FIRST HAWAIIAN, INC. - Annual Report: 2002 (Form 10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Commission file number 0-7949

Registrant’s telephone number, including area code: (808) 525-7000

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [N/A]

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

Yes o  No x

The aggregate market value of the common stock held by nonaffiliates of the registrant
as of the last business day of the registrant’s most recently completed second fiscal quarter was $0.

The number of shares outstanding of each of the registrant’s classes of common stock
as of January 31, 2003 was:

DOCUMENTS INCORPORATED BY REFERENCE

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Index

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Part I

PART I

Item 1. Business

BancWest Corporation

     BancWest Corporation, a Delaware corporation (“BancWest,” the “Corporation,” the “Company” or “we/our”), is a registered financial holding company under the Gramm-Leach-Bliley Act (the “GLBA”). As a financial holding company, we are allowed to acquire or invest in the securities of companies in a broad range of financial activities. The Corporation, 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; First Hawaiian Bank (“First Hawaiian”), a State of Hawaii-chartered bank; FHL Lease Holding Company, Inc. (“FHL”),a financial services loan company; BancWest Capital I (“BWE Trust”) and First Hawaiian Capital I (“FH Trust”), both Delaware business trusts. First Hawaiian, FHL, BWE Trust and FH Trust are wholly-owned subsidiaries of the Corporation. In 2002, we sold BNP Paribas 14.815% of the outstanding common stock of Bank of the West. See Note 4 to the Consolidated Financial Statements for additional information. At December 31, 2002, the Corporation had consolidated total assets of $34.7 billion, total loans and leases of $24.2 billion, total deposits of $24.6 billion and total stockholder’s equity of $3.9 billion. Based on assets as of December 31, 2002, BancWest Corporation was the 25th largest bank holding company in the United States.

     On December 20, 2001, Chauchat L.L.C., a Delaware limited liability company (“Merger Sub”), merged (the “BNP Paribas Merger”) with and into BancWest pursuant to an Agreement and Plan of Merger, dated as of May 8, 2001, as amended and restated as of July 19, 2001, by and among BancWest, BNP Paribas, a société anonyme or limited liability banking corporation organized under the laws of the Republic of France (“BNP Paribas”), and Merger Sub (the “Merger Agreement”). Merger Sub was a wholly-owned subsidiary of BNP Paribas.

     At the effective time of the BNP Paribas Merger, all outstanding shares of common stock, par value $1 per share (“Company Common Stock”), of BancWest were cancelled and converted solely into the right to receive $35 per share in cash, without interest thereon.

     Pursuant to the Merger Agreement, each share of Class A common stock, par value $1 per share, of BancWest owned by BNP Paribas and French American Banking Corporation, a wholly-owned subsidiary of BNP Paribas, remained outstanding as one share of Class A Common Stock and all of the units of Merger Sub were cancelled without any consideration becoming payable therefor. Concurrent with the BNP Paribas Merger, the par value of the Class A common stock was changed to $.01. As a result of the Merger, BancWest became a wholly-owned subsidiary of BNP Paribas.

     In December 2001, BNP Paribas signed a definitive agreement with Tokyo-headquartered UFJ Bank Ltd. to acquire its wholly-owned subsidiary, United California Bank (“UCB”), for a cash purchase price of $2.4 billion. The transaction closed on March 15, 2002. Former United California Bank branches were fully integrated into Bank of the West in the third quarter of 2002.

Bank of the West

     Bank of the West is a State of California-chartered bank that is not a member of the Federal Reserve System. The deposits of Bank of the West are insured by the Bank Insurance Fund (“BIF”) and the Savings Association Insurance Fund (“SAIF”) of the Federal Deposit Insurance Corporation (“FDIC”) to the extent and subject to the limitations set forth in the Federal Deposit Insurance Act (“FDIA”). The predecessor of Bank of the West, “The Farmers National Gold Bank,” was chartered as a national banking association in 1874 in San Jose, California.

     On July 1, 1999, SierraWest Bancorp and SierraWest Bank were merged with and into Bank of the West. As a result of the SierraWest merger, 20 SierraWest branches in California and Nevada became branches of Bank of the West.

     In the first quarter of 2001, Bank of the West acquired 23 branches in New Mexico and seven branches in Nevada that were being divested as part of the merger between First Security Corporation and Wells Fargo & Company. These branches became branches of Bank of the West.

     At December 31, 2002, Bank of the West was the third largest bank headquartered in California, with total assets of approximately $26.1 billion, total loans and leases of $19.1 billion, total deposits of approximately $17.9 billion and total stockholders’ equity of $4.5 billion. Bank of the West conducts a general commercial banking business, providing retail and corporate banking and trust services to individuals, institutions, businesses and governments through 297 branches and other commercial banking offices located in California, Oregon, Washington, Idaho, New Mexico and Nevada. Bank of the West also originates indirect automobile loans and leases, recreational vehicle loans, recreational marine vessel loans, equipment leases and deeds of trust on single-family residences through a network of manufacturers, dealers, representatives and brokers in all 50 states. Essex Credit Corporation (“Essex”) is engaged primarily in the business of originating and selling consumer loans on a nationwide basis, such loans being made for the purpose of acquiring or refinancing pleasure boats or recreational vehicles. Essex generally sells the loans that it makes to various banks and other financial

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institutions, on a servicing released basis. Essex has a network of 11 regional direct lending offices located in the following states: California, Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York, Texas and Washington. In November 2002, Bank of the West purchased Trinity Capital Corporation (“Trinity”). Trinity is a leasing subsidiary that specializes in nationwide vendor leasing programs for manufacturers in specific vertical markets.

