UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


(Mark ~~One~~)		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,~~September 30, 2003


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
		For the transition period from to

Commission file number 0-7949

BANCWEST CORPORATION

(Exact name of registrant as specified in its charter)


Delaware				99-0156159
(State of incorporation)				(I.R.S. Employer Identification No.)
				~~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 l5(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes oNoo

Indicate by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act). Yes oNoüx

As of ~~April 30,~~November 1, 2003 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		Outstanding

Class A Common Stock, $0.01 Par Value		85,759,123 Shares

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY AND COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
		OVERVIEW
		NEW PRONOUNCEMENTS
		FORWARD-LOOKING STATEMENTS
		MONETARY POLICY AND ECONOMIC CONDITIONS
		CRITICAL ACCOUNTING POLICIES
		CONSOLIDATED FINANCIAL HIGHLIGHTS
		NET INTEREST INCOME
		NONINTEREST INCOME
		NONINTEREST EXPENSE
		OPERATING SEGMENT RESULTS
		INVESTMENT SECURITIES
		LOANS AND LEASES
		NONPERFORMING ASSETS AND RESTRUCTURED LOANS
		PROVISION AND ALLOWANCE FOR CREDIT LOSSES
		DEPOSITS
		LIQUIDITY MANAGEMENT
		CAPITAL
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
~~CERTIFICATION~~
EXHIBIT INDEX
EXHIBIT 12
EXHIBIT 31
EXHIBIT 32

BANCWEST CORPORATION

FORM 10-Q
~~March 31,~~September 30, 2003

INDEX


			Page

	PART I. FINANCIAL INFORMATION			2
Item 1.	Financial Statements(Unaudited)			2
	Consolidated Statements of Income for the three and nine months ended ~~March 31,~~September 30, 2003 and 2002			2
	Consolidated Balance Sheets at ~~March 31,~~September 30, 2003, December 31, 2002 and ~~March 31,~~September 30, 2002			3
	Consolidated Statements of Changes in Stockholder’s Equity and Comprehensive Income for the ~~three~~nine months ended ~~March 31,~~September 30, 2003 and 2002			5
	Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2003 and 2002			6
	Notes to Consolidated Financial Statements			7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			1518
	Overview			18
	New Pronouncements			18
	Forward Looking Statements			19
	Monetary Policy and Economic Conditions			19
	Critical Accounting Policies			19
	Consolidated Financial Highlights			21
	Net Interest Income			22
	Noninterest Income			25
	Noninterest Expense			25
	Operating Segment Results			26
	Investment Securities			30
	Loans and Leases			31
	Nonperforming Assets and Restructured Loans			32
	Provision and Allowance for Credit Losses			34
	Deposits			36
	Liquidity Management			36
	Capital			36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			3238
Item 4.	Controls and Procedures			3440
	PART II. OTHER INFORMATION			34
Item 6.	Exhibits and Reports on Form 8-K			3440
SIGNATURE				35
~~CERTIFICATIONS~~		3641
EXHIBIT INDEX

Exhibit 12	Statement Regarding Computation of Ratios

Exhibit 31	Section 302 Certifications

Exhibit 32	Section 1350 Certifications

~~Exhibit 12 Statement Regarding Computation of Ratios.~~

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 2002 Annual Report on Form 10-K.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BancWest Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

Three Months Ended March 31, Three Months Ended September 30, Nine Months Ended September 30,

2003 2002 2003 2002 2003 2002

(in thousands) (in thousands)
Interest income
Interest income

Interest income

Interest and fees on loans Interest and fees on loans $ 338,259 $ 256,229 Interest and fees on loans $ 343,610 $ 365,886 $ 1,021,733 $ 992,123
Lease financing income Lease financing income 36,028 36,726 Lease financing income 32,809 34,894 102,151 107,860
Interest on investment securities: Interest on investment securities: Interest on investment securities:
Taxable interest income 41,797 34,262 Taxable interest income 46,118 40,704 131,986 114,881
Exempt from Federal income taxes 154 44 Exempt from Federal income taxes 153 126 490 360
Other interest income Other interest income 1,238 2,023 Other interest income 1,580 2,938 4,750 6,298

Total interest income 417,476 329,284 Total interest income 424,270 444,548 1,261,110 1,221,522

Interest expense
Interest expense

Interest expense

Deposits Deposits 53,147 63,629 Deposits 39,835 76,477 140,706 218,884
Short-term borrowings Short-term borrowings 3,696 5,793 Short-term borrowings 9,230 10,430 16,464 26,486
Long-term debt Long-term debt 45,394 35,382 Long-term debt 43,843 36,907 136,014 109,044

Total interest expense 102,237 104,804 Total interest expense 92,908 123,814 293,184 354,414

Net interest income 315,239 224,480 Net interest income 331,362 320,734 967,926 867,108
Provision for credit losses Provision for credit losses 22,690 20,007 Provision for credit losses 24,145 26,300 65,695 69,209

Net interest income after provision for credit losses 292,549 204,473 Net interest income after provision for credit losses 307,217 294,434 902,231 797,899

Noninterest income
Noninterest income

Noninterest income

Service charges on deposit accounts Service charges on deposit accounts 37,029 25,974 Service charges on deposit accounts 39,512 39,183 115,102 101,718
Trust and investment services income Trust and investment services income 9,507 8,140 Trust and investment services income 9,461 9,883 28,826 28,275
Other service charges and fees Other service charges and fees 35,615 23,498 Other service charges and fees 38,535 34,032 113,380 89,442
Securities gains, net Securities gains, net 1,892 228 Securities gains, net 555 282 3,913 966
Other Other 10,791 4,784 Other 11,563 8,259 33,813 22,291

Total noninterest income 94,834 62,624 Total noninterest income 99,626 91,639 295,034 242,692

Noninterest expense
Noninterest expense

Noninterest expense

Salaries and wages Salaries and wages 84,662 60,094 Salaries and wages 86,269 89,486 252,908 236,043
Employee benefits Employee benefits 37,646 23,482 Employee benefits 34,091 28,340 111,127 87,497
Occupancy expense Occupancy expense 22,320 15,614 Occupancy expense 22,239 24,008 67,153 63,117
Outside services Outside services 17,567 13,252 Outside services 18,002 17,472 53,843 48,532
Intangible amortization Intangible amortization 5,763 2,757 Intangible amortization 5,763 5,763 17,290 14,283
Equipment expense Equipment expense 11,156 7,729 Equipment expense 11,563 14,043 35,156 36,252
Restructuring and integration costs Restructuring and integration costs — 6,015 Restructuring and integration costs — 6,213 — 14,966
Other Other 41,546 30,155 Other 45,036 39,039 135,935 111,592

Total noninterest expense 220,660 159,098 Total noninterest expense 222,963 224,364 673,412 612,282

Income before income taxes 166,723 107,999
Income before income taxes and cumulative effect of accounting change Income before income taxes and cumulative effect of accounting change 183,880 161,709 523,853 428,309
Provision for income taxes Provision for income taxes 64,642 42,582 Provision for income taxes 69,268 64,651 199,498 169,256

Income before cumulative effect of accounting change Income before cumulative effect of accounting change 114,612 97,058 324,355 259,053

Cumulative effect of accounting change, net of tax Cumulative effect of accounting change, net of tax 2,370 — 2,370 —

Net income
Net income
$ 102,081 $ 65,417
Net income
$ 112,242 $ 97,058 $ 321,985 $ 259,053

The accompanying notes are an integral part of these consolidated financial statements.
2
BancWest Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS(Unaudited)

March 31, December 31, March 31, September 30, December 31, September 30,
2003 2002 2002 2003 2002 2002

(in thousands, except per share data) (in thousands)
Assets
Assets

Assets

Cash and due from banks Cash and due from banks $ 1,591,999 $ 1,761,261 $ 1,338,866 Cash and due from banks $ 1,385,335 $ 1,761,261 $ 1,308,653
Interest-bearing deposits in other banks Interest-bearing deposits in other banks 162,194 2,098 182,930 Interest-bearing deposits in other banks 369,217 2,098 272,082
Federal funds sold and securities purchased under agreements to resell Federal funds sold and securities purchased under agreements to resell 110,000 430,056 149,500 Federal funds sold and securities purchased under agreements to resell 340,920 430,056 351,925
Trading assets Trading assets 67,042 43,430 10,165 Trading assets 58,612 43,430 54,020
Available-for-sale investment securities Available-for-sale investment securities 4,528,484 3,940,769 3,161,922 Available-for-sale investment securities 5,412,369 3,940,769 3,708,473
Loans held for sale Loans held for sale 82,563 85,274 44,642 Loans held for sale 79,300 85,274 69,824
Loans and leases: Loans and leases: Loans and leases:
Loans and leases 24,056,267 24,146,087 24,070,667 Loans and leases 25,264,537 24,146,087 24,071,689
Less allowance for credit losses 396,049 384,081 383,003 Less allowance for credit losses 390,194 384,081 385,190

Net loans and leases Net loans and leases 23,660,218 23,762,006 23,687,664 Net loans and leases 24,874,343 23,762,006 23,686,499

Premises and equipment, net Premises and equipment, net 378,985 380,272 410,429 Premises and equipment, net 537,171 380,272 394,800
Customers’ acceptance liability Customers’ acceptance liability 29,728 25,945 11,292 Customers’ acceptance liability 38,790 25,945 28,200
Core deposit intangible, net Core deposit intangible, net 204,647 210,411 231,925 Core deposit intangible, net 193,120 210,411 216,174
Goodwill Goodwill 3,226,829 3,229,200 3,380,392 Goodwill 3,226,851 3,229,200 3,383,877
Other real estate owned and repossessed personal property Other real estate owned and repossessed personal property 18,544 19,613 24,393 Other real estate owned and repossessed personal property 19,237 19,613 15,523
Other assets Other assets 854,856 858,932 690,373 Other assets 890,237 858,932 766,450

Total assets
Total assets
$ 34,916,089 $ 34,749,267 $ 33,324,493
Total assets
$ 37,425,502 $ 34,749,267 $ 34,256,500

Liabilities and Stockholder’s Equity
Liabilities and Stockholder’s Equity

Liabilities and Stockholder’s Equity

Deposits: Deposits: Deposits:
Domestic: Domestic:
Interest-bearing $ 16,645,026 $ 16,720,767 $ 17,146,357 Interest-bearing $ 17,545,258 $ 16,720,767 $ 16,930,452
Noninterest-bearing 6,986,600 7,144,929 6,200,071 Noninterest-bearing 7,709,616 7,144,929 6,779,247
Foreign 706,967 691,783 737,492 Foreign 665,728 691,783 647,163

Total deposits Total deposits 24,338,593 24,557,479 24,083,920 Total deposits 25,920,602 24,557,479 24,356,862

Federal funds purchased and securities sold under agreements to repurchase Federal funds purchased and securities sold under agreements to repurchase 830,388 791,476 810,192 Federal funds purchased and securities sold under agreements to repurchase 1,072,759 791,476 617,470
Short-term borrowings Short-term borrowings 949,012 733,274 1,330,673 Short-term borrowings 930,000 733,274 1,549,713
Acceptances outstanding Acceptances outstanding 29,728 25,945 11,292 Acceptances outstanding 38,790 25,945 28,200
Long-term debt Long-term debt 3,313,368 3,376,947 2,120,993 Long-term debt 3,962,279 3,376,947 2,325,513
Guaranteed preferred beneficial interests in Company’s junior subordinated debentures 258,476 259,191 261,261
Guaranteed preferred beneficial interests in Company’s Guaranteed preferred beneficial interests in Company’s
junior subordinated debentures 257,479 259,191 259,893
Other liabilities Other liabilities 1,227,705 1,137,473 1,041,529 Other liabilities 1,086,071 1,137,473 1,187,070

Total liabilities
Total liabilities
$ 30,947,270 $ 30,881,785 $ 29,659,860
Total liabilities
$ 33,267,980 $ 30,881,785 $ 30,324,721

The accompanying notes are an integral part of these consolidated financial statements.
3
BancWest Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS, Continued(Unaudited)

March 31, December 31, March 31, September 30, December 31, September 30,
2003 2002 2002 2003 2002 2002

(in thousands, except per share data) (in thousands, except per share data)
Commitments and contingent liabilities Commitments and contingent liabilities Commitments and contingent liabilities
Stockholder’s equity: Stockholder’s equity: Stockholder’s equity:
Class A common stock, par value $.01 per share at March 31, 2003, December 31, 2002 and March 31, 2002 Class A common stock, par value $.01 per share at September 30, 2003, December 31, 2002 and September 30, 2002
Authorized – 150,000,000 shares at March 31, 2003, December 31, 2002 and March 31, 2002 Authorized – 150,000,000 shares at September 30, 2003, December 31, 2002 and September 30, 2002
Issued – 85,759,123 shares at March 31, 2003, December 31, 2002 and March 31, 2002 $ 858 $ 858 $ 858 Issued – 85,759,123 shares at September 30, 2003, December 31, 2002 and September 30, 2002 $ 858 $ 858 $ 858
Surplus 3,419,927 3,419,927 3,584,978 Surplus 3,419,927 3,419,927 3,587,403
Retained earnings 471,715 369,634 73,719 Retained earnings 691,619 369,634 267,355
Accumulated other comprehensive income, net 76,319 77,063 5,078 Accumulated other comprehensive income, net 45,118 77,063 76,163

Total stockholder’s equity
Total stockholder’s equity
3,968,819 3,867,482 3,664,633
Total stockholder’s equity
4,157,522 3,867,482 3,931,779

Total liabilities and stockholder’s equity
Total liabilities and stockholder’s equity
$ 34,916,089 $ 34,749,267 $ 33,324,493
Total liabilities and stockholder’s equity
$ 37,425,502 $ 34,749,267 $ 34,256,500

The accompanying notes are an integral part of these consolidated financial statements.
4
BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDER’S EQUITY AND COMPREHENSIVE INCOME(Unaudited)

Accumulated Accumulated
Class A Other Class A Other
Common Stock Retained Comprehensive Common Stock Retained Comprehensive
Shares Amount Surplus Earnings Income, net Total Shares Amount Surplus Earnings Income, net Total

(in thousands, except per share data) (in thousands, except share data)
Balance, December 31, 2002 Balance, December 31, 2002 85,759,123 $ 858 $ 3,419,927 $ 369,634 $ 77,063 $ 3,867,482 Balance, December 31, 2002 85,759,123 $ 858 $ 3,419,927 $ 369,634 $ 77,063 $ 3,867,482
Comprehensive income: Comprehensive income: Comprehensive income:
Net income — — — 102,081 — 102,081 Net income — — — 321,985 — 321,985
Net unrealized loss on investment securities available for sale, net of tax and reclassification adjustment — — — — (2,089 ) (2,089 ) Net unrealized loss on investment securities available for sale, net of tax and reclassification adjustment — — — — (32,997 ) (32,997 )
Net unrealized gain on cash-flow derivative hedges, net of tax and reclassification adjustment 1,345 1,345 Net unrealized loss on cash-flow derivative hedges, net of tax and reclassification adjustment — — — — 1,052 1,052

Comprehensive income — — — 102,081 (744 ) 101,337 Comprehensive income — — — 321,985 (31,945 ) 290,040

Balance, March 31, 2003
85,759,123 $ 858 $ 3,419,927 $ 471,715 $ 76,319 $ 3,968,819
Balance, September 30, 2003 Balance, September 30, 2003 85,759,123 $ 858 $ 3,419,927 $ 691,619 $ 45,118 $ 4,157,522

Balance, December 31, 2001 Balance, December 31, 2001 56,074,874 $ 561 $ 1,985,275 $ 8,302 $ 7,782 $ 2,001,920 Balance, December 31, 2001 56,074,874 $ 561 $ 1,985,275 $ 8,302 $ 7,782 $ 2,001,920
Comprehensive income: Comprehensive income: Comprehensive income:
Net income — — — 65,417 — 65,417 Net income — — — 259,053 — 259,053
Net unrealized loss on investment securities available for sale, net of tax and reclassification adjustment — — — — (1,885 ) (1,885 ) Net unrealized gain on investment securities available for sale, net of tax and reclassification adjustment — — — — 38,384 38,384
Net unrealized loss on cash-flow derivative hedges, net of tax and reclassification adjustment (819 ) (819 ) Net unrealized gain on cash-flow derivative hedges, net of tax and reclassification adjustment — — — — 29,997 29,997

Comprehensive income — — — 65,417 (2,704 ) 62,713 Comprehensive income — — — 259,053 68,381 327,434

Issuance of Class A common stock Issuance of Class A common stock 29,684,249 297 1,599,703 — — 1,600,000 Issuance of Class A common stock 29,684,249 297 1,599,703 — — 1,600,000

Balance, March 31, 2002 85,759,123 $ 858 $ 3,584,978 $ 73,719 $ 5,078 $ 3,664,633
Discounted Share Purchase Plan Discounted Share Purchase Plan — — 2,425 — — 2,425

Balance, September 30, 2002 Balance, September 30, 2002 85,759,123 $ 858 $ 3,587,403 $ 267,355 $ 76,163 $ 3,931,779

The accompanying notes are an integral part of these consolidated financial statements.
5
BancWest Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

Three Months Ended March 31, Nine Months Ended September 30,

2003 2002 2003 2002

(in thousands) (in thousands)
Cash flows from operating activities:
Cash flows from operating activities:

Cash flows from operating activities:

Net income $ 321,985 $ 259,053
Net income $ 102,081 $ 65,417 Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change, net of tax 2,370 —
Provision for credit losses 22,690 20,007 Provision for credit losses 65,695 69,209
Depreciation and amortization 17,531 11,511 Depreciation and amortization 47,797 46,837
Increase in deferred income taxes 63,437 4,941 (Decrease) increase in deferred income taxes (35,475 ) 156,843
Increase in interest receivable (5,686 ) (75,333 ) Decrease (increase) in interest receivable 23,896 (45,483 )
Increase in interest payable 24,981 49,285 Increase in interest payable 35,804 28,658
Decrease (increase) in prepaid expenses 5,125 (27,844 ) Increase in prepaid expenses (4,979 ) (30,712 )
Increase in trading assets (23,612 ) (1,885 ) Increase in accrued restructuring and integration costs — 14,966
Decrease (increase) in loans held for sale 2,711 1,417 Increase in trading assets (15,182 ) (54,020 )
Securities gains, net (1,892 ) (228 ) Decrease (increase) in loans held for sale 5,974 (23,765 )
Increase in accrued restructuring and integration costs — 6,015 Securities gains, net (3,913 ) (966 )
Other 5,452 61,652 Other (55,978 ) 31,353

Net cash provided by operating activities
Net cash provided by operating activities
212,818 114,955
Net cash provided by operating activities
387,994 451,973

Cash flows from investing activities:
Cash flows from investing activities:

Cash flows from investing activities:

Net increase in interest-bearing deposits in other banks (160,096 ) (72,995 ) Net increase in interest-bearing deposits in other banks (367,119 ) (162,147 )
Net decrease (increase) in Federal funds sold and securities purchased under agreements to resell 320,056 119,500 Net decrease (increase) in Federal funds sold and securities purchased under agreements to resell 89,136 (82,925 )
Proceeds from maturity of available-for-sale investment securities 465,100 142,825 Proceeds from sale of available-for-sale investment securities 416,667 167,079
Proceeds from the sale of available-for-sale securities 101,053 60,062 Proceeds from the maturity of available-for-sale securities 1,656,995 533,736
Purchase of available-for-sale investment securities (1,154,535 ) (306,995 ) Purchase of available-for-sale investment securities (3,596,807 ) (1,319,598 )
Net increase in loans and leases from originations and collections (118,592 ) (284,522 ) Net increase in loans and leases from originations and collections (773,059 ) (593,200 )
Purchase of loans (26,510 ) — Purchase of loans and leases (1,086,957 ) (24,949 )
Proceeds from the sale of loans 227,045 69,694 Proceeds from the sale of loans 681,877 370,167
Net cash provided by (paid for) acquisitions — (1,793,000 ) Net cash paid for acquisitions — (1,793,000 )
Purchase of premises and equipment (8,003 ) 6,854 Purchase of premises and equipment (25,895 ) (23,349 )
Other 932 (311 ) Other 10,190 (345 )

Net cash provided by (used) in investing activities
(353,550 ) (2,058,888 )
Net cash used in investing activities
Net cash used in investing activities
(2,994,972 ) (2,928,531 )

Cash flows from financing activities:
Cash flows from financing activities:

Cash flows from financing activities:

Net increase (decrease) in deposits (218,886 ) 401,822 Net increase in deposits 1,363,123 674,764
Net increase (decrease) in Federal funds purchased and securities sold under agreements to repurchase 38,912 (212,902 ) Net increase (decrease) in Federal funds purchased and securities sold under agreements to repurchase 281,283 (404,914 )
Net increase in other short-term borrowings 215,738 937,447 Net increase in other short-term borrowings 196,726 1,155,777
Proceeds from long-term debt 75,000 40,000 Proceeds from long-term debt 565,000 440,000
Repayment of long-term and subordinate debt (139,294 ) (220,830 ) Repayment of long-term and subordinated debt (175,080 ) (417,678)
Proceeds from issuance of Class A common stock — 1,600,000 Proceeds from issuance of Class A common stock — 1,600,000

Net cash provided by (used in) financing activities
(28,530 ) 2,545,537
Net cash provided by financing activities
Net cash provided by financing activities
2,231,052 3,047,949

Net increase (decrease) in cash and due from banks
(169,262 ) 601,604
Net (decrease) increase in cash and due from banks
Net (decrease) increase in cash and due from banks
(375,926 ) 571,391
Cash and due from banks at beginning of period
Cash and due from banks at beginning of period
1,761,261 737,262
Cash and due from banks at beginning of period
1,761,261 737,262

Cash and due from banks at end of period
Cash and due from banks at end of period
$ 1,591,999 $ 1,338,866
Cash and due from banks at end of period
$ 1,385,335 $ 1,308,653

Supplemental disclosures:
Supplemental disclosures:

Supplemental disclosures:

Interest paid $ 77,256 $ 55,159 Interest paid $ 257,380 $ 325,756

Income taxes paid $ 1,205 $ 3,503 Income taxes paid $ 156,928 $ 12,413

Supplemental schedule of noncash investing and financing activities:
Supplemental schedule of noncash investing and financing activities:

Supplemental schedule of noncash investing and financing activities:

Loans converted into other real estate owned and repossessed personal property $ 1,036 $ 4,161 Loans converted into other real estate owned and repossessed personal property $ 8,263 $ 13,131

Loans made to facilitate the sale of other real estate owned $ 216 $ 57 Loans made to facilitate the sale of other real estate owned $ 1,795 $ 7,765

Total increase in assets from accounting change $ 159,910 $ —
Total increase in liabilities from accounting change $ 162,280 $ —

In connection with acquisitions, the following liabilities were assumed:
In connection with acquisitions, the following liabilities were assumed:

In connection with acquisitions, the following liabilities were assumed:

Fair value of assets acquired $ — $ 10,959,000 Fair value of assets acquired $ — $ 10,959,000
Cash (paid) received — (1,793,000 ) Cash paid — (1,793,000 )

Liabilities assumed
Liabilities assumed
$ — $ 9,166,000
Liabilities assumed
$ — $ 9,166,000

