FIRST HAWAIIAN, INC. - Quarter Report: 2005 June (Form 10-Q)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-7949

BANCWEST CORPORATION

(Exact name of registrant as specified in its charter)


Delaware (State of incorporation)		99-0156159 (I.R.S. Employer Identification No.)


999 Bishop Street, Honolulu, Hawaii (Address of principal executive offices)		96813 (Zip Code)

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

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

None

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

None

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or l5(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act). Yes No P

As of August 9, 2005, the number of outstanding shares of each of the issuer’s classes of
common stock (all of which were beneficially owned by BNP Paribas) was:


Class		Outstanding
Class A Common Stock, $0.01 Par Value		106,859,123 Shares

BANCWEST CORPORATION AND SUBSIDIARIES

FORM 10-Q
June 30, 2005

INDEX


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	27
	Consolidated Statements of Income	27
	Consolidated Balance Sheets	28
	Consolidated Statements of Changes in Stockholder’s Equity and Comprehensive Income	29
	Consolidated Statements of Cash Flows	30
	Notes to Consolidated Financial Statements	31
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2
	Consolidated Financial Highlights	2
	Forward-Looking Statements	3
	Overview	4
	Critical Accounting Estimates	5
	Financial Overview	5
	Results of Operations	6
	Net Interest Income	6
	Noninterest Income	11
	Noninterest Expense	12
	Income Taxes	13
	Operating Segments	13
	Securities Available For Sale	17
	Loans and Leases	18
	Nonperforming Assets and Restructured Loans	19
	Provision and Allowance for Loan and Lease Losses	20
	Deposits	21
	Capital	21
	Liquidity Management	21
	Recent Accounting Standards	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	26

PART II. OTHER INFORMATION

Item 4.	Submission of Matters to a Vote of Security Holders	49
Item 6.	Exhibits	49
SIGNATURE		50

Exhibit 12	Statement Regarding Computation of Ratios
Exhibit 31	Section 302 Certifications
Exhibit 32	Section 1350 Certifications
EXHIBIT 12
EXHIBIT 31
EXHIBIT 32

The information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for such periods. Such adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for the full year. The interim financial information should be read in conjunction with the Company’s 2004 Annual Report on Form 10-K.

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

PART I. FINANCIAL INFORMATION

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

CONSOLIDATED FINANCIAL HIGHLIGHTS


	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Earnings:
(Dollars in thousands)
Interest income	$	593,156		$	419,868		$	1,151,384		$	837,019
Interest expense		198,238			97,607			362,043			193,733

Net interest income		394,918			322,261			789,341			643,286
Provision for loan and lease losses		3,224			11,900			14,324			30,765
Noninterest income		133,209			110,021			256,005			211,492
Noninterest expense		283,585			232,224			575,677			451,138

Income before income taxes		241,318			188,158			455,345			372,875
Provision for income taxes		92,169			73,401			169,592			145,066

Net income	$	149,149		$	114,757		$	285,753		$	227,809

Balance Sheet Data Averages:
(Dollars in millions)
Average assets	$	51,816		$	39,343		$	51,083		$	38,840
Average securities available for sale at cost		8,898			6,005			8,623			5,920
Average loans and leases ⁽¹⁾		33,594			26,747			33,173			26,344
Average deposits		35,000			27,117			34,504			26,775
Average long-term debt		6,688			4,582			6,461			4,453
Average stockholder’s equity		5,907			4,416			5,854			4,371
Balance Sheet Data At Period End:
(Dollars in millions)
Assets		52,516			40,264			52,516			40,264
Securities available for sale		9,025			5,821			9,025			5,821
Loans and leases ⁽¹⁾		34,034			27,255			34,034			27,255
Deposits		34,623			27,976			34,623			27,976
Long-term debt		6,830			4,646			6,830			4,646
Stockholder’s equity		6,003			4,431			6,003			4,431
Selected Financial Ratios For the Period Ended:
Return on average total assets (ROA)⁽²⁾		1.15	%		1.17	%		1.13	%		1.18	%
Return on average stockholder’s equity (ROE)⁽²⁾		10.13			10.45			9.84			10.48
Net interest margin (taxable-equivalent basis)⁽²⁾		3.66			3.88			3.73			3.93
Net loans and leases charged off to average loans and leases ⁽²⁾		0.15			0.19			0.17			0.20
Efficiency ratio ⁽³⁾		53.70			53.72			55.07			52.78
Average equity to average total assets		11.40			11.22			11.46			11.25
At Period End:
Allowance for loan and lease losses to total loans and leases		1.25			1.46			1.25			1.46
Nonperforming assets to total loans and leases and other real estate owned and repossessed personal property		0.42			0.52			0.42			0.52
Allowance for loan and lease losses to nonaccruing loans and leases		3.33	x		3.21	x		3.33	x		3.21	x
Regulatory Capital Ratios:
Leverage Ratio ⁽⁴⁾:
Bank of the West		9.26	%		9.56	%		9.26	%		9.56	%
First Hawaiian Bank		10.62			10.31			10.62			10.31
Tier 1 capital (risk-based):
Bank of the West		10.81			10.80			10.81			10.80
First Hawaiian Bank		13.62			13.32			13.62			13.32
Total capital (risk-based):
Bank of the West		12.41			12.96			12.41			12.96
First Hawaiian Bank		15.72			15.62			15.72			15.62


⁽¹⁾		Includes loans held for sale.

⁽²⁾		Annualized.

⁽³⁾		The efficiency ratio is noninterest expense as a percentage of net interest income plus noninterest income.

⁽⁴⁾		The capital leverage ratios are based on quarterly averages.

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

FORWARD-LOOKING STATEMENTS

Certain matters contained in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements (such as those concerning our plans, expectations, estimates, strategies, projections and goals) involve risks and uncertainties that could cause actual results to differ materially from those discussed in this report. Readers should carefully consider those risks and uncertainties in reading this report. Factors that could cause or contribute to such differences include, but are not limited to:

(1)		global, national and local economic and market conditions, specifically with respect to changes in the United States economy and geopolitical uncertainty;

(2)		the level and volatility of interest rates and currency values;

(3)		government fiscal and monetary policies;

(4)		credit risks inherent in the lending process;

(5)		loan and deposit demand in the geographic regions where we conduct business;

(6)		the impact of intense competition in the rapidly evolving banking and financial services business;

(7)		extensive federal and state regulation of our business, including the effects of current and pending legislation and regulations;

(8)		whether expected revenue enhancements and cost savings are realized within expected time frames;

(9)		matters relating to the integration of our business with that of past and future merger partners, including the impact of combining these businesses on revenues, expenses, deposit attrition, customer retention and financial performance;

(10)		our reliance on third parties to provide certain critical services, including data processing;

(11)		the proposal or adoption of changes in accounting standards by the Financial Accounting Standards Board (FASB), the Securities and Exchange Commission (SEC) or other standard setting bodies;

(12)		technological changes;

(13)		other risks and uncertainties discussed in this document or detailed from time to time in other SEC filings that we make; and

(14)		management’s ability to manage risks that result from these and other factors.

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

The following discussion should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Form 10-Q.

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

OVERVIEW

BancWest Corporation (www.bancwestcorp.com) is a financial holding company with assets of $52.5 billion. 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 June 30, 2005, its principal subsidiaries were Bank of the West (BOW) (465 full service retail branches and 13 limited service retail offices in Arizona, California, Colorado, Idaho, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, Wisconsin and Wyoming) and First Hawaiian Bank (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.”

Acquisitions

Commercial Federal Corporation Acquisition

On June 13, 2005, BancWest announced that its Bank of the West subsidiary entered into a definitive agreement to acquire Commercial Federal Corporation (CFC), the parent company of Commercial Federal Bank. It is anticipated that the purchase transaction will close in the fourth quarter of 2005, subject to regulatory approval. CFC and its branches will be integrated into Bank of the West’s branch network system. The acquisition of CFC will add three new states (Kansas, Missouri and Oklahoma) to Bank of the West’s footprint, as well as to our market share in Arizona, Colorado, Iowa and Nebraska. CFC operates 198 branches in seven states in the Midwest, Colorado and Arizona. At March 31, 2005, CFC had total assets of $10.4 billion, total deposits of $6.5 billion and loans of $7.8 billion. Following the acquisition, results of operations of CFC will be included in our consolidated financial statements. The purchase price of approximately $1.36 billion will be paid in cash and the acquisition will be accounted for as a purchase.

In connection with the acquisition, management is in the process of assessing and formulating 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 and to focus the Company’s resources on activities that will promote growth. We will be consolidating excess facilities and evaluating areas where we will be able to take advantage of existing facilities. As management is still in the process of developing the plans, estimates of associated exit costs and other restructuring costs yet to be incurred have not been determined at this time.

Strategic Initiatives

The Company has continued to implement a series of initiatives that are designed to improve customer service and expand our physical footprint through branch expansion and acquisitions. The focus of the Company is to promote long-lasting customer service relationships through advanced technology and implementing new training vehicles. The Company strives for a “high touch” personalized marketing position, promoting brand recognition through marketing and community outreach. 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 footprint. Bank of the West currently operates 57 insurance agencies in eight states and is planning to expand the insurance operations through acquisitions.

Bank of the West’s Commercial Banking Group is expanding geographically and has increased its product offering for the Commercial Banking Division, the Agribusiness Banking Division and the Real Estate Industries Division. The Commercial Banking Group will have two new offices in Denver, Colorado and Minneapolis, Minnesota and is considering other states to take advantage of the new footprint resulting from the merger with Community First Bankshares, Inc. (Community First).

Bank of the West’s Consumer Finance Group will continue its expansion plans for auto loan products throughout the Midwest, including those states within BOW’s new footprint resulting from the 2004 merger with Community First Bank. Additional expansion of the auto loan products 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.

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

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. Also, as part of the focus on our core markets, First Hawaiian Bank has nearly completed its planned reduction in Media Finance and Corporate National credits.

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 planned for 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.

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, trust and investments, which are considered key sources of growth for the Bank’s future. Responsibilities previously concentrated in the Bank’s Financial Management Group have been realigned to improve delivery of these services. A Private Banking department has been created within the Retail Banking Group to focus on private client relationship management, financial and estate planning and business development.

Key among the elements of the Company’s profitability has been the interest rate environment, from both a deposit and loan pricing standpoint. As an industry, banks and other financial intermediaries have seen net interest margins decline over the past year principally as a result of the absolute level and shape of the yield curve. We manage the interest rate and market risks inherent in our asset and liability balances, while ensuring ample liquidity and diverse funding.

CRITICAL ACCOUNTING ESTIMATES

Our significant accounting policies are fundamental to understanding our financial position and results of operations and are discussed in detail in Note 1 (Summary of Significant Accounting Policies) to the Consolidated Financial Statements in our 2004 Annual Report on Form 10-K. Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. We have identified two accounting estimates that we believe are critical due to the levels of subjectivity and judgment necessary and because it is likely that materially different results would be reported if different judgments, assumptions and estimates were used. These estimates relate to the allowance for loan and lease losses and goodwill and are described in more detail in our 2004 Annual Report on Form 10-K in the “Critical Accounting Estimates” section of Management’s Discussion and Analysis.

FINANCIAL OVERVIEW

Income Statement Analysis

Second quarter 2005 compared with second quarter 2004

The Company reported net income of $149.1 million, compared with $114.8 million, an increase of 30.0%. The increase in the income statement categories and earning assets were due, in large part to the acquisitions of Community First Bankshares and USDB Bancorp in November 2004. Net interest income was $394.9 million, compared with $322.3 million. A significant portion of the increase was due to growth in average earning assets, offset by a lower net interest margin for the quarter. Average loans and leases increased by $6.8 billion and average securities available for sale increased by $2.9 billion. The net interest margin decreased 22 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 $133.2 million compared with $110.0 million, an increase of 21.1%, predominately due to the increases in service charges on deposit accounts, other service charges and fees and vehicle and equipment operating lease income. Noninterest expense was $283.6 million compared with $232.2 million, an increase of 22.1%, predominately due to increases in salaries and wages, employee benefits, outside services, occupancy, intangible amortization and equipment.

Six-month period 2005 compared with six-month period 2004

The Company reported net income of $285.8 million, compared with $227.8 million, an increase of 25.4%. The increase in the income statement categories and earning assets were due, in large part to the acquisitions of Community First Bankshares and USDB Bancorp in November 2004. Net interest income was $789.3 million, compared with $643.3 million. A significant portion of the increase was due to growth in average earning assets, offset by a lower net interest margin for the period. Average loans and leases

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

increased by $6.8 billion, up 25.9%, primarily due to the two acquisitions and internal growth and average securities available for sale increased by $2.7 billion. The net interest margin decreased 20 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 $256.0 million compared with $211.5 million, an increase of 21.0%, predominately due to the increases in trust and investment services income, service charges on deposit accounts, other service charges and fees and vehicle and equipment operating lease income. Noninterest expense was $575.7 million compared with $451.1 million, an increase of 27.6%, predominately due to increases in salaries and wages, employee benefits, occupancy, outside services, intangible amortization, equipment, depreciation on vehicle and equipment operating leases, stationery and supplies and restructuring and integration costs.

Balance Sheet Analysis

The Company had total assets of $52.5 billion at June 30, 2005, an increase of 4.9% from December 31, 2004 and 30.4% from June 30, 2004. Securities available for sale totaled $9.0 billion, an increase of 13.5% from December 31, 2004 and 55.0% from June 30, 2004. Loans and leases totaled $34.0 billion, up 3.9% from December 31, 2004 and 24.9% from a year ago. Deposits were $34.6 billion, up 3.0% from December 31, 2004 and 23.8% from a year ago. The increases from December 31, 2004 to June 30, 2005 were due internal growth. The increases over June 30, 2004 were primarily due to the two acquisitions in the fourth quarter of 2004.

The Company’s nonperforming assets were 0.42% of loans, leases and foreclosed properties at June 30, 2005, 0.45% at December 31, 2004 and 0.52% at June 30, 2004. The allowance for loan and lease losses totaled $423.3 million, a decrease of 3.0% from December 31, 2004 and an increase of 6.9% from June 30, 2004. The provision for loan and lease losses for the three and six months ending June 30, 2005 was $3.2 million and $14.3 million, respectively, compared with $11.9 million and $30.8 million for the same periods of 2004. The reduction was due to the improvement in the credit quality of the loan and lease portfolio.

RESULTS OF OPERATIONS

Net Interest Income

Second quarter 2005 compared with second quarter 2004

Net interest income increased to $394.9 million from $322.3 million.

The increase in net interest income was primarily the result of a $10.1 billion, or 30.2% increase in average earning assets. The increase in our average earning assets was the result of increases in loans and leases and securities available for sale as a result of our acquisitions of Community First and USDB Bancorp (USDB) in the fourth quarter of 2004, purchases of loans and securities and internal growth.

Six-month period 2005 compared with six-month period 2004

Net interest income increased to $789.3 million as compared with $643.3 million.

The increase in net interest income was primarily the result of a $9.9 billion, or 30.1%, increase in average earning assets. The increase in our average earning assets was the result of increases in loans and leases and securities available for sale as a result of our acquisitions of Community First and USDB in the fourth quarter of 2004, purchases of loans and securities and internal growth.

Net Interest Margin

Second quarter 2005 compared with second quarter 2004

The net interest margin decreased by 22 basis points due primarily to short-term interest rates increasing faster than long-term interest rates. Our yield on earning assets increased by 42 basis points to 5.48% from 5.06%, while our rates paid on sources of funds increased by 79 basis points to 2.30% from 1.51%. The impact of our noninterest-bearing sources increased 15 basis points to 0.48% from 0.33%.

