Union Safe Deposit Bank, in a cash
transaction valued at $245 million. USDB Bancorp is a holding company
headquartered in Stockton, California, and operates 19 Union Safe Deposit Bank
branches in San Joaquin and Stanislaus Counties in the Central Valley of
California. As of June 30, 2004, USDB Bancorp had total assets of $1.1 billion,
deposits of $850.7 million and net loans of $654.8 million. During the first
half of 2004, the company reported net income of $5.7 million. Union Safe
Deposit Bank has about 398 full time equivalent employees. The merger requires
approval from federal and state banking regulators. Upon approval, the
transaction will close during the third quarter of 2004, with the conversion
and merger of Union Safe Deposit Bank into Bank of the West projected for the
fourth quarter. Expanding Bank of the Wests presence in California has been
one of the Companys strategic goals. The acquisition will give us the
opportunity to service additional parts of the Central Valley. Initiatives The Company has continued to implement a series of initiatives that are
designed to improve customer service and expand our physical footprint through
branch expansion and mergers and acquisitions. The focus of the Company is to
promote long-lasting customer service relationships through upgrading
technology and implementing new training vehicles. The Company strives for a
high touch personalized marketing position, promoting brand recognition
through logos and community outreach. The Company is expanding its line of
financial services to its customers through internal initiatives as well as
mergers and acquisitions. This includes insurance services that it will attain
through its acquisition of Community First Bankshares. Bank of the Wests Commercial Banking Segment is planning on increasing
its product offering for the Commercial Banking Division, the Agribusiness
Banking Division and the Real Estate Industries Division. The Commercial
Banking Segment has created 18




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) two new departments, National Middle Market Leasing and the Corporate
Finance Department. The National Middle Market Leasing Department will
originate lease transactions nationwide, targeting middle market companies with
sales of $25 million-$500 million. The Corporate Finance Department offers commercial
loans and extensions of credit on a secured basis only. Secured loan products
offered will include asset-based lending, loan syndications and cash
flow/business value lending. Key among the elements of the Companys profitability has been the
interest rate environment, from both a deposit and loan pricing standpoint. As
an industry, banks and other financial intermediaries have seen net interest
margins decline over the past year principally as a result of the absolute
level and shape of the yield curve. We manage the interest rate and market
risks inherent in our asset and liability balances, while ensuring ample
liquidity and diverse funding. Financial Overview Income Statement Analysis Second quarter 2004 as compared with second quarter 2003 The Company reported net income of $114.8 million, compared with $107.7
million, an increase of 6.6%. Net interest income was $322.3 million, up 0.8%
compared with $319.9 million. This increase was primarily due to growth in
average earning assets, partially offset by a lower net interest margin for the
quarter. Average loans and leases increased by $2.3 billion; average
investment securities increased by $1.6 billion. The Company increased its
consumer lending and purchased residential mortgage loans and securities while
commercial borrowing was relatively slow. The net interest margin decreased 49
basis points (1% equals 100 basis points) from 4.37% last year to 3.88% as a
result of the continued low interest rate environment. Noninterest income was
$110.0 million, an increase of 7.7% compared with $102.1 million in the second
quarter of 2003. The increase was partly due to the requirement of accounting
for new automobile leases as operating leases rather than direct finance
leases. Another significant factor in the increase in noninterest income was
related to the sales of the net investment in certain equipment leases. Noninterest expense was $232.2 million
compared with $229.9 million in the second quarter of 2003, an increase of
1.0%. The increase was primarily the result of vehicle depreciation costs
incurred from the operating method of accounting for leases, increased
merger-related contract services and increased costs of employee long-term
incentive and workers compensation benefits, partially offset by cost savings
from lower pension and postretirement expenses. Six-month period 2004 as compared with six-month period 2003 The Company reported net income of $227.8 million, compared with $209.7
million, an increase of 8.6%. Net interest income was $643.3 million, up 1.5%
compared with $633.9 million. This increase was primarily due to growth in
average earning assets, partially offset by a lower net interest margin for the
period. Average loans and leases increased by $2.1 billion; average investment
securities increased by $1.7 billion. The Company increased its consumer
lending and purchased residential mortgage loans and securities while commercial
borrowing was relatively slow. The net interest margin decreased 49 basis
points from 4.42% last year to 3.93% as a result of the continued low interest
rate environment. Noninterest income was $211.5 million, an increase of 6.7%
compared with $198.2 million. The increase was primarily due to increased
service charges on deposits and other service charges and fees, as well as
accounting for new automobile leases as operating leases rather than direct
finance leases. The Companys strategy to increase noninterest income included
growth in average deposit balances, repricing efforts in account analysis as
well as growth in investment product sales and merchant services. The Company
also focused on niche markets where the Company would have a competitive
advantage in growing its vehicle and equipment leasing, SBA, church and
healthcare lending portfolios. Noninterest expense was $451.1 million compared
with $450.6 million. The slight increase was primarily the result of vehicle
depreciation costs incurred from the operating method of accounting
for new leases,
increased merger-related contract services and increased costs of employee
healthcare benefits, partially offset by cost savings from staff reductions and
lower pension and postretirement benefit expenses. 19




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##### Table of Contents



BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Balance Sheet Analysis The Company had total assets of $40.3 billion at June 30, 2004, an
increase of 5.0% from December 31, 2003 and 10.5% from June 30, 2003.
Investment securities totaled $5.8 billion, an increase of 0.8% from December
31, 2003 and 16.1% from the same period in 2003. Loans and leases totaled
$27.2 billion, up 5.7% from December 31, 2003 and 8.7% from a year ago.
Deposits were $28.0 billion, up 6.0% from December 31, 2003 and 11.7% from a
year ago. The Companys nonperforming assets were 0.52% of loans, leases and
foreclosed properties at June 30, 2004, an improvement from 0.59% at December
31, 2003 and 0.75% at June 30, 2003. The provision for loan and lease losses
was $11.9 million for the second quarter of 2004, compared with $18.9 million
for the same period in 2003. The allowance for loan and lease losses was 1.46%
of total loans and leases at June 30, 2004, compared with 1.52% of total loans
and leases at December 31, 2003 and 1.57% at June 30, 2003. 
 CRITICAL ACCOUNTING ESTIMATES Our significant accounting policies are fundamental to understanding our
financial position and results of operations and are discussed in detail in
Note 1 (Summary of Significant Accounting Policies) to the Consolidated
Financial Statements in our 2003 Annual Report on Form 10-K. Various elements
of our accounting policies, by their nature, are inherently subject to
estimation techniques, valuation assumptions and other subjective assessments.
We have identified three accounting estimates that we believe are critical due
to the levels of subjectivity and judgment necessary and because it is likely
that materially different results would be reported if different judgments,
assumptions and estimates were used. These estimates relate to the allowance
for loan and lease losses, goodwill and lease financing. These estimates are
described in more detail in our 2003 Annual Report on Form 10-K in the
Critical Accounting Estimates section of Managements Discussion and
Analysis. 20




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##### Table of Contents



BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) CONSOLIDATED FINANCIAL HIGHLIGHTS(Unaudited) Three Months Ended June 30,
    
    Six Months Ended June 30,2004
    
    2003
    
    2004
    
    2003Earnings:(Dollars in thousands)Interest income
    
    $
    419,868
    
    
    $
    417,908
    
    
    $
    837,019
    
    
    $
    834,178Interest expense
    
    
    97,607
    
    
    
    98,047
    
    
    
    193,733
    
    
    
    200,292Net interest income
    
    
    322,261
    
    
    
    319,861
    
    
    
    643,286
    
    
    
    633,886Provision for loan and lease losses
    
    
    11,900
    
    
    
    18,860
    
    
    
    30,765
    
    
    
    41,550Noninterest income
    
    
    110,021
    
    
    
    102,127
    
    
    
    211,492
    
    
    
    198,227Noninterest expense
    
    
    232,224
    
    
    
    229,878
    
    
    
    451,138
    
    
    
    450,590Income before income taxes
    
    
    188,158
    
    
    
    173,250
    
    
    
    372,875
    
    
    
    339,973Provision for income taxes
    
    
    73,401
    
    
    
    65,588
    
    
    
    145,066
    
    
    
    130,230Net income
    
    $
    114,757
    
    
    $
    107,662
    
    
    $
    227,809
    
    
    $
    209,743Balance Sheet Data Averages:(Dollars in millions)Average assets
    
    $
    39,343
    
    
    $
    35,110
    
    
    $
    38,840
    
    
    $
    34,752Average securities available for sale at cost
    
    
    6,007
    
    
    
    4,430
    
    
    
    5,922
    
    
    
    4,217Average loans and leases (1)
    
    
    26,747
    
    
    
    24,399
    
    
    
    26,344
    
    
    
    24,217Average deposits
    
    
    27,117
    
    
    
    24,339
    
    
    
    26,775
    
    
    
    24,230Average long-term debt and capital securities
    
    
    4,582
    
    
    
    3,609
    
    
    
    4,453
    
    
    
    3,593Average stockholders equity
    
    
    4,416
    
    
    
    4,033
    
    
    
    4,371
    
    
    
    3,970Balance Sheet Data At Period End:(Dollars in millions)Assets
    
    
    40,264
    
    
    
    36,448
    
    
    
    40,264
    
    
    
    36,448Securities available for sale
    
    
    5,822
    
    
    
    5,015
    
    
    
    5,822
    
    
    
    5,015Loans and leases (1)
    
    
    27,255
    
    
    
    25,068
    
    
    
    27,255
    
    
    
    25,068Deposits
    
    
    27,976
    
    
    
    25,036
    
    
    
    27,976
    
    
    
    25,036Long-term debt and capital securities
    
    
    4,646
    
    
    
    3,782
    
    
    
    4,646
    
    
    
    3,782Stockholders equity
    
    
    4,431
    
    
    
    4,088
    
    
    
    4,431
    
    
    
    4,088Selected Financial Ratios For the Period Ended:Return on average total assets (ROA) (2)
    
    
    1.17
    %
    
    
    1.23
    %
    
    
    1.18
    %
    
    
    1.22
    %Return on average stockholders equity (ROE) (2)
    
    
    10.45
    
    
    
    10.71
    
    
    
    10.48
    
    
    
    10.65Net interest margin (taxable-equivalent basis) (2)
    
    
    3.88
    
    
    
    4.37
    
    
    
    3.93
    
    
    
    4.42Net loans
and leases charged off to average loans and leases (2)
    
    
    0.18
    
    
    
    0.38
    
    
    
    0.20
    
    
    
    0.28Efficiency ratio (3)
    
    
    53.72
    
    
    
    54.48
    
    
    
    52.78
    
    
    
    54.15Average equity to average total assets
    
    
    11.22
    
    
    
    11.49
    
    
    
    11.25
    
    
    
    11.42At Period End:Allowance for loan and lease losses to total loans and leases
    
    
    1.46
    
    
    
    1.57
    
    
    
    1.46
    
    
    
    1.57Nonperforming assets to total loans and leases and other
real estate owned and repossessed personal property
    
    
    0.52
    
    
    
    0.75
    
    
    
    0.52
    
    
    
    0.75Allowance for loan and lease losses to nonperforming loans
and leases
    
    
    3.21x
    
    
    
    2.30x
    
    
    
    3.21x
    
    
    
    2.30xRegulatory Capital Ratios:Leverage Ratio (4):Bank of the West
    
    
    9.56
    %
    
    
    9.51
    %
    
    
    9.56
    %
    
    
    9.51
    %First Hawaiian Bank
    
    
    10.31
    
    
    
    9.69
    
    
    
    10.31
    
    
    
    9.69Tier 1 capital (risk-based):Bank of the West
    
    
    10.80
    
    
    
    10.28
    
    
    
    10.80
    
    
    
    10.28First Hawaiian Bank
    
    
    13.32
    
    
    
    12.19
    
    
    
    13.32
    
    
    
    12.19Total capital (risk-based):Bank of the West
    
    
    12.96
    
    
    
    12.54
    
    
    
    12.96
    
    
    
    12.54First Hawaiian Bank
    
    
    15.62
    
    
    
    14.59
    
    
    
    15.62
    
    
    
    14.59
   (1)
    
    These balances include loans held for sale and are not adjusted for loan
and lease losses.(2)
    
    Annualized.(3)
    
    The efficiency ratio is noninterest expense as a percentage of net
interest income plus noninterest income.(4)
    
