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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549
   FORM 10-Q (Mark One) x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2004
 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from           to
 Commission file number 0-7949   BANCWEST CORPORATION    Delaware
    
    99-0156159(State of incorporation)
    
    (I.R.S. Employer Identification No.)999 Bishop Street, Honolulu, Hawaii
    
    96813(Address of principal executive offices)
    
    (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 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes    No Indicate by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act). Yes            No x As of April 30, 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
March 31, 2004 INDEX PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements(Unaudited)
    
    
    2Consolidated Statements of Income for the three months ended March 31, 2004 and 2003
    
    
    2Consolidated Balance Sheets at March 31, 2004, December 31, 2003 and March 31, 2003
    
    
    3Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income for the three months ended March 31, 2004 and 2003
    
    
    4Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003.
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Forward-Looking Statements
    
    
    17Overview
    
    
    18Monetary Policy and Economic Conditions
    
    
    19Critical Accounting Estimates
    
    
    19Consolidated Financial Highlights
    
    
    21Results of Operations
    
    
    22Net Interest Income
    
    
    22Noninterest Income
    
    
    24Noninterest Expense
    
    
    24Operating Segments
    
    
    25Investment Securities
    
    
    27Loans and Leases
    
    
    29Nonperforming Assets and Restructured Loans
    
    
    30Provision and Allowance for Loan and Lease Losses
    
    
    32Deposits
    
    
    33Capital
    
    
    33Income Taxes
    
    
    34Liquidity Management
    
    
    34Recent Accounting Standards
    
    
    36Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    40PART II. OTHER INFORMATIONItem 6. Exhibits and Reports on Form 8-K
    
    
    41SIGNATURE
    
    
    42CERTIFICATIONS
    
    
    44EXHIBIT INDEXEXHIBIT 2EXHIBIT 12EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  Exhibit 2   Agreement and Plan of Merger dated as of March 15, 2004 among
BancWest Corporation, BW Newco, Inc. and Community First
                  Bankshares, Inc. Exhibit 12   Statement Regarding Computation of Ratios Exhibit 31   Section 302 Certifications Exhibit 32   Section 1350 Certifications 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 BancWest Corporation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
 Three Months Ended March 31,2004
    
    2003(in thousands)Interest incomeLoans
    
    $
    332,576
    
    
    $
    338,259Lease financing
    
    
    31,180
    
    
    
    36,028Investment securities:Taxable
    
    
    51,871
    
    
    
    41,506Exempt from Federal income taxes
    
    
    94
    
    
    
    154Other
    
    
    1,431
    
    
    
    1,529Total interest income
    
    
    417,152
    
    

    
    417,476Interest expenseDeposits
    
    
    43,436
    
    
    
    53,147Short-term borrowings
    
    
    5,413
    
    
    
    3,696Long-term debt
    
    
    47,277
    
    
    
    45,394Total interest expense
    
    
    96,126
    
    
    
    102,237Net interest income
    
    
    321,026
    
    
    
    315,239Provision for loan and lease losses
    
    
    18,865
    
    
    
    22,690Net interest income after provision for
loan and lease losses
    
    
    302,161
    
    
    
    292,549Noninterest incomeService charges on deposit accounts
    
    
    40,829
    
    
    
    37,029Trust and investment services income
    
    
    10,302
    
    
    
    9,507Other service charges and fees
    
    
    38,026
    
    
    
    31,655Securities gains, net
    
    
    367
    
    
    
    1,892Other
    
    
    11,914
    
    
    
    14,751Total noninterest income
    
    
    101,438
    
    
    
    94,834Noninterest expenseSalaries and wages
    
    
    83,455
    
    
    
    84,662Employee benefits
    
    
    36,237
    
    
    
    37,646Occupancy
    
    
    21,615
    
    
    
    22,320Outside services
    
    
    18,261
    
    
    
    17,567Intangible amortization
    
    
    5,763
    
    
    
    5,763Equipment
    
    
    12,133
    
    
    
    11,156Other
    
    
    41,418
    
    
    
    41,546Total noninterest expense
    
    
    218,882
    
    
    
    220,660Income before income taxes
    
    
    184,717
    
    
    
    166,723Provision for income taxes
    
    
    71,665
    
    
    
    64,642Net income

    
    $
    113,052
    
    
    $
    102,081
 The accompanying notes are an integral part of these consolidated financial
statements. 2




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##### Table of Contents



BancWest Corporation and Subsidiaries 
 CONSOLIDATED BALANCE SHEETS
 March 31, 2004
    
    December 31, 2003
    
    March 31, 2003(Dollars in thousands, except per share data)AssetsCash and due from banks
    
    $
    1,328,783
    
    
    $
    1,538,004
    
    
    $
    1,587,513Interest-bearing deposits in other banks
    
    
    309,198
    
    
    
    189,687
    
    
    
    166,680Federal funds sold and securities purchased under
agreements to resell
    
    
    469,998
    
    
    
    444,100
    
    
    
    110,000Trading assets
    
    
    10,043
    
    
    
    19,109
    
    
    
    67,042Investment securities available-for-sale
    
    
    6,030,393
    
    
    
    5,927,762
    
    
    
    4,528,484Loans held for sale
    
    
    62,646
    
    
    
    51,007
    
    
    
    82,563Loans and leases:Loans and leases
    
    
    26,229,432
    
    
    
    25,722,079
    
    
    
    24,056,267Less allowance for loan and lease losses
    
    
    396,487
    
    
    
    391,699
    
    
    
    396,049Net loans and leases
    
    
    25,832,945
    
    
    
    25,330,380
    
    
    
    23,660,218Premises and equipment, net
    
    
    528,652
    
    
    
    530,153
    
    
    
    378,985Operating lease equipment, net
    
    
    43,515
    
    
    
    
    
    
    
    Customers acceptance liability
    
    
    21,001
    
    
    
    30,078
    
    
    
    29,728Core deposit intangible, net
    
    
    181,593
    
    
    
    187,357
    
    
    
    204,647Goodwill
    
    
    3,228,371
    
    
    
    3,226,871
    
    
    
    3,226,829Other real estate owned and repossessed personal property
    
    
    15,571
    
    
    
    17,387
    
    
    
    18,544Other assets
    
    
    851,384
    
    
    
    860,320
    
    
    
    854,856Total assets
    
    $
    38,914,093
    
    
    $
    38,352,215
    
    
    $
    34,916,089Liabilities and Stockholders EquityDeposits:Domestic:Interest-bearing
    
    $
    17,584,115
    
    
    $
    17,738,246
    
    
    $
    16,645,026Noninterest-bearing
    
    
    7,617,332
    
    
    
    7,910,845
    
    
    
    6,986,600Foreign
    
    
    1,541,750
    
    
    
    754,026
    
    
    
    706,967Total deposits
    
    
    26,743,197
    
    
    
    26,403,117
    
    
    
    24,338,593Federal funds purchased and securities sold under
agreements to repurchase
    
    
    1,344,471
    
    
    
    1,174,877
    
    
    
    830,388Short-term borrowings
    
    
    970,000
    
    
    
    1,197,809
    
    
    
    949,012Acceptances outstanding
    
    
    21,001
    
    
    
    30,078
    
    
    
    29,728Long-term debt
    
    
    4,282,717
    
    
    
    4,221,025
    
    
    
    3,313,368Guaranteed preferred beneficial interests in Companys
junior subordinated debentures
    
    
    
    
    
    
    
    
    
    
    258,476Other liabilities
    
    
    1,154,885
    
    
    
    1,062,437
    
    
    
    1,227,705Total liabilities
    
    $
    34,516,271
    
    
    $
    34,089,343
    
    
    $
    30,947,270Commitments and contingent liabilitiesStockholders equity:Class A common stock, par value $.01 per shareAuthorized - 150,000,000 sharesIssued - 85,759,123 shares
    
    $
    858
    
    
    $
    858
    
    
    $
    858Surplus
    
    
    3,419,927
    
    
    
    3,419,927
    
    
    
    3,419,927Retained earnings
    
    
    919,250
    
    
    
    806,198
    
    
    
    471,715Accumulated other comprehensive income, net
    
    
    57,787
    
    
    
    35,889
    
    
    
    76,319Total stockholders equity
    
    
    4,397,822
    
    
    
    4,262,872
    
    
    
    3,968,819Total liabilities and stockholders equity
    
    $
    38,914,093
    
    
    $
    38,352,215
    
    
    $
    34,916,089
 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
 AccumulatedClass A
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    
    
    
    Retained
    
    ComprehensiveShares
    
    Amount
    
    Surplus
    
    Earnings
    
    Income, net
    
    Total(in thousands, except per share data)Balance, December 31, 2003
    
    
    85,759,123
    
    
    $
    858
    
    
    $
    3,419,927
    
    
    $
    806,198
    
    
    $
    35,889
    
    
    $
    4,262,872Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,052
    
    
    
    
    
    
    
    113,052Unrealized net gains on securities
available-for-sale arising during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,752
    
    
    
    24,752Reclassification of net realized gains on
securities available-for-sale included in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (367
    )
    
    
    (367
    )Unrealized net gains on cash flow derivative
hedges arising during the quarter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    646
    
    
    
    646Reclassification of net realized gains on cash
flow derivative hedges included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,133
    )
    
    
    (3,133
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,052
    
    
    
    21,898
    
    
    
    134,950Balance, March 31, 2004
    
    
    85,759,123
    
    
    $
    858
    
    
    $
    3,419,927
    
    
    $
    919,250
    
    
    $
    57,787
    
    
    $
    4,397,822Balance, December 31, 2002
    
    
    85,759,123
    
    
    $
    858
    
    
    $
    3,419,927
    
    
    $
    369,634
    
    
    $
    77,063
    
    
    $
    3,867,482Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,081
    
    
    
    
    
    
    
    102,081Unrealized net losses on securities
available-for-sale arising during the
period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (197

    )
    
    
    (197
    )Reclassification of net realized gains on
securities available-for-sale included in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,892
    )
    
    
    (1,892
    )Unrealized net gains on cash flow derivative
hedges arising during the quarter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,517
    
    
    
    3,517Reclassification of net realized gains on cash
flow derivative hedges included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,172
    )
    
    
    (2,172
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,081
    
    
    
    (744
    )
    
    
    101,337Balance, March 31, 2003
    
    
    85,759,123
    
    
    $
    858
    
    
    $
    3,419,927
    
    
    $
    471,715
    
    
    $
    76,319
    
    
    $
    3,968,819
 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
 Three Months Ended March 31,2004
    
    2003(in thousands)Cash flows from operating activities:Net income
    
    $
    113,052
    
    
    $
    102,081Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    16,504
    
    
    
    17,531Deferred income taxes
    
    
    1,205
    
    
    
    63,437Provision for loan and lease losses
    
    
    18,865
    
    
    
    22,690Decrease (increase) in trading assets
    
    
    9,066
    
    
    
    (23,612
    )Decrease (increase) in loans held for sale
    
    
    (11,639
    )
    
    
    2,711Gains realized on the sale of investment securities
    
    
    (367
    )
    
    
    (1,892
    )Decrease (increase) in interest receivable
    
    
    3,242
    
    
    
    (5,686
    )Increase in interest payable
    
    
    44,470
    
    
    
    24,981Decrease (increase) in prepaid expense
    
    
    (4,442
    )
    
    
    5,125Other
    
    
    36,723
    
    
    
    5,452Net cash provided by operating activities
    
    
    226,679
    
    
    
    212,818Cash flows from investing activities:Proceeds from maturity of available-for-sale investment securities
    
    
    453,616
    
    
    
    465,100Proceeds from the sale of available-for-sale securities
    
    
    56,372
    
    
    
    101,053Purchase of available-for-sale investment securities
    
    
    (570,754
    )
    
    
    (1,154,535
    )Proceeds from sale of loans
    
    
    83,026
    
    
    
    227,045Purchase of loans
    
    
    (439,608
    )
    
    
    (26,510
    )Net increase in loans and leases resulting from originations and collections
    
    
    (163,178
    )
    
    
    (118,592
    )Net increases in origination of vehicle operating leases
    
    
    (43,515
    )
    
    
    Purchase of premises and equipment
    
    
    (5,463
    )
    
