FIRST HAWAIIAN, INC. - Annual Report: 2005 (Form 10-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
		EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
		OR
[   ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
		EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM            TO           :

Commission file number: 0-7949

BANCWEST CORPORATION

(Exact name of registrant as specified in its charter)

		Delaware		99-0156159
		(State of incorporation)		(I.R.S. Employer
				Identification No.)
		999 Bishop Street, Honolulu, Hawaii		96813
		(Address of principal executive offices)		(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None (Title of class)

     Indicate by check mark whether the registrant is a well known seasoned issuer (as defined in Section 405 of the Securities Act). Yes [   ] No [X]

     Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [X] No [   ]

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [   ] No [   ]

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer: [   ]		Accelerated filer: [   ]		Non-accelerated filer: [X]

     Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes [   ] No [X]

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

     The number of shares outstanding of each of the registrant’s classes of common stock as of March 29, 2006 was:

Title of Class		Number of Shares Outstanding
Class A Common Stock, $0.01 Par Value		110,859,123

Documents Incorporated by Reference
Portions of the following documents are incorporated by reference in this Form 10-K: None

BancWest Corporation and Subsidiaries

TABLE OF CONTENTS

				Page
PART I
Item 1.		Business			1
		General			1
		Employees			3
		Monetary Policy and Economic Conditions			3
		Competition			3
		Supervision and Regulation			3
		Future Legislation			8
		Foreign Operations			8
		Operating Segments			8
		Other Information			8
Item 1A.		Risk Factors			8
Item 1B.		Unresolved Staff Comments (1)			—
Item 2.		Properties			12
Item 3.		Legal Proceedings			13
Item 4.		Submission of Matters to a Vote of Security Holders			13
PART II
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			13
Item 6.		Selected Financial Data			14
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
		Forward-Looking Statements			15
		Overview			17
		Critical Accounting Estimates			19
		Financial Overview			20
		Results of Operations			21
		Net Interest Income			21
		Noninterest Income			26
		Noninterest Expense			27
		Operating Segments			28
		Securities Available For Sale			33
		Loans and leases			33
		Nonperforming Assets and Restructured Loans			36
		Provision and Allowance for Loan and Lease Losses			38
		Deposits			41
		Capital			41
		Income Taxes			41
		Off-Balance Sheet Arrangements			42
		Contractual Obligations			43
		Benefit Plans			44
		Liquidity Management			44
		Credit Management			45
		Recent Accounting Standards			46
Item 7A.		Quantitative and Qualitative Disclosures about Market Risk			47
Item 8.		Financial Statements and Supplementary Data			50
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			104
Item 9A.		Controls and Procedures			104
Item 9B.		Other Information			104
PART III
Item 10.		Directors and Executive Officers of the Registrant			105
Item 11.		Executive Compensation			108
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			114
Item 13.		Certain Relationships and Related Transactions			114
Item 14.		Principal Accounting Fees and Services			115
PART IV
Item 15.		Exhibits and Financial Statement Schedules			116
SIGNATURES					119
GLOSSARY OF FINANCIAL TERMS					103
EXHIBIT 10.9
EXHIBIT 10.14
EXHIBIT 12
EXHIBIT 21
EXHIBIT 31
EXHIBIT 32

(1) Not applicable

 i 

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PART I

Item 1.     Business

GENERAL

     BancWest Corporation

     BancWest Corporation, a Delaware corporation (“BancWest”), is a registered financial holding company under the Bank Holding Company Act, as amended, and is a wholly owned subsidiary of BNP Paribas. As a financial holding company, BancWest is allowed to acquire or invest in the securities of companies in a broad range of financial activities. BancWest, through its subsidiaries, operates a general commercial banking business and other businesses related to banking. Its principal assets are its investments in Bank of the West, (“BOW”) a State of California-chartered bank and First Hawaiian Bank (“First Hawaiian” or “FHB”), a State of Hawaii-chartered bank. First Hawaiian is a wholly owned subsidiary of BancWest. At December 31, 2005 BancWest held 84.509% of the outstanding common stock of Bank of the West. The balance of Bank of the West’s common stock is held by BNP Paribas. See Note 4 (Transactions with Affiliates) to the Consolidated Financial Statements for additional information. In this report BancWest Corporation and subsidiaries is referred to as the “Company,” “we” or “our.” At December 31, 2005, the Company had consolidated total assets of $66.3 billion, total loans and leases of $43.7 billion, total deposits of $42.4 billion and total stockholder’s equity of $6.8 billion.

     On December 2, 2005, Bank of the West acquired Commercial Federal Corporation (“Commercial Federal”), of Omaha, Nebraska, the parent company of Commercial Federal Bank, for $34.00 for each share of Commercial Federal’s common stock in a cash transaction valued at $1.3 billion. Commercial Federal also paid a special one-time cash dividend of $.50 per share prior to completion of the merger. The banking operations of Commercial Federal were merged into Bank of the West on the date of the acquisition.

     On November 1, 2004, BancWest acquired Community First Bankshares, Inc. (“Community First”), of Fargo, North Dakota, for $32.25 for each share of Community First’s common stock in a cash transaction valued at $1.2 billion. The banking operations of Community First were merged into Bank of the West in the fourth quarter of 2004. Also on November 1, 2004, the Company acquired USDB Bancorp (“USDB”) and its banking operations were merged into Bank of the West in January 2005.

     Bank of the West

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

     At December 31, 2005, Bank of the West was the second largest commercial bank headquartered in California, with total assets of $55.2 billion, total loans and leases of $37.7 billion, total deposits of approximately $33.9 billion and total stockholders’ equity of $8.3 billion. Bank of the West conducts a general commercial banking business, providing retail and corporate banking, trust and insurance services to individuals, institutions, businesses and governments through 681 banking locations (663 full service retail branches and 18 limited service retail offices) and other commercial banking offices located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Washington, Wisconsin and Wyoming. Bank of the West also originates direct and indirect automobile loans and leases, recreational vehicle loans, recreational marine vessel loans, equipment leases and deeds of trust on single-family residences through a network of manufacturers, dealers, representatives and brokers in all 50 states.

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Bank of the West’s principal subsidiaries include:

	•		Essex Credit Corporation engages in the origination of consumer loans for the purchase or refinancing of pleasure boats and recreational vehicles.
	•		BW Insurance Agency, Inc., engages in the sale of property, casualty, life, accident and crop insurance.
	•		BancWest Investment Services, Inc., formerly a subsidiary of BancWest, sells mutual funds and annuities to the general public through branches of Bank of the West and First Hawaiian.

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

     On September 2, 2005 Bank of the West announced an increase in its community support to offer $75 billion in loans, investments, contributions and services to low- and moderate-income individuals, small businesses and community-based organizations. The new goal extends through 2015 and increases by 150% an earlier $30 billion goal announced in 2002. Since the announcement of its original initiative in 2002, Bank of the West has contributed and advanced $26 billion for these purposes.

     First Hawaiian Bank

     First Hawaiian is a State of Hawaii-chartered bank that is not a member of the Federal Reserve System. At December 31, 2005, First Hawaiian was the largest bank in Hawaii in terms of total deposits. The deposits of First Hawaiian are insured by the BIF and the SAIF of the FDIC to the extent and subject to the limitations set forth in the FDIA. First Hawaiian, the oldest financial institution in Hawaii, was established as Bishop & Co. in 1858 in Honolulu.

     At December 31, 2005, First Hawaiian had total assets of $11.6 billion, total loans and leases of $6.0 billion, total deposits of $8.6 billion and stockholder’s equity of $2.1 billion.

     First Hawaiian is a full-service bank conducting general commercial and consumer banking business and offering trust and insurance services to individuals, institutions, businesses and governments through 61 branches in Hawaii, Guam and Saipan.

     First Hawaiian’s principal subsidiaries include:

	•		Bishop Street Capital Management Corporation, a registered investment adviser that serves the institutional and high net worth investment markets primarily in Hawaii and the Western United States. It is also the advisor to the Bishop Street Funds mutual fund family, and
	•		First Hawaiian Leasing, Inc., which engages in commercial equipment and vehicle leasing.

     To support affordable housing and as part of its community reinvestment program, First Hawaiian is a member of the Hawaii Community Reinvestment Corporation (“HCRC”), a nonprofit consortium of Hawaii financial institutions that provides $50 million in long-term financing for affordable housing rental projects throughout Hawaii for low- and moderate-income residents. The $50 million loan pool is funded by the member financial institutions, which participate pro rata (based on deposit size) in each HCRC loan. First Hawaiian’s participation in these HCRC loans is included in its loan portfolio.

     To further enhance First Hawaiian’s community reinvestment program and provide support for the development of additional affordable-housing rental units in Hawaii, First Hawaiian and other HCRC member institutions have subscribed to: (i) a $20.0 million tax-credit equity fund (“Hawaii Affordable Housing Fund II”), (ii) a $12.5 million tax-credit equity fund (“Hawaii Affordable Housing Fund III”), (iii) a $15.15 million tax-credit equity fund (“Hawaii Equity Fund IV, LLC (Class A)”) and subscription in a $35.9 million tax-credit equity fund (“Hawaii Equity Fund IV, LLC (Class B)”).

     Hawaii Affordable Housing Fund II, Hawaii Affordable Housing Fund III, and Hawaii Equity Fund IV, LLC (Classes A and B) (the “Funds”) have been established to invest in qualified low-income housing tax credit rental projects and to ensure that these

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projects are maintained as low-income housing throughout the required compliance period. First Hawaiian’s investments in these Funds are included in other assets. The investment in projects associated with the Affordable Housing Fund I was sold in 2003.

EMPLOYEES

     At December 31, 2005, the Company had 12,554 full-time equivalent employees. Bank of the West and First Hawaiian Bank had 10,832 and 2,219 employees, including part-time employees, respectively. None of our employees are represented by any collective bargaining agreements and our relations with employees are considered excellent.

MONETARY POLICY AND ECONOMIC CONDITIONS

     Our earnings and businesses are affected not only by general economic conditions (both domestic and international), but also by the monetary policies of various regulatory authorities of the United States and foreign governments and international agencies. In particular, our earnings and growth may be affected by actions of the Federal Reserve Board in connection with its implementation of national monetary policy through its open market operation in securities, control of the discount rate and establishment of reserve requirements against both member and non-member financial institutions’ deposits. These actions may have a significant effect on the overall growth and distribution of loans and leases, investments and deposits, as well as on the rates earned on investment securities, loans and leases or paid on deposits. It is difficult to predict future changes in monetary policies.