First Hawaiian Bank

     First Hawaiian Bank is a State of Hawaii-chartered bank that is not a member of the Federal Reserve System. The deposits of First Hawaiian are insured by the BIF and the SAIF of the FDIC to the extent and subject to the limitations set forth in the FDIA. First Hawaiian, the oldest financial institution in Hawaii, was established as Bishop & Co. in 1858 in Honolulu.

     At December 31, 2002, First Hawaiian had total assets of $9.2 billion, total loans and leases of $5.1 billion, total deposits of $6.7 billion and stockholder’s equity of $1.8 billion, making it the largest bank in Hawaii based on domestic deposits from individuals, corporations and partnerships.

     First Hawaiian is a full-service bank conducting a general commercial and consumer banking business and offering trust and insurance services to individuals, institutions, businesses and governments.

     On November 9, 2001, First Hawaiian completed its acquisition of Union Bank of California’s network in Guam and Saipan, along with associated loan and deposit accounts.

Other Subsidiaries

     First Hawaiian also conducts business through the following wholly-owned subsidiaries:

Hawaii Community Reinvestment Corporation

     In an effort to support affordable housing and as part of First Hawaiian’s community reinvestment program, First Hawaiian is a member of the Hawaii Community Reinvestment Corporation (the “HCRC”). The HCRC is a consortium of local financial institutions that provides $50 million in permanent long-term financing for affordable housing rental projects throughout Hawaii for low- and moderate-income residents.

     The $50 million loan pool is funded by the member financial institutions, which participate pro rata (based on deposit size) in each HCRC loan. First Hawaiian’s participation in these HCRC loans is included in its loan portfolio.

Hawaii Investors for Affordable Housing, Inc.

     To further enhance First Hawaiian’s community reinvestment program and provide support for the development of additional affordable-housing rental units in Hawaii, First Hawaiian and other HCRC member institutions, have subscribed to a $19.7-million-tax credit equity fund (“Hawaii Affordable Housing Fund I”) and a $20.0 million tax-credit equity fund (“Hawaii Affordable Housing Fund II”). A third tax-credit equity fund has been established to continue the support of additional affordable housing projects.

     Hawaii Affordable Housing Fund I and Hawaii Affordable Housing Fund II (the “Funds”) have been established to invest in qualified low-income housing tax credit rental projects and to ensure that these projects are maintained as low-income housing throughout the required compliance period. First Hawaiian’s investments in these Funds are included in other assets.

FHL Lease Holding Company, Inc.

     FHL primarily finances and leases personal and real property, including equipment and vehicles. FHL is in a run-off mode and all new leveraged and direct financing leases are recorded by First Hawaiian Leasing, Inc. At December 31, 2002, FHL’s net investment in leases amounted to $58.8 million and its total assets were $59.6 million.

BancWest Capital I

     BWE Trust is a Delaware business trust which was formed in November 2000. BWE Trust exchanged $150 million of its BancWest Capital I Quarterly Income Preferred Securities (the “BWE Capital Securities”), as well as all outstanding common securities of BWE Trust, for 9.5% junior subordinated deferrable interest debentures of the Corporation. The Corporation sold to the public $150 million of BWE Capital Securities. The BWE Capital Securities qualify as Tier 1 capital of the Corporation and are solely, fully and unconditionally guaranteed by the Corporation. All of the common securities of the BWE Trust are owned by the Corporation.

     At December 31, 2002, the BWE Trust’s total assets were $155.9 million, comprised primarily of the

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Corporation’s junior subordinated debentures.

First Hawaiian Capital I

     FH Trust is a Delaware business trust which was formed in 1997. FH Trust issued $100 million of its Capital Securities (the “FH Capital Securities”) and used the proceeds therefrom to purchase junior subordinated deferrable interest debentures of the Corporation. The FH Capital Securities qualify as Tier 1 capital of the Corporation and are solely, fully and unconditionally guaranteed by the Corporation. All of the common securities of the FH Trust are owned by the Corporation.

     At December 31, 2002, the FH Trust’s total assets were $107.4 million, comprised primarily of the Corporation’s junior subordinated debentures.

Employees

     At December 31, 2002, the Corporation had 7,753 full-time equivalent employees. Bank of the West and First Hawaiian employed 5,563 and 2,190 persons, respectively. None of our employees are represented by any collective bargaining agreements and our relations with employees are considered excellent.

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.

Competition

     Competition in the financial services industry is intense. We compete with a large number of commercial banks (including domestic, foreign and foreign-affiliated banks), savings institutions, finance companies, leasing companies, credit unions and other entities that provide financial services such as mutual funds, insurance companies and brokerage firms. Many of these competitors are significantly larger and have greater financial resources than the Corporation. In addition, the increasing use of the Internet and other electronic distribution channels has resulted in increased competition with respect to many of the products and services that we offer. As a result, we compete with financial service providers located not only in our home markets but also those elsewhere in the United States that are able to offer their products and services through electronic and other non-conventional distribution channels.