    
    (8,003
    )Other
    
    
    (1,618
    )
    
    
    932Net cash used in investing activities
    
    
    (631,122
    )
    
    
    (513,510
    )Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    340,080
    
    
    
    (218,886
    )Net increase (decrease) in Federal funds purchased and securities sold
under agreements to repurchase
    
    
    169,594
    
    
    
    38,912Net increase (decrease) in short-term borrowings
    
    
    (227,809
    )
    
    
    215,738Proceeds from long-term debt
    
    
    200,000
    
    
    
    75,000Repayments on long-term debt
    
    
    (141,234
    )
    
    
    (139,294
    )Net cash provided by (used in) financing activities
    
    
    340,631
    
    
    
    (28,530
    )Net increase (decrease) in cash and cash equivalents
    
    
    (63,812
    )
    
    
    (329,222
    )Cash and cash equivalents at beginning of period
    
    
    2,171,791
    
    
    
    2,193,415Cash and cash equivalents at end of period
    
    $
    2,107,979
    
    
    $
    1,864,193Supplemental disclosures:Interest paid
    
    $
    51,656
    
    
    $
    77,256Income taxes paid
    
    $
    2,653
    
    
    $
    1,205Supplemental schedule of noncash investing and financing activities:Loans converted into other real estate owned and repossessed personal property
    
    $
    177
    
    
    $
    1,036Loans made to facilitate the sale of other real estate owned
    
    $
    33
    
    
    $
    216
 The accompanying notes are an integral part of these consolidated financial
statements. 5




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##### Table of Contents



BancWest Corporation and Subsidiaries 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  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. Basis of Presentation We have prepared the accompanying financial data for the three months
ended March 31, 2004 and 2003 pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying condensed consolidated
financial statements contain all normal and recurring adjustments necessary to
present fairly our condensed consolidated financial position as of March 31,
2004, December 31, 2003 and March 31, 2003, condensed consolidated results of
operations for the three months ended March 31, 2004 and 2003, and cash flows
activities for the three months ended March 31, 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 condensed
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 BancWest
Corporation and subsidiaries (BancWest, the Company or we/our) 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.
    
    Mergers and Acquisitions Community First 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). It is anticipated that the
purchase transaction will close in the third quarter of 2004, subject to
approval from Community First shareholders and federal and state banking
regulators. 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 in growing states will complement the Banks existing network
in California, Nevada, New Mexico and the Pacific Northwest. At March 31, 2004
CFB had total assets of $5.5 billion, total deposits of $4.4 billion and loans
of $3.3 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. 6




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##### Table of Contents



BancWest Corporation and Subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(Continued)  3.
    
    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 months ended March 31, 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 March 31, 2004, the Company carried an interest rate swap of
$2.7 million with a fair market value loss of $0.7 million that was categorized
as a fair value hedge for a commercial loan. The Company receives 1-month LIBOR
and pays a fixed rate of 8.32%. At March 31, 2003, the Company carried $2.8
million of such swaps with a fair market value loss of $0.8 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 BancWest Capital I. Following the adoption of FIN 46
(see Note 7), BancWest Capital I was deconsolidated, resulting in recognition of
$150 million 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 and a gain of $1.2 million at
March 31, 2004 and 2003, respectively. In addition, at March 31, 2004, the Company carried interest rate swaps
totaling $77.9 million with a market value loss of $6.7 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 March 31, 2003, the Company carried $126.6 million of such swaps
with a market value loss of $11.8 million. At March 31, 2004, the Company carried interest rate swaps and swaptions
totaling $8.6 million with a market value gain of $0.6 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 March
31, 2003, the Company carried $8.6 million of such swaps and swaptions with a
market value gain of $0.8 million. Cash Flow Hedges At March 31, 2004, the Company carried interest rate swaps of $600 million
with a fair market value gain of $48.3 million which are categorized as cash
flow hedges, to hedge our LIBOR-based commercial loans. The hedges had a fair
market value gain of $59.9 million at March 31, 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 $6.1 million
from January 1, 2004 through March 31, 2004 and by $5.8 million from January 1,
2003 through March 31, 2003. The Company estimates net settlement gains,
recorded as commercial loan interest income, of $23.5 million over the next
twelve months resulting from these hedges. At March 31, 2004, the Company carried interest rate swaps totaling $100
million with a fair market value gain of $1.3 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 pre-tax income
from these swaps for the three months ended March 31, 2004 was a loss of $0.8
million. The Company estimates a net increase to interest expense of $3.1
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)(Continued) 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. 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 March
31, 2004, December 31, 2003 and March 31, 2003: March 31, 2004
    
    December 31, 2003
    
    March 31, 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
    
    $
    934,888
    
    
    $
    51,183
    
    
    $
    42,083
    
    
    $
    944,110
    
    
    $
    54,821
    
    
    $
    44,885
    
    
    $
    882,295
    
    
    $
    61,569
    
    
    $
    48,989Swaptions
    
    
    4,329
    
    
    
    206
    
    
    
    206
    
    
    
    4,329
    
    
    
    178
    
    
    
    178
    
    
    
    5,639
    
    
    
    391
    
    
    
    391Held for trading or free-standing:Interest rate swaps
    
    
    1,427,642
    
    
    
    31,511
    
    
    
    6,517
    
    
    
    1,375,018
    
    
    
    22,113
    
    
    
    5,224
    
    
    
    1,405,290
    
    
    
    26,055
    
    
    
    2,764Purchased interest rate options
    
    
    71,923
    
    
    
    117
    
    
    
    117
    
    
    
    22,318
    
    
    
    187
    
    
    
    187
    
    
    
    81,488
    
    
    
    220
    
    
    
    220Written interest rate options
    
    
    131,942
    
    
    
    
    
    
    
    (218
    )
    
    
    62,946
    
    
    
    
    
    
    
    (187
    )
    
    
    179,438
    
    
    
    1,526
    
    
    
    1,309Forward interest rate options
    
    
    30,000
    
    
    
    41
    
    
    
    41
    
    
    
    217,930
    
    
    
    782
    
    
    
    732
    
    
    
    63,500
    
    
    
    
    
    
    
    (318
    )Commitments to purchase and sell foreign currencies
    
    
    523,037
    
    
    
    6,691
    
    
    
    476
    
    
    
    421,130
    
    
    
    8,592
    
    
    
    (48
    )
    
    
    445,731
    
    
    
    6,030
    
    
    
    (63
    )Purchased foreign exchange options
    
    
    41,234
    
    
    
    422
    
    
    
    422
    
    
    
    55,791
    
    
    
    597
    
    
    
    597
    
    
    
    31,964
    
    
    
    274
    
    
    
    274Written foreign exchange options
    
    
    41,234
    
    
    
    
    
    
    
    (422
    )
    
    
    55,791
    
    
    
    
    
    
    
    (597
    )
    
    
    31,964
    
    
    
    
    
    
    
    (274
    )
 8




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##### Table of Contents



BancWest Corporation and Subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(Continued)  4.
    
    Operating Segments Our reportable segments are the ones 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 significant 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 business segments:
Regional Banking, Commercial Banking and Consumer Finance. Regional Banking Regional Banking seeks to serve a broad customer base by furnishing 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
its branch network 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 one- to four-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 in-branch 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. All areas within the Commercial Banking Segment focus on cross-sell
opportunities. 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, with emphasis on originating credits at the high end of the credit
spectrum. 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. 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. Essex has office
locations throughout the United States. First Hawaiian Bank First Hawaiian manages its operations through the following business
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. 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. Both First Hawaiian Bank and BancWest
Investment Services are affiliates under the common control of BancWest
Corporation. 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. Consumer Finance Consumer Lending offers many types of loans and credits 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® credit cards and VISA®
credit cards in Hawaii. 10




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##### Table of Contents



BancWest Corporation and Subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(Continued) Real Estate Lending-Residential 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. 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 March
31, 2004, the Trust and Investments Division had approximately 3,965 accounts
with a market value of $8.8 billion. Of this total, $6.5 billion represented
assets in nonmanaged accounts and $2.3 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 to its
customers. 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 table below presents information about the Companys operating
segments as of or for the periods indicated. The Other BancWest category in
the table below consists principally of BancWest Corporation (Parent Company),
FHL Lease Holding Company, Inc. and BancWest Investment Services (BWIS). The
reconciling items are principally consolidating entries to eliminate
intercompany balances and transactions. The following table summarizes
significant financial information, as of March 31, 2004 and 2003 for our
reportable segments: Bank of the WestRegional
    
    Commercial
    
    Consumer(in millions)
    
    Banking
    
    Banking
    
    Finance
    
    Other(1)Three Months Ended March 31, 2004:Net interest income
    
    $
    123.4
    
    
    $
    77.5
    
    
    $
    53.0
    
    
    $
    20.7Noninterest income
    
    
    43.0
    
    
    
    14.0
    
    
    
    2.7
    
    
    
    5.2Noninterest expense
    
    
    107.8
    
    
    
    29.1
    
    
    
    17.0
    
    
    
    6.3Provision for loan and lease losses
    
    
    0.5
    
    
    
    0.4
    
    
    
    14.9
    
    
    
    Tax provision (benefit)
    
    
    22.9
    
    
    
    24.4
    
    
    
    9.4
    
    
    
    7.7Net income (loss)
    
    $
    35.2
    
    
    $
    37.6
    
    
    $
    14.4
    
    
    $
    11.9Segment assets at March 31
    
    $
    7,841
    
    
    $
    8,708
    
    
    $
    8,213
    
    
    $
    4,804Segment goodwill at March 31
    
    
    1,214
    
    
    
    707
    
    
    
    308
    
    
    
    Average assets
    
    $
    7,822
    
    
    $
    8,648
    
    
    $
    8,110
    
    
    $
    4,614Average loans and leases
    
    
    5,795
    
    
    
    7,327
    
    
    
    7,760
    
    
    
    Average deposits
    
    
    14,391
    
    
    
    3,380
    
    
    
    6
    
    
    
    1,623Three Months Ended March 31, 2003:Net interest income
    
    $
    121.9
    
    
    $
    80.7
    
    
    $
    49.7
    
    
    $
    12.7Noninterest income
    
    
    38.7
    
    
    
    11.3
    
    
    
    2.7
    
    
    
    5.5Noninterest expense
    
    
    105.9
    
    
    
    30.0
    
    
    
    15.3
    
    
    
    7.3Provision for loan and lease losses
    
    
    3.6
    
    
    
    0.3
    
    
    
    12.8
    
    
    
    Tax provision (benefit)
    
    
    20.3
    
    
    
    24.5
    
    
    
    9.7
    
    
    
    4.3Net income (loss)
    
    $
    30.8
    
    
    $
    37.2
    
    
    $
    14.6
    
    
    $
    6.6Segment assets at March 31
    
    $
    7,176
    
    
    $
    8,201
    
    
    $
    7,179
    
    
    $
    3,741Segment goodwill at March 31
    
    
    1,214
    
    
    
    706
    
    
    
    308
    
    
    
    Average assets
    
    $
    7,325
    
    
    $
    8,249
    
    
    $
    7,097
    
    
    $
    3,123Average loans and leases
    
    
    5,295
    
    
    
    6,923
    
    
    
    6,753
    
    
    
    Average deposits
    
    
    13,533
    
    
    
    2,918
    
    
    
    14
    
    
    
    1,071
   [Continued from above table, first column(s) repeated] First Hawaiian BankRetail
    
    Consumer
    
    Commercial
    
    Financial
    
    
    
    
    
    Other
    
    Reconciling
    
    Consolidated(in millions)
    
    Banking
    
    Finance
    
    Banking
    
    Management
    
    Other(2)
    
    BancWest(3)
    
    Items(4)
    
    TotalsThree Months Ended March 31, 2004:Net interest income
    
    $
    56.3
    
    
    $
    20.7
    
    
    $
    8.6
    
    
    $
    
    
    
    $
    (4.3
    )
    
    $
    (34.9
    )
    
    $
    
    
    
    $
    321.0Noninterest income
    
    
    17.7
    
    
    
    7.9
    
    
    
    1.9
    
    
    
    7.7
    
    
    
    0.9
    
    
    
    0.5
    
    
    