The accompanying notes are an integral part of these consolidated financial statements.
6
BancWest Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
1. Summary of Significant Accounting Policies
Description of Operations
     BancWest, a bank holding company, through its subsidiaries, operates a general commercial banking business and other businesses related to banking. Its principal assets are its investments in Bank of the West, a State of California-chartered bank; and First Hawaiian, a State of Hawaii-chartered bank. We provide a wide range of general commercial banking services, providing retail and corporate banking, trust and insurance services to individuals, institutions, businesses and governments.
Basis of Presentation
     We have prepared the accompanying financial data for the three and nine months ended September 30, 2003 and 2002 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 September 30, 2003, December 31, 2002 and September 30, 2002, condensed consolidated results of operations for the three and nine months ended September 30, 2003 and 2002, and cash flows activities for the nine months ended September 30, 2003 and 2002.
     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,”~~(BancWest, the ~~“Company”~~Company or ~~“we/our”)~~we/our) are included in Note 1 (Summary of Significant Accounting Policies) to the audited consolidated financial statements included in the Company’s 2002 Annual Report on Form 10-K. There have been no ~~significant~~ changes to these ~~policies.~~policies except for the one listed below.
Changes in Accounting Principles
Consolidation
     In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46,Consolidation of Variable Interest Entities (FIN 46). FIN 46 provides guidance on how to identify a variable interest entity (VIE) and determine when the assets, liabilities, noncontrolling interests and results of operations of a variable interest entity should be consolidated. The recognition and measurement provisions of FIN 46 apply at inception to any variable interest entity formed after January 31, 2003, and becomes effective for existing variable interest entities on the first interim or annual reporting period ending after December 15, 2003. The Company adopted the consolidation provisions of FIN 46 in the third quarter for one variable interest entity formed prior to February 1, 2003, REFIRST, Inc. Please refer to Note 6 Financial Interpretation No. 46: Consolidation of Variable Interest Entities for details.
     Reclassifications
     ~~The~~Amounts in the condensed consolidated financial statements for the periods ended September 30, 2002 ~~Consolidated Financial Statements were~~and December 31, 2002 have been reclassified ~~in certain respects~~ to conform to the ~~2003~~current period’s presentation. ~~Such reclassifications did not have a material effect on the Consolidated Financial Statements.~~
2. Mergers and Acquisitions
United California Bank Acquisition
7
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)
     On March 15, 2002, BancWest completed its acquisition of all outstanding common stock of United California Bank ~~(“UCB”)~~(UCB) from UFJ Bank Ltd. of ~~Japan.~~Japan (UFJ). UCB was subsequently merged with and into Bank of the West in April 2002 and its branches were integrated into the ~~Bank’s~~Company’s branch network system in the third quarter of 2002. On the date of acquisition by BancWest, UCB had 115 branches (located exclusively in California), total assets of $10.1 billion, net loans of $8.5 billion and total deposits of $8.2 billion. The preceding amounts do not include purchase price adjustments. UCB’s strong presence in Southern California complements BancWest’s existing network in Northern California, Nevada, New Mexico and the Pacific Northwest. Results of operations of UCB are included in our ~~Consolidated Financial Statements~~consolidated financial statements beginning on March 15, 2002. The purchase price of approximately $2.4 billion was paid in cash and accounted for as a purchase. BNP Paribas funded BancWest’s acquisition of UCB by providing $1.6 billion of additional capital and lending the Company $800 million. We expect to achieve cost savings for the combined company of approximately $75-80 million per year beginning in 2003. These anticipated cost savings primarily involve compensation and occupancy-related expenses.
The following table provides an allocation of the purchase price:

(in thousands)
Total purchase price of UCB, including transaction costs $ 2,406,268
Equity of UCB prior to acquisition by BancWest 1,083,000

Excess of pushed down equity over the carrying value of net assets acquired 1,323,268

Purchase accounting adjustments related to assets and liabilities acquired:
Sublease loss reserve 25,645
Premises and equipment 7,645
Severance and employee relocation 44,513
Contract cancellations 12,862
New core deposit intangible (120,219 )
Other assets 3,354
Deposits 8,047
Deferred cost on pension and retirement benefits 49,349
Other liabilities and taxes (28,062 )

Goodwill resulting from acquisition of and merger with UCB $ 1,326,402

     BancWest incurred expenses associated with exiting certain branches, operational centers and technology platforms of the pre-merged Bank of the West, as well as certain other conversion and restructuring expenses, totaling approximately $18 million. Exit costs associated with UCB were considered as part of the purchase accounting for the acquisition. BancWest established a severance reserve of approximately $40.5 million. Approximately 750 employees throughout the combined organization have been or will be displaced in conjunction with the acquisition. This initiative is substantially complete. In addition to the severance reserve, we recorded the following accruals: $34.5 million for losses on subleases, $8.0 million for contract cancellations, $1.3 million for relocation and other. InSince the ~~twelve months ended March 31, 2003,~~date of acquisition, we made the following adjustments to the reserves: $6.9 million increase for severance, $7.5 million decrease for losses on subleases, $4.9 million increase for contract cancellations and $0.2 million decrease for relocation. In addition, since the date of acquisition, the reserves were decreased as follows: ~~$28.2~~$41.6 million for severance payments, ~~$6.0~~$10.1 million for sublease loss amortization, ~~$7.6~~$9.3 million for contract cancellation payments and $1.1 million for relocation and other payments.
7
~~BancWest Corporation and Subsidiaries~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)~~
The following unaudited pro forma financial information for the ~~three~~nine months ended ~~March 31,~~September 30, 2002, assumes that the UCB acquisition occurred as of January 1, 2002, after giving effect to certain adjustments. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations which may occur in the future or which would have occurred had the UCB acquisition been consummated ~~on the date indicated:~~as of January 1, 2002:

Pro Forma Financial Information for the nine month period
Ended September 30, 2002

(in thousands)
Net Interest Income $ 954,325
Provision for Credit Losses 85,628
Noninterest Income 262,618
Noninterest Expense 674,220
Income Tax Expense 178,990

Net Income $ 278,105

8
~~Pro Forma Financial Information for the Three Months Ended~~BancWest Corporation and Subsidiaries
~~March 31, 2002~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)

(in thousands)
Net Interest Income $ 313,014
Provision for Credit Losses 36,426
Noninterest Income 82,550
Noninterest Expense 229,909
Income Tax Expense 49,256

Net Income $ 79,973

     In conjunction with the purchase of UCB from UFJ, ~~Bank Ltd. of Japan (UFJ),~~ there were certain items that were in dispute. The disputed items were related to UCB’s loan charge-offs and its deferred tax liability. In March 2003, an arbitrator decided in favor of BancWest on both matters. Interest on the disputed amounts totaled $0.8 million, which was recognized in other income during the first quarter of 2003. The resolution of the loan charge-off issue was a receivable due from UFJ of $8.9 million, an increase to our allowance for credit losses of $13.6 million, representing recoveries of loans charged off by BancWest, and a related decrease to our deferred tax liability of $4.7 million. Upon resolution of the deferred tax issue during the first quarter of 2003, we reassessed the adequacy of UCB’s deferred tax liability and reduced the related goodwill by $14.9 million. All cash due from UFJ as a result of the arbitrator’s decision was received in April 2003.
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 and nine months ended ~~March 31,~~September 30, 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”~~(fair value hedges). At ~~March 31,~~September 30, 2003, the Company carried an interest rate swap of ~~$2.8~~$2.7 million with a fair market value ~~(loss)~~loss of ~~$0.8~~$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,~~September 30, 2003, we carried a $150 million interest rate swap with BNP Paribas to hedge obligations under the 9.5% BancWest Capital I Quarterly Income Preferred Securities. We pay 3-month LIBOR plus 3.69% and receive fixed payments at 9.5%. The fair market value ~~(gain)~~gain of the swap at ~~March 31,~~September 30, 2003 was ~~$1.2~~$0.5 million.
     Cash Flow Hedges
     At ~~March 31,~~September 30, 2003, the Company carried interest rate swaps of $600 million with a fair market value ~~(gain)~~gain of ~~$59.9~~$55.3 million which ~~are~~were categorized as cash flow hedges, to hedge our LIBOR-based commercial loans. The interest rate swaps were entered into during 2001 by UCB 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 ~~$5.8~~$17.9 million from January 1, 2003 through ~~March 31,~~September 30, 2003. The Company estimates net settlement gains, recorded as commercial loan interest income, of ~~$23.2~~$24.6 million over the next twelve months resulting from these hedges.
8
~~BancWest Corporation~~     During 2003, the Company entered into interest rate swaps totaling $75 million with a fair value gain of $2.7 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: $45 million in 2013, $20 million in 2018 and ~~Subsidiaries~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)~~$10 million in 2023. We pay fixed rates ranging from 3.64% to 4.58% and receive 3-month LIBOR. The effect on net income from these swaps year-to-date 2003 was $0.4 million. The Company estimates a net increase to interest expense of $2.1 million over the next twelve months resulting from these hedges.
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. The interest rate exposure on these commitments is economically hedged primarily with best efforts forward sale contracts. The commitments and free-standing derivative instruments are marked to market and recorded as a component of noninterest income in the consolidated statement of income. Once a loan commitment is funded, the same forward sale contract is designated as a fair value hedge of the loan held for sale, as described above. Trading activities primarily involve providing various free-standing interest rate and foreign exchange derivative products to customers. ~~Interest-rate~~Interest rate derivative instruments utilized by the Company in its trading operations include ~~interest-rate~~interest rate swaps, caps, floors and collars.
     The following table summarizes derivatives held by the Company as of ~~March 31,~~September 30, 2003 and 2002:
9
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)

2003 2002 2003 2002

Contractual Amounts Which Credit Credit Credit Credit
Represent Notional Risk Net Fair Notional Risk Net Fair Notional Risk Net Fair Notional Risk Net Fair
Credit Risk: Amount Amount Value Amount Amount Value Amount Amount Value Amount Amount Value

(in thousands) (in thousands)
Held for Hedge Purposes
Held for hedge purposes:
Interest rate swaps $ 752,798 $ 61,128 $ 60,346 $ 600,000 $ 10,845 $ 10,845 $ 827,747 $ 58,494 $ 57,754 $ 603,715 $ 61,200 $ 60,311
Held for Trading or Free-standing:
Held for trading or free-standing:
Interest rate swaps 1,534,787 26,496 (8,593 ) 1,215,206 14,703 (2,837 ) 1,527,965 27,900 (3,324 ) 1,406,334 36,560 (9,023 )
Purchased interest rate options 87,127 611 611 66,105 675 675 34,213 468 468 70,266 1,135 1,135
Written interest rate options 81,738 — (217 ) 57,813 — (292 ) 50,917 — (285 ) 63,401 — (588 )
Forward interest rate options 63,500 — (318 ) — — — 43,000 11 11 21,000 73 73
Rate Locks 97,700 1,526 1,526 — — —
Rate locks 66,400 1,111 1,111 — — —
Commitments to purchase and sell foreign currencies 445,731 6,030 (63 ) 432,480 4,180 316 458,570 9,400 222 400,607 2,860 76
Purchased foreign exchange options 31,964 274 274 — — — 43,187 533 533 11,984 143 143
Written foreign exchange options 31,964 — (274 ) — — — 43,187 — (533 ) 11,984 — (143 )
4. Operating Segments
     Our reportable segments are the ones we use in our internal reporting at Bank of the West and First Hawaiian Bank ~~(“First Hawaiian”)~~(First Hawaiian). 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 ~~nation wide.~~nationwide. Although First Hawaiian’s segments operate primarily in Hawaii, First Hawaiian also has significant operations outside the state, such as leveraged leases, ~~and~~ 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 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.
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’s primary markets include California, Nevada, the Pacific Northwest region and New Mexico. The Northern California Division is comprised~~Banking seeks to serve a broad customer base by furnishing a wide range of the Greater San Francisco Bay area. The San Francisco Bay area is one of California’s wealthiest regions. The Southern California Division stretches from Santa Barbara in the north through the L.A. Metro
9
~~BancWest Corporation and Subsidiaries~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)~~
area to San Diego in the South. The largest portion of California’s population resides in this geographic region. The Valley/ Nevada Division contains the Central Valley area of California and the state of Nevada. The Central Valley of California is an area that has been experiencing rapid transition from a largely agricultural base to a mix of agriculturalretail and commercial ~~enterprises. Nevada has been the fastest growing state in the country for the past decade. The Pacific Northwest Division includes Oregon, Washington~~banking products. Deposit products offered by this segment include checking accounts, savings deposits, market rate accounts, individual retirement accounts and Idaho. The New Mexico Division is centered in the Albuquerque metropolitan area where we have the third largest market share. The senior executives in the divisions are responsible for both retail and business banking activities in their markets.
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. A key element of Bank of the West’s strategy is to seek to distinguish itself as the provider of the best value in banking services. To this end, Regional Banking seeks to position itself within its markets as an alternative to both the higher-priced, smaller “boutique” commercial banks and the larger money center commercial banks, which may be perceived as offering lower service and lower prices on a “mass market” basis.
     Regional Banking seeks to serve a broad customer base by furnishing a wide range of retail and commercial banking products. Deposit products offered by Regional Banking include checking accounts, savings deposits, market rate accounts, Individual Retirement Accounts and time deposits.     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 ~~basic~~ commercial banking products intended to serve the needs of smaller community-based businesses. These ~~loan products~~ include in-branch originations of standardized loan and deposit products for businesses with relatively simple banking and financing needs. More complex and customized commercial banking services are offered through Bank of the West’s regional banking centers, which serve clusters of branches and provide lending, deposit and cash management services to companies operating in the relevant market areas. Regional Banking also provides a number of fee-based products and services such as annuities, insurance and securities brokerage.
     The Regional Banking Segment includes a Business Banking Division which supports commercial lending activities for middle market business customers through 14 Business Banking centers located throughout California, as well as Portland, Oregon, Reno and Las Vegas, Nevada and Albuquerque, New Mexico. Each Business Banking Center provides a wide range of loan and deposit services to medium-sized companies with borrowing needs of $500,000 to $25 million. Lending services include receivable and inventory financing, equipment term loans, letters of credit, agricultural loans and trade finance. Other banking services include cash management, insurance products, trust, investment, foreign exchange and various international banking services.
The Regional Banking Segment also includes a Pacific Rim Division which offers multilingual services through ~~an 18-branch~~a branch network in predominately Asian American communities in California, with specialized domestic and international products and services for both individuals and companies. ~~The Pacific Rim Division has a largely commercial clientele.~~
Commercial Banking:
10
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)
     The Commercial Banking Segment supports business clients with revenues between $25 million and $350 million. This segment’s clients include those engaged in agribusiness, real estate industries, as well as, churches, Small Business Administration ~~(“SBA”)~~(SBA) and equipment leasing clients. ~~Services offered include cash management, trade finance, correspondent banking services and syndication of commercial credits exceeding $30 million.~~
     This segment lends to agricultural clients including dairies, nurseries and growers of row crops among others. Offices serving agribusiness are located in Central California, Oregon and Washington. This segment also provides construction and commercial mortgage funding for developers of single-family and apartment residences, offices, retail space, hotels and industrial facilities. There are nine real estate industry lending offices located throughout California, as well as in Las Vegas, Reno and Portland. The Commercial Banking Segment provides SBA lending nationwide to meet the real estate, construction, equipment financing and operating expense requirements of businesses qualifying for government guaranteed SBA programs. Equipment leasing is available through the Bank’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.
     ~~Cash~~Services offered include cash management, trade finance, correspondent banking services ~~include account analysis~~ and reconcilement, armored car and cash vault services, investment sweep accounts, lock box and wire transfer services among others. Business customers can access their accounts in real time via WebDirect.syndication of commercial credits exceeding $30 million.
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 ~~approximately 2,000~~ auto dealers and ~~2,000~~ recreational vehicle and marine dealers serviced by sales representatives located throughout the country. ~~Collateral supporting these loans includes new and used automobiles, light duty trucks, vans, motor homes, travel trailers and boats.~~ This segment also includes Bank of the West’s wholly-owned subsidiary,
10
~~BancWest Corporation and Subsidiaries~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)~~
Essex Credit Corporation, which focuses on the origination of marine and recreational vehicle loans directly with customers. Essex has office locations throughout the United States and sells substantially all of its loans to ~~investors servicing released for a fee.~~investors.
First Hawaiian Bank
     First Hawaiian manages its operations through the following business segments: Retail Banking, Consumer Banking, Commercial Banking and Financial Management.
Retail Banking:
     First Hawaiian’s Retail Banking Segment operates its main banking office in Honolulu, Hawaii, and 55 other banking offices located throughout Hawaii. First Hawaiian also operates three branches in Guam and two branches in Saipan.
     The focus of First Hawaiian’s retail/community banking strategy is primarily in Hawaii, where it has a 40% market share of the domestic bank deposits of individuals, corporations and partnerships in the state as of ~~March 31,~~September 30, 2003. ~~The predominant economic force~~Thanks to its significant market share in Hawaii, First Hawaiian 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 ~~tourism, although there have been significant recent efforts~~ to ~~diversify the economy into high-tech~~build those relationships by cross-selling additional products and ~~other industries.~~services to existing individual and business customers.
     In pursuing the community banking markets in Hawaii, Guam and Saipan, First Hawaiian seeks to serve a broad customer base by furnishing a range of retail and commercial banking products. Through its branch network, First Hawaiian 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 offers a wide range of banking products intended to serve the needs of smaller, community-based businesses. First Hawaiian also provides a number of fee-based products and services such as annuities and mutual funds, insurance and securities brokerage.
     First Hawaiian’s principal funding source is its 61-branch network. Thanks to its significant market share in Hawaii, First Hawaiian 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.
     First Hawaiian’s goal is to become each customer’s primary bank, using core products such as demand deposit (checking) accounts as entry points to generate cross-sales and develop a multi-product relationship with individual and business customers. Toward this goal, employees in First Hawaiian’s branch network focus on selling bank, trust, investment and insurance products to meet customers’ needs and build on those existing relationships.
To complement its branch network and serve these customers, First Hawaiian operates a system of automated teller machines, a 24-hour ~~Phone Center~~phone center in Honolulu and a full-service ~~Internet~~internet banking system.
Consumer Banking:
     Consumer Lending: First Hawaiian 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 also provides indirect consumer automobile financing on new and used autos by purchasing finance contracts from dealers. First Hawaiian’s Dealer Center is one of the largest commercial bank automobile lenders in the ~~state~~State of Hawaii. First Hawaiian is the largest issuer of ~~MasterCard®~~MasterCard^® credit cards and ~~VISA®~~VISA^® credit cards in Hawaii.
     Real Estate Lending-Residential: First Hawaiian 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 also originates residential real estate loans for sale on the secondary market.
11
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)
Commercial Banking:
     Commercial Lending: First Hawaiian is a major lender to small and medium-sized businesses in Hawaii and Guam. Lending services include receivable and inventory financing, equipment term loans, letters of credit, dealer vehicle flooring financing and trade financing. To support the cash management needs of both commercial banking customers and large private and public deposit relationships maintained with the bank, First Hawaiian operates a Cash Management Department which provides a full range of innovative and relationship-focused cash management services.
     Real Estate Lending-Commercial: First Hawaiian provides permanent financing for a variety of commercial developments, such as retail facilities, warehouses and office buildings.
     International Banking Services: First Hawaiian ~~maintains an International Banking Division which~~ provides international banking products and services through First Hawaiian’s branch system, its ~~international banking headquarters~~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 maintains a network of correspondent banking relationships throughout the world.
First Hawaiian’s trade-related international banking activities ~~are primarily trade-related and~~ are concentrated in the Asia-Pacific area.
Financial Management:
     Trust and Investment Services: First Hawaiian’s Financial Management Segment offers a full range of trust and investment
11
~~BancWest Corporation and Subsidiaries~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)~~
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,~~September 30, 2003, the Trust and Investments Division had approximately 4,000 accounts with a market value of ~~$8.4~~$8.2 billion. Of this total, ~~$5.8~~$5.9 billion represented assets in nonmanaged accounts and ~~$2.6~~$2.3 billion were managed assets.
     The Trust and Investments Division maintains custodial accounts pursuant to which it acts as agent for customers in rendering a variety of services, including dividend and interest collection, collection under installment obligations and rent collection.
     Securities and Insurance Services: First Hawaiian, through a wholly-owned subsidiary, First Hawaiian Insurance, Inc., provides insurance brokerage services for personal, business or estate insurance 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. In association with an independent registered broker-dealer, First Hawaiian offers mutual funds, annuities and other securities in its branches.
     Private Banking Services: The Private Banking Department within First Hawaiian’s Financial Management Segment provides a wide range of products to high-net-worth individuals.
12
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) ~~(Continued)~~
The tables below present information about the Company’s operating segments as of or for the periods indicated:

Bank of the West Bank of the West First Hawaiian Bank

Regional Commercial Consumer Regional Commercial Consumer Retail Consumer Commercial Financial
(in millions) Banking Banking Finance Other⁽¹⁾ Banking Banking Finance Other⁽¹⁾ Banking Banking Banking Management Other⁽²⁾

Three Months Ended March 31, 2003:

Three Months Ended September 30, 2003:
Net interest income
$ 121.9 $ 77.7 $ 49.7 $ 15.6 $ 127.7 $ 78.5 $ 53.0 $ 20.1 $ 68.2 $ 22.5 $ 7.9 $ — $ (11.5 )
Noninterest income
38.7 11.4 2.7 5.5 42.7 13.0 2.9 5.1 17.9 5.4 3.1 7.9 1.7
Noninterest expense
106.6 29.9 15.4 6.5 107.9 28.2 15.0 6.0 45.9 11.7 2.0 6.0 (2.3 )
Provision for credit losses
3.6 0.3 12.8 — 4.3 2.2 13.6 — 1.3 2.4 0.1 — 0.2
Tax Provision (benefit)
20.0 23.4 9.6 5.8
Tax provision (benefit) 23.0 24.1 10.8 6.3 14.2 5.0 2.2 0.8 (1.8 )

Income before cumulative effect of accounting change 35.2 37.0 16.5 12.9 24.7 8.8 6.7 1.1 (5.9 )
Cumulative effect of accounting change, net of tax — — — — — — — — (2.4 )

Net income (loss)
$ 30.4 $ 35.5 $ 14.6 $ 8.8 $ 35.2 $ 37.0 $ 16.5 $ 12.9 $ 24.7 $ 8.8 $ 6.7 $ 1.1 $ (8.3 )

Segment Assets at March 31
$ 7,189 $ 8,139 $ 7,179 $ 3,791
Segment goodwill at March 31
1,214 706 308 —

Segment assets at September 30 $ 7,635 $ 8,469 $ 7,842 $ 4,446 $ 3,470 $ 1,354 $ 989 $ 19 $ 3,862
Segment goodwill at September 30 1,214 706 308 — 650 216 118 10 —
Average assets
$ 7,325 $ 8,189 $ 7,097 $ 3,182 $ 7,720 $ 8,356 $ 7,777 $ 4,070 $ 3,472 $ 1,379 $ 1,036 $ 18 $ 3,650
Average loans
5,298 6,916 6,757 — 5,698 7,070 7,460 — 2,472 1,183 895 3 407
Average deposits
13,533 2,588 14 1,401 13,834 2,926 12 1,819 6,621 11 27 56 173

Three Months Ended March 31, 2002:
Three Months Ended September 30, 2002:
Net interest income $ 74.8 $ 31.4 $ 41.8 $ 22.2 $ 135.4 $ 73.5 $ 47.7 $ 14.7 $ 64.1 $ 18.0 $ 7.0 $ 0.1 $ (7.8 )
Noninterest income 25.4 1.9 2.5 1.2 40.7 8.6 2.8 7.5 15.7 7.8 1.7 7.2 (0.3 )
Noninterest expense 70.6 10.5 14.3 6.2 109.4 27.8 13.5 14.8 43.6 10.4 1.9 5.8 (3.9 )
Provision for credit losses 1.9 1.3 11.1 — 6.8 1.9 12.9 — 2.1 2.5 0.3 — (0.2 )
Tax Provision (benefit) 11.1 8.6 7.6 6.9
Tax provision (benefit) 24.8 21.6 10.0 2.3 13.0 4.8 2.0 0.6 (1.0 )

