FIRST HAWAIIAN, INC. - Annual Report: 2003 (Form 10-K)

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 0-7949

BancWest Corporation

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

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

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 þ

      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, 2004 was:

Documents Incorporated by Reference

Portions of the following documents are incorporated by reference in this Form 10-K:

Table of Contents

TABLE OF CONTENTS

1

Table of Contents

2

Table of Contents

PART I

General

      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 and BancWest Investment Services (“BWIS”), a broker-dealer registered with the National Association of Securities Dealers (“NASD”). Bank of the West, First Hawaiian Bank, FHL and BWIS 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, 2003, the Corporation had consolidated total assets of $38.4 billion, total loans and leases of $25.7 billion, total deposits of $26.4 billion and total stockholder’s equity of $4.3 billion.

      On December 20, 2001, BNP Paribas acquired all of the outstanding stock of BancWest Corporation that BNP Paribas did not already own in a cash merger (the “BNP Paribas Merger”). As a result of the BNP Paribas 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.

      On March 16, 2004, BancWest announced that it signed an agreement to acquire Community First Bankshares, Inc. (Community First), whereby BancWest will pay $32.25 for each Community First share in a cash transaction valued at $1.2 billion. Refer to Note 26 to the Consolidated Financial Statements of this Form 10-K for further details.

      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.

      At December 31, 2003, Bank of the West was the third largest bank headquartered in California, with total assets of approximately $29.3 billion, total loans and leases of $20.7 billion, total deposits of approximately $19.4 billion and total stockholders’ equity of $4.8 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 295 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 a Bank of the West subsidiary 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 institutions, on a servicing released basis. Essex has

3

Table of Contents

      Bank of the West has been a leader in the improvement of the social and economic health of the communities in which it operates. The Bank has a long commitment to the development of housing for low-to-moderate income people through loans, investment in intermediaries and volunteer participation in such organizations as California Community Reinvestment Corporation, California Environmental Redevelopment Fund and the Low Income Housing Fund.

      Bank of the West has set a goal of $30 billion in loans, investments, contributions and services to low- and moderate-income individuals, small businesses and community-based organizations over a 10-year period. This initiative was announced in March 2002 and since its announcement, Bank of the West has contributed $11 billion to–date, $6 billion in 2003 and $5 billion in 2002.

      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 Bank 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 Bank, the oldest financial institution in Hawaii, was established as Bishop & Co. in 1858 in Honolulu.

      At December 31, 2003, First Hawaiian Bank had total assets of $9.9 billion, total loans and leases of $5.0 billion, total deposits of $7.1 billion and stockholder’s equity of $1.9 billion. It is Hawaii’s largest bank based on total assets.

      First Hawaiian Bank 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 through 61 branches in Hawaii, Guam and Saipan.

      First Hawaiian Bank also conducts business through the following subsidiaries:

      In an effort to support affordable housing and as part of its community reinvestment program, First Hawaiian Bank 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 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 Bank’s participation in these HCRC loans is included in its loan portfolio.

4

Table of Contents

      To further enhance First Hawaiian Bank’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 $20.0 million tax-credit equity fund (“Hawaii Affordable Housing Fund II”) and a $12.5 million tax-credit equity fund (“Hawaii Affordable Housing Fund III”). A fourth tax-credit equity fund is being contemplated to continue the support of additional affordable housing projects.

      Hawaii Affordable Housing Fund II and Hawaii Affordable Housing Fund III (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 Bank’s investments in these Funds are included in other assets. Projects associated with the Hawaii Affordable Housing Fund I were completed in 2003.

      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, 2003, FHL’s net investment in leases amounted to $52.3 million and its total assets were $52.9 million.

      BWIS was purchased from Primevest Financial on November 10, 2003. At December 31, 2003, BWIS had total assets of $2.6 million. BWIS is a broker-dealer registered with the NASD and sells mutual funds and annuities to the general public from locations in the branches of its affiliates, Bank of the West and First Hawaiian Bank.

Employees

      At December 31, 2003, the Corporation had 7,461 full-time equivalent employees. Bank of the West and First Hawaiian Bank employed 5,863 and 2,264 persons, including part-time employees, 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 investment securities, 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

5

Table of Contents

      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 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 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.

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, 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 regulated by a functional regulator: a state insurance regulator in the case of insurance activities, the Securities and Exchange Commission in the case of broker-dealer or investment advisory activities, 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 or savings association. 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

6

Table of Contents

      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 Bank), with each depository institution being classified into one of the following categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.”

      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, 2003, all of the Corporation’s subsidiary depository institutions were “well capitalized.”