     Changes in federal law over the past several years have also made it easier for out-of-state banks to enter and compete in the states in which our bank subsidiaries operate. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”), among other things, eliminated substantially all state law barriers to the acquisition of banks by out-of-state bank holding companies. A bank holding company may now acquire banks in states other than its home state, without regard to the permissibility of such acquisitions under state law, but subject to any state requirement that the acquired bank has been organized and operating for a minimum period of time (not to exceed five years), and the requirement that the acquiring bank holding company, prior to or following the proposed acquisition, controls no more than 10 percent of the total amount of deposits of insured depository institutions in the United States and no more than 30 percent of such deposits in that state (or such lesser or greater amount as may be established by state law).

     The Riegle-Neal Act also permits interstate branching by banks in all states other than those which have “opted out.” Since June 1, 1997, the Riegle-Neal Act has allowed banks to acquire branches located in another state by purchasing or merging with a bank chartered in that state or a national banking association having its headquarters located in that state. However, banks are not permitted to establish de novo branches or purchase individual branches located in other states unless expressly permitted by the laws of those other states. None of the states in which our banking subsidiaries operate have elected to “opt out” of the provisions of the Riegle-Neal Act permitting interstate branching through acquisition or mergers, although most do not permit de novo branching.

Supervision and Regulation

     As a registered financial holding company, we are subject to regulation and supervision by the Federal Reserve Board. Our subsidiaries are subject to regulation and supervision by the banking authorities of California, Hawaii, Nevada, Washington, Oregon, Idaho, New Mexico, Guam and the Commonwealth of the Northern Mariana Islands, as well as by the FDIC (which is the primary federal regulator of our two bank subsidiaries) and various other regulatory agencies.

     The consumer lending and finance activities of the Corporation’s subsidiaries are also subject to extensive regulation under various Federal laws, including the Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting,

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Fair Debt Collection Practice and Electronic Funds Transfer Acts, as well as various state laws. These statutes impose requirements on the making, enforcement and collection of consumer loans and on the types of disclosures that need to be made in connection with such loans.

     Holding Company Structure. On November 12, 1999, the Gramm-Leach-Bliley Act (“GLBA”) was signed into law. The GLBA permits bank holding companies that qualify for, and elect to be regulated as, financial holding companies, to engage in a wide range of financial activities, including certain activities, such as insurance, merchant banking and real estate investment, that are not permissible for other bank holding companies. Each activity is to be conducted in a separate subsidiary that is regulated by a functional regulator: a state insurance regulator in the case of an insurance subsidiary, the Securities and Exchange Commission in the case of a broker-dealer or investment advisory subsidiary, or the appropriate federal banking regulator in the case of a bank or thrift institution. The Federal Reserve Board is the “umbrella” supervisor of financial holding companies. Section 23A of the Federal Reserve Act, which severely restricts lending by an insured bank subsidiary to nonbank affiliates, remains in place.

     Financial holding companies are permitted to acquire nonbank companies without the prior approval of the Federal Reserve Board, but approval of the Federal Reserve Board continues to be required before acquiring more than 5% of the voting shares of another bank or bank holding company, before merging or consolidating with another bank holding company and before acquiring substantially all the assets of any additional bank. In addition, all acquisitions are reviewed by the Department of Justice for antitrust considerations. In conjunction with the BNP Paribas Merger, we elected to become a financial holding company.

     Dividend Restrictions. As a holding company, the principal source of our cash revenue has been dividends and interest received from our bank subsidiaries. Each of the bank subsidiaries is subject to various federal regulatory restrictions relating to the payment of dividends. For example, if, in the opinion of the FDIC, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), the FDIC may require, after notice and hearing, that such bank cease and desist from such practice. In addition, the Federal Reserve Board has issued a policy statement which provides that, as a general matter, insured banks and bank holding companies should only pay dividends out of current operating earnings. The regulatory capital requirements of the Federal Reserve Board and the FDIC also may limit the ability of the Corporation and its insured depository subsidiaries to pay dividends. See “Prompt Corrective Action” and “Capital Requirements” below.

     There are also statutory limits on the transfer of funds to the Corporation and its nonbanking subsidiaries by its banking subsidiaries, whether in the form of loans or other extensions of credit, investments or asset purchases. Such transfers by a bank subsidiary to any single affiliate are limited in amount to 10% of the bank’s capital and surplus, or 20% in the aggregate to all affiliates. Furthermore, such loans and extensions of credit are required to be collateralized in specified amounts.

     Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each subsidiary bank and to make capital infusions into a troubled subsidiary bank. The Federal Reserve Board may charge a bank holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank. This capital infusion may be required at times when a bank holding company may not have the resources to provide it. Any capital loans by us to one of our subsidiary banks would be subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank.