Net income (loss) $ 16.6 $ 12.9 $ 11.3 $ 10.3 $ 35.1 $ 30.8 $ 14.1 $ 5.1 $ 21.1 $ 8.1 $ 4.5 $ 0.9 $ (3.0 )

Segment Assets at March 31 $ 6,903 $ 7,100 $ 8,879 $ 2,242
Segment goodwill at March 31 1,205 703 305 —

Segment assets at September 30 $ 7,597 $ 7,821 $ 6,869 $ 3,477 $ 3,199 $ 1,315 $ 1,098 $ 13 $ 3,309
Segment goodwill at September 30 1,208 703 306 — 650 216 118 10 —
Average assets $ 3,740 $ 3,750 $ 6,547 $ 1,600 $ 7,915 $ 7,963 $ 6,804 $ 2,867 $ 3,206 $ 1,300 $ 1,083 $ 13 $ 3,201
Average loans 2,413 3,170 6,125 — 5,907 6,767 6,447 — 2,355 1,093 944 — 533
Average deposits 9,271 335 17 1,195 13,652 2,434 — 1,685 6,131 9 19 32 169

[Additional columns below]
[Continued from above table, first column(s) repeated]

First Hawaiian Bank

Retail Commercial Financial Other Reconciling Consolidated Other Reconciling Consolidated
(in millions) Banking Consumer Banking Management Other⁽²⁾ BancWest⁽³⁾ Items⁽⁴⁾ Totals BancWest⁽³⁾ Items⁽⁴⁾ Totals

Three Months Ended March 31, 2003:

Three Months Ended September 30, 2003:
Net interest income
$ 64.9 $ 20.0 $ 7.7 $ 0.1 $ (8.1 ) $ (34.3 ) $ 0.1 $ 315.3 $ (35.0 ) $ — $ 331.4
Noninterest income
17.8 8.9 1.6 6.9 1.4 — (0.1 ) 94.8 (0.2 ) 0.1 99.6
Noninterest expense
43.5 11.3 2.1 6.3 (2.3 ) 1.3 0.1 220.7 2.3 0.3 223.0
Provision for credit losses
1.7 2.2 — — 0.1 2.0 — 22.7 — — 24.1
Tax Provision (benefit)
14.1 5.8 2.1 0.3 (1.2 ) (15.3 ) — 64.6
Tax provision (benefit) (15.4 ) 0.1 69.3

Income before cumulative effect of accounting change (22.1 ) (0.3 ) 114.6
Cumulative effect of accounting change, net of tax — — (2.4 )

Net income (loss)
$ 23.4 $ 9.6 $ 5.1 $ 0.4 $ (3.3 ) $ (22.3 ) $ (0.1) $ 102.1 $ (22.1 ) $ (0.3 ) $ 112.2

Segment Assets at March 31
$ 3,287 $ 1,472 $ 1,066 $ 14 $ 3,452 $ 7,603 $ (8,276 ) $ 34,916
Segment goodwill at March 31
650 216 118 10 — 5 — 3,227

Segment assets at September 30 $ 6,947 $ (7,607 ) $ 37,426
Segment goodwill at September 30 5 — 3,227
Average assets
$ 2,615 $ 1,212 $ 937 $ 4 $ 4,390 $ 6,516 $ (7,050 ) $ 34,417 $ 6,877 $ (7,557 ) $ 36,798
Average loans
2,389 1,189 905 1 560 2 29 24,046 55 (44 ) 25,199
Average deposits
6,392 10 21 51 155 — (19 ) 24,146 — (57 ) 25,422

Three Months Ended March 31, 2002:
Three Months Ended September 30, 2002:
Net interest income $ 67.2 $ 17.5 $ 5.9 $ 0.1 $ (7.8 ) $ (27.5 ) $ (1.1 ) $ 224.5 $ (31.8 ) $ (0.2 ) $ 320.7
Noninterest income 16.2 5.9 1.5 7.3 (0.4 ) 0.1 1.0 62.6 (0.1 ) — 91.6
Noninterest expense 43.4 10.2 1.6 6.0 (4.6 ) 0.9 — 159.1 1.2 (0.2 ) 224.3
Provision for credit losses 2.2 2.1 — — 1.4 — — 20.0 — — 26.3
Tax Provision (benefit) 14.6 4.3 1.8 0.6 (1.6 ) (11.2 ) (0.1 ) 42.6
Tax provision (benefit) (13.4 ) (0.1 ) 64.6

Net income (loss) $ 23.2 $ 6.8 $ 4.0 $ 0.8 $ (3.4 ) $ (17.1 ) $ — $ 65.4 $ (19.7 ) $ 0.1 $ 97.1

Segment Assets at March 31 $ 3,519 $ 1,376 $ 850 $ 12 $ 2,833 $ 7,179 $ (7,569) $ 33,324
Segment goodwill at March 31 650 216 118 10 — 173 — 3,380

Segment assets at September 30 $ 7,572 $ (8,013 ) $ 34,257
Segment goodwill at September 30 173 — 3,384
Average assets $ 2,884 $ 1,123 $ 725 $ 3 $ 3,850 $ 4,750 $ (5,179 ) $ 23,793 $ 7,466 $ (7,881 ) $ 33,937
Average loans 2,651 1,098 697 — 683 3 21 16,861 22 — 24,068
Average deposits 5,850 11 27 59 199 — (31 ) 16,933 (36 ) — 24,095

13
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)

Bank of the West First Hawaiian Bank

Regional Commercial Consumer Retail Consumer Commercial Financial Other Reconciling Consolidated
(in millions) Banking Banking Finance Other⁽¹⁾ Banking Banking Banking Management Other⁽²⁾ BancWest⁽³⁾ Items⁽⁴⁾ Totals

Nine Months
Ended
September 30,
2003:
Net interest income $ 370.3 $ 234.4 $ 153.4 $ 55.5 $ 199.4 $ 63.8 $ 23.3 $ 0.2 $ (28.7 ) $ (103.8 ) $ 0.1 $ 967.9
Noninterest income 123.0 38.4 9.1 15.7 51.7 22.8 6.3 22.7 5.5 (0.2 ) — 295.0
Noninterest expense 323.9 88.1 46.0 18.7 134.7 34.5 6.4 19.2 (8.1 ) 9.8 0.2 673.4
Provision for credit losses 12.2 (1.6 ) 43.2 — 4.8 7.0 0.1 — — — — 65.7
Tax provision (benefit) 62.2 73.7 29.0 18.0 41.7 16.8 6.4 1.5 (3.5 ) (46.3 ) (0.1 ) 199.4

Income before cumulative effect of an accounting change 95.0 112.6 44.3 34.5 69.9 28.3 16.7 2.2 (11.6 ) (67.5 ) — 324.4
Cumulative effect of accounting change, net of tax — — — — — — — — (2.4 ) — — (2.4 )

Net income (loss) $ 95.0 $ 112.6 $ 44.3 $ 34.5 $ 69.9 $ 28.3 $ 16.7 $ 2.2 $ (14.0 ) $ (67.5 ) $ — $ 322.0

Segment assets at September 30 $ 7,635 $ 8,469 $ 7,842 $ 4,446 $ 3,470 $ 1,354 $ 989 $ 19 $ 3,862 $ 6,947 $ (7,607 ) $ 37,426
Segment goodwill at September 30 1,214 706 308 — 650 216 118 10 — 5 — 3,227
Average assets $ 7,461 $ 8,252 $ 7,432 $ 3,629 $ 3,343 $ 1,416 $ 1,040 $ 15 $ 3,491 $ 6,760 $ (7,398 ) $ 35,441
Average loans 5,447 6,973 7,108 — 2,448 1,217 897 2 441 58 (43 ) 24,548
Average deposits 13,719 2,754 13 1,470 6,493 10 22 52 159 — (60 ) 24,632
Nine Months Ended September 30, 2002:
Net interest income $ 356.0 $ 182.4 $ 132.9 $ 40.5 $ 196.5 $ 53.1 $ 20.5 $ 0.2 $ (23.9 ) $ (91.1 ) $ — $ 867.1
Noninterest income 105.5 20.2 8.2 16.4 46.8 19.3 4.9 22.3 (0.9 ) — — 242.7
Noninterest expense 291.8 66.4 41.9 35.9 130.5 30.9 5.5 17.7 (11.6 ) 3.3 — 612.3
Provision for credit losses 11.3 5.3 37.7 — 6.2 7.0 0.6 — 1.1 — — 69.2
Tax provision (benefit) 64.5 53.2 25.0 7.0 40.9 13.1 6.1 1.9 (4.3 ) (38.2 ) 0.1 169.3

Net income (loss) $ 93.9 $ 77.7 $ 36.5 $ 14.0 $ 65.7 $ 21.4 $ 13.2 $ 2.9 $ (10.0 ) $ (56.2 ) $ (0.1 ) $ 259.0

Segment assets at September 30 $ 7,597 $ 7,821 $ 6,869 $ 3,477 $ 3,199 $ 1,315 $ 1,098 $ 13 $ 3,309 $ 7,572 $ (8,013 ) $ 34,257
Segment goodwill at September 30 1,208 703 306 — 650 216 118 10 — 173 — 3,384
Average assets $ 6,545 $ 6,659 $ 6,548 $ 2,341 $ 3,341 $ 1,345 $ 1,007 $ 13 $ 2,985 $ 6,749 $ (7,119 ) $ 30,414
Average loans 4,788 5,682 6,181 — 2,482 1,128 890 — 566 22 — 21,739
Average deposits 12,211 1,711 9 1,516 5,990 10 21 45 184 (33 ) — 21,664
⁽¹⁾ The material ~~items in the other column related to~~ net interest income and noninterest income ~~consist of~~items in the Other column relate to Treasury activities of ~~$16.9~~$22.6 million and $55.1 million and unallocated other income of ~~$4.2~~$2.6 million and $16.1 million for ~~March 31, 2003.~~the three and nine months ended September 30, 2003, respectively. The material net interest income and noninterest income items in the ~~other~~Other column for ~~March 31,~~the three and nine months ended September 30, 2002 resulted substantially from Treasury activities of ~~$19.7~~$11.9 million and $30.0 million and unallocated other income of ~~$3.7 million.~~$10.3 million and $26.9 million, respectively.
The material noninterest expense items in the ~~other~~Other column ~~related to noninterest expense~~ for ~~March 31,~~the three and nine months ended September 30, 2003, ~~resulted~~are substantially derived from Treasury activities and unallocated administrative ~~items of $6.5 million.~~items. The ~~material item~~noninterest expense items in the ~~other~~Other column ~~resulted~~for the three months ended September 30, 2002 are mostly ~~from~~the result of unallocated merger-related costs of ~~$6.0~~$6.2 million, Treasury activities of $4.7 million and unallocated administrative items of $3.9 million. The material noninterest expense items in the Other column for ~~March 31, 2002.~~the nine months ended September 30, 2002 resulted primarily from Treasury activities of $11.8 million, unallocated merger-related costs of $15.0 million and unallocated administrative items of $9.1 million.
The material average asset items in the ~~other~~Other column ~~related~~relate to ~~average assets are~~ unallocated Treasury securities for ~~March 31, 2003 and 2002.~~the periods presented:
The material average deposit items in the ~~other~~Other column ~~related~~relate to ~~average deposits are~~ unallocated Treasury balances for ~~March 31,~~the three and nine months ended September 30, 2003 and 2002.
⁽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 Other were related to the following for March 31, 2003:~~14
~~The material items in noninterest income resulted primarily from unallocated Treasury activities.~~
~~The material items in noninterest expense consists primarily of unallocated costs.~~
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) (Continued)
The material items in the other column related to ~~average assets are unallocated Treasury securities~~net interest income for ~~March 31,~~the three and nine months ended September 30, 2003 resulted from $7.9 million and ~~2002.~~$29.1 million, respectively, in transfer pricing adjustments.
The material items in the other column related to noninterest income for the three and nine months ended September 30, 2003 resulted primarily from a $0.7 million and $4.1 million gain on sale of a leveraged lease, respectively.
The material items in the other column related to noninterest expense for the three and nine months ended September 30, 2003 resulted from unallocated Treasury activities of $5.1 million and $11.6 million, respectively, partially offset by a pre-tax $2.6 million reduction in net investment in leveraged leases in September 2003.
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 ~~March 31,~~the three and nine months ended September 30, 2003 and 2002.
⁽³⁾ The ~~“Other BancWest”~~Other BancWest category in the table above consists primarily of BancWest Corporation (Parent Company), FHL Lease Holding Company, Inc., BancWest Capital I and First Hawaiian ~~Lease Holding~~ Capital I.
⁽⁴⁾ The reconciling items in the above table are principally intercompany eliminations.
13
15
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited) ~~(Continued)~~
5. Intangible Assets
     The Company adopted SFAS 142 on January 1, 2002. The most significant changes made by SFAS 142 are that goodwill and other ~~indefinite lived~~indefinite-lived intangible assets are no longer amortized and will be tested for impairment at least annually. As of ~~March 31,~~September 30, 2003, the Company had goodwill of $3.2 billion. The table below provides the breakdown of goodwill by reportable segment and the change during the year.

Bank of the West First Hawaiian Bank

Bank of the West First Hawaiian Bank
Retail Financial

Regional Commercial Consumer Banking Commercial Management Consolidated Regional Commercial Consumer Retail Consumer Commercial Financial Consolidated
(in millions) (in millions) Banking Banking Finance Group Consumer Banking Group BancWest Totals (in millions) Banking Banking Finance Banking Banking Banking Management BancWest Totals

Balance as of January 1, 2003: Balance as of January 1, 2003: $ 1,215 $ 707 $ 308 $ 650 $ 216 $ 118 $ 10 $ 5 $ 3,229 Balance as of January 1, 2003: $ 1,215 $ 707 $ 308 $ 650 $ 216 $ 118 $ 10 $ 5 $ 3,229
Purchase accounting adjustment: Purchase accounting adjustment: Purchase accounting adjustment:
UCB (1 ) — — — — — — — (1 ) UCB (1 ) — — — — — — — (1 )
Trinity Capital — (1 ) — — — — — — (1 ) Trinity Capital — (1 ) — — — — — — (1 )

Balance as of March 31, 2003:
$ 1,214 $ 706 $ 308 $ 650 $ 216 $ 118 $ 10 $ 5 $ 3,227
Balance as of September 30, 2003:
Balance as of September 30, 2003:
$ 1,214 $ 706 $ 308 $ 650 $ 216 $ 118 $ 10 $ 5 $ 3,227

14     The estimated annual amortization expense for finite-lived intangible assets, primarily core deposit intangibles arising from the BNP Paribas merger and the acquisition of UCB, is approximately $23 million (pre-tax) for each of the years from 2003 to 2007. The details of our intangible assets are depicted below:

Gross
Carrying Accumulated Net Book
Amount Amortization Value

(in thousands)
Balance as of September 30, 2003:
Core Deposits $ 230,538 $ 37,418 $ 193,120

Total $ 230,538 $ 37,418 $ 193,120
Balance as of December 31, 2002:
Core Deposits $ 230,538 $ 20,127 $ 210,411

Total $ 230,538 $ 20,127 $ 210,411
Balance as of September 30, 2002:
Core Deposits $ 230,538 $ 14,364 $ 216,174

Total $ 230,538 $ 14,364 $ 216,174
6. Financial Interpretation No. 46: Consolidation of Variable Interest Entities
     In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 provides guidance on how to identify a variable interest entity and determine when the assets, liabilities, noncontrolling interests and results of operations of a variable interest entity should be consolidated by the primary beneficiary. FIN 46 requires that a variable interest entity (VIE) be consolidated by a company if that company meets the definition of the VIE’s primary beneficiary. The primary beneficiary is the enterprise that will absorb a majority of the risk of loss from the VIE’s activities or is entitled to receive a majority of the VIE’s residual returns or both. The recognition and measurement provisions of FIN 46 apply at inception to any variable interest entity formed after January 31, 2003, and becomes effective for existing variable interest entities on the first interim or annual reporting period ending after December 15, 2003. The Company adopted the consolidation provisions of FIN 46 in the third quarter for one variable interest entity formed prior to February 1, 2003, REFIRST, Inc.
     REFIRST, Inc. is a VIE that was created by a nonrelated third party to construct, finance and hold title to our administrative headquarters building in Honolulu, First Hawaiian Center (FHC). We entered into a noncancelable operating lease for FHC with REFIRST, Inc. that terminates on December 1, 2003. Our intention is to purchase FHC at the end of the lease term. Prior to July 1, 2003, we were not required to consolidate REFIRST, Inc. into our consolidated financial statements. However, upon our
16
implementation of FIN 46, REFIRST, Inc. was consolidated into BancWest effective July 1, 2003, including the depreciation expense of FHC and interest expense on the financing. The provisions of FIN 46 required us to record a cumulative effect of an accounting change upon its implementation. The amount of such cumulative effect, (essentially, a retrospective depreciation charge for an 18-month period covering the time in which the building was last revalued for purchase-accounting purposes) as it relates to the consolidation of REFIRST, Inc., recognized in July 2003 was an after-tax charge to earnings of approximately $2.4 million. Additionally, we increased total assets by approximately $160 million (principally due to the addition of the FHC building), increased debt by approximately $193.9 million, reduced the deferred tax liability by approximately $1.7 million and decreased the reserve for the guaranteed residual value upon lease termination of $30 million.
     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 shall not participate in the control of the Partnership’s business. The general partner exercises the day-to-day control and management of the projects. The general partner has exclusive control over the Partnership’s business and shall have all of the rights, powers, and authority generally conferred by law or necessary, advisable or consistent with accomplishing the Partnership’s business. BancWest is considered a defacto agent for the general partner and cannot sell the investments without the general partners’ consent. 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 current pledge amount for these investments is approximately $77 million with approximately $30 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 pledge amount. A bargain purchase option is available for the general partner to purchase the Company’s portion of interest in the limited partnerships. These partnerships were entered into from 1989 through 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 preferred capital securities were sold to the public; BancWest owns the common 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. At the Trusts’ inception, we issued junior subordinated deferrable interest debentures to the Trusts in return for either capital securities, in the case of BWE Trust, or the proceeds from capital securities that were issued from FH Trust. 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 is still assessing the impact of FIN 46 on the Trusts and may no longer be permitted to consolidate them in preparing its financial statements. The Company plans to complete this assessment during the fourth quarter of 2003.
17
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
~~New Pronouncements~~OVERVIEW
     Headquartered in Honolulu, Hawaii, with offices in San Francisco, BancWest is a financial holding company with assets of $37.4 billion at September 30, 2003. BancWest, through its subsidiaries, operates a general commercial banking business and other businesses related to banking. Its principal assets are its investments in Bank of the West, a State of California-chartered bank; and First Hawaiian, a State of Hawaii-chartered bank. We provide a wide range of general commercial banking services, providing retail and corporate banking, trust and insurance services to individuals, institutions, businesses and governments.
     Net income for the third quarter of 2003 was $112.2 million, compared with $97.1 million for the same period in 2002. Net income for the first nine months of 2003 was $322.0 million compared with $259.1 million for the same period in 2002. Net interest income was $331.4 million for the third quarter of 2003 and $967.9 million for the first nine months of 2003 compared with $320.7 million and $867.1 million for the same periods of 2002. Noninterest income was $99.6 million and $295.0 million for the third quarter and first nine months of 2003, respectively, compared with $91.6 million and $242.7 million for the same periods in 2002. Noninterest expense totaled $223.0 million and $673.4 million for the third quarter and first nine months of 2003, respectively, compared with $224.4 million and $612.3 million for the same periods of 2002.
     BancWest had total assets of $37.4 billion at September 30, 2003, up 9.3% from a year earlier. Investment securities totaled $5.4 billion, an increase of 45.9% as compared to the same period in 2002. Loans and leases totaled $25.3 billion, an increase of 5.0% compared to the same period in 2002. Deposits were $25.9 billion, up 6.4% from a year earlier.
     BancWest’s nonperforming assets were reduced significantly to 0.71% of loans and foreclosed properties at September 30, 2003, an improvement from 1.12% at September 30, 2002. The provision for credit losses was $24.1 million for the third quarter of 2003 compared to $26.3 million for the same period in 2002. BancWest’s allowance for credit losses was 1.54% of total loans and leases at September 30, 2003, compared to 1.59% at December 31, 2002 and 1.60% at September 30, 2002.
NEW PRONOUNCEMENTS
     In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 provides guidance on consolidation and how to identify a variable interest entity (VIE) and determine when the assets, liabilities, noncontrolling interests and results of operations of a variable interest entity should be consolidated. The recognition and measurement provisions of FIN 46 apply at inception to any variable interest entity formed after January 31, 2003, and become effective for existing variable interest entities on the first interim or annual reporting period ending after December 15, 2003. The Company consolidated one variable interest entity, REFIRST, Inc., during the third quarter. REFIRST, Inc. finances and holds title to our administrative headquarters building in Honolulu, First Hawaiian Center (FHC). Upon adoption, the Company recognized an after-tax charge to earnings of approximately $2.4 million accounted for as a cumulative effect of an accounting change. Additionally, we increased total assets by approximately $160 million (principally due to the addition of the FHC building), increased debt by approximately $193.9 million, reduced the deferred tax liability by approximately $1.7 million and decreased the reserve for the guaranteed residual value upon lease termination of $30 million. Please refer to Note 6 Financial Interpretation No. 46: Consolidation of Variable Interest Entities for details.
     In April 2003, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ~~SFAS~~Statement of Financial Accounting Standards (SFAS) 149,Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in ~~Statement~~SFAS 133. In addition, it clarifies when a derivative contains a financing component that warrants special reporting. ~~Statement~~SFAS 149 amends certain other existing pronouncements. Those changes will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. This statement will be applied prospectively and is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS 149 isdid not ~~expected to~~ have a material ~~effect~~impact on our consolidated financial position, results of operations or cash flows.
     In May 2003, the ~~Company’s Consolidated~~FASB issued SFAS 150, “Accounting for Certain Financial ~~Statements.~~Instruments with Characteristics of both Liabilities and Equity” (SFAS 150). SFAS 150 establishes standards for the classification and measurement of financial instruments with
18
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
characteristics of both liabilities and equity. This standard is effective beginning in the third quarter of 2003. The adoption of this standard did not have a material impact on our consolidated financial position, results of operations or cash flows.
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 uncertainties; (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 effect 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”),~~FASB, the Securities and Exchange Commission ~~(“SEC”)~~(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.
~~Monetary Policy and Economic Conditions~~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 Policies~~CRITICAL ACCOUNTING POLICIES
     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,~~September 30, 2003. 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
15
~~BancWest Corporation and Subsidiaries~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
~~CONDITION AND RESULTS OF OPERATIONS (Continued)~~
financial statements to these critical 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, ~~in particular,~~ Note 1 (Summary of Significant Accounting Policies) of our 2002 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. In particular, we have identified ~~three~~two policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of our consolidated financial statements.
19
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
• Allowance for Credit ~~Losses:~~Losses (the Allowance): The allowance for credit losses represents our best estimate of losses inherent in the existing loan portfolio. 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 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) to the ~~Consolidated Financial Statements~~consolidated financial statements of our 2002 Annual Report on Form 10-K 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 types. Some of the Allowance is not allocated to specific impaired loans because of the subjective nature of the process of estimating an adequate allowance for credit losses, economic uncertainties and other factors.