7

Table of Contents

      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 3 to 27 basis points 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 2004 was 1.5 basis points annualized. 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 requirements is included in Note 15, Regulatory Capital Requirements.

      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

8

Table of Contents

      On November 29, 2001, the federal bank regulatory agencies published a 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 represents 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 regulation did not have a material effect on the Corporation’s operations or financial position.

      The U.S. federal bank regulatory agencies’ risk-based capital guidelines are based upon the 1988 capital accord of the Basel Committee on Banking Supervision (the “Basel Committee”). The Basel Committee is a committee of central banks and bank supervisors from the major industrialized countries that develops broad policy guidelines that each country’s supervisors can use to determine the supervisory policies they apply. In January 2001, the Basel Committee released a proposal to replace the 1988 capital accord with a new capital accord that would set capital requirements for operational risk and refine the existing capital requirements for credit risk exposures. Operational risk is defined to mean the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. The 1988 capital accord does not include separate capital requirements for operational risk. The Basel Committee has stated that its objective is to have member countries implement the new accord at year-end 2006. The ultimate timing for a new accord, and the specifics of capital assessments for addressing operational risk, are uncertain. However, the Corporation expects that a new capital accord addressing operational risk will eventually be adopted by the Basel Committee and implemented by the U.S. federal bank regulatory agencies. The new capital requirements that may arise out of a new Basel Committee capital accord could increase minimum capital requirements applicable to the Corporation.

9

Table of Contents

      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 their most recent examination the banks received at least a satisfactory composite rating and at least a satisfactory rating for management.

      The USA PATRIOT Act. On October 26, 2001, President Bush signed into law the USA PATRIOT Act of 2001 (the “Act”). The Act includes numerous provisions designed to fight international money laundering and to block terrorist access to the U.S. financial system. The provisions of the Act generally affect banking institutions, broker-dealers and certain other financial institutions, and require all “financial institutions,” as defined in the Act, to establish anti-money laundering compliance and due diligence programs. The Act also grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on subsidiary operations. We believe the Corporation’s programs satisfy the requirements of the Act.

      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, 2003, 2002 and 2001, 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 22, International Operations.

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 21, Operating Segments.

      The Corporation’s website is www.bancwestcorp.com. We make available free of charge on our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current report on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act. These reports are posted on our website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission.

      Bank of the West leases a site in Walnut Creek, California, which is its primary administrative headquarters. The administrative headquarters office is a 133,000-square-foot, three-story building. Bank of

10

Table of Contents

      As of December 31, 2003, 105 of Bank of the West’s active branches are located on land owned by Bank of the West. The remaining 190 active branches are located on leasehold properties. Bank of the West also has 10 surplus branch properties, 5 of which are currently subleased to others. Bank of the West leases 24 properties that are utilized for administrative (including warehouses), lease support, management information systems and regional management services and 21 additional office facilities.

      First Hawaiian Bank indirectly (through two subsidiaries) owns a city block in downtown Honolulu. The administrative headquarters of the Corporation and First Hawaiian Bank, as well as the main branch of First Hawaiian Bank, are located in a modern banking center on this city block. That headquarters building, First Hawaiian Center (“FHC”), includes 418,000 square feet of office space. FHC was constructed and financed by a nonrelated third party, REFIRST, Inc. We held an operating lease for FHC with REFIRST, Inc. that terminated on December 1, 2003. At the end of the term, we used cash to repay $193.9 million in debt and acquire all interests in FHC held by REFIRST, Inc. For additional information concerning REFIRST, Inc., see Note 5 to the Consolidated Financial Statements.

      As of December 31, 2003, 19 of First Hawaiian Bank’s offices in Hawaii and one in Guam are located on land owned in fee simple by First Hawaiian Bank. The other branches of First Hawaiian Bank in Hawaii, two branches in Guam and one branch in Saipan are situated on leasehold premises or in buildings constructed on leased land. In addition, First Hawaiian Bank owns an operations center which is located on approximately 126,000 square feet of land owned in fee simple by First Hawaiian Bank in an industrial area near downtown Honolulu. First Hawaiian Bank occupies most of this four-story building.

      First Hawaiian Bank 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.

      See Note 9, Premises and equipment, for further information.

      The information required by this Item is set forth in Note 23 to the Consolidated Financial Statements of this Form 10-K, and is incorporated herein by reference.

      No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2003.

PART II

      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 Bank 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, 2003, the aggregate amount of dividends that such subsidiaries could pay to the Corporation under the foregoing limitations without prior regulatory approval was $810.5 million.