     In addition, depository institutions insured by the FDIC can be held liable for any losses incurred, or reasonably expected to be incurred, by the FDIC in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default. “Default” is defined generally as the appointment of a conservator or receiver and “in danger of default” is defined generally as the existence of certain conditions indicating that a “default” is likely to occur in the absence of regulatory assistance. Accordingly, in the event that any insured subsidiary of the Corporation causes a loss to the FDIC, other insured subsidiaries of the Corporation could be required to compensate the FDIC by reimbursing it for the amount of such loss. Any such obligation by our insured subsidiaries to reimburse the FDIC would rank senior to their obligations, if any, to the Corporation.

     Prompt Corrective Action. Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), the federal banking agencies are required to take “prompt corrective action” with respect to insured depository institutions that do not meet minimum capital requirements. FDICIA established a five-tier framework for measuring the capital adequacy of insured depository institutions (including Bank of the West and First Hawaiian), with each depository institution being classified into one of the following categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.”

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     Under the regulations adopted by the federal banking agencies to implement these provisions of FDICIA (commonly referred to as the “prompt corrective action” rules), a depository institution is “well capitalized” if it has (i) a total risk-based capital ratio of 10% or greater, (ii) a Tier 1 risk-based capital ratio of 6% or greater, (iii) a leverage ratio of 5% or greater and (iv) is not subject to any written agreement, order or directive to meet and maintain a specific capital level for any capital measure. An “adequately capitalized” depository institution is defined as one that has (i) a total risk-based capital ratio of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or greater and (iii) a leverage ratio of 4% or greater (or 3% or greater in the case of a bank rated a composite 1 under the Uniform Financial Institution Rating System, “CAMELS rating,” established by the Federal Financial Institution Examinations Council). A depository institution is considered (i) “undercapitalized” if it has (A) a total risk-based capital ratio of less than 8%, (B) a Tier 1 risk-based capital ratio of less than 4% or (C) a leverage ratio of less than 4% (or 3% in the case of an institution with a CAMELS rating of 1), (ii) “significantly undercapitalized” if it has (A) a total risk-based capital ratio of less than 6%, (B) a Tier 1 risk-based capital ratio of less than 3% or (C) a leverage ratio of less than 3% and (iii) “critically undercapitalized” if it has a ratio of tangible equity to total assets equal to or less than 2%. An institution may be deemed by the regulators to be in a capitalization category that is lower than is indicated by its actual capital position if, among other things, it receives an unsatisfactory examination rating. At December 31, 2002, all of the Corporation’s subsidiary depository institutions were “well capitalized.”

     FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a cash dividend) or paying any management fees to its holding company if the depository institution is, or would thereafter be, undercapitalized. Undercapitalized depository institutions are subject to growth limitations and are required to submit a capital restoration plan. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company under such guarantee is limited to the lesser of (i) an amount equal to 5% of the depository institution’s total assets at the time it became undercapitalized, or (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.

     Significantly undercapitalized depository institutions may be subject to a number of other requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized institutions may not make any payments of interest or principal on their subordinated debt and are subject to the appointment of a conservator or receiver, generally within 90 days of the date such institution becomes critically undercapitalized. In addition, the FDIC has adopted regulations under FDICIA prohibiting an insured depository institution from accepting brokered deposits (as defined by the regulations) unless the institution is “well capitalized” or is “adequately capitalized” and receives a waiver from the FDIC.

     FDIC Insurance Assessments. The FDIC has implemented a risk-based deposit insurance assessment system under which the assessment rate for an insured institution may vary according to the regulatory capital levels of the institution and other factors (including supervisory evaluations). Depository institutions insured by the BIF which are ranked in the least risky category currently have no annual assessment for deposit insurance while all other banks are required to pay premiums ranging from .03% to .27% of domestic deposits. As a result of the enactment on September 30, 1996 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (the “Deposit Funds Act”), the deposit insurance premium assessment rates for depository institutions insured by the SAIF were reduced, effective January 1, 1997, to the same rates that were applied to depository institutions insured by the BIF. The Deposit Funds Act also provided for a one-time assessment of 65.7 basis points on all SAIF-insured deposits in order to fully recapitalize the SAIF (which assessment was paid by the Corporation in 1996), and imposes annual assessments on all depository institutions to pay interest on bonds issued by the Financing Corporation (the “FICO”) in connection with the resolution of savings association insolvencies occurring prior to 1991. The FICO assessment rate for the first quarter of 2003 was 1.7 basis points. These rate schedules are adjusted quarterly by the FDIC. In addition, the FDIC has authority to impose special assessments from time to time, subject to certain limitations specified in the Deposit Funds Act.

     Capital Requirements. Under the GLBA, our insured depository institutions are subject to regulatory capital guidelines issued by the federal banking agencies. Information with respect to the applicable capital require-

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ments is included in Note 13 Regulatory Capital Requirements, on pages 57 and 58.

     FDICIA required each federal banking agency to revise its risk-based capital standards to ensure that those standards take adequate account of interest rate risk, concentration of credit risk and the risk of nontraditional activities, as well as reflect the actual performance and expected risk of loss on multi-family mortgages. The federal banking agencies have adopted amendments to their respective risk-based capital requirements that explicitly identify concentrations of credit risk and certain risks arising from nontraditional activities, and the management of such risks, as important factors to consider in assessing an institution’s overall capital adequacy. The amendments do not, however, mandate any specific adjustments to the risk-based capital calculations as a result of such factors.