    The capital leverage ratios are based on quarterly averages. 21




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 RESULTS OF OPERATIONS 
 Net Interest Income Second quarter 2004 as compared with second quarter 2003 Net interest income increased to $322.3 million as compared with $319.9
million. The increase in net interest income was principally the result of a $4.0
billion, or 13.6%, increase in average earning assets. The increase in our
average earning assets was primarily the result of growth in loans (from
originations and purchases), leases and investment securities within Bank of
the West and First Hawaiian Bank. The effect of the increase from average
earning assets was partially offset by a 49 basis point reduction in our net
interest margin. The continuing effect of historically low interest rates has
reduced the yield on earning assets more rapidly than rates paid on sources of funds. Six-month period 2004 as compared with six-month period 2003 Net interest income increased 1.5% to $643.3 million as compared with
$633.9 million. The increase in net interest income was principally the result of a $4.0
billion, or 13.7%, increase in average earning assets. The increase in our
average earning assets was primarily the result of growth in loans (from
originations and purchases), leases and investment securities within Bank of
the West and First Hawaiian Bank. The effect of the increase from average
earning assets was partially offset by a 49 basis point reduction in our net
interest margin. The continuing effect of historically low interest rates has
reduced the yield on earning assets more rapidly than rates paid on sources of funds. Net Interest Margin Second quarter 2004 as compared with second quarter 2003 The net interest margin decreased by 49 basis points due primarily to the
effects of the continued low interest rate environment. While the low rate
environment reduced our yield on earning assets by 64 basis points to 5.06%
from 5.70%, it also decreased our rate paid on sources of funds by 15 basis
points to 1.18% from 1.33%. Also offsetting the decrease in the yield on
average earning assets, average noninterest-bearing deposits maintained by
retail and commercial customers increased by $1.0 billion, or 14.9%. Six-month period 2004 as compared with six-month period 2003 The net interest margin decreased by 49 basis points due primarily to the
effects of the continued low interest rate environment. While the low rate
environment reduced our yield on earning assets by 70 basis points to 5.11%
from 5.81%, it also decreased our rate paid on sources of funds by 21 basis
points to 1.18% from 1.39%. Also offsetting the decrease in the yield on
average earning assets, average noninterest-bearing deposits maintained by
retail and commercial customers increased by $0.9 billion, or 13.9%. Average Earning Assets Second quarter 2004 as compared with second quarter 2003 Growth in Bank of the Wests loan and lease portfolio and higher levels of
investment securities in both banks are primarily responsible for the increase
in average earning assets. The $2.3 billion, or 9.6%, increase in average
total loans and leases was primarily due to increased consumer lending and
residential mortgages. Consumer loans continue to grow due to strength in the
consumer market and the low interest rates on consumer products. As commercial
lending was relatively slow during the past year, funds were used to purchase
residential mortgages as well as investment securities. Consequently, average
total investment securities were $6.0 billion, up $1.6 billion, or 35.6%. 22




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Six-month period 2004 as compared with six-month period 2003 Growth in Bank of the Wests loan and lease portfolio and higher levels of
investment securities in both banks are primarily responsible for the increase
in average earning assets. The $2.1 billion, or 8.8%, increase in average
total loans and leases was primarily due to increased consumer lending and
residential mortgages. Consumer loans continue to grow due to strength in the
consumer market and the low interest rates on consumer products. As commercial
lending was relatively slow during the past year, funds were used to purchase
residential mortgages as well as investment securities. Consequently, average
total investment securities were $5.9 billion, up $1.7 billion, or 40.4%. Average Loans and Leases Second quarter 2004 as compared with second quarter 2003 The increase in average loans and leases was primarily due to growth in
Bank of the West. Average consumer loans within Bank of the West increased
approximately $1.3 billion, or 21.8%, primarily due to growth in financing for
autos, recreational vehicles and pleasure boats, while loan purchases increased
the average residential mortgage portfolio. Bank of the Wests average
residential real estate loans increased by $0.5 billion. Six-month period 2004 as compared with six-month period 2003 The increase in average loans and leases was primarily due to growth in
Bank of the West. Average consumer loans within Bank of the West increased
approximately $1.2 billion, or 21.9%, primarily due to growth in consumer
loans, while real estate loan purchases increased the average residential
mortgage portfolio. Bank of the Wests average residential real estate loans
increased by $0.6 billion. Average Interest-Bearing Deposits and Liabilities Second quarter 2004 as compared with second quarter 2003 The $3.0 billion, or 13.0%, increase in average interest-bearing deposits
and liabilities was primarily due to growth in our customer deposit base and an
increase in average long-term debt and average short-term borrowings. Average
deposits increased due to growth in the demand deposit, interest-bearing
checking, regular and money market savings, foreign and time deposit
portfolios. Short-and long-term borrowings from the Federal Home Loan Bank
also increased average short-term borrowings and average long-term debt. Six-month period 2004 as compared with six-month period 2003 The $2.9 billion, or 12.6%, increase in average interest-bearing deposits
and liabilities was primarily due to growth in our customer deposit base and an
increase in average long-term debt and average short-term borrowings. Average
deposits increased due to growth in the demand deposit, interest-bearing
checking, regular and money market savings, foreign and time deposit
portfolios. Short-and long-term borrowings from the Federal Home Loan Bank
also increased average short-term borrowings and average long-term debt. 23




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Table 1: Average Balances, Interest Income and Expense, and Yields and Rates (Taxable-Equivalent Basis) The following table presents consolidated average balances, an analysis of
interest income/expense and average yield/rate for each major category of
earning assets and interest-bearing deposits and liabilities for the years
indicated on a taxable-equivalent basis. The taxable-equivalent adjustment is
made for items exempt from Federal income taxes (assuming a 35% tax rate for
June 30, 2004 and 2003) to make them comparable with taxable items before any
income taxes are applied. Three Months Ended June 30,2004
    
    2003Interest
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    Income/
    
    Yield/
    
    Average
    
    Income/
    
    Yield/Balance
    
    Expense
    
    Rate (1)
    
    Balance
    
    Expense
    
    Rate (1)(Dollars in thousands)ASSETSEarning assets:Interest-bearing deposits in other banks:Domestic
    
    $
    5,975
    
    
    $
    14
    
    
    
    0.94
    %
    
    $
    5,864
    
    
    $
    14
    
    
    
    0.96
    %Foreign
    
    
    235,557
    
    
    
    657
    
    
    
    1.12
    
    
    
    142,994
    
    
    
    455
    
    
    
    1.28Total interest-bearing deposits in other banks
    
    
    241,532
    
    
    
    671
    
    
    
    1.12
    
    
    
    148,858
    
    
    
    469
    
    
    
    1.26Federal funds sold and securities purchased under
agreements to resell
    
    
    222,312
    
    
    
    577
    
    
    
    1.04
    
    
    
    230,673
    
    
    
    718
    
    
    
    1.25Trading assets
    
    
    7,727
    
    
    
    14
    
    
    
    0.73
    
    
    
    63,639
    
    
    
    466
    
    
    
    2.94Securities available for sale (2):Taxable
    
    
    5,999,165
    
    
    
    50,885
    
    
    
    3.41
    
    
    
    4,415,051
    
    
    
    43,026
    
    
    
    3.91Exempt from Federal income taxes
    
    
    7,501
    
    
    
    135
    
    
    
    7.24
    
    
    
    15,212
    
    
    
    278
    
    
    
    7.33Total securities available for sale
    
    
    6,006,666
    
    
    
    51,020
    
    
    
    3.42
    
    
    
    4,430,263
    
    
    
    43,304
    
    
    
    3.92Loans and leases (3),(4):Domestic
    
    
    26,392,660
    
    
    
    360,370
    
    
    
    5.49
    
    
    
    24,041,018
    
    
    
    365,048
    
    
    
    6.09Foreign
    
    
    354,337
    
    
    
    5,790
    
    
    
    6.57
    
    
    
    358,108
    
    
    
    6,906
    
    
    
    7.74Total loans and leases
    
    
    26,746,997
    
    
    
    366,160
    
    
    
    5.51
    
    
    
    24,399,126
    
    
    
    371,954
    
    
    
    6.11Other interest earning assets
    
    
    156,476
    
    
    
    1,646
    
    
    
    4.23
    
    
    
    116,548
    
    
    
    1,336
    
    
    
    4.60Total earning assets
    
    
    33,381,710
    
    
    
    420,088
    
    
    
    5.06
    
    
    
    29,389,107
    
    
    
    418,247
    
    
    
    5.70Non interest-bearing assets:Cash and due from banks
    
    
    1,441,906
    
    
    
    
    
    
    
    
    
    
    
    1,346,398Premises and equipment
    
    
    526,005
    
    
    
    
    
    
    
    
    
    
    
    388,225Core deposit intangible
    
    
    178,559
    
    
    
    
    
    
    
    
    
    
    
    201,647Goodwill
    
    
    3,228,832
    
    
    
    
    
    
    
    
    
    
    
    3,226,844Other assets
    
    
    586,480
    
    
    
    
    
    
    
    
    
    
    
    558,069Total noninterest-bearing assets
    
    
    5,961,782
    
    
    
    
    
    
    
    
    
    
    
    5,721,183Total assets
    
    $
    39,343,492
    
    
    
    
    
    
    
    
    
    
    $
    35,110,290LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing deposits and liabilities:Deposits:Domestic:Interest-bearing demand
    
    $
    302,737
    
    
    $
    69
    
    
    
    0.09
    %
    
    $
    272,364
    
    
    $
    87
    
    
    
    0.13
    %Savings
    
    
    11,035,985
    
    
    
    15,724
    
    
    
    0.57
    
    
    
    10,044,400
    
    
    
    17,737
    
    
    
    0.71Time
    
    
    6,718,142
    
    
    
    25,141
    
    
    
    1.51
    
    
    
    6,524,143
    
    
    
    28,446
    
    
    
    1.75Foreign
    
    
    1,114,692
    
    
    
    2,655
    
    
    
    0.96
    
    
    
    581,210
    
    
    
    1,454
    
    
    
    1.00Total interest-bearing deposits
    
    
    19,171,556
    
    
    
    43,589
    
    
    
    0.91
    
    
    
    17,422,117
    
    
    
    47,724
    
    
    
    1.10Short-term borrowings
    
    
    2,187,174
    
    
    
    5,566
    
    
    
    1.02
    
    
    
    1,916,730
    
    
    
    7,042
    
    
    
    1.47Long-term debt and capital securities
    
    
    4,582,180
    
    
    
    48,452
    
    
    
    4.25
    
    
    
    3,608,704
    
    
    
    43,281
    
    
    
    4.81Total interest-bearing deposits and liabilities
    
    
    25,940,910
    
    
    
    97,607
    
    
    
    1.51
    
    
    
    22,947,551
    
    
    
    98,047
    
    
    
    1.71Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.55
    %
    
    
    
    
    
    
    
    
    
    
    3.99
    %Noninterest-bearing deposits
    
    
    7,945,430
    
    
    
    
    
    
    
    
    
    
    
    6,917,285Other liabilities
    
    
    1,041,611
    
    
    
    
    
    
    
    
    
    
    
    1,212,823Total liabilities
    
    
    34,927,951
    
    
    
    
    
    
    
    
    
    
    
    31,077,659Stockholders equity
    
    
    4,415,541
    
    
    
    
    
    
    
    
    
    
    
    4,032,631Total liabilities and stockholders equity
    
    $
    39,343,492
    
    
    
    
    
    
    
    
    
    
    $
    35,110,290Impact of noninterest-bearing sources
    
    
    
    
    
    
    
    
    
    
    0.33
    %
    
    
    
    
    
    
    
    
    
    
    0.38
    %Net interest income and margin on total earning assets
    
    
    
    
    
    
    322,481
    
    
    
    3.88
    %
    
    
    
    
    
    
    320,200
    
    
    
    4.37
    %Tax equivalent adjustment
    
    
    
    
    
    
    220
    
    
    
    
    
    
    
    
    
    
    
    339Net interest income
    
    
    
    
    
    $
    322,261
    
    
    
    
    
    
    
    
    
    
    $
    319,861
   (1)
    
    Annualized.(2)
    
    For the three months ended June 30, 2004 and 2003, average debt
investment securities were computed based on historical amortized costs,
excluding the effects of SFAS No. 115 adjustments.(3)
    
    Nonaccruing loans and leases, and loans held for sale have been included
in the computations of average loan and lease balances.(4)
    
    Interest income for loans and leases included loan fees of $11.0 million
and $15.6 million for three months ended June 30, 2004 and 2003,
respectively. 24