    
    
    
    
    101.5Noninterest expense
    
    
    44.9
    
    
    
    11.4
    
    
    
    2.0
    
    
    
    6.5
    
    
    
    (8.1
    )
    
    
    2.0
    
    
    
    
    
    
    
    218.9Provision for loan and lease losses
    
    
    1.1
    
    
    
    1.7
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    18.8Tax provision (benefit)
    
    
    11.3
    
    
    
    6.2
    
    
    
    2.4
    
    
    
    0.5
    
    
    
    1.8
    
    
    
    (14.9
    )
    
    
    
    
    
    
    71.7Net income (loss)
    
    $
    16.7
    
    
    $
    9.3
    
    
    $
    6.0
    
    
    $
    0.7
    
    
    $
    2.8
    
    
    $
    (21.5
    )
    
    $
    
    
    
    $
    113.1Segment assets at March 31
    
    $
    3,620
    
    
    $
    1,512
    
    
    $
    1,081
    
    
    $
    24
    
    
    $
    3,619
    
    
    $
    7,083
    
    
    $
    (7,591
    )
    
    $
    38,914Segment goodwill at March 31
    
    
    650
    
    
    
    216
    
    
    
    118
    
    
    
    10
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    3,228Average assets
    
    $
    3,581
    
    
    $
    1,471
    
    
    $
    1,114
    
    
    $
    24
    
    
    $
    3,419
    
    
    $
    7,019
    
    
    $
    (7,486
    )
    
    $
    38,336Average loans and leases
    
    
    2,582
    
    
    
    1,279
    
    
    
    974
    
    
    
    9
    
    
    
    204
    
    
    
    49
    
    
    
    (37
    )
    
    
    25,942Average deposits
    
    
    6,838
    
    
    
    7
    
    
    
    19
    
    
    
    30
    
    
    
    200
    
    
    
    
    
    
    
    (62
    )
    
    
    26,432Three Months Ended March 31, 2003:Net interest income
    
    $
    57.2
    
    
    $
    18.5
    
    
    $
    8.3
    
    
    $
    0.1
    
    
    $
    (0.7
    )
    
    $
    (34.3
    )
    
    $
    1.2
    
    
    $
    315.3Noninterest income
    
    
    17.3
    
    
    
    10.1
    
    
    
    1.6
    
    
    
    7.4
    
    
    
    1.4
    
    
    
    
    
    
    
    (1.2
    )
    
    
    94.8Noninterest expense
    
    
    43.6
    
    
    
    11.3
    
    
    
    2.2
    
    
    
    6.3
    
    
    
    (2.5
    )
    
    
    1.3
    
    
    
    
    
    
    
    220.7Provision for loan and lease losses
    
    
    1.4
    
    
    
    1.9
    
    
    
    (0.1
    )
    
    
    
    
    
    
    0.8
    
    
    
    2.0
    
    
    
    
    
    
    
    22.7Tax provision (benefit)
    
    
    11.2
    
    
    
    5.8
    
    
    
    2.3
    
    
    
    0.5
    
    
    
    1.4
    
    
    
    (15.4
    )
    
    
    
    
    
    
    64.6Net income (loss)
    
    $
    18.3
    
    
    $
    9.6
    
    
    $
    5.5
    
    
    $
    0.7
    
    
    $
    1.0
    
    
    $
    (22.2
    )
    
    $
    
    
    
    $
    102.1Segment assets at March 31
    
    $
    3,287
    
    
    $
    1,472
    
    
    $
    1,198
    
    
    $
    14
    
    
    $
    3,320
    
    
    $
    7,603
    
    
    $
    (8,275
    )
    
    $
    34,916Segment goodwill at March 31
    
    
    650
    
    
    
    216
    
    
    
    118
    
    
    
    10
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    3,227Average assets
    
    $
    3,265
    
    
    $
    1,428
    
    
    $
    1,182
    
    
    $
    14
    
    
    $
    3,269
    
    
    $
    6,516
    
    
    $
    (7,051
    )
    
    $
    34,417Average loans and leases
    
    
    2,420
    
    
    
    1,227
    
    
    
    1,043
    
    
    
    1
    
    
    
    353
    
    
    
    2
    
    
    
    29
    
    
    
    24,046Average deposits
    
    
    6,392
    
    
    
    10
    
    
    
    21
    
    
    
    51
    
    
    
    155
    
    
    
    
    
    
    
    (19
    )
    
    
    24,146
   (1)
    
    The material net interest income and noninterest income items in the
Other column are related to Treasury activities of $24.6 million and
unallocated other income of $1.3 million for March 31, 2004. The material
net interest income and noninterest income items in the Other column
resulted substantially from Treasury activities of $13.2 million and
unallocated other income of $5.0 million for March 31, 2003.The material noninterest expense items in the Other column is substantially
derived from Treasury activities of $4.2 million and unallocated
administrative items of $2.1 million for March 31, 2004. The material
noninterest expense items in the Other column primarily resulted from Treasury
activities and unallocated administrative items of $7.3 million for March 31,
2003.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 and
noninterest expense in March 31, 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. 12




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BancWest Corporation and Subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(Continued)  5.
    
    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 March 31, 2004: Rental Income(in thousands)2004
    
    $
    10,0772005
    
    
    14,1252006
    
    
    13,9092007
    
    
    9,2692008
    
    
    8,2032009 and thereafter
    
    
    15,928Total minimum payments
    
    $
    71,511
  6.
    
    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
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Balance as of March 31, 2004:
    
    $
    1,214
    
    
    $
    707
    
    
    $
    308
    
    
    $
    650
    
    
    $
    216
    
    
    $
    118
    
    
    $
    10
    
    
    $
    5
    
    
    $
    3,228
 Amortization of intangible assets was $5.8 million for each of the
three-month periods ended March 31, 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
(pre-tax) for each of the years from 2004 to 2008. Our finite-lived intangible assets substantially consist of core deposit
tangible assets. The gross carrying amount, accumulated amortization and net
book value of these intangible assets are detailed below. March 31, 2004
    
    December 31, 2003
    
    March 31,2003(in thousands)Gross carrying amount
    
    $
    230,538
    
    
    $
    230,538
    
    
    $
    230,538Accumulated amortization
    
    
    48,945
    
    
    
    43,181
    
    
    
    25,891Net book value
    
    $
    181,593
    
    
    $
    187,357
    
    
    $
    204,647
 13




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##### Table of Contents



BancWest Corporation and Subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(Continued)  7.
    
    Financial Interpretation No. 46: Consolidation of Variable Interest Entities In January 2003, the FASB issued Financial Interpretation No. (FIN) 46,
Consolidation of Variable Interest Entities  An Interpretation of ARB No. 51.
FIN 46 established new guidance on the accounting and reporting for the
consolidation of variable interest entities (VIEs). In December 2003, the FASB
issued Financial Interpretation No. (FIN) 46 (Revised December 2003),
Consolidation of Variable Interest Entities  An Interpretation of ARB No.
51 (FIN 46R).The application of FIN 46R replaces FIN 46 and applies to
companies who have not adopted FIN 46 with VIEs for financial statement periods
ending after December 15, 2003. The principal objective of FIN 46 is to
require the primary beneficiary of a VIE to consolidate the VIEs assets,
liabilities and results of operations in the primary beneficiarys own
financial statements. The Company adopted the consolidation provisions of FIN
46 on July 1, 2003 consolidating one VIE formed prior to February 1, 2003.
However in December 2003, our relationship with this VIE changed and it is no
longer being consolidated. In the fourth quarter of 2003, BancWest also
ceased consolidating two trusts, which were included in the consolidated
financial statements presented prior to October 1, 2003. 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 March 31, 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 Corporation, representing
the Companys maximum liability for the securities. 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 March 31, 2004, the FH Trusts
total assets were $105.2 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. As of October 2003, effective with the adoption of Financial
Interpretation No. 46, Consolidation of Variable Interest Entities(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 will review 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 March 31, 2004 is approximately
$93.4 million with approximately $30.4 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 14




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BancWest Corporation and Subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(Continued) the general partners to purchase the Companys portion of interests in the
limited partnerships. These commitments were entered into from 1991 through
2004.  8.
    
    Pension and Other Postretirement Benefit Plans The Company sponsors a noncontributory defined benefit pension plan, which
is a merger of two separate plans. The first plan, for First Hawaiian
employees, was frozen at December 31, 1995. As a result of that freeze, there
are no further benefit accruals for First Hawaiian employees in the merged
plan. The second plan, for Bank of the West employees, was a cash balance
pension plan. The merged employee retirement plan (ERP) continues to provide
cash balance benefit accruals for eligible Bank of the West employees. The Company also sponsors an unfunded excess benefit pension plan covering
employees whose pay or benefits exceed certain regulatory limits, unfunded
postretirement medical and life insurance plans, and, for certain key
executives, an unfunded supplemental executive retirement plan (SERP). In connection with the March 2002 acquisition of United California Bank
(UCB), the Company assumed the pension and postretirement obligations of UCB.
UCB employees participated in a noncontributory final pay defined benefit
pension plan, an unfunded excess benefit pension plan covering employees whose
pay or benefits exceed certain regulatory limits, an unfunded postretirement
medical plan, and a 401(k) savings plan. In addition, certain key executives
were eligible for a supplemental pension benefit if they met certain age and
service conditions. The UCB plans were curtailed on June 30, 2003. The Company
integrated UCB employees into the Companys existing benefit plan structure on
July 1, 2003. UCB employees were guaranteed the benefits they acquired through
the UCB plans up to the curtailment date. The curtailment reduced the
projected benefit obligation of the UCB retirement plan by $29.5 million
measured as of July 1, 2003, which did not exceed the unrecognized net loss as
of that date. The projected benefit obligation related to the UCB supplemental
plan decreased by $2.9 million due to the curtailment. This exceeded the
unrecognized loss in that plan resulting in a curtailment gain of $0.15 million
during 2003. Special benefits were provided to UCB participants meeting certain
age and service requirements; this is reflected as a termination benefit and is
included in the pension liability. The special benefits were accounted for as
an adjustment to goodwill as a purchase accounting adjustment due to the
business combination of UCB with Bank of the West. The benefit obligations
assumed by the Company in connection with the acquisition and the effect of the
curtailment have been reflected in the table below. The following table sets forth the components of the net periodic benefit
cost (credit) for March 31, 2004 and 2003: Pension Benefits
    
    Other Benefits2004
    
    2003
    
    2004
    
    2003(in thousands)Service cost
    
    $
    2,260
    
    
    $
    3,498
    
    
    $
    552
    
    
    $
    595Interest cost
    
    
    6,568
    
    
    
    9,166
    
    
    
    654
    
    
    
    720Expected return on plan assets
    
    
    (8,159
    )
    
    
    (10,923
    )
    
    
    
    
    
    
    Amortization of transition (asset)/obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognized net actuarial (gain) loss
    
    
    1,515
    
    
    
    4,007
    
    
    
    117
    
    
    
    (3
    )Total benefit cost (credit)
    
    $
    2,184
    
    
    $
    5,748
    
    
    $
    1,323
    
    
    $
    1,312
 The following table sets forth the components of the net periodic benefit
cost (credit) for our funded plans for March 31, 2004 and 2003: Funded Pension Benefits2004
    
    2003(in thousands)Service cost
    
    $
    1,760
    
    
    $
    3,085Interest cost
    
    
    5,531
    
    
    
    8,222Expected return on plan assets
    
    
    (8,159
    )
    
    
    (10,923
    )Amortization of transition (asset)/obligation
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    Recognized net actuarial (gain) loss
    
    
    1,275
    
    
    
    3,868Net periodic benefit cost (credit)
    
    $
    407
    
    
    $
    4,252
 15




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BancWest Corporation and Subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(Continued) Contributions BancWest expects to contribute $2.5 million to its defined benefit pension
plans and $2.5 million to its other post retirement benefit plans in 2004.  9.
    