     In August 1996, the federal banking regulators adopted amendments to their risk-based capital rules to incorporate a measure for market risk in foreign exchange and commodity activities and in the trading of debt and equity instruments. Under these amendments, which became effective in 1997, banking institutions with relatively large trading activities are required to calculate their capital charges for market risk using their own internal value-at-risk models (subject to parameters set by the regulators) or, alternatively, risk management techniques developed by the regulators. As a result, these institutions are required to hold capital based on the measure of their market risk exposure in addition to existing capital requirements for credit risk. These institutions are able to satisfy this additional requirement, in part, by issuing short-term subordinated debt that qualifies as Tier 3 capital. The adoption of these amendments did not have a material effect on the Corporation’s business or operations.

     On November 29, 2001, the federal bank regulatory agencies published a final regulation that addresses the capital treatment of recourse arrangements, direct credit substitutes and residual interests. “Recourse” means any retained credit risk associated with any asset transferred by a banking organization that exceeds a pro rata share of the banking organization’s remaining claim on the asset, if any. “Direct credit substitute” means any assumed credit risk associated with any asset or other claim not previously owned by a banking organization that exceeds the banking organization’s pro rata share of the asset or claim, if any. “Residual interest” means any on-balance sheet asset that represent interests retained by a banking organization after a transfer of financial assets that qualifies as a sale for purposes of generally accepted accounting principles, which interests are structured to absorb more than a pro rata share of credit loss relating to the transferred assets. “Residual interests” do not include interests purchased from a third party, except for credit-enhancing interest-only strips (credit-enhancing I/O strips).

     The regulation assesses risk-based capital requirements on recourse obligations, residual interests (except credit-enhancing I/O strips), direct credit substitutes, and senior and subordinated securities in asset securitizations based on ratings assigned by nationally recognized statistical rating agencies. The risk weights range from 20% for a position that is rated AA or better, to 200% for a position that is rated BB. A banking organization that holds a recourse obligation or a direct credit substitute (other than a residual interest) that does not qualify for the ratings-based approach is required by the new regulation to maintain capital against that position and all senior positions in the securitization, but is not required to hold more capital than if assets had not been transferred. A banking organization that holds a residual interest that does not qualify for the ratings-based approach is required to hold capital on a dollar-for-dollar basis against the position and all senior positions, even if the capital charge exceeds the full risk-based capital charge that would have been held against the transferred assets.

     The regulation limits credit-enhancing I/O strips, whether retained or purchased, to 25% of Tier 1 capital, with any excess amount to be deducted from Tier 1 capital and from assets. (The deducted amount is not subject to the dollar-for-dollar capital charge discussed above.) Credit-enhancing I/O strips are not aggregated with non-mortgage servicing assets and purchased credit card relationships for purposes of calculating the 25% limit. The regulation became effective on January 1, 2002 for transactions settled on or after that date and became effective December 31, 2002 for all other transactions. The Corporation does not believe the regulation will have a material effect on its operations or financial position.

     On January 16, 2001, the Basel Committee on Banking Supervision (the “Committee”) proposed a new capital adequacy framework to replace the framework adopted in 1988. Under the new framework, risk weights for certain types of claims, including corporate credits, would be based on ratings assigned by rating agencies. Certain low quality exposures would be assigned a risk weight greater than 100%. Short-term commitments to lend, which currently do not require capital, would be subject to a 20% conversion factor. In addition to this “standardized” approach, banks with more advanced risk management capabilities, which can meet rigorous supervisory standards, can make use of an internal ratings-based approach under which some of the key elements of credit risk, such as the probability of default, will be estimated internally by a bank. The Committee also proposes capital charges for operational risk. The Committee announced on July 10, 2002 that it

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intends to finalize the proposed new capital adequacy requirement by the end of 2003, with implementation in 2006. If adopted by the Committee, the new accord would then be the subject of rulemaking by the U.S. bank regulatory agencies. Because the timing and final content of the proposal are not yet clear, the Corporation cannot predict at this time the potential effect that the adoption of such a proposal will have on its regulatory capital requirements and financial position.

     On January 25, 2002, the federal bank regulatory agencies jointly published a rule establishing special minimum regulatory capital requirements for equity investments in nonfinancial companies, which became effective on April 1, 2002. The rule requires banking organizations to deduct from Tier 1 capital an amount equal to specified percentages of its aggregate nonfinancial investment portfolio, which portfolio is then excluded from risk-weighted assets for purposes of risk-based capital calculations. An 8 percent charge applies to that portion of a banking organization’s aggregate nonfinancial investment portfolio that amounts to less than fifteen percent of the banking organization’s Tier 1 capital. A 12 percent charge applies to the portion of the portfolio (if any) that amounts to between 15 and 24.9 percent of the banking organization’s Tier 1 capital. A 25 percent charge applies to the portion of the portfolio (if any) that amounts to 25 percent or more of the banking organization’s Tier 1 capital. The Corporation does not believe the regulation will have a material impact on its operations or financial position.