• Fair Value of Assets: Certain assets and liabilities are reflected at their estimated fair value in the consolidated financial statements. Such amounts are based on either quoted market prices or estimated values derived by utilizing dealer quotes, market comparisons or internally generated modeling techniques. Our internal models generally involve present value of cash flow techniques.

One of the most significant assets for which we estimate fair value is goodwill. As of ~~March 31,~~September 30, 2003, we had $3.2 billion in goodwill on our Consolidated Balance Sheet. SFAS No. 142 requires that we perform a two-step impairment test for goodwill at least annually. However, if an event occurs or circumstances change during the year indicating potential impairment, goodwill must be tested. The testing process involves estimating cash flows for future periods. The first step compares the fair value of the reporting unit, which is an individual business segment of the Company, to the carrying amount. If the carrying amount exceeds the fair value, then a second step is conducted whereby the implied fair value of the goodwill is compared with the carrying amount of the goodwill. If the implied fair value of the goodwill is less than the carrying amount, an impairment loss is recognized.
• Deferred Tax Assets: We use an estimate of future earnings to support our position that the benefit of our deferred tax assets will be realized. Deferred tax assets and liabilities are measured using effective tax rates that we estimate will be in existence for the periods such deferred tax assets and liabilities will be realized. Generally, this estimate is based on tax rates currently in effect adjusted for any changes resulting from enacted tax laws that have yet to become effective. If tax rates change in the future as a result of tax law enactments or other reasons, the value of deferred tax assets and liabilities may be adjusted through current earnings. If future taxable income should prove insufficient to utilize the deductions associated with the deferred tax assets in the years such deductions are incurred, some or all of the assets may not be realized and our net income will be reduced.
1620
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ~~(Continued)~~
CONSOLIDATED FINANCIAL HIGHLIGHTS(Unaudited)

Three Months Ended Three Months Ended Nine Months Ended
March 31, September 30, September 30,

2003 2002 2003 2002 2003 2002

(dollars in thousands) (dollars in thousands)
Earnings:
Earnings:

Earnings:

Net interest income Net interest income $ 315,239 $ 224,480 Net interest income $ 331,362 $ 320,734 $ 967,926 $ 867,108
Provision for credit losses Provision for credit losses 22,690 20,007 Provision for credit losses 24,145 26,300 65,695 69,209
Noninterest income Noninterest income 94,834 62,624 Noninterest income 99,626 91,639 295,034 242,692
Noninterest expense Noninterest expense 220,660 159,098 Noninterest expense 222,963 224,364 673,412 612,282
Tax provision Tax provision 64,642 42,582 Tax provision 69,268 64,651 199,498 169,256
Net income $ 102,081 $ 65,417
Income before cumulative effect of accounting change Income before cumulative effect of accounting change 114,612 97,058 324,355 259,053
Cumulative effect of accounting change, net of tax Cumulative effect of accounting change, net of tax 2,370 — 2,370 —
Net Income
Net Income
$ 112,242 $ 97,058 $ 321,985 $ 259,053
Selected Financial Ratios:
Selected Financial Ratios:

Selected Financial Ratios:

Return on average total assets (ROA) Return on average total assets (ROA) 1.20 % 1.12 % Return on average total assets (ROA) 1.21 % 1.13 % 1.21 % 1.14 %
Return on average stockholder’s equity (ROE) Return on average stockholder’s equity (ROE) 10.54 11.51 Return on average stockholder’s equity (ROE) 10.83 9.99 10.70 10.50
Net interest margin (taxable-equivalent basis) Net interest margin (taxable-equivalent basis) 4.49 4.57 Net interest margin (taxable-equivalent basis) 4.26 4.52 4.37 4.58
Allowance for credit losses to total loans and leases (at March 31) 1.65 1.59
Nonperforming assets to total assets (at March 31) 0.67 0.77
Allowance for credit losses to nonperforming loans and leases (at March 31) 1.83 x 1.65 x
Allowance for credit losses to total loans and leases (at September 30) Allowance for credit losses to total loans and leases (at September 30) 1.54 1.60 1.54 1.60
Nonperforming assets to total assets (at September 30) Nonperforming assets to total assets (at September 30) 0.48 0.79 0.48 0.79
Allowance for credit losses to nonperforming loans and leases (at September 30) Allowance for credit losses to nonperforming loans and leases (at September 30) 2.44 x 1.52 x 2.44 x 1.52 x
Average equity to average total assets Average equity to average total assets 11.17 % 11.36 % 11.35 % 10.85 %
Regulatory Capital Ratios:
Regulatory Capital Ratios:

Regulatory Capital Ratios:

Leverage Ratio:
Bank of the West 9.48 % 7.37 %
United California Bank N/A 10.08
First Hawaiian Bank 9.38 8.64
Leverage Ratio⁽¹⁾:

Tier 1 capital (risk-based): Bank of the West 9.36 % 8.94 % 9.36 % 8.94 %
Bank of the West 10.29 8.11 First Hawaiian Bank 9.68 9.08 9.68 9.08
United California Bank N/A 10.83 Tier 1 capital (risk-based):
First Hawaiian Bank 11.66 9.95 Bank of the West 10.56 9.84 10.56 9.84
Total capital (risk-based): First Hawaiian Bank 12.51 11.06 12.51 11.06
Bank of the West 12.59 11.11 Total capital (risk-based):
United California Bank N/A 12.09 Bank of the West 12.81 12.16 12.81 12.16
First Hawaiian Bank 14.05 12.29 First Hawaiian Bank 14.88 13.47 14.88 13.47
Balance Sheet Data Averages:
Balance Sheet Data Averages:

Balance Sheet Data Averages:

Average assets Average assets 34,417,081 23,792,836 Average assets 36,797,885 33,937,459 35,441,404 30,414,475
Average loans(2) Average loans(2) 24,046,194 16,861,211 Average loans(2) 25,199,215 24,067,661 24,548,196 21,739,282
Average deposits Average deposits 24,146,346 16,932,851 Average deposits 25,422,161 24,095,238 24,631,586 21,663,686
Average stockholder’s equity Average stockholder’s equity 3,926,093 2,305,697 Average stockholder’s equity 4,110,928 3,854,560 4,023,643 3,299,628
Balance Sheet Data At Period End:
Balance Sheet Data At Period End:

Balance Sheet Data At Period End:

Assets Assets 34,916,089 33,324,493 Assets 37,425,502 34,256,500 37,425,502 34,256,500
Loans(2) Loans(2) 24,056,267 24,070,667 Loans(2) 25,343,837 24,141,513 25,343,837 24,141,513
Deposits Deposits 24,338,593 24,083,920 Deposits 25,920,602 24,356,862 25,920,602 24,356,862
Stockholder’s equity Stockholder’s equity 3,968,819 3,664,633 Stockholder’s equity 4,157,522 3,931,779 4,157,522 3,931,779
17
⁽¹⁾ The capital leverage rates are based on quarterly averages.
⁽²⁾ These balances include loans held-for-sale and are not adjusted for credit losses.
21
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ~~(Continued)~~
NET INTEREST INCOME
~~The increase in net~~Net interest income ~~for~~increased 3.3% in the three months ended September 30, 2003 to $331.4 million from $320.7 million in the corresponding period last year. Net interest income increased to $967.9 million, a growth of 11.6% in the nine months ending September 30, 2003 from $867.1 million in the same nine-month period last year. The margins in the three and nine-month periods ending September 30, 2003 decreased in a record low interest rate environment in which the yields on our earning assets declined faster than the rates on our funding sources. Increases in average earning assets were partially offset by the impact of the decreased margin.
Average earning assets increased by $2.7 billion and $4.3 billion or 9.7% and 17.0%, respectively, in the three and nine months ended September 30, 2003 from the corresponding periods last year. These increases were primarily driven by purchases of investment securities, residential real estate loans and originations of consumer loans. In addition, our March 2002 acquisition of United California Bank (UCB) increased both our investment securities and loans and leases. We significantly increased our purchasing of investment securities in the three months ended September 30, 2003 from the comparable period last year. Average investment securities increased $1.7 billion and $1.5 billion or 49.1% and 47.7%, respectively, in the three and nine month periods ended September 30, 2003 compared to the corresponding periods last year. Average loans and leases outstanding grew by $1.1 billion or 4.7% during the three-month period ended ~~March 31,~~September 30, 2003 ~~over~~and 12.9% or $2.8 billion during the same period in 2002 was primarily due to an increase in average earning assets of 43.4%, or $8.6 billion, and a 68-basis-point decrease (1% equals 100 basis points) in the rate paid on interest-bearing funding sources, partially offset by a 78-basis point decline in the yield on average earning assets. In addition, higher average noninterest-bearing deposits, which increased by $2.9 billion or 76.4% in the first quarter of 2003 over the same period in 2002, contributed to a decline in the overall cost of funds of 70 basis points. The increase in average earning assets is primarily due to the acquisition of UCB. The decline in yields is primarily attributable to the continued effects of the interest rate reductions implemented by the Federal Reserve Bank in the previous two years.
~~In the three-month~~nine-month period ended ~~March 31,~~September 30, 2003 as compared to the same ~~period in 2002,~~periods last year.
For the ~~net interest margin~~three and nine months ended September 30, 2003 interest-bearing demand deposits decreased ~~by 8 basis points due~~23.3% and 23.4% or $82.6 million and $83.7 million. Savings deposits increased $1.1 billion and $1.9 billion or 12.4% and 23.9%, respectively for the three and nine months ended September 30, 2003 compared to ~~a decrease in the yield on average earning assets of 78 basis points substantially~~last year. Short-term borrowing decreased 13.3% and 9.8% or $314.2 million and $199.2 million, respectively, offset by a ~~decline~~significant increase in long-term borrowing of 66.0% and 57.6% or $1.6 billion and $1.4 billion in the ~~rate paid on funding sources~~three and nine-month periods, respectively, ending September 30, 2003 from the same periods in 2002. The shift from short-term to long-term debt was primarily a result of ~~70 basis points. The continuing effects~~finalizing the long-term financing for the portion of the ~~reduction of key~~UCB acquisition ($800 million) that had been financed during the interim with short-term debt.
In addition to a falling interest ~~rates by the Federal Reserve Bank are primarily responsible for the declines in yields and rates.~~
~~Our~~rate environment, our cost of funds was lowered by an increase in average noninterest-bearing deposits of $948.1 million and $1.6 billion, or 14.9% and 30.5% in the three and nine months ended ~~March 31,~~September 30, 2003, respectively as compared to the same ~~period~~periods in 2002. The percentage of average noninterest-bearing deposits to total average deposits ~~increased to 27.9%~~ for the three and nine months ended ~~March 31,~~September 30, 2003 ~~compared~~increased to ~~22.6%~~28.7% and 28.3%, respectively, from 26.4% and 24.7% for the same ~~period~~periods in 2002.
The increase in average earning assets was primarily due to an increase in average loans and leases of $7.2 billion, or 42.6%, and an increase in investment securities of $1.5 billion, or 53.8%. These increases are primarily due to the acquisition of UCB. Also contributing to the increase in average loans and leases was the acquisition of Trinity Capital in the fourth quarter of 2002.
The increase in average interest-bearing deposits and liabilities was primarily due to an increase in average interest-bearing deposits of $4.3 billion, or 32.8%, and a $1.2 billion, or 50.5%, increase in long-term debt. Expansion of our customer deposit base, primarily due to the acquisition of UCB, contributed to the increase in average interest-bearing deposits. To facilitate the purchase of UCB, BancWest borrowed $800 million from BNP Paribas. This amount was initially recorded as short-term debt under a bridge financing arrangement. In November, 2002, permanent financing was put in place and classified as long-term debt. The remaining increase of approximately $400 million in average long-term debt is primarily due to increased borrowing from the Federal Home Loan Bank.
18
~~BancWest Corporation and Subsidiaries~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
~~CONDITION AND RESULTS OF OPERATIONS (Continued)~~
The following table sets forth consolidated average balance sheets, as well as an analysis of interest income/expense and ~~average~~ yield/rate for each major category of interest-earning assets and interest-bearing liabilities for the periods indicated on a taxable equivalent basis. The tax equivalent adjustment is made for items exempt from federal income taxes (assuming a 35% tax rate for 2003 and 2002) to make them comparable with taxable items before any income taxes are applied.
22
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Three Months Ended March 31, Three Months Ended September 30,

2003 2002 2003 2002

Interest Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate (1) Balance Expense Rate (1) Balance Expense Rate (1) Balance Expense Rate (1)

(dollars in thousands) (dollars in thousands)
ASSETS ASSETS ASSETS
Earning assets: Earning assets: Earning assets:
Interest-bearing deposits in other banks $ 273,327 $ 748 1.09 % $ 173,466 $ 822 1.88 %
Federal funds sold and securities purchased under agreements to resell 153,472 406 1.05 392,523 1,724 1.74
Trading assets 59,350 426 2.85 42,409 392 3.67
Interest-bearing deposits in other banks $ 108,376 $ 415 1.55 % $ 152,079 $ 742 1.98 %
Investment securities:⁽²⁾

Federal funds sold and securities purchased under agreements to resell 249,634 823 1.34 205,067 866 1.71 Taxable investment securities 5,218,770 46,118 3.51 3,495,137 40,704 4.62
Investment securities (2),(3) 4,149,668 42,587 4.16 2,697,438 34,787 5.23 Non-taxable investment securities 15,663 240 6.08 15,001 228 6.03
Loans and leases (4),(5) 24,046,194 374,287 6.31 16,861,211 292,966 7.05
Loans and leases⁽³⁾^,⁽⁴⁾
25,199,215 376,696 5.93 24,067,661 400,825 6.61

Total earning assets 28,553,872 $ 418,112 5.93 19,915,795 $ 329,361 6.71 Total earning assets 30,919,797 424,634 5.45 % 28,186,197 444,695 6.26 %

Non-earning assets Non-earning assets 5,863,209 3,877,041 Non-earning assets 5,878,088 5,751,262

Total assets $ 34,417,081 $ 23,792,836 Total assets $ 36,797,885 $ 33,937,459

LIABILITIES AND STOCKHOLDER’S EQUITY LIABILITIES AND STOCKHOLDER’S EQUITY LIABILITIES AND STOCKHOLDER’S EQUITY
Interest-bearing deposits and liabilities: Interest-bearing deposits and liabilities:
Deposits: Deposits:
Domestic: Domestic:
Interest-bearing demand $ 266,838 $ 119 0.18 $ 336,207 $ 219 0.26 Interest-bearing
Savings 9,696,019 18,239 0.76 5,742,800 16,231 1.15 Demand $ 271,111 $ 44 0.06 % $ 353,668 $ 267 0.30 %
Time 6,839,649 33,231 1.97 6,664,839 45,250 2.75 Savings 10,399,436 13,637 0.52 9,255,123 29,013 1.24
Foreign 608,316 1,558 1.04 370,124 1,929 2.11 Time 6,838,840 24,868 1.44 7,513,111 44,753 2.36

Foreign 615,304 1,286 0.83 623,987 2,444 1.55
Total interest-bearing deposits 17,410,822 53,147 1.24 13,113,970 63,629 1.97

Short-term borrowings 1,373,035 3,696 1.09 1,330,766 5,793 1.77 Total interest-bearing deposits 18,124,691 39,835 0.87 17,745,889 76,477 1.71
Long-term debt and capital securities 3,580,283 45,394 5.14 2,378,244 35,382 6.03 Short-term borrowings 2,041,899 9,230 1.79 2,356,097 10,430 1.76

Long-term debt and capital securities 4,139,256 43,843 4.20 2,494,038 36,907 5.87
Total interest-bearing deposits and liabilities 22,364,140 102,237 1.85 16,822,980 104,804 2.53

Total interest-bearing deposits and liabilities 24,305,846 92,908 1.52 22,596,024 123,814 2.17
Interest rate spread 4.08 % 4.18 %

Interest rate spread 3.93 % 4.09 %
Noninterest-bearing deposits 6,735,524 3,818,881 Noninterest-bearing deposits 7,297,470 6,349,349
Other liabilities 1,391,324 845,278 Other liabilities 1,083,641 1,137,526

Total liabilities 30,490,988 21,487,139 Total liabilities 32,686,957 30,082,899
Stockholder’s equity 3,926,093 2,305,697 Stockholder’s equity 4,110,928 3,854,560

Total liabilities and stockholder’s equity $ 34,417,081 $ 23,792,836 Total liabilities and stockholder’s equity $ 36,797,885 $ 33,937,459

Impact of noninterest-bearing sources Impact of noninterest-bearing sources 0.41 % 0.39 % Impact of noninterest-bearing sources 0.33 % 0.43 %
Net interest income and margin on total earning assets 315,875 4.49 % 224,557 4.57 % Net interest income and margin on total earning assets 331,726 4.26 % 320,881 4.52 %

Tax equivalent adjustment 364 147
Tax equivalent adjustment 636 77

Net interest income $ 331,362 $ 320,734
Net interest income $ 315,239 $ 224,480

⁽¹⁾ Annualized.

⁽²⁾ Average ~~debt~~ investment securities were computed based on historical amortized cost, excluding the effects of SFAS No. 115 adjustments.

⁽³⁾ ~~Average investment securities includes trading securities.~~
~~(4)~~ Nonaccruing loans and leases, and loans ~~held for sale and acceptances held for trading~~held-for-sale have been included in the computations of average loan and lease balances.

~~(5)~~⁽⁴⁾ Interest income for loans and leases included loan fees of ~~$13,706~~$17.5 million and ~~$11,138~~$13.7 million for the three months ended September 30, 2003 and 2002, respectively.
1923
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ~~(Continued)~~

Nine Months Ended September 30,

2003 2002

Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate (1) Balance Expense Rate (1)

(dollars in thousands)
ASSETS
Earning assets:
Interest-bearing deposits in other banks $ 177,077 $ 1,632 1.23 % $ 142,777 $ 2,057 1.93 %
Federal funds sold and securities purchased under agreements to resell 212,842 1,947 1.22 279,109 3,650 1.75
Trading assets 55,877 1,171 2.80 23,507 591 3.36

Investment securities:⁽²⁾

Taxable investment securities 4,616,617 131,986 3.82 3,124,281 114,881 4.92
Non-taxable investment securities 15,380 753 6.55 11,809 736 8.33

Loans and leases⁽³⁾^,⁽⁴⁾
24,548,196 1,124,709 6.13 21,739,282 1,100,121 6.77

Total earning assets 29,625,989 $ 1,262,198 5.70 % 25,320,765 $ 1,222,036 6.45 %

Non-earning assets 5,815,415 5,093,710

Total assets $ 35,441,404 $ 30,414,475

LIABILITIES AND STOCKHOLDER’S EQUITY
Interest-bearing deposits and liabilities:
Deposits:
Domestic:
Interest-bearing
Demand $ 274,221 $ 271 0.13 % $ 357,969 $ 749 0.28 %
Savings 10,047,001 49,613 0.66 8,108,901 73,248 1.21
Time 6,737,313 86,625 1.72 7,280,520 137,799 2.53
Foreign 594,578 4,197 0.94 568,272 7,088 1.67

Total interest-bearing deposits 17,653,113 140,706 1.07 16,315,662 218,884 1.79
Short-term borrowings 1,841,025 16,464 1.20 2,040,197 26,486 1.74
Long-term debt and capital securities 3,777,603 136,014 4.81 2,396,453 109,044 6.08

Total interest-bearing deposits and liabilities 23,271,741 293,184 1.68 20,752,312 354,414 2.28

Interest rate spread 4.02 % 4.17 %
Noninterest-bearing deposits 6,978,473 5,348,024
Other liabilities 1,167,547 1,014,511

Total liabilities 31,417,761 27,114,847
Stockholder’s equity 4,023,643 3,299,628

Total liabilities and stockholder’s equity $ 35,441,404 $ 30,414,475

Impact of noninterest-bearing sources 0.35 % 0.41 %
Net interest income and margin on total earning assets 969,014 4.37 % 867,622 4.58 %
Tax equivalent adjustment 1,088 514

Net interest income $ 967,926 $ 867,108

⁽¹⁾ Annualized.
⁽²⁾ Average investment securities were computed based on historical amortized cost, 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 $46.8 million and $39.4 million for the nine months ended September 30, 2003 and 2002, respectively.
24
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NONINTEREST INCOME
The following table reflects the key components of the change in noninterest income for the three and nine months ended ~~March 31,~~September 30, 2003, as compared to the same ~~period~~periods in 2002:

2003 2002 % Change

(in thousands)
Three Months Ended March 31,

Service charges on deposit accounts $ 37,029 $ 25,974 42.6 %
Trust and investment services income 9,507 8,140 16.8
Other service charges and fees 35,615 23,498 51.6
Securities gains, net 1,892 228 729.8
Other 10,791 4,784 125.6

Total noninterest income $ 94,834 $ 62,624 51.4 %

2003 2002 % Change

(in thousands)
Three Months Ended September 30,

Service charges on deposit accounts $ 39,512 $ 39,183 0.8 %
Trust and investment services income 9,461 9,883 (4.3 )
Other service charges and fees 38,535 34,032 13.2
Securities gains, net 555 282 96.8
Other 11,563 8,259 40.0

Total noninterest income $ 99,626 $ 91,639 8.7 %

2003 2002 % Change

(in thousands)
Nine Months Ended September 30,

Service charges on deposit accounts $ 115,102 $ 101,718 13.2 %
Trust and investment services income 28,826 28,275 1.9
Other service charges and fees 113,380 89,442 26.8
Securities gains, net 3,913 966 305.1
Other 33,813 22,291 51.7

Total noninterest income $ 295,034 $ 242,692 21.6 %

As the table above shows in detail, noninterest income increased by ~~51.4%~~8.7% and 21.6% for the three and nine months ended September 30, 2003, respectively, compared to the same periods in 2002. These increases were driven by a number of different causes. Service charges on deposit accounts for the quarter did not increase materially, but increased $13.4 million or 13.2% in the nine months ended September 30, 2003. This was due in large part to an increase in average deposit balances of approximately 5.5% and 13.7% for the three and nine months, respectively, compared to the same periods in the prior year. Part of the year-to-date increase is attributable to the acquisition of UCB in March ~~31, 2003,~~2002.
Other service charges and fees increased 13.2% in the quarter and 26.8% in the nine months year-to-date. The increase in other service charges and fees compared to the same period ~~in 2002. The increase in noninterest income~~last year is ~~substantially~~primarily due to higher ~~levels~~income from fees on commercial loans, higher lease servicing income from the acquisition of Trinity Capital in November 2002, higher commission from issuing letters of credit, higher broker servicing fees and increased debit card usage. Other noninterest income increased 40.0% in the third quarter and 51.7% in the nine-month period compared to the corresponding periods in 2002. These increases are primarily gains from the sale of loans and ~~deposits resulting from the expansion of our customer loan~~leases.
Approximately $0.6 million and ~~deposit base~~$3.9 million in ~~Bank of the West, especially those resulting from the UCB acquisition.~~
~~Approximately $1.9 million in~~net gains on the sale of investment securities ~~was~~were recognized in the three and nine months ended ~~March 31,~~September 30, 2003, ~~primarily from the sale of FHLB bonds and U.S. Treasury Notes.~~respectively.
NONINTEREST EXPENSE
The following table reflects the key components of the change in noninterest expense for the three and nine months ended ~~March 31,~~September 30, 2003 as compared to the same ~~period~~periods in 2002:

2003 2002 % Change

(in thousands)
Three Months Ended March 31,

Salaries and wages $ 84,662 $ 60,094 40.9 %
Employee benefits 37,646 23,482 60.3
Occupancy expense 22,320 15,614 42.9
Outside services 17,567 13,252 32.6
Intangible amortization 5,763 2,757 109.0
Equipment expense 11,156 7,729 44.3
Stationery and supplies 7,018 5,685 23.4
Advertising and promotion 5,203 4,657 11.7
Restructuring and integration costs — 6,015 —
Other 29,325 19,813 48.0

Total noninterest expense $ 220,660 $ 159,098 38.7 %

As the table above shows in detail, noninterest expense increased by 38.7% for the three months ended March 31, 2003, compared to the same period in 2002. The increase in noninterest expense is predominately due to the UCB acquisition. Significant items include the following:
2025
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ~~(Continued)~~

2003 2002 % Change

(in thousands)
Three Months Ended September 30,

Salaries and wages $ 86,269 $ 89,486 (3.6 )%
Employee benefits 34,091 28,340 20.3
Occupancy expense 22,239 24,008 (7.4 )
Outside services 18,002 17,472 3.0
Intangible amortization 5,763 5,763 —
Equipment expense 11,563 14,043 (17.7 )
Stationery and supplies 5,962 6,990 (14.7 )
Advertising and promotion 5,794 12,301 (52.9 )
Restructuring and integration costs — 6,213 —
Other 33,280 19,748 68.5

Total noninterest expense $ 222,963 $ 224,364 0.6 %

2003 2002 % Change

(in thousands)
Nine Months Ended September 30,

Salaries and wages $ 252,908 $ 236,043 7.1 %
Employee benefits 111,127 87,497 27.0
Occupancy expense 67,153 63,117 6.4
Outside services 53,843 48,532 10.9
Intangible amortization 17,290 14,283 21.1
Equipment expense 35,156 36,252 (3.0 )
Stationery and supplies 19,396 20,017 (3.1 )
Advertising and promotion 19,451 24,978 (22.1 )
Restructuring and integration costs — 14,966 —
Other 97,088 66,597 45.8

Total noninterest expense $ 673,412 $ 612,282 10.0 %

• ~~The restructuring and integration efforts related to the UCB merger are substantially complete, resulting in the decrease in the related costs.~~
• The increase in salaries and wages and employee benefits is consistent with the increase to 7,713 average full-time employee equivalents for the quarter ended March 31, 2003 as compared to 5,932 for the comparable period in 2002.
• ~~The increase of $3.0 million in intangible amortization resulted from the amortization of the UCB core deposit intangibles.~~
As the table above shows in detail, the change in total noninterest expense from the previous year was not material in the third quarter. The increase in employee benefits of $5.8 million, or 20.3% in the three months ended September 30, 2003 compared to the same period in the previous year is primarily attributable to higher workers’ compensation insurance, higher group healthcare insurance and increased retirement plan expense. Occupancy expenses decreased $1.8 million or 7.4% in the three months ended September 30, 2003 compared to the same period in the prior year due to the consolidation of branches after the UCB acquisition. Advertising and promotion expenses decreased by $6.5 million in the period due to higher expenses in the third quarter of 2002 to promote brand recognition after the acquisition of UCB. The decreases in the other categories of noninterest expense in the third quarter from the previous year, such as salaries and wages, equipment expense, stationery and supplies are primarily from efficiencies of operations from our restructuring efforts in 2002. The increase of $13.5 million in the other expense category is primarily attributable to higher depreciation expense on software, higher general liability and property insurance, increased charitable contributions and increases in certain administrative costs.
In the nine months ended September 30, 2003, noninterest expense increased $61.1 million, or 10.0% compared to the same period in 2002. The increase in salaries and wages of $16.9 million, or 7.1% in the nine month period ended September 30, 2003 compared to the prior year is attributable to the acquisition of UCB. The increase of $23.6 million in employee benefits is primarily attributable to higher worker’s compensation insurance, higher group healthcare insurance and increased retirement plan expenses. Intangible amortization increased 21.1% in the nine months ended September 30, 2003 from the prior year due to the acquisition of UCB and the additional intangibles acquired. Advertising and promotion expenses were much higher in the nine-month period in the previous year, decreasing $5.5 million, or 22.1% in the current year. This decrease was the result of higher advertising and promotion expenses in 2002 to promote brand recognition and maintain customer base after the acquisition of UCB. Increases in other expenses include certain fees and software depreciation that we incurred this year that were not incurred in 2002 as well as a leveraged lease restructuring charge from the second quarter.
As a result of the consolidation of operations subsequent to the acquisition of UCB, we expect to achieve cost savings of approximately $75 million per year beginning in 2003. These anticipated cost savings primarily involve compensation and occupancy-related expenses.
OPERATING SEGMENT RESULTS
Bank of the West
Regional Bankingsegment’s net income was $30.4 million in the first quarter, compared with $16.6 million for the same period in 2002, an increase of 83%. Net interest income increased by $47.1 million, or 63%, compared with the first quarter of 2002. The increase is primarily due to the UCB acquisition, which added over 100 branches and over $3 billion in loans to the segment. Noninterest income was up $13.3 million, or 52%,remained nearly flat in the three months ended ~~March 31,~~September 30, 2003 from the same period in the prior year at $35.2 million. Net interest income decreased $7.7 million or 5.7% in the third quarter compared to the same period in the
26
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
prior year. Noninterest income increased $2.0 million or 4.9% and noninterest expense decreased $1.5 million or 1.4% this quarter from the quarter ended September 30, 2002. The provision for credit losses decreased $2.5 million or 36.8%.
Net interest income decreased in the third quarter compared to the prior year due to interest rate compression. While average deposits have increased slightly, interest margins have shrunk. Demand deposit accounts margins have also declined. Noninterest income increased due to debit card interchange revenue associated with increased volume usage and an additional MasterCard® product. Noninterest expense decreased in the three month period compared to the prior year due to lower salary and wage expenses this quarter. This decrease in expenses was coupled with savings from the consolidation of branch facilities subsequent to the acquisition of UCB and partially offset by higher employee benefit costs.
For the nine months ended September 30, 2003 net income increased $1.1 million or 1.2% compare to the same period last year. Net interest income increased $14.3 million or 4.0% in the year to date period. Noninterest income increased $17.5 million or 16.6% and noninterest expense increased $32.1 million or 11.0% in the nine months ended September 30, 2003 compared ~~with 2002 primarily due~~ to higher service charges on a larger deposit base, primarily attributable to deposits acquired through UCB, and higher other service charges. Noninterest expense increased by $36.0 million, or 51%, over 2002 primarily due to higher staffing and operating costs associated with the ~~larger branch network discussed above.~~prior year. The provision for credit losses increased ~~by $1.7~~$0.9 million or ~~89%, as~~8.0% in the nine months ended September 30, 2003 compared ~~with 2002.~~to the same period in the prior year.
Net interest income increased in the nine month period ended September 30, 2003 due to the acquisition of UCB branches partially offset by the interest rate compression. Noninterest income has increased due to growth in deposit balances and the debit card interchange revenue from new VISA® and MasterCard® accounts. Noninterest expense increased in the first three quarters of 2003 compared to the prior year due to the acquisition of UCB and increases in employee benefit expenses for group insurance.
Average deposit balances in the nine months ended September 30, 2003 grew approximately 12.3% over last year.
Commercial Bankingsegment’s net income ~~was $35.5 million in the first quarter, compared with $12.9 million for the same period in 2002, an increase of 175%. Net interest income~~ increased ~~by $46.3~~$6.2 million or 147%, compared with the first quarter of 2002 primarily due to a larger average loan balance for the quarter, which is primarily attributable to the UCB acquisition. Noninterest income was up $9.5 million, or 500%,20.1% in the three months ended ~~March 31,~~September 30, 2003 ~~compared with 2002 due to higher service charges on a larger deposit base, due to UCB, and higher other service charges. Noninterest expense increased by $19.4~~from $30.8 million or 185%, over 2002 due to higher operating costs associated with running a larger segment after the UCB acquisition. The provision for Credit Losses decreased by $1 million or 77%, as compared with 2002. A lower provision was required forin the three months ended ~~March 31,~~September 30, 2002 to $37.0 million this year. Net interest income increased $5.0 million or 6.8% in the third quarter compared to the same period in the prior year. Noninterest income increased $4.4 million or 51.2% and noninterest expense increased $0.4 million or 1.4% this quarter from the quarter ended September 30, 2002.
Net interest income increased in the three months ended September 30, 2003 ~~compared with 2002 primarily~~despite a declining interest rate environment that eroded margins on deposits. Margins on loans and leases increased 26 basis point, while average balances grew by 4.5%. Margins on deposits dropped 116 basis points due to lower transfer pricing rates, while average balances grew 20.2%. The increase in loan and lease margins reflects a change in portfolio mix between loans and leases, with higher yielding leases acquired through the ~~recognition~~acquisition of Trinity Capital and UCB acquisition replacing lower yielding loans. The $4.4 million increase in noninterest income was due to higher nonyield loan fees, derivative sales fees, and foreign exchange fees. The provision for credit losses has increased $0.3 million because of the ~~recoveries~~increase in ~~March~~the volume of loans we administer.
Commercial Banking segment’s net income increased $34.9 million or 44.9% in the nine months ended September 30, 2003 from $77.7 million in the ~~arbitration settlement with UFJ.~~nine months ended September 30, 2002 to $112.6 million this year. Net interest income increased $52.0 million or 28.5%. Noninterest income increased $18.2 million or 90.1%. Noninterest expense increased $21.7 million or 32.7%. Provision for credit losses decreased $6.9 million.
Commercial Banking achieved growth in loans, deposits, and net income due to strong performance in SBA, Church Lending, Healthcare, and Cash Management, and the acquisitions of UCB in April 2002 and Trinity Capital in November 2002. Interest margins on loans and leases increased 24 basis points, as higher yielding leases replaced lower yielding loans in the portfolio. Deposit margins decreased 89 basis points due to a declining interest rate environment. Noninterest income growth was driven by the UCB and Trinity acquisitions, nonyield related loan fees and lease servicing, as well as aggressive efforts to sell cash management, derivatives, and foreign exchange services. While the Trinity Capital acquisition increased full-time equivalents (FTE) by 86, FTE in legacy Bank of the West and UCB businesses has declined by 73 from September 2002 to September 2003. Commercial Banking continues to pursue a strategy of leveraging efficiencies gained through the expanded resources resulting from the UCB and Trinity Capital acquisitions, while focusing on niche markets where there is a competitive advantage, such as equipment leasing, SBA loans and Church Lending.
27
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Acquisitions of UCB in April 2002 and Trinity Capital in November 2002 resulted in increases of 22.7% in average loans and 61.0% in average deposits in the nine months ended September 30, 2003. The Commercial Banking Segment continues to pursue a strategy of leveraging efficiencies gained through the expanded resources resulting from the UCB acquisition, while focusing on niche markets where there is competitive advantage, such as equipment leasing, SBA loans and religious lending.
Consumer Financesegment’s net income for the three months ended September 30, 2003 was ~~$14.6~~$16.5 million compared to $14.1 million a year ago. Net interest income in the third quarter 2003 was $53.0 million, compared with $47.7 million for the same period 2002, an increase of 11.1%. Noninterest income increased $0.1 million for the quarter compared to the prior year. Noninterest expense increased from $13.5 million in the ~~first~~three months ended September 30, 2002 to $15.0 million this year, an increase of 11.1%. Our provision for credit allowances also increased 5.4% in the third quarter of this year compared to the third quarter of 2002.
The Consumer Finance Segment remains very competitively priced in the indirect lending market. Noninterest income in the three months ended September 30, 2003 was $2.9 million, compared with ~~$11.3~~$2.8 million for the same period 2002. This increase was primarily due to an increase in loan servicing related fees. Noninterest expense for the third quarter 2003 increased by 11.1% over the same period in 2002. This increase was primarily due to an increase in the cost of employee salaries and benefits. Other expense categories experienced a decrease due to efficiency gains.
Net income for the nine months ended September 30, 2003 was $44.3 million compared to $36.5 million in the same period a year ago. Net interest income for the nine months ended September 30, 2003 was $153.4 million, compared to $132.9 million for the same period in 2002, an increase of ~~29%~~15.4%. ~~Net interest~~Noninterest income increased ~~by $7.9~~11.0% and noninterest expense increased 9.8% in the first three-quarters of 2003 compared to the corresponding period of 2002. The provision for credit losses increased $5.5 million ~~or 19%,~~from $37.7 million in the first three quarters of 2002 to $43.2 million in 2003.
Noninterest income for the nine months ended September 30, 2003 was $9.1 million, compared with $8.2 million for the ~~first quarter of 2002 primarily due to higher loan volume, particularly~~same period in ~~automobile, recreational vehicle and marine lending, and wider margins. Noninterest income~~2002. This increase was ~~up $0.2 million, or 8%, in the three months ended March 31, 2003 compared with 2002~~ primarily due to gains on ~~the sale~~sales of loans through our Essex subsidiary, increases in installment non-yield related loan fees, and ~~extension fees.~~other retail service charges. Noninterest expense for the nine months ended September 30, 2003 increased by ~~$1.1~~$4.1 million ~~or 8%, over 2002~~from the same period 2002. This increase was primarily due to ~~higher~~greater staff and occupancy requirements associated with growth and the UCB acquisition. ~~The provision~~Additionally, increases in the cost of employee benefits and an increase in the use of outside services related to higher production volumes contributed to the higher expenses in 2003.
Average assets for ~~credit losses~~the nine months ended September 30, 2003 were $7.4 billion, compared to $6.5 billion, an increase of $0.9 billion, or 13.5% in the nine months ended September 30, 2002. This increase is due to both the UCB acquisition that took place in 2002 and increased ~~by $1.7 million or 15%, as compared with 2002.~~indirect loan production.
First Hawaiian Bank
Retail Bankingsegment’s net income ~~was $23.4~~for the third quarter ended September 30, 2003 increased $3.6 million, ~~in the first quarter,~~or 17.1% compared ~~with $23.2 million for~~to the same period in ~~2002, an increase of 0.9%.~~2002. Net interest income ~~decreased~~for the third quarter increased by ~~$2.3~~$4.1 million, or ~~3%,~~6.4% compared ~~with~~to the ~~first quarter of 2002. This~~prior year. The increase was primarily due to ~~the transfer of loans to the Commercial Banking Group in April 2002.~~higher commercial loan and mortgage loan fees. Noninterest income ~~was up $1.6 million, or 10%, in~~for the three months ended ~~March 31,~~September 30, 2003 increased by $2.2 million, or 14.0% compared ~~with 2002~~to prior year. The increase was primarily due to higher account analysis fees. Noninterest expense for the third quarter increased by ~~$0.1 million over 2002. The provision for credit losses decreased by $0.5~~$2.3 million, or ~~23%, as~~5.3% compared ~~with 2002.~~
~~Consumer~~~~segment’s net income~~to prior year. The increase was $9.6 million in the first quarter, compared with $6.8 million for the same period in 2002, an increase of 41%. Net interest income increased by $2.5 million, or 14%, compared with the first quarter of 2002 primarily as a result of higher loan volume and a wider margin. Noninterest income was up $3.0 million, or 51%, in the three months ended March 31, 2003 compared with 2002, primarily due to higher ~~merchant service income and higher gains on the sale of loans. Noninterest expense increased by $1.1 million, or 11%, over 2002. The provision~~retirement plan expense. Provision for credit losses ~~increased~~for the third quarter decreased by ~~$0.1~~$0.8 million, or ~~5%, as~~38.1% compared ~~with 2002.~~to prior year.
~~Commercial Banking~~~~segment’s net~~Net income ~~was $5.1 million in the first quarter, compared with $4.0 million~~ for the nine months ended September 30, 2003 increased $4.2 million, or 6.4% compared to the same ~~period~~periods in ~~2002, an increase of 28%.~~2002. Net interest income for nine months ended September 30, 2003 increased ~~by $1.8~~$2.9 million, or ~~31%,~~1.5% compared ~~with the first quarter of 2002 primarily due~~ to ~~the transfer of loans from the Regional Banking Segment, higher volume, a wider margin and beneficial change in the loan mix. Noninterest income~~prior year. The increase was ~~up $0.1 million, or 7%, in the three months ended March 31, 2003 compared with 2002. Noninterest expense increased by $0.5 million, or 31%, over 2002.~~
~~Financial Management~~segment’s net income was $0.4 million in the first quarter, compared with $0.8 million for the same period in 2002, a decrease of 50%. Net interest income did not change from the first quarter of 2002. Noninterest income was down $0.4 million, or 5%, in the three months ended March 31, 2003 compared with 2002. Noninterest expense increased by $0.3 million, or 5%, over 2002 primarily due to higher ~~salaries~~commercial loan and mortgage loan fees. Noninterest income for the nine months ended September 30, 2003 increased by $4.9 million, or 10.5% compared to prior year. The increase was primarily due to higher account analysis fees. Noninterest expense for the nine months ended September 30, 2003 increased $4.2 million or 3.2% compared to prior year. The increase was primarily due to higher retirement plan expense. Provision for credit losses for the year-to-date period ended September 30, 2003 decreased by $1.4 million, or 22.6% compared to prior year.
2128
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ~~(Continued)~~
Consumer segment’s net income for the third quarter ended September 30, 2003 increased $0.7 million, or 8.6% compared to prior year. Net interest income for the third quarter increased by $4.5 million, or 25.0% compared to prior year. The increase was primarily due to higher loan volume and higher interchange and mortgage loan fees. Noninterest income for the third quarter of 2003 decreased $2.4 million, or 30.8%, compared to prior year. The decrease was primarily due to large gains on sales of mortgage loans in August 2002. Noninterest expense for the third quarter increased $1.3 million, or 12.5% compared to prior year. The increase was primarily due to higher incentive compensation, temporary help and higher retirement plan expense. Provision for credit losses in the third quarter of 2003 compared to the same period in the prior year decreased $0.1 million, or 4%.
Net income for the nine months ended September 30, 2003 increased $6.9 million, or 32.2% compared to prior year. Net interest income for the nine months ended September 30, 2003 increased by $10.7 million, or 20.2% compared to prior year. Noninterest income for the nine months ended September 30, 2003 was up $3.5 million, or 18.1%, compared to prior year. The increase was primarily due to higher merchant service income and higher gains on sales of loans. Noninterest expense for the nine months ended September 30, 2003 increased $3.6 million, or 11.7% compared to prior year. The increases were primarily due to higher incentive compensation, temporary help and higher retirement plan expense. There was no change in the provision for credit losses in the first nine months of 2003, compared to prior year.
Commercial Bankingsegment’s net income for the third quarter ended September 30, 2003 increased $2.2 million, or 48.9%, compared to the same periods in 2002. Net interest income for the third quarter increased $0.9 million, or 12.9% compared to the same periods in the prior year. Noninterest income for the three months ended September 30, 2003 increased $1.4 million, or 82.4% over the same periods in the prior year. The large increase was primarily due to the gain on sale of low-income housing projects and equipment in July 2003. Noninterest expense for the third quarter was up $0.1 million, or 5.3% compared to the same periods in the prior year. Provision for credit losses for the third quarter decreased by $0.2 million, or 66.7% compared to prior year.
Net income for the nine months ended September 30, 2003 increased $3.5 million, or 26.5%, compared to prior year. Net interest income for the nine months ended September 30, 2003 increased $2.8 million, or 13.7%, compared to the same periods in the prior year. Noninterest income for the nine months ended September 30, 2003 increased $1.4 million, or 28.6% over the same periods in the prior year. The large increase was primarily due to the gain on sale of low-income housing projects and equipment in July 2003. Noninterest expense for the nine months ended September 30, 2003 was up $0.9 million, or 16.4% compared to the same periods in the prior year. Provision for credit losses for the nine months ended September 30, 2003 decreased by $0.5 million, or 83.3% compared to prior year.
Financial Managementsegment’s net income was $1.1 million for the third quarter of 2003, compared to $0.9 million for the same period in 2002, an increase of 22.2%. Net interest income for the third quarter of 2003 decreased $0.1 million, compared to the same period in the prior year. Noninterest income was up $0.7 million or 9.7%, for the three months ended September 30, 2003, compared to the same period in the prior year. Noninterest expense for the third quarter was up $0.2 million, or 3.4% compared to prior year. The increases were primarily due to higher salaries and retirement plan expense.
Net income for the nine months ended September 30, 2003 was $2.2 million, a decrease of 24.1%, from $2.9 million for the same period in 2002. There was no change in net interest income for the nine months ended September 30, 2003, compared to prior year. Noninterest income was up $0.4 million, or 1.8%, for the nine months ended September 30, 2003, compared to the same period in the prior year. Noninterest expense for the nine months ended September 30, 2003 was up $1.5 million, or 8.5% compared to prior year. The increases were primarily due to higher salaries and retirement plan expense.
29
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INVESTMENT SECURITIES
Available-for-Sale
The fair value of available-for-sale securities at ~~March 31,~~September 30, 2003 increased by approximately ~~$1.4~~$1.7 billion, or ~~43.2%~~45.9%, compared to ~~March 31,~~the value at September 30, 2002 and increased by approximately ~~$621 million,~~$1.5 billion, or ~~15.9%~~37.3%, compared to December 31, 2002. ~~These increases are primarily attributable~~While we still continue to originate and purchase loans, we have increased our purchases of investment securities as the ~~purchase of asset-backed securities, mortgage securities~~slow economy has not been conducive to significant loan originations.
The following table provides the cost and ~~securities issued by government-sponsored agencies, including~~fair value for the ~~Government National Mortgage Association (GNMA) and the Federal National Mortgage Association (FNMA). The purchase~~major components of securities ~~issued directly by the U.S. Treasury and other governmental agencies and corporations also contributed to the increase.~~available for sale carried at fair value.