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

Six-month period 2005 compared with six-month period 2004

The net interest margin decreased by 20 basis points due primarily to short-term interest rates increasing faster than long-term interest rates. Our yield on earning assets increased by 32 basis points to 5.43% from 5.11%, while our rates paid on sources of funds increased by 62 basis points to 2.14% from 1.52%. The impact of our noninterest-bearing sources increased 10 basis points to 0.44% from 0.34%.

Average Earning Assets

Second quarter 2005 compared with second quarter 2004

The increase in average earning assets was predominately due to increases in the average loan and lease portfolio and higher average securities available for sale. The $6.8 billion, or 25.6%, increase in average total loans and leases was predominately due to increases in consumer lending, commercial and commercial real estate lending, purchased residential mortgages and loans and leases acquired from Community First and USDB. Consumer, commercial and commercial real estate loans grew due to the strength in the consumer and business banking markets, relatively low interest rates and the two acquisitions. Average total securities available for sale were $8.9 billion, up $2.9 billion, or 48.2%, due to the two acquisitions and purchases of securities.

Six-month period 2005 compared with six-month period 2004

The increase in average earning assets was predominately due to increases in the average loan and lease portfolio and higher average securities available for sale. The $6.8 billion, or 25.9%, increase in average total loans and leases was predominately due to increases in consumer lending, commercial and commercial real estate lending, purchased residential mortgages and loans and leases acquired from Community First and USDB. Consumer, commercial and commercial real estate loans grew due to the strength in most of the Company’s markets, relatively low interest rates and the two acquisitions. Average total securities available for sale were $8.6 billion, up $2.7 billion, or 45.7%, due to the two acquisitions and purchases of securities.

Average Loans and Leases

Second quarter 2005 compared with second quarter 2004

The increase in loans and leases was primarily due to loans and leases acquired from Community First and USDB and internal growth. Average consumer loans increased $1.4 billion, or 17.0%, 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 $2.0 billion, or 39.2%, average commercial real estate increased by $1.6 billion, or 37.2%, and average commercial loans increased $1.6 billion, or 30.8%.

Six-month period 2005 compared with six-month period 2004

The increase in loans and leases was primarily due to loans and leases acquired from Community First and USDB and internal growth. Average consumer loans increased $1.5 billion, or 19.8%, 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 $1.8 billion, or 35.1%, average commercial real estate increased by $1.7 billion, or 39.4%, and commercial loans increased $1.6 billion, or 31.0%.

Average Interest-Bearing Deposits and Liabilities

Second quarter 2005 compared with second quarter 2004

The $8.7 billion, or 33.4%, increase in average interest-bearing deposits and liabilities was predominately due to interest-bearing deposits and liabilities acquired from Community First and USDB, growth in our customer deposit base and increases in average long-term debt and short-term borrowings. Average deposits increased significantly within regular savings, time deposits and foreign deposit portfolios. Borrowings from the Federal Home Loan Bank and repurchase agreements, including the $590 million repurchase agreement with BNP Paribas related to the two acquisitions, increased average long-term debt. The increase in short-term borrowings was largely due to increases in short-term advances from the Federal Home Loan Bank and a short-term borrowing from BNP Paribas,

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

which was issued to finance the acquisitions of Community First and USDB and paid off in April 2005 with the proceeds from the above mentioned $590 million repurchase agreement.

Six-month period 2005 compared with six-month period 2004

The $8.4 billion, or 32.9%, increase in average interest-bearing deposits and liabilities was due to interest-bearing deposits and liabilities acquired from Community First and USDB, growth in our customer deposit base and increases in average long-term debt and short-term borrowings. Average deposits increased significantly within regular savings, time deposits and foreign deposit portfolios. The increase in long-term debt was predominately due to an increase in borrowings from the Federal Home Loan Bank and the $590 million repurchase agreement with BNP Paribas related to the two acquisitions. The increase in short-term borrowings was primarily due to the increase in short-term advances from the Federal Home Loan Bank and a short-term borrowing with BNP Paribas, which was issued the to finance acquisitions of Community First and USDB and paid off in April 2005 with the proceeds from the above mentioned $590 million repurchase agreement.

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 consolidated average balances, an analysis of interest income/expense and yield/rate for each major category of earning assets and interest-bearing deposits and liabilities for the periods indicated. The taxable-equivalent adjustment is made for items exempt from Federal income taxes (assuming a 35% tax rate for June 30, 2005 and 2004) to make them comparable with taxable items before any income taxes are applied.


	Three Months Ended June 30,
	2005							2004
			Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate ⁽¹⁾			Balance		Expense		Rate ⁽¹⁾
(Dollars in thousands)

ASSETS
Earning assets:
Interest-bearing deposits in other banks:
Domestic	$	5,172	$	21		1.63	%	$	5,975	$	14		0.94	%
Foreign		336,239		2,497		2.98			235,557		657		1.12

Total interest-bearing deposits in other banks		341,411		2,518		2.96			241,532		671		1.12
Federal funds sold and securities purchased under agreements to resell		408,782		3,035		2.98			222,312		577		1.04
Trading assets		5,032		17		1.36			7,727		14		0.73
Securities available for sale ⁽²⁾:
Taxable		8,843,371		81,136		3.68			5,997,423		50,885		3.41
Exempt from Federal income taxes		54,610		727		5.34			7,501		135		7.24

Total securities available for sale		8,897,981		81,863		3.69			6,004,924		51,020		3.42
Loans and leases ⁽³⁾⁽⁴⁾:
Domestic		33,203,743		498,291		6.02			26,392,660		360,370		5.49
Foreign		390,084		6,354		6.53			354,337		5,790		6.57

Total loans and leases		33,593,827		504,645		6.03			26,746,997		366,160		5.51
Other interest earning assets		226,621		2,386		4.22			158,218		1,646		4.18

Total earning assets		43,473,654		594,464		5.48			33,381,710		420,088		5.06

Noninterest-bearing assets:
Cash and due from banks		1,808,272							1,441,906
Premises and equipment		682,237							526,005
Other intangibles		249,990							178,559
Goodwill		4,315,324							3,228,832
Other assets		1,286,940							586,480

Total noninterest-bearing assets		8,342,763							5,961,782

Total assets	$	51,816,417						$	39,343,492

LIABILITIES AND STOCKHOLDER’S EQUITY
Interest-bearing deposits and liabilities:
Deposits:
Domestic:
Interest-bearing demand	$	353,790	$	398		0.45	%	$	302,737	$	69		0.09	%
Savings		12,544,066		27,297		0.87			11,035,985		15,724		0.57
Time		10,393,075		66,713		2.57			6,718,142		25,141		1.51
Foreign		1,488,887		8,907		2.40			1,114,692		2,655		0.96

Total interest-bearing deposits		24,779,818		103,315		1.67			19,171,556		43,589		0.91
Short-term borrowings		3,129,366		22,645		2.90			2,187,174		5,566		1.02
Long-term debt		6,687,876		72,278		4.33			4,582,180		48,452		4.25

Total interest-bearing deposits and liabilities		34,597,060		198,238		2.30			25,940,910		97,607		1.51

Interest rate spread						3.18	%						3.55	%
Noninterest-bearing deposits		10,219,718							7,945,430
Other liabilities		1,092,795							1,041,611

Total liabilities		45,909,573							34,927,951
Stockholder’s equity		5,906,844							4,415,541

Total liabilities and stockholder’s equity	$	51,816,417						$	39,343,492

Impact of noninterest-bearing sources						0.48	%						0.33	%

Net interest income and margin on total earning assets				396,226		3.66					322,481		3.88	%

Tax equivalent adjustment				1,308							220

Net interest income			$	394,918						$	322,261


⁽¹⁾		Annualized.

⁽²⁾		Average debt securities available for sale were computed based on amortized costs, excluding the effects of SFAS No. 115 adjustments.

⁽³⁾		Nonaccruing loans and leases, and loans held for sale have been included in the computations of average loan and lease balances.

⁽⁴⁾		Interest income for loans and leases included loan fees of $8.4 million and $11.0 million for the three months ended June 30, 2005 and 2004, respectively.

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


	Six Months Ended June 30,
	2005							2004
			Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate ⁽¹⁾			Balance		Expense		Rate ⁽¹⁾
(Dollars in thousands)

ASSETS
Earning assets:
Interest-bearing deposits in other banks:
Domestic	$	5,511	$	36		1.32	%	$	6,585	$	23		0.70	%
Foreign		340,857		4,835		2.86			265,718		1,463		1.11

Total interest-bearing deposits in other banks		346,368		4,871		2.84			272,303		1,486		1.10
Federal funds sold and securities purchased under agreements to resell		469,504		6,253		2.69			228,103		1,179		1.04
Trading assets		4,974		31		1.26			11,373		28		0.50
Securities available for sale ⁽²⁾:
Taxable		8,568,060		155,736		3.67			5,912,375		101,307		3.45
Exempt from Federal income taxes		54,623		1,453		5.36			7,464		269		7.25

Total securities available for sale		8,622,683		157,189		3.68			5,919,839		101,576		3.45
Loans and leases ⁽³⁾⁽⁴⁾:
Domestic		32,791,996		968,743		5.96			25,993,269		718,557		5.56
Foreign		381,262		12,652		6.69			351,041		11,576		6.63

Total loans and leases		33,173,258		981,395		5.97			26,344,310		730,133		5.57
Other interest earning assets		220,417		4,218		3.86			157,218		3,095		3.96

Total earning assets		42,837,204		1,153,957		5.43			32,933,146		837,497		5.11

Noninterest-bearing assets:
Cash and due from banks		1,765,764							1,408,127
Premises and equipment		683,304							527,799
Other intangibles		256,834							181,459
Goodwill		4,315,451							3,228,589
Other assets		1,224,091							560,862

Total noninterest-bearing assets		8,245,444							5,906,836

Total assets	$	51,082,648						$	38,839,982

LIABILITIES AND STOCKHOLDER’S EQUITY
Interest-bearing deposits and liabilities:
Deposits:
Domestic:
Interest-bearing demand	$	361,599	$	882		0.49	%	$	308,384	$	138		0.09	%
Savings		12,682,345		49,586		0.79			10,928,278		31,465		0.58
Time		9,895,364		117,955		2.40			6,717,683		50,623		1.52
Foreign		1,463,624		15,833		2.18			1,055,886		4,799		0.91

Total interest-bearing deposits		24,402,932		184,256		1.52			19,010,231		87,025		0.92
Short-term borrowings		3,189,293		42,371		2.68			2,158,874		10,979		1.02
Long-term debt		6,460,665		135,416		4.23			4,452,738		95,729		4.32

Total interest-bearing deposits and liabilities		34,052,890		362,043		2.14			25,621,843		193,733		1.52

Interest rate spread						3.29	%						3.59	%
Noninterest-bearing deposits		10,101,461							7,764,441
Other liabilities		1,074,747							1,082,464

Total liabilities		45,229,098							34,468,748
Stockholder’s equity		5,853,550							4,371,234

Total liabilities and stockholder’s equity	$	51,082,648						$	38,839,982

Impact of noninterest-bearing sources						0.44	%						0.34	%

Net interest income and margin on total earning assets				791,914		3.73	%				643,764		3.93	%

Tax equivalent adjustment				2,573							478

Net interest income			$	789,341						$	643,286


⁽¹⁾		Annualized.

⁽²⁾		Average debt securities available for sale were computed based on amortized costs, excluding the effects of SFAS No. 115 adjustments.

⁽³⁾		Nonaccruing loans and leases, and loans held for sale have been included in the computations of average loan and lease balances.

⁽⁴⁾		Interest income for loans and leases included loan fees of $15.4 million and $21.5 million for the six months ended June 30, 2005 and 2004, respectively.

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

Noninterest Income


	Three Months Ended June 30,					Change
	2005			2004		$			%
(Dollars in thousands)

Service charges on deposit accounts	$	48,067		$	40,525	$	7,542			18.6	%
Trust and investment services income		11,775			10,054		1,721			17.1
Other service charges and fees		48,218			36,872		11,346			30.8
Net gains (losses) on sales of securities available for sale		(3	)		691		(694	)		—
Vehicle and equipment operating lease income		5,573			4,215		1,358			32.2
Other		19,579			17,664		1,915			10.8

Total noninterest income	$	133,209		$	110,021	$	23,188			21.1	%


	Six Months Ended June 30,				Change
	2005		2004		$			%
(Dollars in thousands)

Service charges on deposit accounts	$	91,653	$	81,354	$	10,299			12.7	%
Trust and investment services income		24,839		20,356		4,483			22.0
Other service charges and fees		94,249		74,045		20,204			27.3
Net gains on sales of securities available for sale		415		1,058		(643	)		(60.8	)
Vehicle and equipment operating lease income		11,353		5,069		6,284			124.0
Other		33,496		29,610		3,886			13.1

Total noninterest income	$	256,005	$	211,492	$	44,513			21.0	%

Second quarter 2005 compared with second quarter 2004

The increase in service charges on deposit accounts was predominately due to additional personal checking accounts acquired from Community First and USDB.

The increase in other service charges and fees was primarily due to increases in insurance revenue and debit card fees as a result of our acquisition of Community First and USDB and to increases in fees from merchant credit card transactions.

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.

Six-month period 2005 compared with six-month period 2004

The increase in service charges on deposit accounts was predominately due to additional personal checking accounts acquired from Community First and USDB.

The increase in trust and investment service income was predominately due to additional fees from trust accounts acquired from the acquisition of Community First and higher income from new business.

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.

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

Noninterest Expense


	Three Months Ended June 30				Change
	2005		2004		$			%
(Dollars in thousands)

Personnel:
Salaries and wages	$	105,538	$	83,433	$	22,105			26.5	%
Employee benefits		42,005		34,609		7,396			21.4

Total personnel expense		147,543		118,042		29,501			25.0
Occupancy		28,373		21,790		6,583			30.2
Outside services		26,637		21,036		5,601			26.6
Intangible amortization		9,982		5,764		4,218			73.2
Equipment		15,177		12,008		3,169			26.4
Depreciation – vehicle and equipment operating leases		4,828		4,218		610			14.5
Restructuring and integration costs		—		2,754		(2,754	)		(100.0	)
Stationery and supplies		7,542		6,154		1,388			22.6
Advertising and promotions		7,672		6,452		1,220			18.9
Other		35,831		34,006		1,825			5.4

Total noninterest expense	$	283,585	$	232,224	$	51,361			22.1	%


	Six Months Ended June 30,				Change
	2005		2004		$		%
(Dollars in thousands)

Personnel:
Salaries and wages	$	210,477	$	166,888	$	43,589		26.1	%
Employee benefits		90,356		70,846		19,510		27.5

Total personnel expense		300,833		237,734		63,099		26.5
Occupancy		56,765		43,405		13,360		30.8
Outside services		51,079		41,513		9,566		23.0
Intangible amortization		19,962		11,527		8,435		73.2
Equipment		29,674		23,455		6,219		26.5
Depreciation – vehicle and equipment operating leases		9,849		4,904		4,945		100.8
Restructuring and integration costs		5,350		2,754		2,596		94.3
Stationery and supplies		16,013		12,318		3,695		30.0
Advertising and promotions		14,820		12,779		2,041		16.0
Other		71,332		60,749		10,583		17.4

Total noninterest expense	$	575,677	$	451,138	$	124,539		27.6	%

Second quarter 2005 compared with second quarter 2004

The increase in salaries and wages and employee benefits expense was predominately due to a higher full-time equivalent employee count as a result of the acquisitions of Community First and USDB in November 2004.