     In order for us to remain a financial holding company, Bank of the West and First Hawaiian Bank (as well as each foreign bank that is controlled by BNP Paribas and that has a branch, agency or bank subsidiary in the United States) must remain “well capitalized” and “well managed.” In the case of Bank of the West and First Hawaiian Bank, “well capitalized” has the same meaning as under the “prompt corrective action” guidelines described above and “well managed” means that at its most recent examination it received at least a satisfactory composite rating and at least a satisfactory rating for management.

     Real Estate Activities. The FDIC adopted regulations, effective January 1, 1999, that make it significantly easier for state non-member banks to engage in a variety of real estate investment activities. These regulations generally allow a majority-owned corporate subsidiary of a state non-member bank to make equity investments in real estate if the bank complies with certain investment and transaction limits and satisfies certain capital requirements (after giving effect to its investment in the majority-owned subsidiary). In addition, the regulations permit a subsidiary of an insured state non-member bank to act as a lessor under a real property lease that is the equivalent of a financing transaction, meets certain criteria applicable to the lease and the underlying real estate and does not represent a significant risk to the deposit insurance funds.

Future Legislation

     Legislation relating to banking and other financial services has been introduced from time to time in Congress and is likely to be introduced in the future. If enacted, such legislation could significantly change the competitive environment in which we and our subsidiaries operate. Management cannot predict whether these or any other proposals will be enacted or the ultimate impact of any such legislation on our competitive situation, financial condition or results of operations.

Foreign Operations

     Foreign outstandings are defined as the balances outstanding of cross-border loans, acceptances, interest-bearing deposits with other banks, other interest-bearing investments and any other monetary assets. At December 31, 2002, 2001 and 2000, we had no foreign outstandings to any country which exceeded 1% of total assets. Additional information concerning foreign operations is also included in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 20 International Operations on page 66.

Operating Segments

     Information regarding the Corporation’s operating segments is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 19 Operating Segments on pages 62 through 66.

Item 2. Properties

     Bank of the West leases a site in Walnut Creek, California, which is its primary administrative headquarters. The administrative headquarters office is a 132,000-square-foot, three-story building. Bank of the West also leases 45,698 square feet of executive office space in downtown San Francisco in the same building that houses its San Francisco Main Branch at 180 Montgomery Street. See Note 21 Lease Commitments on page 67. Approximately 26,862 square feet of leased space at 180 Montgomery Street is subleased to BNP Paribas.

     As of December 31, 2002, 109 of Bank of the West’s active branches are located on land owned by Bank of the West. The remaining 188 active branches are located on leasehold properties. Bank of the West also has 24 surplus branch properties, 15 of which are currently leased to others. In addition, Bank of the West leases 47 properties that are utilized for administrative (including warehouses), lease support, management information systems and regional management services. See Note 21

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Lease Commitments on page 67.

     First Hawaiian indirectly (through two subsidiaries) owns all of a city block in downtown Honolulu. The administrative headquarters of the Corporation and First Hawaiian, as well as the main branch of First Hawaiian are located in a modern banking center on this city block. The headquarters building includes 418,000 square feet of gross office space. Information about the lease financing of the headquarters building is included in Note 21 Lease Commitments on page 67.

     As of December 31, 2002, 19 of First Hawaiian’s offices in Hawaii and one in Guam are located on land owned in fee simple by First Hawaiian. The other branches of First Hawaiian in Hawaii, two branches in Guam and one branch in Saipan are situated on leasehold premises or in buildings constructed on leased land. See Note 21 Lease Commitments on page 67. In addition, First Hawaiian owns an operations center which is located on 125,919 square feet of land owned in fee simple by First Hawaiian in an industrial area near downtown Honolulu. First Hawaiian occupies most of this four-story building.

     First Hawaiian owns a five-story, 75,000-square-foot office building, including a branch, which is situated on property owned in fee simple in Maite, Guam, where it maintains a branch.

Item 3. Legal Proceedings

     The information required by this Item is set forth in Note 22 to the Consolidated Financial Statements on pages 67 and 68 of this Form 10-K, and is incorporated herein by reference.

Item 4. Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2002.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

     BancWest is a wholly-owned subsidiary of BNP Paribas and there is no public trading market for BancWest’s common equity.

     State regulations place restrictions on the ability of our bank subsidiaries to pay dividends. Under Hawaii law, First Hawaiian is prohibited from declaring or paying any dividends in excess of its retained earnings. California law generally prohibits Bank of the West from paying cash dividends to the extent such payments exceed the lesser of retained earnings and net income for the three most recent fiscal years (less any distributions to stockholders during such three-year period). At December 31, 2002, the aggregate amount of dividends that such subsidiaries could pay to the Corporation under the foregoing limitations without prior regulatory approval was $363.3 million.

     Here are quarterly and annual cash dividends paid per share data, computed using the common stock and Class A common shares:

     As we no longer have outstanding shares of common stock, future dividends will be paid only on Class A common shares. The declaration and payment of cash dividends are subject to future earnings, capital requirements, financial condition and certain limitations as described in Note 14 to the Consolidated Financial Statements on page 58.