    Subsequent Event On April 27, 2004, BancWest announced that it signed an agreement to
acquire USDB Bancorp in a cash transaction valued at $245 million. USDB
Bancorp is a holding company that operates Union Safe Deposit Bank, which has
19 branches in California. It is anticipated that the purchase transaction
will close in the third quarter of 2004, subject to approval from USDB Bancorp
shareholders and federal and state banking regulators. Subsequently, Union Safe
Deposit Bank will be merged into Bank of the West. As a purchase transaction,
the results of operations of Union Safe Deposit Bank will be included with that
of BancWest subsequent to the consummation of the transaction. 16




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##### Table of Contents



BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations 
 FORWARD-LOOKING STATEMENTS Certain matters contained in this filing 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
the statements. 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. Our actual results could differ from the results contemplated by
these forward-looking statements due to certain factors, including those
discussed in Item 2 and elsewhere in this report. 17




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##### Table of Contents



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 $38.9 billion. It is a wholly owned subsidiary of Paris-based
BNP Paribas. BancWest 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 state and Idaho) and First Hawaiian Bank (61
branches in Hawaii, Guam and Saipan). Acquisitions On April 27, 2004, BancWest announced that it signed an agreement to
acquire USDB Bancorp in a cash transaction valued at $245 million. USDB
Bancorp is a holding company that operates Union Safe Deposit Bank, which has
19 branches in California. It is anticipated that the purchase transaction
will close in the third quarter of 2004, subject to approval from USDB Bancorp
shareholders and federal and state banking regulators. Subsequently, Union
Safe Deposit Bank will be merged into Bank of the West. As a purchase
transaction, the results of operations of Union Safe Deposit Bank will be
included with that of BancWest subsequent to the consummation of the
transaction. 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) in a cash
transaction valued at $1.2 billion. It is anticipated that the
purchase transaction will close in the third quarter of 2004, subject to
approval from Community First shareholders and federal and state banking
regulators. 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. See Note 2 of the Companys Notes to Unaudited Consolidated Financial
Statements. Initiatives BancWest has continued to implement a series of initiatives that are
designed to improve customer service and expand our physical footprint by
branch expansion and mergers and acquisitions. The focus of the Company is to
promote long-lasting customer service relationships through upgrading
technology and enhancing existing and implementing new training vehicles.
BancWest strives for a high touch personalized marketing position, promoting
brand recognition through logos and community outreach. BancWest 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 Community First. To
remain competitive, Bank of the Wests Regional Banking segment offers
Free Checking to assist in business
development and customer experience activities. This product was developed to
assure that customers are finding the right checking product to meet their
needs. Bank of the West has also launched a new electronic check service (ECS) for
merchant services through its relationship with NOVA Information Systems.
Merchant Services is the process of accepting, processing and settling payments
for businesses. The Company provides the payment processing equipment,
technology, reporting and reconciliation services merchants need to conduct
business. ECS offers almost instant verification of fund availability when
checks are swiped through the merchants check reader. ECS offers next day
funding to merchants without having to make deposits in a branch. 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 intrinsic in our asset and liability balances, while ensuring ample
liquidity and diverse funding. Financial Overview First quarter 2004 as compared to first quarter 2003 BancWest reported net income of $113.1 million, compared with $102.1
million, an increase of 10.7%. Net interest income was $321.0 million, up 1.8%
compared to $315.2 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 $1.9 billion; average
investment securities increased by $1.9 billion. The Company increased its
consumer lending and purchased residential mortgage loans and securities while
commercial borrowing was still relatively slow. The net interest margin
decreased 51 basis points (1% equals 100 basis points) from 18




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##### Table of Contents



BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) 4.49% last year to 3.98% as a declining interest rate environment caused rates
on interest earning assets to decrease more rapidly than rates paid on funding
sources. Noninterest income was $101.4 million, an increase of 7.0% compared
to $94.8 million in the first quarter of 2003. The increase was primarily due
to increased service charges on deposit accounts and other service charges and
fees. 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 portfolio related to equipment leasing, SBA, church and
healthcare lending. Noninterest expense was $218.9 million compared to $220.7
million, a decrease of 0.8%. Cost savings from staff reductions, offset by the increased cost of
healthcare , resulted in a decrease in noninterest expense of $1.8 million from the first quarter of 2003. BancWest had total assets of $38.9 billion at March 31, 2004, an increase
of 1.5% from December 31, 2003 and 11.5% from March 31, 2003. Investment
securities totaled $6.0 billion, an increase of 1.7% from December 31, 2003 and
33.2% from the same period in 2003. Loans and leases totaled $26.2 billion, up
2.0% from December 31, 2003 and 9.0% from a year ago. Deposits were $26.7
billion, up 1.3% from December 31, 2003 and 9.9% from a year ago. BancWests nonperforming assets were 0.58% of loans, leases and foreclosed
properties at March 31, 2004, an improvement from 0.59% at December 31, 2003
and 0.98% at March 31, 2003. The provision for loan and lease losses was $18.9
million for the first quarter of 2004, compared to $22.7 million for the
quarter ended a year ago. BancWests allowance for loan and lease losses was
1.51% of total loans and leases at March 31, 2004, compared to 1.52% of total
loans and leases at December 31, 2003 and 1.65% at March 31, 2003. 
 MONETARY POLICY AND ECONOMIC CONDITIONS Our earnings and businesses are affected not only by general economic
conditions (both domestic and international), but also by the monetary policies
of various governmental regulatory authorities of (i) the United States and
foreign governments and (ii) international agencies. In particular, our
earnings and growth may be affected by actions of the Federal Reserve Board in
connection with its implementation of national monetary policy through its open
market operations in United States Government securities, control of the
discount rate and establishment of reserve requirements against both member and
non-member financial institutions deposits. These actions have a significant
effect on the overall growth and distribution of loans and leases, investments
and deposits, as well as on the rates earned on loans and leases or paid on
deposits. It is difficult to predict future changes in monetary policies. 
 CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make a number of judgments, estimates and assumptions that affect
the reported amount of assets, liabilities, income and expenses in our
Consolidated Financial Statements and accompanying notes. We believe that the
judgments, estimates and assumptions used in the preparation of our
Consolidated Financial Statements are appropriate given the factual
circumstances as of March 31, 2004. We have established policies and procedures
that are intended to ensure valuation methods are well controlled and applied
consistently from period to period. In addition, the policies and procedures
are intended to ensure that the process for changing methodologies occurs in an
appropriate manner. However, given the sensitivity of our Consolidated
Financial Statements to these accounting policies, the use of other judgments,
estimates and assumptions could result in material differences in our results
of operations or financial condition. Our accounting policies are discussed in detail in the notes to the
Consolidated Financial Statements, Note 1 (Summary of Significant Accounting
Policies) of 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 the following accounting estimates that we believe are material due
to the levels of subjectivity and judgment necessary to account for uncertain
matters or where these matters are particularly subject to change.  
    
    Allowance for loan and lease losses (the Allowance): The Companys
allowance for loan and lease losses represents managements best
estimate of probable losses inherent in the existing loan and lease
portfolio as of the balance sheet date. The determination of the
adequacy of the Allowance is ultimately one of management judgment,
which includes consideration of many factors such as: (1) the amount of
problem and potential problem loans and leases; (2) net charge-off
experience; (3) changes in the composition of the loan and lease
portfolio by type and location of loans and leases; (4) changes in
overall loan and lease risk profile and quality; (5) general economic
factors; (6) specific regional economic factors; and (7) the fair value
of collateral. Using this methodology, we allocate the Allowance to
individual loans and leases and to the categories of loans and 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)  leases, representing probable losses based on available information. At
least quarterly, we conduct internal credit analyses to determine which
loans and leases are impaired. As a result, we allocate specific amounts of
the Allowance to individual loan and lease relationships. Note 1, (Summary
of Significant Accounting Policies) of our 2003 Annual Report on Form 10-K
in the notes to the Consolidated Financial Statements describes how we
evaluate loans for impairment. Some categories of loans and leases are not
subjected to a loan-by-loan credit analysis. Management makes an allocation
to these categories based on our statistical analysis of historic trends of
impairment and charge-offs of such loans and leases. Additionally, we
allocate a portion of the Allowance based on risk classifications of
certain loan and lease types. If general or specific regional economic
factors were to improve or deteriorate significantly, we may need to revise
our loss factors, thereby decreasing or increasing our allowance.
Furthermore, the estimated fair value of collateral may differ from what is
realized upon the sale of that collateral. Due to the subjective nature of
estimating an adequate allowance for loan and lease losses, economic
uncertainties and other factors, some of the allowance is not allocated to
specific loans and leases or specific categories of loans and leases. The
Corporation monitors differences between estimated and actual incurred loan
and lease losses. This monitoring process includes periodic assessments by
senior management of credit portfolios and the methodologies used to
estimate incurred losses in those portfolios. In managements judgment, the
Allowance has historically been adequate to absorb losses inherent in the
loan and lease portfolios. However, changes in prevailing economic
conditions in our markets could result in changes in the level of
nonperforming loans and leases, and charge-offs in the future. We will
continue to monitor economic developments closely and make necessary
adjustments to the Allowance accordingly.  
    
    Goodwill: Goodwill recorded on the books of BancWest resulted
from business acquisitions. It arose when the purchase price exceeded
the assigned value of the net assets of acquired businesses. In each
situation, it was based on estimates and assumptions that were subject
to managements judgment and was recorded at its estimated fair value at
the time purchase accounting estimates of acquired entities were
concluded. As of March 31, 2004, we had $3.2 billion in goodwill on our
Consolidated Balance Sheet. The value of this goodwill is supported by
the revenue we generate from our business segments. A decline in
earnings as a result of material lack of growth, or our inability to
deliver services in a cost-effective manner over a long time period
could lead to possible impairment of goodwill, and this would be
recorded as a write-down in our statements of income. We perform an
impairment test for goodwill annually, or as circumstances dictate. The
evaluation methodology for potential impairment is centered on the
projection of cash flows into the future using present value techniques
and, as such, involves significant management judgment in the modeling
of estimates and assumptions. If the projected net cash flow assumptions
are too high, or if the discount rate used is too low, there is a risk
that impairment should have been recognized, but was not recorded. We
use a two-step process to evaluate possible impairment. The first step
compares the fair value of a reporting unit, which is an individual
business segment of the Company, to its carrying amount. If the fair
value exceeds the carrying amount, no impairment exists. If the carrying
amount exceeds the fair value, then a second step is conducted whereby
we assign fair values to identifiable assets and liabilities, leaving an
implied fair value for goodwill. The implied fair value of goodwill is
compared with the carrying amount of goodwill. If the implied fair value
of goodwill is less than the carrying amount, an impairment loss is
recognized. We performed the impairment testing of goodwill required
under Statement of Financial Accounting Standards (SFAS) No. 142 for the
year ended December 31, 2003, in the fourth quarter. Due to the inherent
imprecision of projections used in the impairment test, a number of
different scenarios were used. In addition to using anticipated balance
sheet growth, scenarios for 25% more and 20% less than the anticipated
growth were used. Furthermore, in projecting cash flows, a continuing
value scenario as well as a terminal value scenario were used. Finally,
two separate discount rate scenarios were used. The first discount rate
used was the weighted average cost of capital, which is a composite of
the after-tax cost of debt and cost of equity. The second discount rate
was the cost of equity using a capital asset pricing model. The
conclusion after testing under each of these scenarios is that there is
no impairment of goodwill.  
    