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##### Table of Contents



BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Six Months Ended June 30,2004
    
    2003Interest
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    Income/
    
    Yield/
    
    Average
    
    Income/
    
    Yield/Balance
    
    Expense
    
    Rate (1)
    
    Balance
    
    Expense
    
    Rate (1)(Dollars in thousands)ASSETSEarning assets:Interest-bearing deposits in other banks:Domestic
    
    $
    6,585
    
    
    $
    23
    
    
    
    0.70
    %
    
    $
    5,498
    
    
    $
    23
    
    
    
    0.84
    %Foreign
    
    
    265,718
    
    
    
    1,463
    
    
    
    1.11
    
    
    
    124,892
    
    
    
    861
    
    
    
    1.39Total interest-bearing deposits in other banks
    
    
    272,303
    
    
    
    1,486
    
    
    
    1.10
    
    
    
    130,390
    
    
    
    884
    
    
    
    1.37Federal funds sold and securities purchased under
agreements to resell
    
    
    228,103
    
    
    
    1,179
    
    
    
    1.04
    
    
    
    243,019
    
    
    
    1,541
    
    
    
    1.28Trading assets
    
    
    11,373
    
    
    
    28
    
    
    
    0.50
    
    
    
    54,112
    
    
    
    802
    
    
    
    2.99Securities available for sale (2):Taxable
    
    
    5,914,118
    
    
    
    101,307
    
    
    
    3.44
    
    
    
    4,201,525
    
    
    
    83,128
    
    
    
    3.99Exempt from Federal income taxes
    
    
    7,464
    
    
    
    269
    
    
    
    7.25
    
    
    
    15,039
    
    
    
    512
    
    
    
    6.87Total securities available for sale
    
    
    5,921,582
    
    
    
    101,576
    
    
    
    3.45
    
    
    
    4,216,564
    
    
    
    83,640
    
    
    
    4.00Loans and leases (3),(4):Domestic
    
    
    25,993,269
    
    
    
    718,557
    
    
    
    5.56
    
    
    
    23,853,687
    
    
    
    732,571
    
    
    
    6.19Foreign
    
    
    351,041
    
    
    
    11,576
    
    
    
    6.63
    
    
    
    363,604
    
    
    
    12,723
    
    
    
    7.06Total loans and leases
    
    
    26,344,310
    
    
    
    730,133
    
    
    
    5.57
    
    
    
    24,217,291
    
    
    
    745,294
    
    
    
    6.21Other interest-earning assets
    
    
    155,475
    
    
    
    3,095
    
    
    
    4.00
    
    
    
    109,898
    
    
    
    2,740
    
    
    
    5.03Total earning assets
    
    
    32,933,146
    
    
    
    837,497
    
    
    
    5.11
    
    
    
    28,971,274
    
    
    
    834,901
    
    
    
    5.81Non interest-bearing assets:Cash and due from banks
    
    
    1,408,127
    
    
    
    
    
    
    
    
    
    
    
    1,383,422Premises and equipment
    
    
    527,799
    
    
    
    
    
    
    
    
    
    
    
    384,702Core deposit intangible
    
    
    181,459
    
    
    
    
    
    
    
    
    
    
    
    204,480Goodwill
    
    
    3,228,589
    
    
    
    
    
    
    
    
    
    
    
    3,227,274Other assets
    
    
    560,862
    
    
    
    
    
    
    
    
    
    
    
    580,770Total noninterest-bearing assets
    
    
    5,906,836
    
    
    
    
    
    
    
    
    
    
    
    5,780,648Total assets
    
    $
    38,839,982
    
    
    
    
    
    
    
    
    
    
    $
    34,751,922LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing deposits and liabilities:Deposits:Domestic:Interest-bearing demand
    
    $
    308,384
    
    
    $
    138
    
    
    
    0.09
    %
    
    $
    269,055
    
    
    $
    206
    
    
    
    0.15
    %Savings
    
    
    10,928,278
    
    
    
    31,465
    
    
    
    0.58
    
    
    
    9,867,863
    
    
    
    35,976
    
    
    
    0.74Time
    
    
    6,717,683
    
    
    
    50,623
    
    
    
    1.52
    
    
    
    6,681,002
    
    
    
    61,676
    
    
    
    1.86Foreign
    
    
    1,055,886
    
    
    
    4,799
    
    
    
    0.91
    
    
    
    595,496
    
    
    
    3,012
    
    
    
    1.02Total interest-bearing deposits
    
    
    19,010,231
    
    
    
    87,025
    
    
    
    0.92
    
    
    
    17,413,416
    
    
    
    100,870
    
    
    
    1.17Short-term borrowings
    
    
    2,158,874
    
    
    
    10,979
    
    
    
    1.02
    
    
    
    1,738,923
    
    
    
    10,739
    
    
    
    1.25Long-term debt and capital securities
    
    
    4,452,738
    
    
    
    95,729
    
    
    
    4.32
    
    
    
    3,592,984
    
    
    
    88,683
    
    
    
    4.98Total interest-bearing deposits and liabilities
    
    
    25,621,843
    
    
    
    193,733
    
    
    
    1.52
    
    
    
    22,745,323
    
    
    
    200,292
    
    
    
    1.77Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.59
    %
    
    
    
    
    
    
    
    
    
    
    4.04
    %Noninterest-bearing deposits
    
    
    7,764,441
    
    
    
    
    
    
    
    
    
    
    
    6,816,331Other liabilities
    
    
    1,082,464
    
    
    
    
    
    
    
    
    
    
    
    1,220,385Total liabilities
    
    
    34,468,748
    
    
    
    
    
    
    
    
    
    
    
    30,782,039Stockholders equity
    
    
    4,371,234
    
    
    
    
    
    
    
    
    
    
    
    3,969,883Total liabilities and stockholders equity
    
    $
    38,839,982
    
    
    
    
    
    
    
    
    
    
    $
    34,751,922Impact of noninterest-bearing sources
    
    
    
    
    
    
    
    
    
    
    0.34
    %
    
    
    
    
    
    
    
    
    
    
    0.38
    %Net interest income and margin on total earning assets
    
    
    
    
    
    
    643,764
    
    
    
    3.93
    %
    
    
    
    
    
    
    634,609
    
    
    
    4.42
    %Tax equivalent adjustment
    
    
    
    
    
    
    478
    
    
    
    
    
    
    
    
    
    
    
    723Net interest income
    
    
    
    
    
    $
    643,286
    
    
    
    
    
    
    
    
    
    
    $
    633,886
   (1)
    
    Annualized.(2)
    
    For the six months ended June 30, 2004 and 2003, average debt investment
securities were computed based on historical amortized costs, excluding
the effects of SFAS No. 115 adjustments.(3)
    
    Nonaccruing loans and leases, and loans held for sale have been included
in the computations of average loan and lease balances.(4)
    
    Interest income for loans and leases included loan fees of $21.5 million
and $29.3 million for six months ended June 30, 2004 and 2003,
respectively. 25




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##### Table of Contents



BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 Noninterest Income The following tables reflect the key components of the changes in
noninterest income for the three and six months ended June 30, 2004, as
compared with the same period in 2003: Three Months Ended June 30,
    
    Change2004
    
    2003
    
    $
    
    %(Dollars in thousands)Service charges on deposit accounts
    
    $
    40,525
    
    
    $
    38,561
    
    
    $
    1,964
    
    
    
    5.1
    %Trust and investment services income
    
    
    10,054
    
    
    
    9,858
    
    
    
    196
    
    
    
    2.0Other service charges and fees
    
    
    36,872
    
    
    
    37,587
    
    
    
    (715
    )
    
    
    (1.9
    )Net gains on securities available for sale
    
    
    691
    
    
    
    1,466
    
    
    
    (775
    )
    
    
    (52.9
    )Vehicle and equipment operating lease income
    
    
    4,215
    
    
    
    
    
    
    
    4,215
    
    
    
    Other
    
    
    17,664
    
    
    
    14,655
    
    
    
    3,009
    
    
    
    20.5Total noninterest income
    
    $
    110,021
    
    
    $
    102,127
    
    
    $
    7,894
    
    
    
    7.7
    %
 Six Months Ended June 30,
    
    Change2004
    
    2003
    
    $
    
    %(Dollars in thousands)Service charges on deposit accounts
    
    $
    81,354
    
    
    $
    75,590
    
    
    $
    5,764
    
    
    
    7.6
    %Trust and investment services income
    
    
    20,356
    
    
    
    19,365
    
    
    
    991
    
    
    
    5.1Other service charges and fees
    
    
    74,045
    
    
    
    70,448
    
    
    
    3,597
    
    
    
    5.1Net gains on securities available for sale
    
    
    1,058
    
    
    
    3,358
    
    
    
    (2,300
    )
    
    
    (68.5
    )Vehicle and equipment operating lease income
    
    
    5,069
    
    
    
    
    
    
    
    5,069
    
    
    
    Other
    
    
    29,610
    
    
    
    29,466
    
    
    
    144
    
    
    
    0.5Total noninterest income
    
    $
    211,492
    
    
    $
    198,227
    
    
    $
    13,265
    
    
    
    6.7
    %
 Second quarter 2004 as compared with second quarter 2003 Service charges on deposit accounts were $40.5 million, an increase of
$2.0 million. The increase is primarily attributed to an increase in average
deposit balances of approximately 11.4% and higher fee income from overdraft
and nonsufficient fund transactions, partially offset by lower servicing fee
income as a result of repricing efforts in account analysis. Vehicle and equipment operating lease income totaled $4.2 million. The
increase was due to accounting for new auto leases as operating leases rather
than direct finance leases. See Note 4 to the Consolidated Financial
Statements for additional information. Other noninterest income totaled $17.7 million, an increase of $3.0
million, primarily attributed to higher income related to the sales
of the net
investment in certain equipment leases, a reclassification of the amortization of low income
housing investments in late 2003 and proceeds from a bankruptcy
settlement. The increases were partially offset by lower gains on the sale of
residential loans, losses on the disposal of certain fixed assets and lower
income from the sale of loans in the Essex subsidiary as Essex began to retain
loans in its portfolio rather than selling them. 26




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##### Table of Contents



BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Six-month period 2004 as compared with six-month period 2003 Service charges on deposit accounts were $81.4 million, an increase of
$5.8 million. The increase is primarily attributed to an increase in average
deposit balances of approximately 10.5% and higher fee income from overdraft
and nonsufficient fund transactions. Other service charges and fees were $74.0 million, an increase of $3.6
million. The increase is primarily due to higher revenue from the sale of
investment products, higher credit card fees resulting from an increase in
retail sales volume, partially offset by lower fee income from debit cards and
lower gains on the sale of residential loans. Net gains on securities available for sale totaled $1.1 million, compared
with net gains of $3.4 million. The higher gains in 2003 were due to portfolio
restructuring activities. Vehicle and equipment operating lease income totaled $5.1 million. The
increase was due to accounting for new auto leases as operating leases rather
than direct finance leases. 
 Noninterest Expense The following tables reflect the key components of the changes in
noninterest expense for the three and six months ended June 30, 2004 as
compared with the same period in 2003: Three Months Ended June 30,
    
    Change2004
    
    2003
    
    $
    
    %(Dollars in thousands)Personnel:Salaries and wages
    
    $
    83,441
    
    
    $
    83,262
    
    
    $
    179
    
    
    
    0.2
    %Employee benefits
    
    
    34,652
    
    
    
    37,930
    
    
    
    (3,278
    )
    
    
    (8.6
    )Total personnel expense
    
    
    118,093
    
    
    
    121,192
    
    
    
    (3,099
    )
    
    
    (2.6
    )Occupancy
    
    
    21,790
    
    
    
    22,381
    
    
    
    (591
    )
    
    
    (2.6
    )Outside services
    
    
    20,683
    
    
    
    18,154
    
    
    
    2,529
    
    
    
    13.9Intangible amortization
    
    
    5,764
    
    
    
    5,764
    
    
    
    
    
    
    
    Equipment
    
    
    12,020
    
    
    
    12,437
    
    
    
    (417
    )
    
    
    (3.4
    )Depreciation  vehicle and equipment operating leases
    
    
    4,207
    
    
    
    
    
    
    
    4,207
    
    
    
    Stationery and supplies
    
    
    6,185
    
    
    
    6,416
    
    
    
    (231
    )
    
    
    (3.6
    )Advertising and promotion
    
    
    6,443
    
    
    
    8,092
    
    
    