COMPETITION

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

SUPERVISION AND REGULATION

     As a registered bank holding company under the Bank Holding Company Act of 1956, as amended (“BHC Act”), that has qualified and elected to be treated as a financial holding company, we are subject to regulation and supervision by the Federal Reserve Board. Our subsidiaries and branches are subject to regulation and supervision by the banking authorities of Arizona, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Minnesota, Missouri, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Washington, Wisconsin, Wyoming, Guam and the Commonwealth of the Northern Mariana Islands, as well as by the FDIC (which is the primary federal regulator of our two bank subsidiaries) and various other regulatory agencies.

     The consumer lending and finance activities of BancWest’s subsidiaries are also subject to extensive regulation under various Federal laws, including the Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting, Fair Debt Collection Practices and Electronic Funds Transfer Acts, as well as various state laws. These statutes impose requirements on the making, enforcement and collection of consumer loans and on the types of disclosures that need to be made in connection with such loans.

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

     Financial holding companies are permitted to enter into new financial activities or acquire nonbank companies engaged in financial activities without the prior approval of the Federal Reserve Board, but may be subject to review by the Federal Trade

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Commission and the Department of Justice for antitrust considerations. However, approval of the Federal Reserve Board is generally required before acquiring more than 5% of the voting shares of another bank, savings association or bank holding company, before merging or consolidating with another bank holding company or before acquiring substantially all the assets of any bank or savings association. In addition, all banking acquisitions are reviewed by the Department of Justice for antitrust considerations. Our parent company, BNP Paribas, has also qualified and elected to become a financial holding company.

     A financial holding company that does not continue to meet all the requirements for financial holding company status will, depending on which requirements it fails to meet, lose the ability to undertake new activities or to make acquisitions that are not generally permissible for all bank holding companies or to continue such activities. Under the BHC Act, bank holding companies that are not financial holding companies are generally limited to engaging in the business of banking, managing or controlling banks, and other activities that the Federal Reserve Board has determined to be so closely related to banking as to be properly incident thereto. Additionally, bank holding companies that are not financial holding companies generally must apply for and obtain the prior approval of, or provide prior notice to, the Federal Reserve Board to make acquisitions of companies engaged in permissible activities or to commence those activities de novo.

     In order for us to retain our status as a financial holding company and be able to continue to engage in or commence new financial activities not permissible for bank holding companies that are not financial holding companies and to acquire companies engaged in such activities, Bank of the West and First Hawaiian, as well as BNP Paribas, must remain “well capitalized” and “well managed.” In the case of Bank of the West and First Hawaiian, “well capitalized” has the same meaning as under the “prompt corrective action” guidelines described below, and “well managed” means that at each bank’s most recent examination the bank received at least a satisfactory composite rating and at least a satisfactory rating for management. Additionally, Bank of the West and First Hawaiian must continue to achieve a Community Reinvestment Act examination rating of at least satisfactory, otherwise we will be restricted from commencing, or making acquisitions of companies engaged in activities that are not permissible for bank holding companies that are not financial holding companies.

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

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

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

     Depositor Preference. The Federal Deposit Insurance Act provides for a depositor preference on amounts realized from the liquidation or other resolution of any depository institution insured by the FDIC.

     Cross-Guarantee Liability of FDIC-Insured Bank Subsidiaries. Depository institutions insured by the FDIC can be held liable for any losses incurred, or reasonably expected to be incurred, by the FDIC in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default. “Default” is defined generally as the appointment of a conservator or receiver and “in danger of default” is defined generally as the existence of certain specified conditions indicating that a “default” is likely to occur in the absence

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of regulatory assistance. Accordingly, in the event that any insured subsidiary of a bank holding company causes a loss to the FDIC, other insured subsidiaries of the bank holding company could be required to compensate the FDIC by reimbursing it for the amount of such loss. Any such obligation by our insured subsidiaries to reimburse the FDIC would rank senior to their obligations, if any, to us.

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

     Under the regulations adopted by the federal banking agencies to implement these provisions of FDICIA (commonly referred to as the “prompt corrective action” rules), a depository institution is “well capitalized” if it has (i) a total risk-based capital ratio (total capital to risk-weighted assets) of 10% or greater, (ii) a Tier 1 risk-based capital ratio (Tier 1 capital to risk-weighted assets) of 6% or greater, (iii) a leverage ratio (Tier 1 capital to average total assets) of 5% or greater and (iv) is not subject to any written agreement, order or directive to meet and maintain a specific capital level for any capital measure. An “adequately capitalized” depository institution is defined as one that has (i) a total risk-based capital ratio of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or greater and (iii) a leverage ratio of 4% or greater (or 3% or greater in the case of a bank that received the highest supervisory rating in its most recent report of examination, subject to appropriate federal banking agency guidelines). A depository institution is considered (i) “undercapitalized” if it has (A) a total risk-based capital ratio of less than 8%, (B) a Tier 1 risk-based capital ratio of less than 4% or (C) a leverage ratio of less than 4% (or less than 3% in the case of a bank that received the highest supervisory rating in its most recent report of examination, subject to appropriate federal banking agency guidelines), (ii) “significantly undercapitalized” if it has (A) a total risk-based capital ratio of less than 6%, (B) a Tier 1 risk-based capital ratio of less than 3% or (C) a leverage ratio of less than 3% and (iii) “critically undercapitalized” if it has a ratio of tangible equity to total assets equal to or less than 2%. An institution may be deemed by the regulators to be in a capitalization category that is lower than is indicated by its actual capital position if, among other things, it receives an unsatisfactory examination rating. At December 31, 2005, all of BancWest’s subsidiary depository institutions were “well capitalized.”

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

     Significantly undercapitalized depository institutions may be subject to a number of other requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized institutions may not make any payments of interest or principal on their subordinated debt and are subject to the appointment of a conservator or receiver, generally within 90 days of the date such institution becomes critically undercapitalized.

     As discussed above, if a depository institution is not well capitalized, its parent holding company cannot become, and, subject to a capital restoration plan, cannot remain, a financial holding company. In addition, the FDIC has adopted regulations under FDICIA prohibiting an insured depository institution from accepting brokered deposits (as defined by the regulations) unless the institution is “well capitalized” or is “adequately capitalized” and receives a waiver from the FDIC.

     FDIC Insurance Assessments. The FDIC has implemented a risk-based deposit insurance assessment system under which the assessment rate for an insured institution may vary according to the regulatory capital levels of the institution and other factors (including supervisory evaluations). In recent years, our bank subsidiaries and other well capitalized and well managed depository institutions have not paid premiums for FDIC deposit insurance, while all other insured depository institutions have been required to

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pay premiums ranging from 3 to 27 cents per $100 of domestic deposits. However, well capitalized and well managed depository institutions may be required to pay premiums on deposit insurance in the future. The outcome of legislative and regulatory initiatives, the deposit insurance fund loss experience and other factors will determine the amount of such premiums.

     The Deposit Insurance Funds Act of 1996 (the “Deposit Funds Act”) separated the Financing Corporation (“FICO”) assessment to service the interest on FICO bond obligations from the BIF and SAIF assessments. The FICO annual assessment on individual depository institutions is in addition to the amount, if any, paid for deposit insurance according to the FDIC’s risk-based assessment rate schedules. FICO assessment rates may be adjusted quarterly by the FDIC. The current FICO assessment rate is 1.32 cents per $100 of deposits. In addition, the FDIC has authority to impose special assessments from time to time, subject to certain limitations specified in the Deposit Funds Act.

     The Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”, the “Act”), signed into law by President Bush on February 8, 2006 as part of the Deficit Reduction Act of 2005, provides for the establishment of a new Deposit Insurance Fund (the “DIF”) and the merger of each of the BIF and the SAIF into it. The Reform Act authorizes revisions to the FDIC’s current risk-based assessment system, but provides that the FDIC’s assessment regulations as in effect immediately before the date of the enactment of the Reform Act will continue to apply to all members of the DIF until such regulations are modified by the FDIC in accordance with the Act. With regard to factors affecting assessment rates, the Reform Act eliminates the designated reserve ratio previously in effect for the BIF and the SAIF of 1.25 percent of estimated insured deposits and directs the FDIC to designate a reserve ratio for the DIF for each calendar year within the range of 1.15 to 1.5 percent of estimated insured deposits. The Reform Act also provides for indexing of the $100,000 maximum deposit insurance coverage amount to reflect inflation, increases the deposit insurance coverage for retirement accounts to $250,000, and also provides for dividends of amounts in the DIF above certain specified thresholds from time to time and a one-time credit against assessments for certain insured depository institutions that capitalized the deposit insurance system. The dividends and the credit are to be determined on a historical basis concept utilizing an institution’s assessment base in 1996 and adding premiums paid since that time. The Reform Act calls for final FDIC regulations implementing the statute to be effective within 270 days after enactment of the Act, although the merger of the BIF and the SAIF into the DIF is to take place no later than the first day of the calendar quarter beginning after the 90-day period following enactment of the Reform Act.

     Capital Requirements. Bank holding companies and their insured depository institution subsidiaries generally are subject to risk-based capital guidelines issued by the U.S. federal banking agencies. However, the Federal Reserve Board has taken the position that where a U.S. bank holding company is a subsidiary of a foreign bank that has been determined by the Board to be “well-capitalized” and “well-managed” and that is a financial holding company, the subsidiary U.S. bank holding company as a general matter will not be required to comply with the Board’s capital adequacy guidelines for bank holding companies, although its subsidiary banks will remain subject to the regulatory capital requirements applicable to them. Accordingly, as a subsidiary of BNP Paribas, a foreign bank which satisfies these requirements, BancWest is not subject at this time to the Board’s capital adequacy guidelines, as described below. Bank of the West and First Hawaiian remain subject to the applicable capital adequacy requirements of the federal bank regulatory agencies (in their cases the FDIC). Under the capital requirements of the federal banking agencies, the minimum ratio of qualifying total capital to risk-weighted assets (including certain off-balance sheet items) is 8%. At least half of the total capital must consist of common stock, retained earnings, qualifying noncumulative perpetual preferred stock, minority interests in the equity accounts of consolidated subsidiaries and, for bank holding companies and subject to certain limitations, qualifying noncumulative perpetual preferred stock, trust preferred securities and certain other so-called ‘restricted core capital elements,’ less most intangibles including goodwill (“Tier 1 capital”). The remainder (“Tier 2 capital”) may consist of certain other preferred stock, certain other capital instruments, and limited amounts of subordinated debt and the allowance for loan and lease losses. In addition, banks and bank holding companies must maintain a Tier 1 leverage ratio (Tier 1 capital to average total assets) of at least 3% for institutions that meet certain specified criteria, including those having the highest supervisory rating, or at least 4% for all other institutions.