September 30, 2003 December 31, 2002 September 30, 2002

Estimated Estimated Estimated
fair fair fair
Cost value Cost value Cost value

(in thousands)
Securities of U.S. Treasury and federal agencies: $ 1,463,688 $ 1,479,594 $ 1,312,430 $ 1,338,310 $ 1,096,605 $ 1,119,443
Securities of U.S. states and political subdivisions 15,601 15,824 14,920 15,025 15,008 15,117
Mortgage-backed securities:
Federal and federally sponsored agencies 2,175,235 2,179,420 1,366,656 1,403,374 1,366,803 1,402,292
Private collateralized mortgage obligations 880,570 875,807 447,176 453,331 530,223 539,719

Total mortgage-backed securities 3,055,805 3,055,227 1,813,832 1,856,705 1,897,026 1,942,011

Total debt securities 4,535,094 4,550,645 3,141,182 3,210,040 3,008,639 3,076,571
Equity securities 852,533 861,724 719,115 730,729 622,756 631,902

Total $ 5,387,627 $ 5,412,369 $ 3,860,297 $ 3,940,769 $ 3,631,395 $ 3,708,473

The following table presents the amortized cost, unrealized gains and losses and fair values of available-for-sale investment securities as of the dates indicated:

March 31, December 31, March 31, September 30, December 31, September 30,
2003 2002 2002 2003 2002 2002

(in thousands) (in thousands)
Amortized cost $ 4,451,712 $ 3,860,297 $ 3,152,914 $ 5,387,627 $ 3,860,297 $ 3,631,395
Unrealized gains 78,957 82,838 20,834 55,922 82,838 79,265
Unrealized losses (2,185 ) (2,366 ) (11,826 ) (31,180 ) (2,366 ) (2,187 )

Fair value $ 4,528,484 $ 3,940,769 $ 3,161,922 $ 5,412,369 $ 3,940,769 $ 3,708,473

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 three and nine months ended ~~March 31,~~September 30, 2003 and 2002 were as follows:

Three months Ended Nine months Ended
September 30, September 30,

2003 2002 2003 2002 2003 2002

(in thousands) (in thousands)
Realized gains $ 1,892 $ 241 $ 555 $ 402 $ 3,913 $ 1,124
Realized losses — (13 ) — (120 ) — (158 )

Securities gains, net $ 1,892 $ 228 $ 555 $ 282 $ 3,913 $ 966

2230
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,~~September 30, 2003, December 31, 2002 and ~~March 31,~~September 30, 2002:

March 31, 2003 December 31, 2002 March 31, 2002 September 30, 2003 December 31, 2002 September 30, 2002

Amount % Amount % Amount % Amount % Amount % Amount %

(dollars in thousands) (dollars in thousands)
Commercial, financial and agricultural Commercial, financial and agricultural $ 4,636,502 19.3 % $ 4,802,581 19.9 % $ 5,079,888 21.1 % Commercial, financial and agricultural $ 4,446,197 17.6 % $ 4,802,581 19.9 % $ 4,764,805 19.8 %
Real estate: Real estate: Real estate:
Commercial 4,871,097 20.3 4,806,220 19.9 4,846,071 20.1 Commercial 5,023,284 19.9 4,806,220 19.9 4,785,058 19.9
Construction 944,222 3.9 971,861 4.0 1,161,303 4.8 Construction 919,115 3.6 971,861 4.0 1,042,011 4.3
Residential: Residential:
Insured, guaranteed or conventional 3,850,906 16.0 4,022,810 16.7 3,767,094 15.7 Insured, guaranteed or conventional 4,326,332 17.1 4,022,810 16.7 4,241,750 17.6
Home equity credit lines 716,949 3.0 726,535 3.0 1,046,134 4.3 Home equity credit lines 705,736 2.8 726,535 3.0 718,143 3.0

Total real estate loans 10,383,174 43.2 10,527,426 43.6 10,820,602 44.9 Total real estate loans 10,974,467 43.4 10,527,426 43.6 10,786,962 44.8

Consumer Consumer 6,305,507 26.2 6,021,510 25.0 5,458,094 22.7 Consumer 7,124,576 28.2 6,021,510 25.0 5,858,098 24.3
Lease financing Lease financing 2,344,341 9.7 2,398,681 9.9 2,326,056 9.7 Lease financing 2,365,395 9.4 2,398,681 9.9 2,272,232 9.5
Foreign Foreign 386,743 1.6 395,889 1.6 386,027 1.6 Foreign 353,902 1.4 395,889 1.6 389,592 1.6

Total loans and leases 24,056,267 100.0 % 24,146,087 100.0 % 24,070,667 100.0 % Total loans and leases 25,264,537 100.0 % 24,146,087 100.0 % 24,071,689 100.0 %

Less allowance for credit losses Less allowance for credit losses 396,049 384,081 383,003 Less allowance for credit losses 390,194 384,081 385,190

Total net loans and leases $ 23,660,218 $ 23,762,006 $ 23,687,664 Total net loans and leases $ 24,874,343 $ 23,762,006 $ 23,686,499

Total loans and leases to: Total loans and leases to: Total loans and leases to:
Total assets 68.9 % 69.5 % 72.2 % Total assets 67.5 % 69.5 % 70.3 %
Total earning assets 83.2 % 84.5 % 87.2 % Total earning assets 80.1 % 84.3 % 84.4 %
Total deposits 98.8 % 98.3 % 99.9 % Total deposits 97.5 % 98.3 % 98.8 %
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 ~~slight decrease~~$1.2 billion, or 5.0% increase in total loans and leases ~~as of March 31, 2003, as~~from September 30, 2002 and a $1.1 billion, or 4.6% increase compared to December 31, 2002.
When comparing the current period to December 31, 2002 ~~decreases of $166 million in Commercial lending and $144 million in Real Estate loans were substantially offset by~~there was an increase of ~~$284 million~~$1.1 billion, or ~~4.7 percent~~18.3% in ~~Consumer loans. When comparing~~consumer loans due to continued strength in the current period to March 31, 2002, decreases of $443 million in Commercial lending and $437 million in Real Estate loans were substantially offset by an increase of $847 million or 15.5% in Consumer loans.consumer market. Consumer loans consist primarily of direct and indirect automobile, recreational vehicle, marine, credit card and unsecured financing.
~~Our Foreign loans are principally in Guam and Saipan. Foreign loans as~~ This increase was partially offset by a decrease of ~~March 31, 2003 decreased $9.1~~$356.4 million or ~~2.3%~~7.4%, in commercial lending resulting from ~~December 31,~~run off. Total real estate loans increased primarily due to the origination of commercial real estate loans and the purchase of approximately $935 million in residential loans which was substantially offset by run off due to refinancing of residential real estate loans with other institutions.
When comparing the current period to September 30, 2002 ~~and~~consumer loans increased ~~$716 thousand,~~by $1.3 billion, or ~~0.2%~~21.6%, ~~over March 31, 2002.~~due to the continued strength in the consumer market. This increase was partially offset by a decrease of $318.6 million, or 6.7%, in commercial lending.
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,~~September 30, 2003, we did not have a concentration of loans greater than 10% of total loans which is not otherwise disclosed as a category of loans as shown in the table above.
23Off-balance-sheet commitments were as follows at September 30, for the years indicated:

Notional/Contract Amount

2003 2002

(in thousands)
Contractual amounts which represent credit risk:
Commitments to extend credit $ 7,741,817 $ 7,893,668
Standby letters of credit 792,910 821,844
Commercial letters of credit 69,751 77,047
31
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ~~(Continued)~~
~~Off-balance-sheet commitments were as follows at March 31, for the years indicated:~~

Notional/Contract Amount
2003 2002

(in thousands)
Contractual Amounts Which Represent Credit Risk:
Commitments to extend credit $ 7,313,461 $ 8,883,179
Standby letters of credit 806,596 788,565
Commercial letters of credit 78,294 56,773
NONPERFORMING ASSETS AND RESTRUCTURED LOANS
Nonperforming assets and restructured loans at ~~March 31,~~September 30, 2003, December 31, 2002 and ~~March 31,~~September 30, 2002 ~~are~~were as follows:

March 31, December 31, March 31, September 30, December 31, September 30,
2003 2002 2002 2003 2002 2002

(dollars in thousands) (dollars in thousands)
Nonperforming Assets: Nonperforming Assets: Nonperforming Assets:
Nonaccrual:
Commercial, financial and agricultural $ 129,248 $ 145,222 $ 151,028
Real estate:
Commercial 51,185 47,377 45,043
Construction — — 3,000
Residential:
Insured, guaranteed, or conventional 7,909 5,460 12,094

Total real estate loans 59,094 52,837 60,137

Consumer 4,459 4,769 3,919
Lease financing 13,527 11,532 9,900
Foreign 8,758 10,088 3,968

Nonaccrual:
Total nonaccrual loans and leases 215,086 224,448 228,952 Commercial, financial and agricultural $ 89,698 $ 145,920 $ 177,988

Real estate:
Restructured: Commercial 40,694 48,071 46,720
Commercial, financial and agricultural 693 698 1,502 Residential:
Real estate: Insured, guaranteed, or conventional 8,132 5,460 8,223
Commercial 667 694 1,094

Residential: Total real estate loans 48,826 53,531 54,943
Insured, guaranteed, or conventional — — —

Consumer 2,083 4,769 3,175
Total real estate loans 667 694 1,094 Lease financing 12,047 11,532 8,937

Foreign 7,210 10,088 9,069
Total restructured loans and leases 1,360 1,392 2,596

Total nonaccrual loans and leases 159,864 225,840 254,112
Total nonperforming loans and leases 216,446 225,840 231,548

Other real estate owned and repossessed personal property 18,545 19,613 24,393 Other real estate owned and repossessed personal property 19,237 19,613 15,523

Total nonperforming assets $ 234,991 $ 245,453 $ 255,941 Total nonperforming assets $ 179,101 $ 245,453 $ 269,635

Past due loans and leases⁽¹⁾:
Past due loans and leases⁽¹⁾:

Past due loans and leases⁽¹⁾:

Commercial, financial and agricultural $ 11,387 $ 9,005 $ 17,432 Commercial, financial and agricultural $ 15,792 $ 9,005 $ 9,591
Real estate: Real estate:
Commercial 5,613 2,952 1,192 Commercial 6,226 2,952 8,142
Construction 907 — 2,217 Residential:
Residential: Insured, guaranteed, or conventional 1,499 5,082 3,263
Insured, guaranteed, or conventional 2,046 5,082 2,347 Home equity credit lines 334 661 685
Home equity credit lines 737 661 160

Total real estate loans 8,059 8,695 12,090
Total real estate loans 9,303 8,695 5,916

Consumer 2,536 1,984 2,214
Consumer 1,792 1,984 2,603 Lease financing 72 232 113
Foreign 213 1,181 3,176

Total past due loans and leases $ 26,672 $ 21,097 $ 27,184

Accruing Restructured Loans: Accruing Restructured Loans:
Commercial, financial and agricultural $ 33 $ 69 $ 74
Real estate:
Commercial 1,637 4,570 4,615

Total real estate loans 1,637 4,570 4,615

Total accruing restructured loans and leases $ 1,670 $ 4,639 $ 4,689

Nonperforming assets to total loans and leases and other real estate owned and repossessed personal property (end of period): Nonperforming assets to total loans and leases and other real estate owned and repossessed personal property (end of period):
Excluding past due loans and leases 0.71 % 1.02 % 1.12 %
Including past due loans and leases 0.81 % 1.10 % 1.23 %
Nonperforming assets to total assets (end of period): Nonperforming assets to total assets (end of period):
Excluding past due loans and leases 0.48 % 0.71 % 0.79 %
Including past due loans and leases 0.55 % 0.77 % 0.87 %
24
(1) Represents loans and leases which are past due 90 days or more as to the principal and/or interest, are still accruing interest and are adequately collateralized and in the process of collection.
32
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ~~(Continued)~~

March 31, December 31, March 31,
2003 2002 2002

(dollars in thousands)
Lease financing 393 232 84
Foreign 563 1,181 4,291

Total past due loans and leases $ 23,438 $ 21,097 $ 30,326

Nonperforming assets to total loans and leases and other real estate owned and repossessed personal property (end of period):
Excluding past due loans and leases 0.98 % 1.02 % 1.06 %
Including past due loans and leases 1.07 % 1.10 % 1.19 %
Nonperforming assets to total assets (end of period):
Excluding past due loans and leases 0.67 % 0.71 % 0.77 %
Including past due loans and leases 0.74 % 0.77 % 0.86 %
~~(1)~~ ~~Represents loans and leases which are past due 90 days or more as to principal and/or interest, are still accruing interest and are adequately collateralized and in the process of collection.~~
Nonperforming assets at ~~March 31,~~September 30, 2003 were ~~$235~~$179.1 million, or ~~0.98%~~0.71%, of total loans and leases and other real estate owned (“OREO”), and repossessed personal property, ~~(“OREO”),~~ compared to 1.02% at December 31, 2002 and ~~1.06%~~1.12% at ~~March 31,~~September 30, 2002. Nonperforming assets at ~~March 31,~~September 30, 2003 were ~~0.67%~~0.48% of total assets, compared to 0.71% at December 31, 2002 and ~~0.77%~~0.79% at ~~March 31,~~September 30, 2002.
Nonperforming assets at ~~March 31,~~September 30, 2003 decreased by ~~$10~~$66.4 million, or ~~4.3%~~27.0%, from December 31, 2002. The decrease in nonaccrual loans was primarily due to resolution of problem relationships in commercial lending, partially offset by increases in nonaccrual real estate loans. Nonperforming assets at March 31, 20032002 and decreased by ~~$21~~$90.5 million, or ~~8.2%~~33.6%, from ~~March 31,~~September 30, 2002. ~~The decrease was primarily attributable to decreases in nonaccrual~~Nonaccrual loans for commercial, financial and agricultural lending decreased $56.2 million or 38.5% from December 31, 2002 and decreased $88.3 million or 49.6% from the same period last year. Total real estate loans ~~which~~have decreased $4.7 million or 8.8% since December 31, 2002 and $6.1 million or 11.1% since September 30, 2002. Within the nonaccrual real estate loans category, decreases in commercial real estate loans of $7.4 million or 15.3% from December 31, 2002 were partially offset by increases in nonaccrual residential real ~~estate-commercial~~estate loans of $2.7 million or 48.9%. Total nonaccrual loans and ~~lease financing.~~ leases decreased $66.0 million, or 29.2% since December 31, 2002 and $94.2 million, or 37.1% since September 30, 2002. These decreases resulted from the resolution of problem relationships.
Foreign nonperforming ~~assets~~loans decreased at ~~March 31,~~September 30, 2003 by $1$2.9 million, or ~~13.2%~~28.5% from December 31, 2002 ~~but increased~~and by $5$1.9 million, or ~~120.7%~~20.5% from ~~March 31, 2002, primarily due to loans in Guam. However, our~~September 30, 2002. Our overall foreign loan portfolio, composed primarily of loans in Guam and Saipan, represents a relatively small component ~~(1.6%)~~1.4% of our total loan portfolio at ~~March 31,~~September 30, 2003.
We generally place a loan or lease on nonaccrual status when we believe that collection of principal or interest has become doubtful or when loans and leases are 90 days past due as to principal or interest, unless they are well secured and in the process of collection. We may make an exception to the general 90-day-past-due rule when the fair value of the collateral exceeds our recorded investment in the ~~loan or when other factors indicate that the borrower will shortly bring the loan current.~~loan.
While the majority of consumer loans and leases are subject to our general policies regarding nonaccrual loans, certain past-due consumer loans and leases are not placed on nonaccrual status because they are charged off upon reaching a predetermined delinquency status varying from 120 to 180 days, depending on product type.
When we place a loan or lease on nonaccrual status, previously accrued and uncollected interest is reversed against interest income of the current period. When we receive a cash interest payment on a nonaccrual loan, we apply it as a reduction of the principal balance when we have doubts about the ultimate collection of the principal. Otherwise, we record such payments as income.
Nonaccrual loans and leases are generally returned to accrual status when they: (1) become current as to principal and interest and have demonstrated a sustained period of payment performance or (2) become both well secured and in the process of collection.
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 ~~$23~~$26.7 million at ~~March 31,~~September 30, 2003 an increase of $2$5.6 million, or ~~11.1%~~26.4%, from December 31, 2002 ~~but~~and a decrease of $7$0.5 million, or ~~22.7%~~1.9%, from ~~March 31,~~September 30, 2002. The increase at ~~March 31,~~September 30, 2003 compared to December 31, 2002 was primarily due to ~~real estate-commercial and~~ commercial, financial and agricultural ~~loans.~~lending which increased $6.8 million or 75.4% from December 31, 2002 and real estate-commercial loans which increased $3.3 million or 110.9%. These increases were partially offset by decreases in residential real estate loans of $3.6 million or 70.5% from December 31, 2002 and decreases in foreign loans of $1.0 million or 82.0% from December 31, 2002. The decrease at ~~March 31,~~September 30, 2003 compared to ~~March 31,~~September 30, 2002 was primarily due to real estate loans that decreased $4.0 million or 33.3% and foreign loans that decreased $3.0 million or 93.3% from last year, partially offset by commercial, financial and agricultural ~~and foreign~~ loans ~~partially offset by real estate-commercial loans.~~which increased $6.2 million or 64.7% from last year. 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.
2533
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ~~(Continued)~~
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The following table sets forth the activity in the allowance for credit losses for the periods indicated:

Three Months Ended Three Months Ended Nine Months Ended
March 31, September 30, September 30,

2003 2002 2003 2002 2003 2002

(dollars in thousands) (dollars in thousands)
Loans and leases outstanding (end of period) Loans and leases outstanding (end of period) $ 24,056,267 $ 24,070,667 Loans and leases outstanding (end of period) $ 25,264,537 $ 24,071,689 $ 25,264,537 $ 24,071,689

Allowance for credit losses: Allowance for credit losses: Allowance for credit losses:
Balance at beginning of period $ 384,081 $ 194,654

Balance at beginning of period $ 391,518 $ 387,272 $ 384,081 $ 194,654
Allowance purchased — 210,000 Allowance purchased — — — 210,000
Loans and leases charged off: Loans and leases charged off:
Commercial, financial and agricultural 9,257 28,685 Commercial, financial and agricultural 13,344 16,512 33,213 49,956
Real estate: Real estate:
Commercial 123 66 Commercial 216 1,970 1,270 3,604
Residential 370 394 Residential 161 241 757 950
Consumer 15,303 12,875 Consumer 12,658 11,469 41,769 30,440
Lease financing 6,083 6,033 Lease financing 5,833 5,017 18,930 22,294
Foreign 841 475 Foreign 537 647 1,896 1,515

Total loans and leases charged off 31,977 48,528 Total loans and leases charged off 32,749 35,856 97,835 108,759

Recoveries on loans and leases previously charged off: Recoveries on loans and leases previously charged off: Recoveries on loans and leases previously charged off:
Commercial, financial and agricultural 16,432 2,724 Commercial, financial and agricultural 2,156 2,912 23,017 6,413
Real estate: Real estate:
Commercial 91 130 Commercial 87 82 288 328
Construction 34 220 Construction 34 17 98 271
Residential 296 202 Residential 256 122 864 538
Consumer 2,747 2,191 Consumer 2,986 2,749 8,897 6,890
Lease financing 1,543 1,252 Lease financing 1,648 1,457 4,642 5,244
Foreign 112 151 Foreign 113 135 447 402

Total recoveries on loans and leases previously charged off 21,255 6,870 Total recoveries on loans and leases previously charged off 7,280 7,474 38,253 20,086

Net charge-offs (10,722 ) (41,658 ) Net charge-offs (25,469 ) (28,382 ) (59,582 ) (88,673 )

Provision for credit losses 22,690 20,007 Provision for credit losses 24,145 26,300 65,695 69,209

Balance at end of period $ 396,049 $ 383,003 Balance at end of period $ 390,194 $ 385,190 $ 390,194 $ 385,190

Net loans and leases charged off to average loans and leases Net loans and leases charged off to average loans and leases 0.18 %⁽¹⁾ 1.00 %⁽¹⁾ Net loans and leases charged off to average loans and leases 0.40 %⁽¹⁾ 0.47 %⁽¹⁾ 0.32 %⁽¹⁾ 0.55 %⁽¹⁾
Net loans and leases charged off to allowance for credit losses Net loans and leases charged off to allowance for credit losses 10.83 %⁽¹⁾ 44.11 %⁽¹⁾ Net loans and leases charged off to allowance for credit losses 25.90 %⁽¹⁾ 29.23 %⁽¹⁾ 20.42 %⁽¹⁾ 30.78 %⁽¹⁾
Allowance for credit losses to total loans and leases (end of period) Allowance for credit losses to total loans and leases (end of period) 1.65 % 1.59 % Allowance for credit losses to total loans and leases (end of period) 1.54 % 1.60 % 1.54 % 1.60 %
Allowance for credit losses to nonperforming loans and leases (end of period): Allowance for credit losses to nonperforming loans and leases (end of period): Allowance for credit losses to nonperforming loans and leases (end of period):
Excluding 90 days past due accruing loans and leases 1.83 x 1.65 x Excluding 90 days past due accruing loans and leases 2.44 x 1.52 x 2.44 x 1.52 x
Including 90 days past due accruing loans and leases 1.65 x 1.46 x Including 90 days past due accruing loans and leases 2.09 x 1.37 x 2.09 x 1.37 x
⁽¹⁾ ~~Annualized.~~
26
~~BancWest Corporation and Subsidiaries~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
~~CONDITION AND RESULTS OF OPERATIONS (Continued)~~
~~PROVISION AND ALLOWANCE FOR CREDIT LOSSES, Continued~~
Annualized.
The ~~provision~~allowance for credit losses for the first ~~three~~nine months of 2003 was ~~$22.7~~$390.2 million, an increase of ~~$2.7~~$5.0 million, or ~~13.4%~~1.3%, compared to the same period in 2002. The provision for credit losses is based upon our judgment as to the adequacy of the allowance for credit 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 credit 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.
34
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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:
•
Setting Underwriting and Grading Standards.Our loan grading system utilizes ten different principal risk categories where “1” is “no risk” and “10” is “loss.” Risk parameters are established so that 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 real estate-construction (which accounted for only ~~3.9%~~3.6% of total loans and leases at ~~March 31,~~September 30, 2003), as well as Hawaiian commercial real estate and agricultural loans.