    (1,649
    )
    
    
    (20.4
    )Other
    
    
    37,039
    
    
    
    35,442
    
    
    
    1,597
    
    
    
    4.5Total noninterest expense
    
    $
    232,224
    
    
    $
    229,878
    
    
    $
    2,346
    
    
    
    1.0
    %
 27




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##### Table of Contents



BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Six Months Ended June 30,
    
    Change2004
    
    2003
    
    $
    
    %(Dollars in thousands)Personnel:Salaries and wages
    
    $
    166,896
    
    
    $
    168,900
    
    
    $
    (2,004
    )
    
    
    (1.2
    )%Employee benefits
    
    
    70,889
    
    
    
    74,476
    
    
    
    (3,587
    )
    
    
    (4.8
    )Total personnel expense
    
    
    237,785
    
    
    
    243,376
    
    
    
    (5,591
    )
    
    
    (2.3
    )Occupancy
    
    
    43,405
    
    
    
    44,527
    
    
    
    (1,122
    )
    
    
    (2.5
    )Outside services
    
    
    38,944
    
    
    
    35,841
    
    
    
    3,103
    
    
    
    8.7Intangible amortization
    
    
    11,527
    
    
    
    11,527
    
    
    
    
    
    
    
    Equipment
    
    
    23,456
    
    
    
    23,593
    
    
    
    (137
    )
    
    
    (0.6
    )Depreciation  vehicle and equipment operating leases
    
    
    4,904
    
    
    
    
    
    
    
    4,904
    
    
    
    Stationery and supplies
    
    
    12,349
    
    
    
    13,434
    
    
    
    (1,085
    )
    
    
    (8.1
    )Advertising and promotion
    
    
    12,779
    
    
    
    12,956
    
    
    
    (177
    )
    
    
    (1.4
    )Other
    
    
    65,989
    
    
    
    65,336
    
    
    
    653
    
    
    
    1.0Total noninterest expense
    
    $
    451,138
    
    
    $
    450,590
    
    
    $
    548
    
    
    
    0.1
    %


Second quarter 2004 as compared with second quarter 2003

Employee benefits expense was $34.7 million, a decrease of $3.3 million,
primarily due to lower pension and postretirement plan expense as a result of
reduced costs from consolidating benefit plans and lower recognized actuarial losses. The decrease was
partially offset by increases in other benefits, primarily long-term incentive
and workers compensation.

Outside services expense was $20.7 million, an increase of $2.5 million,
substantially due to an increase in contracted services related to the CFB
acquisition.

Depreciation on vehicle and equipment operating leases totaled $4.2
million. The increase was the result of vehicle depreciation costs incurred
from the change in accounting for new auto leases as operating leases rather
than direct finance leases.

Advertising and promotion expenses were $6.4 million, a decrease of $1.6
million, primarily the result of higher advertising expenses in 2003 related to
certificate of deposit campaigns to promote brand recognition.

Other noninterest expense was $37.0 million, an increase of $1.6 million.
The increase is primarily due to higher fees due to increased transaction
volume related to airline branded credit cards, increased write-offs related to
OREOs and higher legal expenses, partially offset by lower split dollar life
insurance expense as a result of marking policies to cash surrender value.

Six-month period 2004 as compared with six-month period 2003

Salaries and wages expense was $166.9 million, a decrease of $2.0 million.
The decrease is primarily attributable to a decrease in full-time equivalent
staff.

Employee benefits expense was $70.9 million, a decrease of $3.6 million,
primarily due to lower pension and postretirement plan expense as a result of
reduced costs from consolidating benefit plans and lower recognized actuarial losses. The decrease was
partially offset by increases in other benefits, primarily healthcare and
workers compensation.

Outside services expense was $38.9 million, an increase of $3.1 million,
primarily due to an increase in contracted and data processing services related
to the CFB acquisition.

Depreciation in vehicle and equipment operating leases totaled $4.9
million. The increase in expense was the result of vehicle depreciation costs
incurred from the change in accounting for new auto leases.

28



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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 OPERATING SEGMENTS Our operations are managed principally through our two major bank
subsidiaries, Bank of the West and First Hawaiian Bank. Bank of the West
operates primarily in California, Oregon, Washington, Idaho, New Mexico and
Nevada. It also conducts business nationally through its Consumer Finance
Division as well as its Essex Credit Corporation and Trinity Capital
subsidiaries. First Hawaiian Banks primary base of operations is in Hawaii,
Guam and Saipan. It also has significant operations extending to California
through its automobile dealer flooring and financing activities. Bank of the West Regional Banking Second quarter 2004 as compared with second quarter 2003 The Regional Banking Segments net income increased $3.6 million, from
$30.8 million to $34.4 million. Net interest income increased $1.1 million or
0.9%. This increase was driven by an 11.4% increase in average loans and
transfer pricing credits provided on higher deposit balances. Noninterest
income increased $3.0 million, or 7.2%, primarily due to increases in
commissions and other fees and service fees on deposit accounts. Noninterest
expense was flat quarter over quarter, primarily due to a decrease in staff,
offset by an increase in benefits. The provision for loan and lease losses
decreased $2.7 million due to the improved credit quality of its
loan and lease portfolio. The growth in
average deposits of 6.2% was driven by core deposits, offset by a decline in
certificates of deposits. Six-month period 2004 as compared with six-month period 2003 The Regional Banking Segments net income increased $7.8 million, from
$62.0 million to $69.8 million. Net interest income increased $2.5 million or
1.0%. This increase was driven by a 10.4% increase in average loans and
transfer pricing credits provided on higher deposit balances. Noninterest
income increased $7.4 million, or 9.2%, as a result of an increase in
commissions on sale of investment products. Noninterest expense
increased $2.2 million, or 1.0%. The increase was primarily due to an increase in occupancy
related to five de novo branches and higher costs associated with employee benefits.
The provision for loan and lease losses decreased $5.7 million due to the
improvement in credit quality. The growth in average deposits was driven by core
deposits, offset by a decline in certificates of deposits. Commercial Banking Second quarter 2004 as compared with second quarter 2003 The Commercial Banking Segments net income decreased $0.8 million or 2.1%
from $38.6 million to $37.8 million, primarily due to a
negative provision for credit losses in second quarter 2003. Net interest income
increased $3.6 million or 4.7%. The increase in net interest income was due to an increase in
average loans. Average loan and lease balances increased by 9.5% to $7.6 billion, and
average deposit balances increased by 12.9% to $3.5 billion. Six-month period 2004 as compared with six-month period 2003 The Commercial Banking Segments net income decreased to $75.3 million
from $75.8 million, primarily due to a negative provision for
credit losses in the six month period of 2003. Net interest income remained relatively flat, despite an
increase in average assets. Average loan and lease balances increased by 7.7% to $7.5 billion, and
average deposit balances increased by 14.3% to $3.4 billion. 29




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Consumer Finance Second quarter 2004 as compared with second quarter 2003 The Consumer Finance Segments net income was $18.3 million compared with
$13.7 million. Net interest income was $51.1 million, compared with $50.7
million, an increase of 0.8%. Noninterest income increased to $6.5 million,
compared with $3.5 million. Noninterest expense increased from $15.3 million
to $20.6 million. The Consumer Finance Segment remains very competitively priced in the
indirect lending market. Net interest income remained relatively flat.
Noninterest income was favorably impacted as a result of recording lease
payments on auto leases as rental income starting in February 2004. The
provision for loan and lease losses was decreased by the improved credit
quality in the consumer loan and lease portfolio. These favorable variances were partially offset by lower gains on
sales of loans as a result of Essex retaining certain of the loans it
originates. Noninterest expense increased by 34.6% to $20.6 million. However,
expenses as a percentage of average assets remained relatively constant. The
increase in noninterest expense was primarily due to an increase in employee
salaries and benefits and an increase in depreciation expense as a
result of the accounting for vehicle operating leases. Average assets were $8.4 billion compared with $7.4 billion, an increase
of 13.7%. This increase is primarily due to increased indirect loan
production. Six-month period 2004 as compared with six-month period 2003 The Consumer Finance Segments net income was $32.8 million, compared with
$28.3 million. Net interest income was $104.2 million, compared with $100.4
million, an increase of 3.8%. Noninterest income increased $3.0 million, or
48.4%. Noninterest expense increased from $30.5 million to $37.5 million.
The increase in noninterest income was primarily due to the change in
accounting for vehicle operating leases. The increase in noninterest expense was primarily
due to an increase in employee salaries and benefits and an increase in
depreciation expense as a result of the accounting for vehicle operating leases. Average assets were $8.3 billion compared with $7.3 billion, an increase
of 14.0%. This increase is primarily due to increased indirect loan
production. The provision for credit losses decreased $7.8 million due to the
improvement in credit quality. First Hawaiian Bank Retail Banking Second quarter 2004 as compared with second quarter 2003 The Retail Banking Segments net income increased to $16.4 million, up
$0.3 million, or 1.9%. Net interest income increased $2 million or 3.5%,
primarily due to higher balances in earning assets. Noninterest income
increased $0.9 million, or 6.6%, primarily due to increased fees on deposit
accounts. Noninterest expense increased $2.3 million, or 5.4%, primarily due
to higher furniture and equipment write-offs. The provision for loan and lease
losses decreased $0.8 million or 42.1%. The decrease in the provision for loan
and lease losses was a result of improved credit quality which has led
to a decrease in nonperforming assets and lower charge offs. Average assets increased 12.3% to $3.7 billion, primarily due to increases
in loans of $241 million. Average deposits increased 8.4% to $7.0 billion,
primarily due to an increase in core deposits, partially offset by a decrease
in time certificates of deposit. Six-month period 2004 as compared with six-month period 2003 The Retail Banking Segments net income decreased to $33.3 million, down
$1.2 million, or 3.5%. Net interest income increased $1.1 million or 1.0%,
primarily due to higher earning asset balances. Noninterest income increased
$1.1 million, or 3.9%, primarily from increased fees on deposit accounts,
partially offset by a gain on the sale of foreclosed property in 2003.
Noninterest expense increased $3.4 million, or 4.1%, primarily due to higher
furniture and equipment expense, partially offset by a decrease in occupancy
expense corresponding to the purchase of First Hawaiian Center in December
2003. The provision for loan and lease losses decreased $1.1 million or 31.4%.
The decrease in the provision for loan and lease losses was a result of the
improved credit quality which has led to a decrease in nonperforming
assets and lower charge offs. 30




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Average assets increased 11% to $3.6 billion, primarily due to increases
in loans. Average assets also increased due to the purchase of First Hawaiian
Center. Average deposits increased 7.7% to $6.9 billion, primarily due to an
increase in core deposits, partially offset by a decrease in time certificates
of deposit. Consumer Finance Second quarter 2004 as compared with second quarter 2003 Consumer Finances net income decreased to $8.9 million, down $1 million,
or 10.1%. Net interest income was $22.2 million compared with $19.9 million,
an increase of 11.6%. This was the result of increased interest income on
higher loan balances. Noninterest income decreased $3.4 million or 34.3%. The
decrease was caused by lower gains on the sale of mortgages. Noninterest
expense remained relatively flat. The provision for loan and lease losses
decreased $0.2 million or 8.3%. The decrease reflects lower charge offs and
improved credit quality. Average assets increased 8.0% to $1.6 billion, primarily due to increases
in consumer and dealer flooring loans. Six-month period 2004 as compared with six-month period 2003 Consumer Finances net income decreased to $18.2 million, down $1.3
million, or 6.7%. Net interest income was $43.2 million compared with $38.7
million, an increase of 11.6%. This was the result of increased interest
income on higher loan balances. Noninterest income decreased $5.6 million or
28.0%. The decrease was caused by lower gains on the sale of mortgages.
Noninterest expense remained relatively flat. The provision for loan and lease
losses decreased $0.4 million or 8.7%. The decrease reflects lower charge offs
and improved credit quality. Average assets increased 5.5% to $1.5 billion, primarily due to increases
in consumer and dealer flooring loans. Commercial Banking Second quarter 2004 as compared with second quarter 2003 Commercial Bankings net income decreased to $6.7 million, down $0.8
million, or 10.7%. Net interest income decreased $0.8 million or 9.4%,
primarily due to lower earning assets. Noninterest income increased $3.5
million or 70.0%, primarily due to a $6.9 million fee on the
sale of the net investment in a lease,
which was offset by a $3.4 million gain on the sale of a lease in 2003.
Noninterest expense increased $3.1 million, or 134.8%, primarily due to a $3.1
million pretax reduction in net investments of certain leveraged leases. Average assets decreased 2.2% to $1.1 billion, primarily due to a decrease
in loans. Six-month period 2004 as compared with six-month period 2003 Commercial Bankings net income decreased to $12.7 million, down $0.2
million, or 1.6%. Net interest income decreased $0.5 million or 3.0%,
primarily due to lower earning assets. Noninterest income increased $3.7
million or 56.1%, primarily due to a $6.9 million marketing fee on the sale of
a lease in the second quarter 2004, partially offset by a $3.4 million net gain
on sale of the net investment in a lease in second quarter 2003. Noninterest expense increased $2.8
million or 60.9%, primarily due to a $3.1 million pretax reduction in net
investments of certain leveraged leases in second quarter 2004. The provision
for loan and lease losses increased $0.2 million. Average assets decreased 4.0% to $1.1 billion, primarily due to a planned
decrease in media and syndicate loans. 31




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Financial Management Second quarter 2004 as compared with second quarter 2003 The Financial Management Segments net income of $0.6 million increased
$0.4 million from 2003. Noninterest expense decreased by $0.5 million or 7.2%,
primarily due to a Trust settlement write-off in June 2003. Six-month period 2004 as compared with six-month period 2003 The Financial Management Segments net income of $1.2 million increased
$0.2 million from 2003. Noninterest income increased by $0.2 million primarily
due to higher investment management fees. Investment fees were positively
impacted by the upturn in the equity markets. Noninterest expense decreased by
$0.4 million primarily due to a Trust settlement write-off in June 2003. 
 SECURITIES AVAILABLE FOR SALE The Company focuses on the following four objectives for its
available-for-sale portfolio:  
    
    Support its needs for liquidity to fund loans or to meet
unexpected deposit runoffs. Liquidity can be met by having
investments with relatively short maturities and/or a high degree of
marketability.
    