     The federal banking agencies’ risk-based capital guidelines explicitly identify concentrations of credit risk and certain risks arising from nontraditional activities, and the management of such risks, as important factors to consider in assessing an institution’s overall capital adequacy. In addition, the federal banking agencies’ capital guidelines incorporate a measure for market risk in foreign exchange and commodity activities and in the trading of debt and equity instruments. The market risk capital rules require banking organizations with large trading activities to maintain capital for market risk in an amount calculated by using the banking organizations’ own internal value-at-risk models, subject to parameters set by the regulators. The adoption of the market risk capital rules has not had a material effect on our business or operations.

     The Basel Committee on Banking Supervision published in 2004, and updated in 2005, a new set of risk-based capital standards (“Basel II”) in order to enhance the international capital standards that have been in place since 1988 (“Basel I”). Basel II adopts a three-pillar framework of minimum capital requirements, with more emphasis on supervisory assessment of capital adequacy and

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greater reliance on market discipline. Basel II also would include a separate capital requirement for operational risk. Although at the time Basel II was originally published in 2004, the Basel Committee indicated that Basel II would be fully implemented in 2008, on September 30, 2005, the U.S. federal banking agencies issued a joint statement setting forth a revised timeline for U.S. banking institutions. Under this timeline, transitional arrangements for implementing Basel II would begin in the United States no earlier than 2008, with full implementation occurring no earlier than 2012. The agencies have stated that they expect to issue a proposed rule for the domestic implementation of Basel II in the first quarter of 2006. The agencies have stated that the proposed domestic implementation of Basel II will retain both the existing prompt corrective action capital requirements, as discussed above in “Prompt Corrective Action,” and the Tier 1 leverage ratio requirement described above.

     Compliance with Basel II will be mandatory only for U.S. banking institutions with over $250 billion in banking assets or on-balance sheet foreign exposures of at least $10 billion, although certain other institutions may elect to comply voluntarily. As a result, the United States is expected to have a bifurcated regulatory capital framework upon the implementation of Basel II, which may result in the largest banking organizations being subject to different, and most likely lower, regulatory capital levels than those applicable to other banking organizations for the same or similar products. On October 6, 2005, the federal banking agencies jointly proposed revisions to Basel I that are intended to more closely align risk-based capital requirements with the risk inherent in various exposures and mitigate potential competitive disadvantages as the Basel II rules are implemented for the most complex internationally active banking organizations. Among other things, the proposed amendments would increase the number of risk-weight categories, permit greater use of external ratings as an indicator of credit risk for exposures for purposes of determining appropriate risk weight, expand the types of guarantees and collateral that may be recognized, modify risk weights associated with one-to-four family residential mortgages and apply certain credit conversion factors to certain types of commitments, as well as address the appropriate risk-based capital treatment of certain securitizations with early-amortization features.

     BancWest and its bank subsidiaries are not required to comply with Basel II under U.S. regulations. BNP Paribas will comply with Basel II and we may be required to comply with all or portions of the Basel II regime in accordance with French regulatory expectations.

     Privacy. The GLBA modified laws relating to financial privacy. The GLBA financial privacy provisions generally prohibit a financial institution, including BancWest and its bank subsidiaries, from disclosing nonpublic personal financial information about consumers to unaffiliated third parties unless consumers have the opportunity to “opt out” of the disclosure. A financial institution is also required to provide its privacy policy annually to its customers. A number of state legislatures have adopted privacy laws, including laws prohibiting sharing of customer information without the customer’s prior permission, and other state legislatures are considering similar laws. These laws may make it more difficult for BancWest and its bank subsidiaries to share information with their marketing partners, reduce the effectiveness of marketing programs, and increase the cost of marketing programs.

     Anti-Money Laundering Initiatives and the USA PATRIOT Act. A major focus of governmental policy relating to financial institutions in recent years has been combating money laundering and terrorist financing. The USA PATRIOT Act of 2001 (the “PATRIOT Act”) substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Treasury Department has issued a number of implementing regulations that apply various requirements of the PATRIOT Act to financial institutions such as banks, broker-dealers, investment advisers, mutual funds and other entities. Those regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. In addition, the bank regulatory agencies are imposing heightened standards, and law enforcement authorities have been taking a more active role. Failure by a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious legal and reputational consequences for the institution. BancWest believes that the programs of its banking subsidiaries satisfy the requirements of the PATRIOT Act.

     Community Reinvestment Act. The Community Reinvestment Act requires banks to help serve the credit needs of their communities, including credit to low- and moderate-income individuals and geographies. Should our bank subsidiaries fail to adequately serve their communities, potential penalties may include regulatory denials to expand branches, relocate, add subsidiaries and affiliates, expand into new financial activities or merge with or purchase other financial institutions.

     Real Estate Activities. FDIC regulations generally allow a majority-owned corporate subsidiary of a state non-member bank to make equity investments in real estate if the bank complies with certain investment and transaction limits and satisfies certain capital requirements (after giving effect to its investment in the majority-owned subsidiary). In addition, the regulations permit a subsidiary of an insured state non-member bank to act as a lessor under a real property lease that is the equivalent of a financing transaction, meets

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certain criteria applicable to the lease and the underlying real estate and does not represent a significant risk to the deposit insurance funds. In connection with our acquisition of Commercial Federal, we acquired certain subsidiaries that are involved in real estate activities that are considered impermissible activities under federal bank regulations. The Company and the Federal Reserve entered into an agreement whereby the Company would divest these activities within two years from the date of the acquisition, or December 2, 2007.

FUTURE LEGISLATION

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

FOREIGN OPERATIONS

     Foreign outstandings are defined as the balances outstanding of cross-border loans, acceptances, interest-bearing deposits with other banks, other interest-bearing investments and any other monetary assets. At December 31, 2005, 2004 and 2003, we had no foreign outstandings to any country which exceeded 1% of total assets.

OPERATING SEGMENTS

     Information regarding the Corporation’s operating segments is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 20 (Operating Segments) to the Consolidated Financial Statements.

OTHER INFORMATION

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

Item 1A. Risk Factors

     The Company faces numerous risks, including those set forth below or those described elsewhere in this Annual Report on Form 10-K. The risks described below are not the only risks that the Company faces, nor are they necessarily listed in order of significance. Other risks and uncertainties may also affect its business operations. Any of these risks may have a material effect on the Company’s business, financial condition, results of operations and cash flows.

Industry Factors

     Our business may be adversely affected by fluctuations in interest rates

     Significant increases in market interest rates, or the perception that an increase may occur, could adversely affect both our ability to originate new loans and our ability to grow our business. Conversely, decreases in interest rates could result in an acceleration of loan prepayments. An increase in market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations. If this occurred, it could result in or contribute to an increase in nonperforming assets and charge-offs, which could adversely affect our business.

     Our net interest margin may be adversely affected by fluctuations in interest rates

     Changes in market interest rates, including changes in the relationship between short-term and long-term market interest rates or between different interest rate indices, can impact our net interest margin, that is, the difference between the interest rates we receive on interest earning assets, such as loans and investments, and the interest rates we pay on interest bearing liabilities, such as deposits or other borrowings. The impact could result in a decrease in our interest income relative to interest expense.

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     Terrorist activities and other international hostilities could have an adverse effect on the U.S. and international economies

     Acts or threats of terrorism and actions taken by the U.S. or other governments as a result of such acts or threats or other international hostilities may result in a disruption of U.S. and global economic and financial markets and could adversely affect business and economic and financial conditions in the U.S., globally or in our principal markets.

     Changes in, or the adverse effects of, banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect our business

     We are subject to significant federal and state regulation and supervision, which is primarily for the benefit and protection of our customers and not for the benefit of investors in any of our securities. In the past, our business, as is the case with many banks, has been materially affected by these regulations. This will likely continue in the future. Laws, regulations or policies, including accounting standards and interpretations, currently affecting us and our subsidiaries may change at any time. Regulatory authorities may also change their interpretation of these statutes and regulations. Therefore, our business may be adversely affected by future changes in laws, regulations, policies or interpretations or regulatory approaches to compliance and enforcement. Due to BNP Paribas’ controlling ownership of us, laws, regulations and policies adopted or enforced by the Government of France and the Federal Reserve Board, which supervise and regulate BNP Paribas, may adversely affect our activities and investments and those of our subsidiaries in the future.

     Additionally, our business is affected significantly by the fiscal and monetary policies of the U.S. federal government and its agencies. We are particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the U.S. Under long-standing policy of the Federal Reserve Board, a bank holding company and any financial holding company is expected to act as a source of financial strength for its subsidiary banks. As a result of that policy, we may be required to commit financial and other resources to our subsidiary banks in circumstances where we might not otherwise do so.

     Refer to “Supervision and Regulation” above for discussion of other laws and regulations that may have a material effect on our business, prospects, results of operations and financial condition.

     Our business may be adversely affected by substantial competition

     Banking is a highly competitive business. We compete actively for loan, deposit, and other financial services business in the Western U.S. markets, as well as nationally and internationally. Our competitors include a large number of state and national banks, thrift institutions, credit unions, mortgage bankers, and major foreign-affiliated or foreign banks, as well as many financial and nonfinancial firms that offer products and services similar to those offered by us, including many large securities firms and mutual fund complexes. Some of our competitors are community or regional banks that have strong local market positions. Other competitors include large financial institutions and insurance companies that have substantial capital, technology and marketing resources. Such larger financial institutions may have greater access to capital at a lower cost than us, which may adversely affect our ability to compete effectively.

     The increasing number of nonbank competitors providing financing services could adversely affect our business

     Technology and other changes increasingly allow parties to complete financial transactions electronically, and in many cases, without banks. For example, consumers can pay bills and transfer funds over the internet and by telephone without banks. Nonbank financial service providers may have lower overhead costs and are subject to fewer regulatory constraints. If consumers do not use banks to complete their financial transactions, we could potentially lose fee income, deposits and income generated from those deposits.

     Changes in accounting standards could have a material impact on our financial statements

     From time to time, the Financial Accounting Standards Board (FASB) and the SEC change the financial accounting and reporting standards governing the preparation of our financial statements. These changes are very difficult to predict and can materially impact how we record and report our financial condition and results of operations and other financial data.