11

Table of Contents

      During the years ended December 31, 2003 and 2002, no quarterly or annual cash dividends were paid on the Class A common stock. During the year ended December 31, 2001, the Company paid quarterly cash dividends totaling $0.80 per share of common stock and Class A common stock.

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, financial information for the period from December 20, 2001 through December 31, 2001 was not material and certain information presented in this section combines the Company’s consolidated results of operations from December 20, 2001 to December 31, 2001 with those for the period from January 1, 2001 to December 19, 2001. These combined results for 2001 will generally serve as comparable amounts to the 12-month periods ended December 31, 2003, 2002, 2000 and 1999 and will be utilized for purposes of providing discussion and analysis of results of operations.

12

Table of Contents

13

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

      On July 1, 1999, we acquired SierraWest Bancorp. That merger was accounted for as a pooling of interests.

      On March 15, 2002 the Company completed its acquisition of all of the outstanding common stock of UCB. The acquisition was accounted for as a purchase.

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:

      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.

14

Table of Contents

      The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. Our actual results could differ from the results contemplated by these forward-looking statements due to certain factors, including those discussed in Item 7 and elsewhere in this report.

Glossary

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

Overview

      Headquartered in Honolulu, Hawaii, with offices in San Francisco, BancWest is a financial holding company with assets of $38.4 billion at December 31, 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 Bank, 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.

      BancWest reported net income of $436.6 million for the year ended December 31, 2003, compared with $361.3 million for the year ended December 31, 2002. Net interest income was $1.298 billion compared with $1.194 billion, primarily due to an increase in interest earning assets resulting from organic growth and the full year impact of the UCB acquisition. Average loans increased by $2.4 billion; average investment securities increased by $1.6 billion. The Company increased its consumer lending and purchased residential mortgage loans and securities in a year when commercial borrowing was still relatively slow. The net interest margin decreased 26 basis points (1% equals 100 basis points) as a declining interest rate environment caused rates on interest earning assets to decrease more than rates paid on funding sources. Noninterest income was $387.3 million compared with $332.4 million. The increase was primarily due to increased service charges on deposit accounts and other service charges and fees related to broker servicing fees, higher commissions from the issuance of letters of credit, and higher merchant services fees. The increase in noninterest income is also impacted by higher gains on the sale of lease residual interests, OREO property and miscellaneous assets as well as increased revenue from derivative sale activities and the full year impact of the UCB acquisition. The Company’s strategy to increase noninterest income included growth in average deposit balances, repricing efforts in account analysis as well as growth in debit card interchange revenue. The Company also focused on niche markets where the Company would have a competitive advantage in growing its portfolio related to equipment leasing, and SBA, church and healthcare lending. Noninterest expense was $892.8 million compared with $836.1 million, primarily due to increased employee salaries and benefits expense resulting from the full year impact of the UCB acquisition and the increased cost of healthcare and retirement benefits, and other noninterest expense related to depreciation on software and general liability and property insurance.

      BancWest had total assets of $38.4 billion at December 31, 2003, up 10.4% from a year earlier. Investment securities totaled $5.9 billion, an increase of 50.4% from the same date in 2002. Loans and leases totaled $25.7 billion, up 6.5% from the prior year. Deposits were $26.4 billion, up 7.5% from a year earlier.

      BancWest’s nonperforming assets were reduced to 0.59% of loans, leases and foreclosed properties at December 31, 2003, an improvement from 1.02% at December 31, 2002. The provision for loan and lease losses was $81.3 million compared to $95.4 million. BancWest’s allowance for loan and lease losses was 1.52% of total loans and leases at December 31, 2003, compared to 1.59% at December 31, 2002. The decrease in nonperforming assets was primarily due to loan prepayments and sales. Loan and lease charge-offs and workouts also contributed to the decrease.

Critical Accounting Estimates

      The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make a number of judgments, estimates and

15

Table of Contents

      Our accounting policies are discussed in detail in the notes to the Consolidated Financial Statements, Note 1 Summary of Significant Accounting Policies. Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. We have identified the following accounting estimates that we believe are material due to the levels of subjectivity and judgment necessary to account for uncertain matters or where these matters are particularly subject to change.

16

Table of Contents

Results of Operations

      Net interest income for the year ended December 31, 2003 increased 8.7% to $1.298 billion as compared with $1.194 billion for the prior year.

      The increase in net interest income was principally the result of a $4.0 billion, or 15%, increase in average earning assets. The increase in our average earning assets was primarily the result of internal growth in loans, leases and investment securities within Bank of the West and First Hawaiian Bank, as well as the earning assets obtained from UCB contributing for a full year during 2003 versus only nine and one half months during 2002. The increase in average earning assets was partially offset by a 26 basis point reduction in our net interest margin. The continuing effect of historically low interest rates has reduced the yield on earning assets as well as rates paid on sources of funds.

      The increase in net interest income 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 Bank’s

17

Table of Contents

      The net interest margin decreased by 26 basis points due primarily to the effects of the decreasing interest rate environment that continued into 2003. While the decreasing rate environment reduced our yield on earning assets by 77 basis points to 5.60% from 6.37%, it also decreased our rate paid on sources of funds by 51 basis points to 1.28% from 1.79%. Consequently, our net interest margin decreased by 26 basis points in 2003. Also offsetting the decrease in the yield on average earning assets, average noninterest-bearing deposits maintained by retail and commercial customers in both banks increased by $1.4 billion, or 25.5%. Higher yielding average domestic time deposits decreased 7.7% due, in part, to maturities of certificates originated in a higher interest rate environment.

      The net interest margin decreased by 15 basis points due primarily to the effects of the decreasing interest rate environment mentioned earlier. Although the decreasing rate environment reduced our yield on earning assets by 129 basis points to 6.37% from 7.66%, it also decreased our rate paid on sources of funds by 114 basis points to 1.79% from 2.93%. As a result, our net interest margin decreased by 15 basis points. Partially offsetting the decrease in the yield on average earning assets, average noninterest-bearing deposits increased by $2.5 billion, or 80.4%. The primary reason for the increase was the UCB acquisition in March 2002.

     Average Earning Assets

     2003 as Compared with 2002

      The full-year contribution of earning assets from the UCB acquisition, continuing internal growth of Bank of the West’s loan and lease portfolio and higher levels of investment securities in both Banks, are primarily responsible for the increase in average earning assets. The $2.4 billion, or 10.8%, increase in average total loans and leases was primarily due to increased consumer lending, residential mortgages and the UCB acquisition. As commercial lending was relatively slow in 2003, funds were used to purchase residential mortgages as well as investment securities. Consequently, average total investment securities also increased to $4.9 billion, up $1.6 billion, or 47.8%.

     2002 as Compared with 2001

      The UCB acquisition and the continuing growth of Bank of the West’s loans and leases are primarily responsible for the increase in average earning assets. Average loans increased $7.8 billion, or 53.2%, primarily due to the UCB acquisition. Average total investment securities increased by $1.0 billion, or 45.1%, to $3.3 billion.

     Average Loans and Leases

     2003 as Compared with 2002

      The increase in average loans and leases was primarily due to the full-year contribution of loans acquired through UCB and growth in Bank of the West. Average consumer loans within Bank of the West increased approximately $1.0 billion, or 18.9%, primarily due to growth in financing for autos, recreational vehicles and pleasure boats, while purchases increased the average residential mortgage portfolio. Average loans and leases in First Hawaiian Bank decreased slightly, primarily due to the planned reduction in certain syndicated national credits, partially offset by increased consumer loans.

18

Table of Contents

     2002 as Compared with 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 First Hawaiian Bank decreased, 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.

     Average Interest-Bearing Deposits and Liabilities

     2003 as Compared with 2002

      The increase in average interest-bearing deposits and liabilities was primarily due to an increase in average long-term debt and growth in our customer deposit base. Average interest-bearing deposits increased due to the full-year contribution to averages from the UCB acquisition, as well as internal growth in the demand deposit and interest-bearing checking, regular and money market savings portfolios. These increases were partially offset by a decrease in average certificates of deposit. Average short-term borrowings decreased primarily due to the replacement of $800 million of short-term financing, entered into with BNP Paribas in conjunction with the BNP Paribas Merger, with long-term financing in November 2002. The reduction of this short-term borrowing for all of 2003, as opposed to only a portion of 2002, is partially responsible for the decrease in average short-term debt, while increasing average long-term debt. Long-term borrowings from Federal Home Loan Bank also increased average long-term debt.

     2002 as Compared with 2001

      The increase in average deposits and liabilities was principally due to growth in our customer deposit base. Average deposits increased due to the UCB acquisition as well as the Guam and Saipan branches acquired by First Hawaiian Bank 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 $1.550 billion in long-term debt, issued to BNP Paribas in conjunction with the BNP Paribas Merger, which was outstanding for all of 2002, as opposed to only a portion of December 2001.

19

Table of Contents

      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 2003, 2002 and 2001) to make them comparable with taxable items before any income taxes are applied. Certain information presented in this section combines the Company’s consolidated results of operations from December 20, 2001 to December 31, 2001 with those for the period from January 1, 2001 to December 19, 2001. Financial information for the period from December 20, 2001 through December 31, 2001 was not material.