    Act as a vehicle to make meaningful shifts in the Companys overall interest rate risk profile.
    
    Provide collateral to secure the Companys public funds-taking activities.
    
    Provide maximum level of after-tax earnings consistent with the
safety factors of quality, maturity, marketability and risk
diversification. The recent and relatively large increases in the portfolio are directly
related to the high deposit growth that has been experienced over the past two
years. 32




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Amortized cost and fair value of securities available for sale at June 30,
2004, December 31, 2003 and June 30, 2003 were as follows: June 30, 2004
    
    December 31, 2003
    
    June 30, 2003Amortized
    
    Unrealized
    
    Unrealized
    
    
    
    
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    
    
    
    
    Amortized
    
    Unrealized
    
    UnrealizedCost
    
    Gains
    
    Losses
    
    Fair Value
    
    Cost
    
    Gains
    
    Losses(1)
    
    Fair Value
    
    Cost
    
    Gains
    
    Losses(1)
    
    Fair Value(in thousands)U.S. Treasury and other U.S. Government
agencies and corporations
    
    $
    1,685,357
    
    
    $
    3,336
    
    
    $
    (12,380
    )
    
    $
    1,676,313
    
    
    $
    1,588,359
    
    
    $
    14,110
    
    
    $
    (2,256
    )
    
    $
    1,600,213
    
    
    $
    1,407,677
    
    
    $
    25,126
    
    
    $
    (97
    )
    
    $
    1,432,706Mortgage and asset-backed securities:Government agencies
    
    
    2,418,435
    
    
    
    11,680
    
    
    
    (56,943
    )
    
    
    2,373,172
    
    
    
    2,356,615
    
    
    
    23,397
    
    
    
    (23,879
    )
    
    
    2,356,133
    
    
    
    2,090,955
    
    
    
    45,216
    
    
    
    (1,822
    )
    
    
    2,134,349Other
    
    
    579,993
    
    
    
    4,443
    
    
    
    (3,206
    )
    
    
    581,230
    
    
    
    691,466
    
    
    
    7,990
    
    
    
    (1,425
    )
    
    
    698,031
    
    
    
    676,824
    
    
    
    15,251
    
    
    
    (142
    )
    
    
    691,933Collateralized mortgage obligations
    
    
    1,150,056
    
    
    
    729
    
    
    
    (17,824
    )
    
    
    1,132,961
    
    
    
    1,066,679
    
    
    
    2,611
    
    
    
    (8,119
    )
    
    
    1,061,171
    
    
    
    698,629
    
    
    
    5,550
    
    
    
    (343
    )
    
    
    703,836State and political subdivisions
    
    
    7,765
    
    
    
    191
    
    
    
    (56
    )
    
    
    7,900
    
    
    
    15,925
    
    
    
    355
    
    
    
    (61
    )
    
    
    16,219
    
    
    
    15,694
    
    
    
    524
    
    
    
    (120
    )
    
    
    16,098Other
    
    
    53,261
    
    
    
    
    
    
    
    (2,418
    )
    
    
    50,843
    
    
    
    43,159
    
    
    
    173
    
    
    
    (628
    )
    
    
    42,704
    
    
    
    34,749
    
    
    
    1,011
    
    
    
    (67
    )
    
    
    35,693Total securities available for sale
    
    $
    5,894,867
    
    
    $
    20,379
    
    
    $
    (92,827
    )
    
    $
    5,822,419
    
    
    $
    5,762,203
    
    
    $
    48,636
    
    
    $
    (36,368
    )
    
    $
    5,774,471
    
    
    $
    4,924,528
    
    
    $
    92,678
    
    
    $
    (2,591
    )
    
    $
    5,014,615
   (1)
    
    At December 31, 2003 and June 30, 2003, the Company held no securities
that had been in a continuous unrealized loss position for 12 months or
more. The following table presents the unrealized gross losses and fair value of
securities in the securities available for sale portfolio at June 30, 2004, by
length of time that individual securities in each category have been in a
continuous loss position. Because the declines in fair value were a result of
changes in market interest rates and the Company has both the ability and the
intent to hold the securities until maturity or the fair value at least equals
the recorded cost, no other-than-temporary impairment was recorded at June 30,
2004. June 30, 2004Less Than 12 Months
    
    12 Months or More
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedLosses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value(in thousands)U.S. Treasury and other U.S. Government
agencies and corporations
    
    $
    (11,070
    )
    
    $
    1,162,593
    
    
    $
    (1,310
    )
    
    $
    48,728
    
    
    $
    (12,380
    )
    
    $
    1,211,321Mortgage and asset-backed securities:Government agencies
    
    
    (41,326
    )
    
    
    1,697,272
    
    
    
    (15,617
    )
    
    
    211,020
    
    
    
    (56,943
    )
    
    
    1,908,292Other
    
    
    (2,725
    )
    
    
    334,999
    
    
    
    (481
    )
    
    
    34,501
    
    
    
    (3,206
    )
    
    
    369,500Collateralized mortgage obligations
    
    
    (15,598
    )
    
    
    965,718
    
    
    
    (2,226
    )
    
    
    62,934
    
    
    
    (17,824
    )
    
    
    1,028,652States and political subdivisions
    
    
    (34
    )
    
    
    1,002
    
    
    
    (22
    )
    
    
    423
    
    
    
    (56
    )
    
    
    1,425Other
    
    
    (2,310
    )
    
    
    37,440
    
    
    
    (108
    )
    
    
    1,708
    
    
    
    (2,418
    )
    
    
    39,148Total securities available for sale
    
    $
    (73,063
    )
    
    $
    4,199,024
    
    
    $
    (19,764
    )
    
    $
    359,314
    
    
    $
    (92,827
    )
    
    $
    4,558,338
 Proceeds from the sales of securities available for sale were $282.4
million and $339.4 million for the six months ended June 30, 2004 and 2003,
respectively. 33




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Gains and losses realized on the sales of securities available for sale
are determined using the specific identification method. Gross realized gains
and losses on securities available for sale for the periods indicated were as
follows: Three Months Ended June 30,
    
    Six Months Ended June 30,2004
    
    2003
    
    2004
    
    2003(in thousands)Realized gains
    
    $
    691
    
    
    $
    1,466
    
    
    $
    1,059
    
    
    $
    3,358Realized losses
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    Realized net gains
    
    $
    691
    
    
    $
    1,466
    
    
    $
    1,058
    
    
    $
    3,358
 
 LOANS AND LEASES The following table sets forth the loan and lease portfolio by major
categories and loan and lease mix at June 30, 2004, December 31, 2003 and June
30, 2003: June 30, 2004
    
    December 31, 2003
    
    June 30, 2003Amount
    
    %
    
    Amount
    
    %
    
    Amount
    
    %(Dollars in thousands)Commercial, financial and agricultural
    
    $
    4,738,271
    
    
    
    17.4
    %
    
    $
    4,492,319
    
    
    
    17.5
    %
    
    $
    4,644,481
    
    
    
    18.6
    %Real estate:Commercial
    
    
    5,286,412
    
    
    
    19.4
    
    
    
    5,146,077
    
    
    
    20.0
    
    
    
    4,950,251
    
    
    
    19.8Construction
    
    
    1,036,993
    
    
    
    3.8
    
    
    
    952,818
    
    
    
    3.7
    
    
    
    912,058
    
    
    
    3.6Residential
    
    
    5,479,017
    
    
    
    20.2
    
    
    
    5,019,625
    
    
    
    19.5
    
    
    
    5,009,568
    
    
    
    20.0Total real estate loans
    
    
    11,802,422
    
    
    
    43.4
    
    
    
    11,118,520
    
    
    
    43.2
    
    
    
    10,871,877
    
    
    
    43.4Consumer
    
    
    8,092,565
    
    
    
    29.8
    
    
    
    7,344,620
    
    
    
    28.6
    
    
    
    6,765,184
    
    
    
    27.1Lease financing
    
    
    2,192,436
    
    
    
    8.1
    
    
    
    2,417,310
    
    
    
    9.4
    
    
    
    2,371,711
    
    
    
    9.5Foreign:Commercial and industrial
    
    
    60,652
    
    
    
    0.2
    
    
    
    63,476
    
    
    
    0.2
    
    
    
    61,345
    
    
    
    0.2Other
    
    
    303,477
    
    
    
    1.1
    
    
    
    285,834
    
    
    
    1.1
    
    
    
    293,822
    
    
    
    1.2Total foreign loans
    
    
    364,129
    
    
    
    1.3
    
    
    
    349,310
    
    
    
    1.3
    
    
    
    355,167
    
    
    
    1.4Total loans and leases
    
    $
    27,189,823
    
    
    
    100
    %
    
    $
    25,722,079
    
    
    
    100
    %
    
    $
    25,008,420
    
    
    
    100
    %Less allowance for loan and lease losses
    
    
    396,101
    
    
    
    
    
    
    
    391,699
    
    
    
    
    
    
    
    391,518Total net loans and leases
    
    $
    26,793,722
    
    
    
    
    
    
    $
    25,330,380
    
    
    
    
    
    
    $
    24,616,902Total loans and leases to:Total assets
    
    
    67.5
    %
    
    
    
    
    
    
    67.1
    %
    
    
    
    
    
    
    68.6
    %Total interest earning assets
    
    
    80.9
    %
    
    
    
    
    
    
    79.5
    %
    
    
    
    
    
    
    81.7
    %Total deposits
    
    
    97.2
    %
    
    
    
    
    
    
    97.4
    %
    
    
    
    
    
    
    99.9
    %
 We continue to diversify our loan and lease portfolio, both geographically
and by industry. Our overall growth in loan and lease volume came primarily
from our Mainland United States operations. The loan and lease portfolio is
the largest component of earning assets and accounts for the greatest portion
of total interest income. There was a $2.2 billion, or 8.7%, increase in total
loans and leases from June 30, 2003 and a $1.5 billion, or 5.7% increase
compared with December 31, 2003. When comparing the current period with June 30, 2003, there was an
increase of $1.3 billion, or 19.6%, in consumer loans. Consumer loans consist
primarily of open- and closed-end direct and indirect loans for personal,
automobile, recreational vehicle, marine, and household purchases. Total real
estate loans increased $931 million or 8.6% from June 30, 2003 primarily from
purchases of residential loans and growth in commercial real estate lending. The increase in total loans and leases from December 31, 2003 to June 30,
2004 was mainly driven by increases in residential real estate and consumer
lending. Total real estate loans increased $684 million, or 6.2%, and consumer
loans increased $748 million, or 10.2%, in the period ending June 30, 2004
compared with December 31, 2003. These increases were partially offset by
declines in lease financing. The increase in residential loans was a result of
purchases. Our portfolio of consumer loans has increased as a result of the
Companys competitive position and competitive interest rates. The decrease in
lease financing was due to the change in the accounting for new auto leases as
operating leases rather than direct finance leases. See Note 4 to the
Consolidated Financial Statements for additional information. 34