    Lease Financing: We provide lease financing under a variety of
arrangements, primarily consumer automobile leases and commercial
equipment leases. Leases for commercial equipment and consumer
automobiles through January 2004 have been classified as financing
leases if they conform to the definition set out in SFAS 13, Accounting
for Leases. (See Note 5 to the Consolidated Financial Statements.) At
the time the leasing transaction is executed, we record the gross lease
receivable and the estimated residual value of leased equipment on our
balance sheet. Unearned income on direct financing leases is accreted
over the lives of the leases to provide a constant periodic rate of
return on the net investment in the lease. Estimates are made to
predict what our unguaranteed lease residual values will be at the end
of their lease term. Historically we have not experienced significant
losses from overestimating residual values in our leasing portfolio. If
these estimates differ significantly from our actual results, there may
be an impact to our financial statements. 20




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BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 CONSOLIDATED FINANCIAL HIGHLIGHTS(Unaudited) Three Months Ended March 31,2004
    
    2003Earnings:(Dollars in thousands)Interest income
    
    $
    417,152
    
    
    $
    417,476Interest expense
    
    
    96,126
    
    
    
    102,237Net interest income
    
    
    321,026
    
    
    
    315,239Provision for loan and lease losses
    
    
    18,865
    
    
    
    22,690Noninterest income
    
    
    101,438
    
    
    
    94,834Noninterest expense
    
    
    218,882
    
    
    
    220,660Income before income taxes
    
    
    184,717
    
    
    
    166,723Tax provision
    
    
    71,665
    
    
    
    64,642Net income
    
    $
    113,052
    
    
    $
    102,081Balance Sheet Data Averages:(Dollars in millions)Average assets
    
    
    38,336
    
    
    
    34,417Average securities available-for-sale
    
    
    5,991
    
    
    
    4,113Average loans and leases (1)
    
    
    25,942
    
    
    
    24,046Average deposits
    
    
    26,432
    
    
    
    24,146Average long-term debt and capital securities
    
    
    4,323
    
    
    
    3,580Average stockholders equity
    
    
    4,327
    
    
    
    3,926Balance Sheet Data At Period End:(Dollars in millions)Assets
    
    
    38,914
    
    
    
    34,916Securities available-for-sale
    
    
    6,030
    
    
    
    4,528Loans and leases (1)
    
    
    26,292
    
    
    
    24,139Deposits
    
    
    26,743
    
    
    
    24,339Long-term debt and capital securities
    
    
    4,283
    
    
    
    3,572Stockholders equity
    
    
    4,398
    
    
    
    3,969Selected Financial Ratios For the Period Ended:Return on average total assets (ROA) (2)
    
    
    1.19
    %
    
    
    1.20
    %Return on average stockholders equity (ROE) (2)
    
    
    10.51
    
    
    
    10.54Net interest margin (taxable-equivalent basis) (2)
    
    
    3.98
    
    
    
    4.49Net loans and leases charged off to average loans and leases (2)
    
    
    0.22
    
    
    
    0.18Efficiency ratio (3)
    
    
    51.81
    
    
    
    53.81Average equity to average total assets
    
    
    11.29
    
    
    
    11.41At Period End:Allowance for loan and lease losses to total loans and leases
    
    
    1.51
    
    
    
    1.65Nonperforming assets to total loans and leases and other
real estate owned and repossessed personal property
    
    
    0.58
    
    
    
    0.98Allowance for loan and lease losses to nonperforming loans
and leases
    
    
    2.88
    x
    
    
    1.83
    xRegulatory Capital Ratios:Leverage Ratio (4):Bank of the West
    
    
    9.58
    %
    
    
    9.48
    %First Hawaiian Bank
    
    
    10.19
    
    
    
    9.38Tier 1 capital (risk-based):Bank of the West
    
    
    10.92
    
    
    
    10.29First Hawaiian Bank
    
    
    13.28
    
    
    
    11.66Total capital (risk-based):Bank of the West
    
    
    13.13
    
    
    
    12.59First Hawaiian Bank
    
    
    15.64
    
    
    
    14.05
   (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 total
operating revenue (net interest income plus noninterest income).(4)
    
    The capital leverage ratios are based on quarterly averages. 21




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##### Table of Contents



BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 RESULTS OF OPERATIONS 
 Net Interest Income First quarter 2004 as compared to first quarter 2003 Net interest income increased 1.8% to $321.0 million as compared to $315.2
million. The increase in net interest income was principally the result of a $3.9
billion, or 13.8%, 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 increase in average earning assets was
partially offset by a 51 basis point reduction in our net interest margin. The
continuing effect of historically low interest rates has reduced the yield on
earning assets as well as rates paid on sources of funds. Net Interest Margin First quarter 2004 as compared to first quarter 2003 The net interest margin decreased by 51 basis points due primarily to the
effects of the decreasing interest rate environment. While the decreasing rate
environment reduced our yield on earning assets by 76 basis points to 5.17%
from 5.93%, it also decreased our rate paid on sources of funds by 25 basis
points to 1.19% from 1.44%. Also offsetting the decrease in the yield on
average earning assets, average noninterest-bearing deposits maintained by
retail and commercial customers in both banks increased by $0.8 billion, or
12.6%. Higher yielding average domestic time deposits decreased $0.1 billion,
or 1.8% due to the low interest rate environment. Average Earning Assets First quarter 2004 as compared to first 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. Higher levels of foreign interest bearing deposits
in other banks also contributed to the increase in average earning assets. The
$1.9 billion, or 7.9%, 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 also
increased to $6.0 billion, up $1.9 billion, or 45.7%. Average Loans and Leases First quarter 2004 as compared to first 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 $1.2 billion, or 22.7%, 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 have increased by $0.6 billion. Average Interest-Bearing Deposits and Liabilities First quarter 2004 as compared to first quarter 2003 The increase in average interest-bearing deposits and liabilities was
primarily due to an increase in average long-term debt, average short-term
borrowings and growth in our customer deposit base. Average deposits increased
due to growth in the demand deposit and interest-bearing checking, regular,
money market savings and foreign deposit portfolios. These increases were
partially offset by a decrease in average time deposits. Short and long term
borrowings from the Federal Home Loan Bank also increased average short-term
borrowings and average long-term debt. 22




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##### Table of Contents



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 sets forth the condensed consolidated average balance
sheets, 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 March 31, 2004 and 2003) to make them comparable with taxable
items before any income taxes are applied. Three Months Ended March 31,2004
    
    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
    
    $
    7,194
    
    
    $
    8
    
    
    
    0.45
    %
    
    $
    5,127
    
    
    $
    8
    
    
    
    0.63
    %Foreign
    
    
    295,879
    
    
    
    807
    
    
    
    1.10
    
    
    
    103,249
    
    
    
    407
    
    
    
    1.60Total interest-bearing deposits in other banks
    
    
    303,073
    
    
    
    815
    
    
    
    1.08
    
    
    
    108,376
    
    
    
    415
    
    
    
    1.55Federal funds sold and securities purchased under
agreements to resell
    
    
    233,895
    
    
    
    602
    
    
    
    1.04
    
    
    
    249,634
    
    
    
    823
    
    
    
    1.34Trading assets
    
    
    15,018
    
    
    
    14
    
    
    
    0.37
    
    
    
    32,279
    
    
    
    291
    
    
    
    3.66Investment securities (2):Taxable
    
    
    5,983,546
    
    
    
    51,871
    
    
    
    3.49
    
    
    
    4,098,266
    
    
    
    41,506
    
    
    
    4.11Exempt from Federal income taxes
    
    
    7,427
    
    
    
    135
    
    
    
    7.31
    
    
    
    14,865
    
    
    
    234
    
    
    
    6.38Total investment securities
    
    
    5,990,973
    
    
    
    52,006
    
    
    
    3.49
    
    
    
    4,113,131
    
    
    
    41,740
    
    
    
    4.12Loans and leases (3),(4):Domestic
    
    
    25,593,879
    
    
    
    358,186
    
    
    
    5.63
    
    
    
    23,677,033
    
    
    
    368,153
    
    
    
    6.31Foreign
    
    
    347,744
    
    
    
    5,787
    
    
    
    6.69
    
    
    
    369,161
    
    
    
    6,438
    
    
    
    7.07Total loans and leases
    
    
    25,941,623
    
    
    
    363,973
    
    
    
    5.64
    
    
    
    24,046,194
    
    
    
    374,591
    
    
    
    6.32Total earning assets
    
    
    32,484,582
    
    
    $
    417,410
    
    
    
    5.17
    
    
    
    28,549,614
    
    
    $
    417,860
    
    
    
    5.93Non-interest bearing assets:Cash and due from banks
    
    
    1,374,349
    
    
    
    
    
    
    
    
    
    
    
    1,444,905Premises and equipment
    
    
    541,319
    
    
    
    
    
    
    
    
    
    
    
    381,140Core deposit intangible
    
    
    184,359
    
    
    
    
    
    
    
    
    
    
    
    207,344Goodwill
    

    
    3,228,346
    
    
    
    
    
    
    
    
    
    
    
    3,227,710Other assets
    
    
    523,518
    
    
    
    
    
    
    
    
    
    
    
    606,368Total non-interest bearing assets
    
    
    5,851,891
    
    
    
    
    
    
    
    
    
    
    
    5,867,467Total assets
    
    $
    38,336,473
    
    
    
    
    
    
    
    
    
    
    $
    34,417,081LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing deposits and liabilities:Deposits:Domestic:Interest-bearing demand
    
    $
    314,032
    
    
    $
    69
    
    
    
    0.09
    
    
    $
    266,838
    
    
    $
    119
    
    
    
    0.18Savings
    
    
    10,820,570
    
    
    
    15,741
    
    
    
    0.59
    
    
    
    9,696,019
    
    
    
    18,239
    
    
    
    0.76Time
    
    
    6,717,222
    
    
    
    25,482
    
    
    
    1.53
    
    
    
    6,839,649
    
    
    
    33,231
    
    
    
    1.97Foreign
    
    
    997,080
    
    
    
    2,144
    
    
    
    0.86
    
    
    
    608,316
    
    
    
    1,558
    
    
    
    1.04Total interest-bearing deposits
    
    
    18,848,904
    
    
    
    43,436
    
    
    
    0.93
    
    
    
    17,410,822
    
    
    
    53,147
    
    
    
    1.24Short-term borrowings
    
    
    2,130,573
    
    
    
    5,413
    
    
    
    1.02
    
    
    
    1,373,035
    
    
    
    3,696
    
    
    
    1.09Long-term debt and capital securities
    
    
    4,323,264
    
    
    
    47,277
    
    
    
    4.40
    
    
    
    3,580,283
    
    
    
    45,394
    
    
    
    5.14Total interest-bearing deposits and liabilities
    
    
    25,302,741
    
    
    
    96,126
    
    
    
    1.53
    
    
    
    22,364,140
    
    
    
    102,237
    
    
    
    1.85Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.64
    %
    
    
    
    
    
    
    
    
    
    
    4.08
    %Noninterest-bearing deposits
    
    
    7,583,455
    
    
    
    
    
    
    
    
    
    
    
    6,735,524Other liabilities
    
    
    1,123,351
    
    
    
    
    
    
    
    
    
    
    
    1,391,324Total liabilities
    
    
    34,009,547
    
    
    
    
    
    
    
    
    
    
    
    30,490,988Stockholders equity
    
    
    4,326,926
    
    
    
    
    
    
    
    
    
    
    
    3,926,093Total liabilities and stockholders equity
    
    $
    38,336,473
    
    
    
    
    
    
    
    
    
    
    $
    34,417,081Impact of noninterest-bearing sources
    
    
    
    
    
    
    
    
    
    
    0.34
    %
    
    
    
    
    
    
    
    
    
    
    0.41
    %Net interest income and margin on total earning assets
    
    
    
    
    
    
    321,284
    
    
    
    3.98
    %
    
    
    
    
    
    
    315,623
    
    
    
    4.49
    %Tax equivalent adjustment
    
    
    
    
    
    
    258
    
    
    
    
    
    
    
    
    
    
    
    384Net interest income
    
    
    
    
    
    $
    321,026
    
    
    
    
    
    
    
    
    
    
    $
    315,239
   (1)
    
    Annualized.(2)
    
    For the three months ended March 31, 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 $10.5 million
and $13.8 million for three months ended March 31, 2004 and 2003,
respectively. 23




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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 table reflects the key components of the change in
noninterest income for the three months ended March 31, 2004, as compared to
the same period in 2003: Three Months Ended March 31,
    
    Change2004
    
    2003
    
    $
    
    %(Dollars in thousands)Service charges on deposit accounts
    
    $
    40,829
    
    
    $
    37,029
    
    
    $
    3,800
    
    
    
    10.3
    %Trust and investment services income
    
    
    10,302
    
    
    
    9,507
    
    
    
    795
    
    
    
    8.4Other service charges and fees
    
    
    38,026
    
    
    
    31,655
    
    
    
    6,371
    
    
    
    20.1Securities gains, net
    
    
    367
    
    
    
    1,892
    
    
    
    (1,525
    )
    
    
    (80.6
    )Other
    
    
    11,914
    
    
    