The increase in occupancy expense was primarily due to the acquisitions of Community First and USDB.

The increase in outside services was primarily due to increased item processing, debit card processing, property appraisals and environmental studies. These increases were primarily due to the increase in the debit card customer base and loan volume due to the acquisition of Community First.

The increase in amortization of intangible assets was due to the amortization of core deposit and other intangibles resulting from the Community First and USDB acquisitions.

The increase in equipment expense was primarily due to the acquisitions of Community First and USDB.

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

The restructuring and integration costs recorded for the three months ended June 30, 2004 were related to the acquisition of Community First. No such integration costs were recorded for the acquisitions of Community First or USDB for the three months ended June 30, 2005.

Six-month period 2005 compared with six-month period 2004

The increase in occupancy expense was primarily due to the acquisitions of Community First and USDB.

The increase in outside services was primarily due to increased contracted services, item and debit card processing, property appraisals and environmental studies. These increases were primarily due to the increase in the debit card customer base and loan volume due to the acquisition of Community First.

The increase in amortization of intangible assets was due to the amortization of core deposit and other intangibles resulting from the Community First and USDB acquisitions.

The increase in equipment expense was primarily due to the acquisitions of Community First and USDB.

The increase in depreciation on vehicle and equipment operating leases was the result of accounting for auto leases originated from February through July 2004 as operating leases rather than direct financing leases.

The increase in restructuring and integration costs was related to the acquisitions of Community First and USDB.

The increase in “Other” was primarily due to data communications, travel and entertainment and a reserve for the exposure for merchant services related to an airline that filed for Chapter 11 reorganization in December 2004.

INCOME TAXES

Our effective income tax rates (exclusive of the tax equivalent adjustment) for the quarters ended June 30, 2005 and 2004 were 38.2% and 39.0%, respectively, and 37.2% and 38.9% for the first six months of 2005 and 2004, respectively. The decrease in the effective tax rate for the first six months of 2005 was predominantly due to the reversal of $9.9 million in reserves for Unitary State Tax liabilities, partly offset by an increase of $5.6 million in tax reserves for foreign leveraged leases. The $9.9 million Unitary State Tax amount was comprised of $6.4 million pertaining to the tax year 2002 and $3.5 million pertaining to the tax year 2003.

Lease-in/lease-out (LILO) transactions have recently been subject to review on a nationwide basis by the Internal Revenue Service (IRS) to determine whether the tax deductions connected with such transactions are allowable for U.S. federal income tax purposes. The Company has entered into several LILO transactions, which have been the subject of an audit by the IRS. In April 2004, the Company received a Revenue Agent’s Report (RAR) which disallowed all deductions associated with the LILO transactions. In order to avoid potential future interest and penalties, the Company has paid, under protest, the amounts claimed by the IRS and other tax authorities in the RAR. The Company continues to believe that it properly reported its LILO transactions, has contested the results of the IRS’s audit and is in discussions with the IRS related to those results. Recently the IRS has identified certain sale-leaseback transactions as listed transactions and is in the process of reviewing them to determine whether the deductions are allowable for tax purposes. The Company has entered into several such sale-leaseback transactions, which are currently being audited by the IRS. At the present time, the Company cannot predict the outcome of these issues.

OPERATING SEGMENTS

Our reportable segments are the operating segments that we use in our internal reporting at Bank of the West and First Hawaiian Bank. Bank of the West’s segments operate primarily in Arizona, California, Colorado, Idaho, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, Wisconsin and Wyoming. Certain Bank of the West segments conduct business nationwide. Although First Hawaiian Bank’s segments operate primarily in Hawaii, it also has significant operations outside the state, such as leveraged leases, international banking and branches in Guam and Saipan. It also has significant operations extending to California through its automobile dealer flooring and financing activities.

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

Bank of the West

Regional Banking

Second quarter 2005 compared with second quarter 2004

The Regional Banking Segment’s net income increased $25.0 million, or 71.2% from $35.1 million to $60.1 million. Net interest income increased $60.9 million, or 50.0% from last year. The increase is primarily related to the acquisitions of Community First and USDB in the fourth quarter of 2004. Noninterest income increased $19.7 million, or 44.2%. The increase is primarily due to the acquisitions, which includes the added insurance agency business, investment services fees and increased debit card interchange revenue. Noninterest expense increased $52.8 million, or 49.3%. The increase is primarily due to the acquisitions, which includes the insurance agency business, compensation expenses, direct occupancy costs from the acquired branch network and increased debit card processing from the larger debit card customer base.

Average loans and leases increased $4.2 billion, or 70.3%. The increase is primarily due to the acquisitions and continued purchases of residential loans during the quarter.

Average deposits increased $5.3 billion, or 36.2%. The increase is primarily due to the Community First acquisition in 2004.

Six-month period 2005 as compared with six-month period 2004

The Regional Banking Segment’s net income increased $34.3 million, or 48.7% from $70.5 million to $104.8 million. Net interest income increased $114.0 million, or 46.5% from last year. The increase is primarily related to the acquisitions of Community First and USDB in the fourth quarter of 2004. Noninterest income increased $34.4 million, or 39.0%. The increase is primarily due to the acquisitions, which includes the added insurance agency business, investment services fees and increased debit card interchange revenue. Noninterest expense increased $106.9 million, or 49.7%. The increase is primarily due to the acquisitions, which includes the insurance agency business, compensation expenses, direct occupancy costs from the acquired branch network and increased debit card processing from the larger debit card customer base.

Average loans and leases increased $4.1 billion, or 69.3%. The increase is primarily due to the acquisitions and purchases of residential loans in 2005.

Average deposits increased $5.5 billion, or 37.6%. The increase is primarily due to the Community First acquisition in 2004.

Commercial Banking

Second quarter 2005 compared with second quarter 2004

The Commercial Banking Segment’s net income increased to $51.8 million, up $14.3 million, or 38.1%, from $37.5 million. Net interest income increased $9.2 million, or 11.6%. The increase in net interest income is primarily related to an increase in loans and leases and deposit balances, offset by a decrease in margins. Noninterest income increased $5.2 million, or 31.1%. The increase in noninterest income is primarily related to increased trust fees due to accounts acquired from the acquisitions in the fourth quarter of 2004 and gains on sale of other real estate owned, primarily offset by a decrease in asset management fees. Noninterest expense increased $3.1 million, or 9.1%. The increase is primarily due to higher salaries and wages and employee healthcare benefits as a result of the increased full-time equivalent employees from the acquisitions. Provision for loan and lease losses decreased $9.8 million in 2005, primarily related to large recoveries.

Average loans and leases increased 20.0% to $9.1 billion. The increase was primarily due to increases in commercial, SBA and construction loans from internal growth and the acquisitions.

Average deposits increased 37.5% to $4.8 billion. The growth in deposits was largely from an increase in short-term negotiable CD’s.

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

Six-month period 2005 as compared with six-month period 2004

The Commercial Banking Segment’s net income increased to $92.8 million, up $17.3 million, or 22.9%, from $75.5 million. Net interest income increased $13.6 million, or 8.7%. The increase in net interest income is primarily related to an increase in loans and leases and deposit balances, offset by a decrease in margins. Noninterest income increased $5.6 million, or 16.2%. The increase in noninterest income is primarily related to increased trust fees due to accounts acquired from the acquisitions in the fourth quarter of 2004 and gains on sale of other real estate owned, partially offset by a decrease in asset management fees. Noninterest expense increased $5.9 million, or 8.9%. The increase is primarily due to higher salaries and wages and employee healthcare benefits as a result of the increased full-time equivalent employees from the acquisitions. Provision for loan and lease losses decreased $10.4 million in 2005, primarily related to large recoveries.

Average loans and leases increased 19.8% to $8.9 billion. The increase was primarily due to increases in commercial, SBA and construction loans from internal growth and the acquisitions.

Average deposits increased 26.1% to $4.3 billion. The growth in deposits was largely from an increase in short-term negotiable CD’s.

Consumer Finance

Second quarter 2005 compared with second quarter 2004

The Consumer Finance Segment’s net income increased $1.5 million, 8.3% to $19.5 million compared to $18.0 million for the same period in 2004. Net interest income was $55.9 million, compared to $51.2 million in 2004, an increase of 9.2%. Noninterest income increased $1.0 million, or 15.4% to $7.5 million. Noninterest expense increased $1.4 million to $22.8 million in 2005. The increase is primarily due to higher employee healthcare benefits and a decrease in deferred loan origination costs.

Average assets as of June 30, 2005 were $9.1 billion compared to $8.4 billion at June 30, 2004, an increase of $0.7 billion, or 7.8%. This increase is due to indirect loan production and the addition of assets from the acquisition of Community First in the fourth quarter of 2004.

Six-month period 2005 as compared with six-month period 2004

The Consumer Finance Segment’s net income increased $9.0 million, 27.9% to $41.3 million compared to $32.3 million for the same period in 2004. Net interest income was $112.0 million, compared to $104.2 million in 2004, an increase of 7.5%. Noninterest income increased $5.8 million, or 63.0% to $15.0 million. The increase is partially due to accounting for auto leases originated from February through July 2004 as operating leases rather than direct finance leases. This increase was partially offset by lower gains on sales of loans through our Essex subsidiary. In February 2004 Essex began retaining certain types of loans in its own portfolio. Noninterest expense increased $6.5 million to $44.9 million in 2005. The increase is primarily due to higher depreciation on vehicle and equipment operating leases as a result of accounting for the above mentioned auto leases as operating leases, higher employee healthcare benefits and a decrease in deferred loan origination costs. The provision for loan and lease losses decreased $8.6 million from $21.8 million to $13.2 million, due to an improvement in credit quality.

Average assets as of June 30, 2005 were $9.2 billion compared to $8.3 billion at June 30, 2004, an increase of 11.8%. This increase is due to indirect loan production and the addition of assets from the acquisition of Community First in the fourth quarter of 2004.

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

First Hawaiian Bank

Retail Banking

Second quarter 2005 compared with second quarter 2004

The Retail Banking Segment’s net income increased to $25.3 million, up $8.0 million, or 46.2%. Net interest income increased $12.9 million, or 22.0%, primarily due to higher balances in earning assets. Noninterest income decreased $0.3 million, or 2.0%. Noninterest expense decreased $0.9 million, or 2.0%. The provision for loan and lease losses decreased $0.1 million, or 9.1%.

Average assets increased 12.4% to $4.1 billion, primarily due to increases in loans of $444 million. The increase in loans was primarily in residential and commercial real estate. Average deposits increased 11.3% to $7.8 billion, primarily due to an increase in savings and time deposits.

Six-month period 2005 as compared with six-month period 2004

The Retail Banking Segment’s net income increased to $49.7 million, up $15.7 million, or 46.2%. Net interest income increased $24.7 million, or 21.4%, primarily due to higher earning asset balances. Noninterest income decreased $0.8 million, or 2.7%. The provision for credit losses decreased $1.6 million, or 66.7%. The decrease in the provision for loan and lease losses was a result of improved credit quality, which has led to a decrease in nonperforming assets and lower charge offs.

Average assets increased 12.9% to $4.1 billion, primarily due to increases in loans of $457 million. The increase in loans was primarily in residential and commercial real estate due to the improved economy and favorable interest rates. Average deposits increased 11.3% to $7.7 billion, primarily due to an increase in savings and time deposits.

Consumer Finance

Second quarter 2005 compared with second quarter 2004

Average assets increased 2.2% to $1.6 billion, partly due to increases in consumer and dealer flooring loans.

Consumer Finance’s net income decreased to $8.4 million, down $0.5 million, or 5.6%. The decrease was primarily due to a modest operating cost increase and an increase in the allocation of the provision for credit losses. Net interest income of $19.8 million was relatively flat compared to the same period in the prior year with a decrease of $0.2 million, or 1.0%. Noninterest income increased $0.8 million, or 11.4%. Noninterest expense increased by $0.9 million, or 9.0%, due to a reassessment of the Bank’s credit card award program liability in 2005. The provision for loan and lease losses increased $0.9 million, or 40.9%. Relative to historical net charge offs, the consumer segment increased proportionately more in 2005, while the other reported segments’ charge offs decreased.

Six-month period 2005 as compared with six-month period 2004

Average assets increased 4.4% to $1.6 billion, primarily due to increases in consumer and dealer flooring loans.

Consumer Finance’s net income decreased to $16.8 million, down $1.4 million, or 7.7%. The decrease was primarily due to a modest operating cost increase and an increase in the allocation of the provision for loan and lease losses. Net interest income of $38.8 million was relatively flat compared to $38.9 million in the prior year. Noninterest income increased $0.4 million or 2.6%. Noninterest expense increased $2.0 million, or 10.1%, primarily due to a reassessment of the Bank’s credit card award program liability in 2005. The provision for loan and lease losses increased $1.1 million, or 26.8%. Relative to historical net charge offs, the consumer segment increased proportionately more in 2005 while the other reported segments’ charge offs decreased.

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

Commercial Banking

Second quarter 2005 compared with second quarter 2004

Commercial Banking’s net income decreased to $4.9 million, down $2.4 million, or 32.9%, primarily due to a $6.9 million fee on the sale of a lease in 2004. Net interest income decreased $0.6 million, or 6.7%. Noninterest income decreased $7.1 million, or 89.9%, primarily due to the $6.9 million fee on the sale of a lease. Noninterest expense decreased $3.5 million, or 70.0%, primarily due to a $3.3 million pretax reduction in net investment of certain leveraged leases in 2004.

Average assets of $1.3 billion were comparable to the same period in the prior year.

Six-month period 2005 as compared with six-month period 2004

Commercial Banking’s net income decreased to $9.8 million, down $4.3 million, or 30.5%, primarily due to a $6.9 million fee on the sale of a lease in the second quarter of 2004. Net interest income decreased $3.2 million, or 16.8%, partially due to lease financing deferred taxes, as well as a reduction in loans related to the exit of Syndicated and Media credit exposures. Noninterest income decreased $7.2 million, or 76.6%, due to the $6.9 million fee on the sale of a lease. Noninterest expense decreased $3.8 million, or 56.7%, primarily due to a $3.3 million pretax reduction in net investments of certain leveraged leases in second quarter 2004.

Average assets decreased 1.0% to $1.2 billion, primarily resulting from a reduction in loans related to the exit of Syndicated and Media credit exposure.

Financial Management

Second quarter 2005 compared with second quarter 2004

The Financial Management Segment’s net income of $0.9 million increased $0.5 million from 2004. Noninterest income increased by $0.5 million, or 7.6%. Noninterest expense decreased by $0.3 million, or 5.0% compared to the same period in the prior year.

Six-month period 2005 as compared with six-month period 2004

The Financial Management Segment’s net income of $1.6 million increased $0.7 million from 2004. Noninterest income of $14.6 million increased by $0.8 million, or 5.8% compared to the same period in the prior year.

SECURITIES AVAILABLE FOR SALE

The $3.2 billion, or 55.0%, increase in securities available for sale from June 30, 2004 to June 30, 2005 was due to the acquisitions of Community First and USDB and purchases of securities. The $1.1 billion, or 13.5% increase from December 31, 2004 was due to purchases of securities.

The Company focuses on the following four objectives for its available-for-sale portfolio:

	•		Support its need for liquidity to fund loans or to meet unexpected deposit runoff. Liquidity can be met by having investments with relatively short maturities and/or a high degree of marketability.

	•		Act as a vehicle to make meaningful shifts in the Company’s overall interest rate risk profile.

	•		Provide collateral to secure the Company’s public funds-taking activities.

	•		Provide the maximum level of after-tax earnings consistent with the safety factors of quality, maturity, liquidity and risk diversification.