Item 6. Selected Financial Data

GAAP, Core and Cash Earnings

     We analyze our performance on a net income basis determined in accordance with generally accepted accounting principles (“GAAP”), as well as on an operating basis before merger-related, integration and other nonrecurring items, minority interest and/or the effects of the amortization of intangible assets. We refer to the results as “core” and “cash” earnings, respectively. Core earnings and cash earnings (the combination of the effect of adjustments for both cash and core results), as well as information calculated from them and related discussions, are presented as supplementary information in this analysis. This presentation is intended to enhance the readers’ understanding of, and highlight trends in, our core financial results excluding the effects of discrete business acquisitions and other transactions. We include these additional disclosures because this information is both relevant and useful in understanding the performance of the Company as management views it. Core earnings and cash earnings should not be viewed as a substitute for net income, among other gauges of performance, as determined in accordance with GAAP.

     Merger-related, integration and other nonrecurring costs, amortization of intangible assets and other items excluded from net income to derive core and cash earnings may be significant and may not be comparable to those of other companies. See the following table for a reconciliation of net income to core and cash earnings.

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Basis of Presentation

     On December 20, 2001, BNP Paribas acquired all of the outstanding common shares of BancWest. As a result of the transaction, BancWest became a wholly-owned subsidiary of BNP Paribas. The business combination was accounted for as a purchase with BNP Paribas’ accounting basis being “pushed down” to BancWest. See Note 2 to the Consolidated Financial Statements for additional information regarding this business combination. It is generally not appropriate to combine pre- and post-“push down” periods; however, for purposes of comparison only, the following tables combine our results of operations from December 20, 2001 through December 31, 2001 with those for the period January 1, 2001 through December 19, 2001. The combined results will generally serve as comparable amounts to the 12-month periods ended December 31, 2002, 2000, 1999 and 1998 and will be utilized for purposes of providing discussion and analysis of results of operations.

On July 1, 1999, we acquired SierraWest Bancorp. That merger was accounted for as a pooling of interests. Therefore, all financial information has been restated for all periods presented.

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Item 6. Selected Financial Data (continued)

On July 1, 1999, we acquired SierraWest Bancorp. That merger was accounted for as a pooling of interests. Therefore, all financial information has been restated for all periods presented.

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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 its 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:

     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.

Glossary

     See “Glossary of Financial Terms” on page 71 for definitions of certain terms used in this annual report.

Overview

     Our net income during 2002 increased 41.8% over 2001 to a record $361.3 million. These were some of the key events that occurred in 2002:

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     its dominant market position by increasing deposits.

     For further information regarding the Company’s mergers and acquisitions, see Note 2 to the Consolidated Financial Statements on pages 49 through 51.

2002 vs. 2001

     The table below compares our 2002 financial results to 2001. The increases in net income and core earnings are primarily the result of the acquisition of UCB. The acquisition, coupled with organic growth, resulted in higher net interest income, caused mainly by increased loan and lease and deposit volume. Noninterest income also contributed to the increase with increased charges and fees from our larger customer base. Noninterest expense increased in 2002 compared to 2001, primarily as a result of higher employee, occupancy, equipment and other costs resulting from the acquisition of UCB. Although net income and core earnings increased in 2002 over 2001, the return on average tangible assets dipped from 1.49% in 2001 to 1.38% in 2002.

2001 vs. 2000

     The table below compares our 2001 financial results to 2000. The improvement in our financial results is primarily attributed to higher net interest income, caused mainly by increased loan and lease and deposit volume, increased noninterest income, a result of our continuing efforts to diversify our revenue base, and controlled noninterest expense.

Net Interest Income

2002 vs. 2001

     The increase in our net interest income in 2002 was principally the result of an $8.8 billion, or 51%, increase in average earning assets. The increase in our average earning assets was primarily the result of growth in Bank of the West resulting from the UCB acquisition. Also contributing to the increase was First Hawaiian’s acquisition of branches in Guam and Saipan from Union Bank of California. The increase in average earning assets was partially offset by a 15-basis-point (1% equals 100 basis points) reduction in our net interest margin. The continuing effect of rate reductions by the Federal Reserve Board’s Federal Open Market Committee has reduced the yield on earning assets as well as rates paid on sources of funds.

2001 vs. 2000

     The increase in our net interest income in 2001 was principally the result of a $1.6 billion, or 9.9%, increase in average earning assets. The increase in our average earning assets was primarily a result of growth in Bank of the West and branch acquisitions in Nevada, New Mexico, Guam and Saipan. The increase in average earning assets was partially offset by a two-basis-point reduction in our net interest margin. The Federal Reserve Board’s Federal Open Market Committee reduced the key Federal Funds rate 11 times by a total of 425 basis points in 2001. These decreases reduced the yield on earning assets, but also the rates paid on sources of funds.

Net Interest Margin

2002 vs. 2001

     The net interest margin decreased by 15 basis points in 2002 from 2001 due primarily to the effects of the decreasing interest rate environment that began in 2001 and continued into 2002. Although the decreasing rate environment reduced our yield on earning assets by 129 basis points to 6.37% in 2002 from 7.66% in 2001, it also decreased our rate paid on sources of funds by 114 basis points to 1.79% in 2002 from 2.93% in 2001. Therefore, our net interest margin decreased by 15 basis points in 2002. Partially offsetting the decrease in the yield on average earning assets, average noninterest-bearing deposits increased by $2.5 billion, or 80.4%, in 2002 compared to 2001. The primary reason for the increase was the UCB acquisition by Bank of the West.