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Loan concentrations are considered to exist when there are amounts loaned
to multiple borrowers engaged in similar activities, which would cause them to
be similarly impacted by economic or other conditions. At June 30, 2004, we did
not have a concentration of loans greater than 10% of total loans which is not
otherwise disclosed as a category of loans as shown in the table above. Loan related off-balance-sheet commitments were as follows at June 30, for
the years indicated: Notional/Contract Amount2004
    
    2003(Dollars in thousands)Contractual Amounts Which Represent Credit Risk:Commitments to extend credit
    
    $
    8,353,227
    
    
    $
    7,514,519Standby letters of credit
    
    
    710,339
    
    
    
    802,476Commercial letters of credit
    
    
    58,419
    
    
    
    81,613
 
 NONPERFORMING ASSETS AND RESTRUCTURED LOANS Nonperforming assets at June 30, 2004, December 31, 2003 and June 30, 2003
were as follows: June 30, 2004
    
    December 31, 2003
    
    June 30, 2003(Dollars in thousands)Nonperforming Assets:Nonaccrual:Commercial, financial and agricultural
    
    $
    60,266
    
    
    $
    66,100
    
    
    $
    92,919Real estate:Commercial
    
    
    40,820
    
    
    
    41,508
    
    
    
    44,714Residential
    
    
    6,913
    
    
    
    8,176
    
    
    
    7,909Total real estate loans
    
    
    47,733
    
    
    
    49,684
    
    
    
    52,623Consumer
    
    
    2,658
    
    
    
    3,634
    
    
    
    3,455Lease financing
    
    
    7,328
    
    
    
    8,038
    
    
    
    12,933Foreign
    
    
    5,381
    
    
    
    6,341
    
    
    
    8,072Total nonaccrual loans and leases
    
    
    123,366
    
    
    
    133,797
    
    
    
    170,002Other real estate owned and repossessed personal property
    
    
    16,993
    
    
    
    17,387
    
    
    
    18,050Total nonperforming assets
    
    $
    140,359
    
    
    $
    151,184
    
    
    $
    188,052Past due loans and leases (1):Commercial, financial and agricultural
    
    $
    18,082
    
    
    $
    17,545
    
    
    $
    7,713Real estate:Commercial
    
    
    7,912
    
    
    
    7,410
    
    
    
    6,820Construction
    
    
    
    
    
    
    
    
    
    
    907Residential
    
    
    796
    
    
    
    1,084
    
    
    
    3,448Total real estate loans
    
    
    8,708
    
    
    
    8,494
    
    
    
    11,175Consumer
    
    
    1,859
    
    
    
    2,559
    
    
    
    1,769Lease financing
    
    
    
    
    
    
    127
    
    
    
    4Foreign
    
    
    192
    
    
    
    651
    
    
    
    7Total past due loans and leases
    
    $
    28,841
    
    
    $
    29,376
    
    
    $
    20,668Accruing Restructured Loans:Commercial, financial and agricultural
    
    $
    48
    
    
    $
    60
    
    
    $
    64Real estate:Commercial
    
    
    436
    
    
    
    1,616
    
    
    
    2,046Total real estate loans
    
    
    436
    
    
    
    1,616
    
    
    
    2,046Total accruing restructured loans and leases
    
    $
    484
    
    
    $
    1,676
    
    
    $
    2,110Nonperforming assets to total loans and leases and other real estate owned and
repossessed personal property (end of period):Excluding past due loans and leases
    
    
    0.52
    %
    
    
    0.59
    %
    
    
    0.75
    %Including past due loans and leases
    
    
    0.62
    
    
    
    0.70
    
    
    
    0.83Nonperforming assets to total assets (end of period):Excluding past due loans and leases
    
    
    0.35
    
    
    
    0.39
    
    
    
    0.52Including past due loans and leases
    
    
    0.42
    
    
    
    0.47
    
    
    
    0.57
   (1)
    
    Represents loans and leases which are past due 90 days or more as to
principal or interest, are still accruing interest, are adequately
collateralized and in the process of collection. 35




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Nonperforming assets at June 30, 2004 decreased by $47.7 million, or
25.4%, from June 30, 2003 and decreased $10.8 million, or 7.2%, from December
31, 2003. The decrease in nonaccrual loans from the previous year was primarily
due to resolution of problem relationships in commercial lending and decreases
in nonaccrual real estate loans and lease financing. Foreign nonperforming
assets decreased at June 30, 2004 by $2.7 million, or 33.3%, from June 30,
2003. We generally place a loan or lease on nonaccrual status when we believe
that collection of principal or interest has become doubtful or when loans and
leases are 90 days past due as to principal or interest, unless they are well
secured and in the process of collection. We may make an exception to the
general 90-day-past-due rule when the fair value of the collateral exceeds our
recorded investment in the loan. While the majority of consumer loans and leases are subject to our general
policies regarding nonaccrual loans, certain past-due consumer loans
and leases are not placed on nonaccrual status because they are charged off
upon reaching a predetermined delinquency status varying from 120 to 180 days,
depending on product type. When we place a loan or lease on nonaccrual status, previously accrued and
uncollected interest is reversed against interest income of the current period.
When we receive a cash interest payment on a nonaccrual loan, we apply it as a
reduction of the principal balance when we have doubts about the ultimate
collection of the principal. Otherwise, we record such payments as income. Nonaccrual loans and leases are generally returned to accrual status when
they: (1) become current as to principal and interest and have demonstrated a
sustained period of payment performance or (2) become both well secured and in
the process of collection. Loans past due 90 days or more and still accruing interest totaled $28.8
million at June 30, 2004, a decrease of $535 thousand or 1.8%, from December
31, 2003, but increased $8.2 million, or 39.5%, from June 30, 2003. The
decrease at June 30, 2004 compared with December 31, 2003 was primarily due to
consumer and foreign loans partially offset by an increase in commercial,
financial and agricultural loans. The increase at June 30, 2004 compared with
June 30, 2003 was due to commercial, financial and agricultural loans,
partially offset by a decrease in past due real estate loans. All of the loans
that are past due 90 days or more and still accruing interest are, in our
judgment, adequately collateralized and in the process of collection. 36




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES The following table sets forth the activity in the allowance for loan and
lease losses for the periods indicated: Three Months Ended June 30,
    
    Six Months Ended June 30,2004
    
    2003
    
    2004
    
    2003(Dollars in thousands)Loans and leases outstanding (end of period)
    
    $
    27,189,823
    
    
    $
    25,008,420
    
    
    $
    27,189,823
    
    
    $
    25,008,420Allowance for loan and lease losses:Balance at beginning of period
    
    $
    396,487
    
    
    $
    396,049
    
    
    $
    391,699
    
    
    $
    384,081Provision for loan and lease losses
    
    
    11,900
    
    
    
    18,860
    
    
    
    30,765
    
    
    
    41,550Loans and leases charged off:Commercial, financial and agricultural
    
    
    2,179
    
    
    
    10,612
    
    
    
    4,316
    
    
    
    19,869Real estate:Commercial
    
    
    796
    
    
    
    931
    
    
    
    1,089
    
    
    
    1,054Residential
    
    
    54
    
    
    
    226
    
    
    
    74
    
    
    
    596Consumer
    
    
    13,552
    
    
    
    13,809
    
    
    
    27,066
    
    
    
    29,112Lease financing
    
    
    4,041
    
    
    
    7,014
    
    
    
    9,485
    
    
    
    13,097Foreign
    
    
    440
    
    
    
    518
    
    
    
    1,171
    
    
    
    1,359Total loans and leases charged off
    
    
    21,062
    
    
    
    33,110
    
    
    
    43,201
    
    
    
    65,087Recoveries on loans and leases previously charged off:Commercial, financial and agricultural
    
    
    2,418
    
    
    
    4,429
    
    
    
    4,873
    
    
    
    20,861Real estate:Commercial
    
    
    54
    
    
    
    111
    
    
    
    180
    
    
    
    202Construction
    
    
    34
    
    
    
    30
    
    
    
    68
    
    
    
    64Residential
    
    
    277
    
    
    
    312
    
    
    
    476
    
    
    
    608Consumer
    
    
    3,371
    
    
    
    3,164
    
    
    
    6,610
    
    
    
    5,911Lease financing
    
    
    2,513
    
    
    
    1,451
    
    
    
    4,278
    
    
    
    2,994Foreign
    
    
    109
    
    
    
    222
    
    
    
    353
    
    
    
    334Total recoveries on loans and leases previously charged off
    
    
    8,776
    
    
    
    9,719
    
    
    
    16,838
    
    
    
    30,974Net charge-offs
    
    
    (12,286
    )
    
    
    (23,391
    )
    
    
    (26,363
    )
    
    
    (34,113
    )Balance at end of period
    
    $
    396,101
    
    
    $
    391,518
    
    
    $
    396,101
    
    
    $
    391,518Net loans and leases charged off to average loans and leases (1)
    
    
    0.18
    %
    
    
    0.38
    %
    
    
    0.20
    %
    
    
    0.28
    %Net loans and leases charged off to allowance for loan and
lease losses (1)
    
    
    12.48
    
    
    
    23.96
    
    
    
    13.38
    
    
    
    17.57Allowance for loan and lease losses to total loans and
leases (end of period)
    
    
    1.46
    
    
    
    1.57
    
    
    
    1.46
    
    
    
    1.57Allowance for loan and lease losses to nonaccruing loans and
leases (end of period):Excluding 90 days past due accruing loans and leases
    
    
    3.21x
    
    
    
    2.30x
    
    
    
    3.21x
    
    
    
    2.30xIncluding 90 days past due accruing loans and leases
    
    
    2.60x
    
    
    
    2.05x
    
    
    
    2.60x
    
    
    
    2.05x
   (1)
    
    Annualized. The provision for loan and lease losses is based upon our judgment as to
the adequacy of the allowance for loan and lease losses (the Allowance) to
absorb probable losses inherent in the portfolio as of the balance sheet date.
The Company uses a systematic methodology to determine the adequacy of the
Allowance and related provision for loan and lease losses to be reported for
financial statement purposes. The determination of the adequacy of the
Allowance is ultimately one of judgment, which includes consideration of many
factors, including, among other things, the amount of problem and potential
problem loans and leases, net charge-off experience, changes in the composition
of the loan and lease portfolio by type and location of loans and leases and in
overall loan and lease risk profile and quality, general economic factors and
the fair value of collateral. Our approach to managing exposure to credit risk involves an integrated
program of setting appropriate standards for credit underwriting and
diversification, monitoring trends that may affect the risk profile of the
credit portfolio and making appropriate adjustments to reflect changes in
economic and financial conditions that could affect the quality of the
portfolio and loss probability. The components of this integrated program
include: 37




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued)  
    
    Setting Underwriting and Grading Standards.Our loan grading system uses ten different principal risk categories where 1 is
no risk and 10 is loss. We continue efforts to decrease our exposure to customers in the weaker credit categories. The
cost of credit risk is an integral part of the pricing and evaluation of credit decisions and the setting of portfolio
targets.
    
    Diversification.We actively manage our credit portfolio to avoid excessive concentration by obligor, risk grade, industry,
product and geographic location. As part of this process, we also monitor changes in risk correlation among concentration
categories. In addition, we seek to reduce our exposure to concentrations by actively participating portions of our
commercial and commercial real estate loans to other banks.
    
    Risk Mitigation.We manage our exposure to higher risk
areas through application of prudent underwriting polices.
    
    Participation in Syndicated National Credits.In addition to providing back-up commercial paper facilities to primarily
investment-grade companies, we participate in media finance credits in the national market. At June 30, 2004, there were
no shared national credits which were nonperforming. We are in the process of decreasing our participation in syndicated
national credits as part of a planned reduction.
    