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

LOANS AND LEASES

We continue our efforts to diversify our loan and lease portfolio, both geographically and by industry. Our overall growth in loan and lease volume came primarily from internal growth and the acquisitions of Community First and USDB in the fourth quarter of 2004. See Note 5 (Loans and Leases) to the Consolidated Financial Statements for additional information.

The loan and lease portfolio is the largest component of total earning assets and accounts for the greatest portion of total interest income. At June 30, 2005, total loans and leases represented 64.7% of total assets, compared with 65.3% at December 31, 2004 and 67.5% at June 30, 2004. As a percentage of total interest earning assets, total loans and leases were 77.2% at June 30, 2005, 78.0% at December 31, 2004 and 80.9% at June 30, 2004. At June 30, 2005, total loans and leases were 98.1% of total deposits compared with 97.2% at December 31, 2004 and June 30, 2004.

Total loans and leases increased by 24.9% from June 30, 2004 to June 30, 2005. Consumer loans increased $1.3 billion, or 15.6%, substantially due to customers taking advantage of the low interest rate environment, and from the acquisitions in the fourth quarter of 2004. Residential real estate loans increased $2.2 billion, or 40.3%, primarily due to the acquisitions and purchases of loans since the second quarter of 2004. Commercial real estate loans increased $1.6 billion, or 29.8%, predominately due to the acquisition of Community First. Commercial, financial and agricultural loans increased 26.4% compared with the same period in the prior year. Total loans and leases increased by 3.9% from December 31, 2004 to June 30, 2005. The increase was mostly due to an increase in residential real estate loans of $1.0 billion, as a result of purchases during 2005. In the context of interest rate trends and the broader economy, we continuously monitor the mix in our loan and lease portfolio.

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

NONPERFORMING ASSETS AND RESTRUCTURED LOANS

Nonperforming assets for the periods indicated were as follows:


	June 30, 2005			December 31, 2004			June 30, 2004
(Dollars in thousands)

Nonperforming Assets:
Nonaccrual:
Commercial, financial and agricultural	$	54,519		$	51,793		$	60,266
Real estate:
Commercial		43,748			47,385			40,820
Construction		9,632			2,386			—
Residential		7,568			6,862			6,913

Total real estate loans		60,948			56,633			47,733

Consumer		2,751			4,477			2,658
Lease financing		6,173			8,078			7,328
Foreign		2,725			4,138			5,381

Total nonaccrual loans and leases		127,116			125,119			123,366

Other real estate owned and repossessed personal property		14,681			21,653			16,993

Total nonperforming assets		141,797		$	146,772		$	140,359

Past due loans and leases ⁽¹⁾:
Commercial, financial and agricultural	$	12,509		$	6,140		$	18,082
Real estate:
Commercial		7,280			2,119			7,912
Construction		866			506			—
Residential		1,619			1,112			796

Total real estate loans		9,765			3,737			8,708

Consumer		1,568			2,243			1,860
Lease financing		—			79			—
Foreign		448			216			192

Total past due loans and leases	$	24,290		$	12,415		$	28,842

Accruing Restructured Loans and leases:
Commercial, financial and agricultural		21			36			48
Commercial real estate		396			429			436

Total accruing restructured loans and leases	$	417		$	465		$	484

Nonperforming assets to total loans and leases and other real estate owned and repossessed personal property (end of period):
Excluding past due loans and leases		0.42	%		0.45	%		0.52	%
Including past due loans and leases		0.49			0.49			0.62
Nonperforming assets to total assets (end of period):
Excluding past due loans and leases		0.27			0.29			0.35
Including past due loans and leases		0.32			0.32			0.42


⁽¹⁾		Represents loans and leases which are past due 90 days or more as to principal or interest, are still accruing interest, are adequately collateralized and in the process of collection.

The increase in nonaccrual loans from December 31, 2004 was due to an increase in commercial, financial and agricultural and construction real estate nonaccrual loans as a result of a few large loans being moved to nonaccrual status in 2005. A significant portion of the increase was offset by a decrease in commercial real estate nonaccrual loans, due to the resolution of problem relationships. The increase in nonaccrual loans from June 30, 2004 was due to the increase in real estate nonaccrual loans. The increase in real estate nonaccrual loans was mostly due to the acquisition of nonaccrual loans from Community First and a few large loans that were moved to nonaccrual status in 2005. These increases were primarily offset by a decrease in commercial, financial and agricultural nonaccrual loans as a result of resolutions of problem relationships.

As a percentage of loans and leases, nonaccrual loans decreased 8 basis points from 0.45% at June 30, 2004 to 0.37% at June 30, 2005. The decrease was substantially due to decreases in commercial, financial and agricultural (0.91% at June 30, 2005 compared with 1.27% at June 30, 2004) and foreign (0.72% at June 30, 2005 compared with 1.48% at June 30, 2004), mostly offset by an increase in real estate construction (0.61% at June 30, 2005 compared with zero at June 30, 2004). The decrease in commercial, financial and agricultural was primarily due to the resolution of problem relationships and growth in loans outstanding. The decrease

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

in foreign was due to the resolution of a large problem relationship, partially offset by a decrease in the foreign loans outstanding. The increase in real estate construction was due to loans acquired in the acquisition of Community First that were placed on nonaccrual since November 2004.

We generally place a loan or lease on nonaccrual status when we believe that collection of principal or interest has become doubtful or when loans or leases are 90 days past due as to principal or interest, unless they are well secured and in the process of collection. We may make an exception to the general 90-day-past-due rule when the fair value of the collateral exceeds our recorded investment in the loan.

Consumer loans and leases are subject to our general policies regarding nonaccrual loans and substantially all past-due consumer loans and leases are charged off upon reaching a predetermined delinquency status varying from 120 to 180 days, depending on product type.

When we place a loan or lease on nonaccrual status, previously accrued and uncollected interest is reversed against interest income of the current period. When we receive a cash payment on a nonaccrual loan, we apply it as a reduction of the principal balance when we have doubts about the ultimate collection of the principal. Otherwise, we record such payments as income.

Nonaccrual loans and leases are generally returned to accrual status when they: (1) become current as to principal and interest and have demonstrated a sustained period of payment performance or (2) become both well secured and in the process of collection.

PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses is based upon our judgment as to the adequacy of the allowance for loan and lease losses (the Allowance) to absorb probable losses inherent in the portfolio as of the balance sheet date. The Company uses a systematic methodology to determine the adequacy of the Allowance and related provision for loan and lease losses to be reported for financial statement purposes. The determination of the adequacy of the Allowance is ultimately one of judgment, which includes consideration of many factors, including, among other things, the amount of problem and potential problem loans and leases, net charge-off experience, changes in the composition of the loan and lease portfolio by type and location of loans and leases, change in the overall loan and lease risk profile, general economic factors and the fair value of collateral. The analysis of the changes in the allowance for loan and lease losses, including charge-offs and recoveries, is presented in Note 6 (Allowance for Loan and Lease Losses) to the Consolidated Financial Statements.

Our approach to managing exposure to credit risk involves an integrated program of setting appropriate standards for credit underwriting and diversification, monitoring trends that may affect the risk profile of the credit portfolio and making appropriate adjustments to reflect changes in economic and financial conditions that could affect the quality of the portfolio and loss probability. The components of this integrated program include:

	•		Setting Underwriting and Grading Standards. Our loan grading system uses ten different principal risk categories where 1 is no risk and 10 is loss. We continue efforts to decrease our exposure to customers in the weaker credit categories. The cost of credit risk is an integral part of the pricing and evaluation of credit decisions and the setting of portfolio targets.

	•		Diversification. We actively manage our credit portfolio to avoid excessive concentrations by obligor, risk grade, industry, product and geographic location. In addition, we seek to reduce our exposure to concentrations by actively participating portions of our commercial and commercial real estate loans to other banks.

	•		Risk Mitigation. We manage our exposure to higher risk areas through application of prudent underwriting policies.

	•		Emphasis on Consumer Lending. Consumer loans represent our single largest category of loans and leases. We use formula-based approaches to calculate appropriate reserve levels that reflect historical loss experience. We generally do not participate in subprime lending activities. We also seek to reduce our credit exposures where feasible by obtaining third-party insurance or similar protections. For example, in our vehicle lease portfolio (which represents approximately 33.4% of our lease financing portfolio and 6.2% of our combined lease financing and consumer loans at June 30, 2005), we obtain third-party insurance for the estimated residual value of the leased vehicle, and set aside reserves to cover the uninsured portion.

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

The allowance for loan and lease losses was 1.25% of total loans and leases at June 30, 2005, compared with 1.33% of total loans and leases at December 31, 2004 and 1.46% at June 30, 2004. Compared with the same periods a year ago, net charge-offs were $0.4 million higher and $1.1 million higher in the three and six months ended June 30, 2005. This was driven by an increase in installment loan charge offs (Auto and RV’s), offset by a few large loan recoveries.

In our judgment, the Allowance was adequate to absorb losses inherent in the loan and lease portfolio at June 30, 2005. However, changes in prevailing economic conditions in our markets could result in changes in the level of nonperforming assets and charge-offs in the future and, accordingly, changes in the Allowance. We will continue to closely monitor economic developments and make necessary adjustments to the Allowance accordingly.

DEPOSITS

Deposits are the largest component of our total liabilities and account for 52.1% and 50.9% of total interest expense during the second quarter of 2005 and first six months of 2005, respectively. At June 30, 2005, total deposits were $34.6 billion, an increase of 3.0% over December 31, 2004 and an increase of 23.8% over June 30, 2004. The increase from June 30, 2004 was predominately due to growth in our customer deposit base and the acquisitions of Community First and USDB. The increase from December 2004 was primarily due to growth in our time deposits over $100 thousand. Rates paid on deposits have increased based on current market conditions. Additional information on our average deposit balances and rates paid is provided in Table 1: Average Balances, Interest Income and Expense, and Yields and Rates (Taxable-Equivalent Basis).

CAPITAL

Stockholder’s equity totaled $6.0 billion at June 30, 2005, an increase of $273.3 million, or 4.8%, from December 31, 2004 and $1.6 billion, or 35.5%, from June 30, 2004. The increase from December 2004 was predominately due to net income earned by the Company during the first six months of 2005, offset by changes in other comprehensive income. The increase from June 30, 2004 was predominately due to an issuance of common stock of the Company for the acquisitions of Community First and USDB and net income for the last 12 months.

LIQUIDITY MANAGEMENT

Liquidity refers to our ability to provide sufficient short and long-term cash flows to fund operations and to meet obligations and commitments, including depositor withdrawals and debt service, on a timely basis at reasonable cost. We achieve our liquidity objectives with both assets and liabilities. Further, while liquidity positions are managed separately by the Company and its two subsidiary Banks, both short-term and long-term activities are coordinated between the two subsidiary Banks.

We obtain short-term asset-based liquidity through our investment securities portfolio, principally short-term securities, and other liquid assets, which can be readily converted to cash. These assets consist of cash and due from banks, interest-bearing deposits in other banks, federal funds sold, trading assets, securities purchased under agreements to resell, securities available for sale and loans held for sale. Such assets represented 22.1%, 21.3% and 20.1% of total assets at June 30, 2005, December 31, 2004 and June 30, 2004, respectively.

Intermediate and longer-term asset liquidity is primarily provided by regularly scheduled maturities and cash flows from loans and securities. Additional liquidity is available from certain assets that can be sold, securitized or used as collateral for borrowings from the Federal Home Loan Bank such as consumer and mortgage loans.

We obtain short-term, liability-based liquidity primarily from deposits. Average total deposits for the six months ended June 30, 2005 were $34.5 billion an increase of 28.9% from the same period of 2004. The increase was due to the acquisitions of Community First and USDB in November 2004, an increase in time deposits over $100 thousand and continued expansion of our customer base in the Western United States. Average total deposits funded 67.5% of average total assets for the six months ended June 30, 2005 and 68.9% for the year ended December 31, 2004 and the six months ended June 30, 2004.

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

We also obtain short-term and long-term liquidity from access to regional and national wholesale funding sources, including purchasing federal funds, selling securities under agreements to repurchase, lines of credit from other banks and credit facilities from Federal Home Loan Banks. The following table reflects immediately available borrowing capacity at the Federal Reserve Discount Window and Federal Home Loan Banks and securities available for sale under repurchase agreements:


	June 30,
(Dollars in millions)	2005		2004

Federal Reserve Discount Window	$	673	$	618
Federal Home Loan Banks		882		1,752
Securities Available for Repurchase Agreements		4,574		3,016

Total	$	6,129	$	5,386

Further information on short-term borrowings is provided in Note 13 (Short-term Borrowings) to the Consolidated Financial Statements included in the Company’s 2004 Annual Report on Form 10-K. Offshore deposits in the international market provide another available source of funds.

Funds raised in the intermediate and longer-term markets are structured to avoid concentration of maturities and to reduce refinancing risk. We also attempt to diversify the types of instruments issued to avoid undue reliance on any one market or funding source.

Liquidity for the parent company is primarily provided by dividend and interest income from its subsidiaries. Short-term cash requirements are met through liquidation of short-term investments. Longer-term liquidity is provided by access to the capital markets or from transactions with BancWest’s parent company, BNP Paribas.

The Parent’s ability to pay dividends depends primarily upon dividends and other payments from its subsidiaries, which are subject to certain limitations as described in Note 17 (Limitation on Payments of Dividends) to the Consolidated Financial Statements included in the Company’s 2004 Annual Report on Form 10-K.

Our borrowing costs and ability to raise funds are a function of our credit ratings and any change in those ratings. The following table reflects the ratings of Bank of the West and First Hawaiian Bank:


	Bank of the West/First Hawaiian Bank
	Short-Term Deposit	Long-Term Deposit

Moody’s	P-1	Aa3
S & P	A-1	A+
Fitch, Inc.	F1+	AA-

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

RECENT ACCOUNTING STANDARDS

We have adopted numerous new or modifications to existing standards, rules or regulations promulgated by various standard setting and regulatory bodies. Chief among these are the federal financial institutions regulators, the SEC and the FASB. The following section highlights important developments in the area of accounting and disclosure requirements. This discussion is not intended to be a comprehensive listing of the impact of all standards and rules adopted.

In May 2005, The Financial Accounting Standards Board (FASB) issued Statement No. 154, Accounting Changes and Error Corrections. This statement requires changes in accounting principles and corrections of errors, to be applied retrospectively to prior periods, unless it is deemed impracticable to do so. This statement is effective for fiscal years beginning after December 15, 2005. Currently, the application of this statement does not have an impact to our financial statements. However, the future impact could be significant, if the Company were to elect changes to our accounting principles, or discover errors in previously issued financial statements.

In December 2004, the FASB issued FASB Statement No. 153, Exchanges of Nonmonetary Assets, an Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions. This statement is based upon the principle that transactions involving nonmonetary assets should be measured based upon their fair market value. This statement is effective for fiscal years beginning after June 15, 2005. We do not believe this statement will have a material impact on our financial statements, as we do not frequently enter into nonmonetary transactions.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004) Accounting for Share-Based Payment. This statement requires stock options awarded to employees to be expensed over the vesting period of the option, at the fair value at the grant date using an option-pricing model. This statement is effective at the beginning of the next fiscal year that begins after June 15, 2005. The Company currently accounts for stock based compensation under Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees and related Interpretations, as allowed under FASB Statement 123, Accounting for Stock-Based Compensation. This pronouncement will increase the amount of compensation expense per period, however, we believe this statement will not have a significant impact to our financial statements.