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Company Factors

     Adverse economic conditions in California or Hawaii could adversely affect our business

     A substantial portion of our assets, deposits and fee income is generated in California and Hawaii. As a result, poor economic conditions in California or Hawaii may cause us to incur losses associated with higher default rates and decreased collateral values in our loan portfolio. Economic conditions in California are subject to various uncertainties at this time, including the pace and scope of the recovery in the technology sector, and the California state government’s continuing budgetary and fiscal difficulties. Hawaii’s economy is dependent to a considerable degree on the level of tourism. If economic conditions in California or Hawaii decline, we expect that our level of problem assets could increase and our prospects for growth could be impaired. The State of California continues to face fiscal challenges, the long-term impact of which on the State’s economy cannot be predicted with any certainty.

     Our business may be adversely affected by economic factors affecting certain industries we serve

     We are subject to certain industry-specific economic factors. For example, a significant and increasing portion of our total loan portfolio is related to residential real estate, automobile loans and leases, recreational vehicle loans and recreational marine vessel loans. Accordingly, a downturn in these industries or sectors could have an adverse effect on our operations and the quality of our loan portfolio. Increases in residential mortgage loan interest rates could also have an adverse effect on our operations by depressing new mortgage loan originations. We provide financing to businesses in a number of other industries that may be particularly vulnerable to industry-specific economic factors, including the commercial real estate industry, the agriculture industry and the construction industry. Recent increases in fuel prices and energy costs have adversely affected businesses in several of these industries. Industry-specific risks which are beyond our control could adversely affect our portfolio of loans, potentially resulting in an increase in nonperforming loans or charge-offs and a slowing of growth or reduction in our loan portfolio.

     Economic conditions which have a disproportionate impact on small businesses may adversely affect our business

     A portion of our loan portfolio involves Small Business Administration loans to small businesses. Small businesses are generally less able to withstand adverse economic conditions than larger businesses. Adverse business and economic conditions could negatively impact the ability of small businesses to meet loan obligations and reduce the lending market for Small Business Administration loans which could have an adverse impact on our business.

     Our business strategy includes pursuing opportunistic acquisitions, which subject it to related risks

     Historically, an important component of our overall growth strategy is to make focused acquisitions of complementary banks and other businesses. Acquisition activity, by its nature, is not predictable and involves risks such as:

	•		Lower than expected performance or higher than expected costs in connection with acquisitions and integration of acquired businesses;
	•		Potential unavailability of attractive acquisition candidates;
	•		Potential disruption of management’s time and attention;
	•		Possible loss of employees and customers of acquired banks or other companies;
	•		Difficulty entering new and unfamiliar markets;
	•		Incurring undiscovered liabilities or operational risks associated with acquired banks or other companies;
	•		Incorrectly valuing acquisition candidates; and,
	•		Inability to realize the growth opportunities of acquired businesses and inability to achieve efficiency goals.

BancWest Corporation and Subsidiaries
PART I

     Loss of our status as a financial holding company would adversely affect our business and prospects

     We have made an election under federal banking law to become a financial holding company. Financial holding companies are permitted to engage in a wide range of financial activities, insurance, merchant banking and real estate investments that are not permissible for other bank holding companies. In order to remain a financial holding company we must continue to meet certain regulatory requirements, including certain of our affiliates remaining “well-capitalized” under federal regulatory capital guidelines. If we are unable to meet these requirements, we may be unable to offer the services of a financial holding company which could adversely affect our business and prospects. If BNP Paribas were to no longer have the status of a financial holding company, we expect that this would also impair our status as a financial holding company.

     Regulatory constraints could limit our ability to make acquisitions and risks associated with potential acquisitions or divestitures or restructurings may adversely affect our business

     We may seek to acquire or invest in financial and non-financial companies that complement our business. There can be no assurance that we will be successful in completing any such acquisition or investment as this will depend on the availability of prospective target opportunities at valuation levels we find attractive and the competition for such opportunities from other parties. Any acquisitions, divestitures or restructurings may result in significant write-offs, including those related to goodwill and other intangible assets, and/or the incurrence of debt, any of which could have a material adverse effect on our business, results of operations and financial condition. Acquisitions, divestitures or restructurings could involve numerous additional risks including difficulties in obtaining any required regulatory approvals and in the integration or separation of operations, services, products and personnel, the diversion of management’s attention from other business concerns, higher than expected deposit attrition (run-off), divestitures required by regulatory authorities, the disruption of our business and the potential loss of key employees. There can be no assurance that we will be successful in addressing these or any other significant risks encountered.

     Restrictions on dividends and other distributions could limit amounts payable to us

     As a holding company, a substantial portion of our cash flow comes from dividends our bank subsidiaries pay to us. Various statutory provisions and regulatory policies restrict the amount of dividends our subsidiaries can pay to us without regulatory approval. In addition, if any of our subsidiaries were to liquidate, that subsidiary’s creditors would be entitled to receive distributions from the assets of that subsidiary to satisfy their claims against it before we, as a holder of an equity interest in the subsidiary, would be entitled to receive any of the assets of the subsidiary.

     Privacy restrictions could adversely affect our business

     Our business model relies, in part, upon cross-marketing the services offered by our subsidiaries to our customers. Laws that restrict our ability to share information about customers within our corporate organization could adversely affect our business, results of operations and financial condition.

     Legal actions could expose us to substantial uninsured liabilities

     We are from time to time subject to claims related to our operations. These claims and legal actions, including supervisory actions by our regulators, could involve large monetary claims and significant defense costs. To protect ourselves from the cost of these claims, we maintain insurance coverage in amounts and with deductibles that we believe are appropriate for our operations. However, our insurance coverage may not cover all claims against us or continue to be available to us at a reasonable cost. As a result, we may be exposed to substantial uninsured liabilities, which could adversely affect our business, prospects, results of operations and financial condition.

     We rely on third party vendors for important products and services

     Third party vendors provide various components of our business infrastructure such as internet connections and network access. While we have selected these third party vendors carefully, we do not control their actions. Any problems caused by these third parties, including as a result of their not providing us their services for any reason or their performing their services poorly, could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Replacing these third party vendors could also entail significant delay and expense.

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     We are exposed to operational risk as a result of the scale and scope of our business, which could adversely affect our results of operations

     We are exposed to operational risk as a result of the scale and scope of our business. Operational risk is the risk of loss resulting from inadequate or failed internal processes, human factors and systems or external events. We continually assess and monitor operational risk in our business and provide for disaster and business recovery planning, including geographical diversification of our facilities; however, the occurrence of various events including unforeseeable and unpreventable events such as earthquakes, hurricanes or other natural disasters could still damage our physical facilities or our computer systems or software, cause delay or disruptions to operational functions, impair our clients, vendors and counterparties and adversely affect our results of operations.

     Our controls and procedures may fail or be circumvented

     Management regularly reviews and updates our internal controls, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures could have a material adverse affect on our business, results of operations and financial condition.

     We are controlled by BNP Paribas; our interests may not be the same as those of BNP Paribas

     BNP Paribas controls all of the outstanding shares of our common stock. As a result, BNP Paribas can elect all of our directors and can control the vote on all matters, including: approval of mergers or other business combinations; a sale of all or substantially all of our assets; issuance of any additional common stock or other equity securities; incurrence of debt other than in the ordinary course of business; the selection and tenure of our Chief Executive Officer and payment of dividends with respect to our common stock or other equity securities. BNP Paribas’ view of possible new businesses, strategies, acquisitions, divestitures or other initiatives may differ from ours. This may delay or hinder us from pursuing such initiatives.

     BNP Paribas’ financial condition could adversely affect our operations

     We have partly funded our operations through capital infusions and loans from BNP Paribas. Developments which negatively affect BNP Paribas could also have a negative effect on us. In addition, BNP Paribas’ credit ratings may affect our credit ratings. BNP Paribas is also subject to regulatory oversight and review by French, U.S. and other regulatory authorities. Our business operations and expansion plans could be negatively affected by regulatory concerns related to the French and European financial system, BNP Paribas and other developments concerning BNP Paribas, which may result in capital constraints as well as additional French and U.S. regulatory constraints.

Item 2.     Properties

     Bank of the West leases approximately 64,000 square feet of office space in downtown San Francisco, California which is its primary administrative headquarters. The space is in the same building that houses its San Francisco Main Branch at 180 Montgomery Street. In addition, Bank of the West leases a 133,000-square-foot, three-story administrative office in Walnut Creek, California.

     Through its acquisition of Commercial Federal Bank, Bank of the West acquired three large facilities in Omaha, Nebraska. A fourth facility is under construction. The first facility is located at 450 Regency Parkway, consists of 88,000 square feet and is currently utilized to house administrative functions. The second building located at 13220 California Street, consists of 44,500 square feet and is currently utilized to house a branch and the Midwest regional headquarters. The third building is located at 13505 California Street, consists of approximately 121,000 square feet and is currently utilized to house administrative and back office functions. The fourth building located at 13525 California Street will consist of approximately 121,000 square feet and is designed to be an operations and data center.

     As of December 31, 2005, 358 of Bank of the West’s active branches were located on land owned by Bank of the West. The remaining 323 active branches were located on leasehold properties. Bank of the West also has 12 surplus branch properties, of which six are currently subleased to others. Bank of the West leases 45 properties that are being utilized for administrative purposes.

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PART I

     The headquarters of BancWest Corporation and First Hawaiian, as well as the First Hawaiian main branch, are located in a modern banking center situated on a city block in downtown Honolulu, Hawaii owned in fee simple by First Hawaiian. That headquarters building, First Hawaiian Center, includes 380,000 square feet of office space. First Hawaiian owns an operations center located on approximately 123,000 square feet of fee simple land in an industrial area near downtown Honolulu. First Hawaiian occupies most of this four-story building. On Guam, First Hawaiian owns a five-story, 68,000-square-foot office building, including a branch, situated on fee simple property.

     As of December 31, 2005, 21 of First Hawaiian Bank offices in Hawaii and in Guam were located on land owned in fee simple by First Hawaiian. It had 39 branches in Hawaii, in Guam and in Saipan situated on leasehold premises or in buildings constructed on leased land and one Hawaii site that includes one fee simple and one leasehold parcel.

     See Note 10 (Premises and Equipment) to the Consolidated Financial Statements for additional information regarding the Company’s premises and equipment.