2001 vs. 2000

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     The net interest margin decreased by 2 basis points in 2001 from 2000 due primarily to the effects of the decreasing interest rate environment that was experienced for most of 2001. Although the decreasing rate environment reduced our yield on earning assets by 66 basis points to 7.66% in 2001 from 8.32% in 2000, it also decreased our rate paid on sources of funds by 64 basis points to 2.93% in 2001 from 3.57% in 2000. Therefore, our net interest margin decreased by two basis points in 2001. Partially offsetting the decrease in the yield on average earning assets, average noninterest-bearing deposits increased by $431 million, or 15.8%, in 2001 compared to 2000.

Average Earning Assets

2002 vs. 2001

     The UCB acquisition and the continuing growth of Bank of the West are primarily responsible for the increase in average earning assets. In particular, the $7.8 billion, or 53.2%, increase in average total loans and leases was primarily due to the UCB acquisition. Average total investment securities also increased by $1.0 billion, or 46.3%, to $3.3 billion in 2002 over 2001.

2001 vs. 2000

     The continuing growth of Bank of the West and our branch acquisitions in Nevada, New Mexico, Guam and Saipan were primarily responsible for the increase in average earning assets. In particular, the $1.3 billion, or 9.8%, increase in average total loans and leases was primarily due to growth in the Western United States. Average total investment securities also increased by $177.5 million, or 8.5%, to $2.3 billion in 2001 over 2000.

Average Loans and Leases

2002 vs. 2001

     The increase in average loans and leases was primarily due to the UCB acquisition and growth in Bank of the West. All categories, except lease financing, increased significantly due to the UCB acquisition. Average loans and leases in the First Hawaiian operating segment decreased in 2002 as compared to 2001, primarily due to the planned reduction in certain syndicated national credits, partially offset by loans and leases acquired from Union Bank of California in the fourth quarter of 2001.

2001 vs. 2000

     The increase in average loans and leases was primarily due to growth in Bank of the West’s consumer loan and lease financing portfolios. In addition to growth from its existing branch network, average loans and leases in the Bank of the West operating segment also increased due to the acquisition of branches in Nevada and New Mexico. Average loans and leases in the First Hawaiian operating segment decreased in 2001 as compared to 2000, primarily due to the planned reduction in certain syndicated national credits, partially offset by loans and leases acquired in the Guam and Saipan branch acquisition.

Average Interest-Bearing Deposits and Liabilities

2002 vs. 2001

     The increase in average interest-bearing deposits and liabilities in 2002 over 2001 was principally due to growth in our customer deposit base, primarily in Bank of the West. Average deposits increased due to the UCB acquisition and the Guam and Saipan branches acquired by First Hawaiian from Union Bank of California. Average short-term borrowings increased primarily due to higher Federal Home Loan Bank advances and the $800 million in short-term debt financing for the UCB acquisition. Average long-term debt and capital securities increased primarily due to the inclusion of $1.550 billion in long-term debt entered into with BNP Paribas in conjunction with the BNP Paribas Merger for all of 2002, as opposed to only a portion of December 2001. In November 2002, we recorded an additional $800 million in long-term debt in connection with the UCB acquisition.

2001 vs. 2000

     The increase in average interest-bearing deposits and liabilities in 2001 over 2000 was principally caused by growth in our customer deposit base, primarily in Bank of the West. Our average deposits also increased due to branch acquisitions in Nevada, New Mexico, Guam and Saipan. Average long-term debt and capital securities increased in 2001 over 2000 primarily due to the inclusion of the $150 million in BWE Capital Securities for all of 2001, as opposed to only a portion of December 2000. Also affecting average long-term debt was the $1.550 billion in long-term debt entered into with BNP Paribas in conjunction with the BNP Paribas Merger.

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Table 1: Average Balances, Interest Income and Expense, and Yields and Rates (Taxable-Equivalent Basis)

     On December 20, 2001, BNP Paribas acquired all of the outstanding common shares of BancWest Corporation. As a result of the transaction, the Corporation became a wholly-owned subsidiary of BNP Paribas. The business combination was accounted for as a purchase with BNP Paribas’ accounting basis being “pushed down” to BancWest Corporation. See Note 2 to the Consolidated Financial Statements for additional information regarding this business combination. It is generally not appropriate to combine pre- and post-“push-down” periods; however, for purposes of comparison only, the following tables combine our consolidated results of operations from December 20, 2001 through December 31, 2001 with those for the period January 1, 2001 through December 19, 2001. The combined results will generally serve as comparable amounts to the 12-month periods ended December 31, 2002 and 2000 and will be utilized for purposes of providing discussion and analysis of consolidated results of operations.

     The following table sets forth the condensed consolidated average balance sheets, an analysis of interest income/expense and average yield/rate for each major category of earning assets and interest-bearing deposits and liabilities for the years indicated on a taxable-equivalent basis. The taxable-equivalent adjustment is made for items exempt from Federal income taxes (assuming a 35% tax rate for 2002, 2001 and 2000) to make them comparable with taxable items before any income taxes are applied.