In June 2004, the Emerging Issues Task Force (EITF) published EITF 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (EITF 03-1). EITF 03-1 clarifies the impairment methodology used to determine when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. The guidance includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. EITF 03-1 applies to all investments accounted for in accordance with the provisions of FAS 115, certain debt and equity securities within the scope of Statement 124, and equity securities that are not subject to the scope of Statement 115 and not accounted for under the equity method of accounting. On September 30, 2004, the FASB staff published FASB Staff Position (FSP) EITF 03-1-1. FSP EITF 03-1-1 delays the effective date for the measurement and recognition guidance contained in Paragraphs 10-20 of EITF 03-1, while the FASB considered application guidance. In June 2005, the FASB reached a decision and is expected to issue a final FSP. We will evaluate the new guidance when it is issued.

BancWest Corporation and Subsidiaries
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk Measurement and Management

Interest rate risk, one of the leading risks in terms of potential earnings impact, is an essential element of being a financial intermediary. The Company’s net interest income is subject to interest rate risk to the extent our interest-bearing liabilities (primarily deposits and borrowings) mature or reprice on a different basis than our interest-earning assets (primarily loans, leases and investment securities). When interest-bearing liabilities mature or reprice more quickly than interest-earning assets during a given period, an increase in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, a decrease in interest rates could have a negative impact on net interest income. In addition, the impact of interest rate swings may be exacerbated by factors such as our customers’ propensity to manage their demand deposit balances more or less aggressively or to refinance loans. Short and long-term market rates may change independent of each other resulting in changes to the slope and absolute level of the yield curve.

The Asset/Liability Committees of BancWest and its major subsidiaries are responsible for managing interest rate risk. The Asset/Liability Committees generally meet monthly or quarterly. The committees may recommend changes to a particular subsidiary’s interest rate profile to their respective Board of Directors, should changes be necessary and depart significantly from established policies.

Our exposure to interest rate risk is managed primarily by taking actions that impact certain balance sheet accounts (e.g., lengthening or shortening maturities in the investment portfolio, changing asset and/or liability mix — including increasing or decreasing the amount of fixed and/or variable instruments held by the Company — to adjust sensitivity to interest rate changes) and/or by utilizing instruments such as interest rate swaps, caps, floors, options or forwards.

Derivatives entered into for trading purposes include commitments to purchase and sell foreign currencies and certain interest rate swaps and options. We also enter into customer accommodation interest rate swaps and foreign exchange spot and forward contracts as well as contracts to offset either the customer’s counter-position or our foreign currency denominated deposits. These contracts basically offset each other and they do not expose us to material losses resulting from interest rate or foreign currency fluctuations.

The Company and its subsidiaries use computer simulation models to evaluate net interest income in order to quantify exposure to changes in interest rates. Generally, the balance sheet is subjected to interest rate shocks up in 100 basis-point increments and down in 100 basis-point increments. Each account-level item is repriced according to its respective contractual characteristics, including any embedded options which might exist (e.g., periodic interest rate caps or floors or loans and leases which permit the borrower to prepay the principal balance of the loan or lease prior to maturity without penalty). Derivative financial instruments such as interest rate swaps, caps or floors are included as part of the modeling process. For each interest rate shock scenario, net interest income over a 12-month horizon is compared against the results of a scenario in which no interest rate change occurs (flat rate scenario) to determine the level of interest rate risk at that time.

The projected impact of incremental increases and decreases in interest rates on the projected Company’s consolidated net interest income over the 12 months beginning July 1, 2005 is shown below.


	+3%			+2%			+1%			Flat			-1%			-2%
(Dollars in millions)

Net interest income	$	1,646.1		$	1,666.0		$	1,675.1		$	1,670.1		$	1,653.9		$	1,593.4
Difference from flat		(24.0	)		(4.1	)		5.0			—			(16.2	)		(76.7	)
% variance		(1.4	)%		(0.2	)%		0.3	%		—	%		(1.0	)%		(4.6	)%

Because of the relatively low level of interest rates in the first six months of 2005, modeling below a 200-basis-point decrease was deemed not meaningful. The changes in the models are due to differences in interest rate environments which include the absolute level of interest rates, the shape of the yield curve, and spreads between various benchmark rates.

BancWest Corporation and Subsidiaries
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Significant Assumptions Utilized and Inherent Limitations

The net interest income changes for each interest rate scenario presented above include assumptions based on accelerating or decelerating mortgage and non-mortgage consumer loan prepayments in declining or rising scenarios, respectively, and adjusting deposit levels and mix in the different interest rate scenarios. The magnitude of changes to both areas in turn are based upon analyses of customers’ behavior in differing rate environments. However, these analyses may differ from actual future customer behavior. For example, actual prepayments may differ from current assumptions as prepayments are affected by many variables which cannot be predicted with certainty (e.g., prepayments of mortgages may differ on fixed and adjustable loans depending upon current interest rates, expectations of future interest rates, availability of refinancing, economic benefit to borrower, financial viability of borrower, etc.).

As with any model for analyzing interest rate risk, certain limitations are inherent in the method of analysis presented above. For example, the actual impact on net interest income due to certain interest rate shocks may differ from those projections presented should market conditions vary from assumptions used in the analysis. Furthermore, the analysis does not consider the effects of a changed level of overall economic activity that could exist in certain interest rate environments. Moreover, the method of analysis used does not take into account the actions that management might take to respond to changes in interest rates because of inherent difficulties in determining the likelihood or impact of any such response.

The following estimated net fair value amounts of interest rate derivatives held for trading purposes have been determined by the Company using available market information and appropriate valuation methodologies:


June 30, 2005
				Gross					Expected Maturity
	Net Fair			Positive		Notional																		After
Interest Rate Contracts	Value			Value		Amount			2005			2006			2007			2008			2009			2009
(Dollars in thousands)

Pay-Fixed Swaps:
Contractual Maturities	$	(10,463	)	$	4,220	$	812,516		$	76,406		$	24,123		$	39,587		$	100,905		$	107,073		$	464,422
Weighted Avg. Pay Rates							4.69	%		2.81	%		4.99	%		4.69	%		5.34	%		4.31	%		4.92	%
Weighted Avg. Receive Rates							3.67	%		3.10	%		2.82	%		3.51	%		5.03	%		3.30	%		3.61	%
Receive-Fixed Swaps:
Contractual Maturities		20,233			22,668	$	812,516		$	76,823		$	23,706		$	39,587		$	100,905		$	107,073		$	464,422
Weighted Avg. Pay Rates							3.70	%		3.11	%		3.38	%		3.55	%		5.05	%		3.30	%		3.62	%
Weighted Avg. Receive Rates							4.95	%		3.04	%		4.46	%		4.99	%		5.57	%		4.64	%		5.23	%
Pay-Fixed Swaps
(Forward Value Dated):
Contractual Maturities		(873	)		47	$	33,570		$	—		$	—		$	—		$	—		$	—		$	33,570
Weighted Avg. Pay Rates							4.98	%		—			—			—			—			—			4.98	%
Weighted Avg. Receive Rates⁽¹⁾						NA				—			—			—			—			—		NA
Receive-Fixed Swaps
(Forward Value Dated):
Contractual Maturities		1,825			1,825	$	33,570			—			—			—			—			—		$	33,570
Weighted Avg. Pay Rates⁽¹⁾						NA				—			—			—			—			—		NA
Weighted Avg. Receive Rates							5.88	%		—			—			—			—			—			5.88	%
Caps/Collars:
Contractual Maturities		—			227	$	281,154		$	209,657		$	—		$	64,250		$	3,821		$	1,440		$	1,986
Weighted Avg. Strike Rates							4.18	%		3.93	%		—	%		4.85	%		5.18	%		4.50	%		6.83	%
Weighted Floor Rates							4.77	%		—	%		—	%		—	%		—	%		—	%		4.77	%

Total interest rate contracts held for trading purposes	$	10,722		$	28,987	$	1,973,326


⁽¹⁾		Rates will be assigned at maturity date.

BancWest Corporation and Subsidiaries
CONTROLS AND PROCEDURES

Item 4. Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s chief executive officer and its chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)). Based upon that evaluation, its chief executive officer and its chief financial officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

No change in the Company’s internal control over financial reporting was identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) or Rule 15d-15(d) during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Item 1. Financial Statements


	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands)	2005			2004		2005		2004


Interest income
Loans	$	476,232		$	337,039	$	924,120	$	669,615
Lease financing		27,325			28,941		55,142		60,121
Securities available for sale		81,644			50,980		156,750		101,496
Other		7,955			2,908		15,372		5,787

Total interest income		593,156			419,868		1,151,384		837,019

Interest expense
Deposits		103,315			43,589		184,256		87,025
Short-term borrowings		22,645			5,566		42,371		10,979
Long-term debt		72,278			48,452		135,416		95,729

Total interest expense		198,238			97,607		362,043		193,733

Net interest income		394,918			322,261		789,341		643,286
Provision for loan and lease losses		3,224			11,900		14,324		30,765

Net interest income after provision for loan and lease losses		391,694			310,361		775,017		612,521

Noninterest income
Service charges on deposit accounts		48,067			40,525		91,653		81,354
Trust and investment services income		11,775			10,054		24,839		20,356
Other service charges and fees		48,218			36,872		94,249		74,045
Net gains (losses) on securities available for sale		(3	)		691		415		1,058
Vehicle and equipment operating lease income		5,573			4,215		11,353		5,069
Other		19,579			17,664		33,496		29,610

Total noninterest income		133,209			110,021		256,005		211,492

Noninterest expense
Salaries and wages		105,538			83,433		210,477		166,888
Employee benefits		42,005			34,609		90,356		70,846
Occupancy		28,373			21,790		56,765		43,405
Outside services		26,637			21,036		51,079		41,513
Intangible amortization		9,982			5,764		19,962		11,527
Equipment		15,177			12,008		29,674		23,455
Depreciation-vehicle and equipment operating leases		4,828			4,218		9,849		4,904
Restructuring and integration costs		—			2,754		5,350		2,754
Stationery and supplies		7,542			6,154		16,013		12,318
Advertising and promotions		7,672			6,452		14,820		12,779
Other		35,831			34,006		71,332		60,749

Total noninterest expense		283,585			232,224		575,677		451,138

Income before income taxes		241,318			188,158		455,345		372,875
Provision for income taxes		92,169			73,401		169,592		145,066

Net income	$	149,149		$	114,757	$	285,753	$	227,809

The accompanying notes are an integral part of these consolidated financial statements

BancWest Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Unaudited)


	June 30, 2005			December 31, 2004			June 30, 2004
(Dollars in thousands, except share data)

Assets
Cash and due from banks	$	1,809,222		$	1,676,056		$	1,702,563
Interest-bearing deposits in other banks		513,655			16,531			267,947
Federal funds sold and securities purchased under agreements to resell		165,100			937,875			245,500
Trading assets		4,442			4,685			4,726
Securities available for sale		9,024,593			7,954,563			5,820,727
Loans held for sale		78,076			71,402			65,031
Loans and leases:
Loans and leases		33,956,423			32,688,843			27,189,823
Less allowance for loan and lease losses		423,294			436,391			396,101

Net loans and leases		33,533,129			32,252,452			26,793,722

Vehicle and equipment operating leases, net		113,751			132,539			127,280
Premises and equipment, net		684,752			684,783			520,507
Customers’ acceptance liability		15,199			12,841			15,279
Other intangibles, net		251,629			272,490			175,830
Goodwill		4,315,692			4,312,800			3,229,771
Other real estate owned and repossessed personal property		14,681			21,653			16,993
Other assets		1,991,755			1,703,356			1,278,272

Total assets	$	52,515,676		$	50,054,026		$	40,264,148

Liabilities and Stockholder’s Equity
Deposits:
Interest-bearing	$	24,160,459		$	23,553,861		$	19,649,419
Noninterest-bearing		10,462,922			10,059,918			8,326,906

Total deposits		34,623,381			33,613,779			27,976,325

Federal funds purchased and securities sold under agreements to repurchase		2,339,997			2,050,344			1,799,249
Short-term borrowings		1,681,120			1,454,845			574,089
Acceptances outstanding		15,199			12,841			15,279
Long-term debt		6,829,757			6,181,040			4,646,075
Other liabilities		1,022,877			1,011,142			822,123

Total liabilities	$	46,512,331		$	44,323,991		$	35,833,140

Stockholder’s equity:
Class A common stock, par value $0.01 per share
Authorized — 150,000,000 shares
Issued and outstanding — 106,859,123 shares at June 30, 2005 and December 31, 2004 and 85,759,123 shares at June 30, 2004	$	1,069		$	1,069		$	858
Additional paid-in capital		4,475,087			4,475,006			3,419,927
Retained earnings		1,565,328			1,279,575			1,034,007
Accumulated other comprehensive loss, net		(38,139	)		(25,615	)		(23,784	)

Total stockholder’s equity		6,003,345			5,730,035			4,431,008

Total liabilities and stockholder’s equity	$	52,515,676		$	50,054,026		$	40,264,148

The accompanying notes are an integral part of these consolidated financial statements

BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDER’S EQUITY AND COMPREHENSIVE INCOME (Unaudited)


									Accumulated
	Class A				Additional				Other
	Common Stock				Paid-in		Retained		Comprehensive
	Shares		Amount		Capital		Earnings		Income, net			Total
(Dollars in thousands)

Balance, December 31, 2004		106,859,123	$	1,069	$	4,475,006	$	1,279,575	$	(25,615	)	$	5,730,035

Comprehensive income:
Net income		—		—		—		285,753		—			285,753
Unrealized net losses on securities available for sale arising during the period		—		—		—		—		(5,940	)		(5,940	)
Reclassification of net realized gains on securities available for sale included in net income		—		—		—		—		(245	)		(245	)
Unrealized net losses on cash flow derivative hedges arising during the period		—		—		—		—		(2,486	)		(2,486	)
Reclassification of net realized gains on cash flow derivative hedges included in net income		—		—		—		—		(3,853	)		(3,853	)

Comprehensive income		—		—		—		285,753		(12,524	)		273,229
Other		—		—		81		—		—			81

Balance, June 30, 2005		106,859,123	$	1,069	$	4,475,087	$	1,565,328	$	(38,139	)	$	6,003,345


Balance, December 31, 2003		85,759,123	$	858	$	3,419,927	$	806,198	$	35,889		$	4,262,872

Comprehensive income:
Net income		—		—		—		227,809		—			227,809
Unrealized net losses on securities available for sale arising during the period		—		—		—		—		(49,293	)		(49,293	)
Reclassification of net realized gains on securities available for sale included in net income		—		—		—		—		(624	)		(624	)
Unrealized net losses on cash flow derivative hedges arising during the period		—		—		—		—		(3,474	)		(3,474	)
Reclassification of net realized gains on cash flow derivative hedges included in net income		—		—		—		—		(6,282	)		(6,282	)

Comprehensive income		—		—		—		227,809		(59,673	)		168,136

Balance, June 30, 2004		85,759,123	$	858	$	3,419,927	$	1,034,007	$	(23,784	)	$	4,431,008

The accompanying notes are an integral part of these consolidated financial statements

BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Six Months Ended June 30,
	2005			2004
(Dollars in thousands)

Cash flows from operating activities:
Net income	$	285,753		$	227,809
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		57,608			38,091
Provision for loan and lease losses		14,324			30,765
Net decrease in deferred income taxes		(5,571	)		(211,538	)
Net decrease in trading assets		243			14,383
Net increase in loans held for sale		(6,674	)		(14,024	)
Net gains on sales of securities available for sale		(415	)		(1,058	)
Net gains on sales of loans		(3,348	)		(2,868	)
Net increase in interest receivable		(17,375	)		(212	)
Net increase in interest payable		32,635			10,160
Net decrease (increase) in prepaid expense		8,638			(1,541	)
Other		(31,946	)		(80,806	)