    14,751
    
    
    
    (2,837
    )
    
    
    (19.2
    )Total noninterest income
    
    $
    101,438
    
    
    $
    94,834
    
    
    $
    6,604
    
    
    
    7.0
    %
 First quarter 2004 as compared to first quarter 2003 As detailed in the table above, total noninterest income was $101.4
million, an increase of $6.6 million or 7.0%. Service charges on deposit accounts were $40.8 million, an increase of
$3.8 million. The increase is primarily attributed to an increase in average
deposit balances of approximately 9.5%, higher fee income from overdraft
and nonsufficient fund transactions and higher servicing fee income as a result
of repricing efforts in account analysis. Other service charges and fees were $38.0 million, an increase of $6.4
million. The increase is primarily due to increased revenue resulting from a
concentrated effort in growing the sales of investment products, higher rental
income from automobile operating leases as we began accounting for our auto
leases as operating leases beginning in February 2004 (see Note 5 to the
Consolidated Financial Statements), higher non-yield-related fees on commercial
loans, higher loan servicing fees and higher merchant services fees resulting
from an increase in the number of retail merchant accounts and higher retail
sales volume. Net securities gains totaled $0.4 million, compared to a net gain of $1.9
million. The higher gains in 2003 were due to portfolio restructuring
activities. Other noninterest income totaled $11.9 million, a decrease of $2.8
million, primarily attributed to lower gains on the sale of residential loans
due to lower loan volume, lower gains on the sale of foreclosed property and
lower income from the sale of loans in the Essex subsidiary as Essex began to
keep specific types of loans in its portfolio rather than selling them. These
decreases were partially offset by increased revenue from derivative sale
activities and miscellaneous assets. 
 Noninterest Expense The following table reflects the key components of the change in
noninterest expense for the three months ended March 31, 2004 as compared to
the same period in 2003: 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) Three Months Ended March 31,
    
    Change2004
    
    2003
    
    $
    
    %(Dollars in thousands)Personnel:Salaries and wages
    
    $
    83,455
    
    
    $
    84,662
    
    
    $
    (1,207
    )
    
    
    (1.4
    )%Employee benefits
    
    
    36,237
    
    
    
    37,646
    
    
    
    (1,409
    )
    
    
    (3.7
    )Total personnel expense
    
    
    119,692
    
    
    
    122,308
    
    
    
    (2,616
    )
    
    
    (2.1
    )Occupancy
    
    
    21,615
    
    
    
    22,320
    
    
    
    (705
    )
    
    
    (3.2
    )Outside services
    
    
    18,261
    
    
    
    17,567
    
    
    
    694
    
    
    
    4.0Intangible amortization
    
    
    5,763
    
    
    
    5,763
    
    
    
    
    
    
    
    Equipment
    
    
    12,133
    
    
    
    11,156
    
    
    
    977
    
    
    
    8.8Stationery and supplies
    
    
    6,164
    
    
    
    7,018
    
    
    
    (854
    )
    
    
    (12.2
    )Advertising and promotion
    
    
    6,336
    
    
    
    5,203
    
    
    
    1,133
    
    
    
    21.8Other
    
    
    28,918
    
    
    
    29,325
    
    
    
    (407
    )
    
    
    (1.4
    )Total noninterest expense
    
    $
    218,882
    
    
    $
    220,660
    
    
    $
    (1,778
    )
    
    
    (0.8
    )%
 First quarter 2004 as compared to first quarter 2003 As the table above shows in detail, total noninterest expense was $218.9
million, a decrease of $1.8 million. Salaries and wages expenses were $83.5 million, a decrease of $1.2
million. The decrease is primarily attributable to a lower full-time
equivalent employee count and a reduction in temporary services. Employee benefits expense was $36.2 million, a decrease of $1.4 million,
primarily due to lower pension and retirement plan expense as a result of
reduced costs and lower recognized actuarial loss. The decrease was partially
offset by increases in other benefits, primarily healthcare. Advertising and promotion expenses were $6.3 million, an increase of $1.1
million, primarily the result of higher advertising expenses related to media
outdoor and CD campaigns to promote brand recognition. 
 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 BankingFirst quarter 2004 as compared to first quarter 2003 The Regional Banking Groups net income increased $4.4 million, from $30.8
million to $35.2 million. Net interest income increased $1.5 million or 1.2%.
This increase was driven by a 9.4% increase in average loans, offset by a
decline in demand deposit transfer pricing margins. Noninterest income
increased $4.3 million, or 11.1%, driven by a repricing in our fee structure,
an increase in investment sales volume and increased penalty fees collected on
commercial real estate loans in this period. Noninterest expense increased
$1.9 million, or 1.8%. Noninterest expense increased due to higher costs
associated with employee benefits. The provision for loan and lease losses
decreased $3.1 million due to higher recoveries of previously charged off
loans. The growth in deposit balances was driven by core deposits, offset by a
decline in certificates of deposits. 25




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BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued)  
    
    Commercial BankingFirst quarter 2004 as compared to first quarter 2003 The
Commercial Banking segments net income increased $0.4 million or 1.1%
from $37.2 million to $37.6 million. Net interest income decreased $3.2
million or 4.0%. The decrease in net interest income is a result of a 100 basis
point drop in the transfer pricing margin for money market savings and demand
deposits, despite an increase in average balances. The change in transfer
pricing methodology on money market accounts contributed to the margin
decrease. The margins on loans and leases remained constant as compared to last
year. Noninterest income increased $2.7 million or 23.9%. The increase is
related to non-yield related loan fees and trading derivatives as well as
unexpected early lease contract termination fees. Noninterest expense decreased
$ 0.9 million or 3.0%. Average loan and lease balances increased by 5.8% to $7.3 billion, and
average deposit balances increased by 15.8% to $3.4 billion.  
    
    Consumer FinanceFirst quarter 2004 as compared to first quarter 2003 The
Consumer Finance segments net income was $14.4 million compared to $14.6
million. Net interest income was $53.0 million, compared to $49.7 million, an
increase of 6.6%. Noninterest income has remained flat. Noninterest expense
increased from $15.3 million to $17.0 million. The Consumer Finance Segment remains very competitively priced in the
indirect lending market. Though noninterest income remained flat, income
decreased due to lower gains on sales of loans through our Essex subsidiary,
offset by an increase in other operating income as a result of originating
operating leases rather than finance leases (see Note 5 to the Consolidated
Financial Statements). In 2004, Essex began to keep in its portfolio specific
types of loans, rather than selling substantially all loans as it had done in
the past. Noninterest income was favorably impacted as a result of recording
lease payments as noninterest income on all auto leases recorded as operating
leases according to Statement of Financial Accounting Standards No. 13 starting
in February 2004. Noninterest expense increased by 11.1%. However, expenses
as a percentage of average assets remained constant. The noninterest expense
increase was primarily due to an increase in the cost of employee salaries and
benefits. Average assets were $8.1 billion compared to $7.1 billion, an increase of
14.3%. This increase is primarily due to increased indirect loan production.
The provision for credit losses increased $2.1 million due to a $1.0 billion
increase in average loans. First Hawaiian Bank  
    
    Retail BankingFirst quarter 2004 as compared to first quarter 2003 The Retail Banking Groups net income decreased to $16.7 million, down
$1.6 million, or 8.7%. Net interest income decreased $0.9 million or 1.6%,
primarily due to a decrease in the net interest margin, which was negatively
impacted by the effects of a lower interest rate environment. Noninterest
income increased $0.4 million, or 2.3%, primarily from increased fees on
deposit accounts, partially offset by a gain on the sale of foreclosed property
in 2003. Noninterest expense increased $1.3 million, or 3.0%, primarily due to
increased allocated corporate expenses. The provision for loan and lease
losses decreased $0.3 million or 21.4%. The decrease in nonperforming assets
and lower charge offs have reduced the provision for loan and lease losses. Average assets increased 9.7%, primarily due to increases in residential
and commercial loans. Average assets also increased due to the purchase of the
First Hawaiian Center building. Average deposits increased 7.0% primarily due
to an increase in core deposits, partially offset by a decrease in time
certificates of deposit. 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)  
    
    Consumer FinanceFirst quarter 2004 as compared to first quarter 2003 Consumer Finances net income decreased to $9.3 million, down $0.3
million, or 3.1%. Net interest income was $20.7 million compared to $18.5
million, an increase of 11.9%. This was the result of increased interest
income on higher loan balances. Noninterest income decreased $2.2 million or
21.8%. The decrease was caused by lower gains on the sale of mortgages.
Noninterest expense remained flat. The provision for loan and lease losses
decreased $0.2 million or 10.5%. The decrease reflects lower charge offs and
improved credit quality. Average assets increased 3.0%, primarily due to increases in consumer and
dealer flooring loans.  
    
    Commercial BankingFirst quarter 2004 as compared to first quarter 2003 Commercial Bankings net income increased to $6.0 million, up $0.5
million, or 9.1%. Net interest income increased $0.3 million or 3.6%,
primarily due to higher fees from loans that were paid off in 2004.
Noninterest income increased $0.3 million or 18.8%, primarily due to an
increase in loan servicing fees. Noninterest expense remained relatively flat.
The provision for loan and lease losses increased $0.2 million, primarily due
to a recovery on a loan previously charged off in 2003. Average assets decreased 5.8%, primarily due to a decrease in loans.  
    
    Financial ManagementFirst quarter 2004 as compared to first quarter 2003 The Financial Management Groups net income of $0.7 million was unchanged
from 2003. Noninterest income increased by $0.3 million, primarily due to
higher investment management fees. Investment fees were positively impacted by
the upturn in the equity markets. Noninterest expense increased by $0.2
million, primarily due to increases in salaries and employee benefits. 
 INVESTMENT SECURITIES The Company focuses on the following four objectives for its investment
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. Because of the resultant high degree of liquidity that must be
invested, the current investment strategy is focused primarily on managing
overall interest rate risk and maximizing earnings. 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) Held-to-Maturity There were no held-to-maturity investment securities at March 31, 2004,
December 31, 2003 or March 31, 2003. Available-for-Sale Amortized cost and fair value of available-for-sale investment securities
at March 31, 2004, December 31, 2003 and March 31, 2003 were as follows: March 31, 2004Amortized
    
    Unrealized
    
    UnrealizedCost
    
    Gains
    
    Losses (1)
    
    Fair Value(in thousands)U.S. Treasury and other U.S. Government
agencies and corporations
    
    $
    1,557,294
    
    
    $
    17,826
    
    
    $
    (580
    )
    
    $
    1,574,540Mortgage and asset-backed securities:Government
    
    
    2,447,891
    
    
    
    34,362
    
    
    
    (12,342
    )
    
    
    2,469,911Other
    
    
    666,555
    
    
    
    10,049
    
    
    
    (354
    )
    
    
    676,250Collateralized mortgage obligations
    
    
    1,088,833
    
    
    
    5,899
    
    
    
    (2,082
    )
    
    
    1,092,650State and political subdivisions
    
    
    7,794
    
    
    
    523
    
    
    
    (12
    )
    
    
    8,305Other (2)
    
    
    208,260
    
    
    
    598
    
    
    
    (121
    )
    
    
    208,737Total available-for-sale investment securities
    
    $
    5,976,627
    
    
    $
    69,257
    
    
    $
    (15,491
    )
    
    $
    6,030,393
   [Continued from above table, first column(s) repeated] December 31, 2003
    
    March 31, 2003Amortized
    
    Unrealized
    
    Unrealized
    
    
    
    
    
    Amortized
    
    Unrealized
    
    UnrealizedCost
    
    Gains
    
    Losses (1)
    
    Fair Value
    
    Cost
    
    Gains
    
    Losses (1)
    
    Fair Value(in thousands)U.S. Treasury and other U.S. Government
agencies and corporations
    
    $
    1,588,359
    
    
    $
    14,110
    
    
    $
    (2,256
    )
    
    $
    1,600,213
    
    
    $
    1,411,466
    
    
    $
    22,115
    
    
    $
    (107
    )
    
    $
    1,433,474Mortgage and asset-backed securities:Government
    
    
    2,356,615
    
    
    
    23,397
    
    
    
    (23,879
    )
    
