~~U N I T E D S T A T E S~~UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

~~Quarterly Report Pursuant to Section~~QUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) ~~of the Securities Exchange Act of~~OF THE SECURITIES EXCHANGE ACT OF 1934 ~~for~~

For the quarterly period ended~~September 30, 2002~~ March 31, 2003

~~Transition Report Pursuant to Section~~TRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) ~~of the Securities Exchange Act of~~OF THE SECURITIES EXCHANGE ACT OF 1934 ~~for~~

For the transition period from ~~________________~~ to ~~_______________~~

Commission File Number 1-6887

BANK OF HAWAII CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		99-0148992
(State of incorporation)		(IRS Employer Identification No.)


130 Merchant Street, Honolulu, Hawaii		96813
(Address of principal executive offices)		(Zip Code)

~~(808) 538-4727~~1-(888)-643-3888

(Registrant’s telephone number, including area code)

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, and (2) has been subject to such filing requirements for the past 90 days.

Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 Par Value; outstanding at ~~October 22, 2002~~April 25, 2003 – ~~64,825,194~~60,361,874 shares

~~Index~~

Bank of Hawaii Corporation ~~and Subsidiaries~~

Form 10-Q

INDEX

		~~Part I. — Financial Information~~Page

~~Item 1.~~ Part I. – Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of ~~Income—~~Income – Three months ended March 31, 2003 and ~~Nine months ended September 30,~~ 2002 ~~and 2001~~	3

	Consolidated Statements of ~~Condition—September 30, 2002,~~Condition – March 31, 2003, December 31, ~~2001,~~2002, and ~~September 30, 2001~~March 31, 2002	4

	Consolidated Statements of Shareholders’ ~~Equity—Nine~~Equity – Three months ended ~~September 30,~~March 31, 2003 and 2002 ~~and 2001~~	5

	Consolidated Statements of Cash ~~Flows—Nine~~Flows – Three months ended ~~September 30,~~March 31, 2003 and 2002 ~~and 2001~~	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosure of Market Risk	32

Item 4.	Controls and Procedures	32

Part II. —– Other Information

Item 6.4.	Submission of Matters to a Vote of Shareholders	33

Item 6.	Exhibits and Reports on Form 8-K	33

Signatures		34

Certifications		35

Bank of Hawaii Corporation and ~~subsidiaries~~Subsidiaries

Consolidated Statements of Income (Unaudited)

Three Months Ended
September 30

Nine Months Ended September 30
(dollars in thousands except per share amounts)
2002

2001

2002

2001
Interest Income
Interest and Fees on Loan and Leases    $ 89,335    $ 143,205    $ 280,421    $ 495,732
Income on Investment Securities—Held to Maturity    4,847    8,007    14,939    27,120
Income on Investment Securities—Available for Sale    25,291    31,390    78,886    107,982
Deposits    5,384    9,413    16,442    19,738
Funds Sold and Security Resale Agreements    914    1,781    2,669    4,231
Other    1,575    1,384    4,302    3,948
Total Interest Income    127,346    195,180    397,659    658,751
Interest Expense
Deposits    20,547    50,145    66,691    182,147
Security Repurchase Agreements    7,039    17,576    25,588    63,049
Funds Purchased    299    1,279    775    9,735
Short-Term Borrowings    334    2,019    1,272    8,013
Long-Term Debt    6,946    12,459    23,320    42,232
Total Interest Expense    35,165    83,478    117,646    305,176
Net Interest Income    92,181    111,702    280,013    353,575
Provision for Loan and Lease Losses    —      919    11,616    59,798
Net Interest Income After Provision for Loan and Lease Losses    92,181    110,783    268,397    293,777
Non-Interest Income
Trust and Asset Management    13,655    13,999    42,648    45,041
Mortgage Banking    4,037    10,411    15,300    20,192
Service Charges on Deposit Accounts    7,925    9,592    24,291    29,409
Fees, Exchange, and Other Service Charges    13,114    17,587    38,631    60,837
Gain on Sales of Banking Operations, Net of Venture Investment Losses    —      47,771    —      144,680
Investment Securities Gains    —      935    3    32,914
Other    9,517    13,060    30,311    38,720
Total Non-Interest Income    48,248    113,355    151,184    371,793
Non-Interest Expense
Salaries    38,837    50,341    117,437    149,791
Pensions and Other Employee Benefits    7,377    9,646    26,764    34,070
Net Occupancy Expense    9,597    11,422    28,511    35,447
Net Equipment Expense    10,058    12,443    30,176    38,929
Goodwill Amortization    —      3,333    —      10,916
Restructuring and Other Related Costs    —      2,986    1,979    86,329
Information Technology Systems Replacement Project    6,576    —      6,576    —
Other    20,509    32,397    64,297    100,727
Total Non-Interest Expense    92,954    122,568    275,740    456,209
Income Before Income Taxes    47,475    101,570    143,841    209,361
Provision for Income Taxes    17,275    70,511    51,569    117,886
Net Income    $ 30,200    $ 31,059    $ 92,272    $ 91,475
Basic Earnings Per Share    $ 0.44    $ 0.39    $ 1.30    $ 1.14
Diluted Earnings Per Share    $ 0.43    $ 0.37    $ 1.26    $ 1.11
Dividends Declared Per Share    $ 0.19    $ 0.18    $ 0.55    $ 0.54
Basic Weighted Average Shares    67,893,086    80,539,330    71,148,663    80,261,610
Diluted Weighted Average Shares    69,910,264    83,418,955    73,158,354    82,497,107

	Three Months Ended
(dollars in thousands except per share amounts)	March 31, 2003		March 31, 2002
Interest Income
Interest and Fees on Loans and Leases	$	85,773	$	98,645
Income on Investment Securities – Held to Maturity		2,283		5,145
Income on Investment Securities – Available for Sale		22,463		27,193
Deposits		1,307		5,047
Funds Sold and Security Resale Agreements		764		1,003
Other		1,189		1,332

Total Interest Income		113,779		138,365
Interest Expense
Deposits		14,447		23,978
Security Repurchase Agreements		2,242		10,293
Funds Purchased		205		231
Short-Term Borrowings		24		649
Long-Term Debt		5,861		8,319

Total Interest Expense		22,779		43,470

Net Interest Income		91,000		94,895
Provision for Loan and Lease Losses		—		8,292

Net Interest Income After Provision for Loan and Lease Losses		91,000		86,603
Non-Interest Income
Trust and Asset Management		13,190		14,818
Mortgage Banking		283		7,957
Service Charges on Deposit Accounts		8,950		8,410
Fees, Exchange, and Other Service Charges		12,980		12,452
Investment Securities Gains		583		—
Insurance		2,982		2,599
Other		5,785		6,789

Total Non-Interest Income		44,753		53,025
Non-Interest Expense
Salaries		36,459		39,187
Pensions and Other Employee Benefits		9,970		9,996
Net Occupancy Expense		9,613		9,593
Net Equipment Expense		9,748		10,121
Restructuring and Other Related Costs		—		1,979
Information Technology Systems Replacement Project		7,417		—
Other		16,993		20,547

Total Non-Interest Expense		90,200		91,423

Income Before Income Taxes		45,553		48,205
Provision for Income Taxes		15,752		17,149

Net Income	$	29,801	$	31,056

Basic Earnings Per Share	$	0.49	$	0.42
Diluted Earnings Per Share	$	0.47	$	0.41
Dividends Per Share	$	0.19	$	0.18
Basic Weighted Average Shares		61,294,460		73,312,573
Diluted Weighted Average Shares		63,535,609		75,199,181

See accompanying notes to the consolidated financial statements.

Bank of Hawaii Corporation and ~~subsidiaries~~Subsidiaries

Consolidated Statements of Condition (Unaudited)

September 30

December 31

September 30

(dollars in thousands)
2002

2001

2001

Assets

Interest-Bearing Deposits    $ 1,019,823    $ 1,101,974    $ 1,227,095
Investment Securities—Held to Maturity
    (Market Value of $286,526, $407,838, and $471,579, respectively)
   277,856    396,216    460,461
Investment Securities—Available for Sale    2,241,106    2,001,420    2,064,141
Securities Purchased Under Agreements to Resell    —      —      7,639
Funds Sold    95,000    115,000    162,830
Loans Held for Sale    30,863    456,709    228,056
Loans    5,258,675    5,652,518    6,766,063
Allowance for Loan and Lease Losses    (154,475 )    (158,979 )    (182,541 )
Net Loans    5,104,200    5,493,539    6,583,522
Total Earning Assets              8,768,848              9,564,858            10,733,744
Cash and Non-Interest Bearing Deposits    328,135    405,981    426,884
Premises and Equipment    182,230    196,171    223,528
Customers’ Acceptance Liability    1,106    593    1,310
Accrued Interest Receivable    38,839    42,687    55,968
Foreclosed Real Estate    17,568    17,174    37,240
Mortgage Servicing Rights    29,911    27,291    23,899
Goodwill    36,216    36,216    67,617
Other Assets    299,190    336,826    373,949
Total Assets    $ 9,702,043    $ 10,627,797    $ 11,944,139
Liabilities

Domestic Deposits
Demand—Non-Interest Bearing    $ 1,593,137    $ 1,548,322    $ 1,428,454
—Interest Bearing    2,063,426    1,926,018    1,792,155
Savings    1,382,719    967,825    813,427
Time    1,549,693    1,927,778    2,186,849
Foreign Deposits
Demand—Non-Interest Bearing    —      2    321,706
Time Due to Banks    4,387    230,247    30,357
Other Savings and Time    33,681    73,404    826,789
Total Deposits    6,627,043    6,673,596    7,399,737
Securities Sold Under Agreements to Repurchase    1,089,287    1,643,444    1,833,091
Funds Purchased    116,775    55,800    129,715
Current Maturities of Long-Term Debt    15,975    100,670    216,670
Short-Term Borrowings    17,941    134,222    138,910
Banker’s Acceptances Outstanding    1,106    593    1,310
Retirement Expense Payable    38,317    36,175    36,775
Accrued Interest Payable    21,870    29,762    49,057
Taxes Payable    191,519    138,366    224,915
Other Liabilities    87,709    98,422    65,166
Long-Term Debt    393,795    469,735    477,738
Total Liabilities    8,601,337    9,380,785    10,573,084
Shareholders’ Equity

Common Stock ($.01 par value), authorized 500,000,000 shares; issued / outstanding: September 2002—81,310,042 / 66,048,072; December 2001—81,377,241 / 73,218,326; September 2001—81,365,600 / 79,195,668    806    806    806
Capital Surplus    371,098    367,672    367,394
Accumulated Other Comprehensive Income    26,038    22,761    24,579
Retained Earnings    1,100,016    1,055,424    1,044,039
Deferred Stock Grants    (2,886 )    (7,637 )    (14,679 )
Treasury Stock, at Cost (Shares: September 2002—15,261,970; December 2001—8,158,915; September 2001—2,169,932)    (394,366 )    (192,014 )    (51,084 )
Total Shareholders’ Equity    1,100,706    1,247,012    1,371,055
Total Liabilities and Shareholders’ Equity    $ 9,702,043    $ 10,627,797    $ 11,944,139

(dollars in thousands)	March 31, 2003			December 31, 2002			March 31, 2002
Assets
Interest-Bearing Deposits	$	157,067		$	549,978		$	1,347,611
Investment Securities – Held to Maturity (Market Value of $180,043, $236,016 and $354,187, respectively)		175,600			229,720			344,723
Investment Securities – Available for Sale		2,497,508			2,287,201			1,980,378
Funds Sold		175,000			195,000			135,000
Loans Held for Sale		47,269			40,118			99,773
Loans		5,565,371			5,359,004			5,601,580
Allowance for Loan and Lease Losses		(140,028	)		(142,853	)		(158,979	)

Net Loans		5,425,343			5,216,151			5,442,601

Total Earning Assets		8,477,787			8,518,168			9,350,086
Cash and Non-Interest Bearing Deposits		331,994			374,352			248,307
Premises and Equipment		170,696			176,969			192,291
Customers’ Acceptance Liability		1,372			2,680			1,007
Accrued Interest Receivable		36,845			36,722			40,940
Foreclosed Real Estate		9,097			9,434			19,181
Mortgage Servicing Rights		25,801			28,820			30,501
Goodwill		36,216			36,216			36,216
Other Assets		320,402			333,057			326,492

Total Assets	$	9,410,210		$	9,516,418		$	10,245,021

Liabilities
Domestic Deposits
Non-Interest Bearing Demand	$	1,714,601		$	1,719,633		$	1,592,955
Interest Bearing Demand		1,162,202			1,169,128			933,801
Savings		2,669,409			2,535,219			2,089,257
Time		1,416,860			1,461,780			1,807,015
Foreign Deposits
Time Due to Banks		276			1,130			42,261
Other Savings and Time		23,983			33,271			78,492

Total Deposits		6,987,331			6,920,161			6,543,781
Securities Sold Under Agreements to Repurchase		646,317			735,621			1,544,718
Funds Purchased		69,890			64,467			43,485
Current Maturities of Long-Term Debt		118,792			114,781			64,975
Short-Term Borrowings		12,096			33,420			20,644
Banker’s Acceptances Outstanding		1,372			2,680			1,007
Retirement Benefits Payable		62,091			61,385			37,055
Accrued Interest Payable		12,761			13,731			27,983
Taxes Payable		206,139			196,813			146,360
Other Liabilities		70,644			82,596			84,874
Long-Term Debt		270,770			275,004			464,232

Total Liabilities		8,458,203			8,500,659			8,979,114
Shareholders’ Equity
Common Stock ($.01 par value); authorized 500,000,000 shares; issued / outstanding: March 2003 – 81,276,420 / 60,418,539; December 2002 – 81,294,730 / 63,015,442; March 2002 – 81,346,027 / 73,409,966		807			806			806
Capital Surplus		372,887			372,192			369,541
Accumulated Other Comprehensive Income		8,273			11,659			20,389
Retained Earnings		1,133,642			1,115,910			1,065,706
Deferred Stock Grants		74			(1,424	)		(4,933	)
Treasury Stock, at Cost (Shares: March 2003 – 20,857,881; December 2002 – 18,279,288; March 2002 – 7,936,061)		(563,676	)		(483,384	)		(185,602	)

Total Shareholders’ Equity		952,007			1,015,759			1,265,907
Total Liabilities and Shareholders’ Equity	$	9,410,210		$	9,516,418		$	10,245,021

See accompanying notes to the consolidated financial statements.

Bank of Hawaii Corporation and ~~subsidiaries~~Subsidiaries

Consolidated Statements of Shareholders’ Equity (Unaudited)

(dollars in thousands)
Total

Common Stock

Capital Surplus

Accum Other Comprehensive Income

Retained Earnings

Deferred Stock Grants

Treasury Stock

Compre- hensive Income

Nine Months Ended September 30, 2002

Balance at December 31, 2001

$
1,247,012


$
806

$
367,672


$
22,761


$
1,055,424


$
(7,637
)

$
(192,014
)

Comprehensive Income
Net Income    92,272    —      —      —      92,272    —      —      $ 92,272
Other Comprehensive Income, Net of Tax
Unrealized Gain on Investment Securities    3,859    —      —      3,859    —      —      —      3,859
Foreign Currency Translation Adjustment    (582 )    —      —      (582 )    —      —      —      (582 )

Total Comprehensive Income                         $ 95,549

Common Stock Issued
     33,402  Profit Sharing Plan    933    —      196    —      —      —      737
1,369,679  Stock Option Plan    27,895    —      4,022    —      (9,236 )    (233 )    33,342
     77,270  Dividend Reinvestment Plan    2,152    —      439    —      (2 )    —      1,715
       4,101  Directors’ Restricted Shares and
                    Deferred Compensation Plan
   44    —      117    —      —      —      (73 )
    (71,300)  Employees’ Restricted Shares    3,636    —      (1,348 )    —      —      4,984
Treasury Stock Purchased (8,581,000 shares)    (238,073 )    —      —      —      —      —      (238,073 )
Cash Dividends Paid    (38,442 )          —      —      —      (38,442 )    —      —

Balance at September 30, 2002

$
1,100,706


$
806

$
371,098


$
26,038


$
1,100,016


$
(2,886
)

$
(394,366
)


Nine Months Ended September 30, 2001

Balance at December 31, 2000

$
1,301,356


$
806

$
346,045


$
(25,079
)

$
996,791


$
—


$
(17,207
)

Comprehensive Income
Net Income    91,475    —      —      —      91,475    —      —      $ 91,475
Other Comprehensive Income, Net of Tax
Unrealized Gain on Investment Securities    23,906    —      —          23,906    —      —      —      23,906
Foreign Currency Translation Adjustment    25,911    —      —      25,911    —      —      —      25,911
Pension Liability Adjustments    (159 )    —      —      (159 )    —      —      —      (159 )

Total Comprehensive Income                         $ 141,133

Common Stock Issued
  46,408  Profit Sharing Plan    1,065    —      257    —      —      —      808
604,264  Stock Option Plan    11,160    —      892    —      (812 )    847    10,233
  91,764  Dividend Reinvestment Plan    2,103    —      483    —      —      —      1,620
    4,248  Directors’ Restricted Shares and
                Deferred Compensation Plan
   341    —      95    —      —      —      246
724,600  Employees’ Restricted Shares    2,797    —            18,323    —      —      (15,526 )    —
  65,146  Hawaii Insurance Network    1,299    —      1,299    —      —      —      —
Treasury Stock Purchased (1,965,000 shares)    (46,784 )    —      —      —      —      —      (46,784 )
Cash Dividends Paid    (43,415 )    —      —      —      (43,415 )    —      —

Balance at September 30, 2001

$
1,371,055


$
806

$
367,394


$
24,579


$
1,044,039


$
(14,679
)

$
(51,084
)

(dollars in thousands)		Total			Common Stock		Capital Surplus			Accum. Other Comprehensive Income			Retained Earnings			Deferred Stock Grants			Treasury Stock			Comprehensive Income
Balance at December 31, 2002		$	1,015,759		$	806	$	372,192		$	11,659		$	1,115,910		$	(1,424	)	$	(483,384	)
Comprehensive Income
Net Income			29,801			—		—			—			29,801			—			—		$	29,801
Other Comprehensive Income, Net of Tax:
Unrealized Gain on Investment Securities			(3,386	)		—		—			(3,386	)		—			—			—			(3,386	)

Total Comprehensive Income																						$	26,415

Common Stock Issued
9,930	Profit Sharing Plan		216			—		—			—			—			—			216
245,213	Stock Option Plan		5,834			—		1,083			—			(507	)		(44	)		5,302
24,969	Dividend Reinvestment Plan		543			—		—			—			—			—			543
690	Directors’ Restricted Shares and Deferred Compensation Plan		(6	)		1		20			—			—			—			(27	)
(19,000)	Employees’ Restricted Shares		1,134			—		(408	)		—			—			1,542			—
Treasury Stock Purchased (2,856,600 shares)			(86,326	)		—		—			—			—			—			(86,326	)
Cash Dividends Paid			(11,562	)		—		—			—			(11,562	)		—			—

Balance at March 31, 2003		$	952,007		$	807	$	372,887		$	8,273		$	1,133,642		$	74		$	(563,676	)

Balance at December 31, 2001		$	1,247,012		$	806	$	367,672		$	22,761		$	1,055,424		$	(7,637	)	$	(192,014	)
Comprehensive Income
Net Income			31,056			—		—			—			31,056			—			—		$	31,056
Other Comprehensive Income, Net of Tax:
Unrealized Gain on Investment Securities			(1,913	)		—		—			(1,913	)		—			—			—			(1,913	)
Foreign Currency Translation Adjustment			(459	)		—		—			(459	)		—			—			—			(459	)

Total Comprehensive Income																						$	28,684

Common Stock Issued
12,113	Profit Sharing Plan		325			—		37			—			—			—			288
884,893	Stock Option Plan		18,237			—		2,455			—			(7,595	)		746			22,631
27,454	Dividend Reinvestment Plan		731			—		77			—			(2	)		—			656
(114)	Directors’ Restricted Shares and Deferred Compensation Plan		(16	)		—		(1	)		—			—			—			(15	)
(31,100)	Employees’ Restricted Shares		1,259			—		(699	)		—			—			1,958			—
Treasury Stock Purchased (701,000 shares)			(17,148	)		—		—			—			—			—			(17,148	)
Cash Dividends Paid			(13,177	)		—		—			—			(13,177	)		—			—

Balance at March 31, 2002		$	1,265,907		$	806	$	369,541		$	20,389		$	1,065,706		$	(4,933	)	$	(185,602	)

See accompanying notes to the consolidated financial statements.

Bank of Hawaii Corporation and ~~subsidiaries~~Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

Nine Months ended September 30
(dollars in thousands)

2002

2001

Operating Activities
Net Income    $ 92,272    $ 91,475
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Loan and Lease Losses    11,616    59,798
Depreciation and Amortization    22,106    43,289
Amortization of Deferred Loan Fees and Leasing Income    (25,316 )    (33,041 )
Amortization and Accretion of Investment Securities    14,248    12,526
Deferred Stock Grants    3,636    2,797
Deferred Income Taxes    23,236    (1,543 )
Investment Security Gains    (3 )    (32,914 )
Proceeds From Sales of Loans Held for Sale    993,316    798,922
Originations of Loans Held for Sale    (567,470 )    (847,749 )
Gain on Sale of Banking Operations, Net of Venture Investment Losses    —      (144,680 )
Net Change in Other Assets and Liabilities    54,815    (44,113 )
Net Cash Provided (Used) by Operating Activities    622,456    (95,233 )
Investing Activities
Proceeds from Redemptions of Investment Securities Held to Maturity    132,092    295,828
Purchases of Investment Securities Held to Maturity    (20,513 )    (170,340 )
Proceeds from Sales and Redemptions of Investment Securities Available for Sale    772,864    1,106,773
Purchases of Investment Securities Available for Sale    (1,019,046 )    (602,171 )
Net Decrease in Loans and Lease Financing    403,039    1,292,394
Proceeds from Sale of Banking Operations    —      657,476
Premises and Equipment, Net    (8,165 )    (13,222 )
Net Cash Provided by Investing Activities    260,271    2,566,738
Financing Activities
Net Increase (Decrease) in Demand Deposits    182,223    (194,797 )
Net Increase in Savings Deposits    414,894    304,124
Net Decrease in Time Deposits    (378,085 )    (393,766 )
Net Decrease in Foreign Deposits    (265,585 )    (683,953 )
Proceeds from Lines of Credit and Long-Term Debt    —      4,572
Repayments and Repurchases of Long-Term Debt    (160,635 )    (307,321 )
Net Decrease in Short-Term Borrowings    (609,463 )    (178,179 )
Proceeds from Issuance of Common Stock    31,024    14,669
Repurchase of Common Stock    (238,073 )    (46,784 )
Cash Dividends    (38,442 )    (43,415 )
Net Cash Used by Financing Activities    (1,062,142 )    (1,524,850 )
Effect of Exchange Rate Changes on Cash    (582 )    25,911
Increase (Decrease) in Cash and Cash Equivalents    (179,997 )    972,566
Cash and Cash Equivalents at Beginning of Year    1,622,955    851,882
Cash and Cash Equivalents at End of Period    $ 1,442,958    $ 1,824,448

	Three Months ended March 31,
(dollars in thousands)	2003			2002
Operating Activities
Net Income	$	29,801		$	31,056
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Loan and Lease Losses		—			8,292
Depreciation and Amortization		8,908			7,669
Amortization of Deferred Loan and Lease Fees		(8,433	)		(8,702	)
Amortization and Accretion of Investment Securities		9,185			4,756
Deferred Stock Grants		1,134			1,259
Deferred Income Taxes		2,664			9,581
Investment Security Gains		(583	)		—
Proceeds From Sales of Loans Held for Sale		43,021			663,514
Originations of Loans Held for Sale		(50,172	)		(306,578	)
Net Change in Other Assets and Liabilities		12,252			(5,256	)

Net Cash Provided by Operating Activities		47,777			405,591

Investing Activities
Proceeds from Redemptions of Investment Securities Held to Maturity		65,912			56,201
Purchases of Investment Securities Held to Maturity		(11,772	)		(10,710	)
Proceeds from Sales and Redemptions of Investment Securities Available for Sale		528,496			245,744
Purchases of Investment Securities Available for Sale		(752,729	)		(232,089	)
Net Decrease (Increase) in Loans and Lease Financing		(200,759	)		55,952
Premises and Equipment, Net		(2,635	)		(3,789	)

Net Cash Provided (Used) by Investing Activities		(373,487	)		111,309

Financing Activities
Net Increase (Decrease) in Demand Deposits		(11,958	)		17,630
Net Increase in Savings Deposits		134,190			151,594
Net Decrease in Time Deposits		(44,920	)		(120,763	)
Net Decrease in Foreign Deposits		(10,142	)		(182,900	)
Repayments of Long-Term Debt		(223	)		(61,173	)
Net Decrease in Short-Term Borrowings		(105,205	)		(204,644	)
Proceeds from Issuance of Common Stock		6,587			19,277
Repurchase of Common Stock		(86,326	)		(17,148	)
Cash Dividends		(11,562	)		(13,177	)

Net Cash Used by Financing Activities		(129,559	)		(411,304	)

Effect of Exchange Rate Changes on Cash		—			(459	)

Increase (Decrease) in Cash and Cash Equivalents		(455,269	)		105,137
Cash and Cash Equivalents at Beginning of Year		1,119,330			1,625,781
Cash and Cash Equivalents at End of Period	$	664,061		$	1,730,918

See accompanying notes to the consolidated financial statements.

Bank of Hawaii Corporation

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Summary of Significant Accounting Policies

~~Name Change and Organization~~

On April 26, 2002, the Shareholders of Pacific Century Financial Corporation approved changing the company name. An amendment to the company’s Certificate of Incorporation was filed in April 2002 to change the name of the company to

Bank of Hawaii Corporation (the ~~Company)~~“Company”) is a bank holding company providing a broad range of financial products and services to customers in Hawaii and the Pacific Islands (Guam, nearby islands and American Samoa).

The Company’s principal subsidiary ~~bank~~ is Bank of ~~Hawaii. The Company also owns First Savings~~Hawaii (the “Bank”). All significant intercompany accounts and ~~Loan Association of America (First Savings)~~transactions have been eliminated in ~~Guam. An application was filed with its regulators seeking approval to merge First Savings into Bank of Hawaii. The merger is expected to be completed before the end of the year.~~

consolidation.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the consolidated financial statements reflect all normal recurring adjustments necessary for a fair presentation of the results for the interim periods.

Certain prior period amounts have been reclassified to conform to current period classifications.

These statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s ~~2001~~2002 Annual Report on Form 10-K. Operating results for the three ~~and nine~~ months ended ~~September 30, 2002~~March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2002.~~

~~Income Taxes~~

The provision for income taxes is computed by applying statutory federal, foreign, and state income tax rates to income before income taxes as reported in the Consolidated Statements of Income after adjusting for tax preference items, such as tax-exempt interest income, bank owned life insurance and low-income housing investment tax credits.

2003.

~~Note 2. Recent Accounting Pronouncements~~Stock-Based Compensation

~~In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142,~~~~Goodwill and Other Intangible Assets~~ (SFAS 142). SFAS 142 eliminates amortization of goodwill associated with business combinations completed after June 30, 2001. During a transition period from July 1, 2001 through December 31, 2001, goodwill associated with business combinations completed prior to July 1, 2001 continued to be amortized through the income statement. Effective January 1, 2002, periodic goodwill amortization and expense recognition was discontinued and goodwill is assessed at least annually for impairment at the reporting unit level by applying a fair-value based test. SFAS 142 also provides additional guidance on acquired intangibles that should be separately recognized and amortized. Under SFAS 142, intangibles with indefinite lives will no longer be amortized through the income statement. The Company adopted SFAS 142 on January 1, 2002. An initial impairment assessment was completed and it was determined that a transition impairment charge was not required. Under SFAS 142 the elimination of goodwill amortization is expected to increase net income by approximately $7.6 millionaccounts for its stock-based compensation plans in ~~2002.~~

~~In August 2001, FASB issued SFAS~~accordance with Accounting Principles Board Opinion No. ~~144,~~25,Accounting for Stock Issued to Employees (“APB No. 25”) and related interpretations. As permitted by APB No. 25, stock-based employee compensation expense is generally not included in reported net income as all options granted had an exercise price equal to the ~~Impairment or Disposal of Long-Lived Assets~~ ~~(SFAS 144). SFAS 144 supercedes FASB Statement No.121,~~~~Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of~~ (SFAS 121), and certain of the accounting and reporting provisions of APB Opinion No. 30. For long-lived assets to be held and used, SFAS 144 retains the requirements of SFAS 121 to (a) recognize an impairment loss only if the carryingmarket value of the ~~long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as~~underlying common stock on the ~~difference between~~date of grant. Over the ~~carrying amount and~~last several years, new accounting standards were developed that permit fair value expense recognition of employee stock options. Under current guidance, there are three methods available for transition to the ~~asset. For long-lived assets to be disposed~~new accounting standards – prospective, modified prospective and retroactive restatement. If the standards were adopted in the first quarter of ~~by sale,~~2003, each transition method would have a different impact on the SFAS 121 model is also retained which requires an asset to be measured at the lower of its carrying amount or fair value less cost to sell and to cease depreciation. SFAS 144 establishes criteria beyond that previously specified in SFAS 121 to determine when a long-lived asset is held for sale. SFAS 144 is effective forCompany’s financial statements, ~~issued~~including reductions in net income ranging from $0.3 million to $3.1 million for ~~fiscal years beginning after December 15, 2001~~the three months ended March 31, 2003.

The following table illustrates the effect on net income and ~~is generally to be~~earnings per share if the Company had previously completed the transition and had fully applied ~~prospectively. The Company adopted SFAS 144 on January 1, 2002, no transition adjustment was necessary.~~these new accounting standards:

	Three Months Ended March 31,
(dollars in thousands except per share and per option data)	2003			2002
Net Income, as reported	$	29,801		$	31,056
Add: Stock-Based Employee Compensation Expense included in reported Net Income, Net of Related Tax Effects		163			161
Deduct: Total Stock-Based Employee Compensation Expense Determined Under Fair Value Method For All Awards, Net of Related Tax Effects¹		(3,103	)		(1,259	)

Pro Forma Net Income	$	26,861		$	29,958

Earnings Per Share:
Basic-as reported	$	0.49		$	0.42
Basic-pro forma¹	$	0.44		$	0.41
Diluted-as reported	$	0.47		$	0.41
Diluted-pro forma¹	$	0.42		$	0.40

Weighted Average Fair Value Per Option Granted During the Period¹	$	8.26		$	7.97
Assumptions:
Average Risk Free Interest Rate		3.81	%		5.11	%
Average Expected Volatility		31.84	%		31.34	%
Expected Dividend Yield		3.08	%		3.16	%
Expected Life		6.7 years			6.5 years

A Black-Scholes option pricing model was used to develop the fair values of the options granted.

Note 2. Information Technology Systems Replacement Project

In ~~June~~July 2002, the ~~FASB issued SFAS 146,~~~~Accounting~~Company entered into contracts with Metavante Corporation to provide for ~~Costs Associated with Exit or Disposal Activities~~~~(SFAS 146). The provisions of SFAS 146 will become effective for disposal activities initiated after December 31, 2002, with early adoption encouraged. This statement applies~~technology services, including professional services to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by SFAS 144. Those costs include, but are not limitedconvert existing systems to termination benefits, costs to terminate contracts, costs to consolidate facilities and costs to relocate employees. The Statement requires that a liability be recognized and measured initially at its fair value in the period in which the liability is incurred, except for termination benefits that are recognized over time. Termination benefits for employees not required to render service until they are terminated or not required to render service beyond the minimum retention period should be recognized at fair value at the communication date. Termination benefits for employees that are required to render service until they are terminated in order to receive the termination benefit or who are required to render service beyond the minimum retention period should be recognized ratably over the service period. Costs to terminate a contract before the end of its term shall be recognized and measured at fair value when the contract terminates. The Company adopted SFAS 146Metavante systems in the third quarter of ~~2002.~~

2003. The costs incurred through March 31, 2003 and total expected costs in connection with the transition to this outsourcing arrangement are summarized below:

(dollars in millions)	Professional Fees		Employee Termination Benefits		Accelerated Depreciation		Other Associated Costs¹		Total
Costs Incurred:
Three Months Ended:
September 30, 2002	$	1.9	$	1.0	$	3.2	$	0.5	$	6.6
December 31, 2002		3.2		0.2		2.2		1.4		7.0

Year Ended December 31, 2002		5.1		1.2		5.4		1.9		13.6
Three Months Ended March 31, 2003		3.5		0.4		2.0		1.5		7.4

Total Costs Incurred	$	8.6	$	1.6	$	7.4	$	3.4	$	21.0

Total Expected Project Costs	$	13.1	$	5.9	$	9.2	$	7.3	$	35.5

Includes contract termination, equipment, excise tax and other costs.

Changes in related liability balances during the three months ended March 31, 2003 were as follows:

(dollars in millions)	Professional Fees		Employee Termination Benefits		Other Associated Costs¹		Total
Liability Balance at December 31, 2002	$	0.1	$	0.3	$	—	$	0.4
Accruals		3.5		0.4		1.5		5.4
Payments		1.3		—		1.3		2.6

Liability Balance at March 31, 2003	$	2.3	$	0.7	$	0.2	$	3.2

Note 3. Business Segments

The ~~Company~~information under the caption “Business Segments” in Management’s Discussion and Analysis is ~~a financial services organization that is aligned into~~incorporated herein by reference.

Note 4. Stock Compensation

The following revises the ~~following segments: Retail Banking, Commercial Banking, Investment Services Group, and Treasury and Other Corporate. Divestiture Businesses reflected~~disclosure in the ~~results~~2002 Annual Report on Form 10-K of ~~operations~~the amount of ~~businesses which~~options available for future grants under the Company ~~exited in 2001. Corporate Restructuring Related Activities includes gains, losses and expenses arising out of the divestiture and credit quality enhancement processes.~~

Business segment results are determined based on the Company’s internal financial management reporting process and organizational structure. This process uses various techniques to assign balance sheet and income statement amounts to business segments, including allocations of overhead, credit loss provision, and capital. This process is dynamic and requires certain allocations based on judgment and subjective factors. Unlike financial accounting, there is no comprehensive, authoritative guidance for management accounting that is equivalent to generally accepted accounting principles. The management accounting process measures the performance of the operating segments based on the management structure of the Company and is not necessarily comparable with similar information for any other financial institution.

The financial results for the three and nine months ended September 30, 2002 and 2001 are presented on pages 10 and 11 for each of the Company’s principal segments. Segment information for 2001 has been reclassified to conform to the 2002 presentation.

Stock Option Plans:

Business Segments Selected Financial Information (Unaudited)

(dollars in thousands)
   RETAIL    COMMERCIAL    INVESTMENT SERVICES GROUP    TREASURY AND OTHER CORPORATE    DIVESTITURE BUSINESSES      CORPORATE RESTRUCTURING RELATED ACTIVITIES    CONSOLIDATED TOTAL
Three Months Ended September 30, 2002

Net Interest Income    $ 49,293    $ 35,700    $ 3,250    $ 3,938    $ —        $ —      $ 92,181
Provision for Loan and Lease Losses    (722 )    (4,456 )    (76 )    5,254    —        —      —

Net Interest Income after Provision for Loan and Lease Losses    48,571    31,244    3,174    9,192    —        —      92,181
Non-Interest Income    20,118    9,112    16,667    2,351    —        —      48,248
Non-Interest Expense    (43,625 )    (25,280 )    (15,780 )    (1,693 )    —        —      (86,378 )
Information Technology Systems Replacement Project    —      —      —      (6,576 )    —        —      (6,576 )
Income Before Income Taxes    25,064    15,076    4,061    3,274    —        —      47,475
Provision for Income Taxes    (9,524 )    (5,635 )    (1,543 )    (573 )    —        —      (17,275 )
Net Income    $ 15,540    $ 9,441    $ 2,518    $ 2,701    $ —        $ —      $ 30,200
Total Assets (End of Period)    $ 3,135,092    $ 2,324,205    $ 118,625    $ 4,124,121    $ —        $ —      $ 9,702,043
Total Assets (Average)    $ 3,159,190    $ 2,358,495    $ 121,254    $ 4,164,957    $ —        $ —      $ 9,803,896
   RETAIL    COMMERCIAL    INVESTMENT SERVICES GROUP    TREASURY AND OTHER CORPORATE    DIVESTITURE BUSINESSES      CORPORATE RESTRUCTURING RELATED ACTIVITIES    CONSOLIDATED TOTAL
Three Months Ended September 30, 2001

Net Interest Income    $ 45,009    $ 36,995    $ 2,337    $ 6,667    $ 20,694      $ —      $ 111,702
Provision for Loan and Lease Losses    (2,131 )    (5,089 )    —      799    5,502      —      (919 )
Net Interest Income after Provision for Loan and Lease Losses    42,878    31,906    2,337    7,466    26,196      —      110,783
Gain on Sale of Banking Operations, Net of Venture Investment Losses    —      —      —      —      —        47,771    47,771
Non-Interest Income    26,822    7,765    17,735    1,409    8,034      3,819    65,584
Non-Interest Expense    (48,191 )    (24,769 )    (17,372 )    (591 )    (28,659 )      —    (119,582 )
Restructuring & Other Related Costs    —      —      —      —      —        (2,986 )    (2,986 )
Income Before Income Taxes    21,509    14,902    2,700    8,284    5,571      48,604    101,570
Provision for Income Taxes    (9,476 )    (5.626 )    (748 )    (2,790 )    (2,806 )      (49,065 )    (70,511 )
Net Income    $ 12,033    $ 9,276    $ 1,952    $ 5,494    $ 2,765      $ (461 )    $ 31,059
Total Assets (End of Period)    $ 3,389,485    $ 3,320,492    $ 191,900    $ 2,351,940    $ 2,690,322      $ —      $ 11,944,139
Total Assets (Average)    $ 3,435,534    $ 3,071,464    $ 139,730    $ 2,673,427    $ 2,978,528      $ —      $ 12,298,683

	As Reported	Revised
Options Available for Future Grants
Year Ended 2002	3,102,471	2,466,271
Year Ended 2001	5,170,277	4,442,077

~~Business Segments Selected Financial Information (Unaudited)~~

~~(dollars in thousands)~~

RETAIL

COMMERCIAL

INVESTMENT SERVICES GROUP

TREASURY AND OTHER CORPORATE

DIVESTITURE BUSINESSES

CORPORATE RESTRUCTURING RELATED ACTIVITIES

CONSOLIDATED TOTAL

Nine Months Ended September 30, 2002
Net Interest Income $ 147,784    $ 106,009    $ 9,371 $ 16,849 $ —        $ —      $ 280,013
Provision for Loan and Lease Losses (3,213 )    (14,062 )    (76 ) 5,735 —        —      (11,616 )
Net Interest Income after Provision for Loan and Lease Losses 144,571    91,947    9,295 22,584 —        —      268,397
Non-Interest Income 62,771    27,955    51,926 8,532 —        —      151,184
Non-Interest Expense (134,428 )    (76,133 )    (49,903 ) (6,721 ) —        —      (267,185 )
Restructuring & Other Related Costs —      —      —   —   —        (1,979 )    (1,979 )
Information Technology Systems Replacement Project —      —      —   (6,576 ) —        —      (6,576 )
Income Before Income Taxes 72,914    43,769    11,318 17,819 —        (1,979 )    143,841
Provision for Income Taxes (27,707 )    (16,346 )    (4,301 ) (3,919 ) —        704    (51,569 )
Net Income $ 45,207    $ 27,423    $ 7,017 $ 13,900 $ —        $ (1,275 )    $ 92,272
Total Assets (End of Period) $ 3,135,092    $ 2,324,205    $ 118,625 $ 4,124,121 $ —        $ —      $ 9,702,043
Total Assets (Average) $ 3,258,970    $ 2,503,595    $ 120,686 $ 4,213,707 $ —        $ —      $ 10,096,958

RETAIL

COMMERCIAL

INVESTMENT SERVICES GROUP

TREASURY AND OTHER CORPORATE

DIVESTITURE BUSINESSES

CORPORATE RESTRUCTURING RELATED ACTIVITIES

CONSOLIDATED TOTAL

Nine Months Ended September 30, 2001
Net Interest Income $ 137,838    $ 118,060    $ 7,422 $ 7,665 $ 85,034      $ (2,444 )    $ 353,575
Provision for Loan and Lease Losses (6,665 )    (15,178 )    —   800 (2,039 )      (36,716 )    (59,798 )
Net Interest Income after Provision for Loan and Lease Losses 131,173    102,882    7,422 8,465 82,995      (39,160 )    293,777
Gain on Sale of Banking Operations, Net of Venture Investment Losses —      —      —   —   —        144,680    144,680
Non-Interest Income 69,629    26,735    53,273 13,642 27,940      35,894    227,113
Non-Interest Expense (143,683 )    (76,205 )    (50,721 ) (2,392 ) (96,879 )      —      (369,880 )
Restructuring & Other Related Costs —      —      —   —   —        (86,329 )    (86,329 )
Income Before Income Taxes 57,119    53,412    9,974 19,715 14,056      55,085    209,361
Provision for Income Taxes (24,011 )    (20,240 )    (3,760 ) (8,868 ) (4,229 )      (56,778 )    (117,886 )
Net Income $ 33,108    $ 33,172    $ 6,214 $ 10,847 $ 9,827      $ (1,693 )    $ 91,475
Total Assets (End of Period) $ 3,389,485    $ 3,320,492    $ 191,900 $ 2,351,940 $ 2,690,322      $ —      $ 11,944,139
Total Assets (Average) $ 3,500,491    $ 3,354,314    $ 143,419 $ 2,585,894 $ 3,457,165      $ —      $ 13,041,283

~~Note 4. Information Technology Systems Replacement Project (ITSRP)~~

On July 22, 2002 the Company entered into a seven year outsourcing arrangement with Metavante Corporation to serve as the Company’s primary technology systems provider. The Company will convert its key systems, including loans and deposits, to Metavante’s state-of-the-industry computer system. The arrangement is intended to enhance customer service and convenience, as well as improve the Company’s efficiency. The seven-year outsourcing arrangement is expected to be operational in the third quarter of 2003 and should provide annual cost savings of over $17 million compared to current level expenses. In connection with this decision, the Company estimates that it will recognize transition charges of approximately $35 million over the five-quarter conversion period.

~~Costs incurred, total expected costs and changes in the liability balance by type of expense are presented below.~~

~~Information Technology Systems Replacement Project (Unaudited)~~

(dollars in thousands)    Professional Fees    Employee Termination Benefits      Accelerated Depreciation
Other
Associated
Costs²
         Total
Costs Incurred¹
   $ 1,875    $ 1,042      $ 3,197    $ 462    $ 6,576
Total Expected Costs    $ 12,481    $ 6,371      $ 9,371    $ 7,236    $ 35,459

Beginning Liability Balance at July 1, 2002    $ —      $ —        N/A    $ —      $ —
Costs Incurred    1,875    1,042      N/A    462    3,379
Payments    (1,875 )    (374 )      N/A    (146 )    (2,395 )
Ending Liability Balance at September 30, 2002    $ —      $ 668      N/A    $ 316    $ 984

~~Three and nine months ended September 30, 2002 and project-to-date are the same.~~

~~Includes contract termination, equipment, excise tax, and other costs.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This report contains forward-looking statements concerning a number of matters, including the expected level of loan loss provisioning, the projected efficiency ratio, the timing and number of share repurchases, anticipated costs and annual savings of our technology systems replacement project, value of stock option awards, normalization of deferred loan payments in Guam and Micronesia, the impact of interest rate changes on net interest income, and anticipated revenues and expenses in ~~2002~~2003 and beyond. We believe the assumptions underlying our forward-looking statements are reasonable. However, any of the assumptions could prove to be inaccurate and actual results may differ materially from those projected for a variety of reasons, including, but not limited to: 1) unanticipated changes in business and economic conditions, the competitive environment, fiscal and monetary policies, or legislation in Hawaii ~~economy may not continue at~~and the ~~pace~~other markets we anticipate; our refocused emphasis on our Hawaii market may not achieve the customer and revenue gains we anticipate; our credit markets may deteriorate and our credit quality may fall short of our goals; we may not achieve the expense reductions we expect; we may not be able to maintain our net interest margin; we may not be able to implement our proposed equity repurchases in the amount or at the times planned; the economics or timing, or both, of our information technology systems replacement project may not result in the expected benefits; unanticipated difficulties or delays in the conversion of our data processing to outsourcing may result in the reduction or delay of anticipated cost savings or increased cost of conversion; the information technology systems replacement project may not be able to achieve the projected reductions in staffing; we may encounter unanticipated difficulties or costs in exiting existing data processing agreements with third parties; the required level of the allowances for loan and lease losses may increase or decrease due toserve; 2) changes in our credit quality or risk ~~profile; there~~profile which may ~~be economic volatility in~~increase or decrease the ~~markets we serve;~~required level of allowance for loan and ~~there may be~~lease losses; 3) changes in market interest rates may deteriorate our credit markets and ability to maintain our net interest margin; 4) changes to the amount and timing of our proposed equity repurchases; 5) inability to achieve expected benefits of our technology systems replacement project and other business process changes due to adverse changes in implementation processes or costs, operational savings, or timing; 6) actions by the United States military and ~~economic~~real or threatened terrorist activity affecting business conditions; and 7) adverse weather and other natural conditions ~~competition, fiscal~~impacting our and ~~monetary policies or legislation.~~customers’ operations. We do not undertake any obligation to update any forward-looking statements to reflect later events or circumstances.

~~PERFORMANCE HIGHLIGHTS~~

The Company reported earnings for the three months ended September 30, 2002 of $30.2 million, a decrease of 2.8% from $31.1 million for the three months ended September 30, 2001. Diluted earnings per share was $0.43 for the third quarter of 2002, an increase of 16.2% from $0.37 in the third quarter of 2001, which was primarily attributable to share repurchases. The Company’s net income for the first nine months of 2002 was $92.3 million, compared to $91.5 million for the corresponding period of the prior year. Prior year earnings included gains of $144.7 million from the sale of the Company’s credit card portfolio and Pacific Century Bank N.A.’s branches, $20.9 million related to the exchange of stock in Star Systems, Inc. for Concord EFS, Inc., and $11.1 million from the sale of the Company’s interest in the Bank of Queensland and Concord EFS, Inc., partially offset by restructuring and other related costs of $86.3 million.

Net interest income for the third quarter of 2002 on a fully taxable equivalent basis was $92.2 million for the third quarter of 2002, a decline of $19.6 million from $111.8 million the same quarter last year and $0.8 million from June 30, 2002. The decrease from the prior year quarter was primarily due to divested businesses, the managed reduction of loans in an effort to improve the Company’s credit profile, and lower returns earned on the increased liquidity of the Company. The Company’s net interest margin for the third quarter of 2002 was 4.03%, an increase from 3.89% in the same quarter last year and an increase from 3.97% in the quarter ended June 30, 2002.

There was no provision for loan and lease losses in the third quarter of 2002, compared to $0.9 million in the third quarter last year. The decrease reflects improvements in the Company’s asset quality.

Non-performing assets were $63.3 million at September 30, 2002, a decline of $16.4 million from December 31, 2001 and $43.1 million, or 40.5%, from September 30, 2001. Non-performing assets declined $15.5 million, or 19.7%, from $78.8 million at the end of second quarter 2002.

~~In the third quarter of 2002, return on average assets (ROAA) and return on average equity (ROAE) were 1.22% and 10.40%, respectively, compared to 1.00% and 8.88% in the same 2001 quarter.~~

Total assets at September 30, 2002 were $9.7 billion, $10.6 billion at December 31, 2001 and $11.9 billion at September 30, 2001. The most significant reductions were in commercial loans and foreign loans resulting from the divestitures and managed reduction of loans in an effort to improve the Company’s credit profile.

~~Bank of Hawaii Corporation and subsidiaries~~

Highlights (Unaudited)	Table 1

(dollars in thousands except per share amounts)

	Three Months Ended
Earnings Highlights and Performance Ratios	March 31, 2003			March 31, 2002¹
Net Income	$	29,801		$	31,056
Basic Earnings Per Share		0.49			0.42
Diluted Earnings Per Share		0.47			0.41
Cash Dividends		11,562			13,177
Return on Average Assets		1.31	%		1.21	%
Return on Average Equity		12.42	%		9.97	%
Net Interest Margin		4.29	%		3.92	%
Efficiency Ratio		66.44	%		61.81	%
Efficiency Ratio excluding ITSRP and Restructuring Costs		60.98	%		60.47	%

Statement of Condition Highlights and Performance Ratios	March 31, 2003			March 31, 2002¹
Total Assets	$	9,410,210		$	10,245,021
Net Loans		5,425,343			5,442,601
Total Deposits		6,987,331			6,543,781
Total Shareholders’ Equity		952,007			1,265,907
Book Value Per Common Share	$	15.76		$	17.24
Allowance / Loans Outstanding		2.52	%		2.84	%
Average Equity / Average Assets		10.53	%		12.13	%
Employees (FTE)		2,891			3,082
Branches and offices		91			104
Market Price Per Share of Common Stock for the Quarter Ended:
Closing	$	30.80		$	26.06
High	$	31.50		$	27.79
Low	$	29.25		$	23.79

~~Highlights (Unaudited)~~

~~Table 1~~

(dollars in thousands except per share amounts)
Three Months Ended

Nine Months Ended

September 30

September 30
Earnings Highlights and Performance Ratios

2002             2001

2002                2001

Net Income $ 30,200    $ 31,059    $ 92,272    $ 91,475
Basic Earnings Per Share 0.44    0.39    1.30    1.14
Diluted Earnings Per Share 0.43    0.37    1.26    1.11
Cash Dividends 12,197    14,625    38,442    43,415
Return on Average Assets 1.22%    1.00%    1.22%    0.94%
Return on Average Equity 10.40%    8.88%    10.10%    8.96%
Net Interest Margin 4.03%    3.89%    3.97%    3.91%
Efficiency Ratio 66.19%    54.46%    63.95%    62.89%
Continuing Business Efficiency Ratio ¹     61.51%        61.03%    61.96%    60.81%


September 30
Statement of Condition Highlights and Performance Ratios

2002                2001
Total Assets       $ 9,702,043    $ 11,944,139
Net Loans       5,104,200    6,583,522
Total Deposits       6,627,043    7,399,737
Total Shareholders’ Equity       1,100,706    1,371,055
Book Value Per Common Share       $ 16.67    $ 17.31
Allowance / Loans Outstanding       2.94%    2.70%
Average Equity / Average Assets       12.10%    10.47%
Employees (FTE)       2,934    3,881
Branches and offices       97    140
Market Price Per Share of Common Stock for the Quarter Ended:
   Closing    $ 27.90    $ 23.37
   High    $ 30.00    $ 28.30
   Low    $ 22.79    $ 20.20

~~Excludes the effects of the businesses that were divested in 2001, restructuring, non-core transactions and costs associated with the~~Certain 2002 information ~~technology system replacement project.~~has been reclassified to conform to 2003 presentation.

ANALYSIS OF STATEMENT OF INCOME ~~ANALYSIS~~

Net Interest Income

Average interest earning/yielding assets and liabilities declined 20.2% and 22.5%, respectively, in the third quarter of 2002 from the same quarter last year, mainly due to the divested businesses. The Company’s net interest margin was 4.03% for the quarter ended September 30, 2002, an increase of 14 basis points from the comparable period a year ago.

Taxable-equivalent net interest income was ~~$92.2~~$91.0 million for the ~~third~~first quarter of ~~2002,~~2003, a decline of ~~$19.6~~$3.9 million, or ~~17.5%~~4.1% from the comparable period in ~~2001.~~2002. The decline in net interest income was ~~primarily due~~mainly attributable to ~~the divestitures and the managed reduction of loans in an effort to improve the Company’s credit profile. Also contributing to the decline was the general declining~~a lower interest rate ~~environment.~~environment and lower loan volume during 2003. The average prime rate for the quarter ended ~~September 30, 2002~~March 31, 2003 was ~~4.75%~~4.25% compared to ~~6.58%~~4.75% for the comparable quarter in the prior year. ~~The Company was asset sensitive~~Average interest earning/yielding assets and liabilities declined 12.3% and 14.6%, respectively, in the ~~third~~first quarter of ~~2002~~2003 from the same quarter last year. The decrease in average balances was primarily due to utilization of excess liquidity for stock repurchases and ~~expects to benefit when short term interest rates begin to increase.~~debt repayments. The Company’s net interest margin ~~is expected to~~was 4.29% for the quarter ended March 31, 2003, a 37 basis point increase ~~slightly in~~from the ~~fourth quarter.~~comparable period a year ago. Presented in Table 2 are average balances, yields earned, and rates paid for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2003, December 31, 2002 and ~~September 30, 2001.~~

March 31, 2002. An analysis of changes in interest income is presented in Table 3 for the three months ended March 31, 2003 compared to the same quarter last year.

Consolidated Average Balances and Interest Rates Taxable Equivalent (Unaudited)

Table 2

Three Months Ended
September 30, 2002

Three Months Ended¹
September 30, 2001

Nine Months Ended
September 30, 2002

Nine Months Ended¹
September 30, 2001

(dollars in millions)
Average Balance

Income/ Expense

Yield/ Rate

Average Balance

Income/ Expense

Yield/ Rate

Average Balance

Income/ Expense

Yield/ Rate

Average Balance

Income/ Expense

Yield/ Rate

Earning Assets
Interest Bearing Deposits $ 1,142.3 $ 5.4 1.87 % $ 938.7 $ 9.4 3.98 % $ 1,202.3 $ 16.4 1.83 % $ 564.0 $ 19.7 4.68 %
Funds Sold 210.2 0.9 1.74 194.3 1.8 3.59 206.9 2.7 1.72 132.1 4.2 4.22
Investment Securities
—  Held-To-Maturity 296.9 5.0 6.63 526.9 8.1 6.12 331.1 15.2 6.11 557.3 27.4 6.55
—  Available for Sale 2,009.5 25.3 5.03 2,139.7 31.4 5.86 1,946.5 78.9 5.40 2,311.4 108.0 6.23
Loans Held For Sale 40.0 0.6 6.24 310.6 5.3 6.83 147.6 7.4 6.70 314.8 16.3 6.94
Net Loans and Lease Financing
Domestic
—  Commercial and Industrial 963.9 12.9 5.31 1,583.9 27.8 6.96 1,057.9 41.0 5.18 1,923.3 110.8 7.70
—  Construction 147.7 2.1 5.57 223.0 4.2 7.41 158.3 6.5 5.49 262.4 16.1 8.19
—  Mortgage 2,904.9 50.4 6.93 3,261.2 62.3 7.58 2,969.0 155.9 7.01 3,448.2 200.7 7.78
—  Installment 818.1 17.0 8.25 751.6 19.4 10.22 780.2 50.0 8.56 837.5 72.0 11.49
—  Lease Financing 500.8 6.3 4.98 533.4 7.4 5.53 498.3 19.4 5.22 539.3 22.0 5.45
Total Domestic Loans 5,335.4 88.7 6.62 6,353.1 121.1 7.59 5,463.7 272.8 6.67 7,010.7 421.6 8.03
Foreign 14.1 —   —   920.4 16.8 7.23 14.2 0.2 1.61 1,110.4 57.9 6.97
Total Loans 5,349.5 88.7 6.60 7,273.5 137.9 7.54 5,477.9 273.0 6.65 8,121.1 479.5 7.89
Other 99.6 1.5 6.28 78.8 1.4 6.96 95.8 4.3 6.01 77.3 3.9 6.83
Total Earning Assets 9,148.0 127.4 5.55 11,462.5 195.3 6.78 9,408.1 397.9 5.65 12,078.0 659.0 7.29
Cash and Non-Interest Bearing Assets 297.6 347.3 313.7 384.0
Other Assets 358.3 488.9 375.1 579.3
Total Assets $ 9,803.9 $ 12,298.7 $ 10,096.9 $ 13,041.3

Interest Bearing Liabilities

Domestic Deposits
—  Demand 2,036.0 4.0 0.78 1,892.6 8.3 1.74 1,982.2 12.8 0.86 1,934.9 29.3 2.02
—  Savings 1,346.2 5.0 1.46 794.9 4.6 2.29 1,183.6 13.4 1.51 720.3 11.7 2.16
—  Time 1,600.0 11.4 2.82 2,432.0 29.5 4.81 1,739.8 39.0 3.00 2,661.2 109.9 5.52
Total Domestic Deposits 4,982.2 20.4 1.62 5,119.5 42.4 3.29 4,905.6 65.2 1.78 5,316.4 150.9 3.79
Foreign Deposits
—  Time Due to Banks 9.6 —   —   235.3 2.2 3.78 54.8 0.8 1.90 346.4 12.4 4.79
—  Other Time and Savings 38.3 0.2 1.68 640.7 5.5 3.41 60.2 0.7 1.69 716.4 19.0 3.54
Total Foreign Deposits 47.9 0.2 1.59 876.0 7.7 3.51 115.0 1.5 1.79 1,062.8 31.4 3.95
Total Interest Bearing Deposits 5,030.1 20.6 1.62 5,995.5 50.1 3.32 5,020.6 66.7 1.78 6,379.2 182.3 3.82
Short-Term Borrowings 1,301.3 7.7 2.34 2,012.6 20.9 4.11 1,503.7 27.6 2.46 2,160.5 80.8 5.00
Long-Term Debt 451.6 6.9 6.10 746.0 12.5 6.63 498.7 23.3 6.25 841.6 42.2 6.71
Total Interest Bearing Liabilities 6,783.0 35.2 2.06 8,754.1 83.5 3.78 7,023.0 117.6 2.24 9,381.3 305.3 4.35
Net Interest Income 92.2 111.8 280.3 353.7
Interest Rate Spread 3.49 % 3.00 % 3.41 % 2.94 %
Net Interest Margin 4.03 % 3.89 % 3.97 % 3.91 %
Non-Interest Bearing Demand Deposits
—  Demand 1,547.0 1,509.0 1,540.0 1,570.7
—  Foreign —   330.7 —   352.0

Total Demand Deposits 1,547.0 1,839.7 1,540.0 1,922.7
Other Liabilities 312.6 316.6 312.0 372.4
Shareholders’ Equity 1,152.3 1,388.3 1,221.9 1,364.9

Total Liabilities and Shareholders’ Equity $ 9,803.9 $ 12,298.7 $ 10,096.9 $ 13,041.3

Provision for Loan and Lease Losses —   0.9 11.6 59.8
Net Overhead 44.6 9.2 124.6 84.4
Income Before Income Taxes 47.6 101.7 144.1 209.5
Provision for Income Taxes 17.3 70.5 51.6 117.8
Tax-Equivalent Adjustment 0.1 0.1 0.2 0.2
Net Income $ 30.2 $ 31.1 $ 92.3 $ 91.5
¹ Adjusted to reflect the reclassification of certain average balances and other interest income.

Consolidated Average Balances and Interest Rates – Taxable Equivalent Basis (Unaudited)																	Table 2

	Three Months Ended March 31, 2003						Three Months Ended¹ December 31, 2002						Three Months Ended¹ March 31, 2002
(dollars in millions)	Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate
Earning Assets
Interest Bearing Deposits	$	253.8	$	1.3	2.09	%	$	796.6	$	3.6	1.78	%	$	1,154.7	$	5.0	1.77	%
Funds Sold		250.5		0.8	1.22			234.5		0.8	1.42			237.3		1.0	1.69
Investment Securities
– Held-to-Maturity		202.0		2.3	4.61			253.8		3.2	4.98			368.7		5.2	5.66
– Available for Sale		2,268.1		22.5	3.96			2,273.3		24.1	4.24			1,939.1		27.2	5.61
Loans Held for Sale		10.1		0.1	5.16			38.9		0.6	5.88			340.9		5.7	6.66
Net Loans and Lease Financing
Domestic
– Commercial and Industrial		871.7		10.7	4.96			867.7		11.4	5.20			1,150.9		14.5	5.11
– Construction		115.4		1.4	5.08			131.5		1.8	5.30			169.8		2.2	5.20
– Commercial Mortgage		597.8		9.0	6.14			610.5		9.9	6.40			625.9		10.5	6.77
– Residential Mortgage		2,249.0		37.7	6.70			2,212.6		38.5	6.97			2,394.0		42.8	7.15
– Installment		501.9		12.6	10.21			443.3		11.5	10.38			390.6		11.0	11.46
– Home Equity		434.5		5.7	5.28			422.2		5.9	5.50			347.9		5.3	6.22
– Purchased Home Equity		180.2		2.6	5.78			10.1		—	—			—		—	—
– Lease Financing		495.6		5.9	4.81			498.5		6.3	5.03			492.0		6.6	5.46

Total Domestic Loans		5,446.1		85.6	6.33			5,196.4		85.3	6.54			5,571.1		92.9	6.72
Foreign		14.7		—	—			14.0		—	—			14.3		0.1	1.71

Total Loans		5,460.8		85.6	6.32			5,210.4		85.3	6.52			5,585.4		93.0	6.71
Other		74.6		1.2	6.47			78.7		1.3	6.62			88.4		1.3	6.12

Total Earning Assets		8,519.9		113.8	5.38			8,886.2		118.9	5.33			9,714.5		138.4	5.73
Cash and Non-interest Bearing Deposits		331.6						305.2						304.0
Other Assets		391.5						363.4						398.3

Total Assets	$	9,243.0					$	9,554.8					$	10,416.8

Interest Bearing Liabilities
Interest Bearing Deposits
Domestic Deposits
– Demand	$	1,149.2		0.7	0.26		$	1,099.9		1.1	0.38		$	926.4		1.0	0.45
– Savings		2,608.2		4.6	0.71			2,468.2		6.4	1.03			2,045.5		7.2	1.43
– Time		1,443.3		9.1	2.55			1,501.1		10.1	2.66			1,891.0		14.8	3.17

Total Domestic Deposits		5,200.7		14.4	1.12			5,069.2		17.6	1.37			4,862.9		23.0	1.92
Foreign Deposits
– Time Due to Banks		1.0		—	—			2.9		—	—			118.7		0.6	2.09
– Other Time and Savings		30.5		0.1	1.23			39.4		0.1	1.38			83.9		0.4	1.70

Total Foreign Deposits		31.5		0.1	1.11			42.3		0.1	1.29			202.6		1.0	1.93

Total Interest Bearing Deposits		5,232.2		14.5	1.12			5,111.5		17.7	1.37			5,065.5		24.0	1.92
Short-Term Borrowings		649.8		2.5	1.54			1,053.5		5.1	1.90			1,738.8		11.2	2.61
Long-Term Debt		390.4		5.8	6.09			389.9		5.9	6.05			538.2		8.3	6.27

Total Interest Bearing Liabilities		6,272.4		22.8	1.47			6,554.9		28.7	1.73			7,342.5		43.5	2.40

Net Interest Income			$	91.0					$	90.2					$	94.9

Interest Rate Spread					3.91	%					3.60	%					3.33	%
Net Interest Margin					4.29	%					4.05	%					3.92	%
Non-Interest Bearing Demand Deposits (Domestic)		1,636.8						1,601.0						1,508.9
Other Liabilities		360.7						329.3						301.9
Shareholders’ Equity		973.1						1,069.6						1,263.5

Total Liabilities and Shareholders’ Equity	$	9,243.0					$	9,554.8					$	10,416.8

Certain 2002 information has been reclassified to conform to 2003 presentation.

Analysis of Change in Net Interest Income – Tax Equivalent Basis (Unaudited)

Table 3

	Three Months Ended March 31, 2003 Compared to March 31, 2002²
(dollars in millions)	Volume¹			Rate¹			Total
Change in Interest Income:
Interest Bearing Deposits	$	(4.5	)	$	0.8		$	(3.7	)
Funds Sold		0.1			(0.3	)		(0.2	)
Investment Securities:
Held-to-Maturity		(2.1	)		(0.8	)		(2.9	)
Available for Sale		4.1			(8.8	)		(4.7	)
Loans Held for Sale		(4.5	)		(1.1	)		(5.6	)
Net Loans and Lease Financing
Domestic
Commercial and Industrial		(3.4	)		(0.4	)		(3.8	)
Construction		(0.7	)		(0.1	)		(0.8	)
Commercial Mortgage		(0.5	)		(1.0	)		(1.5	)
Residential Mortgage		(2.5	)		(2.6	)		(5.1	)
Installment		2.9			(1.3	)		1.6
Home Equity		1.3			(0.9	)		0.4
Purchased Home Equity		2.6			—			2.6
Lease Financing		0.1			(0.8	)		(0.7	)

Total Domestic		(0.2	)		(7.1	)		(7.3	)
Foreign		(0.1	)		0.0			(0.1	)

Total Loans		(0.3	)		(7.1	)		(7.4	)
Other		(0.2	)		0.1			(0.1	)

Total Change in Interest Income		(7.4	)		(17.2	)		(24.6	)

Change in Interest Expense:
Interest Bearing Deposits
Domestic
Demand Deposits		0.2			(0.5	)		(0.3	)
Savings Deposits		1.6			(4.2	)		(2.6	)
Time Deposits		(3.1	)		(2.6	)		(5.7	)

Total Domestic		(1.3	)		(7.3	)		(8.6	)
Foreign Deposits		(0.6	)		(0.3	)		(0.9	)

Total Interest Bearing Deposits		(1.9	)		(7.6	)		(9.5	)
Short-Term Borrowings		(5.3	)		(3.4	)		(8.7	)
Long-Term Debt		(2.3	)		(0.2	)		(2.5	)

Total Change in Interest Expense		(9.5	)		(11.2	)		(20.7	)

Change in Net Interest Income	$	2.1		$	(6.0	)	$	(3.9	)

The changes for each category of interest income and expense are divided between the portion of changes attributable to the variance in volume or rate for that category.

Certain 2002 information has been reclassified to conform to 2003 presentation.

Provision for Loan and Lease Losses

~~No provision~~

Consistent with the previous two quarters, no Provision for ~~loan~~Loan and ~~lease losses~~Lease Losses (the “Provision”) was recorded for the three months ended ~~September 30, 2002, due to further stabilization and improvements~~March 31, 2003. This resulted in a reduction in the ~~Company’s asset quality.~~Allowance for Loan and Lease Losses (the “Allowance”) equal to the amount of net charge-offs of $2.8 million. The ~~provision~~Provision in the ~~third~~first quarter ~~2001~~2002 was equal to net charge-offs of ~~$0.9~~$8.3 million. Net loan charge-offs in the third quarter 2001 benefited from significant foreign loan recoveries. Net loan charge-offs for the quarter ended September 30, 2002 were $4.5 million. Based on current conditions, the Company does not expect to record a provision for loan and lease losses in the fourth quarter 2002. However, the actual amount of the provision for loan and lease losses will depend on determinations of credit risk in the portfolio and the economic environment that will be made near the end of the quarter. For further information on ~~credit quality,~~Credit Quality, refer to the section on “Corporate Risk Profile”.

Non-Interest Income

Non-interest income was ~~$48.2~~$44.8 million for the three months ended ~~September 30, 2002,~~March 31, 2003, compared to ~~$113.4~~$53.0 million for the comparable period in ~~2001.~~ 2002.

The prior year included a gain on the sale of Pacific Century Bank N.A.’s California branches of $49.4 million, $1.9 million gain on sale of a leverage lease, partially offset by a $3.5 million write-down taken on an equity investment. After excluding 2001 non-recurring gains and divested businesses, non-interest income from continuing businesses was $53.7 milliondecline in ~~the third quarter of 2001 and $163.3 million for the nine months ended September 30, 2001.~~

~~Trust~~trust and asset management income ~~declined to $13.7 million~~ in the ~~third~~first quarter of 2003 of 11.0% from the same quarter of 2002 ~~a decrease of 2.5% from $14.0 million in the third quarter of 2001. The decrease~~ was primarily attributable to reduced fees resulting from declines in values of assets under ~~administration and the decline in interest rates.~~

administration.

Mortgage banking income ~~was $4.0 million in~~decreased by 96.4% from the ~~third~~first quarter of ~~2002, a decrease of 61.2% from $10.4 million in the third quarter of 2001.~~2002. The significant decrease was ~~mainly~~ due to ~~adjustments~~a reduction in ~~the prior year to recognize unearned income on mortgages sold in previous periods and the third quarter 2001 reversal of the mortgage loan portfolio valuation reserve.~~

Service charges on deposit accounts declined to $7.9 million in the third quarter of 2002, a decrease of 17.4% from $9.6 million in the same period last year. The decline was primarily attributable to the divested businesses.

Fees, exchange, and other service charges were $13.1 million for the three months ended September 30, 2002 compared to $17.6 million for the same prior year period. The decrease was mainly due to the divested businesses.

~~Gain~~gains on sales of banking operations, net of venture investment losses of $47.8 million included the gain on sale of Pacific Century Bank N.A.’s California branches in the third quarter of 2001. There were no sales of banking operations in 2002.

~~Other operating income was $9.5 million for the third quarter of 2002, down $3.5 million~~mortgage loans resulting from the ~~third quarter of 2001. The decline was primarily due to the prior year gain on sale of a leverage lease and decreased annuity income.~~

~~Non-Interest Expense~~

Non-interest expense for the three months ended September 30, 2002 was $93.0 million, a decline of 22.3% from $119.6 million, excluding restructuring and related costs of $3.0 million, in the comparable period of 2001. There were no restructuring and related costs for the three months ended September 30, 2002. However, $6.6 million of expenses related to the ITSRP were incurred in the current quarter. Refer to the notes to the financial statements for further discussion.

Salaries and pension and other employee benefits expense totaled $46.2 million in the third quarter of 2002, compared to $60.0 million for the corresponding period of 2001. Net occupancy and equipment expense in the third quarter of September 2002 was $19.7 million, a decrease of 17.6% from $23.9 million for the same period in 2001. Other operating expense decreased to $20.5 million in the third quarter of 2002 from $32.4 million for the same quarter in 2001. The decrease in expenses was primarily attributable to the divested businesses. In addition, salaries and benefits declined due to lower incentive compensation and reversal of 2001 accruals. Equipment expense benefited from reduced depreciation cost.

~~Restructuring~~

In April 2001, the Company announced a strategic plan designed to maximize shareholder value by strengthening its Hawaii and West Pacific operations and divesting most other holdings. The Company substantially completed its divestiture activities bydecision at the end of ~~2001, although a small amount~~2002 to hold the majority of ~~wrap-up activity was concluded~~first quarter 2003 mortgage originations in the portfolio rather than selling them in the secondary market. Additionally, mortgage banking income in the first quarter of 2002 ~~and resulted in $2.0~~included $4.4 million of ~~restructuring costs.~~

~~The~~recoveries in loan values following a market value adjustment at December 31, 2001.

Service charges on deposit accounts increased by 6.4% in the first quarter ~~expense~~ of ~~$2.0 million included $3.1 million of employee severance costs, $0.2 million of other costs, offset by adjustments of $1.3 million in previous estimates of foreign currency translation losses.~~

~~Activity in the Restructuring Accrual~~

~~(in millions)~~

Balance at December 31, 2001

$
11.8

Restructuring Charges    3.3
Adjustments    (1.3 )
Payments    (10.6 )
Balance at March 31, 2002


3.2

Payments    (3.2 )
Balance at June 30, 2002

$
0.0

There were no costs or activity in the third quarter of 2002. The Company anticipates costs of up to $1.0 million in the fourth quarter 2002 associated with the closure of four small West Pacific branches.

~~Income Tax Provision~~

~~The 36.4% effective tax rate for the third quarter of 2002 decreased from 69.4% in the third quarter of 2001 primarily due to the impact of the divestitures and foreign taxes in the prior year.~~

~~Continuing Businesses~~

Similar to business segment results, continuing business results are determined based on the Company’s internal financial management reporting process and organizational structure. This process uses various techniques to assign balance sheet and income statement amounts, including allocations of overhead and loan and lease loss provision. This process is dynamic and requires certain allocations based on judgment and subjective factors.

Continuing businesses exclude the businesses that were divested in 2001 (Pacific Century Bank N.A., Asia Division, South Pacific Division and the credit card business) restructuring, non-core transactions and ITSRP costs. Table 3 presents results from continuing businesses for September 30, 2002 and 2001.

~~In the third quarter of 2002, net interest income from the continuing businesses increased $1.2 million~~2003 compared to the same period last year mainly due to increased fees charged as a result of the lower interest rate environment and a larger account base as the result of deposit promotion programs.

Insurance income increased 14.7% from the same quarter ~~in 2001,~~of 2002 primarily due to ~~increased liquidity~~an increase in contingent commission income.

Other operating income for the first quarter of 2003 declined 14.8% from the first quarter of 2002 primarily due to decreased annuity income, lease income and ~~reductions~~retail brokerage commissions.

Non-Interest Expense

Non-interest expense for the first quarter of 2003 was $90.2 million including $7.4 million in ~~long-term debt. The decrease~~systems replacement costs. Non-interest expense for the first quarter of 2002 included net restructuring costs of $2.0 million. Excluding these items, non-interest expense was $82.8 million in the ~~provision for loan and lease losses from the prior year is due to improved asset quality. Non-interest income decreased $5.5 million compared to the same~~first quarter in 2001 primarily from reductions in mortgage banking income and foreign exchange income. Non-interest expense decreased $2.0 million mainly due to decreases in compensation expense and relocation costs. Net income was $34.4 million, an increase of ~~$3.0~~2003, a decrease of $6.7 million from the same quarter last year. Refer to Note 2 to the Consolidated Financial Statements for additional information on the systems replacement project.

Salaries and employee benefits expense decreased 7.0% in ~~2001. Year to date net income increased by $5.5 million~~the first quarter of 2003 compared to the ~~nine months ended September 30, 2001.~~

Continuing Business (Unaudited)


Table 3


Three Months Ended
September 30

Nine Months Ended
September 30

(dollars in thousands)
2002

2001

2002

2001

Net Interest Income    $ 92,181    $ 91,008    $ 280,013    $ 270,985
Provision for Loan and Lease Losses    —      (6,421 )    (11,616 )    (21,043 )
Net Interest Income After Provision for Loan and Lease Losses    92,181    84,587    268,397    249,942
Non-Interest Income    48,248    53,731    151,184    163,279
Non-Interest Expense¹
   (86,378 )    (88,328 )    (267,185 )    (264,087 )
Income Before Income Taxes    54,051    49,990    152,396    149,134
Provision for Income Taxes    (19,668 )    (18,640 )    (54,666 )    (56,879 )
Net Income¹
   $ 34,383    $ 31,350    $ 97,730    $ 92,255
Total Assets (End of Period)    $ 9,702,043    $ 9,253,817    $ 9,702,043    $ 9,261,817
Total Assets (Average)    9,803,896    9,320,155    10,096,958    9,584,119
Diluted Earnings Per Share¹
   $ 0.49    $ 0.38    $ 1.34    $ 1.12
Return on Average Equity¹
   11.84 %    8.96 %    10.69 %    9.04 %
Efficiency Ratio¹
   61.51 %    61.03 %    61.96 %    60.81 %

~~Adjusted to exclude goodwill amortization expense for 2001.~~

comparable period in 2002 mainly due to a 6.2% decrease in the number of employees.

Other operating expense decreased in the first quarter of 2003 from the same quarter in 2002 primarily due to a decline in other professional services and legal fees.

BALANCE SHEET ANALYSIS

~~Other Short-term~~

Short-Term Interest Earning Assets

~~Other short-term~~

Short-term interest-earning assets, including interest-bearing deposits, securities purchased under agreements to resell and funds sold, totaled ~~$1.1 billion~~$332.1 million at ~~September 30, 2002,~~March 31, 2003, compared to ~~$1.2 billion~~$745.0 million and ~~$1.4~~$1.5 billion at December 31, ~~2001~~2002 and ~~September 30, 2001,~~March 31, 2002, respectively. The ~~decrease from the same period in the prior year was~~decreases were mainly due to the redeployment of funds to purchase available for sale securities and to repurchase of the Company’s stock.

Investments

The Company’s investment portfolio is managed in an effort to meet strategic asset/liability objectives, to provide both interest income and balance sheet liquidity and to collateralize customer deposits. Available-for-sale securities at ~~September 30, 2002~~March 31, 2003 were ~~$2.2~~$2.5 billion, compared to ~~$2.0~~$2.3 billion at December 31, ~~2001,~~2002, and ~~$2.1~~$2.0 billion at ~~September 30, 2001.~~March 31, 2002. The 9.2% increase from year-end 2002 is attributable to the investment of excess liquidity. Securities held to maturity were ~~$277.9~~$175.6 million at ~~September 30, 2002,~~March 31, 2003, declining from ~~$396.2~~$229.7 million at December 31, ~~2001~~2002 and ~~$460.5~~$344.7 million at ~~September 30, 2001. These decreases were~~March 31, 2002. The decrease in held to maturity securities was largely due to maturities. During the third quarter the Company extended the maturity on approximately $800 million of liquid assets. These assets were a consequence of the 2001 divestitures and had initially been invested in overnight funds in anticipation of an increase in short-term interest rates, which did not occur. At ~~September 30, 2002~~March 31, 2003 and December 31, ~~2001~~2002 investment securities with a book value of ~~$1.8~~$1.1 billion and $2.1 billion, respectively, were pledged as collateral for repurchase agreements.

Loans Held for Sale

Loans held for sale, primarily residential mortgage loans, totaled ~~$30.9~~$47.3 million at ~~September 30, 2002,~~March 31, 2003, compared to ~~$456.7~~$40.1 million at December 31, ~~2001,~~2002, an increase of $7.2 million, and $99.8 million at March 31, 2002, a decrease of ~~$425.8 million, and compared to $228.1 million at September 30, 2001, a decrease of $197.2~~$52.5 million. During the third quarter the percentage of loans originated and designated held for sale increased from second quarter 2002. However, the loan held for sale balance declined due to improved delivery to the secondary market of mortgage loans for sale.

Loans

As of ~~September 30, 2002,~~March 31, 2003, loans outstanding, excluding loans held for sale, ~~declined~~increased to ~~$5.3~~$5.6 billion from ~~$5.7~~$5.4 billion at year-end ~~2001~~2002 and ~~$6.8 billion at September 30, 2001.~~remained flat from March 31, 2002. The ~~decrease~~increase from ~~September 30, 2001~~December 31, 2002 was ~~primarily due~~attributable to the ~~divested businesses~~increases in residential and ~~strategic risk reductions in~~commercial mortgages. Compared to March 31, 2002, the ~~portfolio.~~

~~The loan portfolio decreased slightly during~~mix of loans has changed as the third quarter 2002 from second quarter 2002. Consumer loans decreased due to the acceleration of mortgage prepayments and management’s decision to sell a higher percentage of mortgage originations. However, otherCompany increased consumer loans ~~continue to increase. Commercial loan balances~~and decreased ~~as some of the syndicated~~commercial loans, ~~were exited and a slight decrease in commercial funding occurred. The increase in commercial mortgages is largely due to reclassifications.~~

including large borrower exposures.

Table 4 presents the composition of the loan portfolio by major loan categories and Table 5 presents the composition of consumer loans by geographic area.

Loan Portfolio Balances (Unaudited)

Table 4

(dollars in millions)
September 30 2002

      June 30 2002

December 31 2001

September 30 2001
Domestic Loans
Commercial
Commercial and Industrial¹
   $ 869.4    $ 999.6    $ 1,175.5    $ 1,413.6
Mortgage – Commercial¹
   616.5    562.5    640.7    667.9
Construction    146.3    148.6    169.6    175.7
Lease Financing    451.8    450.8    441.8    466.8
Total Commercial    2,084.0    2,161.5    2,427.6    2,724.0
Consumer
Mortgage – Residential    2,259.2    2,360.5    2,419.4    2,440.4
Home Equity    419.2    404.2    329.9    306.3
Other Consumer    421.6    403.2    399.8    428.4
Lease Financing    36.5    37.3    38.9    41.2
Total Consumer    3,136.5    3,205.2    3,188.0    3,216.3
Total Domestic


5,220.5


5,366.7


5,615.6


5,940.3
Foreign Loans    38.2    41.8    36.9    825.8
Total Loans

$
5,258.7

$
5,408.5

$
5,652.5

$
6,766.1

(dollars in millions)	March 31, 2003		December 31, 2002		March 31, 2002¹
Domestic Loans
Commercial
Commercial and Industrial	$	824.9	$	875.0	$	1,114.9
Commercial Mortgage		691.7		591.1		617.6
Construction		86.7		127.5		161.4
Lease Financing		430.4		427.3		436.1

Total Commercial		2,033.7		2,020.9		2,330.0
Consumer
Residential Mortgage		2,305.3		2,131.4		2,409.4
Home Equity		439.1		428.2		369.8
Purchased Home Equity		170.9		185.8		—
Other Consumer		518.5		493.3		389.5
Lease Financing		33.8		34.5		37.9

Total Consumer		3,467.6		3,273.2		3,206.6

Total Domestic		5,501.3		5,294.1		5,536.6

Foreign		64.1		64.9		65.0

Total Loans	$	5,565.4	$	5,359.0	$	5,601.6

¹ Certain 2002 information has been reclassified to conform to 2003 presentation.

~~$42.3 million in loans were reclassified to mortgage-commercial from commercial and industrial during the third quarter of 2002.~~

Consumer Loans by Geographic Area ~~(Unaudited)~~

Table 5

(dollars in millions)
September 30 2002

      June 30 2002

December 31 2001

September 30 2001
Hawaii

Residential Mortgage    $ 2,190.0    $ 2,293.1    $ 2,345.4    $ 2,347.0
Home Equity    410.0    395.1    320.5    296.4
Other Consumer    345.5    317.5    292.6    319.1
West Pacific

Residential Mortgage    69.0    67.1    73.7    92.9
Home Equity    9.2    9.1    9.4    9.9
Other Cosumer    81.2    89.9    109.9    113.2
American Samoa

Residential Mortgage    0.2    0.3    0.3    0.5
Other Consumer    31.4    33.1    36.2    37.3

Total Consumer Loans

$
3,136.5

$
3,205.2

$
3,188.0

$
3,216.3

(dollars in millions)	March 31, 2003		December 31, 2002		March 31, 2002¹
Hawaii
Residential Mortgage	$	2,100.0	$	1,921.4	$	2,200.3
Home Equity		429.7		419.2		360.6
Other Consumer		442.3		448.2		298.6
Guam
Residential Mortgage		200.5		202.9		205.1
Home Equity		9.4		9.0		9.2
Other Consumer		44.1		42.8		54.1
U.S. Mainland
Purchased Home Equity		170.9		185.8		—
Other Pacific Islands
Residential Mortgage		4.8		7.1		4.0
Other Consumer		65.9		36.8		74.7

Total	$	3,467.6	$	3,273.2	$	3,206.6

Certain 2002 information has been reclassified to conform to 2003 presentation.

Mortgage Servicing Rights

As of March 31, 2003, the Company’s portfolio of residential loans serviced for third parties totaled $3.5 billion, a $0.4 billion and $0.5 billion decrease from December 31, 2002 and March 31, 2002, respectively. The ~~Company’s~~carrying value of mortgage ~~loan~~ servicing ~~portfolio was $3.7 billion~~rights amounted to $25.8 million at ~~September 30, 2002.~~March 31, 2003, a $3.0 million and $4.7 million decrease from December 31, 2002 and March 31, 2002, respectively. The Company did not incur an impairment charge related to mortgage servicing rights in the ~~third quarter. These rights had a carrying value~~first quarter of ~~$30.0 million at September 30, 2002.~~2003. The prepayment speed of Hawaii mortgages ~~has been and remains~~continues to be less than national speeds.

Deposits

As of ~~September 30, 2002,~~March 31, 2003, deposits totaled ~~$6.6~~$7.0 billion, ~~down~~a $0.1 billion increase from ~~$6.7 billion at~~ December 31, ~~2001~~2002 and ~~down $0.8 billion from $7.4 billion at September 30, 2001. Compared to September 30, 2001, domestic deposits increased~~a $0.4 billion ~~while foreign deposits declined by $1.1 billion due to the divested foreign operations.~~increase from March 31, 2002. During the ~~third~~first quarter of ~~2002,~~2003, the Company ~~experienced~~continued to experience growth in demand and savings deposits while continuing to manage ~~down~~ its higher cost time deposits.

~~Table 6 presents average deposits by type for the quarters ended September 30, 2002, December 31, 2001 and September 30, 2001.~~

~~Average Deposits (Unaudited)~~

~~Table 6~~

Three Months Ended September 30, 2002

Three Months Ended December 31, 2001

Three Months Ended September 30, 2001
(dollars in millions)
Amount

Mix

Amount

Mix

Amount

Mix
Domestic
Non-Interest Bearing Demand    $1,547.0      23.5%    $1,397.8      19.1%    $1,509.0      19.3%
Interest-Bearing Demand    2,036.0      31.0%    1,774.7      24.2%    1,892.6      24.2%
Regular Savings    1,346.2      20.5%    958.3      13.1%    794.9      10.1%
Time Certificates of Deposit
    ($100,000 or More)
   780.0      11.8%    990.8      13.5%    1,202.7      15.3%
Other Time and
    Savings Certificates
   820.0      12.5%    1,057.4      14.5%    1,229.3      15.7%
Total Domestic    6,529.2      99.3%    6,179.0      84.4%    6,628.5      84.6%
Foreign
Non-Interest Bearing Demand    —        0.0%    328.0      4.5%    330.7      4.2%
Time Due to Banks    9.6      0.1%    365.5      5.0%    235.3      3.0%
Other Time and Savings    38.3      0.6%    445.9      6.1%    640.7      8.2%
Total Foreign    47.9      0.7%    1,139.4      15.6%    1,206.7      15.4%
Total    $6,577.1      100.0%    $7,318.4      100.0%    $7,835.2      100.0%

Borrowings

Short-term borrowings, including funds purchased, ~~and~~ securities sold under agreements to repurchase commercial paper, and other short-term borrowings, totaled ~~$1.2~~$0.7 billion at ~~September 30, 2002, $1.8~~March 31, 2003, $0.8 billion at December 31, ~~2001~~2002 and ~~$2.1~~$1.6 billion at ~~September 30, 2001.~~March 31, 2002. The decline in short-term borrowings reflected the lower funding needs of the Company. Long-term debt at ~~September 30, 2002 decreased to $409.8 million~~March 31, 2003 declined from ~~$570.4 million at~~ December 31, ~~2001~~2002 and ~~$694.4 million at September 30, 2001. Long-term debt declined~~March 31, 2002 due to repayments and repurchases.

Shareholders’ Equity

The Company’s capital position remains strong. ~~Total~~The 6.3% net reduction in capital ~~decreased to $1,100.7 million at September 30, 2002,~~ from ~~$1,247.0 million at~~ December 31, ~~2001 and from $1,371.1 million at September 30, 2001. The reduction in capital~~2002 is attributable to the Company’s common stock repurchase ~~programs.~~programs offset by earnings for the first quarter of 2003. A further discussion of the Company’s capital is included in the Corporate Risk Profile section of this report.

~~LINE OF~~ BUSINESS ~~FINANCIAL REVIEW~~SEGMENTS

The Company’s business segments are defined as Retail Banking, Commercial Banking, Investment Services Group, and Treasury and Other Corporate. Business ~~Segment~~segment results are determined based on the Company’s internal financial management reporting process and organizational structure. This process uses various techniques to assign balance sheet and income statement amounts to business segments, including allocations of overhead, the Provision and capital. This process is dynamic and requires certain allocations based on judgment and subjective factors. Unlike financial accounting, there is no comprehensive, authoritative guidance for management accounting that is equivalent to accounting principles generally accepted in the United States. The management accounting process measures the performance of the operating segments based on the management structure of the Company and is not necessarily comparable with similar information for any other financial institution.

The business segments are primarily managed with a focus on performance measures, including risk adjusted return on capital (“RAROC”) and net income after capital charge (“NIACC”). RAROC is the ratio of net income to risk-adjusted equity. Equity is allocated to each business segment based on an assessment of its inherent risk. NIACC is net income available to common shareholders less a charge for allocated capital. The cost of capital is determined by multiplying management’s estimate of the shareholder’s minimum required rate of return on capital invested (11% for 2003 and 12% for 2002) by the segment’s allocated equity. The Company assumes a cost of capital that is equal to the long-term government bond rate plus an additional level of return for the average risk premium of an equity investment adjusted for the Company’s market risk. The net interest income of the business segments reflects the results of a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics and reflects the allocation of net interest income related to the Company’s overall asset and liability management activities on a proportionate basis. The basis for the allocation of net interest income is a function of management decisions and assumptions which are subject to change based on changes in current interest rate and market conditions. The Provision charged to the Treasury and Other Corporate segment represents changes in the level of the Allowance. The Provision recorded in the Retail Banking, Commercial Banking, and Investment Services Group segments represents actual net charge-offs of these segments.

The financial results for the three months ended March 31, 2003 and 2002 are discussed below and are presented in ~~Note 3~~Table 6. Segment information for 2002 has been reclassified to conform to the ~~financial statements. The following is a discussion of segment performance.~~

2003 presentation.

Retail Banking

The Company’s ~~retail banking franchise and market share are key strengths of the Company.~~ Retail Banking segment offers financial products and services to consumers and small businesses. Loan and lease products include residential mortgage loans, home equity lines of credit, automobile loans and leases, and installment loans. Deposit products include checking, savings and time deposit accounts. The Retail Banking segment also provides ~~checking~~merchant services to its small business customers. Products and ~~savings products~~services from the Retail Banking segment are delivered to customers through 74 Hawaii branch locations and the largest network of bank ATM’s in the State of Hawaii, e-bankoh (on-line banking service) and 24-hour telephone banking service.

Allocated net income for the ~~consumer~~Retail Banking segment increased by $3.0 million, or 18.6%, for the first quarter of 2003 compared to the first quarter of 2002. The Retail Banking segment’s NIACC increased by $2.1 million to $12.3 million for the first quarter of 2003. RAROC increased from 32% for the first quarter of 2002 to 36% for the first quarter of 2003. The improvement in these financial measures was primarily due to an increase in net interest income and ~~small business segments; merchant services; installment, home equity~~decreases in non-interest expense and ~~mortgage lending products; as well as other products and services.~~the Provision, partially offset by lower non-interest income. The increase in ~~Retail Banking’s net-interest~~net interest income ~~for the three and nine months ended September 30, 2002~~ was ~~a result of increased deposit income~~primarily due to the lower ~~average cost~~interest rate environment in the first quarter of ~~consumer~~2003 as compared to the first quarter of 2002, which resulted in a reduction of interest expense on deposit accounts. Also contributing to the increase in net interest income was the interest income earned on the home equity portfolio that was purchased in December 2002. Non-interest expense decreased by $5.5 million, or 11.8%, for the first quarter of 2003 compared to the first quarter of 2002, primarily due to reductions in technology spending, incentive compensation and lower marketing costs. The reduction in the Provision for the first quarter of 2003 as compared to the first quarter of 2002 reflects enhanced credit management and collections in the consumer portfolio. The decrease in non-interest income for the ~~three~~Retail Banking segment was primarily due to lower mortgage banking income, as a result of lower gains on sale and ~~nine months ended September 30, 2002~~reduced net servicing income.

Commercial Banking

The Commercial Banking segment offers products including corporate banking and commercial real estate loans, lease financing, auto dealer financing, deposit and cash management products, and property and casualty insurance products. Lending, deposit and cash management services are offered to middle-market and large companies in Hawaii. Commercial real estate mortgages are focused on customers that include investors, developers and builders primarily domiciled in Hawaii. Lease financing targets commercial leasing transactions ranging between $5 million and $15 million. The Commercial Banking unit also serves customers through its 15 branches in the Pacific Islands and a representative office in Tokyo.

The Commercial Banking segment’s allocated net income increased by $4.6 million or 56.8% in the first quarter of 2003 compared to the ~~same periods~~first quarter of 2002. NIACC increased by $4.1 million and RAROC increased from 15% in ~~2001 was~~the first quarter 2002 to 24% in the first quarter of 2003. The improvement in these financial measures is a result of ~~decreased mortgage banking revenue~~an increase in net interest income along with decreases in the Provision and non-interest expense. The increase in net-interest income was driven by lower ~~fee~~interest expense on deposits, partially offset by the decline in total loan and lease income due to lower volume. The decline in the Provision is a result of improved credit quality of the loan portfolios from ~~consumer deposits.~~first quarter 2002 to first quarter of 2003. Total non-interest expense declined by $2.4 million, or 9.7%, in the first quarter of 2003 as compared to the first quarter of 2002. The decrease in non-interest expense ~~for the three and nine months ended September 30, 2002 compared to the same periods in 2001 was due to lower incentive compensation resulting from decreased mortgage origination volume.~~

~~Commercial Banking~~

~~The Commercial Banking segment offers an array~~is a result of products including corporate banking, commercial demand and time deposit products, lease financing, commercial real estate loans, commercial insurance products, cash management products and auto dealer financing. The Company’s West Pacific and Japan Marketing Divisions are included in this segment. For the nine months ended September 30, 2002, total average assets declined by 25.4% from the same period last year. Much of the decrease was due to exiting certain loans to reduce credit risks. That process was largely concluded by June 30, 2002. The provision for loan and lease losses decreased by $1.1 million or 7.4% as compared to the same nine month period last year. The decrease in net interest income for the three and nine months ended September 30, 2002 compared to the same periods last year was attributable to the reduction in ~~average assets and the lower interest rate environment. Non-interest income increased compared to the same periods a year ago reflecting higher prepayment and placement fees.~~

staffing levels as well as decreases in other direct expenses.

Investment Services Group

The Investment Services Group ~~offers~~includes private banking, trust services, asset management, ~~investments such as mutual funds~~institutional investment advice, and stocks, financial planning, annuities, and life insurance. The primary markets served through this segment are affluent individuals, corporations and foundations with trust and investment management needs.retail brokerage. A significant portion of ~~the~~this segment’s income is derived from fees, which are generally based on the market values of assets under management. ~~Income from~~The private banking and personal trust group assists individuals and families in building and preserving their wealth by providing investment, credit, and trust expertise to high-net-worth individuals. The asset management ~~services declined~~group manages portfolios and creates investment products. Institutional sales and service offers investment advice to corporations, government entities, and foundations. Also included in the group is Bankoh Investment Services, Inc. a full service brokerage offering equities, mutual funds, and annuities.

Allocated net income for the Investment Services Group decreased by $0.8 million or 26.5% in first ~~nine months~~quarter of 2003 compared to first quarter of 2002. The Investment Services Group’s NIACC decreased by $0.8 million to $0.6 million in first quarter of 2003 and RAROC decreased from 22% in the first quarter of 2002 ~~compared~~ to 16% in the ~~prior year~~first quarter of 2003. The decline in these financial measures was primarily due to ~~declines~~a decrease in ~~values of assets under management. However, this was~~non-interest income, partially offset by an increase in net interest income. Net interest income ~~resulting~~increased $1.0 million, due to lower interest expense on deposits. Non-interest income declined $2.1 million from first quarter of 2002 to first quarter of 2003. This reduction was primarily due to the decrease in trust and asset management fee income as a ~~higher level~~result of ~~private banking deposits.~~

declines in the market value of assets under management. The decrease in non-interest expense is primarily due to lower staffing levels.

Treasury and Other Corporate

The primary income earning component of this segment is Treasury, which consists of corporate asset and liability management activities including interest rate risk ~~management.~~management and foreign exchange business. This segment’s assets and liabilities (and related net interest income) consist of interest bearing deposits, investment securities, federal funds ~~purchased~~sold and ~~sold,~~purchased, government deposits, and short and long-term borrowings. The ~~remaining activity~~primary source of foreign exchange income relates to customer driven currency requests from ~~the divested businesses, including loan loss recoveries, is included in this segment.~~merchants and island visitors. The net residual effect of transfer pricing of assets and liabilities is included in Treasury, along with eliminations of ~~intercompany transactions~~inter-company transactions.

This segment also includes divisions that provide a wide-range of support (Technology and Operations, Human Resources, Finance and Legal, and Risk Management) to the other ~~minor unallocated amounts.~~income earning segments. Expenses incurred by these support units are charged to the business segments through an internal cost allocation process. This segment also includes the expenses related directly to the systems replacement project. Direct systems replacement project expenses are not allocated to the Retail, Commercial and Investment Services Group segments.

Allocated net income for Treasury and Other Corporate decreased by $8.1 million in the first quarter of 2003 as compared to the first quarter of 2002. NIACC decreased $3.3 million to $(19.6) million from the first quarter of 2002 to the first quarter of 2003. The decrease in these measures was due to the decrease in net interest income for the three months ended September 30, 2002 compared to the same period in 2001 reflects the impact of the lower interest rate environment Non-interest expense increased over the previous year due to severance expenses and professional fees.

~~Divestiture Businesses~~

~~For 2001, this segment reported the results of the businesses that were divested or closed.~~

~~Corporate Restructuring and Other Related Activities~~

This segment reflects the implementation of the Company’s strategic plan to improve credit quality and to divest underperforming businesses. This category included the gains and costs of divesting certain businesses (the credit card portfolio, Pacific Century Bank branches, Asia Division and the ~~South Pacific Division) and the costs of restructuring the Company, and losses associated with accelerated resolution of credit problems undertaken in 2001.~~

~~Additional indicators of performance adopted by the Company include:~~

~~GAAP~~

~~Net income: Net income generated by the business using measurement practices consistent with accounting principles generally accepted in the United States.~~

~~The key differences between the derivation of Economic and GAAP results are:~~

~~Provision for Loan and Lease Losses~~: The GAAP provision is an estimate of the change in risk in the current period, measured in accordance with generally accepted accounting principles. The economic provision represents estimated losses in the credit portfolio assuming a “normalized” economic environment and loss rate over the business cycle. Consequently, there is no recognition of the ~~free funds value~~systems replacement project expenses during the first quarter of ~~the allowance for loan and lease losses under Economic accounting.~~

~~Excess Capital Funding Value: GAAP~~2003. The decrease in allocated net income ~~includes~~was partially offset by a negative Provision in the ~~free funding value~~first quarter of ~~a share~~2003, the result of reducing the Allowance. Net interest income decreased mostly due to lower yields on the investment portfolio and short-term investments. The lower capital charge from the first quarter of 2002 to the first quarter of 2003 is due to the reduction of the Company’s excess capital ~~not allocated to the segments to cover risk. Economic results are based on risk-adjusted capital, necessitating adjustment~~and related charge for ~~the~~this excess capital, ~~funding value.~~

as a result of the continuing share repurchase activity.

~~Economic~~

NIACC (Net Income After Capital Charge): The key indicator of creating value for the shareholder, it is determined by subtracting a charge for capital from economic results. Positive value is created by generating net income above the Company’s estimated cost of capital.

~~RAROC (Risk Adjusted Return on Capital): A complementary measure that indicates the economic return produced by the business, on the assigned risk-adjusted capital.~~

~~Economic NIACC and RAROC for each segment for the three and nine months ended September 30, 2002 and 2001 are presented in Table 7.~~

~~Economic NIACC and RAROC~~Business Segment Selected Financial Information (Unaudited)

~~Table 7~~

(dollars in thousands)
RETAIL

COMMERCIAL

INVESTMENT SERVICES GROUP

DIVESTITURE BUSINESSES

TREASURY AND OTHER CORPORATE ¹

RESTRUCTURING
AND OTHER
RELATED ACTIVITIES

Three Months Ended September 30, 2002

NIACC (Economic)    $ 8,230      $ 2,846      $ 871      $ —        $ (20,398 )      $ —
RAROC (Economic)    29 %      17 %      18 %      —        2 %      N/A
Three Months Ended September 30, 2001

NIACC (Economic)    $ 6,573      $ 1,547      $ 243      $ (12,583 )      $ (10,743 )      $ (380 )
RAROC (Economic)    26 %      14 %      14 %      (4 )%      18 %      N/A
Nine Months Ended September 30, 2002

NIACC (Economic)    $ 24,296      $ 6,182      $ 1,803      $ —        $ (54,032 )      $ (1,275 )
RAROC (Economic)    29 %      16 %      16 %      —        24 %      N/A
Nine Months Ended September 30, 2001

NIACC (Economic)    $ 14,987      $ 5,178      $ 1,922      $ (33,071 )      $ (24,931 )      $ 20,699
RAROC (Economic)    22 %      14 %      17 %      0 %      13 %      N/A

~~This segment experienced negative NIACC because a charge for excess equity is included in the NIACC calculation; however, RAROC is calculated without the excess capital charge.~~

Table 6

(dollars in thousands)	Retail Banking			Commercial Banking			Investment Services Group			Treasury and Other Corporate				Consolidated Total
Three Months Ended March 31, 2003
Net Interest Income	$	54,988		$	36,383		$	3,970		$	(4,341	)		$	91,000
Provision for Loan and Lease Losses		(848	)		(2,151	)		—			2,999				—

Net Interest Income After Provision for Loan and Lease Losses		54,140			34,232			3,970			(1,342	)			91,000
Non-Interest Income		17,364			8,415			15,680			3,294				44,753

		71,504			42,647			19,650			1,952				135,753
Information Technology Systems Replacement Project		(583	)		(23	)		(244	)		(6,567	)			(7,417	)
Non-Interest Expense		(40,846	)		(22,541	)		(15,904	)		(3,492	)			(82,783	)

Income Before Income Taxes		30,075			20,083			3,502			(8,107	)			45,553
Provision for Income Taxes		(11,128	)		(7,334	)		(1,296	)		4,006				(15,752	)

Allocated Net Income (Loss)		18,947			12,749			2,206			(4,101	)			29,801

Allowance Funding Value		(152	)		(1,141	)		(10	)		1,303				—
GAAP Provision		848			2,151			—			(2,999	)			—
Economic Provision		(2,708	)		(3,058	)		(132	)		(6	)			(5,904	)
Tax Effect of Adjustments		744			758			53			629				2,184
Capital Charge		(5,403	)		(5,367	)		(1,517	)		(14,464	)			(26,751	)

Net Income (Loss) After Capital Charge (NIACC)	$	12,276		$	6,092		$	600		$	(19,638	)		$	(670	)

RAROC (ROE for the Company)		36	%		24	%		16	%		(4	)%			12	%

Total Assets at March 31, 2003	$	3,471,677		$	2,242,681		$	145,925		$	3,549,927		��	$	9,410,210

Three Months Ended March 31, 2002
Net Interest Income	$	49,556		$	35,630		$	3,001		$	6,708			$	94,895
Provision for Loan and Lease Losses		(1,942	)		(6,510	)		—			160				(8,292	)

Net Interest Income After Provision for Loan and Lease Losses		47,614			29,120			3,001			6,868				86,603
Non-Interest Income		24,052			8,621			17,824			2,528				53,025

		71,666			37,741			20,825			9,396				139,628
Restructuring and Other Related Costs		—			—			—			(1,979	)			(1,979	)
Non-Interest Expense		(46,314	)		(24,955	)		(16,061	)		(2,114	)			(89,444	)

Income Before Income Taxes		25,352			12,786			4,764			5,303				48,205
Provision for Income Taxes		(9,380	)		(4,655	)		(1,763	)		(1,351	)			(17,149	)

Allocated Net Income		15,972			8,131			3,001			3,952				31,056

Allowance Funding Value		(267	)		(1,551	)		(7	)		1,825				—
GAAP Provision		1,942			6,510			—			(160	)			8,292
Economic Provision		(2,504	)		(4,239	)		(127	)		(1	)			(6,871	)
Tax Effect of Adjustments		307			(266	)		50			(617	)			(526	)
Capital Charge		(5,323	)		(6,559	)		(1,501	)		(21,366	)			(34,749	)

Net Income (Loss) After Capital Charge (NIACC)	$	10,127		$	2,026		$	1,416		$	(16,367	)		$	(2,798	)

RAROC (ROE for the Company)		32	%		15	%		22	%		24	%			10	%

Total Assets at March 31, 2002	$	3,243,345		$	2,598,482		$	113,914		$	4,289,280			$	10,245,021

FOREIGN OPERATIONS

The countries in which the Company maintains its largest exposure on a cross-border basis include the United Kingdom, ~~Canada, Singapore, the~~Japan, Netherlands, and Australia. Table 87 presents as of ~~September 30, 2002,~~March 31, 2003, December 31, ~~2001,~~2002, and ~~September 30, 2001,~~March 31, 2002, a geographic distribution of the Company’s cross-border assets for ~~each country in which such assets exceeded 0.75% of total assets. The primary component of cross-border assets as of September 30, 2002 was interest bearing deposits of $1,017.8 million.~~

selected countries:

Geographic Distribution of Cross-Border International Assets (Unaudited)¹

Table 87

(dollars in millions)
Country

September 30, 2002

December 31, 2001

September 30, 2001

Australia      $ 101.8      $ 116.0      $ 91.2
Canada      120.0      119.9      104.2
France      73.5      —        103.3
Germany      76.2      188.2      96.8
Italy      —        —        95.6
Japan      —        81.9      120.3
Netherlands      107.8      192.9      183.1
Singapore      139.2      140.6      145.7
United Kingdom      309.7      257.9      295.0
All Others      211.8      281.9      399.7
     $ 1,140.0      $ 1,379.3      $ 1,634.9

In this table, cross-border outstandings are defined as foreign monetary assets that are payable to the Company in U.S. dollars or other non-local currencies, plus amounts payable in local currency but funded with U.S. dollars or other non-local currencies. Cross-border outstandings include loans, acceptances, interest-bearing deposits with other banks, other interest-bearing investments, and other monetary assets.

~~The West~~

(dollars in millions)
Country	March 31, 2003		December 31, 2002²		March 31, 2002²
Australia	$	36.8	$	63.2	$	177.4
Canada		33.0		31.9		215.6
France		8.3		34.2		78.7
Germany		26.0		100.6		46.4
Japan		53.5		56.4		63.2
Netherlands		38.1		98.0		197.0
Singapore		—		100.1		83.9
Switzerland		0.3		0.2		99.3
United Kingdom		60.8		170.5		326.3
All Others		28.1		17.8		208.3

	$	284.9	$	672.9	$	1,496.1

Cross-border outstandings are defined as foreign monetary assets that are payable to the Company in U.S. dollars or other non-local currencies, plus amounts payable in local currency but funded with U.S. dollars or other non-local currencies. Cross-border outstandings include loans, acceptances, interest-bearing deposits with other banks, other interest-bearing investments and other monetary assets.

Certain 2002 information has been reclassified to conform to 2003 presentation.

Because the U.S. dollar is used in the Pacific ~~(consisting of Guam~~Island division locations (Guam and American Samoa, which are U.S. territories, and other nearby islands) ~~includes Bank of Hawaii and First Savings branches. Since the U.S. dollar is used in~~, these ~~locations,~~ operations ~~in the West Pacific~~ are not considered foreign for financial reporting purposes.

CORPORATE RISK PROFILE

Credit Risk

Credit Risk is defined as the risk that borrowers or counterparties will not be able to repay their obligations to the Company. Credit exposures reflect legally binding commitments for loans, leases, banker’s acceptances, financial and standby letters of credit, and overnight overdrafts.

The Company’s asset quality continued to ~~benefit from the resiliency in the Hawaii economy and a continued yet challenged national recovery,~~improve as evidenced by lower levels of internally criticized loans and non-performing assets, and a positive trend in the ~~decline~~level of net charge-offs. The Company’s lower risk position relative to a year ago in ~~year-to-date~~the corporate portfolio reflects the execution of portfolio strategy to shift to lower risk industries as well as reduce large borrower concentrations, syndicated national credits, and exposure to the telecommunications industry. Management continues to monitor the portfolio in an effort to identify and disengage from any deteriorating credits as early as possible. In the Hawaii commercial portfolio, overall risk has been generally stable primarily due to the resiliency of the Hawaii economy. In the retail portfolios, enhanced credit management and collections have also produced lower net ~~charge-offs and further improvement in internal~~charge-off rates.

Although the Company’s credit risk ~~ratings.~~

~~Concentration~~profile continues to improve overall, two components, airline/aircraft and Guam, continue to carry higher risk characteristics. Information about these components is summarized in Table 8.

Risk in the airline industry continues to remain high as the industry struggles with elevated cost structures, rising fuel costs, reduced travel, an uncertain geopolitical environment, and the possible need for U.S. government financial assistance. The risk of ~~Credit Risk~~

additional airline bankruptcies may place further downward pressure on aircraft values and lease rents. The increase in exposure to regional passenger carriers reflects a non-aircraft cash secured transaction.

In the Guam portfolio, which is materially dependent on tourism and military spending, economic stress continues which has been further complicated by both geopolitical uncertainties and a recent super typhoon. Already low Japan tourism has been further reduced.

The Guam hotel portfolio had $42.8 million in exposure at March 31, 2003, of which $31.2 million or 73% of that exposure was guaranteed by financial institutions or entities with limited exposure to tourism.

The largest syndicated loan outstanding is $27.3 million to a prominent Hawaii based hotel operator while the second largest is $26.8 million to a Hawaii shopping center operator. The 10 largest syndicated loans outstanding total $178 million centered in real estate, hospitality, and gaming. As of March 31, 2003, only one unfunded syndicated commitment, which had $6.1 million in exposure (less than 1% of total syndicated commitments), was internally classified.

Concentration of credit risk to certain industries and the amount of syndicated loan exposure are summarized in Table 9.

Selected Concentrations of Credit Exposure (Unaudited)

Table 98

September 30, 2002 ¹

June 30, 2002
(dollars in millions)
Outstandings

Unused Commitments

Total   Exposure

Total Exposure

Air Transportation
Regional Passenger Carriers      $ 49      $ 8      $ 57      $ 58
United States Based Passenger Carriers      48      —        48      49
International Based Passenger Carriers      32      —        32      32
Cargo Carriers      15      —        15      15
Total Air Transportation      $ 144      $ 8      $ 152      $ 154
Lodging²

National Hotel Companies      $ 31      $ 74      $ 105      $ 104
Hawaii Hotels      103      32      135      137
West Pacific Hotels      47      —        47      43
Total Lodging      $ 181      $ 106      $ 287      $ 284
Telecommunication Companies      $ 6      $ 25      $ 31      $ 45
Syndicated Exposure³
     $ 312      $ 764      $ 1,076      $ 1,096

	March 31, 2003						Dec. 31, 2002		Mar. 31, 2002
(dollars in millions)	Outstanding		Unused Commitments		Total Exposure¹		Total Exposure		Total Exposure
Air Transportation
Regional Passenger Carriers	$	46.4	$	12.3	$	58.7	$	57.3	$	59.8
United States Based Passenger Carriers		39.7		—		39.7		39.6		48.7
International Based Passenger Carriers		31.9		—		31.9		32.1		32.4
Cargo Carriers		14.7		—		14.7		15.0		14.8

Total Air Transportation	$	132.7	$	12.3	$	145.0	$	144.0	$	155.7

Guam
Hotels	$	42.8	$	—	$	42.8	$	44.4	$	42.8
Other Commercial		139.6		31.7		171.3		166.0		230.5
Consumer		254.0		9.9		263.9		257.4		283.2

Total Guam	$	436.4	$	41.6	$	478.0	$	467.8	$	556.5

Syndicated Exposure	$	319.4	$	633.1	$	952.5	$	1,002.1	$	1,352.2

~~The credit exposures to the air transportation, lodging,~~Exposure includes loans, leveraged and ~~telecommunication industries were current at September 30, 2002.~~operating leases.

One collateralized loan in the West Pacific with $5.6 million of exposure was reclassified in the third quarter from commercial and industrial loans to mortgage commercial-hotels. This Loan is on non-accrual, but remains current on payments. Approximately 95% of the Hawaii and West Pacific hotel loans are collateralized by hotel properties or guaranteed by either financial institutions or entities with limited exposure to tourism.

The largest syndicated loan outstanding is $27.1 million to a Hawaii shopping center. The 10 largest syndicated loans outstanding totaled $174 million, centered in real estates, hospitality and gaming.

Non-Performing Assets

Non-performing assets (“NPAs”) were ~~$63.3~~$44.2 million at the end of the ~~third~~first quarter ~~2002,~~2003, a decline of ~~19.7%~~$10.2 million or 18.8% from ~~$78.8 million at~~ the end of the ~~second~~fourth quarter 2002. Compared to the same quarter last year, non-performing assets declined ~~$43.1~~$46.5 million, or ~~40.5%~~51.3%. At ~~September 30, 2002~~March 31, 2003, the ratio of non-performing assets to total loans plus foreclosed assets and non-performing loans held for sale was ~~1.20%~~0.79%, down from ~~1.45%~~1.01% at ~~June 30,~~December 31, 2002 and ~~1.56%~~1.61% at ~~September 30, 2001. The quarterly decrease in~~March 31, 2002. New non-performing assets during the quarter totaled $4.8 million. Loans that were returned to accrual and loans that were sold more than offset the amount of loan that was ~~largely~~placed on non-accrual.

NPAs in Guam were $22.6 million at March 31, 2003, a decline of $3.3 million from the December 31, 2002 primarily due to the return to accrual ~~status and payoff~~ of a single borrower. As a percent of total NPAs, Guam loans ~~by two Hawaii borrowers. There was also a lower inflow of non-performing loans. The new non-performing loans consisted of smaller exposures, the largest being a $1.8 million loan~~represented 51.1%, an increase from 47.7% in the ~~West Pacific, where borrowers continue~~prior quarter. The increase was due to ~~be affected by the recession~~improvement in ~~the Guam economy.~~

other portfolio segments.

Non-accrual loans were ~~$45.7~~$35.1 million at ~~September 30, 2002, a decline of $15.9~~March 31, 2003, down $9.9 million from ~~the $61.6~~$45.0 million at ~~June 30,~~December 31, 2002 and ~~$16.1~~$28.6 million, or ~~26.1%~~44.9% from ~~September 30, 2001.~~$63.7 million at March 31, 2002. Non-accrual loans as a percentage of total loans were ~~0.87%~~0.63% at ~~September 30, 2002, a decline~~March 31, 2003, down from 0.84% at the end of the previous quarter and down from 1.14% inat the ~~prior quarter and from 0.91% in~~end of the ~~same~~comparable quarter last year.

Impaired loans at September 30, 2002 of $53.5 million declined $16.3 million from $69.8 million at June 30, 2002, and decreased $13.7 million from $67.2 million at December 31, 2001. These loans had a related allowance for loan losses that totaled $7.0 million at September 30, 2002. Compared to September 30, 2001, impaired loans decreased $30.0 million to $83.5 million.

Foreclosed assets were ~~$17.6~~$9.1 million at the end of the ~~third~~first quarter of ~~2002, virtually unchanged~~2003, a decrease of $0.3 million from $9.4 million in the prior quarter and ~~52.7% lower than~~a decrease of $10.1 million from $19.2 million for the ~~$37.2 million reported in the third quarter~~same period last year. The ~~decrease~~decline from the prior year was due primarily to the sale of ~~two~~a large ~~properties~~parcel of foreclosed real estate in ~~Hawaii.~~

the fourth quarter of 2002.

Impaired loans at March 31, 2003 of $35.0 million increased $6.9 million from $41.9 million at December 31, 2002. These loans had a related Allowance that totaled $3.2 million at March 31, 2003, an increase of $1.1 million from the prior quarter. Compared to March 31, 2002, impaired loans decreased $50.3 million or 59.0% from $85.3 million. Prior year impaired loans had a related Allowance of $14.6 million.

Accruing loans past due 90 days or more were ~~$1.7~~$4.3 million at ~~September 30, 2002, significantly lower than the $4.9~~March 31, 2003, an increase of $2.5 million from $1.8 million at ~~year-end 2001~~December 31, 2002 and ~~$5.3~~were flat from the same period of 2002. Of the total increase, $1.3 million was from installment loans, including $0.9 million that was due to a temporary delay in payment collections, domiciled in the Micronesia branches that were closed in the fourth quarter of 2002. An additional $0.2 million reflects residential payment deferrals in Guam following the typhoon. These are expected to normalize going forward. The remainder of the increase is centered in residential real estate in Hawaii. Despite this increase in delinquencies, residential real estate net charge-off rates are at ~~September 30, 2001.~~

their lowest levels in recent history.

For further information on non-performing assets refer to Table ~~10.~~

Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More
(Unaudited)


Table 10

(dollars in millions)
September 30
2002

June 30
2002

March 31
2002

December 31
2001

September 30
2001

Non-Accrual Loans
Commercial and Industrial    $ 6.4    $ 14.4    $ 27.4    $ 18.9    $ 10.5
Mortgage—Commercial    18.1    25.3    15.1    16.3    12.8
Construction    0.9    0.7    1.0    9.3    0.7
Lease Financing    5.7    6.9    4.4    0.8    1.0
Mortgage—Residential    14.5    14.3    15.7    15.4    19.5
Other Consumer    0.1    —      0.1    0.1    0.1
Foreign    —      —      —      —      17.2
Total Non-Accrual Loans    45.7    61.6    63.7    60.8    61.8
Non-Accrual Loans Held For Sale    —      —      7.8    1.7    7.4
Foreclosed Real Estate
Domestic    17.6    17.2    19.2    17.2    36.9
Foreign    —      —      —      —      0.3
Total Foreclosed Real Estate    17.6    17.2    19.2    17.2    37.2
Total Non-Performing Assets    $ 63.3    $ 78.8    $ 90.7    $ 79.7    $ 106.4
Accruing Loans Past Due 90 Days or More
Commercial and Industrial    $ —      $ —      $ 0.2    $ 0.1    $ 0.1
Mortgage—Commercial    —      —      1.2    —      —
Lease Financing    —      0.1    0.1    0.1    —
Mortgage—Residential    1.4    0.9    2.1    3.8    3.4
Other Consumer    0.3    0.5    0.7    0.9    1.0
Foreign    —      —      —      —      0.8
Total Accruing and Past Due    $ 1.7    $ 1.5    $ 4.3    $ 4.9    $ 5.3
Total Loans    $ 5,258.7    $ 5,408.5    $ 5,601.3    $ 5,652.5    $ 6,766.1
Ratio of Non-Accrual Loans
to Total Loans
   0.87 %    1.14 %    1.14 %    1.08 %    0.91 %
Ratio of Non-Performing Assets
to Total Loans, Foreclosed Real Estate
and Non-Performing Loans Held for Sale
   1.20 %    1.45 %    1.61 %    1.41 %    1.56 %
Ratio of Non-Performing Assets
and Accruing Loans Past Due
90 Days or More to Total Loans
   1.24 %    1.48 %    1.70 %    1.50 %    1.65 %
Quarter to Quarter Changes in Non-Performing Assets

Balance at Beginning of Quarter

$
78.8


$
90.7


$
79.7


$
106.4


$
118.9

Additions    7.0    20.5    36.4    43.8    23.2
Reductions
Payments and Sales of Loans    (8.5 )    (20.6 )    (12.9 )    (40.9 )    (25.8 )
Return to Accrual    (9.1 )    (6.2 )    (6.3 )    (3.6 )    (0.9 )
Sales of Foreclosed Assets    (1.4 )    (3.5 )    (0.9 )    (21.9 )    (2.2 )
Charge-offs    (3.5 )    (2.1 )    (5.3 )    (4.1 )    (6.8 )
Total Reductions    (22.5 )    (32.4 )    (25.4 )    (70.5 )    (35.7 )
Balance at End of Quarter

$
63.3


$
78.8


$
90.7


$
79.7


$
106.4

Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited)

Table 9

(dollars in millions)	March 31, 2003			December 31, 2002			September 30, 2002¹			June 30, 2002¹			March 31, 2002¹
Non-Performing Assets
Non-Accrual Loans
Commercial
Commercial and Industrial	$	2.4		$	5.9		$	6.4		$	14.4		$	27.4
Commercial Mortgage		17.9			20.3			18.1			25.3			15.1
Construction		—			0.5			0.9			0.7			1.0
Lease Financing		3.2			4.1			5.7			6.9			4.4

Total Commercial		23.5			30.8			31.1			47.3			47.9
Consumer
Residential Mortgage		11.5			13.9			14.3			14.2			15.3
Home Equity		0.1			0.3			0.2			0.1			0.4
Other Consumer		—			—			0.1			—			0.1

Total Consumer		11.6			14.2			14.6			14.3			15.8

Total Non-Accrual Loans		35.1			45.0			45.7			61.6			63.7

Non-Accrual Loans Held for Sale		—			—			—			—			7.8
Foreclosed Real Estate		9.1			9.4			17.6			17.2			19.2

Total Non-Performing Assets	$	44.2		$	54.4		$	63.3		$	78.8		$	90.7

Accruing Loans Past Due 90 Days or More
Commercial
Commercial and Industrial	$	—		$	0.2		$	—		$	—		$	0.2
Commercial Mortgage		0.4			0.3			—			—			1.2

Total Commercial		0.4			0.5			—			—			1.4
Consumer
Residential Mortgage		1.6			0.6			1.4			0.9			2.1
Other Consumer		2.3			0.7			0.3			0.5			0.7
Lease Financing		—			—			—			0.1			0.1

Total Consumer		3.9			1.3			1.7			1.5			2.9

Total Accruing and Past Due	$	4.3		$	1.8		$	1.7		$	1.5		$	4.3

Total Loans	$	5,565.4		$	5,359.0		$	5,259.3		$	5,409.2		$	5,601.6

Ratio of Non-Accrual Loans to Total Loans		0.63	%		0.84	%		0.87	%		1.14	%		1.14	%

Ratio of Non-Performing Assets to Total Loans, Foreclosed Real Estate and Non-Performing Loans Held for Sale		0.79	%		1.01	%		1.20	%		1.45	%		1.61	%

Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans		0.87	%		1.05	%		1.24	%		1.48	%		1.70	%

Quarter to Quarter Changes in Non-Performing Assets
Balance at Beginning of Quarter	$	54.4		$	63.3		$	78.8		$	90.7		$	79.7
Additions		4.8			12.0			7.0			20.5			36.4
Reductions
Payments and Sales of Loans		(5.6	)		(6.9	)		(8.5	)		(20.6	)		(12.9	)
Return to Accrual		(5.6	)		(1.9	)		(9.1	)		(6.2	)		(6.3	)
Sales of Foreclosed Assets		(1.1	)		(9.4	)		(1.4	)		(3.5	)		(0.9	)
Charge-offs		(2.7	)		(2.7	)		(3.5	)		(2.1	)		(5.3	)

Total Reductions		(15.0	)		(20.9	)		(22.5	)		(32.4	)		(25.4	)

Balance at End of Quarter	$	44.2		$	54.4		$	63.3		$	78.8		$	90.7

Certain 2002 information has been reclassified to conform to 2003 presentation.

Allowance for Loan and Lease Losses

The Company maintains an Allowance adequate to cover management’s estimate of probable incurred credit losses in its lending portfolios based on a comprehensive quarterly analysis of historical loss experience supplemented by judgmental expectations of portfolio performance and economic conditions as of a given balance sheet date.

The Allowance ~~for Loan and Lease Losses (Allowance)~~ at ~~September 30, 2002~~March 31, 2003 of ~~$154.5~~$140.0 million decreased from $142.9 million at December 31, 2002, and $159.0 million at ~~both June 30, 2002 and December~~March 31, ~~2001, and $182.5 million at September 30, 2001.~~2002. The current quarter ~~decline reflects the non-replenishment of net charge-offs based on the Company’s decision to decrease reserves commensurate with the stabilization~~ and ~~continued improvement~~year-over-year decreases reflected improvements in credit quality and the estimated impact of current economic ~~conditions. The decrease from the prior year also reflects the release of Allowance components related to the divestitures.~~conditions on portfolio performance. The ratio of Allowance to total loans was ~~2.94%~~2.52%, ~~unchanged~~a decrease from ~~the prior quarter, and an increase from 2.81%~~2.67% at December 31, ~~2001~~2002 and from ~~2.70%~~2.84% for the ~~same~~comparable period ~~last year.~~in 2002. A summary of the activity for the Allowance is presented in Table ~~11.~~

10.

Net charge-offs for the ~~third~~first quarter of ~~2002~~2003 were ~~$4.5~~$2.8 million or ~~0.33%~~0.21% of total average loans (annualized), compared to ~~$2.4~~$8.3 million or ~~0.13%~~0.60% of total average loans (annualized) for the ~~same~~comparable period ~~last year. Current~~in 2002. This improvement reflects management’s execution of portfolio strategies in an effort to shift to lower risk industries, reduce large borrower concentrations and syndicated national credits, resiliency of the Hawaii economy, as well as enhanced credit management and collection process in the retail portfolios. First quarter 2003 charge-offs of ~~$7.2~~$6.1 million were partially offset by recoveries of ~~$2.7~~$3.3 million. Third quarter 2001 net charge-offs included a recovery of $6.5 million in the Asia business. Net charge-offs for the first nine months of 2002 of $16.1 million or 0.39% of total average loans declined significantly from $107.0 million or 1.76% of total average loans for the same period last year. The relatively high level of net charge-offs in the first nine months of last year was primarily related to exiting several higher risk credit relationships in the first quarter of 2001.

With continued improvement in credit quality including the trend in net charge-off rates and continued stability in the Hawaii economy, the Company anticipates that the level of the Allowance will be reduced in future quarters. The timing and amount of reduction will depend on the level of risk in the loan portfolios. Portfolio risk and economic conditions will continue to be evaluated quarterly, and provisions for loan and lease losses will be recorded to the extent necessary to maintain the Allowance at an appropriate level.

Consolidated Allowance for Loan and Lease Losses (Unaudited)

Table 1110

Three Months Ended

Nine Months Ended

(dollars in millions)
September 30 2002

    June 30
2002

September 30 2001

September 30
2002

September 30
2001

Balance of Allowance for Loan and Lease Losses at
Beginning of Period    $ 159.0    $ 159.0    $ 199.8    $ 159.0    $ 246.2
Loans Charged-Off
Commercial and Industrial    (0.7 )    (1.0 )    (3.4 )    (9.0 )    (87.8 )
Mortgage – Commercial    (2.5 )    (1.8 )    (2.6 )    (4.3 )    (16.1 )
Construction    —      —      —      (0.5 )    —
Lease Financing    (0.4 )    (0.5 )    (0.6 )    (0.9 )    (0.7 )
Mortgage – Residential    (0.6 )    (1.3 )    (1.3 )    (3.3 )    (5.5 )
Other Consumer    (3.0 )    (2.9 )    (5.4 )    (9.8 )    (15.0 )
Foreign    —      —      (4.1 )    —      (18.0 )
Total Charge-Offs    (7.2 )    (7.5 )    (17.4 )    (27.8 )    (143.1 )
Recoveries on Loans Previously Charged-Off
Commercial and Industrial    1.0    2.3    1.1 �� 4.0    8.1
Mortgage – Commercial    0.1    0.1    1.3    2.0    2.4
Lease Financing    0.1    —      —      0.1    0.2
Mortgage – Residential    0.1    0.3    0.2    0.7    0.7
Other Consumer    1.4    1.6    2.2    4.9    5.6
Foreign    —      (0.1 )    10.2    —      19.1
Total Recoveries    2.7    4.2    15.0    11.7    36.1
Net Loan Charge-Offs    (4.5 )    (3.3 )    (2.4 )    (16.1 )    (107.0 )
Provision for Loan and Lease Losses    —      3.3    0.9    11.6    59.8
Allowance Related to Disposition    —      —      (16.4 )    —      (16.4 )
Foreign Currency Translation    —      —      0.6    —      (0.1 )
Balance at End of Period    $ 154.5    $ 159.0    $ 182.5    $ 154.5    $ 182.5
Average Loans Outstanding    $ 5,349.5    $ 5,503.4    $ 7,273.5    $ 5,477.9    $ 8,121.1
Ratio of Net Charge-Offs to Average Loans Outstanding (annualized)    0.33%    0.24%    0.13%    0.39%    1.76%
Ratio of Allowance to Loans and Leases
Outstanding
   2.94%    2.94%    2.70%    2.94%    2.70%

	Three Months Ended¹
(dollars in millions)	March 31, 2003			December 31, 2002			March 31, 2002
Balance at Beginning of Period	$	142.9		$	154.5		$	159.0
Loans Charged-Off
Commercial
Commercial and Industrial		(1.6	)		(2.0	)		(7.3	)
Construction		(0.5	)		—			(0.5	)
Lease Financing		—			(9.6	)		—
Consumer
Residential Mortgage		(0.7	)		(0.4	)		(1.4	)
Home Equity		(0.1	)		(0.1	)		(0.1	)
Other Consumer		(3.1	)		(2.8	)		(3.7	)
Lease Financing		(0.1	)		(0.1	)		(0.1	)

Total Charge-Offs		(6.1	)		(15.0	)		(13.1	)
Recoveries on Loans Previously Charged-Off
Commercial
Commercial and Industrial		0.6			1.4			0.7
Commercial Mortgage		—			0.1			1.8
Construction		0.9			0.2			—
Consumer
Residential Mortgage		0.2			0.3			0.3
Home Equity		0.1			—			0.1
Other Consumer		1.3			1.3			1.8
Lease Financing		0.1			0.1			—
Foreign		0.1			—			0.1

Total Recoveries		3.3			3.4			4.8

Net Loan Charge-Offs		(2.8	)		(11.6	)		(8.3	)
Provision for Loan and Lease Losses		—			—			8.3

Balance at End of Period²	$	140.0		$	142.9		$	159.0

Average Loans Outstanding	$	5,460.8		$	5,210.4		$	5,585.4

Ratio of Net Charge-Offs to Average Loans Outstanding (annualized)		0.21	%		0.88	%		0.60	%
Ratio of Allowance to Loans Outstanding		2.52	%		2.67	%		2.84	%

Certain 2002 information has been reclassified to conform to 2003 presentation.

Totals may not add due to rounding.

Market Risk

Market risk is the potential of loss arising from adverse changes in interest rates and prices. The Company ~~manages assets and liabilities in an effort~~is exposed to ~~maximize long term,~~market risk ~~adjusted returns to shareholders.~~as a consequence of the normal course of conducting its business activities. The Company’s ~~asset and liability~~market risk management process involves measuring, monitoring, controlling and managing ~~financial~~ risks that can significantly impact the Company’s financial position and operating results. ~~Financial~~In this management process, market risks ~~in the form of interest rate sensitivity, foreign currency exchange fluctuations, liquidity, and capital adequacy~~ are balanced with expected returns ~~with the objective~~in an effort to ~~maximize~~enhance earnings performance and shareholder value, while limiting the volatility of each.

The activities associated with these ~~financial~~market risks are categorized into ~~either~~“trading” and “other than trading” ~~or “trading.”~~

~~Other Than Trading Activities~~

~~A key element~~.

The Company’s trading activities include foreign currency and foreign exchange contracts that expose the Company to a minor degree of foreign currency risk. These transactions are executed on behalf of customers and for the Company’s own account. The remaining exposure from foreign currency trading positions during the first quarter of 2003 was immaterial.

The Company’s “other than trading” activities include normal business transactions that expose the Company’s balance sheet to interest rate risk.

Interest Rate Risk

The Company’s balance sheet is sensitive to changes in the general level of interest rates arising primarily from the Company’s ~~ongoing process~~normal business activities of making loans and taking deposits. Many other factors also affect the Company’s exposure to ~~measure~~changes in interest rates, such as general economic and ~~monitor interest rate risk is~~financial conditions, customer preferences, and historical pricing relationships and the utilization of a net interest income (NII) simulation model. This model is used to estimate the amount that NII will change over a one-year time horizon under various interest rate scenarios using numerous assumptions, which management believes are reasonable. The NII simulation model captures the dynamic naturemonetary and fiscal policies of the ~~balance sheet~~United States and ~~provides a sophisticated estimate rather than a precise prediction of NII’s exposure to higher or lower interest rates.~~

its agencies, particularly the Federal Reserve System.

Table 1211 presents, as of ~~September 30, 2002,~~March 31, 2003, December 31, ~~2001~~2002 and ~~September 30, 2001,~~March 31, 2002, the estimate of the change in ~~NII~~net interest income (the “NII”) that would result from a gradual 200 basis point increase or decrease in interest rates, moving in parallel fashion over the entire yield curve, over the next 12-month period, relative to the measured base case scenario for NII. The 200 basis point increase would equate to a ~~$7.0~~$4.6 million increase in ~~net interest income~~NII per quarter. ~~During the third quarter, the Company deployed some of its liquidity yet maintained its strong liquidity position. NII~~The Company’s balance sheet continues to be asset-sensitive. The resulting estimated NII exposure is within the guidelines approved by the Company’s Asset Liability Management Committee.

Market Risk Exposure to Interest Rate Changes (Unaudited)

Table 1211

September 30, 2002

December 31, 2001

September 30, 2001
     Interest Rate Change      Interest Rate Change      Interest Rate Change
     (in basis points)      (in basis points)      (in basis points)
     -200    +200      -200    +200      -200    +200
Estimated Exposure as a Percent of
Net Interest Income
     (4.7)%    8.7%      (0.3)%    3.5%      (4.3)%    4 .8%

To enhance and complement the results from the NII simulation model, the Company also reviews other measures of interest rate risk. These measures include the sensitivity of market value of equity and the exposure to basis risk and non-parallel yield curve shifts. There are some inherent limitations to these measures, but used along with the NII simulation model, the Company gains a better overall insight for managing its exposure to changes in interest rates.

	March 31, 2003				December 31, 2002				March 31, 2002
	Interest Rate Change (in basis points)				Interest Rate Change (in basis points)				Interest Rate Change (in basis points)
	-200		+200		-200		+200		-200		+200
Estimated Exposure as a Percent of Net Interest Income	(2.8	)%	5.1	%	(3.8	)%	7.7	%	(3.3	)%	4.8	%

In managing interest rate risk, the Company generally uses on-balance sheet transactions to manage its risk position. Approaches that are used to shift balance sheet mix or alter the interest rate characteristics of assets and liabilities include changing product pricing strategies and modifying investment portfolio strategies. The use of financial derivatives has been limited over the past several years.

To estimate the potential loss from foreign currency exposure for the remaining net investments in foreign subsidiaries and branches, the Company continues to use a value-at-risk (VAR) calculation based on an estimated variance-co-variance matrix. This VAR calculation determines the potential loss within a 95% confidence interval.

Table 13 presents, as of September 30, 2002, December 31, 2001 and September 30, 2001, the Company’s foreign currency exposure from its net investment in subsidiaries and branch operations that were denominated in a foreign currency as measured by the VAR. This table shows the results of the divestiture program. Net investments at September 30, 2002 are unrepatriated funds that cannot be returned until foreign government administrative requirements are satisfied.

Market Risk Exposure From Changes in Foreign Exchange Rates (Unaudited)


Table 13

September 30, 2002

December 31, 2001

September 30, 2001
(dollars in millions)
Book Value

Value-at-
      Risk

Book Value

Value-at-
      Risk

Book Value

Value-at-
Risk
Net Investments in Foreign
Subsidiaries & Branches
Japanese Yen    $ —      $ —      $ 1.1    $ 0.2    $ 3.3    $ 0.5
Korean Won    —      —      2.1    0.3    12.9    1.5
Pacific Franc¹
   —      —      —      —      11.1    1.8
Other Currencies    0.2    0.02    0.1    0.1    6.3    15.3
Total    $ 0.2    $ 0.02    $ 3.3    $ 0.6    $ 33.6    $ 19.1

Net of $36 million borrowing denominated in euro and foreign exchange hedge transactions of $40 million at September 30, 2001. There were no borrowing or foreign exchange hedge transactions related to the foreign subsidiaries and branches at September 30, 2002, and December 31, 2001.

~~Trading Activities~~

Trading activities include foreign currency and foreign exchange contracts that expose the Company to a minor degree of foreign currency risk. The Company, however, manages its trading account such that it does not maintain significant foreign currency open positions. The exposure from foreign currency trading positions measured by VAR methodology as of September 30, 2002 continues to be immaterial.

Liquidity Management

Liquidity is managed in an effort to ensure that the Company has continuous access to sufficient, reasonably priced funding to conduct its business in a normal manner.

The ~~Company’s liquidity management process~~Bank is ~~described in the 2001 Annual Report to Shareholders on Form 10-K.~~

~~The Company’s banking subsidiaries are members~~a member of the Federal Home Loan Bank of Seattle (FHLB)~~. The FHLB~~, which is a source of short and long-term ~~funding for these institutions. Borrowings~~funding. Outstanding borrowings from the FHLB were ~~$34.5~~$26.5 million at ~~September 30, 2002,~~March 31, 2003, compared to ~~$147.0~~$42.5 million at December 31, ~~2001~~2002 and ~~$254.0~~$91.5 million at ~~September 30, 2001.~~

March 31, 2002. In April 2003, the Bank entered into a commitment to borrow an additional $50.0 million during the second quarter of 2003 which will be used to replace other scheduled debt maturities. This borrowing will be for a 7 year term and will bear a 4% rate of interest.

Additionally, Bank of Hawaii maintains a $1 billion senior and subordinated bank note program. Under this facility, Bank of Hawaii may issue additional notes provided that at any time the aggregate amount outstanding does not exceed $1 billion. Subordinated notes outstanding under this bank note program totaled $125.0 million at ~~September 30, 2002,~~March 31, 2003, December 31, ~~2001~~2002 and ~~September 30, 2001.~~

March 31, 2002.

Capital Management

The Company ~~manages its~~and the Bank are subject to regulatory capital ~~level~~requirements administered by the federal banking agencies. The Company’s objective is to hold sufficient capital on a regulatory basis to exceed the minimum guidelines of a “well-capitalized” financial institution while over the long term ~~in an effort to~~ optimize shareholder value, support asset growth, reflect risks inherent in its markets, provide protection against unforeseen losses and comply with regulatory requirements. Capital levels are reviewed relative to the Company’s risk profile and current and projected economic conditions. The Company’s objective is to hold sufficient capital on a regulatory basis to exceed the minimum guidelines of a “well-capitalized” financial institution.

At ~~September 30, 2002,~~March 31, 2003, the Company’s shareholders’ equity totaled ~~$1.1 billion,~~$952.0 million, a ~~11.7%~~6.3% net decrease from December 31, ~~2001.~~2002. The decrease in shareholders’ equity during the ~~nine~~first three months of ~~2002~~2003 was primarily attributable to the Company’s repurchase of its common stock under the repurchase ~~programs. The Company increased~~programs, offset by earnings for the ~~quarterly dividend to $0.19 per share which will be paid in December 2002.~~

~~In January 2002, the Company’s Board~~first quarter of ~~Directors approved a $300 million common stock repurchase program. This program was in addition to the 2001 programs totaling $270 million.~~ 2003.

During the first quarter ~~ended September 30, 2002, 4.0~~of 2003, 2.9 million shares were repurchased at an average cost of ~~$27.55~~$30.22 per share, totaling ~~$109.4~~$86.3 million. As of ~~September 30, 2002,~~March 31, 2003, the Company ~~had~~ repurchased a total of ~~16.9~~23.0 million shares under all share repurchase ~~programs.~~programs, totaling $614.2 million. Subsequent to ~~September 30, 2002, the Company~~March 31, 2003, 140.4 thousand shares where repurchased ~~1.3 million shares~~ at an average cost of ~~$27.08~~$31.87 per share for a total of ~~$34.3~~$4.5 million through ~~October 22, 2002,~~April 25, 2003, resulting in remaining buyback authority under the existing repurchase programs of ~~$102.0~~$181.3 million. ~~The Company expects to extend the repurchase program.~~

The Company’s regulatory capital ratios at ~~September 30, 2002~~March 31, 2003 exceeded the minimum threshold levels established by federal bank regulators to qualify an institution as well-capitalized, which are as follows: Tier 1 ~~Capital—~~Capital – 6%; Total ~~Capital—~~Capital – 10%; and ~~Leverage—~~Leverage – 5%. The Company’s regulatory capital ratios are shown on Table ~~14,~~12, along with the activities and balances in the Company’s capital accounts. During the quarter, the Company’s capital ratios and liquidity remained ~~high.~~

strong.

~~Equity~~Regulatory Capital and Ratios (Unaudited)

~~Table 14~~

     Nine Months Ended      Year Ended      Nine Months Ended
(dollars in millions)      September 30, 2002      December 31, 2001      September 30, 2001
Change in Shareholders’ Equity
Net Income      $ 92.3      $ 117.8      $ 91.5
Dividends Paid      (38.4 )      (56.6 )      (43.4 )
Dividend Reinvestment Program      2.2      2.8      2.1
Stock Issued for Acquisition      —        1.3      1.3
Stock Repurchases      (238.1 )      (195.7 )      (46.8 )
Other¹
     35.7      76.0      65.0
Increase (Decrease) in Shareholders’ Equity      $ (146.3 )      $ (54.4 )      $ 69.7
Regulatory Capital

Shareholders’ Equity      $ 1,100.7      $ 1,247.0      $ 1,371.1
Add:    8.25% Capital Securities of Bancorp Hawaii Capital Trust I      43.2      100.0      100.0
Minority Interest      —        —        4.4
Less:   Goodwill      36.2      26.7      57.4
Unrealized Valuation and Other Adjustments      26.8      22.9      26.2
Tier I Capital      1,080.9      1,297.4      1,391.9
Allowable Reserve for Loan Losses      73.8      83.0      99.2
Subordinated Debt      124.7      148.4      148.4
Total Capital      $ 1,279.4      $ 1,528.8      $ 1,639.5
Risk Weighted Assets      $ 5,825.1      $ 6,559.6      $ 7,858.9
Key Capital Ratios

Increase (Decrease) in Common Equity      (11.73 )%      (4.18 )%      5.36 %
Average Equity/Average Assets Ratio      12.10 %      10.60 %      10.47 %
Tier I Capital Ratio      18.55 %      19.76 %      17.71 %
Total Capital Ratio      21.96 %      23.29 %      20.86 %
Leverage Ratio      11.07 %      11.20 %      11.37 %

Includes unrealized valuation adjustments for investment securities, foreign currency translation and pension liability; profit sharing; and stock options, restricted shares and deferred compensation plans.

Table 12

	Three Months Ended			Year Ended			Three Months Ended
(dollars in millions)	March 31, 2003			December 31, 2002			March 31, 2002
Regulatory Capital
Shareholders’ Equity	$	952.0		$	1,015.8		$	1,265.9
Add: 8.25% Capital Securities of Bancorp
Hawaii Capital Trust I		31.4			31.4			94.6
Less: Goodwill		36.2			36.2			26.7
Unrealized Valuation and Other Adjustments		23.8			27.2			21.0

Tier I Capital		923.4			983.8			1,312.8
Allowable Reserve for Loan Losses		76.4			75.0			79.1
Subordinated Debt		124.8			124.7			148.4

Total Capital	$	1,124.6		$	1,183.5		$	1,540.3

Risk Weighted Assets	$	6,048.3		$	5,929.6		$	6,244.2

Key Capital Ratios
Average Equity/Average Assets Ratio		10.53	%		11.88	%		12.13	%
Tier I Capital Ratio		15.27	%		16.59	%		21.18	%
Total Capital Ratio		18.59	%		19.96	%		24.84	%
Leverage Ratio		10.03	%		10.34	%		12.64	%

Economic Outlook

~~One year after~~

The Hawaii economy remained relatively strong during the ~~September 11 attacks, Hawaii tourism has returned~~first quarter of 2003 and is forecast to ~~normal levels. Through~~remain healthy during the ~~end~~remainder of ~~August, travel to Hawaii from~~ the western United States was at record levels, with all-time highs for the California market and high single-digit growth from the intermountain west. East Coast travel to Hawaii was down and travel from Japan remains about 15% below pre September 11 volumes.

year. The ~~momentum in Hawaii growth continues to come from~~ construction and real estate ~~investment. This growth~~investment sectors continue to lead the Hawaii economy. Tourism, as measured by passenger arrivals, was sufficient to sustain Hawaii’s 4.0% seasonally-adjusted unemployment rate in August 2002, against a backdrop of still low, 1.1% consumer price inflation during the first half of 2002 and roughly 2.0% real growth in total personal income during the two reported quarters following September 11.

Overall, the outlook for Hawaii is continued modest growth that is expected to slightly outpace the national economy. This outlook is confirmed by a 4.2% year-over-year increase in scheduled air seats to Hawaii during August 2002 and renewed state tax revenue growth of 3% to 4%up 4.1 percent in the first ~~three months~~quarter of 2003 compared to the ~~government’s new fiscal year which began~~same quarter last year. The recent conflict in Iraq had minimal effects on ~~July 1, 2002.~~

~~Investment~~Hawaii tourism. Unemployment in Hawaii

~~Bank of Hawaii Corporation is increasingly focused on strengthening its competitive position in its markets, primarily in Hawaii. During~~ declined to 3.0 percent during the quarter, ~~ended September 30, 2002~~about half the ~~following was accomplished:~~

•

~~Education of nearly 1,300 personnel on customer focused sales and service.~~

•

~~Investment of $7.0 million in new and improved branch facilities.~~

•

~~Selection and investment of $6.6 million in primary and supporting systems to improve customer service.~~

•

~~Special investments in community organizations of $4.0 million.~~

•

~~Contribution of $1.3 million to local non-profit organizations from Bank of Hawaii and its charitable foundation.~~

national unemployment level. Job growth in the state is projected to be approximately 2.0 percent for 2003 and real income is forecast to grow about 3.0 percent. Inflation expectations remain relatively low at 1.5 percent.

Earnings Outlook

The ~~Company affirmed its expectation that~~Company’s previously published earnings guidance of $131 million in net income for the full year ~~2002 will equal or exceed $120 million. Earnings for the fourth quarter are~~of 2003 remains unchanged. The efficiency ratio is expected to ~~approximate third quarter levels, but could decrease slightly due~~improve to ~~higher costs for~~58% by the ~~systems replacement project, branch closings in the West Pacific and seasonal increases in compensation and other expense categories.~~

~~Earnings expectations for 2003, which were established at $130 million in April 2001, are being reviewed and should be updated in January when the 2002 earnings are announced.~~

end of 2003. Based on current conditions, the Company does not expect to record a provision for loan ~~losses.~~losses in 2003. However, the actual amount of the provision for loan ~~and lease~~ losses will depend on determinations of credit risk that will be made near the end of each quarter. In the second quarter of 2003, net income is expected to approximate that of the first quarter. Net interest income is expected to increase slightly, as is non-interest income due to the sale of mortgage loan originations. Systems replacement costs and other expenses will likely increase in the second quarter and then decline in the second half of 2003. System replacement costs are expected to be $10.2 million in the second quarter. Share repurchases are expected to continue to be made in a disciplined manner; however, second quarter 2003 repurchases may be less than those in the first quarter. Earnings per share and return on equity projections continue to be dependent upon the terms and timing of share repurchases.

Item 3. Quantitative and Qualitative Disclosures of Market Risk

See Management’s Discussion and Analysis of Results of Operations and Financial Condition-Market Risk.

Item 4. Controls and Procedures

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a – 14(c) under the Securities and Exchange Act of 1934, as amended) within 90 days prior to the filing date of this quarterly report. Based on this evaluation the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. There were no significant changes in internal controls that could significantly affect the disclosure controls and procedures since the date of the evaluation.

Part II. – Other Information

Items 1 to 3 and Item 5 omitted pursuant to instructions.

Item 4 –Submission of Matters to a Vote of Shareholders

At the annual shareholders meeting held on April 25, 2003, the following matters were submitted to a vote of the shareholders.

Election of Directors – Three directors whose terms in office were expiring were elected to the Board of Directors as follows:

Clinton R. Churchill

Votes cast for:		51,617,116
Votes cast against:		0
Votes withheld:		422,245

David A. Heenan

Votes cast for:		50,982,890
Votes cast against:		0
Votes withheld:		1,056,471

Michael E. O’Neill

Votes cast for:		51,416,774
Votes cast against:		0
Votes withheld:		622,587

Election of an Independent Auditor-Ernst & Young, LLP

Votes cast for:		49,561,697
Votes cast against:		2,366,854
Votes abstained:		110,811

Item 6 – Exhibits and Reports on Form 8-K

~~(a)~~

Exhibit Index

Exhibit Number


12		~~Exhibit Number~~

		12 Statement Regarding Computation of Ratios

99	Certification

	~~99 Certification~~

(b	)b.	NoThe following report on Form 8-K was filed during the quarter ended ~~September 30, 2002.~~March 31, 2003:

Current Report on Form 8-K dated January 27, 2003 and filed January 28, 2003 Item 5.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date

April 29, 2003

~~Date~~ ~~October 28, 2002~~ BANKOF HAWAII CORPORATION

~~BANK OF HAWAII CORPORATION~~


						/s/ MICHAEL E. O’NEILL
						Michael E. O’Neill
~~(Signature)~~
~~Michael E. O’Neill~~ Chairman, Chief Executive Officer and President



/s/ ALLAN R. LANDON
Allan R. Landon
~~(Signature)~~
~~Allan R. Landon~~ Vice Chairman, Treasurer and Chief Financial Officer



/s/ RICHARD C. KEENE
Richard C. Keene
~~(Signature)~~
~~Richard C. Keene~~ Executive Vice President and Controller

CERTIFICATIONS

I, Michael E. O’Neill, certify that:

I have reviewed this quarterly report on Form 10-Q of Bank of Hawaii Corporation;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant’s other certifying ~~officers~~officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

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

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

The registrant’s other certifying ~~officers~~officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of ~~directors (or persons performing the equivalent function):~~directors:

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

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

The registrant’s other certifying ~~officers~~officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: ~~October 28, 2002~~

April 29, 2003

/s/ MICHAEL E. O’NEILL

Michael E. O’Neill

~~Michael E. O’Neill~~

Chairman, Chief Executive Officer and President

I, Allan R. Landon, certify that:

I have reviewed this quarterly report on Form 10-Q of Bank of Hawaii Corporation;

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

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

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

Date: ~~October 28, 2002~~

April 29, 2003

/s/ ALLAN R. LANDON

Allan R. Landon

~~Allan R. Landon~~

Vice Chairman, Treasurer and Chief Financial Officer


	Three Months Ended September 30				Nine Months Ended September 30
(dollars in thousands except per share amounts)	2002		2001		2002		2001

Interest Income
Interest and Fees on Loan and Leases	$	89,335	$	143,205	$	280,421	$	495,732
Income on Investment Securities—Held to Maturity		4,847		8,007		14,939		27,120
Income on Investment Securities—Available for Sale		25,291		31,390		78,886		107,982
Deposits		5,384		9,413		16,442		19,738
Funds Sold and Security Resale Agreements		914		1,781		2,669		4,231
Other		1,575		1,384		4,302		3,948

Total Interest Income		127,346		195,180		397,659		658,751
Interest Expense
Deposits		20,547		50,145		66,691		182,147
Security Repurchase Agreements		7,039		17,576		25,588		63,049
Funds Purchased		299		1,279		775		9,735
Short-Term Borrowings		334		2,019		1,272		8,013
Long-Term Debt		6,946		12,459		23,320		42,232

Total Interest Expense		35,165		83,478		117,646		305,176

Net Interest Income		92,181		111,702		280,013		353,575
Provision for Loan and Lease Losses		—		919		11,616		59,798

Net Interest Income After Provision for Loan and Lease Losses		92,181		110,783		268,397		293,777
Non-Interest Income
Trust and Asset Management		13,655		13,999		42,648		45,041
Mortgage Banking		4,037		10,411		15,300		20,192
Service Charges on Deposit Accounts		7,925		9,592		24,291		29,409
Fees, Exchange, and Other Service Charges		13,114		17,587		38,631		60,837
Gain on Sales of Banking Operations, Net of Venture Investment Losses		—		47,771		—		144,680
Investment Securities Gains		—		935		3		32,914
Other		9,517		13,060		30,311		38,720

Total Non-Interest Income		48,248		113,355		151,184		371,793
Non-Interest Expense
Salaries		38,837		50,341		117,437		149,791
Pensions and Other Employee Benefits		7,377		9,646		26,764		34,070
Net Occupancy Expense		9,597		11,422		28,511		35,447
Net Equipment Expense		10,058		12,443		30,176		38,929
Goodwill Amortization		—		3,333		—		10,916
Restructuring and Other Related Costs		—		2,986		1,979		86,329
Information Technology Systems Replacement Project		6,576		—		6,576		—
Other		20,509		32,397		64,297		100,727

Total Non-Interest Expense		92,954		122,568		275,740		456,209

Income Before Income Taxes		47,475		101,570		143,841		209,361
Provision for Income Taxes		17,275		70,511		51,569		117,886

Net Income	$	30,200	$	31,059	$	92,272	$	91,475

Basic Earnings Per Share	$	0.44	$	0.39	$	1.30	$	1.14
Diluted Earnings Per Share	$	0.43	$	0.37	$	1.26	$	1.11
Dividends Declared Per Share	$	0.19	$	0.18	$	0.55	$	0.54
Basic Weighted Average Shares		67,893,086		80,539,330		71,148,663		80,261,610
Diluted Weighted Average Shares		69,910,264		83,418,955		73,158,354		82,497,107


	September 30			December 31			September 30
(dollars in thousands)	2002			2001			2001

Assets
Interest-Bearing Deposits	$	1,019,823		$	1,101,974		$	1,227,095
Investment Securities—Held to Maturity (Market Value of $286,526, $407,838, and $471,579, respectively)		277,856			396,216			460,461
Investment Securities—Available for Sale		2,241,106			2,001,420			2,064,141
Securities Purchased Under Agreements to Resell		—			—			7,639
Funds Sold		95,000			115,000			162,830
Loans Held for Sale		30,863			456,709			228,056
Loans		5,258,675			5,652,518			6,766,063
Allowance for Loan and Lease Losses		(154,475	)		(158,979	)		(182,541	)

Net Loans		5,104,200			5,493,539			6,583,522

Total Earning Assets		8,768,848			9,564,858			10,733,744
Cash and Non-Interest Bearing Deposits		328,135			405,981			426,884
Premises and Equipment		182,230			196,171			223,528
Customers’ Acceptance Liability		1,106			593			1,310
Accrued Interest Receivable		38,839			42,687			55,968
Foreclosed Real Estate		17,568			17,174			37,240
Mortgage Servicing Rights		29,911			27,291			23,899
Goodwill		36,216			36,216			67,617
Other Assets		299,190			336,826			373,949

Total Assets	$	9,702,043		$	10,627,797		$	11,944,139

Liabilities
Domestic Deposits
Demand—Non-Interest Bearing	$	1,593,137		$	1,548,322		$	1,428,454
—Interest Bearing		2,063,426			1,926,018			1,792,155
Savings		1,382,719			967,825			813,427
Time		1,549,693			1,927,778			2,186,849
Foreign Deposits
Demand—Non-Interest Bearing		—			2			321,706
Time Due to Banks		4,387			230,247			30,357
Other Savings and Time		33,681			73,404			826,789

Total Deposits		6,627,043			6,673,596			7,399,737
Securities Sold Under Agreements to Repurchase		1,089,287			1,643,444			1,833,091
Funds Purchased		116,775			55,800			129,715
Current Maturities of Long-Term Debt		15,975			100,670			216,670
Short-Term Borrowings		17,941			134,222			138,910
Banker’s Acceptances Outstanding		1,106			593			1,310
Retirement Expense Payable		38,317			36,175			36,775
Accrued Interest Payable		21,870			29,762			49,057
Taxes Payable		191,519			138,366			224,915
Other Liabilities		87,709			98,422			65,166
Long-Term Debt		393,795			469,735			477,738

Total Liabilities		8,601,337			9,380,785			10,573,084
Shareholders’ Equity
Common Stock ($.01 par value), authorized 500,000,000 shares; issued / outstanding: September 2002—81,310,042 / 66,048,072; December 2001—81,377,241 / 73,218,326; September 2001—81,365,600 / 79,195,668		806			806			806
Capital Surplus		371,098			367,672			367,394
Accumulated Other Comprehensive Income		26,038			22,761			24,579
Retained Earnings		1,100,016			1,055,424			1,044,039
Deferred Stock Grants		(2,886	)		(7,637	)		(14,679	)
Treasury Stock, at Cost (Shares: September 2002—15,261,970; December 2001—8,158,915; September 2001—2,169,932)		(394,366	)		(192,014	)		(51,084	)

Total Shareholders’ Equity		1,100,706			1,247,012			1,371,055

Total Liabilities and Shareholders’ Equity	$	9,702,043		$	10,627,797		$	11,944,139

Business Segments Selected Financial Information (Unaudited)

(dollars in thousands)
	RETAIL			COMMERCIAL			INVESTMENT SERVICES GROUP			TREASURY AND OTHER CORPORATE			DIVESTITURE BUSINESSES			CORPORATE RESTRUCTURING RELATED ACTIVITIES			CONSOLIDATED TOTAL


Three Months Ended September 30, 2002
Net Interest Income	$	49,293		$	35,700		$	3,250		$	3,938		$	—		$	—		$	92,181
Provision for Loan and Lease Losses		(722	)		(4,456	)		(76	)		5,254			—			—			—


Net Interest Income after Provision for Loan and Lease Losses		48,571			31,244			3,174			9,192			—			—			92,181
Non-Interest Income		20,118			9,112			16,667			2,351			—			—			48,248
Non-Interest Expense		(43,625	)		(25,280	)		(15,780	)		(1,693	)		—			—			(86,378	)
Information Technology Systems Replacement Project		—			—			—			(6,576	)		—			—			(6,576	)

Income Before Income Taxes		25,064			15,076			4,061			3,274			—			—			47,475
Provision for Income Taxes		(9,524	)		(5,635	)		(1,543	)		(573	)		—			—			(17,275	)

Net Income	$	15,540		$	9,441		$	2,518		$	2,701		$	—		$	—		$	30,200

Total Assets (End of Period)	$	3,135,092		$	2,324,205		$	118,625		$	4,124,121		$	—		$	—		$	9,702,043
Total Assets (Average)	$	3,159,190		$	2,358,495		$	121,254		$	4,164,957		$	—		$	—		$	9,803,896

	RETAIL			COMMERCIAL			INVESTMENT SERVICES GROUP			TREASURY AND OTHER CORPORATE			DIVESTITURE BUSINESSES			CORPORATE RESTRUCTURING RELATED ACTIVITIES			CONSOLIDATED TOTAL


Three Months Ended September 30, 2001
Net Interest Income	$	45,009		$	36,995		$	2,337		$	6,667		$	20,694		$	—		$	111,702
Provision for Loan and Lease Losses		(2,131	)		(5,089	)		—			799			5,502			—			(919	)


Net Interest Income after Provision for Loan and Lease Losses		42,878			31,906			2,337			7,466			26,196			—			110,783
Gain on Sale of Banking Operations, Net of Venture Investment Losses		—			—			—			—			—			47,771			47,771
Non-Interest Income		26,822			7,765			17,735			1,409			8,034			3,819			65,584
Non-Interest Expense		(48,191	)		(24,769	)		(17,372	)		(591	)		(28,659	)		—			(119,582	)
Restructuring & Other Related Costs		—			—			—			—			—			(2,986	)		(2,986	)


Income Before Income Taxes		21,509			14,902			2,700			8,284			5,571			48,604			101,570
Provision for Income Taxes		(9,476	)		(5.626	)		(748	)		(2,790	)		(2,806	)		(49,065	)		(70,511	)

Net Income	$	12,033		$	9,276		$	1,952		$	5,494		$	2,765		$	(461	)	$	31,059


Total Assets (End of Period)	$	3,389,485		$	3,320,492		$	191,900		$	2,351,940		$	2,690,322		$	—		$	11,944,139
Total Assets (Average)	$	3,435,534		$	3,071,464		$	139,730		$	2,673,427		$	2,978,528		$	—		$	12,298,683


(dollars in thousands except per share amounts)	Three Months Ended				Nine Months Ended
	September 30				September 30
Earnings Highlights and Performance Ratios	2002 2001				2002 2001

Net Income	$	30,200	$	31,059	$	92,272	$	91,475
Basic Earnings Per Share		0.44		0.39		1.30		1.14
Diluted Earnings Per Share		0.43		0.37		1.26		1.11
Cash Dividends		12,197		14,625		38,442		43,415
Return on Average Assets		1.22%		1.00%		1.22%		0.94%
Return on Average Equity		10.40%		8.88%		10.10%		8.96%
Net Interest Margin		4.03%		3.89%		3.97%		3.91%
Efficiency Ratio		66.19%		54.46%		63.95%		62.89%
Continuing Business Efficiency Ratio ¹		61.51%		61.03%		61.96%		60.81%


					September 30
Statement of Condition Highlights and Performance Ratios					2002 2001

Total Assets					$	9,702,043	$	11,944,139
Net Loans						5,104,200		6,583,522
Total Deposits						6,627,043		7,399,737
Total Shareholders’ Equity						1,100,706		1,371,055

Book Value Per Common Share					$	16.67	$	17.31
Allowance / Loans Outstanding						2.94%		2.70%
Average Equity / Average Assets						12.10%		10.47%
Employees (FTE)						2,934		3,881
Branches and offices						97		140

Market Price Per Share of Common Stock for the Quarter Ended:
				Closing	$	27.90	$	23.37
				High	$	30.00	$	28.30
				Low	$	22.79	$	20.20

Consolidated Average Balances and Interest Rates Taxable Equivalent (Unaudited)																							Table 2

	Three Months Ended September 30, 2002						Three Months Ended¹ September 30, 2001						Nine Months Ended September 30, 2002						Nine Months Ended¹ September 30, 2001
(dollars in millions)	Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate

Earning Assets
Interest Bearing Deposits	$	1,142.3	$	5.4	1.87	%	$	938.7	$	9.4	3.98	%	$	1,202.3	$	16.4	1.83	%	$	564.0	$	19.7	4.68	%
Funds Sold		210.2		0.9	1.74			194.3		1.8	3.59			206.9		2.7	1.72			132.1		4.2	4.22
Investment Securities
— Held-To-Maturity		296.9		5.0	6.63			526.9		8.1	6.12			331.1		15.2	6.11			557.3		27.4	6.55
— Available for Sale		2,009.5		25.3	5.03			2,139.7		31.4	5.86			1,946.5		78.9	5.40			2,311.4		108.0	6.23
Loans Held For Sale		40.0		0.6	6.24			310.6		5.3	6.83			147.6		7.4	6.70			314.8		16.3	6.94
Net Loans and Lease Financing
Domestic
— Commercial and Industrial		963.9		12.9	5.31			1,583.9		27.8	6.96			1,057.9		41.0	5.18			1,923.3		110.8	7.70
— Construction		147.7		2.1	5.57			223.0		4.2	7.41			158.3		6.5	5.49			262.4		16.1	8.19
— Mortgage		2,904.9		50.4	6.93			3,261.2		62.3	7.58			2,969.0		155.9	7.01			3,448.2		200.7	7.78
— Installment		818.1		17.0	8.25			751.6		19.4	10.22			780.2		50.0	8.56			837.5		72.0	11.49
— Lease Financing		500.8		6.3	4.98			533.4		7.4	5.53			498.3		19.4	5.22			539.3		22.0	5.45

Total Domestic Loans		5,335.4		88.7	6.62			6,353.1		121.1	7.59			5,463.7		272.8	6.67			7,010.7		421.6	8.03
Foreign		14.1		—	—			920.4		16.8	7.23			14.2		0.2	1.61			1,110.4		57.9	6.97

Total Loans		5,349.5		88.7	6.60			7,273.5		137.9	7.54			5,477.9		273.0	6.65			8,121.1		479.5	7.89
Other		99.6		1.5	6.28			78.8		1.4	6.96			95.8		4.3	6.01			77.3		3.9	6.83

Total Earning Assets		9,148.0		127.4	5.55			11,462.5		195.3	6.78			9,408.1		397.9	5.65			12,078.0		659.0	7.29
Cash and Non-Interest Bearing Assets		297.6						347.3						313.7						384.0
Other Assets		358.3						488.9						375.1						579.3

Total Assets	$	9,803.9					$	12,298.7					$	10,096.9					$	13,041.3

Interest Bearing Liabilities
Domestic Deposits
— Demand		2,036.0		4.0	0.78			1,892.6		8.3	1.74			1,982.2		12.8	0.86			1,934.9		29.3	2.02
— Savings		1,346.2		5.0	1.46			794.9		4.6	2.29			1,183.6		13.4	1.51			720.3		11.7	2.16
— Time		1,600.0		11.4	2.82			2,432.0		29.5	4.81			1,739.8		39.0	3.00			2,661.2		109.9	5.52

Total Domestic Deposits		4,982.2		20.4	1.62			5,119.5		42.4	3.29			4,905.6		65.2	1.78			5,316.4		150.9	3.79
Foreign Deposits
— Time Due to Banks		9.6		—	—			235.3		2.2	3.78			54.8		0.8	1.90			346.4		12.4	4.79
— Other Time and Savings		38.3		0.2	1.68			640.7		5.5	3.41			60.2		0.7	1.69			716.4		19.0	3.54

Total Foreign Deposits		47.9		0.2	1.59			876.0		7.7	3.51			115.0		1.5	1.79			1,062.8		31.4	3.95

Total Interest Bearing Deposits		5,030.1		20.6	1.62			5,995.5		50.1	3.32			5,020.6		66.7	1.78			6,379.2		182.3	3.82
Short-Term Borrowings		1,301.3		7.7	2.34			2,012.6		20.9	4.11			1,503.7		27.6	2.46			2,160.5		80.8	5.00
Long-Term Debt		451.6		6.9	6.10			746.0		12.5	6.63			498.7		23.3	6.25			841.6		42.2	6.71

Total Interest Bearing Liabilities		6,783.0		35.2	2.06			8,754.1		83.5	3.78			7,023.0		117.6	2.24			9,381.3		305.3	4.35

Net Interest Income				92.2						111.8						280.3						353.7
Interest Rate Spread					3.49	%					3.00	%					3.41	%					2.94	%
Net Interest Margin					4.03	%					3.89	%					3.97	%					3.91	%
Non-Interest Bearing Demand Deposits
— Demand		1,547.0						1,509.0						1,540.0						1,570.7
— Foreign		—						330.7						—						352.0

Total Demand Deposits		1,547.0						1,839.7						1,540.0						1,922.7
Other Liabilities		312.6						316.6						312.0						372.4
Shareholders’ Equity		1,152.3						1,388.3						1,221.9						1,364.9

Total Liabilities and Shareholders’ Equity	$	9,803.9					$	12,298.7					$	10,096.9					$	13,041.3

Provision for Loan and Lease Losses				—						0.9						11.6						59.8
Net Overhead				44.6						9.2						124.6						84.4

Income Before Income Taxes				47.6						101.7						144.1						209.5
Provision for Income Taxes				17.3						70.5						51.6						117.8
Tax-Equivalent Adjustment				0.1						0.1						0.2						0.2

Net Income			$	30.2					$	31.1					$	92.3					$	91.5

¹ Adjusted to reflect the reclassification of certain average balances and other interest income.

Balance at December 31, 2001	$	11.8
Restructuring Charges		3.3
Adjustments		(1.3	)
Payments		(10.6	)

Balance at March 31, 2002		3.2
Payments		(3.2	)

Balance at June 30, 2002	$	0.0

Continuing Business (Unaudited)											Table 3

	Three Months Ended September 30						Nine Months Ended September 30
(dollars in thousands)	2002			2001			2002			2001

Net Interest Income	$	92,181		$	91,008		$	280,013		$	270,985
Provision for Loan and Lease Losses		—			(6,421	)		(11,616	)		(21,043	)

Net Interest Income After Provision for Loan and Lease Losses		92,181			84,587			268,397			249,942
Non-Interest Income		48,248			53,731			151,184			163,279
Non-Interest Expense¹		(86,378	)		(88,328	)		(267,185	)		(264,087	)

Income Before Income Taxes		54,051			49,990			152,396			149,134
Provision for Income Taxes		(19,668	)		(18,640	)		(54,666	)		(56,879	)

Net Income¹	$	34,383		$	31,350		$	97,730		$	92,255

Total Assets (End of Period)	$	9,702,043		$	9,253,817		$	9,702,043		$	9,261,817
Total Assets (Average)		9,803,896			9,320,155			10,096,958			9,584,119

Diluted Earnings Per Share¹	$	0.49		$	0.38		$	1.34		$	1.12
Return on Average Equity¹		11.84	%		8.96	%		10.69	%		9.04	%
Efficiency Ratio¹		61.51	%		61.03	%		61.96	%		60.81	%


(dollars in millions)	September 30 2002		June 30 2002		December 31 2001		September 30 2001

Domestic Loans
Commercial
Commercial and Industrial¹	$	869.4	$	999.6	$	1,175.5	$	1,413.6
Mortgage – Commercial¹		616.5		562.5		640.7		667.9
Construction		146.3		148.6		169.6		175.7
Lease Financing		451.8		450.8		441.8		466.8

Total Commercial		2,084.0		2,161.5		2,427.6		2,724.0
Consumer
Mortgage – Residential		2,259.2		2,360.5		2,419.4		2,440.4
Home Equity		419.2		404.2		329.9		306.3
Other Consumer		421.6		403.2		399.8		428.4
Lease Financing		36.5		37.3		38.9		41.2

Total Consumer		3,136.5		3,205.2		3,188.0		3,216.3

Total Domestic		5,220.5		5,366.7		5,615.6		5,940.3

Foreign Loans		38.2		41.8		36.9		825.8

Total Loans	$	5,258.7	$	5,408.5	$	5,652.5	$	6,766.1


	Three Months Ended September 30, 2002		Three Months Ended December 31, 2001		Three Months Ended September 30, 2001
(dollars in millions)	Amount	Mix	Amount	Mix	Amount	Mix


Domestic
Non-Interest Bearing Demand	$1,547.0	23.5%	$1,397.8	19.1%	$1,509.0	19.3%
Interest-Bearing Demand	2,036.0	31.0%	1,774.7	24.2%	1,892.6	24.2%
Regular Savings	1,346.2	20.5%	958.3	13.1%	794.9	10.1%
Time Certificates of Deposit ($100,000 or More)	780.0	11.8%	990.8	13.5%	1,202.7	15.3%
Other Time and Savings Certificates	820.0	12.5%	1,057.4	14.5%	1,229.3	15.7%


Total Domestic	6,529.2	99.3%	6,179.0	84.4%	6,628.5	84.6%


Foreign
Non-Interest Bearing Demand	—	0.0%	328.0	4.5%	330.7	4.2%
Time Due to Banks	9.6	0.1%	365.5	5.0%	235.3	3.0%
Other Time and Savings	38.3	0.6%	445.9	6.1%	640.7	8.2%


Total Foreign	47.9	0.7%	1,139.4	15.6%	1,206.7	15.4%


Total	$6,577.1	100.0%	$7,318.4	100.0%	$7,835.2	100.0%


	September 30, 2002 ¹						June 30, 2002
(dollars in millions)	Outstandings		Unused Commitments		Total Exposure		Total Exposure


Air Transportation
Regional Passenger Carriers	$	49	$	8	$	57	$	58
United States Based Passenger Carriers		48		—		48		49
International Based Passenger Carriers		32		—		32		32
Cargo Carriers		15		—		15		15

Total Air Transportation	$	144	$	8	$	152	$	154


Lodging²
National Hotel Companies	$	31	$	74	$	105	$	104
Hawaii Hotels		103		32		135		137
West Pacific Hotels		47		—		47		43

Total Lodging	$	181	$	106	$	287	$	284


Telecommunication Companies	$	6	$	25	$	31	$	45


Syndicated Exposure³	$	312	$	764	$	1,076	$	1,096

Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited)														Table 10

(dollars in millions)	September 30 2002			June 30 2002			March 31 2002			December 31 2001			September 30 2001

Non-Accrual Loans
Commercial and Industrial	$	6.4		$	14.4		$	27.4		$	18.9		$	10.5
Mortgage—Commercial		18.1			25.3			15.1			16.3			12.8
Construction		0.9			0.7			1.0			9.3			0.7
Lease Financing		5.7			6.9			4.4			0.8			1.0
Mortgage—Residential		14.5			14.3			15.7			15.4			19.5
Other Consumer		0.1			—			0.1			0.1			0.1
Foreign		—			—			—			—			17.2

Total Non-Accrual Loans		45.7			61.6			63.7			60.8			61.8
Non-Accrual Loans Held For Sale		—			—			7.8			1.7			7.4
Foreclosed Real Estate
Domestic		17.6			17.2			19.2			17.2			36.9
Foreign		—			—			—			—			0.3

Total Foreclosed Real Estate		17.6			17.2			19.2			17.2			37.2

Total Non-Performing Assets	$	63.3		$	78.8		$	90.7		$	79.7		$	106.4

Accruing Loans Past Due 90 Days or More
Commercial and Industrial	$	—		$	—		$	0.2		$	0.1		$	0.1
Mortgage—Commercial		—			—			1.2			—			—
Lease Financing		—			0.1			0.1			0.1			—
Mortgage—Residential		1.4			0.9			2.1			3.8			3.4
Other Consumer		0.3			0.5			0.7			0.9			1.0
Foreign		—			—			—			—			0.8

Total Accruing and Past Due	$	1.7		$	1.5		$	4.3		$	4.9		$	5.3

Total Loans	$	5,258.7		$	5,408.5		$	5,601.3		$	5,652.5		$	6,766.1


Ratio of Non-Accrual Loans to Total Loans		0.87	%		1.14	%		1.14	%		1.08	%		0.91	%

Ratio of Non-Performing Assets to Total Loans, Foreclosed Real Estate and Non-Performing Loans Held for Sale		1.20	%		1.45	%		1.61	%		1.41	%		1.56	%

Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans		1.24	%		1.48	%		1.70	%		1.50	%		1.65	%

Quarter to Quarter Changes in Non-Performing Assets
Balance at Beginning of Quarter	$	78.8		$	90.7		$	79.7		$	106.4		$	118.9
Additions		7.0			20.5			36.4			43.8			23.2
Reductions
Payments and Sales of Loans		(8.5	)		(20.6	)		(12.9	)		(40.9	)		(25.8	)
Return to Accrual		(9.1	)		(6.2	)		(6.3	)		(3.6	)		(0.9	)
Sales of Foreclosed Assets		(1.4	)		(3.5	)		(0.9	)		(21.9	)		(2.2	)
Charge-offs		(3.5	)		(2.1	)		(5.3	)		(4.1	)		(6.8	)

Total Reductions		(22.5	)		(32.4	)		(25.4	)		(70.5	)		(35.7	)

Balance at End of Quarter	$	63.3		$	78.8		$	90.7		$	79.7		$	106.4



	September 30, 2002		December 31, 2001		September 30, 2001


	Interest Rate Change		Interest Rate Change		Interest Rate Change

	(in basis points)		(in basis points)		(in basis points)

	-200	+200	-200	+200	-200	+200

Estimated Exposure as a Percent of Net Interest Income	(4.7)%	8.7%	(0.3)%	3.5%	(4.3)%	4 .8%

Market Risk Exposure From Changes in Foreign Exchange Rates (Unaudited)												Table 13


	September 30, 2002				December 31, 2001				September 30, 2001
(dollars in millions)	Book Value		Value-at- Risk		Book Value		Value-at- Risk		Book Value		Value-at- Risk

Net Investments in Foreign
Subsidiaries & Branches
Japanese Yen	$	—	$	—	$	1.1	$	0.2	$	3.3	$	0.5
Korean Won		—		—		2.1		0.3		12.9		1.5
Pacific Franc¹		—		—		—		—		11.1		1.8
Other Currencies		0.2		0.02		0.1		0.1		6.3		15.3

Total	$	0.2	$	0.02	$	3.3	$	0.6	$	33.6	$	19.1