    Emphasis on Consumer Lending.Consumer loans represent our single largest category of loans and leases. We focus our
consumer lending activities on loan grades with what we believe are predictable loss rates. As a result, we are able to use
formula-based approaches to calculate appropriate reserve levels that reflect historical loss experience. We generally do
not participate in subprime lending activities. We also seek to reduce our credit exposures where feasible by obtaining
third-party insurance or similar protections. For example, in our vehicle finance lease portfolio (which represents
approximately 45.8% of our lease financing portfolio and 9.8% of our combined lease financing and consumer loans at June
30, 2004), we obtain third-party insurance for the estimated residual value of the leased vehicle, and set aside reserves
to cover the uninsured portion. Compared with the same period a year ago, net charge-offs were $7.8
million lower in the six months ended June 30, 2004. While an improvement in
credit quality resulted in lower charge-offs, primarily in the commercial,
financial and agricultural category, recoveries were higher in 2003. This was
the result of a $13.6 million dispute resolution with UFJ Bank Ltd. of Japan in
conjunction with charge-offs that were disputed during the acquisition of
United California Bank in 2002. See Note 2 to the Consolidated Financial
Statements in the 2003 Form 10-K for further information. In our judgment, the Allowance was adequate to absorb losses inherent in
the loan and lease portfolio at June 30, 2004. However, changes in prevailing
economic conditions in our markets could result in changes in the level of
nonperforming assets and charge-offs in the future and, accordingly, changes in
the Allowance. We will continue to closely monitor economic developments and
make necessary adjustments to the Allowance accordingly. 
 DEPOSITS Deposits are the largest component of our total liabilities and account
for 44.7% of total interest expense during the quarter ended June 30, 2004. At
June 30, 2004, total deposits were $28.0 billion, an increase of 6.0% over
December 31, 2003 and an increase of 11.7% over June 30, 2003. The increase was
primarily due to the growth in our customer deposit base, primarily in Bank of
the West. The decrease in all of the rates paid on deposits reflects the lower
interest rate environment. Additional information on our average deposit
balances and rates paid is provided in Table 1: Average Balances, Interest
Income and Expense, and Yields and Rates (Taxable-Equivalent Basis). 38




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 CAPITAL Stockholders equity totaled $4.4 billion at June 30, 2004, an increase of
$168.1 million, or 3.9%, from December 31, 2003 and $343.4 million, or 8.4%,
from June 30, 2003. The increases were primarily due to net income earned by
the Company during the first six months of 2004, partially offset by net
unrealized losses on securities available-for-sale and cash flow hedges. Capital adequacy regulations require the Companys depository institution
subsidiaries to maintain minimum amounts of Tier 1 Capital and Total Capital
and minimum ratios of Tier 1 Capital and Total Capital to risk-weighted assets,
respectively, and of Tier 1 Capital to average assets (leverage). These amounts
and ratios as of June 30, 2004 are set forth below: To Be WellCapitalizedUnder PromptFor Required
    
    Corrective ActionActual
    
    Minimum Capital
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Tier 1 Capital to Risk-WeightedAssets:Bank of the West
    
    $
    2,661,031
    
    
    
    10.80
    %
    
    $
    985,571
    
    
    
    4.00
    %
    
    $
    1,478,357
    
    
    
    6.00
    %First Hawaiian Bank
    
    
    905,543
    
    
    
    13.32
    
    
    
    272,004
    
    
    
    4.00
    
    
    
    408,007
    
    
    
    6.00Total Capital to Risk-WeightedAssets:Bank of the West
    
    $
    3,194,087
    
    
    
    12.96
    %
    
    $
    1,971,142
    
    
    
    8.00
    %
    
    $
    2,463,928
    
    
    
    10.00
    %First Hawaiian Bank
    
    
    1,062,287
    
    
    
    15.62
    
    
    
    544,009
    
    
    
    8.00
    
    
    
    680,011
    
    
    
    10.00Tier 1 Capital to AverageAssets:Bank of the West
    
    $
    2,661,031
    
    
    
    9.56
    %
    
    $
    1,113,402
    
    
    
    4.00
    %
    
    $
    1,391,752
    
    
    
    5.00
    %First Hawaiian Bank
    
    
    905,543
    
    
    
    10.31
    
    
    
    351,250
    
    
    
    4.00
    
    
    
    439,062
    
    
    
    5.00
 We elected to become a financial holding company in 2001. Because of this
election, only our depository institution subsidiaries are subject to various
regulatory capital requirements administered by the Federal banking agencies.
If these subsidiaries fail to meet minimum capital requirements, the Federal
agencies can initiate certain mandatory actions. Such regulatory actions could
have a material effect on the Companys financial statements. Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, our depository institution subsidiaries must each meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. These capital amounts and classifications are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors. 
 INCOME TAXES Our effective income tax rate (exclusive of the tax equivalent adjustment)
for the six months ended June 30, 2004 and 2003 was 38.9% and 38.3%,
respectively. Lease-in/lease-out (LILO) transactions have recently been subject to
review on a nationwide basis by the Internal Revenue Service (IRS) to determine
whether the tax deductions connected with such transactions are allowable for
U.S. federal income tax purposes. The Company has entered into several LILO
transactions, which have been the subject of an audit by the IRS. In April
2004, the Company received a Revenue Agents Report (RAR) which disallowed all
deductions associated with the LILO transactions. In order to avoid potential
future interest and penalties, the Company has paid, under protest, the
amounts claimed by the IRS and other tax authorities in the RAR. The Company
continues to believe that it properly reported its LILO transactions and will
contest the results of the IRSs audit. At the present time, the Company
cannot predict the outcome of this issue. 39




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 LIQUIDITY MANAGEMENT Liquidity refers to our ability to provide sufficient short- and long-term
cash flows to fund operations and to meet obligations and commitments,
including depositor withdrawals and debt service, on a timely basis at
reasonable costs. We achieve our liquidity objectives with both assets and
liabilities. Further, while liquidity positions are managed separately by the
Company and its two subsidiary banks, both short-term and long-term activities
are coordinated between the two subsidiary banks. We obtain short-term, asset-based liquidity through our investment
securities portfolio and short-term investments which can be readily converted
to cash. These liquid assets consist of cash and due from banks,
interest-bearing deposits in other banks, federal funds sold, trading assets,
securities purchased under agreements to resell, securities available for sale
and loans held for sale. Such assets represented 20.1% of total assets at June
30, 2004, compared with 20.9% at December 31, 2003 and 19.2% at June 30, 2003. Intermediate- and longer-term asset liquidity is primarily provided by
regularly scheduled maturities and cash flows from our loans and investment
securities. Additional liquidity is available from certain assets that can be
sold, securitized or used as collateral for borrowings from the Federal Home
Loan Bank such as consumer and mortgage loans. We obtain short-term, liability-based liquidity primarily from deposits.
Average total deposits for the six months ended June 30, 2004 increased by
10.5% to $26.8 billion, primarily due to continued expansion of our customer
base in the Western United States. Average total deposits funded 68.9% and
69.4% of average assets for the six months ended June 30, 2004 and the year
ended December 31, 2003, respectively. We also obtain short-term and long-term liquidity from ready access to
regional and national wholesale funding sources, including purchasing federal
funds, selling securities under agreements to repurchase, lines of credit from
other banks and credit facilities from the Federal Home Loan Bank. The
following table reflects immediately available borrowing capacity at the
Federal Reserve Discount Window and the Federal Home Loan Bank and securities
available for selling under repurchase agreements: June 30,2004
    
    2003(in millions)Federal Reserve Discount Window
    
    $
    618
    
    
    $
    493Federal Home Loan Bank
    
    
    1,752
    
    
    
    1,058Securities Available for Repurchase Agreements
    
    
    3,016
    
    
    
    2,573Total
    
    $
    5,386
    
    
    $
    4,124
 Offshore deposits in the international market provide another available
source of funds. Funds taken in the intermediate- and longer-term markets are structured to
avoid concentration of maturities and to reduce refinancing risk. We also
attempt to diversify the types of instruments issued to avoid undue reliance on
any one market or funding source. Liquidity for the parent company is primarily provided by dividend and
interest income from its subsidiaries. Short-term cash requirements are met
through liquidation of short-term investments. Longer-term liquidity is
provided by access to the capital markets or from transactions with our parent
company, BNP Paribas. Our ability to pay dividends depends primarily upon dividends and other
payments from our subsidiaries, which are subject to certain limitations as
described in Note 16 to the Audited Consolidated Financial Statements included
in the Companys 2003 Annual Report on Form 10-K. 40




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) Our borrowing costs and ability to raise funds are a function of our
credit ratings and any change in those ratings. The following table reflects
the ratings of Bank of the West and First Hawaiian Bank as of June 30, 2004: Bank of the West/First Hawaiian BankShort-Term Deposit
    
    Long-Term DepositMoodys
    
    P-1
    
    Aa3S & P
    
    A-1
    
    A+Fitch, Inc.
    
    F1+
    
    AA-
 Cash Flows The following is a summary of our cash flows for the six months ended June
30, 2004 and 2003. (There is more detail in the Consolidated Statements of Cash
Flows.) Six Months Ended June 30,2004
    
    2003(in thousands)Net cash used in investing activities
    
    $
    1,959,751
    
    
    $
    2,103,944Net cash provided by operating and
financing activities
    
    $
    2,003,970
    
    
    $
    1,753,084
 The increase in cash and cash equivalents in the first six months of 2004
was primarily due to an increase in deposits. 
 RECENT ACCOUNTING STANDARDS We have adopted numerous new or modifications to existing standards, rules
or regulations promulgated by various standard setting and regulatory bodies.
Chief among these are the federal financial institutions regulators, the SEC
and the FASB. The following section highlights important developments in the
area of accounting and disclosure requirements. This discussion is not intended
to be a comprehensive listing of the impact of all standards and rules adopted. In
June 2004, the Emerging Issues Task Force published EITF 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments(EITF 03-1). EITF 03-1 clarifies the impairment methodology used
to determine when an investment is considered impaired, whether that impairment
is other than temporary, and the measurement of an impairment loss. The
guidance includes accounting considerations subsequent to the recognition of an
other-than-temporary impairment and requires certain disclosures about
unrealized losses that have not been recognized as other-than-temporary
impairments. EITF 03-1 applies to all investments accounted for in accordance
with the provisions of SFAS 115, certain debt and equity securities within the
scope of Statement 124, and equity securities that are not subject to the scope
of Statement 115 and not accounted for under the equity method of accounting.
We currently conduct quarterly impairment evaluations in accordance with the
recognition and guidance of EITF 03-1. On March 9, 2004 the SEC released a Staff Accounting Bulletin: No. 105,
Application of Accounting Principles to Loan Commitments (SAB 105), which
provides guidance pertaining to interest rate locks of loan commitments
accounted for as derivative instruments. It states that cash flows pertaining
to mortgage servicing should not be included in the value of the derivative.
We account for such rate locks in accordance with SAB 105. In December 2003, the Accounting Standards Executive Committee of the
AICPA issued Statement of Position No. 03-3 (SOP 03-3), Accounting for
Certain Loans or Debt Securities Acquired in a Transfer. SOP 03-3 addresses the
accounting for differences between the contractual cash flows and the cash
flows expected to be collected from purchased loans or debt securities if those
differences are attributable, in part, to credit quality. SOP 03-3 requires
purchased loans and debt securities to be recorded initially at fair value
based on the present value of the cash flows expected to be collected with no
carryover of any valuation allowance previously recognized by the seller.
Interest income should be recognized based on the effective yield from the cash
flows expected to be collected. To the extent that the purchased loans
experience subsequent deterioration in credit quality, a valuation allowance
would be established for any additional cash flows that are not expected to be
received. However, if more cash flows 41




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BancWest Corporation and Subsidiaries
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Continued) subsequently are expected to be received than originally estimated, the
effective yield would be adjusted on a prospective basis. SOP 03-3 will be
effective for loans and debt securities acquired after December 31, 2004. The
Company anticipates that the implementation of SOP 03-3 will require
significant loan system and operational changes to track credit related losses
on loans purchased starting in 2005. We are still assessing the impact it will
have on the Consolidated Financial Statements. In December 2003, the Financial Accounting Standards Board (FASB) issued
SFAS No. 132 (revised 2003) Employers Disclosures about Pensions and Other
Postretirement Benefits(SFAS 132 (revised 2003)), an amendment of FASB
Statements No. 87, Employers Accounting for Pensions,No. 88, Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits,and No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions. This Statement retains the
disclosure requirements contained in FASB Statement No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits,which it
replaces. It requires additional disclosures to those in the original
Statement 132 about describing the types of plan assets, investment strategy,
measurement date(s), plan obligations, cash flows, and net periodic benefit
cost of defined benefit pension plans and other defined benefit postretirement
plans. This Statement amends APB Opinion No. 28, Interim Financial Reporting,
to require interim-period disclosure of the components of net periodic benefit
cost and, if significantly different from previously disclosed amounts, the
amounts of contributions and projected contributions to fund pension plans and
other postretirement benefit plans. This Statement is effective for fiscal
years ending after December 15, 2003. The interim-period disclosures required
by this Statement are effective for interim periods beginning after December
15, 2003. Disclosure of information about foreign plans and estimated future
benefit payments required by SFAS 132 (revised 2003) shall be effective for
fiscal years ending after June 15, 2004. The adoption of SFAS 132 (revised
2003) required enhanced disclosure and did not impact our consolidated
financial statements. On December 8, 2003 President Bush signed the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the Act). The Act introduces a
prescription drug benefit under Medicare as well as a federal subsidy to plan
sponsors that provide a benefit that is at least equivalent to Medicare. On
May 19, 2004, the Financial Accounting Standards Board (FASB) issued staff
Position 106-2, Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003.At this time,
the net periodic postretirement benefit cost in the financial statements does
not reflect the effects of the Act on our postretirement health care plans
because the Company has not concluded whether the benefits provided by the plan
are actuarially equivalent to Medicare Part D under the Act. 42