•
Reduced Participation in Syndicated National ~~Credits.~~Credits. We are in the process of exiting from the syndicated national credit and media finance areas. At ~~March 31,~~September 30, 2003, the ratio of nonperforming shared national credits and media finance loans to total shared national credits and media finance loans outstanding was ~~13.4%.~~5.1%

•
Emphasis on High Quality 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 experience. We generally do not participate in subprime lending activities. We also seek to reduce our exposures where feasible by obtaining third-party insurance or similar protections. For example, in our vehicle lease portfolio (which represents approximately ~~59%~~55.4% of our lease financing portfolio and ~~16%~~13.8% of our combined lease financing and consumer loans at ~~March 31,~~September 30, 2003), we obtain third-party insurance for the estimated residual value of the leased vehicle.
27
~~BancWest Corporation and Subsidiaries~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
~~CONDITION AND RESULTS OF OPERATIONS (Continued)~~
~~PROVISION AND ALLOWANCE FOR CREDIT LOSSES, Continued~~
~~Charge-offs~~Net charge-offs were ~~$32.0~~$59.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2003, a decrease of ~~$16.6~~$29.1 million, or ~~34.1%~~32.8%, ~~over~~from the same period in 2002. Charge-offs were higher in the ~~three~~nine months ended ~~March 31,~~September 30, 2002 primarily due to charge-offs required in late March 2002 on the UCB portfolio. These charge-offs were contested with UFJ and settlement, resulting in $13.6 million of recoveries, was reached ~~this~~in the first quarter, as discussed in ~~note 2.~~Item 1, Note 2 (Mergers and Acquisitions).
For the ~~three~~nine months ended ~~March 31,~~September 30, 2003, recoveries increased by ~~$14.4~~$18.2 million, or ~~209.4%~~90.4%, compared to the same period in 2002. The increase in recoveries was primarily in commercial, financial and agricultural loans, due to the settlement with UFJ discussed above.
Net charge-offs for the ~~three~~nine months ended ~~March 31,~~September 30, 2003 were ~~0.18%~~0.32% of average loans and leases (annualized) compared to ~~1.00%~~0.55% (annualized) for the same period in 2002.
The Allowance increased to ~~1.83~~2.44 times nonperforming loans and leases (excluding 90 days or more past due accruing loans and leases) at ~~March 31,~~September 30, 2003 from ~~1.65~~1.52 times at ~~March 31,~~September 30, 2002. ~~The increase in the ratio is principally due to a decrease in nonperforming loans and leases and the higher allowance resulting from $13.6 million of recoveries recognized from the UFJ settlement.~~
In our judgment, the Allowance was adequate to absorb losses inherent in the loan and lease portfolio at ~~March 31,~~September 30, 2003. 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.
35
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
DEPOSITS
Deposits are the largest component of our total liabilities and account for ~~the greatest~~a significant portion of total interest expense. At ~~March 31,~~September 30, 2003, total deposits were ~~$24.3~~$25.9 billion, ~~a decrease~~an increase of 1%5.6% from December 31, 2002, and an increase of 1%6.4% over ~~March 31,~~September 30, 2002. The increase was primarily due to the growth in our customer deposit base and various deposit product programs that we initiated.
During the 12-month period from ~~April~~October 1, 2002 to ~~March 31,~~September 30, 2003, the benchmark federal funds rate was decreased by 5075 basis points contributing to lower interest rates on deposits.
~~INCOME TAXES~~
~~Our effective income tax rate (exclusive of the tax equivalent adjustment) for the three months ended March 31, 2003 was 38.8%, as compared to 39.4% for the same period in 2002.~~
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. We obtain short-term asset-based liquidity through our investment securities portfolio and short-term investments that 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 and investment securities. Such assets represented ~~18.4%~~20.2% of total assets at ~~March 31,~~September 30, 2003, compared to ~~17.7%~~17.8% at December 31, 2002 and 16.6% at September 30, 2002.
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 or securitized, such as consumer and mortgage loans. We obtain short-term liability-based liquidity primarily from deposits. Average total deposits for the three months ended ~~March 31,~~September 30, 2003 were ~~$24.1~~$25.4 billion, compared to $22.3 billion for the year ended December 31, 2002. Average total deposits funded ~~70%~~69.3% of average total assets for the ~~three~~nine months ended ~~March 31,~~September 30, 2003 and ~~71%~~71.0% for the year ended December 31, 2002.
28
~~BancWest Corporation and Subsidiaries~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
~~CONDITION AND RESULTS OF OPERATIONS (Continued)~~
We also obtain short-term liquidity from ready access to regional and national wholesale funding sources, including issuing our own certificates of deposit, purchasing federal funds, selling securities under agreements to repurchase, arranging lines of credit from other banks and obtaining credit facilities from the Federal Home Loan Banks. ~~Additional information on short-term borrowings is provided in Note 10 to the Consolidated Financial Statements on pages 55 and 56 of our 2002 Annual Report on Form 10-K.~~ 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.
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 and the ability to obtain resources from BNP Paribas.
29
~~BancWest Corporation and Subsidiaries~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
~~CONDITION AND RESULTS OF OPERATIONS (Continued)~~
CAPITAL
Stockholder’s equity increased to ~~$3,969 million~~$4.2 billion at ~~March 31,~~September 30, 2003 from ~~$3,867 million~~$3.9 billion at December 31, 2002, an increase of ~~$102~~$290.0 million, or ~~2.6%~~7.5%. Stockholder’s equity at ~~March 31,~~September 30, 2003 increased as compared to ~~March 31,~~September 30, 2002 by ~~$304~~$225.7 million, or ~~8.3%~~5.7%. The increase ~~between March 31, 2003 and~~from December 31, 2002 to September 30, 2003 was primarily due to net income earned by the Company during the ~~three-month~~nine-month period. The increase ~~between March 31,2003 and March 31,~~from September 30, 2002 to September 30, 2003 was primarily due to net income earned during the twelve month period and ~~unrealized gains on investment securities and cash flow hedge derivatives. These increases were partially~~ offset by a ~~$167~~$167.0 million adjustment to properly reflect BNP Paribas’ accounting basis in BancWest following its purchase on December 19, 2001 of the remaining 55% of outstanding voting stock it did not already own. This adjustment, ~~is reflected~~recognized in the fourth quarter of 2002, was recorded as a decrease in the “surplus” category of the Company’s stockholder’s equity.
36
BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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,~~September 30, 2003 are set forth below:

To Be Well
Capitalized
Under Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

Tier 1 Capital to Risk-Weighted Assets:
Bank of the West $ 2,219,050 10.29 % $ 862,290 4.00 % $ 1,293,435 6.00 %
First Hawaiian 762,652 11.66 261,661 4.00 392,491 6.00
Total Capital to Risk-Weighted Assets:
Bank of the West $ 2,714,230 12.59 % $ 1,724,580 8.00 % $ 2,155,725 10.00 %
First Hawaiian 918,808 14.05 523,321 8.00 654,152 10.00
Tier 1 Capital to Average Assets:
Bank of the West $ 2,219,050 9.48 % $ 936,225 4.00 % $ 1,170,281 5.00 %
First Hawaiian 762,652 9.38 325,076 4.00 406,345 5.00

To Be Well
Capitalized
Under Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

Tier 1 Capital to Risk-Weighted
Assets:
Bank of the West $ 2,393,456 10.56 % $ 906,245 4.00 % $ 1,359,368 6.00 %
First Hawaiian 820,493 12.51 262,282 4.00 393,423 6.00
Total Capital to Risk-Weighted
Assets:
Bank of the West $ 2,901,978 12.81 % $ 1,812,490 8.00 % $ 2,265,613 10.00 %
First Hawaiian 975,535 14.88 524,563 8.00 655,704 10.00
Tier 1 Capital to Average
Assets:
Bank of the West $ 2,393,456 9.36 % $ 1,023,169 4.00 % $ 1,278,961 5.00 %
First Hawaiian 820,493 9.68 339,159 4.00 423,948 5.00
We elected to become a financial holding company concurrent with the BNP Paribas acquisition. 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~~our 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.
30
~~BancWest Corporation and Subsidiaries~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
~~CONDITION AND RESULTS OF OPERATIONS (Continued)~~
~~SPECIAL PURPOSE ENTITIES~~
A special purpose entity (“SPE”) is a separate legal entity created by a sponsor to carry out a specified purpose. We are involved in three special purpose entities: BWE Trust and FH Trust are both fully consolidated subsidiaries of BancWest Corporation. The purpose of these entities is to allow for the issuance of capital securities that qualify for inclusion in Tier 1 regulatory capital. We have issued to BWE Trust and FH Trust junior subordinated deferrable interest debentures in return for either capital securities, which we then issued to the public, in the case of BWE Trust, or the proceeds from capital securities that were issued from FH Trust. We report the debt issued to BWE Trust and FH Trust on our Consolidated Balance Sheets as “Guaranteed preferred beneficial interests in Company’s junior subordinated debentures.” We include the interest payments related to these debentures on our Consolidated Statements of Income and Consolidated Statements of Cash Flows as interest expense on long-term debt.
REFIRST, Inc. is an SPE that was created by a nonrelated third party to construct, finance and hold title to our administrative headquarters building in Honolulu, First Hawaiian Center (“FHC”). We entered into a noncancelable operating lease for FHC with REFIRST, Inc. that terminates on December 1, 2003. Under current accounting guidance, we do not need to consolidate REFIRST, Inc. into our Consolidated Financial Statements. However, generally accepted accounting principles regarding the consolidation of REFIRST, Inc. into our Consolidated Financial Statements are set to change upon the implementation in July 2003 of FASB Interpretation No. 46 (“FIN No. 46”), “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51.” FIN No. 46 establishes new guidance on the accounting and reporting for the consolidation of variable interest entities. The principal objective of FIN No. 46 is to require the primary beneficiary of a variable interest entity to consolidate the variable interest entity’s assets, liabilities and results of operations in the entity’s own financial statements. Accordingly, FIN No. 46 requires the consolidation of REFIRST, Inc. Upon implementation of FIN No. 46, FHC and the related notes and equity for its financing will be included in our Consolidated Balance Sheets. In addition, the depreciation expense of FHC and interest expense on the financing will be included on our Consolidated Statements of Income and Consolidated Statements Cash Flows on a prospective basis. The provisions of FIN No. 46 require us to record a cumulative effect of an accounting change upon its implementation. The amount of such cumulative effect has not been quantified. We have communicated to FHC’s owners our intent to purchase it at the end of the lease term for a purchase price of approximately $194 million, which is equal to the outstanding notes and equity. For the three months ended March 31, 2003, we recorded approximately $1.9 million in occupancy expense for the lease of FHC.
3137
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
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 our 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.
The Asset/Liability Committees of the Company and ~~its~~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. ~~Other than~~Derivatives entered into for trading purposes include commitments to purchase and sell foreign currencies and mortgage-backed securities ~~and~~as well as certain interest ~~rates~~rate swaps and ~~options, interest rate derivatives are not entered into for trading purposes.~~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 models ~~its~~our net interest income in order to quantify ~~its~~our 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 ~~100~~a 50 basis-point ~~increments.~~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 on 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, swaptions, 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~~(flat rate ~~scenario”)~~scenario) to determine the level of interest rate risk at that time.
The projected impact of ~~100 basis-point~~ incremental increases and ~~decreases~~a 50 basis-point decrease in interest rates on the Company’s consolidated net interest income over the 12 months beginning ~~April 1, 2003 and January~~October 1, 2003 is shown below:

(dollars in millions) + 3% +2% +1% Flat -1% + 3% +2% +1% Flat -0.5%

April 1, 2003
Net Interest Income $ 1,305.2 $ 1,299.2 $ 1,289.1 $ 1,278.3 $ 1,244.3
October 1, 2003
Net interest income $ 1,276.8 $ 1,285.2 $ 1,290.5 $ 1,302.9 $ 1,295.6
Difference from flat 26.9 20.9 10.8 — (34.0 ) (26.1 ) (17.7 ) (12.4 ) — (7.3 )
% variance 2.1 % 1.6 % 0.8 % — % (2.7 )% (2.0 )% 1.4 % (1.0 )% — % (0.6 )%
January 1, 2003
Net Interest Income $ 1,308.2 $ 1,303.3 $ 1,294.3 $ 1,280.6 $ 1,246.3
Difference from flat 27.6 22.7 13.7 — (34.3 )
% variance 2.2 % 1.8 % 1.1 % — % (2.7 )%
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 benchmark rates.
32
~~BancWest Corporation and Subsidiaries~~
~~QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)~~
~~SIGNIFICANT ASSUMPTIONS UTILIZED AND INHERENT LIMITATIONS~~Significant Assumptions Utilized And Inherent Limitations
The net interest income changes for each interest rate scenario presented above include assumptions based on accelerating or decelerating mortgage and installment 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~~is based upon analyses of customers’ historic 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
38
BancWest Corporation and Subsidiaries
QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (continued)
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.
3339
BancWest Corporation and Subsidiaries
CONTROLS AND PROCEDURES
Item 4. Controls and Procedures
~~Within~~As of the ~~90 days prior to~~end of the period covered by 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.~~13a-15. 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.
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.
~~Item 6.~~ ~~Exhibits and Reports on Form 8-K~~

~~The~~(a) Exhibits ~~listed below are filed or incorporated by reference as part of this Report.~~

~~(a) Exhibits~~
              12 Statement regarding computation of ratios.

             31 Section 302 Certifications

             32 Section 1350 Certifications
(b)  Reports on Form 8-K ~~None.~~On July 17, 2003, the Company filed a Report on Form 8-K that provided information under Items 7 and 9 concerning the Company’s financial results for the year-to-date and quarter ended June 30, 2003.
3440
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 14,~~November 11, 2003 By ~~/s/~~    /s/ Douglas C. Grigsby

(Douglas C. Grigsby
Executive Vice President, Chief
Financial Officer and Treasurer
(principal financial officer)
35
~~CERTIFICATION~~
~~I, Walter A. Dods, Jr., certify that:~~
          ~~1.     I have reviewed this quarterly report on Form 10-Q of BancWest Corporation;~~
          2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
          3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
          4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
     a)     Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
     b)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
     ~~c)     Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;~~
          5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
     a)     All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
     ~~b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and~~
          6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
~~/s/ Walter A. Dods, Jr.~~
~~Name: Walter A. Dods, Jr.~~
~~Title: Chairman and Chief Executive Officer~~
~~Date: May 14, 2003~~
36
\
~~CERTIFICATION~~
~~I, Douglas C. Grigsby, certify that:~~
          ~~1.     I have reviewed this quarterly report on Form 10-Q of BancWest Corporation;~~
          2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
          3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
          4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
     a)     Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
     b)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
     ~~c)     Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;~~
          5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
     a)     All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
     ~~b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and~~
          6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
~~/s/ Douglas C. Grigsby~~
~~Name: Douglas C. Grigsby~~
~~Title: Executive Vice President, Chief Financial Officer and Treasurer~~
~~Date: May 14, 2003~~
3741
EXHIBIT INDEX

Exhibit No. Exhibit

12 Statement regarding computation of ratios.
31 Section 302 Certifications
32 Section 1350 Certifications


		Three Months Ended March 31,						Three Months Ended September 30,				Nine Months Ended September 30,

		2003		2002				2003		2002		2003		2002

		(in thousands)						(in thousands)
Interest income	Interest income						Interest income
Interest and fees on loans	Interest and fees on loans	$	338,259		$	256,229	Interest and fees on loans	$	343,610	$	365,886	$	1,021,733	$	992,123
Lease financing income	Lease financing income		36,028			36,726	Lease financing income		32,809		34,894		102,151		107,860
Interest on investment securities:	Interest on investment securities:						Interest on investment securities:
	Taxable interest income		41,797			34,262	Taxable interest income		46,118		40,704		131,986		114,881
	Exempt from Federal income taxes		154			44	Exempt from Federal income taxes		153		126		490		360
Other interest income	Other interest income		1,238			2,023	Other interest income		1,580		2,938		4,750		6,298

	Total interest income		417,476			329,284	Total interest income		424,270		444,548		1,261,110		1,221,522

Interest expense	Interest expense						Interest expense
Deposits	Deposits		53,147			63,629	Deposits		39,835		76,477		140,706		218,884
Short-term borrowings	Short-term borrowings		3,696			5,793	Short-term borrowings		9,230		10,430		16,464		26,486
Long-term debt	Long-term debt		45,394			35,382	Long-term debt		43,843		36,907		136,014		109,044

	Total interest expense		102,237			104,804	Total interest expense		92,908		123,814		293,184		354,414

	Net interest income		315,239			224,480	Net interest income		331,362		320,734		967,926		867,108
Provision for credit losses	Provision for credit losses		22,690			20,007	Provision for credit losses		24,145		26,300		65,695		69,209

	Net interest income after provision for credit losses		292,549			204,473	Net interest income after provision for credit losses		307,217		294,434		902,231		797,899

Noninterest income	Noninterest income						Noninterest income
Service charges on deposit accounts	Service charges on deposit accounts		37,029			25,974	Service charges on deposit accounts		39,512		39,183		115,102		101,718
Trust and investment services income	Trust and investment services income		9,507			8,140	Trust and investment services income		9,461		9,883		28,826		28,275
Other service charges and fees	Other service charges and fees		35,615			23,498	Other service charges and fees		38,535		34,032		113,380		89,442
Securities gains, net	Securities gains, net		1,892			228	Securities gains, net		555		282		3,913		966
Other	Other		10,791			4,784	Other		11,563		8,259		33,813		22,291

	Total noninterest income		94,834			62,624	Total noninterest income		99,626		91,639		295,034		242,692

Noninterest expense	Noninterest expense						Noninterest expense
Salaries and wages	Salaries and wages		84,662			60,094	Salaries and wages		86,269		89,486		252,908		236,043
Employee benefits	Employee benefits		37,646			23,482	Employee benefits		34,091		28,340		111,127		87,497
Occupancy expense	Occupancy expense		22,320			15,614	Occupancy expense		22,239		24,008		67,153		63,117
Outside services	Outside services		17,567			13,252	Outside services		18,002		17,472		53,843		48,532
Intangible amortization	Intangible amortization		5,763			2,757	Intangible amortization		5,763		5,763		17,290		14,283
Equipment expense	Equipment expense		11,156			7,729	Equipment expense		11,563		14,043		35,156		36,252
Restructuring and integration costs	Restructuring and integration costs		—			6,015	Restructuring and integration costs		—		6,213		—		14,966
Other	Other		41,546			30,155	Other		45,036		39,039		135,935		111,592

	Total noninterest expense		220,660			159,098	Total noninterest expense		222,963		224,364		673,412		612,282

Income before income taxes			166,723			107,999
Income before income taxes and cumulative effect of accounting change							Income before income taxes and cumulative effect of accounting change		183,880		161,709		523,853		428,309
Provision for income taxes	Provision for income taxes		64,642			42,582	Provision for income taxes		69,268		64,651		199,498		169,256

Income before cumulative effect of accounting change							Income before cumulative effect of accounting change		114,612		97,058		324,355		259,053

Cumulative effect of accounting change, net of tax							Cumulative effect of accounting change, net of tax		2,370		—		2,370		—

Net income	Net income	$	102,081		$	65,417	Net income	$	112,242	$	97,058	$	321,985	$	259,053


			March 31,		December 31,		March 31,				September 30,		December 31,		September 30,
			2003		2002		2002				2003		2002		2002

			(in thousands, except per share data)								(in thousands)
Assets	Assets								Assets
Cash and due from banks	Cash and due from banks		$	1,591,999	$	1,761,261	$	1,338,866	Cash and due from banks		$	1,385,335	$	1,761,261	$	1,308,653
Interest-bearing deposits in other banks	Interest-bearing deposits in other banks			162,194		2,098		182,930	Interest-bearing deposits in other banks			369,217		2,098		272,082
Federal funds sold and securities purchased under agreements to resell	Federal funds sold and securities purchased under agreements to resell			110,000		430,056		149,500	Federal funds sold and securities purchased under agreements to resell			340,920		430,056		351,925
Trading assets	Trading assets			67,042		43,430		10,165	Trading assets			58,612		43,430		54,020
Available-for-sale investment securities	Available-for-sale investment securities			4,528,484		3,940,769		3,161,922	Available-for-sale investment securities			5,412,369		3,940,769		3,708,473
Loans held for sale	Loans held for sale			82,563		85,274		44,642	Loans held for sale			79,300		85,274		69,824
Loans and leases:	Loans and leases:								Loans and leases:
	Loans and leases			24,056,267		24,146,087		24,070,667	Loans and leases			25,264,537		24,146,087		24,071,689
	Less allowance for credit losses			396,049		384,081		383,003	Less allowance for credit losses			390,194		384,081		385,190

Net loans and leases	Net loans and leases			23,660,218		23,762,006		23,687,664	Net loans and leases			24,874,343		23,762,006		23,686,499

Premises and equipment, net	Premises and equipment, net			378,985		380,272		410,429	Premises and equipment, net			537,171		380,272		394,800
Customers’ acceptance liability	Customers’ acceptance liability			29,728		25,945		11,292	Customers’ acceptance liability			38,790		25,945		28,200
Core deposit intangible, net	Core deposit intangible, net			204,647		210,411		231,925	Core deposit intangible, net			193,120		210,411		216,174
Goodwill	Goodwill			3,226,829		3,229,200		3,380,392	Goodwill			3,226,851		3,229,200		3,383,877
Other real estate owned and repossessed personal property	Other real estate owned and repossessed personal property			18,544		19,613		24,393	Other real estate owned and repossessed personal property			19,237		19,613		15,523
Other assets	Other assets			854,856		858,932		690,373	Other assets			890,237		858,932		766,450

Total assets	Total assets		$	34,916,089	$	34,749,267	$	33,324,493	Total assets		$	37,425,502	$	34,749,267	$	34,256,500

Liabilities and Stockholder’s Equity	Liabilities and Stockholder’s Equity								Liabilities and Stockholder’s Equity
Deposits:	Deposits:								Deposits:
	Domestic:								Domestic:
		Interest-bearing	$	16,645,026	$	16,720,767	$	17,146,357		Interest-bearing	$	17,545,258	$	16,720,767	$	16,930,452
		Noninterest-bearing		6,986,600		7,144,929		6,200,071		Noninterest-bearing		7,709,616		7,144,929		6,779,247
	Foreign			706,967		691,783		737,492	Foreign			665,728		691,783		647,163

Total deposits	Total deposits			24,338,593		24,557,479		24,083,920	Total deposits			25,920,602		24,557,479		24,356,862

Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase			830,388		791,476		810,192	Federal funds purchased and securities sold under agreements to repurchase			1,072,759		791,476		617,470
Short-term borrowings	Short-term borrowings			949,012		733,274		1,330,673	Short-term borrowings			930,000		733,274		1,549,713
Acceptances outstanding	Acceptances outstanding			29,728		25,945		11,292	Acceptances outstanding			38,790		25,945		28,200
Long-term debt	Long-term debt			3,313,368		3,376,947		2,120,993	Long-term debt			3,962,279		3,376,947		2,325,513
Guaranteed preferred beneficial interests in Company’s junior subordinated debentures				258,476		259,191		261,261
Guaranteed preferred beneficial interests in Company’s									Guaranteed preferred beneficial interests in Company’s
									junior subordinated debentures			257,479		259,191		259,893
Other liabilities	Other liabilities			1,227,705		1,137,473		1,041,529	Other liabilities			1,086,071		1,137,473		1,187,070

Total liabilities	Total liabilities		$	30,947,270	$	30,881,785	$	29,659,860	Total liabilities		$	33,267,980	$	30,881,785	$	30,324,721


										Accumulated																Accumulated
		Class A								Other								Class A								Other
		Common Stock						Retained		Comprehensive								Common Stock						Retained		Comprehensive
		Shares		Amount		Surplus		Earnings		Income, net			Total					Shares		Amount		Surplus		Earnings		Income, net			Total

						(in thousands, except per share data)												(in thousands, except share data)
Balance, December 31, 2002	Balance, December 31, 2002		85,759,123	$	858	$	3,419,927	$	369,634	$	77,063		$	3,867,482		Balance, December 31, 2002			85,759,123	$	858	$	3,419,927	$	369,634	$	77,063		$	3,867,482
Comprehensive income:	Comprehensive income:															Comprehensive income:
	Net income		—		—		—		102,081		—			102,081		Net income			—		—		—		321,985		—			321,985
	Net unrealized loss on investment securities available for sale, net of tax and reclassification adjustment		—		—		—		—		(2,089	)		(2,089	)	Net unrealized loss on investment securities available for sale, net of tax and reclassification adjustment			—		—		—		—		(32,997	)		(32,997	)
	Net unrealized gain on cash-flow derivative hedges, net of tax and reclassification adjustment										1,345			1,345		Net unrealized loss on cash-flow derivative hedges, net of tax and reclassification adjustment			—		—		—		—		1,052			1,052

	Comprehensive income		—		—		—		102,081		(744	)		101,337			Comprehensive income		—		—		—		321,985		(31,945	)		290,040

Balance, March 31, 2003			85,759,123	$	858	$	3,419,927	$	471,715	$	76,319		$	3,968,819
Balance, September 30, 2003																Balance, September 30, 2003			85,759,123	$	858	$	3,419,927	$	691,619	$	45,118		$	4,157,522

Balance, December 31, 2001	Balance, December 31, 2001		56,074,874	$	561	$	1,985,275	$	8,302	$	7,782		$	2,001,920		Balance, December 31, 2001			56,074,874	$	561	$	1,985,275	$	8,302	$	7,782		$	2,001,920
Comprehensive income:	Comprehensive income:															Comprehensive income:
	Net income		—		—		—		65,417		—			65,417		Net income			—		—		—		259,053		—			259,053
	Net unrealized loss on investment securities available for sale, net of tax and reclassification adjustment		—		—		—		—		(1,885	)		(1,885	)	Net unrealized gain on investment securities available for sale, net of tax and reclassification adjustment			—		—		—		—		38,384			38,384
	Net unrealized loss on cash-flow derivative hedges, net of tax and reclassification adjustment										(819	)		(819	)	Net unrealized gain on cash-flow derivative hedges, net of tax and reclassification adjustment			—		—		—		—		29,997			29,997

	Comprehensive income		—		—		—		65,417		(2,704	)		62,713			Comprehensive income		—		—		—		259,053		68,381			327,434

Issuance of Class A common stock	Issuance of Class A common stock		29,684,249		297		1,599,703		—		—			1,600,000		Issuance of Class A common stock			29,684,249		297		1,599,703		—		—			1,600,000

Balance, March 31, 2002			85,759,123	$	858	$	3,584,978	$	73,719	$	5,078		$	3,664,633
Discounted Share Purchase Plan																Discounted Share Purchase Plan			—		—		2,425		—		—			2,425