    
    2,356,133
    
    
    
    1,840,240
    
    
    
    37,515
    
    
    
    (1,283
    )
    
    
    1,876,472Other
    
    
    691,466
    
    
    
    7,990
    
    
    
    (1,425
    )
    
    
    698,031
    
    
    
    558,218
    
    
    
    13,556
    
    
    
    (298
    )
    
    
    571,476Collateralized mortgage obligations
    
    
    1,066,679
    
    
    
    2,611
    
    
    
    (8,119
    )
    
    
    1,061,171
    
    
    
    474,003
    
    
    
    5,075
    
    
    
    (246
    )
    
    
    478,832State and political subdivisions
    
    
    15,925
    
    
    
    355
    
    
    
    (61
    )
    
    
    16,219
    
    
    
    15,346
    
    
    
    274
    
    
    
    (145
    )
    
    
    15,475Other (2)
    
    
    196,450
    
    
    
    173
    
    
    
    (628
    )
    
    
    195,995
    
    
    
    152,439
    
    
    
    422
    
    
    
    (106
    )
    
    
    152,755Total available-for-sale investment securities
    
    $
    5,915,494
    
    
    $
    48,636
    
    
    $
    (36,368
    )
    
    $
    5,927,762
    
    
    $
    4,451,712
    
    
    $
    78,957
    
    
    $
    (2,185
    )
    
    $
    4,528,484
   (1)
    
    At March 31, 2004, December 31, 2003 and March 31, 2003, the Company
held no securities that had been in a continuous unrealized loss position
for 12 months or more.(2)
    
    Includes investment in restricted stock of the Federal Home Loan Bank
of $155.9 million, $153.3 million and $111.3 million as of March 31,
2004, December 31, 2003 and March 31, 2003, respectively. Proceeds from the sales of available-for-sale investment securities
portfolio were $56.4 million and $101.1 million for the three months ended
March 31, 2004 and 2003, respectively. Gains and losses realized on the sales of available-for-sale investment
securities are determined using the specific identification method. Gross
realized gains and losses on available-for-sale investment securities for the
periods indicated were as follows: Three Months Ended March 31,2004
    
    2003(Dollars in thousands)Realized gains
    
    $
    368
    
    
    $
    1,892Realized losses
    
    
    (1
    )
    
    
    Securities gains (losses), net
    
    $
    367
    
    
    $
    1,892
 28




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##### Table of Contents



BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) 
 LOANS AND LEASES The following table sets forth the loan and lease portfolio by major
categories and loan and lease mix at March 31, 2004, December 31, 2003 and
March 31, 2003: March 31, 2004
    
    December 31, 2003
    
    March 31, 2003Amount
    
    %
    
    Amount
    
    %
    
    Amount
    
    %(Dollars in millions)Commercial, financial and agricultural
    
    $
    4,441
    
    
    
    16.9
    %
    
    $
    4,492
    
    
    
    17.5
    %
    
    $
    4,637
    
    
    
    19.3
    %Real estate:Commercial
    
    
    5,163
    
    
    
    19.7
    
    
    
    5,146
    
    
    
    20.0
    
    
    
    4,871
    
    
    
    20.3Construction
    
    
    958
    
    
    
    3.7
    
    
    
    953
    
    
    
    3.7
    
    
    
    944
    
    
    
    3.9Residential
    
    
    5,338
    
    
    
    20.4
    
    
    
    5,020
    
    
    
    19.5
    
    
    
    4,568
    
    
    
    19.0Total real estate loans
    
    
    11,459
    
    
    
    43.8
    
    
    
    11,119
    
    
    
    43.2
    
    
    
    10,383
    
    
    
    43.2Consumer
    
    
    7,659
    
    
    
    29.2
    
    
    
    7,345
    
    
    
    28.6
    
    
    
    6,305
    
    
    
    26.2Lease financing
    
    
    2,321
    
    
    
    8.8
    
    
    
    2,417
    
    
    
    9.4
    
    
    
    2,344
    
    
    
    9.7Foreign:Commercial and industrial
    
    
    61
    
    
    
    0.2
    
    
    
    63
    
    
    
    0.2
    
    
    
    80
    
    
    
    0.3Other
    
    
    288
    
    
    
    1.1
    
    
    
    286
    
    
    
    1.1
    
    
    
    307
    
    
    
    1.3Total foreign loans
    
    
    349
    
    
    
    1.3
    
    
    
    349
    
    
    
    1.3
    
    
    
    387
    
    
    
    1.6Total loans and leases
    
    $
    26,229
    
    
    
    100.0
    %
    
    $
    25,722
    
    
    
    100.0
    %
    
    $
    24,056
    
    
    
    100.0
    %Less allowance for loan and lease losses
    
    
    396
    
    
    
    
    
    
    
    392
    
    
    
    
    
    
    
    396Total net loans and leases
    
    $
    25,833
    
    
    
    
    
    
    $
    25,330
    
    
    
    
    
    
    $
    23,660Total loans and leases to:Total assets
    
    
    67.4
    %
    
    
    
    
    
    
    67.1
    %
    
    
    
    
    
    
    68.9
    %Total interest earning assets
    
    
    79.2
    %
    
    
    
    
    
    
    79.5
    %
    
    
    
    
    
    
    82.9
    %Total deposits
    
    
    98.1
    %
    
    
    
    
    
    
    97.4
    %
    
    
    
    
    
    
    98.8
    %
 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 9.0%, increase in total
loans and leases from March 31, 2003 and a $507.4 million, or 2.0% increase
compared to December 31, 2003. When comparing the current period to March 31, 2003 there was an increase
of $1.4 billion, or 21.5%, in consumer loans due to continued strength in the
consumer market. Consumer loans consist primarily of open-and closed-end
direct and indirect credit facilities for personal, automobile, recreational
vehicle, marine, and household purchases. This increase was partially offset
by a decrease of $196 million, or 4.2%, in commercial lending resulting from run
off. Total real estate loans increased $1.1 billion or 10.4% from March 31,
2003 primarily from growth in residential and commercial real estate lending. Total loans and leases increased slightly from December 31, 2003. This
increase was mainly driven by increases in residential real estate and consumer
lending. Total real estate loans increased $0.3 million, or 3.1%, and consumer
loans increased $0.3 million, or 4.3%, in the period ending March 31, 2004
compared to December 31, 2003. These increases were partially offset by
declines in commercial, financial and agricultural lending and lease financing. Our mix of loans and leases has remained similar to our portfolio in the
period ending March 31, 2003 with a few exceptions. We have decreased
exposures in certain commercial, financial and agricultural loans in response
to concentration levels from 19.3% on March 31, 2003 to 16.9% on March 31,
2004. Our portfolio of consumer loans has increased while lease financing has
decreased slightly. This shift is due to changes in the consumer market and
attractive interest rates on consumer lending. Low interest rates on consumer
products have turned consumers away from leasing to purchasing. 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 March 31, 2004, we
did not have a 29




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##### Table of Contents



BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) 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. Off-balance-sheet commitments were as follows at March 31, for the years
indicated: Notional/Contract Amount2004
    
    2003(Dollars in thousands)Contractual Amounts Which Represent Credit Risk:Commitments to extend credit
    
    $
    8,435,507
    
    
    $
    7,313,461Standby letters of credit
    
    
    668,888
    
    
    
    806,596Commercial letters of credit
    
    
    65,659
    
    
    
    78,294
 
 NONPERFORMING ASSETS AND RESTRUCTURED LOANS Nonperforming assets at March 31, 2004, December 31, 2003 and March 31,
2003 are as follows: March 31, 2004
    
    December 31, 2003
    
    March 31, 2003(Dollars in thousands)Nonperforming Assets:Nonaccrual:Commercial, financial and agricultural
    
    $
    66,060
    
    
    $
    66,100
    
    
    $
    129,941Real estate:Commercial
    
    
    47,897
    
    
    
    41,508
    
    
    
    51,852Construction
    
    
    
    
    
    
    
    
    
    
    Residential
    
    
    8,093
    
    
    
    8,176
    
    
    
    7,909Total real estate loans
    
    
    55,990
    
    
    
    49,684
    
    
    
    59,761Consumer
    
    
    2,457
    
    
    
    3,634
    
    
    
    4,459Lease financing
    
    
    7,550
    
    
    
    8,038
    
    
    
    13,527Foreign
    
    
    5,607
    
    
    
    6,341
    
    
    
    8,758Total nonaccrual loans and leases
    
    
    137,664
    
    
    
    133,797
    
    
    
    216,446Other real estate owned and repossessed personal property
    
    
    15,571
    
    
    
    17,387
    
    
    
    18,545Total nonperforming assets
    
    $
    153,235
    
    
    $
    151,184
    
    
    $
    234,991Past due loans and leases (1):Commercial, financial and agricultural
    
    $
    18,520
    
    
    $
    17,545
    
    
    $
    11,387Real estate:Commercial
    
    
    6,363
    
    
    
    7,410
    
    
    
    5,613Construction
    
    
    
    
    
    
    
    
    
    
    907Residential
    
    
    1,190
    
    
    
    1,084
    
    
    
    2,783Total real estate loans
    
    
    7,553
    
    
    
    8,494
    
    
    
    9,303Consumer
    
    
    2,602
    
    
    
    2,559
    
    
    
    1,792Lease financing
    
    
    16
    
    
    
    127
    
    
    
    393Foreign
    
    
    303
    
    
    
    651
    
    
    
    563Total past due loans and leases
    
    $
    28,994
    
    
    $
    29,376
    
    
    $
    23,438Accruing Restructured Loans:Commercial, financial and agricultural
    
    $
    55
    
    
    $
    60
    
    
    $
    68Real estate:Commercial
    
    
    1,596
    
    
    
    1,616
    
    
    
    4,523Total real estate loans
    
    
    1,596
    
    
    
    1,616
    
    
    
    4,523Total accruing restructured loans and leases
    
    $
    1,651
    
    
    $
    1,676
    
    
    $
    4,591Nonperforming assets to total loans and leases and other real estate owned and
repossessed personal property (end of period):Excluding past due loans and leases
    
    
    0.58
    %
    
    
    0.59
    %
    
    
    0.98
    %Including past due loans and leases
    
    
    0.69
    
    
    
    0.70
    
    
    
    1.07Nonperforming assets to total assets (end of period):Excluding past due loans and leases
    
    
    0.39
    
    
    
    0.39
    
    
    
    0.67Including past due loans and leases
    
    
    0.47
    
    
    
    0.47
    
    
    
    0.74
   (1)
    
    Represents loans and leases which are past due 90 days or more as to
principal and/or interest, are still accruing interest, are adequately
collateralized and in the process of collection. 30




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##### Table of Contents



BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) Nonperforming assets at March 31, 2004 were $153.2 million, or 0.58% of
total loans and leases and other real estate owned (OREO) and repossessed
personal property, compared to 0.59% at December 31, 2003 and 0.98% at March
31, 2003. Nonperforming assets at March 31, 2004 decreased by $81.8 million, or
34.8%, from March 31, 2003 and increased $2.1 million, or
1.4%, 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 March 31, 2004 by $3.2 million, or
36.0%, from March 31,
2003. However, our overall foreign loan portfolio, composed primarily of loans
in Guam and Saipan, represents a relatively small component (1.3%) of our total
loan portfolio at March 31, 2004. The increase in nonperforming assets from
December 31, 2003 is primarily due to an increase in nonperforming commercial
real estate loans of $6.4 million or 15.4 %. 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, substantially all 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. Other than the loans listed, we were not aware of any significant
potential problem loans where possible credit problems of the borrower caused
us to seriously question the borrowers ability to repay the loan under
existing terms. Loans past due 90 days or more and still accruing interest
totaled $29.0 million at March 31, 2004, a decrease of $0.4 million or 1.3%,
from December 31, 2003, but an increase of $5.6 million, or 23.7%, from March
31, 2003. The decrease at March 31, 2004 compared to December 31, 2003 was
primarily due to commercial real estate loans offset by an increase in
commercial, financial and agricultural loans. The increase at March 31, 2004
compared to March 31, 2003 was primarily 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. 31




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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 March 31,2004
    
    2003(Dollars in thousands)Loans and leases outstanding (end of period)
    