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##### Table of Contents



BancWest Corporation and Subsidiaries
QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Measurement and Management Interest rate risk, one of the leading risks in terms of potential
earnings impact, is an essential element of being a financial intermediary.
The Companys net interest income is subject to interest rate risk to the
extent our interest-bearing liabilities (primarily deposits and borrowings)
mature or reprice on a different basis than its interest-earning assets
(primarily loans and leases and investment securities). When interest-bearing
liabilities mature or reprice more quickly than interest-earning assets during
a given period, an increase in interest rates could reduce net interest income.
Similarly, when interest-earning assets mature or reprice more quickly than
interest-bearing liabilities, a decrease in interest rates could have a
negative impact on net interest income. In addition, the impact of interest
rate swings may be exacerbated by factors such as our customers propensity to
manage their demand deposit balances more or less aggressively or to refinance
mortgage and other consumer loans depending on the interest rate environment.
Short and long-term market rates may change independent of each other resulting
in changes to the slope and absolute level of the yield curve. The Asset/Liability Committees of the Company and our major subsidiaries
are responsible for managing interest rate risk. The Asset/Liability Committees
generally meet monthly or quarterly. The committees may recommend changes to a
particular subsidiarys interest rate profile to their respective Board of
Directors, should changes be necessary and depart significantly from
established policies. Our exposure to interest rate risk is managed primarily by taking actions
that impact certain balance sheet accounts (e.g., lengthening or shortening
maturities in the investment portfolio, changing asset and/or liability mix -
including increasing or decreasing the amount of fixed and/or variable
instruments held by the Corporation  to adjust sensitivity to interest rate
changes) and/or utilizing instruments such as interest rate swaps, caps,
floors, options or forwards. Derivatives entered into for trading purposes include commitments to
purchase and sell foreign currencies as well as certain interest rate swaps and
options. We also enter into customer accommodation interest rate swaps and
foreign exchange spot and forward contracts as well as contracts to offset
either the customers counter-position or our foreign currency denominated
deposits. These contracts basically offset each other and they do not expose
us to material losses resulting from interest rate or foreign currency
fluctuations. The Company and its subsidiaries use computer simulation models to
evaluate net interest income in order to quantify exposure to changes in
interest rates. Generally, we use a dynamic modeling method which
projects balance sheet growth which is then subjected to interest rate shocks up in 100-basis-point
increments and down in a 50 basis-point increment. Each account-level item is
repriced according to its respective contractual characteristics, including any
embedded options which might exist (e.g., periodic interest rate caps or floors
or loans and leases which permit the borrower to prepay the principal balance
of the loan or lease prior to maturity without penalty). Derivative financial
instruments such as interest rate swaps, caps or floors are included as part of
the modeling process. For each interest rate shock scenario, net interest
income over a 12-month horizon is compared against the results of a scenario in
which no interest rate change occurs (flat rate scenario) to determine the
level of interest rate risk at that time. The projected impact of incremental increases and a 50 basis-point
decrease in interest rates on the projected Companys consolidated net interest
income over the 12 months beginning July 1, 2004 is shown below. +3%
    
    +2%
    
    +1%
    
    Flat
    
    -0.5%(Dollars in millions)Net interest income
    
    
    1,312.7
    
    
    
    1,336.7
    
    
    
    1,350.4
    
    
    
    1,344.1
    
    
    
    1,337.1Difference from flat
    
    
    (31.4
    )
    
    
    (7.4
    )
    
    
    6.3
    
    
    
    
    
    
    
    (7.0
    )% variance
    
    
    (2.3
    )%
    
    
    (0.6
    )%
    
    
    0.5
    %
    
    
    
    %
    
    
    (0.5
    )%
 Because of the absolute low level of interest rates in 2004, modeling a
200 and 100-basis-point decrease was deemed impractical. The changes in the
models are due to differences in interest rate environments which include the
absolute level of interest rates, the shape of the yield curve, and spreads
between various benchmark rates. 43




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##### Table of Contents



BancWest Corporation and Subsidiaries
QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued) Significant Assumptions Utilized and Inherent Limitations The significant net interest income changes for each interest rate
scenario presented above include assumptions based on accelerating or
decelerating mortgage and non-mortgage consumer loan prepayments in declining
or rising scenarios, respectively, and adjusting deposit levels and mix in the
different interest rate scenarios. The magnitude of changes to both areas in
turn are based upon analyses of customers behavior in differing rate
environments. However, these analyses may differ from actual future customer
behavior. For example, actual prepayments may differ from current assumptions
as prepayments are affected by many variables which cannot be predicted with
certainty (e.g., prepayments of mortgages may differ on fixed and adjustable
loans depending upon current interest rates, expectations of future interest
rates, availability of refinancing, economic benefit to borrower, financial
viability of borrower, etc.). As with any model for analyzing interest rate risk, certain limitations
are inherent in the method of analysis presented above. For example, the actual
impact on net interest income due to certain interest rate shocks may differ
from those projections presented should market conditions vary from assumptions
used in the analysis. Furthermore, the analysis does not consider the effects
of a changed level of overall economic activity that could exist in certain
interest rate environments. Moreover, the method of analysis used does not take
into account the actions that management might take to respond to changes in
interest rates because of inherent difficulties in determining the likelihood
or impact of any such response. The following estimated net fair value amounts of interest rate
derivatives held for trading purposes have been determined by the Company using
available market information and appropriate valuation methodologies: June 30, 2004Maturity RangeGrossNet Fair
    
    Positive
    
    Notional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AfterInterest Rate Contracts
    
    Value
    
    Value
    
    Amount
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    2008(Dollars in thousands)Pay-Fixed Swaps:Contractual Maturities
    
    $
    4,550
    
    
    $
    10,405
    
    
    $
    614,317
    
    
    $
    3,415
    
    
    $
    105,585
    
    
    $
    25,638
    
    
    $
    29,836
    
    
    $
    87,996
    
    
    $
    361,847Weighted Avg. Pay Rates
    
    
    
    
    
    
    
    
    
    
    4.50
    
    
    
    4.34
    
    
    
    3.66
    
    
    
    4.78
    
    
    
    5.01
    
    
    
    4.08
    
    
    
    4.64Weighted Avg. Receive Rates
    
    
    
    
    
    
    
    
    
    
    1.49
    
    
    
    1.01
    
    
    
    1.35
    
    
    
    1.84
    
    
    
    1.78
    
    
    
    1.67
    
    
    
    1.26Receive-Fixed Swaps:Contractual Maturities
    
    
    1,195
    
    
    
    7,344
    
    
    
    614,317
    
    
    
    3,415
    
    
    
    105,585
    
    
    
    25,638
    
    
    
    29,836
    
    
    
    87,996
    
    
    
    361,847Weighted Avg. Pay Rates
    
    
    
    
    
    
    
    
    
    
    1.46
    
    
    
    1.26
    
    
    
    1.37
    
    
    
    1.92
    
    
    
    1.82
    
    
    
    1.67
    
    
    
    1.33Weighted Avg. Receive
Rates
    
    
    
    
    
    
    
    
    
    
    4.86
    
    
    
    4.79
    
    
    
    3.97
    
    
    
    5.03
    
    
    
    5.30
    
    
    
    4.46
    
    
    
    5.10Pay-Fixed Swaps(Forward
Value Dated):Contractual Maturities
    
    
    (115
    )
    
    
    217
    
    
    
    46,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,871Weighted Avg. Pay Rates
    
    
    
    
    
    
    
    
    
    
    4.68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.68Weighted Avg. Receive Rates
    
    
    
    
    
    
    
    
    
    
    1.32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.32Receive-Fixed Swaps(Forward
Value Dated):Contractual Maturities
    
    
    1,424
    
    
    
    1,424
    
    
    
    46,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,871Weighted Avg. Pay Rates
    
    
    
    
    
    
    
    
    
    
    1.46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.68Weighted Avg. Receive Rates
    
    
    
    
    
    
    
    
    
    
    5.02
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.02Caps/Collars:Contractual Maturities
    
    
    
    
    
    
    101
    
    
    
    164,196
    
    
    
    16,125
    
    
    
    45,176
    
    
    
    102,895
    
    
    
    
    
    
    
    
    
    
    
    Weighted Avg. Strike Rates
    
    
    
    
    
    
    
    
    
    
    6.72
    
    
    
    6.90
    
    
    
    5.86
    
    
    
    7.28
    
    
    
    
    
    
    
    
    
    
    
    Weighted Floor Rates
    
    
    
    
    
    
    
    
    
    
    3.38
    
    
    
    3.38
    
    
    
    3.38
    
    
    
    3.38
    
    
    
    
    
    
    
    
    
    
    
    Total interest rate contracts
held for trading purposes
    
    $
    7,054
    
    
    $
    19,491
    
    
    $
    1,486,572
 44




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BancWest Corporation and Subsidiaries
CONTROLS AND PROCEDURES Item 4. Controls and Procedures As of the filing date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Companys
management, including the Companys chairman and chief executive officer and
its chief financial officer, of the effectiveness of the design and operation
of the Companys disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, its chairman and chief executive
officer and its chief financial officer concluded that the Companys disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Companys periodic SEC filings. There were no significant changes in the Companys internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their most recent evaluation. 45




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##### Table of Contents



BancWest Corporation and Subsidiaries
OTHER INFORMATION 
 PART II. OTHER INFORMATION 
 Item 4. Submission of Matters to a Vote of Security Holders Effective April 15, 2004, BNP Paribas executed consent resolutions
re-electing all members of the board of directors and re-electing
PricewaterhouseCoopers as the Companys Independent Registered Public
Accounting Firm. Also on April 15, 2004, the Companys board of directors adopted
resolutions that increased the number of directors from 19 to 20 and elected
General Eric K. Shinseki as a director. During April 2004, the Companys shareholders executed consent
resolutions approving the merger agreement for the Companys proposed
acquisition of Community First Bankshares, Inc., effective March 15, 2004. 
 Item 6. Exhibits and Reports on Form 8-K The Exhibits listed below are filed or incorporated by reference as part of
this Report. (a)
    
    Exhibits12
    
    
    Statement regarding computation of ratios.31
    
    
    Section 302 Certifications.32
    
    
    Section 1350 Certifications.(b)
    
    Reports on Form 8-K
    
    On April 14, 2004, the Company filed a Report on Form 8-K that
provided information under Items 7 and 12
concerning the Companys
financial results for the quarter ended March
31, 2004.On April 29, 2004, the Company filed a
Report on Form 8-K that
provided information under Items 5 and 7
concerning the Companys
definitive agreement to acquire USBD
Bancorp, parent company of
Union Safe Deposit Bank.
 46




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##### Table of Contents



BancWest Corporation and Subsidiaries
EXHIBITS AND REPORTS ON FORM 8-K 
 SIGNATURE Pursuant to the requirements 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. Date: August 12, 2004 BANCWEST CORPORATION
(Registrant)By              /s/ Douglas C. GrigsbyDouglas C. GrigsbyExecutive Vice President, Chief
Financial Officer and Treasurer
(principal financial officer) 47




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BancWest Corporation and Subsidiaries
EXHIBITS AND REPORTS ON FORM 8-K (Continued)  
 EXHIBIT INDEX Exhibit No.
    
    Exhibit12
    
    Statement regarding computation of ratios31
    
    Section 302 Certifications32
    
    Section 1350 Certifications
 48