Net cash provided by operating activities		333,872			9,161

Cash flows from investing activities:
Securities available for sale:
Proceeds from prepayments and maturities		1,457,594			973,691
Proceeds from the sales		381,301			282,394
Purchases		(2,927,834	)		(1,387,691	)
Proceeds from sales of loans		158,864			167,007
Purchases of loans		(1,633,865	)		(744,256	)
Net decrease (increase) in loans and leases resulting from originations and collections		210,791			(883,080	)
Net decrease (increase) in vehicle and equipment operating leases resulting from originations and collections		8,939			(132,184	)
Purchases of premises and equipment		(30,019	)		(14,551	)
Increase in investment in bank owned life insurance		(226,277	)		(200,000	)
Other		(54,607	)		(23,221	)

Net cash used in investing activities		(2,655,113	)		(1,961,891	)

Cash flows from financing activities:
Net increase in deposits		1,009,602			1,573,208
Net increase in Federal funds purchased and securities sold under agreements to repurchase		289,653			624,372
Net increase (decrease) in short-term borrowings		226,275			(623,720	)
Proceeds from issuance of long-term debt		1,285,036			756,000
Repayments of long-term debt		(631,810	)		(332,911	)

Net cash provided by financing activities		2,178,756			1,996,949
Net increase (decrease) in cash and cash equivalents		(142,485	)		44,219

Cash and cash equivalents at beginning of period		2,630,462			2,171,791

Cash and cash equivalents at end of period	$	2,487,977		$	2,216,010

Supplemental disclosures:
Interest paid	$	329,409		$	183,573

Income taxes paid	$	159,691		$	311,404

Supplemental schedule of noncash investing and financing activities:
Loans transferred to other real estate owned and repossessed personal property	$	2,180		$	4,548

Loans made to facilitate the sale of other real estate owned	$	650		$	620

The accompanying notes are an integral part of these consolidated financial statements

BancWest Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Summary of Significant Accounting Policies

Descriptions of Operations

BancWest Corporation is a financial holding company headquartered in Honolulu, Hawaii and incorporated under the laws of the State of Delaware. Through our principal subsidiaries, Bank of the West (BOW) and First Hawaiian Bank (FHB), we provide commercial and consumer banking services, engage in commercial, equipment and vehicle leasing and offer trust, investment and insurance products. As of June 30, 2005, BancWest Corporation’s subsidiaries operated 539 banking locations (526 full service retail branches and 13 limited service retail offices) in the states of Arizona, California, Colorado, Hawaii, Idaho, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, Wisconsin and Wyoming and in 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” or “BancWest.” BancWest Corporation is a wholly owned subsidiary of Paris-based BNP Paribas (BNPP).

Basis of Presentation

We have prepared the accompanying financial data for the three and six months ended June 30, 2005 and 2004 in accordance with accounting principles generally accepted in the United States.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management.

In the opinion of management, the accompanying consolidated financial statements contain all normal and recurring adjustments necessary to present fairly our consolidated financial position as of June 30, 2005, December 31, 2004 and June 30, 2004, consolidated results of operations for the three months and six months ended June 30, 2005 and 2004, and consolidated cash flows for the six months ended June 30, 2005 and 2004.

Descriptions of the significant accounting policies of the Company are included in Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements included in the Company’s 2004 Annual Report on Form 10-K. There have been no significant changes to these policies.

Reclassifications

Certain amounts in the financial statements for prior periods have been reclassified to conform with the current financial statement presentation.

Stock-Based Compensation

As allowed under the provisions of FAS No. 123, Accounting for Stock-Based Compensation, as amended, the Company has chosen to recognize compensation expense using the intrinsic value-based method of valuing stock options prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. Under the intrinsic value-based method, compensation cost is measured as the amount by which the quoted market price at the date of grant exceeds the stock option exercise price.

Certain members of BancWest’s senior management team receive stock option awards from BNPP. The options do not vest until after the fourth year, at which time they are exercisable from the fourth anniversary through the tenth anniversary date. Stock option awards of the 2005 and 2003 plans have been reflected in compensation expense as the grant price was lower than the market price.

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

The following table is a summary of our stock option activity.

Weighted

average

remaining

exercise

contractual life

Number

price

(in years)

Options outstanding as of December 31, 2003

275,000

39.07

9.22

Granted

80,000

60.45

Forfeited

(1,972

)

39.07

Options outstanding as of June 30, 2004

353,028

43.91

8.95

Options outstanding as of December 31, 2004

347,028

43.88

8.44

Granted

193,000

71.42

Forfeited

(2,000

)

65.94

Options outstanding as of June 30, 2005

538,028

53.67

8.58

The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of FAS No. 123 to stock-based employee compensation.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
(Dollars in thousands)

Net Income (as reported)	$	149,149		$	114,757		$	285,753		$	227,809

Add: Stock-based compensation expense recognized during period, net of tax effects		27			24			48			48
Less: Stock-based employee compensation expense determined under fair value-based method, net of taxes		(293	)		(243	)		(537	)		(459	)


Pro Forma Net Income	$	148,883		$	114,538		$	285,264		$	227,398

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

2. Mergers and Acquisitions

Commercial Federal Corporation Acquisition

On June 13, 2005, BancWest announced that its Bank of the West subsidiary had entered into a definitive agreement to acquire Commercial Federal Corporation (CFC), the parent company of Commercial Federal Bank. It is anticipated that the purchase transaction will close in the fourth quarter of 2005, subject to regulatory approval. CFC and its branches will be integrated into Bank of the West’s branch network system. The acquisition of CFC will add 3 new states (Kansas, Missouri and Oklahoma) to Bank of the West’s footprint, as well as to our market share in Arizona, Colorado, Iowa and Nebraska. CFC operates 198 branches in 7 states in the Midwest, Colorado and Arizona. At March 31, 2005, CFC had total assets of $10.4 billion, total deposits of $6.5 billion and loans of $7.8 billion. Following the acquisition, results of operations of CFC will be included in our consolidated financial statements. The purchase price of approximately $1.36 billion will be paid in cash and the acquisition will be accounted for as a purchase.

Community First Bankshares Acquisition

During the fourth quarter of 2004, the Company acquired Community First Bankshares, Inc. (Community First). The acquisition was accounted for in accordance with Statement of Financial Accounting Standard No. 141 Business Combinations. Accordingly, the purchase price was preliminarily allocated to the assets acquired and the liabilities assumed based on their estimated fair values at the acquisition date.

The following table summarizes the Community First Balance Sheet on November 1, 2004, including the effects of purchase accounting adjustments:


(Dollars in thousands)

Assets
Cash and cash equivalents	$	228,233
Securities available for sale		1,458,677
Net loans and leases		3,394,490
Goodwill		914,367
Intangibles		96,021
Other assets		313,431

Total Assets	$	6,405,219


Liabilities and Stockholder’s Equity
Deposits	$	4,511,754
Debt		603,318
Other liabilities		95,241

Total Liabilities		5,210,313
Stockholder’s equity		1,194,906

Total Liabilities and Stockholder’s Equity	$	6,405,219

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

The following table summarizes the purchase price allocation of the Community First acquisition.


(Dollars in thousands)
Total purchase price of Community First, including transaction costs	$	1,199,459
Equity of Community First prior to acquisition by BancWest		352,693

Excess of pushed down equity over the carrying value of net assets acquired		846,766

Estimated adjustments to reflect assets acquired and liabilities assumed at fair value:
Sublease loss reserve		1,196
Loans and leases		27,104
Premises and equipment		(4,989	)
Other assets		4,193
Severance and employee relocation		7,587
Contract terminations		5,496
Identifiable intangibles		(3,218	)
Deposits		8,985
Debt		15,093
Other liabilities and taxes		6,154

Estimated fair value adjustments related to net assets acquired		67,601

Estimated goodwill resulting from the merger with Community First	$	914,367

The following unaudited pro forma condensed financial information presents the results of operations of the Company had the Community First acquisition occurred as of January 1, 2004, after giving effect to certain adjustments. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations which may occur in the future or which would have occurred had the Community First acquisition been consummated as of January 1, 2004.


	(Unaudited)		(Unaudited)
(Dollars in thousands)	Three Months Ended		Six Months Ended
(Dollars in thousands)	June 30, 2004		June 30, 2004

Net interest income	$	382,670	$	763,684
Provision for loan and lease losses		14,267		35,497
Noninterest income		132,932		256,985
Noninterest expense		284,108		555,415

Income before income taxes		217,227		429,757
Provision for income taxes		84,741		167,197

Net Income	$	132,486	$	262,560

Exit costs related to Community First activities were recorded as purchase accounting adjustments resulting in an increase to goodwill. We anticipate that cash outlays for exit and restructuring costs should be substantially completed by the end of 2005. Below is a summarization of the exit cost activity related to the Community First acquisition.


	Severance and			Contract			Sublease loss			Fixed		Prepaid
(Dollars in thousands)	Relocation			Terminations			Reserves			Assets		Expenses		Other			Total

Balance, December 31, 2004	$	7,557		$	5,810		$	1,196		$	10,431	$	383	$	—		$	25,377
Adjustments, net		30			(314	)		—			401		640		1,763			2,520
Cash Payments		(4,368	)		(4,661	)		(132	)		—		—		(165	)		(9,326	)

Balance, June 30, 2005	$	3,219		$	835		$	1,064		$	10,832	$	1,023	$	1,598		$	18,571

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

3. Derivative Financial Instruments

Any portion of the changes in the fair value of a derivative designated as a hedge that is deemed ineffective is recorded in current period earnings; this amount was not material in the three and six months ended June 30, 2005 and 2004.

Fair Value Hedges

The Company has various derivative instruments that hedge the fair values of recognized assets or liabilities or of unrecognized firm commitments. At June 30, 2005, the Company carried an interest rate swap of $2.6 million with a fair value loss of $0.5 million that was a hedge for a commercial loan. The Company receives 1-month LIBOR and pays a fixed rate of 8.32%. At June 30, 2004, the Company carried $2.7 million of such swaps with a fair value loss of $0.5 million. In addition, at June 30, 2005, the Company carried interest rate swaps totaling $76.1 million with fair value gains of $0.1 million and fair value losses of $3.5 million that were categorized as fair value hedges for commercial and commercial real estate loans. The Company receives 6-month LIBOR and pays fixed rates ranging from 3.79% to 7.99%. At June 30, 2004, the Company carried $78.6 million of such swaps with fair value gains of $0.7 million and fair value losses of $3.3 million.

On November 20, 2002, the Parent executed a $150 million interest rate swap agreement with BNP Paribas to hedge the fair value of the 9.5% BancWest Capital I Quarterly Income Preferred Securities (the BWE Capital Securities) issued by BancWest Capital I, which upon adoption of FIN 46,was redesignated to hedge the related subordinated debt. On June 3, 2005, the company terminated the swap. No gain or loss was recognized upon termination of the swap.

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

At June 30, 2005, the Company carried interest rate swaps totaling $5.7 million with fair value gains of $0.2 million that were categorized as hedges for repurchase agreements. The Company pays 3-month LIBOR and receives a fixed rate of 8.29%. At June 30, 2004, the Company carried $8.6 million of such swaps with a fair value gain of $0.5 million.

Cash Flow Hedges

At June 30, 2005, the Company carried interest rate swaps of $600 million with fair value gains of $10.8 million which hedge LIBOR-based commercial loans. The hedges had fair value gains of $28.2 million at June 30, 2004. The interest rate swaps were entered into during 2001 and mature in 2006. We pay 3-month LIBOR and receive fixed rates ranging from 5.64% to 5.87%. The net settlement on the $600 million swaps has increased commercial loan interest income by $7.2 million for the six months ended June 30, 2005 and by $12.2 million for the six months ended June 30, 2004. The Company estimates net settlement gains, recorded as commercial loan interest income, of $7.4 million over the next twelve months resulting from these hedges.

At June 30, 2005, the Company carried multiple interest rate swaps totaling $100 million with fair value gains of $1.5 million and fair value losses of $0.5 million, in order to reduce exposure to interest rate increases associated with short-term fixed rate liabilities. The swaps hedge forecasted transactions associated with short-term fixed rate liabilities. These swaps had fair value gains of $8.4 million at June 30, 2004. The swaps mature as follows: $70 million in 2013, $20 million in 2018 and $10 million in 2023. We pay fixed rates ranging from 3.65% to 4.58% and receive 3-month LIBOR. The effect on pretax income from these swaps for the six months ended June 30, 2005 was a loss of $0.7 million compared with a $1.6 million loss at June 30, 2004. The Company estimates a net increase to interest expense of $0.3 million over the next twelve months resulting from these hedges.

Free-standing derivative instruments include derivative transactions entered into for risk management purposes that do not otherwise qualify for hedge accounting. Interest rate lock commitments issued on residential mortgage loans intended to be held for resale are considered free-standing derivative instruments. Such commitments are stratified by rates and terms and are valued based on market quotes for similar loans. Adjustments, including discounting the historical fallout rate, are then applied to the estimated fair value. Trading activities primarily involve providing various free-standing interest rate and foreign exchange derivative products to customers. Interest rate derivative instruments utilized by the Company in its trading operations include interest rate swaps, caps, floors and collars.

The following table summarizes derivatives held by the Company as of the dates indicated:


	June 30, 2005							December 31, 2004							June 30, 2004
			Credit							Credit							Credit
	Notional		Risk		Net Fair			Notional		Risk		Net Fair			Notional		Risk		Net Fair
(Dollars in thousands)	Amount		Amount		Value			Amount		Amount		Value			Amount		Amount		Value

Held for hedge purposes:
Interest rate swaps	$	784,353	$	12,618	$	8,084		$	938,534	$	24,790	$	17,327		$	939,851	$	37,780	$	33,552
Held for trading or free-standing:
Interest rate swaps		1,692,172		28,760		10,722			1,502,706		19,558		7,856			1,322,376		19,390		7,054
Purchased interest rate options		140,488		227		227			143,251		203		203			95,390		101		101
Written interest rate options		173,166		—		(227	)		152,645		—		(203	)		94,406		—		(101	)
Forward interest rate options		23,500		—		(82	)		22,000		—		(20	)		22,000		—		(262	)
Commitments to purchase and sell foreign currencies		464,412		6,923		827			401,057		9,533		1,046			534,392		3,909		73
Purchased foreign exchange options		3,222		37		37			4,876		217		217			26,550		268		268
Written foreign exchange options		3,222		—		(37	)		4,876		—		(217	)		26,550		—		(268	)

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

4. Securities Available for Sale

Amortized cost and fair value of securities available for sale were as follows:


	June 30, 2005									December 31, 2004									June 30, 2004
	Amortized		Unrealized		Unrealized					Amortized		Unrealized		Unrealized					Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses			Fair Value		Cost		Gains		Losses			Fair Value		Cost		Gains		Losses			Fair Value

U.S. Treasury and other U.S. Government agencies and corporations	$	200,808	$	398	$	(1,155	)	$	200,051	$	266,174	$	263	$	(1,745	)	$	264,692	$	188,879	$	283	$	(1,322	)	$	187,840
Government-sponsored agencies		3,122,085		2,169		(22,339	)		3,101,915		2,372,319		1,374		(14,868	)		2,358,825		1,496,478		3,053		(11,058	)		1,488,473
Mortgage and asset-backed securities:
Government agencies		194,266		1,284		(510	)		195,040		229,827		1,741		(450	)		231,118		104,884		604		(1,559	)		103,929
Government-sponsored agencies		3,196,036		6,147		(35,441	)		3,166,742		3,185,857		10,733		(37,208	)		3,159,382		2,313,550		11,077		(55,382	)		2,269,245
Other		639,859		794		(2,674	)		637,979		487,250		3,177		(2,512	)		487,915		579,993		4,443		(3,207	)		581,229
Collateralized mortgage obligations:
Government agencies		157,791		—		(2,372	)		155,419		181,502		—		(2,311	)		179,191		197,054		14		(3,494	)		193,574
Government-sponsored agencies		620,643		363		(6,896	)		614,110		603,173		420		(6,907	)		596,686		576,762		677		(8,478	)		568,961
Other		840,387		3,352		(5,545	)		838,194		568,724		154		(5,565	)		563,313		376,241		37		(5,853	)		370,425
State and political subdivisions		58,681		584		(868	)		58,397		56,081		627		(297	)		56,411		7,765		191		(56	)		7,900
Other		59,091		2		(2,347	)		56,746		59,311		103		(2,384	)		57,030		51,473		—		(2,322	)		49,151

Total securities available for sale	$	9,089,647	$	15,093	$	(80,147	)	$	9,024,593	$	8,010,218	$	18,592	$	(74,247	)	$	7,954,563	$	5,893,079	$	20,379	$	(92,731	)	$	5,820,727

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

The following table presents the unrealized gross losses and fair value of securities in the securities available for sale portfolio at June 30, 2005, by length of time that individual securities in each category have been in a continuous loss position. Because the declines in fair value were a result of changes in market interest rates and the Company has both the ability and the intent to hold the securities until maturity or the fair value at least equals the recorded cost, no other-than-temporary impairment was recorded at June 30, 2005.