Balance, September 30, 2002																Balance, September 30, 2002			85,759,123	$	858	$	3,587,403	$	267,355	$	76,163		$	3,931,779


		(in thousands)
Total purchase price of UCB, including transaction costs		$	2,406,268
Equity of UCB prior to acquisition by BancWest			1,083,000

Excess of pushed down equity over the carrying value of net assets acquired			1,323,268

Purchase accounting adjustments related to assets and liabilities acquired:
	Sublease loss reserve		25,645
	Premises and equipment		7,645
	Severance and employee relocation		44,513
	Contract cancellations		12,862
	New core deposit intangible		(120,219	)
	Other assets		3,354
	Deposits		8,047
	Deferred cost on pension and retirement benefits		49,349
	Other liabilities and taxes		(28,062	)

Goodwill resulting from acquisition of and merger with UCB		$	1,326,402


	Pro Forma Financial Information for the nine month period
	Ended September 30, 2002

	(in thousands)
Net Interest Income	$	954,325
Provision for Credit Losses		85,628
Noninterest Income		262,618
Noninterest Expense		674,220
Income Tax Expense		178,990

Net Income	$	278,105


	(in thousands)
Net Interest Income	$	313,014
Provision for Credit Losses		36,426
Noninterest Income		82,550
Noninterest Expense		229,909
Income Tax Expense		49,256

Net Income	$	79,973


	Bank of the West								Bank of the West								First Hawaiian Bank

	Regional		Commercial		Consumer				Regional		Commercial		Consumer				Retail		Consumer		Commercial		Financial
(in millions)	Banking		Banking		Finance		Other⁽¹⁾		Banking		Banking		Finance		Other⁽¹⁾		Banking		Banking		Banking		Management		Other⁽²⁾

Three Months Ended March 31, 2003:
Three Months Ended September 30, 2003:
Net interest income	$	121.9	$	77.7	$	49.7	$	15.6	$	127.7	$	78.5	$	53.0	$	20.1	$	68.2	$	22.5	$	7.9	$	—	$	(11.5	)
Noninterest income		38.7		11.4		2.7		5.5		42.7		13.0		2.9		5.1		17.9		5.4		3.1		7.9		1.7
Noninterest expense		106.6		29.9		15.4		6.5		107.9		28.2		15.0		6.0		45.9		11.7		2.0		6.0		(2.3	)
Provision for credit losses		3.6		0.3		12.8		—		4.3		2.2		13.6		—		1.3		2.4		0.1		—		0.2
Tax Provision (benefit)		20.0		23.4		9.6		5.8
Tax provision (benefit)										23.0		24.1		10.8		6.3		14.2		5.0		2.2		0.8		(1.8	)

Income before cumulative effect of accounting change										35.2		37.0		16.5		12.9		24.7		8.8		6.7		1.1		(5.9	)
Cumulative effect of accounting change, net of tax										—		—		—		—		—		—		—		—		(2.4	)

Net income (loss)	$	30.4	$	35.5	$	14.6	$	8.8	$	35.2	$	37.0	$	16.5	$	12.9	$	24.7	$	8.8	$	6.7	$	1.1	$	(8.3	)

Segment Assets at March 31	$	7,189	$	8,139	$	7,179	$	3,791
Segment goodwill at March 31		1,214		706		308		—

Segment assets at September 30									$	7,635	$	8,469	$	7,842	$	4,446	$	3,470	$	1,354	$	989	$	19	$	3,862
Segment goodwill at September 30										1,214		706		308		—		650		216		118		10		—
Average assets	$	7,325	$	8,189	$	7,097	$	3,182	$	7,720	$	8,356	$	7,777	$	4,070	$	3,472	$	1,379	$	1,036	$	18	$	3,650
Average loans		5,298		6,916		6,757		—		5,698		7,070		7,460		—		2,472		1,183		895		3		407
Average deposits		13,533		2,588		14		1,401		13,834		2,926		12		1,819		6,621		11		27		56		173

Three Months Ended March 31, 2002:
Three Months Ended September 30, 2002:
Net interest income	$	74.8	$	31.4	$	41.8	$	22.2	$	135.4	$	73.5	$	47.7	$	14.7	$	64.1	$	18.0	$	7.0	$	0.1	$	(7.8	)
Noninterest income		25.4		1.9		2.5		1.2		40.7		8.6		2.8		7.5		15.7		7.8		1.7		7.2		(0.3	)
Noninterest expense		70.6		10.5		14.3		6.2		109.4		27.8		13.5		14.8		43.6		10.4		1.9		5.8		(3.9	)
Provision for credit losses		1.9		1.3		11.1		—		6.8		1.9		12.9		—		2.1		2.5		0.3		—		(0.2	)
Tax Provision (benefit)		11.1		8.6		7.6		6.9
Tax provision (benefit)										24.8		21.6		10.0		2.3		13.0		4.8		2.0		0.6		(1.0	)

Net income (loss)	$	16.6	$	12.9	$	11.3	$	10.3	$	35.1	$	30.8	$	14.1	$	5.1	$	21.1	$	8.1	$	4.5	$	0.9	$	(3.0	)

Segment Assets at March 31	$	6,903	$	7,100	$	8,879	$	2,242
Segment goodwill at March 31		1,205		703		305		—

Segment assets at September 30									$	7,597	$	7,821	$	6,869	$	3,477	$	3,199	$	1,315	$	1,098	$	13	$	3,309
Segment goodwill at September 30										1,208		703		306		—		650		216		118		10		—
Average assets	$	3,740	$	3,750	$	6,547	$	1,600	$	7,915	$	7,963	$	6,804	$	2,867	$	3,206	$	1,300	$	1,083	$	13	$	3,201
Average loans		2,413		3,170		6,125		—		5,907		6,767		6,447		—		2,355		1,093		944		—		533
Average deposits		9,271		335		17		1,195		13,652		2,434		—		1,685		6,131		9		19		32		169


		Gross
		Carrying		Accumulated		Net Book
		Amount		Amortization		Value

				(in thousands)
Balance as of September 30, 2003:
Core Deposits		$	230,538	$	37,418	$	193,120

	Total	$	230,538	$	37,418	$	193,120
Balance as of December 31, 2002:
Core Deposits		$	230,538	$	20,127	$	210,411

	Total	$	230,538	$	20,127	$	210,411
Balance as of September 30, 2002:
Core Deposits		$	230,538	$	14,364	$	216,174

	Total	$	230,538	$	14,364	$	216,174

	•		Allowance for Credit ~~Losses:~~Losses (the Allowance): The allowance for credit losses represents our best estimate of losses inherent in the existing loan portfolio. 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 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) to the ~~Consolidated Financial Statements~~consolidated financial statements of our 2002 Annual Report on Form 10-K 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 types. Some of the Allowance is not allocated to specific impaired loans because of the subjective nature of the process of estimating an adequate allowance for credit losses, economic uncertainties and other factors.

	•		Fair Value of Assets: Certain assets and liabilities are reflected at their estimated fair value in the consolidated financial statements. Such amounts are based on either quoted market prices or estimated values derived by utilizing dealer quotes, market comparisons or internally generated modeling techniques. Our internal models generally involve present value of cash flow techniques.

			One of the most significant assets for which we estimate fair value is goodwill. As of ~~March 31,~~September 30, 2003, we had $3.2 billion in goodwill on our Consolidated Balance Sheet. SFAS No. 142 requires that we perform a two-step impairment test for goodwill at least annually. However, if an event occurs or circumstances change during the year indicating potential impairment, goodwill must be tested. The testing process involves estimating cash flows for future periods. The first step compares the fair value of the reporting unit, which is an individual business segment of the Company, to the carrying amount. If the carrying amount exceeds the fair value, then a second step is conducted whereby the implied fair value of the goodwill is compared with the carrying amount of the goodwill. If the implied fair value of the goodwill is less than the carrying amount, an impairment loss is recognized.

	•		Deferred Tax Assets: We use an estimate of future earnings to support our position that the benefit of our deferred tax assets will be realized. Deferred tax assets and liabilities are measured using effective tax rates that we estimate will be in existence for the periods such deferred tax assets and liabilities will be realized. Generally, this estimate is based on tax rates currently in effect adjusted for any changes resulting from enacted tax laws that have yet to become effective. If tax rates change in the future as a result of tax law enactments or other reasons, the value of deferred tax assets and liabilities may be adjusted through current earnings. If future taxable income should prove insufficient to utilize the deductions associated with the deferred tax assets in the years such deductions are incurred, some or all of the assets may not be realized and our net income will be reduced.


			Three Months Ended								Three Months Ended						Nine Months Ended
			March 31,								September 30,						September 30,

			2003			2002					2003			2002			2003			2002

			(dollars in thousands)											(dollars in thousands)
Earnings:	Earnings:								Earnings:
Net interest income	Net interest income		$	315,239		$	224,480		Net interest income		$	331,362		$	320,734		$	967,926		$	867,108
Provision for credit losses	Provision for credit losses			22,690			20,007		Provision for credit losses			24,145			26,300			65,695			69,209
Noninterest income	Noninterest income			94,834			62,624		Noninterest income			99,626			91,639			295,034			242,692
Noninterest expense	Noninterest expense			220,660			159,098		Noninterest expense			222,963			224,364			673,412			612,282
Tax provision	Tax provision			64,642			42,582		Tax provision			69,268			64,651			199,498			169,256
Net income			$	102,081		$	65,417
Income before cumulative effect of accounting change									Income before cumulative effect of accounting change			114,612			97,058			324,355			259,053
Cumulative effect of accounting change, net of tax									Cumulative effect of accounting change, net of tax			2,370			—			2,370			—
Net Income									Net Income		$	112,242		$	97,058		$	321,985		$	259,053
Selected Financial Ratios:	Selected Financial Ratios:								Selected Financial Ratios:
Return on average total assets (ROA)	Return on average total assets (ROA)			1.20	%		1.12	%	Return on average total assets (ROA)			1.21	%		1.13	%		1.21	%		1.14	%
Return on average stockholder’s equity (ROE)	Return on average stockholder’s equity (ROE)			10.54			11.51		Return on average stockholder’s equity (ROE)			10.83			9.99			10.70			10.50
Net interest margin (taxable-equivalent basis)	Net interest margin (taxable-equivalent basis)			4.49			4.57		Net interest margin (taxable-equivalent basis)			4.26			4.52			4.37			4.58
Allowance for credit losses to total loans and leases (at March 31)				1.65			1.59
Nonperforming assets to total assets (at March 31)				0.67			0.77
Allowance for credit losses to nonperforming loans and leases (at March 31)				1.83	x		1.65	x
Allowance for credit losses to total loans and leases (at September 30)									Allowance for credit losses to total loans and leases (at September 30)			1.54			1.60			1.54			1.60
Nonperforming assets to total assets (at September 30)									Nonperforming assets to total assets (at September 30)			0.48			0.79			0.48			0.79
Allowance for credit losses to nonperforming loans and leases (at September 30)									Allowance for credit losses to nonperforming loans and leases (at September 30)			2.44	x		1.52	x		2.44	x		1.52	x
Average equity to average total assets									Average equity to average total assets			11.17	%		11.36	%		11.35	%		10.85	%
Regulatory Capital Ratios:	Regulatory Capital Ratios:								Regulatory Capital Ratios:
	Leverage Ratio:
		Bank of the West		9.48	%		7.37	%
		United California Bank		N/A			10.08
		First Hawaiian Bank		9.38			8.64		Leverage Ratio⁽¹⁾:
	Tier 1 capital (risk-based):									Bank of the West		9.36	%		8.94	%		9.36	%		8.94	%
		Bank of the West		10.29			8.11			First Hawaiian Bank		9.68			9.08			9.68			9.08
		United California Bank		N/A			10.83		Tier 1 capital (risk-based):
		First Hawaiian Bank		11.66			9.95			Bank of the West		10.56			9.84			10.56			9.84
	Total capital (risk-based):									First Hawaiian Bank		12.51			11.06			12.51			11.06
		Bank of the West		12.59			11.11		Total capital (risk-based):
		United California Bank		N/A			12.09			Bank of the West		12.81			12.16			12.81			12.16
		First Hawaiian Bank		14.05			12.29			First Hawaiian Bank		14.88			13.47			14.88			13.47
Balance Sheet Data Averages:	Balance Sheet Data Averages:								Balance Sheet Data Averages:
Average assets	Average assets			34,417,081			23,792,836		Average assets			36,797,885			33,937,459			35,441,404			30,414,475
Average loans(2)	Average loans(2)			24,046,194			16,861,211		Average loans(2)				25,199,215			24,067,661			24,548,196			21,739,282
Average deposits	Average deposits			24,146,346			16,932,851		Average deposits			25,422,161			24,095,238			24,631,586			21,663,686
Average stockholder’s equity	Average stockholder’s equity			3,926,093			2,305,697		Average stockholder’s equity			4,110,928			3,854,560			4,023,643			3,299,628
Balance Sheet Data At Period End:	Balance Sheet Data At Period End:								Balance Sheet Data At Period End:
Assets	Assets			34,916,089			33,324,493		Assets			37,425,502			34,256,500			37,425,502			34,256,500
Loans(2)	Loans(2)			24,056,267			24,070,667		Loans(2)				25,343,837			24,141,513			25,343,837			24,141,513
Deposits	Deposits			24,338,593			24,083,920		Deposits			25,920,602			24,356,862			25,920,602			24,356,862
Stockholder’s equity	Stockholder’s equity			3,968,819			3,664,633		Stockholder’s equity			4,157,522			3,931,779			4,157,522			3,931,779

⁽¹⁾		The capital leverage rates are based on quarterly averages.

⁽²⁾		These balances include loans held-for-sale and are not adjusted for credit losses.

⁽¹⁾		Annualized.

⁽²⁾		Average ~~debt~~ investment securities were computed based on historical amortized cost, excluding the effects of SFAS No. 115 adjustments.

⁽³⁾		~~Average investment securities includes trading securities.~~

~~(4)~~		Nonaccruing loans and leases, and loans ~~held for sale and acceptances held for trading~~held-for-sale have been included in the computations of average loan and lease balances.

~~(5)~~⁽⁴⁾		Interest income for loans and leases included loan fees of ~~$13,706~~$17.5 million and ~~$11,138~~$13.7 million for the three months ended September 30, 2003 and 2002, respectively.


			2003		2002		% Change

			(in thousands)
Three Months Ended March 31,
	Service charges on deposit accounts		$	37,029	$	25,974		42.6	%
	Trust and investment services income			9,507		8,140		16.8
	Other service charges and fees			35,615		23,498		51.6
	Securities gains, net			1,892		228		729.8
	Other			10,791		4,784		125.6

		Total noninterest income	$	94,834	$	62,624		51.4	%

	•		~~The restructuring and integration efforts related to the UCB merger are substantially complete, resulting in the decrease in the related costs.~~

	•		The increase in salaries and wages and employee benefits is consistent with the increase to 7,713 average full-time employee equivalents for the quarter ended March 31, 2003 as compared to 5,932 for the comparable period in 2002.

	•		~~The increase of $3.0 million in intangible amortization resulted from the amortization of the UCB core deposit intangibles.~~


				September 30, 2003				December 31, 2002				September 30, 2002

						Estimated				Estimated				Estimated
						fair				fair				fair
				Cost		value		Cost		value		Cost		value

				(in thousands)
Securities of U.S. Treasury and federal agencies:				$	1,463,688	$	1,479,594	$	1,312,430	$	1,338,310	$	1,096,605	$	1,119,443
Securities of U.S. states and political subdivisions					15,601		15,824		14,920		15,025		15,008		15,117
Mortgage-backed securities:
	Federal and federally sponsored agencies				2,175,235		2,179,420		1,366,656		1,403,374		1,366,803		1,402,292
	Private collateralized mortgage obligations				880,570		875,807		447,176		453,331		530,223		539,719

		Total mortgage-backed securities			3,055,805		3,055,227		1,813,832		1,856,705		1,897,026		1,942,011

	Total debt securities				4,535,094		4,550,645		3,141,182		3,210,040		3,008,639		3,076,571
Equity securities					852,533		861,724		719,115		730,729		622,756		631,902

			Total	$	5,387,627	$	5,412,369	$	3,860,297	$	3,940,769	$	3,631,395	$	3,708,473


			March 31, 2003					December 31, 2002					March 31, 2002							September 30, 2003					December 31, 2002					September 30, 2002

			Amount		%			Amount		%			Amount		%					Amount		%			Amount		%			Amount		%

								(dollars in thousands)												(dollars in thousands)
Commercial, financial and agricultural	Commercial, financial and agricultural		$	4,636,502		19.3	%	$	4,802,581		19.9	%	$	5,079,888		21.1	%	Commercial, financial and agricultural		$	4,446,197		17.6	%	$	4,802,581		19.9	%	$	4,764,805		19.8	%
Real estate:	Real estate:																	Real estate:
	Commercial			4,871,097		20.3			4,806,220		19.9			4,846,071		20.1		Commercial			5,023,284		19.9			4,806,220		19.9			4,785,058		19.9
	Construction			944,222		3.9			971,861		4.0			1,161,303		4.8		Construction			919,115		3.6			971,861		4.0			1,042,011		4.3
	Residential:																	Residential:
		Insured, guaranteed or conventional		3,850,906		16.0			4,022,810		16.7			3,767,094		15.7			Insured, guaranteed or conventional		4,326,332		17.1			4,022,810		16.7			4,241,750		17.6
		Home equity credit lines		716,949		3.0			726,535		3.0			1,046,134		4.3			Home equity credit lines		705,736		2.8			726,535		3.0			718,143		3.0

		Total real estate loans		10,383,174		43.2			10,527,426		43.6			10,820,602		44.9			Total real estate loans		10,974,467		43.4			10,527,426		43.6			10,786,962		44.8

Consumer	Consumer			6,305,507		26.2			6,021,510		25.0			5,458,094		22.7		Consumer			7,124,576		28.2			6,021,510		25.0			5,858,098		24.3
Lease financing	Lease financing			2,344,341		9.7			2,398,681		9.9			2,326,056		9.7		Lease financing			2,365,395		9.4			2,398,681		9.9			2,272,232		9.5
Foreign	Foreign			386,743		1.6			395,889		1.6			386,027		1.6		Foreign			353,902		1.4			395,889		1.6			389,592		1.6

		Total loans and leases		24,056,267		100.0	%		24,146,087		100.0	%		24,070,667		100.0	%		Total loans and leases		25,264,537		100.0	%		24,146,087		100.0	%		24,071,689		100.0	%

Less allowance for credit losses	Less allowance for credit losses			396,049					384,081					383,003				Less allowance for credit losses			390,194					384,081					385,190

		Total net loans and leases	$	23,660,218				$	23,762,006				$	23,687,664					Total net loans and leases	$	24,874,343				$	23,762,006				$	23,686,499

Total loans and leases to:	Total loans and leases to:																	Total loans and leases to:
		Total assets				68.9	%				69.5	%				72.2	%		Total assets				67.5	%				69.5	%				70.3	%
		Total earning assets				83.2	%				84.5	%				87.2	%		Total earning assets				80.1	%				84.3	%				84.4	%
		Total deposits				98.8	%				98.3	%				99.9	%		Total deposits				97.5	%				98.3	%				98.8	%


		Notional/Contract Amount

		2003		2002

		(in thousands)
Contractual amounts which represent credit risk:
	Commitments to extend credit	$	7,741,817	$	7,893,668
	Standby letters of credit		792,910		821,844
	Commercial letters of credit		69,751		77,047

	•		Setting Underwriting and Grading Standards.Our loan grading system utilizes ten different principal risk categories where “1” is “no risk” and “10” is “loss.” Risk parameters are established so that 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 real estate-construction (which accounted for only ~~3.9%~~3.6% of total loans and leases at ~~March 31,~~September 30, 2003), as well as Hawaiian commercial real estate and agricultural loans.

	•		Reduced Participation in Syndicated National ~~Credits.~~Credits. We are in the process of exiting from the syndicated national credit and media finance areas. At ~~March 31,~~September 30, 2003, the ratio of nonperforming shared national credits and media finance loans to total shared national credits and media finance loans outstanding was ~~13.4%.~~5.1%

	•		Emphasis on High Quality 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 experience. We generally do not participate in subprime lending activities. We also seek to reduce our exposures where feasible by obtaining third-party insurance or similar protections. For example, in our vehicle lease portfolio (which represents approximately ~~59%~~55.4% of our lease financing portfolio and ~~16%~~13.8% of our combined lease financing and consumer loans at ~~March 31,~~September 30, 2003), we obtain third-party insurance for the estimated residual value of the leased vehicle.


												To Be Well
												Capitalized
												Under Prompt
							For Capital					Corrective Action
		Actual					Adequacy Purposes					Provisions

(dollars in thousands)		Amount		Ratio			Amount		Ratio			Amount		Ratio

Tier 1 Capital to Risk-Weighted Assets:
	Bank of the West	$	2,219,050		10.29	%	$	862,290		4.00	%	$	1,293,435		6.00	%
	First Hawaiian		762,652		11.66			261,661		4.00			392,491		6.00
Total Capital to Risk-Weighted Assets:
	Bank of the West	$	2,714,230		12.59	%	$	1,724,580		8.00	%	$	2,155,725		10.00	%
	First Hawaiian		918,808		14.05			523,321		8.00			654,152		10.00
Tier 1 Capital to Average Assets:
	Bank of the West	$	2,219,050		9.48	%	$	936,225		4.00	%	$	1,170,281		5.00	%
	First Hawaiian		762,652		9.38			325,076		4.00			406,345		5.00


(dollars in millions)	+ 3%			+2%			+1%			Flat			-1%			+ 3%			+2%			+1%			Flat			-0.5%

April 1, 2003
Net Interest Income	$	1,305.2		$	1,299.2		$	1,289.1		$	1,278.3		$	1,244.3
October 1, 2003
Net interest income																$	1,276.8		$	1,285.2		$	1,290.5		$	1,302.9		$	1,295.6
Difference from flat		26.9			20.9			10.8			—			(34.0	)		(26.1	)		(17.7	)		(12.4	)		—			(7.3	)
% variance		2.1	%		1.6	%		0.8	%		—	%		(2.7	)%		(2.0	)%		1.4	%		(1.0	)%		—	%		(0.6	)%
January 1, 2003
Net Interest Income	$	1,308.2		$	1,303.3		$	1,294.3		$	1,280.6		$	1,246.3
Difference from flat		27.6			22.7			13.7			—			(34.3	)
% variance		2.2	%		1.8	%		1.1	%		—	%		(2.7	)%

~~Item 6.~~		~~Exhibits and Reports on Form 8-K~~

		~~The~~(a) Exhibits ~~listed below are filed or incorporated by reference as part of this Report.~~

		~~(a) Exhibits~~


31	Section 302 Certifications

32	Section 1350 Certifications

(b) Reports on Form 8-K	~~None.~~On July 17, 2003, the Company filed a Report on Form 8-K that provided information under Items 7 and 9 concerning the Company’s financial results for the year-to-date and quarter ended June 30, 2003.


	BANCWEST CORPORATION
	(Registrant)

Date: ~~May 14,~~November 11, 2003	By			~~/s/~~ /s/ Douglas C. Grigsby

			(Douglas C. Grigsby
		Executive Vice President, Chief
			Financial Officer and Treasurer
		(principal financial officer)


	a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;


	b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and


	~~c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;~~


	a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and


	~~b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and~~


Exhibit No.		Exhibit

	12	Statement regarding computation of ratios.

	31	Section 302 Certifications

	32	Section 1350 Certifications