    $
    26,229,432
    
    
    $
    24,056,267Allowance for loan and lease losses:Balance at beginning of period
    
    $
    391,699
    
    
    $
    384,081Provision for loan and lease losses
    
    
    18,865
    
    
    
    22,690Loans and leases charged off:Commercial, financial and agricultural
    
    
    2,136
    
    
    
    9,257Real estate:Commercial
    
    
    293
    
    
    
    123Residential
    
    
    20
    
    
    
    370Consumer
    
    
    13,514
    
    
    
    15,303Lease financing
    
    
    5,444
    
    
    
    6,083Foreign
    
    
    731
    
    
    
    841Total loans and leases charged off
    
    
    22,138
    
    
    
    31,977Recoveries on loans and leases previously charged off:Commercial, financial and agricultural
    
    
    2,454
    
    
    
    16,432Real estate:Commercial
    
    
    126
    
    
    
    91Construction
    
    
    34
    
    
    
    34Residential
    
    
    199
    
    
    
    296Consumer
    
    
    3,239
    
    
    
    2,747Lease financing
    
    
    1,765
    
    
    
    1,543Foreign
    
    
    244
    
    
    
    112Total recoveries on loans and leases previously charged off
    
    
    8,061
    
    
    
    21,255Net charge-offs
    
    
    (14,077
    )
    
    
    (10,722
    )Balance at end of period
    
    $
    396,487
    
    
    $
    396,049Net loans and leases charged off to average loans and leases (1)
    
    
    0.22
    %
    
    
    0.18
    %Net loans and leases charged off to allowance for credit losses (1)
    
    
    14.28
    
    
    
    10.83Allowance for loan and lease losses to total loans and leases (end of period)
    
    
    1.51
    
    
    
    1.65Allowance for loan and lease losses to nonaccruing loans and leases
(end of period):Excluding 90 days past due accruing loans and leases
    
    
    2.88x
    
    
    
    1.83xIncluding 90 days past due accruing loans and leases
    
    
    2.38x
    
    
    
    1.65x
   (1)
    
    Annualized. The provision for loan and lease losses for the first three months ended
March 31, 2004 was $18.9 million, a decrease of $3.8 million, or 16.9%,
compared to the same period in 2003. 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: 32




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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.Over the past few years, we have reduced our exposure
to higher-risk areas such as Hawaii commercial real estate, hotel and
agricultural loans.  
    
    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 March 31, 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 49.1% of our lease financing portfolio and 11.4 % of our
combined lease financing and consumer loans at March 31, 2004), we
obtain third-party insurance for the estimated residual value of the
leased vehicle. We set aside reserves to cover the uninsured portion. Compared to the same quarter a year ago, net charge-offs were $3.4 million
higher during the first quarter of 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 March 31, 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 45.2% of total interest expense. At March 31, 2004, total deposits were
$26.7 billion, an increase of 1.3% over December 31, 2003 and an increase of
9.9% over March 31, 2003. The increase was primarily due to the growth in our
customer deposit base, primarily in Bank of the West, as well as various
deposit product programs that we initiated. The decrease in all of the rates
paid on deposits reflects the lower interest rate environment, caused primarily
by rate decreases by the Federal Reserves Open Market Committee. 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). 
 CAPITAL Stockholders equity totaled $4.4 billion at March 31, 2004, an increase
of $135.0 million, or 3.2%, from December 31, 2003 and $429.0 million, or
10.8%, from March 31, 2003. The increase between December 31, 2003 and March
31, 2004 was primarily due to net income earned by the Company during the first
quarter of 2004 and net unrealized gains on securities available-for-sale. The
increase between March 31, 2003 and March 31, 2004 was primarily due to net
income earned during the twelve month period. 33




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BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) 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 March 31, 2004 are set forth below: To Be WellCapitalizedUnder PromptFor Capital
    
    Corrective ActionActual
    
    Adequacy Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Tier 1 Capital to Risk-WeightedAssets:Bank of the West
    
    $
    2,573,467
    
    
    
    10.92
    %
    
    $
    942,739
    
    
    
    4.00
    %
    
    $
    1,414,109
    
    
    
    6.00
    %First Hawaiian Bank
    
    
    876,810
    
    
    
    13.28
    
    
    
    264,184
    
    
    
    4.00
    
    
    
    396,276
    
    
    
    6.00Total Capital to Risk-WeightedAssets:Bank of the West
    
    $
    3,093,532
    
    
    
    13.13
    %
    
    $
    1,885,478
    
    
    
    8.00
    %
    
    $
    2,356,848
    
    
    
    10.00
    %First Hawaiian Bank
    
    
    1,032,920
    
    
    
    15.64
    
    
    
    528,368
    
    
    
    8.00
    
    
    
    660,460
    
    
    
    10.00Tier 1 Capital to AverageAssets:Bank of the West
    
    $
    2,573,467
    
    
    
    9.58
    %
    
    $
    1,074,455
    
    
    
    4.00
    %
    
    $
    1,343,069
    
    
    
    5.00
    %First Hawaiian Bank
    
    
    876,810
    
    
    
    10.19
    
    
    
    344,175
    
    
    
    4.00
    
    
    
    430,219
    
    
    
    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 three months ended March 31, 2004 and 2003 was 38.8%. Lease-in/lease-out
(LILO) transactions have recently been subject to review
on a nation-wide 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 anticipates paying, under protest, the
amounts claimed by the IRS 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. 
 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, available-for-sale investment
securities and loans held for sale. Such assets represented 21.1% of total
assets at the March 31, 2004, compared to 21.3% at December 31, 2003 and 18.7%
at March 31, 2003. 34




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##### Table of Contents



BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) 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 increased by 9.5% to $26.4 billion at March 31, 2004,
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 quarter ended March 31, 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: March 31,2004
    
    2003(in millions)Federal Reserve Discount Window
    
    $
    626
    
    
    $
    494Federal Home Loan Bank
    
    
    1,851
    
    
    
    949Securities Available for Repurchase Agreements
    
    
    3,172
    
    
    
    2,238Total
    
    $
    5,649
    
    
    $
    3,681
 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. 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 March 31, 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-
 35




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BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) Cash Flows The following is a summary of our cash flows for the three months ended
March 31, 2004 and 2003. (There is more detail in the Consolidated Statements
of Cash Flows.) Three Months Ended March 31,2004
    
    2003(in thousands)Net cash and cash equivalents provided by operating and
financing activities
    
    $
    567,310
    
    
    $
    184,288Net cash and cash equivalents used in investing activities
    
    $
    631,122
    
    
    $
    513,510
 The decrease in cash and cash equivalents in the first quarter of 2004 was
primarily due to increased loan volume, through direct origination and loan
purchases, as well as the purchase of investment securities. The increases in
these portfolios were primarily funded by an increase in customer deposits of
$340.1 million and additional borrowings. The decrease in the first quarter of
2003 was primarily due to the purchase of investment securities. 
 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. On March 9, 2004 the SEC released a Staff Accounting Bulletin: No. 105,
Application of Accounting Principles to Loan Commitments, 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. 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 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 36




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BancWest Corporation and Subsidiaries 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS(Continued) ending after June 15, 2004. The adoption of SFAS 132 (revised 2003)
required enhanced disclosure and did not impact our consolidated financial
position, results of operations or cash flows. 37




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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, the size of the balance sheet is held relatively
constant and 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 April 1, 2004 is shown below. +3%
    
    +2%
    
    +1%
    
    Flat
    
    -0.5%(Dollars in millions)Net interest income
    
    
    1,282.8
    
    
    
    1,291.7
    
    
    
    1,301.4
    
    
    
    1,313.0
    
    
    
    1,305.0Difference from flat
    
    
    (30.2
    )
    
    
    (21.3
    )
    
    
    (11.6
    )
    
    
    
    
    
    
    (8.0
    )% variance
    
    
    (2.3
    )%
    
    
    (1.6
    )%
    
    
    (0.9
    )%
    
    
    
    %
    
    
    (0.6
    )%
 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. 38




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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: March 31, 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
    
    $
    (24,177
    )
    
    $
    523
    
    
    $
    700,915
    
    
    
    83,495
    
    
    
    102,500
    
    
    
    24,681
    
    
    
    30,540
    
    
    
    95,430
    
    
    
    364,269Weighted Avg. Pay Rates
    
    
    
    
    
    
    
    
    
    
    4.28
    
    
    
    3.19
    
    
    
    1.38
    
    
    
    4.94
    
    
    
    5.15
    
    
    
    5.63
    
    
    
    4.58Weighted Avg. Receive Rates
    
    
    
    
    
    
    
    
    
    
    1.15
    
    
    
    1.08
    
    
    
    0.54
    
    
    
    1.39
    
    
    
    1.61
    
    
    
    1.13
    
    
    
    1.17Receive-Fixed Swaps:Contractual Maturities
    
    
    30,434
    
    
    
    30,623
    
    
    
    700,915
    
    
    
    83,495
    
    
    
    102,500
    
    
    
    24,681
    
    
    
    30,540
    
    
    
    95,430
    
    
    
    364,269Weighted Avg. Pay Rates
    
    
    
    
    
    
    
    
    
    
    1.15
    
    
    
    1.07
    
    
    
    1.01
    
    
    
    1.61
    
    
    
    1.61
    
    
    
    1.13
    
    
    
    1.13Weighted Avg. Receive
Rates
    
    
    
    
    
    
    
    
    
    
    4.50
    
    
    
    3.19
    
    
    
    3.03
    
    
    
    2.78
    
    
    
    2.78
    
    
    
    5.82
    
    
    
    4.82Pay & Receive Variable
Swaps:Contractual Maturities
    
    
    260
    
    
    
    365
    
    
    
    25,812
    
    
    
    
    
    
    
    
    
    
    
    4,812
    
    
    
    
    
    
    
    
    
    
    
    21,000Weighted Avg. Pay Rates
    
    
    
    
    
    
    
    
    
    
    2.83
    
    
    
    
    
    
    
    
    
    
    
    3.35
    
    
    
    
    
    
    
    
    
    
    
    2.71Weighted Avg. Receive Rates
    
    
    
    
    
    
    
    
    
    
    3.94
    
    
    
    
    
    
    
    
    
    
    
    4.03
    
    
    
    
    
    
    
    
    
    
    
    3.37Caps/CollarsContractual Maturities
    
    
    
    
    
    
    117
    
    
    
    164,865
    
    
    
    38,300
    
    
    
    25,242
    
    
    
    101,323
    
    
    
    
    
    
    
    
    
    
    
    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
    
    $
    6,517
    
    
    $
    31,628
    
    
    $
    1,592,507
 39




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##### Table of Contents



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. 40




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##### Table of Contents



BancWest Corporation and Subsidiaries 
EXHIBITS AND REPORTS ON FORM 8-K 
 PART II. OTHER INFORMATION 
 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)
    
    Exhibits2
    
    Agreement and Plan of Merger dated as of March 15, 2004 among
Bancwest Corporation, BW Newco, Inc. and Community First Bankshares,
Inc.12
    
    Statement regarding computation of ratios.31

    
    Section 302 Certifications.32

    
    Section 1350 Certifications.(b)
    
    Reports on Form 8-KOn January 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
and year ended December 31, 2003.On March 16, 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 Community
First Bankshares, Inc.
 41




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##### Table of Contents



BancWest Corporation and Subsidiaries 
EXHIBITS AND REPORTS ON FORM 8-K(Continued) 
 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. BANCWEST CORPORATION
     (Registrant)Date: May 13, 2004
    By /s/ Douglas C. Grigsby(Douglas C. GrigsbyExecutive Vice President, Chief
Financial Officer and Treasurer
(principal financial officer) 42




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##### Table of Contents



BancWest Corporation and Subsidiaries 
EXHIBITS AND REPORTS ON FORM 8-K(Continued) 
 EXHIBIT INDEX Exhibit No.
    
    Exhibit2
    
    Agreement and Plan of Merger dated as of March 15, 2004
among Bancwest Corporation, BW Newco, Inc. and Community
First Bankshares, Inc.12
    
    Statement regarding computation of ratios.31
    
    Section 302 Certifications.32
    
    Section 1350 Certifications.
 43