	June 30, 2005
	Less Than 12 Months					12 Months or More					Total
	Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Losses			Fair Value		Losses			Fair Value		Losses			Fair Value

U.S. Treasury and other U.S. Government agencies and corporations	$	(471	)	$	76,008	$	(684	)	$	93,623	$	(1,155	)	$	169,631
Government-sponsored agencies		(14,770	)		2,119,127		(7,569	)		542,167		(22,339	)		2,661,294
Mortgage and asset-backed securities:
Government agencies		(510	)		73,375		—			—		(510	)		73,375
Government-sponsored agencies		(10,222	)		1,682,605		(25,219	)		879,483		(35,441	)		2,562,088
Other		(1,168	)		322,998		(1,506	)		136,961		(2,674	)		459,959
Collateralized mortgage obligations:
Government agencies		(338	)		39,783		(2,034	)		115,636		(2,372	)		155,419
Government-sponsored agencies		(958	)		161,641		(5,938	)		352,504		(6,896	)		514,145
Other		(2,528	)		402,064		(3,017	)		141,035		(5,545	)		543,099
States and political subdivisions		(863	)		1,020		(5	)		370		(868	)		1,390
Other		(454	)		18,902		(1,893	)		19,351		(2,347	)		38,253

Total securities available for sale	$	(32,282	)	$	4,897,523	$	(47,865	)	$	2,281,130	$	(80,147	)	$	7,178,653

Gross realized gains and losses on securities available for sale for the periods indicated were as follows:


	Three Months Ended June 30,					Six Months Ended June 30 ,
	2005			2004		2005			2004
(Dollars in thousands)

Realized gains	$	3		$	691	$	422		$	1,059
Realized losses		(6	)		—		(7	)		(1	)

Realized net gains	$	(3	)	$	691	$	415		$	1,058

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

5. Loans and Leases

The following table sets forth the loan and lease portfolio by major categories for the periods indicated:


	June 30, 2005					December 31, 2004					June 30, 2004
	Amount		%			Amount		%			Amount		%
(Dollars in thousands)

Commercial, financial and agricultural	$	5,988,395		17.6	%	$	6,027,376		18.4	%	$	4,738,271		17.4	%
Real estate:
Commercial		6,860,866		20.2			6,706,882		20.5			5,286,412		19.4
Construction		1,570,090		4.6			1,493,723		4.6			1,036,993		3.8
Residential		7,689,252		22.7			6,700,462		20.5			5,479,017		20.2

Total real estate loans		16,120,208		47.5			14,901,067		45.6			11,802,422		43.4
Consumer		9,353,881		27.6			9,243,731		28.3			8,092,565		29.8
Lease financing		2,115,097		6.2			2,132,578		6.5			2,192,436		8.1
Foreign loans		378,842		1.1			384,091		1.2			364,129		1.3

Total loans and leases	$	33,956,423		100.0	%	$	32,688,843		100.0	%	$	27,189,823		100.0	%

Outstanding loan balances at June 30, 2005, December 31, 2004 and June 30, 2004 are net of unearned income, including net deferred loan fees, of $264.7 million, $283.0 million and $311.9 million, respectively.

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

6. Allowance for Loan and Lease Losses

The following table sets forth the activity in the allowance for loan and lease losses for the periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
(Dollars in thousands)

Balance at beginning of period	$	432,762		$	396,487		$	436,391		$	391,699

Provision for loan and lease losses		3,224			11,900			14,324			30,765

Loans and leases charged off:
Commercial, financial and agricultural		2,389			2,179			4,480			4,316
Real estate:
Commercial		516			796			824			1,089
Residential		569			54			736			74
Consumer		15,761			13,552			32,959			27,066
Lease financing		3,175			4,041			7,246			9,485
Foreign		362			440			709			1,171

Total loans and leases charged off		22,772			21,062			46,954			43,201

Recoveries on loans and leases previously charged off:
Commercial, financial and agricultural		3,125			2,418			4,973			4,873
Real estate:
Commercial		310			54			716			180
Construction		1			34			1			68
Residential		201			277			398			476
Consumer		4,712			3,371			8,801			6,610
Lease financing		1,559			2,513			3,437			4,278
Foreign		172			109			1,207			353

Total recoveries on loans and leases previously charged off		10,080			8,776			19,533			16,838

Net charge-offs		(12,692	)		(12,286	)		(27,421	)		(26,363	)

Balance at end of period	$	423,294		$	396,101		$	423,294		$	396,101

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

7. Goodwill and Intangible Assets

We perform the impairment testing of goodwill required under FAS No. 142 annually in the fourth quarter. The impairment analysis is performed using a discounted cash flows model. The table below provides the breakdown of goodwill by reportable segment and the change during the year.


	Bank of the West						First Hawaiian Bank
	Regional		Commercial		Consumer		Retail		Consumer		Commercial		Financial					Consolidated
(Dollars in millions)	Banking		Banking		Finance		Banking		Finance		Banking		Management		BancWest			Totals

Balance as of December 31, 2004:	$	2,127	$	708	$	308	$	650	$	216	$	118	$	11	$	175		$	4,313
Purchase accounting adjustment:
Trinity Capital		—		1		—		—		—		—		—		—			1
Community First		2		—		—		—		—		—		—		—			2
USDB		170		—		—		—		—		—		—		(170	)		--

Balance as of June 30, 2005:	$	2,299	$	709	$	308	$	650	$	216	$	118	$	11	$	5		$	4,316

Amortization of finite-lived intangible assets was $10.0 million and $5.8 million for the three-month periods ended June 30, 2005 and 2004, respectively, and $20.0 million and $11.5 million for the six-month periods ended June 30, 2005 and 2004, respectively. The estimated annual amortization expense for finite-lived intangible assets, primarily core deposit intangibles is:


(Dollars in thousands)

Estimate for the six months ending December 31, 2005	$	19,953
Estimate for years ending December 31,
2006	$	37,308
2007		35,002
2008		33,078
2009		31,471
2010		30,138

The details of our finite-lived intangible assets are presented below:


	Gross Carrying		Accumulated		Net Book
(Dollars in thousands)	Amount		Amortization		Value

Balance as of June 30, 2005:
Core Deposits	$	330,206	$	88,572	$	241,634
Other Intangible Assets		11,101		1,106		9,995

Total	$	341,307	$	89,678	$	251,629


Balance as of December 31, 2004:
Core Deposits	$	330,206	$	69,141	$	261,065
Other Intangible Assets		12,000		575		11,425

Total	$	342,206	$	69,716	$	272,490


Balance as of June 30, 2004:
Core Deposits	$	230,538	$	54,708	$	175,830

Total	$	230,538	$	54,708	$	175,830

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

8. Regulatory Capital Requirements

Quantitative measures established by regulation to ensure capital adequacy require the Company’s depository institution subsidiaries to maintain minimum amounts and ratios of Tier 1 and Total capital to risk-weighted assets, and Tier 1 capital to average assets. The table below sets forth those ratios at June 30, 2005.


											To Be Well
											Capitalized
											Under Prompt
						For Required					Corrective Action
	Actual					Minimum Capital					Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
(Dollars in thousands)

Tier 1 Capital to Risk-Weighted
Assets:
Bank of the West	$	3,516,231		10.81	%	$	1,301,265		4.00	%	$	1,951,897		6.00	%
First Hawaiian Bank		1,042,980		13.62			306,408		4.00			459,612		6.00
Total Capital to Risk-Weighted
Assets:
Bank of the West	$	4,037,327		12.41	%	$	2,602,530		8.00	%	$	3,253,162		10.00	%
First Hawaiian Bank		1,204,308		15.72			612,815		8.00			766,019		10.00
Tier 1 Capital to Average
Assets (leverage ratio) ⁽¹⁾:
Bank of the West	$	3,516,231		9.26	%	$	1,519,371		4.00	%	$	1,899,214		5.00	%
First Hawaiian Bank		1,042,980		10.62			392,865		4.00			491,081		5.00


(1)		The leverage ratio consists of the ratio of Tier 1 capital to average assets excluding goodwill and certain other items. The minimum leverage ratio guideline is three percent for banking organizations that do not anticipate or are not experiencing significant growth, and that have well-diversified risk, excellent asset quality, high liquidity, good earnings, a strong banking organization, and are rated a composite 1 under the Uniform Financial Institution Rating System established by the Federal Financial Institution Examination Council. For all others, the minimum ratio is 4%.

Because we are a financial holding company, only our depository institution subsidiaries are subject to regulatory capital requirements administered by the federal banking agencies. If these subsidiaries fail to meet minimum capital requirements, the federal agencies can initiate certain mandatory actions. Such regulatory actions could have a material effect on the Company’s financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, our depository institution subsidiaries must each meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. These capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

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

9. Pension and Other Postretirement Benefit Plans

The Company sponsors two noncontributory qualified defined benefit pension plans in addition to unfunded nonqualified benefit pension plans that provide excess and supplemental benefits.

Prior to June 30, 2004, the Company sponsored three postretirement benefit plans. Subsequently, two of the plans were amended for eligible employees who retire after such date. The amendment places a cap on the funding of plans and combined the two plans into one single plan.

The following table sets forth the components of the net periodic benefit cost for the three months ending June 30:


	Pension Benefits						Other Benefits
(Dollars in thousands)	2005			2004			2005			2004
Service cost	$	2,956		$	2,260		$	378		$	381
Interest cost		6,727			6,569			582			655
Expected return on plan assets		(9,675	)		(8,159	)		—			—
Amortization of prior service cost		—			—			(281	)		(218	)
Recognized net actuarial loss		3,778			1,515			166			124

Total benefit cost	$	3,786		$	2,185		$	845		$	942

The following table sets forth the components of the net periodic benefit cost for the six months ending June 30:


	Pension Benefits						Other Benefits
(Dollars in thousands)	2005			2004			2005			2004
Service cost	$	5,912		$	4,520		$	756		$	933
Interest cost		13,595			13,137			1,164			1,309
Expected return on plan assets		(18,508	)		(16,318	)		—			—
Amortization of prior service cost		—			—			(562	)		(218	)
Recognized net actuarial loss		7,324			3,030			332			241

Total benefit cost	$	8,323		$	4,369		$	1,690		$	2,265

The following table sets forth the components of the net periodic benefit cost for our funded plans at June 30:


	Funded Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2005			2004			2005			2004
Service cost	$	2,475		$	1,761		$	4,950		$	3,521
Interest cost		5,570			5,530			11,242			11,061
Expected return on plan assets		(9,675	)		(8,159	)		(18,508	)		(16,318	)
Recognized net actuarial loss		3,005			1,274			5,923			2,549

Net periodic benefit cost	$	1,375		$	406		$	3,607		$	813

Contributions

The Company expects to contribute $4.2 million to its defined benefit pension plans and $3.4 million to its other postretirement benefit plans in 2005. These contributions are estimated needs for the unfunded plans and may vary depending on retirements during 2005. Of these amounts, the Company has contributed to its defined benefit pension and other postretirement benefit plans $1.9 million and $1.7 million, respectively, as of June 30, 2005. No contributions to the pension trust for funded plans are expected to be made during 2005.

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

10. Operating Segments

Our reportable segments are the operating segments that we use in our internal reporting at BOW and FHB. BOW’s segments operate primarily in Arizona, California, Colorado, Idaho, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, Wisconsin and Wyoming. As discussed below, certain BOW segments conduct business nationwide. Although FHB’s segments operate primarily in Hawaii, it also has operations outside the state, such as leveraged leases, international banking and branches in Guam and Saipan.

The results of each segment are determined by our management accounting process, which assigns balance sheet and income statement items to each reporting segment. The net interest income of each segment includes the results of the respective bank’s transfer pricing process, which assesses an internal funds charge on all segment assets and provides a funds credit on all segment liabilities. The internal charges and credits assigned to each asset and liability are intended to match the maturity, repayment and interest rate characteristics of that asset or liability. With the exception of goodwill, assets are allocated to each business segment on the basis of assumed benefit to their business operations. Goodwill is assigned on the basis of projected future earnings of the segments. The process of management accounting is dynamic and subjective. There is no comprehensive or authoritative guidance which can be followed. Changes in management structure and/or the allocation process may result in changes in allocations and transfers. In that case, results for prior periods would be (and have been) reclassified for comparability. Results for 2004 have been reclassified to reflect changes in the organizational hierarchy, including the Private Banking reorganization at First Hawaiian Bank, and tax provision allocation methodology applied in 2005.

Bank of the West

BOW manages its operations through three operating segments: Regional Banking, Commercial Banking and Consumer Finance.

Regional Banking

Regional Banking seeks to serve a broad customer base by offering a wide range of retail and commercial banking products. Deposit products offered by this segment include checking accounts, savings deposits, market rate accounts, individual retirement accounts and time deposits. Regional Banking utilizes its branch network in sixteen states as its principal funding source. BOW’s telephone banking service, a network of automated teller machines and the online eTimeBanker service provide retail customers with other means of accessing and managing their accounts.

Through its branch network, this business segment originates a variety of consumer loans, including real estate secured installment loans and lines of credit and, to a lesser extent, other collateralized and non-collateralized installment loans. In addition, Regional Banking originates and holds a portfolio of first mortgage loans on 1-4 family residences. Through commercial banking operations conducted from its branch network, Regional Banking offers a wide range of commercial banking products intended to serve the needs of smaller community-based businesses. These include originations of standardized loan and deposit products for businesses with relatively simple banking and financing needs. Regional Banking also provides a number of fee-based products and private banking services including trust, insurance and investment services.

More complex and customized commercial banking services are offered through the segment’s Business Banking Centers which serve clusters of branches and provide lending, deposit and cash management services to companies operating in the respective market areas. Business Banking Centers support commercial lending activities for middle market business customers in locations throughout California, as well as Portland, Oregon, Reno and Las Vegas, Nevada, Albuquerque and Las Cruces, New Mexico, and Salt Lake City, Utah.