Item 3.     Legal Proceedings

     The information required by this Item is set forth in Note 21 (Litigation) to the Consolidated Financial Statements.

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

     No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2005.

PART II

Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     BancWest is a wholly owned subsidiary of BNP Paribas and there is no public trading market for BancWest’s common equity. BancWest has no compensation plans that provide for issuance of its equity securities.

     State regulations place restrictions on the ability of our bank subsidiaries to pay dividends. Under Hawaii law, First Hawaiian Bank is prohibited from declaring or paying any dividends in excess of its retained earnings. California law generally prohibits Bank of the West from paying cash dividends to the extent such payments exceed the lesser of retained earnings and net income for the three most recent fiscal years (less any distributions to stockholders during such three-year period). At December 31, 2005, the aggregate amount of dividends that such subsidiaries could pay to BancWest under the foregoing limitations without prior regulatory approval was $931.5 million.

     During the years ended December 31, 2005, 2004 and 2003, no quarterly or annual cash dividends were paid on the Class A common stock.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Item 6.     Selected Financial Data

		Year Ended December 31,
		2005				2004				2003				2002				2001
Earnings:
(dollars in thousands)
Interest income		$	2,505,175			$	1,795,163			$	1,678,790			$	1,656,185			$	1,323,649
Interest expense			880,120				442,825				385,207				465,330				507,135
Net interest income			1,625,055				1,352,338				1,293,583				1,190,855				816,514
Provision for loan and lease losses			37,004				49,219				81,295				95,356				103,050
Noninterest income			533,748				431,500				392,179				335,901				308,398
Noninterest expense			1,184,306				962,549				892,835				836,074				595,746
Income before income taxes and cumulative effect of accounting change			937,493				772,070				711,632				595,326				426,116
Provision for income taxes			347,080				298,693				272,698				233,994				171,312
Income before cumulative effect of accounting change			590,413				473,377				438,934				361,332				254,804
Cumulative effect of accounting change, net of tax (1)			—				—				2,370				—				—
Net income		$	590,413			$	473,377			$	436,564			$	361,332			$	254,804
Cash dividends		$	—			$	—			$	—			$	—			$	99,772
Balance Sheet Data Averages:
(dollars in millions)
Average assets		$	53,346			$	41,307			$	35,898			$	31,370			$	19,461
Average securities available for sale at cost			9,037				6,324				4,737				3,154				2,267
Average loans and leases (2)			34,709				27,752				24,756				22,340				14,586
Average deposits			35,653				28,454				24,911				22,300				14,550
Average long-term debt			6,764				4,967				3,880				2,541				1,074
Average stockholder’s equity			6,025				4,631				4,063				3,441				2,079
Balance Sheet Data At Year End:
(dollars in millions)
Assets		$	66,345			$	50,054			$	38,352			$	34,749			$	21,647
Securities available for sale			10,431				7,955				5,773				3,941				2,542
Loans and leases (2)			43,783				32,760				25,773				24,231				15,224
Deposits			42,411				33,614				26,403				24,557				15,334
Long-term debt			9,566				6,181				4,221				3,636				2,463
Stockholder’s equity			6,752				5,730				4,263				3,867				2,002
Selected Financial Ratios For the Year Ended:
Return on average total assets (ROA)			1.11	%			1.15	%			1.22	%			1.15	%			1.31	%
Return on average stockholder’s equity (ROE)			9.80				10.22				10.74				10.50				12.25
Net interest margin (taxable-equivalent basis) (3)			3.64				3.88				4.31				4.57				4.73
Net loans and leases charged off to average loans and leases			0.17				0.23				0.30				0.53				0.56
Efficiency ratio (4)			54.86				53.96				52.96				54.76				52.96
Average equity to average total assets			11.29				11.21				11.32				10.97				10.68
At year end:
Allowance for loan and lease losses to total loans and leases			1.12				1.33				1.52				1.59				1.28
Nonperforming assets to total loans and leases and other real estate owned and repossessed personal property			0.51				0.45				0.59				1.02				0.79
Allowance for loan and lease losses to nonaccruing loans and leases			2.54x				3.49x				2.93x				1.70x				2.00x
Regulatory Capital Ratios:
Leverage Ratio (5):
Bank of the West (6)			9.27	%			9.69	%			9.55	%			9.17	%			7.18	%
First Hawaiian Bank			10.88				10.39				9.91				9.21				8.39
Union Safe Deposit Bank (6)			—				8.16				—				—				—
Tier 1 capital (risk-based):
Bank of the West (6)			9.43				10.57				10.72				9.93				7.85
First Hawaiian Bank			14.12				13.62				12.85				11.19				9.52
Union Safe Deposit Bank (6)			—				11.02				—				—				—
Total capital (risk-based):
Bank of the West (6)			10.79				12.41				12.94				12.23				10.90
First Hawaiian Bank			16.18				15.86				15.21				13.56				11.81
Union Safe Deposit Bank (6)			—				11.83				—				—				—

(1)		The Company adopted the consolidation provisions of FIN 46 in the third quarter for one variable interest entity (REFIRST, Inc.) formed prior to February 1, 2003.
(2)		These balances include loans held for sale and are not adjusted for loan and lease losses.
(3)		The taxable-equivalent adjustment is made for items exempt from Federal income taxes (assuming a 35% tax rate for 2005, 2004 and 2003) to make them comparable with taxable items before any income taxes are applied.
(4)		The efficiency ratio is noninterest expense as a percentage of net interest income plus noninterest income.
(5)		The capital leverage ratios are based on quarterly averages.
(6)		Union Safe Deposit Bank was merged into Bank of the West in January 2005.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

     Certain matters contained in this document are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements (such as those concerning plans, expectations, estimates, strategies, projections and goals with respect to BancWest) involve risks and uncertainties that could cause actual results to differ materially from those discussed in this document. BancWest may make forward-looking statements in filings with the Securities and Exchange Commission (SEC), press releases, news articles, conference calls with analysts and when otherwise speaking on behalf of BancWest. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include the words “believe,” “expect,” “target,” “anticipate,” “intend,” “plan,” “estimate,” “potential,” “project,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” You should carefully consider those risks and uncertainties in reading this document. Factor that could cause or contribute to such differences include, but are not limited to:

	•		global, national and local economic and market conditions, specifically with respect to changes in the U.S. economy or regions of the United States where we operate, and geopolitical uncertainty;
	•		the level and volatility of interest rates and currency values and the impact of changes in loan and deposit portfolios on our net interest margin;
	•		government fiscal and monetary policies;
	•		credit risks inherent in the lending process and provision for credit losses;
	•		demand for loans, deposits and other banking services in the geographic regions where the BancWest operates;
	•		the impact of intense competition in the rapidly evolving banking and financial services business;
	•		extensive federal and state regulation of the business of BancWest and its banking and other subsidiaries, including the effects of current and pending legislation and regulations;
	•		whether expected revenue enhancements and cost savings following acquisitions or otherwise are realized within expected time frames;
	•		matters relating to the integration of BancWest’s business with that of past and future merger partners, including the impact of combining these businesses on revenues, expenses, deposit attrition, management retention, customer retention and financial performance;
	•		BancWest’s reliance on third parties to provide certain critical services, including data processing;
	•		the proposal or adoption of changes in accounting standards by the Financial Accounting Standards Board, the Commission, bank regulatory agencies or other standard setting bodies;
	•		technological changes;
	•		pending or potential legal actions;
	•		increased regulatory controls and processes regarding Bank Secrecy Act and anti-money laundering matters and costs related thereto;
	•		BNP Paribas’ control of BancWest and changes in the credit rating or financial condition of BNP Paribas;

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

	•		other risks and uncertainties with respect to BancWest discussed in this document or described from time to time in Commission filings that BancWest makes; and
	•		management’s ability to manage risks that result from these and other factors.

     Forward-looking statements are based on management’s current views about future events. Those statements speak only as of the date on which they are made. BancWest does not intend to update forward-looking statements, and, except as required by law, disclaims any obligation or undertaking to update or revise any such statements to reflect any change in our expectations or any change in events, conditions, circumstances or assumptions on which forward-looking statements are based.

     The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Glossary

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

OVERVIEW

     BancWest Corporation (www.bancwestcorp.com) is a financial holding company with assets of $66.3 billion at December 31, 2005. It is a wholly owned subsidiary of Paris-based BNP Paribas. The Company is headquartered in Honolulu, Hawaii, with an administrative headquarters in San Francisco, California. As of December 31, 2005, its principal subsidiaries were Bank of the West (“BOW”) (663 full service retail branches and 18 limited service retail offices in Arizona, California, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Washington, Wisconsin and Wyoming) and First Hawaiian Bank (“First Hawaiian” or “FHB”) (61 branches in Hawaii, Guam and Saipan). In this report, BancWest Corporation and Subsidiaries is referred to as “the Company,” “we” or “our.” BancWest Corporation alone is referred to as “the Parent.”

Strategic Initiatives

    The Company has continued to implement a series of initiatives that are designed to improve customer service and expand our geographic footprint through acquisitions and branch expansion. The focus of the Company is to promote long-lasting customer service relationships through an array of financial products and services supported by advanced technology. The Company strives for a “high touch” personalized marketing position, promoting brand recognition through marketing and community outreach programs. The Company is developing a distribution model that will give regional management more decision making ability in the areas of lending and product pricing that will allow them to be more responsive to the local needs of our customers in our diverse markets. The Company is expanding its line of financial services to its customers through internal initiatives as well as acquisitions. This includes insurance services, where the Company continues to explore acquisitions of independent insurance agencies within the Company’s geographic footprint. Bank of the West currently operates 58 insurance agencies in eight states and is planning to expand the insurance operations through acquisitions. With the acquisition of Commercial Federal, the Company has significantly expanded its residential mortgage loan origination business. Three components of the origination business, including legacy Bank of the West, the joint ventures from Community First and the Commercial Federal mortgage division have been consolidated under one management team in Omaha. The Company plans to expand its sales force, which will operate in all of our markets.

     Bank of the West’s Commercial Banking Group is expanding geographically and has increased its product offerings for the Commercial Banking Division as well as the Agribusiness Banking Division and the Real Estate Industries Division. The Commercial Banking Group is leveraging the expanded footprint from the mergers with Community First Bankshares, Inc. and Commercial Federal through offices in Denver, Minneapolis, Phoenix, Las Vegas, Omaha, Des Moines and Kansas City.

     Bank of the West’s Consumer Finance Group will continue its expansion plans for its auto loan product throughout the Mid-West, including those states within the Bank’s new footprint resulting from the mergers with Community First and Commercial Federal Bank. Additional expansion of the auto loan product in adjacent markets is also being considered.

     First Hawaiian Bank’s focus is on its core markets of Hawaii, Guam and Saipan. Its primary focus is on deepening relationships with existing customers. Objectives include emphasis on effective client segmentation and cross-selling, largely through development and sale of segment-targeted packaged products and services. A Private Banking department within the Retail Banking Group focuses on private client relationship management, financial and estate planning and business development.

     In addition, due to improving economic conditions in Hawaii, Guam and Saipan, First Hawaiian Bank seeks to increase loan and deposit volumes by developing relationships with new customers.

     First Hawaiian Bank is growing its commercial card business, offering sophisticated credit card products to serve the needs of our business customers at both First Hawaiian Bank and Bank of the West. Investments are being made in this business line to enhance customer service and improve staff efficiencies. New initiatives undertaken in 2005 include a co-branded debit card in Guam, a Web Cash Manager product for our business customers, expanded use of new computerized cross-selling tools and new real estate loan products to meet the needs of our customers.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

     First Hawaiian Bank has also made a series of organizational changes to place increased emphasis on wealth management services such as private banking, financial and estate planning and trust and investments, which are considered key sources of growth for FHB’s future. The organizational changes include renaming FHB’s Financial Management Segment to the Wealth Management Segment, in order to communicate the segment’s focus on management of wealth assets such as personal trusts, investment portfolios and real estate. The Wealth Management Segment also incorporates the Bank’s wholly-owned subsidiary, Bishop Street Capital Management Corporation, and acts as trustee and custodian of retirement and other employee benefit plans.

Acquisitions

     All acquisitions are accounted for using the purchase method of accounting in accordance with Statement of Financial Accounting Standard No. 141 “Business Combinations.” Under the purchase method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based on their relative fair values, with the excess recorded as goodwill.

Commercial Federal Corporation Acquisition

     On December 2, 2005, we acquired 100 percent of the outstanding stock of Commercial Federal Corporation, (“Commercial Federal”) a holding company that operated Commercial Federal Bank. The purchase price of approximately $1.3 billion was paid in cash. We recorded $910 million of goodwill and $95 million of identifiable intangibles related to the Commercial Federal acquisition.

     The final allocation of the purchase price will be established after completing the analysis to determine the fair values of Commercial Federal’s tangible assets and liabilities and identifiable intangible assets and final decisions regarding integration activities have been made. The acquisition of Commercial Federal added three new states to the Company’s footprint (Kansas, Missouri and Oklahoma) and added to our market share in Arizona, Colorado, Iowa and Nebraska. Commercial Federal operated 204 banking locations (199 full service retail branches and five limited service retail offices) in those seven states. At December 2, 2005, Commercial Federal had total assets of $10.0 billion, total deposits of $6.0 billion and loans of $7.9 billion. Beginning December 3, 2005, the results of operations of Commercial Federal were included in our Consolidated Financial Statements. The branches of Commercial Federal were fully integrated into BOW’s network on the date of acquisition.

     In connection with the acquisition, management is in the process of implementing various restructuring plans. These restructuring plans will target areas where there is a significant amount of overlap between the two companies. This includes consolidating administrative and support services, including sales and marketing, to focus the Company’s resources on activities that will promote growth. We will be consolidating excess facilities and evaluating those areas where we will be able to take advantage of existing facilities. We have estimated net cost savings of approximately $54 million per year beginning in 2007 from restructuring efforts. In 2006, the Company expects to realize net cost savings of approximately $47 million. Exit costs related to Commercial Federal activities are expected to approximate $47 million. We expect to finalize the estimates for these costs in the first half of 2006. Approximately 160 employees have been or will be displaced in conjunction with the acquisition. We are also expecting to incur conversion and restructuring expenses totaling approximately $21 million. In 2005, the Company incurred approximately $17 million of restructuring expenses related to the Commercial Federal acquisition. We anticipate that cash outlays for exit and restructuring costs should be substantially completed by March 2007.

Insurance Agency Acquisitions

     During 2005, the Company increased its insurance business by acquiring the assets of Insurance One, Inc. on February 1, 2005 and purchasing Barlow Insurance Agency, Inc. on December 1, 2005. The combined purchase price of these agencies was $7.7 million, which was paid in cash. We recorded $4 million of goodwill and $3 million of other intangibles related to these acquisitions. We did not incur any exit costs related to these acquisitions.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Community First Bankshares Acquisition

     On November 1, 2004, we acquired 100 percent of the outstanding stock of Community First Bankshares, Inc. (Community First), a holding company that operated Community First National Bank (CFB). The purchase price of approximately $1.2 billion was paid in cash. We recorded $914 million of goodwill and $96 million of identifiable intangibles related to this acquisition.

     The acquisition of Community First added 10 states to the Company’s footprint, and added to our market share in California and New Mexico. CFB operated 166 banking locations (153 full service retail branches and 13 limited service retail offices) in Arizona, California, Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, South Dakota, Utah, Wisconsin and Wyoming. Beginning November 1, 2004, the results of operations of Community First were included in our Consolidated Financial Statements. Branches of CFB were fully integrated into BOW’s network in the fourth quarter of 2004.

USDB Bancorp Acquisition

     On November 1, 2004, we also acquired USDB Bancorp (USDB), parent company of Union Safe Deposit Bank. USDB was a holding company headquartered in Stockton, California, and operated 19 Union Safe Deposit Bank branches in San Joaquin and Stanislaus Counties in the Central Valley of California. The purchase price of approximately $245 million was paid in cash. We recorded $170 million of goodwill and $15 million of identifiable intangibles related to the USDB acquisition. The conversion and merger of Union Safe Deposit Bank into Bank of the West occurred in January of 2005.

CRITICAL ACCOUNTING ESTIMATES

     The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our Consolidated Financial Statements and accompanying notes. We believe that the judgments, estimates and assumptions used in the preparation of our Consolidated Financial Statements are appropriate given the factual circumstances as of December 31, 2005. We have policies and procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. However, given the sensitivity of our Consolidated Financial Statements to these accounting policies, the use of other judgments, estimates and assumptions could result in material differences in our results of operations or financial condition.

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

•

Allowance for loan and lease losses (the “Allowance”): The Company’s allowance for loan and lease losses represents management’s best estimate of probable losses inherent in the existing loan and lease portfolio as of the balance sheet date. The determination of the adequacy of the Allowance is ultimately one of management judgment, which includes consideration of many factors such as: (1) the amount of problem loans and leases existing at the balance sheet date (whether or not specifically identified at that date); (2) net charge-off experience; (3) changes in the composition of the loan and lease portfolio by type and location of loans and leases; (4) changes in overall loan and lease risk profile and quality; (5) general economic factors; (6) specific regional economic factors; and (7) the fair value of collateral. Using this methodology, we allocate the Allowance to individual loans and leases and to the categories of loans and leases representing probable losses based on available information. At least quarterly, we conduct internal credit analyses to determine which loans and leases are impaired. As a result, we allocate specific amounts of the Allowance to individual loan and lease relationships. Note 1 (Summary of Significant Accounting Policies) to the Consolidated Financial Statements describes how we evaluate loans for impairment. Some categories of loans and leases are not subjected to a loan-by-loan credit analysis. Management makes an allocation to these categories based on our analysis of historic trends of impairment and charge-offs of such loans and leases. Additionally, we allocate a portion of the Allowance based on risk classifications of certain loan and lease types. If general or specific regional economic factors were to improve or deteriorate significantly, we may need to revise our loss factors, thereby decreasing or increasing our allowance. Furthermore, the estimated fair value of collateral may differ from what is realized

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

			upon the sale of that collateral. Due to the subjective nature of estimating an adequate allowance for loan and lease losses, economic uncertainties and other factors, some of the allowance is not allocated to specific categories of loans and leases. The Corporation monitors differences between estimated and actual incurred loan and lease losses. This monitoring process includes periodic assessments by senior management of credit portfolios and the methodologies used to estimate incurred losses in those portfolios. In management’s judgment, the Allowance has historically been adequate to absorb losses inherent in the loan and lease portfolios. However, changes in prevailing economic conditions in our markets could result in changes in the level of nonperforming loans and leases, and charge-offs in the future. We will continue to monitor economic developments closely and make necessary adjustments to the Allowance accordingly.
	•		Goodwill: Goodwill recorded on the books of the Company resulted from business acquisitions. It arose when the purchase price exceeded the assigned value of the net assets of acquired businesses. In each situation, it was based on estimates and assumptions that were subject to management’s judgment and was recorded at its estimated fair value at the time purchase accounting estimates of acquired entities were concluded. As of December 31, 2005, we had $5.2 billion in goodwill on our Consolidated Balance Sheet. The value of this goodwill is supported by the revenue we generate from our business segments. A decline in earnings as a result of material lack of growth, or our inability to deliver services in a cost-effective manner over a long time period, could lead to possible impairment of goodwill, and this would be booked as a write-down in our income statement. We perform an impairment test for goodwill annually, or as circumstances dictate, using a two-step process. The first step compares the estimated fair value of a reporting unit, which is an individual business segment of the Company, to its carrying amount. If the estimated fair value exceeds the carrying amount, no impairment exists. If the carrying amount exceeds the estimated fair value, then a second step is conducted whereby we assign estimates of fair values to identifiable assets and liabilities, leaving an implied fair value for goodwill. The implied fair value of goodwill is compared with the carrying amount of goodwill. If the implied fair value of goodwill is less than the carrying amount, an impairment loss is recognized. We performed the impairment testing of goodwill required under FAS No. 142 “Goodwill and Other Intangible Assets” for the year ended December 31, 2005, in the fourth quarter. Due to the inherent imprecision of projections used in the impairment test, a number of different scenarios were used. In addition to using anticipated balance sheet growth, scenarios for 25% more and 20% less than the anticipated growth were used. Furthermore, in projecting cash flows, a continuing value scenario as well as a terminal value scenario were used. Finally, two separate discount rate scenarios were used. The first discount rate used was the weighted average cost of capital, which is a composite of the after-tax cost of debt and cost of equity. The second discount rate was the cost of equity using a capital asset pricing model. The conclusion after testing under each of these scenarios was that there was no impairment of goodwill. However, the evaluation methodology for potential impairment is centered on the projection of cash flows into the future using present value techniques and, as such, involves significant management judgment in the modeling of estimates and assumptions. If the projected net cash flow assumptions are too high, or if the discount rate used is too low, there is a risk that impairment should have been recognized, but was not recorded.

FINANCIAL OVERVIEW

     Except as noted below, the acquisitions of Community First Bankshares, Inc. and USDB Bancorp in November 2004 and to some extent the December 2005 acquisition of Commercial Federal Corporation were the primary reasons for the growth in most revenues and expense categories in 2005 compared with 2004. The growth in period end 2005 balance sheet categories was primarily due to the December 2005 acquisition.

Income Statement Analysis

2005 compared with 2004

     The Company reported net income of $590.4 million, compared with $473.4 million, an increase of 24.7%. Net interest income was $1,625.1 million compared with $1,352.3 million, an increase of 20.2%. Average loans increased by $7.0 billion and average securities available for sale increased by $2.7 billion. While balance sheet growth contributed to the increase in net interest income, the net interest margin decreased 24 basis points (1% equals 100 basis points) as a result of the effects of a flattening yield curve in which short-term rates have risen more quickly than long-term rates. Noninterest income was $533.7 million compared with $431.5 million, an increase of 23.7%. The increase was partially due to increases in service charges on deposit accounts and other service charges and fees as a result of internal growth and income from bank-owned life insurance, partially offset by an other-than-temporary write-down on securities available for sale. Noninterest expense was $1,184.3 million compared with $962.5 million, an increase of 23.0%, partially due to increases in depreciation on vehicle and equipment operating leases, advertising and promotions as a result of internal growth and restructuring and integration costs.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Balance Sheet Analysis

     The Company had total assets of $66.3 billion at December 31, 2005, an increase of 32.5% from December 31, 2004. Securities available for sale totaled $10.4 billion, an increase of 31.1% from December 31, 2004. The increase over December 31, 2004 was partially due to purchases of securities. Loans and leases totaled $43.7 billion, up 33.7% from the prior year. The increase from the prior year was partially due to purchases of loans and internal growth. Deposits were $42.4 billion, up 26.2% from a year earlier. The increase over the prior year was partially due to growth in the customer base, with a majority of the growth from short-term certificates of deposits (CDs).

     The Company’s nonperforming assets were 0.51% of loans, leases and foreclosed properties at December 31, 2005, an increase from 0.45% at December 31, 2004. The allowance for loan and lease losses was $490.3 million, an increase of 12.4% from $436.4 million at December 31, 2004. The increase in the allowance for loan and lease losses was due to $37.0 million in provision for loan and lease losses and the transfer of $76.2 million of allowance from the acquisition of Commercial Federal, partially offset by net charge-offs of $59.3 million. The provision for loan and lease losses decreased by $12.2 million, or 24.8%, from $49.2 million in 2004.

RESULTS OF OPERATIONS

     Except as noted below, the acquisitions of Community First Bankshares, Inc. and USDB Bancorp in November 2004 and to some extent the December 2005 acquisition of Commercial Federal Corporation were the primary reasons for the growth in average earning assets and average interest-bearing deposits and liabilities in 2005 compared with 2004.

Net Interest Income

     2005 compared with 2004

     Net interest income increased to $1,625.1 million from $1,352.3 million, or 20.2%.

     The increase in net interest income was primarily the result of a $9.9 billion, or 28.5%, increase in average earning assets. The increase in our average earning assets was also partially the result of purchases of loans and securities available for sale and internal growth.

     2004 compared with 2003

     Net interest income increased to $1,352.3 million from $1,293.6 million, or 4.5%.

     The increase in net interest income was primarily the result of a $4.8 billion, or 16.1%, increase in average earning assets. The increase in our average earning assets in 2004 was predominately due to the acquisitions of Community First and USDB in November 2004, purchases of loans and securities available for sale and internal growth.

     Net Interest Margin

     2005 compared with 2004

     The net interest margin decreased by 24 basis points primarily due to short-term interest rates increasing faster than long-term rates. Our yield on earning assets increased by 45 basis points to 5.60% from 5.15%, while our rates paid on sources of funds increased by 85 basis points to 2.46% from 1.61%. The impact of our noninterest-bearing sources increased the margin by 16 basis points from 0.34% to 0.50%.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

     2004 compared with 2003

     The net interest margin decreased by 43 basis points in 2004 as compared with 2003. Our yield on earning assets decreased by 44 basis points to 5.15% from 5.59%, and our rates paid on sources of funds decreased by three basis points to 1.61% from 1.64%. The impact of our noninterest-bearing sources decreased the margin by two basis points from 0.36% to 0.34%.

Average Earning Assets

     2005 compared with 2004

     The increase in average earning assets was predominately due to increases in the average loan and lease portfolio and higher securities available for sale. The $7.0 billion, or 25.1%, increase in average total loans and leases was also due to increases in purchases of residential mortgages. Consumer, commercial and commercial real estate loans also grew due to strength in the Company’s markets and competitive interest rates. Average total securities available for sale were $9.0 billion, up $2.7 billion, or 42.9%.

     2004 compared with 2003

     The increase in average earning assets was predominately due to internal growth in the average loan and lease portfolio, higher average securities available for sale and the acquisitions of Community First and USDB in the fourth quarter of 2004. The $3.0 billion, or 12.1%, increase in average total loans and leases in 2004 was primarily due to increased consumer lending, purchased residential mortgages and loans and leases acquired from Community First and USDB. Average total securities available for sale were $6.3 billion, up $1.6 billion, or 33.5%, primarily due to internal growth and the two acquisitions.

Average Loans and Leases

     2005 compared with 2004

     The increase in loans and leases was also due to purchases and internal growth. Average consumer loans increased $1.3 billion, or 16.3%, partially due to growth in financing for recreational vehicles and pleasure boats. Average residential real estate loans grew by $2.3 billion, or 42.2%, partially due to loans purchased. Average commercial loans increased $1.6 billion or 28.8% and average commercial real estate loans increased $1.4 billion, or 30.5%.

     2004 compared with 2003

     A significant portion of the increase was due to loans and leases acquired from Community First and USDB. Average consumer loans increased $1.4 billion, or 20.7%, primarily due to growth in financing for autos, recreational vehicles and pleasure boats, while loan purchases increased the average residential mortgage portfolio. Average residential real estate loans increased by $0.7 billion due to purchases of loans, partially offset by net collections. The modest increase in commercial, financial and agricultural loans in both banks also contributed to the increase.

Average Interest-Bearing Deposits and Liabilities

     2005 compared with 2004

     The $8.4 billion, or 30.6%, increase in average interest-bearing deposits and liabilities was substantially due to increases in our customer deposit base, long-term debt and short-term borrowings. Average deposits increased partially due to our capital markets division issuing time certificates of deposits in excess of $100 thousand to business customers. The increase in average long-term debt was a result of increased borrowings from our parent company, BNP Paribas, and the Federal Home Loan Bank System. This includes advances acquired from Commercial Federal that were made by the Federal Home Loan Bank of Topeka, Kansas and were subsequently refinanced with the Federal Home Loan Bank of San Francisco, California. The increase in long-term debt was partially offset by the redemption of the junior subordinated debt owed to BancWest Capital I Trust. See Note 5 (Variable Interest Entities (VIEs)) to the Consolidated Financial Statements for additional information. The increase in short-term borrowings was primarily due to increases in short-term advances from the Federal Home Loan Bank System.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

2004 compared with 2003

     The $3.9 billion, or 16.6%, increase in average interest-bearing deposits and liabilities in 2004 as compared to 2003 was substantially due to organic growth in our customer deposit base and an increase in average long-term debt and average short-term borrowings. Average deposits increased substantially due to internal growth in regular and money market savings, foreign and time deposits, demand deposit and interest-bearing checking portfolios and partly due to the Community First and USDB acquisitions. Borrowings from the Federal Home Loan Bank System increased average long-term debt, while overnight Federal funds purchases were largely responsible for the increase in short-term borrowings.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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

     The following table presents the consolidated average balance sheets, an analysis of interest income/expense and average yield/rate on a taxable-equivalent basis. The taxable-equivalent adjustment is made for items exempt from Federal income taxes (assuming a 35% tax rate for 2005, 2004 and 2003) to make them comparable with taxable items before any income taxes are applied.

		Year Ended December 31,
		2005												2004												2003
						Interest												Interest												Interest
		Average				Income/				Yield/				Average				Income/				Yield/				Average				Income/				Yield/
(dollars in thousands)		Balance				Expense				Rate				Balance				Expense				Rate				Balance				Expense				Rate
ASSETS
Earning assets:
Interest-bearing deposits in other banks:
Domestic		$	5,879			$	122				2.08	%		$	3,025			$	53				1.75	%		$	3,232			$	54				1.67	%
Foreign			332,413				10,904				3.28				301,417				4,471				1.48				195,811				2,329				1.19
Total interest-bearing deposits in other banks			338,292				11,026				3.26				304,442				4,524				1.49				199,043				2,383				1.20
Federal funds sold and securities purchased under agreements to resell			494,923				16,347				3.30				344,528				5,292				1.54				200,456				2,379				1.19
Trading assets			3,849				96				2.49				7,722				171				2.21				50,598				1,329				2.63
Securities available for sale (1):
Taxable			8,944,696				336,292				3.76				6,303,327				219,052				3.48				4,722,007				174,187				3.69
Exempt from Federal income taxes			92,066				5,350				5.81				21,012				665				3.16				15,233				898				5.90
Total securities available for sale			9,036,762				341,642				3.78				6,324,339				219,717				3.47				4,737,240				175,085				3.70
Loans and leases (2) (3):
Domestic			34,328,820				2,103,836				6.13				27,387,252				1,536,239				5.61				24,398,117				1,468,447				6.02
Foreign			380,536				28,046				7.37				364,378				24,101				6.61				357,565				24,848				6.95
Total loans and leases			34,709,356				2,131,882				6.14				27,751,630				1,560,340				5.62				24,755,682				1,493,295				6.03
Other interest earning assets			257,111				10,188				3.96				173,546				6,335				3.65				123,635				5,623				4.55
Total earning assets			44,840,293				2,511,181				5.60				34,906,207				1,796,379				5.15				30,066,654				1,680,094				5.59
Noninterest-bearing assets:
Cash and due from banks			1,833,734												1,478,976												1,390,850
Premises and equipment			689,483												555,859												462,804
Other intangibles			264,551												200,453												204,764
Goodwill			4,376,523												3,409,012												3,227,064
Interest receivable			194,933												137,102												125,054
Bank-owned life insurance			809,815												401,373												273,250
Other assets			337,292												217,923												147,615
Total noninterest-bearing assets			8,506,331												6,400,698												5,831,401
Total assets		$	53,346,624											$	41,306,905											$	35,898,055
LIABILITIES AND STOCKHOLDER’S EQUITY
Interest-bearing deposits and liabilities:
Deposits:
Domestic:
Interest-bearing demand		$	3,059,038			$	5,232				0.17	%		$	2,169,238			$	1,678				0.08	%		$	1,927,150			$	1,534				0.08	%
Savings			10,077,134				116,342				1.15				9,608,553				65,528				0.68				8,545,099				63,717				0.75
Time			10,672,692				297,839				2.79				7,273,233				121,811				1.67				6,707,813				109,622				1.63
Foreign			1,418,950				36,336				2.56				1,207,794				14,390				1.19				594,351				5,359				0.90
Total interest-bearing deposits			25,227,814				455,749				1.81				20,258,818				203,407				1.00				17,774,413				180,232				1.01
Short-term borrowings			3,834,847				123,137				3.21				2,200,059				29,285				1.33				1,875,304				21,424				1.14
Long-term debt			6,764,475				301,234				4.45				4,966,836				210,133				4.23				3,879,639				183,551				4.73
Total interest-bearing deposits and liabilities			35,827,136				880,120				2.46				27,425,713				442,825				1.61				23,529,356				385,207				1.64
Interest rate spread											3.14	%											3.54	%											3.95	%
Noninterest-bearing deposits			10,424,776												8,195,163												7,137,066
Other liabilities			1,069,374												1,054,894												1,168,446
Total liabilities			47,321,286												36,675,770												31,834,868
Stockholder’s equity			6,025,338												4,631,135												4,063,187
Total liabilities and stockholder’s equity		$	53,346,624											$	41,306,905											$	35,898,055
Impact of noninterest-bearing sources											0.50	%											0.34	%											0.36	%
Net interest income and margin on total earning assets							1,631,061				3.64	%							1,353,554				3.88	%							1,294,887				4.31	%
Tax equivalent adjustment							6,006												1,216												1,304
Net interest income						$	1,625,055											$	1,352,338											$	1,293,583

(1)		Average debt securities available for sale were computed based on historical amortized cost, excluding the effect of FAS No. 115 adjustments.
(2)		Nonaccruing loans and leases, and loans held for sale have been included in the average loan and lease balances.
(3)		Interest income for loans and leases includes loan and lease fees of $30.1 million, $44.4 million and $62.7 million for 2005, 2004 and 2003, respectively.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Table 2: Analysis of Changes in Net Interest Income (Taxable-Equivalent Basis)

     The following table analyzes the dollar amount of change (on a taxable-equivalent basis) in interest income and expense and the changes in dollar amounts attributable to:

     (a) changes in volume (changes in volume times the prior year’s rate),

     (b) changes in rates (changes in rates times the prior year’s volume), and

     (c) changes in rate/volume (change in rate times change in volume).

     In this table, the dollar change in rate/volume is prorated to volume and rate proportionately.

		Year Ended December 31,
		2005 vs. 2004											2004 vs. 2003
		Increase (Decrease) Due To											Increase (Decrease) Due To
(dollars in thousands)										Net Increase												Net Increase
		Volume				Rate				(Decrease)				Volume				Rate				(Decrease)
INTEREST INCOME
Interest-bearing deposits in other banks:
Domestic		$	57			$	12			$	69			$	(1	)		$	—			$	(1	)
Foreign			504				5,929				6,433				1,469				673				2,142
Total interest-bearing deposits in other banks			561				5,941				6,502				1,468				673				2,141
Federal funds sold and securities purchased under agreements to resell			3,041				8,014				11,055				2,067				846				2,913
Trading assets			(95	)			20				(75	)			(977	)			(181	)			(1,158	)
Securities available for sale (1):
Taxable			98,079				19,161				117,240				55,452				(10,587	)			44,865
Exempt from Federal income taxes			3,756				929				4,685				270				(503	)			(233	)
Total securities available for sale			101,835				20,090				121,925				55,722				(11,090	)			44,632
Loans and leases (2) (3):
Domestic			415,773				151,824				567,597				172,038				(104,246	)			67,792
Foreign			1,103				2,842				3,945				467				(1,214	)			(747	)
Total loans and leases			416,876				154,666				571,542				172,505				(105,460	)			67,045
Other interest earning assets			3,272				581				3,853				1,969				(1,257	)			712
Total earning assets			525,490				189,312				714,802				232,754				(116,469	)			116,285
INTEREST EXPENSE
Deposits:
Domestic:
Interest-bearing demand			899				2,655				3,554				188				(44	)			144
Savings			3,342				47,472				50,814				7,527				(5,716	)			1,811
Time			72,573				103,455				176,028				9,418				2,771				12,189
Foreign			2,898				19,048				21,946				6,887				2,144				9,031
Total interest-bearing deposits			79,712				172,630				252,342				24,020				(845	)			23,175
Short-term borrowings			32,357				61,495				93,852				4,024				3,837				7,861
Long-term debt			79,546				11,555				91,101				47,487				(20,905	)			26,582
Total interest-bearing deposits and liabilities			191,615				245,680				437,295				75,531				(17,913	)			57,618
Increase (decrease) in net interest income		$	333,875			$	(56,368	)		$	277,507			$	157,223			$	(98,556	)		$	58,667

(1)		Debt securities available for sale volume was computed based on historical amortized cost, excluding the effect of FAS No. 115 adjustments.
(2)		Nonaccruing loans and leases, and loans held for sale have been included in the computations of volume balances.
(3)		Interest income for loans and leases includes loan and lease fees of $30.1 million, $44.4 million and $62.7 million, for 2005, 2004 and 2003, respectively.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

NONINTEREST INCOME

     The following table reflects the key components of noninterest income for the years indicated:

		Year Ended December 31												2005/2004 Change								2004/2003 Change
(dollars in thousands)		2005				2004				2003				Amount				%				Amount				%
Service charges on deposit accounts		$	198,779			$	163,679			$	155,243			$	35,100				21.4	%		$	8,436				5.4	%
Trust and investment services income			47,371				40,580				38,045				6,791				16.7				2,535				6.7
Other service charges and fees			197,315				153,911				142,030				43,404				28.2				11,881				8.4
Net gains (losses) on securities available for sale			(1,737	)			873				4,289				(2,610	)			—				(3,416	)			(79.6	)
Vehicle and equipment leases income			22,291				17,092				—				5,199				30.4				17,092				—
Income from bank-owned life insurance			29,303				12,475				9,416				16,828				134.9				3,059				32.5
Other			40,426				42,890				43,156				(2,464	)			(5.7	)			(266	)			(0.6	)
Total noninterest income		$	533,748			$	431,500			$	392,179			$	102,248				23.7	%		$	39,321				10.0	%

     Included in other service charges and fees are loan prepayment fees, the majority of which are related to commercial loans, of $7.4 million, $7.5 million and $8.3 million for the years ended December 31, 2005, 2004 and 2003, respectively. These fees generally arise during a falling interest rate environment as those customers who prefer fixed-rate loans seek to refinance. The fees are cyclical and typically lower during an increasing interest rate environment.

     Except as noted below, the acquisitions of Community First Bankshares, Inc. and USDB Bancorp in November 2004 were the primary reasons for the increases in noninterest income in 2005 compared with 2004.

     2005 compared with 2004

     The increase in service charges on deposit accounts was partially due to increased overdraft and insufficient funds charges on personal checking accounts as a result of growth in our customer base.

     The increase in other service charges and fees was also partially due to increased commissions on the sale of insurance products and debit card fees as a result of internal growth. In addition there were increased fees from merchant credit card transactions from new and existing customers.

     The decrease in net gains on securities available for sale was due to an other-than-temporary write-down of $1.8 million on certain equity securities recorded in the fourth quarter of 2005. See Note 6 (Securities Available for Sale) to the Consolidated Financial Statements.

     The increase in income from bank-owned life insurance was mostly the result of increased investment activity.

     2004 compared with 2003

     The increase in service charges on deposit accounts was due to increased overdraft and insufficient funds charges on personal checking accounts acquired as a result of our acquisitions of Community First and USDB in November 2004 and an increase in average deposit balances of approximately 14.2%, partially offset by lower account analysis income.

     The increase in other service charges and fees was partially attributed to higher merchant services fees resulting from an increase in the number of retail merchant accounts and higher retail sales volume. Higher fees from debit card and ATM transactions also contributed to the increase in 2004 as compared with 2003.

     The increase in vehicle and equipment operating lease income was due to accounting for auto leases originated from February through July 2004 as operating leases rather than direct finance leases. See Note 9 (Operating Leases) to the Consolidated Financial Statements for additional information.

BancWest Corporation and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

NONINTEREST EXPENSE

     The following table reflects the key components of the change in noninterest expense for the years indicated:

		Year Ended December 31,												2005/2004 Change								2004/2003 Change
(dollars in thousands)		2005				2004				2003				Amount				%				Amount				%
Personnel:
Salaries and wages		$	435,747			$	359,480			$	342,985			$	76,267				21.2	%		$	16,495				4.8	%
Employee benefits			177,966				141,104				139,198				36,862				26.1				1,906				1.4
Total personnel expense			613,713				500,584				482,183				113,129				22.6				18,401				3.8
Occupancy			115,255				91,770				87,514				23,485				25.6				4,256				4.9
Outside services			105,859				85,222				85,315				20,637				24.2				(93	)			(0.1	)
Intangible amortization			40,947				26,535				23,054				14,412				54.3				3,481				15.1
Equipment			60,507				49,814				47,197				10,693				21.5				2,617				5.5
Depreciation-vehicle and equipment operating leases			19,030				15,275				—				3,755				24.6				15,275				—
Restructuring and integration costs			22,471				16,144				—				6,327				39.2				16,144				—
Stationery and supplies			33,031				25,054				25,416				7,977				31.8				(362	)			(1.4	)
Advertising and promotions			28,828				26,717				23,535				2,111				7.9				3,182				13.5
Other			144,665				125,434				118,621				19,231				15.3				6,813				5.7
Total noninterest expense		$	1,184,306			$	962,549			$	892,835			$	221,757				23.0	%		$	69,714				7.8	%