Through its insurance subsidiary, BW Insurance Agency, Regional Banking offers a wide variety of insurance services for both individuals and small businesses. The BW Insurance Agency product set includes auto, home and life, as well as numerous commercial insurance options. The company operates 57 insurance agencies in eight states: Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, Utah and Wyoming.

BancWest Investment Services Inc., (BWIS), another subsidiary, offers individuals a wide array of mutual funds, annuities, IRA accounts, other tax-advantaged accounts and education savings plans. BWIS operates its own broker/dealer and employs licensed investment specialists to meet with clients in branches or at their clients’ place of business. Currently, Community First Investment Services continues to serve states in the former Community First Bank footprint. Conversion of these relationships to BWIS is scheduled for the fourth quarter of 2005.

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

The Regional Banking Segment also includes a Pacific Rim Division which offers multilingual services through a branch network in predominately Asian American communities in California, with specialized domestic and international products and services for both individuals and companies.

Commercial Banking

The Commercial Banking Segment is comprised of several divisions: Commercial Banking Division, Agribusiness Banking Division, Real Estate Industries Division, Leasing Division and Specialty areas. The Commercial Banking Division supports business clients with revenues between $25 million and $500 million, focusing on relationship banking including deposit generation as well as lending activities. The Agribusiness Banking Division serves all agribusiness and rural commercial clients. The Real Estate Industries Division provides construction financing to large regional and national real estate developers for residential and commercial projects. Interim and permanent financing is available on these commercial real estate projects. Equipment leasing is available through the Company’s commercial offices, branches and brokers across the nation. Our subsidiary, Trinity Capital, specializes in nationwide vendor leasing and servicing programs for manufacturers in specific markets.

The Commercial Banking Segment also includes specialty areas: Church Lending, Small Business Administration (SBA), Health Care, Credit Union, Government, Correspondent Banking and Cash Management Services.

The Commercial Banking Segment also provides trade finance and functions as an agent in commercial, agribusiness and real estate syndication transactions, as well as providing fixed income investment opportunities, foreign exchange and derivative transactions through its Capital Markets unit.

In addition, the Wealth Management Division provides trust and asset management services to a broad spectrum of clientele throughout the Company’s footprint.

Consumer Finance

The Consumer Finance Segment targets the origination of auto loans and leases in the western and mid-western United States, and recreational vehicle and marine loans nationwide, with emphasis on originating credits at the high end of the credit spectrum. These loans and leases are originated through a network of auto dealers and recreational vehicle and marine dealers serviced by sales representatives located throughout the country. This segment also includes BOW’s wholly owned subsidiary, Essex Credit Corporation, which focuses on the origination of marine and recreational vehicle loans directly with customers. Essex has office locations throughout the United States.

First Hawaiian Bank

FHB manages its operations through the following business segments: Retail Banking, Consumer Finance, Commercial Banking and Financial Management.

Retail Banking

FHB’s Retail Banking Segment operates through 56 banking offices located throughout Hawaii. FHB also operates three branches in Guam and two branches in Saipan.

The focus of FHB’s retail/community banking strategy is primarily Hawaii. Through its significant market share in Hawaii, FHB already has product or service relationships with a majority of the households in the State. Therefore, a key goal of its retail community banking strategy is to build those relationships by cross-selling additional products and services to existing individual and business customers.

In pursuing the community banking markets in Hawaii, Guam and Saipan, FHB seeks to serve a broad customer base by furnishing a full range of retail and commercial banking products. Through its branch network, FHB generates first-mortgage loans on residences and a variety of consumer loans, consumer lines of credit and second mortgages. To complement its branch network and serve these customers, FHB operates a system of automated teller machines, a 24-hour phone center in Honolulu and a full-service internet banking system. Through commercial banking operations conducted from its branch network, FHB offers a wide range of banking products intended to serve the needs of smaller, community-based businesses. FHB also provides a number of fee-based products and services such as annuities and mutual funds, insurance and securities brokerage. The First Investment Center of FHB makes available annuities, mutual funds and other securities through BWIS.

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

The Private Banking Department within FHB’s Retail Banking Segment provides a wide range of private banking services and products to high-net-worth individuals.

Consumer Finance

Consumer Finance offers many types of loans to consumers, including lines of credit (uncollateralized or collateralized) and various types of personal and automobile loans. FHB also provides indirect consumer automobile financing on new and used autos by purchasing finance contracts from dealers.

Consumer Finance also makes residential real estate loans, including home-equity loans, to enable borrowers to purchase, refinance, improve or construct residential real property. The loans are collateralized by mortgage liens on the related property, substantially all located in Hawaii. FHB also originates residential real estate loans for sale on the secondary market.

Commercial Banking

Commercial Banking is a major lender to small and medium-sized businesses in Hawaii, Guam and Saipan. Lending services include receivable and inventory financing, term loans for equipment acquisition and facilities expansion and trade finance letters of credit. To support the funds management needs of both commercial banking customers and large private and public deposit relationships maintained with the Company, FHB operates a Cash Management Department which provides a full range of innovative and relationship-focused cash management services.

Real Estate Lending-Commercial provides interim construction, residential development and permanent financing for commercial real estate projects, including retail facilities, warehouses and office buildings. FHB also does lease-to-fee conversion financing for condominium associations and cooperatives.

International Banking Services provides international banking products and services through FHB’s branch system, its Japan Business Development Department in Honolulu, a Grand Cayman branch, three Guam branches, two branches in Saipan and a representative office in Tokyo, Japan. FHB maintains a network of correspondent banking relationships throughout the world. FHB’s trade-related international banking activities are concentrated in the Asia-Pacific area.

Leasing provides leasing services for businesses from heavy equipment to office computer and communication systems.

Financial Management

The Financial Management Segment consists of the FHB Trust Division and a wholly owned FHB subsidiary, Bishop Street Capital Management (BSCM). Financial Management offers asset management, advisory and administrative services for estates, trusts and individuals. It also acts as trustee and custodian of retirement and other employee benefit plans. At June 30, 2005, Financial Management actively managed $3.6 billion in assets. Total assets actively managed and/or held in custody were valued at $9.2 billion.

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

The tables below present information about the Company’s operating segments as of or for the periods indicated:


	Bank of the West										First Hawaiian Bank
	Regional		Commercial			Consumer					Retail		Consumer		Commercial		Financial					Other			Reconciling			Consolidated
(Dollars in millions)	Banking		Banking			Finance		Other⁽¹⁾			Banking		Finance		Banking		Management		Other⁽²⁾			BancWest⁽³⁾			Items⁽⁴⁾			Totals
Three Months Ended June 30, 2005:
Net interest income	$	182.7	$	88.6		$	55.9	$	16.5		$	71.5	$	19.8	$	8.3	$	—	$	(6.1	)	$	(42.3	)	$	—		$	394.9
Noninterest income		64.3		21.9			7.5		4.4			14.7		7.8		0.8		7.1		5.2			(0.5	)		—			133.2
Noninterest expense		159.9		37.1			22.8		3.4			44.1		10.9		1.5		5.7		(3.6	)		1.8			—			283.6
Provision for loan and lease losses		3.7		(9.8	)		6.7		(0.6	)		1.0		3.1		0.2		—		—			(1.1	)		—			3.2
Tax provision (benefit)		23.3		31.4			14.4		15.8			15.8		5.2		2.5		0.5		0.8			(17.5	)		—			92.2

Net income (loss)	$	60.1	$	51.8		$	19.5	$	2.3		$	25.3	$	8.4	$	4.9	$	0.9	$	1.9		$	(26.0	)	$	—		$	149.1

Assets at June 30		13,311		11,079			9,460		8,054			4,178		1,673		1,300		17		3,820			9,272			(9,648	)		52,516
Goodwill at June 30		2,299		709			308		—			650		216		118		11		—			5			—			4,316
Average assets		14,193		10,294			9,104		7,766			4,139		1,590		1,264		17		3,821			9,222			(9,594	)		51,816
Average loans and leases		10,118		9,126			8,740		—			3,137		1,406		1,064		—		27			11			(35	)		33,594
Average deposits		19,937		4,785			14		2,219			7,802		10		49		33		224			—			(73	)		35,000

Three Months Ended June 30, 2004:
Net interest income	$	121.8	$	79.4		$	51.2	$	22.1		$	58.6	$	20.0	$	8.9	$	—	$	(6.6	)	$	(33.1	)	$	—		$	322.3
Noninterest income		44.6		16.7			6.5		2.0			15.0		7.0		7.9		6.6		3.7			—			—			110.0
Noninterest expense		107.1		34.0			21.4		6.0			45.0		10.0		5.0		6.0		(6.2	)		3.9			—			232.2
Provision for loan and lease losses		1.7		—			6.9		—			1.1		2.2		0.2		—		(0.2	)		—			—			11.9
Tax provision (benefit)		22.5		24.6			11.4		7.4			10.2		5.9		4.3		0.2		2.1			(15.2	)		—			73.4

Net income (loss)	$	35.1	$	37.5		$	18.0	$	10.7		$	17.3	$	8.9	$	7.3	$	0.4	$	1.4		$	(21.8	)	$	—		$	114.8

Assets at June 30		8,013		9,120			8,536		5,144			3,760		1,575		1,244		25		3,412			7,153			(7,718	)		40,264
Goodwill at June 30		1,214		708			308		—			650		216		118		11		—			5			—			3,230
Average assets		7,978		8,959			8,445		4,755			3,682		1,556		1,237		23		3,287			7,166			(7,745	)		39,343
Average loans and leases		5,943		7,603			8,019		9			2,693		1,368		1,064		9		33			40			(34	)		26,747
Average deposits		14,639		3,480			11		1,822			7,009		8		21		26		192			—			(91	)		27,117


	Bank of the West										First Hawaiian Bank
	Regional		Commercial			Consumer					Retail		Consumer		Commercial		Financial						Other			Reconciling			Consolidated
(Dollars in millions)	Banking		Banking			Finance		Other⁽¹⁾			Banking		Finance		Banking		Management			Other⁽²⁾			BancWest⁽³⁾			Items⁽⁴⁾			Totals
Six Months Ended June 30, 2005:
Net interest income	$	359.2	$	170.5		$	112.0	$	45.9		$	139.9	$	38.8	$	15.8	$	—		$	(11.9	)	$	(80.9	)	$	—		$	789.3
Noninterest income		122.6		40.2			15.0		7.7			29.2		15.7		2.2		14.6			9.9			(1.0	)		—			256.1
Noninterest expense		321.8		72.4			44.9		14.8			87.0		21.8		2.9		12.0			(5.8	)		3.9			—			575.7
Provision for loan and lease losses		5.3		(10.0	)		13.2		(0.5	)		0.8		5.2		0.4		—			0.9			(1.0	)		—			14.3
Tax provision (benefit)		49.9		55.5			27.6		22.3			31.6		10.7		4.9		1.0			0.9			(34.8	)		—			169.6

Net income (loss)	$	104.8	$	92.8		$	41.3	$	17.0		$	49.7	$	16.8	$	9.8	$	1.6		$	2.0		$	(50.0	)	$	—		$	285.8

Average assets		13,515		10,413			9,249		7,634			4,096		1,580		1,244		18			3,795			9,141			(9,602	)		51,083
Average loans and leases		9,938		8,943			8,739		—			3,095		1,398		1,045		—			28			21			(34	)		33,173
Average deposits		19,975		4,325			14		2,247			7,706		10		48		34			219			—			(74	)		34,504

Six Months Ended June 30, 2004:
Net interest income	$	245.2	$	156.9		$	104.2	$	42.8		$	115.2	$	38.9	$	19.0	$	(0.2	)	$	(12.7	)	$	(66.0	)	$	—		$	643.3
Noninterest income		88.2		34.6			9.2		3.4			30.0		15.3		9.4		13.8			7.9			(0.3	)		—			211.5
Noninterest expense		214.9		66.5			38.4		9.5			87.4		19.8		6.7		12.1			(11.5	)		7.3			—			451.1
Provision for loan and lease losses		2.2		0.4			21.8		—			2.4		4.1		0.3		—			(0.5	)		0.1			—			30.8
Tax provision (benefit)		45.8		49.1			20.9		14.5			21.4		12.1		7.3		0.6			3.6			(30.2	)		—			145.1

Net income (loss)	$	70.5	$	75.5		$	32.3	$	22.2		$	34.0	$	18.2	$	14.1	$	0.9		$	3.6		$	(43.5	)	$	—		$	227.8

Average assets		7,897		8,802			8,274		4,693			3,627		1,514		1,257		23			3,276			7,091			(7,614	)		38,840
Average loans and leases		5,869		7,465			7,889		5			2,638		1,325		1,101		9			35			44			(36	)		26,344
Average deposits		14,514		3,430			9		1,723			6,924		8		20		28			195			—			(76	)		26,775

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


⁽¹⁾		The net interest income and noninterest income items in the Other column are related to Treasury activities and unallocated other income for all periods presented. The noninterest expense items in the Other column are related to Treasury activities and unallocated administrative items for all periods presented. The material average asset items in the Other column relate to unallocated Treasury securities for the periods presented. The material average deposit items in the Other column relate to unallocated Treasury balances for the periods presented.

⁽²⁾		The net interest income and noninterest income items in the Other column are related to Treasury activities and unallocated other income and transfer pricing charges for all periods presented. The noninterest expense items in the Other column are unallocated administrative items for June 30, 2005. The noninterest expense items in the Other column are primarily from Treasury activities and unallocated administrative items for June 30, 2004. The material average asset items in the Other column are related to unallocated Treasury securities for the periods presented. The material average deposit items in the Other column are related to unallocated Treasury balances for the periods presented.

⁽³⁾		The Other BancWest column consists primarily of BancWest Corporation (Parent Company) and FHL Lease Holding Company, Inc.

⁽⁴⁾		The reconciling items are intercompany eliminations.

BancWest Corporation and Subsidiaries
EXHIBITS

PART II. OTHER INFORMATION

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

On April 19, 2005, BNP Paribas executed consent resolutions electing directors of the registrant for a one-year term or until the election of their successors. The consent resolutions also elected PricewaterhouseCoopers to serve as the registrant’s auditor. The individuals elected as directors were:


Frank J. Bonetto		Michel Larrouilh
François Dambrine		A. Ewan Macdonald
Gérard Denot		Pierre Mariani
W. Allen Doane		Don J. McGrath
Walter A. Dods, Jr.		Rodney R. Peck
Robert A. Fuhrman		Edouard A. Sautter
Paul Mullin Ganley		Eric K. Shinseki
John A. Hoag		John K. Tsui
Donald G. Horner		Jacques Henri Wahl
Bert T. Kobayashi, Jr.

Item 6. Exhibits

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

(a) Exhibits


	2.1			Agreement and Plan of Merger dated as of June 13, 2005 among Bank of the West, Bear Merger Co., Inc., and Commercial Federal Corporation, incorporated by reference to Exhibit 2.1 to the registrant’s Report on Form 8-K dated June 13, 2005.

	10.1			Stock Purchase Agreement dated April 28, 2005 between BancWest Corporation and BNP Paribas S.A., concerning Bank of the West common stock, incorporated by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K dated April 28, 2005.

	10.2			Amended and Restated Stockholders’ Agreement dated April 28, 2005 between BancWest Corporation and BNP Paribas S.A., concerning Bank of the West common stock, incorporated by reference to Exhibit 10.2 to the registrant’s Report on Form 8-K dated April 28, 2005.


12		Statement regarding computation of ratios

31		Section 302 Certifications

32		Section 1350 Certifications

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

SIGNATURE

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


	BANCWEST CORPORATION
Date: August 12, 2005	By	/s/ Douglas C. Grigsby
		Douglas C. Grigsby
		Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer)